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                                                                   Exhibit 10(p)






                              REINSURANCE AGREEMENT

                                     between

                 PHYSICIANS HEALTH SERVICES OF CONNECTICUT, INC

                                       and

                             Trumbull, Connecticut

                 THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA

                               New York, New York
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                              REINSURANCE AGREEMENT

     This Reinsurance Agreement (this "Agreement") is made and entered into as
of this 1st day of October, 1996 between PHYSICIANS HEALTH SERVICES OF
CONNECTICUT, INC., a corporation organized under the laws of the State of
Connecticut as a health maintenance organization (the "Company") and THE
GUARDIAN LIFE INSURANCE COMPANY OF AMERICA, a mutual life insurance company
organized under the laws of the State of New York (the "Reinsurer").

     The Company and the Reinsurer mutually agree to enter into the Agreement on
the terms and conditions stated herein. This Agreement is a reinsurance
agreement solely between the Company and the Reinsurer, and the performance of
the obligations of each party under this Agreement shall be rendered solely to
the other parties. In no instance, except as set forth in Article XII, shall
anyone other than the Company or the Reinsurer have any rights under this
Agreement, and the Company shall be and remain solely liable to any insured,
contractholder, physician or other provider or beneficiary under any contract
reinsured hereunder.

                                    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 forms
of each term defined in this Article):
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     "Accounting Period" means the Fiscal Quarter, except that the first
Accounting Period shall be the period commencing with the Effective Date and
ending with the last day of the then current Fiscal Quarter, and the last
Accounting Period shall be the period commencing with the first day of the last
Fiscal Quarter preceding the Terminal Accounting Date and ending on the Terminal
Accounting Date.

     "Administrative Expense" means an expense which will be reimbursable each
Accounting Period and is intended to compensate the Company or the Reinsurer for
a reasonable estimate of the actual cost of performing administrative services
in connection with the HMO Plans, as set forth in the Marketing and Services
Agreement, without provision for profit.

     "Affiliate" means with respect to a specified person, a person that
directly, or indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, the person specified.

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

     "Capitation Agreement" means a health care provider contract pursuant to
which the Company agrees to pay a provider or risk entity a per subscriber fee
in lieu of all or a portion of actual claims made.

     "Capitation Fees" means the per subscriber fees to health care providers
incurred under Capitation Agreements, net of amounts paid or payable to the
Company by providers under such agreements.

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     "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 the Company or PHS (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 of the aggregate value of
the assets of the Company or PHS; or (ii) twenty-five percent (25 %) or more of
any ownership interest in the Reinsurer.

     "Commissions" means commissions and other incentives or bonuses applicable
to the marketing of the HMO Plans.

     "Continuation Plan" has the meaning set forth in Section 8.6.

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

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

     "Direct Paid Claims" means amounts paid to health care providers for
medical claims and/or to subscribers for services covered by HMO Plans,
including withholds paid to providers, but not including Capitation Fees.

     "Direct Paid Premium" means premiums received.

     "Earned Premium" shall consist of the item shown on Schedule C, line I.A.7.

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     "Effective Date" shall have the meaning set forth in Section 2.1.

     "Fiscal Quarter" means each of the four consecutive three-month periods in
a fiscal year commencing on January 1 of each year and ending on December 31 of
that calendar year.

     "HMO Plans" means commercial contracts for health care services provided by
Company to Contractholders in the Service Area utilizing the Company's network
of healthcare providers 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.

     "Insurance Taxes" means all taxes, licenses and fees directly imposed on
the HMO Plans reinsured hereunder and shall be given the same meaning as
Insurance Taxes, Licenses and Fees, Excluding Federal Income Taxes in the
Summary of Operations Schedule in the NAIC Life, Accident and Health Convention
Blank which is taken from the Taxes, Licenses and Fees Exhibit, or similar
entries on financial statements filed by the Company. Such term shall not
include any franchise or other federal, state or local tax measured by net
income.

     "Interest Compensation Rate" means the rate of interest defined in Schedule
D as applicable to delayed payments.

     "LIBOR" means, at any time of determination, the London Interbank Offered
Rate paid on U.S. dollar deposits for the applicable period of time as published
under "Money Rates" in the New York City edition of the Wall Street Journal or,
if

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there is no such publication or statement therein as to LIBOR, then in any
publication used in the New York City financial community.

     "Marketing and Services Agreement" shall have the meaning set forth in
Section 3.1.

     "PHCS" shall mean Private Health Care Systems Incorporated, a corporation
with its corporate offices in Waltham, Massachusetts that develops medical
provider networks and provides utilization review services.

     "PHS" shall mean Physicians Health Services, Inc., a Delaware corporation
and the parent of the Company.

     "Profit or Loss" shall have the meaning set forth in Article X.

     "Quarterly Accounting Report" means the report required to be prepared in
accordance with Section 7.2 and providing the data as shown on Schedules C and
F.

     "Quarterly Settlement" means the net amount due and payable to any party
with respect to any Accounting Period as set forth in Section 7.3.

     "Renewal Date" means, with respect to a HMO Plan, the date that is the
anniversary of the day on which the liability of the Company began under such
HMO Plan.

     "Reserves" means amounts shown in the Company's annual statement as filed
with the State of Connecticut as reserves for the HMO Plans.

     "Service Area" means the State of Connecticut.

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     "Stop Loss Reinsurance" means reinsurance other than the reinsurance under
this Agreement obtained by the Company and provided in connection with HMO
Plans.

     "Stop Loss Reinsurance Premium" means consideration paid by the Company for
Stop Loss Reinsurance provided.

     "Stop Loss Reinsurance Recoveries Received" means amounts collected
pursuant to Stop Loss Reinsurance.

     "Terminal Accounting and Settlement" means the final accounting and payment
of any amount due any party upon the termination of this Agreement, as described
in Section 9.1.

     "Terminal Accounting Date" shall have the meaning set forth in Section 9.1.

     "Withholds" means amounts withheld by the Company from payments of claims
submitted by primary care physicians and specialists.

                                   ARTICLE II

                              REINSURANCE COVERAGE

     2.1 Coverage. (a) Effective October 1, 1996 (the "Effective Date"), the
Company agrees to cede to the Reinsurer fifty percent (50%) of the risks under
the HMO Plans, all as more specifically described in Schedule A, and the
Reinsurer agrees to indemnify the Company against fifty percent (50%) of the
risks under such HMO Plans.

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     (b) The parties acknowledge that, pursuant to the terms of Schedule C
(Selection Adjustment) to the Marketing and Services Agreement, the parties
agreed to apportion profit or loss realized on the HMO Plans sold under the
Marketing and Services Agreement. The parties also agreed to apportion profit or
loss realized on the Reinsurer's Health Insurance Contracts sold under the
Marketing and Services Agreement. As of the date hereof, the loss realized on
the HMO Plans sold under the Marketing and Services Agreement is $3,800,000 and
the loss realized on the Health Insurance Contracts sold under the Marketing and
Services Agreement is $500,000. The parties further acknowledge and agree that
the net loss amount of $3,300,000 (the "Net Loss Amount"), payable by the
Reinsurer to the Company, will be deducted from the profit portion of the
amounts otherwise payable by the Company to the Reinsurer pursuant to Section
7.3 below. After the entire Net Loss Amount has been paid to the Company, profit
and loss shall be allocated between the parties as set forth in Article VII
below. The amounts set forth herein shall be subject to quarterly settlement and
may be subject to change as mutually agreed to by the Company and Reinsurer.

     2.2 Plan of Reinsurance. The reinsurance hereunder shall be on a
coinsurance basis. Each party agrees to establish and maintain Reserves in an
amount appropriate for the risks assumed by such party, as set forth in Section
2.1.

     2.3 Conditions. The reinsurance hereunder is subject to the same
limitations and conditions as the HMO Plans, except as otherwise expressly
provided for in this Agreement.

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     2.4 Exclusions. The reinsurance hereunder does not apply to the following
risks: (i) any portion of the risk under any HMO Plan issued by the Company
other than the risk reinsured hereunder; (ii) any HMO Plan issued and delivered
in a jurisdiction in which issuance and delivery of such contract constituted
the doing of business where the Company was not properly licensed; and (iii)
those risks for which the Reinsurer is not liable pursuant to the provisions of
Section 3.11 hereof.

                                   ARTICLE III

                               GENERAL PROVISIONS

     3.1 Contract Administration. The Company and the Reinsurer each shall have
responsibility for certain aspects of the marketing and administration of the
HMO Plans, in accordance with the Amended and Restated Marketing and Services
Agreement dated as of October 1, 1996 between the Reinsurer, the Company and PHS
(which amended and restated in its entirety the Marketing and Services Agreement
dated December 2, 1994) (the "Marketing and Services Agreement").

     3.2 Non-Solicitation. (a) During the term of this Agreement, the Reinsurer
shall not contact, solicit or contract for services with any health care
provider in the Service Area under contract with the Company. In addition,
during the term of this Agreement, and following its termination, the Reinsurer
will not provide any party with lists of health care providers under contract
with the Company or non-public information concerning contracts between the
Company (or its Affiliates) and its health care providers under contract;
provided, however, that provider lists must be made available to the Departments
of Health or Insurance of the State of Connecticut, to

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prospective Contractholders, to the Reinsurer's insureds and as otherwise
required under applicable law. This Section 3.2 shall not apply (i) to
contracting efforts by third parties, including, but not limited to, PHCS acting
on behalf of the Reinsurer, for the purpose of developing managed care networks,
provided, however, that, the names of health care providers solicited by such
third parties shall not have been furnished by the Reinsurer, its employees or
agents, or (ii) following the Termination Date of this Agreement, as described
in the provisions of Article VIII hereof. The Reinsurer further agrees not to
replace a HMO Plan with a PHCS managed health care plan during the term of this
Agreement.

     (b) No party, nor any of its Affiliates, shall contact, solicit or contract
with any other party's full-time employees who have been engaged in the
activities covered by this Agreement without the consent of such other party.

     3.3 Inspection. Any party, or its designated representative, may inspect,
at the offices of the Company or the Reinsurer, as the case may be, where such
records are located, and conduct reasonable audits of, the papers and any and
all other books or documents of the Company or the Reinsurer reasonably relating
to the HMO Plans and the administrative responsibilities hereunder, during
normal business hours for such period as this Agreement is in effect or for as
long thereafter as the Company or the Reinsurer, as the case may be, seeks
performance by the other party pursuant to the terms of this Agreement. The
information obtained shall be used only for purposes relating to the reinsurance
provided under this Agreement and shall not be disclosed to any person without
the express permission of the other party, except to the extent that

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disclosure is required by law. Each party's rights under this Section 3.3 shall
survive termination of this Agreement.

     3.4 Misunderstandings and Oversights. If any delay, omission, error or
failure to pay amounts due or to perform any other act required by this
Agreement is unintentional and caused by misunderstanding or oversight, the
Company and the Reinsurer 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 parties in writing promptly upon discovery of the
misunderstanding or oversight. The parties shall act to correct the error,
omission or oversight within twenty (20) calendar days of notification of the
problem. This Section 3.4 shall not be construed as a waiver by any party of its
right to enforce strictly the terms of this Agreement.

     3.5 Reinstatements. If a HMO Plan reinsured hereunder that was terminated
or lapsed is reinstated while this Agreement is in effect, the reinsurance for
such HMO Plan shall be reinstated automatically as if such HMO Plan had not been
terminated or lapsed. All amounts received in connection with such reinstatement
shall be treated as Direct Paid Premiums.

     3.6 Contract Changes or Reserve Changes. The Company and the Reinsurer
shall share, based upon the percentages set forth in Section 2.1 and Schedule A,
in any increase or decrease in the Company's liability that results from any
change in the terms or conditions of any HMO Plan reinsured hereunder or in the
calculation of Reserves. The Company must provide written notification to the
Reinsurer within

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fifteen (15) calendar days after any such change, if such change can reasonably
be expected to have a significant effect on the transactions contemplated by
this Agreement.

     3.7 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 and the HMO Plans remain reinsured hereunder. 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 the payment of commissions.

     3.8 Amendment and/or Termination Upon Failure to Comply. In the event that
it is determined by an insurance or health regulatory authority, the Internal
Revenue Service or any other federal, state or local regulatory authority or by
any party to this Agreement upon the advice of an insurance or health regulatory
authority or the Internal Revenue Service that this Agreement fails to conform
to, or that the intent of this Agreement cannot be effected as a result of, the
requirements of existing applicable laws and regulations and that this Agreement
may be brought into conformity with said requirements, or the intent of this
Agreement may be effected, only by means of a material change to this Agreement,
or in the event that such laws or regulations are changed subsequent to the
Effective Date and such change has a material adverse effect on any party or
requires a material change to this Agreement in order for this Agreement to
conform with applicable laws and regulations or for its intent to be

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effected, the parties shall exercise reasonable efforts to reach an agreement to
amend this Agreement so as to return the parties to the economic position that
they would have been in had no such change occurred or so that both parties
share the economic detriment of such change proportionately. If the parties are
unable to reach an agreement to amend the Agreement, then the differences
between the parties shall be resolved through arbitration in accordance with the
provisions of Article XIII. In the event that any required change is not
material, this Agreement shall be amended in accordance with such requirement.

     3.9 Notification of Disapproval or Change in Law. The Company shall
promptly notify the Reinsurer of any actual or anticipated disapprovals or
required changes regarding this Agreement that are made by any insurance or
health regulatory authority or taxing authority and of any change in the laws,
regulations or rulings affecting this Agreement or related documents. The
Reinsurer shall be allowed to participate in the defense of this Agreement or
related documents on its own behalf with such authority after consultation with
the Company.

     3.10 Setoff. It is expressly understood that any debts or credits, matured
or unmatured, liquidated or unliquidated, arising or incurred pursuant to the
terms hereof, including but not limited to such debts and credits arising under
Articles IV, V and VI shall, at all times and under all circumstances relevant
to the rights and liabilities of the parties to this Agreement, be deemed mutual
debts or credits, as the case may be, and shall be set off, and only the net
balance shall be allowed or paid.

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     3.11 Limitations on Liability. (a) The Reinsurer shall not indemnify or be
liable pursuant to this Agreement or otherwise for any of the Company's risk, to
the extent any damages result from the negligent acts or omissions to act,
reckless or intentional wrongs, fraud, oppression or bad faith of the Company.
The Reinsurer shall be liable and indemnify the Company fully for all losses
arising from the negligent acts or omissions to act, reckless or intentional
wrongs, fraud, oppression or bad faith of the Reinsurer acting in connection
with a HMO Plan reinsured hereunder.

     (b) The Company does not indemnify and shall not be liable pursuant to this
Agreement or otherwise for any of the Reinsurer's risk, to the extent any
damages result from the negligent acts or omissions to act, reckless or
intentional wrongs, fraud, oppression or bad faith of the Reinsurer. The Company
shall be liable and indemnify the Reinsurer fully for all losses arising from
the negligent acts or omissions to act, reckless or intentional wrongs, fraud,
oppression or bad faith of the Company acting in connection with a HMO Plan
reinsured hereunder.

     (c) The Reinsurer shall be liable, based on the applicable percentages set
forth in Section 2.1 and Schedule A, and subject to the election permitted by
Section 6.2, for any losses arising from non-negligent acts or omissions to act
taken by the Company in good faith pursuant to HMO Plans reinsured hereunder.

     (d) For purposes of this Agreement, any damages, claims, liabilities or
other expenses for which the Reinsurer shall be liable shall be net of the
appropriate share of any recoveries from third parties, including, without
limitation, recoveries under Stop-Loss Reinsurance Contracts.

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     (e) The Reinsurer shall not be liable for any damages incurred by the
Company or the Reinsurer to the extent such liability or damages arise from the
action or actions of a health care provider or health care facility in
connection with the HMO Plans reinsured hereunder.

     3.12 Exclusivity. The Company and the Reinsurer shall not enter into an
arrangement with other parties similar to this Agreement for reinsurance of
Managed Care Contracts (as defined in the Marketing and Services Agreement)
offered in the Service Area, except as expressly permitted under the Marketing
and Services Agreement.

     3.13 Press Releases. No public statement or press release regarding the
existence of this Agreement or the terms thereof shall be made by any party
hereto without the prior written consent of the other parties, except as
required by applicable laws, ordinances, rules and regulations.

     3.14 Restrictions on the Reinsurer and the Company Relating to Other
Agreements. During the period from the Effective Date through the last date on
which the provisions of this Agreement are in effect, the Reinsurer and the
Company shall be prohibited from, directly or indirectly, entering into any
contract, lease, sublease, license, sublicense, promissory note, evidence of
indebtedness or other contract or commitment (whether oral or written), which
will, or can reasonably be expected to at any time, place any material
restriction or restrictions on such party's ability to perform any or all of its
obligations under this Agreement; provided, however, that, nothing

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herein shall limit either party's right to enter into a Change of Control
transaction in accordance with the provisions set forth herein.

     3.15 Investigations. Each party to this Agreement shall immediately notify
the other parties, in writing, of any and all investigations of such party or
its directors, principal officers or shareholders conducted by any federal,
state or local governmental or regulatory authority other than routine
examinations or surveys by state insurance or health regulatory authorities and
federal or state tax authorities.

     3.16 Change of Control. Each party shall fully disclose the details of any
pending Change of Control known to it to the other party, and shall provide the
other party with copies of any and all applications for approval therefor made
to Federal, state or local regulatory authorities. Such disclosure shall be made
prior to or concurrent with notification and/or application for approval to such
Federal, state or local regulatory authorities of a Change of Control. In the
event that such Change of Control shall be approved, the party that intends to
undergo the Change of Control shall notify the other party immediately thereof
and the other party shall have the rights set forth in Section 8.6.

     3.17 Reinsurance or Sale of HMO Plans. (a) The Company agrees that, during
the period in which this Agreement is in effect, it shall not reinsure. sell or
assign the HMO Plans to another entity (other than in connection with Stop Loss
Reinsurance).

     (b) Notwithstanding paragraph (a) above, this Section 3.17 shall not
restrict the ability of the Company to (i) enter into a merger or consolidation,
(ii) effect a sale

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of all or a portion of its capital stock or (iii) effect a sale of its business
as an entirety or substantially as an entirety; provided, however, that the
Company may not enter into a transaction listed in (i), (ii) or (iii) above with
another entity unless such other entity provides the Reinsurer with a writing,
in form and substance satisfactory to the Reinsurer which shall state that the
entity agrees to be bound by the terms of this Agreement to the same extent and
effect as if such entity had been a party to this Agreement.

     3.18 Commission Scale and Commission Scale Changes. Commission payments
made with respect to any HMO Plans reinsured hereunder shall be made according
to the same commission scale used by the Company with respect to the specific
types of products listed in Schedule A, or substantially similar products, that
are not subject to this Agreement, as that scale may be changed from time to
time.

     3.19 Stop-Loss Reinsurance. The Company agrees, during the period that this
Agreement is in effect, that it will maintain Stop-Loss Reinsurance with respect
to the HMO Plans in effect, with deductibles, coverages and limits of liability
that are substantially the same as those that apply under the Stop Loss
Reinsurance contract or contracts of the Company that are in effect on the
Effective Date, a copy or copies of which are attached as Exhibit I; provided,
however, that each Stop Loss Reinsurance contract or contracts of the Company
relating to HMO Plans must provide coverage with respect to claims relating to
any periods during which the Company is obligated to provide services with
respect to HMO Plans, without regard to (i) the failure of the Company to remain
qualified to conduct the business for which it is organized, or (ii)

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the insolvency or the commencement of supervision, conservation, rehabilitation,
liquidation or similar proceedings against the Company. In the event that any
Stop Loss Reinsurance contract issued to the Company does not meet the
requirements of this Section 3.l9 at the Effective Date, or at any time
thereafter, the Company will obtain substitute Stop Loss Reinsurance meeting
such requirements from a qualified reinsurer, including the Reinsurer.

     3.20 Statement of Actuarial Opinion. Within forty-five (45) calendar days
after the end of the calendar year, the Company shall provide the Reinsurer with
a Statement of Actuarial Opinion certifying the adequacy of the reserves which
are covered under this Agreement. In addition, the Actuarial Opinion must state
whether or not the reserves covered under this Agreement meet the minimum
standards of all states where the Company is licensed, and if not the difference
between the Company's reserves and state minimums. The Actuarial Opinion shall
meet the requirements as set forth in the NAIC's Actuarial Opinion and
Memorandum Regulation. The Opinion shall be signed by the Company's "Appointed
Actuary."

                                   ARTICLE IV

                             PREMIUMS AND RESERVES

     4.1 Premiums - HMO Plans. After the Net Loss Amount described in Section
2.1(b) above is satisfied, Premiums under HMO Plans received by the Reinsurer,
pursuant to the terms of the Marketing and Services Agreement, shall be
allocated to the Company and the Reinsurer in accordance with the applicable

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percentages set forth in Section 2.1 and in Schedule A, and the portion of the
Premiums allocated to the Reinsurer shall constitute the consideration in
respect of the Reinsurer's acceptance of risk under this Agreement. The portion
of Premiums allocated to the Company shall be paid over to the Company in
accordance with the settlements required by Section 7.3 of this Agreement. Until
the Net Loss Amount is satisfied, the portion of the Premiums allocated to the
Reinsurer shall also be paid over to the Company in accordance with Section
2.1(b) above.

     4.2 HMO Plan Reserves. With respect to the HMO Plans reinsured hereunder,
each of the Company and the Reinsurer shall establish and maintain Reserves in
accordance with the risk assumed by each party and all applicable regulatory
requirements.

                                    ARTICLE V

                               EXPENSE ALLOWANCE

     5.1 Administrative Expenses. Each party shall be entitled to reimbursement
for its Administrative Expenses (not including pre-marketing expenses),
identified in Schedule B, for each Accounting Period. Such Administrative
Expenses, plus any Insurance Taxes and Commissions, paid by such party with
respect to the HMO Plans during the Accounting Period, shall be considered
reimbursable expenses.

     5.2 Payment. The Company and the Reinsurer shall be reimbursed for the
amounts shown as Company Expenses or Reinsurer Expenses, as set forth in Section
7.3 below.

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                                   ARTICLE VI

                                     CLAIMS

     6.1 Notice of Claim. Upon receipt of any claim on any HMO Plan, which claim
is reasonably anticipated to exceed fifty thousand dollars ($50,000), the
Company shall promptly notify the Reinsurer of such claim. Copies of
notification, claim papers, and proofs shall be furnished by the Company to the
Reinsurer upon request.

     6.2 Determination of Claims by the Company. The Reinsurer will accept the
decision of the Company with respect to the payment of a claim under a HMO Plan;
provided, however, that the Company shall promptly advise the Reinsurer of the
Company's intention to contest a claim under a HMO Plan, and the Reinsurer shall
have the right to advise and assist the Company in its determination of
liability and in the best procedure to follow with respect to any such claim of
doubtful validity. The Company and the Reinsurer shall share, in accordance with
the applicable percentages set forth in Section 2.1 and Schedule A, all expenses
incurred in connection with contesting, compromising or settling claims under a
HMO Plan, subject to the limitations of Section 3.11. Such expenses may
include, but are not limited to, all costs and expenses of investigation,
settlement of claims, litigation costs and judgments. If, however, the Reinsurer
has advised the Company that a contested claim should be paid, and elects to
assume liability for its applicable percentage (as set forth in Section 2.1 and
Schedule A) of the claim as originally presented, the Reinsurer shall not share
in any additional costs or expenses associated with such claim.

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                                  ARTICLE VII

                            ACCOUNTING AND REPORTING

     7.1 Reinsurance Accounting. The Company shall maintain separate books or
details of account with respect to the HMO Plans reinsured hereunder, setting
forth the data required in Schedules C and E.

     7.2 Quarterly Accounting Reports. Following the end of each Accounting
Period, the Company shall supply the Reinsurer with a Quarterly Accounting
Report providing the data required in Schedules C and E. The Quarterly
Accounting Report shall be submitted within forty-five (45) calendar days of the
end of each calendar quarter.

     7.3 Settlements. Settlement of amounts payable between the Company and the
Reinsurer shall be made in a reasonably expeditious manner once the amounts or
estimates are known or determined. All settlement payments shall be made by wire
transfer with same or next day availability unless otherwise agreed.

     (a) Weekly Settlements. The Reinsurer shall make reimbursement payments to
the Company for estimated weekly cash claims paid by the Company. Such estimates
are to be mutually determined, and appropriately adjusted from time to time, to
reasonably approximate the timing and amounts of cash claim expenditures made by
the

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Company and to minimize the quarterly settlement amounts with respect to claims.
Such payments are due weekly based upon a mutually agreed upon schedule.

     (b) Monthly Settlements. The Reinsurer shall make reimbursement payments to
the Company monthly for any actual or estimated monthly administrative expenses,
premium taxes, licenses, fees or assessments incurred by the Company. Such
payments are due within 20 Business Days after the end of each month in which
they were incurred. The Reinsurer's actual or estimated administrative or
commission expenses incurred are also deemed payable at that time. By mutual
agreement, certain expenses may be added to or deleted from this monthly
reimbursement.

     (c) Quarterly Settlements. Based upon the Quarterly Accounting Reports,
including Schedules C and E, settlement payment shall be made to the Company or
Reinsurer, as the case may be, within 45 calendar days from the end of such
quarter. If such reports or schedules are not finalized within this time frame,
a reasonable estimated payment shall be made followed by an adjustment payment.
The Quarterly Settlement payment shall represent settlement, net of any interim
reimbursements or other related settlement payments, of all amounts due during
that quarter and any mutually agreed upon adjustments to prior periods. The
quarterly calculation of this payment shall be substantially in the form of
Schedule E with any positive amounts listed on Line 24 of such Schedule being
payable from the Reinsurer to the Company and any negative amounts being payable
from the Company to the Reinsurer. For the


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purpose of calculating interest on delayed payments relating to this quarterly
settlement payment, the parties agree that the due date is the 15th day (unless
such 15th day falls on a day other than a Business Day, in which case the due
date is the Business Day immediately preceding such 15th day) of the middle
month of the settlement quarter unless otherwise mutually agreed.

     (d) Other Settlements. Other settlement payments between the Company and
the Reinsurer such as payment adjustments, preliminary quarterly settlements,
withhold payout reimbursements or interest compensation may be made separately
or along with other settlement payments upon mutual agreement. For the purpose
of calculating interest on delayed payments relating to these payments, due
dates are to be mutually agreed upon if not otherwise specified in this
Agreement.

     7.4 Reconciliation. Each party shall have the right to review all
individual components of transactions entered into each Quarterly Accounting
Report, such as Premiums received, Commissions and Insurance Taxes, claims
incurred or paid, and similar items. The parties shall have a reasonable period
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 forty-five (45) calendar days of the receipt
of notice that additional amounts are due.

                                       22
<PAGE>

     7.5 Best Efforts to Supply Actual Data. In preparing all reports required
in this Agreement, the Reinsurer and the Company shall make their best efforts
to supply the actual data. If the actual data cannot be supplied with the
appropriate report, the Reinsurer or the Company shall produce best estimates,
and shall provide amended reports based on actual data no more than forty-five
(45) days after such report was originally due.

     7.6 Interest Delayed Payments. Should any payment in connection with the
Settlements due the Company or the Reinsurer as set forth in Section 7.3 above
be delayed beyond its due date as defined or determined, such delayed payment
shall accrue interest during such period of delay at the Interest Compensation
Rate as defined on Schedule D. Interest is to be calculated based upon an
actual/365 day basis. Any such interest accrued or paid shall not be included in
Schedule C as a jointly shared income or expense item, but rather be paid
directly to the deficient party either separately or as a separate item added to
the Schedule E settlement. The application of this calculation shall also apply
to any over payments, with interest accruing back to the deficient party.

                                       23
<PAGE>

                                  ARTICLE VIII

                            DURATION AND TERMINATION

     8.1 Duration. Except as otherwise provided herein, this Agreement shall be
unlimited in duration.

     8.2 Commencement of Liability. The liability of the Reinsurer on
reinsurance ceded hereunder shall commence on the later of the Effective Date
and the date the liability of the Company commences under a HMO Plan reinsured
hereunder.

     8.3 Termination of Liability. Except as provided in the next sentence of
this Section 8.3, the liability of the Reinsurer with respect to any HMO Plan
shall terminate on the date the liability of the Company on such HMO Plan is
terminated. If this Agreement is terminated as provided in this Article VIII,
the Reinsurer's liability with respect to HMO Plans that remain in force shall
terminate on the day that all Direct Paid Claims incurred prior to the date of
such termination are satisfied.

     8.4 Termination of Agreement. Either party shall have the right to
terminate this Agreement without cause upon the giving of one hundred eighty
(180) days advance written notice to the other party; provided, however, that,
the liability of the Reinsurer with respect to HMO Plans that remain in force
will terminate on the day that all Direct Paid Claims incurred prior to the date
of such termination are satisfied. The Contract Termination Date under this
Section 8.4 shall be the 180th day following the giving of the notice required
by this Section 8.4.

     8.5 Automatic Termination. If, at the end of an Accounting Period, none of
the HMO Plans is in force, this Agreement shall automatically terminate. In the
event

                                       24
<PAGE>

of termination pursuant to this Section 8.5, the last day of such Accounting
Period shall be the Contract Termination Date.

     8.6 Termination Subsequent to a Change of Control. In the event of a Change
of Control of the Company (for purposes of this Section 8.6, the term "Company"
shall include PHS) or the Reinsurer, the party not undergoing the Change of
Control may elect to terminate this Agreement. In the event that this Agreement
is terminated as a result of a Change of Control: (i) without any further action
required of either party, the Marketing and Services Agreement shall be deemed
to be terminated as of the effective date of the Change of Control, except with
respect to the provisions regarding the administration of the HMO Plans
continued under this Section 8.6 which provisions shall be deemed to survive
such termination for the period set forth in clause (ii) of this sentence; and
(ii) the party not undergoing the Change of Control may elect to continue this
Agreement solely with respect to reinsurance of any case that was originally
written as an HMO Plan and that was in force on the Contract Termination Date,
until the tenth (10th) succeeding Renewal Date applicable to such HMO Plan, or
continuation managed care contract issued by the Company (collectively,
"Continuation Plans") following the Contract Termination Date. The Contract
Termination Date under this Section 8.6 shall be the effective date of the
Change of Control.

     8.7 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

                                       25
<PAGE>

this Agreement or the Marketing and Services Agreement, 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
the Marketing and Services Agreement that is reasonably satisfactory to the
other party, the defaulting party shall be allowed thirty (30) calendar days
from receipt of 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 upon delivery of written notice of such
termination to the defaulting party, which shall be effective on 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 Marketing and Services Agreement, the other party shall have
the right to terminate this Agreement 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.

     (c) The Contract Termination Date under this Section 8.7 shall be the date
of receipt of the notice of termination.

                                       26
<PAGE>

     8.8 Termination of Agreement Upon the Occurrence of Certain Events. (a)
Upon the occurrence of either of the following events:

     (i) one of the parties to this Agreement fails to remain in good standing
under the laws of its state of domicile, or fails for any reason to remain
qualified to engage in the transaction contemplated by this Agreement under
applicable laws, ordinances, rules or regulations; or

     (ii) a voluntary or involuntary proceeding is commenced in any state by or
against one of the parties to this Agreement for the purpose of supervising,
conserving, rehabilitating or liquidating such party; this Agreement may be
terminated at the election of the other party pursuant to a written notice.

     The Contract Termination Date under this Section 8.8 will be the day of
receipt of the notice of termination. In the event that the Company shall be
subject to (i) or (ii) above, the Reinsurer shall have the exclusive right
(subject to appropriate regulatory approvals) to acquire the HMO Plans or to
require the Company to assign the HMO Plans to a designated entity authorized to
operate a health maintenance organization in the geographic areas in which the
Company operates.

     8.9 Termination for Material Change in PHS Network. In the event that the
PHS Network (as that term is defined in the Marketing and Services Agreement)
undergoes a material change within the meaning of Section 6.3 of the Marketing
and Services Agreement, Company shall be allowed thirty (30) calendar days to
present to

                                       27
<PAGE>

Reinsurer a plan to cure such Material Change that is reasonably satisfactory to
Reinsurer. If a reasonably satisfactory plan to cure the Material Change is not
submitted within that time, or if the plan is not carried out according to its
terms, Reinsurer shall have the right to terminate this Agreement upon delivery
of written notice of such termination to Company, which shall be effective upon
receipt (the date of receipt being the Contract Termination Date under this
Section 8.9), without prejudice to any other rights or remedies available to
Reinsurer.

                                   ARTICLE IX

                     PAYMENTS UPON TERMINATION OF AGREEMENT

     9.1 Payments on Termination. (a) In the event that this Agreement shall be
terminated pursuant to Article VIII, a net accounting and settlement as to any
balance due under this Agreement shall be undertaken by the parties to this
Agreement (the "Terminal Accounting and Settlement"), which calculations shall
be performed as of the day that is one (1) year from the date that the liability
of the Reinsurer shall have terminated (the "Terminal Accounting Date"). During
the period between the termination of this Agreement and the Terminal Accounting
Date, Direct Paid Claims that accrued prior to the termination of this Agreement
shall continue to be paid, and Reserves shall continue to be held, in accordance
with the terms set forth herein.

     (b) The Company shall supply the Reinsurer with final Schedules C and D
which shall show the Terminal Accounting and Settlement. If the Terminal
Accounting and Settlement shows that the Company owes the Reinsurer, then the
Company shall pay the amount owing to the Reinsurer. If the Terminal Accounting
and Settlement

                                       28
<PAGE>

shows that the Reinsurer owes the Company, then the Reinsurer shall pay the
amount owing the Company. Such Schedules shall be supplied by the Company within
the period agreed by the parties.

     (c) Any payment required under the Terminal Accounting and Settlement by
the Company shall be paid by the Company no later than the day on which the
final Schedules C and E, as required by Section 9.l(b), are due. The Reinsurer
shall make any payment required to be made by the Reinsurer hereunder within ten
(10) calendar days of receipt of such final schedules. In the event that the
calculation for the payment required under the Terminal Accounting and
Settlement cannot be accurately calculated by such date, then an estimate shall
be paid with a supplemental accounting being made when the accurate information
shall become available.

     9.2 Supplemental Accounting. In the event that, subsequent to the Terminal
Accounting and Settlement, an adjustment is made with respect to any amount
taken into account in the Terminal Accounting and Settlement, or in the event
that the Company pays a Direct Paid Claim that accrued prior to the termination
hereof, a supplemental accounting shall be made. Any net amount owed to the
Reinsurer or the Company by reason of such supplemental accounting, plus any
interest due pursuant to Section 7.6, shall be paid promptly upon the completion
of such supplemental accounting.

                                       29
<PAGE>

                                    ARTICLE X

                         CALCULATION OF PROFIT AND LOSS

     10.1 Determination and Allocation of Profit or Loss. The Company shall
calculate Profit or Loss with respect to the HMO Plans, and the Reinsurer or the
Company, as appropriate, shall make settlements as required by Section 7.3 or
Section 9.1, as appropriate, according to the calculations as shown on Schedules
C and E and shall be made part of each Quarterly Accounting Report.

                                   ARTICLE XI

                              CONDITION PRECEDENT

     11.1 Condition Precedent. When under insurance, public health or other
applicable laws or regulations, approval of arrangements of the type
contemplated by this Agreement by one or more Federal, state or local
governmental or regulatory authorities is required, the receipt by the Company
and the Reinsurer of any and all such approvals shall be a condition precedent
to the other party's liability under this Agreement. Subject to Section 11.2, if
this condition precedent is not met by the Company or the Reinsurer by the
Effective Date, this Agreement shall be void as of the Effective Date.

     11.2 Extension of Time. In the event that the necessary approvals set forth
in Section 11.1 have not been obtained by the Company or the Reinsurer as of the
Effective Date, the parties may mutually agree to modify the Effective Date of
this Agreement.

                                       30
<PAGE>

     11.3 Cooperation of the Parties. Each of the Reinsurer and the Company
shall each use its best efforts to cooperate with and assist the other parties
in obtaining the necessary approvals referred to in Section 11.1.

                                   ARTICLE XII

                           INSOLVENCY OF THE COMPANY

     12.1 Payments by the Reinsurer. In the event of the insolvency of the
Company, payments due the Company on all reinsurance made, ceded, renewed or
otherwise becoming effective under this Agreement shall, subject to Section
12.2, be payable by the Reinsurer directly to the Company or to its liquidator,
receiver, or statutory successor on the basis of the liability of the Company
and the Reinsurer under the HMO Plans reinsured hereunder without diminution
because of the insolvency of the Company.

     12.2 Claims. In the event of the insolvency of the Company, the Reinsurer
shall be given written notice of the pendency of a claim against the insolvent
Company on a HMO Plan reinsured hereunder within a reasonable time after such
claim is filed in the insolvency proceeding. During the pendency of such claim,
the Reinsurer may investigate such claim and interpose, at its own expense, in
the proceeding where such claim is to be adjudicated, any defense or defenses
which it may deem available to the Company or its liquidator or receiver or
statutory successor. The expense thus incurred by the Reinsurer shall be
chargeable' subject to court approval, against the insolvent Company as part of
the expense of liquidation to the extent of a proportionate share of

                                       31
<PAGE>

the benefit which may accrue to the Company solely as a result of the defense
undertaken by the Reinsurer. Where two or more assuming reinsurers are involved
in the same claim and a majority in interest elect to interpose defenses to such
claim, the expense shall be apportioned in accordance with the terms of this
Agreement as though such expense had been incurred by the Company.

                                  ARTICLE XIII

                                   ARBITRATION

     13.1 Appointment of Arbitrators. In the event of any disputes or
differences arising hereafter between the contracting parties with respect to
any transaction, matter or issue arising from or relating in any way to this
Agreement on which agreement between the parties hereto cannot be reached, the
same shall be decided by arbitration. Three arbitrators will decide any dispute
or difference. The arbitrators must be disinterested officers or retired
officers of health maintenance organizations or managed health care companies,
or insurance companies with experience in managed health care, other than the
parties to this Agreement or their Affiliates. Each of the Company and the
Reinsurer agrees to appoint one of the arbitrators with the third, the "Umpire,"
to be chosen by the other arbitrators. In the event that either such party
should fail to choose an arbitrator within 30 days following a written request
by the other party to do so, the requesting party may choose an Umpire before
entering upon arbitration. In the event that the two arbitrators shall not be
able to agree on the choice of the Umpire within 30 days following their
appointment, each arbitrator shall nominate five

                                       32
<PAGE>

candidates within 10 days thereafter, four of whom the other arbitrator shall
decline, and the Umpire shall be chosen from the two remaining nominees by the
President of the American Arbitration Association.

     13.2 Decision of Arbitrators: Expenses. The arbitrators shall consider
customary and standard practices in the HMO and managed health care insurance
businesses. 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. Each party shall bear the expense of its own arbitrator and outside
attorney fees, and shall jointly and equally bear with the other party the
expenses of the third arbitrator.

     13.3 Applicable Law: Survival. Any arbitration instituted pursuant to this
Article XIII shall be held in Connecticut and the laws of the State of
Connecticut and, to the extent applicable, the Federal Arbitration Act shall
apply. This Article XIII shall survive termination of this Agreement.

     13.4 Other Actions. Submission of a matter to arbitration shall be a
condition precedent to any right to institute a proceeding at law or in equity
concerning such matter, except for injunctive or other provisional relief
pending the arbitration of a matter subject to arbitration pursuant to this
Agreement.

                                   ARTICLE XIV

                         REPRESENTATIONS AND WARRANTIES

     14.1 Representations and Warranties of the Reinsurer. The Reinsurer hereby
represents and warrants to the Company as follows:

                                       33
<PAGE>

     The Reinsurer is a mutual life insurance company organized and existing
under the laws, including the insurance laws, of the State of New York and is in
good standing under these laws. The Reinsurer further represents and warrants
that it is duly licensed and admitted as an insurer under the laws of those
jurisdictions in which the HMO Plans reinsured hereunder have been issued and is
authorized under the laws and regulations of said jurisdictions to act as a
reinsurer in those jurisdictions. In addition, the Reinsurer covenants that, so
long as this Agreement is in effect, the Reinsurer shall take all actions
reasonably necessary to remain duly licensed under the laws of those
jurisdictions wherein the HMO Plans have been issued. The Reinsurer shall notify
the Company immediately in the event that any license shall be revoked or
suspended in any jurisdiction hereunder.

     The Reinsurer has full corporate power and authority to execute and deliver
this Agreement and the other agreements and documents contemplated hereby and to
carry out all of its obligations hereunder.

     The execution and delivery by the Reinsurer of this Agreement and the other
agreements and documents contemplated hereby, the consummation by the Reinsurer
of the transactions as herein contemplated and the carrying out by the Reinsurer
of its obligations contemplated hereby have been duly and validly authorized by
all necessary corporate action.

     14.2 Representations and Warranties of the Company. The Company hereby
represents and warrants to the Reinsurer as follows:

                                       34
<PAGE>

     The Company is a corporation organized and existing under the laws,
including the insurance and/or public health laws, of the State of Connecticut
and is in good standing under these laws. The Company further represents and
warrants that it is duly licensed as a health maintenance organization under the
laws of those jurisdictions wherein the HMO Plans have been issued. In addition,
the Company covenants that, so long as this Agreement is in effect, the Company
shall take all reasonable actions necessary to remain duly licensed as a health
maintenance organization within the purview of this Agreement under the laws of
those jurisdictions wherein the HMO Plans have been issued. The Company shall
notify the Reinsurer immediately in the event that any license shall be revoked
or suspended in any jurisdiction hereunder.

     The Company has full corporate power and authority to execute and deliver
this Agreement and the other agreements and documents contemplated hereby and to
carry out all of its obligations hereunder.

     The execution and delivery by the Company of this Agreement and the other
agreements and documents contemplated hereby, the consummation by the Company of
the transactions as herein contemplated and the carrying out by the Company of
its obligations contemplated hereby have been duly and validly authorized by all
necessary corporate action.

                                       35
<PAGE>

                                   ARTICLE XV

                                CONFIDENTIALITY

     15.1 Obligations of the Parties. Each party agrees that all information
concerning the business affairs of the Company or the Reinsurer, as the case may
be, which is not generally available to the public, including but not limited
to, lists of physicians and other health care providers, lists of brokers and
other information of a proprietary nature relating to methods of doing business
heretofore or hereinafter received by it from the other parties shall be kept
and maintained as confidential and in complete secrecy. No party shall, without
the prior written consent of the other parties, disclose at any time, either
orally, or in writing, or otherwise, in any manner, directly or indirectly, to
any person or entity, except to other employees or agents of the non-disclosing
party, any such proprietary information. Any breach of confidentiality shall
give the non-breaching party the right of injunctive relief in addition to any
other remedy permitted by law.

     15.2 Survival of Article XV. This Article XV shall survive termination of
this Agreement.

                                   ARTICLE XVI

                            MISCELLANEOUS PROVISIONS

     16.1 Notices. All notices required pursuant to this Agreement shall be in
writing and shall become effective when received. Each written notice shall be
sent by certified or registered mail, return receipt requested, or a nationally
recognized

                                       36
<PAGE>

overnight delivery service (providing for delivery receipt) or delivered by
hand. All notices under this Agreement shall be addressed as follows:

If to the Reinsurer:

          The Guardian Life Insurance Company of America
          201 Park Avenue South
          New York, New York 10003
          ATTENTION: Edward K. Kane, Esq.
          Senior Vice President & General Counsel

If to the Company:

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

If to PHS:

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

     16.2 Successors and Assigns. Except as provided in Section 3.17(b) this
Agreement cannot be assigned by the Company or the Reinsurer 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.

                                       37
<PAGE>

     16.3 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.

     16.4 Currency. All payments and accounts shall be made in United States
Dollars, and all fractional amounts shall be rounded to the nearest whole
dollar.

     16.5 Amendment. This Agreement shall be amended only by written agreement
signed by a duly authorized officer of each of the Company and the Reinsurer,
and any change to this Agreement shall be null and void unless made by such
amendment; provided, however, that where, under insurance, public 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 received by the Company. In the event
that such an approval is required, the Company and the Reinsurer shall each be
obligated to take all necessary actions in order to obtain such approval.

     16.6 Entire Agreement. This Agreement and the Schedules and Exhibits
attached hereto, together with the Marketing and Services Agreement, supersede
all prior discussions and written and oral agreements between the parties with
respect to the subject matter of this Agreement, and contain the sole and entire
agreement between the parties hereto with respect to the subject matter hereof.
Headings are not part of this Agreement, and shall not affect the terms hereof.

                                       38
<PAGE>

     16.7 Binding Effect. This Agreement is binding upon and will inure to the
benefit of the parties and their respective successors and permitted assigns.

     16.8 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Connecticut, without giving effect to
its provisions relating to conflicts of law.

     16.9 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.

     16.10 Waivers and Remedies. The waiver by any of the parties of any other
party's prompt and complete performance, or breach or violation, of any
provisions of this Agreement and related documents shall not operate nor be
construed as a waiver of any subsequent breach or violation, and the waiver by
any of the parties to exercise any right or remedy which it may possess
hereunder shall not operate nor 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.

     16.11 Regulatory Review. The parties acknowledge and agree that this
Agreement is subject to the review and approval of the New York State Department
of Insurance. The parties expressly agree that any revisions to this Agreement
required by

                                       39
<PAGE>

the New York State Department of Insurance will be addressed in an amendment to,
or restatement of, the Agreement.

                                       40
<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
                                              OF CONNECTICUT, 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

                                       41
<PAGE>

                                       CT

                                   SCHEDULE A

                          CONTRACTS AND RISKS REINSURED

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
          CONTRACT                                        RISKS REINSURED
--------------------------------------------------------------------------------
<S>           <C>         <C>   <C>
- HMO          AND         POS   The Reinsurer agrees to accept 50% of the risks
Contracts                        under such contracts
--------------------------------------------------------------------------------

</TABLE>


                                       A-1
<PAGE>

                                       CT
                                   Schedule B
                 Contract 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>
                                                HMO             POS
                                                ---             ---
<S>                                            <C>             <C>
Health Services, UR                            1.67%           1.67%
Net Mgt, MOD, QA                               2.43%           2.43%
Operations                                     3.58%           3.58%
Acct Svc., Cust Srv.                           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>

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------
                                   Schedule C
--------------------------------------------------------------------------------
                             Year to Date Accounting
--------------------------------------------------------------------------------
                                 Quarter Ending:
--------------------------------------------------------------------------------
                                                                         CT
--------------------------------------------------------------------------------
                                                                         HMO
--------------------------------------------------------------------------------
                                                                        & POS
<S>     <C>                                                             <C>
--------------------------------------------------------------------------------
I.      Profits/losses From Underwriting
--------------------------------------------------------------------------------
A.      Earned Premium
--------------------------------------------------------------------------------
        1 Cash Received
--------------------------------------------------------------------------------
        2 Change in D/U
--------------------------------------------------------------------------------
        3 Change in UPR
--------------------------------------------------------------------------------
        4 Change in Advance Premium
--------------------------------------------------------------------------------
        5 Gross Earned Premium (A1+A2+A3+A4)
--------------------------------------------------------------------------------
        6 CSEHRP & Other Reins. Pool Premium Ceded
--------------------------------------------------------------------------------
        7 Net Earned Premium (A5+A6)
--------------------------------------------------------------------------------
B.      Incurred Claims
--------------------------------------------------------------------------------
        1 Cash Claims (including Capitations) Paid
--------------------------------------------------------------------------------
        2 Cash Withholds +PCP Bonuses Paid
--------------------------------------------------------------------------------
        3 Cash Rein. PI.,COB, Subrog. Recov.
--------------------------------------------------------------------------------
        4 Nurses Line Expenses
--------------------------------------------------------------------------------
        5 Total Cash Claims (B1+B2+B3+B4)
--------------------------------------------------------------------------------
        6 Changes in IBNR
--------------------------------------------------------------------------------
        7 Change in Withholds + PCP Bonuses Payable
--------------------------------------------------------------------------------
        8 Changes in Rein. PL, COB, Subrog. Recov.
--------------------------------------------------------------------------------
        9 Total Change in Reserves (B6+B7+B8)
--------------------------------------------------------------------------------
       10 Total Incurred Claims (B5+B9)
--------------------------------------------------------------------------------
C.      Expenses
--------------------------------------------------------------------------------
        1 Commissions
--------------------------------------------------------------------------------
          a. Cash
--------------------------------------------------------------------------------
          b. Change in Liability
--------------------------------------------------------------------------------
          c. Total Incurred (C1a+C1b)
--------------------------------------------------------------------------------
        2 Px Taxes , Licenses & Fees (if applicable).
--------------------------------------------------------------------------------
          a. Cash
--------------------------------------------------------------------------------
          b. Change in Liability
--------------------------------------------------------------------------------
          c. Total Incurred (C2a+C2b)
--------------------------------------------------------------------------------
        3 Assessments (if applicable)
--------------------------------------------------------------------------------
          a. Cash
--------------------------------------------------------------------------------
          b. Change in Liability
--------------------------------------------------------------------------------
          c. Total Incurred (C3a+C3b)
--------------------------------------------------------------------------------
        4 Field Expenses
--------------------------------------------------------------------------------
          a. Cash
--------------------------------------------------------------------------------
          b. Change in Liability
--------------------------------------------------------------------------------
          c. Total Incurred (C4a+C4b)
--------------------------------------------------------------------------------
        5 Guardian Admin. Exp.
--------------------------------------------------------------------------------
        6 PHS Admin. Exp.
--------------------------------------------------------------------------------
        7 Total Incurred Expenses (C1c+C2c+C3c+C4c+C5+C6)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
II      Profit(Loss)(A7-B10-C7)
--------------------------------------------------------------------------------
D.           Guardian Profit (50%)
--------------------------------------------------------------------------------
E.           PHS Profit (50%)
--------------------------------------------------------------------------------

</TABLE>
<PAGE>

                                   SCHEDULE D

                                  INTERST RATES

The Interest Compensation Rate applicable for any given fiscal quarter is
defined as the annual rate of interest equal to the closed yield on 3-month
LIBOR as of the last trading day of the prior fiscal quarter plus 1.00%. Such
rate shall remain in effect for that entire quarter regardless of any interim
fluctuations or changes in 3-month LIBOR yields.

The above interest rate may be changed or modified as appropriate upon mutual
agreement between the Company and the Reinsurer.
<PAGE>

<TABLE>


--------------------------------------------------------------------------------
                                   Schedule E
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
                       Cash Flow and Funds Reconciliation
--------------------------------------------------------------------------------
                                 Quarter Ending:
--------------------------------------------------------------------------------
                                                                          CT
--------------------------------------------------------------------------------
             (All numbers to reflect year to date totals.)                HMO
--------------------------------------------------------------------------------
                                                                         & POS
--------------------------------------------------------------------------------
Underwriting Cash Flows
<S>     <C>  <C>                                                         <C>
        1    Cash Premiums Received (Sched C:A1)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
        2    Reins. Pool Premiums Ceded (Sched C:A6)
--------------------------------------------------------------------------------
        3    Cash Claims (Total) (Sched C:B4)
--------------------------------------------------------------------------------
        4    Commissions Incurred (Sched C:C1c)
--------------------------------------------------------------------------------
        5    Premium Tx, Licenses, Fees Incurred (Sched C:C2c)
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        6    HRA Assessment Incurred (Sched C:C3c)
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        7    Field Expenses (Sched C: C4c)
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        8    Guardian Admin. Expenses (Sched C:C5)
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        9    PHS Admin. Expenses (Sched C:C6)
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       10        Total Cash Out (2+3+4+5+6+7+8+9)
--------------------------------------------------------------------------------

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       11       Net Cash Generated for Period (1-10)
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Distribution of Cash Flows
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       12    Cash Flow to PHS (1-4-7-8-50% of 11)
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       13    Cash Flow to Guardian (4+7+8+50% of 11)
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       14    Marketing Expenses Reimbursable from Guardian
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       15    Marketing Expenses Reimbursable from PHS
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       16    Interest on Delayed Payments Owed from Guardian
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       17    Interest on Delayed Payments Owed from PHS
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       18    Interest on Cash Reserves held Owed from Guardian
--------------------------------------------------------------------------------
       19    Interest on Cash Reserves held Owed from PHS
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       20    Other amounts Owed from Guardian
--------------------------------------------------------------------------------
       21    Other amounts Owed from PHS
--------------------------------------------------------------------------------

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       22    Gross Amount Due to PHS (12+14-15+16-17+18-19+20-21)
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       23    Less Related YTD Payments Made
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
       24    Net Amount Due to (from) PHS (22-23)
--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
</TABLE>