<PAGE>










                                  NISOURCE INC.

                          1994 LONG-TERM INCENTIVE PLAN

                AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2000


<PAGE>



                                       -i-

                                  NISOURCE INC.

                          1994 LONG-TERM INCENTIVE PLAN

                As Amended and Restated Effective January 1, 2000

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                              PAGE
<S>     <C>                                                                                                     <C>

1.       Purpose................................................................................................-1-

2.       Administration.........................................................................................-1-

3.       Common Shares Subject to the Plan......................................................................-1-

4.       Participants...........................................................................................-2-

5.       Awards Under the Plan..................................................................................-2-

6.       Section 162(m) Limitations.............................................................................-3-

7.       NonQualified Stock Options.............................................................................-3-
         (a)      Option Price..................................................................................-3-
         (b)      Exercise of Option............................................................................-3-
         (c)      Payment for Shares............................................................................-3-
         (d)      Transferability...............................................................................-4-
         (e)      Rights Upon Termination of Employment.........................................................-4-

8.       Incentive Stock Options................................................................................-5-
         (a)      Option Price..................................................................................-5-
         (b)      Exercise of Option............................................................................-5-
         (c)      Payment for Shares............................................................................-6-
         (d)      Transferability...............................................................................-6-
         (e)      Rights Upon Termination of Employment.........................................................-6-

9.       Stock Appreciation Rights..............................................................................-7-
         (a)      Awards........................................................................................-7-
         (b)      Term..........................................................................................-7-
         (c)      Payment.......................................................................................-7-



<PAGE>


10.      Performance Units......................................................................................-8-
         (a)      Performance Period............................................................................-8-
         (b)      Valuation of Units............................................................................-8-
         (c)      Performance Targets...........................................................................-8-
         (d)      Adjustments...................................................................................-8-
         (e)      Payments of Units.............................................................................-8-
         (f)      Termination of Employment.....................................................................-8-
         (g)      Other Terms...................................................................................-9-

11.      Restricted Stock Awards................................................................................-9-
         (a)      Restriction Period............................................................................-9-
         (b)      Restrictions Upon Transfer....................................................................-9-
         (c)      Certificates..................................................................................-9-
         (d)      Lapse of Restrictions........................................................................-10-
         (e)      Termination Prior to Lapse of Restrictions...................................................-10-

12.      Contingent Stock Awards...............................................................................-10-
         (a)      Restriction Period...........................................................................-10-
         (b)      Lapse of Restrictions........................................................................-10-
         (c)      Termination Prior to Lapse of Restrictions...................................................-11-

13.      Supplemental Cash Payments............................................................................-11-

14.      Dividend Equivalents..................................................................................-11-

15.      General Restrictions..................................................................................-12-

16.      Rights as a Shareholder...............................................................................-12-

17.      Employment Rights.....................................................................................-12-

18.      Tax--Withholding.......................................................................................-12-

19.      Change in Control.....................................................................................-13-

20.      Amendment or Termination..............................................................................-13-

21.      Effect on Other Plans.................................................................................-13-

22.      Assumption of Options.................................................................................-14-

23.      Duration of the Plan..................................................................................-15-


</TABLE>

<PAGE>









                                  NISOURCE INC.

                          1994 LONG-TERM INCENTIVE PLAN

               (AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2000)

WHEREAS,  NiSource  Inc.  (formerly  NIPSCO  Industries,  Inc.) (the  "Company")
adopted the NIPSCO  Industries,  Inc. 1994  Long-Term  Incentive  Plan effective
April 13, 1994, as last amended and restated  effective  April 14, 1999, and now
known as the NiSource Inc. 1994 Long-Term Incentive Plan ("Plan"); and

         WHEREAS,  pursuant  to Section 20 of the Plan,  the  Company  wishes to
further amend the Plan in certain respects and restate it in a single document;

         NOW  THEREFORE,  the Plan is hereby  amended  and  restated,  effective
January 1, 2000, as follows:

1.  PURPOSE. The purpose of the NiSource Inc. 1994 Long-Term Incentive Plan (the
"Plan") is to further the  earnings of NiSource  Inc.  (the  "Company")  and its
subsidiaries.  The Plan provides long-term  incentives to those officers and key
executives  who  make  substantial  contributions  by  their  ability,  loyalty,
industry  and  invention.  The  Company  intends  that  the  Plan  will  thereby
facilitate  securing,  retaining,  and motivating  management  employees of high
caliber and potential.

2.  ADMINISTRATION.  The  Plan  shall  be  administered  by the  Nominating  and
Compensation  Committee  ("Committee")  of the Board of Directors of the Company
("Board").  The Committee shall be composed of not fewer than two members of the
Board who are "nonemployee  directors" of the Company within the meaning of Rule
16b-3 under the Securities  Exchange Act of 1934, as amended  ("1934 Act"),  and
"outside  directors" of the Company  within the meaning of Section 162(m) of the
Internal  Revenue  Code of  1986,  as  amended,  ("Code"),  and the  regulations
thereunder.  Subject to the express  provisions  of the Plan,  the Committee may
interpret the Plan, prescribe,  amend and rescind rules and regulations relating
to it,  determine  the terms and  provisions of awards to officers and other key
executive employees under the Plan (which need not be identical),  and make such
other  determinations as it deems necessary or advisable for the  administration
of the Plan.  The decisions of the Committee  under the Plan shall be conclusive
and binding.  No member of the Board or of the Committee shall be liable for any
action taken, or  determination  made,  hereunder in good faith.  Service on the
Committee shall constitute  service as a director of the Company so that members
of the  Committee  shall be entitled to  indemnification  and  reimbursement  as
directors of the Company, pursuant to its by-laws.


<PAGE>



                                       -2-

3.  COMMON  SHARES  SUBJECT  TO THE  PLAN.  (a)  Subject  to the  provisions  of
subsection  3(b), the shares that may be issued,  or may be the measure of stock
appreciation  rights  granted,  under the Plan shall not exceed in the aggregate
11,000,000  of the common  shares  without par value of the Company (the "Common
Shares").  Such shares may be authorized and unissued shares or treasury shares.
Except as otherwise  provided  herein,  any shares subject to an option or right
which for any reason  expires or is  terminated,  unexercised as to such shares,
shall again be available under the Plan.

(b) (i)  Appropriate  adjustments  in the  aggregate  number  of  Common  Shares
issuable  pursuant  to the Plan,  the  number of Common  Shares  subject to each
outstanding  award  granted  under the Plan,  the option  price with  respect to
options and connected stock  appreciation  rights,  the specified price of stock
appreciation rights not connected to options,  and the value for Units, shall be
made to give effect to any  increase or decrease in the number of issued  Common
Shares resulting from a subdivision or consolidation of shares,  whether through
recapitalization,  stock split, reverse stock split, spin-off, spin-out or other
distribution of assets to stockholders,  stock  distributions or combinations of
shares, payment of stock dividends,  other increase or decrease in the number of
such Common Shares outstanding  effected without receipt of consideration by the
Company,  or  any  other  occurrence  for  which  the  Committee  determines  an
adjustment is appropriate.

         (ii) In the event of any merger, consolidation or reorganization of the
Company with any other  corporation  or  corporations,  or an acquisition by the
Company of the stock or assets of any other  corporation or corporations,  there
shall be  substituted on an equitable  basis,  as determined by the Committee in
its sole  discretion,  for each Common Share then  subject to the Plan,  and for
each Common Share then subject to an award  granted  under the Plan,  the number
and kind of shares of stock,  other securities,  cash or other property to which
the  holders of Common  Shares of the  Company  are  entitled  pursuant  to such
transaction.

         (iii) Without  limiting the  generality of the foregoing  provisions of
this  paragraph,  any such  adjustment  shall be  deemed to have  prevented  any
dilution or enlargement of a participant's  rights, if such participant receives
in any such adjustment, rights that are substantially similar (after taking into
account the fact that the participant has not paid the applicable  option price)
to  the  rights  the  participant  would  have  received  had he  exercised  his
outstanding  award and become a shareholder of the Company  immediately prior to
the event giving rise to such adjustment. Adjustments under this paragraph shall
be made by the Committee, whose decision as to the amount and timing of any such
adjustment shall be conclusive and binding on all persons.

4.  PARTICIPANTS.  Persons  eligible  to  participate  shall be limited to those
officers and other key executive  employees of the Company and its  subsidiaries
who are in positions in which their decisions, actions and counsel significantly
impact upon profitability. Directors who are not otherwise officers or employees
shall not be eligible to participate in the Plan.



<PAGE>


5.  AWARDS  UNDER  THE PLAN.  Awards  under the Plan may be in the form of stock
options (both options designed to satisfy  statutory  requirements  necessary to
receive  favorable tax treatment  pursuant to any present or future  legislation
and  options  not  designed  to so  qualify),  incentive  stock  options,  stock
appreciation  rights,  performance units,  restricted  shares,  contingent stock
awards, or such combinations of the above as the Committee may in its discretion
deem appropriate. Except in accordance with equitable adjustments as provided in
subsection  3(b),  no stock option  granted  under the Plan shall at any time be
repriced or subject to cancellation and replacement.

6.  SECTION 162(M)  LIMITATIONS.  Subject to  subsection  3(b) of the Plan,  the
maximum  number of stock options and stock  appreciation  rights  granted to any
person who  qualifies  as an  executive  officer  named from time to time in the
summary  compensation  table in the Company's annual meeting proxy statement and
who is employed  by the  Company on the last day of the  taxable  year (the "SCT
Executives") shall be 300,000 options and stock appreciation rights with respect
to Common Shares per year and 1,500,000  options and stock  appreciation  rights
with respect to Common Shares during the term of the Plan. The maximum number of
performance  units granted to any SCT Executive shall be 200,000 units per year,
provided that no more than 400,000 units may be awarded in any three year period
and that the maximum  number of units  granted to any SCT  Executive  during the
term of the Plan shall be 750,000. The maximum number of restricted stock awards
granted to any SCT Executive  shall be 200,000 Common Shares per year,  provided
that no more than  400,000  Shares of  restricted  stock may be  awarded  in any
three-year  period and that the  maximum  number of Shares of  restricted  stock
granted to any SCT Executive  during the term of the Plan shall be 750,000.  The
maximum number of contingent  stock awards granted to any SCT Executive shall be
200,000  Common Shares per year provided that no more than 400,000 Common Shares
may be subject to contingent  stock awards  granted in any three year period and
the maximum  number of Common Shares  subject to contingent  stock awards to any
SCT Executive during the term of the Plan shall be 750,000.

7.  NONQUALIFIED  STOCK  OPTIONS.  Options  shall be  evidenced  by stock option
agreements  in such  form and not  inconsistent  with the Plan as the  Committee
shall approve from time to time, which agreements shall contain in substance the
following terms and conditions:

         (a) OPTION PRICE. The purchase price per Common Share  deliverable upon
the  exercise of an option  shall not be less than 100% of the fair market value
of a  Common  Share on the day the  option  is  granted,  as  determined  by the
Committee.  Fair market value of Common Shares for purposes of the Plan shall be
the average of the high and low prices on the New York Stock Exchange  Composite
Transactions on the date of the grant, or on any other applicable date.

         (b) EXERCISE  OF OPTION.  Each stock option  agreement  shall state the
period or  periods of time  within  which the  option  may be  exercised  by the
optionee,  in whole or in part, which shall be such period or periods of time as
may be determined by the  Committee,  provided that the option  exercise  period
shall not  commence  earlier  than six months after the date of the grant of the
option nor end later than ten years  after the date of the grant of the  option.
The Committee  shall have the power to permit in its discretion an  acceleration
of the previously determined exercise terms, within the terms of the Plan, under
such circumstances and upon such terms and conditions as it deems appropriate.


<PAGE>


         (c) PAYMENT FOR SHARES.  Except as otherwise provided in the Plan or in
any stock option  agreement,  the optionee  shall pay the purchase  price of the
Common Shares upon the exercise of any option (i) in cash, (ii) in cash received
from a  broker-dealer  to whom the  optionee has  submitted  an exercise  notice
consisting  of a fully  endorsed  option  (however  in the  case of an  optionee
subject  to  Section  16 of the 1934 Act,  this  payment  option  shall  only be
available to the extent such payment  procedures comply with Regulation T issued
by the Federal  Reserve  Board),  (iii) by  delivering  Common  Shares having an
aggregate fair market value on the date of exercise equal to the option exercise
price,  (iv) by directing  the Company to withhold  such number of Common Shares
otherwise  issuable upon exercise of such option having an aggregate fair market
value on the date of exercise equal to the option  exercise  price,  (v) by such
other medium of payment as the Committee, in its discretion,  shall authorize at
the time of grant, or (vi) by any combination of (i), (ii), (iii), (iv) and (v).
In the case of an election  pursuant to (i) or (ii) above,  cash shall mean cash
or check issued by a federally insured bank or savings and loan association, and
made payable to NiSource Inc. In the case of payment  pursuant to (ii), (iii) or
(iv)  above,  the  optionee's  election  must be made on or prior to the date of
exercise and shall be irrevocable. In lieu of a separate election governing each
exercise  of an  option,  an  optionee  may  file a  blanket  election  with the
Committee  which shall govern all future  exercises of options  until revoked by
the  optionee.  The Company  shall  issue,  in the name of the  optionee,  stock
certificates representing the total number of Common Shares issuable pursuant to
the  exercise  of any  option  as  soon as  reasonably  practicable  after  such
exercise,  provided  that any Common Shares  purchased by an optionee  through a
broker-dealer  pursuant  to  clause  (ii)  above,  shall  be  delivered  to such
broker-dealer in accordance with 12 C.F.R.ss.  220.3(e)(4),  or other applicable
provision of law.

         (d) TRANSFERABILITY. Each stock option agreement shall provide that the
option subject  thereto is not  transferable  by the optionee  otherwise than by
will or the laws of  descent  or  distribution.  Notwithstanding  the  preceding
sentence,  an  optionee,  at any time prior to his death,  may assign all or any
portion of the option to (i) his spouse or lineal  descendant,  (ii) the trustee
of a trust for the primary benefit of his spouse or lineal descendant,  or (iii)
a tax-exempt organization as described in Section 501(c)(3) of the Code. In such
event the spouse, lineal descendant,  trustee or tax-exempt organization will be
entitled  to all of the rights of the  optionee  with  respect  to the  assigned
portion of such  option,  and such  portion of the option  will  continue  to be
subject to all of the  terms,  conditions  and  restrictions  applicable  to the
option  as set  forth  herein,  and  in  the  related  stock  option  agreement,
immediately  prior to the effective date of the assignment.  Any such assignment
will be permitted  only if (i) the optionee  does not receive any  consideration
therefor,  and (ii) the assignment is expressly approved by the Committee or its
delegate.  Any such  assignment  shall be  evidenced by an  appropriate  written
document executed by the optionee,  and a copy thereof shall be delivered to the
Committee or its delegate on or prior to the effective  date of the  assignment.
This paragraph shall apply to all  nonqualified  stock options granted under the
Plan at any time.


<PAGE>


         (e)  RIGHTS  UPON  TERMINATION  OF  EMPLOYMENT.  In the  event  that an
optionee ceases to be an employee for any reason other than death, disability or
retirement,  the optionee shall have the right to exercise the option during its
term  within a period of thirty days after such  termination  to the extent that
the option was  exercisable at the date of such  termination  of employment,  or
during such other period and subject to such terms as may be  determined  by the
Committee.  In the event that an optionee  dies,  retires,  or becomes  disabled
prior to termination  of his option  without having fully  exercised his option,
the optionee or his successor shall have the right to exercise the option during
its term within a period of three years after the date of such  termination  due
to  death,  disability  or  retirement,  to  the  extent  that  the  option  was
exercisable at the date of termination  due to death,  disability or retirement,
or during such other  period and subject to such terms as may be  determined  by
the  Committee.  For  purposes  of the Plan,  the term  "disability"  shall mean
disability as defined in the Company's Long-Term Disability Plan. The Committee,
in its sole discretion, shall determine the date of any disability. For purposes
of the Plan,  the term  "retirement"  shall  mean  retirement  as defined in the
Company's pension plan.

8.  INCENTIVE STOCK OPTIONS. Incentive stock options shall be evidenced by stock
option  agreements  in such  form  and not  inconsistent  with  the  Plan as the
Committee  shall approve from time to time,  which  agreements  shall contain in
substance the following terms and conditions:

         (a) OPTION PRICE.  Except as otherwise provided in subsection 8(b), the
purchase price per share of stock  deliverable upon the exercise of an incentive
stock  option shall not be less than 100% of the fair market value of the Common
Shares on the day the option is granted, as determined by the Committee.

         (b)  EXERCISE OF OPTION.  Each stock option  agreement  shall state the
period or  periods of time  within  which the  option  may be  exercised  by the
optionee,  in whole or in part, which shall be such period or periods of time as
may be  determined by the  Committee,  provided that the option period shall not
commence  earlier  than six months after the date of the grant of the option nor
end  later  than ten  years  after  the date of the  grant  of the  option.  The
aggregate fair market value  (determined  with respect to each  incentive  stock
option  at the  time of  grant)  of the  Common  Shares  with  respect  to which
incentive  stock  options are  exercisable  for the first time by an  individual
during any calendar year (under all incentive  stock option plans of the Company
and its parent and subsidiary  corporations)  shall not exceed $100,000.  If the
aggregate  fair  market  value  (determined  at the time of grant) of the Common
Shares  subject to an option,  which first becomes  exercisable  in any calendar
year exceeds the  limitation  of this Section  8(b),  so much of the option that
does not exceed the applicable  dollar limit shall be an incentive  stock option
and the  remainder  shall  be a  nonqualified  stock  option;  but in all  other
respects,  the original option  agreement shall remain in full force and effect.
As used in this Section 8, the words  "parent" and  "subsidiary"  shall have the
meanings given to them in Section 424(e) and 424(f) of the Code. Notwithstanding
anything  herein to the contrary,  if an incentive stock option is granted to an
individual  who owns stock  possessing  more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of its parent or
subsidiary  corporations,  within the meaning of Section  422(b)(6) of the Code,
(i) the  purchase  price of each Common  Share  subject to the  incentive  stock
option shall be not less than one hundred ten percent  (110%) of the fair market
value of the Common  Shares on the date the  incentive  stock option is granted,
and (ii) the  incentive  stock option shall  expire,  and all rights to purchase
Common Shares thereunder shall cease, no later than the fifth anniversary of the
date the incentive stock option was granted.


<PAGE>


         (c) PAYMENT FOR SHARES.  Except as otherwise provided in the Plan or in
any stock option  agreement,  the optionee  shall pay the purchase  price of the
Common  Shares  upon the  exercise  of any  option,  (i) in  cash,  (ii) in cash
received  from a  broker-dealer  to whom the optionee has  submitted an exercise
notice consisting of a fully endorsed option (however in the case of an optionee
subject  to  Section  16 of the 1934 Act,  this  payment  option  shall  only be
available to the extent such payment  procedures comply with Regulation T issued
by the Federal  Reserve  Board),  (iii) by  delivering  Common  Shares having an
aggregate fair market value on the date of exercise equal to the option exercise
price,  (iv) by directing  the Company to withhold  such number of Common Shares
otherwise  issuable upon exercise of such option having an aggregate fair market
value on the date of exercise equal to the option  exercise  price,  (v) by such
other medium of payment as the Committee, in its discretion,  shall authorize at
the time of grant, or (vi) by any combination of (i), (ii), (iii), (iv) and (v).
In the case of an  election  pursuant  to (i) or (ii),  cash  shall mean cash or
check issued by a federally  insured bank or savings and loan  association,  and
made payable to NiSource Inc. In the case of payment  pursuant to (ii), (iii) or
(iv)  above,  the  optionee's  election  must be made on or prior to the date of
exercise and shall be irrevocable. In lieu of a separate election governing each
exercise  of an  option,  an  optionee  may  file a  blanket  election  with the
Committee  which shall govern all future  exercises of options  until revoked by
the  optionee.  The Company  shall  issue,  in the name of the  optionee,  stock
certificates representing the total number of Common Shares issuable pursuant to
the  exercise  of any  option  as  soon as  reasonably  practicable  after  such
exercise,  provided  that any Common Shares  purchased by an optionee  through a
broker-dealer  pursuant  to  clause  (ii)  above,  shall  be  delivered  to such
broker-dealer in accordance with 12 C.F.R. ss. 220.3(e)(4),  or other applicable
provision of law.

         (d) TRANSFERABILITY.  Each stock option agreement shall provide that it
is not transferable by the optionee otherwise by will or the laws of descent  or
distribution.

         (e) RIGHTS   UPON  TERMINATION  OF  EMPLOYMENT.  In the  event  that an
optionee ceases to be an employee for any reason other than death, disability or
retirement,  the optionee shall have the right to exercise the option during its
term  within a period of thirty days after such  termination  to the extent that
the option was  exercisable at the date of such  termination  of employment,  or
during such other period and subject to such terms as may be  determined  by the
Committee.  In the event that an optionee  dies,  retires,  or becomes  disabled
prior to termination  of his option  without having fully  exercised his option,
the optionee or his successor shall have the right to exercise the option during
its term within a period of three years after the date of such  termination  due
to  death,  disability  or  retirement,  to  the  extent  that  the  option  was
exercisable at the date of termination  due to death,  disability or retirement,
or during such other  period and subject to such terms as may be  determined  by
the Committee.  Notwithstanding the foregoing, in accordance with Section 422 of
the Code, if an incentive  stock option is exercised more than ninety days after
termination of employment,  that portion of the option exercised after such date
shall  automatically be a nonqualified  stock option, but in all other respects,
the original option agreement shall remain in full force and effect.


<PAGE>


The provisions of this Section 8 shall be construed and applied, and (subject to
the  limitations  of  Section  23) shall be  amended  from time to time so as to
comply with Section 422 or its  successors  of the Code and  regulations  issued
thereunder.

9.  STOCK APPRECIATION RIGHTS.  Stock appreciation  rights shall be evidenced by
stock  appreciation  right agreements in such form and not inconsistent with the
Plan as the Committee shall approve from time to time,  which  agreements  shall
contain in substance the following terms and conditions:

         (a) AWARDS.  A stock  appreciation  right shall  entitle the grantee to
receive  upon  exercise  the excess of (i) the fair market  value of a specified
number of shares of the Company  Common Shares at the time of exercise over (ii)
a specified  price which shall not be less than 100% of the fair market value of
the Common Shares at the time the stock appreciation  right was granted,  or, if
connected with a previously issued stock option,  not less than 100% of the fair
market  value of Common  Shares at the time such  option  was  granted.  A stock
appreciation  right may be granted in  connection  with all of any  portion of a
previously or contemporaneously granted stock option or not in connection with a
stock option.

         (b) TERM.  Stock  appreciation  rights shall be granted for a period of
not less than one year nor more than ten  years,  and  shall be  exercisable  in
whole or in part,  at such time or times and  subject  to such  other  terms and
conditions,  as shall  be  prescribed  by the  Committee  at the time of  grant,
subject to the following:

                  (i)......No stock  appreciation  right shall be exercisable in
         whole or in part, during the six-month period starting with the date of
         grant; and

                  (ii).....Stock  appreciation  rights will be exercisable  only
         during a grantee's  employment,  except that in the  discretion  of the
         Committee a stock  appreciation right may be made exercisable for up to
         thirty days after the grantee's employment is terminated for any reason
         other than death, disability or retirement. ln the event that a grantee
         dies,  retires,  or becomes disabled without having fully exercised his
         stock appreciation  rights, the grantee or his successor shall have the
         right to  exercise  the stock  appreciation  rights  during  their term
         within a period of three years after the date of such  termination  due
         to death,  disability  or  retirement  to the extent that the right was
         exercisable at the date of such termination or during such other period
         and subject to such terms as may be determined by the Committee.

         The  Committee  shall  have the power to permit  in its  discretion  an
         acceleration of previously  determined exercise terms, within the terms
         of  the  Plan,  under  such  circumstances  and  upon  such  terms  and
         conditions as it deems appropriate.

         (c) PAYMENT. Upon exercise of a stock appreciation right, payment shall
be made in cash,  in the form of Common  Shares at fair  market  value,  or in a
combination thereof, as the Committee may determine.


<PAGE>


10. PERFORMANCE  UNITS.   Performance  Units  ("Units")  shall be  evidenced  by
performance unit agreements in such form and not  inconsistent  with the Plan as
the Committee shall approve from time to time, which agreements shall contain in
substance the following terms and conditions:

         (a) PERFORMANCE  PERIOD. At  the  time  of  award,  the Committee shall
establish with respect  to each Unit award a performance period of not less than
two, nor more than five, years.

         (b) VALUATION  OF UNITS.   At the time of award,  the  Committee  shall
establish  with respect to each such award a value for each Unit which shall not
thereafter  change,  or which may vary  thereafter  determinable  from  criteria
specified by the Committee at the time of award.

         (c) PERFORMANCE  TARGETS.   At the time of award,  the Committee  shall
establish maximum and minimum performance targets to be achieved with respect to
each award during the performance  period.  The participant shall be entitled to
payment  with  respect to all Units  awarded if the  maximum  target is achieved
during the performance  period, but shall be entitled to payment with respect to
a  portion  of the  Units  awarded  according  to the  level of  achievement  of
performance  targets, as specified by the Committee,  for performance during the
performance  period which meets or exceeds the minimum  target but fails to meet
the maximum target.

         The  performance  targets  established by the Committee shall relate to
corporate,  division,  or unit  performance  and may be  established in terms of
growth in gross revenue,  earnings per share, ratio of earnings to shareholders'
equity or to total assets,  dividend  payments and total  shareholders'  return.
Multiple targets may be used and may have the same or different  weighting,  and
they may relate to  absolute  performance  or relative  performance  as measured
against other institutions or divisions or units thereof.

         (d) ADJUSTMENTS.  At any  time   prior to  payment  of the  Units,  the
Committee may adjust previously established  performance targets and other terms
and conditions,  including the corporation's,  or division's or unit's financial
performance  for Plan  purposes,  to reflect  major  unforeseen  events  such as
changes in laws, regulations or accounting practices,  mergers,  acquisitions or
divestitures or extraordinary, unusual or non-recurring items or events.

         () PAYMENTS OF UNITS.  Following the  conclusion  of each  performance
period,  the Committee shall determine the extent to which  performance  targets
have been  attained  for such period as well as the other  terms and  conditions
established  by the  Committee.  The  Committee  shall  determine  what, if any,
payment  is due on the  Units.  Payment  shall be made in  cash,  in the form of
Common  Shares  at  fair  market  value,  or in a  combination  thereof,  as the
Committee may determine.


<PAGE>


         (f) TERMINATION OF EMPLOYMENT.  In the event that a participant holding
a Unit  award  ceases  to be an  employee  prior  to the  end of the  applicable
performance period by reason of death,  disability or retirement,  his Units, to
the extent earned under the applicable  performance targets, shall be payable at
the end of the  performance  period in proportion  to the active  service of the
participant during the performance period, as determined by the Committee.  Upon
any other termination of employment, participation shall terminate forthwith and
all outstanding Units held by the participant shall be canceled.

         (g) OTHER TERMS. The Unit agreements  shall contain  such  other  terms
and  provisions  and  conditions  not  inconsistent  with  the  Plan as shall be
determined by the Committee.

11. RESTRICTED STOCK AWARDS.  Restricted Stock Awards under the Plan shall be in
the form of Common Shares of the Company,  restricted as to transfer and subject
to  forfeiture,  and shall be evidenced by restricted  stock  agreements in such
form and not inconsistent with the Plan as the Committee shall approve from time
to time,  which  agreements  shall contain in substance the following  terms and
conditions:

         (a) RESTRICTION  PERIOD.  Restricted  Common Shares awarded pursuant to
the Plan shall be subject to such terms, conditions, and restrictions, including
without  limitation:   prohibitions  against  transfer,   substantial  risks  of
forfeiture,  attainment of performance  objectives and repurchase by the Company
or right of first refusal, and for such period or periods as shall be determined
by the  Committee at the time of grant.  The  Committee  shall have the power to
permit in its  discretion,  an  acceleration of the expiration of the applicable
restriction  period with respect to any part or all of the Common Shares awarded
to a participant.

The  performance  objectives  established  by  the  Committee  shall  relate  to
corporate,  division or unit  performance,  and may be  established  in terms of
growth and gross revenue, earnings per share, ratio of earnings to shareholder's
equity or to total assets,  dividend  payments and total  shareholders'  return.
Multiple  objectives  may be used and may have the same or different  weighting,
and they may relate to absolute  performance or relative performance as measured
against other institutions or divisions or units thereof.

         (b) RESTRICTIONS UPON TRANSFER. Common Shares awarded, and the right to
vote such Shares and to receive dividends  thereon,  may not be sold,  assigned,
transferred,  exchanged, pledged,  hypothecated, or otherwise encumbered, except
as herein  provided,  during the restriction  period  applicable to such Shares.
Subject to the  foregoing,  and except as  otherwise  provided in the Plan,  the
participant shall have all the other rights of a shareholder including,  but not
limited to, the right to receive dividends and the right to vote such Shares.

         (c) CERTIFICATES.  Each certificate  issued in respect of Common Shares
awarded to a participant  shall be deposited with the Company,  or its designee,
and shall bear the following legend:


<PAGE>


"This certificate and the shares represented hereby are subject to the terms and
conditions (including forfeiture and restrictions against transfer) contained in
the NiSource Inc. 1994 Long-Term incentive Plan and an Agreement entered into by
the registered  owner.  Release from such terms and conditions shall obtain only
in accordance  with the provisions of the Plan and Agreement,  a copy of each of
which is on file in the office of the Secretary of said Company."

         (d) LAPSE OF  RESTRICTIONS.  A restricted stock agreement shall specify
the terms and conditions upon which any restrictions  upon Common Shares awarded
under the Plan shall lapse,  as determined by the  Committee.  Upon the lapse of
such  restrictions,  Common Shares,  free of the foregoing  restrictive  legend,
shall be issued to the participant or his legal representative.

         (e) TERMINATION  PRIOR   TO LAPSE OF  RESTRICTIONS.  In the  event of a
participant's termination of employment,  other than due to death, disability or
retirement,  prior to the lapse of restrictions  applicable to any Common Shares
awarded to such participant, all Shares as to which there still remains unlapsed
restrictions  shall be  forfeited  by such  participant  without  payment of any
consideration  to  the   participant,   and  neither  the  participant  nor  any
successors,  heirs,  assigns,  or personal  representatives  of such participant
shall  thereafter  have  any  further  rights  or  interest  in such  Shares  or
certificates.

12. CONTINGENT STOCK AWARDS.  Contingent stock awards under the Plan shall be in
the form of the issuance of Common Shares of the Company  following the lapse of
restrictions  applicable  to such awards.  Such awards shall be restricted as to
transfer and subject to forfeiture,  and shall be evidenced by contingent  stock
award  agreements  in  such  form  and not  inconsistent  with  the  Plan as the
Committee  shall approve from time to time,  which  agreements  shall contain in
substance the following terms and conditions:

         (a) RESTRICTION   PERIOD.  Contingent  stock awards shall be subject to
such  terms,   conditions  and  restrictions,   including  without  limitations,
prohibitions against transfer,  substantial risk of forfeiture and attainment of
performance  objectives,  and for such period or periods, as shall be determined
by the  Committee at the time of grant.  The  Committee  shall have the power to
permit in its  discretion an  acceleration  of the  expiration of the applicable
restriction period with respect to any part or all of a contingent stock award.

The  performance  objectives  established  by  the  Committee  shall  relate  to
corporate,  division or unit  performance,  and may be  established  in terms of
growth  and  gross   revenue,   earnings  per  share,   ratios  of  earnings  to
shareholders'   equity  or  to  total  assets,   dividend   payments  and  total
shareholders'  return.  Multiple objectives may be used and may have the same or
different  weighting,  and they may relate to absolute  performance  or relative
performance  as  measured  against  other  institutions  or  divisions  or units
thereof.


<PAGE>


         (b) LAPSE OF  RESTRICTIONS.  A contingent  stock award  agreement shall
specify the terms and conditions upon which any restrictions  applicable to such
award  shall  lapse  as  determined  by  the  Committee.   Upon  lapse  of  such
restriction,  Common  Shares  subject to such  contingent  stock  award shall be
issued to the participant or his legal representative.  Such Common Shares, when
issued to the participant or his legal  representative,  shall either be free of
any  restrictions,  or shall be subject  to such  further  restrictions,  as the
Committee shall determine.  In the event that Common Shares issued pursuant to a
contingent  stock award are subject to further  restrictions,  the  certificates
issued in respect of the Common Shares awarded  pursuant to the contingent stock
award shall be deposited with the Company,  or its designee,  and shall bear the
legend set forth in subsection 11(c) above. Upon the lapse of such restrictions,
Common Shares free of such restrictive legend shall be issued to the participant
or his legal representative.

         (c) TERMINATION   PRIOR  TO LAPSE OF  RESTRICTIONS.  In the  event of a
participant's termination of employment,  other than due to death, disability or
retirement,  prior to the lapse of  restrictions  applicable  to any  contingent
stock  award  granted to such  participant,  such  award and all  Common  Shares
subject thereto as to which there still remain unlapsed  restrictions,  shall be
forfeited  by such  participant  without  payment  of any  consideration  to the
participant and neither the participant  nor any successors,  heirs,  assigns or
personal  representatives  of such participant  shall have any further rights or
interests  in such  contingent  stock  awards or such Common  Shares  subject to
thereto.

13. SUPPLEMENTAL   CASH  PAYMENTS.  Subject to the Company's  discretion,  stock
options,  incentive stock options, stock appreciation rights, performance units,
restricted stock agreements or contingent stock award agreements may provide for
the payment of a supplemental  cash payment to a participant  promptly after the
exercise of an option or stock appreciation right, or, at the time of payment of
a performance unit, or at the end of a restriction  period of a restricted stock
or contingent stock award.  Supplemental  cash payments shall be subject to such
terms and conditions as shall be provided by the Committee at the time of grant,
provided that in no event shall the amount of each payment exceed:

         (a) In the case of an option,  the excess of the fair market value of a
         Common Share on the date of exercise  over the option price  multiplied
         by the number of Common Shares for which such option is exercised, or

         (b) In the  case  of a  stock  appreciation  right,  performance  unit,
         restricted  stock award or  contingent  stock  award,  the value of the
         Common Shares and other consideration issued in payment of such award.


<PAGE>


14. DIVIDEND   EQUIVALENTS.  Each holder of an incentive  stock option,  a stock
appreciation  right not granted in connection with a stock option, a performance
unit award,  or a contingent  stock award,  shall receive a  distribution  of an
amount equivalent to the dividends payable in cash or property (other than stock
of the  Company)  that would have been payable to the holder with respect to the
number of Common  Shares  subject to such  award,  had the holder been the legal
owner of such  Common  Shares on the date on which such  dividend is declared by
the Company on Common Shares.  Such dividend  payable in cash or property (other
than  stock of the  Company)  shall be  payable  directly  to the  holder of the
applicable award at such time, in such form, and upon such terms and conditions,
as are applicable to the actual cash or property dividend actually declared with
respect to Common Shares.  Any  participant  entitled to receive a cash dividend
pursuant to this section  may, by written  election  filed with the Company,  at
least ten days  prior to the date for  payment of such  dividend,  elect to have
such dividend credited to an account maintained for his benefit under a dividend
reinvestment  plan  maintained  by the  Company.  Appropriate  adjustments  with
respect to awards shall be made to give effect to the payment of stock dividends
as set forth in subsection 3(b) above.

15. GENERAL   RESTRICTIONS.  Each  award  under the Plan shall be subject to the
requirement  that, if at any time the  Committee  shall  determine  that (i) the
listing,  registration or  qualification of the Common Shares subject or related
thereto upon any securities  exchange or under any state or federal law, or (ii)
the consent or approval of any government regulatory body, or (iii) an agreement
by the recipient of an award with respect to the  disposition  of Common Shares,
is necessary or desirable as a condition of, or in connection with, the granting
of such award or the issue or purchase of Common Shares  thereunder,  such award
may not be  consummated  in whole or in part unless such listing,  registration,
qualification,  consent,  approval  or  agreement  shall have been  effected  or
obtained, free of any conditions not acceptable to the Committee.

16. RIGHTS AS A SHAREHOLDER.  The recipient of any award under the Plan,  unless
otherwise  provided  by the Plan,  shall  have no rights as a  shareholder  with
respect  thereto unless and until  certificates  for Common Shares are issued to
the recipient.

17. EMPLOYMENT   RIGHTS.  Nothing in the Plan or in any  agreement  entered into
pursuant to the Plan shall confer upon any  participant the right to continue in
employment  or affect any right which his  employer  may have to  terminate  the
employment of such participant.



<PAGE>


18. TAX--WITHHOLDING.  Whenever  the Company proposes or is required to issue or
transfer  Common Shares to a participant  under the Plan, the Company shall have
the  right  to  require  the  participant  to  remit to the  Company  an  amount
sufficient to satisfy all federal,  state and local withholding tax requirements
prior to the delivery of any certificate or certificates for such Common Shares.
If such  certificates  have  been  delivered  prior  to the  time a  withholding
obligation  arises,  the Company shall have the right to require the participant
to remit to the Company an amount  sufficient  to satisfy all federal,  state or
local  withholding tax  requirements  at the time such obligation  arises and to
withhold from other  amounts  payable to the  participant,  as  compensation  or
otherwise,  as necessary.  Whenever  payments under the Plan are to be made to a
participant  in cash,  such  payment  shall be net of any amount  sufficient  to
satisfy all federal,  state and local withholding tax  requirements.  In lieu of
requiring a participant to make a payment to the Company in an amount related to
the withholding tax requirement,  the Committee may, in its discretion,  provide
that, at the  participant's  election,  the tax withholding  obligation shall be
satisfied by the Company's  withholding a portion of the Common Shares otherwise
distributable to the participant,  such Common Shares being valued at their fair
market value at the date of exercise, or by the participant's  delivering to the
Company a portion of the Common Shares previously delivered by the Company, such
Common Shares being valued at their fair market value as of the date of delivery
of such Common Shares by the participant to the Company.  For this purpose,  the
amount  of  required  withholding  shall be a  specified  rate not less than the
statutory  minimum federal,  state and local (if any) withholding  rate, and not
greater  than the maximum  federal,  state and local (if any)  marginal tax rate
applicable to the participant and to the particular transaction. Notwithstanding
any provision of the Plan to the contrary, a participant's  election pursuant to
the  preceding  sentences  (a)  must be made on or prior to the date as of which
income  is  realized  by  the  recipient  in  connection   with  the  particular
transaction, and (b) must be irrevocable. In lieu of a separate election on each
effective date of each  transaction,  a participant may file a blanket  election
with the Committee which shall govern all future  transactions  until revoked by
the participant.

19. CHANGE IN CONTROL.  (a) Effect of Change in Control.  Notwithstanding any of
the provisions of the Plan or any agreement evidencing awards granted hereunder,
upon a Change in Control of the  Company (as  defined in  subsection  19(b)) all
outstanding  awards shall become fully exercisable and all restrictions  thereon
shall  terminate  in order that  participants  may fully  realize  the  benefits
thereunder.  Further,  the  Committee,  as  constituted  before  such  Change in
Control, is authorized,  and has sole discretion, as to any award, either at the
time such award is granted hereunder or any time thereafter,  to take any one or
more of the  following  actions:  (i) provide for the exercise of any such award
for an amount of cash equal to the difference between the exercise price and the
then fair market value of the Common Shares covered  thereby had such award been
currently  exercisable;  (ii)  provide  for the  vesting or  termination  of the
restrictions  on any such award;  (iii) make such  adjustment  to any such award
then  outstanding as the Committee  deems  appropriate to reflect such Change in
Control;  and (iv) cause any such award then  outstanding to be assumed,  by the
acquiring or surviving corporation, after such Change in Control.

         (b)  Definition  of Change in  Control.  A "Change in  Control"  of the
Company  shall be deemed to have  occurred  if any one of the  occurrences  of a
"Change  in  Control"  set  forth  in the  Change  in  Control  and  Termination
Agreements between the Company and certain executive officers thereof shall have
been satisfied.

20. AMENDMENT   OR  TERMINATION.  The  Board  or the  Committee  may at any time
terminate,  suspend or amend the Plan without the  authorization of shareholders
to the extent allowed by law,  including without  limitation any rules issued by
the Securities and Exchange Commission under Section 16 of the 1934 Act, insofar
as shareholder approval thereof is required in order for the Plan to continue to
satisfy the  requirements  of Rule 16b-3 under the 1934 Act, or the rules of any
applicable stock exchange.  No termination,  suspension or amendment of the Plan
shall  adversely  affect any right  acquired by any  participant  under an award
granted  before the date of such  termination,  suspension or amendment,  unless
such participant shall consent;  but it shall be conclusively  presumed that any
adjustment  for  changes in  capitalization  as  provided  for  herein  does not
adversely affect any such right. Subject to the preceding sentence,  the Plan as
amended and restated  effective January 1, 2000 shall apply to all awards at any
time granted hereunder.


<PAGE>


21. EFFECT ON OTHER PLANS. Unless otherwise specifically provided, participation
in the Plan shall not preclude an employee's  eligibility  to participate in any
other  benefit or incentive  plan and any awards made pursuant to the Plan shall
not be considered as compensation in determining the benefits provided under any
other plan.

22. ASSUMPTION OF OPTIONS.  Pursuant to the terms of Section 5.22 of the Amended
and Restated Agreement and Plan of Merger by and among the Company,  Acquisition
Gas Company,  Inc., a wholly owned subsidiary of the Company,  and Bay State Gas
Company ("Bay State"), dated as of December 18, 1997 and amended and restated as
of March 4, 1998 and further  amended as of November 16, 1998 (as may be further
amended, restated or supplemented,  the "Agreement'),  and at the Effective Time
defined in the  Agreement,  each  outstanding  stock option issued under the Bay
State Gas Company 1989 Key  Employee  Stock Option Plan ("Bay State Stock Option
Plan"),  shall be  assumed by the  Company.  Each such  stock  option  ("Assumed
Option")  shall be deemed to constitute an option to acquire Common Shares in an
amount and at a  purchase  price  determined  pursuant  to  Section  5.22 of the
Agreement.  Each  Assumed  Option  shall  be  subject  to all of the  terms  and
conditions  applicable to options  granted under the Plan.  Notwithstanding  the
preceding sentence:

                  (1)......if  the employment of the holder of an Assumed Option
         with the Company and its  subsidiaries  terminates for any reason other
         than  death,  disability,   retirement  or  Cause,  he,  or  his  legal
         representatives or beneficiary,  may exercise the Assumed Option at any
         time within three months  immediately  following  such  termination  of
         employment,  but not  later  than  the  expiration  of the term of such
         Assumed Option;

                  (2)......if  the  holder  of  an  Assumed  Option  that  is  a
         non-qualified  stock option terminates  employment with the Company and
         its subsidiaries because of death, disability or retirement, he, or his
         legal  representatives or beneficiary,  may exercise the Assumed Option
         at any time during the term of such Assumed Option to the extent he was
         entitled to exercise it at the date of death, disability or retirement;

                  (3)......if  the  holder  of  an  Assumed  Option  that  is an
         incentive stock option  terminates  employment with the Company and its
         subsidiaries because of death, his legal representatives or beneficiary
         may  exercise  the  Assumed  Option at any time during the term of such
         Assumed Option to the extent he was entitled to exercise it at the date
         of death;

                  (4)......if  the  holder  of  an  Assumed  Option  that  is an
         incentive stock option  terminates  employment with the Company and its
         subsidiaries  because of  disability  or  retirement,  he, or his legal
         representatives or beneficiary,  may exercise the Assumed Option at any
         time within three months  immediately  following  such  termination  of
         employment,  but not  later  than  the  expiration  of the term of such
         Assumed Option;


<PAGE>


                  (5)......if  the employment of the holder of an Assumed Option
         with the Company and its subsidiaries terminates for Cause, the Assumed
         Option shall expire as of the date of such termination of employment.

         For purposes of this  Section,  "Cause"  shall have the same meaning as
         defined in the holder's severance  agreement with the Company or any of
         its subsidiaries in effect on the date of termination of employment. If
         the holder has not entered into a severance  agreement with the Company
         or any  subsidiary  that is in  effect  on the date of  termination  of
         employment,  or if the term "Cause" is not defined therein, Cause shall
         mean the holder's  conviction  for the  commission of a felony,  or the
         holder's  fraud or  dishonesty  which has  resulted  in or is likely to
         result in material economic damage to the Company or any subsidiary.

         Each Assumed Option shall be evidenced by an amended and restated stock
         option agreement entered into as of the Effective Time by and among the
         Company, Bay State and the applicable optionee.

23. DURATION OF THE PLAN. The Plan shall remain in effect until all awards under
the Plan have been  satisfied by the issuance of Common Shares or the payment of
cash, but no award shall be granted more than six years after the date the Plan,
as  amended  and  restated  effective  January  1,  2000,  is  approved  by  the
shareholders, which shall be its effective date of adoption.