NiSource Capital Markets, Inc.
                    Puttable Reset Securities (PURS) due 2010
                               Purchase Agreement

                               September 13, 2000


                  Reference is made to the Puttable Reset Securities  (PURS) due
2010 (the "Bonds") of NiSource  Capital  Markets,  Inc., an Indiana  corporation
(the "Company"), the Calculation Agency Agreement, dated September 23, 1999 (the
"Calculation  Agency Agreement"),  between the Company and Goldman,  Sachs & Co.
("Goldman") and Barclays Bank PLC ("Barclays"  and,  collectively  with Goldman,
the "Sellers") and the Support Agreement,  dated as of April 4, 1989, as amended
as of May 15,  1989,  December  10, 1990 and  February  14,  1991 (the  "Support
Agreement"),  between the Company and NiSource  Inc.  ("NiSource").  Capitalized
terms used and not otherwise  defined herein shall have the meanings assigned to
them in the Bonds.

                  Goldman  intends to give  notice of the Call  Option  Holders'
intention to purchase the outstanding  Bonds pursuant to Section 3 of the Bonds.
Subject to the terms and conditions  herein set forth and to the satisfaction of
all conditions to the  obligations of the Sellers to purchase the Bonds pursuant
to Section 3 of the  Bonds,  the  Company  agrees to  purchase  from each of the
Sellers,  and each of the Sellers agrees,  severally and not jointly, to sell to
the Company, at a purchase price of $81,096,825 per $80,000,000 principal amount
of the Bonds.

                  The  Bonds  to be  purchased  by  the  Company  hereunder  are
represented by one or more definitive global securities in book-entry form which
have been  deposited  by or on behalf of the Company with The  Depository  Trust
Company ("DTC") or its designated custodian.  The Sellers will deliver the Bonds
to the Company,  against  payment by or on behalf of the Company of the purchase
price  therefor by wire  transfer of Federal  (same-day)  funds to the  accounts
specified at least  forty-eight  hours in advance by the Sellers to the Company,
by causing  DTC to credit the Bonds to the account  specified  by the Company at
DTC. The time and date of such delivery and payment shall be 9:30 A.M., New York
City time,  on September 28, 2000 or such other time and date as the Sellers and
the Company may agree upon in writing.  Such time and date are herein called the
"Time of Delivery".

                  It is  understood  and agreed  that the Call  Option  Holders'
purchase of the Bonds pursuant to the Call Option and resale of the Bonds to the
Company as provided  above will not  constitute a Failed  Remarketing  or Market
Disruption  Event and that  Goldman is not  obligated  to take any other  action
pursuant to the Calculation  Agency Agreement,  including,  without  limitation,
resetting  the interest rate on and  remarketing  the Bonds as  contemplated  by
Section 5 of the Bonds; provided that the Company shall remain obligated to make
all payments of principal of and any premium and interest on the Bonds.  Subject
to the foregoing,  in the event that prior to the Time of Delivery  Goldman,  on
behalf of the Call Option Holders,  becomes  entitled to demand and demands that
the  Company pay the Call Option  Holders  the Call  Option  Termination  Amount
pursuant to Section 3 of the Bonds, the Sellers shall have no obligation to sell
the Bonds to the Company and upon payment of the Call Option  Termination Amount
by the Company, the Call Option will terminate and the Put Option will be deemed
to have been exercised.

                  Subject to the  foregoing,  the rights and  obligations of the
parties to the  Calculation  Agency  Agreement  pursuant to such agreement shall
remain in full force and effect, including,  without limitation,  the indemnity,
reimbursement and exculpation  provisions of Section 3 of such agreement,  which
are hereby  agreed to extend to and cover any and all loss,  liability,  damage,
claims or expense (including the costs and expenses,  including reasonable legal
fees and  expenses,  of defending  against any claim of  liability)  incurred by
Goldman that arises out of or in connection with the  transactions  contemplated
hereby.

                  The  payment  obligations  of the  Company  hereunder  will be
entitled  to the  benefits of the  Support  Agreement,  which shall be deemed to
provide for the payment of the purchase price of the Bonds hereunder by NiSource
at the Time of  Delivery  as  provided  above in the event of a  default  by the
Company.

                  Goldman and Barclays hereby agree that notwithstanding Section
4(c) of the  Agreement,  dated as of September  23, 1999 (the  "Goldman-Barclays
Agreement"),  between  Goldman and  Barclays,  the time and date of delivery and
payment with respect to the 10-year U.S. Treasury Bonds to be sold by Goldman to
Barclays and purchased by Barclays from Goldman pursuant to the Goldman-Barclays
Agreement  shall be 3:00 P.M., New York City time, on September 14, 2000 or such
other time and date as Goldman  and  Barclays  may agree in writing and the Risk
Equivalent  Amount and  Purchase  Price (both as defined in Section  4(a) of the
Goldman-Barclays  Agreement)  shall be  determined  as of  September  13,  2000.
Subject to the  foregoing,  the  provisions of the  Goldman-Barclays  Agreement,
including, without limitation, the exculpation and indemnification provisions of
Section 6 thereof,  shall remain in full force and effect and shall be deemed to
apply to the transactions contemplated hereby.

                  This   Agreement   shall  be  governed  by  and  construed  in
accordance with the laws of the State of New York.



<PAGE>



         IN  WITNESS  WHEREOF,  each  of the  parties  hereto  has  caused  this
Agreement to be signed on its behalf by its duly authorized officers,  all as of
the day and year first above written.


                                         NISOURCE CAPITAL MARKETS, INC.


                                         By: /s/ Francis P. Girot
                                         ---------------------------------------
                                         Name: Francis P. Girot
                                         Title: Treasurer


                                         NISOURCE INC.


                                         By: /s/ Stephen P. Adik
                                         ---------------------------------------
                                         Name: Stephen P. Adik
                                         Title: Senior Executive Vice President


                                         /s/ Goldman, Sachs & Co.
                                         ---------------------------------------
                                         (GOLDMAN, SACHS & CO.)


                                         BARCLAYS BANK PLC


                                         By: /s/ Thomas G. Voorhees
                                         ---------------------------------------
                                         Name: Thomas G. Voorhees
                                         Title: Director