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                              BAY STATE GAS COMPANY
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                         STOCK PERFORMANCE SHARING PLAN
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              Amended And Restated Effective As Of October 1, 1997











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                              AMENDED AND RESTATED
                              BAY STATE GAS COMPANY
                         STOCK PERFORMANCE SHARING PLAN


              Amended and Restated Effective as of October 1, 1997


        1.      Background and Purposes of the Plan

        Bay State Gas Company (the "Company") adopted the Bay State Gas Company
Key Employee Long-Term Incentive Plan, as most recently amended and restated on
October 1, 1996 ("KELTIP") to provide long-term incentives and to increase the
opportunity for ownership of stock in the Company by those employees of the
Company and its affiliated companies who are directly responsible for the
management, growth and success of the Company's business.

        Effective October 1, 1997, the KELTIP was amended and restated as the
Bay State Gas Company Stock Performance Sharing Plan (the "Plan"). In addition
to providing the incentives and opportunity enhancements fostered by the KELTIP,
the Plan is intended to achieve the following three goals by providing long-term
stock-based incentives to employees who contribute directly to the Company's
success and advancement of the Company's legitimate interests: (1) align the
interests of Company employees and shareholders; (2) encourage superior
employment performance; and (3) stimulate employee teamwork and commitment.

        2.      Administration of the Plan

        The Plan shall be administered by the Compensation Committee (the
"Committee") appointed by the Board of Directors of the Company (the "Board"),
which shall consist of two or more members of the Board who qualify as
disinterested persons, within the meaning of rule 16b-3 promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act") and as outside
directors, within the meaning of Section 162(m) of the Internal Revenue Code of
1986, as amended (the "Code"). No member of the Committee shall be eligible to
receive an award under the Plan.

        The Committee shall act by a majority of its members, without the
necessity of a meeting. The Committee shall have full power, discretion and
authority to interpret and administer the Plan, and any interpretation or other
determination made, and any action taken, by the Committee shall be conclusive
and binding on all persons having an interest under the Plan, except as
otherwise determined by the Board.

        The Committee shall (a) determine the number of participants eligible
for participation and, subject to the provisions of Section 3 hereof, the
criteria for such participation, (b) determine the number of shares to award to
each participant, provided however that the Committee shall not award any shares
to an officer of the Company without prior Board






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approval, and (c) set the maximum number of shares to be awarded under the Plan
and the performance measures; provided, however, that fifty percent of the
target Performance Shares shall vest if the Company's total return is in the
33rd or greater percentile of the group of companies to which the Company is
compared, unless the Board determines otherwise. The details of the goals and
measures of the Plan shall be established by the Committee.

        All rights, powers, duties and responsibilities granted to the Committee
under this Plan may be delegated, in whole or in part, by the Committee to the
Company's Leader of Culture Development or to such other person(s) as the
Committee may deem appropriate, provided however that such delegation(s) shall
be ineffective to the extent, but only to the extent, that such delegation(s)
would result in adverse consequences under the provisions of Rule 16bA3 of the
Exchange Act and/or Section 162(m) of the Code.

        3.      Participation

        All employees of the Company and it affiliated companies who meet such
criteria for participation in the Plan as shall be established from time to time
by the Committee, shall be eligible to participate in the Plan, provided
however, that in no event shall the Committee establish criteria or approve or
deny participant status to individuals in violation of any applicable federal or
state law.

        4.      Performance Shares

        The maximum number of performance shares ("Performance Shares") which
may be awarded under the Plan is 500,000. Each Performance Share shall, upon
vesting in accordance with the provisions of the Plan, be exchangeable for (i) a
cash payment in an amount equal to the closing price for the Company's common
stock par value $3.33 1/3 per share ("Common Stock") as reported for trades on
the New York Stock Exchange on the last day on which such trades took place
immediately preceding the date of vesting (the "Exchange Price"), but in no
event shall such cash payment be less than the par value of such common stock,
which cash payment shall only be made on the condition that the participant
receiving such cash payment immediately invest all of such cash payment in
shares of Common Stock, which the Company shall make available to such
participant at a per share price equal to the Exchange Price, without brokerage
or other commissions of any kind, and (ii) an additional cash payment equal to
the dividends which would have been paid on all such shares of Common Stock if
owned by the participant during the performance period, as defined below. The
award of Performance Shares shall not entitle a participant to any rights as a
shareholder of the Company.

        5.      Grant of Awards

        The Committee shall grant awards of Performance Shares to the selected
employees, who shall then become participants in the Plan, as of October 1 of
each year from



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1994 through 2003, inclusive. Performance Shares awarded to any one employee
shall not exceed 100,000 in the aggregate for the period the Plan is in effect.
In no event shall awards be granted to participating employees with respect to
any period for which the employee (i) received a performance rating of less than
3.0 (or its successor standard(s)), unless such requirement is waived by the
Committee, on a general or individual basis, after due deliberation, (ii) is
subject to disciplinary action, as determined by the Compensation Committee, or
(iii) is deemed by the Compensation Committee to have engaged in conduct
contrary or harmful to the interests of the Company.

        6.      Vesting

        The Performance Shares awarded to a participant in any year shall vest
at the end of the three-consecutive year period beginning on the date the award
is granted (a "Performance Period"), depending on the Company's total return to
shareholders for the Performance Period, as determined by the Committee.

        Except as otherwise provided in Section 7, if a participant terminates
employment with the Company and/or its affiliates, voluntarily or involuntarily,
or is otherwise inactive (as determined by the Committee) as of the date his or
her Performance Shares would otherwise vest, he or she shall forfeit all
Performance Shares awarded for the Performance Period in which the termination
of employment occurs or inactive status arises.

        7.      Retirement, Disability, Death or Termination of Participant

        In the event a participant terminates employment by reason of
retirement, disability or death, the participant shall be entitled to payment of
a portion of the Performance Shares awarded to him or her for the Performance
Period in which the termination occurs. Such portion shall be equal to the
portion of the Performance Period for which the employee was employed by the
Company or an affiliate, except that, in the case of a participant's disability
or death, the Company's total return to shareholders shall be determined as of
the last day of the month in which participant's disability or death, as the
case may be, occurs.

        A participant whose employment is terminated for any reason other than
retirement, disability or death shall forfeit any award granted with respect to
the year of such termination. Without limiting the foregoing, effective October
1, 1997, a participant who is not actively employed, as determined by the
Compensation Committee, as of the date awards are granted for any Performance
Period and who is not entitled to a portion of such award based on retirement,
disability or death during the Performance Period shall not be eligible to
receive an award with respect to such period.

        A participant may designate a beneficiary or revoke a beneficiary
designation, at any time. Such designation or revocation must be in writing and
received by the Culture Development Group to be effective. In absence of a
designation of a beneficiary, a deceased participant's award will be paid to the
participant's estate.



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        For purposes of the Plan, disability means the complete and permanent
inability of a participant to perform the participant's duties under the terms
of employment. The determination of disability and the date thereof shall be
made by the Committee in its sole discretion, on the basis of evidence,
including medical examinations and reports, satisfactory to the Committee.

        8.      Change of Control

        In the event of a change of control of the Company, as defined in this
Section 8, each Participant shall be entitled to payment of fifty percent of the
Performance Shares awarded to him or her for the Performance Period in which the
change of control occurs. A change of control shall be considered to have
occurred if:

        (a)     any person, entity or group of persons (other than the Company
or any wholly-owned subsidiary of the Company), within the meaning of sections
13(d) or 14(d) of the Exchange Act, becomes the beneficial owner, within the
meaning of Rule 13d-3 promulgated under such Act, directly or indirectly, of
twenty-five percent or more of the Company's then outstanding shares of Common
Stock;

        (b)     any person, entity or group of persons (other than the Company
or any wholly-owned subsidiary of the Company), after purchasing Common Stock of
the Company in a tender or exchange offer, becomes the beneficial owner,
directly or indirectly, of twenty-five percent or more of the Company's then
outstanding shares of Common Stock;

        (c)     the shareholders of the Company approve (i) a merger or
consolidation of the Company in which the Company is not the continuing or
surviving corporation or pursuant to which the shares of Common Stock would be
converted into cash, securities or other property, or (ii) any sale, lease,
exchange or other transfer of all or substantially all of the Company's assets;
or

        (d)     there is a change in the majority of the members of the
Company's Board of Directors within a twenty-five month period, unless such
change has been approved by two-thirds of the Directors then still in office who
were in office at the beginning of the twenty-five month period.

        9.      Payment of Awards

        Payment of Performance Shares shall be made to the participant or, in
the event of the participant's death, his or her beneficiary. In the absence of
a designation of a beneficiary, payment shall be made to the participant's
estate on condition that the executor or administrator thereof immediately
invest such cash payment in Common Stock as provided herein. Shares of Common
Stock into which the cash payment made to a participant (or beneficiary) is to
be invested pursuant to the Plan shall be made available from authorized and
unissued shares or treasury shares of the Company.



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        The participant (or beneficiary) shall also receive payment in cash of
an amount equal to the dividends paid during the Performance Period on an equal
number of shares of Common Stock.

        Payment of Performance Shares and cash shall be made as-soon as
practicable after the event giving rise to the participant's entitlement to
payment.

        10.     Nontransferability of Awards

        Neither Performance Shares nor any interest of a participant under the
Plan shall be sold, transferred, pledged, assigned, disposed of or encumbered,
voluntarily or by operation of law.

        11.     Compliance with Securities Laws

        If at any time the Company determines that the listing, registration or
qualification of Performance Shares or shares of Common Stock issuable pursuant
to an award of Performance Shares on any securities exchange or under any
federal or state law, or the approval of any governmental entity, is necessary
to the issue or transfer of such shares, such Performance shares or shares of
Common Stock may not be accepted unless the listing, registration, qualification
or approval is obtained. However, the Company shall not be required to apply for
or to obtain such listing, registration, qualification or approval.

        12.     Forfeiture and Cancellation of Shares

        Performance Shares awarded to a participant which do not become vested
shall be forfeited and canceled. The Committee may also cancel Performance
Shares with the written consent of the participant to whom the Performance
Shares were awarded. In the event of any cancellation, all rights of the
participant with respect to the canceled Performance Shares shall terminate, and
the Performance Shares shall be available for subsequent award under the Plan.

        13.     Adjustments

        In the event of any recapitalization, reclassification, stock dividend,
stock split, change in par value, merger, consolidation or similar event
involving a change in the capital structure of the Company, the Committee may
make such adjustments in Performance Shares or awards and shares of Common Stock
available for issuance under the Plan, or the terms, conditions or restrictions
on such Performance Shares or awards, as the Committee considers equitable.



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        14.     Withholding

        A participant or beneficiary receiving an award shall pay to the Company
the amount of any taxes required to be withheld with respect thereto or make
provision satisfactory to the Committee for payment of any such taxes no later
than the date of the event creating the tax liability. In the Committee's
discretion, such tax obligations may be paid in whole or in part in shares of
Common Stock retained from the award creating the tax obligation. The Company
shall deduct from awards any taxes required to be withheld on the portion of
such award payable with respect to dividends which would have been paid on the
Common Stock during the Performance Period.

        15.     Amendment and Termination

        The Company at any time may amend or terminate the Plan by action of the
Board of Directors. No amendment shall, without the approval of the shareholders
of the Company, cause the Plan no longer to comply with Rule 16b-3 under the
Exchange Act or any listing requirement or no longer to be described in section
162(m) (4) (C) of the Code. The termination or amendment of the Plan shall not
adversely affect any right or obligation with respect to any award previously
granted to a participant.

         16.      No Employment or Other Rights

         No employee shall have any claim or right to the grant of an award
under the Plan. Neither the Plan nor any action taken by the Company or the
Committee under the Plan shall be construed as giving any employee any right to
be retained in the employ of the Company or any affiliated company.

         17.      Shareholder Approval

         The Plan was approved by the shareholders of the Company at the Annual
Meeting on January 26, 1995. All amendments to the Plan shall be submitted to
the shareholders for approval if so required under Section 16(b) of the Exchange
Act. In the event such approval is not obtained, all awards made thereafter
under the Plan shall be null and void.

        18.     Effective Date and Duration of Plan

        The Plan was adopted by the Board on July 28, 1994, to begin as of
October 1, 1994. The Plan shall remain in effect through the fiscal year ending
September 30, 2004, unless sooner terminated, except that any awards outstanding
at the end of such period shall remain subject to the terms, conditions and
restrictions of the document evidencing the award and the Plan as in effect at
the date of grant of the award.



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        19.     Governing Law

        The Plan shall be governed by the laws of the Commonwealth of
Massachusetts.








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