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Stock-Based Compensation
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<!--DOCTYPE html PUBLIC "-//W3C//DTD XHTML 1.0 Transitional//EN" "http://www.w3.org/TR/xhtml1/DTD/xhtml1-transitional.dtd" -->
<!-- Begin Block Tagged Note 11 - us-gaap:DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock-->
<div style="margin-left: 0%">
<div style="margin-top: 12pt; font-size: 1pt"> 
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 13pt; font-family: Arial, Helvetica; color: #000000; background: transparent; text-align: left">
<tr>
<td width="12%"></td>
<td width="88%"></td>
</tr>
<tr valign="top">
<td>
<b><font style="font-family: Arial, Helvetica">NOTE 11. </font></b>
</td>
<td>
<b><font style="font-family: Arial, Helvetica">STOCK-BASED
COMPENSATION</font></b>
</td>
</tr>
</table>
<div style="font-size: 3pt; margin-left: 0%; width: 99%; align: left; border-bottom: 1pt solid #000000">
</div>
<div style="margin-top: 12pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; font-size: 12pt; font-family: Arial, Helvetica; color: #000000; background: transparent">
<b><font style="font-family: Arial, Helvetica">     STOCK-BASED
COMPENSATION FOR KEY EMPLOYEES</font></b>
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
We have stock-based awards outstanding in the form of stock
options, performance shares and performance units. We have
issued stock options and performance shares under our
shareholder-approved 1999 Incentive Compensation Plan, as
amended and
restated (1999 Plan). The 1999 Plan allows WGL Holdings to issue
up to 2,000,000 shares of common stock to persons
designated by the Human Resources Committee of the Board of
Directors, including officers and key employees. Effective
March 1, 2007, WGL Holdings adopted a shareholder-approved
Omnibus Incentive Compensation Plan (Omnibus Plan). The Omnibus
Plan was adopted to replace, on a prospective basis, the 1999
Plan. The Omnibus Plan provides similar benefits as provided
under the 1999 Plan. Stock options, stock appreciation rights,
restricted stock, deferred stock, stock granted as a bonus in
lieu of other awards, dividend equivalents, other stock-based
awards and cash awards may be granted under the Omnibus Plan.
The Omnibus Plan allows WGL Holdings to issue up to
1,700,000 shares of common stock, subject to adjustment as
provided by the plan, to persons designated by the Human
Resources Committee of the Board of Directors, including
officers and key employees. Refer to Note 6—<i>Common
Stock</i>—<i>WGL Holdings </i>for amounts remaining to be
issued under these plans.
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
During the fiscal year ended September 30, 2010, we granted
performance shares and performance units under the Omnibus Plan;
however, we did not issue any stock options. As of
September 30, 2010, there are prior years’ stock
option grants outstanding with an exercise price at the market
value of our common stock on the date of the grant.
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
For both performance shares and performance units, we impose
performance goals based on certain market conditions, which if
unattained, may result in no performance shares or units being
earned for the applicable performance period. These performance
awards generally vest over three years from the date of grant.
The actual number of performance shares and units that may be
earned varies based on the total shareholder return of WGL
Holdings relative to a selected peer group of companies over the
three year performance period. Any performance shares that are
earned will be paid in shares of common stock of WGL Holdings.
Any performance units that may be earned pursuant to terms of
the grant will be paid in cash and are valued at $1.00 per
performance unit. Our stock options generally have a vesting
period of three years, and expire ten years from the date of the
grant. Performance units, performance shares and stock option
awards provide for accelerated vesting upon a change in control
of WGL Holdings. Additionally, stock options provide for
accelerated vesting upon retirement, death or disability. We
generally issue new shares of common stock in order to satisfy
stock issuances related to performance shares and stock options;
however, we may, from time to time, repurchase shares of our
common stock on the open market in order to satisfy these
issuances. Both performance shares and stock options are
accounted for as equity awards, and performance units are
accounted for as liability awards as they will settle in cash.
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
For the years ended September 30, 2010, 2009 and 2008, we
recognized stock-based compensation expense related to our
performance shares, performance units and stock options of
$6.8 million, $4.2 million and $4.6 million, net
of related income tax benefits of $2.7 million, $1.7 and
$1.8 million, respectively.
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
As of September 30, 2010, there was $5.5 million of
total unrecognized compensation expense related to stock-based
awards granted. Performance shares and performance units
comprised $2.7 million and $2.8 million of total
unrecognized compensation expense, respectively. The total
unrecognized compensation expense is expected to be recognized
over a weighted average period of 1.7 years for performance
shares and performance units. As of September 30, 2009,
there was $5.1 million of total unrecognized compensation
expense related to stock-based awards granted. Performance
shares and performance units comprised $2.2 million and
$2.9 million of total unrecognized compensation expense,
respectively. For the years ended September 30, 2010 and
2009, there was no unrecognized compensation expense related to
stock options. As of September 30, 2008, there was
$5.2 million of total unrecognized compensation expense
related to share-based awards granted. Performance shares,
performance units and stock options comprised $3.1 million,
$1.8 million and $0.3 million of total unrecognized
compensation expense, respectively. During the fiscal years
ended September 30, 2010, 2009 and 2008, we paid
$2.1 million, $1.0 million and $1.1 million,
respectively, for income taxes withheld in connection with the
settlement of share-based awards.
</div>
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</div>
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<div style="margin-left: 0%">
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<div align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent">
<b>
<font style="font-family: 'Times New Roman', Times">
</font>
</b>
<font style="font-family: 'Times New Roman', Times">
<i>
</i>
</font>
</div>
<!-- XBRL Pagebreak End -->
<div style="margin-top: 12pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; font-size: 12pt; font-family: Arial, Helvetica; color: #000000; background: transparent">
<b><i><font style="font-family: Arial, Helvetica">     Performance
Shares</font></i></b>
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
The following table summarizes information regarding performance
share activity during the fiscal year ended September 30,
2010.
</div>
<div style="margin-top: 9pt; font-size: 1pt"> 
</div>
<table border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent; text-align: left">
<!-- Table Width Row BEGIN -->
<tr style="font-size: 1pt" valign="bottom">
<td width="76%"> </td><!-- colindex=01 type=maindata -->
<td width="1%"> </td><!-- colindex=02 type=gutter -->
<td width="1%" align="right"> </td><!-- colindex=02 type=lead -->
<td width="6%" align="right"> </td><!-- colindex=02 type=body -->
<td width="1%" align="left"> </td><!-- colindex=02 type=hang1 -->
<td width="6%"> </td><!-- colindex=03 type=gutter -->
<td width="1%" align="right"> </td><!-- colindex=03 type=lead -->
<td width="7%" align="right"> </td><!-- colindex=03 type=body -->
<td width="1%" align="left"> </td><!-- colindex=03 type=hang1 -->
</tr>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<tr style="font-size: 10pt" valign="bottom" align="center">
<td colspan="8" nowrap="nowrap" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
<b>Performance Share Activity</b>
</td>
<td>
 
</td>
</tr>
<tr style="font-size: 10pt" valign="bottom" align="center">
<td nowrap="nowrap" align="center" valign="bottom">
 
</td>
<td>
 
</td>
<td colspan="6" nowrap="nowrap" align="center" valign="bottom">
<b><i>Year Ended<br />
</i></b>
</td>
<td>
 
</td>
</tr>
<tr style="font-size: 10pt" valign="bottom" align="center">
<td nowrap="nowrap" align="center" valign="bottom">
 
</td>
<td>
 
</td>
<td colspan="6" nowrap="nowrap" align="center" valign="bottom">
<b><i>September 30, 2010</i></b>
</td>
<td>
 
</td>
</tr>
<tr style="font-size: 1pt" valign="bottom" align="center">
<td colspan="8" nowrap="nowrap" align="center" valign="bottom" style="font-size: 1pt; border-bottom: 1px solid #000000">
 
</td>
<td>
 
</td>
</tr>
<tr style="font-size: 10pt" valign="bottom" align="center">
<td nowrap="nowrap" align="center" valign="bottom">
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
 
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
<b><i>Weighted<br />
</i></b>
</td>
<td>
 
</td>
</tr>
<tr style="font-size: 10pt" valign="bottom" align="center">
<td nowrap="nowrap" align="center" valign="bottom">
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
 
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
<b><i>Average<br />
</i></b>
</td>
<td>
 
</td>
</tr>
<tr style="font-size: 10pt" valign="bottom" align="center">
<td nowrap="nowrap" align="center" valign="bottom">
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
<b>Number of<br />
</b>
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
<b><i>Grant-Date<br />
</i></b>
</td>
<td>
 
</td>
</tr>
<tr style="font-size: 8pt" valign="bottom" align="center">
<td nowrap="nowrap" align="center" valign="bottom">
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
<b><font style="font-size: 10pt">Shares<i><sup style="font-size: 85%; vertical-align: top">(a)</sup></i></font></b>
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
<b><i><font style="font-size: 10pt">Fair Value</font></i></b>
</td>
<td>
 
</td>
</tr>
<tr style="font-size: 1pt" valign="bottom" align="center">
<td colspan="8" nowrap="nowrap" align="center" valign="bottom" style="font-size: 1pt; border-bottom: 1px solid #000000">
 
</td>
<td>
 
</td>
</tr>
<!-- TableOutputBody -->
<tr valign="bottom" style="background: #cceeff">
<td align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
<b>Non-vested and outstanding, beginning of year</b>
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
<b>277,896</b>
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
<b>$</b>
</td>
<td nowrap="nowrap" align="right" valign="bottom">
<b>32.13</b>
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
</tr>
<tr valign="bottom">
<td nowrap="nowrap" align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
<b>Granted</b>
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
<b>97,444</b>
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
<b>$</b>
</td>
<td nowrap="nowrap" align="right" valign="bottom">
<b>34.13</b>
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td nowrap="nowrap" align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
<b>Vested</b>
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
<b>(91,171</b>
</td>
<td nowrap="nowrap" align="left" valign="bottom">
<b>)</b>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
<b>$</b>
</td>
<td nowrap="nowrap" align="right" valign="bottom">
<b>29.68</b>
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
</tr>
<tr valign="bottom">
<td nowrap="nowrap" align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
<b>Cancelled/forfeited</b>
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
<b>(41,734</b>
</td>
<td nowrap="nowrap" align="left" valign="bottom">
<b>)</b>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
<b>$</b>
</td>
<td nowrap="nowrap" align="right" valign="bottom">
<b>33.37</b>
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
</tr>
<tr valign="bottom" style="font-size: 2pt">
<td colspan="9" valign="bottom">
<div style="font-size: 0pt; margin-left: 0%; width: 100%; border-bottom: 1pt solid #000000">
</div>
</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
<b>Non-vested and outstanding, end of year</b>
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
<b>242,435</b>
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
<b>$</b>
</td>
<td nowrap="nowrap" align="right" valign="bottom">
<b>33.64</b>
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
</tr>
<tr valign="bottom" style="font-size: 2pt">
<td colspan="9" valign="bottom">
<div style="font-size: 0pt; margin-left: 0%; width: 100%; align: left; border-bottom: 1pt solid #000000">
</div>
<div style="font-size: 1pt; margin-left: 0%; width: 100%; align: left; border-bottom: 1pt solid #000000">
</div><b>
</b>
</td>
</tr>
</table>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
</div>
<table width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent; text-align: left">
<tr>
<td width="1%"></td>
<td width="1%"></td>
<td width="98%"></td>
</tr>
<tr>
<td valign="top">
<i><font style="font-size: 8pt"><sup style="font-size: 85%; vertical-align: top">(a)</sup></font></i></td>
<td></td>
<td valign="bottom">
<i><font style="font-size: 8pt">The number of common shares
issued related to performance shares may range from zero to
200 percent of the number of shares shown in the table
above based on our achievement of performance goals for total
shareholder return relative to a selected peer group of
companies</font></i></td>
</tr>
</table>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
The number of forfeited shares increased significantly in fiscal
year 2010 after the retirement of certain executive officers,
including the chairman and chief executive officer.
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
The total intrinsic value of performance shares vested during
the years ended September 30, 2010, 2009 and 2008 was
$5.9 million, $2.8 million and $3.2 million,
respectively. Performance shares non-vested and outstanding at
September 30, 2010 had a weighted average remaining
contractual term of one year.
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
We measure compensation expense related to performance shares
based on the fair value of these awards at their date of grant.
Compensation expense for performance shares is recognized for
awards that ultimately vest, and is not adjusted based on the
actual achievement of performance goals. We estimated the fair
value of performance shares on the date of grant using a Monte
Carlo simulation model based on the following assumptions:
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<table border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent; text-align: left">
<!-- Table Width Row BEGIN -->
<tr style="font-size: 1pt" valign="bottom">
<td width="80%"> </td><!-- colindex=01 type=maindata -->
<td width="1%"> </td><!-- colindex=02 type=gutter -->
<td width="1%" align="right"> </td><!-- colindex=02 type=lead -->
<td width="3%" align="right"> </td><!-- colindex=02 type=body -->
<td width="1%" align="left"> </td><!-- colindex=02 type=hang1 -->
<td width="2%"> </td><!-- colindex=03 type=gutter -->
<td width="1%" align="right"> </td><!-- colindex=03 type=lead -->
<td width="3%" align="right"> </td><!-- colindex=03 type=body -->
<td width="1%" align="left"> </td><!-- colindex=03 type=hang1 -->
<td width="2%"> </td><!-- colindex=04 type=gutter -->
<td width="1%" align="right"> </td><!-- colindex=04 type=lead -->
<td width="3%" align="right"> </td><!-- colindex=04 type=body -->
<td width="1%" align="left"> </td><!-- colindex=04 type=hang1 -->
</tr>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<tr style="font-size: 10pt" valign="bottom" align="center">
<td colspan="12" align="center" valign="bottom">
<b>Fair Value Assumptions</b>
</td>
<td>
 
</td>
</tr>
<tr style="font-size: 1pt" valign="bottom" align="center">
<td colspan="12" align="center" valign="bottom" style="font-size: 1pt; border-bottom: 1px solid #000000">
 
</td>
<td>
 
</td>
</tr>
<tr style="font-size: 8pt" valign="bottom" align="center">
<td nowrap="nowrap" align="left" valign="bottom">
<font style="font-size: 10pt">Years Ended September 30,
</font>
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
<b><font style="font-size: 10pt">2010</font></b>
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
<font style="font-size: 10pt">2009
</font>
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
<font style="font-size: 10pt">2008
</font>
</td>
<td>
 
</td>
</tr>
<tr style="font-size: 1pt" valign="bottom" align="center">
<td colspan="12" align="center" valign="bottom" style="font-size: 1pt; border-bottom: 1px solid #000000">
 
</td>
<td>
 
</td>
</tr>
<!-- TableOutputBody -->
<tr valign="bottom" style="background: #cceeff">
<td align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
Expected stock-price volatility
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
<b>29.80</b>
</td>
<td nowrap="nowrap" align="left" valign="bottom">
<b>%</b>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
21.40
</td>
<td nowrap="nowrap" align="left" valign="bottom">
%
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
17.70
</td>
<td nowrap="nowrap" align="left" valign="bottom">
%
</td>
</tr>
<tr valign="bottom">
<td nowrap="nowrap" align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
Dividend yield
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
<b>4.44</b>
</td>
<td nowrap="nowrap" align="left" valign="bottom">
<b>%</b>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
4.38
</td>
<td nowrap="nowrap" align="left" valign="bottom">
%
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
4.00
</td>
<td nowrap="nowrap" align="left" valign="bottom">
%
</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
Risk-free interest rate
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
<b>2.72</b>
</td>
<td nowrap="nowrap" align="left" valign="bottom">
<b>%</b>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
2.27
</td>
<td nowrap="nowrap" align="left" valign="bottom">
%
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
4.00
</td>
<td nowrap="nowrap" align="left" valign="bottom">
%
</td>
</tr>
<tr valign="bottom">
<td align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
Weighted average fair value of performance shares granted during
the year
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
<b>$</b>
</td>
<td nowrap="nowrap" align="right" valign="bottom">
<b>34.13</b>
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
$
</td>
<td nowrap="nowrap" align="right" valign="bottom">
32.71
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
$
</td>
<td nowrap="nowrap" align="right" valign="bottom">
34.01
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
</tr>
<tr valign="bottom" style="font-size: 2pt">
<td colspan="13" valign="bottom">
<div style="font-size: 0pt; margin-left: 0%; width: 100%; align: left; border-bottom: 1pt solid #000000">
</div>
<div style="font-size: 1pt; margin-left: 0%; width: 100%; align: left; border-bottom: 1pt solid #000000">
</div>
</td>
</tr>
</table>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
Expected stock-price volatility is based on the daily historical
volatility of our common shares for the past three fiscal years.
The dividend yield represents our annualized dividend yield on
the closing market price of our common stock at the date of the
grant. The risk-free interest rate is based on the zero-coupon
U.S. Treasury bond, with a term equal to the remaining
contractual term of the performance shares.
</div>
<div style="margin-top: 12pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; font-size: 12pt; font-family: Arial, Helvetica; color: #000000; background: transparent">
<b><i><font style="font-family: Arial, Helvetica">     Performance
Units</font></i></b>
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
Our performance units are liability awards as they settle in
cash; therefore, we measure and record compensation expense for
these awards based on their fair value at the end of each period
until their vesting date. This may cause fluctuations in
earnings that do not exist under the accounting requirements for
both our stock options and performance shares.
</div>
<!-- XBRL Pagebreak Begin -->
</div>
<!-- END PAGE WIDTH -->
<!-- PAGEBREAK -->
<div style="margin-left: 0%">
<!-- BEGIN PAGE WIDTH -->
<div align="center" style="margin-left: 0%; margin-right: 0%; font-size: 10pt; font-family: Arial, Helvetica; color: #000000; background: transparent">
<b>
<font style="font-family: 'Times New Roman', Times">
</font>
</b>
<font style="font-family: 'Times New Roman', Times">
<i>
</i>
</font>
</div>
<!-- XBRL Pagebreak End -->
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
The following table summarizes information regarding performance
unit activity during the fiscal year ended September 30,
2010.
</div>
<div style="margin-top: 9pt; font-size: 1pt"> 
</div>
<table border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent; text-align: left">
<!-- Table Width Row BEGIN -->
<tr style="font-size: 1pt" valign="bottom">
<td width="84%"> </td><!-- colindex=01 type=maindata -->
<td width="1%"> </td><!-- colindex=02 type=gutter -->
<td width="1%" align="right"> </td><!-- colindex=02 type=lead -->
<td width="13%" align="right"> </td><!-- colindex=02 type=body -->
<td width="1%" align="left"> </td><!-- colindex=02 type=hang1 -->
</tr>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<tr style="font-size: 10pt" valign="bottom" align="center">
<td colspan="4" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
<b>Performance Unit Activity</b>
</td>
<td>
 
</td>
</tr>
<tr style="font-size: 10pt" valign="bottom" align="center">
<td nowrap="nowrap" align="center" valign="bottom">
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
Year Ended<br />
</td>
<td>
 
</td>
</tr>
<tr style="font-size: 10pt" valign="bottom" align="center">
<td nowrap="nowrap" align="center" valign="bottom">
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
September 30, 2010
</td>
<td>
 
</td>
</tr>
<tr style="font-size: 1pt" valign="bottom" align="center">
<td colspan="4" align="center" valign="bottom" style="font-size: 1pt; border-bottom: 1px solid #000000">
 
</td>
<td>
 
</td>
</tr>
<tr style="font-size: 8pt" valign="bottom" align="center">
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
<font style="font-size: 10pt">Number of Units
</font>
</td>
<td>
 
</td>
</tr>
<tr style="font-size: 1pt" valign="bottom" align="center">
<td colspan="4" align="center" valign="bottom" style="font-size: 1pt; border-bottom: 1px solid #000000">
 
</td>
<td>
 
</td>
</tr>
<!-- TableOutputBody -->
<tr valign="bottom" style="background: #cceeff">
<td align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
Non-vested and outstanding, beginning of year
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
<b>6,187,013</b>
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
</tr>
<tr valign="bottom">
<td nowrap="nowrap" align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
Granted
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
<b>3,229,359</b>
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td nowrap="nowrap" align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
Cancelled/forfeited
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
<b>(1,384,563</b>
</td>
<td nowrap="nowrap" align="left" valign="bottom">
<b>)</b>
</td>
</tr>
<tr valign="bottom" style="font-size: 2pt">
<td colspan="5" valign="bottom">
<div style="font-size: 0pt; margin-left: 0%; width: 100%; border-bottom: 1pt solid #000000">
</div>
</td>
</tr>
<tr valign="bottom">
<td align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
Non-vested and outstanding, end of year
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
<b>8,031,809</b>
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
</tr>
<tr valign="bottom" style="font-size: 2pt">
<td colspan="5" valign="bottom">
<div style="font-size: 0pt; margin-left: 0%; width: 100%; align: left; border-bottom: 1pt solid #000000">
</div>
<div style="font-size: 1pt; margin-left: 0%; width: 100%; align: left; border-bottom: 1pt solid #000000">
</div>
</td>
</tr>
</table>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
The number of forfeited units increased significantly in fiscal
year 2010 after the retirement of certain executive officers,
including the chairman and chief executive officer.
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
The total fair value of our performance units outstanding at
September 30, 2010 for the units expected to vest was
$11.0 million. As of September 30, 2010, 2009 and
2008, we recorded a liability of $7.2 million,
$2.9 million and $0.9 million, respectively, related
to our performance units. This liability is recorded in
“Deferred credits—other”.
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
We estimated the fair value of performance units using a Monte
Carlo simulation model. The following table provides the
year-end assumptions used to value our performance units:
</div>
<div style="margin-top: 9pt; font-size: 1pt"> 
</div>
<table border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent; text-align: left">
<!-- Table Width Row BEGIN -->
<tr style="font-size: 1pt" valign="bottom">
<td width="71%"> </td><!-- colindex=01 type=maindata -->
<td width="1%"> </td><!-- colindex=02 type=gutter -->
<td width="1%" align="right"> </td><!-- colindex=02 type=lead -->
<td width="11%" align="right"> </td><!-- colindex=02 type=body -->
<td width="1%" align="left"> </td><!-- colindex=02 type=hang1 -->
<td width="2%"> </td><!-- colindex=03 type=gutter -->
<td width="1%" align="right"> </td><!-- colindex=03 type=lead -->
<td width="11%" align="right"> </td><!-- colindex=03 type=body -->
<td width="1%" align="left"> </td><!-- colindex=03 type=hang1 -->
</tr>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<tr style="font-size: 10pt" valign="bottom" align="center">
<td colspan="8" align="center" valign="bottom" style="border-bottom: 1px solid #000000">
<b>Fair Value Assumptions</b>
</td>
<td>
 
</td>
</tr>
<tr style="font-size: 8pt" valign="bottom" align="center">
<td nowrap="nowrap" align="left" valign="bottom">
<font style="font-size: 10pt">September 30,
</font>
</td>
<td>
 
</td>
<td colspan="6" align="center" valign="bottom">
<font style="font-size: 10pt">2010
</font>
</td>
<td>
 
</td>
</tr>
<tr style="font-size: 1pt" valign="bottom" align="center">
<td colspan="8" align="center" valign="bottom" style="font-size: 1pt; border-bottom: 1px solid #000000">
 
</td>
<td>
 
</td>
</tr>
<tr style="font-size: 10pt" valign="bottom" align="center">
<td nowrap="nowrap" align="center" valign="bottom">
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
10/1/2009 Grant
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
10/1/2008 Grant
</td>
<td>
 
</td>
</tr>
<tr style="font-size: 1pt" valign="bottom" align="center">
<td colspan="8" align="center" valign="bottom" style="font-size: 1pt; border-bottom: 1px solid #000000">
 
</td>
<td>
 
</td>
</tr>
<tr style="line-height: 3pt; font-size: 1pt">
<td> 
</td>
</tr>
<!-- TableOutputBody -->
<tr valign="bottom">
<td align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
Expected stock-price volatility
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
<b>30.8</b>
</td>
<td nowrap="nowrap" align="left" valign="bottom">
<b>%</b>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
<b>17.8</b>
</td>
<td nowrap="nowrap" align="left" valign="bottom">
<b>%</b>
</td>
</tr>
<tr valign="bottom" style="font-size: 2pt">
<td colspan="9" valign="bottom">
<div style="font-size: 0pt; margin-left: 0%; width: 100%; align: left; border-bottom: 1pt solid #000000">
</div>
<div style="font-size: 1pt; margin-left: 0%; width: 100%; align: left; border-bottom: 1pt solid #000000">
</div>
</td>
</tr>
</table>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
Expected stock-price volatility is based on the daily historical
volatility of our common shares for a period equal to the
remaining term of the performance units.
</div>
<div style="margin-top: 12pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; font-size: 12pt; font-family: Arial, Helvetica; color: #000000; background: transparent">
<b><i><font style="font-family: Arial, Helvetica">     Stock
Options</font></i></b>
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
The following table summarizes information regarding stock
option activity during the fiscal year ended September 30,
2010.
</div>
<div style="margin-top: 9pt; font-size: 1pt"> 
</div>
<table border="0" width="100%" align="center" cellpadding="0" cellspacing="0" style="font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent; text-align: left">
<!-- Table Width Row BEGIN -->
<tr style="font-size: 1pt" valign="bottom">
<td width="58%"> </td><!-- colindex=01 type=maindata -->
<td width="1%"> </td><!-- colindex=02 type=gutter -->
<td width="1%" align="right"> </td><!-- colindex=02 type=lead -->
<td width="4%" align="right"> </td><!-- colindex=02 type=body -->
<td width="1%" align="left"> </td><!-- colindex=02 type=hang1 -->
<td width="2%"> </td><!-- colindex=03 type=gutter -->
<td width="1%" align="right"> </td><!-- colindex=03 type=lead -->
<td width="5%" align="right"> </td><!-- colindex=03 type=body -->
<td width="1%" align="left"> </td><!-- colindex=03 type=hang1 -->
<td width="2%"> </td><!-- colindex=04 type=gutter -->
<td width="1%" align="right"> </td><!-- colindex=04 type=lead -->
<td width="9%" align="right"> </td><!-- colindex=04 type=body -->
<td width="1%" align="left"> </td><!-- colindex=04 type=hang1 -->
<td width="2%"> </td><!-- colindex=05 type=gutter -->
<td width="1%" align="right"> </td><!-- colindex=05 type=lead -->
<td width="9%" align="right"> </td><!-- colindex=05 type=body -->
<td width="1%" align="left"> </td><!-- colindex=05 type=hang1 -->
</tr>
<!-- Table Width Row END -->
<!-- TableOutputHead -->
<tr style="font-size: 10pt" valign="bottom" align="center">
<td colspan="16" align="center" valign="bottom">
<b>Stock Option Activity</b>
</td>
<td>
 
</td>
</tr>
<tr style="font-size: 1pt" valign="bottom" align="center">
<td colspan="16" align="center" valign="bottom" style="font-size: 1pt; border-bottom: 1px solid #000000">
 
</td>
<td>
 
</td>
</tr>
<tr style="font-size: 10pt" valign="bottom" align="center">
<td nowrap="nowrap" align="center" valign="bottom">
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
 
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
 
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
Weighted<br />
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
 
</td>
<td>
 
</td>
</tr>
<tr style="font-size: 10pt" valign="bottom" align="center">
<td nowrap="nowrap" align="center" valign="bottom">
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
 
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
Weighted<br />
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
Average<br />
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
 
</td>
<td>
 
</td>
</tr>
<tr style="font-size: 10pt" valign="bottom" align="center">
<td nowrap="nowrap" align="center" valign="bottom">
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
Number<br />
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
Average<br />
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
Remaining<br />
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
Aggregate<br />
</td>
<td>
 
</td>
</tr>
<tr style="font-size: 10pt" valign="bottom" align="center">
<td nowrap="nowrap" align="center" valign="bottom">
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
of<br />
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
Exercise<br />
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
Contractual<br />
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
Intrinsic Value<br />
</td>
<td>
 
</td>
</tr>
<tr style="font-size: 8pt" valign="bottom" align="center">
<td nowrap="nowrap" align="center" valign="bottom">
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
<font style="font-size: 10pt">Options
</font>
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
<font style="font-size: 10pt">Price
</font>
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
<font style="font-size: 10pt">Term (In years)
</font>
</td>
<td>
 
</td>
<td>
 
</td>
<td colspan="2" nowrap="nowrap" align="center" valign="bottom">
<font style="font-size: 10pt">(In thousands)
</font>
</td>
<td>
 
</td>
</tr>
<tr style="font-size: 1pt" valign="bottom" align="center">
<td colspan="16" align="center" valign="bottom" style="font-size: 1pt; border-bottom: 1px solid #000000">
 
</td>
<td>
 
</td>
</tr>
<!-- TableOutputBody -->
<tr valign="bottom" style="background: #cceeff">
<td align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
Outstanding at September 30, 2009
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
846,207
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
$
</td>
<td nowrap="nowrap" align="right" valign="bottom">
30.74
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
5.77
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
$
</td>
<td nowrap="nowrap" align="right" valign="bottom">
2,035
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
</tr>
<tr valign="bottom">
<td nowrap="nowrap" align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
Exercised
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
(663,122
</td>
<td nowrap="nowrap" align="left" valign="bottom">
)
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
30.52
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
–
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
–
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
</tr>
<tr valign="bottom" style="font-size: 2pt">
<td colspan="17" valign="bottom">
<div style="font-size: 0pt; margin-left: 0%; width: 100%; border-bottom: 1pt solid #000000">
</div>
</td>
</tr>
<tr valign="bottom" style="background: #cceeff">
<td align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
Outstanding at September 30, 2010
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
183,085
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
$
</td>
<td nowrap="nowrap" align="right" valign="bottom">
31.50
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
5.49
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
$
</td>
<td nowrap="nowrap" align="right" valign="bottom">
1,149
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
</tr>
<tr valign="bottom" style="font-size: 2pt">
<td colspan="17" valign="bottom">
<div style="font-size: 0pt; margin-left: 0%; width: 100%; align: left; border-bottom: 1pt solid #000000">
</div>
<div style="font-size: 1pt; margin-left: 0%; width: 100%; align: left; border-bottom: 1pt solid #000000">
</div>
</td>
</tr>
<tr valign="bottom">
<td align="left" valign="bottom">
<div style="text-indent: -10pt; margin-left: 10pt">
Exercisable at September 30, 2010
</div>
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
183,085
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
$
</td>
<td nowrap="nowrap" align="right" valign="bottom">
31.50
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td nowrap="nowrap" align="right" valign="bottom">
5.49
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
<td>
 
</td>
<td nowrap="nowrap" align="left" valign="bottom">
$
</td>
<td nowrap="nowrap" align="right" valign="bottom">
1,149
</td>
<td nowrap="nowrap" align="left" valign="bottom">
 
</td>
</tr>
<tr valign="bottom" style="font-size: 2pt">
<td colspan="17" valign="bottom">
<div style="font-size: 0pt; margin-left: 0%; width: 100%; align: left; border-bottom: 1pt solid #000000">
</div>
<div style="font-size: 1pt; margin-left: 0%; width: 100%; align: left; border-bottom: 1pt solid #000000">
</div>
</td>
</tr>
</table>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 0%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
We received $20.2 million, $4.7 million and
$14.1 million related to the exercise of stock options
during the years ended September 30, 2010, 2009 and 2008,
respectively. The related tax benefits realized for the fiscal
years ended September 30, 2010, 2009 and 2008 were
$1.2 million, $0.4 million and $1.8 million,
respectively.
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</font>
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<i>
</i>
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<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
We measure compensation expense related to stock options based
on the fair value of these awards at their date of grant.
Compensation expense for stock options is recognized for awards
that ultimately vest. We estimated the fair value of stock
options on the date of the grant using the Black-Scholes
option-pricing model.
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
Expected stock-price volatility is based on the daily historical
volatility of our common shares over a period that approximates
the expected term of the stock options. The dividend yield
represents our annualized dividend yield on the closing market
price of our common stock at the date of grant. The risk-free
interest rate is based on the zero-coupon U.S. Treasury
bond, with a term equal to the expected term of the stock
options. The expected option term is based on our historical
experience with respect to stock option exercises and
expectations about future exercises.
</div>
<div style="margin-top: 12pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; font-size: 12pt; font-family: Arial, Helvetica; color: #000000; background: transparent">
<b><font style="font-family: Arial, Helvetica">     STOCK
GRANTS TO DIRECTORS</font></b>
</div>
<div style="margin-top: 6pt; font-size: 1pt"> 
</div>
<div align="left" style="margin-left: 0%; margin-right: 0%; text-indent: 3%; font-size: 10pt; font-family: 'Times New Roman', Times; color: #000000; background: transparent">
Non-employee directors receive a portion of their annual
retainer fee in the form of common stock through the
Directors’ Stock Compensation Plan. Up to
120,000 shares of common stock may be awarded under the
plan. Shares granted to directors totaled 12,600 for each of the
fiscal years 2010, 2009 and 2008. For those years, the fair
value of the stock on the grant dates was $33.82, $32.77, and
$32.55, respectively. Shares awarded to the participants;
<i>(i) </i>vest immediately and cannot be forfeited;
<i>(ii) </i>may be sold or transferred and
<i>(iii) </i>have voting and dividend rights. For the years
ended September 30, 2010, 2009 and 2008, WGL Holdings
recognized stock-based compensation expense related to these
stock grants of $426,000, $413,000, and $410,000, respectively,
net of related income tax benefits of $154,000, $148,000, and
$148,000, respectively.
</div>
</div>
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Disclosure of compensation-related costs for share-based compensation which may include disclosure of policies, compensation plan details, allocation of stock compensation, incentive distributions, share-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.
Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 123R
-Paragraph 64, 65, A240
Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Statement of Position (SOP)
-Number 93-6
-Paragraph 53
Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher SEC
-Name Staff Accounting Bulletin (SAB)
-Number Topic 14
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