EXHIBIT 10.16

                     AMENDMENT NO. 2 TO EMPLOYMENT AGREEMENT

     This Amendment No. 2 to Employment Agreement ("Amendment No. 2") is entered
into as the 5th day of January,  1998, between PennCorp Financial Group, Inc., a
Delaware  corporation  (together with its successors and permitted assigns under
the Employment Agreement, as defined herein, the "Company"),  and David J. Stone
(the "Executive").

                                   WITNESSETH

     WHEREAS,  the  Executive  and the  Company  are  parties  to an  Employment
Agreement (herein so called), dated as of June 7, 1996; and

     WHEREAS,  the Company  desires to amend,  and the  Executive  is willing to
amend,  the provisions of the Employment  Agreement  relating to the Executive's
covenant not to compete with the Company  under  certain  circumstances  to more
fully set forth the  understanding  and agreement of the parties with respect to
such covenant;

     NOW,  THEREFORE,  in  consideration  of the premises  and mutual  covenants
contained herein and for other good and valuable  consideration,  the receipt of
which is mutually acknowledged, the Company and the Executive agree as follows:

          1.  Definitions.  Capitalized terms used herein that are not otherwise
     defined  herein shall have the meaning  given such terms in the  Employment
     Agreement.

          2. Amendment to Definitions.  There shall be added to Section 1 of the
     Employment Agreement new clauses (t), (u) and (v) which shall read in their
     entirety as follows:

          "(t) 'Knightsbridge Fund' means Knightsbridge  Capital Fund I, L.P., a
               Delaware limited partnership."

          "(u) 'Knightsbridge Fund Partnership  Agreement' means the Amended and
               Restated  Agreement of Limited  Partnership of the  Knightsbridge
               Fund, as amended from time to time."

          "(u) Fund Competitive  Activity' shall mean any activity engaged in by
               the  Executive,  whether as an employee,  consultant,  principal,
               agent,  officer,  director,  partner or shareholder involving the
               establishing  or operation of an investment  fund  (regardless of
               the form of entity used for that purpose) the purpose of which is
               to identify,  acquire equity or equity-linked interests in and/or
               manage a portfolio  of companies  engaged  primarily in providing
               life and/or accident and health insurance and related services."

          3. Amendment to Section 13 of the Employment Agreement.  Section 13 of
     the  Employment  Agreement  shall be  amended by adding  new  paragraph  b.
     thereto and renumbering

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                                                                   EXHIBIT 10.16

     existing  paragraphs  b. and c.  thereof  as new  paragraphs  "c." and "d."
     thereto. New paragraph b. thereto shall read as follows:

          "b. The  Executive  covenants and agrees that he shall not directly or
          indirectly engage in any Fund Competitive Activity during (i) the Term
          of  Employment,  or (ii) in the event of a  voluntary  termination  of
          employment  pursuant to Section 11(g) above prior to the date on which
          the  aggregate  Investments  (as  defined  in the  Knightsbridge  Fund
          Partnership  Agreement)  made by the  Knightsbridge  Fund in Portfolio
          Companies (as defined in the Knightsbridge Fund Partnership Agreement)
          equals or exceeds $92 million,  the one year period following the date
          of the Executive's termination of employment, or (iii) in the event of
          a voluntary  termination of employment pursuant to Section 11(g) on or
          after the date on which the aggregate  Investments  (as defined in the
          Knightsbridge  Fund Partnership  Agreement) made by the  Knightsbridge
          Fund in  Portfolio  Companies  (as defined in the  Knightsbridge  Fund
          Partnership  Agreement)  equals or exceeds  $92  million  (the  "Fully
          Invested  Date"),  the nine-month  period following the Fully Invested
          Date or the six- month period  following  the date of the  Executive's
          termination of employment, whichever is longer."

          4. No  Further  Modifications.  Except as  expressly  amended  by this
     Amendment No. 2, the Employment  Agreement shall continue in full force and
     effect in accordance with its terms.

          5.  Governing  Law.  This  Amendment  No. 2 shall be  governed  by and
     construed and  interpreted in accordance  with the laws of New York without
     reference to principles of conflict of laws.

          6. Headings.  The headings of the sections contained in this Amendment
     No. 2 are for convenience only and shall not be deemed to control or affect
     the meaning or construction of any provision of this Agreement.

          7.  Counterparts.  This  Agreement  may be  executed  in  two or  more
     counterparts.



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                                                                   EXHIBIT 10.16

     IN WITNESS  WHEREOF,  the undersigned have executed this Amendment No. 2 as
of the date first above written.

                            PFNNCORP FINANCIAL GROUP, INC.



                            By:/s/ Scott D. Silverman
                               ----------------------
                               Scott D. Silverman,
                               Senior Vice President and
                                 General Counsel


                            By:/s/ Kenneth Roman
                               -----------------
                               Kenneth Roman, Chairman
                               Compensation Committee


                               /s/ David J. Stone
                               ------------------
                               David J. Stone

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