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                                                                   Exhibit 10.36


                                  AMENDMENT TO
                             1996 STOCK OPTION PLAN
                                       OF
                       PREFERRED EMPLOYERS HOLDINGS, INC.

      AMENDMENT, dated as of January 22, 1999, to the 1996 Stock Option Plan of
Preferred Employers Holdings, Inc., a Delaware Corporation, (the "Company").

      The Board desires to amend the 1996 Stock Option Plan as follows:

      1.    Section 15(b) of the Plan is hereby amended and restated in its
entirety as set forth below:

            "(b)  REORGANIZATION, MERGER AND RELATED TRANSACTIONS. All
            outstanding options under the Plan shall become fully exercisable
            following the occurrence of any Trigger Event (as defined below),
            whether or not such options are then exercisable under the
            provisions of the applicable agreements relating thereto. For
            purposes of the Plan, a "Trigger Event" is any one of the following
            events:

                  (i)   the date on which shares of Common Stock are first
            purchased pursuant to a tender offer or exchange offer (other than
            such an offer by the Company, any subsidiary of the Company, any
            employee benefit plan of the Company or of any subsidiary of the
            Company or any entity holding shares or other securities of the
            Company for or pursuant to the terms of such plan), whether or not
            such offer is approved or opposed by the Company and regardless of
            the number of shares purchased pursuant to such offer;

                  (ii)  the date the Company acquires knowledge that any person
            or group deemed a person under Section 13(d)-3 of the Exchange Act
            (other than the Company, any subsidiary of the Company, any employee
            benefit plan of the Company or of any subsidiary of the Company or
            any entity holding shares of Common Stock or other securities of the
            Company for or pursuant to the terms of any such plan or any
            individual or entity or group or affiliate thereof which acquired
            its beneficial ownership interest prior to the date the Plan was
            adopted by the Board), in a transaction or series of transactions,
            has become the beneficial owner, directly or indirectly (with
            beneficial ownership determined as provided in Rule 13d-3, or any
            successor rule, under the Exchange Act), of securities of the
            Company entitling the person or group to 30% or more of all votes
            (without consideration of the rights of any class or stock to elect
            directors by a separate class vote) to which all stockholders of the
            Company would be entitled in the election of the Board were an
            election held on such date;

                  (iii) the date, during any period of two (2) consecutive
            years, when individuals who at the beginning of such period
            constitute the Board cease for any reason to constitute at least a
            majority thereof, unless the election, or the nomination

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            for election by the stockholders of the Company, of each new
            director was approved by a vote of at least a majority of the
            directors then still in office who were directors at the beginning
            of such period; and

                  (iv)  the date of approval by the stockholders of the Company
            of an agreement (a "reorganization agreement") providing for:

                        (A) The merger or consolidation of the Company with
            another corporation (x) where the stockholders of the Company,
            immediately prior to the merger or consolidation, do not
            beneficially own, immediately after the merger or consolidation,
            shares of the corporation issuing cash or securities in the merger
            or consolidation entitling such stockholders to 50% or more of all
            votes (without consideration of the rights of any class of stock to
            elect directors by a separate class vote) to which all stockholders
            of such corporation would be entitled in the election of directors,
            or (y) where the members of the Board of the Company, immediately
            prior to the merger or consolidation, do not, immediately after the
            merger or consolidation, constitute a majority of the Board of
            Directors of the corporation issuing cash or securities in the
            merger or consolidation, or

                        (B) The sale or other disposition of all or
            substantially all the assets of the Company."

      2.    All capitalized terms used herein which are not otherwise defined
herein shall have the meanings given to such terms in the Plan.

      3.    This Amendment shall not constitute a waiver to or modification of
any other provision, term or condition of the 1996 Stock Option Plan.


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