EXHIBIT 2.2


                          AGREEMENT AND PLAN OF MERGER

         This  Agreement and Plan of Merger  ("Agreement"),  dated as of October
26, 1998, is by and between  Physicians  Health Services of New Jersey,  Inc., a
New Jersey corporation  ("PHS-NJ"),  and First Option Health Plan of New Jersey,
Inc., a New Jersey corporation ("FOHP-NJ" or the "Surviving Corporation").

                                    RECITALS

         WHEREAS,  PHS-NJ is a  wholly-owned  subsidiary  of  Physicians  Health
Services,  Inc., a Delaware  corporation ("PHS "), and FOHP-NJ is a wholly-owned
subsidiary of FOHP, Inc., a New Jersey corporation ("FOHP");

         WHEREAS,  Foundation  Health  Systems,  Inc.,  a  Delaware  corporation
("FHS"),  owns 100% of the issued and outstanding stock of PHS and approximately
98% of the issued and outstanding stock of FOHP;

         WHEREAS,  each of PHS-NJ  and  FOHP-NJ  operate  as health  maintenance
organizations in the State of New Jersey;

         WHEREAS,  the Boards of Directors of PHS-NJ and FOHP-NJ have determined
that it is in the best  interests of their  respective  shareholders  and FHS to
merge  PHS-NJ with and into FOHP-NJ (the  "Merger")  pursuant to the terms,  and
subject to the conditions, of this Agreement;

         WHEREAS, upon the terms and subject to the conditions set forth in this
Agreement,  (i) PHS-NJ will be merged with and into FOHP-NJ in  accordance  with
the  applicable  provisions  of the New Jersey  Business  Corporation  Act ("New
Jersey Corporate  Law"),  (ii) each share of PHS-NJ common stock, par value $.0l
per share ("PHS-NJ Common Stock"),  issued and outstanding  immediately prior to
the "Effective Time" (as such term is defined in Section 1.2 of this Agreement),
will be  cancelled,  (iii) PHS will  receive  $100.00  for its  shares of PHS-NJ
Common Stock,  and (iv) the name of the Surviving  Corporation  will change from
"First Option Health Plan of New Jersey, Inc." to "Physicians Health Services of
New Jersey, Inc.;" and

         WHEREAS,  PHS-NJ and FOHP-NJ  desire to make  certain  representations,
warranties, covenants and agreements in connection with the Merger.

         NOW,   THEREFORE,   in   consideration   of  the   foregoing   and  the
representations,  warranties,  covenants and agreements set forth herein, PHS-NJ
and FOHP-NJ hereby agree as follows:


<PAGE>


                                    ARTICLE I

                                   THE MERGER

         1.1. The Merger.  At the Effective  Time and upon the terms and subject
to the  conditions  hereof and in accordance  with the  provisions of New Jersey
Corporate  Law,  PHS-NJ  will be merged  with and into  FOHP-NJ,  whereupon  the
separate corporate existence of PHS-NJ shall cease and FOHP-NJ shall continue as
and be the Surviving Corporation in the Merger. PHS-NJ and FOHP-NJ are sometimes
hereinafter  referred  to  individually  as  a  "Constituent   Corporation"  and
collectively as the "Constituent Corporations."

         1.2.  Effective Time of Merger.  Subject to the terms and conditions of
this Agreement,  and as promptly as practicable after satisfaction of all of the
conditions  to each party's  obligation to  consummate  the Merger  contained in
Article V of this  Agreement,  or, to the  extent  permitted  hereunder,  waiver
thereof, a duly executed copy of this Agreement and a certificate of merger (the
"Certificate of Merger") in such form as required by, and executed in accordance
with, the relevant  provisions of New Jersey  Corporate Law, shall be filed with
the  New  Jersey  Department  of  Treasury,  Division  of  Revenue  (the  "State
Department").  If the  Certificate of Merger is filed before January 1, 1999, it
shall  provide  that the Merger  will be  effective  on January 1, 1999.  If the
Certificate  of Merger is filed  after  January  1, 1999,  the  Merger  shall be
effective  at such time as the  Certificate  of  Merger is filed  with the State
Department or such other time as is stated therein. The date on which the Merger
is effective  shall be the  "Effective  Time." This Agreement is intended by the
Constituent  Corporations  to  constitute  the plan of  merger  contemplated  by
Section 14A:10-1 of New Jersey Corporate Law.

         1.3. Effects of the Merger.

         (a) At the Effective Time, the separate  corporate  existence of PHS-NJ
shall  cease and PHS-NJ  shall be merged  with and into  FOHP-NJ  which,  as the
Surviving  Corporation,  shall  survive  the Merger and  continue  its  separate
corporate  existence  under the laws of the State of New Jersey.  The  Surviving
Corporation  shall succeed to all the properties  and assets of the  Constituent
Corporations  and to all  debts,  causes of action  and other  interests  due or
belonging  to  the  Constituent  Corporations  and  shall  be  subject  to,  and
responsible  for,  all the  debts,  obligations,  liabilities  and duties of the
Constituent Corporations as provided in Section 14A:10-6 of New Jersey Corporate
Law. To the extent permitted by law, the Surviving Corporation shall possess all
the rights,  powers and franchises,  of a public as well as of a private nature,
and shall be subject to all the restrictions, disabilities and duties of each of
the Constituent Corporations.  All rights, privileges,  powers and franchises of
each of the Constituent Corporations and all property, real, personal and mixed,
and all debts due to each of the Constituent  Corporations on whatever  account,
and  all  other  things  in  action   belonging  to  each  of  the   Constituent
Corporations,  shall be  vested  in the  Surviving  Corporation.  All  property,
rights, privileges,  powers, franchises and all choses in action and every other
interest shall  thereafter be the property of the Surviving  Corporation as they
were of the Constituent  Corporations.  The title to any real estate, whether by
deed or otherwise,  and any other  property,  whether  real,  personal or mixed,
vested in any of the Constituent Corporations, shall not revert or be in any way
impaired by reason of the Merger. Any devise,  bequest,  gift or grant contained
in any will or in any instrument, made before or after the Merger, to or for the
benefit of any of the  Constituent 


                                       2

<PAGE>

Corporations,  shall inure to the benefit of the Surviving Corporation.  Insofar
as  may  be  necessary  to  preserve  any  of  the  assets  of  the  Constituent
Corporations,  the existence of each Constituent  Corporation shall be deemed to
continue  in and  through  the  Surviving  Corporation.  Any  claim,  action  or
proceeding,   civil  or  criminal,   pending  by  or  against  any   Constituent
Corporation,  may be  prosecuted  as if the Merger had not taken place,  and the
Surviving  Corporation  may be  substituted  in place of any of the  Constituent
Corporations in connection with such claim,  action or proceeding.  Any judgment
rendered against any of the Constituent Corporations may be enforced against the
Surviving  Corporation.  Neither the rights of creditors  nor any liens upon the
property of any of the Constituent Corporations shall be impaired by the Merger.

         (b) If, at any time after the Effective Time, the Surviving Corporation
shall  determine  or be  advised  that any  deeds,  bills of sale,  assignments,
assurances  or any other  actions or things are  necessary or desirable to vest,
perfect or confirm  of record or  otherwise  in the  Surviving  Corporation  its
right, title or interest in, to or under any of the rights, properties or assets
of the  Constituent  Corporations  acquired or to be  acquired by the  Surviving
Corporation  as a result of or in  connection  with the Merger,  or otherwise to
carry out the purpose and intent of this  Agreement,  the officers and directors
of the Surviving  Corporation shall be authorized to execute and deliver, in the
name and on behalf of any of the Constituent Corporations, all such deeds, bills
of sale,  assignments,  assumption agreements and assurances and to take and do,
in the name and on behalf of each of the Constituent  Corporations or otherwise,
all such other  actions and things as may be  necessary  or  desirable  to vest,
perfect or confirm any and all right,  title and  interest in, to and under such
rights,  properties or assets of the Surviving Corporation or otherwise to carry
out the purpose and intent of this Agreement.

         1.4. Certificate of Incorporation and By-laws.

         (a)  The  Certificate  of  Incorporation  of  FOHP-NJ,   as  in  effect
immediately prior to the Effective Time, shall be amended and restated to change
the name of FOHP-NJ to "Physicians  Health Services of New Jersey,  Inc." and to
effect  certain other  changes  thereto,  and, as so amended and  restated,  the
Certificate   of   Incorporation   of  FOHP-NJ  shall  be  the   Certificate  of
Incorporation of the Surviving  Corporation until thereafter  changed or amended
as provided therein or under  applicable law.  Attached hereto as Exhibit A is a
copy of  FOHP-NJ's  Certificate  of  Incorporation,  as amended and  restated in
accordance herewith, which will be filed with the Certificate of Merger in order
to effect the amendments thereto.

         (b) The  By-laws  of  FOHP-NJ,  as in effect  immediately  prior to the
Effective  Time,  shall be amended and restated as of the Effective  Time (which
amended  and  restated  By-laws  are  attached  hereto as Exhibit B) and,  as so
amended  and  restated,  the  By-laws  of  FOHP-NJ  shall be the  By-laws of the
Surviving Corporation until altered,  amended or repealed as provided therein or
under applicable law.

         1.5. Board of Directors. The directors of FOHP-NJ at the Effective Time
(as set forth on Exhibit C attached hereto) shall,  from and after the Effective
Time, be the directors of the Surviving  Corporation until their successors have
been duly  elected or appointed  and  qualified  or until their  earlier  death,
resignation   or  removal  in  accordance   with  the  Surviving   Corporation's
Certificate of Incorporation and/or By-laws.


                                       3

<PAGE>

         1.6.  Officers.  The officers of FOHP-NJ at the Effective  Time (as set
forth on Exhibit D attached hereto) shall, from and after the Effective Time, be
the officers of the Surviving  Corporation until their successors have been duly
elected or appointed and qualified or until their earlier death,  resignation or
removal  in  accordance   with  the  Surviving   Corporation's   Certificate  of
Incorporation and/or By-laws.

                                   ARTICLE II

                          CONSIDERATION FOR THE MERGER

         At the  Effective  Time, by virtue of the Merger and without any action
on the part of PHS-NJ or  FOHP-NJ or the  holders  of the shares of the  capital
stock of the Constituent Corporations, the following shall occur:

         (i) PHS-NJ Common  Stock.  All shares of PHS-NJ Common Stock issued and
outstanding  immediately prior to the Effective Time (all of which are currently
owned  and  held by  PHS),  shall be  cancelled,  and PHS  will be paid  $100.00
therefor.

         (ii) FOHP-NJ Common Stock. At the Effective Time, each share of FOHP-NJ
common stock, par value $.01 per share ("Surviving  Corporation  Common Stock"),
issued and outstanding  immediately  prior to the Effective  Time,  shall remain
issued and outstanding.  Upon the consummation of the Merger,  FOHP shall be the
sole shareholder of the Surviving  Corporation and shall own and hold all of the
issued and outstanding shares of Surviving Corporation Common Stock.

                                  ARTICLE III

                         REPRESENTATIONS AND WARRANTIES

         Each   of   the   Constituent    Corporations   makes   the   following
representations  and warranties:  (i) it is a duly organized and lawful existing
corporation in the State of New Jersey, (ii) it has filed all federal, state and
other  governmental tax returns which are required to be filed, and has paid, or
has made  adequate  provision  for the  payment  of, all taxes which have or may
become due, (iii) no claims or additional  assessments have been made against it
by federal,  state or other governmental bodies for any taxes, franchise fees or
other assessments, (iv) no judicial or administrative proceedings are pending or
threatened against it which will have a material adverse effect on its assets or
businesses,  and (v) it has good and marketable title to all of its property and
assets except as otherwise disclosed to the other party hereto.

                                   ARTICLE IV

                                    COVENANTS

         From and after the date of this Agreement through the Effective Time of
the Merger,  neither  PHS-NJ nor  FOHP-NJ  will,  except with the prior  written
consent of FOHP and PHS,  (i) incur any  obligation  or  liability,  absolute or
contingent,  except liabilities and obligations  incurred in the ordinary course
of  business,  (ii)  discharge  or satisfy  any lien or  encumbrance  or pay any
liability or obligation,  absolute or contingent, other than current liabilities
shown on its latest

                                       4

<PAGE>

balance sheet,  or incurred since the date of said balance sheet in the ordinary
course of business,  (iii) mortgage,  pledge,  create a security interest in, or
subject to lien or other  encumbrance  any of its assets  except in the ordinary
course of  business,  (iv) sell,  assign or transfer any of its assets or cancel
any debts or claims  except in the ordinary  course of  business,  (v) waive any
right of substantial value, or (vi) enter into any transaction other than in the
ordinary course of business.

                                   ARTICLE V

                              CONDITIONS OF MERGER

         The  obligation  of PHS-NJ  and  FOHP-NJ to  consummate  and effect the
Merger  contemplated  by this  Agreement  shall be subject to  fulfillment at or
prior to the Effective Time of the following conditions:

         5.1. Shareholder Approval.  This Agreement must be approved and adopted
by the sole shareholder of PHS-NJ and the sole shareholder of FOHP-NJ.

         5.2.  Illegality or Legal  Constraint.  No statute,  rule,  regulation,
executive  order,  decree,  injunction  or  restraining  order  shall  have been
enacted,  promulgated or enforced or otherwise made applicable (and not repealed
or superseded) by any court of competent jurisdiction,  administrative agency or
commission or other governmental authority or instrumentality (the "Governmental
Entities"), which prohibits the consummation of the transactions contemplated by
this Agreement.

         5.3.  Governmental  Approvals.  The parties  hereto shall have made the
requisite  filings with all Governmental  Entities as shall be required pursuant
to  applicable  laws,  rules and  regulations,  and such  Governmental  Entities
(including,  but not  limited  to, the New  Jersey  Department  of  Banking  and
Insurance and the New Jersey Department of Health and Senior  Services),  to the
extent  required  by  applicable  law,  shall  have  approved  the  transactions
contemplated by this Agreement.

                                   ARTICLE VI

                            TERMINATION AND AMENDMENT

         6.1.  Termination.  At any time before the Effective  Time, and whether
before or after  approval of this  Agreement  by PHS,  the sole  shareholder  of
PHS-NJ,  and FOHP,  the sole  shareholder  of  FOHP-NJ,  this  Agreement  may be
terminated and the Merger  abandoned,  or the  consummation of the  transactions
contemplated by the Merger may be delayed,  by the Board of Directors of FOHP-NJ
or the  Board  of  Directors  of  PHS-NJ  for  any  reason,  including,  without
limitation, non-satisfaction of any condition to the consummation of the Merger.

         6.2. Effect of Termination.  Upon the termination of this Agreement, it
shall  forthwith  become null and void and neither  party  hereto shall have any
liability or further obligation to the other party to this Agreement.

         6.3.  Amendment.  The Board of Directors of FOHP-NJ,  together with the
Board of Directors of PHS-NJ,  may amend,  modify and supplement this Agreement,
to  the  extent 


                                       5

<PAGE>

permitted by New Jersey  Corporate Law and pursuant to an instrument in writing,
at any time prior to the consummation of the Merger, whether before or after the
approval of this Agreement by the shareholders of FOHP-NJ and PHS-NJ.

                                  ARTICLE VII

                      GENERAL AND MISCELLANEOUS PROVISIONS

         7.1. Captions.  The Article,  Section and Paragraph captions herein are
inserted for convenience of reference only, do not constitute a part hereof, and
shall not be deemed to limit or otherwise affect any of the provisions hereof.

         7.2.  Counterparts.  This  Agreement  may be  executed  in one or  more
counterparts,  each of  which  shall be  deemed  an  original,  but all of which
together shall constitute one and the same instrument.

         7.3.  Applicable  Law.  This  Agreement and the issues  concerning  the
validity of this Agreement, the construction of its terms and the interpretation
and  enforcement  of the rights and duties of the parties  shall be governed by,
and construed in accordance with, the laws of the State of New Jersey.

         7.4.  Entire  Agreement.  This  Agreement,  including  the  attachments
referred to herein, constitutes the entire agreement with respect to the Merger,
and supersedes all other prior agreements and  understandings,  both written and
oral, among the parties,  or any of them, with respect to the Merger, and except
as otherwise expressly provided herein, is not intended to confer upon any other
person any rights or remedies hereunder.

         7.5. Severability.  The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or  enforceability  of any other
provision  of this  Agreement,  each of which  shall  remain  in full  force and
effect.

         7.6. Assignment.  This Agreement shall be binding upon and inure to the
benefit of the respective successors and assigns of the parties hereto.

         7.7. Survival. The representations and warranties made herein shall not
survive the  termination of this Agreement or the Effective  Time.  This Section
7.7 shall not limit any covenant or agreement of the parties hereto which by its
terms  contemplates  performance  after the termination of this Agreement or the
Effective Time.

         7.8. Merger  Expenses.  Unless  otherwise agreed by the parties hereto,
the Surviving  Corporation  shall pay all fees,  costs and expenses  incurred in
connection with the Merger and the other actions contemplated by this Agreement.

         7.9. Notices. Any notice, request,  instruction or other document to be
given  hereunder  by any  party to the other  parties  shall be in  writing  and
delivered  personally or sent by registered or certified mail,  postage prepaid,
or by facsimile transmission (with a confirming copy sent by overnight courier),
as follows:


                                       6

<PAGE>

     (a)  If to PHS-NJ, to:

          Mack Center IV
          South 61 Paramus Road
          Paramus, New Jersey 07652
          Attention:  Secretary

          With a copy to:

          Foundation Health Systems, Inc.
          21600 Oxnard Street
          Woodland Hills, CA 91367
          Attention: Senior Vice President,
          General Counsel and Secretary
          Fax:     (818) 676-8958

     (b)  If to FOHP or FOHP-NJ, to:

          FOHP, Inc.
          3501 State Highway 66
          Neptune, New Jersey 07753
          Attention: Vice President,
          General Counsel and Secretary
          Fax: (732) 918-6407

          With a copy to:

          Giordano, Halleran & Ciesla, P.C.
          125 Half Mile Road
          P. O. Box 190
          Middletown, New Jersey 07748
          Attention:  Paul T. Colella, Esq.
          Fax: (732) 224-6599


                                       7

<PAGE>



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

                                          PHYSICIANS HEALTH SERVICES OF
                                          NEW JERSEY, INC.


                                      By: /s/Donald Parisi
                                          -------------------------------------
                                    Name: DONALD PARISI
                                   Title: Secretary


                                          FIRST OPTION HEALTH PLAN OF
                                          NEW JERSEY, INC.

                                      By: /s/Thomas W. Wilfong
                                          -------------------------------------
                                    Name: THOMAS W. WILFONG
                                   Title: President and Chief Executive Officer






                                       8

<PAGE>


                                    EXHIBIT A
                                    ---------

                              AMENDED AND RESTATED
                          CERTIFICATE OF INCORPORATION
                OF PHYSICIANS HEALTH SERVICES OF NEW JERSEY, INC.
             (FORMERLY FIRST OPTION HEALTH PLAN OF NEW JERSEY, INC.)

         Physicians Health Services of New Jersey, Inc., a corporation organized
under the laws of the State of New Jersey on May 19, 1993 as First Option Health
Plan of New Jersey, Inc. (the "Corporation"),  has, since its formation, amended
its Certificate of  Incorporation  by an amendment filed on June 30, 1993, by an
Amended and Restated Certificate of Incorporation filed on February 28, 1994, by
an Amended and Restated Certificate of Incorporation filed on March 10, 1994, by
an Amended and Restated  Certificate of Incorporation filed on November 3, 1994,
by an Amended and Restated  Certificate  of  Incorporation  filed on December 7,
1995, and by an Amended and Restated Certificate of Incorporation filed on April
17, 1997.

         Pursuant  to N.J.  Stat.  Ann.  14A:9-5,  the  Corporation  hereby  (i)
restates  its  Certificate  of  Incorporation,  to  embody in one  document  its
original  certificate and the subsequent  amendments  thereto,  and (ii) further
amends its Certificate of Incorporation as set forth herein.

         The Corporation  hereby certifies the following which (i) sets forth in
full its Certificate of Incorporation,  as of this date, and (ii) supersedes and
replaces its original  Certificate of  Incorporation  and all  amendments  filed
prior to the date hereof:

                                   ARTICLE I

                                 CORPORATE NAME

         The  name of the  Corporation  is  Physicians  Health  Services  of New
Jersey, Inc.

                                   ARTICLE II

                             PURPOSE OF CORPORATION

         The purpose of the Corporation is to arrange for basic and other health
care services, to operate and maintain a health maintenance  organization and to
engage in any other activity within the purposes for which  corporations  may be
organized under the New Jersey Business Corporation Act.

                                  ARTICLE III

                                  CAPITAL STOCK

         The total number of shares of capital stock which the Corporation shall
have the authority to issue is one hundred  thousand  (100,000) shares of Common
Stock, par value $.01 per share.


<PAGE>


                                   ARTICLE IV

                               BOARD OF DIRECTORS

         The current  Board of Directors of the  Corporation  consists of eleven
(11) directors and the names and addresses of the directors are:

         NAME AND ADDRESS                        NAME AND ADDRESS
         ----------------                        ----------------

         Dr. John F. Bonamo                      Mr. John J. Gantner
         95 Northfield Avenue                    Robert Wood Johnson University
         West Orange, NJ 07052                      Hospital
                                                 One Robert Wood Johnson Place
                                                 New Brunswick, NJ 08903

         Ms. Karen A. Coughlin                   Mr. Jay M. Gellert
         Physicians Health Services, Inc.        Foundation Health Systems, Inc.
         One Far Mill Crossing                   21600 Oxnard Street
         Shelton, CT  06484                      Woodland Hills, CA 91367

         Mr. Bruce G. Coe                        Mr. Laurence M. Merlis
         41 Lambert Lane                         Meridian Health System
         Lambertville, NJ 08530                  Monmouth Shores Corporate Park
                                                 1350 Campus Parkway
                                                 Wall, NJ 07753

         Mr. Christopher M. Dadlez               Dr. Om P. Sawhney
         Saint Barnabas Health Care System       1550 Park Avenue
         Old Short Hills Road                    South Plainfield, NJ 07080
         Livingston, NJ 07039

         Dr. Mark L. Engel                       Mr. Thomas W. Wilfong
         733 North Beers Street                  FOHP, Inc.
         Holmdel, NJ 07733                       3501 State Highway 66
                                                 Neptune, NJ 07753

         Dr. Thomas J. Feneran
         102 East Bay Avenue, Suite C
         Manahawkin, NJ 08050


                                       2

<PAGE>

                                   ARTICLE V

                           REGISTERED OFFICE AND AGENT

         The address of the Corporation's  registered office in the State of New
Jersey is 820 Bear Tavern Road, 3rd Floor,  West Trenton,  New Jersey 08628, and
the  Corporation's  registered  agent at such address is The  Corporation  Trust
Company.

                                   ARTICLE VI

                LIMITATION ON LIABILITY OF DIRECTORS AND OFFICERS

         To the fullest extent permitted by the laws of the State of New Jersey,
as they exist or may  hereafter be amended,  the  directors  and officers of the
Corporation   shall  not  be  personally   liable  to  the  Corporation  or  its
shareholders  for damages for breach of any duty owed to the  Corporation or its
shareholders,  except that the provisions of this Article VI shall not relieve a
director or officer from  liability  for any breach of duty based upon an act or
omission (a) in breach of such  person's duty of loyalty to the  Corporation  or
its shareholders, (b) not in good faith or involving a knowing violation of law,
or (c) resulting in receipt by such person of an improper personal benefit.

                                  ARTICLE VII

                              COMPLIANCE WITH LAWS

         Notwithstanding  anything to the  contrary  contained  herein or in the
Corporation's  By-laws,  the Corporation shall at all times comply with the laws
of the State of New Jersey applicable to the Corporation and its business.







                                       3

<PAGE>



         IN WITNESS  WHEREOF,  Physicians  Health  Services of New Jersey,  Inc.
(formerly First Option Health Plan of New Jersey,  Inc.) has caused this Amended
and  Restated  Certificate  of  Incorporation  to be  executed on the ___ day of
__________________________, 1998, by a duly authorized officer.


                                         PHYSICIANS HEALTH SERVICES OF
                                         NEW JERSEY, INC. (formerly
                                         First Option Health Plan of
                                         New Jersey, Inc.)


                                    By:  _______________________________
                                  Name:  THOMAS W. WILFONG
                                 Title:  President and Chief Executive Officer




Filed By:
PAUL T. COLELLA, ESQ.
Giordano, Halleran & Ciesla, P.C.
125 Half Mile Road
Lincroft, New Jersey 07738




                                       4


<PAGE>
                                    EXHIBIT B
                                    ---------

                                     BY-LAWS

                                       OF

                 PHYSICIANS HEALTH SERVICES OF NEW JERSEY, INC.

                                   ARTICLE I

                                     OFFICES

         SECTION 1. PRINCIPAL OFFICE.  The principal office of Physicians Health
Services of New Jersey, Inc. (the "Corporation")  shall be located at 3501 State
Highway 66, Neptune, New Jersey 07753 or at such other place as is determined by
the Corporation's Board of Directors (the "Board" or "Board of Directors").

         SECTION 2. OTHER OFFICES. The Corporation may also have offices at such
other places,  both within and without the State of New Jersey,  as the Board of
Directors may from time to time determine or as the business of the  Corporation
may require.

                                   ARTICLE II

                                  SHAREHOLDERS

         SECTION 1. PLACE OF MEETING.  All meetings of the  shareholders for the
election of directors  and for any other  purpose shall be held at such time and
place, within or without the State of New Jersey, as stated in the notice of the
meeting or in a duly executed waiver of notice thereof.

         SECTION 2. ANNUAL MEETING.  Annual  meetings of  shareholders  shall be
held in the  month of April or May on such day as the Board of  Directors  shall
designate  at  which  the  shareholders  shall  elect a Board of  Directors  and
transact such other business as may properly be brought before the meeting.

         SECTION 3. NOTICE OF ANNUAL MEETING. Notice of the annual meeting shall
be given by  mailing,  not more than sixty (60) days nor less than ten (10) days
prior to the date of the annual meeting, a written notice stating the date, time
and place thereof,  directed to each  shareholder of record  entitled to vote at
the meeting at his,  her or its address as the same  appears upon the records of
the Corporation.

         SECTION  4.  LIST OF  SHAREHOLDERS.  Prior to each  annual  or  special
meeting of the  shareholders,  the officer who has charge of the stock ledger of
the  Corporation  shall  prepare  and make a complete  list of the  shareholders
entitled to vote at said meeting,  which shall be arranged in alphabetical order
and include the  address of and the number of shares  registered  in the name of
each  shareholder.  The list  shall  be  produced  and kept at the  place of the
meeting  during the whole time thereof and may be  inspected by any  shareholder
who may be present.




<PAGE>


         SECTION 5. SPECIAL MEETINGS. Special meetings of the shareholders,  for
any  purpose  or  purposes,  unless  otherwise  prescribed  by statute or by the
Corporation's  Certificate  of  Incorporation,  as  amended  and  restated  (the
"Certificate of  Incorporation"),  may be called by the President,  and shall be
called by the  President or Secretary at the request in writing of a majority of
the directors  then in office.  Such request shall state the purpose or purposes
of the proposed meeting.

         SECTION 6. NOTICE OF SPECIAL MEETING.  Written or telegraphic notice of
a special meeting of  shareholders,  stating the date,  time,  place and purpose
thereof,  shall be given to each shareholder  entitled to vote thereat, not more
than sixty  (60) days nor less than ten (10) days  before the date fixed for the
meeting.

         SECTION  7.  BUSINESS   TRANSACTED  AT  A  SPECIAL  MEETING.   Business
transacted  at any  special  meeting  of  shareholders  shall be  limited to the
purpose or purposes stated in the notice.

         SECTION 8. QUORUM.  Except as otherwise  provided in the Certificate of
Incorporation,  the  holders of issued  and  outstanding  shares of  Corporation
capital  stock  entitled  to  cast a  majority  of the  votes  at a  meeting  of
shareholders,  present in person or by proxy,  shall constitute a quorum for the
transaction of business at any meeting of the shareholders;  provided, that when
a  specified  matter is  required to be voted on by a class or series of capital
stock,  voting as a separate class, the holders of issued and outstanding shares
of such series or class entitled to cast a majority of the votes at a meeting of
the  holders of shares of such  series or class,  present in person or by proxy,
shall  constitute a quorum for the  transaction of business with respect to such
matter.

         SECTION  9.  METHOD OF  VOTING.  Except as  otherwise  provided  in the
Certificate of  Incorporation,  each shareholder  shall, at every meeting of the
shareholders,  be entitled  to one vote for each share of capital  stock held by
such shareholder.

         Every  shareholder  entitled to vote at a meeting of shareholders or to
express consent without a meeting may authorize another person or persons to act
for him,  her or it by proxy.  Every  proxy  shall be executed in writing by the
shareholder  or his,  her or its  agent,  except  that a proxy may be given by a
shareholder or his, her or its agent by telegram or cable or its equivalent.  No
proxy shall be valid for more than eleven (11)  months,  unless a longer time is
expressly provided therein. Unless it is coupled with an interest, a proxy shall
be revocable at will. A proxy shall not be revoked by the death or incapacity of
a  shareholder  but such proxy  shall  continue  in force  until  revoked by the
personal  representative  or guardian of the  shareholder.  The  presence at any
meeting of any  shareholder  who has given a proxy  shall not revoke  such proxy
unless the  shareholder  shall file written notice of such  revocation  with the
secretary of the meeting prior to the voting of such proxy.

         A person  named in a proxy as the  attorney  or agent of a  shareholder
may, if the proxy so provides,  substitute  another person to act in his, her or
its place,  including any other person named as an attorney or agent in the same
proxy. The substitution shall not be effective until an instrument  effecting it
is filed with the Secretary of the Corporation.



                                       2


<PAGE>

         SECTION 10. ACTION BY SHAREHOLDERS WITHOUT A MEETING. Whenever the vote
of  shareholders  at a meeting  thereof is required or  permitted to be taken in
connection with any corporate action by any provision of the New Jersey Business
Corporation  Act or provision of the Certificate of  Incorporation,  the meeting
and the vote of shareholders  may be dispensed with if all the  shareholders who
would have been entitled to vote upon the action if such meeting were held shall
consent in writing to such corporate  action being taken, and in the case of any
action to be taken  pursuant to Chapter 10 of Title 14A of the Revised  Statutes
of the State of New Jersey,  the Corporation  provides to all other shareholders
the advance notification required by N.J.S.A. 14A:5-6(2)(b).

         Subject to the provisions of N.J.S.A. 14A:5-6(2),  whenever the vote of
shareholders  at a meeting  thereof  is  required  or  permitted  to be taken in
connection with any corporate action by any provision of the New Jersey Business
Corporation Act or provision of the Certificate of Incorporation, other than the
election of  directors,  the meeting and vote of  shareholders  may be dispensed
with and the action may be taken  without a meeting upon the written  consent of
shareholders  who would have been  entitled to cast the minimum  number of votes
which  would be  necessary  to  authorize  such action at a meeting at which all
shareholders entitled to vote thereon were present and voting.

         SECTION 11. CONDUCT AT MEETINGS.  At each meeting of shareholders,  the
Chairman of the Board of Directors or in his or her absence the President of the
Corporation or in his or her absence any Vice President of the Corporation or in
his or her  absence a chairman  chosen by the vote of a majority  in interest of
the shareholders  present in person or represented by proxy and entitled to vote
thereat,  shall act as  chairman.  The  Secretary  or in his or her  absence  an
Assistant  Secretary  or in the  absence  of the  Secretary  and  all  Assistant
Secretaries a person whom the chairman of the meeting shall appoint shall act as
secretary of the meeting and keep a record of the proceedings thereof. The Board
of Directors shall be entitled to make such rules or regulations for the conduct
of  meetings  of  shareholders  as  it  shall  deem  necessary,  appropriate  or
convenient.  Subject to such rules and regulations,  the chairman shall have the
authority to prescribe such rules, regulations and procedures and to do all such
acts as, in the  judgement  of such  chairman,  are  necessary,  appropriate  or
convenient for the proper conduct of the meeting, including, without limitation,
establishing  an  agenda  or  order  of  business  for the  meeting,  rules  and
procedures for maintaining order at the meeting and the safety of those present,
limitations on  participation  in such meeting to  shareholders of record of the
Corporation and their duly authorized and  constituted  proxies,  and such other
persons as the chairman shall permit, restrictions on entry at the meeting after
the time fixed for the commencement thereof, limitations on the time allotted to
questions  or comments  by  participants  and  regulations  with  respect to the
opening and closing of the polls for  balloting on matters which are to be voted
on by  ballot.  The  chairman  shall have  absolute  authority  over  matters of
procedure  and there  shall be no appeal  from the ruling of the  chairman.  The
chairman may rule that a  resolution,  nomination  or motion not be submitted to
the  shareholders  for a vote unless  seconded by a shareholder or a proxy for a
shareholder. The chairman may require that any person who is neither a bona fide
shareholder nor a proxy for a bona fide shareholder leave the meeting,  and upon
the refusal of a shareholder to comply with a procedural  ruling of the chairman
which the chairman deems  necessary for the proper  conduct of the meeting,  may
require that such shareholder leave the meeting. The chairman may, on his or her
own  motion,  summarily  adjourn  any  meeting  for any  period  he or she deems
necessary if he or she rules that orderly procedures 

                                       3

<PAGE>

cannot be maintained at the meeting.  Unless,  and to the extent,  determined by
the Board of Directors or the chairman of the meeting,  meetings of shareholders
shall not be  required  to be held in  accordance  with  rules of  parliamentary
procedure.

         SECTION 12.  PROCEDURE  NECESSARY  TO BRING  BUSINESS  BEFORE AN ANNUAL
MEETING.  To be  properly  brought  before an annual  meeting  of  shareholders,
business  must  be  either  (a)  specified  in the  notice  of  meeting  (or any
supplement thereto) given by or at the direction of the Board of Directors,  (b)
properly  brought before the meeting by or at the direction of the Board, or (c)
properly  brought before the meeting by a shareholder.  In addition to any other
applicable  requirements,  for business to be properly  brought before an annual
meeting by a shareholder,  the shareholder must have given timely notice thereof
in  writing,  either by  personal  delivery or by United  States  mail,  postage
prepaid,  to the Secretary of the  Corporation  not less than one hundred twenty
(120) days in advance of the date of the Corporation's  proxy statement released
to  shareholders  in  connection  with the  previous  year's  annual  meeting of
shareholders; provided, however, that if the Corporation did not release a proxy
statement  in  connection  with the  previous  year's  annual  meeting  then the
shareholder  must give such notice not later than one hundred  twenty (120) days
prior to the anniversary  date of the immediately  preceding  annual meeting.  A
shareholder's  notice to the  Secretary  shall set forth as to each  matter  the
shareholder  proposes to bring before the annual meeting (i) a brief description
of the business  desired to be brought before the annual meeting and the reasons
for  conducting  such business at the annual  meeting,  (ii) the name and record
address of the shareholder  proposing such business,  (iii) the class and number
of shares of the Corporation  which are  beneficially  owned by the shareholder,
and (iv) any material interest of the shareholder in such business.

         Notwithstanding  anything in the By-laws to the  contrary,  no business
shall  be  conducted  at the  annual  meeting  except  in  accordance  with  the
procedures  set forth in this Section 12 of Article 11 and any other  applicable
requirements;  provided,  however, that nothing in this Section 12 of Article 11
shall be  deemed to  preclude  discussion  by any  shareholder  of any  business
properly brought before the annual meeting.

         The  chairman  of an  annual  meeting  shall,  if  the  facts  warrant,
determine  and declare to the meeting that  business  was not  properly  brought
before the  meeting in  accordance  with the  provisions  of this  Section 12 of
Article 11 or any other applicable  requirements,  which  determination shall be
conclusive, and, as a result, any such business shall not be transacted.

                                  ARTICLE III

                                    DIRECTORS

         SECTION 1. NUMBER AND  ELECTION OF  DIRECTORS.  The number of directors
which shall  constitute the entire Board shall be not less than six (6) nor more
than fifty (50)  directors.  As of January 1, 1999,  the Board shall  consist of
twelve  (12)  directors,  and  thereafter  the number of  directors  which shall
constitute  the whole Board may be increased or decreased by  resolution  of the
Board of Directors or shareholders,  but in no case shall be less than three (3)
directors. The directors shall be elected at the annual meeting of shareholders,
or at a special  meeting  of  shareholders  called  for such  purpose,  and each
director  elected  shall hold office  until his or her  successor is elected and
qualified. Directors need not be shareholders.




                                       4


<PAGE>

         SECTION 2.  NOMINATIONS.  Nominations for the election of directors may
be made by the  Board of  Directors  or a  committee  appointed  by the Board of
Directors  or by a  shareholder  entitled to vote in the  election of  directors
generally.

         SECTION 3. VACANCIES;  NEWLY CREATED DIRECTORSHIP.  Vacancies and newly
created  directorships  resulting from any increase in the authorized  number of
directors may be filled by a majority of the directors  then in office,  or by a
sole  remaining  director,  and the  directors so chosen shall hold office until
their successors are duly elected and shall qualify, unless sooner displaced. If
there are no directors in office,  then an election of directors  may be held in
the manner provided by statute.

         SECTION  4.  GOVERNANCE.  The  business  of the  Corporation  shall  be
governed by the Board.  The Board of  Directors  may exercise all such powers of
the  Corporation and do all such lawful acts and things as are not by statute or
by the Certificate of Incorporation directed or required to be exercised or done
by the shareholders.

         SECTION 5.  REMOVAL.  Any  director or  directors  may be removed  from
office  either  with or without  cause by the  shareholders  pursuant to Section
14A:6-6 of the New Jersey Business Corporation Act.

         SECTION 6. MEETINGS. The Board of Directors of the Corporation may hold
meetings,  both regular and special,  either  within or without the State of New
Jersey. The first meeting of each newly elected Board of Directors shall be held
at such time and place as shall be fixed by the vote of the  shareholders at the
annual  meeting,  and no notice of such meeting  shall be necessary to the newly
elected directors in order legally to constitute the meeting,  provided a quorum
shall be  present.  In the event of the failure of the  shareholders  to fix the
time or place of such first meeting of the newly elected Board of Directors,  or
in the  event  such  meeting  is not held at the time and  place so fixed by the
shareholders,  the  meeting  may be held at such  time  and  place  as  shall be
specified in a notice given as hereinafter  provided for special meetings of the
Board of Directors,  or as shall be specified in a written  waiver signed by all
of the directors,  or upon the conclusion of the shareholders'  meeting at which
time they were elected,  without  further  notice.  At such meeting the Board of
Directors  shall  elect from  their own  number a Chairman  of the Board for the
ensuing  year and until his or her  successor  is  elected  and  qualified,  and
transact such other business as may come before the meeting.

         SECTION 7. REGULAR MEETINGS.  Regular meetings of the Board may be held
on five (5) days  written  notice,  at such  time as shall be from  time to time
determined  by the Board.  Written  notice for any such meeting  shall state the
place,  date and time of the meeting and shall be delivered either personally or
by first class mail, facsimile or overnight courier service.

         SECTION 8. SPECIAL MEETINGS. Special meetings of the Board of Directors
may be called by the Chairman of the Board or the President, and shall be called
by the  President or  Secretary at the request in writing of at least  one-third
(1/3) of the directors  then in office.  Written  notice of any special  meeting
shall be given, either personally or by first class mail, facsimile or overnight
courier  service,  to each  director  at least  two (2)  days  prior to the date
thereof.


                                       5

<PAGE>

         SECTION 9. PLACE OF MEETING; WAIVER OF NOTICE. Meetings of the Board of
Directors  shall be held at such place as shall be  designated  in the notice of
meeting if notice is required.  Notice of any meeting, if required,  need not be
given to any director who signs a waiver of notice  before or after the meeting.
The  attendance of any director at any meeting  without the director  protesting
prior to the  conclusion  of such  meeting  the  lack of  notice  thereof  shall
constitute a waiver of notice by such director.

         SECTION 10. ADJOURNMENT. Any meeting of the Board of Directors shall be
adjourned  upon the request of a majority of the  directors on the Board who are
present at the meeting,  for a period of not more than ten (10) days.  Also, any
meeting of a committee of the Board or any other  committee  established  by the
Corporation  shall be adjourned upon the request of a majority of the persons on
the committee who are present at the meeting,  for a period of not more than ten
(10) days.

         SECTION 11. QUORUM.  Except as otherwise provided in the Certificate of
Incorporation,  a majority of the  directors  then in office shall  constitute a
quorum for the transaction of business at any meeting of the Board of Directors.

         SECTION  12.  MANNER OF ACTING.  Except as  otherwise  provided  in the
Certificate of Incorporation  or herein,  the act of a majority of the directors
present at a meeting at which a quorum is present  shall be the act of the Board
of Directors.

         SECTION 13. ACTION WITHOUT A MEETING.  Any action required or permitted
to be taken by the Board of  Directors  or by a  committee  thereof may be taken
without a meeting if, prior to such  action,  all of the members of the Board or
committee  consent in writing  to a  resolution  authorizing  the  action.  Such
written  consents may be executed in  counterparts,  and shall be filed with the
minutes of the Corporation.

         SECTION 14. TELEPHONIC  ATTENDANCE AT MEETING. Any or all directors may
participate  in a meeting of the Board of  Directors or a committee of the Board
by means of  conference  telephone  or any means of  communication  by which all
persons participating in the meeting are able to hear each other.

         SECTION 15. COMMITTEES.

                    (a) FORMATION OF COMMITTEES.  The Board of Directors may, by
one or more  resolutions  passed by a majority of the directors  then in office,
establish  such  other  committees  as it  shall  determine  necessary  for  the
operations of the Corporation. Such committee or committees shall have such name
or names as may be determined  from time to time by a resolution  adopted by the
Board. Moreover, upon a resolution passed by a majority of the directors then in
office,  the Board may designate  one or more  committees,  comprised  solely of
directors  of the  Corporation,  to  exercise  the  power  of the  Board  in the
management of the business and affairs of the Corporation. Only committees whose
membership is  exclusively  reserved for directors may be vested with the powers
of the Board. All other committees shall have and may exercise such authority as
the Board  establishes  by resolution or these  By-laws  permit,  subject to any
limitation  imposed  by law.  The  filling  of  vacancies  in a  committee,  the
abolishing  of a  committee  and the  removal of persons  serving on a committee
shall be as set


                                       6

<PAGE>

forth in a  resolution  adopted by the Board unless  otherwise  set forth in the
provisions of these By-laws  applicable to such committee.  Each committee shall
keep  regular  minutes of its meetings and report same to the Board of Directors
when  required.  Except as may otherwise be provided in a resolution  adopted by
the Board, committee members and chairpersons shall serve one (1) year terms.

                    (b)  RESTRICTIONS  ON  COMMITTEE  MEMBERS.  Members  of  any
committee of the  Corporation  who are  affiliated  with or represent an entity,
including its officers,  directors,  employees and agents,  that provides health
care  services  on behalf of the  Corporation  or any  subsidiary  or  affiliate
thereof  pursuant to an agreement  with the  Corporation  or any  subsidiary  or
affiliate  thereof are prohibited from using their  participation as a committee
member  of  the  Corporation  to  obtain  or  exchange  competitive  information
pertaining  to other  providers  that provide  similar  health care  services on
behalf of the Corporation or any subsidiary or affiliate  thereof pursuant to an
agreement  with  the  Corporation  or  any  subsidiary  or  affiliate   thereof.
Competitive  information includes, but is not limited to, information related to
an individual provider's rates,  discounts,  costs, prices,  salaries,  terms of
participation in other health plans, or strategic or marketing plans.

                    (c) QUORUM.  A majority  of the  members of a  committee  or
subcommittee  shall  constitute a quorum for the  transaction of business at any
meeting of such committee or subcommittee.

                    (d)  REQUIRED  VOTE.  The act of a majority  of the  members
present  at a  meeting  at which a  quorum  is  present  shall be the act of the
committee or subcommittee.

         SECTION 16. COMPENSATION OF DIRECTORS.  The directors may be paid their
expenses,  if any,  relating  to their  attendance  at  meetings of the Board of
Directors,  and directors who are not full-time employees of the Corporation may
be paid a fixed sum for  attendance  at meetings of the Board of  Directors or a
stated salary as a director.  No such payment  shall  preclude any director from
serving  the  Corporation  in any  other  capacity  and  receiving  compensation
therefor.  Members  of  special  or  standing  committees  may be  allowed  like
compensation for attending committee meetings.

                                   ARTICLE IV

                                    OFFICERS

         SECTION 1. OFFICERS. The officers of the Corporation shall be chosen by
the Board of Directors and shall be a Chairman of the Board, a President, one or
more Vice  Presidents,  a Treasurer and a Secretary.  The Board of Directors may
also choose one or more Assistant Secretaries or Assistant  Treasurers,  and may
designate one or more Vice Presidents to be executive or senior Vice Presidents.
One person may hold two (2) or more offices, but the person serving as President
may not serve simultaneously as Secretary.

         SECTION 2. TERM;  REMOVAL.  The officers of the Corporation  shall hold
office until their  successors  are chosen and qualify.  Any officer  elected or
appointed by the Board of  Directors  may be removed or suspended at any time by
the affirmative  vote of a majority of the directors at any meeting of the Board
at which  there is a quorum,  without  the  necessity  of  specifying  any 

                                       7

<PAGE>

cause  therefor  and without  any prior  notice of such action to the officer so
removed or suspended.  All officers,  employees and agents,  other than officers
elected or appointed by the Board of  Directors,  may be suspended or removed by
the committee of the Board of Directors or officer appointing them.

         SECTION 3.  CHAIRMAN  OF THE BOARD.  The  Chairman  of the Board  shall
preside at all meetings of the  shareholders  and the Board of Directors.  He or
she shall, in the absence or the disability of the President, perform the duties
and exercise the powers of the President, and shall perform such other duties as
may be delegated to him or her by the Board of Directors.

         SECTION 4. PRESIDENT.  The President,  who shall be the Chief Executive
Officer of the  Corporation,  shall in  general,  subject to the  control of the
Board of Directors, supervise and control all of the business and affairs of the
Corporation.   All  other  officers  shall  be  subject  to  the  authority  and
supervision  of the  President.  The President may enter into and execute in the
name of the Corporation  contracts or other instruments in the regular course of
business or contracts or other instruments not in the regular course of business
which  are  authorized,  either  generally  or  specifically,  by the  Board  of
Directors.  The President shall have the general powers and duties of management
usually vested in the office of President of a corporation.

         SECTION 5. VICE  PRESIDENTS.  The Board of Directors may appoint one or
more Vice  Presidents  who shall  perform such duties and possess such powers as
shall be assigned him or her by the President or the Board.

         SECTION 6. TREASURER AND ASSISTANT TREASURER.  The Treasurer shall have
charge and custody of, and be  responsible  for, all funds and securities of the
Corporation,  shall keep or cause to be kept  regular  books of account  for the
Corporation and shall perform such other duties and possess such other powers as
are incident to the office of Treasurer or as shall be assigned to the Treasurer
by the  President or the Board.  The Assistant  Treasurer,  or if there shall be
more than one, the Assistant  Treasurers,  in the order determined by the Board,
shall,  in the absence or  disability of the  Treasurer,  perform the duties and
exercise the powers of the  Treasurer  set forth herein and as the  President or
the Board from time to time may prescribe.

         SECTION 7. SECRETARY AND ASSISTANT SECRETARY. The Secretary shall cause
notices  of all  meetings  to be served as  prescribed  in these  By-laws  or by
statute,  shall  keep or cause to be kept the  minutes  of all  meetings  of the
shareholders  and of the Board of Directors,  shall have charge of the corporate
records and seal of the Corporation and shall keep a register of the post-office
address of each  shareholder  which shall be furnished to the  Secretary by such
shareholder.  The  Secretary  shall  perform  such other duties and possess such
other powers as are  incident to the office of the  Secretary or as are assigned
by the  President or the Board.  The Assistant  Secretary,  or if there shall be
more than one, the Assistant Secretaries,  in the order determined by the Board,
shall,  in the absence or  disability of the  Secretary,  perform the duties and
exercise the powers of the  Secretary  set forth herein and as the  President or
the Board from time to time may prescribe.

         SECTION 8. SUBORDINATE  OFFICERS AND AGENTS. The Board may appoint such
other  officers and agents as it shall deem  necessary or  desirable,  who shall
hold their  offices  for such 

                                       8

<PAGE>

terms and  shall  exercise  such  powers  and  perform  such  duties as shall be
determined from time to time by the President or the Board.

                                   ARTICLE V

                             EXECUTION OF DOCUMENTS

         SECTION 1. COMMERCIAL PAPER AND CONTRACTS.  All checks,  notes,  drafts
and other commercial  paper of the Corporation  shall be signed by the President
or the  Treasurer of the  Corporation  or by such other person or persons as the
Board of Directors may from time to time designate.

         SECTION 2. OTHER  INSTRUMENTS.  All  contracts,  deeds,  mortgages and
other instruments shall be executed by the President or any Vice President, and,
if necessary or required by law, by the Secretary or any Assistant Secretary, or
such other  person or persons  as the Board of  Directors  may from time to time
designate.

                                   ARTICLE VI

                                   FISCAL YEAR

         The fiscal year of the Corporation shall be the calendar year.

                                  ARTICLE VII

                        CERTIFICATES REPRESENTING SHARES

         Certificates  representing  shares of capital stock of the  Corporation
shall be in such form as shall be determined by the Board of Directors and shall
be executed by the  President or any Vice  President and by the Secretary or the
Treasurer, unless the Board of Directors shall direct otherwise.

                                  ARTICLE VIII

                                   RECORD DATE

         For the purpose of determining the  shareholders  entitled to notice of
or to vote at any meeting of  shareholders  or any  adjournment  thereof,  or to
express  consent to or dissent from any proposal  without any meeting or for the
purpose of determining  shareholders entitled to receive payment of any dividend
or allotment of any right, or in order to make a  determination  of shareholders
for any other purpose,  the Board of Directors shall fix, in advance,  a date as
the record date for any such determination of shareholders.  Such date shall not
be more than sixty (60) days nor less than ten (10) days before the date of such
meeting,  nor more than sixty  (60) days  prior to any other  action or event to
which  it  relates.  When  a  determination  of  shareholders  of  record  for a
shareholders'  meeting  has been made as  provided in this  Article  VIII,  such
determination  shall  apply to any  adjournment  thereof,  unless  the  Board of
Directors fixes a new record date for the adjourned meeting.


                                       9

<PAGE>

                                   ARTICLE IX

                                    DIVIDENDS

         The  Board  of  Directors  may  from  time  to  time  declare,  and the
Corporation may pay,  dividends or make other  distributions  on its outstanding
shares of capital stock in the manner and upon the terms and conditions provided
by the Certificate of Incorporation and by statute.

                                    ARTICLE X

                                    AMENDMENT

         These By-laws may be altered,  amended or repealed,  or new by-laws may
be adopted by the Board of  Directors,  at any  regular  meeting of the Board of
Directors or of any special meeting of the Board of Directors. These By-laws, or
any new by-laws adopted by the Board, may also be altered,  amended or repealed,
or new  by-laws may be adopted,  by the  shareholders,  at any annual or special
meeting  of  shareholders  if notice of such  alteration,  amendment,  repeal or
adoption of new by-laws is contained in the notice of such meeting.


                                   ARTICLE XI

                                 INDEMNIFICATION

         SECTION  1. The  Corporation  shall  indemnify  a  Corporate  Agent (as
defined  in  Section  8 of  this  Article)  against  his  or  her  expenses  and
liabilities  actually and reasonably  incurred in connection with the defense of
any  proceeding  involving the Corporate  Agent by reason of his or her being or
having been such a Corporate  Agent,  other than a proceeding by or in the right
of the  Corporation,  if (a) such  Corporate  Agent acted in good faith and in a
manner  he or she  reasonably  believed  to be in or  not  opposed  to the  best
interests of the  Corporation  and (b) with respect to any criminal  proceeding,
such Corporate  Agent had no reasonable  cause to believe his or her conduct was
unlawful.  The  termination  of any proceeding by judgment,  order,  settlement,
conviction  or upon a plea of nolo  contendere or its  equivalent,  shall not of
itself  create  a  presumption  that  such  Corporate  Agent  did not  meet  the
applicable standards of conduct set forth in subparts (a) and (b) herein.

         SECTION 2. The  Corporation  shall  indemnify a Corporate Agent against
his or her liabilities and expenses,  actually or reasonably  incurred by him or
her in connection with the defense, in any proceeding, by or in the right of the
Corporation  to procure a judgment in its favor  which  involves  the  Corporate
Agent by reason of his or her being or having been such Corporate  Agent,  if he
or she acted in good faith and in a manner he or she  reasonably  believed to be
in or not opposed to the best  interests of the  Corporation.  However,  in such
proceeding no  indemnification  shall be provided in respect of any claim, issue
or matter as to which such  Corporate  Agent shall have been adjudged  liable to
the Corporation unless and only to the extent that the New Jersey Superior Court
or the  court  in  which  such  proceeding  was  brought  shall  determine  upon
application  that  despite the  adjudication  of  liability,  but in view of all
circumstances  of the  case,  such  Corporate  Agent is  fairly  and  reasonably
entitled  to  indemnity  for such  expenses  or  liabilities  as the New  Jersey
Superior Court or such other court shall deem proper.


                                       10
<PAGE>


         SECTION 3. The  Corporation  shall  indemnify a Corporate Agent against
expenses (including  attorneys fees) to the extent that such Corporate Agent has
been  successful  on the merits or  otherwise in any  proceeding  referred to in
Sections 1 and 2 of this  Article  or in  defense of any claim,  issue or matter
therein.

         SECTION 4. Any  indemnification  under  Section 1 of this  Article and,
unless ordered by a court,  under Section 2 of this Article,  may be made by the
Corporation  only as  authorized in a specific  case upon a  determination  that
indemnification  is proper in the circumstances  because the Corporate Agent met
the applicable standard of conduct set forth in Sections 1 or 2 of this Article.
Such  determination  shall be made:  (a) by the Board of Directors by a majority
vote of a quorum  consisting  of directors  who were not parties to or otherwise
involved in the proceeding;  (b) if such a quorum is not obtainable, or, even if
obtainable  and such quorum of the Board of Directors by a majority  vote of the
disinterested  directors so directs,  by independent  legal counsel in a written
opinion, such counsel to be designated by the Board of Directors;  or (c) by the
shareholders.

         SECTION 5. Expenses  incurred by a Corporate Agent in connection with a
proceeding may be paid by the Corporation in advance of the final disposition of
the  proceeding,  as authorized  by the Board of  Directors,  upon receipt of an
undertaking  by or on behalf of the Corporate  Agent to repay such amount unless
it shall  ultimately be determined  that he or she is entitled to be indemnified
as provided in this Article XI.

         SECTION 6. The  indemnification and advancement of expenses provided by
or granted  pursuant to the other sections of this Article shall not exclude any
other rights to which a Corporate Agent may be entitled under the  Corporation's
Certificate of  Incorporation,  a By-law,  agreement,  vote of shareholders,  or
otherwise;  provided, that no indemnification shall be made to or on behalf of a
Corporate  Agent  if a  judgment  or other  final  adjudication  adverse  to the
Corporate Agent establishes that his or her acts or omissions (a) were in breach
of his or her duty of loyalty to the Corporation or its  shareholders,  (b) were
not in good faith or involved a knowing  violation  of law,  or (c)  resulted in
receipt by the Corporate Agent of an improper personal benefit.

         SECTION  7. The  Corporation  shall  have the  power  to  purchase  and
maintain  insurance  on behalf  of any  Corporate  Agent  against  any  expenses
incurred in any proceeding and any  liabilities  asserted  against him or her by
reason of his or her being or having been a Corporate Agent,  whether or not the
Corporation  would have the power to indemnify  him or her against such expenses
and  liabilities  under the  provisions of this  section.  The  Corporation  may
purchase such insurance  from, or such insurance may be reinsured in whole or in
part by, an  insurer  owned by or  otherwise  affiliated  with the  Corporation,
whether or not such insurer does business with other insurers.

         SECTION 8. For purposes of this Article XI, the following  definitions,
as well as all other definitions set forth in N.J.S.A. 14A:3-5, shall apply:

                    (a) "Corporate  Agent" shall mean any person who is or was a
director,  officer,  employee or agent of the indemnifying corporation or of any
constituent   corporation   absorbed   by  the   indemnifying   corporation   in
consolidation  or  merger  and any  person  who is or was a  director,

                                       11

<PAGE>

officer, trustee, employee or agent of any Other Enterprise,  serving as such at
the  request  of  the  indemnifying  corporation,  or of  any  such  constituent
corporation, or the legal representative of any such director, officer, trustee,
employee  or  agent.  Furthermore,   any  Corporate  Agent  also  serving  as  a
"fiduciary" of an employee benefit plan governed by the Act of Congress entitled
"Employee  Retirement  Income Security Act of 1974" (ERISA) as amended from time
to time,  shall serve in such capacity as a Corporate  Agent, if the corporation
shall have  requested any such person to serve.  Additionally,  the  corporation
shall be deemed to have  requested  such  person to serve as a  fiduciary  of an
employee  benefit plan,  only where the performance by such person of his or her
duties to the corporation also imposes duties on, or otherwise involves services
by, such person to the plan or participants or beneficiaries of the plan.

                    (b) "Other  Enterprise"  shall mean any  domestic or foreign
corporation other than the indemnifying corporation, and any partnership,  joint
venture,  sole  proprietorship,  trust or other enterprise  (including  employee
benefit  plans  governed  by  ERISA),  whether  or not for  profit,  served by a
Corporate Agent.

                                  ARTICLE XII

                 INCONSISTENCY WITH CERTIFICATE OF INCORPORATION

         In  the  event  that  any  of  the   provisions  of  these  By-laws  is
inconsistent   with  any   provision  of  the   Corporation's   Certificate   of
Incorporation, the provision of the Certificate of Incorporation shall apply.

As Amended and Restated: January 1, 1999.








                                       12

<PAGE>

                                    EXHIBIT C
                                    ---------

           DIRECTORS OF PHYSICIANS HEALTH SERVICES OF NEW JERSEY, INC.

         The Board of Directors  of the  Surviving  Corporation  will consist of
eleven (11) directors and the names and addresses of such directors are:

NAME AND ADDRESS                           NAME AND ADDRESS
----------------                           ----------------

Dr. John F. Bonamo                         Mr. John J. Gantner
95 Northfield Avenue                       Robert Wood Johnson
West Orange, NJ 07052                      University Hospital
                                           One Robert Wood Johnson Place
                                           New Brunswick, NJ 08903

Ms. Karen A. Coughlin                      Mr. Jay M. Gellert
Physicians Health Services, Inc.           Foundation Health Systems, Inc.
One Far Mill Crossing                      21600 Oxnard Street
Shelton, CT  06484                         Woodland Hills, CA 91367

Mr. Bruce G. Coe                           Mr. Laurence M. Merlis
41 Lambert Lane                            Meridian Health System
Lambertville, NJ 08530                     Monmouth Shores
                                           Corporate Park
                                           1350 Campus Parkway
                                           Wall, NJ 07753

Mr. Christopher M. Dadlez                  Dr. Om P. Sawhney
Saint Barnabas Health Care System          1550 Park Avenue
Old Short Hills Road                       South Plainfield, NJ 07080
Livingston, NJ 07039

Dr. Mark L. Engel                          Mr. Thomas W. Wilfong
733 North Beers Street                     FOHP, Inc.
Holmdel, NJ 07733                          3501 State Highway 66
                                           Neptune, NJ 07753

Dr. Thomas J. Feneran
102 East Bay Avenue, Suite C
Manahawkin, NJ 08050


<PAGE>




                                    EXHIBIT D
                                    ---------

           OFFICERS OF PHYSICIANS HEALTH SERVICES OF NEW JERSEY, INC.

         The name and  position(s)  of each  executive  officer of the Surviving
Corporation is set for below:

                  NAME                          POSITION
                  ----                          --------

            Thomas W. Wilfong         President and Chief Executive Officer

            Dr. Joseph Singer         Vice President and Chief Medical Officer

            Donald Parisi             Vice President, Secretary and General
                                      Counsel

            Marc M. Stein             Treasurer and Chief Financial Officer