Stock Accumulation Plan For Outside Directors

STOCK ACCUMULATION PLAN FOR OUTSIDE DIRECTORS


ADOPTED EFFECTIVE JANUARY 1, 1997


Bay State Gas Company (the "Company") has adopted the Bay State Gas Company Stock Accumulation Plan for Outside Directors.


1. PURPOSE AND BACKGROUND


The Stock Accumulation Plan for Outside Directors (the "Plan") is designed to align the interests of the directors of the Company who are not employees of the Company or its subsidiaries more closely with the interests of the Company's shareholders by paying a portion of their compensation in Common Stock of the Company. The Plan is intended to advance the interests of the Company by providing these directors with an incentive to remain in the service of the Company and to increase their efforts for the success of the Company.


2. DEFINITIONS


Whenever used in the Plan, the following terms shall have the meanings set forth below unless the context clearly requires a different meaning:


(a) ACCOUNT. A Participant's Stock Account.


(b) AFFILIATE. Any corporation or business organization that is under
common control with the Company (as determined under Code section
414(b) or (c)), or that is a member of an affiliated service group
with the Company (as determined under Code section 414(m)).


(c) ANNIVERSARY DATE. The twelve-month anniversary of the date on which an
Outside Director is first elected or appointed to the Board as an
Outside Director.


(d) BOARD. The Bay State Gas Company Board of Directors.


(e) CESSATION OF SERVICE. The date on which an Outside Director ceases to
be an Outside Director on the Board.


(f) CHANGE OF CONTROL. For the purposes of this Plan, a Change of Control
means:


(i) The acquisition by any unrelated person of beneficial ownership
(as that term is used for purposes of the Exchange Act) of 20% or
more of the then outstanding shares of Company Common Stock or
the combined voting power of the then outstanding voting
securities of the Company


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entitled to vote generally in the election of directors. The term
"unrelated person" means any person other than (x) the Company
and its Subsidiaries, (y) an employee benefit plan or trust of
the Company or its Subsidiaries, and (z) a person who acquires
stock of the Company pursuant to an agreement with the Company
that is approved by the Board in advance of the acquisition,
unless the acquisition results in the persons who were directors
of the Company before the acquisition ceasing to constitute a
majority of the Board. For purposes of this subsection, a
"person" means an individual, entity or group, as that term is
used for purposes of the Exchange Act.


(ii) Approval by the shareholders of the Company of a reorganization,
merger, consolidation or other transaction (collectively a
"transaction") with respect to which the persons who were the
beneficial owners of the Company Common Stock and other voting
securities of the Company immediately prior to the transaction do
not, following the transaction, beneficially own, directly or
indirectly, more than 50% of the then outstanding shares of the
Company Common Stock (or common stock of the successor
corporation) or the combined voting power of the then outstanding
voting securities of the Company (or the successor corporation)
entitled to vote generally in the election of directors.


(iii) A liquidation or dissolution of the Company, or a sale or other
disposition of all or substantially all of the assets of the
Company.


(iv) As a result of any single or combination of the events described
in Section 2(f)(i), (ii) or (iii), individuals who, before the
first of such events, constituted the Board cease for any reason
to constitute at least a majority of the Board within two (2)
years of the last such event.


(h) COMPANY. Bay State Gas Company, and any successor by merger or
otherwise.


(i) COMPANY STOCK. The common stock, par value $3.33 , of the Company.


(j) DISABILITY. A condition, resulting from bodily injury or disease or
mental impairment, that renders, and for a six consecutive month
period has rendered, an Outside Director unable to perform the duties
of a director.


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Disability shall be determined by a licensed medical physician
selected by the Board.


(k) EFFECTIVE DATE. January 1, 1997.


(l) EXCHANGE ACT. The Securities Exchange Act of 1934, as amended.


(m) OUTSIDE DIRECTOR. A director on the Board who is not an employee of
the Company or any of its Subsidiaries or Affiliates.


(n) PLAN. The Bay State Gas Company Stock Accumulation Plan for Outside
Directors.


(o) RETAINER. The annual ...