WASHINGTON GAS LIGHT CO (Form: 10-Q, Received: 05/03/2012 17:31:31)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

þ	Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2012

¨	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934


Commission File Number	Exact name of registrant as specified in its charter and principal office address and telephone number	State of Incorporation	I.R.S. Employer Identification No.
1-16163	WGL Holdings, Inc. 101 Constitution Ave., N.W. Washington, D.C. 20080 (703) 750-2000	Virginia	52-2210912
0-49807	Washington Gas Light Company 101 Constitution Ave., N.W. Washington, D.C. 20080 (703) 750-4440	District of Columbia and Virginia	53-0162882

Indicate by check mark whether each registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether each registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes þ No ¨

Indicate by check mark whether each registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

WGL Holdings, Inc.:


Large accelerated filer þ	Accelerated filer ¨	Non-accelerated filer ¨	Smaller reporting company ¨
	(Do not check if a smaller reporting company)

Washington Gas Light Company:


Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer þ	Smaller reporting company ¨
	(Do not check if a smaller reporting company)

Indicate by check mark whether each registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ

Indicate the number of shares outstanding of each of the issuers’ classes of common stock, as of the latest practicable date.

WGL Holdings, Inc. common stock, no par value, outstanding as of April 30, 2012: 51,535,032 shares.

All of the outstanding shares of common stock ($1 par value) of Washington Gas Light Company were held by WGL Holdings, Inc. as of April 30, 2012.

WGL Holdings, Inc.

Washington Gas Light Company

For the Quarter Ended March 31, 2012

Table of Contents


PART I. Financial Information

Item 1. Financial Statements (Unaudited)
WGL Holdings, Inc.
Consolidated Balance Sheets			4
Consolidated Statements of Income			5
Consolidated Statements of Cash Flows			6

Washington Gas Light Company
Balance Sheets			7
Statements of Income			8
Statements of Cash Flows			9

Notes to Consolidated Financial Statements
WGL Holdings, Inc. and Washington Gas Light Company — Combined			10

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			38
WGL Holdings, Inc.			41
Washington Gas Light Company			62

Item 3. Quantitative and Qualitative Disclosures about Market Risk			68

Item 4. Controls and Procedures			68

PART II. Other Information

Item 1. Legal Proceedings			69

Item 6. Exhibits			69

Signature			70

WGL Holdings, Inc.

Washington Gas Light Company

INTRODUCTION

FILING FORMAT

This Quarterly Report on Form 10-Q is a combined report being filed by two separate registrants: WGL Holdings, Inc. (WGL Holdings) and Washington Gas Light Company (Washington Gas). Except where the content clearly indicates otherwise, any reference in the report to “WGL Holdings,” “we,” “us” or “our” is to the holding company or the consolidated entity of WGL Holdings and all of its subsidiaries, including Washington Gas which is a distinct registrant that is a wholly owned subsidiary of WGL Holdings.

Part I — Financial information in this Quarterly Report on Form 10-Q includes separate financial statements (i.e. balance sheets, statements of income and statements of cash flows) for WGL Holdings and Washington Gas. The Notes to Consolidated Financial Statements are also included and are presented on a combined basis for both WGL Holdings and Washington Gas. The Management’s Discussion and Analysis of Financial Condition and Results of Operations (Management’s Discussion) included under Item 2 is divided into two major sections for WGL Holdings and Washington Gas.

SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS

Certain matters discussed in this report, excluding historical information, include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 with respect to the outlook for earnings, revenues and other future financial business performance or strategies and expectations. Forward-looking statements are typically identified by words such as, but not limited to, “estimates,” “expects,” “anticipates,” “intends,” “believes,” “plans” and similar expressions, or future or conditional verbs such as “will,” “should,” “would” and “could.” Although the registrants, WGL Holdings and Washington Gas, believe such forward-looking statements are based on reasonable assumptions, they cannot give assurance that every objective will be achieved. Forward-looking statements speak only as of today, and the registrants assume no duty to update them. The following factors, among others, could cause actual results to differ materially from forward-looking statements or historical performance:

•

the level and rate at which costs and expenses are incurred and the extent to which they are allowed to be recovered from customers through the regulatory process in connection with constructing, operating and maintaining Washington Gas’ natural gas distribution system;

•

the ability to implement successful approaches to modify the current or future composition of gas delivered to customers or to remediate the effects of the current or future composition of gas delivered to customers, as a result of the introduction of gas from the Dominion Cove Point or the Southern LNG, Inc. Elba Island facility to Washington Gas’ natural gas distribution system or changes in the composition of domestic natural gas as a result of liquids processing and new domestic sources of natural gas;

•

the availability of natural gas supply and interstate pipeline transportation and storage capacity;

•

the ability of natural gas producers, pipeline gatherers and natural gas processors to deliver natural gas into interstate pipelines for delivery by those interstate pipelines to the entrance points of Washington Gas’ natural gas distribution system as a result of factors beyond our control;

•

changes and developments in economic, competitive, political and regulatory conditions;

•

changes in capital and energy commodity market conditions;

•

changes in credit ratings of debt securities of WGL Holdings or Washington Gas that may affect access to capital or the cost of debt;

•

changes in credit market conditions and creditworthiness of customers and suppliers;

•

changes in relevant laws and regulations, including tax, environmental, pipeline integrity and employment laws and regulations;

•

legislative, regulatory and judicial mandates or decisions affecting business operations or the timing of recovery of costs and expenses;

•

the timing and success of business and product development efforts and technological improvements;

•

the pace of deregulation efforts and the availability of other competitive alternatives to our products and services;

•

changes in accounting principles;

•

new commodity purchase and sales contracts or financial contracts and modifications in the terms of existing contracts that may materially affect fair value calculations under derivative accounting requirements;

(ii)

WGL Holdings, Inc.

Washington Gas Light Company

•

the ability to manage the outsourcing of several business processes;

•

acts of nature;

•

terrorist activities and

•

other uncertainties.

The outcome of negotiations and discussions that the registrants may hold with other parties from time to time regarding utility and energy-related investments and strategic transactions that are both recurring and non-recurring may also affect future performance. All such factors are difficult to predict accurately and are generally beyond the direct control of the registrants. Accordingly, while they believe that the assumptions are reasonable, the registrants cannot ensure that all expectations and objectives will be realized. Readers are urged to use care and consider the risks, uncertainties and other factors that could affect the registrants’ business as described in this Quarterly Report on Form 10-Q. All forward-looking statements made in this report rely upon the safe harbor protections provided under the Private Securities Litigation Reform Act of 1995 .

(iii)

W GL Holdings, Inc.

Consolidated Balance Sheets (Unaudited)

Part I—Financial Information

Item 1—Financial Statements


(In thousands)	March 31, 2012			September 30, 2011
ASSETS
Property, Plant and Equipment
At original cost	$	3,664,921		$	3,575,973
Accumulated depreciation and amortization		(1,117,287	)		(1,086,072	)
Net property, plant and equipment		2,547,634			2,489,901
Current Assets
Cash and cash equivalents		97,200			4,332
Receivables
Accounts receivable		347,991			205,950
Gas costs and other regulatory assets		33,942			14,364
Unbilled revenues		147,115			94,078
Allowance for doubtful accounts		(19,263	)		(17,969	)
Net receivables		509,785			296,423
Materials and supplies—principally at average cost		26,606			27,113
Storage gas		175,688			290,394
Deferred income taxes		19,717			18,816
Other prepayments		32,471			63,839
Derivatives		65,185			16,248
Other		14,525			7,568
Total current assets		941,177			724,733
Deferred Charges and Other Assets
Regulatory assets
Gas costs		—			16,798
Pension and other post-retirement benefits		453,331			471,378
Other		63,466			69,279
Derivatives		28,212			11,721
Other		31,192			25,224
Total deferred charges and other assets		576,201			594,400
Total Assets	$	4,065,012		$	3,809,034

CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholders’ equity	$	1,292,414		$	1,202,715
Washington Gas Light Company preferred stock		28,173			28,173
Long-term debt		585,804			587,213
Total capitalization		1,906,391			1,818,101
Current Liabilities
Current maturities of long-term debt		25,071			77,104
Notes payable		131,890			39,421
Accounts payable and other accrued liabilities		258,818			279,434
Wages payable		16,974			16,949
Accrued interest		3,673			3,880
Dividends declared		20,944			20,256
Customer deposits and advance payments		70,577			78,139
Gas costs and other regulatory liabilities		35,751			7,843
Accrued taxes		69,125			16,925
Derivatives		62,284			31,851
Other		10,159			4,938
Total current liabilities		705,266			576,740
Deferred Credits
Unamortized investment tax credits		16,450			11,656
Deferred income taxes		547,803			527,189
Accrued pensions and benefits		386,395			397,460
Asset retirement obligations		68,497			66,928
Regulatory liabilities
Gas costs		13,457			—
Accrued asset removal costs		326,662			326,154
Other		16,623			18,574
Derivatives		22,290			15,066
Other		55,178			51,166
Total deferred credits		1,453,355			1,414,193
Commitments and Contingencies (Note 13)
Total Capitalization and Liabilities	$	4,065,012		$	3,809,034

The accompanying notes are an integral part of these statements.

WGL Holdings, Inc.

Consolidated Statements of Income (Unaudited)

Part I—Financial Information

Item 1—Financial Statements (continued)


	Three Months Ended March 31,					Six Months Ended March 31,
(In thousands, except per share data)	2012		2011			2012		2011
OPERATING REVENUES
Utility	$	460,700	$	561,297		$	824,847	$	970,591
Non-utility		378,744		455,924			742,354		842,504
Total Operating Revenues		839,444		1,017,221			1,567,201		1,813,095
OPERATING EXPENSES
Utility cost of gas		188,475		286,570			343,784		495,190
Non-utility cost of energy-related sales		356,114		422,325			691,976		751,118
Operation and maintenance		85,057		87,531			166,681		165,099
Depreciation and amortization		24,106		22,647			48,346		45,291
General taxes and other assessments		47,281		54,203			84,078		94,675
Total Operating Expenses		701,033		873,276			1,334,865		1,551,373
OPERATING INCOME		138,411		143,945			232,336		261,722
Other Income (Loss)—Net		1,953		(1,320	)		2,994		(432	)
Interest Expense
Interest on long-term debt		9,430		10,123			19,092		19,897
AFUDC and other, net		91		249			251		421
Total Interest Expense		9,521		10,372			19,343		20,318
INCOME BEFORE INCOME TAXES		130,843		132,253			215,987		240,972
INCOME TAX EXPENSE		56,334		52,495			90,710		95,652
NET INCOME	$	74,509	$	79,758		$	125,277	$	145,320
Dividends on Washington Gas preferred stock		330		330			660		660
NET INCOME APPLICABLE TO COMMON STOCK	$	74,179	$	79,428		$	124,617	$	144,660
AVERAGE COMMON SHARES OUTSTANDING
Basic		51,511		51,143			51,473		51,104
Diluted		51,561		51,242			51,546		51,191
EARNINGS PER AVERAGE COMMON SHARE
Basic	$	1.44	$	1.55		$	2.42	$	2.83
Diluted	$	1.44	$	1.55		$	2.42	$	2.83
DIVIDENDS DECLARED PER COMMON SHARE	$	0.4000	$	0.3875		$	0.7875	$	0.7650

The accompanying notes are an integral part of these statements.

WGL Holdings, Inc.

Consolidated Statements of Cash Flows (Unaudited)

Part I—Financial Information

Item 1—Financial Statements (continued)


	Six Months Ended March 31,
(In thousands)	2012			2011
OPERATING ACTIVITIES
Net income	$	125,277		$	145,320
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
Depreciation and amortization		48,346			45,291
Amortization of:
Other regulatory assets and liabilities—net		470			1,832
Debt related costs		441			432
Deferred income taxes—net		25,617			35,784
Accrued/deferred pension cost		9,708			10,051
Compensation expense related to equity awards		3,203			1,415
Provision for doubtful accounts		12,187			12,352
Other non-cash charges (credits)—net		3,635			(1,247	)
CHANGES IN ASSETS AND LIABILITIES
Accounts receivable and unbilled revenues—net		(205,971	)		(246,326	)
Gas costs and other regulatory assets/liabilities—net		8,330			54,864
Storage gas		114,706			158,718
Other prepayments		31,368			34,279
Accounts payable and other accrued liabilities		(10,108	)		65,249
Wages payable		25			585
Customer deposits and advance payments		(7,562	)		(7,701	)
Accrued taxes		52,200			49,883
Accrued interest		(207	)		(28	)
Other current assets		(55,387	)		6,463
Other current liabilities		35,654			(26,819	)
Deferred gas costs—net		30,255			(19,579	)
Deferred assets—other		4,048			32,621
Deferred liabilities—other		(18,386	)		(17,027	)
Other—net		76			1,872
Net Cash Provided by Operating Activities		207,925			338,284
FINANCING ACTIVITIES
Common stock issued		1,343			7,105
Long-term debt issued		—			75,000
Long-term debt retired		(52,000	)		(30,000	)
Debt issuance costs		—			(155	)
Notes payable issued (retired)—net		92,469			(84,717	)
Dividends on common stock and preferred stock		(37,906	)		(39,234	)
Other financing activities—net		(695	)		(3,692	)
Net Cash Provided by (Used in) Financing Activities		3,211			(75,693	)
INVESTING ACTIVITIES
Capital expenditures (excluding AFUDC)		(109,832	)		(74,984	)
Investments in non-utility interests		(11,157	)		(6,452	)
Distributions from non-utility interests		2,721			—
Net Cash Used in Investing Activities		(118,268	)		(81,436	)
INCREASE IN CASH AND CASH EQUIVALENTS		92,868			181,155
Cash and Cash Equivalents at Beginning of Year		4,332			8,849
Cash and Cash Equivalents at End of Period	$	97,200		$	190,004

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Income taxes paid—net	$	20,644		$	1,509
Interest paid	$	19,824		$	20,295
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Project debt financing activities—net	$	(1,393	)	$	873
Capital expenditures included in accounts payable and other accrued liabilities	$	16,492		$	9,983

The accompanying notes are an integral part of these statements.

W ashington Gas Light Company

Balance Sheets (Unaudited)

Part I—Financial Information

Item 1—Financial Statements (continued)


(In thousands)	March 31, 2012			September 30, 2011
ASSETS
Property, Plant and Equipment
At original cost	$	3,587,695		$	3,509,564
Accumulated depreciation and amortization		(1,090,486	)		(1,060,990	)
Net property, plant and equipment		2,497,209			2,448,574
Current Assets
Cash and cash equivalents		94,214			1,353
Receivables
Accounts receivable		183,678			81,778
Gas costs and other regulatory assets		33,942			14,364
Unbilled revenues		48,541			13,888
Allowance for doubtful accounts		(17,021	)		(15,863	)
Net receivables		249,140			94,167
Materials and supplies—principally at average cost		26,560			27,061
Storage gas		66,937			166,054
Deferred income taxes		18,840			15,748
Other prepayments		16,934			30,601
Receivables from associated companies		3,771			21,167
Derivatives		7,991			1,311
Other		6,308			1,154
Total current assets		490,695			358,616
Deferred Charges and Other Assets
Regulatory assets
Gas costs		—			16,798
Pension and other post-retirement benefits		450,570			468,522
Other		63,465			69,277
Derivatives		13,724			8,739
Other		6,884			8,522
Total deferred charges and other assets		534,643			571,858
Total Assets	$	3,522,547		$	3,379,048
CAPITALIZATION AND LIABILITIES
Capitalization
Common shareholder’s equity	$	1,070,555		$	990,135
Preferred stock		28,173			28,173
Long-term debt		585,804			587,213
Total capitalization		1,684,532			1,605,521
Current Liabilities
Current maturities of long-term debt		25,071			77,104
Notes payable		—			22
Accounts payable and other accrued liabilities		126,107			131,055
Wages payable		16,142			16,031
Accrued interest		3,673			3,880
Dividends declared		18,884			18,717
Customer deposits and advance payments		70,589			78,139
Gas costs and other regulatory liabilities		35,751			7,843
Accrued taxes		95,213			22,829
Payables to associated companies		28,057			11,792
Derivatives		5,141			6,105
Other		4,971			5,307
Total current liabilities		429,599			378,824
Deferred Credits
Unamortized investment tax credits		8,231			8,677
Deferred income taxes		538,992			524,253
Accrued pensions and benefits		383,765			394,818
Asset retirement obligations		67,259			65,725
Regulatory liabilities
Gas costs		13,457			—
Accrued asset removal costs		326,662			326,154
Other		16,623			18,574
Derivatives		4,890			7,115
Other		48,537			49,387
Total deferred credits		1,408,416			1,394,703
Commitments and Contingencies (Note 13)
Total Capitalization and Liabilities	$	3,522,547		$	3,379,048

The accompanying notes are an integral part of these statements.

Washington Gas Light Company

Statements of Income (Unaudited)

Part I—Financial Information

Item 1—Financial Statements (continued)


	Three Months Ended March 31,						Six Months Ended March 31,
(In thousands)	2012			2011			2012		2011
OPERATING REVENUES	$	471,057		$	569,724		$	841,950	$	988,100
OPERATING EXPENSES
Utility cost of gas		197,741			294,996			359,558		512,699
Operation and maintenance		69,450			72,980			136,592		136,977
Depreciation and amortization		23,553			22,128			47,004		44,243
General taxes and other assessments		44,656			51,273			78,920		89,628
Total Operating Expenses		335,400			441,377			622,074		783,547
OPERATING INCOME		135,657			128,347			219,876		204,553
Other Income (Loss)—Net		1,054			(597	)		1,744		299
Interest Expense
Interest on long-term debt		9,430			10,123			19,092		19,897
AFUDC and other, net		(21	)		197			78		345
Total Interest Expense		9,409			10,320			19,170		20,242
INCOME BEFORE INCOME TAXES		127,302			117,430			202,450		184,610
INCOME TAX EXPENSE		54,830			46,427			85,472		72,830
NET INCOME	$	72,472		$	71,003		$	116,978	$	111,780
Dividends on Washington Gas preferred stock		330			330			660		660
NET INCOME APPLICABLE TO COMMON STOCK	$	72,142		$	70,673		$	116,318	$	111,120

The accompanying notes are an integral part of these statements.

Washington Gas Light Company

Statements of Cash Flows (Unaudited)

Part I—Financial Information

Item 1—Financial Statements (continued)


	Six Months Ended March 31,
(In thousands)	2012			2011
OPERATING ACTIVITIES
Net income	$	116,978		$	111,780
ADJUSTMENTS TO RECONCILE NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES
Depreciation and amortization		47,004			44,243
Amortization of:
Other regulatory assets and liabilities—net		470			(1,970	)
Debt related costs		440			432
Deferred income taxes—net		17,334			22,256
Accrued/deferred pension cost		9,631			9,979
Compensation expense related to equity awards		2,545			1,351
Provision for doubtful accounts		9,839			10,022
Other non-cash charges (credits)—net		(755	)		(1,971	)
CHANGES IN ASSETS AND LIABILITIES
Accounts receivable, unbilled revenues and receivables from associated companies—net		(127,838	)		(191,656	)
Gas costs and other regulatory assets/liabilities—net		8,330			54,864
Storage gas		99,117			111,865
Other prepayments		13,667			26,859
Accounts payable and other accrued liabilities, including payables to associated companies		17,208			45,302
Wages payable		111			780
Customer deposits and advance payments		(7,550	)		(5,701	)
Accrued taxes		72,384			37,956
Accrued interest		(207	)		(28	)
Other current assets		(11,333	)		6,797
Other current liabilities		(1,300	)		(9,200	)
Deferred gas costs—net		30,255			(19,579	)
Deferred assets—other		13,324			32,519
Deferred liabilities—other		(34,185	)		(1,999	)
Other—net		226			1,806
Net Cash Provided by Operating Activities		275,695			286,707
FINANCING ACTIVITIES
Long-term debt issued		—			75,000
Long-term debt retired		(52,000	)		(30,000	)
Debt issuance costs		—			(155	)
Notes payable issued (retired)—net		(22	)		(43,419	)
Dividends on common stock and preferred stock		(37,459	)		(36,941	)
Other financing activities—net		879			(574	)
Net Cash Used in Financing Activities		(88,602	)		(36,089	)
INVESTING ACTIVITIES
Capital expenditures (excluding AFUDC)		(94,232	)		(69,938	)
Net Cash Used in Investing Activities		(94,232	)		(69,938	)
INCREASE IN CASH AND CASH EQUIVALENTS		92,861			180,680
Cash and Cash Equivalents at Beginning of Year		1,353			4,390
Cash and Cash Equivalents at End of Period	$	94,214		$	185,070

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Income taxes paid—net	$	10,303		$	—
Interest paid	$	19,651		$	20,219
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Project debt financing activities—net	$	(1,393	)	$	873
Capital expenditures included in accounts payable and other accrued liabilities	$	15,995		$	9,983

The accompanying notes are an integral part of these statements.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Consolidated Financial Statements (Unaudited)

NOTE 1. ACCOUNTING POLICIES

Basis of Presentation

WGL Holdings, Inc. (WGL Holdings) is a holding company that owns all of the shares of common stock of Washington Gas Light Company (Washington Gas), a regulated natural gas utility, and all of the shares of common stock of Washington Gas Resources Corporation (Washington Gas Resources), Hampshire Gas Company (Hampshire) and Crab Run Gas Company. Washington Gas Resources owns all of the shares of common stock of four non-utility subsidiaries that include Washington Gas Energy Services, Inc. (WGEServices), Washington Gas Energy Systems, Inc. (WGESystems), Capitol Energy Ventures Corp. (CEV) and WGSW, Inc. (WGSW). Except where the content clearly indicates otherwise, “WGL Holdings,” “we,” “us” or “our” refers to the holding company or the consolidated entity of WGL Holdings and all of its subsidiaries. Unless otherwise noted, these notes apply equally to WGL Holdings and Washington Gas.

The interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Therefore, certain financial information and note disclosures accompanying annual financial statements prepared in accordance with generally accepted accounting principles in the United States of America (GAAP) are omitted in this interim report. The interim consolidated financial statements and accompanying notes should be read in conjunction with the combined Annual Report on Form 10-K for WGL Holdings and Washington Gas for the fiscal year ended September 30, 2011. Due to the seasonal nature of our businesses, the results of operations for the periods presented in this report are not necessarily indicative of actual results for the full fiscal years ending September 30, 2012 and 2011 of either WGL Holdings or Washington Gas.

The accompanying unaudited financial statements for WGL Holdings and Washington Gas reflect all normal recurring adjustments that are necessary, in our opinion, to present fairly the results of operations in accordance with GAAP. Certain prior period amounts in the accompanying balance sheets have been reclassified to conform to the current period presentation.

For a complete description of our accounting policies, refer to Note 1 of the Notes to Consolidated Financial Statements of the combined Annual Report on Form 10-K for WGL Holdings and Washington Gas for the fiscal year ended September 30, 2011.

Storage Gas Valuation Methods

For Washington Gas and WGEServices, storage gas inventory is stated at the lower-of-cost or market as determined using the first-in, first-out method. For CEV, storage gas inventory is stated at the lower-of-cost or market using the weighted average cost method. For the three and six months ended March 31, 2012, WGL Holdings recorded, as a reduction to net income, lower-of-cost or market adjustments of $21.8 million and $31.7 million, respectively, and recorded no significant lower-of-cost or market adjustments for the three or six month periods ended March 31, 2011. There were no significant lower-of-cost or market adjustments recorded by Washington Gas during the three and six month periods ended March 31, 2012 and 2011.

Accounting Standards Adopted in the Current Fiscal Year

Fair Value. In May 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2011-04, Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS . ASU 2011-04 amends ASC Topic 820 to include a consistent definition of the term “fair value” and set forth common requirements for measuring fair value and disclosing information about fair value measurements in financial statements. ASU 2011-04 was effective for us beginning January 1, 2012. The adoption of this standard did not have a material effect on our financial statements. Refer to Note 10 – Fair Value Measurements for the required disclosure under this standard.

Fair Value. In January 2010, the FASB issued ASU 2010-06, Improving Disclosures about Fair Value Measurements . ASU 2010-06 amends ASC Topic 820 to require the following additional disclosures regarding fair value measurements: (i) the amounts of transfers between Level 1 and Level 2 of the fair value hierarchy; (ii) reasons for any transfers in or out of Level 3 of the fair value hierarchy and (iii) the inclusion of information about purchases, sales, issuances and settlements in the reconciliation of recurring Level 3 measurements. ASU 2010-06 also amends ASC Topic 820 to clarify existing disclosure requirements, requiring fair value disclosures by class of assets and liabilities rather than by major category and the disclosure of valuation techniques and inputs used to determine the fair value of Level 2 and Level 3 assets and liabilities. With the exception of disclosures relating to purchases, sales, issuances and settlements of recurring Level 3 measurements, ASU 2010-06 was effective for us on January 1, 2010. The remaining disclosure requirements were effective for us on October 1, 2011. The adoption of this standard did not have a material effect on our financial statements. Refer to Note 10 – Fair Value Measurements for the required disclosure under this standard.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Consolidated Financial Statements (Unaudited)

Newly Issued Accounting Standards

Balance Sheet Offsetting. In December 2011, the FASB issued ASU 2011-11, Disclosures about Offsetting Assets and Liabilities . This standard amends the disclosure requirements on offsetting in ASC Topic 210 by requiring enhanced disclosures about financial instruments and derivative instruments that are either ( i ) offset in accordance with existing guidance or ( ii ) subject to an enforceable master netting arrangement or similar agreement, irrespective of whether they are offset on the balance sheet. ASU 2011-11 will be effective for us on October 1, 2013. We do not expect the adoption of this standard to have a material effect on our financial statements.

Comprehensive Income. In June 2011, the FASB issued ASU 2011-05, Comprehensive Income (Topic 220): Presentation of Comprehensive Income . ASU 2011-05 is intended to improve financial reporting by requiring companies to present items of net income in either one continuous statement, or in two separate but consecutive statements of net income and other comprehensive income. The new guidance removes the current presentation options in ASC Topic 220. The requirements of ASU 2011-05 do not change which components of comprehensive income are recognized in net income or other comprehensive income, nor does the update change the computation of earnings per share (EPS). ASU 2011-05 will be effective for us on October 1, 2012. We do not expect the adoption of this standard to have a material effect on our financial statements.

NOTE 2. ACCOUNTS PAYABLE AND OTHER ACCRUED LIABILITIES

The tables below provide details for the amounts included in “Accounts payable and other accrued liabilities” on the balance sheets for both WGL Holdings and Washington Gas.


WGL Holdings, Inc.
(In millions)	March 31, 2012		September 30, 2011
Accounts payable—trade	$	208.5	$	210.4
Employee benefits and payroll accruals		18.5		26.5
Derivatives and other accrued liabilities		31.8		42.5
Total	$	258.8	$	279.4


Washington Gas Light Company
(In millions)		March 31, 2012		September 30, 2011
Accounts payable—trade	$	91.1	$	103.0
Employee benefits and payroll accruals		17.2		23.7
Derivatives and other accrued liabilities		17.8		4.4
Total	$	126.1	$	131.1

NOTE 3. SHORT-TERM DEBT

WGL Holdings and Washington Gas satisfy their short-term financing requirements through the sale of commercial paper or through bank borrowings. Due to the seasonal nature of our businesses, short-term financing requirements can vary significantly during the year. We maintain revolving credit agreements to support our outstanding commercial paper and to permit short-term borrowing flexibility. Our policy is to maintain bank credit facilities in an amount equal to or greater than our expected maximum commercial paper position. The following is a summary of our committed credit available at March 31, 2012 and September 30, 2011.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Consolidated Financial Statements (Unaudited)


Committed Credit Available (In millions)
As of March 31, 2012	WGL Holdings			Washington Gas		Total Consolidated
Committed credit agreements
Unsecured revolving credit facility, expires August 3, 2012 ^(a)	$	400.0		$	300.0	$	700.0
Less: Commercial Paper		(131.9	)		—		(131.9	)
Net committed credit available	$	268.1		$	300.0	$	568.1



As of September 30, 2011	WGL Holdings			Washington Gas		Total Consolidated
Committed credit agreements
Unsecured revolving credit facility, expires August 3, 2012 ^(a)	$	400.0		$	300.0	$	700.0
Less: Commercial Paper		(39.4	)		—		(39.4	)
Net committed credit available	$	360.6		$	300.0	$	660.6

^(a) Both WGL Holdings and Washington Gas have the right to request extensions with the banks’ approval. WGL Holdings’ revolving credit facility permits it to borrow an additional $50 million, with the banks’ approval, for a total of $450 million. Washington Gas’ revolving credit facility permits it to borrow an additional $100 million, with the banks’ approval, for a total of $400 million.

At March 31, 2012 and September 30, 2011, WGL Holdings and its subsidiaries had outstanding notes payable in the form of commercial paper from revolving credit facilities of $131.9 million and $39.4 million, respectively, at a weighted average interest rate of 0.31% and 0.20%, respectively. At March 31, 2012 and September 30, 2011, there were no outstanding bank loans from WGL Holdings’ or Washington Gas’ revolving credit facilities.

NOTE 4. LONG-TERM DEBT

UNSECURED NOTES

Washington Gas issues unsecured Medium-Term Notes (MTNs) and private placement notes with individual terms regarding interest rates, maturities and call or put options. These notes can have maturity dates of one or more years from the date of issuance.

On October 17 and 19, 2011, Washington Gas retired $7.0 million of 6.05% MTN’s and $20.0 million of 6.00% MTN’s respectively. In addition, Washington Gas also retired $25.0 million of 6.00% MTN’s on February 27, 2012.

At March 31, 2012, Washington Gas had the capacity, under a shelf registration to issue up to $375.0 million of additional MTNs. At March 31, 2012 and September 30, 2011, outstanding MTNs and private placement notes were $608.0 million and $660.0 million, respectively. At both March 31, 2012 and September 30, 2011, the weighted average interest rate on all MTNs and private placement notes was 5.91%.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Consolidated Financial Statements (Unaudited)

NOTE 5. COMMON SHAREHOLDERS’ EQUITY

The tables below reflect the changes in “Common shareholders’ equity” for WGL Holdings and Washington Gas for the six months ended March 31, 2012.


WGL Holdings, Inc.
Components of Common Shareholders’ Equity
(In thousands)	Common Stock Amount		Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Loss, Net of Taxes			Total
Balance at September 30, 2011	$	557,594	$	7,731		$	648,052		$	(10,662	)	$	1,202,715
Net income		—		—			125,277			—			125,277
Post-retirement benefits adjustment, net of taxes		—		—			—			189			189
Comprehensive income													125,466
Dividends reinvestment		3,136											3,136
Stock-based compensation		3,687		(1,361	)		—			—			2,326
Dividends declared:
Common stock		—		—			(40,569	)		—			(40,569	)
Preferred stock							(660	)					(660	)
Balance at March 31, 2012	$	564,417	$	6,370		$	732,100		$	(10,473	)	$	1,292,414


Washington Gas Light Company
Components of Common Shareholder’s Equity
(In thousands)	Common Stock Amount		Paid-In Capital		Retained Earnings			Accumulated Other Comprehensive Loss, Net of Taxes			Total
Balance at September 30, 2011	$	46,479	$	473,099	$	481,219		$	(10,662	)	$	990,135
Net income		—		—		116,978			—			116,978
Post-retirement benefits adjustment, net of taxes		—		—		—			189			189
Comprehensive income												117,167
Stock-based compensation		—		880		—			—			880
Dividends declared:
Common stock		—		—		(36,967	)		—			(36,967	)
Preferred stock		—		—		(660	)		—			(660	)
Balance at March 31, 2012	$	46,479	$	473,979	$	560,570		$	(10,473	)	$	1,070,555

WGL Holdings had 51,532,467 and 51,365,337 shares issued of common stock at March 31, 2012 and September 30, 2011, respectively. Washington Gas had 46,479,536 shares issued of common stock at both March 31, 2012 and September 30, 2011.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Consolidated Financial Statements (Unaudited)

NOTE 6. COMPREHENSIVE INCOME

The tables below reflect the components of comprehensive income (loss) for the three and six months ended March 31, 2012 and 2011 for WGL Holdings and Washington Gas. Items that are excluded from net income (loss) and charged directly to common shareholders’ equity are recorded in other comprehensive income (loss), net of taxes. The amount of accumulated other comprehensive income (loss), net of taxes is included in common shareholders’ equity (refer to Note 5— Common Shareholders’ Equity ).


WGL Holdings, Inc.
Components of Comprehensive Income
	Three Months Ended March 31,				Six Months Ended March 31,
(In thousands)	2012		2011		2012		2011
Net income	$	74,509	$	79,758	$	125,277	$	145,320
Other comprehensive income, net of taxes ^(a)		198		146		189		275
Comprehensive income	$	74,707	$	79,904	$	125,466	$	145,595


(a) Amounts relate to post-retirement benefits.

Washington Gas Light Company
Components of Comprehensive Income
	Three Months Ended March 31,				Six Months Ended March 31,
(In thousands)	2012		2011		2012		2011
Net income	$	72,472	$	71,003	$	116,978	$	111,780
Other comprehensive income, net of taxes ^(a)		198		146		189		275
Comprehensive income	$	72,670	$	71,149	$	117,167	$	112,055


(a) Amounts relate to post-retirement benefits.

NOTE 7. EARNINGS PER SHARE

Basic EPS is computed by dividing net income by the weighted average number of common shares outstanding during the reported period. Diluted EPS assumes the issuance of common shares pursuant to stock-based compensation plans at the beginning of the applicable period unless the effect of such issuance would be anti-dilutive. The following table reflects the computation of our basic and diluted EPS for the three and six months ended March 31, 2012 and 2011.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Consolidated Financial Statements (Unaudited)


Basic and Diluted EPS
(In thousands, except per share data)	Net Income Applicable to Common Stock		Shares		Per Share Amount
Three Months Ended March 31, 2012
Basic EPS	$	74,179		51,511	$	1.44

Stock-based compensation plans		—		50
Diluted EPS	$	74,179		51,561	$	1.44

Three Months Ended March 31, 2011
Basic EPS	$	79,428		51,143	$	1.55

Stock-based compensation plans		—		99
Diluted EPS	$	79,428		51,242	$	1.55

Six Months Ended March 31, 2012
Basic EPS	$	124,617		51,473	$	2.42

Stock-based compensation plans		—		73
Diluted EPS	$	124,617		51,546	$	2.42

Six Months Ended March 31, 2011
Basic EPS	$	144,660		51,104	$	2.83

Stock-based compensation plans		—		87
Diluted EPS	$	144,660		51,191	$	2.83

There were no anti-dilutive shares for the three and six months ended March 31, 2012 or 2011.

NOTE 8. INCOME TAXES

As of March 31, 2012, our uncertain tax positions were approximately $19.7 million primarily due to the change in tax accounting for repairs. If the amounts of unrecognized tax benefits are eventually realized, it would not materially impact the effective tax rate. It is reasonably possible that the amount of the unrecognized tax benefit with respect to Washington Gas’s uncertain tax positions will significantly increase or decrease in the next 12 months due to the on-going audit of Washington Gas by the IRS with respect to the tax year related to its change in accounting method for repairs. At this time an estimate of the range of reasonably possible outcomes cannot be determined.

Under the provision of FIN 48 (now part of ASC Topic 740, Income Taxes),Washington Gas recognizes any accrued interest associated with uncertain tax positions in interest expense and recognizes any accrued penalties associated with uncertain tax positions in other expenses in the statements of income. During each of the quarters ended March 31, 2012 and 2011, we accrued $0.2 million in expense for interest on uncertain tax positions. At March 31, 2012 and September 30, 2011, we had a total accrual of $1.4 million and $0.9 million, respectively, of interest related to uncertain tax positions included in other deferred credits in the accompanying balance sheets.

NOTE 9. DERIVATIVE AND WEATHER-RELATED INSTRUMENTS

DERIVATIVE INSTRUMENTS

Regulated Utility Operations

Washington Gas enters into contracts related to the sale and purchase of natural gas that qualify as derivative instruments and are accounted for under ASC Topic 815. These derivative instruments are recorded at fair value on our balance sheet and Washington Gas does not designate any derivatives as hedges under ASC Topic 815. Washington Gas’ derivative instruments relate to: (i) Washington Gas’ asset optimization program; (ii) managing price risk associated with the purchase of gas to serve utility customers and (iii) managing interest rate risk.

Asset Optimization. Washington Gas optimizes the value of its long-term natural gas transportation and storage capacity resources during periods when these resources are not being used to physically serve utility customers. Specifically, Washington Gas utilizes its transportation capacity assets to benefit from favorable natural gas prices between different geographic locations and its storage capacity assets to benefit from favorable natural gas prices between different time periods. As part of this asset optimization

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Consolidated Financial Statements (Unaudited)

program, Washington Gas enters into physical and financial derivative transactions in the form of forward, swap and option contracts to lock-in operating margins that Washington Gas will ultimately realize. The derivatives used under this program are subject to mark-to-market accounting treatment.

Regulatory sharing mechanisms allow the profit from these transactions to be shared between Washington Gas’ shareholders and customers; therefore, any changes in fair value are recorded through earnings, or as regulatory assets or liabilities to the extent that gains and losses associated with these derivative instruments will be included in the rates charged to customers when they are realized. Valuation changes for the portion of net profits to be retained for shareholders may cause significant period-to-period volatility in earnings from unrealized gains and losses. This volatility does not change the locked-in operating margins that Washington Gas will ultimately realize from these transactions.

All physically and financially settled contracts under our asset optimization program are reported on a net basis in the statements of income in “Utility cost of gas”. Total net margins recorded to “Utility cost of gas” after sharing and management fees associated with all asset optimization transactions for the three months ended March 31, 2012 was a gain of $4.8 million including an unrealized gain of $1.1 million. During the three months ended March 31, 2011 we recorded a gain of $2.9 million including an unrealized derivative loss of $4.7 million. Total net margins recorded for the six months ended March 31, 2012 was a gain of $8.5 million including an unrealized gain of $1.5 million. During the six months ended March 31, 2011 we recorded gains of $1.1 million including an unrealized derivative loss of $14.5 million.

Managing Price Risk. To manage price risk associated with acquiring natural gas supply for utility customers, Washington Gas enters into forward contracts, option contracts, financial swap contracts and other contracts, as authorized by its regulators. These instruments are accounted for as derivative instruments. Any gains and losses associated with these derivatives are recorded as regulatory liabilities or assets, respectively, to reflect the rate treatment for these economic hedging activities.

Managing Interest-Rate Risk . Washington Gas utilizes derivative instruments that are designed to minimize the risk of interest-rate volatility associated with planned issuances of debt securities. Any gains and losses associated with these types of derivatives are recorded as regulatory liabilities or assets, respectively, and amortized in accordance with regulatory requirements, which is typically over the life of the newly issued debt.

Non-Utility Operations

WGEServices enters into certain derivative contracts as part of managing the price risk associated with the sale and purchase of natural gas and electricity. CEV enters into derivative contracts for the purpose of optimizing its storage and transportation capacity as well as managing the transportation and storage assets on behalf of third parties. Derivative instruments are recorded at fair value on our consolidated balance sheets. Neither WGEServices nor CEV designate these derivatives as hedges under ASC Topic 815; therefore, changes in the fair value of these derivative instruments are reflected in the earnings of our non-utility operations and may cause significant period-to-period volatility in earnings.

Consolidated Operations

Reflected in the tables below is information for WGL Holdings as well as Washington Gas. The information for WGL Holdings includes derivative instruments for both utility and non-utility operations.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Consolidated Financial Statements (Unaudited)

At March 31, 2012 and September 30, 2011, respectively, the absolute notional amounts of our derivatives are as follows:


Absolute Notional Amounts
of Open Positions on Derivative Instruments
As of March 31, 2012	Notional Amounts
Derivative transactions	WGL Holdings	Washington Gas
Natural Gas (In millions of therms)
Asset optimization	2,994.1	2,270.8
Retail sales	133.8	—
Other risk-management activities	604.6	256.5
Electricity (In kWhs)
Retail sales	3,054.8	—
Other risk-management activities	15,317.7	—

Absolute Notional Amounts of Open Positions on Derivative Instruments
As of September 30, 2011	Notional Amounts
Derivative transactions	WGL Holdings	Washington Gas
Natural Gas (In millions of therms)
Asset optimization	1,538.6	1,221.7
Retail sales	131.4	—
Other risk-management activities	656.2	392.0
Electricity (In kWhs)
Retail sales	606.5	—
Other risk-management activities	17,085.1	—

The following tables present the balance sheet classification for all derivative instruments as of March 31, 2012 and September 30, 2011.


WGL Holdings, Inc.
Balance Sheet Classification of Derivative Instruments
(In millions)
As of March 31, 2012	Derivative Assets		Derivative Liabilities			Netting of Collateral			Total
Current Assets — Derivatives	$	88.9	$	(23.7	)	$	—		$	65.2
Deferred Charges and Other Assets — Derivatives		69.1		(40.9	)		—			28.2
Accounts payable and other accrued liabilities		3.6		—			—			3.6
Current Liabilities — Derivatives		9.7		(75.6	)		3.6			(62.3	)
Deferred Credits — Derivatives		3.7		(28.4	)		2.4			(22.3	)
Total	$	175.0	$	(168.6	)	$	6.0		$	12.4

As of September 30, 2011
Current Assets — Derivatives	$	26.2	$	(10.1	)	$	0.1		$	16.2
Deferred Charges and Other Assets — Derivatives		39.1		(27.4	)		—			11.7
Accounts payable and other accrued liabilities		7.1		(1.8	)		—			5.3
Current Liabilities — Derivatives		9.6		(41.1	)		(0.4	)		(31.9	)
Deferred Credits — Derivatives		5.1		(23.2	)		3.0			(15.1	)
Total	$	87.1	$	(103.6	)	$	2.7		$	(13.8	)

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Consolidated Financial Statements (Unaudited)


Washington Gas Light Company
Balance Sheet Classification of Derivative Instruments
(In millions)
As of March 31, 2012	Derivative Assets		Derivative Liabilities			Netting of Collateral		Total
Current Assets — Derivatives	$	23.2	$	(15.2	)	$	—	$	8.0
Deferred Charges and Other Assets — Derivatives		54.1		(40.4	)		—		13.7
Current Liabilities — Derivatives		7.8		(12.9	)		—		(5.1	)
Deferred Credits — Derivatives		3.6		(8.5	)		—		(4.9	)
Total	$	88.7	$	(77.0	)	$	—	$	11.7

As of September 30, 2011
Current Assets — Derivatives	$	5.8	$	(4.5	)	$	—	$	1.3
Deferred Charges and Other Assets — Derivatives		36.1		(27.4	)		—		8.7
Current Liabilities — Derivatives		9.0		(15.1	)		—		(6.1	)
Deferred Credits — Derivatives		4.5		(11.6	)		—		(7.1	)
Total	$	55.4	$	(58.6	)	$	—	$	(3.2	)

The following table presents all gains and losses associated with derivative instruments for the three and six months ended March 31, 2012 and 2011.


Gains and Losses on Derivative Instruments
(In millions)	WGL Holdings, Inc.						Washington Gas Light Company
Three Months Ended March 31,		2012			2011			2012		2011
Recorded to income
Operating revenues—non-utility	$	32.4		$	(0.8	)	$	—	$	—
Utility cost of gas		5.0			(5.8	)		5.0		(5.8	)
Non-utility cost of energy-related sales		(20.0	)		2.4			—		—
Recorded to regulatory assets
Gas costs		14.2			(5.6	)		14.2		(5.6	)
Total	$	31.6		$	(9.8	)	$	19.2	$	(11.4	)


Gains and Losses on Derivative Instruments
(In millions)	WGL Holdings, Inc.						Washington Gas Light Company
Six Months Ended March 31,		2012			2011			2012		2011
Recorded to income
Operating revenues—non-utility	$	65.6		$	(7.6	)	$	—	$	—
Utility cost of gas		7.6			(10.9	)		7.6		(10.9	)
Non-utility cost of energy-related sales		(62.3	)		27.7			—		—
Recorded to regulatory assets
Gas costs		25.6			(20.9	)		25.6		(20.9	)
Other		—			6.2			—		6.2
Total	$	36.5		$	(5.5	)	$	33.2	$	(25.6	)

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Consolidated Financial Statements (Unaudited)

Collateral

In accordance with ASC 815, WGL Holdings offsets the fair value of derivative instruments against the right to reclaim or obligation to return collateral for derivative instruments executed under the same master netting arrangement. At March 31, 2012, Washington Gas, WGEServices and CEV posted $4.4 million, $13.4 million and $0.3 million, respectively, of collateral deposits with counterparties that were not offset against open and settled derivative contracts. At September 30, 2011, Washington Gas, WGEServices and CEV posted $9.7 million, $15.8 million and $9.7 million, respectively, of collateral deposits with counterparties that were not offset against open and settled derivative contracts. In addition, at September 30, 2011, Washington Gas held $3.5 million of cash collateral representing an obligation to counterparties that was not offset against open and settled derivative contracts. Any collateral posted that is not offset against open and settled derivative contracts is included in “Other prepayments” in the accompanying balance sheet. Collateral received and not offset against open and settled derivative contracts is included in “Customer deposits and advance payments” in the accompanying balance sheet.

Certain of Washington Gas’ derivative instruments contain contract provisions that require collateral to be posted if the credit rating of Washington Gas’ debt falls below certain levels. Certain of WGEServices’ and CEV’s derivative instruments contain contract provisions that require collateral to be posted if the credit rating of WGL Holdings falls below certain levels or if counterparty exposure to WGEServices or CEV exceeds a certain level. Due to counterparty exposure levels, at March 31, 2012, WGEServices did not post collateral related to its derivative liabilities that contained credit-related contingent features. At September 30, 2011, WGEServices’ posted $0.1 million of collateral related to these aforementioned derivative liabilities. Washington Gas and CEV were not required to post any collateral related to its derivative liabilities that contained credit-related contingent features at March 31, 2012 and September 30, 2011. The following table shows the aggregate fair value of all derivative instruments with credit-related contingent features that are in a liability position, as well as the maximum amount of collateral that would be required to be posted related to the net fair value of our derivative instruments if the most intrusive credit-risk-related contingent features underlying these agreements were triggered on March 31, 2012 and September 30, 2011, respectively.


Potential Collateral Requirements for Derivative Liabilities
with Credit-risk-Contingent Features
(In millions)		WGL Holdings		Washington Gas
March 31, 2012
Derivative liabilities with credit-risk-contingent features	$	133.9	$	65.5
Maximum potential collateral requirements		65.3		0.1
September 30, 2011
Derivative liabilities with credit-risk-contingent features	$	75.1	$	45.1
Maximum potential collateral requirements		30.1		1.8

Washington Gas, WGEServices and CEV do not enter into derivative contracts for speculative purposes.

Concentration of Credit Risk

Washington Gas, WGEServices and CEV are exposed to credit risk associated with agreements with wholesale counterparties that are accounted for as derivative instruments. We have credit policies in place that are designed to mitigate credit risk associated with wholesale counterparties through a requirement for credit enhancements including, but not limited to, letters of credit, parent guarantees and cash collateral when deemed necessary. For certain counterparties or their guarantors that meet this policy’s credit worthiness criteria, Washington Gas, WGEServices and CEV grant unsecured credit which is continuously monitored. Additionally, our agreements with wholesale counterparties contain netting provisions that allow Washington Gas, WGEServices and CEV to offset the receivable and payable exposure related to each counterparty. At March 31, 2012, four counterparties individually represented over 10% of Washington Gas’ credit exposure to wholesale derivative counterparties for a total credit risk of $11.2 million; four counterparties individually represented over 10% of WGEServices’ credit exposure to wholesale counterparties for a total credit risk of $0.2 million and three counterparties individually represented over 10% of CEV’s credit exposure to wholesale counterparties for a total credit risk of $6.1 million.

WEATHER-RELATED INSTRUMENTS

During the three months ended March 31, 2012 and 2011, Washington Gas used Heating Degree Day (HDD) weather derivatives to manage its financial exposure to variations from normal weather in the District of Columbia. Under these contracts, Washington Gas purchased protection against net revenue shortfalls due to warmer-than-normal weather and sold to the counterparty the right to receive the benefit when weather is colder than normal. Washington Gas chose to value all weather derivatives at fair value.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Consolidated Financial Statements (Unaudited)

Gains and losses associated with Washington Gas’ weather-related instruments are recorded to “Operation and maintenance” expense. During the three months ended March 31, 2012 and 2011, Washington Gas recorded a pre-tax net fair value gain of $4.9 million and a pre-tax net fair value loss of $1.1 million, respectively, related to weather derivatives. During the six months ended March 31, 2012 and 2011, Washington Gas recorded a pre-tax net fair value gain of $7.7 million and a pre-tax net fair value loss of $2.6 million, respectively, related to weather derivatives.

WGEServices utilizes weather-related derivatives for managing the financial effects of weather risks. These derivatives cover a portion of WGEServices’ estimated revenue or energy-related cost exposure to variations in heating or cooling degree days. These contracts provide for payment to WGEServices of a fixed-dollar amount for every degree day over or under specific levels during the calculation period depending upon the type of contract executed. For the three and six months ended March 31, 2012, WGEServices recorded pre-tax gains of $8.8 million and $15.1 million, respectively. For the three and six months ended March 31, 2011, WGEServices recorded pre-tax losses of $2.3 million and $4.2 million, respectively, related to these derivatives.

NOTE 10. FAIR VALUE MEASUREMENTS

We measure the fair value of our financial assets and liabilities in accordance with ASC Topic 820. These financial assets and liabilities primarily consist of (i) derivatives recorded on our balance sheet under ASC Topic 815, (ii) weather derivatives and (iii) long-term debt outstanding that is required to be disclosed at fair value. Under ASC Topic 820, fair value is defined as the exit price, representing the amount that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To value our financial instruments, we use market data or assumptions that market participants would use in pricing the asset or liability, including assumptions about credit risk (both our own credit risk and the counterparty’s credit risk) and the risks inherent in the inputs to our valuation technique, the income approach.

We enter into derivative contracts in the over-the-counter (OTC) wholesale and retail markets. These markets are the principal markets for the respective wholesale and retail contracts. We have determined that all of our existing counterparties and others who have participated in energy transactions at our delivery points are the relevant market participants. These participants have access to the same market data as WGL Holdings. We value our derivative contracts based on an “in-exchange” premise and valuations are generally based on pricing service data or indicative broker quotes depending on the market location. We measure the net credit exposure at a counterparty level where the right to set-off exists. The net exposure is determined using the mark-to-market exposure adjusted for collateral, letters of credit and parent guarantees. We use published default rates from Standard & Poor’s Ratings Services and Moody’s Investors Service as inputs for the determination of credit adjustments.

ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The three levels of the fair value hierarchy under ASC Topic 820 are described below:

Level 1. Level 1 of the fair value hierarchy consists of assets or liabilities that are valued using observable inputs based upon unadjusted quoted prices in active markets for identical assets or liabilities at the reporting date. Level 1 assets and liabilities primarily include exchange traded derivatives and securities. At March 31, 2012, we do not have any financial assets or liabilities in this category.

Level 2. Level 2 of the fair value hierarchy consists of assets or liabilities that are valued using directly or indirectly observable inputs that are corroborated with market data or based on exchange traded market data. Level 2 includes fair values based on industry-standard valuation techniques that consider various assumptions including: (i) quoted forward prices, including the use of mid-market pricing within a bid/ask spread; (ii) discount rates; (iii) implied volatility and (iv) other economic factors. Substantially all of these assumptions are observable throughout the full term of the instrument, can be derived from observable data or are supported by observable levels at which transactions are executed in the relevant market. At March 31, 2012, Level 2 financial assets and liabilities included non-exchange traded energy-related derivatives such as financial swaps and options and physical forward contracts for deliveries at active market locations.

Level 3. Level 3 of the fair value hierarchy consists of assets or liabilities that are valued using significant unobservable inputs at the reporting date. These unobservable assumptions reflect our assumptions about estimates that market participants would use in pricing the asset or liability, including natural gas basis prices, annualized volatilities of natural gas prices, and electricity congestion prices. A significant change to any one of these inputs in isolation could result in a significant upward or downward fluctuation in the fair value measurement. These inputs may be used with industry standard valuation methodologies that result in our best estimate of fair value for the assets or liabilities at the reporting date.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Consolidated Financial Statements (Unaudited)

The Company has a Risk Analysis and Mitigation (RA&M) Group that determines the valuation policies and procedures. The RA&M Group reports to the WGL Holdings Treasurer. In accordance with WGL Holdings’ Valuation Policy, we may utilize a variety of valuation methodologies to fair value Level 3 derivative contracts including internally developed valuation inputs and pricing models. In addition, the prices used in our valuations are corroborated using multiple pricing sources, and we periodically conduct assessments to determine whether each valuation model is still appropriate for its intended purpose. Any use of non-industry standard models used in valuations are documented and approved by the WGL Holdings Treasurer. The RA&M Group also evaluates changes in fair value measurements on a daily basis.

At March 31, 2012, Level 3 derivative assets and liabilities included: (i) physical contracts valued with significant basis adjustments to observable market data when delivery is to inactive market locations; (ii) long-dated positions where observable pricing is not available over the life of the contract; (iii) contracts valued using historical volatility assumptions and (iv) valuations using indicative broker quotes for inactive market locations. Additionally, at March 31, 2012 and September 30, 2011, Level 3 financial instruments included weather derivatives that were valued using unadjusted valuations provided by third parties and derived from significant unobservable market data.

The following tables set forth financial instruments recorded at fair value as of March 31, 2012 and September 30, 2011, respectively. A financial instrument’s classification within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy.


WGL Holdings, Inc.
Fair Value Measurements Under the Fair Value Hierarchy
(In millions)	Level 1		Level 2		Level 3		Total
At March 31, 2012
Assets
Natural gas related derivatives	$	—	$	97.0	$	46.4	$	143.4
Electricity related derivatives		—		—		31.6		31.6
Weather derivatives		—		—		6.3		6.3
Total Assets	$	—	$	97.0	$	84.3	$	181.3

Liabilities
Natural gas related derivatives	$	—	$	(63.8)	$	(47.4)	$	(111.2)
Electricity related derivatives		—		(21.4)		(36.0)		(57.4)
Total Liabilities	$	—	$	(85.2)	$	(83.4)	$	(168.6)

At September 30, 2011
Assets
Natural gas related derivatives	$	—	$	38.0	$	29.3	$	67.3
Electricity related derivatives		—		0.2		19.6		19.8
Weather derivatives		—		—		1.3		1.3
Total Assets	$	—	$	38.2	$	50.2	$	88.4

Liabilities
Natural gas related derivatives	$	—	$	(40.2)	$	(33.2)	$	(73.4)
Electricity related derivatives		—		(3.8)		(26.4)		(30.2)
Weather derivatives		—		—		(2.7)		(2.7)
Total Liabilities	$	—	$	(44.0)	$	(62.3)	$	(106.3)

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Consolidated Financial Statements (Unaudited)


Washington Gas Light Company
Fair Value Measurements Under the Fair Value Hierarchy
(In millions)	Level 1		Level 2			Level 3			Total
At March 31, 2012
Assets
Natural gas related derivatives	$	—	$	49.3		$	39.4		$	88.7
Weather derivatives		—		—			6.3			6.3
Total Assets	$	—	$	49.3		$	45.7		$	95.0

Liabilities
Natural gas related derivatives	$	—	$	(33.0	)	$	(44.0	)	$	(77.0	)
Total Liabilities	$	—	$	(33.0	)	$	(44.0	)	$	(77.0	)

At September 30, 2011
Assets
Natural gas related derivatives	$	—	$	28.7		$	26.7		$	55.4
Weather derivatives		—		—			1.3			1.3
Total Assets	$	—	$	28.7		$	28.0		$	56.7

Liabilities
Natural gas related derivatives	$	—	$	(27.0	)	$	(31.6	)	$	(58.6	)
Weather derivatives		—		—			(2.7	)		(2.7	)
Total Liabilities	$	—	$	(27.0	)	$	(34.3	)	$	(61.3	)

The following table includes quantitative information about the significant unobservable inputs used in the fair value measurement of our Level 3 financial instruments and the respective fair values of the net derivative asset and liability positions, by contract type, as of March 31, 2012.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Consolidated Financial Statements (Unaudited)


Quantitative Information about Level 3 Fair Value Measurements
(In millions)	Fair Value March 31, 2012	Valuation Techniques	Unobservable Inputs	Range

WGL Holdings
Natural gas related derivatives	($1.0)	Discounted Cash Flow	Natural Gas Basis Price (per DTH)	($0.348) - $2.3575
		Option Model	Natural Gas Basis Price (per DTH)	$0.041 - $0.898
			Annualized Volatility of Spot Market Natural Gas	37.8% - 307.1%
Electricity related derivatives	($4.4)	Discounted Cash Flow	Electricity Congestion Price (per MWH)	($3.807) - $66.35
		Load-Shaping Option Model	Electricity Congestion Price (per MWH)	$28.50 - $57.983

Washington Gas
Natural gas related derivatives	($4.6)	Discounted Cash Flow	Natural Gas Basis Price (per DTH)	($0.348) - $2.3575
		Option Model	Natural Gas Basis Price (per DTH)	$0.041 - $0.601
			Annualized Volatility of Spot Market Natural Gas	37.8% - 307.1%

The following tables are a summary of the changes in the fair value of our derivative instruments that are measured at net fair value on a recurring basis in accordance with ASC Topic 820 using significant Level 3 inputs during the three and six months ended March 31, 2012 and 2011, respectively.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Consolidated Financial Statements (Unaudited)

WGL Holdings

Reconciliation of Fair Value Measurements Using Significant Level 3 Inputs

(In millions)

Natural Gas
Related
Derivatives

Electricity
Related
Derivatives

Weather
Related
Derivatives

Total

Three Months Ended March 31, 2012

Balance at January 1, 2012

(3.4

)

(7.0

)

1.4

(9.0

)

Realized and unrealized gains (losses)

Recorded to income

10.4

(12.3

)

4.9

3.0

Recorded to regulatory assets — gas costs

4.6

—

4.6

Transfers out of Level 3

(7.3

)

—

(7.3

)

Purchases

—

(0.1

)

—

(0.1

)

Settlements

(5.3

)

15.0

—

9.7

Balance at March 31, 2012

(1.0

)

$(4.4)

$6.3

0.9

Washington Gas

Reconciliation of Fair Value Measurements Using Significant Level 3 Inputs

(In millions)

Natural Gas
Related
Derivatives

Electricity
Related
Derivatives

Weather
Related
Derivatives

Total

Three Months Ended March 31, 2012

Balance at January 1, 2012

(1.6

)

—

1.4

(0.2

)

Realized and unrealized gains (losses)

Recorded to income

1.4

—

4.9

6.3

Recorded to regulatory assets — gas costs

4.6

—

4.6

Transfers out of Level 3

(7.3

)

—

(7.3

)

Settlements

(1.7

)

—

(1.7

)

Balance at March 31, 2012

(4.6

)

—

6.3

1.7

Reconciliation of Fair Value Measurements Using Significant Level 3 Inputs



(In millions)	WGL Holdings			Washington Gas
Three Months Ended March 31, 2011
Balance at January 1, 2011	$	(16.1	)	$	(3.0	)
Realized and unrealized gains (losses)
Recorded to income		(3.8	)		(2.3	)
Recorded to regulatory assets — gas costs		(2.3	)		(2.3	)
Transfers in and/or out of Level 3		(6.7	)		(7.8	)
Purchases and settlements, net		1.8			(0.6	)
Balance at March 31, 2011	$	(27.1	)	$	(16.0	)

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Consolidated Financial Statements (Unaudited)

WGL Holdings

Reconciliation of Fair Value Measurements Using Significant Level 3 Inputs

(In millions)

Natural Gas
Related
Derivatives

Electricity
Related
Derivatives

Weather
Related
Derivatives

Total

Six Months Ended March 31, 2012

Balance at October 1, 2011

(3.9

)

(6.8

)

(1.4

)

(12.1

)

Realized and unrealized gains (losses)

Recorded to income

9.8

(23.4

)

7.7

(5.9

)

Recorded to regulatory assets — gas costs

7.4

—

7.4

Transfers out of Level 3

(9.4

)

—

(9.4

)

Purchases

0.8

—

0.8

Settlements

(4.9

)

25.0

—

20.1

Balance at March 31, 2012

(1.0

)

(4.4

)

6.3

0.9

Washington Gas

Reconciliation of Fair Value Measurements Using Significant Level 3 Inputs

(In millions)

Natural Gas
Related
Derivatives

Electricity
Related
Derivatives

Weather
Related
Derivatives

Total

Six Months Ended March 31, 2012

Balance at October 1, 2011

(4.9

)

—

(1.4

)

(6.3

)

Realized and unrealized gains (losses)

Recorded to income

1.5

—

7.7

9.2

Recorded to regulatory assets — gas costs

7.4

—

7.4

Transfers out of Level 3

(8.1

)

—

(8.1

)

Settlements

(0.5

)

—

(0.5

)

Balance at March 31, 2012

(4.6

)

—

6.3

1.7

Reconciliation of Fair Value Measurements Using Significant Level 3 Inputs



(In millions)	WGL Holdings			Washington Gas
Six Months Ended March 31, 2011
Balance at October 1, 2010	$	(9.6	)	$	15.2
Realized and unrealized gains (losses)
Recorded to income		(8.1	)		(7.9	)
Recorded to regulatory assets — gas costs		(14.9	)		(14.9	)
Transfers in and/or out of Level 3		(6.7	)		(7.8	)
Purchases and settlements, net		12.2			(0.6	)
Balance at March 31, 2011	$	(27.1	)	$	(16.0	)

Transfers between different levels of the fair value hierarchy may occur based on the level of observable inputs used to value the instruments from period to period. It is our policy to show both transfers into and out of the different levels of the fair value hierarchy at the fair value as of the beginning of the reporting period. For WGL Holdings and Washington Gas net derivative assets transferred out of Level 3 during the three and six months ended March 31, 2012, reflected an increase in observable market inputs used to value natural gas derivatives for Washington Gas and CEV.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Consolidated Financial Statements (Unaudited)

The table below sets forth the line items on the Statements of Income to which amounts are recorded for the three and six months ended March 31, 2012 and 2011, respectively, related to fair value measurements using significant Level 3 inputs.

WGL Holdings

Realized and Unrealized Gains (Losses) Recorded to Income for Level 3 Measurements


Three Months Ended	March 31, 2012										March 31, 2011
(In millions)	Natural Gas Related Derivatives		Electricity Related Derivatives			Weather Related Derivatives		Total			Total
Operating revenues — non-utility	$	2.3	$	1.3		$	—	$	3.6		$	(3.2	)
Utility cost of gas		1.4		—			—		1.4			(1.0	)
Non-utility cost of energy — related sales		6.7		(13.6	)		—		(6.9	)		1.7
Operation and maintenance expense		—		—			4.9		4.9			(1.3	)
Total	$	10.4	$	(12.3	)	$	4.9	$	3.0		$	(3.8	)

Washington Gas

Realized and Unrealized Gains (Losses) Recorded to Income for Level 3 Measurements


Three Months Ended	March 31, 2012								March 31, 2011
(In millions)	Natural Gas Related Derivatives		Electricity Related Derivatives		Weather Related Derivatives		Total		Total
Utility cost of gas	$	1.4	$	—	$	—	$	1.4	$	(1.0	)
Operation and maintenance expense		—		—		4.9		4.9		(1.3	)
Total	$	1.4	$	—	$	4.9	$	6.3	$	(2.3	)

WGL Holdings

Realized and Unrealized Gains (Losses) Recorded to Income for Level 3 Measurements


Six Months Ended	March 31, 2012										March 31, 2011
(In millions)	Natural Gas Related Derivatives		Electricity Related Derivatives			Weather Related Derivatives		Total			Total
Operating revenues—non-utility	$	5.5	$	7.8		$	—	$	13.3		$	(8.5	)
Utility cost of gas		1.5		—			—		1.5			(5.1	)
Non-utility cost of energy — related sales		2.8		(31.2	)		—		(28.4	)		8.3
Operation and maintenance expense		—		—			7.7		7.7			(2.8	)
Total	$	9.8	$	(23.4	)	$	7.7	$	(5.9	)	$	(8.1	)

Washington Gas

Realized and Unrealized Gains (Losses) Recorded to Income for Level 3 Measurements


Six Months Ended	March 31, 2012								March 31, 2011
(In millions)	Natural Gas Related Derivatives		Electricity Related Derivatives		Weather Related Derivatives		Total		Total
Utility cost of gas	$	1.5	$	—	$	—	$	1.5	$	(5.1	)
Operation and maintenance expense		—		—		7.7		7.7		(2.8	)
Total	$	1.5	$	—	$	7.7	$	9.2	$	(7.9	)

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Consolidated Financial Statements (Unaudited)

Unrealized gains (losses) for the three and six months ended March 31, 2012 and 2011, attributable to derivative assets and liabilities measured using significant Level 3 inputs were recorded as follows, respectively:

WGL Holdings

Unrealized Gains (Losses) Recorded for Level 3 Measurements


Three Months Ended	March 31, 2012								March 31, 2011
(In millions)	Natural Gas Related Derivatives		Electricity Related Derivatives		Weather Related Derivatives		Total		Total
Recorded to income
Operating revenues — non-utility	$	2.6	$	5.5	$	—	$	8.1	$	(0.3	)
Utility cost of gas		0.7		—		—		0.7		(3.1	)
Non-utility cost of energy — related sales		6.7		2.3		—		9.0		0.2
Operation and maintenance expense		—		—		4.9		4.9		(1.1	)
Recorded to regulatory assets — gas costs		2.3		—		—		2.3		(3.7	)
Total	$	12.3	$	7.8	$	4.9	$	25.0	$	(8.0	)

Washington Gas

Unrealized Gains (Losses) Recorded for Level 3 Measurements


Three Months Ended	March 31, 2012								March 31, 2011
(In millions)	Natural Gas Related Derivatives		Electricity Related Derivatives		Weather Related Derivatives		Total		Total
Recorded to income
Utility cost of gas	$	0.7	$	—	$	—	$	0.7	$	(3.1	)
Operation and maintenance expense		—		—		4.9		4.9		(1.1	)
Recorded to regulatory assets — gas costs		2.3		—		—		2.3		(3.7	)
Total	$	3.0	$	—	$	4.9	$	7.9	$	(7.9	)

WGL Holdings

Unrealized Gains (Losses) Recorded for Level 3 Measurements


Six Months Ended	March 31, 2012											March 31, 2011
(In millions)	Natural Gas Related Derivatives			Electricity Related Derivatives			Weather Related Derivatives		Total			Total
Recorded to income
Operating revenues — non-utility	$	6.0		$	15.4		$	—	$	21.4		$	1.3
Utility cost of gas		0.4			—			—		0.4			(2.8	)
Non-utility cost of energy-related sales		(1.3	)		(6.0	)		—		(7.3	)		4.4
Operation and maintenance expense		—			—			7.7		7.7			(2.8	)
Recorded to regulatory assets — gas costs		2.1			—			—		2.1			(15.1	)
Total	$	7.2		$	9.4		$	7.7	$	24.3		$	(15.0	)

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Consolidated Financial Statements (Unaudited)

Washington Gas

Unrealized Gains (Losses) Recorded for Level 3 Measurements


Six Months Ended	March 31, 2012								March 31, 2011
(In millions)	Natural Gas Related Derivatives		Electricity Related Derivatives		Weather Related Derivatives		Total		Total
Recorded to income
Utility cost of gas	$	0.4	$	—	$	—	$	0.4	$	(2.8	)
Operation and maintenance expense		—		—		7.7		7.7		(2.8	)
Recorded to regulatory assets — gas costs		2.1		—		—		2.1		(15.1	)
Total	$	2.5	$	—	$	7.7	$	10.2	$	(20.7	)

The following table presents the carrying amounts and estimated fair values of our financial instruments at March 31, 2012 and September 30, 2011. The carrying amount of current assets and current liabilities approximates fair value because of the short-term maturity of these instruments, and therefore are not shown in the table below.

Fair Value of Financial Instruments

March 31, 2012

September 30, 2011

(In millions)

Carrying Amount

Fair Value

Carrying Amount

Fair Value

Long-term debt ^(a)

585.8

712.7

587.2

720.9

^(a)	Excludes current maturities and unamortized discounts.

Washington Gas’ long-term debt is not actively traded. The fair value of long-term debt was estimated based on the quoted market prices of the U.S. Treasury issues having a similar term to maturity, adjusted for Washington Gas’ credit quality. Our long-term debt fair value measurement is classified as Level 3 as defined in ASC Topic 820.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Consolidated Financial Statements (Unaudited)

NOTE 11. OPERATING SEGMENT REPORTING

We identify and report on operating segments under the “management approach.” Our chief operating decision maker is our Chief Executive Officer. Operating segments comprise revenue-generating components of an enterprise for which we produce separate financial information internally that we regularly use to make operating decisions and assess performance.

During the first quarter of fiscal year 2012, we made certain changes to our operating segment reporting to reflect the recent growth of our non-utility business activities and the impact of those activities on our financial performance. All of our commercial energy assets and operating activities are now reported within a newly-defined operating segment entitled commercial energy systems. All activities of WGESystems are included in the commercial energy systems segment. WGESystems had previously been reported in the design build energy systems segment, which is now being eliminated as an operating segment. In addition, we have transferred all commercial solar projects, previously reported under retail energy-marketing into the commercial energy systems segment. In the future, commercial solar projects, energy efficiency projects and combined heat and power projects, which we own and manage directly, will be reported as commercial energy systems. We have also established wholesale energy solutions as a new segment that contains the activities of CEV, our non-utility asset optimization business, which we began in fiscal year 2010 and previously included in our segment reporting as part of “other activities”. Prior period operating segment information has been recast to conform to current quarter presentation.

These changes improve visibility into our operations and better align our reporting with current management accountability. Our four segments are summarized below.

•

Regulated Utility – The regulated utility segment is our core business. It comprises Washington Gas and Hampshire and provides regulated gas distribution services (including the sale and delivery of natural gas) to customers and natural gas transportation services to an unaffiliated natural gas distribution company in West Virginia under a Federal Energy Regulatory Commission (FERC) approved interstate transportation service operating agreement.

•

Retail Energy-Marketing – The retail energy-marketing segment consists of WGEServices, which sells natural gas and electricity directly to retail customers and in competition with regulated utilities and unregulated gas and electricity marketers.

•

Commercial Energy Systems – The commercial energy systems segment consists of WGESystems and provides design-build energy efficient and sustainable solutions including commercial solar, energy efficiency and combined heat and power projects to government and commercial clients.

•

Wholesale Energy Solutions – The wholesale energy solutions segment comprises CEV, which engages in acquiring, managing and optimizing natural gas storage and transportation assets.

Activities and transactions that are not significant enough on a stand-alone basis to warrant treatment as an operating segment, and that do not fit into one of our four operating segments, are aggregated as “Other Activities” and included as part of non-utility operations as presented below in the Operating Segment Financial Information. These activities include the operations of WGSW, a holding company formed to invest in alternative energy power generating facilities, and administrative costs associated with WGL Holdings and Washington Gas Resources.

While net income or loss applicable to common stock is the primary criterion for measuring a segment’s performance, we also evaluate our operating segments based on other relevant factors, such as penetration into their respective markets and return on equity.

The following tables present operating segment information for the three and six months ended March 31, 2012 and 2011.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Consolidated Financial Statements (Unaudited)


Operating Segment Financial Information
			Non-Utility Operations
(In thousands)	Regulated Utility		Retail Energy-Marketing		Commercial Energy Systems		Wholesale Energy Solutions		Other Activities		Eliminations		Consolidated
Three Months Ended March 31, 2012
Operating Revenues ^(a)	$	471,057	$	368,381	$	14,170		$ (3,807)	$	—	$	(10,357)	$	839,444
Operating Expenses:
Cost of Energy-Related Sales		197,741		343,936		12,178		—		—		(9,266)		544,589
Operation		54,687		14,159		900		449		1,524		(681)		71,038
Maintenance		14,019		—		—		—		—		—		14,019
Depreciation and Amortization		23,846		174		468		28		—		(410)		24,106
General Taxes and Other Assessments:
Revenue Taxes		28,728		1,465		2		—		—		—		30,195
Other		16,020		937		59		52		18		—		17,086
Total Operating Expenses	$	335,041	$	360,671	$	13,607	$	529	$	1,542	$	(10,357)	$	701,033
Operating Income (Loss)		136,016		7,710		563		(4,336)		(1,542)		—		138,411
Other Income (Expense)-Net		1,047		9		(2)		—		937		(38)		1,953
Interest Expense		9,409		29		—		—		121		(38)		9,521
Dividends on Washington Gas Preferred Stock		330		—		—		—		—		—		330
Income Tax Expense (Benefit)		54,973		3,225		32		(1,614)		(282)		—		56,334
Net Income (Loss) Applicable to Common Stock	$	72,351	$	4,465	$	529	$	(2,722)	$	(444)	$	—	$	74,179
Total Assets	$	3,537,030	$	374,084	$	39,069	$	145,629	$	183,413	$	(214,213)	$	4,065,012

Capital Expenditures	$	47,228	$	380	$	2,733	$	101	$	—	$	—	$	50,442

Equity Method Investments	$	—	$	—	$	—	$	—	$	16,559	$	—	$	16,559

Three Months Ended March 31, 2011
Operating Revenues ^(a)	$	569,724	$	447,706	$	7,803	$	415	$	—	$	(8,427)	$	1,017,221
Operating Expenses:
Cost of Energy—Related Sales		294,996		415,662		6,664		—		—		(8,427)		708,895
Operation		60,298		12,957		996		199		1,103		—		75,553
Maintenance		11,978		—		—		—		—		—		11,978
Depreciation and Amortization		22,419		163		65		—		—		—		22,647
General Taxes and Other Assessments:
Revenue Taxes		34,339		1,611		—		—		—		—		35,950
Other		17,032		1,143		65		4		9		—		18,253
Total Operating Expenses		441,062		431,536		7,790		203		1,112		(8,427)		873,276
Operating Income (Loss)		128,662		16,170		13		212		(1,112)		—		143,945
Other Income-Net		(616)		10		3		—		(668)		(49)		(1,320)
Interest Expense		10,320		39		—		—		62		(49)		10,372
Dividends on Washington Gas Preferred Stock		330		—		—		—		—		—		330
Income Tax Expense (Benefit)		46,553		6,467		34		84		(643)		—		52,495
Net Income (Loss) Applicable to Common Stock	$	70,843	$	9,674	$	(18)	$	128	$	(1,199)	$	—	$	79,428

Total Assets at March 31, 2011	$	3,508,410	$	325,193	$	18,193	$	52,678	$	65,098	$	(99,873)	$	3,869,699

Capital Expenditures	$	37,817	$	4,669	$	3	$	—	$	—	$		$	42,489

Equity Method Investments	$	—	$	—	$	—	$	—	$	1,302	$	—	$	1,302

^(a) Operating revenues are reported gross of revenue taxes. Revenue taxes of both the regulated utility and the retail energy-marketing segments include gross receipt taxes. Revenue taxes of the regulated utility segment also include PSC fees, franchise fees and energy taxes. Operating revenue amounts in the “Eliminations” column represent total intersegment revenues associated with sales from the regulated utility segment to the retail energy-marketing segment.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)


Operating Segment Financial Information
			Non-Utility Operations
(In thousands)	Regulated Utility		Retail Energy- Marketing		Commercial Energy Systems			Wholesale Energy Solutions		Other Activities			Eliminations			Consolidated
Six Months Ended March 31, 2012
Operating Revenues ^(a)	$	841,950	$	704,840	$	32,550		$	4,964	$	—		$	(17,103)		$	1,567,201
Operating Expenses:
Cost of Energy-Related Sales		359,558		663,396		28,580			—		—			(15,774	)		1,035,760
Operation		108,342		27,362		1,869			799		2,375			(829	)		139,918
Maintenance		26,763		—		—			—		—			—			26,763
Depreciation and Amortization		47,590		376		826			54		—			(500	)		48,346
General Taxes and Other Assessments:
Revenue Taxes		51,321		2,793		2			—		—			—			54,116
Other		27,743		1,978		115			104		22			—			29,962
Total Operating Expenses	$	621,317	$	695,905	$	31,392		$	957	$	2,397		$	(17,103)		$	1,334,865
Operating Income (Loss)		220,633		8,935		1,158			4,007		(2,397	)		—			232,336
Other Income (Expense)—Net		1,725		14		(1	)		—		1,311			(55	)		2,994
Interest Expense		19,170		38		—			—		190			(55	)		19,343
Dividends on Washington Gas Preferred Stock		660		—		—			—		—			—			660
Income Tax Expense (Benefit)		85,771		3,601		323			1,492		(477	)		—			90,710
Net Income (Loss) Applicable to Common Stock	$	116,757	$	5,310	$	834		$	2,515	$	(799)		$	—		$	124,617

Total Assets	$	3,537,030	$	374,084	$	39,069		$	145,629	$	183,413		$	(214,213)		$	4,065,012

Capital Expenditures	$	94,907	$	523	$	14,300		$	101	$	1		$	—		$	109,832

Equity Method Investments	$	—	$	—	$	—		$	—	$	16,559		$	—		$	16,559

Six Months Ended March 31, 2011
Operating Revenues ^(a)	$	988,100	$	827,087	$	14,774		$	643	$	—		$	(17,509	)	$	1,813,095
Operating Expenses:
Cost of Energy-Related Sales		512,699		738,814		12,304			—		—			(17,509	)		1,246,308
Operation		113,249		25,317		2,153			327		1,801			—			142,847
Maintenance		22,252		—		—			—		—			—			22,252
Depreciation and Amortization		44,834		325		132			—		—			—			45,291
General Taxes and Other Assessments:
Revenue Taxes		60,260		2,493		—			—		—			—			62,753
Other		29,523		2,259		119			7		14			—			31,922
Total Operating Expenses		782,817		769,208		14,708			334		1,815			(17,509	)		1,551,373
Operating Income (Loss)		205,283		57,879		66			309		(1,815	)		—			261,722
Other Income—Net		261		23		9			—		(624	)		(101	)		(432	)
Interest Expense		20,242		83		—			—		94			(101	)		20,318
Dividends on Washington Gas Preferred Stock		660		—		—			—		—			—			660
Income Tax Expense (Benefit)		73,115		23,210		95			122		(890	)		—			95,652
Net Income (Loss) Applicable to Common Stock	$	111,527	$	34,609	$	(20	)	$	187	$	(1,643	)	$	—		$	144,660

Total Assets at March 31, 2011	$	3,508,410	$	325,193	$	18,193		$	52,678	$	65,098			(99,873	)	$	3,869,699

Capital Expenditures	$	70,214	$	4,759	$	11		$	—		—			—		$	74,984

Equity Method Investments	$	—	$	—	$	—		$	—	$	6,452			—		$	6,452

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Consolidated Financial Statements (Unaudited)

NOTE 12. RELATED PARTY TRANSACTIONS

WGL Holdings and its subsidiaries engage in transactions during the ordinary course of business. Inter-company transactions and balances have been eliminated from the consolidated financial statements of WGL Holdings, except as described below. Washington Gas provides accounting, treasury, legal and other administrative and general support to affiliates, and files consolidated tax returns that include affiliated taxable transactions. The actual costs of these services are billed to the appropriate affiliates, which approximates the market value of the service provided. To the extent such billings for these services are not yet paid, they are reflected in “Receivables from associated companies” on Washington Gas’ balance sheets. Washington Gas assigns or allocates these costs directly to its affiliates and, therefore, does not recognize revenues or expenses associated with providing these services.

In connection with billing for unregulated third party marketers and with other miscellaneous billing processes, Washington Gas collects cash on behalf of affiliates and transfers the cash in a reasonable time period. Cash collected by Washington Gas on behalf of its affiliates but not yet transferred is recorded in “Payables to associated companies” on Washington Gas’ balance sheets.

At March 31, 2012 and September 30, 2011, Washington Gas recorded receivables from associated companies of $3.8 million and $21.2 million, respectively. At March 31, 2012 and September 30, 2011, Washington Gas recorded payables to associated companies of $28.1 million and $11.8 million, respectively.

Washington Gas provides gas balancing services related to storage, injections, withdrawals and deliveries to all energy marketers participating in the sale of natural gas on an unregulated basis through the customer choice programs that operate in its service territory. These balancing services include the sale of natural gas supply commodities related to various peaking arrangements contractually supplied to Washington Gas and then partially allocated and assigned by Washington Gas to the energy marketers, including WGEServices. Washington Gas records revenues for these balancing services pursuant to tariffs approved by the appropriate regulatory bodies. In conjunction with such services and the related sales and purchases of natural gas, Washington Gas charged WGEServices $9.3 million and $8.4 million for the three months ended March 31, 2012 and 2011, respectively. In the six months ended March 31, 2012 and 2011, the charges were $15.8 million and $17.5 million, respectively. These related party amounts have been eliminated in the consolidated financial statements of WGL Holdings.

As a result of these balancing services, an imbalance is created for volumes of natural gas received by Washington Gas that are not equal to the volumes of natural gas delivered to customers of the energy marketers. WGEServices recognized a payable to Washington Gas in the amount of $0.5 million and a receivable from Washington Gas in the amount of $2.1 million at March 31, 2012 and September 30, 2011, respectively, related to an imbalance in gas volumes. Due to regulatory treatment, these receivables are not eliminated in the consolidated financial statements of WGL Holdings. Refer to Note 1— Accounting Policies for further discussion of these imbalance transactions.

On June 29, 2011, Washington Gas implemented a Purchase of Receivables (POR) program as approved by the PSC of MD, whereby it purchases receivables from participating energy marketers at approved discount rates. In addition, WGEServices participates in POR programs with certain Maryland and Pennsylvania utilities, whereby it sells its receivables to various utilities, including Washington Gas, at approved discount rates. The receivables purchased by Washington Gas are included in “Accounts receivable” in the accompanying balance sheet. Any activity between Washington Gas and WGEServices related to the POR program has been eliminated in the accompanying financial statements for WGL Holdings. During the three and six months ended March 31, 2012, Washington Gas purchased $44.8 million and $71.4 million of receivables from WGEServices, respectively. This program was not in effect during the three and six month periods ended March 31, 2011.

Effective October 1, 2011, WGL Holdings began charging to its subsidiaries guarantee fees in an amount equal to the daily guarantee exposure multiplied by a monthly weighted average interest rate. During the three and six months ended March 31, 2012, the total fees charged by WGL Holdings to its subsidiaries were $0.2 million and $0.3 million, respectively. The majority of these fees were charged to WGEServices. These fees have been eliminated in the accompanying consolidated financial statements of WGL Holdings. Refer to Note 13— Commitments and Contingencies for further discussion of our guarantees.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Consolidated Financial Statements (Unaudited)

NOTE 13. COMMITMENTS AND CONTINGENCIES

RATES AND REGULATORY MATTERS

Washington Gas determines its request to modify existing rates based on the level of net investment in plant and equipment, operating expenses and the need to earn a just and reasonable return on invested capital. The following is an update of significant current regulatory matters in each of Washington Gas’ jurisdictions. For a more detailed discussion of the matters below, refer to our combined Annual Report on Form 10-K for WGL Holdings and Washington Gas for the fiscal year ended September 30, 2011.

District of Columbia Jurisdiction

Investigation of Depreciation Practices. On September 9, 2011, the Public Service Commission of the District of Columbia (PSC of DC) docketed a proceeding to review the proper and adequate rates of depreciation of the several classes of Washington Gas’ property. In accordance with the procedural schedule, interested parties’ comments were filed by October 24, 2011. Washington Gas’ reply comments were filed on November 14, 2011, wherein Washington Gas requested that the PSC of DC consider depreciation issues in the context of the newly-initiated rate case, referenced below. On April 26, 2012, the PSC of DC granted Washington Gas’ request to consolidate its investigation of depreciation issues into its base rate proceeding and closed the proceeding.

District of Columbia Base Rate Case. On November 2, 2011, the PSC of DC docketed a proceeding to investigate the reasonableness of Washington Gas’ base rates and charges and required Washington Gas to file a base rate case no later than 90 days from the date of the order. On February 29, 2012, Washington Gas filed a request with the PSC of DC for a $29.0 million annual increase in revenues. The $29.0 million revenue increase requested in this application included a proposed overall rate of return 8.91% and a return on common equity of 10.90%. Washington Gas is also proposing to expand the existing program to replace or encapsulate certain vintage mechanical couplings, which was previously approved by the PSC of DC, to include the accelerated replacement of pipe in its system that is nearing the end of its useful life. Washington Gas plans to invest approximately $119.0 million to replace aging distribution pipe in the District of Columbia over the next five years and included in this proposal, a request for approval of these expenditures over the next five years. Washington Gas has provided a proposed procedural schedule and requested that the PSC of DC establish a pre-hearing conference. On April 26, 2012, the PSC of DC adopted a procedural schedule and designated issues for the proceeding. Intervenor testimony is due on July 17, 2012, rebuttal testimony is due August 31, 2012, and evidentiary hearings are scheduled to occur in October 2012.

Maryland Jurisdiction

Order on and Reviews of Purchased Gas Charges. Each year, the Maryland Public Service Commission (PSC of MD) reviews the annual gas costs collected from customers in Maryland to determine if Washington Gas’ purchased gas costs are reasonable.

On September 9, 2011, the PSC of MD issued an order approving purchased gas charges of Washington Gas for the twelve-month period ending August 2009, except for an undetermined amount related to excess gas deliveries by competitive service providers (CSP) which were cashed-out by Washington Gas. The PSC of MD found that the cash-out of excess deliveries was in violation of Washington Gas’ tariff and that Washington Gas should not have cashed-out the excess deliveries by CSPs, but rather should have eliminated the imbalances through volumetric adjustments in the future and designated that the hearing examiner in a separate proceeding determine whether civil penalties should be levied against Washington Gas. In accordance with generally accepted accounting principles, Washington Gas recorded a $5.3 million estimated regulatory liability associated with this decision during the fourth quarter of fiscal year 2011. On October 11, 2011, Washington Gas filed an application for rehearing of the order with respect to the decision that a violation of the tariff occurred and that civil penalties might be levied. Washington Gas requested that the PSC of MD find that Washington Gas is authorized to cash-out CSP account imbalances under its tariff and therefore is not subject to civil penalties. On January 3, 2012, the PSC of MD issued an order denying Washington Gas’ request for rehearing. Pending the ultimate decision of the PSC of MD, further action may be taken with respect to recovery from the CSPs.

Investigation of Asset Management and Gas Purchase Practices. In 2008, the Office of Staff Counsel of the PSC of MD submitted a petition to the PSC of MD to establish an investigation into Washington Gas’ asset management program and cost recovery of its gas purchases.

In November 2009, the Chief Hearing Examiner of the PSC of MD issued a Proposed Order of Hearing Examiner (POHE), which approved Washington Gas’ proposal for the sharing of margins from asset optimization between Washington Gas and customers and its current methodology for pricing storage injections.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Consolidated Financial Statements (Unaudited)

Subsequently, both the MD Staff and the Office of People’s Counsel (OPC) filed notices of appeal of the POHE followed by a memorandum on appeal in support of their positions. In January 2010, Washington Gas filed a reply memorandum in response to the Staff of the PSC of MD and the OPC’s memoranda on appeal. A decision by the PSC of MD is pending.

Maryland Base Rate Case. On November 14, 2011, the PSC of MD issued an order authorizing: (i) an annual revenue increase of $8.4 million compared to Washington Gas’ revised request of $27.8 million; (ii) a rate of return on common equity of 9.60% and an overall rate of return of 8.09%; and (iii) an end of test period equity ratio of 57.88%. The order also authorized Washington Gas to implement the initial 5-year phase of the accelerated pipe replacement plan, but denied the proposed cost recovery mechanism; and disallowed the amortization of costs to achieve under Washington Gas’ Business Process Outsourcing (BPO) agreement.

On December 14, 2011, Washington Gas filed a petition for rehearing and clarification of the PSC of MD’s November 14, 2011 order to (i) correct the methodology used to calculate the adjustment related to interest synchronization, which would increase the revenue requirement determined by the PSC of MD in its order by $0.7 million, (ii) correct the omission of an adjustment related to “Other Tax Adjustments,” which would increase the revenue requirement by an additional $2.4 million, and (iii) reverse the decision to disallow $1.0 million of Washington Gas’ test period costs to achieve Washington Gas’ BPO agreement. Washington Gas also requested clarification related to implementation of the accelerated pipe replacement plan and what annual reporting requirements may apply.

On March 29, 2012, the PSC of MD issued an order in response to the petition for rehearing and clarification filed by Washington Gas. The PSC of MD (i) granted an additional revenue increase of $0.7 million related to interest synchronization, increasing the overall revenue increase granted to Washington Gas in the case to $9.1 million; (ii) denied Washington Gas’ request for an adjustment related to other tax adjustments, which would have increased the revenue requirement by an additional $2.4 million; (iii) denied recovery of the costs to initiate the outsourcing agreement with Accenture LLC in 2007; and (iv) directed Washington Gas to provide written notice when it implements the accelerated pipeline replacement project and adopted the reporting structure suggested by a PSC of MD Staff (MD Staff) witness as guidance for reporting Washington Gas’ progress. As a result of this order, Washington Gas recorded a $2.8 million charge to income tax expense to write-off a regulatory asset that had been established in 2010 for the change in the tax treatment of Medicare Part D, the amortization of which comprised the majority of the other tax adjustments that were disallowed by the Commission.

On April 30, 2012, Washington Gas filed a petition for rehearing with the PSC of MD which requested the Commission to reverse its decisions in the March 29, 2012 order denying Washington Gas’ request for an adjustment related to other tax adjustments and the costs to initiate the outsourcing agreement with Accenture, LLC. Washington Gas also filed a petition for judicial review of the PSC of MD’s March 29, 2012 order with the Circuit Court for Baltimore City to preserve its right to appeal in this case. Washington Gas has requested the Circuit Court to hold further proceedings on the appeal in abeyance pending the PSC of MD’s action on the petition for rehearing.

Virginia Jurisdiction

Conservation and Ratemaking Efficiency Plan. On July 22, 2010, Washington Gas filed an amendment to the CARE Plan to include small commercial and industrial customers in Virginia. The application included a portfolio of conservation and energy efficiency programs, an associated cost recovery provision and a decoupling mechanism that will adjust weather normalized non-gas distribution revenues for the impact of conservation or energy efficiency efforts. On November 18, 2010, the State Corporation Commission of Virginia (SCC of VA) issued an order that denied Washington Gas’ application. The SCC of VA found that Washington Gas’ current tariff and its underlying class cost of service and revenue apportionment studies do not segregate small versus large customers and that only small customers qualify under the CARE law. The SCC of VA stated that Washington Gas could amend the underlying tariff and studies in connection with its required 2011 base rate case filing. Such a tariff amendment was proposed in the new base rate case filing made with the SCC of VA, which is pending a commission decision.

Virginia Base Rate Case. On January 31, 2011, Washington Gas filed a request with the SCC of VA for a $29.6 million annual increase in revenues. The filing was made pursuant to the settlement agreement reached by the parties and approved by the SCC of VA in Washington Gas’ last base rate case, which resulted in a Performance-Based Rate (PBR) plan. On May 12, 2011, Washington Gas revised its requested revenue increase from $29.6 million to $28.5 million as a result of new proposed depreciation rates. Interim rates went into effect on October 1, 2011 with the requested increase subject to refund pending a final commission decision.

On November 30, 2011, Washington Gas filed a stipulation to reflect settlement terms to which Washington Gas, the Staff, and other stipulating parties to the settlement agreed. The Apartment and Office Building Association (AOBA) did not support this stipulation. In the stipulation, the settling parties agreed to a $20.0 million rate increase, a 9.75% return on equity, an 8.261% overall rate of return, and a provision for sharing margins from asset optimization activities between Washington Gas and customers which includes a $3.2 million annual guarantee. Evidentiary hearings were held on December 5 and 6, 2011. Post-hearing briefs were filed on January 26, 2012. On March 15, 2012, the Senior Hearing Examiner issued a report of findings and recommended that the SCC of

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Consolidated Financial Statements (Unaudited)

VA adopt the stipulation. On April 5, 2012, Washington Gas, the Staff of the SCC of VA, the Office of the Attorney General and Fairfax County all filed comments in support of the recommended decision of the Hearing Examiner while the AOBA filed comments in opposition. On April 18, 2012, Washington Gas filed a petition for leave to file reply and reply to AOBA’s comments on the Hearing Examiner’s report. A commission decision is pending.

Affiliate Transactions. On June 16, 2011, Washington Gas submitted an application to the SCC of VA requesting approval of three affiliate transactions with CEV: (i) the transfer to CEV of the remainder of the term of two agreements for natural gas storage service at the Washington Storage Service (WSS) and Eminence Storage Service (ESS) storage fields; (ii) the sale to CEV of any storage gas balances associated with the WSS and ESS agreements; and (iii) the assignment to CEV of Washington Gas’ rights to buy base gas in the WSS storage field. Washington Gas proposed to make these affiliate transactions by September 30, 2011, coincident with the expiration of its PBR plan approved by the SCC of VA in a separate proceeding. On September 14, 2011, the SCC of VA issued an order denying Washington Gas’ application to transfer Washington Gas’ contracts for certain storage capacity resources to its affiliate, CEV. On October 4, 2011, Washington Gas filed a petition for reconsideration on this proceeding. On October 5, 2011, the SCC of VA granted Washington Gas’ request that the matter be reconsidered, but has not made a final ruling on Washington Gas’ petition for reconsideration. On December 6, 2011, the Staff of the SCC of VA (VA Staff) submitted a supplement to action brief seeking to provide evidence to the commission that ratepayers have been funding the WSS and ESS assets during the PBR period based on the netting of costs associated with those assets when calculating net revenues. Washington Gas submitted comments rejecting the Staff’s position and showing that the ratepayers had not funded these assets. These comments were appended to the VA Staff’s brief on December 9, 2011. A commission decision is pending.

NON UTILITY OPERATIONS

Construction Project Financing

To fund certain of its construction projects, Washington Gas enters into financing arrangements with third party lenders. As part of these financing arrangements, Washington Gas’ customers agree to make principal and interest payments over a period of time, typically beginning after the projects are completed. Washington Gas assigns these customer payment streams to the lender. As the lender funds the construction project, Washington Gas establishes a receivable representing its customers’ obligations to remit principal and interest and a long-term payable to the lender. When these projects are formally “accepted” by the customer as completed, Washington Gas transfers the ownership of the receivable to the lender and removes both the receivable and the long-term financing from its financial statements. As of March 31, 2012 and September 30, 2011, work on these construction projects that was not completed or accepted by customers was valued at $2.8 million and $4.2 million, respectively, which are recorded on the balance sheet as a receivable in “Deferred Charges and Other Assets—Other” with the corresponding long-term obligation to the lender in “Long-term debt.” At any time before these contracts are accepted by the customer, should there be a contract default, such as, among other things, a delay in completing the project, the lender may call on Washington Gas to fund the unpaid principal in exchange for which Washington Gas would receive the right to the stream of payments from the customer. Construction projects are financed primarily for government agencies, which Washington Gas considers to have minimal credit risk. Based on this assessment and previous collection experience, Washington Gas did not record a corresponding reserve for bad debts related to these receivables at March 31, 2012 and September 30, 2011.

Financial Guarantees

WGL Holdings guaranteed payments primarily for certain purchases of natural gas and electricity on behalf of WGEServices and for certain purchase commitments of CEV. At March 31, 2012, these guarantees totaled $532.5 million and $122.6 million for WGEServices and CEV, respectively. The amount of such guarantees is periodically adjusted to reflect changes in the level of financial exposure related to these purchase commitments. We also receive financial guarantees or other collateral from counterparties when required by our credit policy. WGL Holdings also issued guarantees totaling $3.0 million at March 31, 2012 on behalf of certain of our non-utility subsidiaries associated with their banking transactions. Of the total guarantees of $658.1 million, $4.8 million expired on April 30, 2012, and $22.2 million is due to expire on October 31, 2012. The remaining guarantees do not have specific maturity dates. For all of its financial guarantees, WGL Holdings may cancel any or all future obligations imposed by the guarantees upon written notice to the counterparty, but WGL Holdings would continue to be responsible for the obligations created under the guarantees prior to the effective date of the cancellation.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (continued)

Notes to Consolidated Financial Statements (Unaudited)

NOTE 14. PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS

The following tables show the components of net periodic benefit costs (income) recognized in our financial statements during the three and six months ended March 31, 2012 and 2011:


Components of Net Periodic Benefit Costs (Income)
	Three Months Ended March 31,
	2012						2011
(In millions)	Pension Benefits			Health and Life Benefits			Pension Benefits			Health and Life Benefits
Components of net periodic benefit costs (income)
Service cost	$	3.2		$	2.0		$	3.0		$	1.8
Interest cost		10.1			6.3			10.3			6.3
Expected return on plan assets		(10.9	)		(4.7	)		(11.1	)		(4.6	)
Amortization of prior service cost		0.3			(1.0	)		0.3			(1.0	)
Amortization of actuarial loss		4.0			3.3			3.7			2.8
Amortization of transition obligation		—			0.3			—			0.3
Net periodic benefit cost		6.7			6.2			6.2			5.6
Amount allocated to construction projects		(0.7	)		(0.9	)		(0.8	)		(0.9	)
Amount deferred as regulatory asset (liability) — net		(1.9	)		0.3			(1.8	)		0.5
Amount charged to expense	$	4.1		$	5.6		$	3.6		$	5.2


Components of Net Periodic Benefit Costs (Income)
	Six Months Ended March 31,
	2012						2011
(In millions)	Pension Benefits			Health and Life Benefits			Pension Benefits			Health and Life Benefits
Components of net periodic benefit costs (income)
Service cost	$	6.4		$	4.0		$	6.0		$	3.6
Interest cost		20.2			12.6			20.6			12.6
Expected return on plan assets		(21.8	)		(9.4	)		(22.2	)		(9.2	)
Amortization of prior service cost		0.6			(2.0	)		0.6			(2.0	)
Amortization of actuarial loss		8.0			6.6			7.4			5.6
Amortization of transition obligation		—			0.6			—			0.6
Net periodic benefit cost		13.4			12.4			12.4			11.2
Amount allocated to construction projects		(1.5	)		(1.9	)		(1.6	)		(1.7	)
Amount deferred as regulatory asset (liability) — net		(3.7	)		0.8			(3.6	)		1.0
Amount charged to expense	$	8.2		$	11.3		$	7.2		$	10.5

Amounts included in the line item “Amount deferred as regulatory asset/liability-net,” as shown in the table above, represent the difference between the cost of the applicable Pension Benefits or the Health and Life Benefits and the amount that Washington Gas is permitted to recover in rates that it charges to customers in the District of Columbia.

During fiscal year 2012, Washington Gas expects to make contributions totaling $24.2 million to its qualified pension plan.

NOTE 15. SUBSEQUENT EVENTS

Credit Facilities

On April 3, 2012, WGL Holdings and Washington Gas each entered into separate revolving credit agreements to replace the existing revolving credit agreements which were due to expire in August 2012. The credit facility for WGL Holdings permits it to borrow up to $450 million, and further permits, with the banks’ approval, additional borrowings of $100 million for a maximum potential total of $550 million. The credit facility for Washington Gas permits it to borrow up to $350 million, and further permits, with the banks’ approval, additional borrowings of $100 million for a maximum potential total of $450 million. The interest rate on loans made under the credit facilities will be a fluctuating rate per annum that will be set using certain parameters at the time each loan is made. These credit agreements provide for a term of five years and expire on April 3, 2017. The credit agreements each have two one-year extension options.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 1—Financial Statements (concluded)

Notes to Consolidated Financial Statements (Unaudited)

Springfield Operations Center

On April 30, 2012, Washington Gas completed the relocation of its employees from its existing facility to the new operations facility. Washington Gas plans to sell the existing facility, which had a carrying value of $30.1 million at April 30, 2012.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

INTRODUCTION

This Management’s Discussion analyzes the financial condition, results of operations and cash flows of WGL Holdings, Inc. (WGL Holdings) and its subsidiaries. Except where the content clearly indicates otherwise, “WGL Holdings,” “we,” “us” or “our” refers to the holding company or the consolidated entity of WGL Holdings and all of its subsidiaries.

Management’s Discussion is divided into the following two major sections:

—

WGL Holdings —This section describes the financial condition and results of operations of WGL Holdings and its subsidiaries on a consolidated basis. It includes discussions of our regulated operations, including Washington Gas and Hampshire Gas Company (Hampshire), and our non-utility operations.

—

Washington Gas Light Company (Washington Gas) —This section describes the financial condition and results of operations of Washington Gas, a wholly owned subsidiary of WGL Holdings, which comprises the majority of the regulated utility segment.

Both sections of Management’s Discussion—WGL Holdings and Washington Gas—are designed to provide an understanding of our operations and financial performance and should be read in conjunction with the respective company’s financial statements and the combined Notes to Consolidated Financial Statements in this quarterly report as well as our combined Annual Report on Form 10-K for WGL Holdings and Washington Gas for the fiscal year ended September 30, 2011 (2011 Annual Report).

Unless otherwise noted, earnings per share amounts are presented on a diluted basis, and are based on weighted average common and common equivalent shares outstanding. Our operations are seasonal and, accordingly, our operating results for the interim periods presented are not indicative of the results to be expected for the full fiscal year.

EXECUTIVE OVERVIEW

Introduction

WGL Holdings, through its wholly owned subsidiaries, sells and delivers natural gas and provides a variety of energy-related products and services to customers primarily in the District of Columbia and the surrounding metropolitan areas in Maryland, Virginia, as well as in Pennsylvania and Delaware.

In the first quarter of 2012, we made certain changes to our operating segment reporting to reflect the recent growth of our non-utility business activities and the impact of those activities on our financial performance. Commercial solar projects, energy efficiency projects and combined heat and power projects, which we own and manage directly, including activities of Washington Gas Energy Systems, Inc. (WGESystems) are reported within a newly-defined operating segment entitled commercial energy systems. We also established wholesale energy solutions as a new segment that contains the activities of Capitol Energy Ventures Corp. (CEV), our non-utility asset optimization business, which we began in fiscal year 2010. Prior period operating segment information has been recast to conform to current quarter presentation.

These changes improve visibility into our operations and better align our reporting with current management accountability. Our four segments are described below.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Regulated Utility. With approximately 87% of our consolidated total assets, the regulated utility segment consists of Washington Gas and Hampshire. Washington Gas delivers natural gas to retail customers in accordance with tariffs approved by the regulatory commissions that have jurisdiction over Washington Gas’ rates. Washington Gas also sells natural gas to customers who have not elected to purchase natural gas from unregulated third party marketers.

The rates charged to utility customers are designed to recover Washington Gas’ operating expenses and natural gas commodity costs and to provide a return on its investment in the net assets used in its firm gas sales and delivery service. Washington Gas recovers the cost of the natural gas purchased to serve firm customers through the gas cost recovery mechanisms as approved in jurisdictional tariffs. Any difference between the firm customer gas costs incurred and the gas costs recovered from those firm customers is deferred on the balance sheet as an amount to be collected from or refunded to customers in future periods. Therefore, increases or decreases in the cost of gas associated with sales made to firm customers have no direct effect on Washington Gas’ net revenues and net income.

Washington Gas’ asset optimization program utilizes Washington Gas’ storage and transportation capacity resources when those assets are not fully utilized to physically serve utility customers. The objective of this program is to derive a profit to be shared with its utility customers (refer to the section entitled “Market Risk” for further discussion of our asset optimization program) by entering into commodity-related physical and financial contracts with third parties. Unless otherwise noted, therm deliveries shown related to Washington Gas or the regulated utility segment do not include therm deliveries related to our asset optimization program.

Hampshire, a wholly owned subsidiary of WGL Holdings, is regulated by the FERC. Hampshire operates and owns full and partial interests in underground natural gas storage facilities including pipeline delivery facilities located in and around Hampshire County, West Virginia. Washington Gas purchases all of the storage services of Hampshire and includes the cost of these services in the bills sent to its customers. Hampshire operates under a “pass-through” cost of service-based tariff approved by the FERC, and adjusts its billing rates to Washington Gas on a periodic basis to account for changes in its investment in utility plant and associated expenses.

Retail Energy-Marketing. The retail energy-marketing segment consists of the operations of Washington Gas Energy Services, Inc. (WGEServices), a wholly owned subsidiary of Washington Gas Resources, which is a wholly owned subsidiary of WGL Holdings. WGEServices competes with regulated utilities and other unregulated third party marketers to sell natural gas and/or electricity directly to residential, commercial and industrial customers in Maryland, Virginia, Delaware, Pennsylvania and the District of Columbia. WGEServices contracts for its supply needs and buys and resells natural gas and electricity with the objective of earning a profit through competitively priced contracts with end-users. These commodities are delivered to retail customers through the distribution systems owned by regulated utilities such as Washington Gas or other unaffiliated natural gas or electric utilities.

Commercial Energy Systems. The commercial energy systems segment consists of commercial solar projects, energy efficiency projects and combined heat and power projects, which we own and manage directly, including activities of WGESystems, a wholly owned subsidiary of Washington Gas Resources. WGESystems focuses on upgrading the mechanical, electrical, water and energy-related systems of large government and commercial facilities by implementing both traditional as well as alternative energy technologies, primarily in the District of Columbia, Maryland and Virginia. WGESystems is also increasing its investments in commercial solar, energy efficiency, and combined heat and power projects, which we own and manage directly. This expansion includes the ownership and management of its renewable energy producing assets. These investments are part of our long-term commitment to providing clean and efficient energy solutions to our customers and communities in select markets across the United States.

Wholesale Energy Solutions. The wholesale energy solutions segment, which consists of the operations of CEV, engages in acquiring, managing and optimizing natural gas storage and transportation assets. CEV enters into both physical and financial transactions in a manner intended to utilize the most effective energy risk management products available to mitigate risks while maximizing potential profits from the optimization of these assets under its management.

Other Activities. Activities and transactions that are not significant enough on a stand-alone basis to warrant treatment as an operating segment, and that do not fit into one of our other operating segments, are aggregated as “Other activities” and included as part of non-utility operations as presented below in the operating segment financial information. These activities include the operations of WGSW, Inc. (WGSW), a wholly owned subsidiary of Washington Gas Resources, which is a holding company formed to invest in alternative energy power generating facilities. Administrative costs associated with WGL Holdings and Washington Gas Resources are also included in “Other activities.”

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

PRIMARY FACTORS AFFECTING WGL HOLDINGS AND WASHINGTON GAS

The principal business, economic and other factors that affect our operations and/or financial performance include:

•

weather conditions and weather patterns;

•

regulatory environment, regulatory decisions and changes in legislation;

•

availability of natural gas supply and pipeline transportation and storage capacity;

•

diversity of natural gas supply;

•

volatility of natural gas and electricity prices;

•

non-weather related changes in natural gas consumption patterns;

•

maintaining the safety and reliability of the natural gas distribution system;

•

competitive environment;

•

environmental matters;

•

industry consolidation;

•

economic conditions and interest rates;

•

inflation/deflation;

•

use of business process outsourcing;

•

labor contracts, including labor and benefit costs; and

•

changes in accounting principles.

For further discussion of the factors listed above, refer to Management’s Discussion within the 2011 Annual Report. Also, refer to the section entitled “Safe Harbor for Forward-Looking Statements” included in this quarterly report for a listing of forward-looking statements related to factors affecting WGL Holdings and Washington Gas.

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements and related disclosures in compliance with GAAP requires the selection and the application of appropriate technical accounting guidance to the relevant facts and circumstances of our operations, as well as our use of estimates to compile the consolidated financial statements. The application of these accounting policies involves judgment regarding estimates and projected outcomes of future events, including the likelihood of success of particular regulatory initiatives, the likelihood of realizing estimates for legal and environmental contingencies and the probability of recovering costs and investments in both the regulated utility and non-utility business segments.

We have identified the following critical accounting policies that require our judgment and estimation, where the resulting estimates may have a material effect on the consolidated financial statements:

•

accounting for unbilled revenue;

•

accounting for regulatory operations — regulatory assets and liabilities;

•

accounting for income taxes;

•

accounting for contingencies;

•

accounting for derivative instruments;

•

accounting for pension and other post-retirement benefit plans and

•

accounting for stock based compensation.

For a description of these critical accounting policies, refer to Management’s Discussion within the 2011 Annual Report. There were no new critical accounting policies or changes to our critical accounting policies during the six month period ended March 31, 2012.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

WGL HOLDINGS, INC.

RESULTS OF OPERATIONS — Three Months Ended March 31, 2012 vs. March 31, 2011

We analyze the operating results using utility net revenues for the regulated utility segment and gross margins for the retail energy-marketing segment. Both utility net revenues and gross margins are calculated as revenues less the associated cost of energy and applicable revenue taxes. We believe utility net revenues is a better measure to analyze profitability than gross operating revenues for our regulated utility segment because the cost of the natural gas commodity and revenue taxes are generally included in the rates that Washington Gas charges to customers as reflected in operating revenues. Accordingly, changes in the cost of gas and revenue taxes associated with sales made to customers generally have no direct effect on utility net revenues, operating income or net income. We consider gross margins to be a better reflection of profitability than gross revenues or gross energy costs for our retail energy-marketing segment because gross margins are a direct measure of the success of our core strategy for the sale of natural gas and electricity.

Neither utility net revenues nor gross margins should be considered as an alternative to, or a more meaningful indicator of our operating performance, than net income. Our measures of utility net revenues and retail energy-marketing gross margins may not be comparable to similarly titled measures of other companies. Refer to the sections entitled “Results of Operations—Regulated Utility Operating Results” and “Results of Operations—Retail Energy-Marketing” for the calculation of utility net revenues and gross margins, respectively, as well as a reconciliation to operating income and net income for both segments.

Summary Results

WGL Holdings reported net income of $74.2 million and $79.4 million for the three months ended March 31, 2012 and 2011, respectively. For the twelve month periods ended March 31, 2012 and 2011, we earned a return on average common equity of 7.6% and 10.4%, respectively.

The following table summarizes our net income (loss) by operating segment for the three months ended March 31, 2012 and 2011.

Net Income (Loss) by Operating Segment


	Three Months Ended March 31,						Increase/
(In millions)	2012			2011			(Decrease)
Regulated Utility	$	72.4		$	70.8		$	1.6
Non-utility operations:
Retail Energy-Marketing		4.5			9.7			(5.2	)
Commercial Energy Systems		0.5			—			0.5
Wholesale Energy Solutions		(2.7	)		0.1			(2.8	)
Other Activities		(0.5	)		(1.2	)		0.7
Total non-utility		1.8			8.6			(6.8	)
Net income applicable to common stock	$	74.2		$	79.4		$	(5.2	)

EARNINGS PER AVERAGE COMMON SHARE
Basic	$	1.44		$	1.55		$	(0.11	)
Diluted	$	1.44		$	1.55		$	(0.11	)

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Regulated Utility Operating Results

The following table summarizes the regulated utility segment’s operating results for the three months ended March 31, 2012 and 2011.

Regulated Utility Operating Results


	Three Months Ended March 31,					Increase/
(In millions)	2012		2011			Decrease
Utility net revenues:
Operating revenues	$	471.1	$	569.7		$	(98.6	)
Less: Cost of gas		197.7		295.0			(97.3	)
Revenue taxes		28.7		34.3			(5.6	)
Total utility net revenues		244.7		240.4			4.3
Operation and maintenance		68.7		72.3			(3.6	)
Depreciation and amortization		23.8		22.4			1.4
General taxes and other assessments		16.0		17.0			(1.0	)
Operating income		136.2		128.7			7.5
Other income (expense)-net, including preferred stock dividends		0.6		(1.0	)		1.6
Interest expense		9.4		10.3			(0.9	)
Income tax expense		55.0		46.6			8.4
Net income applicable to common stock	$	72.4	$	70.8		$	1.6

The regulated utility segment’s net income applicable to common stock was $72.4 million for the three months ended March 31, 2012, compared to net income of $70.8 million for the same three month period in 2011, primarily due to: (i) $9.8 million in higher revenues due to the implementation of new rates in Maryland and Virginia; (ii) a $5.9 million increase in unrealized margins associated with our asset optimization program; (iii) $3.6 million in lower operation and maintenance expenses, including a $5.3 million benefit from our weather protection and (iv) a $2.2 million increase in revenues related to growth of more than 7,900 average active customer meters. Partially offsetting these increases were: (i) a $8.4 million reduction in revenue attributed to warmer weather, excluding the benefit of our weather protection; (ii) $4.5 million in higher income taxes due to an increase in the effective tax rate including a $2.8 million write off of a regulatory asset originally recognized in 2010 related to the tax effect of Medicare Part D (Med D); (iii) $2.6 million in lower realized margins, net of margin sharing, associated with our asset optimization program and (iv) an increase of $1.4 million in depreciation expense due to the growth in, and changes in the asset mix of, our investment in utility plant.

Utility Net Revenues . The following table provides the key factors contributing to the changes in the utility net revenues of the regulated utility segment between the three months ended March 31, 2012 and 2011.

Composition of Changes in Utility Net Revenues


(In millions)	Increase/ (Decrease)
Customer growth	$	2.2
Impact of approved rates in MD and VA		9.8
Asset optimization:
Realized margins		(2.6	)
Unrealized mark-to-market valuations		5.9
Lower-of-cost or market adjustment		(1.2	)
Estimated weather effects		(8.4	)
Other		(1.4	)
Total	$	4.3

Customer growth — Average active customer meters increased by more than 7,900 for the three months ended March 31, 2012 compared to the same quarter of the prior fiscal year.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Impact of approved rates in MD and VA — New base rates were approved in Maryland and Virginia effective November 14, 2011 and October 1, 2011, respectively.

Asset optimization — We recorded net unrealized gains associated with our energy-related derivatives of $1.2 million and unrealized losses of $4.7 million for the three months ended March 31, 2012 and 2011, respectively. When these derivatives settle, any unrealized amounts will ultimately be reversed, and Washington Gas will realize margins when combined with the related transactions these derivatives economically hedge. Unfavorably affecting asset optimization results were $2.6 million of lower realized margins due to a change in Virginia margin sharing and $1.2 million of lower-of-cost or market adjustments associated with storage capacity assets utilized for asset optimization during the three months ended March 31, 2012. There were no lower-of-cost or market adjustments during the three months ended March 31, 2011. Refer to the section entitled “Market Risk—Price Risk Related to the Regulated Utility Segment” for a further discussion of our asset optimization program.

Estimated weather effects — Weather, when measured by HDDs, was 23.6% warmer and 4.6% colder than normal for the three months ended March 31, 2012 and 2011, respectively. Washington Gas has a weather protection strategy that is designed to neutralize the estimated financial effects of variations from normal weather on net income (refer to the section entitled “Weather Risk” for further discussion of our weather protection strategy). Washington Gas executed heating degree day derivative contracts to manage its exposure to variations from normal weather in the District of Columbia. Changes in the fair value of these derivatives are reflected in operation and maintenance expenses and offset the weather effects reflected above. Due to the extremely warm weather, our weather protection instruments were not sufficient to offset approximately $3.1 million of the reduction in revenue for the three months ended March 31, 2012. There were no material effects on net income attributed to colder or warmer weather for the three months ended March 31, 2011.

Operation and Maintenance Expenses . The following table provides the key factors contributing to the changes in operation and maintenance expenses of the regulated utility for the three months ended March 31, 2012 compared to the same period in 2011.

Composition of Changes in Operation and Maintenance Expenses


(In millions)	Increase/ (Decrease)
Operations, engineering, construction and safety	$	1.7
Employee benefits		1.2
Hexane costs		1.0
Weather derivative benefits:
Benefit		(5.3	)
Premium costs and fair value effects		(0.7	)
Other operating expenses		(1.5	)
Total	$	(3.6	)

Operation, engineering, compliance and safety — The increase in operation, engineering, construction and safety costs during the quarter ended March 31, 2012 compared to the same quarter of the prior year is primarily due to higher costs due to an increase in the volume of projects.

Employee benefits — The increase in employee benefits expense reflects higher pension and other post-retirement benefits due to changes in discount rate and other plan assumptions used to measure the benefit obligation.

Hexane costs — The increase in expense during the quarter ended March 31, 2012 compared to the same quarter of the prior year reflects the deferral of costs in 2011 to a regulatory asset under the regulatory mechanism that was in existence at the time.

Weather derivative benefits — The effects of hedging variations from normal weather in the District of Columbia for the three months ended March 31, 2012 and 2011 are recorded to operation and maintenance expense. Washington Gas recorded a gain of $4.2 million as a direct result of warmer than normal weather in the quarter ended March 31, 2012 and a loss of $1.1 million during the quarter ended March 31, 2011 due to colder than normal weather during that period. The benefits or losses of the weather-related instruments are generally offset by the effect of weather on utility net revenues; however, during the quarter ended March 31, 2012, the warmer than normal weather exceeded the level of our hedging protection. In addition, net premiums received related to the weather derivatives were higher due to market expectations of weather.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Depreciation and Amortization. The increase of $1.4 million in depreciation and amortization is primarily attributed to growth in, and changes in the asset mix of, our investment in utility plant partially offset by a reduction in Virginia depreciation rates.

Retail Energy-Marketing Financial and Statistical Data


	Three Months Ended March 31,					Increase /
	2012			2011		(Decrease)
Operating Results *(In millions)*
Gross margins:
Operating revenues	$	368.4		$	447.7	$	(79.3	)
Less: Cost of energy		343.9			415.7		(71.8	)
Revenue taxes		1.5			1.6		(0.1	)
Total gross margins		23.0			30.4		(7.4	)
Operation expenses		14.2			13.0		1.2
Depreciation and amortization		0.2			0.2		—
General taxes and other assessments		0.9			1.1		(0.2	)
Operating income		7.7			16.1		(8.4	)
Income tax expense		3.2			6.4		(3.2	)
Net income	$	4.5		$	9.7	$	(5.2	)

Realized margins	$	5.0		$	12.1	$	(7.1	)
Unrealized mark-to-market gains		2.4			2.8		(0.4	)
Total gross margins — natural gas		7.4			14.9		(7.5	)
Realized margins		19.5			15.5		4.0
Unrealized mark-to-market losses		(3.9	)		—		(3.9	)

Total gross margins — electricity		15.6			15.5		0.1

Total gross margins	$	23.0		$	30.4	$	(7.4	)

Other Retail-Energy Marketing Statistics
Natural gas
Therm sales (millions of therms)		249.6			302.4		(52.8	)
Number of customers (end of period)		179,000			173,400		5,600
Electricity
Electricity sales (millions of kWhs)		2,896.4			2,611.0		285.4
Number of accounts (end of period)		197,000			183,700		13,300

The retail energy-marketing segment reported net income of $4.5 million for the three months ended March 31, 2012, compared to net income of $9.7 million reported for the same three-month period of the prior fiscal year.

The decrease in net income primarily reflects lower gross margins from natural gas sales. Period-to-period comparisons of quarterly gross margins for this segment can vary significantly and are not necessarily representative of expected annualized results.

Gross margins from natural gas sales decreased $7.5 million in the current quarter of fiscal year 2012 when compared to the same quarter in the prior fiscal year. This decrease is primarily due to the unfavorable change in unrealized mark-to-market margins on energy-related derivatives of $0.4 million resulting from fluctuating market prices and lower realized margins of $7.1 million due to lower retail sales volumes resulting from warmer weather and a less favorable pattern of margin recognition in the current quarter versus the same quarter of the prior year.

Gross margins from electric sales in the current quarter increased $0.1 million from the same quarter of the prior period. This increase reflects higher realized electric retail margins of $4.0 million due to favorable price conditions, higher sales volumes due to customer growth, and a more favorable pattern of margin recognition in the current quarter versus the same quarter of the prior year, partially offset by $3.9 million in unrealized margins due to fluctuating market prices.

The retail energy-marketing segment’s increase in new electricity customer accounts compared to the prior year is primarily due to WGEServices being able to offer customers lower prices than utility standard offer service rates and the addition of new government and commercial accounts.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Commercial Energy Systems

The commercial energy systems segment reported net income of $0.5 million for the second quarter of fiscal year 2012, compared to a net loss of $18,000 reported for the same period of fiscal year 2011. This increase is due to higher revenue from commercial solar projects and the commencement of project work for government agency customers that was delayed in the prior year.

Wholesale Energy Solutions

The wholesale energy solutions segment reported a net loss of $2.7 million for the three months ended March 31, 2012, compared to net income of $0.1 million reported for the same period of the prior fiscal year. This decrease is primarily due to lower storage and transportation spreads due to one of the warmest winters on record across the country, which affected optimization opportunities as well as higher operation and maintenance expense associated with new storage and optimization arrangements.

Other Non-Utility

Transactions that are not significant enough on a stand-alone basis to warrant treatment as an operating segment, and that do not fit into one of our four operating segments, are aggregated as “Other Activities” and included as part of non-utility operations. Results from our other non-utility activities reflect net losses of $0.5 million and $1.2 million for the three months ended March 31, 2012 and 2011, respectively.

RESULTS OF OPERATIONS — Six Months Ended March 31, 2012 vs. March 31, 2011

Summary Results

WGL Holdings reported net income applicable to common stock of $124.6 million, or $2.42 per share, for the six months ended March 31, 2012 compared to $144.7 million, or $2.83 per share, reported for the six months ended March 31, 2011.

The following table summarizes our net income (loss) applicable to common stock by operating segment for the six months ended March 31, 2012 and 2011.


Net Income (Loss) by Operating Segment
	Six Months Ended March 31,						Increase/
(In millions)	2012			2011			(Decrease)
Regulated Utility	$	116.8		$	111.5		$	5.3
Non-utility operations:
Retail Energy-Marketing		5.3			34.6			(29.3	)
Commercial Energy Systems		0.8			—			0.8
Wholesale Energy Solutions		2.5			0.2			2.3
Other Activities		(0.8	)		(1.6	)		0.8
Total non-utility		7.8			33.2			(25.4	)
Net income applicable to common stock	$	124.6		$	144.7		$	(20.1	)

EARNINGS PER AVERAGE COMMON SHARE
Basic	$	2.42		$	2.83		$	(0.41	)
Diluted	$	2.42		$	2.83		$	(0.41	)

Regulated Utility Operating Results

The following table summarizes the regulated utility segment’s operating results for the six months ended March 31, 2012 and 2011.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Regulated Utility Operating Results


	Six Months Ended March 31,					Increase/
(In millions)	2012		2011			(Decrease)
Utility net revenues:
Operating revenues	$	842.0	$	988.1		$	(146.1	)
Less: Cost of gas		359.6		512.7			(153.1	)
Revenue taxes		51.3		60.3			(9.0	)
Total utility net revenues		431.1		415.1			16.0
Operation and maintenance		135.1		135.5			(0.4	)
Depreciation and amortization		47.5		44.8			2.7
General taxes and other assessments		27.7		29.5			(1.8	)
Operating income		220.8		205.3			15.5
Other income (expenses)-net, including preferred stock dividends		1.0		(0.5	)		1.5
Interest expense		19.2		20.2			(1.0	)
Income tax expense		85.8		73.1			12.7
Net income	$	116.8	$	111.5		$	5.3

The regulated utility segment’s net income applicable to common stock was $116.8 million for the six months ended March 31, 2012 compared to $111.5 million for the same six month period of the prior fiscal year. The increase in net income primarily reflects: (i) $16.1 million in higher revenues due to the implementation of new rates in Maryland and Virginia; (ii ) a $16.0 million increase in unrealized margins associated with our asset optimization program and (iii) a $3.3 million increase in revenues related to growth of more than 8,700 average customer meters. Partially offsetting these favorable variances were: (i) a $5.6 million decrease in realized margins, net of margin sharing, associated with our asset optimization program; (ii) $5.6 million in higher income taxes due to an increase in the effective tax rate including a $2.8 million write off of a regulatory asset originally recognized in 2010 related to the tax effect of Med D and (iii) a $2.7 million increase in depreciation expense due to the growth in, and changes in the asset mix of, our investment in utility plant.

Utility Net Revenues . The following table provides the key factors contributing to the changes in the utility net revenues of the regulated utility segment between the six months ended March 31, 2012 and 2011.

Composition of Changes in Utility Net Revenues


(In millions)	Increase / (Decrease)
Customer growth	$	3.3
Impact of approved rates in MD and VA		16.1
Asset optimization:
Realized margins		(5.6	)
Unrealized mark-to-market valuations		16.0
Lower-of-cost or market adjustment		(1.6	)
Estimated weather effects		(12.5	)
Other		0.3
Total	$	16.0

Customer growth — Average active customer meters increased by more than 8,700 for the six months ended March 31, 2012 compared to the same period of the prior fiscal year.

Impact of approved rates in MD and VA — New base rates were approved in Maryland and Virginia effective November 14, 2011 and October 1, 2011, respectively.

Asset optimization — We recorded unrealized gains associated with our energy-related derivatives of $1.4 million for the six months ended March 31, 2012 compared to unrealized losses of $14.6 million for the same period of 2011. When these derivatives settle, any unrealized amounts will ultimately be reversed, and Washington Gas will realize margins in combination with the related transactions that these derivatives economically hedge. Unfavorably affecting asset optimization results were $5.6 million of lower realized margins due to a change in Virginia margin sharing and $1.6 million of lower-of-cost or market adjustments associated with market adjustments during the six months ended March 31, 2012. There were no lower-of-cost or market adjustments during the six months ended March 31, 2011. (Refer to the section entitled “Market Risk—Price Risk Related to the Regulated Utility Segment” for a further discussion of our asset optimization program).

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Estimated weather effects — Weather, when measured by HDDs, was 18.9% warmer and 7.4% colder than normal for the six months ended March 31, 2012 and 2011, respectively. Washington Gas has a weather protection strategy that is designed to neutralize the estimated financial effects of variations from normal weather on net income (refer to the section entitled “Weather Risk” for further discussion of our weather protection strategy). Washington Gas executed heating degree day derivative contracts to manage its exposure to variations from normal weather in the District of Columbia. Changes in the fair value of this derivative are reflected in operation and maintenance expenses and offset the benefits reflected above. Due to the extremely warm weather, protection instruments were not sufficient to offset approximately $3.1 million of the reduction in revenue for the six months ended March 31, 2012. There were no material effects on net income attributed to colder or warmer weather for the six months ended March 31, 2011.

Operation and Maintenance Expenses . The following table provides the key factors contributing to the changes in operation and maintenance expenses of the regulated utility for the six months ended March 31, 2012 compared to the same period in 2011.

Composition of Changes in Operation and Maintenance Expenses


(In millions)	Increase/ (Decrease)
Operations, engineering, construction and safety	$	3.3
Employee benefits		2.7
Labor and incentive plans		2.1
Hexane costs		1.4
Weather derivative benefits:
Benefit		(9.4	)
Premium costs and fair value effects		(0.9	)
Other operating expenses		0.4
Total	$	(0.4	)

Operation, engineering, compliance and safety — The increase in operation, engineering, construction and safety costs during the six months ended March 31, 2012 compared to the same quarter of the prior year is primarily due to higher costs due to an increase in the volume of projects.

Employee benefits — The increase in benefit expenses reflects higher pension and other post-retirement benefits due to changes in discount rate and other plan assumptions used to measure the benefit obligation and higher reserve adjustments for long-term disability.

Labor and incentives — The increase in labor and incentive plans is primarily due to higher direct labor costs driven by higher long-term incentive plan valuations and general wage increases.

Hexane costs — The increase in expense during the six months ended March 31, 2012 compared to the same period of the prior year reflects the deferral of costs in 2011 to a regulatory asset under the regulatory mechanism that was in existence at the time.

Weather derivative benefits — The effects of hedging variations from normal weather in the District of Columbia for the six months ended March 31, 2012 and 2011 are recorded to operation and maintenance expense. Washington Gas recorded a gain of $6.3 million as a direct result of warmer than normal weather in the six months ended March 31, 2012 and a loss of $3.1 million during the six months ended March 31, 2011 due to colder-than-normal weather during that period. The benefits or losses of the weather-related instruments are generally offset by the effect of weather on utility net revenues; however, during the six months ended March 31, 2012, the warmer than normal weather exceeded the level of our hedging protection. In addition, net premiums received related to the weather derivatives were higher due to market expectations of weather.

Depreciation and Amortization — The increase of $2.7 million in depreciation and amortization is primarily attributed to growth in, and changes in the asset mix of, our investment in utility plant partially offset by a reduction in Virginia depreciation rates.

Retail Energy-Marketing

The following table depicts the retail energy-marketing segment’s operating results along with selected statistical data.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Retail-Energy Marketing Financial and Statistical Data


	Six Months Ended March 31,					Increase /
	2012			2011		(Decrease)
Operating Results *(In millions)*
Gross margins:
Operating revenues	$	704.8		$	827.1	$	(122.3	)
Less: Cost of energy		663.4			738.8		(75.4	)
Revenue taxes		2.7			2.5		0.2
Total gross margins		38.7			85.8		(47.1	)
Operation expenses		27.4			25.3		2.1
Depreciation and amortization		0.4			0.3		0.1
General taxes and other assessments—other		2.0			2.3		(0.3	)
Operating income		8.9			57.9		(49.0	)
Interest expense		—			0.1		(0.1	)
Income tax expense		3.6			23.2		(19.6	)
Net income	$	5.3		$	34.6	$	(29.3	)

Analysis of gross margins *(In millions)*
Natural gas
Realized margins	$	17.9		$	22.3	$	(4.4	)
Unrealized mark-to-market gains (losses)		(7.8	)		12.8		(20.6	)
Total gross margins — natural gas		10.1			35.1		(25.0	)
Electricity
Realized margins		42.7			30.3		12.4
Unrealized mark-to-market gains (losses)		(14.1	)		20.4		(34.5	)
Total gross margins — electricity		28.6			50.7		(22.1	)
Total gross margins	$	38.7		$	85.8	$	(47.1	)

Other Retail-Energy Marketing Statistics
Natural gas
Therm sales (millions of therms)		432.4			518.9		(86.5	)
Number of customers (end of period)		179,000			173,400		5,600
Electricity
Electricity sales (millions of kWhs)		5,409.0			5,057.4		351.6
Number of accounts (end of period)		197,000			183,700		13,300

The retail energy-marketing segment reported net income of $5.3 million for the six months ended March 31, 2012, compared to net income of $34.6 million reported for the same six-month period of the prior fiscal year.

The reduction in net income primarily reflects lower gross margins from electric and natural gas sales. Period-to-period comparisons of gross margins for this segment can vary significantly and are not necessarily representative of expected annualized results.

Gross margins from natural gas sales decreased $25.0 million in the current quarter of fiscal year 2012 when compared to the same quarter in the prior fiscal year. This decrease is primarily due to the unfavorable change in unrealized mark-to-market margins on energy-related derivatives of $20.6 million resulting from fluctuating market prices and $4.4 million in lower realized margins reflecting lower retail sales volumes resulting from warmer weather, and lower margins on portfolio optimization activities.

Gross margins from electric sales in the current quarter decreased $22.1 million from the same quarter of the prior period. This decrease reflects a $34.5 million change in unrealized mark-to-market margins on energy-related derivatives from fluctuating market prices partially offset by $12.4 million in higher realized margins attributable to favorable price conditions, higher sales volumes due to customer growth and a more favorable pattern of margin recognition in the current period versus the same period of the prior year.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Commercial Energy Systems

The commercial energy systems segment reported net income of $0.8 million for the six months ended March 31, 2012, compared to a net loss of $20,000 reported for the same period of fiscal year 2011. This increase is due to higher revenue from commercial solar projects in the current period and the commencement of project work for government agency customers that was delayed in the prior year.

Wholesale Energy Solutions

The wholesale energy solutions segment reported net income of $2.5 million for the six months ended March 31, 2012, compared to net income of $0.2 million reported for the same period of the prior fiscal year. This increase is primarily due to the growth in asset optimization activity.

Other Non-Utility

Transactions that are not significant enough on a stand-alone basis to warrant treatment as an operating segment, and that do not fit into one of our four operating segments, are aggregated as “Other Activities” and included as part of non-utility operations. Results from our other non-utility activities reflect net losses of $0.8 million and $1.6 million for the six months ended March 31, 2012 and 2011, respectively.

LIQUIDITY AND CAPITAL RESOURCES

General Factors Affecting Liquidity

It is important for us to have access to short-term debt markets to maintain satisfactory liquidity to operate our businesses on a near-term basis. Our most significant short-term financing requirements include the acquisition of natural gas, electricity and pipeline capacity, and the need to finance accounts receivable and storage gas inventory. The need for long-term capital is driven primarily by capital expenditures and maturities of long-term debt.

Our ability to obtain adequate and cost effective financing depends on our credit ratings, the liquidity of financial markets, and investor demand for our securities. Our credit ratings depend largely on the financial performance of our subsidiaries, and a downgrade in our current credit ratings could require us to post additional collateral with our wholesale counterparties and adversely affect our borrowing costs, as well as our access to sources of liquidity and capital. Also potentially affecting access to short-term debt capital is the nature of any restrictions that might be placed upon us, such as ratings triggers or a requirement to provide creditors with additional credit support in the event of a determination of insufficient creditworthiness. During the three months ended March 31, 2012, WGL Holdings met its liquidity and capital needs through the retention of earnings and the issuance of commercial paper and common stock. Washington Gas met its liquidity and capital needs through the retention of earnings and the issuance of commercial paper. Both WGL Holdings and Washington Gas believe that they will be able to meet their liquidity and capital needs through fiscal year 2012 through a mixture of operating earnings, issuances of commercial paper, and in the case of Washington Gas, issuance of MTNs.

We have a goal to maintain our common equity ratio in the mid-50% range of total consolidated capital. The level of this ratio varies during the fiscal year due to the seasonal nature of our business. This seasonality is also evident in the variability of our short-term debt balances, which are typically higher in the fall and winter months and substantially lower in the spring when a significant portion of our current assets are converted into cash at the end of the winter heating season. Accomplishing this capital structure objective and maintaining sufficient cash flow are necessary to maintain attractive credit ratings for WGL Holdings and Washington Gas, and to allow access to capital at reasonable costs. As of March 31, 2012, total consolidated capitalization, including current maturities of long-term debt and excluding notes payable, comprised 66.9% common equity, 1.5% preferred stock and 31.6% long- term debt. Our cash flow requirements and our ability to provide satisfactory resources to meet those requirements are primarily influenced by the activities of Washington Gas and WGEServices and, to a lesser extent, other non-utility operations.

Our plans provide for sufficient liquidity to satisfy our financial obligations. At March 31, 2012, we did not have any restrictions on our cash balances or retained earnings that would affect the payment of common or preferred stock dividends by WGL Holdings or Washington Gas.

Short-Term Cash Requirements and Related Financing

Washington Gas’ business is weather sensitive and seasonal, causing short-term cash requirements to vary significantly during the year. Approximately 74% of the total therms delivered in Washington Gas’ service area (excluding deliveries to two electric generation facilities) occur during the first and second fiscal quarters. Accordingly, Washington Gas typically generates more net income in the first six months of the fiscal year than it does for the entire fiscal year.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

During the first six months of our fiscal year, Washington Gas generates large sales volumes and its cash requirements peak when combined storage inventory, accounts receivable, and unbilled revenues are at their highest levels. During the last six months of our fiscal year, after the winter heating season, Washington Gas will typically experience a seasonal net loss due to reduced demand for natural gas. During this period, many of Washington Gas’ assets are converted into cash, which Washington Gas generally uses to reduce and sometimes eliminate short-term debt and to acquire storage gas for the next heating season.

Washington Gas, WGEServices and CEV have seasonal short-term cash requirements to fund the purchase of storage gas inventory in advance of the winter heating periods when a large portion of the storage gas is sold. At March 31, 2012 and September 30, 2011, Washington Gas had balances in gas storage of $66.9 million and $166.1 million, respectively; WGEServices had balances in gas storage of $15.5 million and $61.0 million, respectively, and CEV had balances in gas storage of $93.3 million and $63.3 million, respectively. Washington Gas collects the cost of gas under cost recovery mechanisms approved by its regulators. WGEServices and CEV collect revenues that are designed to reimburse their commodity costs used to supply their retail customer and wholesale counterparty contracts. Variations in the timing of cash receipts from customers under these collection methods can significantly affect short-term cash requirements. In addition, Washington Gas, WGEServices and CEV pay their respective commodity suppliers before collecting the accounts receivable balances resulting from these sales. WGEServices and CEV derive their funding to finance these activities from short-term debt issued by WGL Holdings. Additionally, Washington Gas, WGEServices and CEV may be required to post cash collateral for certain purchases. WGEServices and CEV may be required to provide parent guarantees from WGL Holdings for certain non-utility purchases.

Variations in the timing of collections of gas costs under Washington Gas’ gas cost recovery mechanisms can significantly affect short-term cash requirements. At March 31, 2012 and September 30, 2011, Washington Gas had a $2.8 million and $12.1 million net under-collection of unrecovered gas costs, respectively, reflected in current assets/liabilities as gas costs due from/to customers related to the most recent twelve month gas cost recovery cycle ended August 31 of each year. Most of this balance will be collected from customers in fiscal year 2012. Amounts under-collected or over-collected that are generated during the current gas cost recovery cycle are deferred as a regulatory asset or liability on the balance sheet until September 1 ^st of each year, at which time the accumulated amount is transferred to gas costs due from/to customers as appropriate. At March 31, 2012 and September 30, 2011, Washington Gas had a net regulatory liability of $1.8 million and net regulatory asset of $6.5 million, respectively, related to the current gas recovery cycle.

WGL Holdings and Washington Gas utilize short-term debt in the form of commercial paper or unsecured short-term bank loans to fund seasonal cash requirements. Our policy is to maintain back-up bank credit facilities in an amount equal to or greater than our expected maximum commercial paper position. Bank credit balances available to WGL Holdings and Washington Gas net of commercial paper balances were $268.1 million and $300.0 million at March 31, 2012 and $360.6 million and $300.0 million at September 30, 2011, respectively. On April 3, 2012, WGL Holdings and Washington Gas each entered into separate revolving credit agreements to replace the existing revolving credit agreements which were due to expire on August 2012. The credit facility for WGL Holdings permits it to borrow up to $450 million, and further permits, with the banks’ approval, additional borrowings of $100 million for a maximum potential total of $550 million. The credit facility for Washington Gas permits it to borrow up to $350 million, and further permits, with the banks’ approval, additional borrowings of $100 million for a maximum potential total of $450 million. The interest rate on loans made under each of the credit facilities will be a fluctuating rate per annum that will be set using certain parameters at the time each loan is made. These credit agreements provide for a term of five years and expire on April 3, 2017. The credit agreements each have two one-year extension options. Refer to Note 3 —Short-Term Debt of the Notes to the Consolidated Financial Statements for further information.

To manage credit risk, Washington Gas, WGEServices and CEV may require deposits from certain customers and suppliers, which are reported as current liabilities in “Customer deposits and advance payments,” in the accompanying balance sheet. At March 31, 2012 and September 30, 2011, “Customer deposits and advance payments” totaled $70.6 million and $78.1 million, respectively. For both periods, almost all of these deposits related to customer deposits for Washington Gas.

For Washington Gas, deposits from customers may be refunded to the depositor-customer at various times throughout the year based on the customer’s payment habits. At the same time, other customers make new deposits that cause the balance of customer deposits to remain relatively steady. There are no restrictions on Washington Gas’ use of these customer deposits. Washington Gas pays interest to its customers on these deposits in accordance with the requirements of its regulatory commissions.

For WGEServices and CEV, deposits typically represent collateral for transactions with wholesale counterparties. These deposits may be required to be repaid or increased at any time based on the current value of WGEServices’ net position with the counterparty. Currently there are no restrictions on the use of deposited funds and interest is paid to the counterparty on these deposits in accordance with its contractual obligations. Refer to the section entitled “Credit Risk” for further discussion of our management of credit risk.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Long-Term Cash Requirements and Related Financing

The primary drivers of our long-term cash requirements include capital expenditures, long-term debt maturities, and decisions to refinance long-term debt. Our capital expenditures primarily relate to adding new utility customers and system supply as well as maintaining the safety and reliability of Washington Gas’ distribution system. Refer to our 2011 Annual Report for a discussion of our long-term debt maturities and capital expenditures.

On February 27, 2012, Washington Gas retired $25.0 million of 6.0% MTNs. Previously during the year, on October 17 and 19, 2011, Washington Gas retired $7.0 million of 6.05% MTNs and $20.0 million of 6.00% MTNs, respectively. At March 31, 2012, Washington Gas had the capacity under a shelf registration to issue up to $375 million of additional MTNs. Washington Gas has authority from its regulators to issue other forms of debt, including private placements.

We are exposed to interest-rate risk associated with our debt financing. Prior to issuing long-term debt, Washington Gas may utilize derivative instruments to minimize its exposure to the risk of interest-rate volatility. Refer to the section entitled “ Interest-Rate Risk ” included in Management’s Discussion for further discussion of our interest-rate risk management activity.

Security Ratings

The table below reflects the current credit ratings for the outstanding debt instruments of WGL Holdings and Washington Gas. Changes in credit ratings may affect WGL Holdings’ and Washington Gas’ cost of short-term and long-term debt and their access to the capital markets. A security rating is not a recommendation to buy, sell or hold securities. The rating may be subject to revision or withdrawal at any time by the assigning rating organization and each rating should be evaluated independently of any other rating.

Credit Ratings for Outstanding Debt Instruments


	WGL Holdings		Washington Gas
Rating Service	Unsecured Medium-Term Notes (Indicative) ^(a)	Commercial Paper	Unsecured Medium- Term Notes	Commercial Paper
Fitch Ratings ^(b)	A+	F1	AA–	F1+
Moody’s Investors Service ^(c)	Not Rated	P-2	A2	P-1
Standard & Poor’s Ratings Services ^(d)	A+	A-1	A+	A-1

^(a)

Indicates the ratings that may be applicable if WGL Holdings were to issue unsecured MTNs.

^(b)

The long-term debt ratings outlook issued by Fitch Ratings for WGL Holdings and Washington Gas is stable.

^(c)

The long-term debt ratings outlook issued by Moody’s Investors Service for Washington Gas is stable.

^(d)

The long-term debt ratings outlook issued by Standard & Poor’s Rating Services for WGL Holdings and Washington Gas is stable.

Ratings Triggers and Certain Debt Covenants

WGL Holdings and Washington Gas pay fees on their credit facilities, which in some cases are based on the long-term debt ratings of Washington Gas. In the event the long-term debt of Washington Gas is downgraded below certain levels, WGL Holdings and Washington Gas would be required to pay higher fees. There are five different levels of fees. The credit facility for WGL Holdings defines its applicable fee level as one level below the level applicable to Washington Gas. Under the terms of the credit facilities, the lowest level facility fee is 6.0 basis points and the highest is 17.5 basis points.

Under the terms of WGL Holdings’ and Washington Gas’ credit agreements, the ratio of consolidated financial indebtedness to consolidated total capitalization cannot exceed 0.65 to 1.0 (65.0%). In addition, WGL Holdings and Washington Gas are required to inform lenders of changes in corporate existence, financial conditions, litigation, and environmental warranties that might have a material effect. The failure to inform the lenders’ agent of changes in these areas deemed material in nature might constitute default under the agreements. Additionally, failure to pay principal or interest on any other indebtedness may be deemed a default under our credit agreements. A default, if not remedied, may lead to a suspension of further loans and/or acceleration in which obligations become immediately due and payable. At March 31, 2012, we were in compliance with all of the covenants under our revolving credit facilities.

For certain of Washington Gas’ natural gas purchase and pipeline capacity agreements, if the long-term debt of Washington Gas is downgraded to or below the lower of a BBB- rating by Standard & Poor’s or a Baa3 rating by Moody’s Investors Service, or if Washington Gas is deemed by a counterparty not to be creditworthy, then the counterparty may withhold service or deliveries, or may

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

require additional credit support. For certain other agreements, if the counterparty’s credit exposure to Washington Gas exceeds a contractually defined threshold amount, or if Washington Gas’ credit rating declines, then the counterparty may require additional credit support. At March 31, 2012, Washington Gas would not be required to supply additional credit support by these arrangements if its long-term debt rating was to be downgraded one rating level.

WGL Holdings has guaranteed payments for certain purchases of natural gas and electricity on behalf of its wholly-owned subsidiaries; WGEServices and CEV (refer to our 2011 Annual Report for a further discussion of these guarantees). If the credit rating of WGL Holdings declines, WGEServices and CEV may be required to provide additional credit support for these purchase contracts. At March 31, 2012, neither WGEServices nor CEV would be required to provide additional credit support, for these arrangements if the long-term debt rating of WGL Holdings was to be downgraded one rating level.

Cash Flows Provided by Operating Activities

The primary drivers for our operating cash flows are cash payments received from natural gas and electricity customers, offset by our payments for natural gas and electricity costs, operation and maintenance expenses, taxes and interest costs.

Net cash provided by operating activities totaled $207.9 million for the six months ended March 31, 2012. Net cash provided by operating activities reflects net income before preferred stock dividends, as adjusted for non-cash earnings and charges and changes in working capital including:

•

Accounts receivable and unbilled revenues—net increased $206.0 million from September 30, 2011, primarily due to increased sales volumes to customers during our winter heating season and increased sales volumes associated with Washington Gas’ asset optimization program.

•

Storage gas inventory cost levels decreased $114.7 million from September 30, 2011 primarily due to conversion to cash through seasonal physical withdrawals.

•

Gas costs (current and deferred) and other regulatory assets / liabilities—net decreased $38.6 million from September 30, 2011 primarily due to decreases in balancing charges and mark-to-market adjustments.

•

Accounts payable and other accrued liabilities decreased $10.1 million, due to lower gas prices, partially offset by a seasonal increase in the volumes of natural gas purchases and increased trading activity in CEV. Volumes increased both for deliveries to customers for the winter heating season and for Washington Gas’ asset optimization program.

•

Accrued taxes increased $52.2 million from September 30, 2011 primarily due to an increase in fuel taxes in Maryland and the District of Columbia.

•

Other current assets increased $55.4 million primarily due to net changes in the valuation of energy related derivative contracts.

•

Other current liabilities decreased $35.7 million primarily due to net changes in the valuation of energy related derivative contracts.

Cash Flows Provided by Financing Activities

Cash flows provided by financing activities totaled $3.2 million for the six months ended March 31, 2012, reflecting the issuance of $92.5 million of notes payable, partially offset by the retirement of $52.0 million of long-term debt and dividends on common and preferred stock of $37.9 million.

Cash Flows Used in Investing Activities

During the six months ended March 31, 2012, cash flows used in investing activities totaled $118.3 million, which primarily consists of capital expenditures made on behalf of Washington Gas. In addition, investing activities also reflects additional investments in commercial Solar Photovoltaic (Solar PV) facilities and investments in a partnership to directly fund residential Solar PV facilities.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

CONTRACTUAL OBLIGATIONS, OFF-BALANCE SHEET ARRANGEMENTS AND OTHER COMMERCIAL COMMITMENTS

Contractual Obligations

We have certain contractual obligations incurred in the normal course of business that require us to make fixed and determinable payments in the future. These commitments include long-term debt, lease obligations, unconditional purchase obligations for pipeline capacity, transportation and storage services, certain natural gas and electricity commodity commitments and our commitments related to the BPO program.

Reference is made to the “Contractual Obligations, Off-Balance Sheet Arrangements and Other Commercial Commitments” section of Management’s Discussion in our 2011 Annual Report for a detailed discussion of our contractual obligations. Note 4 of the Notes to Consolidated Financial Statements in our 2011 Annual Report includes a discussion of long-term debt, including debt maturities. Note 13 of the Notes to Consolidated Financial Statements in our 2011 Annual Report reflects information about the various contracts of Washington Gas, WGEServices and CEV. Additionally, refer to Note 13 of the Notes to Consolidated Financial Statements in this quarterly report.

There have been no significant changes to contractual obligations in the three month period ended March 31, 2012.

Construction Project Financing

Financial Guarantees

WGL Holdings has guaranteed payments primarily for certain purchases of natural gas and electricity on behalf of WGEServices and for certain purchase commitments on behalf of CEV. At March 31, 2012, these guarantees totaled $532.5 million and $122.6 million for WGEServices and CEV, respectively. The amount of such guarantees is periodically adjusted to reflect changes in the level of financial exposure related to these purchase commitments. We also receive financial guarantees or other collateral from counterparties when required by our credit policy (refer to the section entitled “Credit Risk” for a further discussion of our credit policy). WGL Holdings also issued guarantees totaling $3.0 million at March 31, 2012 on behalf of certain of our non-utility subsidiaries associated with their banking transactions. Of the total guarantees of $658.1 million, $4.8 million expired on April 30, 2012, and $22.2 million is due to expire on October 31, 2012. The remaining guarantees do not have specific maturity dates. For all of its financial guarantees, WGL Holdings may cancel any or all future obligations imposed by the guarantees upon written notice to the counterparty, but WGL Holdings would continue to be responsible for the obligations created under the guarantees prior to the effective date of the cancellation.

Effective October 1, 2011, WGL Holdings began charging to its subsidiaries guarantee fees in an amount equal to the daily guarantee exposure multiplied by a monthly weighted average interest rate. During the three and six months ended March 31, 2012, the total fees charged by WGL Holdings to its subsidiaries were $0.2 million and $0.3 million, respectively. The majority of these fees were charged to WGEServices and have been eliminated in the accompanying consolidated financial statements of WGL Holdings.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Chillum LNG Facility

Washington Gas continues to incorporate in its plans construction of a proposed one billion cubic foot liquefied natural gas (LNG) storage facility on the land owned by Washington Gas in Chillum, Maryland, where natural gas storage facilities previously existed for meeting customers’ forecasted peak demand for natural gas. Subject to the resolution of certain legal and regulatory issues, the new storage facility is currently expected to be completed and in service by the 2019-2020 winter heating season at a total estimated cost of $185.3 million.

In 2005, Washington Gas requested approval from the Maryland Public Service Commission (PSC of MD) regarding the safety of the proposed facility and compliance with applicable federal regulations. In 2007, the Engineering Division of the PSC of MD confirmed the analysis that had been presented by Washington Gas and found the proposed facility to be safely sited. On March 19, 2009, the PSC of MD docketed a proceeding for the purpose of reviewing Washington Gas’ most recent gas procurement plan including the role the Chillum facility plays in meeting current and future customers’ annual and seasonal natural gas requirements.

On October 30, 2006, the District Council of Prince George’s County, Maryland denied Washington Gas’ application for a special exception related to its proposed construction of the LNG peaking plant because of the District Council’s position that newly enacted zoning restrictions prohibit such construction. Washington Gas appealed this decision to the Prince George’s County Circuit Court (the Circuit Court) on November 22, 2006; however, the case was subsequently sent back to the administrative process by the Circuit Court. On April 16, 2008, Washington Gas filed a Complaint for Declaratory and Injunctive Relief with the United States District Court for the District of Maryland (the U.S. District Court) seeking a declaratory judgment that all local laws relating to safety and location of the facility are preempted by Federal and State law. On March 26, 2010, the U.S. District Court denied Washington Gas’ motion for summary judgment; however, Washington Gas filed an amended complaint and there have been further proceedings for consideration of the preemption issues raised by Washington Gas. On March 9, 2012, the U.S. District Court issued an order and memorandum opinion that denied Washington Gas’ motion for summary judgment. Washington Gas filed a notice of appeal with the U.S. Circuit Court of Appeals for the Fourth Circuit on April 3, 2012.

Washington Gas must begin construction of the storage facility in the spring of 2016 in order for the Chillum Facility to be completed and in service by the 2019-2020 winter heating season. Until the LNG plant is constructed, Washington Gas has planned for alternative sources of supply to meet its customers’ peak day requirements. These plans include capital expenditures related to infrastructure improvements which contribute to providing for adequate system performance based on projected needs.

Operating Issues Related To Changes In Natural Gas Supply

In fiscal year 2005, Washington Gas began addressing a significant increase in the number of natural gas leaks on its distribution system in a portion of Prince George’s County, Maryland. Natural gas containing a low concentration of heavy hydrocarbons (HHCs) can cause the seals in certain mechanical couplings on the Washington Gas distribution system to shrink increasing the propensity for the coupling to leak. Independent laboratory tests performed on behalf of Washington Gas have shown that, in a laboratory environment, the injection of HHCs into gas with low concentrations of HHC can be effective in offsetting the affect of the low HHC gas on the seals in couplings which increases their sealing force and in turn, reduces the propensity for the affected couplings to leak.

To resolve the significant increase in leaks, Washington Gas replaced gas service lines and replaced or rehabilitated gas mains that contained the affected mechanical couplings in Prince George’s County. Additionally, Washington Gas constructed three facilities to inject HHCs into the gas stream entering the Washington Gas distribution system. Washington Gas has been evaluating the effectiveness of this HHC injection process on the affected couplings under field conditions. Our evaluation of the role of these HHC injections as a preventative and remedial measure was filed in a report to the PSC of MD on June 29, 2007. Washington Gas continues to mitigate the impact of low HHC gas from whatever source through accelerating the replacement of mechanically coupled pipeline and the operation of three HHC injection facilities.

The current planned mechanical coupling remediation and replacement work includes a planned $62.0 million, 5-year, mechanically coupled pipe replacement program approved by the SCC of VA on April 21, 2011 as part of Washington Gas’ SAVE filing and the continuation of the December 16, 2009 settlement in the District of Columbia that includes a targeted mechanically coupled pipe replacement and encapsulation program which is estimated to cost $28.0 million and is expected to take approximately seven years to complete. Rate recovery of the expenditures has been approved by the SCC of VA and the PSC of DC. Additionally, Washington Gas has budgeted approximately $47.0 million related to a planned 5-year mechanically coupled pipe replacement program in Maryland.

Additional operating expenses and capital expenditures may be necessary to contend with leaks that may accompany the receipt of increased volumes of low HHC gas into Washington Gas’ distribution system. Such additional operating expenses and capital expenditures may not be timely enough to mitigate the challenges posed by increased volumes of low HHC gas, potentially resulting in leakage from mechanical couplings at a rate that could compromise the safety of our distribution system.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Notwithstanding Washington Gas’ recovery of costs related to the construction of the injection facilities and hexane costs through local regulatory commission action, Washington Gas has pursued and will pursue all remedies available to keep its customers from having to pay more than their appropriate share of the costs of the remediation to maintain the safety of the Washington Gas distribution system.

Commonwealth Pipeline

In February 2012, CEV entered into a joint development agreement with UGI Energy Services, Inc. (UGI) and Inergy Midstream, L.P. (Inergy), to jointly market and develop a 200-mile interstate pipeline named the Commonwealth Pipeline. The pipeline is planned to extend south from the terminus of Inergy’s Marc I line in Lycoming County, Pennsylvania and run through central and eastern Pennsylvania accessing markets in and around Philadelphia, Baltimore and the Washington, D.C. metropolitan region. The new pipeline will provide these markets with direct access to abundant supplies of Marcellus natural gas through a safe, reliable and cost-effective transportation system. The pipeline is expected to cross and link with a number of interstate pipelines along its route, providing even greater supply diversity to the mid-Atlantic region while simultaneously providing Marcellus producers with direct access to expanding markets currently served by legacy interstate pipelines.

The purpose of the joint development agreement is to determine the commercial, financial and engineering feasibility and viability of developing the interstate pipeline. The joint development agreement also defines the rights and obligations of each party with respect to the preliminary development and marketing of the interstate pipeline. CEV and UGI are expected to execute precedent agreements to become anchor shippers on the pipeline.

If the parties agree to construct the pipeline after analyzing and assessing certain development considerations, the pipeline is expected to go into service in 2015 and transport at least 800,000 dekatherms of natural gas per day. CEV, Inergy and UGI expect to be equal equity holders of the project. Inergy will construct and operate the pipeline which is expected to cost approximately $1.0 billion and be funded equally by the three parties. To date, no capital expenditures have been incurred on the project and the company has recorded its expenses associated with marketing and development activities.

CREDIT RISK

Wholesale Credit Risk

Certain wholesale suppliers that sell natural gas to any or all of Washington Gas, WGEServices, and CEV may have relatively low credit ratings or may not be rated by major credit rating agencies.

Washington Gas enters into transactions with wholesale counterparties for the purpose of meeting firm ratepayer commitments, to optimize the value of its long-term capacity assets, and for hedging natural gas costs. In the event of a counterparty’s failure to deliver contracted volumes of gas or fulfill its payment obligations, Washington Gas may incur losses that would typically be passed through to its sales customers under the purchased gas cost adjustment mechanisms. Washington Gas may be at risk for financial loss to the extent these losses are not passed through to its customers.

For WGEServices, any failure of wholesale counterparties to deliver natural gas or electricity under existing contracts could cause financial exposure for the difference between the price at which WGEServices has contracted to buy these commodities and their replacement cost from another supplier. To the extent that WGEServices sells natural gas to these wholesale counterparties, WGEServices may be exposed to payment risk if WGEServices is in a net receivable position. Additionally, WGEServices enters into contracts with third parties to hedge the costs of natural gas and electricity. Depending on the ability of the third parties to fulfill their commitments, WGEServices could be at risk for financial loss.

CEV enters into transactions with wholesale counterparties to optimize its portfolio of owned and managed natural gas assets. Any failure of wholesale counterparties to deliver natural gas under existing contracts could cause financial exposure for the difference between the price at which CEV has contracted to buy these commodities and their replacement cost. To the extent that CEV sells natural gas to these wholesale counterparties, CEV may be exposed to payment risk if it is in a net receivable position. In addition, CEV enters into contracts with third parties to hedge the costs of natural gas. Depending on the ability of the third parties to fulfill their commitments, CEV could be at risk for financial loss.

Washington Gas, WGEServices and CEV have an existing credit policy that is designed to mitigate credit risks through a requirement for credit enhancements including, but not limited to, letters of credit, parent guarantees and cash collateral when deemed necessary. In accordance with this policy, Washington Gas, WGEServices and CEV have each obtained credit enhancements from certain of their counterparties. If certain counterparties or their guarantors meet the policy’s credit worthiness criteria, Washington Gas, WGEServices and CEV may grant unsecured credit to those counterparties or their guarantors. The credit worthiness of all counterparties is continuously monitored.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Washington Gas, WGEServices and CEV are also subject to the collateral requirements of their counterparties. At March 31, 2012, Washington Gas, WGEServices and CEV provided $4.4 million, $0.3 million and $19.4 million in cash collateral to counterparties, respectively.

The following table provides information on our credit exposure, net of collateral, to wholesale counterparties as of March 31, 2012 for Washington Gas, WGEServices and CEV, separately.

Credit Exposure to Wholesale Counterparties (In millions)


Rating ^(a)	Exposure Before Credit Collateral ^(b)		Offsetting Credit Collateral Held ^(c)		Net Exposure		Number of Counterparties Greater Than 10% ^(d)		Net Exposure of Counterparties Greater Than 10%
Washington Gas
Investment Grade	$	9.6	$	—	$	9.6		2	$	5.2
Non-Investment Grade		6.2		5.0		1.2		1		1.2
No External Ratings		5.8		—		5.8		1		4.8
WGEServices
Investment Grade	$	0.1	$	—	$	0.1		1	$	0.1
Non-Investment Grade		—		—		—		—		—
No External Ratings		0.2		—		0.2		3		0.1
CEV
Investment Grade	$	7.8	$	—	$	7.8		3	$	6.1
Non-Investment Grade		—		—		—		—		—
No External Ratings		1.2		—		1.2		—		—

^(a) Included in “Investment Grade” are counterparties with a minimum Standard & Poor’s or Moody’s Investor Service rating of BBB- or Baa3, respectively. If a counterparty has provided a guarantee by a higher-rated entity (e.g., its parent), the guarantor’s rating is used in this table.

^(b) Includes the net of all open positions on energy-related derivatives subject to mark-to-market accounting requirements, the net receivable/payable for realized transactions and net open positions for contracts designated as normal purchases and normal sales and not recorded on our balance sheet. Amounts due from counterparties are offset by liabilities payable to those counterparties to the extent that legally enforceable netting arrangements are in place.

^(c) Represents cash deposits and letters of credit received from counterparties, not adjusted for probability of default.

^(d) Using a percentage of the net exposure.

Retail Credit Risk

Washington Gas is exposed to the risk of non-payment of utility bills by certain of its customers. To manage this customer credit risk, Washington Gas may require cash deposits from its high risk customers to cover payment of their bills until the requirements for the deposit refunds are met. In addition, Washington Gas implemented a POR program as approved by the PSC of MD, whereby it purchases receivables from participating energy marketers at approved discount rates. Under the program, Washington Gas is exposed to the risk of non-payment by the retail customers for these receivables. This risk is factored into the approved discount rate at which Washington Gas purchases the receivables.

WGEServices is also exposed to the risk of non-payment by its retail customers. WGEServices manages this risk by evaluating the credit quality of certain new customers as well as by monitoring collections from existing customers. To the extent necessary, WGEServices can obtain collateral from, or terminate service to, its existing customers based on credit quality criteria. In addition, WGEServices participates in POR programs with certain Maryland and Pennsylvania utilities, whereby it sells its receivables to various utilities at approved discount rates. Under the POR programs, WGEServices is exposed to the risk of non-payment by its retail customers for delivered commodities that have not yet been billed. Once the invoices are billed, however, the associated credit risk is assumed by the purchasing utilities. While participation in POR programs reduce the risk of collection and fixes a discount rate on the receivables, there is a risk that the discount rate paid to participate in the POR program will exceed the actual bad debt expense and billing fees associated with these receivables.

CEV is not subject to retail credit risk.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

MARKET RISK

We are exposed to various forms of market risk including commodity price risk, weather risk and interest-rate risk. The following discussion describes these risks and our management of them.

Price Risk Related to the Regulated Utility Segment

Washington Gas faces price risk associated with the purchase and sale of natural gas. Washington Gas generally recovers the cost of the natural gas to serve customers through gas cost recovery mechanisms as approved in jurisdictional tariffs; therefore, a change in the price of natural gas generally has no direct effect on Washington Gas’ net income. However, Washington Gas is responsible for following competitive and reasonable practices in purchasing natural gas for its customers.

To manage price risk associated with its natural gas supply to its firm customers, Washington Gas: (i) actively manages its gas supply portfolio to balance sales and delivery obligations; (ii) injects natural gas into storage during the summer months when prices are historically lower, and withdraws that gas during the winter heating season when prices are historically higher and (iii) enters into hedging contracts and other contracts that qualify as derivative instruments related to the sale and purchase of natural gas.

Washington Gas executes commodity-related physical and financial contracts in the form of forwards, swaps and option contracts as part of an asset optimization program that is managed by its internal staff. These transactions are accounted for as derivatives. Under this program, Washington Gas realizes value from its long-term natural gas transportation and storage capacity resources when not being fully used to serve utility customers. Regulatory sharing mechanisms in all three jurisdictions allow the profit from these transactions to be shared between Washington Gas’ customers and shareholders.

The following two tables summarize the changes in the fair value of our net assets (liabilities) associated with the regulated utility segment’s energy-related derivatives during the six months ended March 31, 2012:

Regulated Utility Segment

Changes in Fair Value of Energy-Related Derivatives


(In millions)
Net liabilities at September 30, 2011	$	(3.2	)
Net fair value of contracts entered into during the period		28.3
Other changes in net fair value		4.9
Realized net settlement of derivatives		(18.3	)
Net assets at March 31, 2012	$	11.7

Regulated Utility Segment

Roll Forward of Energy-Related Derivatives


(In millions)
Net liabilities at September 30, 2011	$	(3.2	)
Recorded to income		7.6
Recorded to regulatory assets/liabilities		25.6
Realized net settlement of derivatives		(18.3	)
Net assets at March 31, 2012	$	11.7

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

The maturity dates of our net assets (liabilities) associated with the regulated utility segment’s energy-related derivatives recorded at fair value at March 31, 2012, is summarized in the following table based on the level of the fair value calculation under ASC Topic 820:

Regulated Utility Segment

Maturity of Net Assets (Liabilities) Associated with our Energy-Related Derivatives


	Years Ended September 30,
(In millions)	Total			Remainder 2012			2013			2014			2015		2016		Thereafter
Level 1 — Quoted prices in active markets	$	—		$	—		$	—		$	—		$	—	$	—	$	—
Level 2 — Significant other observable inputs		16.3			0.9			3.3			10.0			2.1		—		—
Level 3 — Significant unobservable inputs		(4.6	)		(1.5	)		(3.8	)		(9.3	)		1.9		3.5		4.6
Total net assets (liabilities) associated with our energy-related derivatives	$	11.7		$	(0.6	)	$	(0.5	)	$	0.7		$	4.0	$	3.5	$	4.6

Refer to Note 9, Derivative and Weather-Related Instruments and Note 10, Fair Value Measurements of the Notes to Consolidated Financial Statements for a further discussion of our derivative activities and fair value measurements.

Price Risk Related to the Non-Utility Segments

Retail Energy Marketing. Our retail energy-marketing subsidiary, WGEServices, sells natural gas and electricity to retail customers at both fixed and indexed prices. WGEServices must manage daily and seasonal demand fluctuations for these products with its suppliers. Price risk exists to the extent WGEServices does not closely match the timing and volume of natural gas and electricity it purchases with the related fixed price or indexed sales commitments. WGEServices’ risk management policies and procedures are designed to minimize this risk.

A portion of WGEServices’ annual natural gas sales volumes is subject to variations in customer demand associated with fluctuations in weather and other factors. Purchases of natural gas to fulfill retail sales commitments are generally made under fixed-volume contracts based on certain weather assumptions. If there is significant deviation from normal weather or other factors which affect customer usage, purchase commitments may differ significantly from actual customer usage. To the extent that WGEServices cannot match its customer requirements and supply commitments, it may be exposed to commodity price and volume variances, which could negatively impact expected gross margins (refer to the section entitled “ Weather Risk ” for a further discussion of our management of weather risk). WGEServices manages these risks through the use of derivative instruments including financial products and wholesale supply contracts that provide for volumetric variability.

WGEServices procures electricity supply under contract structures in which WGEServices assumes the responsibility of matching its customer requirements with its supply purchases. WGEServices assembles the various components of supply, including electric energy from various suppliers, and capacity, ancillary services and transmission service from the PJM Interconnection, a regional transmission organization, to match its customer requirements in accordance with its risk management policy.

To the extent WGEServices has not sufficiently matched its customer requirements with its supply commitments, it could be exposed to electricity commodity price risk. WGEServices may manage this risk through the use of derivative instruments, including financial products.

WGEServices’ electric business is also exposed to fluctuations in weather and varying customer usage. Purchases generally are made under fixed-price, fixed-volume contracts that are based on certain weather assumptions. If there are significant deviations in weather or usage from these assumptions, WGEServices may incur price and volume variances that could negatively impact expected gross margins (refer to the section entitled “Weather Risk” for a further discussion of our management of weather risk).

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

The following two tables summarize the changes in the fair value of our net assets (liabilities) associated with the retail energy marketing segment’s energy-related derivatives during the six months ended March 31, 2012:

Retail Energy Marketing Segment

Changes in Fair Value of Energy-Related Derivatives


(In millions)
Net liabilities at September 30, 2011	$	(21.4	)
Net fair value of contracts entered into during the period		(4.6	)
Other changes in net fair value		(45.7	)
Realized net settlement of derivatives		27.2
Net liabilities at March 31, 2012	$	(44.5	)

Retail Energy Marketing Segment

Roll Forward of Energy-Related Derivatives


(In millions)
Net liabilities at September 30, 2011	$	(21.4	)
Recorded to income		(49.1	)
Recorded to accounts payable		(1.2	)
Realized net settlement of derivatives		27.2
Net liabilities at March 31, 2012	$	(44.5	)

The maturity dates of our net assets (liabilities) associated with the retail energy marketing segments’ energy-related derivatives recorded at fair value at March 31, 2012 is summarized in the following table based on the level of the fair value calculation under ASC Topic 820:

Retail Energy Marketing Segment

Maturity of Net Assets (Liabilities) Associated with our Energy-Related Derivatives


	Years Ended September 30,
(In millions)	Total			Remainder 2012			2013			2014			2015			2016		Thereafter
Level 1 — Quoted prices in active markets	$	—		$	—		$	—		$	—		$	—		$	—	$	—
Level 2 — Significant other observable inputs		(43.7	)		(19.1	)		(18.4	)		(5.9	)		(0.3	)		—		—
Level 3 — Significant unobservable inputs		(0.8	)		(4.1	)		(1.0	)		3.7			0.6			—		—
Total net assets (liabilities) associated with our energy-related derivatives	$	(44.5	)	$	(23.2	)	$	(19.4	)	$	(2.2	)	$	0.3		$	—	$	—

Wholesale Energy Solutions. CEV engages in wholesale commodity transactions to optimize its owned and managed capacity assets. Depending upon the nature of its forward hedges, CEV may be exposed to fluctuations in mark-to-market valuations based on changes in forward price curves. Price risk exists to the extent that uneven physical natural gas volumes do not perfectly match with forward contracts.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

The following two tables summarize the changes in the fair value of our net assets (liabilities) associated with the non-utility segments’ energy-related derivatives for both natural gas and electricity during the six months ended March 31, 2012:

Wholesale Energy Solutions Segment

Changes in Fair Value of Energy-Related Derivatives


(In millions)
Net assets at September 30, 2011	$	8.1
Net fair value of contracts entered into during the period		45.3
Other changes in net fair value		7.1
Realized net settlement of derivatives		(21.3	)
Net assets at March 31, 2012	$	39.2

Wholesale Energy Solutions Segment

Roll Forward of Energy-Related Derivatives


(In millions)
Net assets at September 30, 2011	$	8.1
Recorded to income		52.4
Realized net settlement of derivatives		(21.3	)
Net assets at March 31, 2012	$	39.2

The maturity dates of our net assets (liabilities) associated with the wholesale energy solutions segments’ energy-related derivatives recorded at fair value at March 31, 2012 is summarized in the following table based on the level of the fair value calculation under ASC Topic 820:

Wholesale Energy Solutions Segment

Maturity of Net Assets (Liabilities) Associated with our Energy-Related Derivatives


	Years Ended September 30,
(In millions)	Total		Remainder 2012			2013		2014		2015		2016		Thereafter

Level 1 — Quoted prices in active markets	$	—	$	—		$	—	$	—	$	—	$	—	$	—
Level 2 — Significant other observable inputs		39.2		(0.7	)		39.1		0.8		—		—		—
Level 3 — Significant unobservable inputs		—		—			—		—		—		—		—
Total net assets associated with our energy-related derivatives	$	39.2	$	(0.7	)	$	39.1	$	0.8	$	—	$	—	$	—

Value-at-Risk. WGEServices measures the market risk of its energy commodity portfolio by determining its value-at-risk. Value-at-risk is an estimate of the maximum loss that can be expected at some level of probability if a portfolio is held for a given time period. The value-at-risk calculation for natural gas and electric portfolios include assumptions for normal weather, new customers and renewing customers for which supply commitments have been secured. Based on a 95% confidence interval for a one-day holding period, WGEServices’ value-at-risk at March 31, 2012 was approximately $4,000 and $48,000, related to its natural gas and electric portfolios, respectively.

Weather Risk

We are exposed to various forms of weather risk in both our regulated utility and non-utility business segments. To the extent Washington Gas does not have weather derivatives or billing adjustment mechanisms in place, its revenues are volume driven and its current rates are based upon an assumption of normal weather. Without weather protection strategies, variations from normal weather will cause our earnings to increase or decrease depending on the weather pattern. Washington Gas currently has a weather protection strategy that is designed to neutralize the estimated financial effects of weather on its net income within a reasonable range of weather expectations, as discussed below.

The financial results of our retail energy-marketing business, WGEServices, are affected by variations from normal weather primarily in the winter relating to its natural gas sales, and throughout the fiscal year relating to its electricity sales. WGEServices manages these weather risks with, among other things, weather derivatives.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Variations from normal weather may also affect the financial results of our wholesale energy business, CEV, primarily with regards to summer—winter storage spreads and in transportation spreads throughout the fiscal year. CEV manages these weather risks with, among other things, locational physical and financial basis hedging.

Billing Adjustment Mechanisms. In Maryland, Washington Gas has an RNA billing mechanism that is designed to stabilize the level of net revenues collected from Maryland customers by eliminating the effect of deviations in customer usage caused by variations in weather from normal levels and other factors such as conservation. In Virginia, Washington Gas has a Weather Normalization Adjustment (WNA) billing adjustment mechanism that is designed to eliminate the effect of variations in weather from normal levels on utility net revenues. Additionally, as part of the CARE, Washington Gas has a CRA mechanism, which, coupled with the WNA, eliminates the effect of both weather and other factors such as conservation for residential customers in Virginia. For a discussion of current rates and regulatory matters, refer to the section entitled “Rates and Regulatory Matters” in Management’s Discussion for Washington Gas.

For the RNA, WNA, and CRA mechanisms, periods of colder-than-normal weather generally would cause Washington Gas to record a reduction to its revenues and establish a refund liability to customers, while the opposite would generally result during periods of warmer-than-normal weather. However, factors such as volatile weather patterns and customer conservation may cause the RNA and the CARE adjustment to function conversely because they adjust billed revenues to provide a designed level of net revenue per meter.

Weather Derivatives. On August 12, 2011, Washington Gas executed HDD weather derivative contracts to manage its financial exposure to variations from normal weather in the District of Columbia for fiscal year 2012 resulting in a net premium payment to Washington Gas of $0.8 million. Under these contracts, Washington Gas purchased protections against net revenue shortfalls due to warmer-than-normal weather and sold colder-than-normal weather benefits. Because weather during the first six months of fiscal year 2012 was extraordinarily warm, Washington Gas expects to receive the maximum contractual payment of $7.1 million (including the net premium) from its weather derivatives. This amount is not expected to be sufficient to cover all of Washington Gas’ warm-weather exposure in the District of Columbia.

WGEServices utilizes HDD derivatives from time to time to manage weather risks related to its natural gas and electricity sales. WGEServices also utilizes cooling degree day (CDD) derivatives to manage weather risks related to its electricity sales during the summer cooling season. These derivatives cover a portion of WGEServices’ estimated revenue or energy-related cost exposure to variations in HDDs or CDDs. Refer to Note 9 —Derivatives of the Notes to Consolidated Financial Statements for a further discussion of the accounting for these weather-related instruments.

Interest-Rate Risk

We are exposed to interest-rate risk associated with our short-term and long-term financing. Washington Gas utilizes derivative instruments from time to time in order to minimize its exposure to the risk of interest-rate volatility. Refer to the section entitled “ Long-Term Cash Requirements and Related Financing” for further discussion of our interest-rate risk management activity.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

WASHINGTON GAS LIGHT COMPANY

This section of Management’s Discussion focuses on Washington Gas for the reported periods. In many cases, explanations and disclosures for both WGL Holdings and Washington Gas are substantially the same.

RESULTS OF OPERATIONS — Three Months Ended March 31, 2012 vs. March 31, 2011

The results of operations for the regulated utility segment and Washington Gas are substantially the same; therefore, this section primarily focuses on statistical information and other information that is not discussed in the results of operations for the regulated utility segment. Refer to the section entitled “Results of Operations—Regulated Utility” in Management’s Discussion for WGL Holdings for a detailed discussion of the results of operations for the regulated utility segment.

Washington Gas’ net income applicable to its common stock was $72.1 million and $70.7 million for the three months ended March 31, 2012 and 2011, respectively. Changes in the composition of earnings from the prior period are primarily due to: (i) higher revenues due to the implementation of new rates in Maryland and Virginia; (ii) an increase in unrealized margins associated with our asset optimization program; (iii) lower operation and maintenance expenses, including a benefit from our weather protection and (iv) an increase in revenues related to growth of more than 7,900 average active customer meters. Partially offsetting these increases were: (i) higher income taxes due to an increase in the effective tax rate including a regulatory write off of a regulatory asset originally recognized in 2010 related to the tax effect of Med D; (ii) a reduction in revenue attributed to warmer weather, excluding the benefit of our weather protection; (iii) lower realized margins, net of margin sharing, associated with our asset optimization program and (iv) an increase in depreciation expense due to the growth in, and changes in the asset mix of, our investment in utility plant.

Key gas delivery, weather and meter statistics are shown in the table below for the three months ended March 31, 2012 and 2011.

Gas Deliveries, Weather and Meter Statistics


	Three Months Ended
	March 31,						Increase/
	2012			2011			(Decrease)
Gas Sales and Deliveries (millions of therms)
Firm
Gas sold and delivered		323.8			418.2			(94.4	)
Gas delivered for others		172.2			212.5			(40.3	)
Total firm		496.0			630.7			(134.7	)
Interruptible
Gas sold and delivered		0.8			0.8			-
Gas delivered for others		78.4			93.5			(15.1	)
Total interruptible		79.2			94.3			(15.1	)
Electric generation—delivered for others		35.2			7.1			28.1
Total deliveries		610.4			732.1			(121.7	)

Degree Days
Actual		1,613			2,207			(594	)
Normal		2,112			2,109			3
Percent colder (warmer) than normal		(23.6	)%		4.6	%		n/a
Average active customer meters		1,096,571			1,088,647			7,924
New customer meters added		2,346			2,035			311

Gas Service to Firm Customers. The volume of gas delivered to firm customers is highly sensitive to weather variability as a large portion of the natural gas delivered by Washington Gas is used for space heating. Washington Gas’ rates are based on an assumption of normal weather. The tariffs in the Maryland and Virginia jurisdictions include provisions that consider the effects of the RNA, WNA and CRA mechanisms, respectively, which are designed to, among other things, eliminate the effect on net revenues of variations in weather from normal levels (refer to the section entitled “Weather Risk” for a further discussion of these mechanisms and other weather-related instruments included in our weather protection strategy).

During the quarter ended March 31, 2012 total gas deliveries to firm customers were 496.0 million therms, a decrease of 134.7 million therms from 630.7 million therms delivered in the same quarter of the prior fiscal year. This comparison in natural gas deliveries to firm customers primarily reflects warmer weather in the current quarter than in the same quarter of the prior year, partially offset by an increase in average active customer meters of 7,924.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Weather, when measured by HDDs was 23.6% warmer than normal for the second quarter of fiscal year 2012, compared to 4.6% colder than normal for the same quarter of fiscal year 2011. Due to the extremely warm weather, our weather protection instruments were not sufficient to offset approximately $3.1 million if the reduction in revenue for the three months ended March 31, 2012. There were no material effects on net income attributed to colder or warmer weather for the three months ended March 31, 2011.

Gas Service to Interruptible Customers. Washington Gas must curtail or interrupt service to this class of customer when the demand by firm customers exceeds specified levels. Therm deliveries to interruptible customers decreased by 15.1 million therms in the second quarter of fiscal year 2012 compared to the same quarter of the prior fiscal year, reflecting decreased demand due to warmer weather.

In the District of Columbia, the effect on net income of any changes in delivered volumes and prices to interruptible customers is limited by margin-sharing arrangements that are included in Washington Gas’ rate designs in the District of Columbia. In the District of Columbia, Washington Gas shares a majority of the margins earned on interruptible gas sales and deliveries with firm customers. A portion of the fixed costs for servicing interruptible customers is collected through the firm customers’ rate design. Rates for interruptible customers in Maryland and Virginia are based on a traditional cost of service approach. In Virginia, Washington Gas retains all revenues above a pre-approved margin threshold level. In Maryland, Washington Gas retains a defined amount of revenues based on a set threshold.

Gas Service for Electric Generation. Washington Gas delivers natural gas for use at two electric generation facilities in Maryland that are each owned by companies independent of WGL Holdings. During the three months ended March 31, 2011, deliveries to these customers increased by 28.1 million therms when compared to the same quarter of the prior year. Washington Gas shares with firm customers a significant majority of the margins earned from natural gas deliveries to these customers. Therefore, changes in the volume of interruptible gas deliveries to these customers do not materially affect either net revenues or net income.

RESULTS OF OPERATIONS — Six Months Ended March 31, 2012 vs. March 31, 2011

Washington Gas’ net income applicable to its common stock was $116.3 million and $111.1 million for the six months ended March 31, 2012 and 2011, respectively. Changes in the composition of earnings from the prior period are primarily due to: (i) higher revenues due to the implementation of new rates in Maryland and Virginia; (ii) an increase in unrealized margins associated with our asset optimization program; (iii) lower operation and maintenance expenses and (iv) an increase in revenues related to growth of more than 8,700 average active customer meters. Partially offsetting these increases were: (i) higher income taxes due to an increase in the effective tax rate including a regulatory write off of a regulatory asset originally recognized in 2010 related to the tax effect of Med D; (ii) a reduction in revenue attributed to warmer weather, excluding the benefit of our weather protection; (iii) lower realized margins, net of margin sharing, associated with our asset optimization program and (iv) an increase in depreciation expense due to the growth in, and changes in the asset mix of, our investment in utility plant.

Key gas delivery, weather and meter statistics are shown in the table below for the six months ended March 31, 2012 and 2011.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

Gas Deliveries, Weather and Meter Statistics


	Six Months Ended March 31,						Increase/
	2012			2011			(Decrease)
Gas Sales and Deliveries (millions of therms)
Firm
Gas sold and delivered		556.5			719.4			(162.9	)
Gas delivered for others		312.8			379.3			(66.5	)
Total firm		869.3			1,098.7			(229.4	)
Interruptible
Gas sold and delivered		1.6			1.6			—
Gas delivered for others		150.3			179.8			(29.5	)
Total interruptible		151.9			181.4			(29.5	)
Electric generation—delivered for others		43.0			23.4			19.6
Total deliveries		1,064.2			1,303.5			(239.3	)

Degree Days
Actual		2,807			3,712			(905	)
Normal		3,462			3,455			7
Percent colder (warmer) than normal		(18.9	)%		7.4	%		n/a
Average active customer meters		1,092,337			1,083,555			8,782
New customer meters added		5,802			4,862			940

Gas Service to Firm Customers. During the six months ended March 31, 2012 total gas deliveries to firm customers were 869.3 million therms, a decrease of 229.4 million therms from 1,098.7 million therms delivered in the same period of the prior fiscal year. This comparison in natural gas deliveries to firm customers primarily reflects warmer weather in the current six months than in the same period of the prior year, partially offset by an increase in average active customer meters of 8,782.

Weather, when measured by HDDs was 18.9% warmer than normal for the six months ended March 31, 2012, compared to 7.4% colder than normal for the same period of fiscal year 2011. Including the effects of our weather protection strategy, there was a $3.1 million unfavorable impact to net income attributed to warmer weather for the three months ended March 31, 2012 and no material effect on net income attributed to colder or warmer weather for the three months ended March 31, 2011.

Gas Service to Interruptible Customers. Therm deliveries to interruptible customers decreased by 29.5 million therms during the six months ended March 31, 2012 compared to the same period of the prior fiscal year, reflecting decreased demand due to warmer weather.

Gas Service for Electric Generation. Washington Gas delivers natural gas for use at two electric generation facilities in Maryland that are each owned by companies independent of WGL Holdings. During the six months ended March 31, 2012, deliveries to these customers increased by 19.6 million therms when compared to the same quarter of the prior year. Washington Gas shares with firm customers a significant majority of the margins earned from natural gas deliveries to these customers. Therefore, changes in the volume of interruptible gas deliveries to these customers do not materially affect either net revenues or net income.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity and capital resources for Washington Gas are substantially the same as the liquidity and capital resources discussion included in the Management’s Discussion of WGL Holdings (except for certain items and transactions that pertain to WGL Holdings and its unregulated subsidiaries). Those explanations are incorporated by reference into this discussion.

RATES AND REGULATORY MATTERS

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

District of Columbia Jurisdiction

Investigation of Depreciation Practices. On September 9, 2011, the PSC of DC docketed a proceeding to review the proper and adequate rates of depreciation of the several classes of Washington Gas’ property. In accordance with the procedural schedule, interested parties’ comments were filed by October 24, 2011. Washington Gas’ reply comments were filed on November 14, 2011, wherein Washington Gas requested that the PSC of DC consider depreciation issues in the context of the newly-initiated rate case, referenced below. On April 26, 2012, the PSC of DC granted Washington Gas’ request to consolidate its investigation of depreciation issues into its base rate proceeding and closed the proceeding.

District of Columbia Base Rate Case. On November 2, 2011, the PSC of DC docketed a proceeding to investigate the reasonableness of Washington Gas’ base rates and charges and required Washington Gas to file a base rate case no later than 90 days from the date of the order. On February 29, 2012, Washington Gas filed a request with the PSC of DC for a $29.0 million annual increase in revenues. The $29.0 million revenue increase requested in this application included a proposed overall rate of return 8.91% and a return on common equity of 10.90%. Washington Gas is also proposing to expand the existing program to replace or encapsulate certain vintage mechanical couplings, which was previously approved by the PSC of DC, to include the accelerated replacement of pipe in its system that is nearing the end of its useful life. Washington Gas plans to invest approximately $119.0 million to replace aging distribution pipe in the District of Columbia over the next five years and included, in this proposal, a request for approval of these expenditures over the next five years. Washington Gas also provided a proposed procedural schedule and requested that the PSC of DC establish a pre-hearing conference. On April 26, 2012, the PSC of DC adopted a procedural schedule and designated issues for the proceeding. Intervenor testimony is due on July 17, 2012, rebuttal testimony is due August 31, 2012, and evidentiary hearings are scheduled in October 2012.

Maryland Jurisdiction

Order on and Reviews of Purchased Gas Charges. Each year, the PSC of MD reviews the annual gas costs collected from customers in Maryland to determine if Washington Gas’ purchased gas costs are reasonable.

On September 9, 2011, the PSC of MD issued an order approving purchased gas charges of Washington Gas for the twelve-month period ending August 2009, except for an undetermined amount related to excess gas deliveries by CSPs which were cashed-out by Washington Gas. The PSC of MD found that the cash-out of excess deliveries was in violation of Washington Gas’ tariff and that Washington Gas should not have cashed-out the excess deliveries by CSPs, but rather should have eliminated the imbalances through volumetric adjustments in the future and designated that the hearing examiner in a separate proceeding determine whether civil penalties should be levied against Washington Gas. In accordance with generally accepted accounting principles, Washington Gas recorded a $5.3 million estimated regulatory liability associated with this decision during the fourth quarter of fiscal year 2011. On October 11, 2011, Washington Gas filed an application for rehearing of the order with respect to the decision that a violation of the tariff occurred and that civil penalties might be levied. Washington Gas requested that the PSC of MD find that Washington Gas is authorized to cash-out CSP account imbalances under its tariff and therefore is not subject to civil penalties. On January 3, 2012, the PSC of MD issued an order denying Washington Gas’ request for rehearing. Pending the ultimate decision of the PSC of MD, further action may be taken with respect to recovery from the CSPs.

In November 2009, the Chief Hearing Examiner of the PSC of MD issued a POHE, which approved Washington Gas’ proposal for the sharing of margins from asset optimization between Washington Gas and customers and its current methodology for pricing storage injections.

Subsequently, both the MD Staff and the OPC filed notices of appeal of the POHE followed by a memorandum on appeal in support of their positions. In January 2010, Washington Gas filed a reply memorandum in response to the Staff of the PSC of MD and the MD OPC’s memoranda on appeal. A decision by the PSC of MD is pending.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (continued)

to disallow $1.0 million of Washington Gas’ test period costs to achieve Washington Gas’ BPO agreement. Washington Gas also requested clarification related to implementation of the accelerated pipe replacement plan and what annual reporting requirements may apply.

On March 29, 2012, the PSC of MD issued an order in response to the petition for rehearing and clarification filed by Washington Gas. The PSC of MD (i) granted an additional revenue increase of $0.7 million related to interest synchronization, increasing the overall revenue increase granted to Washington Gas in the case to $9.1 million; (ii) denied Washington Gas’ request for an adjustment related to other tax adjustments, which would have increased the revenue requirement by an additional $2.4 million; (iii) denied recovery of the costs to initiate the outsourcing agreement with Accenture LLC in 2007; and (iv) directed Washington Gas to provide written notice when it implements the accelerated pipeline replacement project and adopted the reporting structure suggested by a MD Staff witness as guidance for reporting Washington Gas’ progress. As a result of this order, Washington Gas recorded a $2.8 million charge to income tax expense to write-off a regulatory asset that had been established in 2010 for the change in the tax treatment of Medicare Part D, the amortization of which comprised the majority of the other tax adjustments that were disallowed by the Commission.

On April 30, 2012, Washington Gas filed a petition for rehearing with the PSC of MD which requested the Commission reverse its decisions in the March 29, 2012 order denying Washington Gas’ request for an adjustment related to other tax adjustments and the costs to initiate the outsourcing agreement with Accenture, LLC. Washington Gas also filed a petition for judicial review of the PSC of MD’s March 29, 2012 order with the Circuit Court for Baltimore City to preserve its right to appeal in this case. Washington Gas has requested the Circuit Court to hold further proceedings on the appeal in abeyance pending the PSC of MD’s action on the petition for rehearing.

Virginia Jurisdiction

Conservation and Ratemaking Efficiency Plan. On July 22, 2010, Washington Gas filed an amendment to the CARE Plan to include small commercial and industrial customers in Virginia. The application included a portfolio of conservation and energy efficiency programs, an associated cost recovery provision and a decoupling mechanism that will adjust weather normalized non-gas distribution revenues for the impact of conservation or energy efficiency efforts. On November 18, 2010, the SCC of VA issued an order that denied Washington Gas’ application. The SCC of VA found that Washington Gas’ current tariff and its underlying class cost of service and revenue apportionment studies do not segregate small versus large customers and that only small customers qualify under the CARE law. The SCC of VA stated that Washington Gas could amend the underlying tariff and studies in connection with its required 2011 base rate case filing. Such a tariff amendment was proposed in the new base rate case filing made with the SCC of VA, which is pending a commission decision.

Virginia Base Rate Case. On January 31, 2011, Washington Gas filed a request with the SCC of VA for a $29.6 million annual increase in revenues. The filing was made pursuant to the settlement agreement reached by the parties and approved by the SCC of VA in Washington Gas’ last base rate case, which resulted in a PBR plan. On May 12, 2011, Washington Gas revised its requested revenue increase from $29.6 million to $28.5 million as a result of new proposed depreciation rates. Interim rates went into effect on October 1, 2011 with the requested increase subject to refund pending a final commission decision.

On November 30, 2011, Washington Gas filed a stipulation to reflect settlement terms to which Washington Gas, the Staff, and other stipulating parties to the settlement agreed. The AOBA did not support this stipulation. In the stipulation, the settling parties agreed to a $20.0 million rate increase, a 9.75% return on equity, an 8.261% overall rate of return, and a provision for sharing margins from asset optimization activities between Washington Gas and customers which includes a $3.2 million annual guarantee. Evidentiary hearings were held on December 5 and 6, 2011. Post-hearing briefs were filed on January 26, 2012. On March 15, 2012, the Senior Hearing Examiner issued a report of findings and recommended that the SCC of VA adopt the stipulation. On April 5, 2012, Washington Gas, the Staff of the SCC of VA, the Office of the Attorney General and Fairfax County all filed comments in support of the recommended decision of the Hearing Examiner while the AOBA filed comments in opposition. On April 18, 2012, Washington Gas filed a petition for leave to file reply and reply to AOBA’s comments on the Hearing Examiner’s report. A commission decision is pending.

Affiliate Transactions. On June 16, 2011, Washington Gas submitted an application to the SCC of VA requesting approval of three affiliate transactions with CEV: (i) the transfer to CEV of the remainder of the term of two agreements for natural gas storage service at the WSS and ESS storage fields; (ii) the sale to CEV of any storage gas balances associated with the WSS and ESS agreements; and (iii) the assignment to CEV of Washington Gas’ rights to buy base gas in the WSS storage field. Washington Gas proposed to make these affiliate transactions by September 30, 2011, coincident with the expiration of its PBR plan approved by the SCC of VA in a separate proceeding. On September 14, 2011, the SCC of VA issued an order denying Washington Gas’ application to transfer Washington Gas’ contracts for certain storage capacity resources to its affiliate, CEV. On October 4, 2011, Washington Gas filed a petition for reconsideration on this proceeding. On October 5, 2011, the SCC of VA granted Washington Gas’ request that the matter be reconsidered, but has not made a final ruling on Washington Gas’ petition for reconsideration. On December 6, 2011, the VA Staff submitted a supplement to action brief seeking to provide evidence to the commission that ratepayers have been funding the WSS and ESS assets during the PBR period based on the netting of costs associated with those assets when calculating net revenues.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

Item 2—Management’s Discussion and Analysis of

Financial Condition and Results of Operations (concluded)

Washington Gas submitted comments rejecting the Staff’s position and showing that the ratepayers had not funded these assets. These comments were appended to the VA Staff’s brief on December 9, 2011. A commission decision is pending.

OTHER MATTERS

New Labor Contract. Washington Gas has entered into a new three-year labor contract with the Teamsters Local Union No. 96 (Local 96), a local union affiliated with the International Brotherhood of Teamsters. The contract covers approximately 540 employees. The Teamsters ratified the contract on January 31, 2012 and is effective through May 31, 2015. The contract includes, among other things: (i) annual wage increases ranging from 2.25% to 3.25%; (ii) employment protection for each Local 96 employee employed at the date of ratification; (iii) discontinuance of the leave of absence pending retirement benefit as of June 1, 2012 and (iv) an increase in employee’s contribution to its medical benefits consistent with medical benefit plans for all other company employees.

WGL Holdings, Inc.

Washington Gas Light Company

Part I—Financial Information

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following issues related to our market risks are included under Item 2, Management’s Discussion and Analysis of Financial Condition and Results of Operations , and are incorporated by reference into this discussion.

•

Price Risk Related to the Regulated Utility Segment

•

Price Risk Related to the Non-Utility Segments

•

Weather Risk

•

Interest-Rate Risk

ITEM 4. CONTROLS AND PROCEDURES – WGL Holdings

Senior management, including the Chairman and Chief Executive Officer, and the Vice President and Chief Financial Officer, evaluated the effectiveness of WGL Holdings’ disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of March 31, 2012. Based on this evaluation process, the Chairman and Chief Executive Officer, and the Vice President and Chief Financial Officer have concluded that disclosure controls and procedures of WGL Holdings are effective. There have been no changes in the internal control over financial reporting of WGL Holdings during the quarter ended March 31, 2012 that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting of WGL Holdings.

ITEM 4. CONTROLS AND PROCEDURES—Washington Gas

Senior management, including the Chairman and Chief Executive Officer, and the Vice President and Chief Financial Officer, evaluated the effectiveness of the disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) of Washington Gas as of March 31, 2012. Based on this evaluation process, the Chairman and Chief Executive Officer, and the Vice President and Chief Financial Officer have concluded that the disclosure controls and procedures of Washington Gas are effective. There have been no changes in the internal control over financial reporting of Washington Gas during the quarter ended March 31, 2012 that have materially affected, or are reasonably likely to materially affect, the internal control over financial reporting of Washington Gas.

WGL Holdings, Inc.

Washington Gas Light Company

Part II—Other Information

ITEM 1. LEGAL PROCEEDINGS

The nature of our business ordinarily results in periodic regulatory proceedings before various state and federal authorities. For information regarding pending federal and state regulatory matters, see Note 13 — Commitments and Contingencies , contained in Part I under the Notes to Consolidated Financial Statements. Also, see Part II, Item 1 of our Form 10-Q for the quarter ended December 31, 2011 for the description of a material ongoing legal proceeding. There were no material developments in this matter during the quarter ended March 31, 2012.

ITEM 6. EXHIBITS

Exhibits:


Schedule/ Exhibit		Description
(a)(3)		Exhibits

		Exhibits Filed Herewith:

10.1		Credit Agreement dated as of April 3, 2012 among WGL Holdings, Inc., the Lenders Parties Hereto, Wells Fargo Bank, National Association, as administrative agent; The Bank of Tokyo-Mitsubishi UFJ, Ltd. as syndication agent; Branch Banking and Trust Company and TD Bank, N.A., as documentation agents; and Wells Fargo Securities, LLC, The Bank of Tokyo-Mitsubishi UFJ, Ltd., BB&T Capital Markets and TD Bank, N.A. as joint lead arrangers and joint book runners.

10.2		Credit Agreement dated as of April 3, 2012 among Washington Gas Light Company, the Lenders Parties Hereto, Wells Fargo Bank, National Association, as administrative agent; The Bank of Tokyo-Mitsubishi UFJ, Ltd. as syndication agent; Branch Banking and Trust Company and TD Bank, N.A., as documentation agents; and Wells Fargo Securities, LLC, The Bank of Tokyo-Mitsubishi UFJ, Ltd., BB&T Capital Markets and TD Bank, N.A. as joint lead arrangers and joint book runners.

31.1		Certification of Terry D. McCallister, the Chairman and Chief Executive Officer of WGL Holdings, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certification of Vincent L. Ammann, Jr., the Vice President and Chief Financial Officer of WGL Holdings, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.3		Certification of Terry D. McCallister, the Chairman and Chief Executive Officer of Washington Gas Light Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.4		Certification of Vincent L. Ammann, Jr., the Vice President and Chief Financial Officer of Washington Gas Light Company, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32		Certification of Terry D. McCallister, the Chairman and Chief Executive Officer, and Vincent L. Ammann, Jr., the Vice President and Chief Financial Officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

		Exhibits Submitted Herewith:

101.INS		XBRL Instance Document: ^*

101.SCH		XBRL Schema Document: ^*

101.CAL		XBRL Calculation Linkbase Document: ^*

101.LAB		XBRL Labels Linkbase Document: ^*

101.PRE		XBRL Presentation Linkbase Document: ^*

101.DEF		XBRL Definition Linkbase Document. ^*

3		Articles of Incorporation & Bylaws:

		Washington Gas Light Company Charter, filed on Form S-3 dated July 21, 1995.

		WGL Holdings, Inc. Charter, filed on Form S-4 dated February 2, 2000.

		Bylaws of WGL Holdings, Inc. as amended on March 5, 2009, filed as Exhibit 3(ii) to Form 8-K on March 6, 2009. Bylaws of Washington Gas Light Company as amended on December 16, 2011, filed as Exhibit 3(ii) to Form 8-K on December 21, 2011.

Attached as Exhibit 101 to this Quarterly Report are the financial statements and related footnotes of WGL Holdings, Inc. and Washington Gas Light Company formatted in extensible business reporting language (XBRL): Consolidated Balance Sheets (Unaudited); Consolidated Statements of Income (Unaudited); Consolidated Statements of Cash Flows (Unaudited); Balance Sheets (Unaudited); Statements of Income (Unaudited); Statements of Cash Flows (Unaudited) and Related Footnotes (Unaudited). Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed furnished, not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934 and otherwise are not subject to liability. We also make available on our web site the Interactive Data Files submitted as Exhibit 101 to this Quarterly Report.

WGL Holdings, Inc.

Washington Gas Light Company

Signature

Pursuant to the requirements the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized.


				WGL HOLDINGS, INC. and WASHINGTON GAS LIGHT COMPANY
				(Co-registrants)

Date: May 3, 2012				/s/ William R. Ford
				William R. Ford
				Controller (Principal Accounting Officer

Exhibit 10.1

Execution Version

Published Deal CUSIP: 9292EDAC4

Published Revolving Facility CUSIP: 9292EDAD2

CREDIT AGREEMENT

DATED AS OF APRIL 3, 2012

AMONG

WGL HOLDINGS, INC.,

THE LENDERS PARTIES HERETO,

WELLS FARGO BANK, NATIONAL ASSOCIATION,

AS ADMINISTRATIVE AGENT,

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.,

AS SYNDICATION AGENT,

BRANCH BANKING AND TRUST COMPANY AND

TD BANK, N.A.

AS DOCUMENTATION AGENTS,

AND

WELLS FARGO SECURITIES, LLC,

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.,

BB&T CAPITAL MARKETS AND

TD BANK, N.A.

AS JOINT LEAD ARRANGERS AND JOINT BOOK RUNNERS

TABLE OF CONTENTS


	Page

ARTICLE I INTERPRETATION		1

1.1 Definitions		1
1.2 Accounting Terms		18
1.3 Other Interpretive Provisions		18

ARTICLE II CREDIT FACILITY		19

2.1 The Facility		19
2.2 Loans		20
2.3 Funding by Lenders; Disbursement to the Borrower		24
2.4 Fees		24
2.5 Reductions in Aggregate Commitments; Increases in Aggregate Commitments		25
2.6 Extension Option		26
2.7 Repayments; Optional Principal Prepayments		27
2.8 Changes in Interest Rate, etc		28
2.9 Rates Applicable After Default		28
2.10 Method of Payment		29
2.11 Evidence of Indebtedness		30
2.12 Telephonic Notices		30
2.13 Interest Payment Dates; Interest and Fee Basis		31
2.14 Notification of Loans, Interest Rates, Prepayments and Commitment Reductions		31
2.15 Lending Installations		31
2.16 Non-Receipt of Funds by the Administrative Agent		32
2.17 Maximum Interest Rate		32
2.18 Increased Costs; Change in Circumstances; Illegality		32
2.19 Taxes		35
2.20 Compensation		38
2.21 Mitigation Obligations; Replacement of Lenders		39
2.22 Defaulting Lenders		40

ARTICLE III LETTERS OF CREDIT		43

3.1 Issuance		43
3.2 Notices		45
3.3 Participations		45
3.4 Reimbursement		45
3.5 Payment by Revolving Loans		46
3.6 Payment to Lenders		47
3.7 Obligations Absolute		47
3.8 Cash Collateral Account		49
3.9 The Issuing Bank		49
3.10 Effectiveness		50

-i-

TABLE OF CONTENTS

(continued)


	Page

ARTICLE IV CONDITIONS PRECEDENT		50

4.1 Conditions to Agreement Date		50
4.2 Conditions to All Credit Extensions		51

ARTICLE V REPRESENTATIONS AND WARRANTIES		52

5.1 Corporate Existence		52
5.2 Financial Condition		52
5.3 Litigation		53
5.4 No Breach		53
5.5 Corporate Action		53
5.6 Regulatory Approval		53
5.7 Regulations U and X		53
5.8 Pension and Welfare Plans		54
5.9 Accuracy of Information		54
5.10 Taxes		54
5.11 Environmental Warranties		54
5.12 Investment Company Act		56
5.13 Subsidiaries		56
5.14 OFAC; Anti-Terrorism Laws		56

ARTICLE VI COVENANTS		56

6.1 Financial Statements		56
6.2 Litigation		58
6.3 Corporate Existence, Compliance with Laws, Taxes, Examination of Books, Insurance, etc		58
6.4 Use of Proceeds		59
6.5 Environmental Covenant		59
6.6 Financial Covenant		59
6.7 Utility Dividends		59
6.8 Borrower’s Continued Ownership of Utility’s Common Stock		59

ARTICLE VII EVENTS OF DEFAULT		60

ARTICLE VIII REMEDIES, WAIVERS AND AMENDMENTS		62

8.1 Remedies Upon Event of Default		62
8.2 Amendments		62
8.3 Preservation of Rights		64

ARTICLE IX GENERAL PROVISIONS		64

9.1 Survival of Representations		64
9.2 Governmental Regulation		64
9.3 Headings		64

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TABLE OF CONTENTS

(continued)


			Page

9.4 Entire Agreement			64
9.5 Several Obligations; Benefits of this Agreement			64
9.6 Expenses; Indemnification			65
9.7 Numbers of Documents			66
9.8 Accounting			66
9.9 Severability of Provisions			66
9.10 Nonliability of Lenders			66
9.11 Confidentiality			67
9.12 Disclosure			67
9.13 Rights Cumulative			67
9.14 Syndication Agent; Documentation Agents			67

ARTICLE X THE ADMINISTRATIVE AGENT			67

10.1 Appointment and Authority			67
10.2 Rights as a Lender			68
10.3 Exculpatory Provisions			68
10.4 Reliance by Administrative Agent			69
10.5 Delegation of Duties			69
10.6 Resignation of Administrative Agent			70
10.7 Non-Reliance on Administrative Agent and Other Lenders			70
10.8 No Other Duties, etc			71
10.9 Administrative Agent May File Proofs of Claim			71
10.10 Issuing Bank and Swingline Lender			71

ARTICLE XI SETOFF; RATABLE PAYMENTS			71

11.1 Setoff			71
11.2 Ratable Payments			72

ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS			73

12.1 Successors and Assigns			73
12.2 Participations			73
12.3 Assignments			74
12.4 Dissemination of Information			76
12.5 Tax Treatment			76

ARTICLE XIII NOTICES			76

13.1 Notices			76
13.2 Change of Address			77

ARTICLE XIV COUNTERPARTS; EFFECTIVENESS			77

-iii-

TABLE OF CONTENTS

(continued)


			Page

ARTICLE XV CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL			77

15.1 CHOICE OF LAW			77
15.2 Consent To Jurisdiction			77
15.3 WAIVER OF JURY TRIAL			78
15.4 LIMITATION ON LIABILITY			78
15.5 USA PATRIOT ACT NOTICE			78


SCHEDULES

Schedule 1.1-A		Pricing Schedule
Schedule 1.1-B		Commitments and Notice Addresses
Schedule 2.15		Lending Installations
Schedule 5.3		Litigation
Schedule 5.6		Regulatory Approval
Schedule 5.8		Employee Benefit Plans
Schedule 5.11		Environmental Matters
Schedule 5.13		Subsidiaries

EXHIBITS

EXHIBIT 2.2.2		Form of Borrowing Notice
EXHIBIT 2.2.3		Form of Swingline Borrowing Notice
EXHIBIT 2.2.7		Form of Conversion/Continuation Notice
EXHIBIT 2.5.2		Form of Commitment Increase Supplement
EXHIBIT 2.7		Form of Notice of Prepayment
EXHIBIT 2.11.4-A		Form of Revolving Note
EXHIBIT 2.11.4-B		Form of Swingline Note
EXHIBIT 2.19-A		Form of Tax Compliance Certificate
EXHIBIT 2.19-B		Form of Tax Compliance Certificate
EXHIBIT 2.19-C		Form of Tax Compliance Certificate
EXHIBIT 2.19-D		Form of Tax Compliance Certificate
EXHIBIT 3.2		Letter of Credit Notice
EXHIBIT 4.1(a)(6)		Form of Opinion
EXHIBIT 4.2		Form of Compliance Certificate
EXHIBIT 12.3.1		Form of Assignment Agreement

-iv-

CREDIT AGREEMENT, dated as of April 3, 2012 (the “ Agreement ”), among WGL HOLDINGS, INC., as Borrower, the financial institutions from time to time parties hereto, as LENDERS, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent, THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., as Syndication Agent, and BRANCH BANKING AND TRUST COMPANY and THE TORONTO-DOMINION BANK, as Documentation Agents.

RECITALS

WHEREAS, the Borrower has requested that the Lenders provide a revolving credit facility, and the Lenders are willing to do so on the terms and conditions set forth herein.

NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE I

INTERPRETATION

1.1 Definitions . As used in this Agreement:

“ Acquisition ” means any transaction, or any series of related transactions, consummated on or after the Agreement Date, by which the Borrower or any of its Subsidiaries (i) acquires any going business or all or substantially all of the assets of any firm, corporation or limited liability company, or division thereof, whether through purchase of assets, merger or otherwise, or (ii) directly or indirectly acquires (in one transaction or as the most recent transaction in a series of transactions) at least a majority (in number of votes) of the securities of a corporation which have ordinary voting power for the election of directors (other than securities having such power only by reason of the happening of a contingency) or a majority (by percentage or voting power) of the outstanding ownership interests of a partnership or limited liability company.

“ Active Arrangers Fee Letter ” means the letter to the Borrower from Wells Fargo Securities and BTMU, dated as of February 15, 2012.

“ Additional Commitment Lender ” is defined in Section 2.5.2.

“ Administrative Agent ” means Wells Fargo Bank, National Association, in its capacity as administrative agent for the Lenders pursuant to Article X , and not in its individual capacity as a Lender or any successor Administrative Agent appointed pursuant to Article X .

“ Administrative Questionnaire ” means an Administrative Questionnaire in a form supplied by the Administrative Agent.

“ Administrative Fee Letter ” means the letter to the Borrower from Wells Fargo dated as of February 15, 2012.

“ Affiliate ” of any Person means any other Person directly or indirectly controlling, controlled by or under common control with such Person. A Person shall be deemed to control another Person if the controlling Person owns 10% or more of any class of voting securities (or

other ownership interests) of the controlled Person or possesses, directly or indirectly, the power to direct or cause the direction of the management or policies of the controlled Person, whether through ownership of stock, by contract or otherwise.

“ Aggregate Commitments ” means the aggregate of the Commitments of all the Lenders, in the initial aggregate amount of $450,000,000, as increased or decreased from time to time pursuant to the terms hereof.

“ Agreement ” means this Agreement, including all schedules, annexes and exhibits hereto.

“ Agreement Date ” means the first date all the conditions precedent set forth in Sections 4.1 and 4.2 shall have been satisfied or waived in accordance with the terms of this Agreement, which is April 3, 2012 .

“ Alternate Base Rate ” means, for any day, a fluctuating rate per annum equal to the highest of (i) the Prime Rate for such day, (ii) the Federal Funds Effective Rate for such day plus 0.50%, and (iii) the LIBOR Rate plus 1.00%.

“ Applicable Law ” means, anything in Section 15.1 to the contrary notwithstanding, (i) all applicable common law and principles of equity and (ii) all applicable provisions of all (A) treaties, constitutions, statutes, rules, regulations, guidelines and orders of governmental bodies, including the interpretation or administration thereof by any Governmental Authority charged with the enforcement, interpretation or administration thereof, (B) Governmental Approvals and (C) orders, decisions, judgments and decrees.

“ Applicable Margin ” means, with respect to Loans of any Type at any time, the percentage rate per annum which is applicable at such time with respect to Loans of such Type as set forth in the Pricing Schedule.

“ Applicable Percentage ” means, with respect to any Lender at any time, the percentage of the Aggregate Commitments represented by such Lender’s Commitment at such time, subject to adjustment as provided in Section 2.22 . If the commitment of each Lender to make Loans and the obligation of the Issuing Banks to issue Letters of Credit have been terminated pursuant to Section 8.1 , or if the Aggregate Commitments have expired, then the Applicable Percentage of each Lender shall be determined based on the Applicable Percentage of such Lender most recently in effect, giving effect to any subsequent assignments.

“ Arrangers ” means Wells Fargo Securities, BTMU, BB&TCM and TD, each in its capacity as a joint lead arranger and bookrunner.

“ Authorized Officer ” means any of the Vice President and Chief Financial Officer, Vice President and General Counsel, or the Treasurer of the Borrower, acting singly.

“ Bankruptcy Code ” means the United States Bankruptcy Code (11 U.S.C. §101 et seq.).

“ Base Rate Loan ” means a Loan which, except as otherwise provided in Section 2.8 , bears interest at the Alternate Base Rate plus the Applicable Margin.

“ BB&T ” means Branch Banking and Trust Company, and its successors.

“ BB&TCM ” means BB&T Capital Markets, and its successors.

“ Borrower ” means WGL Holdings, Inc., a Virginia corporation.

“ Borrowing Date ” means a date on which a Loan is made.

“ Borrowing Notice ” is defined in Section 2.2.2.

“ BTMU ” means The Bank of Tokyo-Mitsubishi UFJ, Ltd., and its successors.

“ Business Day ” means (i) any day other than a Saturday or Sunday, a legal holiday, or a day on which commercial banks in Charlotte, North Carolina or New York, New York are authorized or required by law to be closed and (ii) in respect of any LIBOR determination, any such day that is also a day on which trading in Dollar deposits is conducted by banks in London, England in the London interbank eurodollar market.

“ Capitalized Lease ” of a Person means any lease of Property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with GAAP.

“ Capitalized Lease Obligations ” of a Person means the amount of the obligations of such Person under Capitalized Leases which would be shown as a liability on a balance sheet of such Person prepared in accordance with GAAP.

“ Cash Collateral Account ” has the meaning given to such term in Section 3.8.

“ Cash Collateralize ” means to pledge and deposit with or deliver to the Administrative Agent, for the benefit of the Administrative Agent, the Issuing Banks and the Lenders, as collateral for the Letter of Credit Exposure or obligations of Lenders to fund participations in respect of Letter of Credit Exposure, cash or deposit account balances or, if the Administrative Agent and the Issuing Banks shall agree in their sole discretion, other credit support, in each case pursuant to documentation in form and substance satisfactory to the Administrative Agent and the Issuing Banks. “ Cash Collateral ” shall have a meaning correlative to the foregoing and shall include the proceeds of such cash collateral and other credit support.

“ Cash Equivalents ” means (i) short-term obligations of, or fully guaranteed by, the United States of America, (ii) commercial paper rated A-1 or better by S&P or Fitch or P-1 or better by Moody’s, (iii) demand deposit accounts maintained in the ordinary course of business, and (iv) certificates of deposit issued by, and time deposits with, commercial banks (whether domestic or foreign) having capital and surplus in excess of $100,000,000; provided in each case that the same provides for payment of both principal and interest (and not principal alone or interest alone) and is not subject to any contingency regarding the payment of principal or interest.

“ CERCLA ” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980.

“ CERCLIS ” means the Comprehensive Environmental Response, Compensation, and Liability Information System List.

“ Change in Law ” means the occurrence, after the date of this Agreement, of any of the following: (i) the adoption or taking effect of any law, rule, regulation or treaty, (ii) any change in any law, rule, regulation or treaty or in the administration, interpretation, implementation or application thereof by any Governmental Authority or (iii) the making or issuance of any request, rule, guideline or directive (whether or not having the force of law) by any Governmental Authority; provided that notwithstanding anything herein to the contrary, (x) the Dodd-Frank Wall Street Reform and Consumer Protection Act and all requests, rules, guidelines or directives thereunder or issued in connection therewith and (y) all requests, rules, guidelines or directives promulgated by the Bank for International Settlements, the Basel Committee on Banking Supervision (or any successor or similar authority) or the United States or foreign regulatory authorities, in each case pursuant to Basel III, shall in each case be deemed to be a “Change in Law”, regardless of the date enacted, adopted or issued.

“ Change in Control ” means (i) an event or series of events by which any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, but excluding any employee benefit plan of such person or its Subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a “person” or “group” shall be deemed to have “beneficial ownership” of all capital stock that such “person” or “group” has the right to acquire, whether such right is exercisable immediately or only after the passage of time (such right, an “option right”)), directly or indirectly, of more than thirty percent (30%) of the capital stock of the Borrower entitled to vote in the election of members of the board of directors (or equivalent governing body) of the Borrower or (ii) a majority of the members of the board of directors (or other equivalent governing body) of the Borrower shall not constitute Continuing Directors.

“ Code ” means the Internal Revenue Code of 1986.

“ Commitment ” means, for each Lender, the obligation of such Lender to make Loans not exceeding the amount set forth opposite such Lenders name on Schedule 1.1-B , as it may be modified as a result of any assignment that has become effective pursuant to Section 12.3.2 or as otherwise decreased or increased from time to time pursuant to the terms hereof.

“ Commitment Increase ” is defined in Section 2.5.2 .

“ Commitment Increase Supplement ” is defined in Section 2.5.2 .

“ Compliance Certificate ” is defined in Section 4.2 .

“ Connection Income Taxes ” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

“ Consolidated Financial Indebtedness ” means at any time the Financial Indebtedness of the Borrower and its Subsidiaries calculated on a consolidated basis as of such time.

“ Consolidated Net Worth ” means at any time the sum of common shareholders’ equity of the Borrower and preferred stock of the Utility, as reported on the consolidated balance sheet of the Borrower prepared as of such time.

“ Consolidated Total Capitalization ” means at any time the sum of Consolidated Financial Indebtedness and Consolidated Net Worth, each calculated at such time.

“ Contingent Obligation ” of a Person means any agreement, Contract, undertaking or arrangement by which such Person assumes, guarantees, endorses, contingently agrees to purchase or provide funds for the payment of, or otherwise becomes or is contingently liable upon, the obligation or liability of any other Person, or agrees to maintain the net worth or working capital or other financial condition of any other Person, or otherwise assures any creditor of such other Person against loss, including, without limitation, any comfort letter, operating agreement, take or pay contract or the obligations of any such Person as general partner of a partnership with respect to the liabilities of the partnership.

“ Continuing Directors ” shall mean the directors of the Borrower on the Agreement Date and each other director of the Borrower, if, in each case, such other director’s nomination for election to the board of directors (or equivalent governing body) of the Borrower is recommended by at least 51% of the then Continuing Directors.

“ Contract ” means (i) any agreement, including an indenture, lease or license, (ii) any deed or other instrument of conveyance, (iii) any certificate of incorporation or charter and (iv) any by-law.

“ Controlled Group ” means all members of a controlled group of corporations and all members of a group of trades or businesses (whether or not incorporated) under common control, which together with the Borrower are treated as a single employer under Section 414(b) or 414(c) of the Code or Section 4001 of ERISA.

“ Conversion/Continuation Notice ” is defined in Section 2.2.7 .

“ Credit Exposure ” means, with respect to any Lender at any time, the sum of (i) the aggregate principal amount of all Loans made by such Lender that are outstanding at such time, (ii) such Lender’s Swingline Exposure at such time and (iii) such Lender’s Letter of Credit Exposure at such time.

“ Defaulting Lender ” means, subject to Section 2.22.2 any Lender that (i) has failed to (x) fund all or any portion of its Loans within two Business Days of the date such Loans were required to be funded hereunder unless such Lender notifies the Administrative Agent and the Borrower in writing that such failure is the result of such Lender’s determination that one or more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied, or (y) pay to the Administrative Agent, any Issuing Bank, any Swingline Lender or any other Lender any other amount required to be paid by it hereunder (including in respect of its participation in Letters of Credit or Swingline Loans) within two Business Days of the date when due, (ii) has notified the Borrower, the Administrative Agent or any Issuing Bank or Swingline Lender in writing that it does not intend to comply with its funding obligations hereunder, or has

made a public statement to that effect (unless such writing or public statement relates to such Lender’s obligation to fund a Loan hereunder and states that such position is based on such Lender’s determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing or public statement) cannot be satisfied), (iii) has failed, within three Business Days after written request by the Administrative Agent or the Borrower, to confirm in writing to the Administrative Agent and the Borrower that it will comply with its prospective funding obligations hereunder ( provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (iii) upon receipt of such written confirmation by the Administrative Agent and the Borrower), or (iv) has, or has a direct or indirect parent company that has, (x) become the subject of a proceeding under the Bankruptcy Code or under other applicable bankruptcy, insolvency or similar law now or hereafter in effect, or (y) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (i) through (iv) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.22.2 ) upon delivery of written notice of such determination by the Administrative Agent to the Borrower, the Issuing Bank, the Swingline Lender and each Lender.

“ Documentation Agent ” means each of BB&T and TD, acting in the capacity as documentation agent hereunder.

“ Dollars ” and the sign “ $ ” mean lawful money of the United States of America.

“ Eligible Assignee ” means any Lender, Affiliate of a Lender or other Person that meets the requirements to be an assignee under Section 12.3.1 .

“ Employee Benefit Plans ” is defined in Section 5.8 .

“ Environmental Laws ” means any and all federal, state, local and foreign statutes, Applicable Laws, judicial decisions, regulations, ordinances, rules, judgments, orders, decrees, plans, injunctions, permits, concessions, grants, franchises, licenses, agreements and other governmental restrictions relating to (i) the protection of the environment, (ii) the effect of the environment on human health, (iii) emissions, discharges or releases of pollutants, contaminants, hazardous substances or wastes into ambient air, surface water, ground water, land surface or subsurface strata, or (iv) the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, hazardous substances or wastes or the clean-up or other remediation thereof.

“ ERISA ” means the Employee Retirement Income Security Act of 1974.

“ Event of Default ” means an event described in Article VII .

“ Exchange Act ” means Securities Exchange Act of 1934.

“ Excluded Taxes ” means any of the following Taxes imposed on or with respect to a Recipient or required to be withheld or deducted from a payment to a Recipient, (i) Taxes imposed on or measured by net income (however denominated), franchise Taxes, and branch profits Taxes, in each case, (x) imposed as a result of such Recipient being organized under the laws of, or having its principal office or, in the case of any Lender, its Lending Installation located in, the jurisdiction imposing such Tax (or any political subdivision thereof) or (y) that are Other Connection Taxes, (ii) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or Commitment pursuant to a law in effect on the date on which (x) such Lender acquires such interest in the Loan or Commitment (other than pursuant to an assignment request by the Borrower under Section 2.21 ) or (y) such Lender changes its Lending Installation, except in each case to the extent that, pursuant to Section 2.19 , amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender became a party hereto or to such Lender immediately before it changed its Lending Installation, (iii) Taxes attributable to such Recipient’s failure to comply with Section 2.19.7 and (iv) any U.S. federal withholding Taxes imposed under FATCA.

“ Existing Credit Agreement ” means that certain Amended and Restated Credit Agreement dated as of August 3, 2007, among the Borrower, the several lender parties listed on the signature pages thereof, Wachovia Bank, National Association, as administrative agent, Bank of Tokyo-Mitsubishi UFJ Trust Company, as syndication agent, and SunTrust Bank and Citibank, N.A., as documentation agents.

“ Extension Option ” means the option of the Borrower under Section 2.6 hereof to extend the Facility Termination Date.

“ Facility Fee ” is defined in Section 2.4.2 .

“ Facility Fee Rate ” means, at any time, the percentage rate per annum at which Facility Fees are accruing on the Aggregate Commitments (without regard to usage) at such time as set forth in the Pricing Schedule.

“ Facility Termination Date ” means September 30, 2012, provided that upon the delivery of certified resolutions of the Board of Directors of the Borrower, reasonably satisfactory to the Administrative Agent, authorizing the Borrower’s performance of its obligations under the Loan Documents through the fifth anniversary of the Agreement Date, the fifth anniversary of the Agreement Date (as such date may be extended from time to time pursuant to Section 2.6 ).

“ FATCA ” means Sections 1471 through 1474 of the Code, as of the date of this Agreement (or any amended version that is substantively comparable) and any current or future regulations or official interpretations thereof.

“ Federal Funds Effective Rate ” means, for any day, an interest rate per annum equal to the weighted average of the rates on overnight Federal funds transactions with members of the Federal Reserve System arranged by Federal funds brokers on such day, as published for such day (or, if such day is not a Business Day, for the immediately preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations at approximately 10:00 a.m. on such day on such transactions received by the Administrative Agent from three Federal funds brokers of recognized standing selected by the Administrative Agent in its sole discretion.

“ Fee Letters ” means, collectively, the Active Arrangers Fee Letter, Passive Arrangers Fee Letter and Administrative Fee Letter.

“ Financial Indebtedness ” of a Person means such Person’s (i) obligations for borrowed money which, in accordance with GAAP, would be shown as short-term debt on a consolidated balance sheet of such Person, including obligations under notes, commercial paper, acceptances and other short-term instruments, and (ii) obligations for borrowed money which, in accordance with GAAP, would be shown as long-term debt (including current maturities) on a consolidated balance sheet of such Person.

“ Fitch ” means Fitch Ratings, Ltd.

“ Foreign Lender ” means (i) if the Borrower is a U.S. Person, a Lender that is not a U.S. Person, and (ii) if the Borrower is not a U.S. Person, a Lender that is resident or organized under the laws of a jurisdiction other than that in which the Borrower is resident for tax purposes.

“ Fronting Exposure ” means, at any time there is a Defaulting Lender, (i) with respect to any Issuing Bank, such Defaulting Lender’s Letter of Credit Exposure with respect to Letters of Credit issued by such Issuing Bank other than such portion of such Defaulting Lender’s Letter of Credit Exposure as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders or Cash Collateralized in accordance with the terms hereof, and (ii) with respect to any Swingline Lender, such Defaulting Lender’s Swingline Exposure with respect to outstanding Swingline Loans made by the Swingline Lender other than Swingline Loans as to which such Defaulting Lender’s participation obligation has been reallocated to other Lenders in accordance with the terms hereof.

“ GAAP ” means generally accepted accounting principles in the United States of America, as set forth in the statements, opinions and pronouncements of the Accounting Principles Board, the American Institute of Certified Public Accountants and the Financial Accounting Standards Board, consistently applied and maintained, as in effect from time to time (subject to the provisions of Section 1.2 ).

“ Governmental Approval ” means any authority, consent, approval, license (or the like) or exemption (or the like) of any governmental unit.

“ Governmental Authority ” means the government of the United States of America or any other nation, or of any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supranational bodies such as the European Union or the European Central Bank).

“ Hazardous Material ” means: any “hazardous substance”, as defined by CERCLA; any petroleum product; or any pollutant or contaminant or hazardous, dangerous or toxic chemical, material or substance within the meaning of any other Environmental Law.

“ Hedge Agreement ” means any interest or foreign currency rate swap, cap, collar, option, hedge, forward rate or other similar agreement or arrangement designed to protect against fluctuations in interest rates, currency exchange rates or spot prices of new materials.

“ Indebtedness ” of a Person means such Person’s (i) obligations for borrowed money, (ii) obligations representing the deferred purchase price of Property or services (other than accounts payable arising in the ordinary course of such Person’s business payable on terms customary in the trade, (iii) obligations, whether or not assumed, secured by Liens on, or payable out of the proceeds or production from, Property now or hereafter owned or acquired by such Person, (iv) obligations which are evidenced by bonds, debentures, notes, acceptances, or other instruments, (v) obligations of such Person to purchase securities or other Property arising out of or in connection with the sale of the same or substantially similar securities or Property, (vi) Capitalized Lease Obligations, (vii) any other obligation for borrowed money or other financial accommodation which in accordance with GAAP would be shown as a liability on the consolidated balance sheet of such Person, (viii) Contingent Obligations in respect of any type of obligation described in any of the other clauses of this definition, (ix) obligations in respect letters of credit (including standby and commercial), bankers’ acceptances, bank guaranties, surety bonds and similar instruments, (x) for all purposes other than Section 6.6 , net obligations under any Hedge Agreements, (xi) Operating Lease Obligations, (xii) obligations in respect of Sale and Leaseback Transactions and (xiii) Off-Balance Sheet Liabilities. Permitted Commodity Hedging Obligations shall not constitute Indebtedness for purposes of this Agreement.

“ Indemnified Person ” means any Person that is, or at any time was, the Administrative Agent, the Syndication Agent, a Documentation Agent, a Lender or an Arranger or an Affiliate, director, officer, employee or agent of any such Person.

“ Indemnified Taxes ” means (i) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of the Borrower under any Loan Document and (ii) to the extent not otherwise described in clause (i), Other Taxes.

“ Indemnitee ” is defined in Section 9.6.2 .

“ Interest Period ” means, with respect to a LIBOR Rate Loan, the period commencing on the date such LIBOR Rate Loan is disbursed or converted to or continued as a LIBOR Rate Loan and ending on the date one, two, three or six months thereafter, as selected by the Borrower pursuant to this Agreement; provided , that (i) any Interest Period pertaining to a LIBOR Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period, (ii) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next

succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day; and (iii) no Interest Period shall extend beyond the Facility Termination Date.

“ Issuing Bank ” means each of Wells Fargo and BB&T, in their respective capacities as issuers of Letters of Credit under this Agreement.

“ LC Fee ” is defined in Section 2.4.4 .

“ Lenders ” means the lending institutions listed on the signature pages of this Agreement, any Additional Commitment Lenders, and their respective successors and assigns.

“ Lending Installation ” means, with respect to a Lender or the Administrative Agent, the office, branch, subsidiary or affiliate of such Lender or the Administrative Agent designated on its Administrative Questionnaire or otherwise selected by such Lender or the Administrative Agent pursuant to Section 2.1 5.

“ Letter of Credit Exposure ” means, with respect to any Lender at any time, such Lender’s ratable share (based on the proportion that its Commitment bears to the Aggregate Commitments at such time) of the sum of (i) the aggregate Stated Amount of all Letters of Credit outstanding at such time and (ii) the aggregate amount of all Reimbursement Obligations outstanding at such time.

“ Letter of Credit Maturity Date ” means the fifth Business Day prior to the Facility Termination Date.

“ Letter of Credit Notice ” has the meaning given to such term in Section 3.2 .

“ Letter of Credit Subcommitment ” means $45,000,000 or, if less, the Aggregate Commitments at the time of determination, as such amount may be reduced at or prior to such time pursuant to the terms hereof.

“ Letters of Credit ” is defined in Section 3.1.

“ LIBOR Market Index Rate ” means, for any day, an interest rate per annum for one month Dollar deposits as reported on Reuters Screen LIBOR01 Page (or any successor page), on such day, or if such day is not a Business Day, then the immediately preceding Business Day (or if not so reported, then as determined by the Administrative Agent from another recognized source or interbank quotation).

“ LIBOR Market Index Rate Loan ” means a Loan that bears interest at the LIBOR Market Index Rate plus the Applicable Margin.

“ LIBOR Rate ” means:

British Bankers Association Interest Settlement Rate for Dollar deposits (“BBA LIBOR”) or (z) if such rate is not available at such time for any reason, the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the LIBOR Rate Loan being made, continued or converted and with a term equivalent to such Interest Period would be offered by Wells Fargo’s London Branch to major banks in the London interbank eurodollar market at their request at approximately 11:00 a.m., London time, two Business Days prior to the first day of such Interest Period, by (ii) the amount equal to 1.00 minus the Reserve Requirement (expressed as a decimal) for such Interest Period.

(b) for any interest calculation with respect to a Base Rate Loan on any date, the rate per annum equal to (i) BBA LIBOR, at approximately 11:00 a.m., London time determined two Business Days prior to such date for Dollar deposits being delivered in the London interbank market for a term of one month commencing that day or (ii) if such published rate is not available at such time for any reason, the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the date of determination in same day funds in the approximate amount of the Base Rate Loan being made or maintained and with a term equal to one month would be offered by Wells Fargo’s London Branch to major banks in the London interbank eurodollar market at their request at the date and time of determination.

“ LIBOR Rate Loan ” means a Loan which bears interest at the LIBOR Rate plus the Applicable Margin requested by the Borrower pursuant to Section 2.2 .

“ Lien ” means any lien (statutory or other), mortgage, pledge, hypothecation, assignment, deposit arrangement, encumbrance or preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever (including, without limitation, the interest of a vendor or lessor under any conditional sale, Capitalized Lease or other title retention agreement).

“ Loan” means, with respect to a Lender, any Revolving Loan or Swingline Loan made by such Lender pursuant to Article II (and, in the case of a loan made pursuant to Section 2.2.2 , any conversion or continuation thereof).

“ Loan Document Related Claim” means any claim or dispute (whether arising under Applicable Law, including any “environmental” or similar law, under Contract or otherwise and, in the case of any proceeding relating to any such claim or dispute, whether civil, criminal, administrative or otherwise) in any way arising out of, related to, or connected with, the Loan Documents, the relationships established thereunder or any actions or conduct thereunder or with respect thereto, whether such claim or dispute arises or is asserted before or after the Agreement Date or before or after the Repayment Date.

“ Loan Documents ” means this Agreement and any Notes issued pursuant to Section 2.11 , the Fee Letters, and all other agreements, instruments, documents and certificates now or hereafter executed and delivered to the Administrative Agent or any Lender by or on behalf of the Borrower with respect to this Agreement, in each case as amended, modified, supplemented or restated from time to time.

“ Material Adverse Effect ” means any effect, resulting from any event or circumstance whatsoever, which will, or is reasonably likely to, have a material adverse effect on the financial condition, operations, assets, business, properties or prospects of the Borrower and its Subsidiaries, taken as a whole, on the ability of the Borrower to perform its obligations under this Agreement, or on the validity or enforceability of this Agreement.

“ Material Subsidiary ” means at any time with respect to a Person, a Subsidiary, if any, of such Person, the consolidated assets of which exceed at such time 15% of the consolidated assets of such Person and its Subsidiaries, if any, determined on a consolidated basis.

“ Maximum Permissible Rate ” means, with respect to interest payable on any amount, the rate of interest on such amount that, if exceeded, could, under Applicable Law, result in (i) civil or criminal penalties being imposed on the payee or (ii) the payee’s being unable to enforce payment of (or, if collected, to retain) all or any part of such amount or the interest payable thereon.

“ Moody’s ” means Moody’s Investors Service, Inc.

“ Multiemployer Plan ” means any “multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA to which the Borrower or any member of the Controlled Group is making or is obligated to make contributions or has made or been obligated to make contributions.

“ Non-Consenting Lender ” means a Lender that does not approve any consent, waiver or amendment to any Loan Document that (i) requires the approval of all Lenders (or all Lenders directly affected thereby) under Section 8.2 and (ii) has been approved by the Required Lenders.

“ Notes ” means, collectively, all of the Revolving Notes and all of the Swingline Notes that may be issued hereunder, and “ Note ” means any one of the Notes.

“ Obligations ” means all principal of and interest (including interest accruing after the filing of a petition or commencement of a case by or with respect to the Borrower seeking relief under any applicable federal and state laws pertaining to bankruptcy, reorganization, arrangement, moratorium, readjustment of debts, dissolution, liquidation or other debtor relief, specifically including, without limitation, the Bankruptcy Code and any fraudulent transfer and fraudulent conveyance laws, whether or not the claim for such interest is allowed in such proceeding) on the Loans and Reimbursement Obligations and all fees, expenses, indemnities and other obligations owing, due or payable at any time by the Borrower or any Subsidiary of the Borrower to the Administrative Agent, any Lender, the Swingline Lender, the Issuing Bank or any other Person entitled thereto, under this Agreement or any of the Loan Documents, in each case whether direct or indirect, joint or several, absolute or contingent, matured or unmatured, liquidated or unliquidated, secured or unsecured, and whether existing by contract, operation of law or otherwise.

“ OFAC ” means the U.S. Department of the Treasury’s Office of Foreign Assets Control, and any successor thereto.

“ Other Connection Taxes ” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing

such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).

“ Off-Balance Sheet Liability ” of a Person means (i) any repurchase obligation or liability of such Person with respect to accounts or notes receivable sold by such Person, (ii) any liability under any Sale and Leaseback Transaction which is not a Capitalized Lease, (iii) any liability under any so-called “synthetic lease” transaction entered into by such Person, or (iv) any obligation arising with respect to any other transaction which is the functional equivalent of, or takes the place of, borrowing, but which does not constitute a liability on the balance sheets of such Person, but excluding from this clause (iv) Operating Leases.

“ Operating Lease ” of a Person means any lease of Property (other than a Capitalized Lease) by such Person as lessee which has an original term (including any required renewals and any renewals effective at the option of the lessor) of one year or more.

“ Operating Lease Obligations ” means, as at any date of determination, the amount obtained by aggregating the present values, determined in the case of each particular Operating Lease by applying a discount rate (which discount rate shall equal the discount rate which would be applied under GAAP if such Operating Lease were a Capitalized Lease) from the date on which each fixed lease payment is due under such Operating Lease to such date of determination, of all fixed lease payments due under all Operating Leases of the Borrower and its Subsidiaries.

“ Other Taxes ” means all present or future stamp, court or documentary, intangible, recording, filing or similar Taxes that arise from any payment made under, from the execution, delivery, performance, enforcement or registration of, from the receipt or perfection of a security interest under, or otherwise with respect to, any Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment (other than an assignment made pursuant to Section 2.21.1 ).

“ Overdue Rate ” means (i) in the case of overdue amounts of the principal of a LIBOR Rate Loan, (A) until the last day of the applicable Interest Period during which such Loan became due and payable, the rate otherwise applicable hereunder plus the Applicable Margin plus 2%, and (B) thereafter, the Alternate Base Rate in effect from time to time plus the Applicable Margin plus 2%, and (ii) in the case of all other overdue amounts, the Alternate Base Rate in effect from time to time plus the Applicable Margin plus 2%.

“ Participants ” is defined in Section 12.2.1 .

“ Participant Register ” has the meaning given to such term in Section 12.2.1 .

“ Passive Arrangers Fee Letter ” means the letter to Borrower from BCM and TD dated as of February 15, 2012.

“ Patriot Act ” is defined in Section 15.5 .

“ Payment Date ” means the last day of each March, June, September and December.

“ PBGC ” means the Pension Benefit Guaranty Corporation.

“ Pension Plan ” means a “pension plan”, as such term is defined in section 3(2) of ERISA, which is subject to Title IV of ERISA, and to which the Borrower or any corporation, trade or business that is, along with the Borrower, a member of a Controlled Group, may have liability, including any liability by reason of having been a substantial employer within the meaning of section 4063 of ERISA at any time during the preceding five years, or by reason of being deemed to be a contributing sponsor under section 4069 of ERISA.

“ Permitted Commodity Hedging Obligations ” means obligations of the Borrower with respect to commodity agreements or other similar agreements or arrangements entered into in the ordinary course of business designed to protect against, or mitigate risks with respect to, fluctuations of commodity prices to which the Borrower is exposed in the conduct of its business so long as (a) the management of the Borrower has determined that entering into such agreements or arrangements are bona fide hedging activities which comply with the Borrower’s risk management policies and (b) such agreements or arrangements are not entered into for speculative purposes.

“ Person ” means any natural person, corporation, firm, joint venture, partnership, limited liability company, association, enterprise, trust or other entity or organization, or any government or political subdivision or any agency, department or instrumentality thereof.

“ Pricing Schedule ” means Schedule 1.1-A attached hereto.

“ Prime Rate ” means a rate per annum equal to the prime rate of interest announced from time to time by Wells Fargo, (which is not necessarily the lowest rate charged to any customer), changing when and as said prime rate changes.

“ Prior Termination Date ” is defined in Section 2.6.3 .

“ Property ” of a Person means any and all property, whether real, personal, tangible, intangible, or mixed, of such Person, or other assets owned, leased or operated by such Person.

“ Purchasers ” is defined in Section 12.3.1 .

“ Recipient ” means (i) the Administrative Agent, (ii) any Lender and (iii) the Issuing Bank, as applicable.

“ Refunded Swingline Loans ” is defined in Section 2.2.4 .

“ Register ” is defined in Section 12.3.4 .

“ Regulation D ” means Regulation D of the Board of Governors of the Federal Reserve System.

“ Regulation U ” means Regulation U of the Board of Governors of the Federal Reserve System.

“ Regulation X ” means Regulation X of the Board of Governors of the Federal Reserve System.

“ Reimbursement Obligation ” is defined in Section 3.4 .

“ Related Parties ” means, with respect to any Person, such Person’s Affiliates and the partners, directors, officers, employees, agents, trustees, administrators, managers, advisors and representatives of such Person and of such Person’s Affiliates.

“ Release ” means “release”, as such term is defined in CERCLA.

“ Repayment Date ” means the later of (a) the date of the termination of the Commitments (whether as a result of the occurrence of the Facility Termination Date, reduction to zero pursuant to Section 2.5.1 or termination pursuant to Article VIII ), and (b) the date of the payment in full of all principal of and interest on the Loans and all other amounts payable or accrued hereunder.

“ Reportable Event ” means a reportable event, as defined in Section 4043 of ERISA and the regulations issued under such section, with respect to a Plan, excluding, however, such events as to which the PBGC has by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event; provided , however , that a failure to meet the minimum funding standard of Section 412 of the Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or Section 412(d) of the Code.

“ Required Lenders ” means Lenders having in the aggregate more than 50.0% of the outstanding Aggregate Commitments or, if the Aggregate Commitments have been terminated, Lenders holding in the aggregate more than 50.0% of the aggregate Credit Exposure; provided that the Commitment of, and the portion of outstanding Loans and Letters of Credit held or deemed held by, any Defaulting Lender shall be excluded for purposes or making a determination of Required Lenders.

“ Reserve Requirement ” means, with respect to any Interest Period, the reserve percentage (expressed as a decimal and rounded upwards, if necessary, to the next higher 1/100 ^th of 1%) in effect from time to time during such Interest Period, as provided by the Federal Reserve Board, applied for determining the maximum reserve requirements (including, without limitation, basic, supplemental, marginal and emergency reserves) applicable to Wells Fargo under Regulation D with respect to “Eurocurrency liabilities” within the meaning of Regulation D, or under any similar or successor regulation with respect to Eurocurrency liabilities or Eurocurrency funding. The LIBOR Rate shall be adjusted automatically on and as of the effective date of any change in the Reserve Requirement.

“ Resignation Effective Date ” is defined in Section 10.6.1 .

“ Resource Conservation and Recovery Act ” means the Resource Conservation and Recovery Act, 42 U.S.C. Section 690, et seq.

“ Revolving Loan ” is defined in Section 2.1.3 .

“ Revolving Note ” means a promissory note issued at the request of a Lender pursuant to Section 2.11.4 , substantially in the form of Exhibit 2.11.4-A .

“ S&P ” means Standard and Poor’s Ratings Services, a division of The McGraw Hill Companies, Inc.

“ Sale and Leaseback Transaction ” means any sale or other transfer of Property by any Person with the intent to lease such Property as lessee.

“ Sanctioned Country ” means a country subject to a sanctions program identified on the list maintained by OFAC and available at http://www.treas.gov/offices/enforcement/ofac/programs/ , or as otherwise published from time to time.

“ Sanctioned Person ” means (i) a Person named on the list of Specially Designated Nationals or Blocked Persons maintained by OFAC available at http://www.treasury.gov/resource-center/sanctions/SDN-List, or as otherwise published from time to time, or (ii) (A) an agency of the government of a Sanctioned Country, (B) an organization controlled by a Sanctioned Country, or (C) a Person resident in a Sanctioned Country, to the extent subject to a sanctions program administered by OFAC.

“ SEC ” means the Securities and Exchange Commission.

“ SEC Disclosure Documents ” means all reports on Forms 10K, 10Q, and 8K filed by the Borrower with the SEC.

“ Single Employer Plan ” means a Plan maintained by the Borrower or any member of the Controlled Group for employees of the Borrower or any member of the Controlled Group.

“ Stated Amount ” means, with respect to any Letter of Credit at any time, the aggregate amount available to be drawn thereunder at such time (regardless of whether any conditions for drawing could then be met).

“ Subsidiary ” of a Person means (i) any corporation more than 50% of the outstanding securities having the ordinary voting power of which shall at the time be owned or controlled, directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (ii) any partnership, limited liability company, association, joint venture or similar business organization more than 50% of the ownership interests having the ordinary voting power of which shall at the time be so owned or controlled. Unless otherwise expressly provided, all references herein to a “ Subsidiary ” shall mean a Subsidiary of the Borrower.

“ Swingline Commitment ” means $45,000,000 or, if less, the Aggregate Commitments at the time of determination, as such amount may be reduced at or prior to such time pursuant to the terms hereof.

“ Swingline Exposure ” means, with respect to any Lender at any time, its maximum aggregate liability to make Refunded Swingline Loans pursuant to Section 2.2.4 or to purchase participations pursuant to Section 2.2.5 in Swingline Loans that are outstanding at such time.

“ Swingline Lender ” means Wells Fargo in its capacity as maker of Swingline Loans, and its successors in such capacity.

“ Swingline Termination Dat e” means the date that is five Business Days prior to the Repayment Date.

“ Swingline Note ” means a promissory note issued at the request of a Lender pursuant to Section 2.11.4 , substantially in the form of Exhibit 2.11.3-B .

“ Syndication Agent ” means BTMU, in its capacity as syndication agent hereunder.

“ Taxes ” means all present or future taxes, levies, imposts, duties, deductions, withholdings (including backup withholding), assessments, fees or other charges imposed by any Governmental Authority, including any interest, additions to tax or penalties applicable thereto.

“ TD ” means The TD Bank, N.A., and its successors.

“ Transferee ” is defined in Section 12.4 .

“ Type ” means, with respect to any Revolving Loan, its nature as a Base Rate Loan or a LIBOR Rate Loan.

“ Unmatured Default ” means an event that, but for the lapse of time or the giving of notice, or both, would constitute an Event of Default.

“ Unutilized Swingline Commitment ” means, with respect to the Swingline Lender at any time, the Swingline Commitment at such time less the aggregate principal amount of all Swingline Loans that are outstanding at such time.

“ U.S. Borrower ” means any Borrower that is a U.S. Person.

“ U.S. Federal Income Taxes ” means any U.S. federal Taxes described in Section 871(a) or 881(a) of the Code, or any successor provision (or any withholding with respect to such Taxes).

“ U.S. Person ” means any Person that is a “United States Person” as defined in section 7701(a)(30) of the Code.

“ U.S. Tax Compliance Certificate ” has the meaning assigned to such term in Section 2.19.7(ii)(b)(3) .

“ Utility ” means Washington Gas Light Company, a Virginia and District of Columbia corporation.

“ Welfare Plan ” means a “welfare plan”, as such term is defined in section 3(1) of ERISA.

“ Wells Fargo ” means Wells Fargo Bank, National Association, and its successors.

“ Wells Fargo Securities ” means Wells Fargo Securities, LLC, and its successors.

“ Withholding Agent ” means the Borrower and the Administrative Agent.

1.2 Accounting Terms . Unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with, GAAP applied on a basis consistent with the most recent audited consolidated financial statements of the Borrower delivered to the Lenders prior to the closing of this Agreement; provided that if the Borrower notifies the Administrative Agent that it wishes to amend any financial covenant in Section 6.6 to eliminate the effect of any change in GAAP on the operation of such covenant (or if the Administrative Agent notifies the Borrower that the Required Lenders wish to amend Section 6.6 for such purpose), then the Borrower’s compliance with such covenant shall be determined on the basis of GAAP as in effect immediately before the relevant change in GAAP became effective, until either such notice is withdrawn or such covenant is amended in a manner satisfactory to the Borrower and the Required Lenders. Notwithstanding the foregoing, for purposes of determining compliance with any covenant (including the computation of any financial covenant) contained herein, Indebtedness of the Borrower and its Subsidiaries shall be deemed to be carried at 100% of the outstanding principal amount thereof, and the effects of FASB ASC 825 on financial liabilities shall be disregarded.

1.3 Other Interpretive Provisions .

(i) Except as otherwise specified herein, all references herein (A) to any Person shall be deemed to include such Person’s successors and assigns and (B) to any Applicable Law defined or referred to herein shall be deemed references to such Applicable Law or any successor Applicable Law as the same may have been or may be amended or supplemented from time to time.

(ii) When used in this Agreement, the words “herein”, “hereof” and “hereunder” and words of similar import shall refer to this Agreement as a whole and not to any provision of this Agreement, and the words “Article”, “Section”, “Schedule” and “Exhibit” shall refer to Articles and Sections of, and Schedules and Exhibits to, this Agreement unless otherwise specified.

(iii) Whenever the context so requires, the neuter gender includes the masculine or feminine, the masculine gender includes the feminine, and the singular number includes the plural, and vice versa.

(iv) Any item or list of items set forth following the word “including”, “include” or “includes” is set forth only for the purpose of indicating that, regardless of whatever other items are in the category in which such item or items are “included”, such item or items are in such category, and shall not be construed as indicating that the items in the category in which such item or items are “included” are limited to such items or to items similar to such items. The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

(v) Each authorization in favor of the Administrative Agent, the Lenders or any other Person granted by or pursuant to this Agreement shall be deemed to be irrevocable and coupled with an interest.

(vi) All references herein to the Lenders or any of them shall be deemed to include the Issuing Bank and the Swingline Lender unless specifically provided otherwise or unless the context otherwise requires.

(vii) Except as otherwise specified herein, all references to the time of day shall be deemed to be to New York City time as then in effect.

ARTICLE II

CREDIT FACILITY

2.1 The Facility .

2.1.1 Availability of Facility . Subject to the terms of this Agreement, the facility is available from the date hereof to the Facility Termination Date, and the Borrower may borrow, repay and reborrow at any time prior to the Facility Termination Date. Unless sooner terminated pursuant to the terms hereof, the Commitments to lend hereunder shall expire on the Facility Termination Date.

2.1.2 Repayment of Facility . Subject to the terms of this Agreement, any outstanding Loans and all other unpaid Obligations shall be paid in full by the Borrower on the Facility Termination Date; provided that if any authorization of any state official or state regulatory authority required under any Applicable Law, for any borrowing of Loans by the Borrower, expires without being extended at any time prior to the Facility Termination Date (and such authorization is required to be in effect at such time in order for the Borrower to continue to have such Loans and other unpaid Obligations outstanding under Applicable Law), then upon the expiration of such authorization, all outstanding Loans and all other unpaid Obligations shall be immediately paid in full by the Borrower.

2.1.3 Revolving Facility . Each Lender severally agrees, subject to and on the terms and conditions of this Agreement, to make loans (each, a “ Revolving Loan ,” and collectively, the “ Revolving Loans ”) to the Borrower, from time to time on any Business Day during the period from and including the Agreement Date to but not including the Facility Termination Date, in an aggregate principal amount at any time outstanding not exceeding its Commitment; provided that no borrowing of Revolving Loans shall be made if, immediately after giving effect thereto (and to any concurrent repayment of Swingline Loans with proceeds of Revolving Loans made pursuant to such borrowing), (i) the amount of all outstanding Credit Exposure of any Lender exceed such Lender’s Commitment or (ii) the aggregate principal amount of all outstanding Credit Exposure exceed the Aggregate Commitments. Subject to and on the terms and conditions of this Agreement, the Borrower may borrow, repay and reborrow Revolving Loans.

2.1.4 Swingline Facility . The Swingline Lender agrees, subject to and on the terms and conditions of this Agreement, to make loans (each, a “ Swingline Loan ,” and collectively, the “ Swingline Loans ”) to the Borrower, from time to time on any Business Day during the period from the Agreement Date to but not including the Swingline Termination Date (or, if earlier, the Facility Termination Date), in an aggregate principal amount at any time outstanding not exceeding the Swingline Commitment. Swingline Loans may be made even if the aggregate principal amount of Swingline Loans outstanding at any time, when added to the aggregate Credit Exposure of the Swingline Lender in its capacity as a Lender outstanding at such time, would exceed the Swingline Lender’s own Commitment at such time, but provided that no borrowing of Swingline Loans shall be made if, immediately after giving effect thereto (i) the amount of all outstanding Credit Exposure of any Lender exceed such Lender’s Commitment or (ii) the aggregate principal amount of all outstanding Credit Exposure exceeds the Aggregate Commitments, and provided further that the Swingline Lender shall not make any Swingline Loan if any Lender is at that time a Defaulting Lender, unless the Swingline Lender has entered into arrangements satisfactory to the Swingline Lender (in its sole discretion) with the Borrower or such Lender to eliminate the Swingline Lender’s actual or potential Fronting Exposure (after giving effect to Section 2.22.1(iv) ) with respect to the Defaulting Lender arising from either the Swingline Loan then proposed to be made or that the Swingline Loan and all other Swingline Loans as to which the Swingline Lender has actual or potential Fronting Exposure, as it may elect in its sole discretion. Subject to and on the terms and conditions of this Agreement, the Borrower may borrow, repay (including by means of a borrowing of Revolving Loans pursuant to Section 2.2.3 ) and reborrow Swingline Loans. All Swingline Loans shall bear interest at the LIBOR Market Index Rate plus the Applicable Margin.

2.2 Loans .

2.2.1 Types of Loans . The Revolving Loans may be made as, and from time to time continued as or converted to, Base Rate Loans or LIBOR Rate Loans (each a “ Type ” of Loan), or a combination thereof, selected by the Borrower in accordance with Section 2.2.2 . The Swingline Loans shall be made and maintained as LIBOR Market Index Rate Loans at all times and may not be converted into or continued as LIBOR Rate Loans or Base Rate Loans under Section 2.2.7 .

2.2.2 Borrowing of Revolving Loans . In order to request Revolving Loans (other than (i) borrowings of Swingline Loans, which shall be made pursuant to Section 2.2.3 , (ii) borrowings for the purpose of repaying Refunded Swingline Loans, which shall be made pursuant to Section 2.2.4 , (iii) borrowings for the purpose of paying unpaid Reimbursement Obligations, which shall be made pursuant to Section 3.4 , and (iv) borrowings involving continuations or conversions of outstanding Loans, which shall be made pursuant to Section 2.2.7 ), the Borrower shall give the Administrative Agent irrevocable written notice (a “Borrowing Notice”), not later than 11:00 a.m. on the requested Borrowing Date of each Base Rate Loan and at least three Business Days before the requested Borrowing Date for each LIBOR Rate Loan. A Borrowing Notice shall be in the form of Exhibit 2.2.2 hereto and shall specify:

(i) the requested Borrowing Date, which shall be a Business Day, of such Loan,

(ii) the aggregate amount of such Loan,

(iii) the Type of Loan selected, and

(iv) in the case of each LIBOR Rate Loan, the Interest Period applicable thereto (which may not end after the Facility Termination Date).

Each LIBOR Rate Loan shall be in the minimum amount of $5,000,000 (and any whole multiple of $1,000,000 in excess thereof), and each Base Rate Loan shall be in the minimum amount of $1,000,000 (and any whole multiple of $1,000,000 in excess thereof); provided , however , any Base Rate Loan may be in the amount of the unused Aggregate Commitments. If the Borrower shall have failed to designate the Type of Loans selected, the Borrower shall be deemed to have requested Base Rate Loans. If the Borrower shall have failed to select the duration of the Interest Period to be applicable to any LIBOR Rate Loans requested, then the Borrower shall be deemed to have selected an Interest Period with a duration of one month.

Upon receipt of any such notice, the Administrative Agent shall promptly notify each Lender of the contents thereof and of the amount and Type of each Loan to be made by such Lender on the requested date specified therein. To the extent such Lenders have made such amounts available to the Administrative Agent as provided in Section 2.3 , the Administrative Agent will make the aggregate of such amounts available to the Borrower in like funds as received by the Administrative Agent.

2.2.3 Borrowing of Swingline Loans . In order to request Swingline Loans, the Borrower shall give the Administrative Agent (and the Swingline Lender, if the Swingline Lender is not also the Administrative Agent) irrevocable written notice ( a “ Swingline Borrowing Notice ”) not later than 11:00 a.m., on the date of requested Borrowing Date. A Borrowing Notice shall be in the form of Exhibit 2.2.3 hereto and shall specify:

(i) the requested Borrowing Date, which shall be a Business Day, of such Loan, and

(ii) the aggregate amount of such Loan.

Each Swingline Loan (x) shall be in the minimum amount of $100,000 (and a whole multiple of $100,000 if in excess thereof (or if less, in the amount of the Unutilized Swingline Commitment)) and (y) shall be due and payable on the earlier of (A) the Swingline Termination Date and (B) within ten Business Days of such Loan being made. To the extent the Swingline Lender has made such amount available to the Administrative Agent as provided in Section 2.3 , the Administrative Agent will make such amount available to the Borrower. Immediately upon the making of a Swingline Loan, each Lender shall be deemed to, and hereby irrevocably and unconditionally agrees to, purchase from the Swingline Lender a risk participation in such Swingline Loan in an amount equal to the product of such Lender’s Applicable Percentage times the amount of such Swingline Loan.

such Swingline Loans by delivering to the Administrative Agent (if the Administrative Agent is not also the Swingline Lender) and each other Lender (on behalf of, and with a copy to, the Borrower), not later than 11:00 a.m. on the proposed Borrowing Date therefor, a notice (which shall be deemed to be a Borrowing Notice given by the Borrower) requesting the Lenders to make Revolving Loans (which shall be made initially as Base Rate Loans) on such Borrowing Date in an aggregate amount equal to the amount of such Swingline Loans (the “ Refunded Swingline Loans ”) outstanding on the date such notice is given that the Swingline Lender requests to be repaid. To the extent the Lenders have made such amounts available to the Administrative Agent as provided in Section 2.3 , the Administrative Agent will make the aggregate of such amounts available to the Swingline Lender in like funds as received by the Administrative Agent, which shall apply such amounts in repayment of the Refunded Swingline Loans. Notwithstanding any provision of this Agreement to the contrary, on the relevant Borrowing Date, the Refunded Swingline Loans (including the Swingline Lender’s ratable share thereof, in its capacity as a Lender) shall be deemed to be repaid with the proceeds of the Revolving Loans made as provided above (including a Revolving Loan deemed to have been made by the Swingline Lender), and such Refunded Swingline Loans deemed to be so repaid shall no longer be outstanding as Swingline Loans but shall be outstanding as Revolving Loans. If any portion of any such amount repaid (or deemed to be repaid) to the Swingline Lender shall be recovered by or on behalf of the Borrower from the Swingline Lender in any bankruptcy, insolvency or similar proceeding or otherwise, the loss of the amount so recovered shall be shared ratably among all the Lenders in the manner contemplated by Section 2.3 .

2.2.5 Lender Participation in Swingline Loans . If, as a result of any bankruptcy, insolvency or similar proceeding with respect to the Borrower, Revolving Loans are not made pursuant to Section 2.2.4 in an amount sufficient to repay any amounts owed to the Swingline Lender in respect of any outstanding Swingline Loans, or if the Swingline Lender is otherwise precluded for any reason from giving a notice on behalf of the Borrower as provided for hereinabove, each Lender, upon one Business Day’s prior notice from the Swingline Lender, shall fund its risk participation in such outstanding Swingline Loans by making available to the Administrative Agent an amount equal to its Applicable Percentage of the unpaid amount thereof together with accrued interest thereon. To the extent the Lenders have made such amounts available to the Administrative Agent as provided Section 2.3 , the Administrative Agent will make the aggregate of such amounts available to the Swingline Lender in like funds as received by the Administrative Agent. In the event any such Lender fails to make available to the Administrative Agent the amount of such Lender’s participation as provided in this Section 2.2.5 , the Swingline Lender shall be entitled to recover such amount on demand from such Lender, together with interest thereon for each day from the date such amount is required to be made available for the account of the Swingline Lender until the date such amount is made available to the Swingline Lender at the Federal Funds Effective Rate for the first three Business Days and thereafter at the Alternative Base Rate. Promptly following its receipt of any payment by or on behalf of the Borrower in respect of a Swingline Loan, the Swingline Lender will pay to each Lender that has acquired a participation therein such Lender’s Applicable Percentage of such payment.

Lender’s obligation to purchase a participation in any unpaid Swingline Loans pursuant to Section 2.2.5 shall be absolute and unconditional and shall not be affected by any circumstance or event whatsoever, including, without limitation, (i) any set-off, counterclaim, recoupment, defense or other right that such Lender may have against the Swingline Lender, the Administrative Agent, the Borrower or any other Person for any reason whatsoever, (ii) the occurrence or continuance of any Unmatured Default or Event of Default, (iii) the failure of the amount of such borrowing of Revolving Loans to meet the minimum borrowing amount specified in Section 2.2.2 , or (iv) the failure of any conditions set forth in Section 4.2 or elsewhere herein to be satisfied.

2.2.7 Conversion and Continuation of Outstanding Loans .

(i) Each Base Rate Loan shall continue as a Base Rate Loan unless and until such Base Rate Loan is either converted into a LIBOR Rate Loan in accordance with this Section 2.2.7 or repaid in accordance with Section 2.5 . Each LIBOR Rate Loan shall continue as a LIBOR Rate Loan until the end of the then applicable Interest Period therefor, at which time such LIBOR Rate Loan shall be automatically converted into a Base Rate Loan unless the Borrower shall have given the Administrative Agent a Conversion/Continuation Notice in the manner set forth below requesting that, at the end of such Interest Period, such LIBOR Rate Loan continue as a LIBOR Rate Loan for the same or another Interest Period. The Borrower may elect from time to time to convert all or any part of a Base Rate Loan into a LIBOR Rate Loan. The Borrower shall give the Administrative Agent irrevocable notice in the form of Exhibit 2.2.7 (a “ Conversion/Continuation Notice ”) of each conversion of a Base Rate Loan into a LIBOR Rate Loan, or continuation of a LIBOR Rate Loan, not later than 11:00 a.m. at least three Business Days prior to the date of the requested conversion or continuation, specifying:

(a) the requested date, which shall be a Business Day, of such conversion or continuation,

(b) the aggregate amount and Type of the Loan which is to be converted or continued, and

(c) the amount of such Loan(s) which is to be converted or continued as a LIBOR Rate Loan and the duration of the Interest Period applicable thereto.

Each conversion of a LIBOR Rate Loan into a Base Rate Loan shall involve a minimum amount of $3,000,000 (and a whole multiple of $1,000,000, if in excess thereof). Each conversion of a Base Rate Loan into a LIBOR Rate Loan shall involve a minimum amount of $5,000,000 (and a whole multiple of $1,000,000 if in excess thereof). No partial conversion of LIBOR Rate Loans made pursuant to a single Borrowing Notice shall reduce the outstanding principal amount of such LIBOR Rate Loans to less than $5,000,000 (or to any greater amount not a whole multiple of $1,000,000 in excess thereof). Except as otherwise provided in Section 2.18.6 , LIBOR Rate Loans may be converted into Base Rate Loans only on the last day of the Interest Period Applicable thereto (and in any event, if a LIBOR Rate Loan is converted into a Base Rate Loan on any day other than the last day of the Interest Period applicable thereto, the Borrower will pay, upon such conversion, all amounts required under Section 2.18.1 to be paid as a consequence thereof).

Upon receipt of any such notice, the Administrative Agent shall promptly notify each Lender of (x) the contents thereof, (y) the amount and Type and, in the case of LIBOR Rate Loans, the last day of the applicable Interest Period of each Loan to be converted or continued by such Lender and (z) the amount and Type or Types of Loans into which such Loans are to be converted or as which such Loan are to be continued.

(ii) Notwithstanding anything to the contrary contained in this Section 2.2.7 , during an Event of Default, the Administrative Agent may notify the Borrower that Loans may only be converted into or continued as Loans of certain specified Types.

2.3 Funding by Lenders; Disbursement to the Borrower .

2.3.1 Funding by Lenders . Not later than 1:00 p.m. on each requested Borrowing Date, each Lender shall, if it has received the notice contemplated by Sections 2.2.2 , 2.2.3 , 2.2.4 or 2.2.5 on or prior to 12:00 noon on such date, in the case of Base Rate Loans, or on or prior to its close of business on the third Business Day before such date, in the case of LIBOR Rate Loans, make available to the Administrative Agent, in Dollars in funds immediately available to the Administrative Agent at its address specified pursuant to Article XIII , the amount of Loans to be made by such Lender on such date.

2.3.2 Disbursement to the Borrower . Upon satisfaction of the applicable conditions set forth in Section 4.2 (and, if such Borrowing is on the Agreement Date, Section 4.1 ), Loans shall be disbursed by the Administrative Agent not later than 3:30 p.m. on the date specified therefor by credit to an account of the Borrower at the Administrative Agent at its address specified pursuant to Article XIII or in such other manner as may have been specified to and as shall be reasonably acceptable to the Administrative Agent, in each case in Dollars in funds immediately available to the Borrower, as the case may be.

2.4 Fees . The Borrower agrees to pay:

2.4.1 Arranger Fees. (i) To Wells Fargo Securities and BTMU, for their own respective accounts, on the Agreement Date, the fees required under the Active Arrangers Fee Letter and (ii) BCM and TD, for their respective accounts, on the Agreement Date, the fees required under the Passive Arrangers Fee Letter;

2.4.2 Facility Fee . To the Administrative Agent for the account of each Lender a facility fee at a per annum rate equal to the Facility Fee Rate on the average daily amount of such Lender’s Commitment (whether used or unused) from the date hereof to and including the Repayment Date (the “ Facility Fee ”), payable on the last day of each calendar quarter hereafter and on the Repayment Date.

termination of the last outstanding Letter of Credit; provided , however , that any letter of credit fees otherwise payable for the account of a Defaulting Lender with respect to any Letter of Credit as to which such Defaulting Lender has not provided Cash Collateral satisfactory to the Issuing Bank pursuant to Section 3.1.1 shall be payable, to the maximum extent permitted by Applicable Law, to the other Lenders in accordance with the upward adjustments in their respective pro rata shares allocable to such Letter of Credit pursuant to Section 2.22.1(iv) , with the balance of such fee, if any, payable to the Issuing Bank for its own account;

2.4.4 Letter of Credit Facing Fee . To each Issuing Bank, for its own account, a facing fee for each calendar quarter (or portion thereof) on the daily average aggregate Stated Amount of all Letters of Credit issued by such Issuing Bank outstanding during such quarter, at a per annum rate separately agreed to between each Issuing Bank and the Borrower (each an “ LC Fee ”), payable in arrears (i) on the last Business Day of each calendar quarter, beginning with the first such day to occur after the Agreement Date, and (ii) on the later of the Facility Termination Date and the date of termination of the last outstanding Letter of Credit;

2.4.5 Letter of Credit Customary Fees . To each Issuing Bank, for its own account, such commissions, transfer fees and other fees and charges incurred in connection with the issuance and administration of each Letter of Credit issued by it as are customarily charged from time to time by such Issuing Bank for the performance of such services in connection with similar letters of credit, or as may be otherwise agreed to by such Issuing Bank, but without duplication of amounts payable under Section 2.4.2 ; and

2.4.6 Administrative Fee . To the Administrative Agent, for its own account, the annual administrative fee described in the Administrative Fee Letter, on the terms, in the amount and at the times set forth therein.

None of the fees payable under this Section 2.4 shall be refundable in whole or in part.

2.5 Reductions in Aggregate Commitments; Increases in Aggregate Commitments .

2.5.1 Reductions . The Borrower may permanently reduce the Aggregate Commitments, in whole or in part, ratably among the Lenders in an amount equal to $5,000,000 ($500,000 in the case of the Unutilized Swingline Commitment) or a whole multiple of $1,000,000 in excess thereof (or $100,000 in the case of the Unutilized Swingline Commitment) upon at least three Business Days’ written notice to the Administrative Agent (and in the case of a termination or reduction of the Unutilized Swingline Commitment, the Swingline Lender), which notice shall specify the amount of any such reduction; provided , however , that the amount of the Aggregate Commitments may not be reduced below the aggregate outstanding Credit Exposure. Upon receipt of any such notice, the Administrative Agent (or Swingline Lender) shall promptly notify each Lender of the contents thereof and the amount to which such Lender’s Commitment is to be reduced. All accrued Facility Fees shall be payable on the effective date of any termination of the obligations of the Lenders to make Loans hereunder. The amount of any termination or reduction made under this Section 2.5.1 may not thereafter be reinstated.

2.5.2 Increases . At any time following the Agreement Date and prior to the Facility Termination Date, the Aggregate Commitments may, at the option of the Borrower, be

increased by a total amount not in excess of $100,000,000, either by one or more then-existing Lenders increasing their Commitments or by new Lenders establishing such additional Commitments (each such increase by either means, a “ Commitment Increase ”, and each such Lender increasing its Commitment or new Lender, an “ Additional Commitment Lender ”); provided that (i) each new Lender shall be reasonably acceptable to the Administrative Agent, (ii) no Unmatured Default or Event of Default shall exist immediately prior to or after the effective date of such Commitment Increase, (iii) all representations and warranties made by the Borrower in this Agreement as of the date of such Commitment Increase are true and correct in all material respects, (iv) each such Commitment Increase shall be in an aggregate amount not less than $10,000,000 or a whole multiple of $5,000,000 in excess thereof, or, if less, the maximum remaining amount that the Aggregate Commitments may be increased pursuant to this Section 2.5.2 , and (v) no such Commitment Increase shall become effective unless and until the Borrower, the Administrative Agent and the Additional Commitment Lenders shall have executed and delivered an agreement substantially in the form of Exhibit 2.5.2 (a “ Commitment Increase Supplement ”). On the effective date of such Commitment Increase, each Additional Commitment Lender shall purchase, by assignment, from each other existing Lender the portion of such other Lender’s Credit Exposure outstanding at such time such that, after giving effect to such assignments, the respective aggregate amount of Credit Exposure of each Lender shall be equal to such Lender’s Applicable Percentage (as adjusted pursuant hereto) of the aggregate Credit Exposure outstanding. The purchase price for the Loans so assigned shall be the principal amount of the Loans so assigned plus the amount of accrued and unpaid interest thereon on the date of assignment. Upon payment of such purchase price, each Lender shall be automatically deemed to have sold and made such an assignment to such Additional Commitment Lender and shall, to the extent of the interest assigned, be released from its obligations under this Agreement, and such Additional Commitment Lender shall be automatically deemed to have purchased and assumed such an assignment from each other Lender and, if not already a Lender hereunder, shall be a party hereto and, to the extent of the interest assigned, have the rights and obligations of a Lender under this Agreement.

2.6 Extension Option. After the first anniversary of the Agreement, and then no earlier than 60 days and no later than 30 days prior to each anniversary of the Agreement Date, but on no more than two occasions, the Borrower may, by written notice to the Administrative Agent, request that the Lenders extend the Facility Termination Date for an additional year. Any election by a Lender to extend the term of its Commitment pursuant to such a request shall be at such Lender’s sole discretion and subject to such credit evaluation as such Lender may determine.

2.6.1 No extension pursuant to this Section 2.6 shall become effective unless agreed to in writing not later than 15 days prior to the relevant anniversary of the Agreement Date by Lenders then holding more than 50% of the Commitments.

2.6.2 In the event that Lenders then holding more than 50% of the Commitments but less than 100% of the Commitments shall agree to an extension requested pursuant to this Section 2.6 , the Borrower shall be entitled to propose a new Lender or Lenders (which shall be reasonably acceptable to the Administrative Agent, the Swingline Lender and the Issuing Banks), or an increase in the Commitment or Commitments of a then existing Lender or Lenders, whose new or increased Commitments (in an aggregate amount not in excess of the Commitments of the Lenders who did not agree to extend) shall be in effect during the extension period so agreed.

2.6.3 Unless a Lender which does not agree to extend its Commitment shall be replaced pursuant to Section 2.6.4 , the Commitment of such Lender shall continue in full force and effect until the Facility Termination Date to which it has agreed (each a “ Prior Termination Date ”).

2.6.4 In the event that an existing Lender shall not agree to extend its Commitment pursuant to a request by the Borrower, the Borrower shall be entitled to replace such Lender with another Lender or and/or an Eligible Assignee that shall assume the then Commitment of such existing Lender and shall agree to the extension requested. Any Eligible Assignee (if not already a Lender hereunder) shall become a party to this agreement as a Lender pursuant to a joinder agreement in form and substance reasonably satisfactory to the Administrative Agent and the Borrower. In the event of such a replacement, such existing Lender shall assign to such replacement Lender the outstanding Loans of such existing Lender for a purchase price equal to the principal amount of the Loans so assigned, plus the amount of accrued and unpaid interest thereon to the date of such assignment, and such replacement Lender shall acquire (and fund as appropriate) its full pro rata share of all Loans and participations in Letters of Credit and Swingline Loans in accordance with its Applicable Percentage.

2.6.5 An extension of the Facility Termination Date pursuant to this Section 2.6 shall only become effective upon the receipt by the Administrative Agent of a certificate (the statements contained in which shall be true) of a duly authorized officer of the Borrower stating that both before and after giving effect to such extension of the Facility Termination Date (i) no Unmatured Default or Event of Default has occurred and is continuing and (ii) all representations and warranties made by the Borrower under this Agreement are true and correct in all material respects on and as of the date such extension is made.

2.6.6 Effective on and after the Prior Termination Date, (i) each of the Lenders who does not agree to extend its Commitment shall be automatically released from their respective participations and Reimbursement Obligations under Section 3.4 with respect to any outstanding Letters of Credit and (ii) the participations and Reimbursement Obligations of each Lender (other than the Lenders who do not agree to extend their Commitments) shall be automatically adjusted to equal such Lender’s revised Applicable Percentage of such outstanding Letters of Credit.

2.7 Repayments; Optional Principal Prepayments .

(a) Each Loan shall mature and become due and payable, and shall be repaid by the Borrower, in full on the day one year after the date such Loan was made, unless the Borrower’s Board of Directors, by a written resolution, has authorized such Loan to be outstanding for a term in excess of one year, in which case such Loan shall mature and become due and payable, and shall be repaid by the Borrower, in full on the date fixed by such written resolution, but in no event later than on the Facility Termination Date.

(b) The Borrower may from time to time pay, without penalty or premium, all outstanding Loans, or any portion of the outstanding Loans, on any Business Day upon notice to the Administrative Agent one Business Day prior to each intended prepayment of Alternative Base Rate Loans and three Business Days prior to each intended prepayment of LIBOR Rate Loans; provided that (i) each partial payment of LIBOR Rate Loans shall be in the minimum amount of $5,000,000 (and a whole multiple of $1,000,000 if in excess thereof), and each partial payment of Base Rate Loans shall be in the minimum amount of $3,000,000 (and a whole multiple of $1,000,000 if in excess thereof) ($100,000 and $100,000, respectively, in the case of Swingline Loans), (ii) no partial payment of LIBOR Rate Loans made pursuant to a single borrowing shall reduce the aggregate outstanding principal amount of the remaining LIBOR Rate Loans under such borrowing to less than $5,000,000 (and a whole multiple of $1,000,000 if in excess thereof), and (iii) unless made together with all amounts required under Section 2.18 .1 to be paid as a consequence of such prepayment, a prepayment of a LIBOR Rate Loan may be made only on the last day of the Interest Period applicable thereto. Each such notice of prepayment shall be in the form of Exhibit 2.7 and shall specify (i) the date such prepayment is to be made and (ii) the amount and Type of the Loans to be prepaid and, in the case of LIBOR Rate Loans, the last day of the applicable Interest Period of the LIBOR Rate Loans to be prepaid. Upon receipt of any such notice, the Administrative Agent shall promptly notify each Lender of the contents thereof and the amount and Type of the Loans to be prepaid and, in the case of LIBOR Rate Loans, the last day of the applicable Interest Period of each LIBOR Rate Loan of such Lender to be prepaid. Amounts to be prepaid shall irrevocably be due and payable on the date specified in the applicable notice of prepayment, together with interest thereon as provided in Section 2.13 .

2.8 Changes in Interest Rate, etc . Each Base Rate Loan shall bear interest on the outstanding principal amount thereof, for each day from and including the date such Loan is made or is converted from a LIBOR Rate Loan into a Base Rate Loan pursuant to Section 2.2.7 to but excluding the date it becomes due or is converted into a LIBOR Rate Loan pursuant to Section 2.2.7 hereof, at a rate per annum equal to the Base Rate plus the Applicable Margin for such day. Each LIBOR Rate Loan shall bear interest on the outstanding principal amount thereof from and including the first day of the Interest Period applicable thereto to (but not including) the last day of such Interest Period at the applicable LIBOR Rate plus the Applicable Margin. No Interest Period may end after the Facility Termination Date.

2.9 Rates Applicable After Default . During the continuance of an Unmatured Default the Required Lenders may, at their option, by notice to the Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to changes in interest rates), declare that no Loan may be made as, converted into, or continued as a LIBOR Rate Loan. During the continuance of an Event of Default the Required Lenders may, at their option, by notice to the Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to changes in interest rates), declare that each Loan and all other amounts payable under the Loan Documents shall bear interest at the Overdue Rate; provided that, during the continuance of an Event of Default under Sections 0 , 0 or 0, any amount payable under the Loan Documents not paid when due (whether at maturity, by

reason of notice of prepayment or otherwise) shall bear interest at a rate per annum equal to the Overdue Rate without any election or action on the part of the Administrative Agent or any Lender.

2.10 Method of Payment .

2.10.1 Payments by Borrower . All payments of the Obligations hereunder and under the other Loan Documents shall be made, observed or performed, without setoff, deduction, or counterclaim (whether sounding in tort, contract or otherwise) or Tax. All amounts payable for the account of the Administrative Agent shall be paid in immediately available funds to the Administrative Agent at the Administrative Agent’s address specified pursuant to Article XIII , or at any other Lending Installation of the Administrative Agent specified in writing by the Administrative Agent to the Borrower, by noon on the date when due and shall be applied ratably by the Administrative Agent among the Lenders. All amounts payable for the account of any Lender under the Loan Documents shall, in the case of payments on account of principal of or interest on the Loans or fees, be made to the Administrative Agent at the Administrative Agent’s address specified pursuant to Article XIII and, in the case of all other payments, be made directly to such Lender at its address specified pursuant to Article XIII or at such other address as such Lender may designate by notice to the Borrower.

2.10.2 Payments to Lenders . Each payment delivered to the Administrative Agent for the account of any Lender shall be delivered promptly by the Administrative Agent to such Lender in the same type of funds that the Administrative Agent received at its address specified pursuant to Article XIII or at any Lending Installation specified in a notice received by the Administrative Agent from such Lender. Notwithstanding the foregoing or any contrary provision hereof, if any Lender shall fail to make any payment required to be made by it hereunder to the Administrative Agent, any Issuing Bank or the Swingline Lender, then the Administrative Agent may, in its discretion, apply any amounts thereafter received by the Administrative Agent for the account of such Lender to satisfy such Lender’s obligations to the Administrative Agent, such Issuing Bank or the Swingline Lender, as the case may be, until all such unsatisfied obligations are fully paid. If the Administrative Agent shall not have made a required distribution to the appropriate Lenders as required hereinabove after receiving a payment for the account of such Lenders, the Administrative Agent will pay to each such Lender, on demand, its ratable share of such payment with interest thereon at the Federal Funds Effective Rate for each day from the date such amount was required to be disbursed by the Administrative Agent until the date repaid to such Lender. The Administrative Agent will distribute to each Issuing Bank like amounts relating to payments made to the Administrative Agent for the account of such Issuing Bank in the same manner, and subject to the same terms and conditions, as set forth hereinabove with respect to distributions of amounts to the Lenders.

2.10.3 Authorization to Charge the Borrower’s Accounts . The Borrower hereby authorizes the Administrative Agent and each Lender, if and to the extent any amount payable by the Borrower under the Loan Documents (whether payable to such Person or to any other Person that is the Administrative Agent or a Lender) is not otherwise paid when due, to charge such amount against any or all of the accounts of the Borrower with such Person or any of its Affiliates (whether maintained at a branch or office located within or without the United States), with the Borrower remaining liable for any deficiency. Any Lender charging an amount against

an account of the Borrower shall comply with Section 11.2 and provide notice thereof to the Borrower, within a reasonable time thereafter, which notice shall include a description in reasonable detail of such action.

2.11 Evidence of Indebtedness .

2.11.1 Lenders’ Evidence of Indebtedness . Each Lender shall maintain in accordance with its usual practice an account or accounts evidencing the indebtedness of the Borrower to such Lender resulting from each Loan made by such Lender from time to time, including the amounts of principal and interest payable and paid to such Lender from time to time hereunder.

2.11.2 Administrative Agent’s Evidence of Indebtedness . The Administrative Agent shall also maintain the Register of accounts pursuant to Section 12.3.4 in which it will record (a) the amount of each Loan made hereunder, the Type thereof and the Interest Period with respect thereto, (b) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (c) the amount of any sum received by the Administrative Agent hereunder from the Borrower and each Lender’s share thereof.

2.11.3 Effect of Entries . The entries maintained in the accounts and records maintained pursuant to Sections 2.11.1 and 2.11.2 above shall be prima facie evidence of the existence and amounts of the Obligations therein recorded; provided , however , that the failure of the Administrative Agent or any Lender to maintain such accounts and records or any error therein shall not in any manner affect the obligation of the Borrower to repay the Obligations in accordance with their terms.

2.11.4 Notes Upon Request . Any Lender may request that its Loans be evidenced by Notes. In such event, the Borrower shall prepare, execute and deliver to such Lender (a) in the case of Revolving Loans, a Revolving Note in the form of Exhibit 2.11.3-A , payable to the order of such Lender and (b) in the case of Swingline Loans, a Swingline Note in the form of Exhibit 2.11.3-B . Thereafter, the Loans represented by such Note and interest thereon shall at all times (including after any assignment pursuant to Section 12.3 ) be evidenced by a Note payable to the order of the payee named therein or any assignee pursuant to Section 12.3 , except to the extent that any such Lender or assignee subsequently returns any such Note for cancellation and requests that such Loans once again be evidenced as described in paragraphs 2.11.1 and 2.11.1 above.

2.12 Telephonic Notices . The Borrower hereby authorizes the Lenders and the Administrative Agent to extend, convert, or continue Loans; to effect selections of Types of Loans; and to transfer funds based on telephonic notices made by any Person or Persons the Administrative Agent or any Lender in good faith believes to be acting on behalf of the Borrower, it being understood that the foregoing authorization is specifically intended to allow Borrowing Notices, Swingline Borrowing Notices, and Conversion/Continuation Notices to be given telephonically. The Borrower agrees to deliver promptly to the Administrative Agent a written confirmation, if such confirmation is requested by the Administrative Agent or any Lender, of each telephonic notice signed by an Authorized Officer. If the written confirmation

differs in any material respect from the action taken by the Administrative Agent and the Lenders, the records of the Administrative Agent and the Lenders shall govern absent manifest error.

2.13 Interest Payment Dates; Interest and Fee Basis . Interest accrued on each Base Rate Loan and each LIBOR Market Index Rate Loan shall be payable on each Payment Date, commencing with the first such date to occur after the Agreement Date, on any date on which the Base Rate Loan or LIBOR Market Index Rate Loan is prepaid, whether due to acceleration or otherwise, and at maturity. Interest accrued on that portion of the outstanding principal amount of any Base Rate Loan converted into a LIBOR Rate Loan on a day other than a Payment Date shall be payable on the date of conversion. Interest accrued on each LIBOR Rate Loan shall be payable on the last day of its applicable Interest Period, on any date on which the Loan is prepaid, whether by acceleration or otherwise, and at maturity. Interest accrued on each LIBOR Rate Loan having an Interest Period longer than three months shall also be payable on the last day of each three month interval during such Interest Period. Interest, Facility Fees and LC Fees shall be calculated for actual days elapsed on the basis of a 360 day year, except that interest calculated based on the Prime Rate shall be calculated for actual days elapsed on the basis of a 365, or when appropriate 366, day year. Interest shall be payable for the day a Loan is made but not for the day of any payment on the amount paid if payment is received prior to noon (local time) at the place of payment. Whenever any payment to the Administrative Agent or any Lender under the Loan Documents would otherwise be due on a day that is not a Business Day, such payment shall instead be due on the next succeeding Business Day; provided , however , that if such next succeeding Business Day falls in a new calendar month, such payment shall instead be due on the immediately preceding Business Day. If the date any payment under the Loan Documents is due is extended (whether by operation of any Loan Document, Applicable Law or otherwise), such payment shall bear interest for such extended time at the rate of interest applicable hereunder. Interest at the Overdue Rate shall be payable on demand.

2.14 Notification of Loans, Interest Rates, Prepayments and Commitment Reductions . Promptly after receipt thereof, the Administrative Agent will notify each Lender of the contents of each Aggregate Commitments reduction notice, Borrowing Notice, Swingline Notice, Conversion/Continuation Notice, Letter of Credit Notice, Commitment Increase Supplement and repayment notice received by it hereunder. The Administrative Agent will notify each Lender of the LIBOR Rate or Alternate Base Rate applicable to each Loan promptly upon determination of such interest rate and will give each Lender prompt notice of each change in the Alternate Base Rate. The Administrative Agent will notify each Lender of any request by the Borrower pursuant to Section 2.6 to extend the Facility Termination Date.

2.15 Lending Installations . Each Lender may book its Loans at any Lending Installation selected by such Lender and may change its Lending Installation from time to time. All terms of this Agreement shall apply to any such Lending Installation and any Notes issued hereunder shall be deemed held by each Lender for the benefit of any such Lending Installation. Each Lender may, by written notice to the Administrative Agent and the Borrower in accordance with Article XIII , designate replacement or additional Lending Installations through which Loans will be made by it and for whose account Loan payments are to be made. A Lender may designate a separate Lending Installation for the purpose of making or maintaining different Types of Loans, and with respect to LIBOR Rate Loans such office may be a domestic or foreign branch or Affiliate of such Lender.

2.16 Non-Receipt of Funds by the Administrative Agent . Unless the Borrower or a Lender, as the case may be, notifies the Administrative Agent prior to the date on which it is scheduled to make payment to the Administrative Agent of (i) in the case of a Lender, the proceeds of a Loan or (ii) in the case of the Borrower, a payment of principal, interest or fees to the Administrative Agent for the account of the Lenders, that it does not intend to make such payment, the Administrative Agent may assume that such payment has been made. The Administrative Agent may, but shall not be obligated to, make the amount of such payment available to the intended Recipient or Recipients in reliance upon such assumption. If such Lender or the Borrower, as the case may be, has not in fact made such payment to the Administrative Agent, the Recipient of such payment shall, on demand by the Administrative Agent, repay to the Administrative Agent the amount so made available together with interest thereon in respect of each day during the period commencing on the date such amount was so made available by the Administrative Agent until the date the Administrative Agent recovers such amount at a rate per annum equal to the Federal Funds Effective Rate for such day for the first three days and, thereafter, at the Alternate Base Rate plus 2%.

2.17 Maximum Interest Rate . Nothing contained in the Loan Documents shall require the Borrower at any time to pay interest at a rate exceeding the Maximum Permissible Rate. If interest payable by the Borrower on any date would exceed the maximum amount permitted by the Maximum Permissible Rate, such interest payment shall automatically be reduced to such maximum permitted amount, and interest for any subsequent period, to the extent less than the maximum amount permitted for such period by the Maximum Permissible Rate, shall be increased by the unpaid amount of such reduction. Any interest actually received for any period in excess of such maximum amount permitted for such period shall be deemed to have been applied as a prepayment of the Loans.

2.18 Increased Costs; Change in Circumstances; Illegality .

2.18.1 Increased Costs Generally . If any Change in Law shall:

(i) impose, modify or deem applicable any reserve, special deposit, compulsory loan, insurance charge or similar requirement against assets of, deposits with or for the account of, or credit extended or participated in by, any Lender (except the Reserve Requirement reflected in the LIBOR Rate) or any Issuing Bank;

(ii) subject any Recipient to any Taxes (other than (A) Indemnified Taxes, (B) Taxes described in clauses (ii) through (iv) of the definition of Excluded Taxes and (C) Connection Income Taxes) on its loans, loan principal, letters of credit, commitments, or other obligations, or its deposits, reserves, other liabilities or capital attributable thereto; or

(iii) impose on any Lender or any Issuing Bank or the London interbank market any other condition, cost or expense (other than Taxes) affecting this Agreement or LIBOR Rate Loans or LIBOR Market Index Rate Loans made by such Lender or any Letter of Credit or participation therein;

and the result of any of the foregoing shall be to increase the cost to such Lender, such Issuing Bank or such other Recipient of making, converting to, continuing or maintaining any LIBOR Rate Loan or of maintaining its obligation to make any such Loan, or to increase the cost to such Lender, such Issuing Bank or such other Recipient of participating in, issuing or maintaining any Letter of Credit (or of maintaining its obligation to participate in or to issue any Letter of Credit), or to reduce the amount of any sum received or receivable by such Lender, such Issuing Bank or other Recipient hereunder (whether of principal, interest or any other amount), then, upon request of such Lender, such Issuing Bank or other Recipient, the Borrower will pay to such Lender, such Issuing Bank or other Recipient, as the case may be, such additional amount or amounts as will compensate such Lender, such Issuing Bank or other Recipient, as the case may be, for such additional costs incurred or reduction suffered.

2.18.2 Capital Requirements . If any Lender or any Issuing Bank determines that any Change in Law affecting such Lender or such Issuing Bank or any Lending Installation of such Lender or such Lender’s or such Issuing Bank’s holding company, if any, regarding capital or liquidity requirements has or would have the effect of reducing the rate of return on such Lender’s or such Issuing Bank’s capital or on the capital of such Lender’s or such Issuing Bank’s holding company, if any, as a consequence of this Agreement, the Commitments of such Lender or the Loans made by, or participations in Letters of Credit or Swingline Loans held by, such Lender, or the Letters of Credit issued by such Issuing Bank, to a level below that which such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company could have achieved but for such Change in Law (taking into consideration such Lender’s or such Issuing Bank’s policies and the policies of such Lender’s or such Issuing Bank’s holding company with respect to capital adequacy), then from time to time the Borrower will pay to such Lender or such Issuing Bank, as the case may be, such additional amount or amounts as will compensate such Lender or such Issuing Bank or such Lender’s or such Issuing Bank’s holding company for any such reduction suffered.

2.18.3 Certificates for Reimbursement . A certificate of a Lender or an Issuing Bank setting forth the amount or amounts necessary to compensate such Lender or such Issuing Bank or its holding company, as the case may be, as specified in Sections 2.18.1 or 2.18.2 and delivered to the Borrower shall be conclusive absent manifest error. The Borrower shall pay such Lender or such Issuing Bank, as the case may be, the amount shown as due on any such certificate within ten days after receipt thereof.

2.18.4 Delay in Requests . Failure or delay on the part of any Lender or any Issuing Bank to demand compensation pursuant to the foregoing provisions of this Section shall not constitute a waiver of such Lender’s or such Issuing Bank’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender or an Issuing Bank pursuant to the foregoing provisions of this Section 2.18 for any increased costs incurred or reductions suffered more than nine months prior to the date that such Lender or such Issuing Bank, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or such Issuing Bank’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to above shall be extended to include the period of retroactive effect thereof).

2.18.5 LIBOR Unavailable . If, (i) on or prior to the first day of any Interest Period, the Administrative Agent shall have determined that adequate and reasonable means do not exist for ascertaining the applicable LIBOR Rate for such Interest Period, (ii) at any time, the Administrative Agent shall have determined that adequate and reasonable means do not exist for ascertaining the applicable LIBOR Market Index Rate, (iii) on or prior to the first day of any Interest Period, the Administrative Agent shall have received written notice from the Required Lenders of their determination that the rate of interest referred to in the definition of “LIBOR Rate” upon the basis of which the LIBOR Rate for LIBOR Rate Loans for such Interest Period is to be determined or will not adequately and fairly reflect the cost to such Lenders of making or maintaining LIBOR Rate Loans during such Interest Period, or (iv) at any time, the Administrative Agent shall have received written notice from the Required Lenders of their determination that the rate of interest referred to in the definition of “LIBOR Market Index Rate” will not adequately and fairly reflect the cost of such Lenders of making LIBOR Market Index Rate Loans, the Administrative Agent will forthwith so notify the Borrower and the Lenders. Upon such notice, (a) all then outstanding LIBOR Rate Loans shall automatically, on the expiration date of the respective Interest Periods applicable thereto (unless then repaid in full), be converted into Base Rate Loans, (b) all then outstanding LIBOR Market Index Rate Loans, shall automatically, on the day of such notice, be converted into Base Rate Loans, (c) the obligation of the Lenders to make, to convert Base Rate Loans into, or to continue, LIBOR Rate Loans shall be suspended (including pursuant to the borrowing to which such Interest Period applies), and (d) any Borrowing Notice, Swingline Borrowing Notice or Conversion/Continuation Notice given at any time thereafter with respect to LIBOR Rate Loans shall be deemed to be a request for Base Rate Loans, in each case until the Administrative Agent or the Required Lenders, as the case may be, shall have determined that the circumstances giving rise to such suspension no longer exist (and the Required Lenders, if making such determination, shall have so notified the Administrative Agent), and the Administrative Agent shall have so notified the Borrower and the Lenders.

2.18.6 Illegality . Notwithstanding any other provision in this Agreement, if, at any time after the date hereof and from time to time, any Lender shall have determined in good faith that the introduction of or any change in any Applicable Law, rule or regulation or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof, or compliance with any guideline or request from any such Governmental Authority (whether or not having the force of law), has or would have the effect of making it unlawful for such Lender to make or to continue to make or maintain LIBOR Rate Loans or LIBOR Market Index Rate Loans, such Lender will forthwith so notify the Administrative Agent and the Borrower. Upon such notice, (i) each of such Lender’s then outstanding LIBOR Rate Loans and LIBOR Market Index Rate Loans shall automatically, immediately in the case of LIBOR Market Index Rate Loans and on the expiration date of the applicable Interest Period in the case of any LIBOR Rate Loan (or, to the extent any such LIBOR Rate Loan may not lawfully be maintained as a LIBOR Rate Loan until such expiration date, upon such notice) and to the extent not sooner prepaid, be converted into a Base Rate Loan, (ii) the obligation of such Lender to make, to convert Base Rate Loans into, or to continue, LIBOR Rate Loans shall be suspended (including pursuant to any borrowing for which the Administrative Agent has received a Borrowing Notice but for which the Borrowing Date has not arrived), and (iii) any Borrowing Notice or Conversion/Continuation Notice given at any time thereafter with respect to LIBOR Rate Loans (or Swingline Borrowing Notice given with

respect to any Swingline Loans) shall, as to such Lender, be deemed to be a request for a Base Rate Loan, in each case until such Lender shall have determined that the circumstances giving rise to such suspension no longer exist and shall have so notified the Administrative Agent, and the Administrative Agent shall have so notified the Borrower.

2.19 Taxes .

2.19.1 Issuing Bank . For purposes of this Section 2.19 , the term “ Lender ” includes any Issuing Bank.

2.19.2 Payments Free of Taxes . Any and all payments by or on account of any obligation of the Borrower under any Loan Document shall be made without deduction or withholding for any Taxes, except as required by Applicable Law. If any Applicable Law (as determined in the good faith discretion of an applicable Withholding Agent) requires the deduction or withholding of any Tax from any such payment by a Withholding Agent, then the applicable Withholding Agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with Applicable Law and, if such Tax is an Indemnified Tax, then the sum payable by the Borrower shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section) the applicable Recipient receives an amount equal to the sum it would have received had no such deduction or withholding been made.

2.19.3 Payments of Other Taxes by the Borrower . The Borrower shall timely pay to the relevant Governmental Authority in accordance with Applicable Law, or at the option of the Administrative Agent timely reimburse it for the payment of, any Other Taxes.

2.19.4 Indemnification by the Borrower . The Borrower shall indemnify each Recipient, within 10 days after demand therefor, for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 2.19 ) payable or paid by such Recipient or required to be withheld or deducted from a payment to such Recipient and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to the Borrower by a Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.

imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by the Administrative Agent to the Lender from any other source against any amount due to the Administrative Agent under this Section 2.19.5 .

2.19.6 Evidence of Payments . As soon as practicable after any payment of Taxes by the Borrower to a Governmental Authority pursuant to this Section 2.19 , the Borrower shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Administrative Agent.

2.19.7 Status of Lenders .

(i) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by Applicable Law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in clauses (ii)(a), (ii)(b) and (ii)(d) below) shall not be required if in the Lender’s reasonable judgment such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.

(ii) Without limiting the generality of the foregoing, in the event that the Borrower is a U.S. Borrower,

(a) any Lender that is a U.S. Person shall deliver to the Borrower and the Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed originals of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax;

(b) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), whichever of the following is applicable:

(1) in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the United States is a party (x) with respect to payments of interest under any Loan Document, executed originals of IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty and (y) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;

(2) executed originals of IRS Form W-8ECI;

(3) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (x) a certificate substantially in the form of Exhibit 2.19-A to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of the Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “ U.S. Tax Compliance Certificate ”) and (y) executed originals of IRS Form W-8BEN; or

(4) to the extent a Foreign Lender is not the beneficial owner, executed originals of IRS Form W-8IMY, accompanied by IRS Form W-8ECI, IRS Form W-8BEN, a U.S. Tax Compliance Certificate substantially in the form of Exhibit 2.19-B or Exhibit 2.19-C , IRS Form W-9, and/or other certification documents from each beneficial owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit 2.19-D on behalf of each such direct and indirect partner;

(c) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed originals of any other form prescribed by Applicable Law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by Applicable Law to permit the Borrower or the Administrative Agent to determine the withholding or deduction required to be made; and

law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by Applicable Law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so.

2.19.8 Treatment of Certain Refunds . If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 2.19 (including by the payment of additional amounts pursuant to this Section 2.19 ), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this Section 2.19.8 (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this Section 2.19.8 , in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this Section 2.19.8 the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the indemnification payments or additional amounts giving rise to such refund had never been paid. This paragraph shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.

2.19.9 Survival . Each party’s obligations under this Section 2.19 shall survive the resignation or replacement of the Administrative Agent or any assignment of rights by, or the replacement of, a Lender, the termination of the Commitments and the repayment, satisfaction or discharge of all obligations under any Loan Document.

any LIBOR Rate Loan occurs on a date other than the last day of an Interest Period applicable thereto (including as a consequence of any assignment made pursuant to Section 2.21.1 or any acceleration of the maturity of the Loans pursuant to ARTICLE VIII) , (iii) if any prepayment of any LIBOR Rate Loan is not made on any date specified in a notice of prepayment given by the Borrower or (iv) as a consequence of any other failure by the Borrower to make any payments with respect to any LIBOR Rate Loan when due hereunder. Calculation of all amounts payable to a Lender under this Section 2.20 shall be made as though such Lender had actually funded its relevant LIBOR Rate Loan through the purchase of a eurodollar deposit bearing interest at the LIBOR Rate in an amount equal to the amount of such LIBOR Rate Loan, having a maturity comparable to the relevant Interest Period; provided , however , that each Lender may fund its LIBOR Rate Loans in any manner it sees fit and the foregoing assumption shall be utilized only for the calculation of amounts payable under this Section 2.20 . A certificate (which shall be in reasonable detail) showing the bases for the determinations set forth in this Section 2.20 by any Lender as to any additional amounts payable pursuant to this Section 2.20 shall be submitted by such Lender to the Borrower either directly or through the Administrative Agent. Determinations set forth in any such certificate made in good faith for purposes of this Section 2.20 of any such losses, expenses or liabilities shall be conclusive absent manifest error.

2.21 Mitigation Obligations; Replacement of Lenders .

2.21.1 If any Lender requests compensation under Section 2.18 , or requires the Borrower to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant to Section 2.19 , then such Lender shall (at the request of the Borrower) use reasonable efforts to designate a different Lending Installation for funding or booking its Loans hereunder or to assign its rights and obligations hereunder to another of its offices, branches or affiliates, if, in the judgment of such Lender, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Sections 2.18 or 2.19 , as the case may be, in the future, and (ii) would not subject such Lender to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Lender. The Borrower hereby agrees to pay all reasonable costs and expenses incurred by any Lender in connection with any such designation or assignment.

2.21.2 If any Lender requests compensation under Section 2.18 , or if the Borrower is required to pay any Indemnified Taxes or additional amounts to any Lender or any Governmental Authority for the account of any Lender pursuant Section 2.19 and, in each case, such Lender has declined or is unable to designate a different Lending Installation in accordance with Section 2.21.1 , or if any Lender is a Defaulting Lender or a Non-Consenting Lender, then the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 12.3 ), all of its interests, rights (other than its existing rights to payments pursuant to Section 2.18 or 2.19 ) and obligations under this Agreement and the related Loan Documents to an Eligible Assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that :

(i) the Borrower shall have paid to the Administrative Agent the assignment fee (if any) specified in Section 12.3.2 ;

(ii) such Lender shall have received payment of an amount equal to the outstanding principal of its Loans and any funded participations in Letters of Credit not refinanced through the Borrowing of Revolving Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder and under the other Loan Documents (including any amounts under Section 2.20 ) from the assignee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts);

(iii) in the case of any such assignment resulting from a request for compensation under Section 2.18 or payments required to be made pursuant to Section 2.19 , such assignment will result in a reduction in such compensation or payments thereafter;

(iv) such assignment does not conflict with Applicable Law; and

(v) in the case of any assignment resulting from a Lender becoming a Non-Consenting Lender, the applicable assignee shall have consented to the applicable amendment, waiver or consent.

A Lender shall not be required to make any such assignment or delegation if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to require such assignment and delegation cease to apply.

2.22 Defaulting Lenders .

2.22.1 Defaulting Lender Adjustments . Notwithstanding anything to the contrary contained in this Agreement, if any Lender becomes a Defaulting Lender, then, until such time as such Lender is no longer a Defaulting Lender, to the extent permitted by Applicable Law:

(i) Waivers and Amendments . Such Defaulting Lender’s right to approve or disapprove any amendment, waiver or consent with respect to this Agreement shall be restricted as set forth in the definition of “Required Lenders” and in Section 8.2 .

(ii) Defaulting Lender Waterfall . Any payment of principal, interest, fees or other amounts received by the Administrative Agent for the account of such Defaulting Lender (whether voluntary or mandatory, at maturity, pursuant to or ARTICLE VII otherwise) or received by the Administrative Agent from a Defaulting Lender pursuant to ARTICLE XI shall be applied at such time or times as may be determined by the Administrative Agent as follows:

(a) first , to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder;

(b) second , to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to any Issuing Bank or the Swingline Lender hereunder;

(c) third , if so determined by the Administrative Agent or requested by any Issuing Bank or the Swingline Lender, to be held as Cash Collateral for future funding obligations of such Defaulting Lender in respect of any participation in any Letter of Credit or Swingline Loan;

(d) fourth , as the Borrower may request (so long as no Unmatured Default or Event of Default exists), to the funding of any Loan in respect of which such Defaulting Lender has failed to fund its portion thereof as required by this Agreement, as determined by the Administrative Agent;

(e) fifth , if so determined by the Administrative Agent and the Borrower, to be held in a non-interest bearing deposit account and released in order to satisfy obligations of such Defaulting Lender to fund Loans under this Agreement;

(f) sixth , to the payment of any amounts owing to the Lenders, the Issuing Banks or the Swingline Lender as a result of any judgment of a court of competent jurisdiction obtained by any Lender, any Issuing Bank or the Swingline Lender against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement;

(g) seventh , so long as no Unmatured Default or Event of Default exists, to the payment of any amounts owing to the Borrower as a result of any judgment of a court of competent jurisdiction obtained by the Borrower against such Defaulting Lender as a result of such Defaulting Lender’s breach of its obligations under this Agreement; and

(h) eighth , to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction;

provided that if (x) such payment is a payment of the principal amount of any Loans or any Letter of Credit Exposure in respect of which such Defaulting Lender has not fully funded its appropriate share, and (y) such Loans were made or the related Letters of Credit were issued at a time when the conditions set forth in Section 4.2 were satisfied or waived, such payment shall be applied solely to pay the Loans of, and obligations in respect of Letters of Credit owed to, all non-Defaulting Lenders on a pro rata basis prior to being applied to the payment of any Loans of, or obligations in respect of Letters of Credit owed to, such Defaulting Lender. Any payments, prepayments or other amounts paid or payable to a Defaulting Lender that are applied (or held) to pay amounts owed by a Defaulting Lender or to post Cash Collateral pursuant to this Section 2.22.1(ii) shall be deemed paid to and redirected by such Defaulting Lender, and each Lender irrevocably consents hereto.

(iii) Any Defaulting Lender shall be entitled to receive any Facility Fee for any period during which such Lender is a Defaulting Lender only to the extent allocable to the sum of (1) the outstanding amount of the Revolving Loans funded by it and (2) its Letter of Credit Exposure and Swingline Exposure for which it has provided Cash Collateral pursuant to Section 2.22.3 (and the Borrower shall (A) be required to pay the applicable Issuing Bank and the Swingline Lender the amount of such fee allocable to its Fronting Exposure arising from such Defaulting Lender and (B) not be required to pay the remaining amount of such fee that otherwise would have been required to have been paid to such Defaulting Lender).

Applicable Percentages (calculated without regard to such Defaulting Lender’s Commitment) but only to the extent that (x) no Unmatured Default or Event of Default shall have occurred and be continuing (and, unless the Borrower shall have otherwise notified the Administrative Agent at the time, the Borrower shall be deemed to have represented and warranted that such condition is satisfied at such time) and (y) such reallocation does not cause the Credit Exposure of any non-Defaulting Lender to exceed such non-Defaulting Lender’s Commitment.

(v) If the reallocation described in Section 2.22.1(iv) cannot, or can only partially, be effected, the Borrower shall, without prejudice to any right or remedy available to it hereunder or under law, within one Business Day following notice by the Administrative Agent, (x) first , prepay Swingline Loans in an amount equal to the Swingline Lenders’ Fronting Exposure and (y) second , Cash Collateralize each Issuing Banks’ Fronting Exposure in accordance with the procedures set forth in Section 2.22.3 .

2.22.2 If the Borrower, the Administrative Agent, the Issuing Banks and the Swingline Lender agree in writing in their sole discretion that a Defaulting Lender should no longer be deemed to be a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any Cash Collateral), such Lender will, to the extent applicable, purchase that portion of outstanding Loans of the other Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause the Revolving Loans and funded and unfunded participations in Letters of Credit and Swingline Loans to be held by the Lenders in accordance with their respective Applicable Percentages (without giving effect to Section 2.22.1(iv) ), whereupon such Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while such Lender was a Defaulting Lender; provided further that, except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from such Lender’s having been a Defaulting Lender.

2.22.3 At any time that there shall exist a Defaulting Lender, within one Business Day upon the request of the Administrative Agent, any Issuing Bank or the Swingline Lender, the Borrower shall deliver to the Administrative Agent Cash Collateral in an amount sufficient to cover all Fronting Exposure (after giving effect to Section 2.22.1(iv) and any Cash Collateral provided by the Defaulting Lender).

(i) All Cash Collateral (other than credit support not constituting funds subject to deposit) shall be maintained in blocked, non-interest bearing deposit accounts with the Administrative Agent. The Borrower, and to the extent provided by any Lender, such Lender, hereby grants to (and subjects to the control of) the Administrative Agent, for the benefit of the Administrative Agent, the Issuing Bank and the Lenders (including the Swingline Lender), and agrees to maintain, a first priority security interest in all such cash, deposit accounts and all balances therein, and all other property so provided as collateral pursuant hereto, and in all proceeds of the foregoing, all as security for the obligations to which such Cash Collateral may be applied pursuant to Section 2.22.3(ii) . If at any time the Administrative Agent determines that Cash Collateral is subject to any right or claim of any Person other than the Administrative

Agent as herein provided, or that the total amount of such Cash Collateral is less than the applicable Fronting Exposure and other obligations secured thereby, the Borrower or the relevant Defaulting Lender will, promptly upon demand by the Administrative Agent, pay or provide to the Administrative Agent additional Cash Collateral in an amount sufficient to eliminate such deficiency.

(ii) Notwithstanding anything to the contrary contained in this Agreement, Cash Collateral provided under this Section 2.22 in respect of Letters of Credit shall be held and applied to the satisfaction of the specific Letter of Credit Exposure, obligations to fund participations therein (including, as to Cash Collateral provided by a Defaulting Lender, any interest accrued on such obligation) and other obligations for which the Cash Collateral was so provided, prior to any other application of such Cash Collateral as may be provided for herein.

(iii) Cash Collateral (or the appropriate portion thereof) provided to reduce any Issuing Bank’s Fronting Exposure shall no longer be required to be held as Cash Collateral pursuant to this Section following (A) the elimination of the applicable Fronting Exposure (including by the termination of Defaulting Lender status of the applicable Lender), or (B) the determination by the Administrative Agent and each Issuing Bank that there exists excess Cash Collateral; provided that, subject to this Section 2.22 the Person providing Cash Collateral and each Issuing Bank may agree that Cash Collateral shall be held to support future anticipated Fronting Exposure or other obligations and provided further that to the extent that such Cash Collateral was provided by the Borrower, such Cash Collateral shall remain subject to the security interest granted pursuant to the Loan Documents.

2.22.4 So long as any Lender is a Defaulting Lender, (i) the Swingline Lender shall not be required to fund any Swingline Loans unless it is satisfied that it will have no Fronting Exposure after giving effect to such Swingline Loan and (ii) no Issuing Bank shall be required to issue, extend, renew or increase any Letter of Credit unless it is satisfied that it will have no Fronting Exposure after giving effect thereto.

ARTICLE III

LETTERS OF CREDIT

3.1 Issuance . Subject to and upon the terms and conditions herein set forth, so long as no Unmatured Default or Event of Default has occurred and is continuing, each Issuing Bank will, at any time and from time to time on and after the Agreement Date and prior to the earlier of (i) the Letter of Credit Maturity Date and (ii) the Repayment Date, and upon request by the Borrower in accordance with the provisions of Section 3.1 , issue for the account of the Borrower one or more irrevocable standby letters of credit denominated in Dollars and in a form customarily used or otherwise approved by such Issuing Bank (together with all amendments, modifications and supplements thereto, substitutions therefor and renewals and restatements thereof, collectively, the “ Letters of Credit ”). The Stated Amount of each Letter of Credit shall not be less than such amount as may be acceptable to the applicable Issuing Bank. Notwithstanding the foregoing:

3.1.1 No Letter of Credit shall be issued if, after giving effect to such issuance, (i) the Stated Amount when added to the aggregate Letter of Credit Exposure of the Lenders at such time, would exceed the Letter of Credit Subcommitment, (ii) the Stated Amount when added to the aggregate outstanding Credit Exposure, would exceed the Aggregate Commitments at such time, and (iii) any Lender is at that time a Defaulting Lender, unless the applicable Issuing Bank has entered into an arrangement, including the delivery of Cash Collateral, satisfactory to such Issuing Bank (in its sole discretion) with the Borrower or such Lender to eliminate such Issuing Bank’s actual or potential Fronting Exposure (after giving effect to Section 2.22.1(iv) ) with respect to the Defaulting Lender arising from either the Letter of Credit then proposed to be issued or that Letter of Credit and all other Letter of Credit Exposure as to which such Issuing Bank has actual or potential Fronting Exposure, as it may elect in its sole discretion;

3.1.2 No Letter of Credit shall be issued that by its terms expires later than the Letter of Credit Maturity Date or, in any event, more than one year after its date of issuance; provided , however , that a Letter of Credit may, if requested by the Borrower, provide by its terms, and on terms acceptable to the applicable Issuing Bank, for renewal for successive periods of one year or less (but not beyond the Letter of Credit Maturity Date), unless and until the applicable Issuing Bank shall have delivered a notice of nonrenewal to the beneficiary of such Letter of Credit;

3.1.3 No Issuing Bank shall be under any obligation to issue any Letter of Credit if, at the time of such proposed issuance, (i) any order, judgment or decree of any Governmental Authority or arbitrator shall purport by its terms to enjoin or restrain such Issuing Bank from issuing such Letter of Credit, or any Applicable Law or any request or directive (whether or not having the force of law) from any Governmental Authority with jurisdiction over such Issuing Bank shall prohibit, or request that such Issuing Bank refrain from, the issuance of letters of credit generally or such Letter of Credit in particular or shall impose upon such Issuing Bank with respect to such Letter of Credit any restriction or reserve or capital requirement (for which such Issuing Bank is not otherwise compensated) not in effect on the Agreement Date, or any unreimbursed loss, cost or expense that was not applicable, in effect or known to such Issuing Bank as of the Agreement Date and that the Issuing Bank in good faith deems material to it, (ii) such Issuing Bank shall have actual knowledge, or shall have received notice from any Lender, prior to the issuance of such Letter of Credit that one or more of the conditions specified in Section 4.1 (if applicable) or Section 4.2 are not then satisfied (or have not been waived in writing as required herein) or that the issuance of such Letter of Credit would violate the provisions of Section 3.1.1 , or (iii) the issuance of such Letter of Credit would violate one or more written policies of such Issuing Bank applicable to letters of credit generally; and

3.1.4 Unless otherwise expressly agreed by the applicable Issuing Bank and the Borrower when a Letter of Credit is issued and subject to applicable laws, performance under Letters of Credit by the applicable Issuing Bank, its correspondents, and the beneficiaries thereof will be governed by the rules of the “International Standby Practices 1998” (or such later revision as may be published by the Institute of International Banking Law & Practice on any date any Letter of Credit may be issued) and to the extent not inconsistent therewith, the governing law of this Agreement.

3.2 Notices . Whenever the Borrower desires the issuance of a Letter of Credit, the Borrower will give the applicable Issuing Bank written notice with a copy to the Administrative Agent not later than 11:00 a.m. three Business Days (or such shorter period as is acceptable to the Issuing Bank in any given case) prior to the requested date of issuance thereof. Each such notice (each, a “ Letter of Credit Notice ”) shall be irrevocable, shall be given in the form of Exhibit 3.2 and shall specify (i) the requested date of issuance, which shall be a Business Day, (ii) the requested Stated Amount and expiry date of the Letter of Credit, and (iii) the name and address of the requested beneficiary or beneficiaries of the Letter of Credit. The Borrower will also complete any application procedures and documents reasonably required by the applicable Issuing Bank in connection with the issuance of any Letter of Credit. Upon its issuance of any Letter of Credit, the applicable Issuing Bank will promptly notify the Administrative Agent of such issuance, and the Administrative Agent will give prompt notice thereof to each Lender. The renewal or extension of any outstanding Letter of Credit shall, for purposes of this Article III, be treated in all respects as the issuance of a new Letter of Credit.

3.3 Participations . Immediately upon the issuance of any Letter of Credit, the Issuing Bank shall be deemed to have sold and transferred to each Lender, and each Lender shall be deemed irrevocably and unconditionally to have purchased and received from the Issuing Bank, without recourse or warranty, an undivided interest and participation, of its Applicable Percentage of such Letter of Credit, each drawing made thereunder and the obligations of the Borrower under this Agreement with respect thereto and any Collateral or other security therefor or guaranty pertaining thereto; provided , however , that the LC Fee shall be payable directly to the Issuing Bank as provided therein, and the other Lenders shall have no right to receive any portion thereof. In consideration and in furtherance of the foregoing, each Lender hereby absolutely and unconditionally agrees to pay to the Administrative Agent, for the account of the Issuing Bank, such Lender’s Applicable Percentage of each Reimbursement Obligation not reimbursed by the Borrower on the date due as provided in Section 3.4 or through the Borrowing of Revolving Loans as provided in Section 3.5 (because the conditions set forth in Section 4.2 cannot be satisfied, or for any other reason), or of any reimbursement payment required to be refunded to the Borrower for any reason. Upon any change in the Commitments of any of the Lenders pursuant to Section 2.5.2 or Section 12.3 , with respect to all outstanding Letters of Credit and Reimbursement Obligations there shall be an automatic adjustment to the participations pursuant to this Section 3.3 to reflect the new Applicable Percentages of the assigning Lender and the assignee. Each Lender’s obligation to make payment to the Issuing Banks pursuant to this Section 3.3 shall be absolute and unconditional and shall not be affected by any circumstance whatsoever, including the termination of the Commitments or the existence of any Unmatured Default or Event of Default, and each such payment shall be made without any offset, abatement, reduction or withholding whatsoever.

satisfied pursuant to a borrowing of Revolving Loans made on the date of such payment by the Issuing Bank, as set forth more completely in Section 3.5 ), together with interest on the amount so paid by such Issuing Bank, to the extent not reimbursed prior to 2:00 p.m. on the Honor Date, for the period from the Honor Date to the date the Reimbursement Obligation created thereby is satisfied, at the Alternate Base Rate plus the Applicable Margin plus 2% per annum as in effect from time to time during such period, such interest also to be payable on demand. Each Issuing Bank will provide the Administrative Agent and the Borrower with prompt notice of any payment or disbursement made or to be made under any Letter of Credit issued by it, although the failure to give, or any delay in giving, any such notice shall not release, diminish or otherwise affect the Borrower’s obligations under this Section 3.4 or any other provision of this Agreement. The Administrative Agent will promptly pay to the applicable Issuing Bank any such amounts received by it under this Section 3.4 .

3.5 Payment by Revolving Loans .

3.5.1 In the event that any Issuing Bank makes any payment under any Letter of Credit and the Borrower shall not have timely satisfied in full its Reimbursement Obligation to such Issuing Bank pursuant to Section 3.4 , the Borrower shall be deemed to have requested a Borrowing of Base Rate Loans to be disbursed on the Honor Date in an amount equal to the Reimbursement Obligation (the “ Unreimbursed Amount ”), without regard to the minimum and multiples for the principal amount of Base Rate Loans, but subject to the amount of the unutilized portion of the Aggregate Commitments and the conditions set forth in Section 4.2 (other than the delivery of a Notice of Borrowing). Any notice given by the applicable Issuing Bank or the Administrative Agent pursuant to this Section 3.5.1 may be given by telephone if immediately confirmed in writing; provided that the lack of such an immediate confirmation shall not affect the conclusiveness or binding effect of such notice.

3.5.2 Each Lender shall upon any notice pursuant to Section 3.5.1 make funds available (and the Administrative Agent may apply Cash Collateral provided for this purpose) for the account of the applicable Issuing Bank in an amount equal to its Applicable Percentage of the Unreimbursed Amount not later than 1:00 p.m. on the Business Day specified in such notice by the Administrative Agent, whereupon, subject to the provisions of Section 3.5.3 , each Lender that so makes funds available shall be deemed to have made a Base Rate Loan to the Borrower in such amount. The Administrative Agent shall remit the funds so received to the applicable Issuing Bank.

3.5.3 With respect to any Unreimbursed Amount that is not fully refinanced by a borrowing of Base Rate Loans because the conditions set forth in Section 4.2 cannot be satisfied or for any other reason, each Lender shall fund its risk participation in such Letter of Credit in the amount of its Applicable Percentage of the Unreimbursed Amount that is not so refinanced, which funded risk participation shall be due and payable on demand (together with interest) and shall bear interest at the Overdue Rate.

3.5.4 Until each Lender funds its Base Rate Loan or risk participation pursuant to this Section 3.5 to reimburse the applicable Issuing Bank for any amount drawn under any Letter of Credit, interest in respect of such Lender’s Applicable Percentage of such amount shall be solely for the account of the applicable Issuing Bank.

3.5.5 Each Lender’s obligation to make Base Rate Loans or to fund its risk participation to reimburse the applicable Issuing Bank for amounts drawn under Letters of Credit, as contemplated by this Section 3.5 , shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right which such Lender may have against such Issuing Bank, the Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of an Unmatured Default or Event of Default, or (C) any other occurrence, event or condition, whether or not similar to any of the foregoing; provided , however , that each Lender’s obligation to make Base Rate Loans pursuant to this Section 3.5 is subject to the conditions set forth in Section 4.2 (other than delivery by the Borrower of a Notice of Borrowing). No such making of a Base Rate Loan or funding of risk participation shall relieve or otherwise impair the obligation of the Borrower to reimburse the applicable Issuing Bank for the amount of any payment made by such Issuing Bank under any Letter of Credit, together with interest as provided herein.

3.5.6 If any Lender fails to make available to the Administrative Agent for the account of the applicable Issuing Bank any amount required to be paid by such Lender pursuant to the foregoing provisions of this Section 3.5 by the time specified in Section 3.5.2 , then, without limiting the other provisions of this Agreement, the applicable Issuing Bank shall be entitled to recover from such Lender (acting through the Administrative Agent), on demand, such amount with interest thereon for the period from the date such payment is required to the date on which such payment is immediately available to such Issuing Bank at a rate per annum equal to the greater of the Federal Funds Rate and a rate determined by such Issuing Bank in accordance with banking industry rules on interbank compensation, plus any administrative, processing or similar fees customarily charged by such Issuing Bank in connection with the foregoing. If such Lender pays such amount (with interest and fees as aforesaid), the amount so paid shall constitute such Lender’s Base Rate Loan included in the relevant borrowing or funded risk participation, as the case may be. A certificate of the applicable Issuing Bank submitted to any Lender (through the Administrative Agent) with respect to any amounts owing under this Section 3.5.6 shall be conclusive absent manifest error.

3.6 Payment to Lenders . Whenever any Issuing Bank receives a payment in respect of a Reimbursement Obligation as to which the Administrative Agent has received, for the account of such Issuing Bank, any payments from the Lenders pursuant to Section 3.5 , such Issuing Bank will promptly pay to the Administrative Agent, and the Administrative Agent will promptly pay to each Lender that has paid its ratable share thereof, in immediately available funds, an amount equal to such Lender’s ratable share (based on the proportionate amount funded by such Lender to the aggregate amount funded by all Lenders) of such Reimbursement Obligation.

3.7 Obligations Absolute . The Reimbursement Obligations of the Borrower shall be irrevocable, shall remain in effect until the Issuing Banks shall have no further obligations to make any payments or disbursements under any circumstances with respect to any Letter of Credit, and shall be absolute and unconditional, shall not be subject to counterclaim, setoff or other defense or any other qualification or exception whatsoever and shall be made in accordance with the terms and conditions of this Agreement under all circumstances, including, without limitation, any of the following circumstances:

3.7.1 Any lack of validity or enforceability of this Agreement, any of the other Loan Documents or any documents or instruments relating to any Letter of Credit;

3.7.2 Any change in the time, manner or place of payment of, or in any other term of, all or any of the Obligations in respect of any Letter of Credit or any other amendment, modification or waiver of or any consent to departure from any Letter of Credit or any documents or instruments relating thereto, in each case whether or not the Borrower has notice or knowledge thereof;

3.7.3 The existence of any claim, setoff, defense or other right that the Borrower may have at any time against a beneficiary named in a Letter of Credit, any transferee of any Letter of Credit (or any Person for whom any such transferee may be acting), the Administrative Agent, any Issuing Bank, any Lender or other Person, whether in connection with this Agreement, any Letter of Credit, the transactions contemplated hereby or any unrelated transactions (including any underlying transaction between the Borrower and the beneficiary named in any such Letter of Credit);

3.7.4 Any draft, certificate or any other document presented under the Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect (provided that such draft, certificate or other document appears on its face to comply with the terms of such Letter of Credit), any errors, omissions, interruptions or delays in transmission or delivery of any messages, by mail, facsimile or otherwise, or any errors in translation or in interpretation of technical terms;

3.7.5 Any defense based upon the failure of any drawing under a Letter of Credit to conform to the terms of the Letter of Credit (provided that any draft, certificate or other document presented pursuant to such Letter of Credit appears on its face to comply with the terms thereof), any nonapplication or misapplication by the beneficiary or any transferee of the proceeds of such drawing or any other act or omission of such beneficiary or transferee in connection with such Letter of Credit;

3.7.6 The exchange, release, surrender or impairment of any collateral or other security for the Obligations;

3.7.7 The occurrence of any Unmatured Default or Event of Default; or

3.7.8 Any other circumstance or event whatsoever, including, without limitation, any other circumstance that might otherwise constitute a defense available to, or a discharge of, the Borrower or a guarantor.

(ii) such Issuing Bank’s exclusive reliance on the documents presented to it under such Letter of Credit as to any and all matters set forth therein, including the amount of any draft presented under such Letter of Credit, whether or not the amount due to the beneficiary thereunder equals the amount of such draft and whether or not any document presented pursuant to such Letter of Credit proves to be insufficient in any respect (so long as such document appears on its face to comply with the terms of such Letter of Credit), and whether or not any other statement or any other document presented pursuant to such Letter of Credit proves to be forged or invalid or any statement therein proves to be inaccurate or untrue in any respect whatsoever, and (iii) any noncompliance in any immaterial respect of the documents presented under such Letter of Credit with the terms thereof shall, in each case, be deemed not to constitute gross negligence or willful misconduct of such Issuing Bank.

3.8 Cash Collateral Account . At any time and from time to time (i) after the occurrence and during the continuance of an Event of Default, the Administrative Agent may, and at the direction or with the consent of the Required Lenders shall, require the Borrower to deliver to the Administrative Agent such additional amount of cash as is equal to 102% of the aggregate Stated Amount of all Letters of Credit at any time outstanding (whether or not any beneficiary under any Letter of Credit shall have drawn or be entitled at such time to draw thereunder) and (ii) in the event of a prepayment under Section 2.5.1 , the Administrative Agent will retain such amount as may then be required to be retained, such amounts in each case under clauses (i) and (ii) above to be held by the Administrative Agent in a cash collateral account (the “ Cash Collateral Account ”). The Borrower hereby grants to the Administrative Agent, for the benefit of the Issuing Bank and the Lenders, a Lien upon and security interest in the Cash Collateral Account and all amounts held therein from time to time as security for Letter of Credit Exposure, and for application to the Borrower’s Reimbursement Obligations as and when the same shall arise. The Administrative Agent shall have exclusive dominion and control, including the exclusive right of withdrawal, over such account. Other than any interest on the investment of such amounts in Cash Equivalents, which investments shall be made at the direction of the Borrower (unless an Unmatured Default or Event of Default shall have occurred and be continuing, in which case the determination as to investments shall be made at the option and in the discretion of the Administrative Agent), amounts in the Cash Collateral Account shall not bear interest. Interest and profits, if any, on such investments shall accumulate in such account. In the event of a drawing, and subsequent payment by any Issuing Bank, under any Letter of Credit at any time during which any amounts are held in the Cash Collateral Account, the Administrative Agent will deliver to such Issuing Bank an amount equal to the Reimbursement Obligation created as a result of such payment (or, if the amounts so held are less than such Reimbursement Obligation, all of such amounts) to reimburse such Issuing Bank therefor. Any amounts remaining in the Cash Collateral Account (including interest) after the expiration of all Letters of Credit and reimbursement in full of the Issuing Banks for all of its obligations thereunder shall be held by the Administrative Agent, for the benefit of the Borrower, to be applied against the Obligations in such order and manner as the Administrative Agent may direct.

in connection with Letters of Credit issued by it or proposed to be issued by it and any documents pertaining to such Letters of Credit as fully as if the term “Administrative Agent” as used in ARTICLE X included the Issuing Banks with respect to such acts or omissions, and (b) as additionally provided herein with respect to the Issuing Banks.

3.10 Effectiveness . Notwithstanding any termination of the Commitments or repayment of the Loans, or both, the obligations of the Borrower under this ARTICLE III shall remain in full force and effect until the Issuing Banks and the Lenders shall have no further obligations to make any payments or disbursements under any circumstances with respect to any Letter of Credit.

ARTICLE IV

CONDITIONS PRECEDENT

4.1 Conditions to Agreement Date . The obligation of each Lender to make Loans and the obligation of the Issuing Banks to issue Letters of Credit hereunder on the Agreement Date, is subject to the satisfaction of the following conditions precedent:

(a) The Administrative Agent shall have received the following, each dated as of the Agreement Date (unless otherwise specified) and in such number of copies as the Administrative Agent shall have requested:

(1) Fully executed counterparts of this Agreement from the Borrower, each Lender, the Issuing Bank, the Swingline Lender and the Administrative Agent.

(2) Copies of the articles or certificate of incorporation of the Borrower, together with all amendments thereto, and a certificate of good standing, each certified by the appropriate governmental officer in its jurisdictions of incorporation.

(3) Copies, certified by the Secretary or Assistant Secretary of the Borrower, of its by-laws and of its Board of Directors’ resolutions and of resolutions or actions of any other body authorizing (i) the execution of the Loan Documents to which the Borrower is a party and (ii) borrowings hereunder by the Borrower in an aggregate amount up to $450,000,000.

(4) An incumbency certificate, executed by the Secretary or Assistant Secretary of the Borrower, which shall identify by name and title and bear the signatures of the Authorized Officers and any other officers of the Borrower authorized to sign the Loan Documents, upon which certificate the Administrative Agent and the Lenders shall be entitled to rely until informed of any change in writing by the Borrower.

(5) A certificate, signed by the chief financial officer of the Borrower, stating that the conditions specified in Section 4.2(b) and (c) have been satisfied.

(6) A written opinion of the Borrower’s counsel, addressed to the Lenders substantially in the form of Exhibit 4.1(a)(6) .

(7) Any Notes requested by a Lender pursuant to Section 2.11 payable to the order of each such requesting Lender.

(8) Evidence that the Existing Credit Agreement has been or concurrently with the Agreement Date is being terminated.

(9) Evidence satisfactory to the Administrative Agent of any required Governmental Approvals or consents regarding this Agreement.

(b) The Borrower shall have paid (i) to the Arrangers, the fees required under the Fee Letters to be paid to them on the Agreement Date, (ii) to the Administrative Agent, the initial payment of the annual administrative fee described in the Administrative Fee Letter, and (iii) all other fees and reasonable expenses of the Arrangers, the Administrative Agent and the Lenders required hereunder or under any other Loan Document to be paid on or prior to the Agreement Date (including reasonable fees and expenses of counsel) in connection with this Agreement and the other Loan Documents.

Without limiting the generality of the provisions of the last paragraph of Section 10.3 , for purposes of determining compliance with the conditions specified in this Section 4.1 , each Lender that has signed this Agreement shall be deemed to have consented to, approved or accepted or to be satisfied with, each document or other matter required thereunder to be consented to or approved by or acceptable or satisfactory to a Lender unless the Administrative Agent shall have received notice from such Lender prior to the proposed Agreement Date specifying its objection thereto.

4.2 Conditions to All Credit Extensions . The Lenders shall not be required to make any Loan, including the initial Loan, and no Issuing Bank shall be required to issue any Letter of Credit, unless on the applicable date of the requested extension of credit:

(a) The Borrower shall have furnished to the Administrative Agent, with sufficient copies for each Lender, a certificate dated such date of the requested extension of credit and signed by an Authorized Officer of the Borrower, stating that after taking in account the making of such Loan or issuance of such Letter of Credit, and the repayment of any outstanding obligations of the Borrower with respect to commercial paper with the proceeds of such Loan, if applicable, the Borrower will not have exceeded the maximum aggregate principal amount that the Borrower is entitled to borrow from financial institutions or receive from the sale of commercial paper under Board of Directors’ resolutions of the Borrower.

(b) There exists no Event of Default or Unmatured Default.

of such date of the requested extension of credit except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty shall have been true and correct on and as of such earlier date.

(d) All legal matters incident to such extension of credit shall be satisfactory to the Lenders and their counsel (including, without limitation, evidence satisfactory to the Administrative Agent of any required Governmental Approvals or consents regarding such extension of credit).

Each request for an extension of credit shall constitute a representation and warranty by the Borrower that the conditions contained in Sections 4.2(a), (b) and (c) have been satisfied. Any Lender may require a duly completed compliance certificate in substantially the form of Exhibit 4.2 (a “ Compliance Certificate ”) as a condition to making a Loan.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants to the Lenders that:

5.1 Corporate Existence . Each of the Borrower and its Material Subsidiaries: (a) is a corporation duly organized and validly existing under the laws of the jurisdiction of its incorporation; (b) has all requisite corporate power, and has all material governmental licenses, authorizations, consents and approvals, necessary to own its assets and carry on its business as now being or as proposed to be conducted; and (c) is qualified to do business in all jurisdictions in which the nature of the business conducted by it makes such qualification necessary and where failure so to qualify would have a Material Adverse Effect.

5.2 Financial Condition .

(a) The consolidated balance sheet and statement of consolidated capitalization of the Borrower and its consolidated Subsidiaries, if any, as at September 30, 2011 and the related consolidated statements of income, cash flows, common stockholders’ equity and income taxes of the Borrower and its consolidated Subsidiaries, if any, for the fiscal year ended on September 30, 2011, with the opinion thereon of Deloitte & Touche LLP, and the unaudited consolidated balance sheet of the Borrower and its consolidated Subsidiaries, if any, as at December 31, 2011 and the related consolidated statements of income and cash flows of the Borrower and its consolidated Subsidiaries, if any, for the applicable three-month period ended on such date, heretofore furnished to each of the Lenders are complete and correct and fairly present the consolidated financial condition of the Borrower and its consolidated Subsidiaries, if any, as at said date and the results of their operations for the fiscal year and the applicable three-month period ended on said dates (subject, in the case of financial statements as at December 31, 2011 to normal year-end audit adjustments), all in accordance with GAAP and practices applied on a consistent basis. Neither the Borrower nor any of its Material Subsidiaries had on said dates any material contingent liabilities, liabilities for taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments, except as referred to or reflected or provided for in said balance sheets as at said dates.

(b) Since September 30, 2011, there has been no material adverse change in the consolidated financial condition or operations, or the prospects or business taken as a whole, of the Borrower and its consolidated Subsidiaries, if any, from that set forth in said financial statements as at said date.

5.3 Litigation . Other than as set out in Schedule 5.3 hereto, there are no legal or arbitral proceedings or any proceedings by or before any Governmental Authority, now pending or (to the knowledge of the Borrower) threatened against the Borrower or any of its Material Subsidiaries as to which there is a reasonable possibility of an adverse determination and which, if adversely determined, could have a Material Adverse Effect during the term of this Agreement.

5.4 No Breach . None of the execution and delivery of this Agreement and the Notes, the consummation of the transactions herein contemplated and compliance with the terms and provisions hereof will conflict with or result in a breach of, or require any consent under, the charter or by-laws of the Borrower, or any Applicable Law or regulation, or any order, writ, injunction or decree of any court or governmental authority or agency, or any agreement or instrument to which the Borrower or its Material Subsidiaries is a party or by which it is bound or to which it is subject or which is applicable to it, or constitute a default under any such agreement or instrument, or result in the creation or imposition of any Lien upon any of the revenues or assets of the Borrower or any of its Material Subsidiaries pursuant to the terms of any such agreement or instrument.

5.5 Corporate Action . The Borrower has all necessary corporate power and authority to execute, deliver and perform its obligations under this Agreement and the Notes and to consummate the transactions herein contemplated, and the execution, delivery and performance of this Agreement and the Notes, and the consummation of the transactions herein contemplated, by the Borrower have been duly authorized by all necessary corporate action on its part; and this Agreement has been duly and validly executed and delivered by the Borrower and constitutes, and each of the Notes when executed and delivered for value will constitute, its legal, valid and binding obligation, enforceable in accordance with its terms.

5.6 Regulatory Approval . No consent, approval, authorization or other action by, notice to, or registration or filing with, any Governmental Authority or other Person is or will be required as a condition to or otherwise in connection with the due execution, delivery and performance by the Borrower of this Agreement or any of the other Loan Documents to which it is or will be a party or the legality, validity or enforceability hereof or thereof, other than consents, authorizations and filings that have been (or on or prior to the Agreement Date will have been) made or obtained and that are (or on the Agreement Date will be) in full force and effect, which consents, authorizations and filings are listed on Schedule 5.6 .

or X, or any official rulings on or interpretations of such regulations. Terms for which meanings are provided in Regulation U or Regulation X or any regulations substituted therefor, as from time to time in effect, are used in this Section 5.7 with such meanings.

5.8 Pension and Welfare Plans . The Borrower is in compliance with the applicable provisions of ERISA. During the twelve consecutive-month period prior to the date of the execution and delivery of this Agreement and prior to the date of any borrowing hereunder, no steps have been taken to terminate or completely or partially withdraw from any Pension Plan, and no contribution failure has occurred with respect to any Pension Plan sufficient to give rise to a Lien under section 302 (f) of ERISA. No condition exists or event or transaction has occurred with respect to any Pension Plan which might result in the incurrence by the Borrower or any member of the Controlled Group of any material liability, fine or penalty or which could reasonably be expected to have a Material Adverse Effect. Except as disclosed in Schedule 5.8 (“ Employee Benefit Plans ”), neither the Borrower nor any member of the Controlled Group has any contingent liability with respect to any post-retirement benefit under a Welfare Plan, other than liability for continuation coverage described in Part 6 of Title I of ERISA.

5.9 Accuracy of Information . All factual information heretofore or contemporaneously furnished by or on behalf of the Borrower in writing to the Administrative Agent or any Lender for purposes of or in connection with this Agreement or any transaction contemplated hereby is, and all other such factual information hereafter furnished by or on behalf of the Borrower to the Administrative Agent or any Lender will be, true and accurate in every material respect on the date as of which such information is dated or certified and as of the date of execution and delivery of this Agreement by the Administrative Agent and such Lender, and such information is not, or shall not be, as the case may be, incomplete by omitting to state any material fact necessary to make such information not misleading.

5.10 Taxes . United States Federal income tax returns of the Utility and those of its Subsidiaries that have filed their returns on a consolidated basis with the Utility have been examined and/or closed through the fiscal year of the Utility ended September 30, 2011. The Borrower and its Subsidiaries have filed all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by the Borrower or any of its Subsidiaries. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of taxes and other governmental charges are, in the opinion of the Borrower, adequate.

5.11 Environmental Warranties . Except as previously disclosed in the SEC Disclosure Documents or on Schedule 5.11 :

(a) all facilities and property (including underlying groundwater) owned, operated or leased by the Borrower or any of its Subsidiaries are in material compliance with all Environmental Laws, except for such instances of noncompliance as are unlikely, singly or in the aggregate, to have a Material Adverse Effect;

(b) there have been no past, and there are no pending or threatened:

(1) claims, complaints, notices or requests for information received by the Borrower or any of its Subsidiaries with respect to any alleged violation of any Environmental Law or,

(2) complaints, notices or inquiries to the Borrower or any of its Subsidiaries regarding potential liability under any Environmental Law;

except as are unlikely, singly or in the aggregate, to have a Material Adverse Effect;

(c) to the Borrower’s knowledge, there have been no Releases of Hazardous Materials at, on or under any property now or previously owned, operated or leased by the Borrower or any of its Subsidiaries that, singly or in the aggregate, are reasonably likely to have a Material Adverse Effect during the term of this Agreement;

(d) the Borrower and its Subsidiaries have been issued and are in material compliance with all permits, certificates, approvals, licenses and other authorizations relating to environmental matters and necessary for their businesses;

(e) no property now or previously owned, operated or leased by the Borrower or any of its Subsidiaries is listed or proposed for listing (with respect to owned property only) on the National Priorities List pursuant to CERCLA or on any similar state list of sites requiring investigation or cleanup;

(f) to the Borrower’s knowledge, there are no underground storage tanks, active or abandoned, including petroleum storage tanks, on or under any property now or previously owned, operated or leased by the Borrower or any of its Subsidiaries that, singly or in aggregate, could have a Material Adverse Effect during the term of this Agreement;

(g) to the Borrower’s knowledge, neither Borrower nor any of its Subsidiaries has directly transported or directly arranged for the transportation of any Hazardous Material to any location which is listed or proposed for listing on the National Priorities List pursuant to CERCLA, on the CERCLIS or on any similar state list or which is the subject of Federal, state or local enforcement actions or other investigations which may lead to material claims against the Borrower or such Subsidiary for any remedial work, damage to natural resources or personal injury, including claims under CERCLA that, singly or in the aggregate, are likely to have a Material Adverse Effect during the term of this Agreement;

(h) there are no polychlorinated biphenyls or friable asbestos present at any property now or previously owned, operated or leased by the Borrower or any of its Subsidiaries that, singly or in the aggregate, could have a Material Adverse Effect during the term of this Agreement; and

(i) no conditions exist at, on or under any property now or previously owned or leased by the Borrower or any of its Subsidiaries which, with the passage of time, or the giving of notice or both, would give rise to liability under any Environmental Law, which would have a Material Adverse Effect during the term of this Agreement.

5.12 Investment Company Act . Neither the Borrower nor any of its Subsidiaries is an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

5.13 Subsidiaries . Schedule 5.13 is a true and complete list of all Subsidiaries of the Borrower as of the Agreement Date.

5.14 OFAC; Anti-Terrorism Laws .

(a) Neither the Borrower nor any of it Subsidiaries (i) is a Sanctioned Person, (ii) has more than 10% of its assets in Sanctioned Countries, or (iii) derives more than 10% of its operating income from investments in, or transactions with, Sanctioned Persons or Sanctioned Countries. No part of the proceeds of any Loan hereunder will be used directly or indirectly to fund any operations in, finance any investments or activities in or make any payments to, a Sanctioned Person or a Sanctioned Country.

(b) Neither the making of the Loans hereunder nor the use of the proceeds thereof will violate the PATRIOT Act, the Trading with the Enemy Act, as amended, the Foreign Corrupt Practices Act or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto. The Credit Parties are in compliance in all material respects with the PATRIOT Act.

ARTICLE VI

COVENANTS

During the term of this Agreement, unless the Required Lenders shall otherwise consent in writing:

6.1 Financial Statements . The Borrower shall deliver to the Administrative Agent (and, in the case of clauses (e), (f) and (g) below, to each of the Lenders):

(a) as soon as available and in any event within 50 days after the end of each of the first three fiscal quarterly periods of each fiscal year of the Borrower, a consolidated statement of income of the Borrower and its consolidated Subsidiaries for such period and for the period from the beginning of the respective fiscal year to the end of such period, and a consolidated statement of cash flows for the period from the beginning of the respective fiscal year to the end of such period, the related consolidated balance sheet as at the end of such period, all in reasonable detail and prepared in accordance with GAAP (subject to the absence of notes required by GAAP and subject to normal year-end adjustments) applied on a basis consistent with that of the preceding quarter or containing disclosure of the effect on the financial condition or results of operations of any change in the application of accounting principles and practices during such quarter, accompanied by a certificate of a senior financial officer of the Borrower, which certificate shall state that said financial statements fairly present the consolidated financial condition and results of operations of the Borrower and its consolidated Subsidiaries in accordance with GAAP, consistently applied, as at the end of, and for, such period (subject to normal year-end audit adjustments);

(b) as soon as available and in any event within 95 days after the end of each fiscal year of the Borrower, consolidated statements of income, common stockholders’ equity, cash flows, and income taxes of the Borrower and its consolidated Subsidiaries for such year and the related consolidated balance sheet and statement of capitalization at the end of such year, setting forth in each case in comparative form the corresponding figures for the preceding fiscal year, all in reasonable detail and prepared in accordance with GAAP (subject to the absence of notes required by GAAP and subject to normal year-end adjustments) applied on a basis consistent with that of the preceding quarter or containing disclosure of the effect on the financial condition or results of operations of any change in the application of accounting principles and practices during such quarter, and accompanied by an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state, without material qualification, that said financial statements fairly present the consolidated financial position and results of operations and cash flows of the Borrower and its consolidated Subsidiaries as at the end of, and for, such fiscal year;

(c) promptly upon their becoming available, notification of the filing of all registration statements, regular periodic reports, if any, and SEC Disclosure Documents which the Borrower shall have filed with the Securities and Exchange Commission (or any governmental agency substituted therefor) or any national securities exchange;

(d) promptly upon the mailing thereof to the shareholders of the Borrower generally, copies, if not publicly available, or notification of mailing, of all financial statements, reports and proxy statements so mailed;

(e) promptly after the Borrower knows or has reason to know that any Event of Default or Unmatured Default has occurred, a notice of such Event of Default or Unmatured Default, describing the same in reasonable detail, and indicating what action is being undertaken with respect to such Event of Default or Unmatured Default;

(f) immediately upon becoming aware of the institution of any steps by the Borrower or any other Person to terminate any Pension Plan or the complete or partial withdrawal from any Pension Plan by the Borrower or any member of its Controlled Group, or the failure to make a required contribution to any Pension Plan if such failure is sufficient to give rise to a Lien under section 302(f) of ERISA, or the taking of any action with respect to a Pension Plan which could result in the requirement that the Borrower furnish a bond or other security to the PBGC or such Pension Plan, or the occurrence of any event with respect to any Pension Plan which could result in the incurrence by the Borrower of any material liability, fine or penalty, or any material increase in the contingent liability of the Borrower with respect to any post-retirement Welfare Plan benefit, notice thereof and copies of all documentation relating thereto; and

(g) from time to time such other information regarding the business, affairs or financial condition of the Borrower or any of its Subsidiaries as any Lender or the Administrative Agent may reasonably request.

The Borrower will furnish to the Administrative Agent, at the time it furnishes each set of financial statements pursuant to clause (a) or (b) above, a Compliance Certificate, executed by an Authorized Officer of the Borrower.

Information required to be delivered pursuant to clause (a), (b) or (c) above shall be deemed to have been delivered on the date on which (i) such information is actually delivered to the Administrative Agent for distribution to the Lenders or (ii) such information (x) has been posted by the Borrower on the Borrower’s website at www.wglholdings.com, or at www.sec.gov or www.ferc.gov and (y) the Borrower provides notice to the Lenders that such information is available and specifies one or more of the above websites on which such information is located. At the request of the Administrative Agent, the Borrower will provide, by electronic mail, electronic versions of all documents containing such information.

6.2 Litigation . The Borrower shall promptly give to each Lender notice of all legal or arbitral proceedings, and of all proceedings before any governmental or regulatory authority or agency, affecting the Borrower or its Material Subsidiaries, except proceedings as to which there is no reasonable possibility of an adverse determination or which, if adversely determined, would not have a Material Adverse Effect during the term of this Agreement.

6.3 Corporate Existence, Compliance with Laws, Taxes, Examination of Books, Insurance, etc . The Borrower shall, and shall cause each of its Material Subsidiaries to: preserve and maintain its corporate existence and all of its material rights, privileges and franchises if failure to maintain such existence, rights, privileges or franchises would materially and adversely affect the financial condition or operations of, or the business taken as a whole, of the Borrower and its Subsidiaries; comply with the requirements of all Applicable Laws, rules, regulations and orders of governmental or regulatory authorities if failure to comply with such requirements would materially and adversely affect the financial condition or operations of, or the business taken as a whole, of the Borrower and its Subsidiaries; pay and discharge all taxes, assessments and governmental charges or levies imposed on it or on its income or profits or on any of its property prior to the date on which penalties attach thereto, except for any such tax, assessment, charge or levy the payment of which is being contested in good faith and by proper proceedings and against which adequate reserves are being maintained; maintain all of its properties used or useful in its business in good working order and condition, ordinary wear and tear excepted; permit representatives of any Lender or the Administrative Agent, during normal business hours, to examine, copy and make extracts from its books and records, to inspect its properties, and to discuss its business and affairs with its officers, all to the extent reasonably requested by such Lender or the Administrative Agent (as the case may be); and keep insured by financially sound and reputable insurers all property of a character usually insured by corporations engaged in the same or similar business similarly situated against loss or damage of the kinds and in the amounts customarily insured against by such corporations and carry such other insurance as is usually carried by such corporations.

6.4 Use of Proceeds . The Borrower shall use the proceeds of the Loans hereunder for its general corporate purposes (in compliance with all applicable legal and regulatory requirements).

6.5 Environmental Covenant . The Borrower will, and will cause each of its Subsidiaries to:

(a) use and operate all of its facilities and properties in compliance with all Environmental Laws except for such noncompliance which, singly or in the aggregate, will not have a Material Adverse Effect, keep all necessary permits, approvals, certificates, licenses and other authorizations relating to environmental matters in effect and remain in compliance therewith, except where the failure to keep such permits, approvals, certificates, licenses or other authorizations, or any noncompliance with the provisions thereof, will not have a Material Adverse Effect, and handle all Hazardous Materials in compliance with all applicable Environmental Laws, except for any noncompliance that will not have a Material Adverse Effect;

(b) immediately notify the Administrative Agent and provide copies upon receipt of all written inquiries from any Governmental Authority, claims, complaints or notices relating to the condition of its facilities and properties or compliance with Environmental Laws which will have a Material Adverse Effect, and promptly cure and have dismissed with prejudice or investigate and contest in good faith any actions and proceedings relating to material compliance with Environmental Laws; and

(c) provide such information and certifications which the Administrative Agent may reasonably request from time to time to evidence compliance with this Section 6.5 .

6.6 Financial Covenan t. The Borrower will not permit the ratio of (i) its Consolidated Financial Indebtedness to (ii) its Consolidated Total Capitalization to exceed 0.65 to 1.0 at any time.

6.7 Utility Dividends . The Borrower shall not, and shall cause the Utility not to, enter into or permit to exist any restriction or other limitation on the ability of the Utility to pay dividends to the Borrower, other than restrictions and limitations required by Applicable Law or the terms of the Utility’s preferred stock.

6.8 Borrower’s Continued Ownership of Utility’s Common Stock . The Borrower shall continue to own 100% of common stock of the Utility and 99% of all issued and outstanding stock of the Utility.

ARTICLE VII

EVENTS OF DEFAULT

The occurrence of any one or more of the following events shall constitute an Event of Default:

7.1 The Borrower fails to pay (i) when and as required to be paid herein, any amount of principal of any Loan or any Reimbursement Obligation, or (ii) within three days after the same becomes due, any interest on any Loan or any fee due hereunder, or (iii) within five days after the same becomes due, any other amount payable hereunder or under any other Loan Document;

7.2 The Borrower or any of its Material Subsidiaries (i) shall default in the payment when due of any principal of or interest on any of its other Indebtedness having an aggregate principal amount of at least $25,000,000, (ii) shall default under any Hedge Agreement covering a notional amount of Indebtedness of at least $25,000,000, (iii) or fails to observe or perform any other agreement or condition relating to any note, agreement, indenture or other document evidencing or relating to any such Indebtedness; or any other event occurs, the effect of which is to cause, or (with the giving of any notice or the lapse of time or both) to permit the holder or holders of such Indebtedness (or a trustee or agent on behalf of such holder or holders) to cause, such Indebtedness to become due prior to its stated maturity.

7.3 Any representation, warranty or certification made or deemed made herein by the Borrower, or any certificate furnished to any Lender or the Administrative Agent pursuant to the provisions hereof, shall prove to have been false or misleading as of the time made, deemed made, or furnished in any material respect.

7.4 The Borrower shall default in the performance of its obligations under Section 6.1(e) , 6.6 or 6.8 hereof.

7.5 The Borrower shall default in the performance of any of its other obligations in this Agreement and such default shall continue unremedied for a period of 15 days after the earlier of (i) the date on which a senior officer of the Borrower becomes aware of such default, or (ii) the date on which notice thereof is given to the Borrower by the Administrative Agent or any Lender (through the Administrative Agent).

7.6 The Borrower or any of its Material Subsidiaries shall admit in writing its inability to, or be generally unable to, pay its debts as such debts become due.

7.7 The Borrower or any of its Material Subsidiaries shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property, (ii) make a general assignment for the benefit of its creditors, (iii) commence a voluntary case under the Bankruptcy Code (as now or hereafter in effect), (iv) file a petition seeking to take advantage of any other law relating to bankruptcy, insolvency, reorganization, winding-up, or composition or readjustment of debts, (v) fail to controvert in a timely and appropriate manner, or acquiesce in writing to, any petition filed against it in an involuntary case under the Bankruptcy Code, or (vi) take any corporate action for the purpose of effecting any of the foregoing.

7.8 A proceeding or case shall be commenced, without the application or consent of the Borrower or any of its Material Subsidiaries, in any court of competent jurisdiction, seeking (i) its liquidation, reorganization, dissolution or winding-up, or the composition or readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of the Borrower or such Material Subsidiary or of all or any substantial part of its assets, or (iii) similar relief in respect of the Borrower or such Material Subsidiary under any law relating to bankruptcy, insolvency, reorganization, winding-up or composition or adjustment of debts, and such proceeding or case shall continue undismissed, or an order, judgment or decree approving or ordering any of the foregoing shall be entered and continue unstayed and in effect, for a period of 60 days; or an order for relief against the Borrower or such Material Subsidiary shall be entered in an involuntary case under the Bankruptcy Code.

7.9 A final judgment or judgments for the payment of money in excess of $50,000,000 in the aggregate that is not covered by insurance, performance bonds or the like shall be rendered by a court or courts against the Borrower or any of its Subsidiaries, and the same shall not be discharged (or provision shall not be made for such discharge), or a stay of execution thereof shall not be procured, within 90 days from the date of entry thereof and the Borrower or the relevant Subsidiary shall not, within said period of 90 days, or such longer period during which execution of the same shall have been stayed, appeal therefrom and cause the execution thereof to be stayed during such appeal.

7.10 Any of the following events shall occur with respect to any Pension Plan:

(i) the institution of any steps by the Borrower, any member of its Controlled Group or any other Person to terminate a Pension Plan if, as a result of such termination, the Borrower or any such member could be required to make a contribution to such Pension Plan, or could reasonably expect to incur a liability or obligation to such Pension Plan, in excess of $50,000,000; or

(ii) the complete or partial withdrawal from any Pension Plan by the Borrower or any member of its Controlled Group if, as a result of such withdrawal, the Borrower or any such member could incur any liability by such Pension Plan in excess of $50,000,000; or

(iii) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA.

7.11 Any license, consent, authorization or approval, filing or registration now or hereafter necessary to enable the Borrower to comply with its obligations hereunder or under the Notes shall be revoked, withdrawn, withheld or not effected or shall cease to be in full force and effect.

7.12 The occurrence of any Change in Control.

ARTICLE VIII

REMEDIES, WAIVERS AND AMENDMENTS

8.1 Remedies Upon Event of Default . If any Event of Default occurs and is continuing, the Administrative Agent shall, at the request of, or may, with the consent of, the Required Lenders, take any or all of the following actions:

8.1.1 declare the commitment of each Lender to make Loans and any obligation of the Issuing Banks to issue Letters of Credit to be terminated, whereupon such commitments and obligation shall be terminated;

8.1.2 declare the unpaid principal amount of all outstanding Loans, all interest accrued and unpaid thereon, and all other amounts owing or payable hereunder or under any other Loan Document to be immediately due and payable, without presentment, demand, protest or other notice of any kind, all of which are hereby expressly waived by the Borrower;

8.1.3 require that the Borrower Cash Collateralize the aggregate Stated Amount of outstanding Letters of Credit (in an amount equal to 102% of the aggregate Stated Amount thereof); and

8.1.4 exercise on behalf of itself, the Lenders and the Issuing Banks all rights and remedies available to it, the Lenders and the Issuing Banks under the Loan Documents;

provided , however , that upon the occurrence of any Event of Default described in Section 7.6 , 7.7 or 7.8 occurs with respect to the Borrower, the obligation of each Lender to make Loans and any obligation of any Issuing Bank to issue Letters of Credit shall automatically terminate, the unpaid principal amount of all outstanding Loans and all interest and other amounts as aforesaid shall automatically become due and payable, and the obligation of the Borrower to Cash Collateralize the aggregate Stated Amount of Letters of Credit as aforesaid shall automatically become effective, in each case without further act of the Administrative Agent or any Lender.

If, within 30 days after acceleration of the maturity of the Obligations or termination of the obligations of the Lenders to make Loans hereunder as a result of any Event of Default (other than any Event of Default as described in Section 7.6 , 7.7 or 7.8 ) and before any judgment or decree for the payment of the Obligations due shall have been obtained or entered, the Required Lenders (in their sole discretion) shall so direct, the Administrative Agent shall, by notice to the Borrower, rescind and annul such acceleration and/or termination.

8.2 Amendments . Subject to the provisions of this Article VIII , the Required Lenders (or the Administrative Agent with the consent in writing of the Required Lenders) and the Borrower may enter into agreements supplemental hereto for the purpose of adding or modifying any provisions to the Loan Documents or changing in any manner the rights of the Lenders or the Borrower hereunder or waiving any Event of Default hereunder; provided , however , that no such supplemental agreement shall, without the consent of each Lender affected thereby:

(i) Extend the final maturity of any Loan or forgive all or any portion of the principal amount thereof, or reduce the rate or extend the time of payment of interest or fees thereon;

(ii) Increase any Commitment of any such Lender over the amount thereof in effect or extend the maturity thereof (it being understood that a waiver of any condition precedent set forth in Section 4.2 or of any Unmatured Default or Event of Default or mandatory reduction in the Commitments, if agreed to by the Required Lenders or all Lenders (as may be required hereunder with respect to such waiver), shall not constitute such an increase);

(iii) Reduce the percentage specified in the definition of Required Lenders;

(iv) Extend the Facility Termination Date (except as set forth in Section 2.6 ), increase the period by which the Repayment Date may be extended, reduce the amount or extend the payment date for, the mandatory payments required under Section 2.1.2 , increase the amount the Commitment of such Lender hereunder (without the consent of such Lender), or permit the Borrower to assign its rights under this Agreement;

(v) Alter any provision in this Agreement providing for the pro rata treatment of the Lenders;

(vi) Amend this Section 8.2 or any provision of this Agreement requiring the consent or other action of all of the Lenders; or

(vii) Unless agreed to in writing by the Issuing Banks, the Swingline Lender or the Administrative Agent in addition to the Lenders required as provided hereinabove to take such action, affect the respective rights or obligations of the Issuing Bank, the Swingline Lender or the Administrative Agent, as applicable, hereunder or under any of the other Loan Documents.

Notwithstanding the fact that the consent of all Lenders is required in certain circumstances as set forth above, each Lender is entitled to vote as such Lender sees fit on any bankruptcy reorganization plan that affects the Loans, and each Lender acknowledges that the provisions of Section 1126(c) of the Bankruptcy Code supersedes the unanimous consent provisions set forth herein.

Notwithstanding anything to the contrary herein, (i) no Defaulting Lender shall have any right to approve or disapprove any amendment, waiver or consent hereunder (and any amendment, waiver or consent which by its terms requires the consent of all Lenders or each affected Lender may be effected with the consent of the applicable Lenders other than Defaulting Lenders), except that (x) the Commitment of any Defaulting Lender may not be increased or extended without the consent of such Lender and (y) any waiver, amendment or modification requiring the consent of all Lenders or each affected Lender that by its terms affects any Defaulting Lender more adversely than other affected Lenders shall require the consent of such Defaulting Lender and (ii) if the Administrative Agent and the Borrower shall have jointly identified (each in its sole discretion) an obvious error or omission of a technical or immaterial nature, in each case, in any provision of the Loan Documents, then the Administrative Agent and the Borrower shall be permitted to amend such provision and such amendment shall become effective without any further action or consent of any other party to any Loan Document if the same is not objected to in writing by the Required Lenders within five Business Days following the posting of such amendment to the Lenders.

No amendment of any provision of this Agreement relating to the Administrative Agent shall be effective without the written consent of the Administrative Agent. The Administrative Agent may waive payment of the fee required under Section 12.3.2 without obtaining the consent of any other party to this Agreement.

8.3 Preservation of Rights . No delay or omission of the Lenders or the Administrative Agent to exercise any right under the Loan Documents shall impair such right or be construed to be a waiver of any Event of Default or an acquiescence therein, and the making of a Loan notwithstanding the existence of an Event of Default or the inability of the Borrower to satisfy the conditions precedent to such Loan shall not constitute any waiver or acquiescence. Any single or partial exercise of any such right shall not preclude other or further exercise thereof or the exercise of any other right, and no waiver, amendment or other variation of the terms, conditions or provisions of the Loan Documents whatsoever shall be valid unless in writing signed by the Lenders required pursuant to Section 8.2 , and then only to the extent in such writing specifically set forth. All remedies contained in the Loan Documents or by law afforded shall be cumulative and all shall be available to the Administrative Agent and the Lenders until the Obligations have been paid in full.

ARTICLE IX

GENERAL PROVISIONS

9.1 Survival of Representation s. All representations and warranties of the Borrower contained in this Agreement shall survive during the period that the Loans herein contemplated are outstanding.

9.2 Governmental Regulation . Anything contained in this Agreement to the contrary notwithstanding, no Lender shall be obligated to extend credit to the Borrower in violation of any limitation or prohibition provided by any Applicable Law.

9.3 Headings . Headings to Articles, Sections and subsections of, and Annexes, Schedules and Exhibits to the Loan Documents are for convenience of reference only, and shall not govern the interpretation of any of the provisions of the Loan Documents.

9.4 Entire Agreement . The Loan Documents embody the entire agreement and understanding among the Borrower, the Administrative Agent and the Lenders and supersede all prior agreements and understandings among the Borrower, the Administrative Agent and the Lenders relating to the subject matter thereof.

9.5 Several Obligations; Benefits of this Agreement . The respective obligations of the Lenders hereunder are several and not joint and no Lender shall be the partner or agent of any other (except to the extent to which the Administrative Agent is authorized to act as such). The failure of any Lender to perform any of its obligations hereunder shall not relieve any other Lender from any of its obligations hereunder. This Agreement shall not be construed so as to confer any right or benefit upon any Person other than the parties to this Agreement and their

respective successors and assigns; provided , however , that the parties hereto expressly agree that the Arrangers shall enjoy the benefits of the provisions of Sections 9.6 , 9.10 and 9.11 to the extent specifically set forth therein and shall have the right to enforce such provisions on its own behalf and in its own name to the same extent as if it were a party to this Agreement.

9.6 Expenses; Indemnification .

9.6.1 Expenses . The Borrower shall pay:

(i) the Administrative Agent and the Arrangers for any reasonable costs, internal charges and out of pocket expenses (including attorneys’ fees and time charges of attorneys for the Administrative Agent, which attorneys may be employees of the Administrative Agent) paid or incurred by the Administrative Agent or the Arrangers, and their respective Affiliates, in connection with the preparation, negotiation, execution, delivery, syndication, review, amendment, modification, and administration of the Loan Documents;

(ii) the Administrative Agent, the Arrangers, the Issuing Banks and the Lenders for any reasonable costs, internal charges and out of pocket expenses (including attorneys’ fees and time charges of attorneys for the Administrative Agent, the Arrangers, the Issuing Banks and the Lenders, which attorneys may be employees of the Administrative Agent, the Arrangers, the Issuing Banks or the Lenders) paid or incurred by the Administrative Agent, the Arrangers, the Issuing Banks or any Lender in connection with the collection and enforcement of its rights (A) in connection with this Agreement and the other Loan Documents, including its rights under this Section 9.6 , or (B) in connection with the Loans made or Letters of Credit issued hereunder, including all such out of pocket expenses incurred during any workout, restructuring or negotiations in respect of such Loans or Letters of Credit;

(iii) the Issuing Banks in connection with the issuance of any Letter of Credit or demand for payment thereunder; and

(iv) any civil penalty or fine assessed by OFAC against, and all reasonable costs and expenses (including counsel fees and disbursements) incurred in connection with defense thereof by, the Administrative Agent, any Issuing Bank or any Lender as a result of conduct of the Borrower that violates a sanction enforced by OFAC.

9.6.2 Indemnification by the Borrower . The Borrower shall indemnify the Administrative Agent (and any sub-agent thereof), each Lender, each Issuing Bank and each Related Party of any of the foregoing persons (each such person being called an “ Indemnitee ”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses (including the fees, charges and disbursements of any counsel for any Indemnitee), incurred by any Indemnitee or asserted against any Indemnitee by any Person (including the Borrower and any of its Subsidiaries) other than such Indemnitee and its Related Parties arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, any other Loan Document or any agreement or instrument contemplated hereby or thereby, the performance by the parties hereto of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby, (ii) any Loan or Letter of Credit or the use or proposed use of the proceeds therefrom (including any

refusal by the Issuing Bank to honor a demand for payment under a Letter of Credit if the documents presented in connection with such demand do not strictly comply with the terms of such Letter of Credit), (iii) any actual or alleged presence or release of Hazardous Material on or from any property owned or operated by the Borrower of any of its Subsidiaries, or any environmental claim related in any way the Borrower or its Subsidiaries, or (iv) any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory, whether brought by a third party or by the Borrower or its Subsidiaries, and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses (x) are determined by a court of competent jurisdiction by final and nonappealable judgment to have resulted from the gross negligence or willful misconduct of such Indemnitee or (y) result from a claim brought by the Borrower or any of its Subsidiaries against an Indemnitee for breach in bad faith of such Indemnitee’s obligations hereunder or under any other Loan Document, if the Borrower or such Credit Party has obtained a final and nonappealable judgment in its favor on such claim as determined by a court of competent jurisdiction. This Section 9.6.2 shall not apply with respect to Taxes other than any Taxes that represent losses, claims, damages or related liabilities or expenses arising from any non-Tax claim.

9.6.3 Payments on Demand . All amounts due under this Section 9.6 shall be payable by the Borrower upon demand therefor.

9.7 Numbers of Documents . All statements, notices, closing documents, and requests hereunder shall be furnished to the Administrative Agent with sufficient counterparts so that the Administrative Agent may furnish one to each of the Lenders.

9.8 Accounting . Except as provided to the contrary herein, all accounting terms used herein shall be interpreted and all accounting determinations hereunder shall be made in accordance with GAAP, except that any calculation or determination which is to be made on a consolidated basis shall be made for the Borrower and all its Subsidiaries, including those Subsidiaries, if any, which are unconsolidated on the Borrower’s audited financial statements.

9.9 Severability of Provisions . Any provision in any Loan Document that is held to be inoperative, unenforceable, or invalid in any jurisdiction shall, as to that jurisdiction, be inoperative, unenforceable or invalid without affecting the remaining provisions in that jurisdiction or the operation, enforceability or validity of that provision in any other jurisdiction, and to this end the provisions of all Loan Documents are declared to be severable. To the extent permitted by Applicable Law, the Borrower hereby waives any provision of Applicable Law that renders any provision of the Loan Documents prohibited or unenforceable in any respect.

9.10 Nonliability of Lenders . The relationship between the Borrower on the one hand and the Lenders and the Administrative Agent on the other hand shall be solely that of borrower and lender. Neither the Administrative Agent, the Arrangers, nor any Lender shall have any fiduciary responsibilities to the Borrower. Neither the Administrative Agent, the Arrangers, nor any Lender undertakes any responsibility to the Borrower to review or inform the Borrower of any matter in connection with any phase of the Borrower’s business or operations. The Borrower agrees that neither the Administrative Agent, the Arrangers nor any Lender shall have liability to

the Borrower (whether sounding in tort, contract or otherwise) for losses suffered by the Borrower in connection with, arising out of, or in any way related to, the transactions contemplated and the relationship established by the Loan Documents, or any act, omission or event occurring in connection therewith, unless it is determined in a final non-appealable judgment by a court of competent jurisdiction that such losses resulted from the gross negligence or willful misconduct of the party from which recovery is sought. Neither the Administrative Agent, the Arrangers nor any Lender shall have any liability with respect to, and the Borrower hereby waives, releases and agrees not to sue for, any special, indirect, punitive or consequential damages suffered by the Borrower in connection with, arising out of, or in any way related to the Loan Documents or the transactions contemplated thereby.

9.11 Confidentiality . Each Lender agrees to hold any confidential information which it may receive from the Borrower pursuant to this Agreement in confidence, except for disclosure (i) to its Affiliates and to other Lenders and their respective Affiliates, (ii) to legal counsel, accountants, and other professional advisors to such Lender or to a Transferee, (iii) to regulatory officials, (iv) to any Person as requested pursuant to or as required by Applicable Law, (v) to any Person in connection with any legal proceeding to which such Lender is a party, (vi) to such Lender’s direct or indirect contractual counterparties in swap agreements or to legal counsel, accountants and other professional advisors to such counterparties, and (vii) permitted by Section 12.4 .

9.12 Disclosure . The Borrower and each Lender hereby acknowledge and agree that the Administrative Agent and/or its Affiliates from time to time may hold investments in, make other loans to or have other relationships with the Borrower and its Affiliates.

9.13 Rights Cumulative . Each of the rights and remedies of the Administrative Agent and the Lenders under the Loan Documents shall be in addition to all of their other rights and remedies under the Loan Documents and Applicable Law, and nothing in the Loan Documents shall be construed as limiting any such rights or remedies.

9.14 Syndication Agent; Documentation Agents . Neither the Syndication Agent nor the Documentation Agents shall have any liability or obligation whatsoever to the Borrower, the Administrative Agent or any Lender at any time under this Agreement, other than its obligations as a Lender hereunder.

ARTICLE X

THE ADMINISTRATIVE AGENT

10.1 Appointment and Authority . Each of the Lenders (for purposes of this ARTICLE X , references to the Lenders shall also mean the Issuing Bank and the Swingline Lender) hereby irrevocably appoints Wells Fargo to act on its behalf as the Administrative Agent hereunder and under the other Loan Documents and authorizes the Administrative Agent to take such actions on its behalf and to exercise such powers as are delegated to the Administrative Agent by the terms hereof or thereof, together with such actions and powers as are reasonably incidental thereto. Except as set forth in Section 10.6 , the provisions of this ARTICLE X are solely for the benefit of the Administrative Agent and the Lenders, and neither the Borrower nor of its Subsidiaries

shall have rights as a third-party beneficiary of any of such provisions. It is understood and agreed that the use of the term “agent” (or any other similar term) herein or in any other Loan Document with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations under agency doctrine of any Applicable Law. Instead, such term is used as a matter of market custom, and is intended to create or reflect only an administrative relationship between contracting parties.

10.2 Rights as a Lender . The Person serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and the term “ Lender ” or “ Lenders ” shall, unless otherwise expressly indicated or unless the context otherwise requires, include the Person serving as the Administrative Agent hereunder in its individual capacity. Such Person and its Affiliates may accept deposits from, lend money to, own securities of, act as the financial advisor or in any other advisory capacity for and generally engage in any kind of business with the Borrower or any Subsidiary or other Affiliate thereof as if such Person were not the Administrative Agent hereunder and without any duty to account therefor to the Lenders.

10.3 Exculpatory Provisions .

10.3.1 The Administrative Agent shall not have any duties or obligations except those expressly set forth herein and in the other Loan Documents, and its duties hereunder shall be administrative in nature. Without limiting the generality of the foregoing, the Administrative Agent:

(i) shall not be subject to any fiduciary or other implied duties, regardless of whether an Unmatured Default or Event of Default has occurred and is continuing;

(ii) shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby or by the other Loan Documents that the Administrative Agent is required to exercise as directed in writing by the Required Lenders (or such other number or percentage of the Lenders as shall be expressly provided for herein or in the other Loan Documents); provided that the Administrative Agent shall not be required to take any action that, in its opinion or the opinion of its counsel, may expose the Administrative Agent to liability or that is contrary to any Loan Document or Applicable Law, including, for the avoidance of doubt, any action that may be in violation of the automatic stay under any the Bankruptcy Code or under other applicable bankruptcy, insolvency or similar law now or hereafter in effect or that may effect a forfeiture, modification or termination of property of a Defaulting Lender in violation of the Bankruptcy Code or any other applicable bankruptcy insolvency or similar law now or hereafter in effect; and

(iii) shall not, except as expressly set forth herein and in the other Loan Documents, have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or any of its Affiliates that is communicated to or obtained by the Person serving as the Administrative Agent or any of its Affiliates in any capacity.

10.3.2 The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number

or percentage of the Lenders as shall be necessary, or as the Administrative Agent shall believe in good faith shall be necessary, under the circumstances as provided in Sections 8.2 and 8.1 ), or (ii) in the absence of its own gross negligence or willful misconduct as determined by a court of competent jurisdiction by final and nonappealable judgment. The Administrative Agent shall be deemed not to have knowledge of any Unmatured Default or Event of Default unless and until notice describing such Unmatured Default or Event of Default is given to the Administrative Agent in writing by the Borrower or a Lender.

10.3.3 The Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (i) any statement, warranty or representation made in or in connection with this Agreement or any other Loan Document, (ii) the contents of any certificate, report or other document delivered hereunder or thereunder or in connection herewith or therewith, (iii) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein or therein or the occurrence of any Unmatured Default or Event of Default, (iv) the validity, enforceability, effectiveness or genuineness of this Agreement, any other Loan Document or any other agreement, instrument or document or (v) the satisfaction of any condition set forth in ARTICLE IV or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.

10.4 Reliance by Administrative Agent . The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing (including any electronic message, internet or intranet website posting or other distribution) believed by it to be genuine and to have been signed, sent or otherwise authenticated by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and believed by it to have been made by the proper Person, and shall not incur any liability for relying thereon. In determining compliance with any condition hereunder to the making of a Loan, or the issuance, extension, renewal or increase of a Letter of Credit, that by its terms must be fulfilled to the satisfaction of a Lender or the Issuing Bank, the Administrative Agent may presume that such condition is satisfactory to such Lender or the Issuing Bank unless the Administrative Agent shall have received notice to the contrary from such Lender or the Issuing Bank prior to the making of such Loan or the issuance, extension, renewal or increase of such Letter of Credit. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts.

10.5 Delegation of Duties . The Administrative Agent may perform any and all of its duties and exercise its rights and powers hereunder or under any other Loan Document by or through any one or more sub-agents appointed by the Administrative Agent. The Administrative Agent and any such sub-agent may perform any and all of its duties and exercise its rights and powers by or through their respective Related Parties. The exculpatory provisions of this Article shall apply to any such sub-agent and to the Related Parties of the Administrative Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent. The Administrative Agent shall not be responsible for the negligence or misconduct of any sub-agent except to the extent that a court of competent jurisdiction determines in a final and nonappealable judgment that the Administrative Agent acted with gross negligence or willful misconduct in the selection of such sub-agent.

10.6 Resignation of Administrative Agent.

10.6.1 Resignation Effective Date . The Administrative Agent may at any time give notice of its resignation to the Lenders and the Borrower. Upon receipt of any such notice of resignation, the Required Lenders shall have the right, in consultation with the Borrower, to appoint a successor, which shall be a bank with an office in the United States, or an Affiliate of any such bank with an office in the United States. If no such successor shall have been so appointed by the Required Lenders and shall have accepted such appointment within 30 days after the retiring Administrative Agent gives notice of its resignation (or such earlier day as shall be agreed by the Required Lenders) (the “ Resignation Effective Date ”), then the retiring Administrative Agent may (but shall not be obligated to), on behalf of the Lenders, appoint a successor Administrative Agent meeting the qualifications set forth above. Regardless of whether a successor has been appointed or has accepted such appointment, such resignation shall become effective in accordance with such note on the Resignation Effective Date.

10.6.2 Discharge of Duties After Resignation . With effect from the Resignation Effective Date, (i) the retiring Administrative Agent shall be discharged from its duties and obligations hereunder and under the other Loan Documents (except that in the case of any collateral security held by the Administrative Agent on behalf of the Lenders under any of the Loan Documents, the retiring Administrative Agent shall continue to hold such collateral security until such time as a successor Administrative Agent is appointed) and (ii) except for any indemnity payments owed to the retiring Administrative Agent, all payments, communications and determinations provided to be made by, to or through the Administrative Agent shall instead be made by or to each Lender directly, until such time, if any, as the Required Lenders appoint a successor Administrative Agent as provided for in Section 10.6.1 . Upon the acceptance of a successor’s appointment as Administrative Agent hereunder, such successor shall succeed to and become vested with all of the rights, powers, privileges and duties of the retiring Administrative Agent (other than any rights to indemnity payments owed to the retiring Administrative Agent), and the retiring Administrative Agent shall be discharged from all of its duties and obligations hereunder or under the other Loan Documents. The fees payable by the Borrower to a successor Administrative Agent shall be the same as those payable to its predecessor unless otherwise agreed between the Borrower and such successor. After the retiring Administrative Agent’s resignation hereunder and under the other Loan Documents, the provisions of this ARTICLE X and Section 9.6 shall continue in effect for the benefit of such retiring Administrative Agent, its sub-agents and their respective Related Parties in respect of any actions taken or omitted to be taken by any of them while the retiring Administrative Agent was acting as Administrative Agent.

10.7 Non-Reliance on Administrative Agent and Other Lenders . Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender or any of their Related Parties and based on

such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Agreement, any other Loan Document or any related agreement or any document furnished hereunder or thereunder.

10.8 No Other Duties, etc . Anything herein to the contrary notwithstanding, none of the Arrangers, Syndication Agent, Documentation Agents or other agents listed on the cover page hereof shall have any powers, duties or responsibilities under this Agreement or any of the other Loan Documents, except in its capacity, as applicable, as the Administrative Agent or a Lender hereunder.

10.9 Administrative Agent May File Proofs of Claim . In case of the pendency of any proceeding under the Bankruptcy Code or under other applicable bankruptcy, insolvency or similar law now or hereafter in effect or any other judicial proceeding relative to the Borrower or any of its Subsidiaries, the Administrative Agent (irrespective of whether the principal of any Loan or Reimbursement Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered (but not obligated) by intervention in such proceeding or otherwise (i) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, Reimbursement Obligations and all other Obligations that are owing and unpaid and to file such other documents as may be necessary advisable in order to have the claims of the Lenders and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and their respective agents, sub-agents and counsel and all other amounts due the Lenders and the Administrative Agent under Sections 2.4 and 9.6) allowed in such judicial proceeding and (ii) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same. Any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents, sub-agents and counsel, and any other amounts due the Administrative Agent under Section 2.4 or 9.6 .

10.10 Issuing Bank and Swingline Lender . The provisions of this ARTICLE X (other than Section 10.2 ) shall apply to the Issuing Bank and the Swingline Lender mutatis mutandis to the same extent as such provisions apply to the Administrative Agent.

ARTICLE XI

SETOFF; RATABLE PAYMENTS

11.1 Setoff . In addition to, and without limitation of, any rights of the Lenders under Applicable Law, if the Borrower becomes insolvent, however evidenced, or any Event of Default occurs, each Lender, the Issuing Banks and each of their respective Affiliates is hereby authorized at any time and from time to time, to the fullest extent permitted by Applicable Law, to set off and apply any and all deposits (general or special, time or demand, provisional or final, in whatever currency) at any time held, and other obligations (in whatever currency) at any time

owing, by such Lender, such Issuing Bank or any such Affiliate, to or for the credit or the account of the Borrower against any and all of the obligations of the Borrower now or hereafter existing under this Agreement or any other Loan Document to such Lender or such Issuing Bank or their respective Affiliates, irrespective of whether or not such Lender, such Issuing Bank or such Affiliate shall have made any demand under this Agreement or any other Loan Document and although such obligations of the Borrower may be contingent or unmatured or are owed to a branch, office or Affiliate of such Lender or such Issuing Bank different from the branch, office or Affiliate holding such deposit or obligated on such indebtedness; provided that in the event that any Defaulting Lender shall exercise any such right of setoff, (i) all amounts so set off shall be paid over immediately to the Administrative Agent for further application in accordance with the provisions of Section 2.18 and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of the Administrative Agent, the Issuing Banks and the Lenders (including the Swingline Lender), and (ii) the Defaulting Lender shall provide promptly to the Administrative Agent a statement describing in reasonable detail the obligations owing to such Defaulting Lender as to which it exercised such right of setoff. The rights of each Lender, each Issuing Bank and their respective Affiliates under this Section 11.1 are in addition to other rights and remedies (including other rights of setoff) that such Lender, such Issuing Bank or their respective Affiliates may have. Each Lender and each Issuing Bank agrees to notify the Borrower and the Administrative Agent promptly after any such setoff and application; provided that the failure to give such notice shall not affect the validity of such setoff and application.

11.2 Ratable Payments . If any Lender, whether by setoff or otherwise, has payment made to it upon Obligations owing to it in a greater proportion than that received by any other Lender, such Lender agrees, promptly upon demand, to (i) notify the Administrative Agent of such fact and (ii) purchase participations (for cash at face value) in the Obligations held by the other Lenders so that after such acquisition each Lender will hold its ratable proportion of the then outstanding Obligations; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this Section 11.2 shall not be construed to apply to (x) any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement (including the application of funds arising from the existence of a Defaulting Lender) or (y) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in Reimbursement Obligations or Swingline Loans to any assignee or Participant, other than to the Borrower or any Subsidiary thereof (as to which the provisions of this Section 11.2 shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under Applicable Law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation. If under the Bankruptcy Code or under other applicable bankruptcy, insolvency or similar law now or hereafter in effect, any Lender receives a secured claim in lieu of a setoff to which this Section 11 .2 applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this Section 11.2 to share in the benefits of any recovery on such secured claim. If any Lender, whether in connection with setoff or amounts which might be subject to setoff or otherwise, receives collateral or other protection for its Obligations or

other amounts which may be subject to setoff, such Lender agrees, promptly upon demand, to take such action necessary such that all Lenders share in the benefits of such collateral or other protection ratably in proportion to their Loans. In case any such payment is disturbed by legal process, or otherwise, appropriate further adjustments shall be made.

ARTICLE XII

BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS

12.1 Successors and Assigns . The terms and provisions of the Loan Documents shall be binding upon and inure to the benefit of the Borrower and the Lenders and their respective successors and assigns, except that (i) the Borrower shall not have the right to assign its rights or obligations under the Loan Documents and (ii) any assignment by any Lender must be made in compliance with Section 12.3 . The parties to this Agreement acknowledge that clause (ii) of this Section 12.1 relates only to absolute assignments and does not prohibit assignments creating security interests, including, without limitation, any pledge or assignment by any Lender of all or any portion of its rights under this Agreement and any Note to a Federal Reserve Bank; provided , however , that no such pledge or assignment creating a security interest shall release the transferor Lender from its obligations hereunder unless and until the parties thereto have complied with the provisions of Section 12.3 . The Administrative Agent may treat the Person which made any Loan or which holds any Note as the owner thereof for all purposes hereof unless and until such Person complies with Section 12.3 ; provided , however , that the Administrative Agent may in its discretion (but shall not be required to) follow instructions from the Person which made any Loan or which holds any Note to direct payments relating to such Loan or Note to another Person. Any assignee of the rights to any Loan or any Note agrees by acceptance of such assignment to be bound by all the terms and provisions of the Loan Documents. Any request, authority or consent of any Person, who at the time of making such request or giving such authority or consent is the owner of the rights to any Loan (whether or not a Note has been issued in evidence thereof), shall be conclusive and binding on any subsequent holder or assignee of the rights to such Loan.

12.2 Participations .

12.2.1 Permitted Participants; Effect . Any Lender may, in the ordinary course of its business and in accordance with Applicable Law, at any time sell to one or more banks or other entities (“ Participants ”) participating interests in any Loan owing to such Lender, any Note held by such Lender, any Commitment of such Lender or any other interest of such Lender under the Loan Documents. In the event of any such sale by a Lender of participating interests to a Participant, such Lender’s obligations under the Loan Documents shall remain unchanged, such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations, such Lender shall remain the owner of its Loans and the holder of any Note issued to it in evidence thereof for all purposes under the Loan Documents, all amounts payable by the Borrower under this Agreement shall be determined as if such Lender had not sold such participating interests, and the Borrower and the Administrative Agent shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under the Loan Documents. Any agreement or instrument pursuant to which a Lender sells such a participation shall provide that such Lender shall retain the sole right to enforce this Agreement

and to approve any amendment, modification or waiver of any provision of this Agreement; provided that such agreement or instrument may provide that such Lender will not, without the consent of the Participant, agree to any amendment, waiver or other modification described in Section 8.2 that affects such Participant. The Borrower agrees that each Participant shall be entitled to the benefits of Sections 2.18.1 , 2.18.2 , 2.19 , and 2.20 to the same extent as if it were a Lender and had acquired its interest by assignment pursuant to Section 12.3 ; provided that such Participant (A) agrees to be subject to the provisions of Section 2.21 as if it were an assignee under Section 12.3 and (B) shall not be entitled to receive any greater payment under Section 2.18 or 2.19 , with respect to any participation, than its participating Lender would have been entitled to receive, except to the extent such entitlement to receive a greater payment results from a Change in Law that occurs after the Participant acquired the applicable participation. Each Lender that sells a participation agrees, at the Borrower’s request and expense, to use reasonable efforts to cooperate with the Borrower to effectuate the provisions of Section 2.21 with respect to any Participant. To the extent permitted by law, each Participant also shall be entitled to the benefits of Section 11.1 as though it were a Lender; provided that such Participant agrees to be subject to Section 11.2 as though it were a Lender. Each Lender that sells a participation shall, acting solely for this purpose as an agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other Obligations under the Loan Documents (the “ Participant Register ”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any Commitments, Loans, Letters of Credit or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish such Commitment, Loan, Letter of Credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.

12.2.2 Certain Pledges . Any Lender may at any time pledge or assign a security interest in all or any portion of its rights under this Agreement (including under its Notes, if any) to secure obligations of such Lender, including any pledge or assignment to secure obligations to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from any of its obligations hereunder or substitute any such pledgee or assignee for such Lender as a party hereto.

12.3 Assignments .

12.3.1 Permitted Assignments . Any Lender may, in the ordinary course of its business and in accordance with Applicable Law, at any time assign to one or more banks or other entities (“ Purchasers ”) all or any part of its rights and obligations under the Loan Documents. Such assignment shall be pursuant to an agreement substantially in the form of Exhibit 12.3.1 . The consent of the Borrower and the Administrative Agent shall be required prior to an assignment becoming effective with respect to a Purchaser which is not a Lender or an Affiliate thereof; provided , however , that if an Event of Default has occurred and is

continuing, the consent of the Borrower shall not be required; provided further that the Borrower shall be deemed to have consented to any such assignment unless it shall object thereto by written notice to the Administrative Agent within five Business Days after having received notice thereof. Such consent shall not be unreasonably withheld or delayed. Each such assignment with respect to a Purchaser which is not a Lender or an Affiliate thereof shall (unless each of the Borrower and the Administrative Agent otherwise consents) be in an amount not less than the lesser of (i) $5,000,000 or (ii) the remaining amount of the assigning Lender’s Commitment (calculated as at the date of such assignment) or outstanding Loans (if the applicable Commitment has been terminated). The consent of the Issuing Banks (such consent not to be unreasonably withheld or delayed) shall be required for any assignment that increases the obligation of the assignee to participate in exposure under one or more Letters of Credit (whether or not then outstanding). The consent of the Swingline Lender (such consent not to be unreasonably withheld or delayed) shall be required for any assignment hereunder. No such assignment shall be made to (A) a natural person, (B) the Borrower or any of its respective Affiliates or Subsidiaries or (C) to any Defaulting Lender or any of its Subsidiaries, or any Person who, upon becoming a Lender hereunder, would constitute any of the foregoing Persons described in this clause.

12.3.2 Effect; Effective Date . Upon (i) delivery to the Administrative Agent of an assignment, together with any consents required by Section 12.3.1 , and (ii) payment of a $3,500 fee to the Administrative Agent for processing such assignment (unless such fee is waived by the Administrative Agent), such assignment shall become effective on the effective date specified in such assignment. On and after the effective date of such assignment, such Purchaser shall for all purposes be a Lender party to this Agreement and any other Loan Document executed by or on behalf of the Lenders and shall have all the rights and obligations of a Lender under the Loan Documents, to the same extent as if it were an original party hereto, and no further consent or action by the Borrower, the Lenders or the Administrative Agent shall be required to release the transferor Lender with respect to the percentage of the Aggregate Commitments assigned to such Purchaser but such transferor Lender shall continue to be entitled to the benefits of Sections 2.18.1 , 2.18.2 , 2.19 , and 2.20 with respect to facts and circumstances occurring prior to the effective date of such assignment; provided that, except to the extent otherwise expressly agreed by the affected parties, no assignment by a Defaulting Lender will constitute a waiver or release of any claim of any party hereunder arising from such Lender’s having been a Defaulting Lender. Upon the consummation of any assignment to a Purchaser pursuant to this Section 12.3.2 , the transferor Lender, the Administrative Agent and the Borrower shall, if the transferor Lender or the Purchaser desires that its Loans be evidenced by Notes, make appropriate arrangements so that new Notes or, as appropriate, replacement Notes are issued to such transferor Lender and new Notes or, as appropriate, replacement Notes, are issued to such Purchaser, in each case in principal amounts reflecting their respective Commitments, as adjusted pursuant to such assignment. Any assignment or transfer by a Lender of rights or obligations under this Agreement that does not comply with this paragraph shall be treated for purposes of this Agreement as a sale by such Lender of a participation in such rights and obligations in accordance with Section 12.2.2 .

12.3.3 Assignments by a Defaulting Lender . In connection with any assignment of rights and obligations of any Defaulting Lender hereunder, no such assignment shall be effective unless and until, in addition to the other conditions thereto set forth herein, the parties

to the assignment shall make such additional payments to the Administrative Agent in an aggregate amount sufficient, upon distribution thereof as appropriate (which may be outright payment, purchases by the assignee of participations or subparticipations, or other compensating actions, including funding, with the consent of the Borrower and the Administrative Agent, the Applicable Percentage of Loans previously requested but not funded by the Defaulting Lender, to each of which the applicable assignee and assignor hereby irrevocably consent), to (i) pay and satisfy in full all payment liabilities then owed by such Defaulting Lender to the Administrative Agent or any Lender hereunder (and interest accrued thereon), and (ii) acquire (and fund as appropriate) its full share of all Loans and participations in Letters of Credit and Swingline Loans in accordance with its Applicable Percentage. Notwithstanding the foregoing, in the event that any assignment of rights and obligations of any Defaulting Lender hereunder shall become effective under Applicable Law without compliance with the provisions of this paragraph, then the assignee of such interest shall be deemed to be a Defaulting Lender for all purposes of this Agreement until such compliance occurs.

12.3.4 Register . The Administrative Agent, acting solely for this purpose as an agent of the Borrower, shall maintain at its address for notices referred to in Schedule 1.1-B a copy of each Assignment and Assumption delivered to it and a register for the recordation of the names and addresses of the Lenders, and the Commitments of, and principal amounts (and stated interest) of the Loans owing to, each Lender pursuant to the terms hereof from time to time (the “ Register ”). The entries in the Register shall be conclusive absent manifest error, and the Borrower, the Administrative Agent and the Lenders shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Lender hereunder for all purposes of this Agreement. In addition, the Administrative Agent shall maintain on the Register information regarding the designation, revocation of designation, of any Lender as a Defaulting Lender. The Register shall be available for inspection by each of the Borrower and the Issuing Bank, at any reasonable time and from time to time upon reasonable prior notice.

12.4 Dissemination of Information . The Borrower authorizes each Lender to disclose to any Participant or Purchaser or any other Person acquiring an interest in the Loan Documents by operation of law (each a “ Transferee ”) and any prospective Transferee any and all information in such Lender’s possession concerning the creditworthiness of the Borrower and its Subsidiaries; provided that each Transferee and prospective Transferee agrees to be bound by Section 9.11 of this Agreement.

12.5 Tax Treatment . If any interest in any Loan Document is transferred to any Transferee which is organized under the laws of any jurisdiction other than the United States or any State thereof, the transferor Lender shall cause such Transferee, concurrently with the effectiveness of such transfer, to comply with the provisions of Section 2.19 .

ARTICLE XIII

NOTICES

13.1 Notices . Except as otherwise permitted by Section 2.12 with respect to Borrowing Notices, Swingline Borrowing Notices and Continuation/Conversion Notices, all notices, requests and other communications to any party hereunder shall be in writing (including

electronic transmission, facsimile transmission or similar writing) and shall be given to such party: (i) in the case of the Borrower or the Administrative Agent, at its address or facsimile number set forth on the signature pages hereof, (ii) in the case of any Lender, at its address or facsimile number set forth on its Administrative Questionnaire or (iii) in the case of any party, at such other address or facsimile number as such party may hereafter specify for the purpose by notice to the Administrative Agent and the Borrower in accordance with the provisions of this Section 13.1 . Each such notice, request or other communication shall be effective (x) if given by facsimile transmission, when transmitted to the facsimile number specified in this Section and confirmation of receipt is received, (y) if given by mail, 72 hours after such communication is deposited in the mails with first class postage prepaid, addressed as aforesaid, or (z) if given by any other means, when delivered (or, in the case of electronic transmission, received) at the address specified in this Section; provided that notices to the Administrative Agent under Article II shall not be effective until received.

13.2 Change of Address . The Borrower, the Administrative Agent and any Lender may each change the address for service of notice upon it by a notice in writing to the other parties hereto.

ARTICLE XIV

COUNTERPARTS; EFFECTIVENESS

This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one agreement, and any of the parties hereto may execute this Agreement by signing any such counterpart. This Agreement shall become effective when (a) it has been executed by the Borrower, the Administrative Agent and the Lenders and each party has notified the Administrative Agent by facsimile transmission or telephone that it has taken such action and (b) the Borrower has paid all outstanding fees and other amounts payable by the Borrower in connection with the termination of the Existing Credit Agreement. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or in electronic format (e.g., “pdf” or “tif” file format) shall be effective as delivery of a manually executed counterpart of this Agreement.

ARTICLE XV

CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL

15.1 CHOICE OF LAW . THE RIGHTS AND DUTIES OF THE BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS UNDER THIS AGREEMENT AND THE NOTES (INCLUDING MATTERS RELATING TO THE MAXIMUM PERMISSIBLE RATE), AND THE OTHER LOAN DOCUMENTS SHALL, PURSUANT TO NEW YORK GENERAL OBLIGATIONS LAW SECTION 5-1401, BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK.

15.2 Consent To Jurisdiction . Any judicial proceeding brought against the Borrower with respect to any Loan Document Related Claim may be brought in any court of competent jurisdiction in The City of New York, and, by execution and delivery of this Agreement, the Borrower (a) accepts, generally and unconditionally, the exclusive jurisdiction of such courts and any related appellate court and irrevocably agrees to be bound by any judgment rendered thereby in connection with any Loan Document Related Claim and (b) irrevocably waives any objection it may now or hereafter have as to the venue of any such proceeding brought in such a court or that such a court is an inconvenient forum. The Borrower hereby waives personal service of process and consents that service of process upon it may be made by certified or registered mail, return receipt requested, at its address specified or determined in accordance with the provisions of Article XIII , and service so made shall be deemed completed on the third Business Day after such service is deposited in the mail. Nothing herein shall affect the right of the Administrative Agent, any Lender or any other Indemnified Person to serve process in any other manner permitted by law or shall limit the right of the Administrative Agent, the Syndication Agent, any Documentation Agent, any Lender or any other Indemnified Person to bring proceedings against the Borrower in the courts of any other jurisdiction. Any judicial proceeding by the Borrower against the Administrative Agent or any Lender involving any Loan Document Related Claim shall be brought only in a court located in the City and State of New York.

15.3 WAIVER OF JURY TRIAL . THE BORROWER, THE ADMINISTRATIVE AGENT AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING ANY LOAN DOCUMENT RELATED CLAIM.

15.4 LIMITATION ON LIABILITY . TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, NEITHER THE ADMINISTRATIVE AGENT, NOR THE LENDERS NOR ANY OTHER INDEMNIFIED PERSON SHALL HAVE ANY LIABILITY WITH RESPECT TO, AND THE BORROWER HEREBY WAIVES, RELEASES AND AGREES NOT TO SUE FOR, ANY SPECIAL, INDIRECT, PUNITIVE OR CONSEQUENTIAL DAMAGES, AND TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, PUNITIVE DAMAGES SUFFERED BY THE BORROWER IN CONNECTION WITH ANY LOAN DOCUMENT RELATED CLAIM.

15.5 USA PATRIOT ACT NOTICE . Each Lender and the Administrative Agent (for itself and not on behalf of any Lender) hereby notifies the Borrower that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)) (the “ Patriot Act ”), it is required to obtain, verify and record information that identifies the Borrower, which information includes the name and address of the Borrower and other information that will allow such Lender or Administrative Agent, as applicable, to identify the Borrower in accordance with the Patriot Act.

[SIGNATURE PAGES FOLLOW]

IN WITNESS WHEREOF, the Borrower, the Lenders and the Administrative Agent have executed this Agreement as of the date first above written.


WGL HOLDINGS, INC.

By:		/s/ Anthony M. Nee
		Anthony M. Nee
		Treasurer

WGL Holdings, Inc. — 2012 Credit Agreement


WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent , Issuing Bank, Swingline Lender and Lender

By:		/s/ Allison Newman
		Allison Newman Director

WGL Holdings, Inc. — 2012 Credit Agreement


THE BANK OF TOKYO-MITSUBISHI UFJ, LTD. , as Syndication Agent and Lender

By:		/s/ Nicholas R. Battista
		Nicholas R. Battista
		Director

WGL Holdings, Inc. — 2012 Credit Agreement


BRANCH BANKING AND TRUST COMPANY , as Co-Documentation Agent, Issuing Bank and Lender

By:		/s/ Michael F. Skorich
		Michael F. Skorich Senior Vice President

WGL Holdings, Inc. — 2012 Credit Agreement


TD BANK, N.A ., as Co-Documentation Agent and Lender

By:		/s/ Vijay Prasad
		Vijay Prasad Senior Vice President

WGL Holdings, Inc. — 2012 Credit Agreement


THE BANK OF NEW YORK MELLON, as Lender

By:		/s/ Richard K. Fronapfel
		Richard K. Fronapfel Vice President

WGL Holdings, Inc. — 2012 Credit Agreement


PNC BANK, NATIONAL ASSOCIATION, as Lender

By:		/s/ Bremmer Kneib
		Bremmer Kneib Vice President

WGL Holdings, Inc. — 2012 Credit Agreement


U.S. BANK, NATIONAL ASSOCIATION, as Lender

By:		/s/ Holland H. Williams
		Holland H. Williams AVP

WGL Holdings, Inc. — 2012 Credit Agreement


CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY, as Lender

By:		/s/ Robert W. Casey, Jr.
		Robert W. Casey, Jr. Executive Director

		Robert Casey Canadian Imperial Bank of Commerce New York Agency Authorized Signatory


CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY, as Lender

By:		/s/ Eoin Roche
		Eoin Roche Executive Director

		Eoin Roche Canadian Imperial Bank of Commerce New York Agency Authorized Signatory

WGL Holdings, Inc. — 2012 Credit Agreement


THE NORTHERN TRUST COMPANY, as Lender

By:		/s/ Lisa Decristofaro
		Lisa Decristofaro Vice President

WGL Holdings, Inc. — 2012 Credit Agreement


MECHANICS AND FARMERS BANK, as Lender

By:		/s/ James E. Sansom
		James E. Sansom SVP

WGL Holdings, Inc. — 2012 Credit Agreement

Exhibit 10.2

Execution Version

Published Deal CUSIP: 938836AC7

Published Revolving Facility CUSIP: 938836AD5

CREDIT AGREEMENT

DATED AS OF APRIL 3, 2012

AMONG

WASHINGTON GAS LIGHT COMPANY,

THE LENDERS PARTIES HERETO,

WELLS FARGO BANK, NATIONAL ASSOCIATION,

AS ADMINISTRATIVE AGENT,

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.,

AS SYNDICATION AGENT,

BRANCH BANKING AND TRUST COMPANY AND

TD BANK, N.A.

AS DOCUMENTATION AGENTS,

AND

WELLS FARGO SECURITIES, LLC,

THE BANK OF TOKYO-MITSUBISHI UFJ, LTD.,

BB&T CAPITAL MARKETS AND

TD BANK, N.A.

AS JOINT LEAD ARRANGERS AND JOINT BOOK RUNNERS

TABLE OF CONTENTS


	Page
ARTICLE I INTERPRETATION		1

1.1 Definitions		1
1.2 Accounting Terms		18
1.3 Other Interpretive Provisions		18

ARTICLE II CREDIT FACILITY		19

2.1 The Facility		19
2.2 Loans		20
2.3 Funding by Lenders; Disbursement to the Borrower		24
2.4 Fees		24
2.5 Reductions in Aggregate Commitments; Increases in Aggregate Commitments		25
2.6 Extension Option		26
2.7 Repayments; Optional Principal Prepayments		28
2.8 Changes in Interest Rate, etc		28
2.9 Rates Applicable After Default		28
2.10 Method of Payment		29
2.11 Evidence of Indebtedness		30
2.12 Telephonic Notices		31
2.13 Interest Payment Dates; Interest and Fee Basis		31
2.14 Notification of Loans, Interest Rates, Prepayments and Commitment Reductions		31
2.15 Lending Installations		32
2.16 Non-Receipt of Funds by the Administrative Agent		32
2.17 Maximum Interest Rate		32
2.18 Increased Costs; Change in Circumstances; Illegality		32
2.19 Taxes		35
2.20 Compensation		39
2.21 Mitigation Obligations; Replacement of Lenders		39
2.22 Defaulting Lenders		40

ARTICLE III LETTERS OF CREDIT		43

3.1 Issuance		43
3.2 Notices		45
3.3 Participations		45
3.4 Reimbursement		45
3.5 Payment by Revolving Loans		46
3.6 Payment to Lenders		47
3.7 Obligations Absolute		47
3.8 Cash Collateral Account		49
3.9 The Issuing Bank		49
3.10 Effectiveness		50

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TABLE OF CONTENTS

(continued)


	Page
ARTICLE IV CONDITIONS PRECEDENT		50

4.1 Conditions to Agreement Date		50
4.2 Conditions to All Credit Extensions		51

ARTICLE V REPRESENTATIONS AND WARRANTIES		52

5.1 Corporate Existence		52
5.2 Financial Condition		52
5.3 Litigation		53
5.4 No Breach		53
5.5 Corporate Action		53
5.6 Regulatory Approval		53
5.7 Regulations U and X		53
5.8 Pension and Welfare Plans		54
5.9 Accuracy of Information		54
5.10 Taxes		54
5.11 Environmental Warranties		54
5.12 Investment Company Act		56
5.13 OFAC; Anti-Terrorism Laws		56

ARTICLE VI COVENANTS		56

6.1 Financial Statements		56
6.2 Litigation		58
6.3 Corporate Existence, Compliance with Laws, Taxes, Examination of Books, Insurance, etc		58
6.4 Use of Proceeds		58
6.5 Environmental Covenant		59
6.6 Financial Covenant		59
6.7 Local Regulatory Commission Approval		59

ARTICLE VII EVENTS OF DEFAULT		59

ARTICLE VIII REMEDIES, WAIVERS AND AMENDMENTS		61

8.1 Remedies Upon Event of Default		61
8.2 Amendments		62
8.3 Preservation of Rights		63

ARTICLE IX GENERAL PROVISIONS		64

9.1 Survival of Representations		64
9.2 Governmental Regulation		64
9.3 Headings		64
9.4 Entire Agreement		64
9.5 Several Obligations; Benefits of this Agreement		64

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TABLE OF CONTENTS

(continued)


	Page
9.6 Expenses; Indemnification		64
9.7 Numbers of Documents		66
9.8 Accounting		66
9.9 Severability of Provisions		66
9.10 Nonliability of Lenders		66
9.11 Confidentiality		66
9.12 Disclosure		67
9.13 Rights Cumulative		67
9.14 Syndication Agent; Documentation Agents		67

ARTICLE X THE ADMINISTRATIVE AGENT		67

10.1 Appointment and Authority		67
10.2 Rights as a Lender		67
10.3 Exculpatory Provisions		68
10.4 Reliance by Administrative Agent		69
10.5 Delegation of Duties		69
10.6 Resignation of Administrative Agent		69
10.7 Non-Reliance on Administrative Agent and Other Lenders		70
10.8 No Other Duties, etc		70
10.9 Administrative Agent May File Proofs of Claim		70
10.10 Issuing Bank and Swingline Lender		71

ARTICLE XI SETOFF; RATABLE PAYMENTS		71

11.1 Setoff		71
11.2 Ratable Payments		72

ARTICLE XII BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS		72

12.1 Successors and Assigns		72
12.2 Participations		73
12.3 Assignments		74
12.4 Dissemination of Information		76
12.5 Tax Treatment		76

ARTICLE XIII NOTICES		76

13.1 Notices		76
13.2 Change of Address		77

ARTICLE XIV COUNTERPARTS; EFFECTIVENESS		77

ARTICLE XV CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL		77

15.1 CHOICE OF LAW		77

-iii-

TABLE OF CONTENTS

(continued)


	Page
15.2 Consent To Jurisdiction		77
15.3 WAIVER OF JURY TRIAL		78
15.4 LIMITATION ON LIABILITY		78
15.5 USA PATRIOT ACT NOTICE		78


SCHEDULES

Schedule 1.1-A		Pricing Schedule
Schedule 1.1-B		Commitments and Notice Addresses
Schedule 2.15		Lending Installations
Schedule 5.3		Litigation
Schedule 5.6		Regulatory Approval
Schedule 5.8		Employee Benefit Plans
Schedule 5.11		Environmental Matters

EXHIBITS

EXHIBIT 2.2.2		Form of Borrowing Notice
EXHIBIT 2.2.3		Form of Swingline Borrowing Notice
EXHIBIT 2.2.7		Form of Conversion/Continuation Notice
EXHIBIT 2.5.2		Form of Commitment Increase Supplement
EXHIBIT 2.7		Form of Notice of Prepayment
EXHIBIT 2.11.4-A		Form of Revolving Note
EXHIBIT 2.11.4-B		Form of Swingline Note
EXHIBIT 2.19-A		Form of Tax Compliance Certificate
EXHIBIT 2.19-B		Form of Tax Compliance Certificate
EXHIBIT 2.19-C		Form of Tax Compliance Certificate
EXHIBIT 2.19-D		Form of Tax Compliance Certificate
EXHIBIT 3.2		Letter of Credit Notice
EXHIBIT 4.1(a)(6)		Form of Opinion
EXHIBIT 4.2		Form of Compliance Certificate
EXHIBIT 12.3.1		Form of Assignment Agreement

-iv-

CREDIT AGREEMENT, dated as of April 3, 2012 (the “ Agreement ”), among WASHINGTON GAS LIGHT COMPANY, as Borrower, the financial institutions from time to time parties hereto, as LENDERS, WELLS FARGO BANK, NATIONAL ASSOCIATION, as Administrative Agent, THE BANK OF TOKYO-MITSUBISHI UFJ, LTD., as Syndication Agent, and BRANCH BANKING AND TRUST COMPANY and THE TORONTO-DOMINION BANK, as Documentation Agents.

RECITALS

WHEREAS, the Borrower has requested that the Lenders provide a revolving credit facility, and the Lenders are willing to do so on the terms and conditions set forth herein.

NOW, THEREFORE, the parties hereto agree as follows:

ARTICLE I

INTERPRETATION

1.1 Definitions . As used in this Agreement:

“ Active Arrangers Fee Letter ” means the letter to the Borrower from Wells Fargo Securities and BTMU, dated as of February 15, 2012.

“ Additional Commitment Lender ” is defined in Section 2.5.2 .

“ Administrative Questionnaire ” means an Administrative Questionnaire in a form supplied by the Administrative Agent.

“ Administrative Fee Letter ” means the letter to the Borrower from Wells Fargo dated as of February 15, 2012.

“ Aggregate Commitments ” means the aggregate of the Commitments of all the Lenders, in the initial aggregate amount of $350,000,000, as increased or decreased from time to time pursuant to the terms hereof.

“ Agreement ” means this Agreement, including all schedules, annexes and exhibits hereto.

“ Applicable Percentage ” means, with respect to any Lender at any time, the percentage of the Aggregate Commitments represented by such Lender’s Commitment at such time, subject to adjustment as provided in Section 2.22 . If the commitment of each Lender to make Loans and the obligation of the Issuing Banks to issue Letters of Credit have been terminated pursuant to Section 8.1, or if the Aggregate Commitments have expired, then the Applicable Percentage of each Lender shall be determined based on the Applicable Percentage of such Lender most recently in effect, giving effect to any subsequent assignments.

“ Arrangers ” means Wells Fargo Securities, BTMU, BB&TCM and TD, each in its capacity as a joint lead arranger and bookrunner.

“ Authorized Officer ” means any of the Vice President and Chief Financial Officer, Vice President and General Counsel, or the Treasurer of the Borrower, acting singly.

“ Bankruptcy Code ” means the United States Bankruptcy Code (11 U.S.C. §101 et seq.).

“ Base Rate Loan ” means a Loan which, except as otherwise provided in Section 2.8 , bears interest at the Alternate Base Rate plus the Applicable Margin.

“ BB&T ” means Branch Banking and Trust Company, and its successors.

“ BB&TCM ” means BB&T Capital Markets, and its successors.

“ Borrower ” means Washington Gas Light Company, a Virginia and District of Columbia corporation.

“ Borrowing Date ” means a date on which a Loan is made.

“ Borrowing Notice ” is defined in Section 2.2.2 .

“ BTMU ” means The Bank of Tokyo-Mitsubishi UFJ Ltd., and its successors.

“ Capitalized Lease ” of a Person means any lease of Property by such Person as lessee which would be capitalized on a balance sheet of such Person prepared in accordance with GAAP.

“ Cash Collateral Account ” has the meaning given to such term in Section 3.8 .

“ CERCLA ” means the Comprehensive Environmental Response, Compensation and Liability Act of 1980.

“ CERCLIS ” means the Comprehensive Environmental Response, Compensation, and Liability Information System List.

“ Change in Control ” means (i) an event or series of events by which any “person” or “group” (as such terms are used in Sections 13(d) and 14(d) of the Exchange Act, but excluding any employee benefit plan of such person or its Subsidiaries, and any person or entity acting in its capacity as trustee, agent or other fiduciary or administrator of any such plan) becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a “person” or “group” shall be deemed to have “beneficial ownership” of all capital stock that such “person” or “group” has the right to acquire, whether such right is exercisable immediately or only after the passage of time (such right, an “option right”)), directly or indirectly, of more than thirty percent (30%) of the capital stock of the Parent entitled to vote in the election of members of the board of directors (or equivalent governing body) of the Parent, (ii) a majority of the members of the board of directors (or other equivalent governing body) of the Parent shall not constitute Continuing Directors, or (iii) the Parent has ceased to own 100% of common stock of the Borrower and 99% of all issued and outstanding stock of the Borrower.

“ Code ” means the Internal Revenue Code of 1986.

“ Commitment Increase ” is defined in Section 2.5.2 .

“ Commitment Increase Supplement ” is defined in Section 2.5.2 .

“ Compliance Certificate ” is defined in Section 4.2 .

“ Connection Income Taxes ” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

“ Consolidated Financial Indebtedness ” means at any time the Financial Indebtedness of the Borrower and its Subsidiaries calculated on a consolidated basis as of such time.

“ Consolidated Net Worth ” means at any time the sum of common shareholders’ equity of the Borrower and preferred stock of the Borrower, as reported on the consolidated balance sheet of the Borrower prepared as of such time.

“ Consolidated Total Capitalization ” means at any time the sum of Consolidated Financial Indebtedness and Consolidated Net Worth, each calculated at such time.

“ Continuing Directors ” shall mean the directors of the Parent or the Borrower on the Agreement Date and each other director of the Parent or the Borrower, if, in each case, such other director’s nomination for election to the board of directors (or equivalent governing body) of the Parent or the Borrower is recommended by at least 51% of the then Continuing Directors.

“ Conversion/Continuation Notice ” is defined in Section 2.2.7 .

more conditions precedent to funding (each of which conditions precedent, together with any applicable default, shall be specifically identified in such writing) has not been satisfied, or (y) pay to the Administrative Agent, any Issuing Bank, any Swingline Lender or any other Lender any other amount required to be paid by it hereunder (including in respect of its participation in Letters of Credit or Swingline Loans) within two Business Days of the date when due, (ii) has notified the Borrower, the Administrative Agent or any Issuing Bank or Swingline Lender in writing that it does not intend to comply with its funding obligations hereunder, or has made a public statement to that effect (unless such writing or public statement relates to such Lender’s obligation to fund a Loan hereunder and states that such position is based on such Lender’s determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing or public statement) cannot be satisfied), (iii) has failed, within three Business Days after written request by the Administrative Agent or the Borrower, to confirm in writing to the Administrative Agent and the Borrower that it will comply with its prospective funding obligations hereunder (provided that such Lender shall cease to be a Defaulting Lender pursuant to this clause (iii) upon receipt of such written confirmation by the Administrative Agent and the Borrower), or (iv) has, or has a direct or indirect parent company that has, (x) become the subject of a proceeding under the Bankruptcy Code or under other applicable bankruptcy, insolvency or similar law now or hereafter in effect, or (y) had appointed for it a receiver, custodian, conservator, trustee, administrator, assignee for the benefit of creditors or similar Person charged with reorganization or liquidation of its business or assets, including the Federal Deposit Insurance Corporation or any other state or federal regulatory authority acting in such a capacity; provided that a Lender shall not be a Defaulting Lender solely by virtue of the ownership or acquisition of any equity interest in that Lender or any direct or indirect parent company thereof by a Governmental Authority so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any determination by the Administrative Agent that a Lender is a Defaulting Lender under any one or more of clauses (i) through (iv) above shall be conclusive and binding absent manifest error, and such Lender shall be deemed to be a Defaulting Lender (subject to Section 2.22.2 ) upon delivery of written notice of such determination by the Administrative Agent to the Borrower, the Issuing Bank, the Swingline Lender and each Lender.

“ Documentation Agent ” means each of BB&T and TD, acting in the capacity as documentation agent hereunder.

“ Dollars ” and the sign “ $ ” mean lawful money of the United States of America.

“ Eligible Assignee ” means any Lender, Affiliate of a Lender or other Person that meets the requirements to be an assignee under Section 12.3.1 .

“ Employee Benefit Plans ” is defined in Section 5.8 .

governmental restrictions relating to (i) the protection of the environment, (ii) the effect of the environment on human health, (iii) emissions, discharges or releases of pollutants, contaminants, hazardous substances or wastes into ambient air, surface water, ground water, land surface or subsurface strata, or (iv) the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of pollutants, contaminants, hazardous substances or wastes or the clean-up or other remediation thereof.

“ ERISA ” means the Employee Retirement Income Security Act of 1974.

“ Event of Default ” means an event described in Article VII .

“ Exchange Act ” means Securities Exchange Act of 1934.

“ Extension Option ” means the option of the Borrower under Section 2.6 hereof to extend the Facility Termination Date.

“ Facility Fee ” is defined in Section 2.4.2 .

“ Fee Letters ” means, collectively, the Active Arrangers Fee Letter, Passive Arrangers Fee Letter and Administrative Fee Letter.

“ Fitch ” means Fitch Ratings, Ltd.

“ Governmental Approval ” means any authority, consent, approval, license (or the like) or exemption (or the like) of any governmental unit.

“ Indemnitee ” is defined in Section 9.6.2 .

“ Interest Period ” means, with respect to a LIBOR Rate Loan, the period commencing on the date such LIBOR Rate Loan is disbursed or converted to or continued as a LIBOR Rate Loan

and ending on the date one, two, three or six months thereafter, as selected by the Borrower pursuant to this Agreement; provided , that (i) any Interest Period pertaining to a LIBOR Rate Loan that begins on the last Business Day of a calendar month (or on a day for which there is no numerically corresponding day in the calendar month at the end of such Interest Period) shall end on the last Business Day of the calendar month at the end of such Interest Period, (ii) any Interest Period that would otherwise end on a day that is not a Business Day shall be extended to the next succeeding Business Day unless such Business Day falls in another calendar month, in which case such Interest Period shall end on the next preceding Business Day; and (iii) no Interest Period shall extend beyond the Facility Termination Date.

“ Issuing Bank ” means each of Wells Fargo and BB&T, in their respective capacities as issuers of Letters of Credit under this Agreement.

“ LC Fee ” is defined in Section 2.4.4 .

“ Lenders ” means the lending institutions listed on the signature pages of this Agreement, any Additional Commitment Lenders, and their respective successors and assigns.

“ Letter of Credit Maturity Date ” means the fifth Business Day prior to the Facility Termination Date.

“ Letter of Credit Notice ” has the meaning given to such term in Section 3.2 .

“ Letter of Credit Subcommitment ” means $35,000,000 or, if less, the Aggregate Commitments at the time of determination, as such amount may be reduced at or prior to such time pursuant to the terms hereof.

“ Letters of Credit ” is defined in Section 3.1 .

“ LIBOR Market Index Rate Loan ” means a Loan that bears interest at the LIBOR Market Index Rate plus the Applicable Margin.

“ LIBOR Rate ” means:

(a) with respect to each LIBOR Rate Loan comprising part of the same borrowing for any Interest Period, an interest rate per annum obtained by dividing (i) (y) the rate of interest appearing on Reuters Screen LIBOR01 Page (or any successor page) that represents an average British Bankers Association Interest Settlement Rate for Dollar deposits (“ BBA LIBOR ”) or (z) if such rate is not available at such time for any reason, the rate per annum determined by the Administrative Agent to be the rate at which deposits in Dollars for delivery on the first day of such Interest Period in same day funds in the approximate amount of the LIBOR Rate Loan being made, continued or converted and with a term equivalent to such Interest Period would be offered by Wells Fargo’s London Branch to major banks in the London interbank eurodollar market at their request at approximately 11:00 a.m., London time, two Business Days prior to the first day of such Interest Period, by (ii) the amount equal to 1.00 minus the Reserve Requirement (expressed as a decimal) for such Interest Period.

“ LIBOR Rate Loan ” means a Loan which bears interest at the LIBOR Rate plus the Applicable Margin requested by the Borrower pursuant to Section 2.2 .

“ Loan ” means, with respect to a Lender, any Revolving Loan or Swingline Loan made by such Lender pursuant to Article II (and, in the case of a loan made pursuant to Section 2.2.2 , any conversion or continuation thereof).

“ Loan Document Related Claim ” means any claim or dispute (whether arising under Applicable Law, including any “environmental” or similar law, under Contract or otherwise and, in the case of any proceeding relating to any such claim or dispute, whether civil, criminal, administrative or otherwise) in any way arising out of, related to, or connected with, the Loan Documents, the relationships established thereunder or any actions or conduct thereunder or with respect thereto, whether such claim or dispute arises or is asserted before or after the Agreement Date or before or after the Repayment Date.

“ Moody’s ” means Moody’s Investors Service, Inc.

“ Notes ” means, collectively, all of the Revolving Notes and all of the Swingline Notes that may be issued hereunder, and “ Note ” means any one of the Notes.

“ OFAC ” means the U.S. Department of the Treasury’s Office of Foreign Assets Control, and any successor thereto.

“ Other Connection Taxes ” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between such Recipient and the jurisdiction imposing such Tax (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to or enforced any Loan Document, or sold or assigned an interest in any Loan or Loan Document).

“ Parent ” means WGL Holdings, Inc., a Virginia and District of Columbia corporation.

“ Participants ” is defined in Section 12.2.1 .

“ Participant Register ” has the meaning given to such term in Section 12.2.1 .

“ Passive Arrangers Fee Letter ” means the letter to Borrower from BCM and TD dated as of February 15, 2012.

“ Patriot Act ” is defined in Section 15.5 .

“ Payment Date ” means the last day of each March, June, September and December.

“ PBGC ” means the Pension Benefit Guaranty Corporation.

“ Pricing Schedule ” means Schedule 1.1-A attached hereto.

“ Prior Termination Date ” is defined in Section 2.6.3 .

“ Property ” of a Person means any and all property, whether real, personal, tangible, intangible, or mixed, of such Person, or other assets owned, leased or operated by such Person.

“ Purchasers ” is defined in Section 12.3.1 .

“ Recipient ” means (i) the Administrative Agent, (ii) any Lender and (iii) the Issuing Bank, as applicable.

“ Refunded Swingline Loans ” is defined in Section 2.2.4 .

“ Register ” is defined in Section 12.3.4 .

“ Regulation D ” means Regulation D of the Board of Governors of the Federal Reserve System.

“ Regulation U ” means Regulation U of the Board of Governors of the Federal Reserve System.

“ Regulation X ” means Regulation X of the Board of Governors of the Federal Reserve System.

“ Reimbursement Obligation ” is defined in Section 3.4 .

“ Release ” means “release”, as such term is defined in CERCLA.

“ Reportable Event ” means a reportable event, as defined in Section 4043 of ERISA and the regulations issued under such section, with respect to a Plan, excluding, however, such events as to which the PBGC has by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event; provided, however , that a failure to meet the minimum funding standard of Section 412 of the Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or Section 412(d) of the Code.

“ Resignation Effective Date ” is defined in Section 10.6.1 .

“ Resource Conservation and Recovery Act ” means the Resource Conservation and Recovery Act, 42 U.S.C. Section 690, et seq.

“ Revolving Loan ” is defined in Section 2.1.3 .

“ Revolving Note ” means a promissory note issued at the request of a Lender pursuant to Section 2.11.4, substantially in the form of Exhibit 2.11.4-A .

“ S&P ” means Standard and Poor’s Ratings Services, a division of The McGraw Hill Companies, Inc.

“ Sale and Leaseback Transaction ” means any sale or other transfer of Property by any Person with the intent to lease such Property as lessee.

“ Sanctioned Person ” means (i) a Person named on the list of Specially Designated Nationals or Blocked Persons maintained by OFAC available at http://www.treasury.gov/resource-center/sanctions/SDN-List , or as otherwise published from time to time, or (ii) (A) an agency of the government of a Sanctioned Country, (B) an organization controlled by a Sanctioned Country, or (C) a Person resident in a Sanctioned Country, to the extent subject to a sanctions program administered by OFAC.

“ SEC ” means the Securities and Exchange Commission.

“ SEC Disclosure Documents ” means all reports on Forms 10K, 10Q, and 8K filed by the Borrower with the SEC.

“ Single Employer Plan ” means a Plan maintained by the Borrower or any member of the Controlled Group for employees of the Borrower or any member of the Controlled Group.

“ Swingline Commitment ” means $35,000,000 or, if less, the Aggregate Commitments at the time of determination, as such amount may be reduced at or prior to such time pursuant to the terms hereof.

“ Swingline Lender ” means Wells Fargo in its capacity as maker of Swingline Loans, and its successors in such capacity.

“ Swingline Termination Date ” means the date that is five Business Days prior to the Repayment Date.

“ Swingline Note ” means a promissory note issued at the request of a Lender pursuant to Section 2.11.4 , substantially in the form of Exhibit 2.11.4-B .

“ Syndication Agent ” means BTMU, in its capacity as syndication agent hereunder.

“ TD ” means The TD Bank, N.A., and its successors.

“ Transferee ” is defined in Section 12.4 .

“ Type ” means, with respect to any Revolving Loan, its nature as a Base Rate Loan or a LIBOR Rate Loan.

“ Unmatured Default ” means an event that, but for the lapse of time or the giving of notice, or both, would constitute an Event of Default.

“ U.S. Borrower ” means any Borrower that is a U.S. Person.

“ U.S. Federal Income Taxes ” means any U.S. federal Taxes described in Section 871(a) or 881(a) of the Code, or any successor provision (or any withholding with respect to such Taxes).

“ U.S. Person ” means any Person that is a “United States Person” as defined in section 7701(a)(30) of the Code.

“ U.S. Tax Compliance Certificate ” has the meaning assigned to such term in Section 2.19.7(ii)(b)(3) .

“ Welfare Plan ” means a “welfare plan”, as such term is defined in section 3(1) of ERISA.

“ Wells Fargo ” means Wells Fargo Bank, National Association, and its successors.

“ Wells Fargo Securities ” means Wells Fargo Securities, LLC, and its successors.

“ Withholding Agent ” means the Borrower and the Administrative Agent.

1.3 Other Interpretive Provisions .

(iii) Whenever the context so requires, the neuter gender includes the masculine or feminine, the masculine gender includes the feminine, and the singular number includes the plural, and vice versa.

context requires otherwise (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein), (b) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights.

(v) Each authorization in favor of the Administrative Agent, the Lenders or any other Person granted by or pursuant to this Agreement shall be deemed to be irrevocable and coupled with an interest.

(vii) Except as otherwise specified herein, all references to the time of day shall be deemed to be to New York City time as then in effect.

ARTICLE II

CREDIT FACILITY

2.1 The Facility .

Revolving Loans made pursuant to such borrowing), (i) the amount of all outstanding Credit Exposure of any Lender exceed such Lender’s Commitment or (ii) the aggregate principal amount of all outstanding Credit Exposure exceed the Aggregate Commitments. Subject to and on the terms and conditions of this Agreement, the Borrower may borrow, repay and reborrow Revolving Loans.

2.1.4 Swingline Facility . The Swingline Lender agrees, subject to and on the terms and conditions of this Agreement, to make loans (each, a “ Swingline Loan ,” and collectively, the “ Swingline Loans ”) to the Borrower, from time to time on any Business Day during the period from the Agreement Date to but not including the Swingline Termination Date (or, if earlier, the Facility Termination Date), in an aggregate principal amount at any time outstanding not exceeding the Swingline Commitment. Swingline Loans may be made even if the aggregate principal amount of Swingline Loans outstanding at any time, when added to the aggregate Credit Exposure of the Swingline Lender in its capacity as a Lender outstanding at such time, would exceed the Swingline Lender’s own Commitment at such time, but provided that no borrowing of Swingline Loans shall be made if, immediately after giving effect thereto (i) the amount of all outstanding Credit Exposure of any Lender exceed such Lender’s Commitment or (ii) the aggregate principal amount of all outstanding Credit Exposure exceeds the Aggregate Commitments, and provided further that the Swingline Lender shall not make any Swingline Loan if any Lender is at that time a Defaulting Lender, unless the Swingline Lender has entered into arrangements satisfactory to the Swingline Lender (in its sole discretion) with the Borrower or such Lender to eliminate the Swingline Lender’s actual or potential Fronting Exposure (after giving effect to Section 2.22.1(iv) ) with respect to the Defaulting Lender arising from either the Swingline Loan then proposed to be made or that the Swingline Loan and all other Swingline Loans as to which the Swingline Lender has actual or potential Fronting Exposure, as it may elect in its sole discretion. Subject to and on the terms and conditions of this Agreement, the Borrower may borrow, repay (including by means of a borrowing of Revolving Loans pursuant to Section 2.2.3) and reborrow Swingline Loans. All Swingline Loans shall bear interest at the LIBOR Market Index Rate plus the Applicable Margin.

2.2 Loans .

2.2.2 Borrowing of Revolving Loans . In order to request Revolving Loans (other than (i) borrowings of Swingline Loans, which shall be made pursuant to Section 2.2.3 , (ii) borrowings for the purpose of repaying Refunded Swingline Loans, which shall be made pursuant to Section 2.2.4 , (iii) borrowings for the purpose of paying unpaid Reimbursement Obligations, which shall be made pursuant to Section 3.4 , and (iv) borrowings involving continuations or conversions of outstanding Loans, which shall be made pursuant to Section 2.2.7 ), the Borrower shall give the Administrative Agent irrevocable written notice (a “ Borrowing Notice ”), not later than 11:00 a.m. on the requested Borrowing Date of each Base

Rate Loan and at least three Business Days before the requested Borrowing Date for each LIBOR Rate Loan. A Borrowing Notice shall be in the form of Exhibit 2.2.2 hereto and shall specify:

(i) the requested Borrowing Date, which shall be a Business Day, of such Loan,

(ii) the aggregate amount of such Loan,

(iii) the Type of Loan selected, and

(iv) in the case of each LIBOR Rate Loan, the Interest Period applicable thereto (which may not end after the Facility Termination Date).

(i) the requested Borrowing Date, which shall be a Business Day, of such Loan, and

(ii) the aggregate amount of such Loan.

2.2.4 Refunded Swingline Loans . With respect to any outstanding Swingline Loans, the Swingline Lender may at any time (whether or not an Event of Default has occurred and is continuing) in its sole and absolute discretion, and is hereby authorized and empowered by the Borrower to, cause a Borrowing of Revolving Loans to be made for the purpose of repaying such Swingline Loans by delivering to the Administrative Agent (if the Administrative Agent is not also the Swingline Lender) and each other Lender (on behalf of, and with a copy to, the Borrower), not later than 11:00 a.m. on the proposed Borrowing Date therefor, a notice (which shall be deemed to be a Borrowing Notice given by the Borrower) requesting the Lenders to make Revolving Loans (which shall be made initially as Base Rate Loans) on such Borrowing Date in an aggregate amount equal to the amount of such Swingline Loans (the “ Refunded Swingline Loans ”) outstanding on the date such notice is given that the Swingline Lender requests to be repaid. To the extent the Lenders have made such amounts available to the Administrative Agent as provided in Section 2.3 , the Administrative Agent will make the aggregate of such amounts available to the Swingline Lender in like funds as received by the Administrative Agent, which shall apply such amounts in repayment of the Refunded Swingline Loans. Notwithstanding any provision of this Agreement to the contrary, on the relevant Borrowing Date, the Refunded Swingline Loans (including the Swingline Lender’s ratable share thereof, in its capacity as a Lender) shall be deemed to be repaid with the proceeds of the Revolving Loans made as provided above (including a Revolving Loan deemed to have been made by the Swingline Lender), and such Refunded Swingline Loans deemed to be so repaid shall no longer be outstanding as Swingline Loans but shall be outstanding as Revolving Loans. If any portion of any such amount repaid (or deemed to be repaid) to the Swingline Lender shall be recovered by or on behalf of the Borrower from the Swingline Lender in any bankruptcy, insolvency or similar proceeding or otherwise, the loss of the amount so recovered shall be shared ratably among all the Lenders in the manner contemplated by Section 2.3 .

by or on behalf of the Borrower in respect of a Swingline Loan, the Swingline Lender will pay to each Lender that has acquired a participation therein such Lender’s Applicable Percentage of such payment.

2.2.6 Notwithstanding any provision of this Agreement to the contrary, the obligation of each Lender (other than the Swingline Lender) to make Revolving Loans for the purpose of repaying any Refunded Swingline Loans pursuant to Section 2.2.4 and each such Lender’s obligation to purchase a participation in any unpaid Swingline Loans pursuant to Section 2.2.5 shall be absolute and unconditional and shall not be affected by any circumstance or event whatsoever, including, without limitation, (i) any set-off, counterclaim, recoupment, defense or other right that such Lender may have against the Swingline Lender, the Administrative Agent, the Borrower or any other Person for any reason whatsoever, (ii) the occurrence or continuance of any Unmatured Default or Event of Default, (iii) the failure of the amount of such borrowing of Revolving Loans to meet the minimum borrowing amount specified in Section 2.2.2 , or (iv) the failure of any conditions set forth in Section 4.2 or elsewhere herein to be satisfied.

2.2.7 Conversion and Continuation of Outstanding Loans .

(a) the requested date, which shall be a Business Day, of such conversion or continuation,

(b) the aggregate amount and Type of the Loan which is to be converted or continued, and

(c) the amount of such Loan(s) which is to be converted or continued as a LIBOR Rate Loan and the duration of the Interest Period applicable thereto.

such LIBOR Rate Loans to less than $5,000,000 (or to any greater amount not a whole multiple of $1,000,000 in excess thereof). Except as otherwise provided in Section 2.18.6 , LIBOR Rate Loans may be converted into Base Rate Loans only on the last day of the Interest Period Applicable thereto (and in any event, if a LIBOR Rate Loan is converted into a Base Rate Loan on any day other than the last day of the Interest Period applicable thereto, the Borrower will pay, upon such conversion, all amounts required under Section 2.18.1 to be paid as a consequence thereof).

2.3 Funding by Lenders; Disbursement to the Borrower.

2.4 Fees . The Borrower agrees to pay:

2.4.1 Arranger Fees . (i) To Wells Fargo Securities and BTMU, for their own respective accounts, on the Agreement Date, the fees required under the Active Arrangers Fee Letter and (ii) BCM and TD, for their respective accounts, on the Agreement Date, the fees required under the Passive Arrangers Fee Letter;

2.4.3 Letter of Credit Fees . To the Administrative Agent, for the account of each Lender, a letter of credit fee for each calendar quarter (or portion thereof) in respect of all Letters of Credit outstanding during such quarter, at a rate per annum equal to the Applicable Margin then in effect during such quarter for LIBOR Rate Loans on such Lender’s pro rata share of the daily average aggregate Stated Amount of such Letters of Credit, payable in arrears on (i) the last Business Day of each calendar quarter, beginning with the first such day to occur after the Agreement Date, and (ii) on the later of the Facility Termination Date and the date of termination of the last outstanding Letter of Credit; provided , however , that any letter of credit fees otherwise payable for the account of a Defaulting Lender with respect to any Letter of Credit as to which such Defaulting Lender has not provided Cash Collateral satisfactory to the Issuing Bank pursuant to Section 3.1.1 shall be payable, to the maximum extent permitted by Applicable Law, to the other Lenders in accordance with the upward adjustments in their respective pro rata shares allocable to such Letter of Credit pursuant to Section 2.22.1(iv) , with the balance of such fee, if any, payable to the Issuing Bank for its own account;

None of the fees payable under this Section 2.4 shall be refundable in whole or in part.

2.5 Reductions in Aggregate Commitments; Increases in Aggregate Commitments.

promptly notify each Lender of the contents thereof and the amount to which such Lender’s Commitment is to be reduced. All accrued Facility Fees shall be payable on the effective date of any termination of the obligations of the Lenders to make Loans hereunder. The amount of any termination or reduction made under this Section 2.5.1 may not thereafter be reinstated.

2.5.2 Increases . At any time following the Agreement Date and prior to the Facility Termination Date, the Aggregate Commitments may, at the option of the Borrower, be increased by a total amount not in excess of $100,000,000, either by one or more then-existing Lenders increasing their Commitments or by new Lenders establishing such additional Commitments (each such increase by either means, a “ Commitment Increase ”, and each such Lender increasing its Commitment or new Lender, an “ Additional Commitment Lender ”); provided that (i) each new Lender shall be reasonably acceptable to the Administrative Agent, (ii) no Unmatured Default or Event of Default shall exist immediately prior to or after the effective date of such Commitment Increase, (iii) all representations and warranties made by the Borrower in this Agreement as of the date of such Commitment Increase are true and correct in all material respects, (iv) each such Commitment Increase shall be in an aggregate amount not less than $10,000,000 or a whole multiple of $5,000,000 in excess thereof, or, if less, the maximum remaining amount that the Aggregate Commitments may be increased pursuant to this Section 2.5.2 , (v) no such Commitment Increase shall be permitted without all required Governmental Approvals and (vi) no such Commitment Increase shall become effective unless and until the Borrower, the Administrative Agent and the Additional Commitment Lenders shall have executed and delivered an agreement substantially in the form of Exhibit 2.5.2 (a “ Commitment Increase Supplement ”). On the effective date of such Commitment Increase, each Additional Commitment Lender shall purchase, by assignment, from each other existing Lender the portion of such other Lender’s Credit Exposure outstanding at such time such that, after giving effect to such assignments, the respective aggregate amount of Credit Exposure of each Lender shall be equal to such Lender’s Applicable Percentage (as adjusted pursuant hereto) of the aggregate Credit Exposure outstanding. The purchase price for the Loans so assigned shall be the principal amount of the Loans so assigned plus the amount of accrued and unpaid interest thereon on the date of assignment. Upon payment of such purchase price, each Lender shall be automatically deemed to have sold and made such an assignment to such Additional Commitment Lender and shall, to the extent of the interest assigned, be released from its obligations under this Agreement, and such Additional Commitment Lender shall be automatically deemed to have purchased and assumed such an assignment from each other Lender and, if not already a Lender hereunder, shall be a party hereto and, to the extent of the interest assigned, have the rights and obligations of a Lender under this Agreement.

2.6 Extension Option . After the first anniversary of the Agreement, and then no earlier than 60 days and no later than 30 days prior to each anniversary of the Agreement Date, but on no more than two occasions, the Borrower may, by written notice to the Administrative Agent, request that the Lenders extend the Facility Termination Date for an additional year. Any election by a Lender to extend the term of its Commitment pursuant to such a request shall be at such Lender’s sole discretion and subject to such credit evaluation as such Lender may determine.

2.7 Repayments; Optional Principal Prepayments.

(b) The Borrower may from time to time pay, without penalty or premium, all outstanding Loans, or any portion of the outstanding Loans, on any Business Day upon notice to the Administrative Agent one Business Day prior to each intended prepayment of Alternative Base Rate Loans and three Business Days prior to each intended prepayment of LIBOR Rate Loans; provided that (i) each partial payment of LIBOR Rate Loans shall be in the minimum amount of $5,000,000 (and a whole multiple of $1,000,000 if in excess thereof), and each partial payment of Base Rate Loans shall be in the minimum amount of $3,000,000 (and a whole multiple of $1,000,000 if in excess thereof) ($100,000 and $100,000, respectively, in the case of Swingline Loans), (ii) no partial payment of LIBOR Rate Loans made pursuant to a single borrowing shall reduce the aggregate outstanding principal amount of the remaining LIBOR Rate Loans under such borrowing to less than $5,000,000 (and a whole multiple of $1,000,000 if in excess thereof), and (iii) unless made together with all amounts required under Section 2.18.1 to be paid as a consequence of such prepayment, a prepayment of a LIBOR Rate Loan may be made only on the last day of the Interest Period applicable thereto. Each such notice of prepayment shall be in the form of Exhibit 2.7 and shall specify (i) the date such prepayment is to be made and (ii) the amount and Type of the Loans to be prepaid and, in the case of LIBOR Rate Loans, the last day of the applicable Interest Period of the LIBOR Rate Loans to be prepaid. Upon receipt of any such notice, the Administrative Agent shall promptly notify each Lender of the contents thereof and the amount and Type of the Loans to be prepaid and, in the case of LIBOR Rate Loans, the last day of the applicable Interest Period of each LIBOR Rate Loan of such Lender to be prepaid. Amounts to be prepaid shall irrevocably be due and payable on the date specified in the applicable notice of prepayment, together with interest thereon as provided in Section 2.13.

2.9 Rates Applicable After Default . During the continuance of an Unmatured Default the Required Lenders may, at their option, by notice to the Borrower (which notice may be

revoked at the option of the Required Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to changes in interest rates), declare that no Loan may be made as, converted into, or continued as a LIBOR Rate Loan. During the continuance of an Event of Default the Required Lenders may, at their option, by notice to the Borrower (which notice may be revoked at the option of the Required Lenders notwithstanding any provision of Section 8.2 requiring unanimous consent of the Lenders to changes in interest rates), declare that each Loan and all other amounts payable under the Loan Documents shall bear interest at the Overdue Rate; provided that, during the continuance of an Event of Default under Sections 7.1 , 7.7 or 7.8 , any amount payable under the Loan Documents not paid when due (whether at maturity, by reason of notice of prepayment or otherwise) shall bear interest at a rate per annum equal to the Overdue Rate without any election or action on the part of the Administrative Agent or any Lender.

2.10 Method of Payment.

2.11 Evidence of Indebtedness.

2.11.2 Administrative Agent’s Evidence of Indebtedness. The Administrative Agent shall also maintain the Register of accounts pursuant to Section 12.3.4 in which it will record (a) the amount of each Loan made hereunder, the Type thereof and the Interest Period with respect thereto, (b) the amount of any principal or interest due and payable or to become due and payable from the Borrower to each Lender hereunder and (c) the amount of any sum received by the Administrative Agent hereunder from the Borrower and each Lender’s share thereof.

2.11.4 Notes Upon Request . Any Lender may request that its Loans be evidenced by Notes. In such event, the Borrower shall prepare, execute and deliver to such Lender (a) in the case of Revolving Loans, a Revolving Note in the form of Exhibit 2.11.4-A , payable to the order of such Lender and (b) in the case of Swingline Loans, a Swingline Note in the form of Exhibit 2.11.4-B . Thereafter, the Loans represented by such Note and interest thereon shall at all times (including after any assignment pursuant to Section 12.3 ) be evidenced by a Note payable to the order of the payee named therein or any assignee pursuant to Section 12.3 , except to the extent that any such Lender or assignee subsequently returns any such Note for cancellation and requests that such Loans once again be evidenced as described in paragraphs 2.11.1 and 2.11.1 above.

2.18 Increased Costs; Change in Circumstances; Illegality.

2.18.1 Increased Costs Generally . If any Change in Law shall:

2.18.4 Delay in Requests . Failure or delay on the part of any Lender or any Issuing Bank to demand compensation pursuant to the foregoing provisions of this Section shall

not constitute a waiver of such Lender’s or such Issuing Bank’s right to demand such compensation; provided that the Borrower shall not be required to compensate a Lender or an Issuing Bank pursuant to the foregoing provisions of this Section 2.18 for any increased costs incurred or reductions suffered more than nine months prior to the date that such Lender or such Issuing Bank, as the case may be, notifies the Borrower of the Change in Law giving rise to such increased costs or reductions and of such Lender’s or such Issuing Bank’s intention to claim compensation therefor (except that, if the Change in Law giving rise to such increased costs or reductions is retroactive, then the nine-month period referred to above shall be extended to include the period of retroactive effect thereof).

outstanding LIBOR Rate Loans and LIBOR Market Index Rate Loans shall automatically, immediately in the case of LIBOR Market Index Rate Loans and on the expiration date of the applicable Interest Period in the case of any LIBOR Rate Loan (or, to the extent any such LIBOR Rate Loan may not lawfully be maintained as a LIBOR Rate Loan until such expiration date, upon such notice) and to the extent not sooner prepaid, be converted into a Base Rate Loan, (ii) the obligation of such Lender to make, to convert Base Rate Loans into, or to continue, LIBOR Rate Loans shall be suspended (including pursuant to any borrowing for which the Administrative Agent has received a Borrowing Notice but for which the Borrowing Date has not arrived), and (iii) any Borrowing Notice or Conversion/Continuation Notice given at any time thereafter with respect to LIBOR Rate Loans (or Swingline Borrowing Notice given with respect to any Swingline Loans) shall, as to such Lender, be deemed to be a request for a Base Rate Loan, in each case until such Lender shall have determined that the circumstances giving rise to such suspension no longer exist and shall have so notified the Administrative Agent, and the Administrative Agent shall have so notified the Borrower.

2.19 Taxes .

2.19.1 Issuing Bank . For purposes of this Section 2.19 , the term “ Lender ” includes any Issuing Bank.

2.19.5 Indemnification by the Lenders . Each Lender shall severally indemnify the Administrative Agent, within 10 days after demand therefor, for (i) any Indemnified Taxes attributable to such Lender (but only to the extent that the Borrower has not already indemnified the Administrative Agent for such Indemnified Taxes and without limiting the obligation of the Borrower to do so), (ii) any Taxes attributable to such Lender’s failure to comply with the provisions of Section 12.2 relating to the maintenance of a Participant Register and (iii) any Excluded Taxes attributable to such Lender, in each case, that are payable or paid by the Administrative Agent in connection with any Loan Document, and any reasonable expenses arising therefrom or with respect thereto, whether or not such Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Lender by the Administrative Agent shall be conclusive absent manifest error. Each Lender hereby authorizes the Administrative Agent to set off and apply any and all amounts at any time owing to such Lender under any Loan Document or otherwise payable by the Administrative Agent to the Lender from any other source against any amount due to the Administrative Agent under this Section 2.19.5.

2.19.7 Status of Lenders .

(ii) Without limiting the generality of the foregoing, in the event that the Borrower is a U.S. Borrower,

(2) executed originals of IRS Form W-8ECI;

reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by Applicable Law to permit the Borrower or the Administrative Agent to determine the withholding or deduction required to be made; and

(d) if a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by Applicable Law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this clause (D), “FATCA” shall include any amendments made to FATCA after the date of this Agreement.

2.19.8 Treatment of Certain Refunds. If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 2.19 (including by the payment of additional amounts pursuant to this Section 2.19 ), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this Section 2.19.8 (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this Section 2.19.8 , in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this Section 2.19.8 the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the indemnification payments or additional amounts giving rise to such refund had never been paid. This paragraph shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.

2.20 Compensation . The Borrower will compensate each Lender upon demand for all losses, expenses and liabilities (including, without limitation, any loss, expense or liability incurred by reason of the liquidation or reemployment of deposits or other funds required by such Lender to fund or maintain LIBOR Rate Loans) that such Lender may incur or sustain (i) if for any reason (other than a default by such Lender) a borrowing or continuation of, or conversion into, a LIBOR Rate Loan does not occur on a date specified therefor in a Borrowing Notice or Conversion/Continuation Notice, (ii) if any repayment, prepayment or conversion of any LIBOR Rate Loan occurs on a date other than the last day of an Interest Period applicable thereto (including as a consequence of any assignment made pursuant to Section 2.21.1 or any acceleration of the maturity of the Loans pursuant to ARTICLE VIII ), (iii) if any prepayment of any LIBOR Rate Loan is not made on any date specified in a notice of prepayment given by the Borrower or (iv) as a consequence of any other failure by the Borrower to make any payments with respect to any LIBOR Rate Loan when due hereunder. Calculation of all amounts payable to a Lender under this Section 2.20 shall be made as though such Lender had actually funded its relevant LIBOR Rate Loan through the purchase of a eurodollar deposit bearing interest at the LIBOR Rate in an amount equal to the amount of such LIBOR Rate Loan, having a maturity comparable to the relevant Interest Period; provided , however , that each Lender may fund its LIBOR Rate Loans in any manner it sees fit and the foregoing assumption shall be utilized only for the calculation of amounts payable under this Section 2.20 . A certificate (which shall be in reasonable detail) showing the bases for the determinations set forth in this Section 2.20 by any Lender as to any additional amounts payable pursuant to this Section 2.20 shall be submitted by such Lender to the Borrower either directly or through the Administrative Agent. Determinations set forth in any such certificate made in good faith for purposes of this Section 2.20 of any such losses, expenses or liabilities shall be conclusive absent manifest error.

2.21 Mitigation Obligations; Replacement of Lenders.

the Borrower may, at its sole expense and effort, upon notice to such Lender and the Administrative Agent, require such Lender to assign and delegate, without recourse (in accordance with and subject to the restrictions contained in, and consents required by, Section 12.3 ), all of its interests, rights (other than its existing rights to payments pursuant to Section 2.18 or 2.19 ) and obligations under this Agreement and the related Loan Documents to an Eligible Assignee that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that :

(i) the Borrower shall have paid to the Administrative Agent the assignment fee (if any) specified in Section 12.3.2 ;

(iv) such assignment does not conflict with Applicable Law; and

(v) in the case of any assignment resulting from a Lender becoming a Non- Consenting Lender, the applicable assignee shall have consented to the applicable amendment, waiver or consent.

2.22 Defaulting Lenders.

(a) first , to the payment of any amounts owing by such Defaulting Lender to the Administrative Agent hereunder;

(b) second , to the payment on a pro rata basis of any amounts owing by such Defaulting Lender to any Issuing Bank or the Swingline Lender hereunder;

(h) eighth , to such Defaulting Lender or as otherwise directed by a court of competent jurisdiction;

(iii) Any Defaulting Lender shall be entitled to receive any Facility Fee for any period during which such Lender is a Defaulting Lender only to the extent allocable to the sum of (1)

the outstanding amount of the Revolving Loans funded by it and (2) its Letter of Credit Exposure and Swingline Exposure for which it has provided Cash Collateral pursuant to Section 2.22.3 (and the Borrower shall (A) be required to pay the applicable Issuing Bank and the Swingline Lender the amount of such fee allocable to its Fronting Exposure arising from such Defaulting Lender and (B) not be required to pay the remaining amount of such fee that otherwise would have been required to have been paid to such Defaulting Lender).

(iv) All or any part of such Defaulting Lender’s Letter of Credit Exposure and Swingline Exposure shall automatically (effective on the day such Lender becomes a Defaulting Lender) be reallocated among the non-Defaulting Lenders in accordance with their respective Applicable Percentages (calculated without regard to such Defaulting Lender’s Commitment) but only to the extent that (x) no Unmatured Default or Event of Default shall have occurred and be continuing (and, unless the Borrower shall have otherwise notified the Administrative Agent at the time, the Borrower shall be deemed to have represented and warranted that such condition is satisfied at such time) and (y) such reallocation does not cause the Credit Exposure of any non-Defaulting Lender to exceed such non-Defaulting Lender’s Commitment.

(v) If the reallocation described in Section 2.22.1(iv) cannot, or can only partially, be effected, the Borrower shall, without prejudice to any right or remedy available to it hereunder or under law, within one Business Day following notice by the Administrative Agent, (x) first, prepay Swingline Loans in an amount equal to the Swingline Lenders’ Fronting Exposure and (y) second , Cash Collateralize each Issuing Banks’ Fronting Exposure in accordance with the procedures set forth in Section 2.22.3 .

2.22.2 If the Borrower, the Administrative Agent, the Issuing Banks and the Swingline Lender agree in writing in their sole discretion that a Defaulting Lender should no longer be deemed to be a Defaulting Lender, the Administrative Agent will so notify the parties hereto, whereupon as of the effective date specified in such notice and subject to any conditions set forth therein (which may include arrangements with respect to any Cash Collateral), such Lender will, to the extent applicable, purchase that portion of outstanding Loans of the other Lenders or take such other actions as the Administrative Agent may determine to be necessary to cause the Revolving Loans and funded and unfunded participations in Letters of Credit and Swingline Loans to be held by the Lenders in accordance with their respective Applicable Percentages (without giving effect to Section 2.22.1(iv)) , whereupon such Lender will cease to be a Defaulting Lender; provided that no adjustments will be made retroactively with respect to fees accrued or payments made by or on behalf of the Borrower while such Lender was a Defaulting Lender; provided further that, except to the extent otherwise expressly agreed by the affected parties, no change hereunder from Defaulting Lender to Lender will constitute a waiver or release of any claim of any party hereunder arising from such Lender’s having been a Defaulting Lender.

ARTICLE III

LETTERS OF CREDIT

of (i) the Letter of Credit Maturity Date and (ii) the Repayment Date, and upon request by the Borrower in accordance with the provisions of Section 3.1 , issue for the account of the Borrower one or more irrevocable standby letters of credit denominated in Dollars and in a form customarily used or otherwise approved by such Issuing Bank (together with all amendments, modifications and supplements thereto, substitutions therefor and renewals and restatements thereof, collectively, the “ Letters of Credit ”). The Stated Amount of each Letter of Credit shall not be less than such amount as may be acceptable to the applicable Issuing Bank.Notwithstanding the foregoing:

3.4 Reimbursement . The Borrower hereby agrees to reimburse the applicable Issuing Bank by making payment to the Administrative Agent, for the account of such Issuing Bank, in immediately available funds, for any payment made by such Issuing Bank under any Letter of Credit issued by it (each such amount so paid until reimbursed, together with interest thereon payable as provided hereinbelow, a “ Reimbursement Obligation ”) immediately upon, and in any event on the same Business Day as, the making of such payment by such Issuing Bank (the “ Honor Date ”), provided that any such Reimbursement Obligation shall be deemed timely satisfied (but nevertheless subject to the payment of interest thereon as provided herein below) if satisfied pursuant to a borrowing of Revolving Loans made on the date of such payment by the Issuing Bank, as set forth more completely in Section 3.5 ), together with interest on the amount so paid by such Issuing Bank, to the extent not reimbursed prior to 2:00 p.m. on the Honor Date, for the period from the Honor Date to the date the Reimbursement Obligation created thereby is satisfied, at the Alternate Base Rate plus the Applicable Margin plus 2% per annum as in effect from time to time during such period, such interest also to be payable on demand. Each Issuing Bank will provide the Administrative Agent and the Borrower with prompt notice of any payment or disbursement made or to be made under any Letter of Credit issued by it, although the failure to give, or any delay in giving, any such notice shall not release, diminish or otherwise affect the Borrower’s obligations under this Section 3.4 or any other provision of this Agreement. The Administrative Agent will promptly pay to the applicable Issuing Bank any such amounts received by it under this Section 3.4 .

3.5 Payment by Revolving Loans .

Credit in the amount of its Applicable Percentage of the Unreimbursed Amount that is not so refinanced, which funded risk participation shall be due and payable on demand (together with interest) and shall bear interest at the Overdue Rate.

3.6 Payment to Lenders . Whenever any Issuing Bank receives a payment in respect of a Reimbursement Obligation as to which the Administrative Agent has received, for the account of such Issuing Bank, any payments from the Lenders pursuant to Section 3.5, such Issuing Bank will promptly pay to the Administrative Agent, and the Administrative Agent will promptly pay to each Lender that has paid its ratable share thereof, in immediately available funds, an amount equal to such Lender’s ratable share (based on the proportionate amount funded by such Lender to the aggregate amount funded by all Lenders) of such Reimbursement Obligation.

3.7.1 Any lack of validity or enforceability of this Agreement, any of the other Loan Documents or any documents or instruments relating to any Letter of Credit;

3.7.6 The exchange, release, surrender or impairment of any collateral or other security for the Obligations;

3.7.7 The occurrence of any Unmatured Default or Event of Default; or

Any action taken or omitted to be taken by any Issuing Bank under or in connection with any Letter of Credit, if taken or omitted in the absence of gross negligence or willful misconduct, shall be binding upon the Borrower and each Lender and shall not create or result in any liability of such Issuing Bank to the Borrower or any Lender. It is expressly understood and agreed that, for purposes of determining whether a wrongful payment under a Letter of Credit resulted from any Issuing Bank’s gross negligence or willful misconduct, (i) such Issuing Bank’s acceptance of documents that appear on their face to comply with the terms of such Letter of Credit, without responsibility for further investigation, regardless of any notice or information to the contrary, (ii) such Issuing Bank’s exclusive reliance on the documents presented to it under such Letter of Credit as to any and all matters set forth therein, including the amount of any draft presented under such Letter of Credit, whether or not the amount due to the beneficiary thereunder equals the amount of such draft and whether or not any document presented pursuant to such Letter of Credit proves to be insufficient in any respect (so long as such document appears on its face to comply with the terms of such Letter of Credit), and whether or not any other statement or any other document presented pursuant to such Letter of Credit proves to be forged or invalid or any statement therein proves to be inaccurate or untrue in any respect whatsoever, and (iii) any noncompliance in any immaterial respect of the documents presented under such Letter of Credit with the terms thereof shall, in each case, be deemed not to constitute gross negligence or willful misconduct of such Issuing Bank.

obligations thereunder shall be held by the Administrative Agent, for the benefit of the Borrower, to be applied against the Obligations in such order and manner as the Administrative Agent may direct.

3.9 The Issuing Bank . The Issuing Banks shall act on behalf of the Lenders with respect to any Letters of Credit issued by it and the documents associated therewith, and the Issuing Banks shall have all of the rights, benefits and immunities (a) provided to the Administrative Agent in ARTICLE X with respect to any acts taken or omissions suffered by it in connection with Letters of Credit issued by it or proposed to be issued by it and any documents pertaining to such Letters of Credit as fully as if the term “Administrative Agent” as used in ARTICLE X included the Issuing Banks with respect to such acts or omissions, and (b) as additionally provided herein with respect to the Issuing Banks.

ARTICLE IV

CONDITIONS PRECEDENT

(1) Fully executed counterparts of this Agreement from the Borrower, each Lender, the Issuing Bank, the Swingline Lender and the Administrative Agent.

(4) An incumbency certificate, executed by the Secretary or Assistant Secretary of the Borrower, which shall identify by name and title and

bear the signatures of the Authorized Officers and any other officers of the Borrower authorized to sign the Loan Documents, upon which certificate the Administrative Agent and the Lenders shall be entitled to rely until informed of any change in writing by the Borrower.

(5) A certificate, signed by the chief financial officer of the Borrower, stating that the conditions specified in Section 4.2(b) and (c) have been satisfied.

(6) A written opinion of the Borrower’s counsel, addressed to the Lenders substantially in the form of Exhibit 4.1(a)(6) .

(7) Any Notes requested by a Lender pursuant to Section 2.11 payable to the order of each such requesting Lender.

(8) Evidence that the Existing Credit Agreement has been or concurrently with the Agreement Date is being terminated.

(9) Evidence satisfactory to the Administrative Agent of any required Governmental Approvals or consents regarding this Agreement.

aggregate principal amount that the Borrower is entitled to borrow from financial institutions or receive from the sale of commercial paper under Board of Directors’ resolutions of the Borrower.

(b) There exists no Event of Default or Unmatured Default.

(c) The representations and warranties contained in Article V (other than, after the Agreement Date, the representations and warranties set forth in Sections 5.2(b), 5.3, 5.11(a), 5.11(b), 5.11(c), 5.11(f), 5.11(g), 5.11(h) and 5.11(i)) are true and correct as of such date of the requested extension of credit except to the extent any such representation or warranty is stated to relate solely to an earlier date, in which case such representation or warranty shall have been true and correct on and as of such earlier date.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

The Borrower represents and warrants to the Lenders that:

5.2 Financial Condition .

furnished to each of the Lenders are complete and correct and fairly present the consolidated financial condition of the Borrower and its consolidated Subsidiaries, if any, as at said date and the results of their operations for the fiscal year and the applicable three-month period ended on said dates (subject, in the case of financial statements as at December 31, 2011 to normal year-end audit adjustments), all in accordance with GAAP and practices applied on a consistent basis. Neither the Borrower nor any of its Material Subsidiaries had on said dates any material contingent liabilities, liabilities for taxes, unusual forward or long-term commitments or unrealized or anticipated losses from any unfavorable commitments, except as referred to or reflected or provided for in said balance sheets as at said dates.

is or will be a party or the legality, validity or enforceability hereof or thereof, other than consents, authorizations and filings that have

been (or on or prior to the Agreement Date will have been) made or obtained and that are (or on the Agreement Date will be) in full force and effect, which consents, authorizations and filings are listed on Schedule 5.6 .

5.7 Regulations U and X . The Borrower is not engaged in the business of extending credit for the purpose of purchasing or carrying margin stock, and no proceeds of any Loans will be used for a purpose which violates, or would be inconsistent with, F.R.S. Board Regulation U or X, or any official rulings on or interpretations of such regulations. Terms for which meanings are provided in Regulation U or Regulation X or any regulations substituted therefor, as from time to time in effect, are used in this Section 5.7 with such meanings.

5.10 Taxes . United States Federal income tax returns of the Borrower and those of its Subsidiaries that have filed their returns on a consolidated basis with the Borrower have been examined and/or closed through the fiscal year of the Borrower ended September 30, 2011. The Borrower and its Subsidiaries have filed all United States Federal income tax returns and all other material tax returns which are required to be filed by them and have paid all taxes due pursuant to such returns or pursuant to any assessment received by the Borrower or any of its Subsidiaries. The charges, accruals and reserves on the books of the Borrower and its Subsidiaries in respect of taxes and other governmental charges are, in the opinion of the Borrower, adequate.

5.11 Environmental Warranties . Except as previously disclosed in the SEC Disclosure Documents or on Schedule 5.11 :

(b) there have been no past, and there are no pending or threatened:

(1) claims, complaints, notices or requests for information received by the Borrower or any of its Subsidiaries with respect to any alleged violation of any Environmental Law or,

(2) complaints, notices or inquiries to the Borrower or any of its Subsidiaries regarding potential liability under any Environmental Law;

except as are unlikely, singly or in the aggregate, to have a Material Adverse Effect;

5.13 OFAC; Anti-Terrorism Laws .

ARTICLE VI

COVENANTS

During the term of this Agreement, unless the Required Lenders shall otherwise consent in writing:

6.1 Financial Statements . The Borrower shall deliver to the Administrative Agent (and, in the case of clauses (e), (f) and (g) below, to each of the Lenders):

operations of any change in the application of accounting principles and practices during such quarter, accompanied by a certificate of a senior financial officer of the Borrower, which certificate shall state that said financial statements fairly present the consolidated financial condition and results of operations of the Borrower and its consolidated Subsidiaries in accordance with GAAP, consistently applied, as at the end of, and for, such period (subject to normal year-end audit adjustments);

6.4 Use of Proceeds . The Borrower shall use the proceeds of the Loans hereunder for its general corporate purposes (in compliance with all applicable legal and regulatory requirements).

6.5 Environmental Covenant . The Borrower will, and will cause each of its Subsidiaries to:

(c) provide such information and certifications which the Administrative Agent may reasonably request from time to time to evidence compliance with this Section 6.5 .

6.6 Financial Covenant . The Borrower will not permit the ratio of (i) its Consolidated Financial Indebtedness to (ii) its Consolidated Total Capitalization to exceed 0.65 to 1.0 at any time.

6.7 Local Regulatory Commission Approval . The Borrower shall promptly notify the Administrative Agent in the event that the borrowing of any Loan by the Borrower will require the approval of the Public Service Commission of the District of Columbia, the Public Service Commission of Maryland, or the State Corporation Commission of Virginia. The Borrower will obtain any such required approval prior to the time such approval is required. Promptly upon receipt of any such approval, the Borrower will furnish a copy thereof to the Administrative Agent.

ARTICLE VII

EVENTS OF DEFAULT

The occurrence of any one or more of the following events shall constitute an Event of Default:

7.4 The Borrower shall default in the performance of its obligations under Section 6.1(e) or 6.6 hereof.

7.6 The Borrower or any of its Material Subsidiaries shall admit in writing its inability to, or be generally unable to, pay its debts as such debts become due.

7.10 Any of the following events shall occur with respect to any Pension Plan:

(iii) a contribution failure occurs with respect to any Pension Plan sufficient to give rise to a Lien under Section 302(f) of ERISA.

7.12 The occurrence of any Change in Control.

ARTICLE VIII

REMEDIES, WAIVERS AND AMENDMENTS

8.1.3 require that the Borrower Cash Collateralize the aggregate Stated Amount of outstanding Letters of Credit (in an amount equal to 102% of the aggregate Stated Amount thereof); and

8.1.4 exercise on behalf of itself, the Lenders and the Issuing Banks all rights and remedies available to it, the Lenders and the Issuing Banks under the Loan Documents;

(i) Extend the final maturity of any Loan or forgive all or any portion of the principal amount thereof, or reduce the rate or extend the time of payment of interest or fees thereon;

(iii) Reduce the percentage specified in the definition of Required Lenders;

(v) Alter any provision in this Agreement providing for the pro rata treatment of the Lenders;

(vi) Amend this Section 8.2 or any provision of this Agreement requiring the consent or other action of all of the Lenders; or

ARTICLE IX

GENERAL PROVISIONS

9.1 Survival of Representations . All representations and warranties of the Borrower contained in this Agreement shall survive during the period that the Loans herein contemplated are outstanding.

respective successors and assigns; provided, however , that the parties hereto expressly agree that the Arrangers shall enjoy the benefits of the provisions of Sections 9.6 , 9.10 and 9.11 to the extent specifically set forth therein and shall have the right to enforce such provisions on its own behalf and in its own name to the same extent as if it were a party to this Agreement.

9.6 Expenses; Indemnification .

9.6.1 Expenses . The Borrower shall pay:

(iii) the Issuing Banks in connection with the issuance of any Letter of Credit or demand for payment thereunder; and

9.6.3 Payments on Demand . All amounts due under this Section 9.6 shall be payable by the Borrower upon demand therefor.

ARTICLE X

THE ADMINISTRATIVE AGENT

10.3 Exculpatory Provisions .

(i) shall not be subject to any fiduciary or other implied duties, regardless of whether an Unmatured Default or Event of Default has occurred and is continuing;

10.3.2 The Administrative Agent shall not be liable for any action taken or not taken by it (i) with the consent or at the request of the Required Lenders (or such other number

10.6 Resignation of Administrative Agent .

10.9 Administrative Agent May File Proofs of Claim . In case of the pendency of any proceeding under the Bankruptcy Code or under other applicable bankruptcy, insolvency or similar law now or hereafter in effect or any other judicial proceeding relative to the Borrower or any of its Subsidiaries, the Administrative Agent (irrespective of whether the principal of any Loan or Reimbursement Obligation shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered (but not obligated) by intervention in such proceeding or otherwise (i) to file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, Reimbursement Obligations and all other Obligations that are owing and unpaid and to file such other documents as may be necessary advisable in order to have the claims of the Lenders and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and their respective agents, sub-agents and counsel and all other amounts due the Lenders and the Administrative Agent under Sections 2.4 and 9.6 ) allowed in such judicial proceeding and (ii) to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same. Any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents, sub-agents and counsel, and any other amounts due the Administrative Agent under Section 2.4 or 9.6 .

ARTICLE XI

SETOFF; RATABLE PAYMENTS

11.2 Ratable Payments . If any Lender, whether by setoff or otherwise, has payment made to it upon Obligations owing to it in a greater proportion than that received by any other Lender, such Lender agrees, promptly upon demand, to (i) notify the Administrative Agent of such fact and (ii) purchase participations (for cash at face value) in the Obligations held by the other Lenders so that after such acquisition each Lender will hold its ratable proportion of the then outstanding Obligations; provided that (i) if any such participations are purchased and all or any portion of the payment giving rise thereto is recovered, such participations shall be rescinded and the purchase price restored to the extent of such recovery, without interest, and (ii) the provisions of this Section 11.2 shall not be construed to apply to (x) any payment made by the Borrower pursuant to and in accordance with the express terms of this Agreement (including the application of funds arising from the existence of a Defaulting Lender) or (y) any payment obtained by a Lender as consideration for the assignment of or sale of a participation in any of its Loans or participations in Reimbursement Obligations or Swingline Loans to any assignee or Participant, other than to the Borrower or any Subsidiary thereof (as to which the provisions of this Section 11.2 shall apply). The Borrower consents to the foregoing and agrees, to the extent it may effectively do so under Applicable Law, that any Lender acquiring a participation pursuant to the foregoing arrangements may exercise against the Borrower rights of setoff and counterclaim with respect to such participation as fully as if such Lender were a direct creditor of the Borrower in the amount of such participation. If under the Bankruptcy Code or under other applicable bankruptcy, insolvency or similar law now or hereafter in effect, any Lender receives a secured claim in lieu of a setoff to which this Section 11.2 applies, such Lender shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the Lenders entitled under this Section 11.2 to share in the benefits of any recovery on such secured claim. If any Lender, whether in connection with setoff or amounts which might be subject to setoff or otherwise, receives collateral or other protection for its Obligations or

ARTICLE XII

BENEFIT OF AGREEMENT; ASSIGNMENTS; PARTICIPATIONS

12.2 Participations .

12.3 Assignments .

ARTICLE XIII

NOTICES

13.2 Change of Address . The Borrower, the Administrative Agent and any Lender may each change the address for service of notice upon it by a notice in writing to the other parties hereto.

ARTICLE XIV

COUNTERPARTS; EFFECTIVENESS

ARTICLE XV

CHOICE OF LAW; CONSENT TO JURISDICTION; WAIVER OF JURY TRIAL

15.3 WAIVER OF JURY TRIAL . THE BORROWER, THE ADMINISTRATIVE AGENT AND EACH LENDER HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING INVOLVING ANY LOAN DOCUMENT RELATED CLAIM.

[SIGNATURE PAGES FOLLOW]

IN WITNESS WHEREOF, the Borrower, the Lenders and the Administrative Agent have executed this Agreement as of the date first above written.


WASHINGTON GAS LIGHT COMPANY

By:		/s/ Anthony M. Nee
		Anthony M. Nee
		Treasurer

Washington Gas Light Company – 2012 Credit Agreement


WELLS FARGO BANK, NATIONAL
ASSOCIATION , as Administrative Agent,
Issuing Bank, Swingline Lender and Lender

By:		/s/ Allison Newman
		Allison Newman
		Director

Washington Gas Light Company – 2012 Credit Agreement


THE BANK OF TOKYO-MITSUBISHI
UFJ, LTD ., as Syndication Agent and Lender

By:		/s/ Nicholas R. Battista
		Nicholas R. Battista
		Director

Washington Gas Light Company – 2012 Credit Agreement


BRANCH BANKING AND TRUST
COMPANY , as Co-Documentation Agent,
Issuing Bank and Lender

By:		/s/ Michael F. Skorich
		Michael F. Skorich
		Senior Vice President

Washington Gas Light Company – 2012 Credit Agreement


TD BANK, N.A. , as Co-Documentation Agent and Lender

By:		/s/ Vijay Prasad
		Vijay Prasad
		Senior Vice President

Washington Gas Light Company – 2012 Credit Agreement


THE BANK OF NEW YORK MELLON , as Lender

By:		/s/ Richard K. Fronapfel
		Richard K. Fronapfel
		Vice President

Washington Gas Light Company – 2012 Credit Agreement


PNC BANK, NATIONAL ASSOCIATION, as Lender

By:		/s/ Bremmer Kneib
		Bremmer Kneib
		Vice President

Washington Gas Light Company – 2012 Credit Agreement


U.S. BANK, NATIONAL ASSOCIATION, as Lender

By:		/s/ Holland H. Williams
		Holland H. Williams
		AVP

Washington Gas Light Company – 2012 Credit Agreement


CANADIAN IMPERIAL BANK OF COMMERCE, NEW YORK AGENCY, as Lender

By:		/s/ Robert W. Casey, Jr.
		Robert W. Casey, Jr.
		Executive Director

Robert Casey

Canadian Imperial Bank of Commerce

New York Agency Authorized signatory


CANADIAN IMPERIAL BANK OF
COMMERCE, NEW YORK AGENCY , as Lender

By:		/s/ Eoin Roche
		Eoin Roche
		Executive Director


		Eoin Roche
		Canadian Imperial Bank of Commerce New York Agency
		Authorized Signatory

Washington Gas Light Company – 2012 Credit Agreement


THE NORTHERN TRUST COMPANY, as Lender

By:		/s/ Lisa DeCristofaro
		Lisa DeCristofaro
		Vice President

Washington Gas Light Company – 2012 Credit Agreement


MECHANICS AND FARMERS BANK, as Lender

By:		/s/ James E. Sansom
		James E. Sansom
		SVP

Washington Gas Light Company – 2012 Credit Agreement

Exhibit 31.1

CERTIFICATION OF WGL HOLDINGS, INC.

I, Terry D. McCallister, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of WGL Holdings, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 3, 2012

/s/ Terry D. McCallister

Terry D. McCallister

Chairman and Chief Executive Officer

Exhibit 31.2

CERTIFICATION OF WGL HOLDINGS, INC.

I, Vincent L. Ammann, Jr., certify that:

1.	I have reviewed this quarterly report on Form 10-Q of WGL Holdings, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 3, 2012

/s/ Vincent L. Ammann, Jr.

Vincent L. Ammann, Jr.

Vice President and Chief Financial Officer

Exhibit 31.3

CERTIFICATION OF WASHINGTON GAS LIGHT COMPANY

I, Terry D. McCallister, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Washington Gas Light Company;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 3, 2012

/s/ Terry D. McCallister

Terry D. McCallister

Chairman and Chief Executive Officer

Exhibit 31.4

CERTIFICATION OF WASHINGTON GAS LIGHT COMPANY

I, Vincent L. Ammann, Jr., certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Washington Gas Light Company;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors:

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 3, 2012

/s/ Vincent L. Ammann, Jr.

Vincent L. Ammann, Jr.

Vice President and Chief Financial Officer

Exhibit 32

CERTIFICATION OF THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER

AND THE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the combined Quarterly Report of WGL Holdings, Inc. and Washington Gas Light Company (the “Companies”) on Form 10-Q for the quarterly period ended March 31, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Terry D. McCallister, Chairman and Chief Executive Officer of the Companies, and Vincent L. Ammann, Jr., Vice President and Chief Financial Officer of the Companies, each hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, to the best of their knowledge, that:

(1)

The Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934; and

(2)

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Companies.

This certification is being made for the exclusive purpose of compliance by the Chairman and Chief Executive Officer and the Vice President and Chief Financial Officer of the Companies with the requirements of Section 906 of the Sarbanes-Oxley Act of 2002, and may not be disclosed, distributed, or used by any person for any reason other than as specifically required by law.

/s/ Terry D. McCallister

Terry D. McCallister

Chairman and Chief Executive Officer

/s/ Vincent L. Ammann, Jr.

Vincent L. Ammann, Jr.

Vice President and Chief Financial Officer

May 3, 2012