EXHIBIT 4.3


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.

                         SUBORDINATED SURPLUS DEBENTURES

                                December 31, 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 $24,000,000 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 31, 2002 (the "Maturity Date"), subject to the
provisions set forth in Section 2 hereof.

         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 (1) 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; and (2) on December 8, 1997 debentures initially representing
approximately $29 million of principal amount, convertible into Common Stock of
FOHP.

         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
payable, subject to the provisions of Section 2.1(b) hereof, with respect to any
given


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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.       Ranking of Debentures.

                           2.1 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.

                           2.2  No Impairment. Nothing contained in this Section
2 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 provided that the approval of the New
Jersey Department of Banking and insurance referenced in Section 2.1 herein is
obtained.

                  3.       Covenants.

                           3.1  Affirmative Covenants. From and after the date
hereof until the Maturity Date, the Company shall comply with and perform each
of the following covenants and agreements:

                           3.1.1  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;


                                      -2-



<PAGE>


                          (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.

                          3.1.2   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 3.1.2
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 3.1.2, 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.

                          3.1.3   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).

                          3.1.4   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

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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.

                          3.1.5   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 4 hereof) or any event which, with the giving
of notice or the passage of time, or both, would constitute any such Event of
Default.

                           3.1.6    Board Composition.

                          (a)   Prior to the maturity 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.


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<PAGE>


                          (b)   After maturity of these Debentures, FHS 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).

                          3.1.7   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.

                           3.2  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:

                  3.2.1    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.

                          3.2.2   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


                                       -5-


<PAGE>


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.

                          3.2.3   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.

                          3.2.4   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.

                          3.2.5   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;

                          (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.

                          3.2.6   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.

                          3.2.7   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.

                          3.2.8   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;


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<PAGE>


                          (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

                          (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.

                  4.       Default.

                          4.1   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


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<PAGE>


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, 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 4.1 or this Section 4.1(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.

                          4.2   Remedies. In case any one or more of the Events
of Default specified in Section 4.1 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 2.1(b) hereof.


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                  5.       Miscellaneous.

                          5.1   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.

                          5.2   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:

         (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


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<PAGE>


               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.

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

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

         IN WITNESS WHEREOF, the Company has caused this instrument to be duly
executed, issued and delivered this 31st 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


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