Document:

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                                                                    EXHIBIT 10.6

                                  NISOURCE INC.
                          1994 LONG-TERM INCENTIVE PLAN

                AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2004

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                                  NISOURCE INC.
                          1994 LONG-TERM INCENTIVE PLAN

                As Amended and Restated Effective January 1, 2004

                                TABLE OF CONTENTS

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

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

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

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

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

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

7.       NonQualified Stock Options............................................................................     -3-
(a)      Option Price..........................................................................................     -3-
(b)      Exercise of Option....................................................................................     -3-
(c)      Payment for Shares....................................................................................     -5-
(d)      Transferability.......................................................................................     -4-
(e)      Rights Upon Termination of Employment.................................................................     -4-

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

9.       Stock Appreciation Rights.............................................................................     -6-
(a)      Awards................................................................................................     -7-
(b)      Term..................................................................................................     -7-
(c)      Payment...............................................................................................     -7-

10.      Performance Units.....................................................................................     -7-
(a)      Performance Period....................................................................................     -7-
(b)      Valuation of Units....................................................................................     -7-
(c)      Performance Targets...................................................................................     -8-
(d)      Adjustments...........................................................................................     -8-
</TABLE>

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<TABLE>
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(e)      Payments of Units.....................................................................................     -8-
(f)      Termination of Employment.............................................................................     -8-
(g)      Other Terms...........................................................................................     -8-

11.      Restricted Stock Awards...............................................................................     -8-
(a)      Restriction Period....................................................................................     -9-
(b)      Restrictions Upon Transfer............................................................................     -9-
(c)      Certificates..........................................................................................     -9-
(d)      Lapse of Restrictions.................................................................................     -9-
(e)      Termination Prior to Lapse of Restrictions............................................................     -9-

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

13.      Supplemental Cash Payments............................................................................    -10-

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

15.      General Restrictions..................................................................................    -11-

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

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

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

19.      Change in Control.....................................................................................    -12-

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

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

22.      Assumption of Options.................................................................................    -13-

23.      Duration of the Plan..................................................................................    -14-
</TABLE>

                                      -ii-
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                                  NISOURCE INC.
                          1994 LONG-TERM INCENTIVE PLAN

               (AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2004)

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

         WHEREAS, the Company further amended and restated the Plan effective
January 1, 2000, and subsequently amended the Plan effective January 1, 2001,
October 1, 2001, January 1, 2002, March 1, 2003, and August 25, 2003; and

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

         NOW THEREFORE, the Plan is hereby amended and restated, effective
January 1, 2004, as follows:

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

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

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3.       COMMON SHARES SUBJECT TO THE PLAN. (a) Subject to the provisions of
subsection 3(b), the shares that may be issued, or may be the measure of stock
appreciation rights granted, under the Plan shall not exceed in the aggregate
21,000,000 of the common shares without par value of the Company (the "Common
Shares"). Such shares may be authorized and unissued shares or treasury shares.
Except as otherwise provided herein, any shares subject to an option or right
which for any reason expires or is terminated, unexercised as to such shares,
shall again be available under the Plan.

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

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

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

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

5.       AWARDS UNDER THE PLAN. Awards under the Plan may be in the form of
stock options (both options designed to satisfy statutory requirements necessary
to receive favorable tax

                                      -2-
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treatment pursuant to any present or future legislation and options not designed
to so qualify), incentive stock options, stock appreciation rights, performance
units, restricted shares, contingent stock awards, or such combinations of the
above as the Committee may in its discretion deem appropriate. Except in
accordance with equitable adjustments as provided in subsection 3(b), no stock
option granted under the Plan shall at any time be repriced or subject to
cancellation and replacement.

6.       SECTION 162(m) LIMITATIONS. Subject to subsection 3(b) of the Plan, the
maximum number of stock options and stock appreciation rights that may be
granted to any person who qualifies as an executive officer named from time to
time in the summary compensation table in the Company's annual meeting proxy
statement and who is employed by the Company on the last day of the taxable year
(the "SCT Executives") shall be 600,000 options and stock appreciation rights
with respect to Common Shares per year and 3,000,000 options and stock
appreciation rights with respect to Common Shares during the term of the Plan.
The maximum number of performance units that may be granted to any SCT Executive
shall be 400,000 units per year, provided that no more than 800,000 units may be
granted in any three year period and the maximum number of units that may be
granted to any SCT Executive during the term of the Plan shall be 1,500,000. The
maximum number of restricted stock awards that may be granted to any SCT
Executive shall be 400,000 Common Shares per year, provided that no more than
800,000 Shares of restricted stock may be granted in any three year period, and
that the maximum number of Shares of restricted stock that may be granted to any
SCT Executive during the term of the Plan shall be 1,500,000. The maximum number
of contingent stock awards that may be granted to any SCT Executive shall be
400,000 Common Shares per year, provided that no more than 800,000 Common Shares
may be subject to contingent stock awards granted in any three year period and
the maximum number of Common Shares subject to contingent stock awards that may
be granted to any SCT Executive during the term of the Plan shall be 1,500,000.
The limitations set forth in this Section 6 shall relate only to years or other
periods of time in which such awards constitute "applicable employee
remuneration" under Code Section 162(m).

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

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

         (b)      EXERCISE OF OPTION. Each stock option agreement shall state
the period or periods of time within which the option may be exercised by the
optionee, in whole or in part, which shall be such period or periods of time as
may be determined by the Committee, provided that the option exercise period
shall not commence earlier than six months after the date of the grant of the
option nor end later than ten years after the date of the grant of the option.
The

                                      -3-
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Committee shall have the power to permit in its discretion an acceleration
of the previously determined exercise terms, within the terms of the Plan, under
such circumstances and upon such terms and conditions as it deems appropriate.

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

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

         (e)      RIGHTS UPON TERMINATION OF EMPLOYMENT. In the event that an
optionee ceases to be an employee for any reason other than death, disability or
retirement, the optionee shall

                                      -4-
<PAGE>

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

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

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

         (b)      EXERCISE OF OPTION. Each stock option agreement shall state
the period or periods of time within which the option may be exercised by the
optionee, in whole or in part, which shall be such period or periods of time as
may be determined by the Committee, provided that the option period shall not
commence earlier than six months after the date of the grant of the option nor
end later than ten years after the date of the grant of the option. The
aggregate fair market value (determined with respect to each incentive stock
option at the time of grant) of the Common Shares with respect to which
incentive stock options are exercisable for the first time by an individual
during any calendar year (under all incentive stock option plans of the Company
and its parent and subsidiary corporations) shall not exceed $100,000. If the
aggregate fair market value (determined at the time of grant) of the Common
Shares subject to an option, which first becomes exercisable in any calendar
year exceeds the limitation of this Section 8(b), so much of the option that
does not exceed the applicable dollar limit shall be an incentive stock option
and the remainder shall be a nonqualified stock option; but in all other
respects, the original option agreement shall remain in full force and effect.
As used in this Section 8, the words "parent" and "subsidiary" shall have the
meanings given to them in Section 424(e) and 424(f) of the Code. Notwithstanding
anything herein to the contrary, if an incentive stock option is granted to an
individual who owns stock possessing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or of its parent or
subsidiary corporations, within the meaning of Section 422(b)(6) of the Code,
(i) the purchase price of each Common Share subject to the incentive stock
option shall be not less than one hundred ten percent (110%) of the fair market
value of the Common Shares on the date the incentive stock option is granted,
and (ii) the incentive stock option shall expire, and all rights to purchase

                                      -5-
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Common Shares thereunder shall cease, no later than the fifth anniversary of the
date the incentive stock option was granted.

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

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

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

                                      -6-
<PAGE>

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

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

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

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

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

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

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

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

                                      -7-
<PAGE>

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

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

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

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

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

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

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

         (f)      TERMINATION OF EMPLOYMENT. In the event that a participant
holding a Unit award ceases to be an employee prior to the end of the applicable
performance period by reason of death, disability or retirement, his Units, to
the extent earned under the applicable performance targets, shall be payable at
the end of the performance period in proportion to the active service of the
participant during the performance period, as determined by the Committee.

                                      -8-
<PAGE>

Upon any other termination of employment, participation shall terminate
forthwith and all outstanding Units held by the participant shall be canceled.

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

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

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

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

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

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

                  "This certificate and the shares represented hereby are
         subject to the terms and conditions (including forfeiture and
         restrictions against transfer) contained in the NiSource Inc. 1994
         Long-Term Incentive Plan and an Agreement entered into by the
         registered owner. Release from such terms and conditions shall obtain
         only in

                                      -9-
<PAGE>

         accordance with the provisions of the Plan and Agreement, a copy of
         each of which is on file in the office of the Secretary of said
         Company."

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

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

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

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

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

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

                                      -10-
<PAGE>

the contingent stock award shall be deposited with the Company, or its designee,
and shall bear the legend set forth in subsection 11(c) above. Upon the lapse of
such restrictions, Common Shares free of such restrictive legend shall be issued
to the participant or his legal representative.

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

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

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

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

14.      DIVIDEND EQUIVALENTS. From and after the date, if any, specified in an
applicable incentive stock option agreement, stock appreciation right agreement
not granted in connection with a stock option, performance unit award agreement
or contingent stock award agreement, and except as otherwise provided in such
agreement, the holder of such award shall receive a distribution of an amount
equivalent to the dividends payable in cash or property (other than stock of the
Company) that would have been payable to the holder with respect to the number
of Common Shares subject to such award, had the holder been the legal owner of
such Common Shares on the applicable date on which such dividend is declared by
the Company on Common Shares. Except as otherwise provided in any contingent
stock award agreement, any such dividend equivalent payable in cash or property
(other than stock of the Company) shall be payable directly to the holder of the
applicable award at such time, in such form, and upon such terms and conditions,
as are applicable to the actual cash or property dividend actually declared with
respect to Common Shares. Except as otherwise provided in any contingent stock
award agreement, any participant entitled to receive a cash dividend equivalent
pursuant to his

                                      -11-
<PAGE>

applicable award agreement may, by written election filed with the Company, at
least ten days prior to the date for payment of such dividend equivalent, elect
to have such dividend equivalent credited to an account maintained for his
benefit under a dividend reinvestment plan maintained by the Company.
Appropriate adjustments with respect to awards shall be made to give effect to
the payment of stock dividends as set forth in subsection 3(b) above.

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

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

17.      EMPLOYMENT RIGHTS. Nothing in the Plan or in any agreement entered into
pursuant to the Plan shall confer upon any participant the right to continue in
employment with the Company or affect any right which his employer or the
Company may have to terminate the employment of such participant. For purposes
of the Plan, termination of employment shall be deemed to occur on the date the
recipient of an award last performed services for the Company or his employer
affiliated with the Company and shall not be deemed to include any period during
which the recipient is entitled to receive severance pay from the Company or any
such affiliate.

18.      TAX WITHHOLDING. Whenever the Company proposes or is required to issue
or transfer Common Shares to a participant under the Plan, the Company shall
have the right to require the participant to remit to the Company an amount
sufficient to satisfy all federal, state and local withholding tax requirements
prior to the delivery of any certificate or certificates for such Common Shares.
If such certificates have been delivered prior to the time a withholding
obligation arises, the Company shall have the right to require the participant
to remit to the Company an amount sufficient to satisfy all federal, state or
local withholding tax requirements at the time such obligation arises and to
withhold from other amounts payable to the participant, as compensation or
otherwise, as necessary. Whenever payments under the Plan are to be made to a
participant in cash, such payment shall be net of any amount sufficient to
satisfy all federal, state and local withholding tax requirements. In lieu of
requiring a participant to make a payment to the Company in an amount related to
the withholding tax requirement, the Committee may, in its discretion, provide
that, at the participant's election, the tax withholding obligation shall be
satisfied by the Company's withholding a portion of the Common Shares otherwise
distributable to the participant, such Common Shares being valued at their fair
market value at the date of exercise, or by the participant's delivering to the
Company a portion of the Common Shares previously delivered by the Company, such
Common Shares being valued at

                                      -12-
<PAGE>

their fair market value as of the date of delivery of such Common Shares by the
participant to the Company. For this purpose, the amount of required withholding
shall be a specified rate not less than the statutory minimum federal, state and
local (if any) withholding rate, and not greater than the maximum federal, state
and local (if any) marginal tax rate applicable to the participant and to the
particular transaction. Notwithstanding any provision of the Plan to the
contrary, a participant's election pursuant to the preceding sentences (a) must
be made on or prior to the date as of which income is realized by the recipient
in connection with the particular transaction, and (b) must be irrevocable. In
lieu of a separate election on each effective date of each transaction, a
participant may file a blanket election with the Committee which shall govern
all future transactions until revoked by the participant.

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

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

20.      AMENDMENT OR TERMINATION. The Board or the Committee may at any time
terminate, suspend or amend the Plan without the authorization of shareholders
to the extent allowed by law, including without limitation any rules issued by
the Securities and Exchange Commission under Section 16 of the 1934 Act, insofar
as shareholder approval thereof is required in order for the Plan to continue to
satisfy the requirements of Rule 16b-3 under the 1934 Act, or the rules of any
applicable stock exchange. No termination, suspension or amendment of the Plan
shall adversely affect any right acquired by any participant under an award
granted before the date of such termination, suspension or amendment, unless
such participant shall consent; but it shall be conclusively presumed that any
adjustment for changes in capitalization as provided for herein does not
adversely affect any such right. Subject to the preceding sentence, the Plan as
amended and restated effective January 1, 2004, shall apply to all awards at any
time granted hereunder.

21.      EFFECT ON OTHER PLANS. Unless otherwise specifically provided,
participation in the Plan shall not preclude an employee's eligibility to
participate in any other benefit or incentive plan

                                      -13-
<PAGE>

and any awards made pursuant to the Plan shall not be considered as compensation
in determining the benefits provided under any other plan.

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

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

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

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

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

                                      -14-
<PAGE>

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

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

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

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

         IN WITNESS WHEREOF, the Company has caused this Amendment and
Restatement to be executed on its behalf by its officer duly authorized, on this
30th day of December, 2003.

                                                   NISOURCE INC.

                                                   By: /s/ S. LaNette Zimmerman

                                       15<PAGE>

                                                                    EXHIBIT 10.7

Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment and such portions have been filed separately with the
Commission.

PRIVILEGED AND CONFIDENTIAL

                                December 3, 2003

Stephen P. Adik
488 Wexford Road
Valparaiso, IN 46385

Dear Steve:

This Letter Agreement confirms our decision concerning your employment status.
As we discussed, your employment with NiSource Corporate Services Company will
be terminated as a result of your voluntary retirement. If you sign this Letter
Agreement, it will constitute the mutual agreement between you and the Company
regarding the termination of your employment. As used herein, "the Company"
shall mean NiSource Inc. or any of its affiliates or subsidiaries, including
NiSource Corporate Services Company, and "NiSource" shall mean exclusively
NiSource Inc.

1.       Employment Status

         Unless you are discharged for cause, you will continue as an active
         employee of the Company through December 31, 2003 for purposes of
         determining your NiSource post-retirement health, life insurance and
         retirement benefits, as well as participation in the 2003 NiSource
         bonus plan. You will be treated as retiring as an active employee on
         January 1, 2004 for purposes of vesting (a) any restricted and
         contingent stock in NiSource owned by you and (b) any NiSource stock
         options owned by you; provided, however, you shall be treated as
         retiring as an active employee on January 29, 2004 for purposes of
         vesting the contingent stock grant awarded to you by NiSource January
         29, 2000. Thereafter, you will retire from the Company with the
         benefits which you are entitled to as a retired employee of the Company
         and only those additional benefits set forth in Paragraphs 2 and 3,
         provided that you shall be entitled to the benefits set forth in
         Paragraphs 2 and 3 after you timely execute a release in the form
         attached as Exhibit 1 hereto.

         You will resign as an officer and director of the Company on December
         31, 2003, except you will not resign as a director of NiSource.

         After your retirement, you agree to cooperate whenever needed in the
         preparation for and/or defense of any litigation in which the Company
         is involved.

2.       Retirement Payments

<PAGE>

         A.       Special Retirement Cash Bonus

         On December 31, 2003, and in recognition for your past services to the
         Company, you will receive a cash bonus in the amount of $450,000 (the
         "Special Bonus"). The Special Bonus will be subject to legally-mandated
         deductions for Social Security and federal, state and local taxes.

         B.       Special Restricted Stack Grant

         On January 2, 2004, and in recognition for your past services to the
         Company, you will receive $450,000 in value of NiSource restricted
         common stock, with the number of restricted shares to be issued to
         equal $450,000 divided by the closing stock price of a share of
         NiSource common stock on January 2, 2004 (the "Special Restricted Stock
         Grant"). The terms of the Special Restricted Stock Grant agreement are
         attached as Exhibit 2.

         C.       Previously Issued Stock Options and Restricted Stock Grants

         Exhibit 3 lists the terms of all stock options, restricted stock grants
         and contingent stock grants previously issued to you and which remain
         outstanding as of January 1, 2004.

3.       Change In Control

         You acknowledge that you are not currently owed any benefits under your
         Change in Control Agreement dated as of February 5, 1990, and as
         amended and restated as of September 1, 1997 and April 19, 2000 (the
         "CIC"). Nonetheless, as additional consideration for your execution of
         this Agreement, the Company agrees that, if

         (a)      an Acquisition of NiSource (as defined below) (**) is
announced on or before June 30, 2005, or

         (b)      (**) then you will receive 34,101 shares of NiSource common
stock (determined by taking the difference between 55,529 TARSAP shares
forfeited upon your retirement less 21,428 shares granted to you under the
Special Restricted Stock Grant and based on the assumption the shares issued
under the Restricted Stock Grant are valued at $21.00 per share). You will not
receive any payments in the event there is an Acquisition of NiSource under
circumstances not specifically described in the previous sentence. For purposes
of this Paragraph 3, the phrase "Acquisition of NiSource" means a transaction
which is defined as a "Change in Control" in the CIC.(**)

---------------------
(**) Text has been omitted pursuant to a request for confidential treatment and
such text has been filed separately with the Commission.

                                      -2-

<PAGE>

4.       Vacation

         You are eligible to receive a lump sum payment representing
         compensation for your accrued and unused vacation in the amount of
         $80,288.49. This payment will be subject to legally-mandated deductions
         for Social Security and federal, state and local taxes, as well as
         deductions for any contributory benefit plans in which you elect to
         continue participation.

5.       COBRA Coverage

         Your retirement is a qualifying event under the Consolidated Omnibus
         Budget Reconciliation Act ("COBRA"). The Company will notify you and/or
         your dependents of the insurance coverage which you may continue on a
         self-pay basis as provided by COBRA upon termination of your
         employment. You are entitled to 18 months of COBRA for dental and
         vision insurance on a self-pay basis commencing January 1, 2004.

         Notwithstanding the foregoing, you will be reimbursed by the Company
         for the first 12 months of COBRA for dental and vision insurance.

6.       Waiver of Severance Payments

         You agree to waive any rights to severance payments under the NiSource
         Executive Severance Policy that became effective as of June 1, 2002

7.       Long Term Incentive Program

         You will be treated as an active employee of the Company through
         January 1, 2004 for purposes of the 1994 Long Term Incentive Plan as
         amended, including the vesting of any contingent or restricted stock or
         stock options.

8.       Indemnification

         You will be entitled to indemnification by the Company pursuant to the
         provisions of Article 6 of NiSource Corporate Services Company's
         by-laws in effect on December 31, 2003 notwithstanding any change made
         thereafter, except as such change may be required by law. You will also
         be entitled to coverage under the directors and officers liability
         insurance coverage maintained by the Company (as in effect from time to
         time) to the same extent as other former officers of the Company.

9.       Company Property

         The Company will transfer to you, title to your current Company
         automobile, at no cost to you, at a time of your choosing, but in no
         event later than January 31, 2004. The Company, in accordance with
         practices previously in place, will reimburse any income tax liability
         incurred by you as a result of this transfer.

                                      -3-
<PAGE>

         You agree to return to the Company any and all of its property,
         including but not limited to, keys, employee identification or security
         access cards, telephones, computing equipment, PDAs, credit cards and
         cars on or before January 1, 2004.

         Notwithstanding the foregoing, you may continue to use your Company
         mobile telephones until January 31, 2004.

10.      Confidentiality

         You acknowledge that preservation of a continuing business relationship
         between the Company and their respective customers, representatives,
         and employees is of critical importance to the continued business
         success of the Company and that it is the active policy of the Company
         to guard as confidential certain information not available to the
         public and relating to the business affairs of the Company. In view of
         the foregoing, you agree that you shall not disclose to any person or
         entity any such confidential information that was obtained by you in
         the course of your employment by the Company (including your employment
         as a director of NiSource) without the prior written consent of the
         Company. It will not be considered a violation of this Paragraph 10 if
         you are required to disclose confidential information in a proceeding
         to enforce your rights under this Letter Agreement or pursuant to a
         subpoena, order of court or other governmental or administrative
         directive, compliance with which is mandatory, provided you give the
         Company notice that you have been served with such a subpoena or order
         immediately upon receiving service.

         Moreover, you agree that upon termination of your employment, you will
         promptly deliver to the Company all documentation and other materials
         relating to the Company's business or the business of any NiSource
         company which are in your possession or under your control, including
         customer and potential customer lists, product lists, and marketing
         material, whether in written or electronic data form; and you will
         delete, destroy or discard all copies of such confidential information
         remaining in your possession, provided, however, you shall be entitled
         to retain documentation and other materials relating to the Company's
         business that is necessary for you to serve as a director of NiSource.

         To facilitate the foregoing, the Company will allow you to use your
         existing office space and will provide you with secretarial assistance
         on an as-needed basis, until the earlier of the date upon which you
         certify that you have complied with the foregoing, or April 1, 2004.

         You further acknowledge and agree that the Company's remedy in the form
         of monetary damages for any breach by you of any of the provisions of
         this paragraph may be inadequate and that, in addition to any monetary
         damages for such breach, the Company shall be entitled to institute and
         maintain any appropriate proceeding or proceedings, including an action
         for specific performance and/or injunction.

                                      -4-
<PAGE>

11.      Status as a Director

         Unless nominated by NiSource, you hereby agree not to stand for
         re-election as a director of NiSource upon the expiration of your
         current term as a director of NiSource.

         Subsequent to December 31, 2003, you will have the status of a
         non-employee director of NiSource and shall be entitled to such
         compensation for board and committee duties as is accorded to
         non-employee directors of NiSource.

12.      Release of Claims

         In consideration of the payment and benefits described above, you, on
         behalf of yourself and your heirs, executors, and administrators, fully
         and finally settle, release, and waive any and all local, state
         (including but not limited to the Indiana Civil Frights Law), and
         federal civil, common law, statutory (including, but not limited to,
         the AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, Title VII of the
         Civil Rights Act of 1964, the Americans with Disabilities Act of 1990,
         the Family and Medical Leave Act of 1993, and the Employee Retirement
         Income Security Act of 1974, as those Acts are amended), and equitable
         claims against the Company and NiSource, Inc. and its subsidiaries and
         affiliated companies, and all the stockholders, predecessors,
         successors, agents, directors, officers, employees, representatives,
         and attorneys of NiSource, and its subsidiaries and affiliated
         companies, known or unknown, occurring or arising prior to you signing
         this Letter Agreement, except for claims relating to the enforcement of
         this Letter Agreement.

         You acknowledge and agree that this release is being given only in
         exchange for consideration to which you are not otherwise entitled.

         Based on the knowledge the Company has of the date of this Letter
         Agreement, the Company has no intention to sue you or your heirs,
         executors or administrators.

13.      Outstanding Charges

         You hereby agree to pay the Company any outstanding amounts owed to the
         Company, and further agree that by signing this Letter Agreement you
         hereby authorize the Company to deduct any outstanding charges from
         your lump sum or salary continuation payments.

14.      Governing Law

         This Letter Agreement shall be construed in accordance with the laws of
         Indiana.

                                      -5-
<PAGE>

15.      Severability

         In the event that one or more of the provisions contained in this
         Letter Agreement shall for any reason be held to be invalid, illegal or
         unenforceable in any respect, the Company shall have the right to
         enforce the remainder of this Letter Agreement.

16.      Non-Disclosure

         Except to the extent that disclosure is required to enforce your rights
         under this Letter Agreement or otherwise is required by subpoena, order
         of court or other governmental or administrative directive, compliance
         with which is mandatory, you expressly agree to keep the terms of this
         Letter Agreement strictly confidential and that you will not disclose
         the terms of this Letter Agreement to anyone other than your spouse,
         your legal counsel or your tax advisor, provided that they each agree
         to preserve the confidentiality of the terms of this Letter Agreement.

         You agree not to make any false and disparaging statements about the
         Released Parties to any media outlet, industry group, financial
         institution or analyst, or current or former employee, consultant,
         client or customer of the Company.

         NiSource and the officers of NiSource shall not make any false and
         disparaging statements about you to any media outlet, individual group,
         financial institution or analyst.

         Nothing herein should be construed as a limitation on your ability to
         consult with your counsel or with an administrative agency.

17.      Complete Agreement

         You acknowledge that in accepting this Letter Agreement, you have not
         relied upon any representation or promise other than those expressly
         stated in this Letter Agreement.

         This Letter Agreement and those sections of other Agreements
         specifically referenced herein, constitute the complete understanding
         between you and the Company relating to your separation and supersede
         any and all prior agreements, promises, representations or inducements,
         no matter their form, concerning your employment with the Company. No
         promises or agreements made subsequent to the execution of this
         Agreement by these parties shall be binding unless reduced to writing
         and signed by authorized representatives of these parties.

18.      Important Information

         YOU ACKNOWLEDGE THAT THE COMPANY HAS ADVISED YOU TAKE UP TO 21 DAYS TO
         CONSIDER THE TERMS AND CONDITIONS OUTLINED ABOVE, AND THAT THE COMPANY
         HAS ALSO ADVISED YOU TO CONSULT AN ATTORNEY BEFORE SIGNING THIS LETTER

                                      -6-
<PAGE>

         AGREEMENT. YOU ALSO HAVE THE RIGHT TO REVOKE YOUR EXECUTION OF THIS
         LETTER AGREEMENT WITHIN 7 DAYS AFTER EXECUTION IN ACCORDANCE WITH THE
         NOTICE TO EMPLOYEE ATTACHED HERETO.

         IF YOU ACCEPT THE TERMS AND CONDITIONS OUTLINED ABOVE, INCLUDING
         PARAGRAPH 12, PLEASE SIGN BOTH COPIES OF THIS LETTER AGREEMENT IN THE
         SPACE PROVIDED BELOW TO SIGNIFY YOUR ACCEPTANCE, AND RETURN BOTH COPIES
         TO GARY L. NEALE BY DECEMBER 24, 2003, ON WHICH DATE THIS OFFER WILL
         EXPIRE IF NOT ACCEPTED. IF YOU ACCEPT THE TERMS AND CONDITIONS OUTLINED
         ABOVE, YOUR ACCEPTANCE IS IN LIEU OF ANY AND ALL OTHER SEVERANCE
         PROGRAMS OFFERED BY THE COMPANY AND YOU KNOWINGLY AND VOLUNTARILY WAIVE
         PARTICIPATION IN ALL OTHER SEVERANCE PROGRAMS OFFERED BY THE COMPANY.
         YOU ACKNOWLEDGE THAT THE COMPANY'S PERFORMANCE UNDER THIS AGREEMENT
         CONSTITUTES FULL AND COMPLETE PAYMENT OF ALL AMOUNTS DUE TO YOU FROM
         THE COMPANY AND CONSTITUTES ADDITIONAL CONSIDERATION TO WHICH YOU ARE
         NOT OTHERWISE ENTITLED.

                                             Very truly yours,

                                             /s/   Gary L. Neale
                                             Gary L. Neale

Accepted:

/s/   Stephen P. Adik
Stephen P. Adik

Date: ____________________

Witness: /s/   Peter V. Fazio, Jr.

Date:_________________

                                      -7-
<PAGE>

                                                                       EXHIBIT 1

GENERAL RELEASE

ATTN: THIS GENERAL RELEASE SHOULD NOT BE SIGNED PRIOR TO EMPLOYEE'S TERMINATION
DATE, JANUARY 1, 2004.

         In consideration of the payments and benefits set forth in the Letter
Agreement attached hereto, the sufficiency of which consideration is hereby
acknowledged, I, for myself and my heirs, executors and administrators, do
hereby fully, finally and unconditionally release and forever discharge NiSource
Inc. and all of its parent, sister and subsidiary corporations and all of its
affiliates, as well as all of its former and current directors, officers,
employees, stockholders, attorneys, agents, predecessor, successors and assigns,
in their personal and corporate capacities (hereinafter "Released Parties"),
from any and all liabilities, actions, causes of action, claims, rights,
obligations, charges, damages, costs, attorneys' fees, suits, re-employment
rights and demands of any and every kind, nature, and character, known and
unknown, liquidated or unliquidated, absolute or contingent, in law or in
equity, enforceable under and local, state, or federal statute or ordinance, or
under the common laws of the United States, FROM THE BEGINNING OF TIME TO THE
DATE OF THIS GENERAL RELEASE, including but not limited to, all claims relating
to THE AGE DISCRIMINATION IN EMPLOYMENT ACT OF 1967, AS AMENDED, 29 U.S-C.
SECTION 621 ET SEQ. and the specific statutes referred to in footnote 1(1), any
and all claims relative to any agreement relating to my employment with any of
the Released Parties, including but not limited to any claims under the
doctrines of defamation, libel, slander, invasion of privacy, intentional
infliction of emotional distress, interference with contractual relations,
retaliatory discharge, breach of contract, wrongful discharge, breach of implied
contract or implied covenant of good faith or fair dealing, and any other
statute, authority or law, providing a cause of action relating to my employment
with NiSource and all of its parent, sister and subsidiary corporations and all
of its affiliates, and/or its termination. I also agree not to sue NiSource or
any of the other Released Parties with respect to the claims covered by the
foregoing General Release.

         This General Release shall not apply to: (1) any third party claims
against me relating to or arising from my employment with the released Parties;
or any of its related parties; or (2) the Letter Agreement attached hereto.

         I acknowledge that prior to entering into the Letter Agreement to which
this General Release is attached and made a part of, I was advised in writing to
consult with an attorney before executing the Letter Agreement and that I was
given a period of at least twenty-one (21)

----------------------------
(1)        Title VII of the Civil Rights Act of 1964, as amended, 42 U.S.C.
Section 2000e et seq.; the Employee Retirement Income Security Act, as amended,
29 U.S.C. Section 1001 et seq.; the Rehabilitation Act of 1973, as amended, 29
U.S.C. Section 701 et seq.; the Americans with Disabilities Act of 1990, as
amended, 42 U.S.C. Section 12101 et seq.; the Family and Medical Leave Act of
1993, 29 U.S.C. Section 2601 et seq.; the Fair Labor Standards Act, as amended,
29 U.S.C. Section 201 et seq.; the Civil Rights Act of 1866, 42 U.S.C. Section
1981 et seq.; the Worker Adjustment Retraining Notification Act, 29 U.S.C. 2101
Section et seq., the Occupational Safety and Health Act, 29 U.S.C. Section 651
et seq. and the Indiana Civil Rights Act.

                                      -8-
<PAGE>

days within which to consider the Letter Agreement, including the terms of this
General Release. Moreover, I was advised in writing of my right, for seven days
following my execution of the Letter Agreement, to revoke the Letter Agreement
and thereby decline to execute this General Release. I expressly represent that
I did not revoke the Letter Agreement. Accordingly, I acknowledge and agree that
the Letter Agreement is effective and enforceable.

         I hereby represent that I have read and understand the terms of this
General Release and represent that my execution of this General Release
constitutes my knowing and voluntary act, made without coercion or intimidation.
I understand that this General Release in applicable to any claims arising prior
to the date of this General Release and is binding upon me, my heirs, executors
and assigns.

__________________________
Stephen P. Adik

Date: __________________________

__________________________
Witness' Signature

Date: __________________________

                                NISOURCE RELEASE

         Based on the knowledge NiSource Inc. and its affiliates have as of the
date of this Release, NiSource Inc. has no intention to sue you or your heirs,
executors or administrators.

                                               NISOURCE INC.

                                               By:_____________________________
                                               Its:_____________________________

                                      -9-
<PAGE>

                                                                       EXHIBIT 2

                                  NISOURCE INC.
                         1994 LONG-TERM INCENTIVE PLAN,
                             AS AMENDED AND RESTATED

                           RESTRICTED STOCK AGREEMENT

         This Agreement is made as of the 2nd day of January, 2004 ("Date of
Award"), between NiSource Inc. (the "Company") and Stephen P. Adik (the
"Grantee"). In consideration of the agreements set forth below, the Company an
the Grantee agree as follows:

         1.       Grant. A restricted stock award ("Award") of 20,736 shares
("Restricted Shares") of the Company's common stock, par value $.01 per share,
is hereby granted by the Company to the Grantee, subject to the following terms
and conditions, and, to the extent relevant and not covered by this Agreement,
to the provisions of the NiSource Inc. 1994 Long-Term Incentive Plan, as Amended
and Restated Effective January 1, 2004 (the "Plan"), the terms of which are
incorporated by reference herein.

         2.       Transfer Restrictions. None of the Restricted Shares shall be
sold, assigned, pledged or otherwise transferred, voluntarily or involuntarily,
by the Grantee prior to the lapse of restrictions pursuant to Sections 3, 4 and
5 below.

         3.       Lapse of Restrictions. The restrictions set forth in Section 2
above shall lapse with respect to the Restricted Shares as follows:

         The restrictions shall lapse on the first to occur of (i) April 17,
         2005 and (ii) the date of the Grantee's death.

         4.       Change in Control. Notwithstanding the provisions of Section 3
above, in the event of a Change in Control of the Company, as defined in the
Flan, all restrictions applicable to the Restricted Shares shall lapse.

         5.       Forfeiture. All of the Restricted Shares shall be forfeited to
the Company if, on or before April 1.7, 2015, the Grantee enters into an
employment, commercial or consulting relationship with (i) another public
utility, public utility holding company or a subsidiary of a public utility
holding company, (ii) a regulated or nonregulated energy company or subsidiary
of a regulated or nonregulated energy company, or (iii) an independent power
producer; or solicits any employee of the Company or its subsidiaries to work
for a business entity described in this Section 5; provided, however, the
Grantee shall be allowed to undertake an employment, commercial or consulting
arrangement with a business entity whose business operations are described above
if the Chief Executive Officer of the Company agrees in writing that such
activities would not conflict with the best interests of the Company, which
agreement shall not he unreasonably withheld.

         6.       Rights as Stockholder. During the restriction period, the
Grantee shall be entitled to all of the rights of a stockholder with respect to
the Restricted Shares, including without

<PAGE>

limitation the right to vote and tender such Restricted Shares, and to receive
dividends and other distributions payable with respect to such Restricted Shares
since the Date of Award.

         7.       Escrow of Share Certificates. Certificates for the Restricted
Shares shall be issued in the Grantee's name and shall be held in escrow by the
Company until all restrictions lapse or such Shares are forfeited as provided
herein. A certificate or certificates representing the Restricted Shares as to
which restrictions have lapsed shall be delivered from escrow by the Company to
the grantee upon such lapse.

         8.       Government Regulations. Notwithstanding anything contained
herein to the contrary, the Company's obligation to issue or deliver
certificates evidencing the Restricted Shares shall be subject to all applicable
laws, rules and regulations, and to such approvals by any governmental agencies
or rational securities exchanges as may be required.

         9.       Withholding Taxes. The Company shall have the right to require
the Grantee to remit to the Company, or to withhold from other amounts payable
to the Grantee, as compensation or otherwise, an amount sufficient to satisfy
all federal, state and local withholding tax requirements as provided in the
Plan.

         10.      Governing Law. This Agreement shall be construed under the
laws of the State of Indiana.

         In Witness Whereof, the Company has caused this Award to be granted,
and the Grantee has accepted this Award, as of the date first above written.

                                      NISOURCE INC.

                                      By: ____________________________
                                          Chairman of the Nominating and
                                          Compensation Committee Board of
                                          Directors

                                      _________________________________
                                      Stephen P. Adik, Grantee

                                      -2-

<PAGE>

                                                                       EXHIBIT 3

A.       Vested NiSource Stock Options

<TABLE>
<CAPTION>
  GRANT        EXPIRATION    PLAN         GRANT       OPTIONS       OPTION         OPTIONS         OPTIONS      OPTIONS
  DATE            DATE        ID          TYPE        GRANTED        PRICE       OUTSTANDING        VESTED     EXERCISABLE
---------      ----------    ----     -------------   -------     ----------     -----------       -------     -----------
<S>            <C>           <C>      <C>             <C>         <C>            <C>               <C>         <C>
8/23/1994      8/23/2004     1988     Non-Qualified   16,000      $14.375000        16,000          16,000        16,000

8/22/1995      8/22/2005     1988     Non-Qualified   20,000      $16.218800        20,000          20,000        20,000

8/27/1996      8/27/2006     1988     Non-Qualified   20,000      $18.906300        20,000          20,000        20,000

8/26/1997      8/26/2007     1994     Non-Qualified   20,000      $20.640700        20,000          20,000        20,000

8/25/1998      8/25/2008     1994     Non-Qualified   20,000      $29.218800        20,000          20,000        20,000

8/24/1999      8/24/2009     1994     Non-Qualified   30,000      $24.593800        30,000          30,000        30,000

1/31/2000      1/31/2010     1994     Non-Qualified   45,000      $18.437500        45,000          45,000        45,000

8/22/2000      8/22/2010     1994     Non-Qualified   45,000      $22.22000         45,000          45,000        45,000

1/1/2001       1/1/2011      1994     Non-Qualified   56,604      $25.940000        56,604          56,604        56,604

1/25/2002      1/25/2012     1994     Non-Qualified   68,493      $21.005000        68,493          68,493        68,493

1/1/2003       1/1/2013      1994     Non-Qualified   135,546     $19.840000        135,546         135,546       135,546
</TABLE>

B.       Vested Restricted Shares

         1.       151,992 restricted NiSource shares which vest on January 1,
                  2004.

C.       Vested NiSource Contingent Shares

         1.       25,000 contingent NiSource shares granted in 2000 and vesting
                  on January 29, 2004.

         2.       25,000 contingent NiSource shares granted in 2000 and vesting
                  on January 29, 2005.

         3.       16,361 contingent NiSource shares granted in 2001 and vesting
                  on January 1, 2004.

         4.       16,360 contingent NiSource shares granted in 2001 and vesting
                  on January 1, 2005.

         5.       27,765 contingent TARSAP NiSource shares granted in 2003 and
                  vesting on January 1, 2004.

                                      -3-

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