Document:

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                                                                    EXHIBIT 4.39

                                                                  EXECUTION COPY

                             NIPSCO INDUSTRIES, INC.

                          NIPSCO CAPITAL MARKETS, INC.

                             NIPSCO CAPITAL TRUST I

                           TRUST PREFERRED SECURITIES

                              REMARKETING AGREEMENT

                                                               February 16, 1999
LEHMAN BROTHERS INC.
Three World Financial Center
New York, New York 10285

Ladies and Gentlemen:

          NIPSCO Capital Trust I, a Delaware statutory business trust (the
"Trust"), is issuing today Preferred Securities (stated liquidation amount $50
per Preferred Security) (the "Preferred Securities") pursuant to the Amended and
Restated Declaration of Trust, dated as of February 16, 1999 (the
"Declaration"), and guaranteed (the "Guarantee"; together with the Preferred
Securities, the "Securities") by NIPSCO Capital Markets, Inc., an Indiana
corporation ("Capital Markets"), to the extent set forth in the Guarantee
Agreement, dated as of February 16, 1999 (the "Guarantee Agreement"), between
Capital Markets and The Chase Manhattan Bank, as Guarantee Trustee (the
"Guarantee Trustee"). Capital Markets will be the owner of all of the beneficial
ownership interests represented by the Common Securities (the "Common
Securities"; together with the Preferred Securities, the "Trust Securities") of
the Trust. Concurrently with the issuance of the Securities and Capital Markets'
purchase of all of the beneficial ownership interests represented by the Common
Securities of the Trust, the Trust will invest the proceeds of each thereof in
Capital Markets' Debentures (the "Debentures"). The Debentures are to be issued
pursuant to the Indenture, dated as of February 14, 1997 (as amended or
supplemented, the "Indenture"), among NIPSCO Industries, Inc., an Indiana
corporation and the parent of Capital Markets (the "Company"), Capital Markets
and The Chase Manhattan Bank, as Indenture Trustee (the "Indenture Trustee").
Capitalized terms used and not defined in this Agreement shall have the meanings
set forth in the Declaration or the Indenture, as the case may be.

          The Remarketing (as defined below) of the Securities is provided for
in the Declaration and, if the Debentures have been distributed to holders of
the Preferred Securities in liquidation of the Trust, the Indenture. As used in
this Agreement, the term "Remarketed Securities" means the Securities or
Debentures subject to the Remarketing as notified by the Indenture Trustee on
the fifth Business Day prior to the Purchase Contract Settlement Date; the term
"Remarketing Procedures" means the procedures in connection with the Remarketing
of the Securities described

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in the Declaration and the Indenture, as the case may be; and the term
"Remarketing" means the remarketing of the Remarketed Securities pursuant to the
Remarketing Procedures.

          Section 1. Appointment and Obligations of the Remarketing Agent. (a)
The Company, Capital Markets and the Trust (collectively, the "Issuers") hereby
appoint Lehman Brothers Inc. as exclusive remarketing agent (the "Remarketing
Agent"), and Lehman Brothers Inc. hereby accepts appointment as Remarketing
Agent, for the purpose of (i) Remarketing Remarketed Securities on behalf of the
holders thereof and (ii) performing such other duties as are assigned to the
Remarketing Agent in the Remarketing Procedures, all in accordance with and
pursuant to the Remarketing Procedures.

          (b) The Remarketing Agent agrees (i) to use commercially reasonable
efforts to remarket the Remarketed Securities tendered or deemed tendered to the
Remarketing Agent in the Remarketing, (ii) to notify the Issuers promptly of the
Reset Rate and (iii) to carry out such other duties as are assigned to the
Remarketing Agent in the Remarketing Procedures, all in accordance with the
provisions of the Remarketing Procedures.

          (c) On the third Business Day immediately preceding the Purchase
Contract Settlement Date (the "Remarketing Date"), the Remarketing Agent shall
use commercially reasonable efforts to remarket, at a price equal to 100% of the
aggregate liquidation or principal amount thereof, the Remarketed Securities
tendered or deemed tendered for purchase.

          (d) If, as a result of the efforts described in Section 1(b), the
Remarketing Agent determines that it will be able to remarket all Remarketed
Securities tendered or deemed tendered for purchase at a price of 100% of the
aggregate stated liquidation or principal amount of such Remarketed Securities
prior to 4:00 P.M., New York City time, on the Remarketing Date, the Remarketing
Agent shall determine the Reset Rate, which shall be the rate per annum (rounded
to the nearest one-thousandth (0.001) of one percent per annum) that the
Remarketing Agent determines, in its sole judgment, to be the lowest rate per
annum that will enable it to remarket all Remarketed Securities tendered or
deemed tendered for Remarketing.

          (e) If none of the holders of Remarketed Securities elects to have
Remarketed Securities remarketed in the Remarketing, the Remarketing Agent shall
determine the rate that would have been established had a Remarketing been held
on the Remarketing Date, and such rate shall be the Reset Rate.

          (f) If, by 4:00 P.M., New York City time, on the Remarketing Date, the
Remarketing Agent is unable to remarket all Remarketed Securities tendered or
deemed tendered for purchase, a failed Remarketing ("Failed Remarketing") shall
be deemed to have occurred, and the Remarketing Agent shall so advise by
telephone the Depositary, the Property Trustee (if the Remarketed Securities are
the Securities), the Indenture Trustee, the Company, the Regular Trustees (if
the Remarketed Securities are the Securities) and Capital Markets.

          (g) By approximately 4:30 P.M., New York City time, on the Remarketing
Date, provided that there has not been a Failed Remarketing, the Remarketing
Agent shall advise, by

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telephone (i) the Depositary, the Property Trustee (if the Remarketed Securities
are the Securities), the Indenture Trustee, the Company, the Regular Trustees
(if the Remarketed Securities are the Securities) and Capital Markets of the
Reset Rate determined in the Remarketing and the number of Remarketed Securities
sold in the Remarketing, (ii) each purchaser (or the Depositary Participant
thereof) of the Reset Rate and the number of Remarketed Securities such
purchaser is to purchase and (iii) each purchaser to give instructions to its
Depositary Participant to pay the purchase price on the Purchase Contract
Settlement Date in same day funds against delivery of the Remarketed Securities
purchased through the facilities of the Depositary.

          (h) The Remarketing Agent shall remit to the Collateral Agent all
proceeds of the Remarketed Securities subject to the Pledge Agreement.

          2. Representations, Warranties and Agreements of the Company and
Capital Markets. The Company and Capital Markets jointly represent, warrant and
agree (i) on and as of the date hereof, (ii) on and as of the date the
Prospectus or other Remarketing Materials (each as defined in Section 2(a)
below) are first distributed in connection with the Remarketing (the
"Commencement Date"), (iii) on and as of the Remarketing Date, and (iv) on and
as of the Purchase Contract Settlement Date that:

          (a) A registration statement or registration statements on Form S-3
     (file No. 333- 69279) and an amendment or amendments thereto with respect
     to the initial offering of the Securities and the Debentures have (i) been
     prepared by the Issuers in conformity with the requirements of the
     Securities Act of 1933, as amended (the "Securities Act"), and the rules
     and regulations (the "Rules and Regulations") of the Securities and
     Exchange Commission (the "Commission") thereunder, (ii) been filed with the
     Commission under the Securities Act and (iii) become effective under the
     Securities Act; a registration statement on Form S-3, if required to be
     filed in connection with the Remarketing, may also be prepared by the
     Issuers in conformity with the requirements of the Securities Act and the
     Rules and Regulations and filed with the Commission under the Securities
     Act; and the Indenture, the Guarantee Agreement and the Declaration have
     each been qualified under the Trust Indenture Act of 1939, as amended, (the
     "Trust Indenture Act"). Copies of such registration statement or
     registration statements that have become effective and the amendment or
     amendments to such registration statements have been delivered by the
     Issuers to you. As used in this Agreement, "Effective Time" means the date
     and time as of which the last of such registration statements that have
     become effective or may be filed, or the most recent post-effective
     amendment thereto, if any, was declared effective by the Commission;
     Effective Date means the date of the Effective Time of such last
     registration statement; Preliminary Prospectus means each prospectus
     included in such last registration statement, or amendment thereto, before
     it became effective under the Securities Act and any prospectus filed by
     the Issuers with your consent pursuant to Rule 424(a) of the Rules and
     Regulations; "Registration Statement" means such last registration
     statement, as amended at its Effective Time, including documents
     incorporated by reference therein at such time and, if applicable, all
     information contained in the final prospectus filed with the Commission
     pursuant to Rule 424(b) of the Rules and Regulations, including any
     information deemed to be part of such Registration Statement as of the
     Effective Time pursuant to paragraph (b) of Rule 430A of

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     the Rules and Regulations; and "Prospectus" means such final prospectus, as
     first filed pursuant to Rule 424(b) of the Rules and Regulations. Reference
     made herein to any Preliminary Prospectus, the Prospectus or any other
     information furnished by the Issuers to the Remarketing Agent for
     distribution to investors in connection with the Remarketing (the
     "Remarketing Materials") shall be deemed to refer to and include any
     documents incorporated by reference therein pursuant to Item 12 of Form S-3
     under the Securities Act as of the date of such Preliminary Prospectus or
     the Prospectus, as the case may be, or, in the case of Remarketing
     Materials, referred to as incorporated by reference therein, and any
     reference to any amendment or supplement to any Preliminary Prospectus, the
     Prospectus or the Remarketing Materials shall be deemed to refer to and
     include any document filed under the Securities Exchange Act of 1934, as
     amended (the "Exchange Act"), after the date of such Preliminary Prospectus
     or the Prospectus incorporated by reference therein pursuant to Item 12 of
     Form S-3 or, if so incorporated, the Remarketing Materials, as the case may
     be; and any reference to any amendment to the Registration Statement shall
     be deemed to include any annual report of the Company or Capital Markets
     filed with the Commission pursuant to Section 13(a) or 15(d) of the
     Exchange Act after the Effective Time that is incorporated by reference in
     the Registration Statement.

          (b) Giving effect to the interpretations of the requirements of the
     Securities Act reflected in the Company's letter requesting "no-action"
     submitted to the staff of the commission (the "Staff"), dated April 27,
     1992, as supplemented by letters dated July 9, 1992 and September 21, 1992
     (the "No-Action Request") and the Staff's response thereto dated September
     25, 1992 (the "Staff Response"), the Registration Statement conforms (and
     the Prospectus and any further amendments or supplements to the
     Registration Statement or the Prospectus, when they become effective or are
     filed with the Commission, as the case may be, will conform) in all
     respects to the requirements of the Securities Act and the Rules and
     Regulations, and the Registration Statement, the Prospectus and the
     Remarketing Materials do not and will not, as of the Effective Date (as to
     the Registration Statement and any amendment thereto), as of the applicable
     filing date (as to the Prospectus and any amendment or supplement thereto)
     and as of the Commencement Date, Remarketing Date and Purchase Contract
     Settlement Date (as to any Remarketing Materials) contain any untrue
     statement of a material fact or omit to state a material fact required to
     be stated therein or necessary to make the statements therein not
     misleading; provided that no representation and warranty is made as to the
     statement of eligibility and qualification on Form T-1 of the Indenture
     Trustee, the Property Trustee or the Guarantee Trustee under the Trust
     Indenture Act, or as to information contained in or omitted from the
     Registration Statement, the Prospectus or the Remarketing Materials in
     reliance upon and in conformity with written information furnished to the
     Issuers by the Remarketing Agent specifically for inclusion therein; the
     Indenture, the Declaration and the Guarantee Agreement each conform in all
     material respects to the requirements of the Trust Indenture Act and the
     applicable rules and regulations thereunder; and the Commission has not
     issued an order preventing or

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     suspending the use of the Registration Statement, any Preliminary
     Prospectus, the Prospectus or the Remarketing Materials.

          (c) The documents incorporated by reference in the Prospectus, when
     they became effective or were filed with the Commission, as the case may
     be, conformed in all material respects to the requirements of the
     Securities Act or the Exchange Act, as applicable, and the rules and
     regulations of the Commission thereunder, and none of such documents
     contained any untrue statement of a material fact or omitted to state a
     material fact required to be stated therein or necessary to make the
     statements therein not misleading; and any further documents so filed and
     incorporated by reference in the Prospectus, when such documents become
     effective or are filed with Commission, as the case may be, will conform in
     all material respects to the requirements of the Securities Act or the
     Exchange Act, as applicable, and the rules and regulations of the
     Commission thereunder and will not contain any untrue statement of a
     material fact or omit to state a material fact required to be stated
     therein or necessary to make the statements therein not misleading.

          (d) Each of the Company, Capital Markets, Northern Indiana Public
     Service Company ("Northern Indiana"), Bay State Gas Company ("Bay State")
     and IWC Resources Corporation ("IWCR" and, together with Northern Indiana
     and Bay State, the "Significant Subsidiaries") has been duly incorporated
     and is validly existing as a corporation in good standing under the laws of
     the jurisdiction of its incorporation, with power and authority (corporate
     and other) to own its properties and conduct its business as described in
     the Prospectus or in any Remarketing Materials, and has been duly qualified
     as a foreign corporation for the transaction of business and is in good
     standing under the laws of each other jurisdiction in which it owns or
     leases properties, or conducts any business, so as to require such
     qualification, or is subject to no material liability or disability by
     reason of the failure to be so qualified in any such jurisdiction; and each
     other subsidiary (as defined in Section 15 hereof) of the Company has been
     duly incorporated and is validly existing as a corporation in good standing
     under the laws of its jurisdiction of incorporation.

          (e) The Company has an authorized capitalization as set forth in the
     Prospectus and in any Remarketing Materials; and all of the issued capital
     shares of the Company and each wholly-owned subsidiary of the Company have
     been duly and validly authorized and issued and are fully paid and
     non-assessable; and except as set forth in Exhibit 21 to the most recent
     Form 10-K of the Company, all of the issued common shares of Northern
     Indiana and Indianapolis Water Company ("IWC") and all of the issued
     capital shares of each other subsidiary of the Company (except for
     directors' qualifying shares and except as set forth in the Prospectus) are
     owned directly or indirectly by the Company, free and clear of all liens,
     encumbrances, equities or claims.

          (f) Northern Indiana, Bay State and IWCR constitute the only
     "significant subsidiaries" (as such term is defined in Rule 1-02 of
     Regulation S-X) of the Company.

          (g) The Indenture has been duly authorized, executed and delivered by
     the Company and Capital Markets and (assuming due execution and delivery by
     the Indenture Trustee) constitutes a valid and binding agreement of each of
     the Company and Capital Markets, enforceable against the Company and
     Capital Markets in accordance with its terms, subject to the effects of
     bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium

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     and other similar laws relating to or affecting creditors' rights
     generally, general equitable principles (whether considered in a proceeding
     in equity or at law) and an implied covenant of good faith and fair
     dealing; and the Debentures have been duly authorized, executed, issued and
     delivered by Capital Markets and (assuming due authentication by the
     Indenture Trustee) constitute valid and binding obligations of Capital
     Markets, entitled to the benefits of the Indenture and the Support
     Agreement, dated April 4, 1989, as amended as of May 15, 1989, December 10,
     1990 and February 14, 1991 (the "Support Agreement"), between the Company
     and Capital Markets, and enforceable in accordance with their terms,
     subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
     reorganization, moratorium and other similar laws relating to or affecting
     creditors' rights generally, general equitable principles (whether
     considered in a proceeding in equity or at law) and an implied covenant of
     good faith and fair dealing.

          (h) The Declaration has been duly authorized, executed and delivered
     by Capital Markets and the Regular Trustees and (assuming due execution and
     delivery by the Property Trustee and the Delaware Trustee) constitutes a
     valid and binding agreement of Capital Markets, enforceable against Capital
     Markets in accordance with its terms, subject to the effects of bankruptcy,
     insolvency, fraudulent conveyance, reorganization, moratorium and other
     similar laws relating to or affecting creditors' rights generally, general
     equitable principles (whether considered in a proceeding in equity or at
     law) and an implied covenant of good faith and fair dealing.

          (i) The Guarantee Agreement has been duly authorized, executed and
     delivered by Capital Markets and (assuming due execution and delivery by
     the Guarantee Trustee) constitutes a valid and binding agreement of Capital
     Markets, enforceable against Capital Markets in accordance with its terms,
     subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
     reorganization, moratorium and other similar laws relating to or affecting
     creditors' rights generally, general equitable principles (whether
     considered in a proceeding in equity or at law) and an implied covenant of
     good faith and fair dealing.

          (j) This Agreement has been duly authorized, executed and delivered by
     the Company, Capital Markets and the Trust.

          (k) The Remarketed Securities, the Indenture, the Declaration, the
     Guarantee Agreement and the Remarketing Agreement, when the Remarketed
     Securities are delivered pursuant to this Agreement, will conform to the
     descriptions thereof contained in the Prospectus and in any Remarketing
     Materials.

          (l) The execution, delivery and performance of this Agreement, the
     Indenture, the Declaration, the Guarantee Agreement and the Remarketing
     Agreement by the Company and Capital Markets, as applicable, the
     consummation by the Issuers of the transactions contemplated hereby and
     thereby and the issuance and delivery of the Debentures (the
     "Transactions") did not and will not conflict with or result in a breach or
     violation of any of the terms or provisions of, or constitute a default
     under, any indenture, mortgage, deed of trust, loan agreement or other
     agreement or instrument to which the Company or any of its

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     subsidiaries is a party or by which the Company or any of its subsidiaries
     is bound or to which any of the properties or assets of the Company or any
     of its subsidiaries is subject, nor will such actions result in any
     violation of the provisions of the charter or by-laws of the Company or any
     of its subsidiaries or any statute or any order, rule or regulation of any
     court or governmental agency or body having jurisdiction over the Company
     or any of its subsidiaries or any of their respective properties or assets;
     and except for such consents, approvals, authorizations, registrations or
     qualifications as may be required under the Securities Act, Trust Indenture
     Act, Exchange Act and applicable state securities laws in connection with
     the initial distribution of the Preferred Securities or the Remarketing, no
     consent, approval, authorization or order of, or filing or registration
     with, any such court or governmental agency or body is required for the
     Transactions.

          (m) There are no contracts, agreements or understandings between (i)
     the Company or Capital Markets and (ii) any person granting such person the
     right to require the Company or Capital Markets to file a registration
     statement under the Securities Act with respect to any securities of the
     Company or Capital Markets owned or to be owned by such person or to
     require the Company or Capital Markets to include such securities in the
     securities registered pursuant to the Registration Statement or in any
     securities being registered pursuant to any other registration statement
     filed by the Company or Capital Markets under the Securities Act.

          (n) Neither the Company nor any of its subsidiaries has sustained,
     since the date of the latest audited financial statements included or
     incorporated by reference in the Prospectus or in any Remarketing
     Materials, any loss or interference with its business from fire, explosion,
     flood or other calamity, whether or not covered by insurance, or from any
     labor dispute or court or governmental action, order or decree, which
     could, individually or in the aggregate, reasonably be expected to have a
     material adverse effect on the general affairs, management, financial
     position, shareholders' equity or results of operations of the Company and
     its subsidiaries taken as a whole or upon the ability of the Issuers to
     perform their obligations under this Agreement (a "Material Adverse
     Effect"), otherwise than as set forth or contemplated in the Prospectus and
     in any Remarketing Materials; and, since such date, there has not been any
     material change in the consolidated share capital or long-term debt of the
     Company and its subsidiaries or the consolidated share capital or long-term
     debt of any Significant Subsidiary or any material adverse change, or any
     development involving a prospective material adverse change, in or
     affecting the general affairs, management, financial position,
     shareholders' equity or results of operations of the Company and its
     subsidiaries, otherwise than as set forth or contemplated in the Prospectus
     and in any Remarketing Materials.

          (o) The financial statements filed as part of the Registration
     Statement or incorporated by reference in the Prospectus or as presented in
     any Remarketing Materials present fairly the financial condition and
     results of operations of the entities purported to be shown thereby, at the
     dates and for the periods indicated, and have been prepared in conformity
     with generally accepted accounting principles applied on a consistent basis
     throughout the periods involved and, with respect to financial statements
     included in periodic

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     reports filed by the Company pursuant to Section 13 or 15(d) of the
     Exchange Act with the Commission on and after September 25, 1992, contain
     the information requested by the Staff in the Staff Response to be so
     included; and the supporting schedules included or incorporated by
     reference in the Prospectus or in any Remarketing Materials present fairly
     the information required to be stated therein.

          (p) Arthur Andersen LLP, who have certified certain financial
     statements of the Company, whose report appears in the Prospectus or is
     incorporated by reference therein or in any Remarketing Materials and who
     have delivered the letter referred to in Section 6(h) hereof, are
     independent public accountants as required by the Securities Act and the
     Rules and Regulations.

          (q) The Company and each Significant Subsidiary has good and
     marketable title in fee simple to such of its fixed assets as are real
     property and good and marketable title to its other assets reflected in the
     most recent consolidated balance sheet incorporated by reference in the
     Prospectus or in any Remarketing Materials, except properties and assets
     that are leased or that are sold or otherwise disposed of in the ordinary
     course of business after the date of said balance sheet, subject to no
     mortgages, liens, charges or encumbrances of any kind whatsoever ("Liens")
     other than Liens permitted under the Indenture.

          (r) Other than as set forth or incorporated by reference in the
     Prospectus, there are no legal or governmental proceedings pending to which
     the Company or any of its subsidiaries is a party or to which any property
     or asset of the Company or any of its subsidiaries is the subject which
     could reasonably be expected individually or in the aggregate to have a
     Material Adverse Effect; and to the best of the Company's knowledge, no
     such proceedings are threatened or contemplated by governmental authorities
     or threatened by others.

          (s) The conditions for use of Form S-3, as set forth in the General
     Instructions thereto, have been satisfied.

          (t) There are no contracts or other documents which are required to be
     described in the Prospectus or filed as exhibits to the Registration
     Statement by the Securities Act or by the Rules and Regulations which have
     not been described in the Prospectus or filed as exhibits to the
     Registration Statement or incorporated therein by reference as permitted by
     the Rules and Regulations.

          (u) None of the Company nor any Significant Subsidiary has any
     material contingent liability which is not disclosed in the Prospectus.

          (v) None of the Company nor any Significant Subsidiary (i) is in
     violation of its charter or by-laws or similar constitutive documents, (ii)
     is in default in any respect, and no event has occurred which, with notice
     or lapse of time or both, would constitute such a default, in the due
     performance or observance of any term, covenant or condition contained in
     any material indenture, mortgage, deed of trust, loan agreement or other
     agreement or

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     instrument to which it is a party or by which it is bound or to which any
     of its properties or assets is subject, except where such defaults,
     individually or in the aggregate, could not reasonably be expected to have
     a Material Adverse Effect, or (iii) is in violation in any material respect
     of any law, ordinance, governmental rule, regulation or court decree to
     which it or its properties or assets may be subject or has failed to obtain
     any material license, permit, certificate, franchise or other governmental
     authorization or permit necessary to the ownership of its properties or
     assets or to the conduct of its business, except where such violations or
     failures, individually or in the aggregate, could not reasonably be
     expected to have a Material Adverse Effect.

          (w) Neither the Company nor any subsidiary of the Company is an
     "investment company" within the meaning of such term under the Investment
     Company Act of 1940, as amended (the "1940 Act"), and the rules and
     regulations of the Commission thereunder; the Commission has issued an
     order (the "Order") exempting Capital Markets from all of the provisions of
     the 1940 Act; the Order is in full force and effect; and Capital Markets
     will continue to comply with the terms and conditions of the Order, or
     otherwise remain exempt from all of the provisions of the 1940 Act, so long
     as any Remarketed Securities are outstanding.

          (x) The Support Agreement has been duly authorized by Capital Markets
     and the Company and constitutes a valid and binding agreement of each of
     Capital Markets and the Company enforceable against Capital Markets and the
     Company in accordance with its terms, subject to the effects of bankruptcy,
     insolvency, fraudulent conveyance, reorganization, moratorium and other
     similar laws relating to or affecting creditors' rights generally, general
     equitable principles (whether considered in a proceeding in equity or at
     law) and an implied covenant of good faith and fair dealing; the Company's
     obligations under the Support Agreement will rank prior to the equity
     securities of the Company and equal with all other unsecured and
     unsubordinated indebtedness of the Company, whether now or hereafter
     outstanding; and the Debentures and the Guarantee will be entitled to the
     benefits of the Support Agreement, the obligations of Capital Markets under
     the Debentures and the Guarantee constitute "Debt" (as defined in the
     Support Agreement) for purposes of the Support Agreement, and the holders
     of the Debentures and the Guarantee will be entitled to the rights of
     "Lenders" (as defined in the Support Agreement) under the Support
     Agreement.

          (y) Each of the Company and each Significant Subsidiary has statutory
     authority, franchises and consents free from burdensome restrictions and
     adequate for the conduct of the business in which it is engaged.

          (z) Except for the Company's ownership of the voting securities of the
     Significant Subsidiaries, as and to the extent described in the Prospectus,
     no person or corporation which is a "holding company" or a "subsidiary
     company" of a "holding company" (as such terms are defined in the Public
     Utility Holding Company Act of 1935, as amended (the "1935 Act")), directly
     or indirectly owns, controls or holds with power to vote 10% or more of the
     outstanding voting securities of the Company or any Significant Subsidiary;
     the Company

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     is a "holding company" (as such term is defined in the 1935 Act) but is
     exempt from all provisions of the 1935 Act pursuant to Section 3(a)(1)
     thereof except Section 9(a)(2) thereof; neither Northern Indiana nor IWCR
     is a "holding company" as defined in the 1935 Act; and Bay State is a
     "holding company" but is exempt from all provisions of the 1935 Act
     pursuant to Section 3(a)(2) thereof except Section 9(a)(2) thereof.

          (aa) The Prospectus accurately describes the most restrictive of the
     existing limitations on the payment of dividends by Northern Indiana on its
     common shares held by the Company.

     3. Representations, Warranties and Agreements of the Company, Capital
Markets and the Trust. The Company, Capital Markets and the Trust, jointly and
severally, represent, warrant and agree, (i) on and as of the date hereof, (ii)
on and as of the Commencement Date, (iii) on and as of the Remarketing Date and
(iv) on and as of the Purchase Contract Settlement Date that:

          (a) The Trust has been duly created and is validly existing as a
     statutory business trust in good standing under the Business Trust Act of
     the State of Delaware (the "Delaware Trust Act") with the trust power and
     authority to own property and conduct its business as described in the
     Prospectus, and has conducted and will conduct no business other than the
     transactions contemplated by this Agreement as described in the Prospectus
     or in any Remarketing Materials; the Trust is not a party to or bound by
     any agreement or instrument other than this Agreement, the Declaration and
     the other agreements entered into in connection with the transactions
     contemplated hereby; the Trust has no liabilities or obligations other than
     those arising out of the transactions contemplated by this Agreement and
     the Declaration and described in the Prospectus or in any Remarketing
     Materials; and the Trust is not a party to or subject to any action, suit
     or proceeding of any nature.

          (b) The Declaration has been duly authorized, executed and delivered
     by Capital Markets, as Sponsor, and the Regular Trustees and (assuming due
     authorization, execution and delivery by the Property Trustee and the
     Delaware Trustee) constitutes a valid and binding obligation of the Trust,
     enforceable against the Trust in accordance with its terms, subject to the
     effects of bankruptcy, insolvency, fraudulent conveyance, reorganization,
     moratorium and other similar laws relating to or affecting creditors'
     rights generally, general equitable principles (whether considered in a
     proceeding in equity or at law) and an implied covenant of good faith and
     fair dealing, and will conform to the description thereof contained in the
     Prospectus or in any Remarketing Materials.

          (c) The Trust Securities are duly authorized, validly issued, fully
     paid and, in the case of the Preferred Securities, non-assessable and
     conform to the descriptions contained in the Prospectus or in any
     Remarketing Materials.

          (d) This Agreement has been duly authorized, executed and delivered by
     the Trust.

          (e) The execution, delivery and performance of this Agreement, the
     Declaration and the Trust Securities by the Trust, the purchase of the
     Debentures by the Trust from Capital

<PAGE>   11

                                                                              11

     Markets, the distribution of the Debentures upon the liquidation of the
     Trust in the circumstances contemplated by the Declaration, and the
     consummation by the Trust of the transactions contemplated herein and in
     the Declaration (the "Trust Transactions"), did not and will not result in
     a violation of any statute or order, rule or regulation of any court or
     governmental agency or body having jurisdiction over the Trust or any of
     its assets; and except for such consents, approvals, authorizations,
     registrations or qualifications as may be required under the Securities
     Act, Trust Indenture Act, Exchange Act or applicable state securities laws
     in connection with the initial distribution of the Preferred Securities and
     the Remarketing, no consent, approval, authorization or order of or filing
     or registration with, any such court or governmental agency or body is
     required for the Trust Transactions.

          (f) The Trust is not an "investment company" within the meaning of
     such term under the 1940 Act and the rules and regulations of the
     Commission thereunder.

     4. Fees and Expenses. (a) For the performance of its services as
Remarketing Agent hereunder, Capital Markets shall pay to the Remarketing Agent
on the Purchase Contract Settlement Date, by wire transfer to an account
designated by the Remarketing Agent, an amount to be agreed upon by Capital
Markets and the Remarketing Agent.

     (b) The Company and Capital Markets, jointly and severally, agree to pay
(i) the costs incident to the preparation and printing of the Registration
Statement, Prospectus and any Remarketing Materials and any amendments or
supplements thereto; (ii) the costs of distributing the Registration Statement,
Prospectus and any Remarketing Materials and any amendments or supplements
thereto; (iii) the fees and expenses of qualifying the Remarketed Securities
under the securities laws of the several jurisdictions as provided in Section
5(h) and of preparing, printing and distributing a Blue Sky Memorandum
(including related fees and expenses of counsel to the Remarketing Agent); (iv)
all other costs and expenses incident to the performance of the obligations of
the Company, Capital Markets and the Trust hereunder; and (v) the reasonable
fees and expenses of counsel to the Remarketing Agent in connection with their
duties hereunder. The Trust shall not be liable for any fees and expenses in
this Section.

     5. Further Agreements of the Company and Capital Markets. The Company and
Capital Markets, jointly and severally, agree to use their reasonable best
efforts:

          (a) To prepare any registration statement or prospectus, if required,
     in connection with the Remarketing, in a form approved by the Remarketing
     Agent and to file any such prospectus pursuant to the Securities Act within
     the period required by the Rules and Regulations; to advise the Remarketing
     Agent, promptly after it receives notice thereof, of the time when any
     amendment to the Registration Statement has been filed or becomes effective
     or any supplement to the Prospectus or any amended Prospectus has been
     filed and to furnish the Remarketing Agent with copies thereof; to file
     promptly all reports and any definitive proxy or information statements
     required to be filed by the Company with the Commission pursuant to Section
     13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of the
     Prospectus and for so long as the delivery of a prospectus is required in
     connection with the offering or sale of the Remarketed Securities; to
     advise the Remarketing

<PAGE>   12

                                                                              12

     Agent, promptly after it receives notice thereof, of the issuance by the
     Commission of any stop order or of any order preventing or suspending the
     use of the Prospectus, of the suspension of the qualification of any of the
     Remarketed Securities for offering or sale in any jurisdiction, of the
     initiation or threatening of any proceeding for any such purpose, or of any
     request by the Commission for the amending or supplementing of the
     Registration Statement or the Prospectus or for additional information;
     and, in the event of the issuance of any stop order or of any order
     preventing or suspending the use of any Prospectus or suspending any such
     qualification, to use promptly its best efforts to obtain its withdrawal.

          (b) To furnish promptly to the Remarketing Agent and to counsel for
     the Remarketing Agent a signed copy of the Registration Statement as
     originally filed with the Commission, and each amendment thereto filed with
     the Commission, including all consents and exhibits filed therewith.

          (c) To deliver promptly to the Remarketing Agent in New York City such
     number of the following documents as the Remarketing Agent shall request:
     (i) conformed copies of the Registration Statement as originally filed with
     the Commission and each amendment thereto (in each case excluding exhibits
     other than this Agreement, the Indenture, the Declaration and the Guarantee
     Agreement), (ii) the Prospectus and any amended or supplemented Prospectus,
     (iii) any document incorporated by reference in the Prospectus (excluding
     exhibits thereto) and (iv) any Remarketing Materials; and, if the delivery
     of a prospectus is required at any time in connection with the Remarketing
     and if at such time any event shall have occurred as a result of which the
     Prospectus as then amended or supplemented would include any untrue
     statement of a material fact or omit to state any material fact necessary
     in order to make the statements therein, in the light of the circumstances
     under which they were made when such Prospectus is delivered, not
     misleading, or if for any other reason it shall be necessary during such
     same period to amend or supplement the Prospectus or to file under the
     Exchange Act any document incorporated by reference in the Prospectus in
     order to comply with the Securities Act or the Exchange Act, to notify the
     Remarketing Agent and, upon its request, to file such document and to
     prepare and furnish without charge to the Remarketing Agent and to any
     dealer in securities as many copies as the Remarketing Agent may from time
     to time request of an amended or supplemented Prospectus which will correct
     such statement or omission or effect such compliance.

          (d) To file promptly with the Commission any amendment to the
     Registration Statement or the Prospectus or any supplement to the
     Prospectus that may, in the judgment of the Company or the Remarketing
     Agent, be required by the Securities Act or requested by the Commission.

          (e) Prior to filing with the Commission (i) any amendment to the
     Registration Statement or supplement to the Prospectus or any document
     incorporated by reference in the Prospectus or (ii) any Prospectus pursuant
     to Rule 424 of the Rules and Regulations, to furnish a copy thereof to the
     Remarketing Agent and counsel for the Remarketing Agent; and

<PAGE>   13
                                                                              13

     not to file any such amendment or supplement which shall be disapproved by
     the Remarketing Agent promptly after reasonable notice.

          (f) As soon as practicable after the Effective Date of the
     Registration Statement to make generally available to the Company's
     security holders and to deliver to the Remarketing Agent an earnings
     statement of the Company and its subsidiaries (which need not be audited)
     complying with Section 11(a) of the Securities Act and the Rules and
     Regulations (including, at the option of the Company, Rule 158).

          (g) During a period of five years following the effective date of the
     Registration Statement, to deliver to the Remarketing Agent copies of all
     reports or other communications (financial or other) furnished to
     shareholders of the Company, and deliver to the Remarketing Agent, (i) as
     soon as they are available, copies of any reports and financial statements
     furnished to or filed by the Company or Capital Markets with the Commission
     or any national securities exchange on which any of the Remarketed
     Securities or any class of securities of the Company or Capital Markets may
     be listed; and (ii) such additional information concerning the business and
     financial condition of the Company or Capital Markets as the Remarketing
     Agent may from time to time reasonably request (such financial statements
     to be on a consolidated basis to the extent the accounts of the Company and
     its subsidiaries are consolidated in reports furnished to the Company's
     shareholders generally or to the Commission).

          (h) Promptly from time to time to take such action as the Remarketing
     Agent may reasonably request to qualify any of the Remarketed Securities
     and the obligations of the Company under the Support Agreement for offering
     and sale under the securities laws of such jurisdictions as the Remarketing
     Agent may request and to comply with such laws so as to permit the
     continuance of sales and dealings therein in such jurisdictions for as long
     as may be necessary to complete the distribution of the Securities and the
     obligations of the Company pursuant to the Support Agreement; provided that
     in connection therewith, neither the Company nor Capital Markets shall be
     required to qualify as a foreign corporation or to file a general consent
     to service of process in any jurisdiction.

     6. Conditions to the Remarketing Agent's Obligations. The obligations of
the Remarketing Agent hereunder are subject to the accuracy, on and as of the
date when made, of the representations and warranties of the Company, Capital
Markets and the Trust contained herein, to the performance by the Company,
Capital Markets and the Trust of their respective obligations hereunder, and to
each of the following additional terms and conditions:

          (a) The Prospectus shall have been timely filed with the Commission;
     no stop order suspending the effectiveness of the Registration Statement or
     any part thereof or suspending the qualification of the Indenture, the
     Guarantee Agreement or the Declaration shall have been issued and no
     proceeding for that purpose shall have been initiated or threatened by the
     Commission; and any request of the Commission for inclusion of additional
     information in the Registration Statement or the Prospectus or otherwise
     shall have been complied with.

<PAGE>   14
                                                                              14

          (b) The Remarketing Agent shall not have discovered and disclosed to
     the Company on or prior to the Remarketing Date that the Prospectus, the
     Registration Statement, or the Remarketing Materials or any amendment or
     supplement thereto contains any untrue statement of a fact which, in the
     opinion of counsel for the Remarketing Agent, is material or omits to state
     any fact which, in the opinion of such counsel, is material and is required
     to be stated therein or is necessary to make the statements therein not
     misleading.

          (c) All corporate proceedings and other legal matters incident to the
     authorization, form and validity of this Agreement, the Declaration, the
     Indenture, the Remarketed Securities, the Guarantee Agreement, the
     Preferred Securities, the Common Securities, the Prospectus, the
     Registration Statement, the Remarketing Materials and all other legal
     matters relating to this Agreement and the transactions contemplated hereby
     shall be reasonably satisfactory in all material respects to counsel for
     the Remarketing Agent, and the Issuers shall have furnished to such counsel
     all documents and information that they may reasonably request to enable
     them to pass upon such matters.

          (d) Counsel to the Company and Capital Markets shall have furnished to
     the Remarketing Agent its written opinion, as counsel to the Company and
     Capital Markets, addressed to the Remarketing Agent and dated the
     Remarketing Date, in form and substance satisfactory to the Remarketing
     Agent, to the effect that:

               (i) The Company and each Significant Subsidiary have been duly
          incorporated and are validly existing as corporations in good standing
          under the laws of their respective jurisdictions of incorporation,
          with respective power and authority (corporate and other) to own their
          respective properties and conduct their businesses as described in the
          Prospectus.

               (ii) The Company has an authorized capitalization as set forth in
          the Prospectus and in any Remarketing Materials, all of the issued
          capital shares of the Company and each Significant Subsidiary of the
          Company have been duly and validly authorized and issued and are fully
          paid and non-assessable; and all of the issued common shares of
          Northern Indiana and all of the issued capital shares of each other
          Significant Subsidiary (except for directors' qualifying shares and as
          set forth or incorporated by reference in the Registration Statement)
          are owned directly or indirectly by the Company, free and clear of all
          liens, encumbrances, equities or claims.

               (iii) The Company and each Significant Subsidiary has been duly
          qualified as a foreign corporation for the transaction of business and
          is in good standing under the laws of each other jurisdiction in which
          it owns or leases properties, or conducts any business, so as to
          require such qualification, or is subject to no material liability or
          disability by reason of the failure to be so qualified in any such
          jurisdiction.

               (iv) There are no preemptive or other rights to subscribe for or
          to purchase, nor any restriction upon the voting or transfer of the
          Debentures pursuant to the

<PAGE>   15
                                                                              15

          Company's or Capital Markets' charter or by-laws or any agreement or
          other instrument known to such counsel.

               (v) To the best of such counsel's knowledge and other than as set
          forth in the Prospectus or in any Remarketing Materials, there are no
          legal or governmental proceedings pending to which the Company or any
          of its subsidiaries is a party or to which any property or asset of
          the Company or any of its subsidiaries is subject which could
          reasonably be expected individually or in the aggregate to have a
          material adverse effect on the consolidated financial position,
          shareholders' equity or results of operations of the Company and its
          subsidiaries; and, to the best of such counsel's knowledge and other
          than as set forth in the Prospectus, no such proceedings are
          threatened or contemplated by governmental authorities or threatened
          by others.

               (vi) The Registration Statement was declared effective under the
          Securities Act, and the Indenture, the Declaration and the Guarantee
          Agreement were qualified under the Trust Indenture Act, as of the date
          and time specified in such opinion, the Prospectus was filed with the
          Commission pursuant to the subparagraph of Rule 424(b) of the Rules
          and Regulations specified in such opinion on the date specified
          therein and, to the knowledge of such counsel, no stop order
          suspending the effectiveness of the Registration Statement has been
          issued and no proceeding for that purpose is pending or threatened by
          the Commission.

               (vii) Giving effect to the interpretations of the requirements of
          the Securities Act reflected in the No-Action Request and the Staff
          Response, the Registration Statement, as of its Effective Date, and
          the Prospectus, as of its date, and any further amendments or
          supplements thereto, as of their respective dates, made by the Company
          prior to the Purchase Contract Settlement Date (other than the
          financial statements, related schedules and other financial data
          contained therein, as to which such counsel need express no opinion)
          complied as to form in all material respects with the requirements of
          the Securities Act, the Rules and Regulations and the Trust Indenture
          Act; and the documents incorporated by reference in the Prospectus and
          any further amendment or supplement to any such incorporated document
          made by any of the Issuers prior to the Purchase Contract Settlement
          Date (other than the financial statements, related schedules and other
          financial data contained therein, as to which such counsel need
          express no opinion), when they became effective or were filed with the
          Commission, as the case may be, complied as to form in all material
          respects with the requirements of the Securities Act or the Exchange
          Act, as applicable, and the rules and regulations of the Commission
          thereunder; and the Indenture, the Declaration and the Guarantee
          Agreement conform in all material respects to the requirements of the
          Trust Indenture Act and the applicable rules and regulations
          thereunder.

               (viii) The statements contained in the Prospectus under the
          captions "Description of the Debentures," "Description of the
          Preferred Securities,"

<PAGE>   16
                                                                              16

          "Description of the Guarantee," "Relationship Among the Preferred
          Securities, the Debentures and the Guarantee" and "Description of the
          Support Agreement" insofar as they purport to constitute summaries of
          certain terms of documents referred to therein, constitute accurate
          summaries of the terms of such documents in all material respects.

               (ix) The Indenture has been duly authorized, executed and
          delivered by the Company and Capital Markets and (assuming due
          authentication, execution and delivery by the Indenture Trustee)
          constitutes a valid and binding agreement of each of the Company and
          Capital Markets enforceable against them in accordance with its terms,
          subject to the effects of bankruptcy, insolvency, fraudulent
          conveyance, reorganization, moratorium and other similar laws relating
          to or affecting creditors' rights generally, general equitable
          principles (whether considered in a proceeding in equity or at law)
          and an implied covenant of good faith and fair dealing.

               (x) The Debentures have been duly authorized, executed and
          delivered by Capital Markets and (assuming due authentication by the
          Indenture Trustee) constitute valid and binding obligations of Capital
          Markets entitled to the benefits of the Indenture and enforceable in
          accordance with their terms, subject to the effects of bankruptcy,
          insolvency, fraudulent conveyance, reorganization, moratorium and
          other similar laws relating to or affecting creditors' rights
          generally, general equitable principles (whether considered in a
          proceeding in equity or at law) and an implied covenant of good faith
          and fair dealing.

               (xi) The Declaration has been duly authorized, executed and
          delivered by Capital Markets.

               (xii) The Guarantee Agreement has been duly authorized, executed
          and delivered by Capital Markets and (assuming due execution and
          delivery by the Guarantee Trustee) constitutes a valid and binding
          agreement of Capital Markets enforceable against Capital Markets in
          accordance with its terms, subject to the effects of bankruptcy,
          insolvency, fraudulent conveyance, reorganization, moratorium and
          other similar laws relating to or affecting creditors' rights
          generally, general equitable principles (whether considered in a
          proceeding in equity or at law) and an implied covenant of good faith
          and fair dealing.

               (xiii) This Agreement has been duly authorized, executed and
          delivered by the Company and Capital Markets.

               (xiv) The Support Agreement has been duly authorized, executed
          and delivered by the Company and Capital Markets and constitutes a
          valid and binding agreement of the Company and Capital Markets
          enforceable in accordance with its terms, subject to the effects of
          bankruptcy, insolvency, fraudulent conveyance, reorganization,
          moratorium and other similar laws relating to or affecting creditors'
          rights generally, general equitable principles (whether considered in
          a proceeding in

<PAGE>   17
                                                                              17

          equity or at law) and an implied covenant of good faith and fair
          dealing; the Debentures and the Guarantee will be entitled to the
          benefits of the Support Agreement, the obligations of Capital Markets
          under the Debentures and the Guarantees will be deemed to be "Debt"
          for purposes of the Support Agreement and the holders of the
          Debentures and the Guarantee will be entitled to the rights of
          "Lenders" under the Support Agreement.

               (xv) The Transactions will not conflict with or result in a
          breach or violation of any of the terms or provisions of, or
          constitute a default under, any indenture, mortgage, deed of trust,
          loan agreement or other agreement or instrument known to such counsel
          to which the Trust, the Company or any of the Significant Subsidiaries
          is a party or by which the Trust, the Company or any of the
          Significant Subsidiaries is bound or to which any of the properties or
          assets of the Trust, the Company or any of the Significant
          Subsidiaries is subject, nor will such actions result in any violation
          of the provisions of the charter or by-laws of the Company or any of
          the Significant Subsidiaries or the Declaration or Certificate of
          Trust of the Trust or any statute, rule or regulation or any order
          known to such counsel of any court or governmental agency or body
          having jurisdiction over the Trust, the Company or any of the
          Significant Subsidiaries or any of their properties or assets; and,
          except for the registration of the Debentures, the Preferred
          Securities, the Guarantee, the Company's obligations under the Support
          Agreement under the Securities Act, the qualification of the
          Indenture, the Declaration and the Guarantee Agreement under the Trust
          Indenture Act, and such consents, approvals, authorizations,
          registrations or qualifications as may be required under the Exchange
          Act and applicable state securities laws, no consent, approval,
          authorization or order of, or filing or registration with, any such
          court or governmental agency or body is required for the Transactions.

               (xvi) None of the Trust nor the Company or any of its
          subsidiaries is an "investment company" or an entity "controlled" by
          an "investment company" as such terms are defined in the 1940 Act.

               (xvii) Based upon current law and the assumptions stated or
          referred to therein: (i) the Trust will be classified as a grantor
          trust for United States federal income tax purposes and not as an
          association taxable as a corporation; (ii) the Debentures will be
          classified as indebtedness of Capital Markets and (iii) the statements
          set forth in the Prospectus or in the Remarketing Materials under the
          caption "Certain United States Federal Income Tax Consequences"
          insofar as they purport to constitute summaries of matters of United
          States federal tax laws and regulations or legal conclusions with
          respect thereto, constitute accurate summaries of the matters
          described therein in all material respects.

     In rendering such opinion, such counsel may (i) state that its opinion is
     limited to matters governed by the Federal laws of the United States of
     America and the laws of the State of Indiana and New York (with respect to
     clause (x)) and (ii) rely (to the extent such counsel

<PAGE>   18

                                                                              18

          deems proper and specifies in its opinion), as to matters involving
          the application of the laws of the State of Massachusetts upon the
          opinion of local counsel. Such counsel shall also advise the
          Remarketing Agent that although such counsel is not passing upon and
          assumes no responsibility or liability for the accuracy, completeness
          or fairness of the statements contained in the documents incorporated
          by reference in the Prospectus or any further amendment or supplement
          thereto made by the Issuers prior to such Remarketing Date, they have
          no reason to believe that any of such documents (other than the
          financial statements and related schedules therein, as to which such
          counsel need express no opinion), when such documents became effective
          or were filed with the Commission, as the case may be, contained, in
          the case of a registration statement which became effective under the
          Securities Act, an untrue statement of a material fact or omitted to
          state a material fact required to be stated therein necessary to make
          the statements therein not misleading, or, in the case of other
          documents which were filed under the Securities Act or the Exchange
          Act with the Commission, an untrue statement of a material fact or
          omitted to state a material fact necessary in order to make the
          statements therein, in light of the circumstances under which they
          were made when such documents were so filed, not misleading. Such
          counsel shall also advise the Remarketing Agent that although such
          counsel is not passing upon and, except as set forth in clauses (viii)
          and (xvii) above, assumes no responsibility or liability for the
          accuracy, completeness or fairness of the statements contained in the
          Registration Statement, the Prospectus and the Remarketing Materials
          and any further amendments and supplements thereto made by the Issuers
          prior to such date, they have no reason to believe that, as of its
          effective date, the Registration Statement or any further amendment
          thereto made by the Issuers prior to such date (other than the
          financial statements and related schedules therein, as to which such
          counsel need express no opinion) contained an untrue statement of a
          material fact or omitted to state a material fact required to be
          stated therein or necessary to make the statements therein not
          misleading or that, as of its date, the Prospectus and the Remarketing
          Materials or any further amendment or supplement thereto made by the
          Issuers prior to such Remarketing Date (other than the financial
          statements and related schedules therein, as to which such counsel
          need express no opinion) contained an untrue statement of a material
          fact or omitted to state a material fact necessary to make the
          statements therein, in light of the circumstances under which they
          were made, not misleading or that, as of such Remarketing Date, either
          the Registration Statement, the Prospectus or the Remarketing
          Materials or any further amendment or supplement thereto made by the
          Issuers prior to such Remarketing Date (other than the financial
          statements and related schedules therein, as to which such counsel
          need express no opinion) contains an untrue statement of a material
          fact or omits to state a material fact necessary to make the
          statements therein, in light of the circumstances under which they
          were made, not misleading; and they do not know of any amendment to
          the Registration Statement required to be filed or of any contracts or
          other documents of a character required to be filed as an exhibit to
          the Registration Statement or required to be incorporated by reference
          into the Prospectus or the Remarketing Materials or required to be
          described in the Registration Statement, the Prospectus or the
          Remarketing Materials which were not filed or incorporated by
          reference or described as required.

               (e) Special Delaware counsel to the Issuers shall have furnished
          to the Remarketing Agent its written opinion, as special Delaware
          counsel to the Issuers, addressed to the

<PAGE>   19
                                                                              19

          Remarketing Agent and dated the Remarketing Date, in form and
          substance satisfactory to the Remarketing Agent, to the effect that:

                    (i) The Trust has been duly created and is validly existing
               in good standing as a business trust under the Delaware Trust
               Act. Under the Delaware Trust Act and the Declaration, the Trust
               has the business trust power and authority to own property and to
               conduct its business as described in the Prospectus and the
               Remarketing Materials and to enter into and perform its
               obligations under this Agreement and the Trust Securities.

                    (ii) The Common Securities have been duly authorized by the
               Declaration and are validly issued and (subject to the terms in
               this paragraph) fully paid undivided beneficial interests in the
               assets of the Trust (such counsel may note that the holders of
               Common Securities will be subject to the withholding provisions
               of Section 10.4 of the Declaration, will be required to make
               payment or provide indemnity or security as set forth in the
               Declaration and will be liable for the debts and obligations of
               the Trust to the extent provided in Section 9.1(b) of the
               Declaration); under the Delaware Trust Act and the Declaration,
               the issuance of the Common Securities is not subject to
               preemptive rights.

                    (iii) The Preferred Securities have been duly authorized by
               the Declaration and are validly issued and (subject to the terms
               in this paragraph) fully paid and non-assessable undivided
               beneficial ownership interests in the assets of the Trust, the
               holders of the Preferred Securities will be entitled to the
               benefits of the Declaration (subject to the limitations set forth
               in clause (v) below) and will be entitled to the same limitation
               of personal liability as extended to stockholders of private
               corporations for profit organized under the General Corporation
               Law of the State of Delaware (such counsel may note that the
               holders of Preferred Securities will be subject to the
               withholding provisions of Section 10.4 of the Declaration and
               will be required to make payment or provide indemnity or security
               as set forth in the Declaration); under the Delaware Trust Act
               and the Declaration, the issuance of the Preferred Securities is
               not subject to preemptive rights.

                    (iv) Under the Delaware Trust Act and the Declaration all
               necessary trust action has been taken to duly authorize the
               execution, delivery and performance by the Trust of this
               Agreement.

                    (v) Assuming the Declaration has been duly authorized by
               Capital Markets and has been duly executed and delivered by
               Capital Markets and the Regular Trustees, and assuming due
               authorization, execution and delivery of the Declaration by the
               Property Trustee and the Delaware Trustee, the Declaration
               constitutes a valid and binding obligation of Capital Markets and
               the Regular Trustees, enforceable against Capital Markets and the
               Regular Trustees in accordance with its terms, except to the
               extent that enforcement thereof may be limited by (i) bankruptcy,
               insolvency, moratorium, receivership, reorganization,
               liquidation,

<PAGE>   20
                                                                              20

               fraudulent conveyance or transfer and other similar laws relating
               to or affecting the rights and remedies of creditors generally,
               (ii) principles of equity, including applicable law relating to
               fiduciary duties (regardless of whether considered and applied in
               a proceeding in equity or at law), and (iii) the effect of
               applicable public policy on the enforceability of provisions
               relating to indemnification or contribution.

                    (vi) The issuance and sale by the Trust of the Preferred
               Securities, the purchase by the Trust of the Debentures, the
               execution, delivery and performance by the Trust of this
               Agreement, the consummation by the Trust of the transactions
               contemplated by this Agreement and compliance by the Trust with
               its obligations thereunder do not violate any of the provisions
               of the Certificate of Trust or the Declaration or any applicable
               Delaware law or administrative regulation.

                    (vii) Assuming that the Trust derives no income from or
               connected with sources within the State of Delaware and has no
               assets, activities (other than having a Delaware Trustee as
               required by the Delaware Trust Act and the filing of documents
               with the Secretary of State of Delaware) or employees in the
               State of Delaware, no filing with, or authorization, approval,
               consent, license, order, registration, qualification or decree
               of, any Delaware court or Delaware governmental authority or
               agency (other that as may be required under the securities or
               blue sky laws of the state of Delaware, as to which such counsel
               need express no opinion) is necessary or required to be obtained
               by the Trust solely in connection with the due authorization,
               execution and delivery by the Trust of this Agreement or the
               offering, issuance, sale or delivery of the Preferred Securities.

          (f) Counsel to the Property Trustee and the Guarantee Trustee shall
     have furnished to the Remarketing Agent its written opinion, as counsel to
     The Chase Manhattan Bank, as Property Trustee and Guarantee Trustee,
     addressed to the Remarketing Agent and dated the Remarketing Date, in form
     and substance satisfactory to the Remarketing Agent, to the effect that:

               (i) Each of the Property Trustee and the Guarantee Trustee is
          duly incorporated as a New York banking corporation with all necessary
          power and authority to execute and deliver and perform their
          respective obligations under the terms of the Declaration and the
          Guarantee Agreement.

               (ii) The execution, delivery and performance by the Property
          Trustee of the Declaration and the execution, delivery and performance
          by the Guarantee Trustee of the Guarantee Agreement have been duly
          authorized by all necessary corporate action on the part of the
          Property Trustee and the Guarantee Trustee, respectively. The
          Declaration has been duly executed and delivered by the Property
          Trustee and the Guarantee Agreement has been duly executed and
          delivered by the Guarantee Trustee and each constitutes the valid and
          binding agreement of the Property Trustee and the Guarantee Trustee,
          respectively, enforceable against the Property Trustee and the
          Guarantee Trustee, respectively, in accordance with their

<PAGE>   21

                                                                              21

          terms, subject to the effects of bankruptcy, insolvency, fraudulent
          conveyance, reorganization, moratorium and other similar laws relating
          to or affecting creditors' rights generally, general equitable
          principles (whether considered in a proceeding in equity or at law)
          and an implied covenant of good faith and fair dealing.

               (iii) The execution, delivery and performance of the Declaration
          and the Guarantee Agreement by the Property Trustee and the Guarantee
          Trustee, respectively, do not conflict with or constitute a breach of
          the charter or by-laws of the Property Trustee and the Guarantee
          Trustee, respectively.

               (iv) No consent, approval or authorization of, or registration
          with or notice to, any New York or federal banking authority is
          required for the execution, delivery or performance by the Property
          Trustee and the Guarantee Trustee of the Declaration and the Guarantee
          Agreement, respectively.

          (g) Counsel to the Delaware Trustee shall have furnished to the
     Remarketing Agent its written opinion, as counsel to Chase Manhattan Bank
     Delaware, as Delaware Trustee, addressed to the Remarketing Agent and dated
     the Remarketing Date, in form and substance satisfactory to the Remarketing
     Agent, to the effect that:

               (i) The Delaware Trustee has been duly incorporated and is
          validly existing as a banking corporation in good standing under the
          laws of the State of Delaware with all necessary power and authority
          to execute and deliver, and to carry out and perform its obligations
          under the terms of the Declaration.

               (ii) The execution, delivery and performance by the Delaware
          Trustee of the Declaration has been duly authorized by all necessary
          corporate action on the part of the Delaware Trustee. The Declaration
          has been duly executed and delivered by the Delaware Trustee and
          constitutes the valid and binding agreement of the Delaware Trustee
          enforceable against the Delaware Trustee in accordance with its terms,
          subject to (i) bankruptcy, insolvency, moratorium, receivership,
          reorganization, liquidation, fraudulent conveyance or transfer and
          other similar laws relating to or affecting the rights and remedies of
          creditors generally, (ii) principles of equity, including applicable
          law relating to fiduciary duties (regardless of whether considered and
          applied in a proceeding in equity or at law), and (iii) the effect of
          applicable public policy on the enforceability of provisions relating
          to indemnification or contribution.

               (iii) The execution, delivery and performance of the Declaration
          by the Delaware Trustee do not conflict with or constitute a breach of
          the charter or by-laws of the Delaware Trustee.

               (iv) No consent, approval or authorization of, or registration
          with or notice to, any Delaware or federal banking authority is
          required for the execution, delivery or performance by the Delaware
          Trustee of the Declaration.

<PAGE>   22
                                                                              22

          (h) On the Remarketing Date, the Company shall have furnished to the
     Remarketing Agent a letter addressed to the Remarketing Agent and dated
     such date, in form and substance satisfactory to the Remarketing Agent, of
     Arthur Andersen LLP, or such other firm of nationally recognized
     independent public accountants satisfactory to the Remarketing Agent,
     containing statements and information of the type ordinarily included in
     accountants' "comfort letters" with respect to certain financial
     information contained in the Prospectus and in the Remarketing Materials.

          (i) Each of the Company and Capital Markets shall have furnished to
     the Remarketing Agent a certificate, dated the Remarketing Date, of, (i)
     with respect to the Company, (A) its Chairman of the Board and President,
     or its Executive Vice President, and (B) its chief financial officer, and
     (ii) with respect to Capital Markets, its President, and its chief
     financial officer, stating that:

               (i) The representations, warranties and agreements of the Company
          and Capital Markets in Sections 2 and 3 are true and correct as of the
          Remarketing Date; the Company and Capital Markets have complied with
          all its agreements contained herein; and the conditions contained in
          Section 6(a) have been fulfilled;

               (ii) (A) Neither the Company nor any of its subsidiaries has
          sustained since the date of the latest audited financial statements
          included or incorporated by reference in the Prospectus or in the
          Remarketing Materials any loss or interference with its business from
          fire, explosion, flood or other calamity, whether or not covered by
          insurance, or from any labor dispute or court or governmental action,
          order or decree, which could, individually or in the aggregate,
          reasonably be expected to have a Material Adverse Effect, otherwise
          than as set forth or contemplated in the Prospectus or in the
          Remarketing Materials and (B) since the respective dates as of which
          information is given in the Prospectus or in the Remarketing
          Materials, there has not been any material change in the consolidated
          share capital or long-term debt of the Company and its subsidiaries or
          the consolidated share capital or long-term debt of any Significant
          Subsidiary or any change, or any development involving a prospective
          change, in or affecting the general affairs, management, financial
          position, shareholders' equity or results of operations of the Company
          and its subsidiaries (taken as a whole), otherwise than as set forth
          or contemplated in the Prospectus or the Remarketing Materials; and

               (iii) They have carefully examined the Registration Statement,
          the Prospectus and the Remarketing Materials and, in their opinion (A)
          the Registration Statement, as of its effective date, and the
          Prospectus and the Remarketing Materials, as of their respective
          dates, did not include any untrue statement of a material fact and did
          not omit to state any material fact required to be stated therein or
          necessary to make the statements therein not misleading, and (B) since
          such dates, no event has occurred which should have been set forth in
          a supplement or amendment to the Registration Statement, the
          Prospectus or the Remarketing Materials.

<PAGE>   23
                                                                              23

          (j) (i) Neither the Company nor any of its subsidiaries shall have
     sustained since the date of the latest audited financial statements
     included or incorporated by reference in the Prospectus and in the
     Remarketing Materials any loss or interference with its business from fire,
     explosion, flood or other calamity, whether or not covered by insurance, or
     from any labor dispute or court or governmental action, order or decree,
     otherwise than as set forth or contemplated in the Prospectus or in the
     Remarketing Materials or (ii) since such date there shall not have been any
     change in the capital stock or long-term debt of the Company or any of its
     subsidiaries or any change, or any development involving a prospective
     change, in or affecting the general affairs, management, financial
     position, stockholders' equity or results of operations of the Company and
     its subsidiaries, otherwise than as set forth or contemplated in the
     Prospectus or in the Remarketing Materials, the effect of which, in any
     such case described in clause (i) or (ii), is, in the judgment of the
     Remarketing Agent, so material and adverse as to make it impracticable or
     inadvisable to proceed with the Remarketing on the terms and in the manner
     contemplated in the Prospectus and in the Remarketing Materials.

          (k) Without the prior written consent of the Remarketing Agent, the
     Declaration or the Indenture shall not have been amended in any manner, or
     otherwise contain any provision contained therein as of the date hereof
     that, in the opinion of the Remarketing Agent, materially changes the
     nature of the Remarketed Securities or the Remarketing Procedures.

          (l) Subsequent to the execution and delivery of this Agreement, (i) no
     downgrading shall have occurred in the rating accorded the Preferred
     Securities or any of the Company's, any Significant Subsidiary's or Capital
     Markets' debt securities by any "nationally recognized statistical rating
     organization", as that term is defined by the Commission for purposes of
     Rule 436(g)(2) under the Securities Act and (ii) no such organization shall
     have publicly announced that it has under surveillance or review, with
     possible negative implications, its rating of any of the Preferred
     Securities or any of the Company's, any Significant Subsidiary's or Capital
     Markets' debt securities.

          (m) Subsequent to the execution and delivery of this Agreement, there
     shall not have occurred any of the following: (i) trading in securities
     generally on the New York Stock Exchange or the American Stock Exchange or
     in the over-the-counter market, or trading in any securities of the Company
     or Capital Markets on any exchange or in the over-the-counter market, shall
     have been suspended or minimum prices shall have been established on any
     such exchange or such market by the Commission, by such exchange or by any
     other regulatory body or governmental authority having jurisdiction, (ii) a
     banking moratorium shall have been declared by Federal or state
     authorities, (iii) the United States shall have become engaged in
     hostilities, there shall have been an escalation in hostilities involving
     the United States or there shall have been a declaration of a national
     emergency or war by the United States or (iv) there shall have occurred
     such a material adverse change in general economic, political or financial
     conditions (or the effect of international conditions on the financial
     markets in the United States shall be such) as to make it, in the judgment
     of the Remarketing Agent, impracticable or inadvisable to proceed with the
     Remarketing on the terms and in the manner contemplated in the Prospectus
     or in the Remarketing Materials.

<PAGE>   24
                                                                              24

          All opinions, letters, evidence and certificates mentioned above or
elsewhere in this Agreement shall be deemed to be in compliance with the
provisions hereof only if they are in form and substance reasonably satisfactory
to counsel for the Remarketing Agent.

          7. Indemnification and Contribution. (a) The Issuers shall indemnify
and hold harmless the Remarketing Agent, its officers and employees and each
person, if any, who controls the Remarketing Agent within the meaning of the
Securities Act, from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof (including, but not limited to, any
loss, claim, damage, liability or action relating to purchases and sales of the
Remarketed Securities), to which the Remarketing Agent or that officer, employee
or controlling person may become subject, under the Securities Act or otherwise,
insofar as such loss, claim, damage, liability or action arises out of, or is
based upon, (i) any untrue statement or alleged untrue statement of a material
fact contained (A) in any Preliminary Prospectus, the Registration Statement,
the Prospectus or the Remarketing Materials or in any amendment or supplement
thereto, or (B) in any blue sky application or other document prepared or
executed by the Issuers (or based upon any written information furnished by the
Issuers) specifically for the purpose of qualifying any or all of the Remarketed
Securities under the securities laws of any state or other jurisdiction (any
such application, document or information being hereinafter called a "Blue Sky
Application"), or (ii) the omission or alleged omission to state in any
Preliminary Prospectus, the Registration Statement, the Prospectus or the
Remarketing Materials or in any amendment or supplement thereto, or in any Blue
Sky Application, any material fact required to be stated therein or necessary to
make the statements therein not misleading and shall reimburse the Remarketing
Agent and each such officer, employee and controlling person promptly upon
demand for any legal or other expenses reasonably incurred by the Remarketing
Agent or that officer, employee or controlling person in connection with
investigating or defending or preparing to defend against any such loss, claim,
damage, liability or action as such expenses are incurred; provided however,
that the Issuers shall not be liable in any such case to the extent that any
such loss, claim, damage, liability or action arises out of, or is based upon,
any untrue statement or alleged untrue statement or omission or alleged omission
made in any Preliminary Prospectus, the Registration Statement, the Prospectus
or the Remarketing Materials or in any such amendment or supplement, or in any
Blue Sky Application in reliance upon and in conformity with the written
information furnished to the Issuers by or on behalf of the Remarketing Agent
specifically for inclusion therein and described in a letter from the
Remarketing Agent to the Company and provided further, that as to any
Preliminary Prospectus this indemnity agreement shall not inure to the benefit
of the Remarketing Agent, its officers or employees or any person controlling
the Remarketing Agent on account of any loss, claim, damage, liability or action
arising from the sale of the Remarketed Securities to any person by the
Remarketing Agent if the Remarketing Agent failed to send or give a copy of the
Prospectus, as the same may be amended or supplemented, to that person within
the time required by the Securities Act, and the untrue statement or alleged
untrue statement of a material fact or omission or alleged omission to state a
material fact in such Preliminary Prospectus was corrected in the Prospectus,
unless such failure resulted from non- compliance by the Company with Section
5(c). For purposes of the last proviso to the immediately preceding sentence,
the term "Prospectus" shall not be deemed to include the documents incorporated
therein by reference, and the Remarketing Agent shall not be obligated to send
or give any supplement or amendment to any document incorporated by reference in
any Preliminary Prospectus or the Prospectus to any person other than a person
to whom the Remarketing Agent had

<PAGE>   25
                                                                              25

delivered such incorporated document or documents in response to a written
request therefor. The foregoing indemnity agreement is in addition to any
liability which the Issuers may otherwise have to the Remarketing Agent or to
any officer, employee or controlling person of the Remarketing Agent.

          (b) The Remarketing Agent shall indemnify and hold harmless the
Company and Capital Markets, their officers and employees, each of their
directors, the Trust and each Trustee, and each person, if any, who controls any
of the Issuers within the meaning of the Securities Act, from and against any
loss, claim, damage or liability, joint or several, or any action in respect
thereof, to which the Company or Capital Markets, any such director, officer or
employee, the Trust or any such Trustee or any such controlling person may
become subject, under the Securities Act or otherwise, insofar as such loss,
claim, damage, liability or action arises out of, or is based upon, (i) any
untrue statement or alleged untrue statement of a material fact contained (A) in
any Preliminary Prospectus, the Registration Statement, the Prospectus or the
Remarketing Materials or in any amendment or supplement thereto, or (B) in any
Blue Sky Application or (ii) the omission or alleged omission to state in any
Preliminary Prospectus, the Registration Statement, the Prospectus or the
Remarketing Materials or in any amendment or supplement thereto, or in any Blue
Sky Application, any material fact required to be stated therein or necessary to
make the statements therein not misleading, but in each case only to the extent
that the untrue statement or alleged untrue statement or omission or alleged
omission was made in reliance upon and in conformity with the written
information furnished to the Company or the Trustee by or on behalf of the
Remarketing Agent specifically for inclusion therein and described in a letter
from the Remarketing Agent to the Company and Capital Markets, and shall
reimburse the Company and Capital Markets and any such director, officer or
employee, the Trust or any such Trustee or such controlling person for any legal
or other expenses reasonably incurred by the Company or Capital Markets or any
such director or officer, the Trust or any Trustee or any such controlling
person in connection with investigating or defending or preparing to defend
against any such loss, claim, damage, liability or action as such expenses are
incurred. The foregoing indemnity agreement is in addition to any liability
which the Remarketing Agent may otherwise have to the Company or Capital Markets
or any such director or officer, the Trust or any such Trustee or any such
controlling person.

          (c) Promptly after receipt by an indemnified party under this Section
7 of notice of any claim or the commencement of any action, the indemnified
party shall, if a claim in respect thereof is to be made against the
indemnifying party under this Section 7, notify the indemnifying party in
writing of the claim or the commencement of that action; provided however, that
the failure to notify the indemnifying party shall not relieve it from any
liability which it may have under this Section 7 except to the extent it has
been materially prejudiced by such failure and, provided further, that the
failure to notify the indemnifying party shall not relieve it from any liability
which it may have to an indemnified party otherwise than under this Section 7.
If any such claim or action shall be brought against an indemnified party, and
it shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume the
defense of such claim or action, the indemnifying party shall not be liable to
the indemnified party under this Section 7 for any legal or other expenses
subsequently

<PAGE>   26
                                                                              26

incurred by the indemnified party in connection with the defense thereof other
than reasonable costs of investigation; provided however, that the Remarketing
Agent shall have the right to employ counsel to represent jointly the
Remarketing Agent and its officers, employees and controlling persons who may be
subject to liability arising out of any claim in respect of which indemnity may
be sought by the Remarketing Agent against the Issuers under this Section 7 if,
in the reasonable judgment of the Remarketing Agent, it is advisable for the
Remarketing Agent and those officers, employees and controlling persons to be
jointly represented by separate counsel, and in that event the fees and expenses
of such separate counsel shall be paid by the Issuers. No indemnifying party
shall (i) without the prior written consent of the indemnified parties (which
consent shall not be unreasonably withheld), settle or compromise or consent to
the entry of any judgment with respect to any pending or threatened claim,
action, suit or proceeding in respect of which indemnification or contribution
may be sought hereunder (whether or not the indemnified parties are actual or
potential parties to such claim or action) unless such settlement, compromise or
consent includes an unconditional release of each indemnified party from all
liability arising out of such claim, action, suit or proceeding, or (ii) be
liable for any settlement of any such action effected without its written
consent (which consent shall not be unreasonably withheld), but if settled with
its written consent or if there be a final judgment of the plaintiff in any such
action, the indemnifying party agrees to indemnify and hold harmless any
indemnified party from and against any loss or liability by reason of such
settlement or judgment.

          (d) If the indemnification provided for in this Section 7 shall for
any reason be unavailable to or insufficient to hold harmless an indemnified
party under Section 7(a) or 7(b) in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to therein, then each
indemnifying party shall, in lieu of indemnifying such indemnified party,
contribute to the amount paid or payable by such indemnified party as a result
of such loss, claim, damage or liability, or action in respect thereof, (i) in
such proportion as shall be appropriate to reflect the relative benefits
received by the Issuers on the one hand and the Remarketing Agent on the other
hand from the Remarketing or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as is appropriate to
reflect not only the relative benefits referred to in clause (i) above but also
the relative fault of the Issuers on the one hand and the Remarketing Agent on
the other with respect to the statements or omissions which resulted in such
loss, claim, damage or liability, or action in respect thereof, as well as any
other relevant equitable considerations. The relative benefits received by the
Issuers on the one hand and the Remarketing Agent on the other with respect to
such offering shall be deemed to be in the same proportion as the total
liquidation or principal amount of the Remarketed Securities less the fee paid
to the Remarketing Agent pursuant to Section 4(a) of this Agreement, on the one
hand, and the total fees received by the Remarketing Agent pursuant to such
Section 4(a), on the other hand, bear to the total liquidation or principal
amount of the Remarketed Securities. The relative fault shall be determined by
reference to whether the untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Issuers on the one hand or the Remarketing Agent on the other
hand, the intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company and the Remarketing Agent agree that it would not be just and
equitable if contributions pursuant to this Section 7(d) were to be determined
by pro rata allocation or by any other method of allocation which does not take
into account the equitable considerations referred to herein. The amount paid or
payable by an

<PAGE>   27
                                                                              27

indemnified party as a result of the loss, claim, damage or liability, or action
in respect thereof, referred to above in this Section 7(d) shall be deemed to
include, for purposes of this Section 7(d), any legal or other expenses
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 7(d), the Remarketing Agent shall not be required to contribute any
amount in excess of the amount by which the fees received by it under Section 4
exceed the amount of any damages which the Remarketing Agent has otherwise paid
or become liable to pay by reason of any untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.

          8. Resignation and Removal of the Remarketing Agent. The Remarketing
Agent may resign and be discharged from its duties and obligations hereunder,
and Capital Markets may remove the Remarketing Agent, by giving 60 days' prior
written notice, in the case of a resignation, to Capital Markets, the
Depositary, the Property Trustee and the Indenture Trustee and, in the case of a
removal, the removed Remarketing Agent, the Depositary, the Property Trustee and
the Indenture Trustee; provided however, that (i) Capital Markets may not remove
the Remarketing Agent unless (A) the Remarketing Agent becomes involved as a
debtor in a bankruptcy, insolvency or similar proceeding, (B) the Remarketing
Agent shall not be among the 15 underwriters with the largest volume
underwritten in dollars, on a lead or co-managed basis, of U.S. domestic debt
securities during the twelve-month period ended as of the last calendar quarter
preceding the Remarketing Date or (C) the Remarketing Agent shall be subject to
one or more legal restrictions preventing the performance of its obligations
hereunder and (ii) no such resignation nor any such removal shall become
effective until Capital Markets shall have appointed at least one nationally
recognized broker-dealer as successor Remarketing Agent and such successor
Remarketing Agent shall have entered into a remarketing agreement with the
Company, Capital Markets and the Trust in which it shall have agreed to conduct
the Remarketing in accordance with the Remarketing Procedures. In any such case,
Capital Markets will use its reasonable efforts to appoint a successor
Remarketing Agent and enter into such a remarketing agreement with such person
as soon as reasonably practicable. The provisions of Sections 4 and 7 shall
survive the resignation or removal of any Remarketing Agent pursuant to this
Agreement.

          9. Dealing in the Remarketed Securities. The Remarketing Agent, when
acting as a Remarketing Agent or in its individual or any other capacity, may,
to the extent permitted by law, buy, sell, hold and deal in any of the
Remarketed Securities. The Remarketing Agent may exercise any vote or join in
any action which any beneficial owner of Remarketed Securities may be entitled
to exercise or take pursuant to the Declaration or the Indenture with like
effect as if it did not act in any capacity hereunder. The Remarketing Agent, in
its individual capacity, either as principal or agent, may also engage in or
have an interest in any financial or other transaction with the Issuers as
freely as if it did not act in any capacity hereunder.

          10. Remarketing Agent's Performance; Duty of Care. The duties and
obligations of the Remarketing Agent shall be determined solely by the express
provisions of this Agreement and the Declaration and the Indenture. No implied
covenants or obligations of or against the Remarketing Agent shall be read into
this Agreement, the Declaration or the Indenture. In the

<PAGE>   28
                                                                              28

absence of bad faith on the part of the Remarketing Agent, the Remarketing Agent
may conclusively rely upon any document furnished to it, which purports to
conform to the requirements of this Agreement, the Declaration or the Indenture
as to the truth of the statements expressed in any of such documents. The
Remarketing Agent shall be protected in acting upon any document or
communication reasonably believed by it to have been signed, presented or made
by the proper party or parties. The Remarketing Agent, acting under this
Agreement, shall incur no liability to the Company or to any holder of
Remarketed Securities in its individual capacity or as Remarketing Agent for any
action or failure to act, on its part in connection with a Remarketing or
otherwise, except if such liability is judicially determined to have resulted
from the gross negligence or willful misconduct on its part.

          11. Termination. This Agreement shall terminate as to the Remarketing
Agent on the effective date of the resignation or removal of the Remarketing
Agent pursuant to Section 8. In addition, the obligations of the Remarketing
Agent hereunder may be terminated by it by notice given to the Company or the
Trust prior to 10:00 A.M., New York City time, on the Remarketing Date if, prior
to that time, any of the events described in Sections 6(j), (k), (l) or (m)
shall have occurred.

          12. Notices. All statements, requests, notices and agreements
hereunder shall be in writing, and:

          (a) if to the Remarketing Agent, shall be delivered or sent by mail,
     telex or facsimile transmission to Lehman Brothers Inc., Three World
     Financial Center, New York, New York 10285, Attention: Syndicate Department
     (Fax: (212) 528-8822);

          (b) if to the Issuers shall be delivered or sent by mail, telex or
     facsimile transmission to the address of the Company set forth in the
     Prospectus, Attention: Treasurer. (Fax: 219- 853-5352).

     Any such statements, requests, notices or agreements shall take effect at
     the time of receipt thereof.

          13. Persons Entitled to Benefit of Agreement. This Agreement shall
inure to the benefit of and be binding upon the Remarketing Agent, the Company,
Capital Markets, the Trust and their respective successors. This Agreement and
the terms and provisions hereof are for the sole benefit of only those persons,
except that (x) the representations, warranties, indemnities and agreements of
the Issuers contained in this Agreement shall also be deemed to be for the
benefit of the officers and employees of the Remarketing Agent and the person or
persons, if any, who control the Remarketing Agent within the meaning of Section
15 of the Securities Act and (y) the indemnity agreement of the Remarketing
Agent contained in Section 7(b) of this Agreement shall be deemed to be for the
benefit of directors, officers and employees of the Issuers and any person
controlling the Issuers within the meaning of Section 15 of the Securities Act.
Nothing in this Agreement is intended or shall be construed to give any person,
other than the persons referred to herein, any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision contained
herein.

<PAGE>   29
                                                                              29

          14. Survival. The respective indemnities, representations, warranties
and agreements of the Issuers and the Remarketing Agent contained in this
Agreement or made by or on behalf of them, respectively, pursuant to this
Agreement, shall survive the Remarketing and shall remain in full force and
effect, regardless of any investigation made by or on behalf of any of them or
any person controlling any of them.

          15. Definition of the Terms "Business Day" and "Subsidiary". For
purposes of this Agreement, (a) "business day" means any day on which the New
York Stock Exchange, Inc. is open for trading and (b) "subsidiary" has the
meaning set forth in Rule 405 under the Securities Act.

          16. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF NEW YORK.

          17. Counterparts. This Agreement may be executed in one or more
counterparts and, if executed in more than one counterpart, the executed
counterparts shall each be deemed to be an original but all such counterparts
shall together constitute one and the same instrument.

          18. Headings. The headings herein are inserted for convenience of
reference only and are not intended to be part of, or to affect the meaning or
interpretation of, this Agreement.

<PAGE>   30

          If the foregoing correctly sets forth the agreement among the Company,
the Trust and the Remarketing Agent, please indicate your acceptance in the
space provided for that purpose below.

                                        Very truly yours,

                                        NIPSCO INDUSTRIES, INC.

                                        By: /s/ Stephen P. Adik
                                            --------------------------------
                                            Title: Executive Vice President,
                                                   Chief Financial Officer
                                                   and Treasurer

                                        NIPSCO CAPITAL MARKETS, INC.

                                        By: /s/ Stephen P. Adik
                                            --------------------------------
                                            Title: President

                                        NIPSCO CAPITAL TRUST I

                                        By:  NIPSCO Capital Markets, as Sponsor

                                             By: /s/ Stephen P. Adik
                                                 -----------------------------
                                                 Title: President

Accepted:

LEHMAN BROTHERS INC.

By:  /s/ Ronald Calise
     ----------------------------
     Authorized Representative<PAGE>   1
                                                                    EXHIBIT 10.3

                  CHANGE IN CONTROL AND TERMINATION AGREEMENT
                  -------------------------------------------

     NIPSCO Industries, Inc., an Indiana corporation ("Employer") and
________________ ("Executive") entered into a Change in Control and Termination
Agreement as of ____________________________________________ ("Agreement"), and
Employer and Executive hereby enter into an amendment and restatement of the
Agreement, effective September 1, 1997, which amended and restated Agreement is
hereinafter set forth.

                                  WITNESSETH:
                                  ----------

     WHEREAS, Executive is currently employed by Employer as its ______________;

     WHEREAS, Employer desires to provide security to Executive in connection
with Executive's employment with Employer in the event of a Change in Control
affecting Employer; and

     WHEREAS, Executive and Employer desire to enter into this Agreement
pertaining to the terms of the security Employer is providing to Executive with
respect to his employment in the event of a Change in Control;

     NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and other good and valuable consideration, the receipt of
which is hereby acknowledged, the parties agree as follows:

     1. Term. The term of this Agreement shall be the period beginning on the
date hereof and terminating on the date 36 months after such date (the "Term"),
provided that for each day from and after the date hereof the Term will
automatically be extended for an additional day, unless either Employer or
Executive has given written notice to the other party of its or his election to
cease such automatic extension, in which case the Term shall be the 36-month
period beginning on the date such notice is received by such other party.
<PAGE>   2

     2. Definitions. For purposes of this Agreement:

          (a) "Affiliate" or "Associate" shall have the meaning set forth in
     Rule 12b-2 under the Securities Exchange Act of 1934.

          (b) "Base Salary" shall mean Executive's monthly base salary at the
     rate in effect on the date of a reduction for purposes of paragraph (g) of
     this Section, or on the date of a termination of employment under
     circumstances described in subsections 3(a) or (b) below, whichever is
     higher; provided, however, that such rate shall in no event be less than
     the highest rate in effect for Executive at any time during the Term.

          (c) "Beneficiary" shall mean the person or entity designated by
     Executive, by written instrument delivered to Employer, to receive the
     benefits payable under this Agreement in the event of his death. If
     Executive fails to designate a Beneficiary, or if no Beneficiary survives
     Executive, such death benefits shall be paid:

               (i)    to his surviving spouse; or

               (ii)   if there is no surviving spouse, to his living descendants
                      per stirpes; or

               (iii)  if there is neither a surviving spouse nor descendants, to
                      his duly appointed and qualified executor or personal
                      representative.

          (d) "Bonus" shall mean Executive's target annual incentive bonus
     compensation for the calendar year in which the date of a termination of
     employment under circumstances described in subsection 3(a) below occurs,
     under the incentive bonus compensation plan then maintained by Employer;
     provided, however, that such target annual incentive bonus compensation
     shall in no event be less than the highest target annual incentive bonus

                                       2
<PAGE>   3

     compensation of Executive under any such incentive bonus compensation plan
     for any calendar year commencing during the Term.

          (e) A "Change in Control" shall be deemed to take place on the
     occurrence of any of the following events:

               (1) The acquisition by an entity, person or group (including all
          Affiliates or Associates of such entity, person or group) of
          beneficial ownership, as that term is defined in Rule 13d-3 under the
          Securities Exchange Act of 1934, of capital stock of Employer entitled
          to exercise more than 30% of the outstanding voting power of all
          capital stock of Employer entitled to vote in elections of directors
          ("Voting Power");

               (2) The effective time of (i) a merger or consolidation of
          Employer with one or more other corporations as a result of which the
          holders of the outstanding Voting Power of Employer immediately prior
          to such merger or consolidation (other than the surviving or resulting
          corporation or any Affiliate or Associate thereof) hold less than 50%
          of the Voting Power of the surviving or resulting corporation, or (ii)
          a transfer of 30% of the Voting Power, or a Substantial Portion of the
          Property, of Employer other than to an entity of which Employer owns
          at least 50% of the Voting Power; or

               (3) The election to the Board of Directors of Employer of
          candidates who were not recommended for election by the Board of
          Directors of Employer in office immediately prior to the election, if
          such candidates constitute a majority of those elected in that
          particular election.

                                       3
<PAGE>   4

Notwithstanding the foregoing, a Change in Control shall not be deemed to take
place by virtue of any transaction in which Executive is a participant in a
group effecting an acquisition of Employer and, after such acquisition,
Executive holds an equity interest in the entity that has acquired Employer.

          (f) "Good Cause" shall be deemed to exist if, and only if:

               (1) Executive engages in acts or omissions constituting
               dishonesty, intentional breach of fiduciary obligation or
               intentional wrongdoing or malfeasance, in each case that results
               in substantial harm to Employer or any Affiliate; or

               (2) Executive is convicted of a criminal violation involving
               fraud or dishonesty.

          (g) "Good Reason" shall be deemed to exist if, and only if:

               (1) there is a significant change in the nature or the scope of
               Executive's authorities or duties;

               (2) there is a significant reduction in Executive's monthly rate
               of Base Salary, his opportunity to earn a bonus under an
               incentive bonus compensation plan maintained by Employer or his
               benefits; or

               (3) Employer changes by 100 miles or more the principal location
               in which Executive is required to perform services.

          (h) "Pension Plan" shall mean any Retirement Plan that is a defined
     benefit plan as defined in Section 3(35) of the Employee Retirement Income
     Security Act of 1974, as amended ("ERISA").

                                       4
<PAGE>   5

          (i) "Retirement Plan" shall mean any qualified or supplemental
     employee pension benefit plan, as defined in Section 3(2) of ERISA,
     currently or hereinafter made available by Employer in which Executive is
     eligible to participate.

          (j) "Severance Period" shall mean the period beginning on the date
     Executive's employment with Employer terminates under circumstances
     described in subsection 3(a) and ending on the date 36 months thereafter.

          (k) "Substantial Portion of the Property of Employer" shall mean 50%
     of the aggregate book value of the assets of Employer and its Affiliates
     and Associates as set forth on the most recent balance sheet of Employer,
     prepared on a consolidated basis, by its regularly employed, independent,
     certified public accountants.

          (l) "Welfare Plan" shall mean any health and dental plan, disability
     plan, survivor income plan or life insurance plan, as defined in Section
     3(1) of ERISA, currently or hereafter made available by Employer in which
     Executive is eligible to participate.

     3. Benefits Upon Termination of Employment. (a) The following provisions
will apply if a Change in Control occurs during the Term, and (i) at any time
during the 24 months after the Change in Control occurs (whether during or after
the expiration of the Term), the employment of Executive with Employer is
terminated by Employer for any reason other than Good Cause, or Executive
terminates his employment with Employer for Good Reason, or (ii) at any time
during the thirteenth month after the Change in Control occurs (whether during
or after the expiration of the Term), Executive terminates his employment with
Employer for any reason:

          (1) Employer shall pay Executive an amount equal to 36 times the sum
     of (a) Executive's Base Salary plus (b) one-twelfth of his Bonus. Such
     amount shall be paid to

                                       5
<PAGE>   6

     Executive in a lump sum within 180 days after his date of termination of
     employment; provided, however, Executive, by written notice to Employer,
     may elect to receive such payment on any date that is no earlier than the
     later to occur of (i) the date 10 days after the date of termination, and
     (ii) the date 10 days after receipt of such notice.

          (2) Employer shall pay Executive an amount equal to the pro rata
     portion of Executive's target annual incentive bonus compensation for the
     calendar year in which the date of termination of employment occurs, under
     the incentive bonus compensation plan then maintained by Employer, that is
     applicable to the period commencing on the first day of such calendar year
     and ending on the date of termination. Such amount shall be paid to
     Executive in a lump sum within 180 days after his date of termination of
     employment; provided, however, Executive, by written notice to Employer,
     may elect to receive such payment on any date that is no earlier than the
     later to occur of (i) the date 10 days after the date of termination, and
     (ii) the date 10 days after receipt of such notice.

          (3) Executive shall receive any and all benefits accrued under any
     Retirement Plan, Welfare Plan or other plan or program in which he
     participates at the date of termination of employment, to the date of
     termination of employment, the amount, form and time of payment of such
     benefits to be determined by the terms of such Retirement Plan, Welfare
     Plan and other plan or program, and Executive's employment shall be deemed
     to have terminated by reason of retirement, and without regard to vesting
     limitations in all such Plans and other plans or programs not subject to
     the qualification requirements of Section 401 (a) of the Internal Revenue
     Code of 1986 as amended ("Code"), under circumstances that have the most
     favorable result for Executive thereunder for all purposes of such Plans
     and

                                       6
<PAGE>   7

     other plans or programs. Payment shall be made at the earliest date
     permitted under any such Plan or other plan or program that is not funded
     with a trust agreement.

          (4) (A) Employer shall pay to Executive a monthly Supplemental Pension
     Benefit in an amount equal to the amount determined pursuant to clause (i)
     below less the amount determined pursuant to clause (ii) below:

               (i) the aggregate monthly amount of the pension benefit
          ("Pension") that would have been payable to Executive under all
          Pension Plans if that Pension were computed (A) by treating the
          Severance Period as service for all purposes of the Pension Plans and
          (B) by considering his compensation during the Severance Period to be
          his Base Salary and one-twelfth of his Bonus for all purposes of the
          Pension Plans;

               (ii) the aggregate monthly amount of any Pension actually paid to
          Executive under all Pension Plans.

               (B) The Supplemental Pension Benefit payable to Executive
     hereunder shall be paid (i) commencing at the later to occur of the last
     day of the Severance Period or the date payment of his Pension commences
     under the Pension Plans; and (ii) in the same form as is applicable to the
     Pension payable to Executive under the Pension Plans.

               (C) If Executive dies prior to commencement of payment to him of
     his Pension under the Pension Plans, under circumstances in which a death
     benefit under the Pension Plans is payable to his surviving spouse or other
     beneficiary, then Employer shall pay a monthly Supplemental Death Benefit
     to Executive's surviving spouse or other beneficiary entitled to receive
     the death benefit payable with respect to Executive under the

                                       7
<PAGE>   8

     Pension Plans in an amount equal to the amount determined pursuant to
     clause (i) below less the amount determined pursuant to clause (ii) below:

               (i) the aggregate monthly amount of the death benefit that would
          have been payable to the surviving spouse or other beneficiary of
          Executive under the Pension Plans if that death benefit were computed
          (A) by treating the Severance Period as service for all purposes of
          the Pension Plans and (B) by considering his compensation during the
          Severance Period to be his Base Salary and one-twelfth of his Bonus
          for all purposes of the Pension Plans;

               (ii) the aggregate monthly amount of any death benefit actually
          paid to the surviving spouse or other beneficiary of Executive under
          the Pension Plans.

               (D) The Supplemental Death Benefit payable with respect to
     Executive hereunder shall be payable at the same time, in the same form,
     and to the same persons as is applicable to the death benefit payable with
     respect to Executive under the Pension Plans.

               (E) Notwithstanding the foregoing provisions, the total of the
     actual years of service of Executive for purposes of each of the Pension
     Plans and the years of service for which credit is given pursuant to
     subparagraphs (3)(A) and (C) shall not exceed the maximum number of years
     of service, if any, that can be considered pursuant to the terms of such
     Pension Plan.

               (F) Any actuarial adjustments made under the Pension Plans with
     respect to the form or time of payment of a Pension or death benefit to
     Executive or his surviving spouse or other beneficiary under the Pension
     Plans shall also be applicable to the

                                       8
<PAGE>   9

     Supplemental Pension Benefit or Supplemental Death Benefit payable
     hereunder and shall be based upon the same actuarial assumptions as those
     specified in the Pension Plans.

          (5) If upon the date of termination of Executive's employment
     Executive holds any options with respect to stock of Employer, all such
     options will immediately become exercisable upon such date and will be
     exercisable for 200 days thereafter. Any restrictions on stock of Employer
     owned by Executive on the date of termination of his employment will lapse
     on such date.

          (6) During the Severance Period Executive and his spouse and other
     dependents will continue to be covered by all Welfare Plans maintained by
     Employer in which he and his spouse and other dependents were participating
     immediately prior to the date of his termination as if he continued to be
     an employee of Employer and Employer will continue to pay the costs of
     coverage of Executive and his spouse and other dependents under such
     Welfare Plans on the same basis as is applicable to active employees
     covered thereunder; provided that, if participation in any one or more of
     such Welfare Plans is not possible under the terms thereof, Employer will
     provide substantially identical benefits. Coverage under any such Welfare
     Plan will cease if and when Executive obtains employment with another
     employer during the Severance Period, and becomes eligible for coverage
     under any substantially similar Welfare Plan provided by his new employer.

          (7) During the Severance Period, Executive shall not be entitled to
     reimbursement for fringe benefits, including without limitation, dues and
     expenses related to club memberships, automobile expenses, expenses for
     professional services and other similar perquisites.

                                       9
<PAGE>   10

     (b) If the employment of Executive with Employer is terminated by Employer
or Executive other than under circumstances set forth in subsection 3(a),
Executive's Base Salary shall be paid through the date of his termination, and
Employer shall have no further obligation to Executive or any other person under
this Agreement. Such termination shall have no effect upon Employee's other
rights, including but not limited to, rights under the Retirement Plans and the
Welfare Plans.

     (c) Notwithstanding anything herein to the contrary, (1) in the event
Employer shall terminate the employment of Executive for Good Cause hereunder,
Employer shall give Executive at least thirty (30) days prior written notice
specifying in detail the reason or reasons for Executive's termination, and (2)
in the event Executive terminates his employment for Good Reason hereunder,
Executive shall give Employer at least thirty (30) days prior written notice
specifying in detail the reason or reasons for Executive's termination.

     (d) This Agreement shall have no effect, and Employer shall have no
obligations hereunder, if Executive's employment terminates for any reason at
any time other than during the 24 months following a Change in Control.

     4. Excise Tax. (a) In the event that a Change in Control shall occur, and a
final determination is made by legislation, regulation, ruling directed to
Executive or Employer, by court decision, or by independent tax counsel
described in subsection (b) next below, that the aggregate amount of any payment
made to Executive (1) hereunder, and (2) pursuant to any plan, program or policy
of Employer in connection with, on account of, or as a result of, such Change in
Control ("Total Payments") will be subject to the excise tax provisions of
Section 4999 of the Code, or any successor section thereof, Executive shall be
entitled to receive from Employer, in addition to any

                                      10
<PAGE>   11

other amounts payable hereunder, a lump sum payment (the "Gross-Up Payment"),
sufficient to cover the full cost of such excise taxes and Executive's federal,
state and local income and employment taxes on this additional payment so that
the net amount retained by Executive, after the payment of all such excise taxes
on the Total Payments, and all federal, state and local income and employment
taxes and excise taxes on the Gross-Up Payment, shall be equal to the Total
Payments. The Total Payments, however, shall be subject to any federal, state
and local income and employment taxes thereon. For this purpose, Executive shall
be deemed to be in the highest marginal rate of federal, state and local taxes.
The Gross-Up Payment shall be made at the same time as the payments described in
subsections 3(a)(1) and (2) above.

     (b) Employer and Executive shall mutually and reasonably determine the
amount of the Gross-Up Payment to be made to Executive pursuant to the preceding
subsection. Prior to the making of any such Gross-Up Payment, either party may
request a determination as to the amount of such Gross-Up Payment. If such a
determination is requested, it shall be made promptly, at Employer's expense, by
independent tax counsel selected by Executive and approved by Employer (which
approval shall not unreasonably be withheld), and such determination shall be
conclusive and binding on the parties. Employer shall provide such information
as such counsel may reasonably request, and such counsel may engage accountants
or other experts at Employer's expense to the extent that they deem necessary or
advisable to enable them to reach a determination. The term "independent tax
counsel," as used herein, shall mean a law firm of recognized expertise in
federal income tax matters that has not previously advised or represented either
party. It is hereby agreed that neither Employer nor Executive shall engage any
such firm as counsel for any purpose, other

                                      11
<PAGE>   12

than to make the determination provided for herein, for three years following
such firm's announcement of its determination.

     (c) In the event the Internal Revenue Service subsequently adjusts the
excise tax computation made pursuant to subsections 4(a) and (b) above, Employer
shall pay to Executive, or Executive shall pay to Employer, as the case may be,
the full amount necessary to make either Executive or Employer whole had the
excise tax initially been computed as subsequently adjusted, including the
amount of any underpaid or overpaid excise tax, and any related interest and/or
penalties due to the Internal Revenue Service.

     5. Setoff. No payments or benefits payable to or with respect to Executive
pursuant to this Agreement shall be reduced by any amount Executive or his
spouse or Beneficiary, or any other beneficiary under the Pension Plans, may
earn or receive from employment with another employer or from any other source,
except as expressly provided in subsection 3(a)(6).

     6. Death. If Executive's employment with Employer terminates under
circumstances described in subsections 3(a) or (b), then upon Executive's
subsequent death, all unpaid amounts payable to Executive under subsections
3(a)(1), (2) or (3) or 3(b), or Section 4, if any, shall be paid to his
Beneficiary, all amounts payable under subsection 3(a)(4) shall be paid pursuant
to the terms of said subsection to his spouse or other beneficiary under the
Pension Plans, and if subsection 3(a) applies, his spouse and other dependents
shall continue to be covered under all applicable Welfare Plans during the
remainder of the Severance Period, if any, pursuant to subsection 3(a)(6).

     7. No Solicitation of Representatives and Employees. Executive agrees that
he shall not, during the Term or the Severance Period, directly or indirectly,
in his individual capacity or otherwise, induce, cause, persuade, or attempt to
do any of the foregoing in order to cause, any

                                      12
<PAGE>   13

representative, agent or employee of Employer or any of its Affiliates to
terminate such person's employment relationship with Employer or any of its
Affiliates, or to violate the terms of any agreement between said
representative, agent or employee and Employer or any of its Affiliates.

     8. Confidentiality. Executive acknowledges that preservation of a
continuing business relationship between Employer or its Affiliates and their
respective customers, representatives, and employees is of critical importance
to the continued business success of Employer and its Affiliates and that it is
the active policy of Employer and its Affiliates to guard as confidential
certain information not available to the public and relating to the business
affairs of Employer and its Affiliates. In view of the foregoing, Executive
agrees that he shall not during the Term and at any time thereafter, without the
prior written consent of Employer, disclose to any person or entity any such
confidential information that was obtained by Executive in the course of his
employment by Employer or any of its Affiliates. This section shall not be
applicable if and to the extent Executive is required to testify in a
legislative, judicial or regulatory proceeding pursuant to an order of Congress,
any state or local legislature, a judge, or an administrative law judge or is
otherwise required by law to disclose such information.

     9. Forfeiture. If Executive shall at any time violate any obligation of his
under Sections 7 or 8 in a manner that results in material damage to the
Employer or its business, he shall immediately forfeit his right to any benefits
under this Agreement, and Employer shall thereafter have no further obligation
hereunder to Executive or his spouse, Beneficiary or any other person.

     10. Executive Assignment. No interest of Executive, his spouse or any
Beneficiary, or any other beneficiary under the Pension Plans, under this
Agreement, or any right to receive any payment or distribution hereunder, shall
be subject in any manner to sale, transfer, assignment,

                                      13
<PAGE>   14

pledge, attachment, garnishment, or other alienation or encumbrance of any kind,
nor may such interest or right to receive a payment or distribution be taken,
voluntarily or involuntarily, for the satisfaction of the obligations or debts
of, or other claims against, Executive or his spouse, Beneficiary or other
beneficiary, including claims for alimony, support, separate maintenance, and
claims in bankruptcy proceedings.

     11. Benefits Unfunded. Except as otherwise provided in Section 13, all
rights under this Agreement of Executive and his spouse, Beneficiary or other
beneficiary under the Pension Plans, shall at all times be entirely unfunded,
and no provision shall at any time be made with respect to segregating any
assets of Employer for payment of any amounts due hereunder. None of Executive,
his spouse, Beneficiary or any other beneficiary under the Pension Plans shall
have any interest in or rights against any specific assets of Employer, and
Executive and his spouse, Beneficiary or other beneficiary shall have only the
rights of a general unsecured creditor of Employer. Except as otherwise provided
in Section 13, and notwithstanding the preceding provisions of this Section, the
Nominating and Compensation Committee of the Board of Directors of Employer, in
its discretion, shall have the right, at any time and from time to time, to
cause amounts payable to Executive or his Beneficiary hereunder to be paid to
the trustee of the NIPSCO Industries, Inc. Umbrella Trust For Management
established effective January 1, 1991, as amended from time to time, or any
similar trust at any time established by Employer ("Trust").

     12. Waiver. No waiver by any party at any time of any breach by the other
party of, or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of any other provisions
or conditions at the same time or at any prior or subsequent time.

                                      14
<PAGE>   15

     13. Litigation Expenses. Employer shall pay Executive's reasonable
attorneys' fees and legal expenses in connection with any judicial proceeding to
enforce this Agreement, or to construe or determine the validity of this
Agreement or otherwise in connection therewith, whether or not Executive is
successful in such litigation. Within 10 days following the occurrence of a
Potential Change in Control (as defined in the Trust described in Section 11),
the Nominating and Compensation Committee of the Board of Directors of Employer
shall cause Employer to contribute the sum of $100,000 to the Trust to be
applied in satisfaction of Employer's obligations under this Section. The
Nominating and Compensation Committee shall cause Employer to contribute
additional amounts to the Trust, at such time or times as the Committee deems
appropriate, to the extent the aggregate of (1) the aforementioned sum of
$100,000, plus Trust earnings thereon, and (2) any additional Employer
contributions to the Trust, plus Trust earnings thereon, is not sufficient to
satisfy in full Employer's obligations under this Section.

     14. Applicable Law. This Agreement shall be construed and interpreted
pursuant to the laws of Indiana.

     15. Entire Agreement. This Agreement contains the entire Agreement between
the Employer and Executive and supersedes any and all previous agreements;
written or oral; between the parties relating to the subject matter hereof. No
amendment or modification of the terms of this Agreement shall be binding upon
the parties hereto unless reduced to writing and signed by Employer and
Executive.

     16. No Employment Contract. Nothing contained in this Agreement shall be
construed to be an employment contract between Executive and Employer.

                                      15
<PAGE>   16

     17. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original.

     18. Severability. In the event any provision of this Agreement is held
illegal or invalid, the remaining provisions of this Agreement shall not be
affected thereby.

     19. Successors. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective heirs, representatives and
successors.

     20. Employment with an Affiliate. For purposes of this Agreement, (A)
employment or termination of employment of Executive shall mean employment or
termination of employment with Employer and all Affiliates, (B) Base Salary and
Bonus shall include remuneration received by Executive from Employer and all
Affiliates, and (C) the terms Pension Plan, Retirement Plan and Welfare Plan
maintained or made available by Employer shall include any such plans of any
Affiliate of Employer.

     21. Notice. Notices required under this Agreement shall be in writing and
sent by registered mail, return receipt requested, to the following addresses or
to such other address as the party being notified may have previously furnished
to the other party by written notice:

     If to Employer:     NIPSCO Industries, Inc.
                         5265 Hohman Avenue
                         Hammond, Indiana 46320

                         Attention: Gary L. Neale

     If to Executive:

                                      16
<PAGE>   17

     IN WITNESS WHEREOF, Executive has hereunto set his hand, and Employer has
caused these presents to be executed in its name on its behalf, all on the
________ day of _______________________________, 1997, effective September 1,
1997.

                                       NIPSCO Industries, Inc.

                                       By:
                                           --------------------------------

                                       Title: Chairman, President and
                                              Chief Executive Officer

                                       ------------------------------------
                                                             , Executive

                                       17
<PAGE>   18

              Schedule of Parties to Change of Control Agreements

     The following NiSource executives have entered into amended Change in
Control and Termination Agreements with Industries: Gary L. Neale, Stephen P.
Adik, Patrick J. Mulchay, Jeffrey W. Yundt, Joseph L. Turner, James K. Abcouwer,
Jerry L. Godwin, David A. Kelly, Mark T. Maassel, Thomas J. Aruffo, Peggy
Landini, Mark D. Wyckoff and Robert J. Schacht. The contracts are substantially
identical in all material respects except as to the parties, the execution dates
and the amount of time following a change of control that the termination
provisions of the agreement apply (from 7-24 months). In addition, Mr. Adik's
and Mr. Neale's agreements provide that if a change of control occurs during the
term of the agreement, they may terminate their employment within 24 months for
any reason; and Mr. Neale's agreement provides that he will receive termination
benefits during the term of the agreement (regardless of whether a change of
control has occurred) if he is terminated for any reason other than for good
cause, if he terminates his employment for good reason or if his employment
terminates due to death or disability.

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