<PAGE>
 
                                                                    EXHIBIT 10.4




                             NONEMPLOYEE DIRECTOR
                             STOCK INCENTIVE PLAN

                            NIPSCO INDUSTRIES, INC.

             (AS AMENDED AND RESTATED EFFECTIVE FEBRUARY 1, 1998)
<PAGE>
 
                               TABLE OF CONTENTS
                               -----------------


ARTICLE 1.  ESTABLISHMENT, PURPOSE, AND DURATION..........................  -1-
            1.1    Establishment of the Plan..............................  -1-
            1.2    Purpose of the Plan....................................  -1-
            1.3    Duration of the Plan...................................  -2-

ARTICLE 2.  DEFINITIONS...................................................  -2-

ARTICLE 3.  ADMINISTRATION................................................  -4-
            3.1    The Board of Directors.................................  -4-
            3.2    Administration by the Board............................  -5-
            3.3    Decisions Binding......................................  -5-

ARTICLE 4.  SHARES SUBJECT TO THE PLAN....................................  -5-
            4.1    Number of Shares.......................................  -5-
            4.2    Lapsed Awards..........................................  -5-
            4.3    Adjustments in Authorized Shares.......................  -6-

ARTICLE 5.  ELIGIBILITY AND PARTICIPATION.................................  -7-
            5.1    Eligibility............................................  -7-
            5.2    Actual Participation...................................  -7-

ARTICLE 6.  RESTRICTED STOCK..............................................  -7-
            6.1    Initial Grant of Restricted Stock......................  -7-
            6.2    Future Grants of Restricted Stock......................  -7-
            6.3    Restricted Stock Award Agreement.......................  -8-
            6.4    Transferability........................................  -8-
            6.5    Other Restrictions.....................................  -8-
            6.6    Certificate Legend.....................................  -9-
            6.7    Vesting................................................  -9-
            6.8    Termination of Directorship............................ -10-
            6.9    Voting Rights.......................................... -10-
            6.10   Dividends and Other Distributions...................... -10-

ARTICLE 7.  NONQUALIFIED STOCK OPTIONS.................................... -10-
            7.1    Potential Grants of Options............................ -10-
            7.2    Option Award Agreement................................. -11-
            7.3    Option Price........................................... -11-
            7.4    Duration of Options.................................... -11-
            7.5    Vesting of Shares Subject to Option.................... -11-
            7.6    Termination of Directorship............................ -12-


                                      -i-
<PAGE>
 
            7.7    Payment................................................ -13-
            7.8    Restrictions on Share Transferability.................. -13-
            7.9    Nontransferability of Options.......................... -13-

ARTICLE 8.  CHANGE IN CONTROL............................................. -14-

ARTICLE 9.  AMENDMENT, MODIFICATION, AND TERMINATION...................... -15-
            9.1    Amendment, Modification, and Termination............... -15-
            9.2    Awards Previously Granted.............................. -15-

ARTICLE 10. MISCELLANEOUS................................................. -16-
            10.1   Gender and Number...................................... -16-
            10.2   Severability........................................... -16-
            10.3   Indemnification........................................ -16-
            10.4   Beneficiary Designation................................ -16-
            10.5   No Right of Nomination................................. -17-
            10.6   Shares Available....................................... -17-
            10.7   Additional Compensation................................ -17-
            10.8   Successors............................................. -17-
            10.9   Requirements of Law.................................... -18-
            10.10  Governing Law.......................................... -18-



                                     -ii-
<PAGE>
 
                             NONEMPLOYEE DIRECTOR
                             STOCK INCENTIVE PLAN
                            NIPSCO INDUSTRIES, INC.

             (AS AMENDED AND RESTATED EFFECTIVE FEBRUARY 1, 1998)

     WHEREAS, NIPSCO Industries, Inc. (the "Company") adopted the NIPSCO
Industries, Inc. Nonemployee Director Stock Incentive Plan, effective
February 1, 1992, as last amended effective December 16, 1997; and

     WHEREAS, pursuant to Section 9.1 of the Plan, the Company wishes to amend
the Plan in certain respects and restate it in a single document;

     NOW THEREFORE, the Plan is hereby amended and restated, effective
February 1, 1998, as follows:


               ARTICLE 1.  ESTABLISHMENT, PURPOSE, AND DURATION

     1.1    Establishment of the Plan. NIPSCO Industries, Inc. hereby
establishes an incentive compensation plan to be known as the "NIPSCO
Industries, Inc. Nonemployee Director Stock Incentive Plan" (the "Plan"), as set
forth in this document. The Plan permits the grant of Restricted Stock and
Nonqualified Stock Options to Nonemployee Directors, subject to the terms and
provisions set forth herein.

     Upon approval by the Board of Directors of the Company, subject to
ratification within twelve (12) months by an affirmative vote of a majority of
Shares present and entitled to vote at the April 8, 1992 annual shareholders
meeting at which a quorum was present, the Plan became effective as of
February 1, 1992 (the "Effective Date"), and shall remain in effect as provided
in Section 1.3 herein.

     1.2    Purpose of the Plan.  The purpose of the Plan is to promote the
achievement of long-term objectives of the Company by linking the personal
interests of Nonemployee Directors to those
<PAGE>
 
of Company shareholders, and to attract and retain Nonemployee Directors of
outstanding competence.

     1.3    Duration of the Plan.  The Plan commenced on February 1, 1992 and
shall remain in effect, subject to the right of the Board of Directors to
terminate the Plan at any time pursuant to Article 9 herein, until all Shares
subject to it shall have been purchased or acquired according to the Plan's
provisions.  However, in no event may an Award be granted under the Plan on or
after April 30, 2002.

                            ARTICLE 2.  DEFINITIONS
                            -----------------------

     Whenever used in the Plan, the following terms shall have the meanings set
forth below and, when the meaning is intended, the initial letter of the word is
capitalized:

     (a)    "Award" means, individually or collectively, a grant of Restricted
            Stock or Nonqualified Stock Options under the Plan.

     (b)    "Award Agreement" means an agreement entered into by and between the
            Company and a Nonemployee Director, setting forth the terms and
            provisions applicable to an Award granted under the Plan.

     (c)    "Beneficial Owner" shall have the meaning ascribed to such term in
            Rule 13d-3 of the General Rules and Regulations under the Exchange
            Act.

     (d)    "Board" or "Board of Directors" means the Board of Directors of the
            Company, and includes any committee of the Board of Directors
            designated by the Board to administer part or all of the Plan.

     (e)    "Change in Control" of the Company shall be deemed to have occurred
            if any one of the occurrences of "Change in Control" set forth in
            the Change in Control and

                                      -2-
<PAGE>
 
            Termination Agreements between the Company and certain executive
            officers thereof shall have been satisfied.

     (f)    "Code" means the Internal Revenue Code of 1986, as amended from time
            to time.

     (g)    "Company" means NIPSCO Industries, Inc., an Indiana corporation, or
            any successor thereto as provided in Section 10.8 herein.

     (h)    "Director" means any individual who is a member of the Board of
            Directors of the Company.

     (i)    "Disability" means a permanent and total disability, within the
            meaning of Code Section 22(e)(3), as determined by the Board in good
            faith, upon receipt of sufficient competent medical advice from one
            or more individuals, selected by the Board, who are qualified to
            give professional medical advice.

     (j)    "Employee" means any full-time, nonunion, salaried employee of the
            Company.  For purposes of the Plan, an individual whose only
            employment relationship with the Company is as a Director, shall not
            be deemed to be an Employee.

     (k)    "Exchange Act" means the Securities Exchange Act of 1934, as amended
            from time to time, or any successor act thereto.

     (1)    "Fair Market Value" means the average of the highest and lowest
            quoted selling prices for Shares on the relevant date, or (if there
            were no sales on such date) the weighted average of the mean between
            the highest and lowest quoted selling prices on the nearest day
            before the nearest day after the relevant date, as reported in The
            Wall Street Journal or a similar publication selected by the Board.

                                      -3-
<PAGE>
 
     (m)    "Nonemployee Director" means any individual who is a member of the
            Board of Directors of the Company, but who is not otherwise an
            Employee of the Company.

     (n)    "Nonqualified Stock Option" or "NQSO" means an option to purchase
            Shares, granted under Article 7 herein.

     (o)    "Option" means a Nonqualified Stock Option granted under the Plan.

     (p)    "Parent" shall have the meaning ascribed to such term in
            Rule 12b-2 of the General Rules and Regulations under the Exchange
            Act.

     (q)    "Participant" means a Nonemployee Director of the Company who has
            outstanding a viable Award granted under the Plan.

     (r)    "Period of Restriction" means the period during which the transfer
            of Shares of Restricted Stock is limited in some way, and the Shares
            are subject to a substantial risk of forfeiture, as provided in
            Article 6 herein.

     (s)    "Person" shall have the meaning ascribed to such term in
            Section 3(a) (9) of the Exchange Act and used in Sections 13(d)
            and 14(d) thereof, including a "group" as defined in Section 13(d).

     (t)    "Restricted Stock" means an Award granted to a Nonemployee Director
            pursuant to Article 6 herein.

     (u)    "Shares" means the common shares of NIPSCO Industries, Inc., without
            par value.

                          ARTICLE 3.  ADMINISTRATION
                          --------------------------

     3.1    The Board of Directors.  The Plan shall be administered by the Board
of Directors of the Company, subject to the restrictions set forth in the Plan.

                                      -4-
<PAGE>
 
     3.2    Administration by the Board. The Board shall have the full power,
discretion, and authority to interpret and administer the Plan in a manner which
is consistent with the Plan's provisions. However, in no event shall the Board
have the power to determine Plan eligibility, or to determine the number, the
value, the vesting period, or the timing, of Awards to be made under the Plan
(all such determinations are automatic pursuant to the provisions of the Plan).
Notwithstanding the preceding sentence, the Board shall have the authority to
designate whether an upcoming grant of Awards shall consist of Restricted Stock
or Nonqualified Stock Options.

     3.3    Decisions Binding. All determinations and decisions made by the
Board pursuant to the provisions of the Plan, and all related orders or
resolutions of the Board, shall be final, conclusive, and binding on all
persons, including the Company, its stockholders, employees, Participants, and
their estates and beneficiaries.


                    ARTICLE 4.  SHARES SUBJECT TO THE PLAN
                    --------------------------------------

     4.1    Number of Shares.  Subject to adjustment as provided in Section 4.3
herein, the total number of Shares available for grant under the Plan may not
exceed one hundred thousand (100,000) (two hundred thousand (200,000) after
January 30, 1998).

     4.2    Lapsed Awards. If any Share of Restricted Stock or Share under an
Option granted under the Plan terminates, expires, or lapses for any reason, any
such Shares of Restricted Stock and any Shares subject to purchase pursuant to
such Option, again shall be available for grant under the Plan. However, in the
event that prior to the Award's termination, expiration, or lapse, the holder of
the Award at any time received one or more "benefits of ownership" pursuant to
such Award (as defined by the Securities and Exchange Commission, pursuant to
any rule or interpretation

                                      -5-
<PAGE>
 
promulgated under Section 16 of the Exchange Act), the Share subject to such
Award shall not be made available for regrant under the Plan.

     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.

     (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

                                      -6-
<PAGE>
 
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.

                   ARTICLE 5.  ELIGIBILITY AND PARTICIPATION
                  ------------------------------------------

     5.1    Eligibility. Persons eligible to participate in the Plan are limited
to Nonemployee Directors who are serving on the Board on the date of each
scheduled grant under the Plan.

     5.2    Actual Participation. All eligible Nonemployee Directors shall
receive grants of Restricted Stock and Options pursuant to the terms and
provisions set forth in Articles 6 and 7 herein.

                         ARTICLE 6.  RESTRICTED STOCK
                         -----------------------------

     6.1    Initial Grant of Restricted Stock. Each person who was a Nonemployee
Director on the Effective Date was granted two hundred fifty (250) Shares of
Restricted Stock for each year of service as a Nonemployee Director of the
Company or its predecessor (The number of years of service was determined as of
the date of the first annual meeting of shareholders of the Company following
the Effective Date).

     6.2    Future Grants of Restricted Stock. Upon each election (or
reelection, as applicable) of a Nonemployee Director to serve on the Board, such
Nonemployee Director shall be granted one thousand (1,000) (two thousand (2000)
after January 30, 1998) Shares of Restricted Stock, subject to the terms of the
Plan. Each such grant shall be made as of the first day of the Board term of the

                                      -7-
<PAGE>
 
newly-elected (or reelected, as applicable) Nonemployee Director, which begins
immediately following such election (or reelection, as applicable).

     In the event that the Board properly designates (pursuant to Section 3.2
herein) that a scheduled Award grant will consist of Options rather than
Restricted Stock, then such grant shall be governed by the terms and provisions
of Article 7 herein, which shall in such event completely supersede and replace
the terms and provisions of this Section 6.2.

     6.3    Restricted Stock Award Agreement. Each Restricted Stock grant under
the Plan shall be evidenced by a Restricted Stock Award Agreement that shall
specify the Period(s) of Restriction, the number of Restricted Stock Shares
granted, and such other provisions as the Board shall determine consistent with
the Plan.

     6.4    Transferability. Except as provided in this Section 6.4, the Shares
of Restricted Stock granted herein may not be sold, transferred, pledged,
assigned, or otherwise alienated or hypothecated until the end of the applicable
Period of Restriction specified in the Restricted Stock Award Agreement.
However, in no event may any Shares of Restricted Stock granted under the Plan
become vested in a Participant prior to six (6) months following the date of its
grant. Prior to vesting, all rights with respect to Shares of Restricted Stock
granted to a Nonemployee Director under the Plan shall be available during his
or her lifetime only to such Director.

     6.5    Other Restrictions. The Board shall impose such other restrictions
on any Shares of Restricted Stock granted pursuant to the Plan as it may deem
advisable, including restrictions imposed under Section 7.8 hereof. Any
restriction imposed on Shares of Restricted Stock shall be included in a legend
appearing on the certificates representing Shares of Restricted Stock.

                                      -8-
<PAGE>
 
     6.6    Certificate Legend. In addition to any legends placed on
certificates pursuant to Section 6.5 herein, each certificate representing
Shares of Restricted Stock granted pursuant to the Plan shall bear the following
legend:

     "The sale or other transfer of the Shares of stock represented by this
     certificate, whether voluntary, involuntary, or by operation of law, is
     subject to certain restrictions on transfer as set forth in the NIPSCO
     Industries, Inc. Nonemployee Director Stock Incentive Plan, and in a
     Restricted Stock Award Agreement. A copy of the Plan and such Restricted
     Stock Award Agreement may be obtained from the Secretary of NIPSCO
     Industries, Inc."

     6.7    Vesting. Except as otherwise provided in the Plan, all Shares of
Restricted Stock granted under the Plan shall vest and become freely
transferable by the Director according to the following schedule:


                             Annual                Cumulative
      Anniversary         Percentage of           Percentage of
     of Grant Date      Shares Which Vest    Shares Which are Vested
     ----------------   ------------------   ------------------------
          1                    20%                     20%
          2                    20%                     40%
          3                    20%                     60%
          4                    20%                     80%
          5                    20%                    100%

     Regardless of the vesting schedule set forth above, all Shares of
Restricted Stock held by a Participant shall immediately become one hundred
percent (100%) vested upon the first to occur of the following:

     (a)    The completion of the vesting schedule set forth above; or

     (b)    The death of the Participant; or

                                      -9-
<PAGE>
 
     (c)    The Disability of the Participant; or

     (d)    The effective date of a Change in Control of the Company.

     Following vesting, each Director shall be entitled to have the legend
required by Section 6.5 and/or Section 6.6 removed from his or her Share
certificate.

     6.8    Termination of Directorship. In the event a Participant ceases to be
a Director for any reason other than death or Disability, all Shares of
Restricted Stock not vested as of the effective date of termination shall be
forfeited and shall revert back to the Company (with no further vesting to
occur). In the event a Participant ceases to be a Director by reason of death or
Disability, all Shares of Restricted Stock granted under the Plan shall
immediately vest one hundred percent (100%).

     6.9    Voting Rights.  During the Period of Restriction, Directors holding
Shares of Restricted Stock granted hereunder may exercise full voting rights
with respect to such Shares.

     6.10   Dividends and Other Distributions. During the Period of Restriction,
Directors holding Shares of Restricted Stock granted hereunder shall be entitled
to receive all dividends and other distributions paid with respect to such
Shares while they are so held. If any such dividends or distributions are paid
in Shares, the Shares shall be subject to the same restrictions on
transferability and forfeitability as the Shares of Restricted Stock with
respect to which they were paid.

                    ARTICLE 7.  NONQUALIFIED STOCK OPTIONS
                    ---------------------------------------

     7.1    Potential Grants of Options. In the event that the Board properly
designates (pursuant to Section 3.2 herein) that a scheduled Award will consist
of Options rather than Restricted Stock, then each eligible Nonemployee Director
shall be granted an Option to purchase three thousand (3,000) (six thousand
(6000) after January 30, 1998) Shares, subject to the terms and

                                      -10-
<PAGE>
 
provisions of the Plan. A Nonemployee Director shall be deemed to be eligible
for such an Option grant if the Director is elected (or reelected, as
applicable) to serve on the Board pursuant to the shareholder vote for which
such Award grant is applicable. Each such grant shall be made as of the first
day of the Board term of the newly-elected (or reelected, as applicable)
Nonemployee Director, which begins immediately following such election (or
reelection, as applicable).
 
     7.2    Option Award Agreement. Each Option grant shall be evidenced by an
Option Award Agreement that shall specify the Option Price, the duration of the
Option, the number of Shares available for purchase under the Option, and such
other provisions as the Board shall determine.
 
     7.3    Option Price. The purchase price per Share available for purchase
under an Option shall equal the Fair Market Value of a Share on the date the
Option is granted.

     7.4    Duration of Options. Each Option shall expire on the tenth (10th)
anniversary date of its grant.

     7.5    Vesting of Shares Subject to Option. Participants shall be entitled
to exercise Options at any time and from time to time, but no sooner than the
time period beginning six (6) months after the grant of the Option, and ending
ten (10) years after grant of the Option, and according to the following vesting
schedule:

                              Annual                 Cumulative
      Anniversary         Percentage of            Percentage of
     of Grant Date      Options Which Vest    Options Which are Vested
     ----------------   -------------------   -------------------------
           1                   20%                       20%
           2                   20%                       40%
           3                   20%                       60%
           4                   20%                       80%
           5                   20%                      100%

                                      -11-
<PAGE>
 
Regardless of the vesting schedule set forth in this Section 7.5, all Options
held by a Participant shall immediately become one hundred percent (100%) vested
upon the first to occur of the following:

     (a)    The completion of the vesting schedule set forth above; or

     (b)    The death of the Participant; or

     (c)    The Disability of the Participant; or

     (d)    The effective date of a Change in Control of the Company.

     7.6    Termination of Directorship. In the event a Participant ceases to be
a Director for any reason other than death or Disability, all Options not vested
as of the effective date of termination shall be forfeited and shall revert back
to the Company (with no further vesting to occur). All Options which are vested
as of such date shall remain exercisable for six (6) months following the date
the Director's service on the Board terminates, or until their expiration date,
whichever period is shorter.

     To the extent an Option is exercisable immediately following the date of
death (or immediately following the date that the Board determines that the
definition of Disability is satisfied, as applicable), it shall remain
exercisable at any time prior to its expiration date, or for one (1) year after
the date of death (or after the date that the Board determines that the
definition of Disability is satisfied, as applicable), whichever period is
shorter, by the Participant or such person or persons as shall have been named
as the Participant's legal representative or beneficiary, or by such persons
that have acquired the Participant's rights under the Option by will or by the
laws of descent and distribution.  Options which vest pursuant to a Change in
Control shall remain exercisable throughout their entire term.

                                      -12-
<PAGE>
 
     7.7    Payment.  Options shall be exercised by the delivery of a written
notice of exercise to the Secretary of the Company, setting forth the number of
Shares with respect to which the Option is to be exercised, accompanied by full
payment for the Shares.

     The Option Price upon exercise of any Option shall be payable to the
Company in full either: (a) in cash or its equivalent, or (b) by tendering
previously acquired Shares having a Fair Market Value at the time of exercise
equal to the total Option Price of the Shares for which the Option is being
exercised (provided that the Shares tendered upon Option exercise have been held
by the Participant for at least six (6) months prior to their tender to satisfy
the Option Price), or (c) by a combination of (a) and (b).  The proceeds from
such a payment shall be added to the general funds of the Company and shall be
used for general corporate purposes.

     As soon as practicable after receipt of a written notification of exercise
and full payment, the Company shall deliver to the Participant, in the
Participant's name, Share certificates in an appropriate amount based upon the
number of Shares purchased pursuant to the exercise of the Option.

     7.8    Restrictions on Share Transferability.  The Board shall impose such
restrictions on any Shares acquired pursuant to the exercise of an Option under
the Plan, as it may deem advisable, including, without limitation, restrictions
under applicable Federal securities laws, under the requirements of any stock
exchange or market upon which such Shares are then listed and/or traded, and
under any blue sky or state securities laws applicable to such Shares.

     7.9    Nontransferability of Options.  No Option granted under the Plan may
be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution.  Further, all
Options granted to a Participant under the Plan shall

                                      -13-
<PAGE>
 
be exercisable, during his lifetime, only by such Participant. Notwithstanding
the preceding provisions of this Section, a Participant, at any time prior to
his death, may assign all or any portion of an Option granted to him under the
Plan 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 Participant 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 Option Award Agreement, immediately prior to the
effective date of the assignment. Any such assignment will be permitted only if
(i) the Participant does not receive any consideration therefor, and (ii) the
assignment is expressly approved by the Board or its delegate. Any such
assignment shall be evidenced by an appropriate written document executed by the
Participant, and a copy thereof shall be delivered to the Board or its delegate
on or prior to the effective date of the assignment.


                         ARTICLE 8.  CHANGE IN CONTROL
                        ------------------------------

     In the event of a Change in Control of the Company, all Awards granted
under the Plan that are still outstanding and not yet vested, shall become
immediately one hundred percent (100%) vested in each Participant, as of the
effective date of the Change in Control, and shall remain as such for the
remaining life of the Award, as such life is provided herein, and within the
provisions of the related Award Agreements.  All Options that are outstanding as
of the effective date of the Change in Control shall remain exercisable for the
remaining lives of the Options.

                                      -14-
<PAGE>
 
             ARTICLE 9.  AMENDMENT, MODIFICATION, AND TERMINATION
             -----------------------------------------------------

     9.1    Amendment, Modification, and Termination.  Subject to the terms set
forth in this Section 9.1, the Board may terminate, amend, or modify the Plan at
any time and from time to time; provided, however, that the provisions set forth
in the Plan regarding the amount of securities to be awarded to Directors, the
price of securities to be awarded to Directors, and the timing of awards to
Directors, may not be amended more than once within any six (6) month period.

     Without the approval of the shareholders of the Company (as may be required
by the Code, by the insider trading rules of Section 16 of the Exchange Act, by
any national securities exchange or system on which the Shares are then listed
or reported, or by a regulatory body having jurisdiction with respect hereto) no
such termination, amendment, or modification may:

     (a)    Increase the total number or value of Shares which may be available
            for grants of Awards under the Plan, except as provided in
            Section 4.3 herein; or

     (b)    Change the class of Participants eligible to participate in the
            Plan; or

     (c)    Materially increase the cost of the Plan, or materially increase the
            benefits to Participants; or

     (d)    Extend the maximum period after the date of grant during which
            Options may be exercised; or

     (e)    Change the provisions of the Plan regarding Option Price.

     9.2    Awards Previously Granted.  Unless required by law, no termination,
amendment, or modification of the Plan shall in any manner adversely affect any
Award previously granted under the Plan, without the written consent of the
Participant holding the Award.

                                      -15-
<PAGE>
 
                           ARTICLE 10. MISCELLANEOUS
                          --------------------------

     10.1   Gender and Number.  Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine; the plural shall
include the singular and the singular shall include the plural.

     10.2   Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.

     10.3   Indemnification. Each individual who is or shall have been a member
of the Board shall be indemnified and held harmless by the Company against and
from any loss, cost, liability, or expense that may be imposed upon or
reasonably incurred by him or her in connection with or resulting from any
claim, action, suit, or proceeding to which he or she may be a party or in which
he or she may be involved by reason of any action taken or failure to act under
the Plan and against and from any and all amounts paid by him or her in
settlement thereof, with the Company's approval, or paid by him or her in
satisfaction of any judgment in any such action, suit, or proceeding against him
or her, provided he or she shall give the Company an opportunity, at its own
expense, to handle and defend the same before he or she undertakes to handle and
defend it on his or her own behalf.

     The foregoing right of indemnification shall not be exclusive of any other
rights of indemnification to which such individuals may be entitled under the
Company's Articles of Incorporation or By-laws, as a matter of law, or
otherwise, or any power that the Company may have to indemnify them or hold them
harmless.

     10.4   Beneficiary Designation. Each Participant under the Plan may, from
time to time, name any beneficiary or beneficiaries (who may be named
contingently or successively) to whom

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any benefit under the Plan is to be paid in the event of his or her death
(and/or who may exercise the Participant's vested Options following his or her
death). Each designation will revoke all prior designations by the same
Participant, shall be in a form prescribed by the Board, and will be effective
only when filed by the Participant in writing with the Board during his or her
lifetime. In the absence of any such designation, benefits remaining unpaid at
the Participant's death shall be paid to the Participant's estate (and, subject
to the terms and provisions of the Plan, any unexercised vested Options may be
exercised by the administrator or executor of the Participant's estate).

     10.5   No Right of Nomination. Nothing in the Plan shall be deemed to
create any obligation on the part of the Board to nominate any Director for
reelection by the Company's shareholders.

     10.6   Shares Available. The Shares made available pursuant to Awards under
the Plan may be either authorized but unissued Shares, or Shares which have been
or may be reacquired by the Company, as determined from time to time by the
Board.

     10.7   Additional Compensation. Shares granted under the Plan shall be in
addition to any annual retainer, attendance fees, or other compensation payable
to each Participant as a result of his or her service on the Board.

     10.8   Successors. All obligations of the Company under the Plan, with
respect to Awards granted hereunder, shall be binding on any successor to the
Company, whether the existence of such successor is the result of a direct or
indirect purchase, merger, consolidation, or otherwise, of all or substantially
all of the business and/or assets of the Company.

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     10.9   Requirements of Law. The granting of Awards under the Plan shall be
subject to all applicable laws, rules, and regulations, and to such approvals by
any governmental agencies or national securities exchanges as may be required.

     10.10  Governing Law. To the extent not preempted by Federal law, the Plan,
and all agreements hereunder, shall be construed in accordance with and governed
by the laws of the State of Indiana.

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