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                                                                    Exhibit 10.5

                               THE MIDLAND COMPANY
                  STOCK OPTION PLAN FOR NON-EMPLOYEE DIRECTORS
                           AS AMENDED (January 2000)

1. Pulpos. The purpose of The Midland Company Stock Option Plan for
Non-Employee Directors (the "Plan") is to advance the interests of The Midland
Company (the "Company") by providing directors who are not full time employees
of the Company or its Subsidiaries with an opportunity to obtain a proprietary
interest in the Company as an additional incentive to promote its success.

2. Participants. Each director of the Company who is not a full time employee of
the Company or its Subsidiaries will be a Participant in the Plan.

3. Grant of Options. On the last business day of January 2000, 2001 and 2002,
each Participant shall receive an Option to purchase 2,000 shares of common
stock of the Company; provided, however, that the Board of Directors may
increase or decrease the number of Options to be granted pursuant to this
Section.

4. Stock Subject To Award. Subject to the provisions of paragraph , the total
number of shares which may be awarded under the Plan is 250,000 Common Shares of
the Company without par value which shall be authorized and unissued shares, or
reacquired common shares held as treasury stock. Any shares related to awards
which terminate without the issuance of such shares shall be available again for
award under the Plan. The shares covered by this Plan are in addition to shares
subject to outstanding options previously granted to Participants.

5. Changes In Capital Structure. In the event that the outstanding Common Shares
of the Company are hereafter increased or decreased or changed into or exchanged
for a different number of kind of shares or other securities of the Company or
of another corporation, by reason of reorganization, merger, consolidation,
recapitalization, reclassification, stock split-up, combination of shares, or
dividend payable in corporate shares, appropriate adjustment shall be made
automatically in the number and kind of shares for the purchase of which options
may be granted under the Plan. In addition, appropriate adjustments shall be
made automatically in the number and kind of shares as to which outstanding
options, or portions thereof then unexercised, shall be exercisable, to the end
that the Optionee's proportionate interest shall be maintained as before the
occurrence of such event; such adjustment in outstanding options shall be made
without change in the total price applicable to the unexercised portion of the
option and with a corresponding adjustment in the option price per share.

6. Terms and Conditions Of Stock Options. Stock Options shall be evidenced by
Stock Option Agreements in such form not inconsistent with this Plan as the
Board of Directors shall from time to time determine, provided that the
substance of the following be included therein.

         (a) Option Price. The Stock Option exercise price shall be 100% of the
         Fair Market Value of the Company's common shares on the date the Stock
         Option is granted.


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         (b) Payment Terms. Shares purchased by exercise of a Stock Option shall
         be paid for in full at the time of purchase, unless the Committee
         authorizes payment by delivery of other common shares of the Company
         which have a Fair Market Value at delivery equal to the purchase price
         of the shares or by appropriate combination of other common shares and
         cash.

         (c) Option Tenn. A Stock Option shall expire ten (10) years from the
         date the Stock Option is granted.

         (d) Exercise. During the time a Stock Option is outstanding, it may be
         exercised with respect to any or all of the shares covered thereby.

         (e) Nonassignability Of Stock Option Rights. A Stock Option shall not
         be assignable or transferable by the Optionee except by will or by the
         laws of descent and distribution. The designation of a beneficiary by a
         Participant does not constitute a transfer. During the life of an
         Optionee, the Stock Option shall be exercisable only by him.

         (f) Effect Of Death, Disability or Retirement. If an Optionee ceases to
         be a director of the Company for any reason whatsoever, any Stock
         Option or unexercised portion thereof granted to the Optionee, which is
         otherwise exercisable pursuant to the terms of the Plan, shall
         terminate three years from the Optionee's last day as a director, or
         the date of expiration of the option period, whichever occurs earlier.

         (g) Restriction. A Participant may not sell shares acquired through
         options awarded under this Plan until at least six (6) months after
         award of such option.

7. Administration Of The Plan. The Board of Directors of the Company shall be
responsible for the administration of the Plan.

8. Effective Date And Termination Of Plan. This plan, which has been adopted by
the Board of Directors on March 5, 1992, shall be subject to approval by the
shareholders of the Company at the next annual meeting of such shareholders or
at any other meeting of such shareholders held before April 9, 1992.

         The Board of Directors may terminate this Plan at any time. Termination
of the Plan will not affect rights and obligations theretofore granted and then
in effect.

         If not terminated earlier, this Plan shall terminate on the tenth
anniversary of the later of adoption by the Board of Directors and approved by
the shareholders and no Stock Options under this Plan shall be awarded
thereafter.

9. Amendment Of Plan. The Board of Directors may at any time amend the Plan,
provided that without approval of shareholders there shall be, except by
operation of the provisions of paragraph above, no increase in the total number
of shares COVERED BY THE PLAN; no change in the class of directors eligible to
receive options granted under the Plan; no reduction in the option

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price; no increase in the frequency or number of options awarded to
Participants; no extension of the latest date upon which options may be
exercised; and no material increase in the benefits accruing to Participants;
and provided further that no amendment may affect any then outstanding options
or any unexercised portions thereof Nevertheless, no Plan provisions pertaining
to the amount, price or timing of awards or the category of persons eligible to
receive awards, may be amended more than once every six (6) months, other than
to comport with changes in the Internal Revenue Code, the Employment Retirement
Income Security Act or the rules thereunder.

10. Use Of Proceeds. The proceeds from the sale of shares pursuant to options
granted under the Plan shall constitute general funds of the Company.

11. Definitions.

         (a) Fair Market Value. The Fair Market Value of a common share shall be
         the average of the high and low price for which the Company's common
         shares have been sold on the American Stock Exchange on the date Fair
         Market Value is to be determined. If there were no trades on such day,
         the Fair Market Value shall be the average of the high and low price on
         the next preceding day on which such trades were made.

         (b) Subsidiga. A Subsidiary of the Company is a subsidiary corporation
         as defined in Section 425 of the Internal Revenue Code of 1954.