EXHIBIT 4.2

THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THEY
MAY NOT BE SOLD,  OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE  REGISTRATION  STATEMENT  AS TO THE  SECURITIES  UNDER  SUCH ACT OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION
IS NOT REQUIRED.


                                   FOHP, INC.

                   CONVERTIBLE SUBORDINATED SURPLUS DEBENTURES

                                December 8, 1997


         FOHP, Inc., a New Jersey corporation (the "Company"), for value
received, promises to pay to Foundation Health Systems, Inc., a Delaware
corporation formerly known as "Health Systems International, Inc." ("FHS"), or
its registered assigns, the principal sum (such principal sum being referred to
herein as the "Principal Amount") of $29,000,000 and accrued and unpaid interest
thereon. The Principal Amount hereof, and the interest thereon, shall be payable
at the main office of the Company or by mail to the registered address of the
holder hereof on December 8, 2002 (the "Maturity Date"), subject to the
provisions set forth in Section 4 hereof. No such payment shall be required to
the extent that such Principal Amount and interest is or has been converted into
Conversion Shares (as such term is defined in Section 2 hereof) under the terms
of the Debentures evidenced by this instrument (the "Debentures").

         These Debentures have been issued in return for additional capital
contributions made by FHS pursuant to Section 6.2 of the Amended and Restated
Securities Purchase Agreement, dated February 10, 1997, as amended by an
Amendment dated as of March 13, 1997, among FHS, the Company and First Option
Health Plan of New Jersey, Inc., a New Jersey corporation and a wholly-owned
subsidiary of FOHP ("FOHP-NJ") (referred to herein, as so amended, as the
"Purchase Agreement"). The Company previously issued to FHS on April 30, 1997
debentures initially representing approximately $51.6 million of principal
amount, the entire remaining principal amount of which debentures was converted
into common stock, par value $.01 per share ("Common Stock"), of FOHP as of
December 1, 1997.

         The following is a statement of the rights of the holder hereof and the
conditions to which these Debentures are subject, and to which the holder
hereof, by the acceptance hereof, agrees:

         1. Interest. The Principal Amount hereof shall bear interest at an
annual rate equal to the rate charged to FHS under its credit facility (the "BA
Facility") issued by a consortium of commercial banks led by Bank of America,
National Trust & Savings Association or such credit facility as is used to
refinance the BA Facility (the "Rate"), which Rate shall be subject to
adjustment at the beginning of each calendar quarter and shall become due and


                                      -1-


<PAGE>


payable, subject to the provisions of Section 4.1(b) hereof, with respect to any
given calendar quarter within 10 days after the end of such quarter. Any such
interest not paid when due and payable shall be considered "Defaulted Interest"
and shall be included in the Principal Amount hereunder.

         2.       Conversion.

                  (a) Any and all portions of the Principal Amount shall be
convertible into such number of shares (referred to herein as "Conversion
Shares") of Common Stock of the Company, at any time prior to or on the Maturity
Date (such conversion ratio being referred to herein as the "Conversion Ratio"),
which will equal, for each $1,000,000 of Principal Amount so converted, an
additional 1.42 percent of the total equity of the Company, as of the date
hereof (as such total equity may be increased from time to time to reflect any
securities issued pursuant to Section 6.2 of, or otherwise expressly
contemplated to be issued under, the Purchase Agreement) on a fully-diluted
basis (i.e., taking into account the conversion of all other securities
convertible into shares of Common Stock, the exercise of all warrants and
options exercisable for shares of Common Stock, and such partial conversion of
such Principal Amount); provided that, once the number of such Conversion
Shares, when added to the other shares of Common Stock and other securities
convertible into shares of Common Stock held by FHS, represent 99.99% of the
fully diluted equity of the Company, then the balance of such Principal Amount
shall not be considered convertible hereunder but shall be subject to and have
all other benefits under the terms and provisions of this Agreement.

                  (b) The Company hereby represents, warrants and agrees that it
will take all action necessary to ensure that there will exist enough remaining
authorized shares of Common Stock in order to issue such number of Conversion
Shares into which these Debentures are convertible in order to represent the
additional percentages of total equity of the Company as set forth in this
Section 2.

                  (c) In order to exercise its conversion rights provided under
the terms of this Section 2, the holder hereof will surrender these Debentures,
together with a notice of conversion indicating the portion of the Principal
Amount converted into Conversion Shares substantially in the form attached
hereto as Exhibit A, to the Company at any time during usual business hours at
its office at 1501 Route 66, Neptune, NJ 07754, Attention: President (or at such
other address as the Company may designate from time to time by written notice
to the holder).

         3.       Issuance of Stock on Conversion.

                           3.1  Delivery of Certificates. These Debentures shall
have been deemed to have been surrendered for conversion and converted at the
close of business on the date on which these Debentures and notice of conversion
from the holder hereof are received by the Company, and on such receipt the
Company will issue and deliver at its sole expense, as soon as practicable after
such date, a certificate or certificates of its Common Stock evidencing the
number of shares into which these Debentures have been converted to the holder
hereto.

                           3.2  Lost Certificates. In the event such certificate
or certificates are 


                                      -2-


<PAGE>


lost, mutilated or destroyed, such certificate or certificates may be replaced,
provided notice is submitted by the holder of such certificate or certificates,
along with any other required supporting documentation.

                           3.3  No Fractional Shares. No fractional shares shall
be issued on conversion hereof. If upon any conversion of these Debentures the
holder hereof would be entitled to recover a fraction of a share of Common
Stock, such fraction of a share shall be rounded up or down, as the case may be,
to the nearest whole number of shares of Common Stock.

                           3.4 Adjustment upon Changes in Capitalization. In the
event of any change in Common Stock by reason of a stock dividend, stock split,
merger, recapitalization, combination, exchange of shares, issuer tender offer
or share repurchase or other similar transaction, the type and number of shares
or securities into which the Debentures is convertible shall be adjusted
appropriately.

                  4.       Ranking of Debentures.

                           4.1  Obligation to Repay.

                           (a) The obligation of the Company to repay the
Principal Amount and accrued interest under these Debentures shall be
subordinated to all other indebtedness of the Company and its subsidiaries.

                           (b) No payments shall be made, in respect of all or
any portion of the Principal Amount or interest thereon, except with the prior
written approval of the New Jersey Department. Such approval may not be withheld
if the Company or FHS provides the New Jersey Department with notice at least 10
business days in advance of any such payments that FOHP-NJ's statutory surplus
will exceed 125 percent of FOHP-NJ's minimum net worth requirement after payment
of the requested amount and for the near future, unless the New Jersey
Department determines that FOHP-NJ's financial condition would be adversely
affected as a result of such payment. The Principal Amount shall be suspended
and shall not mature to the extent FOHP-NJ's net worth, as determined by the New
Jersey Department, is inadequate to make interest payments on these Debentures.

                           4.2 Bankruptcy, Dissolution and Liquidation. Upon any
bankruptcy, dissolution or liquidation of the Company, these Debentures shall
thereupon be deemed to be converted into Conversion Shares and shall thereupon
be treated as pari passu with then-outstanding shares of capital stock of the
Company.

                           4.3 No Impairment. Nothing contained in this Section
4 shall impair, as between the Company and the holder hereof, the obligation of
the Company, which is absolute and unconditional, to pay to the holder hereof
the Principal Amount and interest thereon (except to the extent these Debentures
are converted into Conversion Shares) provided that the approval of the State of
New Jersey Department of Banking and Insurance referenced in Section 4.1 herein
is obtained.

                                      -3-

<PAGE>

                  5.       Covenants.

                           5.1  Affirmative Covenants. From and after the date
hereof until the earlier of the Maturity Date or the conversion of these
Debentures, the Company shall comply with and perform each of the following
covenants and agreements:

                           5.1.1 Financial Reporting. The Company will furnish
to FHS copies of the following financial statements, reports and information:

                           (a) as soon as available and in any event within 90
days after the end of each fiscal year of the Company, a copy of the Company's
consolidated annual report (including audited balance sheets, statements of
operations, statements of stockholders' equity and statements of cash flow) for
the Company and its subsidiaries for such fiscal year, prepared in accordance
with generally accepted accounting principles ("GAAP") consistent with the
preceding year, certified by Ernst & Young, LLP or such other independent public
accountants as shall be approved by the holder hereof, which approval shall not
be unreasonably withheld;

                           (b) as soon as available and in any event within 45
days after the end of each calendar quarter, a consolidated balance sheet,
statement of operations and statement of cash flow for the Company and its
subsidiaries, as of the end of, and for, each such quarter, prepared in
accordance with GAAP consistently applied (subject to the absence of notes and
to customary and reasonable year-end adjustments), certified by the Company's
chief financial officer as fairly and accurately representing the financial
condition of the Company and its subsidiaries as of the end of, and for, the
period covered thereby; and

                           (c) such other information with respect to the
financial condition and operations of the Company and its subsidiaries as the
holder hereof may reasonably request.

                           5.1.2  Payment of Taxes and Claims. The Company will
duly pay and discharge, as the same become due and payable, all taxes,
assessments and governmental and other charges, levies or claims levied or
imposed, which are, or which if unpaid might become, a lien or charge upon the
properties, assets, earnings or business of the Company or any of its operating
subsidiaries; provided, however, that nothing contained in this Section 5.1.2
shall require the Company to pay and discharge, or cause to be paid and
discharged, any such tax, assessment, charge, levy or claim so long as the
Company in good faith shall contest the validity thereof and shall set aside on
its books adequate reserves with respect thereto. In the event the Company fails
to satisfy its obligations under this Section 5.1.2, FHS may, but is not
obligated to, satisfy such obligations in whole or in part, and any payments
made and expenses incurred in doing so shall constitute additional indebtedness
to FHS and shall be paid or reimbursed by the Company as additional Principal
Amount.

                           5.1.3  Selection of Accountants. As long as these
Debentures are outstanding, the holder hereof shall have the right to approve
the accounting firm retained or to be retained by the Company to render
accounting advice thereto (such approval not to be unreasonably withheld).


                                       -4-
 


<PAGE>


                        5.1.4 Maintenance of Corporate Existence and Properties.

                           (a) The Company will, and will cause each of its
operating subsidiaries to, at all times do or cause to be done all things
necessary to maintain, preserve and renew its corporate charter and its rights,
and comply in all material respects with all related laws applicable to the
Company and such operating subsidiary; provided, however, that nothing contained
in this paragraph shall (i) require the Company or such operating subsidiary to
maintain, preserve or renew any right not material in the conduct of the
business of the Company or such operating subsidiary, (ii) prevent the
termination of the corporate existence of such operating subsidiary of the
Company if, in the reasonable opinion of the Board of Directors of the Company,
such termination is not disadvantageous to the holder hereof or (iii) require
the Company or such operating subsidiary to comply with any law so long as the
validity or applicability thereof shall be contested in good faith by
appropriate proceedings.

                           (b) The Company will as soon as practicable give
written notice to the holder hereof of any litigation, arbitration or
governmental investigation or proceeding, which has been instituted or, to the
knowledge of the Company, is threatened against the Company or any of its
operating subsidiaries, or any of their respective properties, which (i)
involves or is likely to involve a claim or claims for damages, penalties or
awards in excess of $100,000 in the case of claims for which the Company is not
adequately insured or in excess of $300,000 in the case of claims for which the
Company is adequately insured; (ii) if determined adversely to the Company or
such operating subsidiary would have a material adverse effect thereon; or (iii)
relates to the Purchase Agreement or any documents executed pursuant thereto.

                           (c) The Company will provide or cause to be provided
for itself and its operating subsidiaries insurance against loss or damage of
the kinds customarily insured against by corporations similarly situated, with
reputable insurers, in such amounts, with such deductibles and by such methods
as shall be adequate, and in no event involving material differences from the
insurance currently generally maintained.

                           (d) The Company will keep true books of records and
accounts in which full and correct entries in all material respects will be made
of all its business transactions and the business transactions of its operating
subsidiaries, and will reflect in its financial statements adequate accruals and
appropriations to reserves, all in accordance with GAAP (subject to customary
and reasonable year-end adjustments) and as otherwise required by the New Jersey
Department.

                           (e) The Company will, and will cause each of its
operating subsidiaries to, comply with all applicable statutes, rules,
regulations, orders and restrictions relating to federal, state and local laws
and of any governmental department, commission, board, regulatory authority,
bureau, agency and instrumentality with respect thereto, and of any court,
arbitrator or other body with jurisdiction and authority, in respect of the
conduct of the respective businesses thereof and the ownership of their
respective properties, except those, the violations of which would not have a
material adverse effect thereon and except such as are being contested in good
faith.


                                      -5-



<PAGE>


                           5.1.5 Notice of Event of Default. In addition to any
other reporting requirements set forth herein, the Company shall have an
immediate obligation to report to the holder hereof the occurrence of any Event
of Default (as defined in Section 6 hereof) or any event which, with the giving
of notice or the passage of time, or both, would constitute any such Event of
Default.

                           5.1.6 Board Composition.

                           (a) Prior to full conversion of these Debentures and
while they are outstanding, FHS shall be permitted to designate such number of
directors on the Board of Directors of the Company and the Boards of Directors
of each of the Company's Subsidiaries as represents the greater of (i) no less
than 15 percent of the directors on the Board of Directors of the Company and
the Boards of Directors of each of the Company's subsidiaries or (ii) such
greater percentage of the directors on the Board of Directors of the Company and
of the Boards of Directors of each of the Company's subsidiaries as is equal to
the percentage ownership by FHS of all outstanding Common Stock in the event
such percentage exceeds 15 percent.

                           (b) Upon conversion of the entire Principal Amount,
FHS, through its ownership of Conversion Shares, shall be permitted to designate
and elect such number of directors on the Board of Directors of the Company and
the Boards of Directors of each of the Company's subsidiaries as represents the
percentage of the directors on the Board of Directors of the Company and the
Board of Directors of each of the Company's subsidiaries as is equal to FHS'
percentage ownership of all outstanding Common Stock, with such number of
directors to be increased as such ownership may be increased from time to time
notwithstanding any "staggered term" or other conflicting provision (but subject
to the requirements set forth in Article III Section 1 of the Bylaws of the
Company that, during the period specified therein, there be at least three
directors on such Board of Directors who are not designees of FHS).

                           (c) In no event shall the number of directors of the
Board of Directors of the Company or the board of directors of any of the
Company's subsidiaries exceed 12 without the prior written consent of the holder
hereof (subject to the requirements set forth in Article III Section 1 of the
By-laws of the Company that, during the period specified therein, there be at
least three directors on such Board of Directors who are not designees of FHS).

                           5.1.7 Use of Proceeds. The Company shall, immediately
upon receipt of the Principal Amount at the Closing on the date hereof, make a
capital contribution of such amount to FOHP-NJ.

                           5.1.8 Increase of Authorized Capital. In accordance
with Section 2(b) hereof, the Company shall take all action necessary to ensure
that there will exist enough remaining authorized shares of Common Stock in
order to issue such number of Conversion Shares into which these Debentures are
convertible in order to represent the additional percentages of total equity of
the Company set forth in and consistent with Section 2(a) hereof.


                                      -6-


<PAGE>


                           5.2  Negative Covenants. From and after the date
hereof, the Company shall not, and shall cause its operating subsidiaries to
not, do any of the following:

                           5.2.1 Restrictions on Sale of Assets, Consolidations,
Mergers and Acquisitions.

                           (a) The Company will not, and will cause each of its
operating subsidiaries to not, sell, lease, transfer or otherwise dispose of all
or a substantial portion of its assets (other than in connection with the sale
of securities issued by the United States government the proceeds of which are
used to purchase additional securities of the United States government).

                           (b) The Company shall not, and shall cause each of
its operating subsidiaries to not, without the prior written consent of the
holder hereof, consolidate with or merge into any other person or entity or
permit any other person or entity to consolidate with or merge into it;
provided, however, that a subsidiary of the Company may consolidate with or
merge into the Company or a wholly-owned subsidiary of the Company.

                           (c) The Company shall not and shall cause each of its
operating subsidiaries to not, acquire, by asset or stock purchase, merger or
otherwise, the assets or stock of any other corporation or partnership without
the prior written consent of the holder hereof.

                           5.2.2 Additional Indebtedness. The Company will not,
and will cause each of its operating subsidiaries to not, create, incur, assume
or suffer to exist any indebtedness for borrowed money ("Borrowed Money") after
the date hereof except for (i) Borrowed Money evidenced by these Debentures and
(ii) other Borrowed Money, incurred with the consent of the holder hereof, the
proceeds of which are used in the ordinary course of business of the Company or
such operating subsidiary, as the case may be.

                           5.2.3 Liens and Encumbrances. The Company will not,
and will cause each of its operating subsidiaries to not, cause or permit any of
its assets or properties, whether now owned or hereafter acquired, to be subject
to any liens or encumbrances except in the ordinary course of business of the
Company or such operating subsidiary, as the case may be.

                           5.2.4 Guarantees. The Company shall not and shall
cause each of its operating subsidiaries to not, become liable as a guarantor,
or otherwise, without the prior written consent of the holder hereof, except for
guarantees provided as to obligations of a wholly-owned subsidiary of the
Company.

                           5.2.5 Restrictions on Dividends, Distributions and
Investments. The Company will not, without the prior written consent of the
holder hereof:

                           (a) declare or pay any dividend or make any other
distributions on any shares of the Company's capital stock;


                                      -7-



<PAGE>

                           (b) except as otherwise permitted by the Purchase
Agreement, redeem, purchase or otherwise acquire for value any shares of the
Company's capital stock or any warrants, rights or other options to purchase
such capital stock; or

                           (c) except as otherwise permitted by the Purchase
Agreement permit its ownership of voting capital stock of any subsidiary of the
Company to be less than 100 percent.

                           5.2.6 Issuance of Additional Stock. Except as
otherwise expressly contemplated herein, the Company will not, without the prior
written consent of the holder hereof, issue any additional shares of Common
Stock or any other capital stock of the Company, or any options, stock
appreciation rights, warrants or other rights to acquire the Common Stock or any
interest therein, or other rights to acquire authorized and unissued shares of
capital stock of the Company, or modify terms of existing securities so as to in
any manner dilute the existing conversion rights of the holder hereof.

                           5.2.7 Granting of Pre-Emptive Rights and Rights of
First Refusal. Except as otherwise expressly contemplated herein, the Company
will not, without the prior written consent of the holder hereof, grant any
pre-emptive rights or rights of first refusal to any shareholders of the
Company.

                           5.2.8 Additional Prohibited Transactions. Neither the
Company nor any of its subsidiaries shall take any of the following actions or
engage in any of the following transactions without the prior written consent of
the holder hereof:

                           (a) amend its certificate of incorporation or bylaws
(except to take the action to increase the authorized number of shares of Common
Stock as contemplated by Section 5.1.8 hereof);

                           (b) make capital expenditures (including such
expenditures made by the Company and all such subsidiaries) exceeding, in the
aggregate, $1,000,000 during any calendar year;

                           (c) make any material change in the scope of the
business of the Company;

                           (d) file for receivership, dissolution, liquidation
or bankruptcy;

                           (e) acquire equity securities (other than pursuant to
a buy back or repurchase of equity securities issued by the Company) or assets
of any other person or entity involving payments aggregating in excess of
$1,000,000 during any calendar year;

                           (f) file a registration statement with respect to the
public sale of securities of the Company under the Securities Act of 1933, as
amended; or


                                      -8-


<PAGE>


                           (g) enter into, assume or become bound by any
agreement to do any of the foregoing or otherwise attempt to do any of the
foregoing.

               6.          Default.

                           6.1 Events of Default. An "Event of Default" shall
exist if any of the following occurs and is continuing as to the Company:

                           (a) Default shall be made by the Company on a payment
of the Principal Amount or interest on these Debentures, when and as such
Principal Amount and interest, as the case may be, shall become due and payable
by acceleration or otherwise; or

                           (b) Default shall be made in the performance or
observance of any covenant, condition, undertaking or agreement contained in
these Debentures or the Purchase Agreement (other than any defaults relating to
actions taken by, or omissions of, FHS in connection with the performance of its
obligations under the Management Agreements) (as defined in the Purchase
Agreement), and such default shall continue for 20 days without being cured
after the holder hereof provides to the Company written notice of such default;
or

                           (c) Any warranty, representation or other statement
made by or on behalf of the Company contained in these Debentures or the
Purchase Agreement shall be false or misleading in any material respect at the
time such warranty, representation or other statement, as the case may be, was
made; or

                           (d) The Company or any of its operating subsidiaries
shall (i) file a petition seeking relief for itself under the United States
Bankruptcy Code, as now constituted or hereafter amended from time to time, or
file an answer consenting to, admitting the material allegations of or otherwise
not controverting, or fail timely to controvert, a petition filed against the
Company seeking relief under the United States Bankruptcy Code, as now
constituted or hereafter amended from time to time or (ii) file a petition or
answer with respect to relief under the provisions of any other now-existing or
future applicable bankruptcy, insolvency or other similar law of the United
States or any state thereof or of any other country or province thereof or
jurisdiction providing for the reorganization, winding-up or liquidation of
corporations or an arrangement, composition, extension or adjustment with
creditors; or

                           (e) (i) An order for relief shall be entered against
the Company or any of its operating subsidiaries under the United States
Bankruptcy Code, as now constituted or hereafter amended from time to time,
which order is not stayed and remains unstayed for a period of 45 days, (ii) the
entry of an order, judgment or decree by operation of law or by a court or by
the New Jersey Department having jurisdiction in the premises which is not
stayed and remains unstayed for a period of 45 days (A) adjudging the Company or
any of its operating subsidiaries bankrupt or insolvent under, or ordering
relief against the Company or any of its operating subsidiaries or by the New
Jersey Department under, or approving a properly-filed petition seeking relief
against the Company or any of its operating subsidiaries or by the New Jersey
Department under the provisions of any other now-existing or future applicable
bankruptcy,


                                      -9-


<PAGE>


insolvency or other similar law of the United States or any state thereof or of
any other country or province thereof or jurisdiction providing for the
reorganization, winding-up or liquidation of corporations or any arrangement,
composition, extension or adjustment with creditors, (B) appointing a receiver,
supervisor, liquidator, assignee, sequestrator, trustee or custodian of the
Company or any of its operating subsidiaries or of any substantial portion of
the property of the Company or any such operating subsidiaries, or (C) ordering
the reorganization, winding-up or liquidation of the affairs of the Company or
any of its subsidiaries, or (iii) the expiration of 60 days after the filing of
any involuntary petition against the Company or any of its operating
subsidiaries seeking any of the relief specified in paragraph (d) of this
Section 6.1 or this Section 6.1 (e) without dismissal of such petition; or

                           (f) The Company or any of its operating subsidiaries
shall (i) make a general assignment for the benefit of creditors, (ii) consent
to the appointment of, or taking possession of all or a substantial part of the
property of the Company or any such operating subsidiary by, a receiver,
supervisor, liquidator, assignee, sequestrator, trustee or custodian of the
Company or any such operating subsidiary, (iii) admit its insolvency or
inability to pay its debts generally as such debts become due, (iv) fail
generally to pay its debts as such debts become due or (v) take any action
(including such actions taken by the Company's directors or a majority of the
Company's shareholders) regarding the dissolution or liquidation of the Company
or any such operating subsidiary.

                           6.2 Remedies. In case any one or more of the Events
of Default specified in Section 6.1 hereof shall have occurred and be
continuing, the holder hereof shall have the right to accelerate payment of the
entire Principal Amount, and all interest accrued thereon, and, upon such
acceleration, such Principal Amount and interest shall thereupon become
immediately due and payable, without any presentment, demand, protest or other
notice of any kind (which presentment demand, protest or other notice of any
kind are hereby expressly waived), and the Company shall forthwith pay to the
holder hereof the entire then outstanding Principal Amount, and interest accrued
thereon, due pursuant to these Debentures; provided, however, that any such
payment by the Company must be in accordance with Section 4.1(b) hereof.

                  7.       Miscellaneous.

                           7.1 Waiver and Amendment. Any provision of these
Debentures may be amended, waived or modified only upon the written consent of
the Company, the holder hereof and the New Jersey Department.

                           7.2 Notices. Any notice or other communication
required or permitted hereunder shall be in writing and shall be delivered
personally, telegraphed, telexed, sent by facsimile transmission, sent by
certified, registered or express mail, postage prepaid, or sent by reputable
overnight courier. Any such notice shall be deemed given when so delivered
personally, telegraphed, telexed or sent by facsimile transmission or, if
mailed, two days after the date of deposit in the United States mail or, if sent
by overnight courier, the business day next succeeding the date the notice is
sent, as follows:


                                      -10-


<PAGE>

                           (a)      if to FHS, to:

                                    Foundation Health Systems, Inc.
                                    225 North Main Street
                                    Pueblo, Colorado  81003
                                    Attention:  Senior Vice President, General
                                    Counsel and Secretary
                                    Fax:  (719) 585-8175

                           (b)      if to the Company, to:

                                    FOHP, Inc.
                                    1501 Route 66
                                    Neptune, New Jersey  07701
                                    Attention:  Senior Vice President, General
                                    Counsel and Secretary
                                    Fax:  (732) 842-5404

                                    with a copy to:

                                    Shereff, Friedman, Hoffman & Goodman, LLP
                                    919 Third Avenue
                                    New York, New York 10022-9998
                                    Attention:  Charles I. Weissman, Esq.
                                    Fax:  (212) 758-9526

                                    and with an additional copy to:

                                    Giordano, Halleran & Ciesla, P.C.
                                    125 Half Mile Road
                                    Post Office Box 190
                                    Middletown, New Jersey 07748
                                    Attention:  Paul T. Colella, Esq.
                                    Fax:  (908) 224-6599

Any party may by notice given in accordance with this section to the other party
designate another address or person for receipt of notices hereunder.

                           7.3 Governing Law. These Debentures shall be governed
by, and construed in accordance with, the laws of the State of New Jersey.

                           7.4 Headings. The headings herein are for purposes of
convenience and reference only, and shall not affect the construction hereof.


                                      -11-


<PAGE>


         IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed, issued and delivered this 8th day of December, 1997.


                                     FOHP, INC.


                                     By:/s/ Roger Birnbaum
                                        ------------------------
                                     Name:     Roger Birnbaum
                                     Title:    President and Chief Executive
                                               Officer



Acknowledged and Agreed:

         FOUNDATION HEALTH SYSTEMS, INC.



         By:/s/ Michael E. Jansen
            --------------------------
            Name:    Michael E. Jansen, Esq.
            Title:   Vice President, Assistant
                     General Counsel and
                     Assistant Secretary



                                      -12-


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EXHIBIT A TO CONVERTIBLE SUBORDINATED SURPLUS DEBENTURES




                  The holder of Convertible Subordinated Surplus Debentures,
dated as of December 8, 1997 (the "Debentures"), issued by FOHP, Inc. (the
"Company") hereby notifies the Company, in accordance with Section 2 of the
Debentures, of its conversion of $ ____ of the Principal Amount (as such term is
defined in the Debentures) of the Debentures into _____ shares of common stock,
par value $.01 per share, of the Company.



         Principal Amount to be Converted                     Number of Shares







                  IN WITNESS WHEREOF, this Notice of Conversion is executed as
of ______ ___, ____.


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