AMENDMENT NUMBER TWO


         WHEREAS,  the  stockholders  of PennCorp  Financial  Group,  Inc.  (the
"Company")  approved  the  Company's  1996 Stock Award and Stock Option Plan (as
amended, the "Plan") on July 11, 1996;

         WHEREAS,  the Board of Directors  of the Company has approved  amending
the  Plan to  allow  Non-Employee  Directors  (as  defined  therein)  who have a
Pecuniary  Interest (as defined  therein) in more than 100,000 shares to receive
the annual 7,500 share option grant available to  Non-Employee  Directors and to
elect to receive all or a portion of their  annual  retainer  in Company  Common
Stock;

         NOW THEREFORE,  upon the approval of the  stockholders  of the Company,
the Plan shall be amended as set forth below:

     1. Section  10(c) is hereby  deleted in its  entirety and the  following is
substituted in lieu thereof:

          (c) Annual Grants.  Each  Nonemployee  Director who has not received a
     grant pursuant to Section 10(b) above during the 12-month  period ending on
     the date of the applicable  annual  meeting of the Company's  shareholders,
     shall  automatically  be  granted  on the date of such  annual  meeting  of
     shareholders a Stock Option to purchase 7,500 shares of Common Stock, which
     shall be  exercisable  18 months  after the date of the  grant.  Such Stock
     Option's  exercise  price shall be the Fair Market Value on the grant date,
     and the Stock  Option may be  exercised  only during the  Exercise  Period.
     During the Exercise Period,  the Nonemployee  Director shall have the right
     to either  exercise  the Stock  Option at the  exercise  price or receive a
     restricted Stock Award for that number of shares of Common Stock determined
     by (a)  multiplying the number of shares subject to the Stock Option by the
     difference  between  the Fair  Market  Value on the  Exercise  Date and the
     exercise  price,  and (b)  dividing the product  resulting  from clause (a)
     above  by 85  percent  of the  Fair  Market  Value  on the  Exercise  Date.
     Fractional  shares  shall be  rounded  (up or down)  to the  nearest  whole
     number.  Any restricted  Stock Award granted pursuant to this Section 10(c)
     shall not vest for a period of three years from the date of the Stock Award
     and shall be forfeited if the Nonemployee  Director ceases to be a director
     of the Company for any reason other than as a result of a change of control
     or ownership of the  Company,  the failure to obtain the required  votes of
     the  Company's  shareholders  approving  the  election  of the  Nonemployee
     Director,  or the  Nonemployee  Director's  death or Disability.  Any Stock
     Award issued  pursuant to this Section  10(c) shall cancel the Stock Option
     underlying the Stock Award.


     2. Section  11(a) is hereby  deleted in its  entirety and the  following is
substituted in lieu thereof:

          (a) A  Nonemployee  Director  may elect to forego up to 100 percent of
     the cash  compensation  attributable to the Nonemployee  Director's  annual
     retainer  fees and to receive in lieu  thereof a Stock Award as  determined
     pursuant to Section 11(b) below.  Any such election shall be in writing and
     must be made at least six months  before the services  are rendered  giving
     rise to such  compensation.  Such  election  may not be  revoked or changed
     thereafter  except as to  compensation  for services  rendered at least six
     months after any such election to revoke or change is made in writing.