<PAGE>

                                                                  Exhibit 10 (o)

                              AMENDED AND RESTATED

                        MARKETING AND SERVICES AGREEMENT

                                  By and Among

                        PHYSICIANS HEALTH SERVICES, INC.

                               and its affiliate,

                 PHYSICIANS HEALTH SERVICES OF NEW JERSEY, INC.

                                       and

                 THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA
<PAGE>

     AMENDED AND RESTATED MARKETING AND SERVICES AGREEMENT

     Reference is hereby made to the Marketing and Services Agreement (the
"Marketing and Services Agreement") made and entered into as of April 17, 1996
(the "Inception Date") by and among PHYSICIANS HEALTH SERVICES, INC., a
corporation organized under the laws of the State of Delaware, and its
affiliate, PHYSICIANS HEALTH SERVICES OF NEW JERSEY, INC., a corporation
organized under the laws of the State of New Jersey as a health maintenance
organization (collectively, "PHS," unless the context indicates reference to
Physicians Health Services, Inc. or Physicians Health Services of New Jersey,
Inc. as separate corporate entities), and THE GUARDIAN LIFE INSURANCE COMPANY OF
AMERICA, a mutual life insurance company organized under the laws of the State
of New York ("Guardian"). This Amended and Restated Marketing and Services
Agreement is dated as of October 1, 1996, and when executed by the parties
hereto, shall supersede and replace the Marketing and Services Agreement and
shall constitute a binding and enforceable amendment to the Marketing and
Services Agreement in its entirety.

     THE MARKETING AND SERVICES AGREEMENT IS AMENDED AND RESTATED IN ITS
ENTIRETY AS FOLLOWS:

     This Amended and Restated Marketing and Services Agreement (this
"Agreement") is made and entered into as of this 1st day of October, 1996 by and
among PHYSICIANS HEALTH SERVICES, INC., PHYSICIANS HEALTH SERVICES OF NEW
JERSEY, INC. and GUARDIAN.
<PAGE>

                                    RECITALS

     WHEREAS, PHS, which is licensed to operate a health maintenance
organization in the State of New Jersey, maintains a network of health care
providers in the State of New Jersey, and is authorized to offer for sale plans
providing managed care health care benefits in such State;

     WHEREAS, Guardian desires to make different types of managed care health
coverage plans available for sale by the Guardian Marketing Force (as defined
herein) in the State of New Jersey:

     WHEREAS, PHS is willing to make its managed care health coverage plans
available for sale by the Guardian Marketing Force;

     WHEREAS, Guardian is authorized to offer for sale preferred provider
organization plans and indemnity insurance contracts (collectively, "Health
Insurance Contracts," as defined herein) to individuals and groups in the State
of New Jersey and to offer certain other insurance plans in such State,
including group life, disability and dental insurance plans ("Ancillary
Products," as defined herein);

     WHEREAS, PHS desires to make Health Insurance Contracts and Ancillary
Products available for sale by PHS in the State of New Jersey;


                                       2
<PAGE>

     WHEREAS, PHS and Guardian each desire to market "multi-choice" plans, which
give employees the option of choosing benefits under pre-selected combinations
of health coverage plans; and

     WHEREAS, PHS and Guardian desire to enter into a reinsurance transaction,
pursuant to which Guardian will reinsure PHS with respect to risks under HMO
Plans (as defined herein);

     NOW THEREFORE, in consideration of the mutual agreements contained herein,
the sufficiency of which is hereby acknowledged, and in consideration of the
performance by the parties of their obligations under this Agreement, the
parties agree as follows:


                                       3
<PAGE>

                                    ARTICLE I

                                   DEFINITIONS

     As used in this Agreement, the following terms shall have the following
meanings (definitions are applicable to both the singular and the plural form of
each term defined herein):

     "Ancillary Products" means the life insurance, short- and long-term
disability insurance, accidental death and dismemberment insurance, and dental
insurance products offered by Guardian as designated by the parties from time to
time.

     "Business Day" means any day except Saturday or Sunday or any legal Federal
or New Jersey holiday.

     "Change of Control" means the acquisition, in a single transaction or in a
series of related transactions, by a person, an entity, or a group of persons or
entities acting in concert of: (i) twenty-five percent (25 %) or more (a) of the
voting common stock of Physicians Health Services, Inc. or Physicians Health
Services of New Jersey, Inc. (excluding any acquisition of stock by a party
currently owning twenty-five percent (25 %) or more of such common stock), or
(b) fifty-one percent (51 %) or more of the aggregate value of the assets of
Physicians


                                       4
<PAGE>

Health Services, Inc. or Physicians Health Services of New Jersey, Inc.; or (ii)
twenty-five percent (25 %) or more of any ownership interest in Guardian.

     "Continuation Plan" has the meaning given such term in the HMO Reinsurance
Agreement.

     "Contractholder" means an employer in the Service Area who or which
executes an enrollment agreement with respect to any Managed Care Contract
subject to this Agreement.

     "Contract Termination Date" means the effective date upon which the
Agreement terminates pursuant to the applicable Section in Article X below.

     "Eligible Employee" means an employee who is eligible to enroll in the
Contractholder's Plan.

     "Effective Date" shall have the meaning set forth in Section 10.1.

     "Guardian Marketing Force" means employees of Guardian, and any agents
under contract with Guardian who or which are licensed in the State of New
Jersey to sell individual and/or group health insurance contracts and who or
which are acting on behalf of Guardian, but not including employees or agents of
PHS, or independent brokers.


                                       5
<PAGE>

     "Health Insurance Contracts" means contracts for health insurance offered
on a fee for service or indemnity basis by Guardian in the Service Area when
such contracts are marketed and sold under the tradename "The Guardian & PHS
Healthcare Solutions," or such other tradename as the parties may mutually agree
to from time to time. Health Insurance Contracts include preferred provider
plans using the PHS Network or PHCS' network of providers offered by Guardian in
the Service Area.

     "HMO Plans" means commercial contracts for health care services provided by
PHS to Contractholders in the Service Area utilizing the PHS Network to provide
health care services when such contracts are marketed and sold under the
tradename "The Guardian & PHS Healthcare Solutions," or such other tradename as
the parties may mutually agree to from time to time. HMO Plans include HMO Plans
with a "point-of-service" feature.

     "HMO Reinsurance Agreement" means the form of Reinsurance Agreement
described in Section 9.1 and attached hereto as Exhibit A-1.

     "Managed Care Contracts" means any HMO Plan or Health Insurance Contract
purchased by a Contractholder pursuant to Article 11 below.


                                       6
<PAGE>

     "Marketing Materials" shall have the meaning set forth in Section 2.6.

     "Material Change" shall have the meaning set forth hi Section 6.3.

     "PHCS" means Private Healthcare Systems, Incorporated, a Delaware
corporation with its headquarters in Waltham, Massachusetts, that organizes
managed care networks.

     "PHS Network" means the network of health care providers in the Service
Area; including physicians and other individual practitioners and health care
facilities or individual practice associations, who or which are under direct or
indirect contract with PHS to provide services to Subscribers under a HMO Plan.

     "Plans" means the HMO Plans, Health Insurance Contracts and Ancillary
Products sold pursuant to this Agreement.

     "Quarter" means each of the four consecutive three-month periods in a
calendar year.

     "Quarterly Accounting Report" shall have the meaning set forth in Section
8.1.

     "Service Area" means the State of New Jersey.


                                       7
<PAGE>

     "Subscriber" means the persons, including, but not limited to, Eligible
Employees, who have enrolled in a Managed Care Contract and who meet the
Contractholder's and the Managed Care Contract's eligibility requirements.


                                       8
<PAGE>

                                   ARTICLE II

                              MARKETING AND SALES

     2.1 Marketing and Sale of the HMO Plans by Guardian. (a) During the term of
this Agreement, Guardian shall have the right to market HMO Plans to its
existing and prospective customers through the Guardian Marketing Force,
pursuant to the terms of Section 2.3 below.

     (b) Except as permitted by 2.1(c) below, Guardian shall not enter into any
marketing agreements or similar agreements with any managed care organization
other than PHS for purpose of offering managed care products for sale in the
Service Area.

     (c) Nothing contained in this Agreement shall limit Guardian's right to
contract with PHCS for the purpose of developing managed care networks in the
Service Area or elsewhere: provided, however, that during the term of this
Agreement, Guardian shall not, without consulting with PHS, replace a HMO Plan
with a similar type of plan utilizing a PHCS network.

     (d) Nothing contained in this Agreement shall limit Guardian's right to
market Health Insurance Contracts and Ancillary Products not subject to this
Agreement directly to employers with whom Guardian contracts.


                                       9
<PAGE>

     2.2 Marketing and Sale of Health Insurance Contracts by PHS: Ancillary
Products.

     (a) During the term of this Agreement, PHS shall have the right to market
Health Insurance Contracts and Ancillary Products to its existing and
prospective customers in the Service Area, pursuant to the terms of Section 2.3
below.

     (b) Except with Guardian's prior written consent and except as permitted by
Section 2.2(c) below, PHS shall not enter into marketing or similar agreements
with any entity other than Guardian with respect to marketing in the Service
Area of HMO Plans, Health Insurance Contracts or Ancillary Products or insurance
products substantially similar to the Health Insurance Contracts or Ancillary
Products.

     (c) PHS expressly acknowledges and agrees that notwithstanding anything to
the contrary stated in this Section 2.2(c), that it has not, and that it will
not, enter into any marketing or similar agreement with any entity other than
Guardian with respect to marketing in the Service Area of any commercial, fully
insured HMO Plan, Health Insurance Contract or Ancillary Product. Nothing
contained in this Agreement shall limit PHS' right to contract with Mastercare
Companies, Inc. ("Mastercare") for the purpose of marketing a managed care
workers compensation plan; provided, however, that during the term of this
Agreement, PHS shall not, without consulting with Guardian, solicit any
Contractholder for the purpose of replacing a Managed Care Contract with a plan
jointly marketed by PHS and Mastercare. Guardian acknowledges and agrees that
PHS may enter into arrangements in the Service Area with respect to marketing
Ancillary Products in connection with PHS' Medicare and Medicaid health
maintenance organization plans ("Government Plans"). Guardian also acknowledges


                                       10
<PAGE>

and agrees that prior to the Effective Date that PHS entered into an arrangement
with Dental Benefit Providers to market dental products (the "DBP Plans") in the
Service Area. PHS agrees that from and after the Effective Date that it will not
market the DBP Plans other than in connection with the marketing of the
Government Plans. Guardian further acknowledges and agrees that prior to the
Effective Date that PHS entered into arrangements with All America Financial
Services, Inc. ("AAFS"), International Netherlands Group and its subsidiaries
(collectively, "ING") and Lincoln National Life Insurance Company of America
("LNLICA") to market specific and aggregate stop-loss premium health maintenance
organization plans ("Stop-Loss Plans") and that PHS marketed the life insurance
products of AAFS, ING and LNLICA in connection with such arrangements. PHS
agrees that from and after the December 31, 1997, that it will not market
Stop-Loss Plans or life insurance products in connection with such Stop-Loss
Plans unless it gives Guardian the opportunity to provide such stop-loss
coverage to PHS. If Guardian is able to provide such stop-loss coverage at a
rate which does not exceed by more than five percent (5 %) the average of the
rates provided by AAFS, ING and LNLICA, then PHS will utilize Guardian to
provide such stop-loss coverage. In the event there is a Change of Control and
PHS is acquired by, or PHS is merged with, any entity, the limitations set forth
in Section 2.2(b) of this Agreement shall apply to the surviving entity.

     (d) Nothing contained in this Agreement shall limit PHS's right to market
HMO plans not subject to this Agreement directly to employers with whom PHS
contracts.


                                       11
<PAGE>

     2.3 Multi-Choice and Stand-Alone Arrangements. (a) Guardian shall have the
right to market HMO Plans after regulatory approval has been obtained, (i) under
multi-choice arrangements with Contractholders, pursuant to which Eligible
Employees will be offered health care coverage options consisting of HMO Plans
or Health Insurance Contracts, and (ii) under stand-alone arrangements, pursuant
to which Eligible Employees will be provided with only the HMO Plan purchased by
the Contractholder.

     (b) PHS shall have the right to market Health Insurance Contracts (i) after
regulatory approval has been obtained, under multi-choice arrangements with
Contractholders, pursuant to which Eligible Employees will be offered health
care coverage options consisting of HMO Plans or Health Insurance Contracts, and
(ii) under stand-alone arrangements, pursuant to which Eligible Employees will
be provided with only the Health Insurance Contract purchased by the
Contractholder.

     (c) PHS agrees to use its best efforts to market Ancillary Products to its
existing and prospective customers; provided, however, that, the failure of PHS
to use its best efforts to market such Ancillary Products shall not entitle
Guardian to terminate this Agreement pursuant to Article X below.

     2.4 Priority. Neither party shall solicit any employer group with which the
other party had an existing contractual relationship as of the Inception Date
for the provision of health care services or health insurance (or with which, as
of the Inception Date, such other party was engaged in negotiating or
renegotiating a contract for such services) without the prior consent of such
other party.


                                       12
<PAGE>

     2.5 Identification of Managed Care Contracts. The Managed Care Contracts
shall be marketed under the collective designation "The Guardian & PHS
Healthcare Solutions." Each Managed Care Contract shall be assigned a specific
trade name, to be agreed to by the parties.

     2.6 Marketing Materials. PHS and Guardian shall jointly develop handbooks,
enrollment forms, identification cards and all other marketing materials
relating to the Managed Care Contracts (collectively, "Marketing Materials").
The parties agree that the cost of the initial development and production of
such Marketing Materials shall be shared equally by the parties pursuant to
Section 7.4 below. Thereafter, the party responsible for reproducing such
Marketing Materials shall include the cost of such reproduction in Schedule B as
a reimbursable expense. To the extent consistent with administrative
requirements, and to the extent permitted by law or regulations, all Marketing
Materials will consist of each party's existing Marketing Materials, modified to
reflect the terms of this Agreement. Neither party will use Marketing Materials
reflecting this Agreement or using the name of the other party, without the
other party's prior approval.

     2.7 Training. PHS and Guardian shall jointly develop training programs
regarding marketing and administering the Managed Care Contracts for all members
of the Guardian Marketing Force and for Guardian and PHS personnel engaging in
marketing or administrative functions.


                                       13
<PAGE>

                                   ARTICLE III

                     UNDERWRITING, RATES AND ADMINISTRATION

     3.1 Underwriting and Administration of HMO Plans. (a) PHS shall be
responsible for developing and filing with the appropriate regulatory
authorities the rates for the HMO Plans. Guardian shall utilize such filed rates
and shall be responsible for calculating premiums according to established
underwriting guidelines for the HMO Plans subject to the requirements of
applicable law; provided, however, that, the parties agree that they will
mutually develop the premiums for any HMO Plan marketed to a group of more than
five hundred (500) employees. PHS shall provide Guardian with all information
reasonably relating to rating methodology, including, without limitation, cost
assumptions, anticipated loss ratios and other actuarial assumptions, and
provider and facility agreements. Underwriting guidelines for HMO Plans that are
to be marketed pursuant to this Agreement will be mutually developed by the
parties.

     (b) Except as otherwise expressly provided for herein, PHS shall be solely
responsible for administration of the HMO Plans, including the payment of
claims, withholds, taxes and all other amounts (other than commissions) payable
to any person with respect to HMO Plans.


                                       14
<PAGE>

     3.2 Underwriting and Administration of Health Insurance Contracts and
Ancillary Products. (a) Guardian shall be responsible for developing and filing
with the appropriate regulatory authorities the rates for the Health Insurance
Contracts and Ancillary Products. Guardian shall utilize such filed rates and
shall be responsible for calculating premiums for the Health Insurance Contracts
and Ancillary Products, subject to the requirements of applicable law.

     (b) Guardian shall be solely responsible for administration of Health
Insurance Contracts and Ancillary Products, including the payment of claims,
taxes and all other amounts payable with respect to such contracts.

     3.3 Discounts. Any discount of manual rates for any HMO Plan which exceeds
a mutually agreed upon amount (as set forth in the underwriting guidelines
mutually agreed upon by the parties), must be jointly authorized by the
underwriting departments of each of the parties, subject to the laws and
regulations of the States of New Jersey and New York applicable to such Plans.


                                       15
<PAGE>

                                   ARTICLE IV

           BILLING AND COLLECTION OF PREMIUMS: PAYMENT OF COMMISSIONS

     4.1 Billing and Collection of Premiums. (a) Guardian shall be responsible
for billing and collection of premiums for all Plans, regardless of how such
Plans are marketed.

     (b) Premiums received by Guardian from Contractholders with respect to HMO
Plans will be held for the benefit of PHS during the Quarter in which such
premiums are received. Interest shall be credited on the cash balances held by
Guardian, at an annual rate equal to as set forth in Article VII of the HMO
Reinsurance Agreement.

     (c) The amount of net premiums held by Guardian at the end of each Quarter
with respect to HMO Plans (i.e., premiums received, plus interest credited in
accordance with Section 4.l(b) above, less commissions paid to agents or brokers
pursuant to Section 4.2 below), reduced by any claims reimbursed to PHS
(including withholds) and other amounts as agreed to by the parties shall be
paid in accordance with Section 7.3 of the HMO Reinsurance Agreement.

     4.2 Commissions. (a) Commissions with respect to Plans sold pursuant to
this Agreement shall be paid according to the schedule of commissions set forth
in Schedule B. The commission rates to be paid with respect to Plans may be
changed from time to time, as agreed to jointly by PHS and Guardian, provided
that the party not proposing the change shall


                                       16
<PAGE>

not unreasonably withhold its consent to a change by the proposing party. All
Managed Care Contracts shall be priced to include expense factors for
appropriate commission payments.

     (b) Guardian shall make payment of all commissions to members of the
Guardian Marketing Force, to independent brokers and to Physicians Health
Insurance Services, Inc., an insurance agency ("PHIS"), to the extent that such
commissions become due as a result of the sale of Plans subject to this
Agreement. Guardian shall act as PHS's agent in the payment of commissions for
HMO Plans. PHS shall have responsibility for any other compensation with respect
to Plans sold by PHIS.

     (c) Each party shall be responsible for ensuring that its employees or
agents are appropriately licensed and appointed, as necessary, to sell Managed
Care Contracts or Ancillary Products and to receive commissions. All payments of
commissions to agents, brokers or employees shall comply with applicable laws,
rules, ordinances and regulations.

     (d) Limitations on Commission and Marketing Fees. Notwithstanding any other
provision of this contract, the total of commissions and marketing fees payable
by Guardian under this Agreement shall not exceed any limitations set forth in
Section 4228 of the New York State Insurance Law.


                                       17
<PAGE>

                                    ARTICLE V

                        ENROLLMENT: MEMBERSHIP SERVICES

     5.1 Enrollment. (a) Guardian and PHS shall jointly enroll new
Contractholders and Subscribers purchasing Managed Care Contracts.

     (b) Each party shall be responsible for obtaining enrollment information
from Contractholders and Subscribers with respect to those Managed Care
Contracts sold by such party's Marketing Force and shall transmit such
information to the other party on a timely basis in a format that is acceptable
to the other party.

     5.2 Meetings with Contractholders and Subscribers. Guardian and PHS shall
cooperate in conducting employee on-site enrollment meetings.

     5.3 Enrollment Materials. All enrollment agreements, forms and other
materials, including Subscriber handbooks and identification cards, used for
Contractholders and Subscribers shall be either PHS's or Guardian's existing
approved forms, modified as necessary to reflect the terms of this Agreement,
and the administrative requirements of PHS and Guardian, respectively. All such
materials shall specify that PHS is the underwriter of HMO Plans, and that
Guardian is the underwriter of Health Insurance Contracts and Ancillary


                                       18
<PAGE>

Products. Neither party will use enrollment materials reflecting this Agreement,
or using the name of the other party; without the other party's approval.

     5.4 Enrollment Reports. (a) PHS and Guardian shall prepare periodic and
timely reports as set forth in Schedule C showing all Managed Care Contracts
sold, renewed or terminated, and other enrollment information required by either
party in order to perform its duties with respect to such Contracts. Such
reports shall be made by each party on a periodic and timely basis on the
Business Day following the date of transactions or other matters reported, and
shall be transmitted by electronic transmission in a form reasonably acceptable
to the receiving party.

     (b) PHS and Guardian shall prepare periodic reconciliations of the
enrollment information in the possession of each party.

     5.5 Membership Services. All membership services with respect to
Subscribers under HMO Plans shall be provided by PHS.


                                       19
<PAGE>

                                   ARTICLE VI

                             PHS NETWORK MANAGEMENT

     6.1 PHS Network Management. (a) PHS shall be solely responsible for
development and maintenance (including, without limitation, quality assurance,
utilization management and credentialing protocols) of the PHS Network. PHS
shall provide Guardian with an accurate listing of the composition of the PHS
Network at the Effective Date, and thereafter shall update the listing
periodically, showing additions and deletions to the composition of the PHS
Network.

     (b) PHS shall be solely responsible for any loss or liability arising from
any inaccuracy in such listings.

     (c) Guardian may recommend additions to, or deletions from, the PHS
Network, and PHS shall endeavor to be responsive to accommodate Guardian's
recommendation. PHS shall have the sole authority to enter into contracts with
providers.

     6.2 Medical Management. PHS shall be solely responsible for all claims
processing and auditing, health services (including hospital pre-certification,
outpatient pre-certification, large claim case management and utilization
review) and all risk accounting for the provider bonus arrangements under the
HMO Plans.


                                       20
<PAGE>

     6.3 Material Change in PHS Network. (a) PHS acknowledges that maintenance
of an adequate network of health care providers in the Service Area is of
primary concern to Guardian, and agrees to notify Guardian if the PHS Network
fails to meet the criteria set forth below. PHS further acknowledges and agrees
that any failure to meet the PHS Network adequacy criteria to be developed by
the parties constitutes a material change in PHS Network.

     (b) PHS agrees to use its best efforts to develop an adequate network of
health care providers. A review of PHS Network adequacy shall be made by the
parties at quarterly intervals for the twelve (12) months following the
Effective Date of this Agreement to monitor the progress of development of the
PHS Network in the Service Area. If, at the end of this twelve (12) month
period, Guardian reasonably determines that the PHS Network is not be
"marketable;" Guardian shall provide written notice of such determination to
PHS. PHS shall be allowed thirty (30) days from the receipt of such notice to
present to Guardian a plan to cure the deficiencies in the PHS Network, which
plan shall be reasonably satisfactory to Guardian. If PHS does not present a
reasonably satisfactory plan to cure such deficiencies within such thirty (30)
day period, or if the plan is not carried out according to its terms, then
Guardian shall have the termination rights provided by Section 10.7 of this
Agreement.

     (c) At the end of the twelve (12) month period described in Section 6.3(b)
above, the parties shall develop specific PHS Network adequacy standards, taking
into account both the number of health care providers in the PHS Network in each
county in the Service Area, and the number of providers in other managed care
organizations operating in the same counties.


                                       21
<PAGE>

     6.4 Professional Liability Insurance. (a) PHS shall require each physician
member of the PHS Network to maintain professional liability insurance, with
limits of at least $1,000,000 per occurrence, and $3,000,000 in the aggregate
for individual practitioners and practice groups, and $1,000,000 per occurrence
and $3,000,000 aggregate for hospitals, clinics and other institutional
providers. Guardian accepts that hospitals and other institutional providers may
self-insure or self-retain with respect to such liability limits, as permitted
by applicable New Jersey law and regulations. Guardian also recognizes that
liability limits for the following individual non-physician members of the PHS
Network may be $1,000,000 per occurrence and $1,000,000 in the aggregate:
chiropractors, social workers, audiologists, speech pathologists, optometrists,
physical therapists and occupational therapists.


                                   ARTICLE VII

             MARKETING AND ADMINISTRATIVE SERVICES FEE AND EXPENSES

     7.1 Guardian's Marketing and Administrative Services Fee. PHS shall pay
Guardian a Marketing and Administrative Services Fee for the duties assigned to
Guardian under this Marketing and Services Agreement equal to the amount shown
on Schedule B; as it may be amended from time to time, for each Quarter, or
portion thereof, during which this Agreement is in effect.

     7.2 PHS's Administrative Services Fee. PHS shall be entitled to an
Administrative Services Fee for the administrative duties assigned to PHS under
this Marketing and Services


                                       22
<PAGE>

Agreement equal to the amount shown on Schedule B, as it may be amended from
time to time, for each Quarter, or portion thereof, during which this Agreement
is in effect.

     7.3 Adjustments of Fee. The Fees set forth in Schedule B shall remain in
effect for four Quarters, or portion thereof, beginning with the Quarter that
includes the Effective Date. Each party shall have the right to adjust the Fees
payable hereunder for any subsequent period of four Quarters by providing notice
to the other party of an amendment of Schedule B no less than forty-five (45)
calendar days prior to the beginning of the next such period. Such adjustment
will be limited to an amount necessary to cover changes in that party's costs of
providing services hereunder, without provision of profit.

     7.4 Expenses. Each party shall be responsible for its expenses incurred in
connection with this Agreement; provided, however, that expenses attributable to
the development and initial production of Marketing Materials shall be shared
equally. Each party shall calculate such expenses (including, without
limitation, a reasonable allocation of internal expenses, production and
printing expenses and legal expenses incurred in connection with obtaining
regulatory approval of any forms) on a Quarterly basis, and shall provide the
other party with a schedule of such expenses in connection with each Quarterly
Accounting Report. A party whose expenses under this Section 7.4 exceed one-half
of the aggregate of the expenses incurred by both parties for the Quarter shall
be entitled to reimbursement for such excess within forty-five (45) calendar
days from the end of such Quarter.

     7.5 Reinsurance Agreement. At the option of the parties, the fees and
expenses hereunder may be incorporated in any Reinsurance Agreement entered into
between the parties


                                       23
<PAGE>

(or affiliates of the parties) to the extent that such fees relate to reinsured
Managed Care Contracts.


                                  ARTICLE VIII

                            ACCOUNTING AND REPORTING

     8.1 Quarterly Accounting Reports. Within forty-five (45) calendar days of
the end of each Quarter, each party shall supply the other with a Quarterly
Accounting Report as defined in Section 7.3 of the Reinsurance Agreement.
Quarterly Accounting Reports shall be made for the Quarter that includes the
Effective Date, and shall be made for each Quarter following the Contract
Termination Date if any amount is due any party under this Agreement.

     8.2 Settlements. Settlement of all amounts due pursuant to this Agreement
shall be made on a net basis in connection with the Quarterly Accounting Report.
If one party owes a net amount to the other, such amount shall be paid in
accordance with Section 7.3 of the HMO Reinsurance Agreement.

     8.3 Reconciliation. Each party shall have the right to review all
individual components of transactions entered into each Quarterly Accounting
Report. The parties shall have twenty (20) Business Days from the day the
Quarterly Accounting Report is submitted to report any deficiency in such report
and to request an adjustment of any payment made to or received by either party.
Any amount due either party in connection with such reconciliation shall be paid
within twenty (20) calendar days of the receipt of notice that additional
amounts are due.


                                       24
<PAGE>

     8.4 Best Efforts to Supply Actual Data. In preparing all reports required
in this Agreement, Guardian or the PHS, as the case may be, shall make its best
efforts to supply the actual data. If the actual data cannot be supplied with
the appropriate report, Guardian or PHS, as the case may be, shall produce best
estimates, and shall provide amended reports based on actual data no more than
thirty (30) calendar days after such report was originally due.

     8.5 Statement of Actuarial Opinion. (a) Within forty-five (45) calendar
days after the end of the calendar year, each party shall provide the other with
a Statement of Actuarial Opinion certifying the adequacy of the reserve for
products covered under this Agreement. The Actuarial Opinion must state whether
or not the reserve for products covered under this Agreement meet the minimum
standards of all states where each party is licensed, and if not, the Actuarial
Opinion must state the difference between reserves and state minimums

     (b) The Actuarial Opinion shall meet the requirements set forth in the
NAIC's Actuarial Opinion and Memorandum Regulation and shall be signed by each
party's "Appointed Actuary." The Appointed Actuary may or may not be an employee
of such party.


                                   ARTICLE IX

                             REINSURANCE AGREEMENTS

     9.1 HMO Reinsurance Agreement. The parties each hereby acknowledge that,
simultaneously with the execution of this Agreement, they intend to enter into a
reinsurance agreement in the form attached hereto as Exhibit A-1 (the "HMO
Reinsurance Agreement").


                                       25
<PAGE>

The parties intend, under the terms of the HMO Reinsurance Agreement, that PHS
will cede to Guardian certain specified percentages of the risks under the HMO
Plans, including those HMO Plans with a point-of-service feature, as more fully
described in the HMO Reinsurance Agreement. The parties further intend that
Guardian will retrocede to Physicians Health Services (Bermuda) Ltd., a
affiliate of PHS, a specified percentage of the risks under the out-of-network
portion of those HMO Plans with a point-of-service feature. In return, Guardian
and Physicians Health Services (Bermuda) Ltd. shall be allocated specified
percentages of premiums received by Company with respect to the HMO Plans, all
as more fully described in the HMO Reinsurance Agreement.


                                       26
<PAGE>

                                    ARTICLE X

                              TERM AND TERMINATION

     10.1 Effective Date. This Agreement shall become effective on October 1,
1996 (the "Effective Date"), and shall continue in effect unless terminated
pursuant to the terms of this Article X. Notwithstanding anything to the
contrary stated in this Article X, this Agreement shall continue in effects
solely with respect to the provision of administrative services, for any Managed
Care Contract in effect on the Contract Termination Date until 180 days
subsequent to the next succeeding renewal date of any Managed Care Contract
following such Contract Termination Date; and provided, further however, that in
the event of a termination pursuant to Section 8.6 of the HMO Reinsurance
Agreement, this Agreement shall remain in effect solely with respect to the
provision of administrative services with respect to any Continuation Plan for
the period stated in Section 8.6 of the HMO Reinsurance Agreement.

     10.2 Termination for Insufficient Premiums. Either party shall have the
right to terminate this Agreement if, on the first anniversary of the day on
which the Managed Care Contracts are first available for sale pursuant to this
Agreement, the total annualized premiums for Managed Care Contracts do not
exceed five million dollars ($5,000,000). Notice of termination under this
Section 10.2 shall be made within thirty (30) days after the anniversary date,
and shall be effective ninety (90) days after such notice is given.


                                       27
<PAGE>

     10.3 Termination Due to Change of Control. In the event of a Change of
Control in one party, the other party shall have the right to terminate this
Agreement as set forth in Section 8.6 of the HMO Reinsurance Agreement. The
Contract Termination Date under this Section 10.3 shall be the effective date of
the Change of Control.

     10.4 Termination Without Cause. (a) Either party shall have the right to
terminate this Agreement without cause upon 180 days prior written notice to the
other party. The Contract Termination Date under this Section 10.4 shall be the
180th day following the giving of the notice required by this Section 10.4.

     (b) If PHS terminates this Agreement pursuant to Section 10.4(a), it agrees
to pay Guardian an amount equal to one half the fair market value of all HMO
Plans in force on the effective date of termination, other than HMO Plans that
(i) resulted from the conversion of pre-existing PHS contracts to Managed Care
Contracts, or (ii) are not continued as PHS plans on or before the first renewal
date for such contracts following the effective date of termination.

     (c) The parties will agree to a method of valuation of the HMO Plans (using
methods of valuation customarily used in valuing HMO Plans or health insurance
business). If the parties are unable to agree on valuation, the matter will be
referred to arbitration. Payments required under this Section 10.4 shall be made
in connection with the final Annual Accounting Report.


                                       28
<PAGE>

     10.5 Termination For Cause. (a) In the event that either party shall
default in the performance of the duties and obligations imposed on it pursuant
to the terms of this Agreement or the Reinsurance Agreement(s), or breach any of
the provisions contained herein or therein, including the failure to pay any
amount when due, or the failure of either party to maintain a level of services
under this Agreement that is reasonably satisfactory to the other party, the
defaulting party shall be allowed thirty (30) days from written notice of such
default or breach to present to the non-defaulting party a plan to cure such
default or breach that is reasonably satisfactory to the non-defaulting party.
If a reasonably satisfactory plan to cure the default or breach is not submitted
within that time, or if the plan is not carried out according to its terms, the
non-defaulting party shall have the right to terminate this Agreement and the
Reinsurance Agreement(s) upon delivery of written notice of such termination to
the defaulting party, which shall be effective upon receipt, without prejudice
to any other rights or remedies available to the non defaulting party by reason
of such default or breach.

     (b) In the event that either party shall engage in fraudulent, illegal or
grossly negligent conduct with respect to its duties and obligations under this
Agreement or the Reinsurance Agreement(s), the other party shall have the right
to terminate this Agreement and the Reinsurance Agreement(s) upon delivery of
written notice of such termination to the defaulting party, which shall be
effective upon receipt, without prejudice to any other rights or remedies
available to the non defaulting party by reason of the defaulting party's
conduct.


                                       29
<PAGE>

     (c) In the event that this Agreement is terminated by Guardian pursuant to
this Section 10.5, the provisions of Section 10.4(b) shall apply as if the PHS
elected to terminate this Agreement.

     (d) The Contract Termination Date under this Section 10.5 shall be the date
of receipt of notification of termination.

     10.6 Termination Due to Financial Impairment or Loss of Authority. In the
event that either party shall become unable to perform its obligations under the
Managed Care Contracts because of financial impairment or loss of authority to
act under law, or by action of any regulatory authority, the other party shall
have the right, subject to the requirements of relevant law and receipt of
necessary approvals; to terminate this Agreement and to have the Managed Care
Contracts assigned to, and all obligations assumed by, an appropriately licensed
organization that provides substantially similar healthcare services as
described in this Agreement. The Contract Termination Date under this Section
10.6 shall be the date set forth in Section 8.8 of the HMO Reinsurance
Agreement.

     10.7 Termination for Material Change in PHS Network. In the event that the
PHS Network undergoes a material change within the meaning of Section 6.3 of
this Agreement, PHS shall be allowed thirty (30) days to present to Guardian a
plan to cure such Material Change that is reasonably satisfactory to Guardian.
If a reasonably satisfactory plan to cure the Material Change is not submitted
within that time, or if the plan is not carried out


                                       30
<PAGE>

according to its terms, Guardian shall have the right to terminate this
Agreement, and the HMO Reinsurance Agreement, upon delivery of written notice of
such termination to PHS, which shall be effective upon receipt, without
prejudice to any other rights or remedies available to Guardian. The Contract
Termination Date under this Section 10.7 shall be the date of receipt of
notification to terminate.

     10.8 Buy-Out Provisions. The parties acknowledge and agree that the
"buy-out" provisions set forth in Section 10.4(b) above apply only to
terminations under Sections 10.4(a) and 10.5 above. Such buy-out provisions do
not apply to terminations under any other section of this Agreement or to
terminations under the HMO Reinsurance Agreement.


                                   ARTICLE XI

                                INDEMNIFICATION

     11.1 PHS's Indemnification. PHS shall indemnify Guardian against all
liabilities, losses, suits, damages, costs, and expenses (including, without
limitation, damages resulting from breach of this Agreement and reasonable fees
of Guardian's attorneys and other expenses of litigation), net of recoveries
from third parties, arising out of or in connection with PHS's obligations under
this Agreement; including acts or omissions to act, or negligent, willful,
reckless or intentional wrongs, fraud, oppression or bad faith.


                                       31
<PAGE>

     11.2 Guardian's Indemnification. Guardian shall indemnify PHS against all
liabilities, losses, suits, damages, costs and expenses (including, without
limitation, damages resulting from breach of this Agreement, reasonable fees of
PHS's attorneys and other expenses of litigation), net of recoveries from third
parties, arising out of or in connection with Guardian's obligations under this
Agreement, including acts or omissions to act, or negligent, willful, reckless
or intentional wrongs, fraud, oppression or bad faith.

     11.3 Liability under PHS's HMO Plans. Except as specifically set forth in
any Reinsurance Agreement(s) to be entered into between the parties, Guardian is
not a guarantor, insurer, or reinsurer of, or joint venturer with, PHS. Guardian
does not accept any risk of loss for, nor provide any indemnification to PHS,
any Contractholder or Subscriber, any provider or any other person with respect
to an HMO Plan. PHS shall indemnify Guardian for all liabilities, losses, suits,
damages, costs and expenses (including reasonable fees of Guardian's attorneys,
and other expenses of litigation), net of recoveries from third parties, arising
in connection with a HMO Plan or the PHS Network, including action or failure to
act by PHS, or its employees or agents (excluding health care providers who or
which are not employees of, or under an agency agreement with, PHS).

     11.4 Liability under Health Insurance Contracts and Ancillary Products. PHS
is not a guarantor, insurer, or reinsurer of, or joint venturer with, Guardian.
PHS does not accept any risk of loss, nor provide any indemnification to
Guardian, any Contractholder or Subscriber,


                                       32
<PAGE>

any provider or any other person with respect to a Health Insurance Contract or
Ancillary Product. Guardian shall indemnify PHS for all liabilities; losses;
suits; damages; costs and expenses (including reasonable fees of PHS's
attorneys, and other expenses of litigation), net of recoveries from third
parties, arising in connection with a Health Insurance Contract or Ancillary
Product, including action or failure to act by Guardian, or its employees or
agents.

     11.5 Survival of Article. This Article XI shall survive the termination or
nonrenewal of this Agreement.


                                       33
<PAGE>

                                   ARTICLE XII

                                   ARBITRATION

     12.1 Appointment of Arbitrators. In the event of any disputes or
differences arising hereafter between the parties with reference to any
transaction under or relating in any way to this Agreement, as to which
agreement between the parties hereto cannot be reached, the dispute or
difference shall be resolved by arbitration. Three arbitrators shall decide any
dispute or difference. The arbitrators must be disinterested officers or retired
officers of life and health insurance or health maintenance organizations other
than the two parties to this Agreement or their affiliates. Each of the parties
agrees to appoint one of the arbitrators with the third, to be chosen by the two
appointed arbitrators. In the event that either party should fail to choose an
arbitrator within thirty (30) calendar days following a written request by the
other party to do so, the requesting party may choose a second arbitrator before
entering upon arbitration. In the event that the two arbitrators shall not be
able to agree on the choice of the third arbitrator within twenty (20) calendar
days following their appointment, each arbitrator shall nominate five (5)
candidates within ten (10) calendar days thereafter, four (4) of whom the other
party shall decline, and the third arbitrator shall be chosen by the President
of the American Arbitration Association or his designee. Should the chosen third
arbitrator so selected decline to serve, the candidate who was not chosen by the
President shall be appointed. This process shall continue until a candidate has
agreed to serve.


                                       34
<PAGE>

     12.2 Decision. The arbitrators shall consider customary and standard
practices in the health insurance and managed care business. They shall decide
by a majority vote of the arbitrators. There shall be no appeal from their
written decision. Judgment may be entered on the decision of the arbitrators by
any court having jurisdiction. If, in the opinion of the arbitrators, a dispute
cannot be otherwise resolved, this Agreement shall be terminated in accordance
with Section 10.5 hereof.

     12.3 Expenses of Arbitration. Each party shall bear the expense of its own
arbitrator (whether selected by that party, or by the other party pursuant to
the procedures set out in Section 12.1) and related outside attorneys' fees, and
shall jointly and equally bear with the other party the expenses of the third
arbitrator.

     12.4 Applicable Law. Any arbitration instituted pursuant to this Article
shall be held in New Jersey and the laws of the State of New Jersey and, to the
extent applicable, the Federal Arbitration Act, shall govern the interpretation
and application of this Agreement.

     12.5 Survival of Article. This Article shall survive termination of this
Agreement.


                                       35
<PAGE>

                                  ARTICLE XIII

                                 MISCELLANEOUS

     13.1 Stop-Loss Coverage. Guardian shall have the right to provide
Contractholders with stop-loss insurance or reinsurance with respect to HMO
Plans that are Managed Care Contracts subject to this Agreement. Guardian shall
have the right to bid on stop-loss reinsurance protection for all other business
of PHS. Nothing herein shall require PHS to reinsure HMO Plans that are not
Managed Care Contracts with Guardian. In addition, Guardian acknowledges that
PHS has certain existing arrangements, and may enter into additional
arrangements in the future, for stop-loss reinsurance coverage for HMO Plans
that are not Managed Care Contracts which shall remain in effect regardless of
this Agreement.

     13.2 Misunderstandings and Oversights. If any delay, omission, error or
failure to perform any act required by this Agreement is unintentional and
caused by misunderstanding or oversight, PHS and Guardian will adjust the
situation to what it would have been had the misunderstanding or oversight not
occurred. The party that first discovers such oversight or incorrect act as a
result of the misunderstanding will notify the other party in writing promptly
upon discovery of the misunderstanding or oversight. The parties shall act to
correct the error, omission or oversight within thirty (30) days of notification
of the problem. This Section 13.2 shall not be construed as a waiver by either
party of its right to enforce strictly the terms of this Agreement.


                                       36
<PAGE>

     13.3 Non-Solicitation. (a) During the term of this Agreement, neither
Guardian nor any entity under Guardian's control shall contact, solicit or
contract for services with any PHS Network health care provider then under
contract with PHS. Nothing in this Agreement shall preclude PHCS from
contracting with any PHS Network health care provider.

     (b) During the term of this Agreement, neither party shall knowingly
solicit for employment an employee of the other party who has been engaged in
activities covered by this Agreement, without written consent of the other
party.

     13.4 Regulatory Approval. Performance of the obligations of either party
under this Agreement shall be subject to the receipt of necessary regulatory
approvals under the laws, regulations and practices of regulatory authorities in
New York and New Jersey. PHS and Guardian shall cooperate in attempting to
obtain expeditiously any necessary regulatory approvals from regulatory
authorities. Each party will bear its own expenses in obtaining such approvals.

     13.5 Audits. Each party shall have the right, upon reasonable notice to the
other party, and at the requesting party's expense, to audit the books and
records of the other party relating to receipts, enrollment, service standards
and other matters relating to this Agreement


                                       37
<PAGE>

during regular business hours at the premises of the audited party where such
records are normally maintained. The audited party shall reasonably cooperate in
any such audit.

     13.6 Headings and Schedules. Headings used herein are not part of this
Agreement. Any Schedules or Exhibits attached hereto are part of this Agreement.

     13.7 Compliance with Applicable Laws and Regulations. It is the intention
of the parties that this Agreement comply with all existing applicable laws and
regulations, as from time to time are in effect, so that the Agreement remains
in full force. Each of the parties agrees to comply with all laws; ordinances,
rules, regulations and orders of regulatory bodies applicable to the
transactions contemplated by this Agreement, including those relating to
maintenance of appropriate licenses and the appointment of agents and payment of
commissions. Either party shall promptly notify the other party of any
complaint, inquiry or lawsuit by any regulatory authority relating to the
Managed Care Contracts or to this Agreement.

     13.8 Successors and Assigns: Binding Effect. Except as otherwise provided
herein and in the HMO Reinsurance Agreement; this Agreement cannot be assigned
by PHS or Guardian without the prior written approval of the other party. The
provisions of this Agreement shall be binding upon and inure to the benefit of
and be enforceable by the parties hereto and their respective permitted
successors and assigns.


                                       38
<PAGE>

     13.9 Counterparts. This Agreement may be executed simultaneously in any
number of counterparts, each of which will be deemed an original; but all of
which will constitute one and the same agreement.

     13.10 Entire Agreement: Amendment. This Agreement and the Reinsurance
Agreement constitute the entire agreement between the parties with respect to
the Managed Care Contracts and Ancillary Products, and supersede any previous
written or oral agreements. This Agreement shall be amended only by written
agreement signed by a duly authorized officer of each of PHS and Guardian, and
any change to this Agreement shall be null and void unless made by such written
agreement; provided, however, that where, under insurance, health or other
applicable laws or regulations, the approval of any such amendment to this
Agreement by one or more federal, state or local governmental or regulatory
authorities is required, the amendment shall not take effect unless and until
all such necessary approvals have been obtained and received by both PHS and
Guardian. In the event that any such approval is required, PHS and Guardian
shall each take all necessary actions in order to obtain such approval.

     13.11 Waivers. The waiver by either of the parties of the other party's
prompt and complete performance, or breach or violation, of any provisions of
this Agreement and related documents shall not operate or be construed as a
waiver of any subsequent breach or violation,


                                       39
<PAGE>

and the waiver by any of the parties to exercise any right or remedy which it
may possess hereunder shall not operate or be construed as a bar to the exercise
of such right or remedy by such party upon the occurrence of any subsequent
breach or violation.

     13.12 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey, without giving effect to
the principles of conflicts of laws thereof.

     13.13 Severability. In the event any section or provision of this Agreement
or related documents is found to be void and unenforceable by a court of
competent jurisdiction, the remaining sections and provisions of this Agreement
or related documents shall nevertheless be binding upon the parties with the
same force and effect as though the void or unenforceable part had not been
severed or deleted.


                                       40
<PAGE>

     13.14 Notices. Any notice to be given pursuant to the terms of this
Agreement shall be given in writing either by personal delivery or by mail,
registered or certified, return receipt requested and postage prepaid. Mail
notices shall be sent to the parties at their respective addresses as shown:

          If to Guardian:

          The Guardian Life Insurance Company of America
          201 Park Avenue South
          New York, New York 10003
          Attention: Edward K. Kane, Esq.

          If to Physicians Health Services, Inc.:

          Physicians Health Services' Inc.
          120 Hawley Lane
          Trumbull, Connecticut 06611
          Attention: Regina M. Campbell
          Senior Vice President & Chief Administrative Officer


          If to Physicians Health Services of New Jersey, Inc.:

          Physicians Health Services of New Jersey, Inc.
          Mack Center 4
          South 61
          Paramus Road
          Paramus, New Jersey 07652
          Attention:
          Executive Director

     13.15 Confidentiality. (a) Neither Guardian nor PHS shall disclose any
proprietary or confidential information of the other party to a third party
without the express written consent


                                       41
<PAGE>

of the other party to this Agreement. For purposes of this Agreement,
"proprietary and confidential" information will include, without limitation, all
internal business practices and business records, information concerning
products and pricing, contracts, computer hardware and software or business
methods in any form whatsoever, peer review, quality assurance and grievance
procedures, any aspect of the utilization review program, provider fee
schedules, reimbursement schedules, or discounts, and advertising or marketing
information, but not including information otherwise available to the public.
Neither party shall use any proprietary and confidential information of the
other party for its own benefit. Upon termination of this Agreement, each party
will immediately return to the other party any confidential information, claims
files necessary for the continued administration of any Plan, and other property
of the other party.

     (b) Guardian and PHS agree to maintain the confidentiality of any health
care information pertaining to Subscribers including, without limitation, files,
records, reports, and other information prepared and maintained in connection
with this Agreement, in accordance with all applicable laws and regulations.

     (c) Each Party shall obtain any necessary consent from Subscribers with
respect to the release to the other party of any confidential information
relating to such Subscribers, by means of general or specific releases, as
appropriate. Each party shall notify the other if it becomes aware that proper
releases have not been obtained.


                                       42
<PAGE>

     (d) Guardian shall not make any list of PHS providers available to any
person other than appropriate regulatory authorities. Guardian employees who are
engaged in operations relating to this Agreement, and independent brokers and
other persons engaged in marketing of Managed Care Contracts.

     13.16 Press Releases. No public statement or press release regarding the
existence of this Agreement shall be made by either party without obtaining the
prior written consent of the other party, except as required by applicable laws
or regulations.

     13.17 Relationship of Parties. The parties to this Agreement are and shall
remain independent contractors. Neither party is the employee or agent of the
other party, except as set forth herein, and neither party has an express or
implied right to bind the other party. The parties do not intend to form a joint
venture, partnership, or to be governed by laws relating to any relationship
other than that of independent contractors. Neither party is authorized to
modify, alter or waive the terms of any product issued by the other party.

     13.18 Offset. In the event that either party to this Agreement shall fail
to make payment of any amount that is due and owing to the other party under
this Agreement, all mutual debts shall be offset, and only the balance of such
debts shall be paid.


                                       43
<PAGE>

     13.19 Financial Statements. Each party shall furnish financial statements
as filed with the appropriate regulatory authority to the other party upon
request.

     13.20 Regulatory Review. The parties acknowledge and agree that this
Agreement is subject to the review and approval of the New Jersey and the New
York State Departments of Insurance. The parties expressly agree that any
revisions to this Agreement required by the New Jersey or the New York State
Departments of Insurance will be addressed in an amendment to, or restatement
of, the Agreement.


                                       44
<PAGE>

                                    EXECUTION

     IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the date first above
written.

                                        PHYSICIANS HEALTH SERVICES, INC.

                                        By   /s/  Regina M. Campbell
                                             ------------------------------
                                             Name Regina M. Campbell
                                             Title Senior Vice President



                                        PHYSICIANS HEALTH SERVICES
                                        OF NEW JERSEY, INC.

                                        By   /s/  Regina M. Campbell
                                             ------------------------------
                                             Name Regina M. Campbell
                                             Title Senior Vice President



                                        THE GUARDIAN LIFE INSURANCE
                                        COMPANY OF AMERICA

                                        By   /s/  Joseph D. Sargent
                                             ------------------------------
                                              Name   Joseph D. Sargent
                                              Title President and CEO


                                       45
<PAGE>

                                   SCHEDULE A

                     DESCRIPTION OF MANAGED CARE CONTRACTS

     [DESCRIBE NJ PLANS]


                                       A-1
<PAGE>

NEW JERSEY--STATUTORY PLANS--GROUPS WITH 2-49 EMPLOYEES--HEALTHCARE SOLUTIONS

<TABLE>
PASSPORT HMO
================================================================================
<S>                      <C>                 <C>
J40000                   PHS/NJ 5/75         Benefits are based on New Jersey
INJSP                                        mandated plan design.
                                             Available eff. 5/1/96
--------------------------------------------------------------------------------
J41000                   PHS/I4J lO/lOO      Benefits are based on New Jersey
2NJSP                                        mandated plan design.
                                             Available eff. 5/1/96
--------------------------------------------------------------------------------
J42000                   PHS/NJ 15/150       Benefits are based on New Jersey
3NJSP                                        mandated plan design.
                                             Available eff. 5/1/96
--------------------------------------------------------------------------------
J43000                   PHS/NJ 20/250       Benefits are based on New Jersey
4NJSP                                        mandated plan design.
                                             Available eff. 5/1/96
--------------------------------------------------------------------------------
</TABLE>


<TABLE>
CHARTER POS
================================================================================
<S>                      <C>                 <C>
                                             Statutory Charter POS plans in this
                                             market are being developed, and are
                                             anticipated to receive DOI approval
                                             Fall, 1996. These plans will be
                                             sold under Healthcare Solutions.
--------------------------------------------------------------------------------
</TABLE>

                                       11
<PAGE>

NEW JERSEY STATUTORY PLANS GROUPS WITH 2-49 EMPLOYEES--HEALTHCARE SOLUTIONS
PASSPORT POS (With Inpatient Hospital Copay)

<TABLE>
<CAPTION>
====================================================================================================================================

Copay      In         Individual      Family          Coinsurance     Coinsured     Family Out      Annual     COMMENTS
Schedule   Network    Deductible      Deductible      (paid by PHS)   Charge        of Pocket       Benefit
           Plans                                                      Limit*        Maximum         Limit
------------------------------------------------------------------------------------------------------------------------------------

<S>        <C>        <C>             <C>             <C>             <C>           <C>             <C>        <C>
J4628S     PHS/NJ     $250            $5OO            80%             $10,000       N/A             NA         Available eff. 7-1-96

5NJSP      $5/75                                                      per member
------------------------------------------------------------------------------------------------------------------------------------

J4658S     PHS/NJ     $500            $l,OOO          80%             $10,000       N/A             NA         Available eff. 7-1-96

6NJSP      $5/75                                                      per member
------------------------------------------------------------------------------------------------------------------------------------

J4727S     PHS/NJ     $250            $500            70%             $10,000       N/A             NA         Available eff. 7-1-96

7NJSP      $10/100                                                    per member
------------------------------------------------------------------------------------------------------------------------------------

J4728S     PHS/NJ     $250            $500            80%             $10,000       N/A             NA         Available eff. 7-1-96

8NJSP      $10/100                                                    per member
------------------------------------------------------------------------------------------------------------------------------------

J4757S     PHS/NJ     $500            $ 1,000         70%             $10,000       N/A             NA         Available eff. 7-1-96

9NJSP      $10/100                                                    per member
------------------------------------------------------------------------------------------------------------------------------------

J4758S     PHS/NJ     $500            $1,000          80%             $10,000       N/A             NA         Available eff. 7-1-96

10NJSP     $10/100                                                    per member
------------------------------------------------------------------------------------------------------------------------------------

J4718S     PHS/NJ     $l,OOO          $2,000          80%             $10,000       N/A             NA         Available eff. 7-1-96

11NJSP     $10/100                                                    per member
------------------------------------------------------------------------------------------------------------------------------------

J4828S     PHS/NJ     $250            $500            80%             $10,000       N/A             NA         Available eff. 7-1-96

12NJSP     $15/150                                                    per member
------------------------------------------------------------------------------------------------------------------------------------

J4857S     PHS/NJ     $500            $l,000          70%             $10,000       N/A             NA         Available eff. 7-1-96

13NJSP     $15/150                                                    per member
------------------------------------------------------------------------------------------------------------------------------------

J4957S     PHS/NJ     $500            $ 1,000         70%             $10,000       N/A             NA         Available eff. 7-1-96

14NJSP     $20/250                                                    per member
------------------------------------------------------------------------------------------------------------------------------------

J4917S     PHS/NJ     $l,OOO          $2,000          70%             $10,000       N/A             NA         Available eff. 7-1-96

15NJSP     $20/250                                                    per member
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>

*    The Coinsured Charge Limit is the amount of covered charges a member must
     incur each Calendar Year before no Coinsurance is required. Charges for
     Mental or Nervous Conditions and Substance Abuse Treatment are not subject
     to or eligible for the Coinsured Charge Limit.


                                       12
<PAGE>

NEW JERSEY STATUTORY PLANS GROUPS WITH 2-49 EMPLOYEES--HEALTHCARE SOLUTIONS
PASSPORT POS (with $0 (Zero) Hospital Copay)

<TABLE>
<CAPTION>
====================================================================================================================================

Copay      In         Individual      Family          Coinsurance     Coinsured     Family Out      Annual     COMMENTS
Schedule   Network    Deductible      Deductible      (paid by PHS)   Charge        of Pocket       Benefit
           Plans                                                      Limit*        Maximum         Limit
------------------------------------------------------------------------------------------------------------------------------------

<S>        <C>        <C>             <C>             <C>             <C>           <C>             <C>        <C>
J5028S     PHS/NJ     $250            $500            80%             $10,000       N/A             NA         Available
5NJSPZ     $5                                                         per member                               eff. 10-1-96
------------------------------------------------------------------------------------------------------------------------------------

J5058S     PHS/NJ     $500            $1,000          80%             $10,000       N/A             NA         Available
6NJSPZ     $5                                                         per member                               eff. 10-1-96
------------------------------------------------------------------------------------------------------------------------------------

J5127S     PHS/NJ     $250            $500            70%             $10,000       N/A             NA         Available
7NJSPZ     $10                                                        per member                               eff. 10-1-96
------------------------------------------------------------------------------------------------------------------------------------

J5128S     PHS/NJ     S250            $500            80%             $10,000       N/A             NA         Available
8NJSPZ     $10                                                        per member                               eff. 10-1-96
------------------------------------------------------------------------------------------------------------------------------------

J5157S     PHS/NJ     $500            $1,000          70%             $1O,OOO       N/A             NA         Available
9NJSPZ     $10                                                        per member                               eff. 10-1-96
------------------------------------------------------------------------------------------------------------------------------------

J5158S     PHS/NJ     $500            $1,000          80%             $10,000       N/A             NA         Available
10NJSPZ    $10                                                        per member                               eff. 10-1-96
------------------------------------------------------------------------------------------------------------------------------------

J5118S     PHS/NJ     $1,000          $2,000          80%             $lO,OO0       N/A             NA         Available
11NJSPZ    $10                                                        per member                               eff. 10-1-96
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>

*    The Coinsured Charge Limit is the amount of covered charges a member must
     incur each Calendar Year before no Coinsurance is required. Charges for
     Mental or Nervous Conditions and Substance Abuse Treatment are not subject
     to or eligible for the Coinsured Charge Limit.


                                       13
<PAGE>

NEW JERSEY STATUTORY PLANS GROUPS WITH 2-49 EMPLOYEES--HEALTHCARE SOLUTIONS
PASSPORT POS with $0 (Zero) Hospital Copay and $5,000 Coinsured Charge Limit

<TABLE>
<CAPTION>
====================================================================================================================================

Copay      In         Individual      Family          Coinsurance     Coinsured     Family Out      Annual     COMMENTS
Schedule   Network    Deductible      Deductible      (paid by PHS)   Charge        of Pocket       Benefit
           Plans                                                      Limit*        Maximum         Limit
------------------------------------------------------------------------------------------------------------------------------------

<S>        <C>        <C>             <C>             <C>             <C>           <C>             <C>        <C>
J50285     PHS/NJ     $250            $500            80%             $5,000        N/A             NA         Available
5NJSPZF    $5                                                         per member                               eff. 1-1-97
------------------------------------------------------------------------------------------------------------------------------------

J50585     PHS/NJ     $500            $1,000          80%             $5,000        N/A             NA         Available
6NJSPZF    $5                                                         per member                               eff. 1-1-97
------------------------------------------------------------------------------------------------------------------------------------

J51285     PHS/NJ     $250            $500            80%             $5,000        N/A             NA         Available
8NJSPZF    $10                                                        per member                               eff. 1-1-97
------------------------------------------------------------------------------------------------------------------------------------

J51585     PHS/NJ     $500            $1,000          80%             $5,000        N/A             NA         Available
lONJSPZF   $10                                                        per member                               eff. 1-1-97
------------------------------------------------------------------------------------------------------------------------------------

J151185    PHS/NJ     $1,000          $2,000          80%             $5,000        N/A             NA         Available
11NJSPZF   $10                                                        per member                               eff. 1-1-97
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>

*    The Coinsured Charge Limit Is the amount of covered charges a member must
     incur each Calendar Year before no Coinsurance is required. Charges for
     Mental or Nervous Conditions and Substance Abuse Treatment are not subject
     to or eligible for the Coinsured Charge Limit.

                                       14
<PAGE>

NEW JERSEY--GROUPS WITH 50 OR MORE EMPLOYEES

<TABLE>
PASSPORT HMO--HEALTHCARE SOLUTIONS
================================================================================
<S>                   <C>                      <C>
J36000 (5-10NJP)      PHS 5 (Customized)       Healthcare Solutions, eff. 5/1/96
--------------------------------------------------------------------------------
J37000 (15-20,25      PHS 15 (Customized)      Healthcare Solutions, eff. 5/1/96
and 26NJP)
--------------------------------------------------------------------------------
J38000 (11-14NJP)     PHS 5/250 (Customized)   Healthcare Solutions, eff. 5/1/96
--------------------------------------------------------------------------------
J39000 (15-214NJP)    PHS 15/500 (Customized)  Healthcare Solutions, eff. 5/1/96
--------------------------------------------------------------------------------
</TABLE>

                                       15
<PAGE>

NEW JERSEY--GROUPS W1TH 50 OR MORE EMPLOYEES--HEALTHCARE SOLUTIONS
CHARTER POS (Note: NJ Regulations probibit the sale of open access POS plans
with less than a $250 deductible).

<TABLE>
<CAPTION>
====================================================================================================================================

Copay      In         Individual      Family          Coinsurance     Individual    Family Out      Annual     COMMENTS
Schedule   Network    Deductible      Deductible      (paid by PHS)   Out of        of Pocket       Benefit
           Plans                                                      Pocket Max.   Maximum         Limit
------------------------------------------------------------------------------------------------------------------------------------

<S>        <C>        <C>             <C>             <C>             <C>           <C>             <C>        <C>
J3637G     PHS 5      $300            $750            70% of the      $1,800        $4,500          NA         Available for sale
6NJC                                                  next $5,000                                              eff. 5/1/96 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3657G     PHS 5      $5OO            $1,250          70% of the      $2,000        $5,000          NA         Available for sale
7NJC                                                  next $5,OOO                                              eff. 5/1/96 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3638G     PHS 5      $300            $750            80% of the      $l,300        $3,250          NA         Available for sale
9NJC                                                  next $5,000                                              eff. 5/1/96 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3658G     PHS 5      $500            $1,250          80% of the      $l,500        $3,750          NA         Available for sale
10NJC                                                 next $5,000                                              eff. 5/1/96 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3837G     PHS 5/250  $300            $750            70% of the      $1,800        $4,500          NA         Available for sale
11NJC                                                 next $5,OOO                                              eff. 5/1/96 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3857G     PHS 5/250  $500            $1,250          70% of the      $2,000        $5,000          NA         Available for sale
12NJC                                                 next $5,000                                              eff. 5/1/96 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3838G     PHS 5/250  $300            $750            80% of the      $l,300        $3,250          NA         Available for sale
13NJC                                                 next $5,000                                              eff. 5/1/96 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3858H     PHS 5/250  $500            $l,250          80% of the      $1,500        $3,750          NA         Available for sale
14NJC                                                 next $5,000                                              eff. 5/1/96 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3737G     PHS 15     $300            $750            70% of the      $1,800        $4,500          NA         Available for sale
16NJC                                                 next $5,000                                              eff. 5/1/96 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3757G     PHS 15     $500            $1,250          70% of the      $2,000        $5,000          NA         Available for sale
17NJC                                                 next $5,000                                              eff. 5/1/96 (1)
------------------------------------------------------------------------------------------------------------------------------------

13738G     PHS 15     $300            $750            80% ofthe       $l,300        $3,250          NA         Available for sale
l9NJC                                                 next $5 000                                              eff. 5/1/96 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3758G     PHS 15     $500            $1,250          80% of the      $l,500        $3,750          NA         Available for sale
20NJC                                                 next $5,000                                              eff. 5/1/96 (1)
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>


                                       16
<PAGE>

NEW JERSEY--GROUPS WITH 50 OR MORE EMPLOYEES--HEALTHCARE SOLUTIONS
CHARTER POS (Note: NJ Regulations probibit the sale of open access POS plans
with less than a $250 deductible).

<TABLE>
<CAPTION>
====================================================================================================================================

Copay      In         Individual      Family          Coinsurance     Individual    Family Out      Annual     COMMENTS
Schedule   Network    Deductible      Deductible      (pd by PHS)     Out of        of Pocket       Benefit
           Plans                                                      Pocket Max.   Max.            Limit
------------------------------------------------------------------------------------------------------------------------------------
<S>        <C>        <C>             <C>             <C>             <C>           <C>             <C>        <C>
J3957G     PHS        $500            $1,250          70% of the      $2,000        $5,000          NA         Available for sale
21NJC      15/500                                     next $5,000                                              eff. 5/1/96 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3958G     PHS        $500            $1,250          80% of the      $1,500        $3,750          NA         Available for sale
22NJC      15/500                                     next $5,000                                              eff. 5/1/96 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3917G     PHS        $1,000          $2,500          70% of the      $3,700        $9,250          NA         Available for sale
23NJC      15/500                                     next $10,000                                             eff. 1-1-97 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3918G     PHS 5      $1,000          $2,500          80% of the      $2,800        $7,000          NA         Available for sale
24NJC      15/500                                     next $10,000                                             eff. 1-1-97 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3717G     PHS 15     $1,000          $2,500          70% of the      $3,700        $9,250          NA         Available for sale
25NJC                                                 next $10,000                                             eff. 1-1-97 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3718G     PHS 15     $1,000          $2,500          80% of the      $2,800        $7,000          NA         Available for sale
26NJC                                                 next $10,000                                             eff. 1-1-97 (1)
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>


                                       17

<PAGE>

NEW JERSEY--GROUPS W1TH 50 OR MORE EMPLOYEES--HEALTHCARE SOLUTIONS
PASSPORT POS

<TABLE>
<CAPTION>
====================================================================================================================================

Copay      In         Individual      Family          Coinsurance     Individual    Family Out      Annual     COMMENTS
Schedule   Network    Deductible      Deductible      (paid by PHS)   Out of        of Pocket       Benefit
           Plans                                                      Pocket Max.   Max.            Limit
------------------------------------------------------------------------------------------------------------------------------------

<S>        <C>        <C>             <C>             <C>             <C>           <C>             <C>        <C>
J3627G     PHS 5      $200            $500            70% of the      $1,700        $4,250          NA         Available for sale
5NJP                                                  next $5,000                                              eff. 5/1/96 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3637G     PHS 5      $3OO            $750            70% of the      $1,800        $4,500          NA         Available for sale
6NJP                                                  next $5,OOO                                              eff. 5/1/96 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3657G     PHS 5      $500            $1,250          70% of the      $2,000        $5,000          NA         Available for sale
7NJP                                                  next $5,000                                              eff. 5/1/96 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3628G     PHS 5      $200            $500            80% of the      $l,200        $3,000          NA         Available for sale
8NJP                                                  next $5,000                                              eff. 5/1/96 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3638G     PHS 5      $300            $750            80% of the      $1,300        $3,250          NA         Available for sale
9NJP                                                  next $5,OOO                                              eff. 5/1/96 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3658G     PHS 5      $500            $1,250          80% of the      $1,500        $3,750          NA         Available for sale
10NJP                                                 next $5,000                                              eff. 5/1/96 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3837G     PHS 5/250  $300            $750            70% of the      $l,800        $4,500          NA         Available for sale
11NJP                                                 next $5,000                                              eff. 5/1/96 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3857G     PHS 5/250  $500            $l,250          70% of the      $2,000        $5,000          NA         Available for sale
12NJP                                                 next $5,000                                              eff. 5/1/96 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3838G     PHS 5/250  $300            $750            80% of the      $1,300        $3,250          NA         Available for sale
13NJP                                                 next $5,000                                              eff. 5/1/96 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3858H     PHS 5/250  $500            $1,250          80% of the      $1,500        $3,750          NA         Available for sale
14NJP                                                 next $5,000                                              eff. 5/1/96 (1)
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>


                                       18

<PAGE>

NEW JERSEY--GROUPS WITH 50 OR MORE EMPLOYEES--HEALTHCARE SOLUTIONS
PASSPORT POS

<TABLE>
<CAPTION>
====================================================================================================================================

Copay      In         Individual      Family          Coinsurance     Individual    Family Out      Annual     COMMENTS
Schedule   Network    Deductible      Deductible      (pd by PHS)     Out of        of Pocket       Benefit
           Plans                                                      Pocket Max.   Max.            Limit
------------------------------------------------------------------------------------------------------------------------------------
<S>        <C>        <C>             <C>             <C>             <C>           <C>             <C>        <C>
J3727G     PHS 15     $200            $500            70% of the      $1,700        $4,250          NA         Available for sale
15NJP                                                 next $5,000                                              eff. 5/1/96 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3737G     PHS 15     $300            $750            70% of the      $1,800        $4,500          NA         Available for sale
16NJP                                                 next $5,000                                              eff. 5/1/96 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3757G     PHS 15     $500            $1,250          70% of the      $2,000        $5,000          NA         Available for sale
17NJP                                                 next $5,000                                              eff. 5/1/96 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3728G     PHS 15     $200            $500            80% of the      $l,200        $3,000          NA         Available for sale
18NJP                                                 next $5,000                                              eff. 5/1/96 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3738G     PHS 15     $300            $750            80% of the      $1,300        $3,250          NA         Available for sale
19NJP                                                 next $5,000                                              eff. 5/1/96 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3758G     PHS 15     $500            $1,250          80% of the      $1,500        $3,750          NA         Available for sale
20NJP                                                 next $5,000                                              eff. 5/1/96 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3957G     PHS        $500            $1,250          70% of the      $2,000        $5,000          NA         Available for sale
21NJP      15/500                                     next $5,000                                              eff. 5/1/96 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3958G     PHS        $500            $l,250          80% of the      $1,500        $3,750          NA         Available for sale
22NJP      15/500                                     next $5,000                                              eff. 5/1/96 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3917G     PHS        $1,000          $2,500          70% of the      $3,700        $9,250          NA         Available for sale
23NJP      15/500                                     next $10,000                                             eff. 1-1-97 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3918G     PHS        $1,000          $2,500          80% of the      $2,800        $7,000          NA         Available for sale
24NJP      15/500                                     next $10,000                                             eff. 1-1-97 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3717G     PHS 15     $1,000          $2,500          70% of the      $3,700        $9,250          NA         Available for sale
25NJP                                                 next $10,000                                             eff. 1-1-97 (1)
------------------------------------------------------------------------------------------------------------------------------------

J3718G     PHS 15     $1,000          $2,500          80% of the      $2,800        $7,000          NA         Available for sale
26NJP                                                 next $10,000                                             eff. 1-1-97 (1)
------------------------------------------------------------------------------------------------------------------------------------

</TABLE>


                                       19
<PAGE>

                                       NJ
                                   Schedule B
                Contracts Allowances Administrative Service Fee

I. Guardian's Administrative Services Fee (as a percentage of premium)

<TABLE>
<CAPTION>
                                               HMO             POS
                                               ---             ---
<S>                                            <C>            <C>
 Marketing                                     0.63%          0.63%
 Sales                                         1.38%          1.38%
 Administration                                1.30%          1.30%
 Billing/Collections                           1.69%          1.69%
 Advertising                                   0.15%          0.15%
                 Total                         5.15%          5.15%
</TABLE>


II. PHS' Administrative Services Fee (as a percentage of premium)

<TABLE>
<CAPTION>
                                                HERO            POS
                                                ----            ---
<S>                                            <C>            <C>
 Health Services, UR                            1.67%          1.67%
 Net Mgt, MDD, QA                               2.43%          2.43%
 Operations                                     3.58%          3.58%
 Acct Svc., CustSrv.                            1.44%          1.44%
 Marketing                                      0.63%          0.63%
 Sales                                          0.15%          0.15%
 Administration                                 1.30%          1.30%
 Advertising                                    0.15%          0.15%
                       Total                   11.35%         11.35%
</TABLE>
<PAGE>

                                   EXHIBIT A-l

                            HMO REINSURANCE AGREEMENT










                                      EX-1