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                                                                    EXHIBIT 10.5
 
                                FIRST AMENDMENT
                                       TO
                            NIPSCO INDUSTRIES, INC.
                   NONEMPLOYEE DIRECTOR STOCK INCENTIVE PLAN
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     WHEREAS, NIPSCO Industries, Inc. (the "Company") adopted the NIPSCO
Industries, Inc. Nonemployee Director Stock Incentive Plan ("Plan"), effective
February 1, 1992;

     WHEREAS, pursuant to Section 9.1, the Board of Directors of the Company may
amend the Plan; and

     WHEREAS, on December 16, 1997, the Board of Directors of the Company
authorized the proper officers of the Company to amend the Plan as described
below;

     NOW THEREFORE, the Plan is hereby amended as follows, effective as of
December 16, 1997:

     1.  Section 4.3 is amended to read as follows:

          4.3  Adjustments in Authorized Shares.  (i) Appropriate adjustments in
     the aggregate number of Shares issuable pursuant to the Plan, the number of
     Shares subject to each outstanding award granted under the Plan and the
     option price with respect to Options, shall be made to give effect to any
     increase or decrease in the number of issued 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 Shares outstanding effected without receipt of consideration by the
     Company, or any other occurrence for which the Board determines an
     adjustment is appropriate.
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          (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 Board in its sole discretion, for each Share then subject
     to the Plan, and for each 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 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 Board, whose decision
     as to the amount and timing of any such adjustment shall be conclusive and
     binding on all persons.

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     This First Amendment has been executed by the Company, by its duly
authorized officer, on this _______ day of ____________, 1998.

                                            NIPSCO Industries, Inc.


                                            By: 
                                               ______________________________

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