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                                                                    EXHIBIT 10.7

 
     WHEREAS, the Company maintains the NIPSCO Industries, Inc. Long-Term
Incentive Plan ("Plan");

     WHEREAS, the Board of Directors of the Company deems it advisable to amend
the Plan to make certain changes to the Plan required by the Internal Revenue
Code of 1986 and Rule 16b-3 under the Securities Exchange Act of 1934, as
amended (the "1934 Act"), and to permit participants to direct the withholding
of common shares to pay taxes when due;

     WHEREAS, Section 20 of the Plan permits the Board to amend the Plan in
certain circumstances without shareholder approval and shareholder approval is
not required under the Exchange Act or otherwise.

     NOW, THEREFORE, BE IT RESOLVED, that Section 2 of the Plan be amended in
its entirety to read as follows:

     2.  Administration.  The Plan shall be administered by the Nominating and
Compensation Committee ("Committee") of the board of directors of the Company
("Board"). The Committee shall be composed of not fewer than two members of the
Board who are not employed by the Corporation. No member of the Committee may
exercise discretion with respect to, or participate in, the administration of
the Plan if, at any time, during the twelve-month period prior to such exercise
or participation, he or she has been granted or awarded stock, restricted stock,
stock options, stock appreciation rights or any other derivative security of the
Company or an affiliate thereof under this Plan or any similar plan of the
Company, except as permitted in Rule 16b-3(c)(2)(i)(A) through (D) under the
Securities Exchange Act of 1934, as amended (the "1934 Act"). Members of the
Committee shall be subject to any additional restrictions necessary to satisfy
the requirements for disinterested administration of the Plan as set forth in
Rule l6b-3, as it may be amended from time to time. If at any time any member of
the Committee does not satisfy such disinterested administration requirements,
no awards shall be made under this Plan to any person until such time as all
members of the Committee satisfy such requirements. 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 the Committee shall be liable for any action taken, or
determination made, hereunder in good faith. Service on the Committee shall
constitute service as 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.

     FURTHER RESOLVED, that the title of Section 7 be amended in its entirety to
read "NonQualified Stock Options."

     FURTHER RESOLVED, that Sections 7(c) and 8(c) of the Plan be amended in
their entirety to read as follows:


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          (c)  Payment for Shares.  Except as otherwise provided in the Plan or
     in any option agreement, the optionee shall pay the purchase price of the
     common shares upon 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 insider complies with Regulation
     T issued by the Federal Reserve Board), (iii) by delivering common shares
     having an aggregate fair market value on the date of exercise equal to the
     option exercise price, (iv) by directing the Company to withhold such
     number of common shares otherwise issuable upon exercise of such option
     having an aggregate fair market value on the date of exercise equal to the
     option exercise price, (v) by such other medium of payment as the
     Committee, in its discretion, shall authorize at the time of grant, or (vi)
     by any combination of (i), (ii), (iii), (iv) and (v). In the case of an
     election pursuant to (i) or (ii) above, cash shall mean cash or a check
     issued by a federally insured bank or savings and loan, and made payable to
     NIPSCO Industries, Inc. In the case of payment pursuant to (ii), (iii) or
     (iv) above, the optionee's election must be made on or prior to the date of
     exercise and shall be irrevocable. In the case of an optionee who is
     subject to Section 16 of the 1934 Act and who elects payment pursuant to
     (iv) above, the election must be made in writing either (A) within ten (10)
     business days beginning on the third business day following release of the
     Company's quarterly or annual summary consolidated statements of earnings
     and ending on the twelfth business day following such date, or (B) at least
     six (6) months prior to the date of exercise of such option. 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. 220.3(e)(4) or other applicable provision of law.

     FURTHER RESOLVED, that a new Section 7(d) be hereby added to the Plan to
read in its entirety as follows:

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

     FURTHER RESOLVED, that present Section 7(d) of the Plan be renumbered as
Section 7(e) and that renumbered Section 7(e) shall be amended to add the
following to the end thereof:

     For purposes of this Plan, the term "disability" shall mean the inability
     of an individual to engage in any substantial gainful activity by reason of
     any medically determinable physical or mental impairment which is expected
     to result in death or which has lasted or can be expected to last for a
     continuous period of not less than twelve (12) months. The Committee,


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     in its sole discretion, shall determine the date of any disability. The
     term "retirement" shall mean retirement as defined in the Company's pension
     plan.

     FURTHER RESOLVED, that the following shall be added to the beginning of the
first sentence of Section 8(a) of the Plan:

     Except as provided in Section 8(b),

     FURTHER RESOLVED, that Section 8(b) of the Plan be amended in its entirety
to read as follows:

          (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), 50 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 425(e) and 425(f) of the Internal Revenue 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 Internal Revenue 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 shares
     thereunder shall cease no later than the fifth anniversary of the date the
     incentive stock option was granted.

     FURTHER RESOLVED, that Section 8(e) is hereby amended by deleting the
reference therein to Section 422A and substituting in lieu thereof Section 422.

     FURTHER RESOLVED, that Section 9(c) of the Plan is hereby amended by adding
the following to the end thereof:

          (c)  Payment for Stock Appreciation Rights.  Except as otherwise
     provided in the


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     Plan or in any stock appreciation right agreement, the grantee shall pay
     the purchase price of the common shares upon exercise of a stock
     appreciation right (i) in cash, (ii) by delivering common shares having an
     aggregate fair market value on the date of exercise equal to the stock
     appreciation exercise right price, (iii) by directing the Company to
     withhold such number of common shares otherwise issuable upon exercise of
     such stock appreciation right having an aggregate fair market value on the
     date of exercise equal to the stock appreciation right exercise price, (iv)
     by such other medium of payment as a 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) above, cash will
     mean cash or a check issued by a federally insured bank or savings and
     loan, and made payable to NIPSCO Industries, Inc. In the case of payment
     pursuant to (ii) and (iii) above, the grantee's election must be made on or
     prior to the date of exercise and shall be irrevocable. In the case of a
     grantee who is subject to Section 16 of the 1934 A c t and who elects
     payment pursuant to (iii) above, the election must be made in writing
     either (A) within the ten (10) business days beginning on the third bus
     ness day following release of the Company's quarterly or annual summary
     consolidated statements of earnings and ending on the twelfth business day
     following such day, or (B) at least six (6) months prior to the date of
     exercise of such stock appreciation right. In lieu of a separate election
     governing each exercise of a stock appreciation right, a grantee may file a
     blanket election with the Committee which shall govern all future exercises
     of stock appreciation rights until revoked by the grantee. Notwithstanding
     the foregoing, in the case of a grantee of a stock appreciation right who
     is subject to Section 16 of the 1934 Act, the Company's right to elect to
     settle any part or all of its obligation arising out of the exercise of 6
     stock appreciation right by the payment of cash or by check shall not apply
     unless such exercise occurs no/less than six months after the date of grant
     of the stock appreciation right and during the period beginning on the
     third business day following the date of release for publication of the
     Company's quarterly or annual summary consolidated statements of earnings
     and ending on the twelfth business day following such day.

     FURTHER RESOLVED, that Section 10(e) of the Plan be amended in its entirety
to read as follows:

          (e)  Payment 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. Except as otherwise provided in
     the Plan or in any performance unit agreement, payment, if any, shall be
     made (i) in cash, (ii) by delivering common shares having an aggregate air
     market value on the date of payment equal to the payment, (iii) by
     directing the Company to withhold such number of common shares otherwise
     issuable u on conclusion of each performance period, having an aggregate
     fair market value on the date of payment equal to the payment, (iv) by such
     other medium of payment a the Committee, in its discretion, shall authorize
     at the time of award, or (v) by any combination of the foregoing. Cash will
     mean cash or a check issued


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     by a federally insured bank or savings and loan, and made pa able to NIPSCO
     Industries, Inc. In the case of payment pursuant to (ii) and (iii) above,
     the election mus be made on or prior to the date of payment and shall be
     irrevocable. In the case of a person who is subject to Section 16 of the
     1934 Act and who elects payment pursuant to (iii) above, the election must
     b made in writing either (A) within the ten (10) business days beginning on
     the third business day following release of the Company's quarterly or
     annual summary consolidated statements of earnings and ending on the
     twelfth business day following such day, or (B) at lea six months prior to
     the date of payment. In lieu of a separate election governing each payment
     for a performance unit, a blanket election may be filed with the Committee
     which shall govern all future payments of performance units until revoked.

     FURTHER RESOLVED, that Section 11(e) of the Plan be amended in its entirety
to read as follows:

          (e)  Termination Prior to Lapse of Restrictions.  In the event of a
     participant's termination of employment, other than due to death or
     retirement, prior to the lapse of restrictions applicable to any 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.

     FURTHER RESOLVED, that Section 16 of the Plan be amended in its entirety to
read as follows:

          16.  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 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 payments shall be net of any amounts 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
     shares otherwise distributable to the participant, such 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 shares previously delivered by
     the Company, such shares being valued at their fair market value as of the
     date of delivery of such shares


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     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 and state 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
     exercise transaction, (b) must be irrevocable, and (c) if the election is
     made by a participant who is subject to Section 16 of the 1934 Act, must be
     made in writing either (A) within ten (10) business days beginning on the
     third business day following the release of the Company's quarterly or
     annual summary consolidated statements of earnings and ending on the
     twelfth business day following such day, or (B) at least six (6) months
     prior to the effective date of the particular exercise transaction. In lieu
     of a separate election on each effective date of each exercise transaction,
     a participant may file a blanket election with the Committee which shall
     govern all future exercise transactions until revoked by the participant.

     FURTHER RESOLVED, that Section 20 of the Plan be amended in its entirety to
read as follows:

          20.  Amendment or Termination.  The Board or the Committee may at any
     time terminate, suspend or modify the Plan without the authorization of
     stockholders 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. No termination, suspension or modification of the Plan shall
     adversely affect any right acquired by any participant under an award
     granted before the date of such termination, suspension or modification,
     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. Any member of the Board
     who is an officer or employee of the Company shall be without a vote on any
     proposed amendment to the Plan, or on any other matter which might affect
     that member's individual interest under the Plan.


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