AMERICAN DENTAL PARTNERS INC, S-1/A, 1998-02-26

AMERICAN DENTAL PARTNERS INC
S-1/A, 1998-02-26
MISC HEALTH & ALLIED SERVICES, NEC

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 26, 1998

REGISTRATION STATEMENT NO. 333-39981

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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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AMENDMENT NO. 3
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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AMERICAN DENTAL PARTNERS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<CAPTION>

DELAWARE 8099 04-3297858
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>

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301 EDGEWATER PLACE, SUITE 320
WAKEFIELD, MASSACHUSETTS 01880
(781) 224-0880
(781) 224-4216 (FAX)
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

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GREGORY A. SERRAO
CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
AMERICAN DENTAL PARTNERS, INC.
301 EDGEWATER PLACE, SUITE 320
WAKEFIELD, MASSACHUSETTS 01880
(781) 224-0880
(781) 224-4216 (FAX)
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

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COPIES TO:
GARY A. WADMAN, ESQ. KEITH F. HIGGINS, ESQ.
BAKER & HOSTETLER LLP ROPES & GRAY
65 EAST STATE STREET ONE INTERNATIONAL PLACE
COLUMBUS, OHIO 43215
(614) 228-1541 BOSTON, MASSACHUSETTS 02110
(617) 951-7000
(614) 462-2616 (FAX) (617) 951-7050 (FAX)

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. [_]

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]

If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. [_]

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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO
SECTION 8(a), MAY DETERMINE.

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<PAGE>

++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION

FEBRUARY 26, 1998

2,000,000 Shares

[LOGO OF AMERICAN DENTAL PARTNERS, INC. APPEARS HERE]
Common Stock

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All of the shares of Common Stock offered hereby are being sold by American
Dental Partners, Inc. ("ADP" or the "Company"). Prior to this offering, there
has been no public market for the Common Stock of the Company. It is currently
estimated that the initial public offering price will be between $15.00 and
$17.00 per share. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price. The Common Stock
has been approved for quotation on the Nasdaq National Market under the symbol
"ADPI."

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THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.

SEE "RISK FACTORS" BEGINNING ON PAGE 7.

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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

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<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS
TO DISCOUNTS AND TO
PUBLIC COMMISSIONS(1) COMPANY(2)
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<S> <C> <C> <C>
Per Share..................................... $ $ $
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Total(3)...................................... $ $ $
</TABLE>
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(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses estimated at $1,000,000, payable by the Company.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to 300,000 additional shares of Common Stock solely to cover over-
allotments, if any. To the extent the option is exercised, the Underwriters
will offer the shares at the Price to Public shown above. If all such
shares are purchased, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $ , $ , and $ ,
respectively. See "Underwriting."

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The shares of Common Stock are offered by the several Underwriters named
herein, subject to prior sale, when, as and if delivered and accepted by them,
and subject to their right to reject orders in whole or in part. It is expected
that delivery of certificates for such shares of Common Stock will be made at
the offices of BT Alex. Brown Incorporated in Baltimore, Maryland on or about
, 1998.

BT ALEX. BROWN

BANCAMERICA ROBERTSON STEPHENS

PIPER JAFFRAY INC.

THE DATE OF THIS PROSPECTUS IS , 1998.
<PAGE>

SINCE ITS INCEPTION THROUGH JANUARY 31, 1998, THE COMPANY HAS COMPLETED
AFFILIATIONS WITH TEN DENTAL GROUP PRACTICES AND CURRENTLY OPERATES 83 DENTAL
FACILITIES WITH 617 OPERATORIES IN SIX STATES. THE COMPANY ACQUIRES
SUBSTANTIALLY ALL THE ASSETS OF THE DENTAL PRACTICES WITH WHICH IT AFFILIATES,
EXCEPT THOSE REQUIRED BY LAW TO BE OWNED OR MAINTAINED BY DENTISTS, AND ENTERS
INTO LONG-TERM SERVICE AGREEMENTS WITH THE AFFILIATED DENTAL PRACTICES.

[A two-colored map of the United States displaying by separate color the states
in which the Company has dental facilities and in which the Company has its
corporate offices, and indicating within each state the metropolitan statistical
areas in which the Company operates, as well as the Company's corporate office,
along with a textual identification of each.]

The Company's corporate office is located at 301 Edgewater Place, Suite 320,
Wakefield, Massachusetts, 01880. Its telephone number is (781) 224-0880.

THE UNDERWRITERS AND CERTAIN OTHER PERSONS PARTICIPATING IN THIS OFFERING MAY
ENGAGE IN TRANSACTIONS THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE MARKET
PRICE OF THE COMMON STOCK, INCLUDING OVER-ALLOTMENT, STABILIZING AND SHORT-
COVERING TRANSACTIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF
THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE>

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements, including the notes thereto,
appearing elsewhere in this Prospectus.

THE COMPANY

American Dental Partners, Inc. is a leading provider of dental practice
management services to multi-disciplinary dental group practices in selected
markets in the United States. The Company seeks to affiliate with leading
dental groups that provide a comprehensive range of dental care services, have
outstanding reputations for quality and have proven records of financial
performance. Since its inception through January 31, 1998, the Company has
successfully completed affiliations with ten dental group practices and
currently operates 83 dental facilities with 617 operatories in six states. The
Company's rapid growth has resulted primarily from these affiliations, which
consisted of three dental group practice affiliations completed in 1996, six
dental group practice affiliations completed in 1997 and one dental group
practice affiliation completed in 1998. For the year ended December 31, 1997,
the Company generated $53.3 million in net revenue and $1.2 million in net
earnings. Based on the size of the Company's affiliated network and its results
of operations, the Company believes it is a leading provider of dental practice
management services in the United States.

The United States Health Care Financing Administration estimates that
expenditures for dental care were approximately $45.8 billion in 1995 and will
reach approximately $79.1 billion by 2005, representing a compound annual
growth rate of approximately 5.6%. The Company believes that the growth in
expenditures for dental care will continue to be driven by both increases in
costs and increases in demand for services due to: (i) improved dental benefits
offered by employers; (ii) increased availability and use of dental insurance,
including preferred provider organization ("PPO") plans and capitated managed
care plans; (iii) increased demand for dental care from an aging population;
and (iv) increased demand for cosmetic and preventative procedures. The Company
believes that this growth will benefit not only dentists, but companies that
provide services to the dental care industry, such as dental practice
management companies. However, the failure of any of the foregoing factors to
materialize could offset increases in demand for dental care, and any such
increases may not correlate with growth in the Company's business.

The delivery of dental care in the United States is highly fragmented. Unlike
many other sectors of the health care services industry, the dental care
industry is in the early stages of consolidation. Although dental care is
typically offered by solo practioners, the trend toward group practice is
growing. According to the American Dental Association, in 1995, 11.8% of the
approximately 153,300 dentists in the United States were practicing in groups
of three or more, up from 4.1% in 1991. The Company believes that this
consolidation trend will continue and that dental group practices will seek to
affiliate with entities, such as the Company, that: (i) allow dentists to focus
on the clinical aspects of dentistry by providing management resources to
conduct the business and administrative aspects of dentistry; (ii) provide
information and operating systems that are required to effectively operate in
an increasingly complex reimbursement environment; (iii) assist with third-
party contracting; (iv) realize economies of scale in purchasing and provide
access to capital; and (v) provide dentists the opportunity to realize value
for their practices.

The Company's affiliation model is designed to create a partnership in
management between the Company and the affiliated dental group practice that
allows each party to maximize its strengths and retain its autonomy. When
affiliating with a dental group practice, the Company acquires substantially
all of its assets and enters into a long-term service agreement to manage the
non-clinical aspects of the dental operations. The Company supports its
affiliated dental group practices with a broad range of services designed to
enhance practice revenue, improve operating efficiencies and expand operating
margins. The Company shares the best practices of its network with each
affiliate and provides assistance with information systems, budgeting,
financial reporting, facilities management, third-party payor contracting,
supplies and equipment procurement, quality assurance initiatives, billing and
collecting accounts receivable, marketing and recruiting, hiring and training
support staff.

3
<PAGE>

Under its service agreements, the Company is responsible for providing all
services necessary for the administration of the non-clinical aspects of the
dental operations. The PC is responsible for the provision of dental care. The
PC reimburses the Company for expenses incurred on its behalf in connection
with the operation and administration of the dental facilities and pays fees to
the Company for its management services. Each of the Company's service
agreements is for an initial term of 40 years.

The Company's objective is to be the leading dental practice management
company in the United States. The Company's strategy for achieving this
objective is to: (i) expand into carefully selected and diverse geographic
markets which have favorable demographics and projected economic growth; (ii)
affiliate with leading dental group practices which have reputations for
quality care and proven records of financial performance; (iii) increase market
penetration in each of its markets through additional affiliations, recruitment
of dentists and new facility development; (iv) add value to each affiliated
dental group practice by assisting the practice in improving operating
performance; and (v) pursue various initiatives to help its affiliates provide
the highest quality of care and service.

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company..... 2,000,000 shares
Common Stock to be outstanding after the 6,829,012 shares(1)(2)
offering...............................
Use of proceeds......................... To redeem the Company's Series B
Redeemable Preferred Stock, to repay
certain indebtedness and for general
corporate purposes, including
acquisitions. See "Use of Proceeds."
Nasdaq National Market symbol........... ADPI
</TABLE>
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(1) Based on shares outstanding at January 31, 1998. Does not include
1,120,166 shares of Common Stock issuable upon the exercise of outstanding
options issued pursuant to the Company's stock option plans, at a weighted
average exercise price of $8.70 as of such date.
(2) After completion of this offering, executive officers and directors of the
Company as a group will own approximately 50.8% of the outstanding shares
of Common Stock and dentists affiliated with the Company's affiliated
dental group practices will beneficially own approximately 19.8% of the
outstanding shares of Common Stock. See "Risk Factors--Control by Existing
Stockholders" and "Principal Stockholders."

Unless otherwise indicated, the term "Company" includes American Dental
Partners, Inc. and (i) its management service organization ("MSO") subsidiaries
and (ii) its wholly-owned subsidiary Orthocare, Ltd. The term "PC" means the
dental professional corporation or other professional entity formed by the
dentists of the affiliating dental group practice. The Company does not own or
control the PCs and, accordingly, does not consolidate the financial statements
of the PCs with those of the Company.

Unless otherwise indicated, all references in this Prospectus: (i) assume no
exercise of the Underwriters' over-allotment option; (ii) assume conversion of
the Company's outstanding shares of Series A Convertible Preferred Stock, $0.01
par value (the "Series A Convertible Preferred Stock"), into 2,400,000 shares
of Common Stock upon completion of this offering; (iii) assume redemption of
the Company's outstanding Series B Redeemable Preferred Stock, $0.01 par value
(the "Series B Redeemable Preferred Stock"), upon completion of this offering;
and (iv) give effect to the 6-for-1 stock split effected in the form of a stock
dividend on November 7, 1997.

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SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND STATISTICAL DATA)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
PRO FORMA
ACTUAL AS ADJUSTED
---------------- ---------------------
1996 1997 1996(1)(2) 1997(2)(3)
------- ------- ---------- ----------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenue............................ $ 3,933 $53,270 $60,604 $68,539
Operating expenses..................... 6,414 51,360 58,511 64,633
Earnings (loss) from operations........ (2,481) 1,910 2,093 3,906
Interest expense (income), net......... (38) 563 667 627
Earnings (loss) before income taxes.... (2,443) 1,347 1,426 3,279
Income taxes........................... -- 124 578 1,328
Net earnings (loss).................... (2,443) 1,223 848 1,951
Net earnings (loss) per common
share:(4)
Basic................................. $ (3.45) $ 0.01 $ 0.13 $ 0.30
Diluted............................... $ (3.45) $ 0.01 $ 0.13 $ 0.29
Weighted average common shares
outstanding:(4)
Basic................................. 768 2,273 6,519 6,533
Diluted............................... 768 2,460 6,587 6,720
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, 1997
-----------------------------------
PRO FORMA
ACTUAL PRO FORMA(5) AS ADJUSTED(6)
------- ------------ --------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................. $ 4,675 $ 1,767 $ 6,728
Working capital........................... 757 (2,596) 1,808
Total assets.............................. 48,114 49,234 53,638
Long-term debt, excluding current
maturities............................... 21,253 21,682 4,982
Redeemable and convertible preferred
stock.................................... 16,297 16,297 --
Total stockholders' equity................ 1,062 1,308 38,709
<CAPTION>
DECEMBER 31,
---------------------------------------
PRO FORMA
ACTUAL AS ADJUSTED
-------------------- --------------
1996 1997 1997(3)
------- ------------ --------------
<S> <C> <C> <C> <C>
STATISTICAL DATA (END OF PERIOD):
Number of dental facilities............... 42 77 83
Number of operatories(7).................. 331 566 617
Number of affiliated dentists(8).......... 128 171 186
</TABLE>

See accompanying footnotes on following page.

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<PAGE>

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The following footnotes should be read in conjunction with the information
under "The Company," "Use of Proceeds," "Capitalization," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Unaudited Pro Forma Consolidated Financial Information.

(1) Gives effect to (i) the 1996 Transactions; (ii) the 1997 Transactions; and
(iii) the 1998 Transaction completed subsequent to December 31, 1997, as
if they had been completed on January 1, 1996.

(2) Gives effect to the sale of 1,704,000 shares of Common Stock as if it had
been completed on January 1, 1996, at an assumed initial public offering
price of $16.00 per share and the application of the estimated net
proceeds therefrom to redeem the Series B Redeemable Preferred Stock, to
reduce debt and the associated interest expense and to adjust taxes.

(3) Gives effect to the 1997 Transactions and 1998 Transaction completed
subsequent to December 31, 1997, as if they had been completed on January
1, 1996.

(4) Actual net earnings (loss) per common share for the years ended December
31, 1996 and 1997 are computed on the basis described in Notes 2 and 12 to
the Company's Consolidated Financial Statements.

(5) Gives effect to the 1998 Transaction completed subsequent to December 31,
1997, as if it occurred on December 31, 1997.

(6) Gives effect to the conversion of the Series A Convertible Preferred Stock
into 2,400,000 shares of Common Stock and the completion of this offering
at an assumed initial public offering price of $16.00 per share and the
receipt and application of the estimated net proceeds therefrom, as if
such events occurred on December 31, 1997.
(7) An operatory is an area where dental care is performed and generally
contains a dental chair, a hand piece delivery system and other essential
dental equipment.
(8) Includes full-time general dentists employed by the PCs and full-time
specialists, some of whom are independent contractors to the PCs.

6
<PAGE>

RISK FACTORS

An investment in the Common Stock offered hereby involves a high degree of
risk. Prospective investors should carefully consider the following risk
factors, in addition to other information contained in this Prospectus, before
purchasing the securities offered hereby. This Prospectus contains forward-
looking statements. Prospective investors are cautioned that any such forward-
looking statements are not guarantees of future performance and involve risks
and uncertainties. Actual events or results may differ materially from those
discussed in the forward-looking statements, including the risk factors set
forth below and the matters set forth in this Prospectus generally.

LIMITED OPERATING HISTORY; 1996 OPERATING LOSS

The Company was formed in December 1995, commenced operations in January
1996 and began engaging in dental practice management operations in November
1996, concurrent with the completion of its first dental practice affiliation.
The Company experienced an operating loss in 1996. Although the Company was
profitable in 1997, there can be no assurance that the Company will be able to
sustain profitable operations.

RISKS ASSOCIATED WITH ACQUISITION STRATEGY

The Company's strategy includes expansion through affiliations with dental
practices in new and existing markets and the expansion of such affiliated
practices. Affiliations involve numerous risks, including failure to retain
key personnel and contracts of the affiliated practices and the inability to
integrate businesses without material disruption. In addition, the Company
competes with other dental practice management companies which have a similar
strategy, some of which may have greater financial resources and a longer
operating history than the Company. Competition for affiliations may intensify
due to ongoing consolidation in the dental care services industry, which may
substantially increase the costs associated with completing affiliation
transactions. There can be no assurance that any future affiliations will be
successfully integrated into the Company's operations, that competition for
affiliations will not intensify or that the Company will be able to complete
such affiliations on acceptable terms and conditions. In addition, the costs
of unsuccessful affiliation efforts may adversely affect the Company's
business, financial condition or results of operations.

The Company devotes substantial time and resources to affiliation-related
activities. Identifying appropriate affiliation candidates and negotiating and
consummating affiliations with dental practices can be a lengthy, complex and
costly process. The success of the Company's expansion strategy will depend on
a number of factors, including the Company's ability to identify and affiliate
with quality dental practices in suitable markets and regulatory constraints.
There can be no assurance that the Company's affiliation strategy will be
successful or that modifications to its strategy will not be required.

MANAGEMENT OF RAPID GROWTH

The Company has experienced substantial growth in a relatively short period
of time, primarily because of affiliations with existing dental practices.
This growth has placed, and will continue to place, significant demands upon
the Company's management, operations and systems. The Company's ability to
manage its growth effectively will depend upon its ability to hire, train and
assimilate additional management and other employees and its ability to
expand, improve and effectively utilize its accounting and finance, management
and operating systems in order to accommodate its expanded operations. A
failure by the Company's management to anticipate, implement and manage
effectively the changes required to sustain the Company's growth could have a
material adverse effect on the Company's business, financial condition and
results of operations.

DEPENDENCE UPON AFFILIATED DENTAL GROUP PRACTICES

The Company's revenue will depend on revenue generated by dental group
practices with which the Company affiliates. The Company does not employ
dentists or control the clinical practices of the dental groups

7
<PAGE>

with which it affiliates. There can be no assurance that dental group
practices with which the Company affiliates will maintain successful dental
practices or that any of the key members of a particular dental group practice
will continue practicing with that group. A shortage of available dentists
could have a material adverse effect on the Company's expansion opportunities.
To the extent permitted by state law, each PC has entered into non-competition
agreements and other restrictive covenants with the dentists employed by the
PC. There can be no assurance that these restrictive covenants are or will be
sufficient to protect the interests of the Company or the PC or that a court
would enforce such agreements. Any material loss of revenue by the affiliated
dental group practices, whether through the loss of existing dentists, the
inability to attract new dentists or otherwise, would have a material adverse
effect on the Company's business, financial condition and results of
operations.

DEPENDENCE UPON SERVICE AGREEMENTS

The Company is dependent upon the service agreements it has entered into
with each of its affiliated PCs for substantially all of its operating
revenue. Under the service agreements, the Company is responsible for
providing all services necessary for the administration of the non-clinical
aspects of the PCs' dental operations. The Company pays all expenses incurred
for these services. The Company is reimbursed for these expenses and also
receives fees for providing management services. The Company's service fees
typically consist of a fixed monthly fee and an additional variable fee. The
additional fee is determined by a comparison of the actual financial
performance of the affiliated dental group practice to its budget. The amount
of the additional fee, in the aggregate, was not material for the year ended
December 31, 1997. The fees payable to the Company are determined prior to
each affiliation and annually thereafter based on a formal budgeting process.

The Company's service agreements with two of its affiliated dental group
practices, Park Dental and Smileage Dental Care, represented approximately 44%
and 13%, respectively, of the Company's pro forma consolidated net revenue for
the year ended December 31, 1997. The termination of either of these service
agreements could have a material adverse effect on the Company.

Any material loss in revenue by one or more PCs (such as the loss of
contracts which provide for significant revenue or significant increases in
patient nonpayment) would have a material adverse effect on their ability to
reimburse the Company for expenses and to pay service fees. The failure to
receive such amounts could have a material adverse effect on the Company's
business, financial condition and results of operations. Furthermore, in the
event of a breach of a service agreement by a PC, there can be no assurance
that the remedies available to the Company under the service agreements will
be enforceable or will be adequate to compensate the Company for its damages
resulting from such breach.

GOVERNMENT REGULATION

The dental industry and dental practices are regulated extensively at the
state and federal levels. The laws of many states, including states where the
Company operates and anticipates operating, prohibit entities not wholly owned
or controlled by dentists from practicing dentistry (which in certain states
includes owning, managing or controlling the assets, equipment or offices used
in a dental practice), employing dentists and, in certain circumstances,
dental assistants and dental hygienists, or exercising control over the
provision of dental services. These laws also often regulate the content of
advertisements of dental services. The Company and its affiliated dental
practices are also subject to state and/or federal licensure, fraud and abuse,
anti-kickback, false claims, fee splitting, self-referral, antitrust and
safety and health laws and regulations. At the state level, many of these laws
and regulations vary widely. In addition, these laws and regulations are
enforced by federal and state regulatory authorities with broad discretion.
The Company does not, and does not intend to, control the practice of
dentistry by the affiliated dental group practices or their compliance with
the regulatory requirements directly applicable to dentists or the practice of
dentistry. However, there can be no assurance that any review of the Company's
business relationships, including the relationships of the Company with
affiliated dental group practices, by courts or other regulatory authorities,
will not result in determinations that could have a material adverse effect on
the operations of the Company, or that the laws and regulatory environment
will not change to restrict or limit the enforceability of the Company's
service agreements. The laws and regulations of certain states in which the
Company may seek to expand may require the Company to change its contractual

8
<PAGE>

relationships with dental practices in a manner that may restrict the
Company's operations in those states or may prevent the Company from
affiliating with dental practices or providing comprehensive services to
dental practices in those states. To the extent that the Company or any
affiliated dental group practice contracts with third party payors, including
self-insured plans, on a capitated or other basis which causes the Company or
such affiliated dental group practice to assume a portion of the financial
risk of providing dental care, the Company or such affiliated dental group
practice may become subject to state insurance laws, in which case the Company
may be required to change the method of payment from third party payors or
seek appropriate licensure. Any regulation of the Company or its affiliated
dental group practices under insurance laws could have a material adverse
effect on the Company's business, financial condition and results of
operations. See "Business--Government Regulation."

NEED FOR ADDITIONAL FINANCING

The Company's ability to execute its business strategy depends to a
significant degree on its ability to obtain substantial capital to finance
future affiliations. To date, the Company has obtained financing through
private sales of Preferred and Common Stock and through its $30 million
revolving credit facility. The Company has historically used a combination of
cash, Common Stock and subordinated promissory notes as consideration in
affiliations with dental practices and intends to continue this practice.
However, the Company's ability to use its Common Stock and subordinated
promissory notes as consideration for future affiliations may be adversely
affected if the Common Stock fails to maintain a sufficient market value or if
the affiliation candidates are unwilling to accept the Company's subordinated
promissory notes. Furthermore, while funds are currently available under the
Company's revolving credit facility, the Company's ability to draw such funds
is subject to certain terms and conditions, and there can be no assurance that
the Company will be able to satisfy such terms and conditions. There can be no
assurance that any other financing will be available to the Company, or if
available, that such financing would be on terms favorable to the Company.

RISKS RELATED TO CAPITATED FEES AND OTHER THIRD PARTY ARRANGEMENTS

A significant portion of the payments for dental care is paid or reimbursed
under insurance programs ("third party payors"). While payor mix varies from
market to market, the aggregate payor mix percentage of the Company's
affiliated practices was approximately 33% fee-for-service (which includes
indemnity plans), 14% PPO plans and 53% capitated managed care plans for the
twelve months ended December 31, 1997. Third party payors are continually
negotiating the prices charged for dental care, with a goal of lowering
reimbursement and utilization rates. Third party payors can also deny
reimbursement for dental care if they determine that a treatment was not
performed in accordance with treatment protocols established by such third
party payors or for other reasons. Loss of revenue by the Company's affiliated
dental group practices caused by cost containment efforts could have a
material adverse effect on the Company. Additionally, some third-party payor
contracts are capitated arrangements. Under such contracts, which are
typically terminable by either party on 30 to 90 days notice, the affiliated
dental group practice receives a capitated payment, calculated on a per member
per month basis, to provide care to the covered enrollees and generally
receives a co-payment at the time care is provided. Such payment methods shift
a portion of the risk of high costs of over-utilization from the third party
payors to the affiliated dental group practices because, to the extent that
patients or enrollees covered by such contracts require more frequent or
extensive care than is anticipated by the affiliated dental group practices,
there may be a potential shortfall between the capitated payments received by
the affiliated dental group practices and the costs to provide the contracted
services. These shortfalls may impact the Company by the possible reduction in
expense reimbursement and service fees from the affiliated dental group
practices. The Company's payor mix with respect to capitated managed care
plans increases the Company's possible exposure with respect to such
shortfalls. There can be no assurance that the Company will be able to
negotiate satisfactory third-party payor arrangements on behalf of the
affiliated dental practices. Insufficient revenue under capitated contracts or
other agreements with third party payors could have a material adverse effect
on the Company's business, financial condition and results of operations.

9
<PAGE>

POSSIBLE EXPOSURE TO PROFESSIONAL LIABILITY

The Company's affiliated dental practices provide dental care to the public
and could be exposed to the risk of professional liability and other claims.
Such claims, if successful, could result in substantial damages which could
exceed the limits of any applicable insurance coverage. It is possible that
such claims could be asserted against the Company as well as the affiliated
dental practices, that a claim brought against an affiliated dental group
practice or dentist could materially increase professional liability insurance
premiums of the affiliated dental group practice, or that fees to the Company
from a dental group practice could be adversely affected, if damages payable
by that practice exceed insurance coverage limits. The Company's service
agreements require that it be named as an additional insured party under the
liability insurance policy that each affiliated dental group is required to
maintain. In addition, the Company requires each affiliated dental group
practice to indemnify the Company for actions or omissions related to the
delivery of dental care by such affiliated dental group practice. However, a
successful professional liability claim against the Company or an affiliated
dental group practice could have a material adverse effect on the Company's
business, financial condition and results of operations.

FLUCTUATIONS IN OPERATING RESULTS

The Company's results of operations may fluctuate significantly from quarter
to quarter or year to year. Results may fluctuate due to a number of factors,
including the timing of future affiliations, seasonal fluctuations in the
demand for dental care and competitive factors. Accordingly, quarterly
comparisons of the Company's revenues and operating results should not be
relied on as an indication of future performance, and the results of any
quarterly period may not be indicative of results to be expected for a full
year. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations."

HIGHLY COMPETITIVE MARKET

The business of providing practice management services is highly
competitive. The Company is aware of a number of competitors specializing in
the business of providing comprehensive management services to dental
practices and there are other companies with substantial resources that may
decide to enter the dental practice management business. In addition, the
Company's revenue depends on the success of its affiliated dental groups and
those groups face competition from several sources, including solo
practitioners and single and multi-disciplinary groups, many of which may have
more established practices. See "Business--Competition."

RISKS RELATED TO INTANGIBLE ASSETS

A significant portion of the Company's consolidated total assets are
represented by intangible assets, the amount and concentration of which are
expected to increase in connection with future acquisitions. In addition,
amortization expense associated with these intangible assets will increase in
the future as a result of intangibles recorded in connection with
affiliations. In the event of any sale or liquidation of the Company or a
portion of its assets, there can be no assurance that the value of the
Company's intangible assets will be realized. In addition, the Company
periodically evaluates whether events or circumstances have occurred
indicating that any portion of the remaining balance of the amount allocable
to the Company's intangible assets may not be recoverable. When factors
indicate that the amount allocable to the Company's intangible assets has been
impaired, the Company would be required to reduce the carrying value of such
assets. Any future determination requiring the write off of a significant
portion of unamortized intangible assets could have a material adverse effect
on the Company's business, financial condition and results of operation.

CONTROL BY EXISTING STOCKHOLDERS

Upon completion of this offering, Summit Partners, executive officers of the
Company and dentists affiliated with the Company's affiliated dental group
practices will beneficially own an aggregate of approximately 34.8%, 11.1% and
19.8%, respectively, of the outstanding shares of Common Stock. If these
groups were to act together, they would be able to elect all of the Company's
directors and determine the outcome of all corporate actions requiring
approval of stockholders, and thus control the business affairs and policies
of the Company. Such control could also have the effect of delaying or
preventing a change in control of the Company and consequently may adversely
affect the market price of the Common Stock. See "Principal Stockholders."

10
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Upon completion of this offering, 4,635,441 shares of Common Stock,
representing approximately 67.9% of the outstanding shares of Common Stock,
will be eligible for sale in the public market under Rule 144 beginning 90
days after the date of this Prospectus, all of which are subject to lock-up
agreements for a period of 180 days from the date of this Prospectus. In
addition, following the completion of this offering, the Company intends to
register 500,000 shares of its Common Stock under a shelf registration for use
in connection with future affiliations. These shares generally will be
eligible for resale in compliance with the volume and manner-of-sale
restrictions of Rule 145 after their issuance, unless the Company
contractually restricts their sale. Initially, the Company will issue such
shares subject to a lock-up period of up to 180 days following the date of
this Prospectus. See "Shares Eligible for Future Sale."

Sales of substantial amounts of Common Stock in the public market following
the offering, or the perception that such sales could occur, could adversely
affect prevailing market prices of the Common Stock and could impair the
future ability of the Company to raise capital through the sale of its equity
securities. The Company is unable to predict the effect, if any, that future
sales of Common Stock or the availability of Common Stock for sale may have on
the market price of the Common Stock prevailing from time to time. Certain
existing stockholders have the right to require the Company to register their
Common Stock from time to time. See "Description of Capital Stock" and "Shares
Eligible for Future Sale."

NO PRIOR PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to this offering, there has been no public market for the Common
Stock. The Common Stock has been approved for quotation on the Nasdaq National
Market, however, there can be no assurance that an active trading market will
develop or be sustained upon completion of this offering or that the market
price of the Common Stock will not decline below the initial public offering
price. The initial public offering price of the Common Stock will be
determined by negotiations between the Company and the Representatives of the
Underwriters and may not be indicative of the prices that will prevail in the
public market. The trading prices of the Company's Common Stock could be
subject to wide fluctuations in response to quarter-to-quarter variations in
the Company's operating results, material announcements by the Company,
governmental regulatory action, general conditions in the health care
industry, or other events or factors, many of which are beyond the Company's
control. In addition, the stock market has experienced extreme price and
volume fluctuations, which have particularly affected the market prices of
many health care services companies and which have often been unrelated to the
operating performance of such companies. The Company's operating results in
the future may be below the expectations of securities analysts and investors.
In such event, the price of the Common Stock would likely decline, perhaps
substantially. See "Underwriting."

NO DIVIDENDS DUE TO POLICY AND PROHIBITIONS

The Company does not intend to pay cash dividends on the Common Stock in the
foreseeable future and anticipates that future earnings will be retained to
finance future operations and expansion. In addition, the terms of the
Company's revolving credit facility prohibit the Company from paying dividends
or making other payments with respect to its Common Stock without the consent
of the lender. See "Dividend Policy."

CERTAIN ANTI-TAKEOVER PROVISIONS

Certain provisions of the Company's Second Amended and Restated Certificate
of Incorporation (the "Certificate of Incorporation") and Amended and Restated
By-laws (the "By-laws") and of Delaware law could, together or separately,
discourage potential acquisition proposals, delay or prevent a change in
control of the Company or limit the price that certain investors might be
willing to pay in the future for shares of the Common Stock. Among other
matters, the Certificate of Incorporation provides for "blank check" preferred
stock, which may be issued without stockholder approval, and requires all
actions by stockholders to be taken at meetings of stockholders. The By-laws
provide for a classified Board of Directors. The Company also is subject

11
<PAGE>

to Section 203 of the Delaware General Corporation Law ("DGCL"), which,
subject to certain exceptions, prohibits a Delaware corporation from engaging
in any of a broad range of business acquisitions with an "interested
stockholder" for a period of three years following the date such stockholder
became an interested stockholder. See "Description of Capital Stock."

IMMEDIATE AND SUBSTANTIAL DILUTION

Purchasers of the Common Stock offered hereby will incur immediate and
substantial dilution in net tangible book value of $15.12 per share from this
offering. In addition, shares of Common Stock issued in connection with future
acquisitions will result in ownership dilution to investors in this offering.
See "Dilution."

12
<PAGE>

THE COMPANY

Overview

American Dental Partners, Inc. was formed as a Delaware corporation on
December 22, 1995, commenced operations in January 1996 and began engaging in
dental practice management operations in November 1996, concurrent with the
completion of its first dental group practice affiliation. The Company
acquires substantially all the assets of the dental practices with which it
affiliates, except those required by law to be owned or maintained by dentists
(such as third party contracts, certain governmental receivables and patient
records), and enters into long-term service agreements with the affiliated
dental practices. The Company provides all services necessary for the
administration of the non-clinical aspects of the dental operations. Services
provided to affiliated dental practices include assistance with information
systems, budgeting, financial reporting, facilities management, third-party
payor contracting, supplies and equipment procurement, billing and collecting
accounts receivable, marketing and recruiting, hiring and training support
staff. The Company does not employ dentists or control the clinical aspects of
dentistry. As described below, the Company's rapid growth has resulted
primarily from the affiliations completed, which consisted of three dental
group practice affiliations in 1996, six dental group practice affiliations
completed in 1997 and one dental group practice affiliation completed in 1998.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Affiliation Summary."

1996 Transactions

During 1996, the Company acquired substantially all the assets of three
dental group practices, except those required by law to be owned or maintained
by dentists (such as third party contracts, certain governmental receivables
and patient records), and simultaneously entered into a 40-year service
agreement with each of the affiliated dental groups. These affiliated dental
groups and their respective dates of affiliation are: PDG, P.A. ("Park
Dental") on November 12, 1996; L. Crane & Associates, P.C. ("Longhorn Dental")
on December 13, 1996; and the Wisconsin Dental Group, S.C. ("Smileage Dental
Care") on December 23, 1996. These transactions are referred to as the "1996
Transactions."

1997 Transactions

During 1997, the Company acquired substantially all the assets of six dental
group practices, except those required by law to be owned or maintained by
dentists (such as third party contracts, certain governmental receivables and
patient records), and simultaneously entered into 40-year service agreements
with four of the affiliated dental groups (two practices joined existing
affiliates). These dental group practices and their respective dates of
affiliation are: Lakeside Dental Group professional corporation ("Lakeside
Dental Care") on March 31, 1997; Malcolm R. Scott, D.D.S. on March 31, 1997;
AJS Associates, P.C. ("Soster Dental Group") on May 22, 1997; Wisconsin Dental
Professionals, S.C. ("Northpoint Dental Group") on July 1, 1997; the four
professional corporations owned by Dr. Terrance R. Wilkens (the "Wilkens
Dental Group") on October 1, 1997; and OCG, Ltd. (the "Orthocare Group") on
October 1, 1997. As part of the Orthocare Group transaction, the Company
acquired Orthocare, Ltd., a related entity that contracts with third party
payors and orthodontic providers to arrange for the provision of orthodontic
care to patients insured by such third party payors in Minneapolis/St. Paul
and Wisconsin. These transactions are referred to as the "1997 Transactions."

1998 Transaction

On January 1, 1998, the Company acquired substantially all the assets of one
dental group practice, except those required by law to be owned or maintained
by dentists (such as third party contracts, certain governmental receivables
and patient records), and simultaneously entered into a 40-year service
agreement with the affiliated dental group. This dental group practice is
Associated Dental Care Providers, P.C. ("Associated Dental Care"). This
transaction is referred to as the "1998 Transaction."

13
<PAGE>

USE OF PROCEEDS

The net proceeds to the Company from the sale of 2,000,000 shares of Common
Stock offered hereby at an assumed initial public offering price of $16.00 per
share are estimated to be $28.8 million ($33.2 million if the Underwriters'
over-allotment option is exercised in full). The Company will use the net
proceeds as follows: (i) approximately $7.7 million will be used to redeem all
the Series B Redeemable Preferred Stock, including unpaid dividends; (ii)
approximately $16.7 million will be used to repay outstanding indebtedness
under the Company's revolving credit facility; and (iii) the balance of
approximately $4.4 million will be used for general corporate purposes,
including affiliations with additional dental group practices. The Company's
$30 million revolving credit facility bears interest at either prime- or
LIBOR-based rates, at the Company's option, plus a margin based upon the
Company's debt coverage ratio, which ranges up to 0.50% for prime-based loans
and up to 2.125% for LIBOR-based loans. At January 31, 1998, $16.7 million was
outstanding under this credit facility at a LIBOR-based rate of approximately
7.6%. The facility matures April 2000. To date, the proceeds from this
revolving credit facility have been used for affiliations with dental
practices. Pending the foregoing uses, the balance of the net proceeds will be
invested in short-term, investment grade, interest bearing obligations. The
Company anticipates that future affiliations will be completed using a
combination of cash, Common Stock and subordinated promissory notes.

DIVIDEND POLICY

The Company has not paid any cash dividends on its Common Stock in the past
and does not plan to pay any cash dividends on its Common Stock in the
foreseeable future. In addition, the terms of the Company's revolving credit
facility prohibit it from paying dividends or making other payments with
respect to its Common Stock without the lender's consent. The Company's Board
of Directors intends, for the foreseeable future, to retain earnings to
finance the continued operation and expansion of the Company's business.

14
<PAGE>

CAPITALIZATION

The following table sets forth as of December 31, 1997: (i) the
capitalization of the Company; (ii) the capitalization of the Company on a pro
forma basis to reflect the 1998 Transaction completed subsequent to December
31, 1997; and (iii) the pro forma capitalization of the Company as adjusted to
reflect the sale of the shares of Common Stock offered hereby (based on an
assumed offering price of $16.00 per share) and the application of the
estimated net proceeds, all as if such events occurred on December 31, 1997.
See "Use of Proceeds."

<TABLE>
<CAPTION>
DECEMBER 31, 1997
----------------------------------------
PRO PRO FORMA
ACTUAL FORMA(1) AS ADJUSTED
----------- ----------- -------------
(IN THOUSANDS, EXCEPT SHARE DATA)
<S> <C> <C> <C>
Cash and cash equivalents........... $ 4,675 $ 1,767 $ 6,728
=========== =========== ===========
Current maturities of debt.......... $ 774 $ 845 $ 845
=========== =========== ===========
Long-term debt, less current
maturities(2)...................... $ 21,253 $ 21,682 $ 4,982
Series A convertible preferred
stock, par value $0.01 per share,
400,000 shares authorized, issued
and outstanding; no shares
authorized, issued or outstanding
pro forma as adjusted(3)........... 8,641 8,641 --
Series B redeemable preferred stock,
par value $0.01 per share, 70,000
shares authorized, issued and
outstanding; no shares authorized,
issued or outstanding pro forma as
adjusted(4)........................ 7,656 7,656 --
Stockholders' equity:
Preferred stock, par value $0.01
per share, 530,000 shares
authorized, no shares issued or
outstanding; 1,000,000 shares
authorized, no shares issued or
outstanding pro forma as
adjusted......................... -- -- --
Common stock, par value $0.01 per
share, 25,000,000 shares
authorized, 2,394,212 shares
issued and outstanding; 2,429,012
shares pro forma; 6,829,012
shares pro forma as adjusted(5).. 24 24 68
Additional paid-in capital........ 2,307 2,553 39,910
Unearned compensation(6).......... (49) (49) (49)
Accumulated deficit............... (1,220) (1,220) (1,220)
----------- ----------- -----------
Total stockholders' equity...... 1,062 1,308 38,709
----------- ----------- -----------
Total capitalization.......... $ 38,612 $ 39,287 $ 43,691
=========== =========== ===========
</TABLE>
- --------

(1) To reflect the 1998 Transaction completed subsequent to December 31,
1997. See "The Company."
(2) See Note 7 to the Company's Consolidated Financial Statements.
(3) Upon completion of this offering, all of the Series A Convertible
Preferred Stock will be converted into 2,400,000 shares of Common Stock.
(4) Upon completion of this offering, all of the Series B Redeemable
Preferred Stock will be redeemed for approximately $7.7 million in cash,
which includes unpaid dividends through the anticipated completion date
of this offering.

(5) Excludes 1,120,166 shares of Common Stock issuable upon the exercise of
outstanding options issued pursuant to the Company's stock option plans
at a weighted average price of $8.70 per share, as of January 31, 1998.
See "Management--Stock Plans."

(6) Unearned compensation relates to the sale of 300,000 shares of Common
Stock in January 1996 which were subject to certain restrictions, for
which the Company is recording compensation expense ratably as the
restrictions lapse. See Note 9 to the Company's Consolidated Financial
Statements.

15
<PAGE>

DILUTION

As of December 31, 1997, after giving effect to the conversion of the Series
A Convertible Preferred Stock into 2,400,000 shares of Common Stock, the
Company had net tangible book value (deficit) of approximately $(19,427,000)
or $(4.05) per share of Common Stock. After giving effect to the 1998
Transaction completed subsequent to December 31, 1997, the Company had pro
forma net tangible book value (deficit) of approximately $(22,720,000) or
$(4.70) per share of Common Stock. The pro forma net tangible book value
(deficit) per share represents the amount of total tangible assets less total
liabilities and the Series B Redeemable Preferred Stock, divided by the number
of shares of Common Stock outstanding. After giving effect, as of such date,
to the sale of 2,000,000 shares of Common Stock at an assumed initial public
offering price of $16.00 per share and the application of the net proceeds,
the pro forma net tangible book value of the Company as of December 31, 1997
would have been approximately $6,040,000 or $0.88 per share. This represents
an immediate increase in net tangible book value of $5.88 per share to
existing stockholders and an immediate dilution of net tangible book value of
$15.12 per share to new investors purchasing Common Stock in this offering.
The following table illustrates this per share dilution:

<S> <C> <C>
Assumed initial public offering price per share.................. $16.00
Net tangible book value per share at December 31, 1997......... (4.05)
Decrease in net tangible book value per share attributable to
the 1998 Transaction completed subsequent to December 31,
1997.......................................................... (0.65)
-----
Pro forma net tangible book value (deficit) per share before
the offering(1)............................................... (4.70)
Increase per share attributable to new investors............... 5.58
-----
Pro forma net tangible book value per share after the offering... 0.88
------
Dilution in net tangible book value per share to new
investors(2).................................................... $15.12
======
</TABLE>

The following table summarizes, on a pro forma basis as of December 31,
1997, the differences between existing stockholders (including 2,400,000
shares of Common Stock to be issued upon conversion of the Series A
Convertible Preferred Stock) and the new investors with respect to the number
of shares of Common Stock purchased from the Company, the total consideration
paid and the average price per share paid to the Company:

<TABLE>
<CAPTION>
TOTAL
SHARES PURCHASED CONSIDERATION AVERAGE
----------------- ------------------- PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
--------- ------- ----------- ------- ---------
<S> <C> <C> <C> <C> <C>
Existing stockholders(1)....... 4,829,012 70.7% $11,777,000 26.9% $ 2.44
New investors.................. 2,000,000 29.3 32,000,000 73.1 $16.00
--------- ----- ----------- -----
Total........................ 6,829,012 100.0% $43,777,000 100.0%
========= ===== =========== =====
</TABLE>
- --------

(1) Excludes Common Stock issuable upon the exercise of outstanding options
to purchase 1,120,166 shares of Common Stock at a weighted average
exercise price of $8.70 per share at January 31, 1998. To the extent
these options are exercised or additional shares of Common Stock are
issued in connection with future transactions, there will be further
dilution to new investors. See "Risk Factors--Dilution" and "Management--
Stock Plans."

(2) Dilution is determined by subtracting pro forma net tangible book value
per share after giving effect to this offering at the initial public
offering price per share. Dilution to new investors will be $14.48 if the
Underwriters' over-allotment option is exercised in full.

16
<PAGE>

SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AND STATISTICAL DATA)

The selected consolidated statement of operations data for the years ended
December 31, 1996 and 1997, and the selected consolidated balance sheet data
at December 31, 1996 and 1997, have been derived from the Consolidated
Financial Statements of the Company which have been audited by KPMG Peat
Marwick LLP, Independent Certified Public Accountants, and which are included
elsewhere in this Prospectus. The selected pro forma financial data set forth
below as of and for the years ended December 31, 1996 and 1997, have been
derived from the Unaudited Pro Forma Consolidated Financial Information of the
Company which is included elsewhere in this Prospectus. The selected pro forma
financial data are not necessarily indicative of the actual results of
operations or financial position that would have been achieved had such
transactions and this offering been completed at the dates specified, nor are
the statements necessarily indicative of the Company's future results of
operations or financial position. The selected historical and pro forma
financial data provided below should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations,"
Unaudited Pro Forma Consolidated Financial Information, Consolidated Financial
Statements and the related notes thereto of the Company and other financial
information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
PRO FORMA
ACTUAL AS ADJUSTED
---------------- ---------------------
1996 1997 1996(1)(2) 1997(2)(3)
------- ------- ---------- ----------
<S> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS
DATA:
Net revenue............................ $ 3,933 $53,270 $60,604 $68,539
------- ------- ------- -------
Operating expenses:
Salaries and benefits................ 2,098 28,438 32,802 36,698
Lab fees and dental supplies......... 534 6,435 7,413 8,248
Office occupancy..................... 389 4,814 5,470 6,009
Other operating expenses............. 773 6,264 7,590 7,493
General corporate expenses........... 2,395 3,337 2,395 3,337
Depreciation......................... 177 1,580 1,784 1,791
Amortization of intangibles.......... 48 492 1,057 1,057
------- ------- ------- -------
Total operating expenses........... 6,414 51,360 58,511 64,633
------- ------- ------- -------
Earnings (loss) from operations........ (2,481) 1,910 2,093 3,906
Interest expense (income), net....... (38) 563 667 627
------- ------- ------- -------
Earnings (loss) before income taxes.... (2,443) 1,347 1,426 3,279
Income taxes......................... -- 124 578 1,328
------- ------- ------- -------
Net earnings (loss).................. $(2,443) $ 1,223 $ 848 $ 1,951
======= ======= ======= =======
Net earnings (loss) per common
share:(4)
Basic................................. $ (3.45) $ 0.01 $ 0.13 $ 0.30
Diluted............................... $ (3.45) $ 0.01 $ 0.13 $ 0.29
Weighted average common shares
outstanding:(4)
Basic................................. 768 2,273 6,519 6,533
Diluted............................... 768 2,460 6,587 6,720
</TABLE>

See accompanying footnotes on following page.

17
<PAGE>

SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA--CONTINUED

(IN THOUSANDS, EXCEPT PER SHARE AND STATISTICAL DATA)

<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
------------- --------- -----------
1996 1997 1997(5) 1997(6)
------ ------ --------- -----------
<S> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................. $5,836 $4,675 $1,767 $6,728
Working capital........................... 3,189 757 (2,596) 1,808
Total assets.............................. 25,294 48,114 49,234 53,638
Long-term debt, excluding current
maturities............................... 3,063 21,253 21,682 4,982
Redeemable and convertible preferred
stock.................................... 15,105 16,297 16,297 --
Total stockholders' equity................ 164 1,062 1,308 38,709
<CAPTION>
DECEMBER 31,
----------------------------
PRO FORMA
ACTUAL AS ADJUSTED
---------------- -----------
1996 1997 1997(3)
------ --------- -----------
<S> <C> <C> <C> <C>
STATISTICAL DATA (END OF PERIOD):
Number of dental facilities...................... 42 77 83
Number of operatories(7)......................... 331 566 617
Number of affiliated dentists(8)................. 128 171 186
</TABLE>
- --------
The following footnotes should be read in conjunction with the information
under "The Company," "Use of Proceeds," "Capitalization," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
Unaudited Pro Forma Consolidated Financial Information.

(1) Gives effect to (i) the 1996 Transactions; (ii) the 1997 Transactions; and
(iii) the 1998 Transaction completed subsequent to December 31, 1997, as
if they had been completed on January 1, 1996.

(3) Gives effect to the 1997 Transactions and the 1998 Transaction completed
subsequent to December 31, 1997, as if they had been completed on January
1, 1996.

(5) Gives effect to the 1998 Transaction completed subsequent to December 31,
1997, as if it occurred on December 31, 1997.

18
<PAGE>

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of the financial condition and results of
operations of the Company should be read in conjunction with the Consolidated
Financial Statements and the Unaudited Pro Forma Consolidated Financial
Information and the notes thereto of the Company included elsewhere in this
Prospectus. This Prospectus contains forward-looking statements. Prospective
investors are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties. Actual
events or results may differ materially from those discussed in the forward-
looking statements as a result of various factors, including the risk factors
set forth under "Risk Factors" and the matters set forth in this Prospectus
generally.

OVERVIEW

American Dental Partners, Inc. is a leading provider of dental practice
management services to multi-disciplinary dental group practices in attractive
markets in the United States. The Company was formed in December 1995,
commenced operations in January 1996 and began engaging in dental practice
management operations in November 1996, concurrent with the completion of its
first dental group practice affiliation. The Company's rapid growth has
resulted primarily from the Company's affiliations with dental group
practices. Since its inception through January 31, 1998, the Company has
successfully completed affiliations with ten dental group practices and
currently operates 83 dental facilities with 617 operatories in six states.

An integral part of the Company's strategy is to affiliate with dental group
practices. Because of the financial impact of the Company's recent
affiliations, it is difficult to make meaningful comparisons between the
Company's actual financial statements for the periods presented. In addition,
due to the relatively small number of affiliated dental group practices, each
affiliation can impact the overall operating results of the Company. After
affiliating with a dental group practice, the Company typically takes a number
of steps designed to enhance the dental group's practice revenue, improve
practice operating efficiencies and expand practice operating margins. The
benefits of these actions generally do not occur immediately. Consequently,
the financial performance of a newly-affiliated dental group practice could
negatively affect overall operating margins in the near term. As the Company
grows, it expects that the effect of adding a new dental group practice
affiliation will be mitigated by the expanded financial base of the existing
affiliations. See "Business--Business Strategy."

AFFILIATION SUMMARY

When affiliating with a dental group practice, the Company acquires
substantially all its assets except those required by law to be owned or
maintained by dentists (such as third party contracts, certain governmental
receivables and patient records), and enters into a long-term service
agreement with the affiliated dental practice. Under its service agreements,
the Company is responsible for providing all services necessary for the
administration of the non-clinical aspects of the dental operations. The PC is
responsible for the provision of dental care. Each of the Company's service
agreements is for an initial term of 40 years. The Company does not own or
control the affiliated dental practices and, accordingly, does not consolidate
the financial statements of the PCs with those of the Company.

1996 Transactions

During 1996, the Company acquired substantially all the assets of three
dental group practices and simultaneously entered into a 40-year service
agreement with each of the affiliated dental groups. These affiliated dental
groups are: Park Dental in Minneapolis; Longhorn Dental in Austin; and
Smileage Dental Care in Milwaukee. These transactions resulted in the addition
of 42 dental facilities with 331 operatories. The aggregate consideration for
the 1996 Transactions consisted of approximately $7.3 million in cash, $2.2
million in subordinated promissory notes and 1,613,400 shares of Common Stock.
All subordinated promissory notes bear interest at 7% and are payable in seven
annual installments maturing in 2003.

19
<PAGE>

1997 Transactions

During 1997, the Company acquired substantially all the assets of six dental
group practices and Orthocare Ltd., a related entity of one of these
practices, and simultaneously entered into 40-year service agreements with
four of these affiliated dental groups (two practices joined existing
affiliates). These six dental group practices are: Lakeside Dental Care in New
Orleans; Malcolm R. Scott, D.D.S. in San Marcos, Texas; Soster Dental Group in
Pittsburgh; Northpoint Dental Group and Wilkens Dental Group in Milwaukee; and
the Orthocare Group in Minneapolis. The Lakeside Dental Care and Soster Dental
Group affiliations represented the entry into two new markets by the Company.
The affiliation with Malcolm R. Scott, D.D.S. expanded the Company's market
presence in Austin by adding one dental facility with six operatories. The
affiliation with Northpoint Dental and Wilkens Dental groups expanded the
Company's market presence in Milwaukee by adding six dental facilities with 53
operatories. In total, these transactions resulted in the addition of 29
dental facilities with 199 operatories. The aggregate consideration for the
above transactions consisted of approximately $16.8 million in cash, $2.4
million in subordinated promissory notes and 180,834 shares of Common Stock.
All subordinated promissory notes bear interest at 7% and are payable in seven
annual installments maturing in 2004.

1998 Transaction

On January 1, 1998, the Company acquired substantially all the assets of a
dental group practice and simultaneously entered into a 40-year service
agreement with the affiliated dental group, Associated Dental Care, in Tuscon,
Arizona. This affiliation resulted in the addition of six dental facilities
with 51 operatories. The aggregate consideration for this transaction
consisted of approximately $2.6 million in cash, $0.5 million in subordinated
promissory notes and 34,800 shares of Common Stock.

COMPONENTS OF REVENUE AND EXPENSES

Affiliate Adjusted Gross Revenue and Payor Mix. The Company's affiliated
dental group practices generate revenue from patients and third party payors
under fee-for-service, PPO plans and capitated managed care plans. The
affiliated dental group practices record revenue at established rates reduced
by contractual adjustments and allowances for doubtful accounts to arrive at
adjusted gross revenue. Contractual adjustments represent the difference
between gross billable charges at established rates and the portion of those
charges allowable by third party payors pursuant to certain reimbursement and
managed care contracts. While payor mix varies from market to market, the
aggregate payor mix percentage of the Company's affiliated practices is
approximately 33% fee-for-service, 14% PPO plans and 53% capitated managed
care plans for the year ended December 31, 1997.

The PC reimburses the Company for expenses incurred on its behalf in
connection with the operation and administration of the dental facilities and
pays fees to the Company for management services. Expenses incurred for the
operation and administration of the dental facilities include salaries and
benefits for non dentist personnel working at the dental facilities (generally
the dental hygienists, dental assistants and administrative staff), lab fees,
dental supplies, office occupancy costs of the dental facilities (rent,
utilities, etc.) and depreciation related to the fixed assets at the dental
facilities. The PC is also responsible for provider expenses, which generally
consist of the salaries, benefits and certain other expenses of the dentists.

Net Revenue. Net revenue for the Company represents the aggregate fees
charged to the affiliated dental practices pursuant to the terms of the long-
term service agreements under which the Company agrees to manage the non-
clinical aspects of the dental practice. Under such agreements, the affiliated
dental group practices reimburse the Company for expenses incurred in
connection with the operation and administration of the dental facilities and
pay fees to the Company for its management services. The Company's service
fees typically consist of a fixed monthly fee and an additional variable fee.
The additional fee is determined by a comparison of the actual financial
performance of the affiliated dental group practice to its budget. For 1997,
the total amount of service fees earned under the Company's service agreements
ranged from approximately 9% of the adjusted gross revenue of one PC to
approximately 25% of the adjusted gross revenue of another PC. The amount of
the

20
<PAGE>

additional fee, in the aggregate, was not material for 1997. The fees payable
to the Company are determined prior to each affiliation and annually
thereafter based on a formal budgeting process. Pursuant to the terms of the
service agreements, the Company bills patients and third party payors on
behalf of the affiliated PCs. Such funds are used to pay all operating
expenses, to pay fees to the Company for its management services and are then
used by the PCs to pay their provider expenses.

Operating Expenses. Operating expenses (excluding general corporate
expenses, depreciation and amortization of intangibles) consist of the
expenses incurred by the Company in fulfilling its obligations under the
service agreements. These expenses are operating costs and expenses that would
have been incurred by the affiliated dental groups had they not affiliated
with the Company and include non-dentist salaries and benefits, lab fees and
dental supplies, office occupancy cost and other expenses related to
operations. Salaries and benefits expense are for personnel working for the
Company at the dental facilities, as well as the local operating management.
At the facility level, the Company generally employs the dental hygienists,
dental assistants and administrative staff. The local operating management
team supervises and supports the staff at the dental facilities. Office
occupancy includes rent expense and certain other operating costs such as
utilities associated with dental facilities and the local administrative
offices. Such costs vary based on the size of each facility and the market
rental rate for dental office space in the particular geographic market. Other
expenses consist of professional fees, marketing costs and other general and
administrative expenses. See "Business--Operations--Operating Structure."

General Corporate Expenses. General corporate expenses consist of
compensation expenses for the Company's corporate personnel and administrative
staff, as well as facility and other administrative costs of the Company's
corporate offices. The Company provides management, administrative, third
party contracting and other services to the affiliated groups. The Company has
built its management infrastructure in anticipation of rapid growth. This
included the hiring of key management and support staff in the areas of
finance and operations prior to the completion of any affiliations, and the
further hiring of additional management and support personnel in the areas of
operations and information systems as the Company completed its first
affiliations. The level of general corporate expenses will likely continue to
increase in the future as the Company continues to expand its management
infrastructure. However, it is anticipated that these expenses will decline as
a percentage of net revenue as the Company achieves its growth objectives.

Depreciation; Amortization of Intangibles. Depreciation expense includes
depreciation charges related to leasehold improvements and furniture, fixtures
and equipment used to operate the dental facilities. Depending on the amount
and timing of future capital expenditures, depreciation expense will likely
increase. Amortization of intangibles relates to intangible assets incurred in
connection with the 1996 and 1997 Transactions. The Company expects that
amortization of intangibles will increase in the future as a result of
intangibles recorded in connection with affiliations.

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1997

Overview

The Company conducted no significant operations from January 1996 until
November 1996, when it completed its first affiliation. Accordingly, the
Company generated revenue of only $3,933,000 for 1996. General corporate
expenses incurred during 1996 were $2,395,000 and contributed to a net loss of
$2,443,000. During 1997, revenue generated from completed affiliations
exceeded operating expenses and general corporate expenses resulting in net
income of $1,223,000. As a result of the Company's recent rapid expansion, the
Company does not believe that a period-to-period comparison and the percentage
relationships of the year ended December 31, 1996 as compared with the year
ended December 31, 1997 are meaningful.

21
<PAGE>

Results of Operations

Net revenue amounted to $3,933,000 for 1996 as compared with $53,270,000 for
1997. The 1997 period includes revenue derived from service agreements entered
into in connection with the 1996 Transactions for the entire year of 1997,
plus revenue derived from service agreements entered into in connection with
the 1997 Transactions. Net revenue derived from the Company's service
agreement with Park Dental represented approximately 56% of the Company's
consolidated net revenue for the year ended December 31, 1997. The termination
of this service agreement could have a material adverse effect on the Company.
See "Risk Factors--Dependence Upon Service Agreements."

Operating expenses for 1996 were $3,794,000 or 96.5% of net revenue as
compared with $45,951,000 or 86.3% of net revenue for 1997. The increase in
the dollar amount resulted from the full year impact of the 1996 Transactions
plus the impact of the 1997 Transactions.

General corporate expenses were $2,395,000 or 60.9% of net revenue for 1996,
as compared with $3,337,000 or 6.3% of net revenue for 1997. The increase
resulted primarily from the impact of additional corporate personnel hired in
finance, information systems and operations in late 1996 and early 1997 to
build infrastructure in anticipation of the Company's growth.

Depreciation expense was $177,000 or 4.5% of net revenue for 1996, as
compared with $1,580,000 or 3.0% of net revenue for 1997. Depreciation expense
for 1996 resulted from costs incurred in connection with the purchase of
furniture, fixtures and equipment for the corporate office. Depreciation
expense for 1997 included depreciation related primarily to the assets
acquired and capital expenditures incurred in connection with the Company's
completed affiliations.

Amortization of intangibles was $48,000 or 1.2% of net revenue for 1996, as
compared with $492,000 or 0.9% of net revenue for 1997. Amortization resulted
from intangibles recorded in connection with the Company's nine affiliations
and one acquisition completed during 1997.

Net interest income was $38,000 for 1996, as compared with net interest
expense of $563,000 for 1997. Interest income for 1996 resulted from earnings
on proceeds received from the Company's private sales of equity securities.
Interest expense for 1997 resulted from borrowings under the Company's credit
facility, the issuance of subordinated notes and the assumption of certain
other debt in connection with completed affiliations.

The Company incurred no income tax expense for 1996, as compared with
$124,000 for 1997. The net loss incurred for 1996 resulted in the Company
creating a net operating loss carryforward for financial statement purposes.
For 1997, the Company utilized a portion of its net operating loss
carryforward which resulted in only $124,000 of income tax expense.

PRO FORMA--YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31,
1997

Overview

The following discussion compares on a pro forma basis the Company's results
of operations for the year ended December 31, 1996 to the year ended December
31, 1997. The unaudited pro forma financial information for the 1996 period
includes the 1996 Transactions, 1997 Transactions and 1998 Transaction as if
they were all completed on January 1, 1996. The unaudited pro forma financial
information for the 1997 period includes the 1997 Transactions and 1998
Transaction as if they were all completed on January 1, 1996. This information
does not purport to represent what the Company's results of operations would
actually have been if such transactions had in fact occurred on this date or
to project the Company's results of operations for any future period. This
information is based on certain assumptions and adjustments and should be read
in conjunction with the Unaudited Pro Forma Consolidated Financial Information
included elsewhere in this Prospectus.

22
<PAGE>

The following table sets forth the percentage of net revenue (consisting of
fees earned pursuant to the terms of the Company's service agreements and
revenue from the Company's Orthocare, Ltd. subsidiary) of certain items
reflected in the Company's unaudited pro forma consolidated statements of
operations.

<TABLE>
<CAPTION>
PRO FORMA
YEAR ENDED
DECEMBER 31,
--------------
1996 1997
------ ------
<S> <C> <C>
Net revenue.................................................. 100.0% 100.0%
------ ------
Operating expenses:
Salaries and benefits...................................... 54.1 53.5
Lab fees and dental supplies............................... 12.2 12.0
Office occupancy........................................... 9.0 8.8
Other operating expenses................................... 12.6 11.0
General corporate expenses................................. 4.0 4.9
Depreciation............................................... 2.9 2.6
Amortization of intangibles................................ 1.7 1.5
------ ------
Total operating expenses................................. 96.5 94.3
------ ------
Earnings from operations..................................... 3.5 5.7
Interest expense, net...................................... 3.6 2.9
------ ------
Earnings (loss) before income taxes.......................... (0.1) 2.8
Income taxes............................................... 0.0 1.1
------ ------
Net earnings (loss)........................................ (0.1)% 1.7%
====== ======
</TABLE>

Results of Operations

Pro forma net revenue increased from $60,604,000 to $68,539,000, or 13.0%,
from 1996 to 1997. This revenue represents what the Company would have earned
under its service agreements had such agreements commenced January 1, 1996.
The majority of this increase came from the Company's affiliations in the
Minneapolis and Austin markets which had same market net revenue growth of
18.2% and 47.2%, respectively. The increase in revenue from the Company's
affiliate in the Minneapolis market resulted from a combination of increases
in fees, the addition of ten new dentists and the addition of a new facility
which opened in July 1997. The increase in revenue from the Company's
affiliate in the Austin market resulted primarily from the addition of two new
facilities which opened in January and February 1997.

Pro forma salaries and benefits amounted to $32,802,000 or 54.1% of net
revenue for 1996, as compared with $36,698,000 or 53.5% of net revenue for
1997. The decrease in salaries and benefits expense as a percentage of net
revenue resulted from the Company's modification to staffing levels at several
of the Company's facilities. Additionally, the increase in net revenue was
greater than the increase in salaries and benefits.

Pro forma lab fees and dental supplies expense amounted to $7,413,000 or
12.2% of net revenue for 1996 as compared with $8,248,000 or 12.0% of net
revenue for 1997. Lab fees and dental supplies expense varies from affiliate
to affiliate and is affected by the volume and type of procedures performed.
On a pro forma basis, these costs remained relatively comparable as a
percentage of net revenue.

Pro forma office occupancy expense amounted to $5,470,000 or 9.0% of net
revenue for 1996, as compared with $6,009,000 or 8.8% of net revenue for 1997.
These costs vary based on the size of each facility and the market rental rate
for dental office space in the particular geographic market. The Company
generally assumes existing lease obligations of the affiliated dental group
practice upon completion of an affiliation. On a pro forma basis, these costs
remained relatively comparable as a percentage of net revenue.

Pro forma other operating expense amounted to $7,590,000 or 12.6% of net
revenue for 1996, as compared with $7,493,000 or 11.0% of net revenue for
1997. Other expenses decreased as a percentage of net revenue

23
<PAGE>

because certain expenses, such as professional fees and other costs associated
with operating a stand alone dental group practice, have been included in
general corporate expenses after the date of affiliation.

General corporate expenses amounted to $2,395,000 or 4.0% of net revenue for
1996, as compared with $3,337,000 or 4.9% of net revenue for 1997. The
increase resulted primarily from the impact of additional corporate personnel
hired in finance, information systems and operations in late 1996 and early
1997 to build infrastructure to support the Company's growth.

Pro forma depreciation expense amounted to $1,784,000 or 2.9% of net revenue
for 1996, as compared with $1,791,000 or 2.6% of net revenue for 1997. Pro
forma amortization of intangibles decreased from 1.7% of net revenue for 1996
to 1.5% of net revenue for 1997. The dollar amount of amortization, however,
remained constant at $1,057,000. These decreases as a percentage of net
revenue resulted from the growth in net revenue.

Pro forma net interest expense amounted to $2,183,000 or 3.6% of net revenue
for 1996, as compared with $1,994,000 or 2.9% of net revenue for 1997.
Interest expense for both periods resulted from borrowings under the Company's
credit facility, the issuance of subordinated notes and the assumption of
certain other debt in connection with affiliations.

Pro forma income tax expense amounted to $0 in 1996 as compared with
$774,000 or 1.1% of net revenue for 1997. The Company calculated its pro forma
income tax expense utilizing a combined federal and state statutory rate of
40.5%.

SELECTED QUARTERLY OPERATING RESULTS

The following table sets forth unaudited quarterly results of operations of
the Company for each of the quarters in the year ended December 31, 1997. This
information has been prepared on the same basis as the Consolidated Financial
Statements and, in the opinion of the Company's management, reflects all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation of the information for the periods presented. The quarterly
operating results are not necessarily indicative of future results of
operations. This data should be read in conjunction with the Consolidated
Financial Statements included elsewhere in this Prospectus.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
-----------------------------------------------------------------------
MARCH 31, 1997 JUNE 30, 1997 SEPTEMBER 30, 1997 DECEMBER 31, 1997
---------------- ------------- ------------------- -----------------
AMOUNT % AMOUNT % AMOUNT % AMOUNT %
--------- ------ ------- ----- ------------------- -----------------
(IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenue............. $ 11,226 100.0% $12,076 100.0% $ 13,318 100.0% $ 16,650 100.0%
-------- ------ ------- ----- ---------- -------- --------- -------
Operating expenses:
Salaries and benefits.. 6,189 55.1 6,339 52.5 7,097 53.3 8,813 52.9
Lab fees and dental
supplies.............. 1,334 11.9 1,505 12.5 1,652 12.4 1,944 11.7
Office occupancy....... 1,008 9.0 1,113 9.2 1,247 9.3 1,446 8.7
Other operating
expense............... 1,366 12.2 1,581 13.1 1,486 11.1 1,831 11.0
General corporate
expense............... 735 6.5 689 5.7 836 6.3 1,077 6.5
Depreciation........... 356 3.2 403 3.3 395 3.0 426 2.6
Amortization of
intangibles........... 64 0.5 94 0.8 101 0.8 233 1.3
-------- ------ ------- ----- ---------- -------- --------- -------
Total operating
expenses.............. 11,052 98.4 11,724 97.1 12,814 96.2 15,770 94.7
-------- ------ ------- ----- ---------- -------- --------- -------
Earnings from
operations............. 174 1.6 352 2.9 504 3.8 880 5.3
Interest expense
(income), net......... (27) (0.2) 107 0.9 115 0.9 368 2.2
-------- ------ ------- ----- ---------- -------- --------- -------
Earnings before income
taxes.................. 201 1.8 245 2.0 389 2.9 512 3.1
Income taxes........... -- -- 7 -- 74 0.5 43 0.3
-------- ------ ------- ----- ---------- -------- --------- -------
Net earnings........... $ 201 1.8% $ 238 2.0% $ 315 2.4% $ 469 2.8%
======== ====== ======= ===== ========== ======== ========= =======
</TABLE>

24
<PAGE>

LIQUIDITY AND CAPITAL RESOURCES

The Company has financed its operating and capital needs, including cash
used for acquisitions, capital expenditures and working capital, from its
private sales of equity securities, borrowings under its revolving line of
credit and cash generated from operations. To date, the Company has completed
ten acquisitions and affiliations for aggregate consideration of $26,690,000
in cash, $5,100,000 in subordinated promissory notes and 1,829,034 shares of
Common Stock.

For the years ended December 31, 1996 and 1997, cash provided by (used for)
operating activities amounted to ($1,539,000) and $1,901,000, respectively.
Cash used for operating activities during 1996 resulted primarily from the
Company's start-up activities prior to the completion of its first
affiliation.

For the years ended December 31, 1996 and 1997, cash used in investing
activities amounted to $6,878,000 and $17,977,000, respectively. For 1996,
this included $6,632,000 in cash used for acquisitions, net of cash acquired,
and $386,000 in capital expenditures. Capital expenditures in 1996 included
costs associated with the opening of dental facilities in Austin and in
Milwaukee. For the year ended December 31, 1997, cash used for acquisitions
amounted to $14,878,000, net of cash acquired, and capital expenditures
amounted to $3,212,000. Capital expenditures for 1997 included costs
associated with the opening of two new facilities in Minneapolis and two new
facilities in Milwaukee. The establishment of new dental facilities and the
expansion of existing dental facilities in the future will require ongoing
capital expenditures.

For the years ended December 31, 1996 and 1997, cash provided from financing
activities amounted to $14,253,000 and $14,915,000, respectively. Cash
provided by financing activities during 1996 resulted primarily from the
Company's private sales of Preferred and Common Stock, which included
$7,900,000 in proceeds from the issuance of Series A Convertible Preferred
Stock, $7,000,000 in proceeds from the issuance of Series B Redeemable
Preferred Stock and $100,000 in proceeds from the issuance of Common Stock.
Cash provided from financing activities for the year ended December 31, 1997
resulted primarily from borrowings under the Company's revolving credit
facility.

In April 1997, the Company entered into a $30 million revolving line of
credit agreement with Fleet National Bank. The credit facility is being used
for general corporate purposes, including acquisitions. Borrowings under this
line of credit bear interest at either prime- or LIBOR-based rates, at the
Company's option, plus a margin based upon the Company's debt coverage ratio,
which ranges up to 0.50% for prime-based loans and up to 2.125% for LIBOR-
based loans. In addition, the Company pays a commitment fee of 0.25% of the
average daily balance of the unused line. Borrowings are limited to an
availability formula based on adjusted EBITDA. The credit facility is secured
by a first lien on substantially all of the Company's assets, including a
pledge of the stock of the Company's subsidiaries. The Company is also
required to comply with certain financial and other covenants. The line of
credit matures in April 2000. At January 31, 1998, $16,700,000 was outstanding
under this line.

The Company will use a portion of the net proceeds from this offering to
redeem the Series B Redeemable Preferred Stock, including unpaid dividends,
and to repay outstanding balances under its revolving credit facility. The
Company believes that the remaining net proceeds from this offering, cash
generated from operations and amounts available under its revolving credit
facility will be sufficient to fund its anticipated cash needs for working
capital, capital expenditures and acquisitions for at least the next 12
months.

25
<PAGE>

BUSINESS

OVERVIEW

American Dental Partners, Inc. is a leading provider of dental practice
management services to multi-disciplinary dental group practices in selected
markets in the United States. The Company seeks to affiliate with leading
dental groups that provide a comprehensive range of dental care services, have
outstanding reputations for quality and have proven records of financial
performance. Since its inception through January 31, 1998, the Company has
successfully completed affiliations with ten dental group practices and
currently operates 83 dental facilities with 617 operatories in six states.
The Company's rapid growth has resulted primarily from these affiliations,
which consisted of three dental group practice affiliations completed in 1996,
six dental group practice affiliations completed in 1997 and one dental group
practice affiliation completed in 1998. For the year ended December 31, 1997,
the Company generated $53.3 million in net revenue and $1.2 million in net
earnings.

The Company's objective is to be the leading dental practice management
company in the United States. The Company's strategy for achieving this
objective is to: (i) expand into carefully selected and diverse geographic
markets which have favorable demographics and projected economic growth; (ii)
affiliate with leading dental group practices which have reputations for
quality care and proven records of financial performance; (iii) increase
market penetration in each of its markets through additional affiliations,
recruitment of dentists and new facility development; (iv) add value to each
affiliated dental group practice by assisting the practice in improving
operating performance; and (v) pursue various initiatives to ensure the
highest quality of care and service.

DENTAL CARE INDUSTRY

The market for dental care is large, growing and highly fragmented. The
United States Health Care Financing Administration estimates that expenditures
for dental care were approximately $45.8 billion in 1995 and will reach
approximately $79.1 billion by 2005, representing a compound annual growth
rate of approximately 5.6%. The Company believes that the growth in
expenditures for dental care will continue to be driven by both increases in
costs and increases in demand for services due to: (i) improved dental
benefits offered by employers; (ii) increased availability and use of dental
insurance, including preferred provider organization ("PPO") plans and
capitated managed care plans; (iii) increased demand for dental care from an
aging population; and (iv) increased demand for cosmetic and preventative
procedures. The Company believes that this growth will benefit not only
dentists, but companies that provide services to the dental care industry,
such as dental practice management companies. However, the failure of any of
the foregoing factors to materialize could offset increases in demand for
dental care, and any such increases may not correlate with growth in the
Company's business.

Unlike many other sectors of the health care services industry, the dental
care industry is in the early stages of consolidation. Although dental care is
typically offered by solo practitioners, the trend towards group practice is
growing. According to the American Dental Association ("ADA"), in 1995, 11.8%
of the approximately 153,300 dentists in the United States were practicing in
groups of three or more, up from 4.1% in 1991. The Company believes this
consolidation trend will continue.

26
<PAGE>

Most dental care performed in the United States is categorized as general
dentistry. Based upon a 1990 survey by the ADA, general dentistry was
estimated to represent approximately 83% of all dental services performed in
the United States. General dentistry includes preventative care, diagnosis and
treatment planning, as well as procedures such as fillings, crowns, bridges,
dentures and extractions. Specialty dentistry, which includes orthodontics,
periodontics, endodontics, prosthodontics and pediatric dentistry, represented
the remaining 17% of dental care services.

Historically, dental care was not covered by insurers and consequently was
paid for by patients on a fee-for-service basis. An increasing number of
employers have responded to the desire of employees for enhanced benefits by
providing coverage from third party payors for dental care. These third party
payors offer indemnity insurance, PPO plans and capitated managed care plans.
Under an indemnity insurance plan, the dental provider charges a fee for each
service provided to the insured patient, which is typically the same as that
charged to a patient not covered by any type of dental insurance. The Company
categorizes indemnity insurance plans as fee-for-service plans. Under a PPO
plan, the dentist charges a discounted fee for each service provided based on
a schedule negotiated with the PPO. Under a capitated managed care plan, the
dentist receives a fixed monthly fee from the managed care organization for
each member covered under the plan who selects that dentist as his or her
provider. Capitated managed care plans also typically require a co-payment by
the patient.

The National Association of Dental Plans estimated that approximately 117
million individuals, or 45.7% of the population of the United States, were
covered by some form of dental care plan in 1995. This compares to
approximately 96 million individuals, or 40.5% of the population of the United
States, in 1990. Of the 117 million individuals with coverage, 70.3% were
covered by indemnity insurance, 17.7% were covered by capitated managed care
plans and 12.0% were covered by PPO plans. The remaining 139 million
individuals, or 54.3% of the population of the United States in 1995, did not
have dental benefit coverage. The Company believes that the number of
individuals with dental benefits will continue to increase and that the
majority of this growth will be in PPO and capitated managed care plans. For
instance, according to the National Association of Dental Plans, the number of
individuals covered by capitated managed care plans increased from 7.8 million
in 1990 to 20.7 million in 1995, representing a 21.6% compound annual growth
rate.

The Company believes that the increased prevalence of dental benefits and
the shift of those benefits from traditional fee-for-service to non-fee-for-
service plans has increased the complexity of operating a dental practice and
has led dental practices to begin to affiliate or consolidate with entities,
such as the Company, that: (i) allow dentists to focus on the clinical aspects
of dentistry by providing management resources to conduct the business and
administrative aspects of dentistry; (ii) provide information and operating
systems that are required to effectively manage in an increasingly complex
reimbursement environment; (iii) assist with third-party payor contracting;
(iv) realize economies of scale in purchasing and provide access to capital;
and (v) provide dentists the opportunity to realize value for their practices.

BUSINESS STRATEGY

The Company's objective is to be the leading dental practice management
company in the United States. In order to achieve this objective, the
Company's business strategy is to:

Expand into carefully selected markets. The Company plans to expand its
network of affiliated dental group practices into carefully selected and
diverse geographic markets. The Company focuses on markets that: (i) offer
the opportunity to gain market share leadership; (ii) have a prevalence of
dental group practices; (iii) have favorable demographics and projected
economic growth; and (iv) have access to dental schools. To date, the
Company has identified approximately 125 markets that currently meet its
market selection criteria. The Company believes that operating in multiple
markets increases the attractiveness of the Company and its affiliated
dental group practices to third party payors who seek to contract with
dental providers that are strategically located in attractive markets and
that offer a comprehensive range of multi-disciplinary dental care
services.

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<PAGE>

Affiliate with leading dental group practices. In entering a new market,
the Company seeks to affiliate with a leading dental group practice in that
market as a platform for expansion. A "platform" dental group practice is
one which has a reputation for quality care, provides a comprehensive range
of dental services, has a significant market presence and has a proven
record of financial performance. The Company believes that by affiliating
with leading dental group practices it will become more attractive to other
practices, dentists and payors.

Increase market penetration. The Company seeks to be the market share
leader in each market in which it operates. After affiliating with a
leading dental group practice, the Company seeks to increase its market
share by assisting the affiliate in recruiting new general and specialty
dentists, expanding its patient base and opening new facilities.
Additionally, the Company may affiliate with other dental practices or with
specialty group practices that complement the platform dental group
practice.

Add value to each affiliated dental group practice. The Company supports
its affiliated dental group practices with a broad range of services
designed to enhance their practice revenue, improve operating efficiencies
and expand operating margins. The Company shares the best practices of its
network with each affiliate and assists each affiliate with an analysis of
its revenue and payor mix, capacity, utilization, staffing, scheduling and
productivity. The Company also provides its affiliates assistance with
information systems, budgeting, financial reporting, facilities management,
third-party payor contracting, supplies and equipment procurement, quality
assurance initiatives, billing and collecting accounts receivable,
marketing and recruiting, hiring and training support staff.

Focus on quality care. The Company pursues various initiatives to help
its affiliates provide the highest quality of care and service. The
Company's goal is to have each affiliated dental group practice become
accredited by the Accreditation Association of Ambulatory Health Care, Inc.
("AAAHC"). Through its National Professional Advisory Forum, the Company
provides its affiliated dental group practices with the opportunity to
share clinical knowledge and best clinical practices. The Company also
implements comprehensive patient satisfaction surveys administered by
independent third parties. The Company believes that its focus on quality
care enhances: (i) its affiliates' relationships with patients; (ii) its
affiliates' ability to recruit dentists; (iii) the Company's ability to
attract new dental groups as affiliates; and (iv) the Company's
attractiveness to third party payors.

AFFILIATION PHILOSOPHY

The Company believes that dental care is an important part of an
individual's overall health care. Because the practitioner is best qualified
to manage the clinical aspects of dentistry, the provision of dental care must
be centered around the dentist. However, current market trends in health care
are increasing the complexity of operating a dental practice. Consequently,
dentists are affiliating with professional practice managers who can manage
the non-clinical aspects of dentistry and provide the business skills that can
improve practice operating performance.

The Company believes that, similar to other sectors of the health care
delivery system, the delivery of dental care is fundamentally a local
business. Therefore, the Company operates its business in a decentralized
manner and maintains the identity of the local affiliated practice. In each
affiliation, the Company strives to maintain the local culture of the
affiliated group and encourages it to retain the name of the practice,
continue its presence in community events, maintain its relationship with
patients and local third party payors and, to the extent possible, maintain
the existing management organization.

The Company's affiliation model is designed to create a partnership in
management between the Company and the affiliated dental group practice that
allows each party to maximize its strengths and retain its autonomy. Under the
Company's affiliation model, the affiliated dental group continues to own its
practice and has sole purview over the clinical aspects of the practice while
the Company manages the business aspects of the practice. The Company's method
of affiliation is consistent across practices and, even where permitted by
law, the Company does not employ dentists.

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<PAGE>

The Company believes that the core values of a business partnership are
shared governance and shared financial objectives and has structured its
affiliation model to achieve these goals. Shared governance is achieved by the
formation of a joint policy board for each affiliated dental group practice
which is comprised of an equal number of representatives from the Company and
the affiliated dental group practice. Together, members of the policy board
develop strategies and decide on major business initiatives for the practice.
Shared financial objectives are achieved through the joint implementation of a
budgeting process that establishes the financial performance standards for the
dental practice.

The organizational structure of a dental group practice before and after its
affiliation with ADP is as follows:

ADP's AFFILIATION MODEL

[A two-column flow chart. The first column is entitled Before Affiliation, under
which is a box which contains the words Dental Group. The second column is
entitled After Affiliation, under which is a circle which contains the words
Joint Policy Board. Under such circle are three boxes which contain the words
Dentist-owned Professional Corporation (PC), Service Agreement, and ADP-Owned
Management Service Organization (MSO), respectively. Arrows point from each box
to the circle, and two-way arrows point from the Service Agreement box to the
other two boxes.]

MARKET AND GROUP SELECTION

Market Selection

The Company has well-defined market selection criteria. The Company defines
potential markets with reference to one or more Metropolitan Statistical Areas
("MSAs"). An MSA is generally a geographic area consisting of a city of at
least 50,000 people, together with adjacent communities that have a high
degree of economic and social integration with the population center. In 1996,
there were 316 MSAs in the United States. The Company typically focuses on
markets with a population of at least 250,000 people that: (i) offer the
opportunity to gain market share leadership; (ii) have a prevalence of dental
group practices; (iii) have favorable demographics and projected economic
growth; and (iv) have access to dental schools. The Company has identified
approximately 125 MSAs that currently meet its market selection criteria.

Group Selection

The Company seeks to affiliate with leading dental group practices in each
selected market. The Company focuses on group practices because they have
greater potential to be market share leaders. Group practices are also more
likely to have implemented quality assurance and peer review policies and
procedures and are better positioned to operate in an increasingly complex
reimbursement environment. When entering a new market, the Company seeks to
affiliate with a platform dental group with a: (i) reputation for quality
care; (ii) comprehensive range of dental care services; (iii) significant
market presence; and (iv) proven record of financial performance. The Company
believes that, although a limited number of platform dental group practices
exist within any given market, there are a significant number of such groups
nationwide.

29
<PAGE>

Affiliation Process

Once the Company has identified a potential affiliate within a market, the
Company's management seeks to determine whether the group practice and the
Company share a common philosophy about the dental industry and common
strategic goals and objectives. To this end, the Company conducts a series of
meetings, site visits and presentations with the potential affiliate about the
industry, the Company and its affiliation model. The Company believes that the
existence of shared philosophical values is a critical element of the
affiliation's ultimate success.

If the Company and a potential affiliate determine that they share common
values, goals and objectives, the Company then undertakes a preliminary due
diligence review of clinical, operating and financial information. Based upon
this review, the Company formulates an offer outlining the basic terms and
conditions of the affiliation which, if accepted by the dental group practice,
is embodied in a letter of intent between the parties.

Upon signing a letter of intent, the Company and its representatives begin a
thorough review of the potential affiliate's clinical systems, processes,
facilities and compliance with licensing and credentialing requirements, as
well as performing legal and accounting due diligence. Acquisition, service
and other agreements are then prepared and the transaction is closed.
Generally, the process of identifying an acceptable affiliation candidate to
closing the transaction takes approximately six to nine months.

Potential Affiliations

The Company is constantly discussing potential affiliations with dental
group practices that meet the Company's group selection criteria, which may be
at various stages at any point in time. There can be no assurance that the
Company will consummate any future transactions.

AFFILIATED NETWORK

Since inception, the Company has successfully affiliated with ten dental
practices in six states consisting of 12 selected MSAs. The following table
lists the affiliations completed by the Company as of the date of this
Prospectus:

<TABLE>
<CAPTION>
DENTAL
MARKET FACILITIES OPERATORIES(1) MSA AFFILIATION DATE
------ ---------- -------------- --------------------- ----------------
<S> <C> <C> <C> <C>
AUSTIN, TX
Longhorn Dental....... 8 41 Austin and Killeen December 1996
Malcolm R. Scott, 1 6 San Marcos March 1997
D.D.S................
MILWAUKEE, WI
Smileage Dental Care.. 13 125 Appleton, Green Bay, December 1996
Kenosha, Madison and
Milwaukee
Northpoint Dental 2 23 Milwaukee July 1997
Group................
Wilkens Dental Group.. 4 30 Milwaukee October 1997
MINNEAPOLIS, MN
Park Dental........... 27 201 Minneapolis/St. Paul November 1996
Orthocare Group....... 17 83 Minneapolis/St. Paul October 1997
NEW ORLEANS, LA
Lakeside Dental Care.. 1 28 Metairie March 1997
PITTSBURGH, PA
Soster Dental Group... 4 29 Pittsburgh May 1997
TUCSON, AZ
Associated Dental 6 51 Phoenix and Tucson January 1998
Care.................
--- ---
Total............... 83 617
=== ===
</TABLE>
--------
(1) An operatory is an area where dental care is performed and generally
contains a dental chair, a hand piece delivery system and other
essential dental equipment.

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<PAGE>

MARKET PENETRATION

After affiliating with a platform dental group practice, the Company's
strategy is to increase its market penetration by increasing the market share
of its existing affiliated dental group and by affiliating with other leading
dental groups that complement or add to the dental care provided by its
existing affiliate.

Increase Existing Groups' Market Share

Upon completing an affiliation, the Company prepares a thorough operating
evaluation of the affiliate which builds upon its operational due diligence.
Based on this evaluation, the Company prepares a plan for increasing the
affiliate's market penetration. This plan may include one or more of the
following methods: (i) opening new facilities that are conveniently located in
highly populated areas within the MSA or in contiguous MSAs; (ii) recruiting
additional general and specialty dentists that will complement or enhance the
dental care provided by each affiliated dental group; (iii) expanding physical
capacity by adding new operatories at existing facilities; (iv) increasing the
utilization of existing physical capacity by expanding hours of operation; and
(v) growing its affiliate's patient base through increased marketing efforts
and expanded relationships with third party payors.

Opening New Facilities. The Company has successfully demonstrated its
ability to open new facilities in several of the markets in which it operates.
Since its affiliation with Park Dental in Minneapolis/St. Paul, the Company
has opened two new facilities with a total of eight operatories. Additionally,
since its affiliation with Longhorn Dental in Austin, the Company has opened
two new facilities with a total of nine operatories. Finally, in Wisconsin,
the Company has opened two new facilities with a total of 11 operatories in
Appleton and Madison, two MSAs contiguous to Milwaukee.

Recruiting Dentists. In markets where the Company has available physical
capacity and where the opportunity exists to attract new patients, the Company
assists its affiliates in recruiting new general and/or specialty dentists.
The Company assists its affiliates in recruiting dentists through a variety of
methods including recommendations from existing affiliated dentists,
participating in dental school activities, attending state dental association
meetings and advertisements in dental publications. In 1997, the Company has
assisted in the recruitment of 17 additional dentists for its affiliates.

Expanding Physical Capacity. In some cases, to facilitate an affiliate's
need for additional physical capacity, the Company adds new operatories to an
existing facility. In 1997, the Company added operatories to several of its
facilities located in San Marcos and Minneapolis/St. Paul. The Company
currently expects that in 1998 it will continue to expand capacity at selected
facilities.

Expanding Hours of Operations. The hours of operation at each of the
Company's facilities vary widely depending on patient needs and staffing
availability. In each of the Company's markets, the Company's facilities
operate on an expanded hours basis (i.e., before 8:00 a.m. and after 5:00
p.m.). Additionally, many of the Company's facilities are open on Saturdays.
In cases where the Company and its affiliated dental groups believe they can
enhance patient service and satisfaction by expanding the hours of operation,
a plan is developed to staff the facilities and implement an expanded hours
program.

Growing Patient Base. Although the Company believes that the greatest
source of new patients is referrals from existing patients, the Company
proactively assists each of its affiliates in growing their patient base
through local marketing efforts and by expanding relationships with third
party payors. The Company and its affiliates attend health fairs, sponsor
community activities, educate elementary school children on the merits of good
oral health and sponsor public awareness programs. In addition, the Company
actively develops new relationships with third party payors at the local,
regional and national level, which increases patient flow at its affiliated
practices.

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<PAGE>

Affiliations in Existing Markets

The Company also increases its market penetration by affiliating with other
leading general dentistry group practices and specialty dental group practices
that complement the platform dental group practice in a given market. These
practices are selected in much the same manner as the platform dental group
practice. The Company identifies those practices which have an outstanding
reputation for quality and provide the type of dental care which will
complement or add to the dental care offered by the platform dental group in
that market.

The Company has demonstrated its ability to affiliate with other leading
dental groups in existing markets. For example, following its affiliation with
Park Dental in Minneapolis/St. Paul, the Company affiliated with the Orthocare
Group in October 1997. The Orthocare Group is a leading provider of
orthodontic care in Minneapolis/St. Paul, operating 17 facilities with 83
operatories. In Milwaukee, the Company expanded its market penetration through
two affiliations with leading dental groups. In July 1997, the Company
affiliated with Northpoint Dental Group, adding two facilities with 23
operatories, and in October 1997, the Company affiliated with the Wilkens
Dental Group, adding four facilities with 30 operatories. In the Austin
market, the Company affiliated with Malcolm R. Scott, D.D.S., and the
principal dentists joined Longhorn Dental. This affiliation expanded the
Company's physical capacity and geographic reach by adding a facility in San
Marcos.

OPERATIONS

Operating Structure

The Company operates under a decentralized organizational structure. At the
facility level, the Company generally employs the dental hygienists, dental
assistants and administrative staff. At each facility, a practice manager
typically oversees the day-to-day business operations. The practice manager
and administrative staff are responsible for, among other things, facility
staffing, patient scheduling, on-site patient invoicing and ordering office
and dental supplies. The Company believes local office scheduling is crucial
because it allows each practice to accommodate the needs of its patients and
increase the productivity of its dentists.

In each market, the Company has a local management team that supervises the
operations of one or more affiliates. This team provides support in areas such
as recruiting, hiring and training facility staff, developing and implementing
quality assurance programs, developing and implementing operating policies and
procedures, billing and collecting accounts receivable, processing payroll,
information systems, accounting, marketing and facilities development and
management.

Each local management team reports to one of the Company's operating vice
presidents. An operating vice president is responsible for monitoring the
operating performance of multiple affiliated dental groups in multiple
markets. Each operating vice president participates as a member of the policy
board of the affiliated dental groups for which he or she has management
oversight responsibilities. The operating vice presidents are responsible for
overseeing the development of operating plans and annual budgets and
monitoring actual results. Additionally, the Company supports each of its
dental group practices with analysis of the capacity, utilization and
productivity of each dental facility. This analysis assists each practice in
improving its operating performance from both a clinical and financial
perspective.

On a national level, the Company supports its affiliated network in several
ways. The Company assists its affiliates with: (i) sharing best clinical
practices through its National Professional Advisory Forum; (ii) evaluating
and negotiating third party contracts; (iii) designing, locating and leasing
new facilities; (iv) developing budgets and implementing accounting and
financial systems; and (v) developing and implementing practice management and
other information systems. The Company also takes advantage of economies of
scale by contracting for various goods and services. For example, the Company
has arranged for national contracts for the purchase of dental supplies and
equipment, professional, casualty, and general liability insurance and payroll
processing.

32
<PAGE>

National Professional Advisory Forum

The Company has organized the National Professional Advisory Forum ("NPAF")
to provide guidance to its affiliated dental group practices with respect to
the clinical aspects of dentistry. Leading dentists from the Company's
affiliated dental groups are selected to participate in the NPAF. The NPAF
meets quarterly and provides a forum for dentists to share the best clinical
practices of their respective dental groups and an opportunity for them to
build professional relationships with other dentists affiliated with the
Company. These dentists, as a result of their affiliation with the Company,
share common long-term goals. This enables the discussion at the NPAF to be
more open than it may be in other professional settings. While the primary
emphasis of the NPAF is on the clinical aspects of dentistry, it also provides
the Company's management an opportunity to communicate with affiliated
dentists. This enables the Company to continue to build strong, mutually
beneficial partner relationships with its affiliated dental groups.

Payor Relationships and Reimbursement Mix

The Company and its affiliates believe that clinical and economic decisions
should be made separately. However, the Company recognizes that the source of
payment for services affects operating and financial performance. The Company
assists its affiliates in analyzing their revenue and payor mix on an ongoing
basis and recommends methods by which the affiliated dental group practices
can improve operating efficiency by improving their revenue and payor mix. As
a general rule, the Company believes that growth in a market is best
facilitated where the payor mix of its affiliates mirrors the payor mix for
that market. The Company assists each of its affiliated dental groups in
evaluating and negotiating third-party payor contracts on a local, regional
and national level. The aggregate payor mix percentage of the Company's
affiliated practices was approximately 33% fee-for-service, 14% PPO plans and
53% capitated managed care plans for the year ended December 31, 1997.

The Company believes it is advantageous to be affiliated with dental groups
that have successfully provided care to patients under all reimbursement
methodologies. Since a shift is taking place in the dental benefits market
from traditional fee-for-service to PPO and capitated managed care dental
plans, the Company believes that its affiliates' experience in operating under
all of these plans provides them with a competitive advantage. All of the
Company's affiliated dental groups have provided care under traditional fee-
for-service plans and non-fee-for-service plans. Several of the Company's
affiliated dental groups have been providing care to patients with capitated
managed care dental benefits for more than 20 years.

Facilities Development and Management

The Company believes an inviting professional environment is a critical
aspect of overall patient satisfaction. Each of the Company's facilities is
constructed to be warm, attractive and inviting to the patients in addition to
being highly functional. The Company's dental facilities have from three to 28
operatories, and typically accommodate general and specialty dentists, dental
hygienists and dental assistants, a business manager and a receptionist.
Generally the Company's facilities are either stand alone or located within a
professional office building or medical facility and range in size from
approximately 1,500 to 10,000 square feet.

The Company works with each of its affiliated dental groups in analyzing
utilization of existing capacity and identifying facility upgrade and
expansion priorities. The Company also provides its affiliates guidance in the
site selection process. The Company initially constructs each facility as
appropriate for the market and adds and equips additional operatories as
necessary through a capacity and utilization analysis.

The Company uses architectural design services to improve the facility
design process and to further ensure that all facilities are properly
constructed and meet the standards set forth by the AAAHC. To this end, the
Company works with each affiliated dental group to establish a defined set of
standards for each facility, such as operatory design and dental equipment,
which are consistent with the desires of the dental group. The Company
believes such facility standards are necessary to speed the site development
process and create consistency across newly developed facilities, leading to
enhanced staff and provider productivity.

33
<PAGE>

Budgeting and Planning; Financial Information Systems

The Company assists each affiliate with budgeting and planning. The Company
and each affiliate develop a strategic plan for increased market penetration
on an annual basis. The Company and each affiliated dental group then jointly
develop a budget which sets specific goals for revenue growth, operating
expenses and capital expenditures. Once a budget has been approved, the
Company measures the financial performance of each affiliated dental group on
a monthly basis and compares actual performance to budget.

The Company's financial information system enables it to measure, monitor
and compare the financial performance of affiliated dental groups on a
standardized basis across its entire network. The system also allows the
Company to track and control costs and facilitates the accounting and
financial reporting process. This financial system is installed in all
affiliated dental group practices. Historically, the Company has converted all
affiliates to its system within 90 days of affiliation and intends to continue
this practice with new affiliates.

Practice Management Systems

The Company uses various dental practice management software systems to
facilitate patient scheduling, to invoice patients and insurance companies, to
assist with facility staffing and for other practice related activities. In
connection with its affiliation with Park Dental, the Company acquired the
rights to Comdent, a proprietary practice management software system which has
been used and continuously enhanced at Park Dental since 1987. The Company
believes that Comdent's scheduling, electronic data interchange and data
management features are superior to others that are commercially available. In
addition, Comdent is scalable and capable of accommodating large multi-site
dental group practices. The Company intends, when appropriate, to convert its
affiliated dental group practices to the Comdent practice management software
system. The Company is also developing a data warehouse and decision support
system to analyze information across its entire network.

AFFILIATION STRUCTURE

Service Agreement

The Company has entered into a service agreement with each of its affiliated
PCs pursuant to which the Company performs all administrative, non-clinical
aspects of such PC's dental practice. The Company expects that each new
affiliated PC will enter into a similar service agreement or become a party to
an existing service agreement at the time of its affiliation. The Company is
dependent on its service agreements for all of its operating revenue. The
termination of one or more of these service agreements could have a material
adverse effect on the Company. See "Risk Factors--Dependence Upon Service
Agreements."

The Company is responsible for providing all services necessary for the
administration of the non-clinical aspects of the dental operations. These
services include assisting its affiliates with information systems, budgeting
and financial reporting, facilities management, third-party contracting,
supplies and equipment procurement, quality assurance initiatives, billing and
collecting accounts receivable, marketing and recruiting, hiring and training
support staff.

The PC is responsible for recruiting and hiring all of the dentists
necessary to provide dental care. The Company does not assume any authority,
responsibility, supervision or control over the provision of dental care to
patients. The service agreement requires the PC to enter into employment or
independent contractor agreements with each dentist retained by the PC. The
service agreement also requires the PC to implement and maintain quality
assurance and peer review programs, maintain professional and comprehensive
general liability insurance covering the PC and each of its dentists and abide
by non-competition and confidentiality provisions.

The Company and each PC establish a joint policy board which is responsible
for developing and implementing management and administrative policies for the
dental operation. The policy board consists of an equal number of
representatives designated by the Company and the PC. The policy board members
designated by the PC must be licensed dentists employed by the PC. The policy
board's responsibilities include the review

34
<PAGE>

and approval of all renovation and expansion plans and capital equipment
expenditures with respect to the dental facilities affiliated with the PC, all
annual capital and operating budgets, all advertising and marketing services,
the long-term strategic and short-term operational goals, objectives, and
plans for the dental facilities and staffing plans regarding provider and
support personnel for the dental facilities. The policy board also reviews and
monitors the financial performance of the PC with respect to the attainment of
the PC's budgeted goals. The policy board also has the authority to approve or
disapprove any merger or combination with, or acquisition of, any dental
practice by the PC. Finally, the policy board reviews and makes
recommendations with respect to contractual relationships between the PC and
third-party payors. However, the PCs have final approval over matters relating
to dental care including all third-party payor contracts and fee practices and
schedules.

The PC reimburses the Company for expenses incurred on its behalf in
connection with the operation and administration of the dental facilities and
pays fees to the Company for management services. The Company's service fees
typically consist of a fixed monthly fee and an additional variable fee. The
additional fee is determined by a comparison of the actual financial
performance of the affiliated dental group practice to its budget. For the
year ended December 31, 1997, the total amount of service fees earned under
the Company's service agreements ranged from approximately 9% of the adjusted
gross revenue of one PC to approximately 25% of the adjusted gross revenue of
another PC. The amount of the additional fee, in the aggregate, was not
material for the year ended December 31, 1997. The PC is also responsible for
provider expenses, which generally consist of the salaries, benefits, and
certain other expenses of the dentist. The fees payable to the Company are
determined prior to each affiliation and annually thereafter based on a formal
budgeting process.

Each of the Company's current service agreements is for an initial term of
40 years and automatically renews for successive five-year terms, unless
terminated by notice given at least 120 days prior to the end of the initial
term or any renewal term. In addition, the service agreement may be terminated
earlier by either party upon the occurrence of certain events involving the
other party, such as its dissolution, bankruptcy, liquidation, or its failure
to perform its material duties and obligations under the service agreement. In
the event a management service agreement is terminated, the related affiliated
dental practice is required to purchase, at the Company's option, the
unamortized balance of intangible assets at the current book value, as well as
all related other assets associated with the affiliated dental practice.

Employment Agreements with Dentists

All dentists practicing full-time at the dental facilities have entered into
employment agreements with their respective PCs. The employment agreements
with dentists who are owners of the PCs generally are for a specified initial
term of up to five years. The employment agreements with other dentists may be
for terms up to 18 months. Such employment agreements are usually terminable
by either party upon advance written notice, which may be 90 days in some
cases, and are terminable by the PC for cause immediately upon written notice
to the dentist. Such agreements typically contain non-competition provisions
which prohibit the dentist from engaging in the practice of dentistry or
otherwise performing professional dental services within a specified
geographic area, usually a specified number of miles from the relevant dental
facility, following termination. The non-competition restrictions are
generally for one to two years following termination.

COMPETITION

The dental practice management industry, currently in its formative stage,
is highly competitive and is expected to become more competitive. The Company
competes with other dental practice management companies with respect to
providing management services to dentists, as well as those seeking to
affiliate with existing dental practices through service agreement
arrangements. The Company believes that the principal factors of competition
between dental practice management companies are their affiliation methods and
models, the reputation of their existing affiliates, the scope of their dental
care networks, their management expertise and experience, the sophistication
of their management information, accounting, finance and other systems and
their operating methods. The Company believes that it competes effectively
with other dental practice management companies with respect to these factors.
See "Risk Factors--Highly Competitive Market."

35
<PAGE>

GOVERNMENT REGULATION

General

The practice of dentistry is highly regulated, and the operations of the
Company and its affiliated dental practices are subject to numerous state and
federal laws and regulations. Furthermore, the Company may become subject to
additional laws and regulations as it expands into new markets. There can be
no assurance that the regulatory environment in which the Company and its
affiliated dental group practices operate will not change significantly in the
future. The ability of the Company to operate profitably will depend, in part,
upon the Company and its affiliated dental group practices obtaining and
maintaining all necessary licenses, certifications and other approvals and
operating in compliance with applicable laws. See "Risk Factors--Government
Regulation."

State Regulation

Every state imposes licensing and other requirements on individual dentists
and dental facilities and services. Except for Wisconsin, the laws of the
states in which the Company currently operates prohibit, either by specific
statutes, case law or as a matter of general public policy, entities not
wholly owned or controlled by dentists, such as the Company, from practicing
dentistry, from employing dentists and, in certain circumstances, dental
assistants and dental hygienists, or from exercising control over the
provision of dental services. Many states prohibit or restrict the ability of
a person other than a licensed dentist to own, manage or control the assets,
equipment or offices used in a dental practice. The laws of some states
prohibit the advertising of dental services under a trade or corporate name
and require all advertisements to be in the name of the dentist. A number of
states also regulate the content of advertisements of dental services and the
use of promotional gift items. These laws and their interpretation vary from
state to state and are enforced by regulatory authorities with broad
discretion.

There are certain regulatory issues associated with the Company's role in
negotiating and administering managed care contracts. To the extent that the
Company or any affiliated dental group practice contracts with third party
payors, including self-insured plans, under a capitated or other arrangement
which causes the Company or such affiliated dental group practice to assume a
portion of the financial risk of providing dental care, the Company or such
affiliated dental group practice may become subject to state insurance laws.
If the Company or any affiliated dental group practice is determined to be
engaged in the business of insurance, the Company may be required to change
the method of payment from third party payors or to seek appropriate
licensure. Any regulation of the Company or its affiliated dental group
practices under insurance laws could have a material adverse effect on the
Company's business, financial condition and results of operations.

Many states have fraud and abuse laws, including anti-kickback laws, which
are similar to the federal laws, discussed below, and in many cases these laws
apply to all referrals for items or services reimbursable by any payor. A
number of states also impose significant criminal and civil penalties for
false claims, false or improper billings, or inappropriate coding for dental
services. Many states either prohibit or require disclosure of self-referral
arrangements and impose criminal and civil penalties for violations of these
laws.

Many states also prohibit a dentist from paying a portion of fees received
for dental services to another person or entity. In some states, this "fee-
splitting" prohibition applies only to payments in exchange for referrals.
Other states flatly prohibit any rebates or split fees regardless of whether
referrals are involved. There can be no assurance that management fees paid to
the Company, to the extent based on a percentage of dental service revenues or
profits, will not be deemed to violate such laws.

Many states have antitrust laws which prohibit agreements in restraint of
trade, the exercise of monopoly power and other practices that are considered
to be anti-competitive, including cooperation by separate economic entities to
fix the prices of services. Dental practices are also subject to compliance
with state and local regulatory standards in the areas of safety and health.

36
<PAGE>

Federal Regulation

The dental industry is also regulated at the federal level to the extent
that dental services are reimbursed under federal programs. Participation by
the affiliated dental group practices and their dentists in such programs
subject them, and potentially the Company, to significant regulation regarding
the provision of services to beneficiaries, submission of claims and related
matters, including the types of regulations discussed below. Violation of
these laws or regulations can result in civil and criminal penalties,
including possible exclusion of individuals and entities from participation in
federal payment programs.

The federal anti-kickback statutes prohibit, in part, and subject to certain
safe harbors, the payment or receipt of remuneration in return for, or in
order to induce, referrals, or arranging for referrals, for items or services
which are reimbursable under federal payment programs. Other federal laws
impose significant penalties for false or improper billings or inappropriate
coding for dental services regardless of the payor source. The federal self-
referral law, or "Stark law," prohibits dentists from making referrals for
certain designated health services reimbursable under federal payment programs
to entities with which they have financial relationships unless a specific
exception applies. The Stark law also prohibits the entity receiving such
referrals from submitting a claim for services provided pursuant to such
referral. The Company may be subject to federal payor rules prohibiting the
assignment of the right to receive payment for services rendered unless
certain conditions are met. These rules prohibit a billing agent from
receiving a fee based on a percentage of collections and may require payments
for the services of the dentists to be made directly to the dentist providing
the services or to a lock-box account held in the name of the dentist or his
or her dental group. In addition, these rules provide that accounts
receivables from federal payors are not saleable or assignable.

Federal antitrust laws prohibit agreements in restraint of trade, the
exercise of monopoly power and other practices that are considered to be anti-
competitive, including cooperation by separate economic entities to fix the
prices of services. Finally, dental practices are also subject to compliance
with federal regulatory standards in the areas of safety and health.

INSURANCE

The Company maintains property-casualty insurance covering its corporate
offices and dental facilities on a replacement cost basis. Each affiliated PC
maintains, or causes to be maintained, professional liability insurance
covering itself and its employees and contractors, including the dentists,
hygienists and dental assistants employed by, or contracted by such affiliated
PC in the amount of $1 million per occurrence and $3 million annual aggregate.
The Company generally is a named insured under such policies. The Company also
maintains umbrella liability coverage for its property-casualty policies in
the amount of $10 million. Certain types of risks and liabilities may not be
covered by insurance, however, and there can be no assurance that coverage
will continue to be available upon terms satisfactory to the Company or that
the coverage will be adequate to cover losses. Malpractice insurance,
moreover, can be expensive and varies from state to state. Successful
malpractice claims asserted against the dentists, the PCs or the Company may
have a material adverse effect on the Company's business, financial condition
and operating results. While the Company believes its insurance policies are
adequate in amount and coverage for its current operations, there can be no
assurance that the coverage maintained by the Company will be sufficient to
cover all future claims or will continue to be available in adequate amounts
or at a reasonable cost.

LEGAL PROCEEDINGS

From time to time, the Company may be subject to litigation incidental to
its business. The Company is not presently a party to any material litigation.
The dentists employed by, or independent contractors of, the Company's
affiliated PCs are from time to time subject to malpractice claims. Such
claims, if successful, could result in damage awards exceeding applicable
insurance coverage.

37
<PAGE>

FACILITIES AND EMPLOYEES

The Company's corporate office is located at 301 Edgewater Place, Suite 320,
Wakefield, Massachusetts, in approximately 5,300 square feet occupied under a
lease which expires in June 1999. The Company leases most of its dental
facilities. Typically, each acquired dental facility is located at the site
used by the dental group practice prior to affiliating with the Company.

As of January 31, 1998, the Company had approximately 885 employees,
including 472 hygienists and dental assistants and 413 administrative and
management employees located at the Company's 83 dental facilities and local
management offices. In addition, the Company was affiliated with 176 dentists,
as well as six hygienists and nine dental assistants located in states which
prohibit the Company's employment of hygienists and dental assistants, all of
whom were employees or independent contractors of their respective affiliated
PCs. The Company considers its relations with its employees to be good.

38
<PAGE>

MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth information concerning each of the directors
and executive officers of the Company:

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Gregory A. Serrao....... 35 Chairman, President and Chief Executive Officer
Ronald M. Levenson...... 42 Senior Vice President, Chief Financial Officer and Treasurer
George W. Robinson...... 60 Senior Vice President--Operations
William H. Bottlinger... 53 Vice President--Regional Operations and Chief Information Officer
Forrest M. Flint........ 45 Vice President--Business Development
Michael F. Frisch....... 39 Vice President--Regional Operations
Kathryn A. Russell...... 45 Vice President--Financial Operations
Dr. Gregory T. Swenson.. 63 President of PDHC, Ltd. and Director
James T. Kelly (1)...... 50 Director
Martin J. Mannion 38 Director
(1)(2).................
Derril W. Reeves 54 Director
(1)(2).................
</TABLE>
- --------
(1) Member of the Audit Committee.
(2) Member of the Compensation Committee.

Mr. Serrao, the founder of the Company, has served as President, Chief
Executive Officer and a Director of the Company since December 1995 and as
Chairman since October 1997. From 1992 through December 1995, Mr. Serrao
served as the President of National Specialty Services, Inc., a subsidiary of
Cardinal Health, Inc. ("Cardinal Health"). From 1991 to 1992, Mr. Serrao
served as Vice President--Corporate Development of Cardinal Health. Before
joining Cardinal Health, Mr. Serrao was an investment banker at Dean Witter
Reynolds Inc. where he co-founded its health care investment banking group and
specialized in mergers, acquisitions and public equity offerings.

Mr. Levenson has served as Senior Vice President, Chief Financial Officer
and Treasurer of the Company since April 1996. Prior to joining the Company,
Mr. Levenson was employed by American Medical Response, Inc. ("AMR"), a
national provider of ambulance services, where he served as Senior Vice
President and Chief Accounting Officer from October 1992 through April 1996
and also served as Treasurer from August 1995 through April 1996. Prior to
joining AMR, Mr. Levenson was a Senior Manager at KPMG Peat Marwick LLP, a
public accounting firm, where he was employed from 1979 through 1992.

Mr. Robinson has served as Senior Vice President--Operations of the Company
since May 1996. From 1994 through May 1996, Mr. Robinson served as the
President of Nanston Dental Group, a dental provider network located in
Georgia and North Carolina. From 1979 to 1994, Mr. Robinson served as an
Administrator of Kaiser Permanente's Dental Division, which was affiliated
with over 200 providers in two states and provided dental care to over 140,000
members.

Mr. Bottlinger has served as Vice President and Chief Information Officer of
the Company since January 1997 and as Vice President--Regional Operations
since November 1997. From 1985 through 1996, Mr. Bottlinger served as Senior
Vice President and Chief Information Officer for Cardinal Health and Senior
Vice President and General Manager of CORD Logistics, Inc., a Cardinal Health
subsidiary which provided pharmaceutical distribution and information
technology services for emerging biotechnical manufacturing companies. During
his career, Mr. Bottlinger has initiated the use of state of the art
information system technology in a variety of businesses engaged in retailing,
food wholesaling, pharmaceutical manufacturing and distribution, pharmacy
operations and financial services.

39
<PAGE>

Mr. Flint has served as Vice President--Business Development of the Company
since November 1996. From 1985 through November 1996, Mr. Flint served as the
Executive Director of PDHC, Ltd ("Park"), prior to its affiliation with the
Company. At Park, Mr. Flint was responsible for managing all external
relationships and contracting with third party payors. From 1984 to 1985, Mr.
Flint was an investment banker in the health care finance group of Dain
Bosworth, Inc. From 1977 to 1984, Mr. Flint was the Director of the South
Dakota Division of Health Services. Mr. Flint is a past Board Member of the
Accreditation Association for Ambulatory Health Care, Inc.

Mr. Frisch has served as Vice President--Regional Operations of the Company
since June 1997. From January 1997 to June 1997, Mr. Frisch served as the
Company's Director--National Support Initiatives. From July 1996 to January
1997, Mr. Frisch was an independent consultant to the Company. From June 1993
to July 1996, Mr. Frisch served as Vice President and General Manager of
National Specialty Services, Inc., a subsidiary of Cardinal Health. From July
1986 to June 1993, Mr. Frisch was employed by VHA, Inc., a national health
care alliance, in a variety of marketing, business development and management
positions.

Ms. Russell has served as Vice President--Financial Operations of the
Company since January 1998. From December 1996 to January 1998, Ms. Russell
served as Vice President--Finance. Prior to joining the Company, Ms. Russell
was employed by Heartland Foods Systems, Inc., a multi-concept food retailer
with 230 locations, where she served as Vice President and Assistant Secretary
from 1993 through 1995. From 1991 to 1992, Ms. Russell was Manager of Sales
Audit for The Limited, Inc., a publicly-held retailer. From 1983 to 1991, Ms.
Russell held management positions with several publicly held financial
services companies. Prior to 1983, Ms. Russell was a Senior Manager at
Deloitte & Touche, a public accounting firm, where she was employed from 1974
through 1983.

Dr. Swenson has served as President of PDHC, Ltd., President of Park Dental
and a Director of the Company since November 1996. From 1983, when he co-
founded Park, to November 1996, Dr. Swenson served as Chairman and Chief
Executive Officer of Park. Dr. Swenson was a member of the American Academy of
Dental Group Practices ("AADGP") from 1980 until 1995, serving on many
occasions as a practice auditor in the AADGP's accreditation program. In 1978,
Park's predecessor was the second group practice to receive AADGP's
accreditation certificate. In 1973, a national referee committee selected Dr.
Swenson to the American Association of Endodontics, a society with which he
maintained a membership until 1989. In 1972, after practicing solo dentistry
for ten years, he formed a partnership with colleagues and helped build Park's
predecessor group practice. Dr. Swenson is a member of the Minnesota State
Dental Association, the American Dental Association, and Federation Dentaire
Internationale. From 1980 to 1996, Dr. Swenson served on the Board of
Directors of Marquette Bank Brookdale.

Mr. Kelly has served as a Director of the Company since February 1997. Mr.
Kelly has served as Chairman of the Board of Lincare Holdings Inc., a provider
of home respiratory therapy services, since April 1994. Mr. Kelly served as
the Chief Executive Officer of Lincare from June 1986 through December 1996.
Prior to 1986, Mr. Kelly served in a number of capacities within the Mining
and Metals Division of Union Carbide Corporation over a 19-year period.

Mr. Mannion has served as a Director of the Company since January 1996 and
served as Chairman from January 1996 to October 1997. Mr. Mannion is a general
partner with Summit Partners, a private equity capital firm, where he has been
employed since 1985. Through his work with Summit Partners, Mr. Mannion
currently serves as a director of Suburban Ostomy Supply Company and numerous
private companies.

Mr. Reeves has served as a Director of the Company since February 1997. Mr.
Reeves is a founder, Executive Vice President for Development and Director of
PhyCor, Inc. and has served in various positions with PhyCor since 1987. From
1974 to 1976, Mr. Reeves was with Hospital Affiliates International ("HAI")
where he served as Vice President of Hospital Management Corporation, the
hospital management subsidiary of HAI. In 1977, he joined Hospital Corporation
of America ("HCA") to head the growth function for HCA's management company.
Mr. Reeves was a Vice President of HCA and also Vice President of Development
for

40
<PAGE>

HCA Management Company until 1985. In 1985, he moved to HCA Health Plans as
Vice President of Sales and Marketing and was instrumental in the creation of
Equicor where he was Senior Vice President, National Sales.

BOARD OF DIRECTORS

The Company's Board of Directors is divided into three classes, with each
class elected to serve a staggered three-year term. The Class I director,
whose term will expire at the 1998 annual meeting of stockholders, is Dr.
Swenson. The Class II directors, whose terms will expire at the 1999 annual
meeting of stockholders, are Messrs. Mannion and Kelly. The Class III
directors, whose terms will expire at the 2000 annual meeting of stockholders,
are Messrs. Serrao and Reeves. The classified Board of Directors may increase
the difficulty of consummating or discourage a business combination or an
attempt to gain control of the Company that is not approved by the Board of
Directors. The Company's executive officers are elected annually by and serve
at the discretion of the Board of Directors. See "--Employment Agreements."

COMPENSATION OF DIRECTORS

Directors who are also employees of the Company or one of its subsidiaries
do not receive additional compensation for serving as directors. Each director
who is not an employee of the Company or one of its subsidiaries receives a
fee of $1,000 for attending each Board of Directors' meeting and $500 for
attending each committee meeting. In addition, each non-employee director who
is not an officer of the Company is eligible to receive options under the
Company's 1996 Amended and Restated Directors Stock Plan. These options are
issued at such times and in such amounts as may be determined by the Directors
Stock Option Plan Committee, at their discretion. See "Stock Plans--1996
Directors Stock Option Plan." Directors are also reimbursed for out-of-pocket
expenses incurred in attending meetings of the Board of Directors or
committees thereof.

41
<PAGE>

COMPENSATION OF EXECUTIVE OFFICERS

The following table sets forth information with respect to compensation paid
to or accrued on behalf of (i) the Chief Executive Officer and (ii) the other
most highly compensated executive officers of the Company whose aggregate base
salary and bonus exceeded $100,000 (the "Named Executive Officers") in 1997
and 1996.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM AWARDS
------------------------------------------- ------------------------
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING ALL OTHER
YEAR SALARY ($) BONUS ($) COMPENSATION(1) STOCK OPTIONS (#) COMPENSATION(2)
---- ---------- --------- --------------- ---------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
Gregory A. Serrao....... 1997 $153,000 $93,600 $ -- $ -- 189,600 $1,900
Chairman, President and 1996 $144,000(3) $90,000 $136,461(4) $99,500(5) 270,270 $ 519
Chief Executive Officer
Ronald M. Levenson...... 1997 $153,000 $62,400 $ -- $ -- 126,000 $1,900
Senior Vice President, 1996 $103,000(3) $41,600 $ 23,000(6) $ -- 81,000 $ --
Chief Financial Officer
and Treasurer
George W. Robinson...... 1997 $123,000 $75,000 $ -- $ -- 6,480 $1,900
Senior Vice President-- 1996 $ 72,000(3) $43,750 $ 41,000(6) $ -- 60,000 $ 433
Operations
William H. Bottlinger... 1997 $143,000(7) $58,800 $ 57,900(6) $ -- 15,000 $ --
Vice President--
Regional Operations and
Chief Information
Officer
Forrest M. Flint........ 1997 $130,000 $26,250 $ -- $ -- 7,200 $2,340
Vice President-- 1996 $ 14,000(3) $15,000 $ -- $ -- 36,000 $ 288
Business Development
</TABLE>
- --------

(1) Except as specifically noted, no Other Annual Compensation for any Named
Executive Officer exceeded $50,000 or 10% of the total salary and bonus
for such officer.

(2) Represents matching contributions under the Company's 401(k) plan.

(3) Represents less than one full year's compensation.

(4) Consists of a tax offset bonus in the amount of $84,461 paid with respect
to the restricted Common Stock issued to Mr. Serrao in January 1996, and
moving and relocation expenses in the amount of $52,000.

(5) Represents the dollar value (net of consideration paid) of 300,000 shares
of restricted Common Stock issued to Mr. Serrao in January 1996, based
upon the fair market value of such shares on the date of issuance. Such
shares are subject to repurchase rights in favor of the Company upon the
occurrence of certain events, including the termination of Mr. Serrao's
employment. Such repurchase rights lapse ratably during the first four
years of Mr. Serrao's employment and upon the occurrence of certain other
events. As of December 31, 1997, 156,300 shares of restricted Common
Stock with a fair market value on such date of $2,214,771 were held by
Mr. Serrao. Dividends, if declared and paid upon the Common Stock, will
be paid on such restricted stock.

(6) Consists of moving and relocation expenses.

(7) Mr. Bottlinger's employment with the Company began in 1997.

42
<PAGE>

OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth certain information about options to purchase
Common Stock which were granted during the year ended December 31, 1997.

<TABLE>
<CAPTION>
POTENTIAL REALIZEABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
-------------------------------------------------- ---------------------
NUMBER OF
SECURITIES EXERCISE
UNDERLYING OPTIONS % OF TOTAL PRICE EXPIRATION
GRANTED (#) OPTIONS ($/SHARE) DATE 5% ($) 10% ($)
------------------ ---------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gregory A. Serrao....... 9,600(1) 2% $12.50 1/01/07 $ 75,467 $ 191,249
169,590(1) 31% $14.17 8/01/07 $1,511,291 $3,829,907
10,410(2) 2% $14.17 1/30/07 $ 86,977 $ 217,287
Ronald M. Levenson...... 6,000(1) 1% $12.50 1/01/07 $ 47,167 $ 119,531
109,590(1) 20% $14.17 8/01/07 $ 976,604 $2,474,907
10,410(2) 2% $14.17 1/30/07 $ 86,977 $ 217,287
George W. Robinson...... 3,480(1) 1% $12.50 1/01/07 $ 27,357 $ 69,328
3,000(1) 1% $14.17 8/01/07 $ 26,734 $ 67,750
William H. Bottlinger... 5,850(1) 1% $12.50 1/17/07 $ 45,988 $ 116,542
7,200(1) 1% $14.17 8/01/07 $ 64,162 $ 162,600
1,950(2) -- $12.50 7/18/06 $ 14,372 $ 35,905
Forrest M. Flint........ 7,200(1) 1% $14.17 8/01/07 $ 64,162 $ 162,600
</TABLE>
- --------

(1) Options issued under the 1996 Stock Option Plan. The exercise price of the
options is equal to the fair market value of the Company's Common Stock on
the date of grant. Options become exercisable in equal annual installments
over a four-year period.

(2) Options issued under the 1996 Time Accelerated Restricted Stock Option
Plan. The exercise price of the options is equal to the fair market value
of the Company's Common Stock on the date of grant. These options will
become exercisable upon completion of this offering.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES

The following table presents information about the value of options
outstanding for each of the Named Executive Officers as of December 31, 1997.
No options were exercised during the year.

<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS AT IN-THE-MONEY OPTIONS
DECEMBER 31, 1997(#) AT DECEMBER 31, 1997 ($)
----------------------------------- ----------------------------
EXERCISABLE(1) UNEXERCISABLE EXERCISABLE(1) UNEXERCISABLE
---------------- --------------- -------------- -------------
<S> <C> <C> <C> <C>
Gregory A. Serrao....... 280,680 179,190 $3,740,537 $ 16,032
Ronald M. Levenson...... 46,410 160,590 $ 498,240 $632,820
George W. Robinson...... 27,150 39,330 $ 158,556 $197,656
William H. Bottlinger... 1,950 13,050 $ 3,257 $ 9,770
Forrest M. Flint........ 20,160 23,040 $ 117,734 $ 92,506
</TABLE>
- --------

(1) Although not exercisable at December 31, 1997, these options will become
exercisable upon the completion of this offering.

EMPLOYMENT AGREEMENTS

The Company has a five-year employment agreement with Mr. Serrao which
terminates in January 2001. Under his employment agreement, Mr. Serrao
receives an annual base salary of $150,000 (subject to potential annual salary
increases) and a bonus in an amount up to 60% of his then current base salary.
Mr. Serrao is also subject to non-competition and confidentiality provisions
in the employment agreement. If Mr. Serrao's employment is terminated prior to
the end of the five-year term by the Company without cause or by Mr. Serrao
for "good reason" (as defined in the employment agreement) he is entitled to
receive severance benefits which

43
<PAGE>

include severance payments in an amount equal to his then current annual base
salary and health care benefits for one year after termination.

The Company has a three-year employment agreement with Mr. Levenson which
terminates in April 1999. Under his employment agreement, Mr. Levenson
receives an annual base salary of $150,000 (subject to potential annual salary
increases) and a bonus in an amount up to 40% of his then current base salary.
Mr. Levenson is also subject to non-competition and confidentiality provisions
in the employment agreement. If Mr. Levenson's employment is terminated prior
to the end of the three-year term by the Company without cause or by Mr.
Levenson for "good reason" (as defined in the employment agreement) he is
entitled to receive severance benefits which include severance payments in an
amount equal to his then current annual base salary and health care benefits
for one year after termination.

The Company has a three-year employment agreement with Mr. Robinson which
terminates in May 1999. Under his employment agreement, Mr. Robinson receives
an annual base salary of $125,000 and a bonus in an amount up to $75,000. Mr.
Robinson is also subject to non-competition and confidentiality provisions in
the employment agreement. If Mr. Robinson's employment is terminated prior to
the end of the three-year term by the Company without cause, he is entitled to
receive severance benefits which include severance payments in an amount equal
to his base salary for the shorter of one year or the remainder of the term of
the agreement.

The Company has a three-year employment agreement with Mr. Flint which
terminates in November 1999. Under his employment agreement, Mr. Flint
receives an annual base salary of $130,000 (subject to potential annual salary
increases) and a bonus in an amount up to $26,250 for 1997, and 25% of his
then-current base salary thereafter. Mr. Flint is also subject to non-
competition and confidentiality provisions in the employment agreement. If Mr.
Flint's employment is terminated prior to the end of the three-year term by
the Company for any reason other than for cause, he is entitled to receive
severance benefits which include severance payments in an amount equal to his
then current base salary for the remainder of such term.

STOCK PLANS

1996 Stock Option Plan

The 1996 Stock Option Plan, as amended (the "1996 Plan"), was originally
adopted in January 1996 to provide options to officers and key employees of
the Company and its subsidiaries. Options are granted at a price per share
which is no less than the fair market value of the Common Stock at the time of
the grant. Options granted pursuant to the 1996 Plan expire ten years from the
date of grant, or may expire earlier upon termination of the grantee's
employment with the Company. The total number of shares of Common Stock
subject to the 1996 Plan is 873,246, of which options for 650,428 shares were
outstanding at January 31, 1998.

1996 Time Accelerated Restricted Stock Option Plan

The 1996 Time Accelerated Restricted Stock Option Plan, as amended (the
"TARSOP"), was originally adopted in January 1996. The total number of shares
subject to the TARSOP is 360,360. Options to purchase all such shares have
been granted and will become exercisable upon completion of this offering.

1996 Affiliate Stock Option Plan

The Amended and Restated 1996 Affiliate Stock Option Plan (the "Affiliate
Plan") was originally adopted in September 1996 to provide options to certain
persons associated with the affiliated dental practices. Options are granted
at a price per share which is no less than the fair market value of Common
Stock at the time of grant. The total number of shares of Common Stock subject
to the Affiliate Plan is 210,000, of which options for 89,586 shares were
outstanding at January 31, 1998.

1996 Directors Stock Option Plan

The 1996 Amended and Restated Directors Stock Option Plan, as amended (the
"Directors Plan"), was originally adopted in September 1996 to grant options
to those directors of the Company who are not employees or officers of the
Company or any subsidiary of the Company. Options are granted at a price per
share which is no less than the fair market value of Common Stock at the date
of the time of grant. The total number of shares

44
<PAGE>

of Common Stock subject to the Directors Plan is 60,000, of which options for
19,800 shares were outstanding at January 31, 1998.

1997 Employee Stock Purchase Plan

Effective December 1, 1997, the Company adopted the 1997 Employee Stock
Purchase Plan (the "Employee Stock Purchase Plan"). The Employee Stock
Purchase Plan enables eligible employees to purchase shares of Common Stock at
a discount on a periodic basis through payroll deductions and is intended to
meet the requirements of Section 423 of the Internal Revenue Code. Purchases
will occur at the end of option periods, each of six months' duration, except
that the first such option period will begin concurrent with the commencement
of this offering and end on June 30, 1998. The purchase price of Common Stock
under the Employee Stock Purchase Plan will be 85% of the lesser of the value
of the Common Stock at the beginning of an option period and the value of the
Common Stock at the end of the option period. Participants may elect under the
Employee Stock Purchase Plan, prior to each option period, to have from 2% to
10% of their pay withheld and applied to the purchase of shares at the end of
the option period. The Employee Stock Purchase Plan imposes a maximum of
$10,000 on the amount that may be withheld from any participant in any option
period. A total of 200,000 shares of Common Stock has been reserved for
issuance under the Employee Stock Purchase Plan.

45
<PAGE>

CERTAIN TRANSACTIONS

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Prior to October 27, 1997, the Company did not have a separate Compensation
Committee or other committee performing equivalent functions. As a result,
compensation decisions prior to that time were made by the Company's Board of
Directors consisting of Messrs. Serrao, Kelly, Mannion, Reeves and Dr.
Swenson. Messrs. Mannion and Reeves serve as the current members of the
Company's Compensation Committee. There are no interlocking relationships
between any executive officers of the Company and any entity whose directors
or executive officers serve on the Company's Board of Directors or
Compensation Committee.

The Company and a group of investors (collectively, the "Purchasers") are
parties to various agreements and transactions which were entered into in
connection with the initial capitalization of the Company. The Purchasers
include, among others, Mr. Serrao and certain limited partnerships which are
affiliated with Summit Partners. Mr. Mannion, a Director of the Company, is a
general partner of Summit Partners. Summit Partners and its affiliated limited
partnerships are hereinafter collectively referred to as "Summit Partners."

The Company and the Purchasers are parties to a Series A and Series B
Preferred Stock Purchase Agreement dated January 8, 1996, as amended (the
"Preferred Stock Purchase Agreement"), pursuant to which the Purchasers
purchased, in the aggregate, 400,000 shares of Series A Convertible Preferred
Stock at a price of $19.75 per share and 70,000 shares of Series B Redeemable
Preferred Stock at a price of $100 per share. In addition, in connection with
entering into the Preferred Stock Purchase Agreement, the Purchasers purchased
an aggregate of 300,000 shares of Common Stock at $0.33 per share. The
aggregate purchase price for all Preferred and Common Stock purchased by the
Purchasers was $15,000,000. The proceeds from the sale of such shares were
used by the Company for the acquisition of dental practices and for general
working capital purposes. The following table describes the number of shares
of Series A and Series B Preferred Stock and Common Stock purchased by Mr.
Serrao and Summit Partners:

<TABLE>
<CAPTION>
NUMBER OF SHARES
------------------------------------------------
SERIES A CONVERTIBLE SERIES B REDEEMABLE COMMON
PREFERRED STOCK PREFERRED STOCK STOCK
-------------------- ------------------- -------
<S> <C> <C> <C>
Gregory A. Serrao........... 2,933 513 2,200
Summit Partners............. 349,600 61,180 278,563
</TABLE>

The Series A Convertible Stock will convert into 17,600 and 2,097,599 shares
of Common Stock for Mr. Serrao and Summit Partners, respectively, upon
completion of this offering. Approximately $7.7 million of the proceeds of
this offering will be used to redeem all of the Series B Preferred Stock,
including unpaid dividends. See "Use of Proceeds." In connection with such
redemption, Mr. Serrao and Summit Partners will receive $57,160 and
$6,812,819, respectively. The Preferred Stock Purchase Agreement also grants
to the Purchasers preemptive rights with respect to the Company's issuance of
certain securities, which rights will expire immediately prior to, and will
not apply in connection with, this offering.

The Company and Summit Partners are parties to a Subordinated Debenture
Purchase Agreement dated January 8, 1996, as amended, pursuant to which Summit
Partners has committed to purchase up to $15,000,000 of 12% subordinated
debentures of the Company (the "Debentures") upon the Company's request. To
date, the Company has not requested that Summit Partners purchase any of the
Debentures, and the Company does not anticipate that any such request will be
made. Furthermore, the obligations of Summit Partners to purchase the
Debentures will automatically terminate upon the completion of this offering.

The Company and the Purchasers are parties to a Registration Rights
Agreement dated January 8, 1996, as amended (the "Purchasers Registration
Rights Agreement"), pursuant to which the Purchasers have the right, subject
to certain restrictions, to cause the Company to effect a registration of
their shares of Common Stock under the Securities Act of 1933, as amended (the
"Securities Act"). The Purchasers also have certain "piggy

46
<PAGE>

back" registration rights in the event the Company registers any of its
securities for either itself or for security holders exercising their
registration rights. The Purchasers have waived their piggy back registration
rights in connection with this offering.

The Company and the Purchasers are parties to a Shareholders' Agreement
dated January 8, 1996, as amended (the "Shareholders' Agreement"). The
Shareholders' Agreement contains provisions granting the non-management
Purchasers (the "Investors") a right of first refusal with respect to stock
sales by management Purchasers, including Messrs. Serrao and Levenson, as well
as granting the Purchasers "drag-along" and "tag-along" rights under certain
circumstances with respect to stock sales to third parties by other
Purchasers. Finally, the Shareholders' Agreement contains provisions regarding
the composition of the Company's Board of Directors and the rights of Mr.
Serrao and Summit Partners to designate certain members to the Board of
Directors. The Shareholders' Agreement will terminate immediately prior to the
completion of this offering.

The Company acquired Park pursuant to the terms of an Acquisition and
Exchange Agreement effective November 12, 1996 (the "Acquisition Agreement"),
among the Company, Park, and all of the shareholders of Park, including Dr.
Swenson. Under the Acquisition Agreement, the shareholders of Park received an
aggregate of $3.3 million in cash, $1.5 million principal amount of
subordinated promissory notes of the Company and 1,260,000 shares of Common
Stock in consideration for the exchange of all of their Park shares. The
consideration received by Dr. Swenson for the exchange of his Park shares was
on a pro rata basis with all other shareholders of Park. The terms and
conditions of the acquisition of Park, including the consideration received
for the exchange of the Park shares, were based upon arms-length negotiations
between representatives of the Company and representatives of Park, including
Dr. Swenson. Dr. Swenson was elected as a member of the Company's Board of
Directors pursuant to the terms of the Acquisition Agreement.

The Company entered into a registration rights agreement with the former
shareholders of Park. This registration rights agreement contains provisions
which grant the former shareholders of Park piggy back registration rights,
exercisable only after an initial public offering by the Company, in the event
the Company registers any of its securities for either itself or for security
holders exercising their registration rights. In addition, this registration
rights agreement contains a provision under which the former Park shareholders
may require registration of their shares of Common Stock (subject to the other
general applicable limitations on the Company's registration obligations) on
one occasion if and to the extent that they have not otherwise had the
opportunity to register their shares during the three-year period following
the completion of an initial public offering by the Company.

The Company entered into a shareholders' agreement with the former
shareholders of Park. This agreement provides a right of first refusal in
favor of the Company or its assignee with respect to stock sales by such
shareholders. This agreement also contains drag-along rights in favor of the
Investors with respect to any stock sales by such shareholders to third
parties. Finally, so long as the Investors own a majority of the shares of
voting stock of the Company or have the right to control the vote of a
majority of the shares of such voting stock with respect to the election of
the directors of the Company, the former Park shareholders are required to
vote all of their Common Stock for the election of the directors of the
Company in such manner as may be designated by Investors holding not less than
a majority of the shares of such voting stock then owned by all Investors.
This shareholders' agreement will terminate immediately prior to the
completion of this offering.

The Company entered into a service agreement with the professional
corporation formed by the former dentist shareholders of Park, including Dr.
Swenson. This service agreement is on substantially the same terms and
conditions as all of the Company's other service agreements. See "Business--
Affiliation Structure--Service Agreement."

INITIAL CAPITALIZATION ARRANGEMENTS

Mr. Serrao and Summit Partners, of which Mr. Mannion is a general partner,
were parties to various agreements and transactions which were entered into in
connection with the initial capitalization of the Company.

47
<PAGE>

In addition, Mr. Levenson, the Company's Senior Vice President and Chief
Financial Officer, was a party to such agreements and transactions. Pursuant
to the Preferred Stock Purchase Agreement, Mr. Levenson purchased 5,600 shares
of Series A Convertible Preferred Stock at a price of $19.75 per share and 980
shares of Series B Redeemable Preferred Stock at a price of $100 per share. In
addition, in connection with entering into the Preferred Stock Purchase
Agreement, Mr. Levenson purchased 4,199 shares of Common Stock at $0.33 per
share. The Series A Convertible Stock will convert into 33,600 shares of
Common Stock upon completion of this offering. As part of the redemption of
the Series B Redeemable Preferred Stock with a portion of the proceeds of this
offering, Mr. Levenson will receive $108,869. See "Use of Proceeds." Mr.
Levenson is also a party to the Purchasers Registration Rights Agreement and
the Shareholders' Agreement, and he is a management Purchaser under the
Shareholders' Agreement. Mr. Levenson has waived his piggy back registration
rights in connection with this offering. See "--Compensation Committee
Interlocks and Insider Participation."

AFFILIATION WITH PARK DENTAL

Dr. Swenson was a party to various agreements and transactions which were
entered into in connection with the Company's affiliation with Park. In
addition to Dr. Swenson, Delta Associates, Ltd. ("DAL"), a greater than 5%
stockholder of the Company, was a stockholder of Park and received its pro
rata share of the consideration paid by the Company for the exchange of its
Park stock. DAL is also a party to the registration rights agreement and the
shareholders' agreement with the former shareholders of Park. See "--
Compensation Committee Interlocks and Insider Participation."

48
<PAGE>

PRINCIPAL STOCKHOLDERS

The following table sets forth certain information regarding beneficial
ownership of Common Stock as of January 30, 1998, and as adjusted to reflect
the sale of Common Stock offered hereby, by: (i) each person who is known to
the Company to own beneficially more than 5% of the outstanding shares of
Common Stock; (ii) each director; (iii) the Named Executive Officers; and (iv)
all directors and executive officers as a group. Under the rules of the
Securities and Exchange Commission, a person is deemed to be a "beneficial
owner" of a security if he or she has or shares the power to vote or direct
the voting of such security, has or shares the power to dispose of or direct
the disposition of such security, or has the right to acquire the security
within 60 days. Accordingly, more than one person may be deemed to be the
beneficial owner of the same security. All persons listed have sole voting and
investment power with respect to their shares unless otherwise indicated.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED(1)
----------------------------------
PERCENTAGE OWNED
---------------------
BEFORE AFTER
NUMBER OFFERING OFFERING
------------ ---------- ----------
<S> <C> <C> <C>
Summit Ventures(2)......................... 2,376,162 49.2% 34.8%
Martin J. Mannion(2)....................... 2,376,162 49.2% 34.8%
Gregory A. Serrao(3)(6).................... 602,880 12.5% 8.8%
Delta Associates, Ltd.(4).................. 378,001 7.8% 5.5%
Dr. Gregory T. Swenson(5)(6)............... 333,885 6.9% 4.9%
Ronald M. Levenson(6)...................... 100,709 2.1% 1.5%
George W. Robinson(6)...................... 28,020 * *
Forrest M. Flint(6)........................ 20,160 * *
William H. Bottlinger(6)................... 3,413 * *
James T. Kelly............................. 1,725 * *
Derril W. Reeves........................... 1,725 * *
All executive officers and directors as a
group (11 persons)(7)..................... 3,471,207 71.9% 50.8%
</TABLE>
- --------
* less than 1%

(1) This table includes for each person or group of persons shares of Common
Stock that may be purchased by such person or group pursuant to options
which will become exercisable upon the completion of this offering or
within 60 days of the estimated effective date of this offering. As of
January 31, 1998, a total of 4,829,012 shares of Common Stock were issued
and outstanding and options for 437,341 shares were exercisable.
(2) Represents 2,285,869 and 90,293 shares of Common Stock owned by Summit
Ventures IV, L.P. and Summit Investors II, L.P., respectively. Summit
Partners is affiliated with both limited partnerships. Mr. Mannion, a
Director of the Company, is a general partner of Summit Partners. The
address of Summit Partners is 600 Atlantic Avenue, Suite 2800, Boston,
Massachusetts 02110.
(3) The address for Mr. Serrao is American Dental Partners, Inc. 301
Edgewater Place, Suite 320, Wakefield, Massachusetts 01880.
(4) Represents shares received by Delta Associates, Ltd. in connection with
the Company's affiliation with PDHC, Ltd. The address of Delta
Associates, Ltd. is 7807 Creekridge Circle, Minneapolis, Minnesota 55439.
(5) Includes 96,000 shares owned by a family trust. The address for Dr.
Swenson is PDHC, Ltd., 6415 Brooklyn Blvd., Minneapolis, Minnesota 55429.

(6) Includes options for 283,808 shares for Mr. Serrao, 4,050 shares for Dr.
Swenson, 62,910 shares for Mr. Levenson, 28,020 shares for Mr. Robinson,
20,160 shares for Mr. Flint and 3,413 shares for Mr. Bottlinger,
respectively, which will become exerciseable upon the completion of this
offering or within 60 days of the estimated effective date of this
offering.
(7) Includes options for 387,451 shares for all executive officers and
directors as a group which will become exerciseable upon the completion
of this offering or within 60 days of the estimated effective date of
this offering.

49
<PAGE>

DESCRIPTION OF CAPITAL STOCK

The Company is authorized to issue 26,000,000 shares of capital stock,
consisting of 25,000,000 shares of Common Stock, $0.01 par value (the "Common
Stock"), and 1,000,000 shares of Preferred Stock, $0.01 par value (the
"Preferred Stock"). Of the Preferred Stock, 400,000 shares have been
designated Series A Convertible Preferred Stock, all of which are currently
outstanding and will be converted into an aggregate of 2,400,000 shares of
Common Stock upon completion of this offering, and 70,000 shares have been
designated Series B Redeemable Preferred Stock, all of which are currently
outstanding and will be redeemed upon completion of this offering. Upon the
closing of this offering, the Series A Convertible Preferred Stock and the
Series B Redeemable Preferred Stock will be restored to the status of
undesignated preferred stock available for issuance. As of the date hereof,
there were 4,829,012 shares of Common Stock outstanding, which assumes
conversion of the Series A Convertible Preferred Stock, and as of the
completion of this offering there will be 6,829,012 shares of Common Stock
outstanding.

Common Stock

The holders of shares of Common Stock are entitled to one vote per share for
the election of directors and on all other matters submitted to a vote of
stockholders. Holders of shares of Common Stock are not entitled to preemptive
rights or to cumulative voting for the election of directors. Subject to any
senior rights of the Preferred Stock which may from time to time be
outstanding, holders of the Common Stock are entitled to receive such
dividends as may be declared by the Board of Directors out of funds legally
available therefor. See "Dividend Policy." Upon dissolution and liquidation of
the Company, holders of the Common Stock are entitled to a ratable share of
the net assets of the Company remaining after payments to creditors of the
Company and to the holders of the Preferred Stock of the full preferential
amounts to which they may be entitled. All outstanding shares of Common Stock
are, and the shares of Common Stock offered hereby will be, validly issued,
fully paid and nonassessable.

Preferred Stock

The Preferred Stock may be issued in one or more series as determined by the
Board of Directors without further stockholder approval, and the Board of
Directors is authorized to fix and determine the terms, limitations, and
relative rights and preferences of the Preferred Stock, and to fix and
determine the variations among series of the Preferred Stock. If any Preferred
Stock is issued following this offering, such Preferred Stock would have
priority over the Common Stock with respect to dividends and to other
distributions, including the distribution of assets upon liquidation and
dissolution. The Preferred Stock may be subject to repurchase or redemption by
the Company. The Board of Directors, without stockholder approval, could issue
Preferred Stock with voting and conversion rights that could adversely affect
the voting power of the holders of Common Stock and the issuance of which
could be used by the Board of Directors in defense of a hostile takeover of
the Company.

Certain Provisions of Certificate of Incorporation and By-laws

The Certificate of Incorporation and By-laws provide that directors may not
be removed from office by the stockholders except by the affirmative vote of
stockholders exercising at least two-thirds of the voting power in the
election of directors; provided that if two-thirds of the entire Board of
Directors recommend to the stockholders that a director be removed, then such
director may be removed by the stockholders exercising at least a majority of
the voting power in the election of directors. The Certificate of
Incorporation requires all actions by stockholders to be taken at annual or
special meetings. The By-laws divide the Board of Directors into three
classes, each with a term of three years, with the term of one class expiring
each year. No provision of the Certificate of Incorporation nor certain
provisions of the By-laws, including those relating to indemnification and
election and removal of directors, may be altered, amended or repealed nor may
any inconsistent provision be adopted except by the affirmative vote of
stockholders exercising at least two-thirds of the voting power of the
Company; provided that if any such action was previously approved by at least
two-thirds of the directors, then such action may be taken by the stockholders
exercising a majority of the voting power. The By-laws also

50
<PAGE>

provide than any vacancy on the Board of Directors may be filled by a majority
of the directors than in office even though less than a quorum exits. The
foregoing provisions could have an anti-takeover effect by delaying, averting
or preventing a change in control or management of the Company.

Statutory Business Combination Provision

The Company is subject to Section 203 of the DGCL which, with certain
exceptions, prohibits a Delaware corporation from engaging in any of a broad
range of business combinations with any "interested stockholder" for a period
of three years following the date that such stockholder became an interested
stockholder, unless: (i) prior to such date, the Board of Directors of the
corporation approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder; (ii) upon
consummation of the transaction which resulted in the stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
voting stock of the corporation outstanding at the time the transaction
commenced, excluding for purposes of determining the number of shares
outstanding those shares owned (a) by persons who are directors and officers
and (b) by employee stock plans in which employee participants do not have the
right to determine confidentially whether shares held subject to the plan will
be tendered in a tender or exchange offer; or (iii) on or after such date, the
business combination is approved by the Board of Directors and authorized at
an annual or special meeting of stockholders by the affirmative vote of at
least two-thirds of the outstanding voting stock which is not owned by the
interested stockholder. An "interested stockholder" is defined as any person
that is (a) the owner of 15% or more of the outstanding voting stock of the
corporation or (b) an affiliate or associate of the corporation and was the
owner of 15% or more of the outstanding voting stock of the corporation at any
time within the three-year period immediately prior to the date on which it is
sought to be determined whether such person is an interested stockholder.

Transfer Agent and Registrar

The Company has selected BankBoston, N.A. as the transfer agent and
registrar for its Common Stock.

51
<PAGE>

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for the Common Stock
and no predictions can be made of the effect, if any, that the sale or
availability for sale of shares of additional Common Stock will have on the
market price of the Common Stock. Nevertheless, sales of substantial amounts
of such shares in the public market, or the perception that such sales could
occur, could materially and adversely affect the market price of the Common
Stock and could impair the Company's future ability to raise capital through
an offering of its equity securities. See "Risk Factors--Shares Eligible for
Future Sale."

SALES OF RESTRICTED SHARES

Upon completion of the offering, the Company will have a total of 6,829,012
shares of Common Stock outstanding. Of these shares, the 2,000,000 shares of
Common Stock offered hereby will be freely tradable without restriction or
registration under the Securities Act by persons other than "affiliates" of
the Company, as defined in the Securities Act, who would be required to sell
such shares under Rule 144 under the Securities Act. The remaining 4,829,012
shares of Common Stock outstanding will be "restricted securities" as that
term is defined by Rule 144 (the "Restricted Shares"). The Restricted Shares
were issued and sold by the Company in private transactions in reliance upon
exemptions from registration under the Securities Act.

Of the Restricted Shares, 4,635,441 Restricted Shares will be eligible for
sale in the public market pursuant to Rule 144 beginning 90 days after the
date of this Prospectus. All such shares are subject to the lock-up agreements
described below. In general, under Rule 144 as currently in effect, a person
(or persons whose shares are aggregated) who has beneficially owned restricted
securities for at least one year (including the holding period of any prior
owner except an affiliate), including persons who may be deemed "affiliates"
of the Company, would be entitled to sell within any three-month period a
number of shares that does not exceed the greater of (i) one percent of the
number of shares of Common Stock then outstanding (approximately 68,290 shares
upon completion of the offering) or (ii) the average weekly trading volume of
the Common Stock during the four calendar weeks preceding the filing of a Form
144 with respect to such sale. Sales under Rule 144 are also subject to
certain manner-of-sale provisions and notice requirements, and to the
availability of current public information about the Company. In addition, a
person who is not deemed to have been an affiliate of the Company at the time
during the 90 days preceding a sale, and who has beneficially owned the shares
proposed to be sold for at least two years (including the holding period of
any prior owner except an affiliate), would be entitled to sell such shares
under Rule 144 (k) without regard to the requirements described above. Rule
144 also provides that affiliates who are selling shares that are not
Restricted Shares must nonetheless comply with the same restrictions
applicable to Restricted Shares with the exception of the holding period
requirement.

Upon completion of this offering, the Company will have options for 437,341
shares of Common Stock outstanding and exercisable. Under Rule 701 promulgated
under the Securities Act, shares of Common Stock acquired pursuant to the
exercise of these options may be resold by persons other than affiliates
beginning 90 days after the date of this Prospectus, subject only to the
manner of sale provisions of Rule 144, and by affiliates, beginning 90 days
after the date of this Prospectus, subject to all provisions of Rule 144
except its one-year minimum holding period requirements.

LOCK-UP AGREEMENTS

All of the stockholders of the Company, including the executive officers and
directors, who will own in the aggregate 4,829,012 shares of Common Stock
after the offering, have agreed that they will not, directly or indirectly,
sell, offer, contract to sell, transfer the economic risk of ownership in,
make any short sale, pledge or otherwise dispose of any shares of Common Stock
of any securities convertible into or exchangeable or exercisable for or any
other rights to purchase or acquire Common Stock beneficially owned by them
during the 180-day period following the date of this Prospectus, except for
certain permitted transfers or with the prior written consent of BT Alex.
Brown Incorporated.

52
<PAGE>

STOCK OPTION AND PURCHASE PLANS

As of January 31, 1998, 1,503,606 shares of Common Stock were reserved for
issuance under the Company's stock plans, of which 1,120,166 shares were
issuable upon the exercise of outstanding stock options, and 200,000 shares of
Common Stock were reserved for issuance under the Employee Stock Purchase
Plan. See "Management--Stock Plans." The Company intends to file registration
statements on Form S-8 under the Securities Act to register all shares of
Common Stock issuable pursuant to its stock option and stock purchase plans.
The Company expects to file these registration statements within approximately
90 days following the date of this Prospectus and such registration statements
will become effective upon filing. Shares covered by these registration
statements will thereupon be eligible for sale in the public markets, subject
to Rule 144 limitations applicable to affiliates and the lock-up agreements
described above.

REGISTRATION RIGHTS

The holders of 3,959,987 shares of Common Stock have the right under certain
circumstances to require the Company to register their shares under the
Securities Act for resale to the public, and holders of approximately
4,794,212 shares have the right to include their shares in a registration
statement filed by the Company. See "Certain Transactions."

SHELF REGISTRATION FOR FUTURE AFFILIATIONS

The Company intends to register 500,000 shares of Common Stock under a shelf
registration for use in connection with future affiliations. These shares
generally will be eligible for resale in compliance with the volume and
manner-of-sale restrictions of Rule 145 after their issuance, unless the
Company contractually restricts their sale. The Company anticipates that the
agreements entered into in connection with its future acquisitions will
contractually restrict the resale of all or a portion of the shares issued in
those transactions for varying periods of time. Initially, the Company will
issue such shares subject to a lock-up period of up to 180 days following the
date of this Prospectus.

53
<PAGE>

UNDERWRITING

Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below, through their representatives, BT Alex. Brown
Incorporated, BancAmerica Robertson Stephens and Piper Jaffray Inc. (the
"Representatives"), have severally agreed to purchase from the Company the
following respective number of shares of Common Stock:

<TABLE>
<CAPTION>
NUMBER
OF SHARES
---------
<S> <C>
BT Alex. Brown Incorporated......................................
BancAmerica Robertson Stephens...................................
Piper Jaffray Inc................................................
---------
Total.......................................................... 2,000,000
=========
</TABLE>

The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase all of the shares of Common Stock offered hereby if any of such
shares are purchased.

The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock to the public at the initial
public offering price set forth on the cover page of this Prospectus and to
certain dealers at such price less a concession not in excess of $ per
share. The Underwriters may allow, and such dealers may re-allow, a concession
not in excess of $ per share to certain other dealers. After commencement
of this offering, the offering price and other selling terms may be changed by
the Representatives.

The Company has granted the Underwriters an option, exercisable not later
than 30 days after the date of this Prospectus, to purchase up to 300,000
additional shares of Common Stock at the initial public offering price less
the underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the
same percentage thereof that the number of shares of Common Stock to be
purchased by it in the above table bears to 2,000,000, and the Company will be
obligated, pursuant to the option to sell such shares to the Underwriters. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of the Common Stock offered hereby. If purchased, the
Underwriters will offer such additional shares on the same terms as those on
which the 2,000,000 shares are being offered.

The Underwriting Agreement contains covenants of indemnity and contribution
between the Underwriters and the Company regarding certain liabilities,
including liabilities under the Securities Act.

To facilitate the offering of the Common Stock, the Underwriters may engage
in transactions that stabilize, maintain or otherwise affect the market price
of the Common Stock. Specifically, the Underwriters may over-allot shares of
the Common Stock in connection with this offering, thereby creating a short
position in the Underwriters' syndicate account. Additionally, to cover such
over-allotments or to stabilize the market price of the Common Stock, the
Underwriters may bid for, and purchase, shares of the Common Stock in the open
market. Any of these activities may maintain the market price of the Common
Stock at a level above that which might otherwise prevail in the open market.
The Underwriters are not required to engage in these activities, and, if
commenced, any such activities may be discontinued at any time. The
Representatives, on behalf of the Underwriters, also may reclaim selling
concessions allowed to an Underwriter or dealer, if the syndicate repurchases
shares distributed by that Underwriter or dealer.

The Company has agreed that it will not sell or offer any shares of Common
Stock or options, rights or warrants to acquire any Common Stock for a period
of 180 days after the date of this Prospectus without the prior written
consent of BT Alex. Brown Incorporated, except for shares issued: (i) in
connection with

54
<PAGE>

acquisitions, provided that the recipients agree not to sell or dispose of
such shares during the 180-day period; (ii) pursuant to the exercise of
options granted under the Company's stock plans; and (iii) upon conversion of
shares of Series A Convertible Preferred Stock. Further, the Company's
directors, officers, and all other stockholders, who beneficially own
4,829,012 shares in the aggregate, have agreed not to directly or indirectly
sell or offer for sale or otherwise dispose of any Common Stock for a period
of 180 days after the date of this Prospectus, except for certain permitted
transfers or with the prior written consent of BT Alex. Brown Incorporated.

The Representatives have advised the Company that the Underwriters do not
intend to confirm sales to any account over which they exercise discretionary
authority.

PRICE OF THIS OFFERING

Prior to this offering, there has been no public market for the Common
Stock. Consequently, the initial public offering price for the Common Stock
will be determined by negotiations between the Company and the
Representatives. Among the factors to be considered in such negotiations are
prevailing market conditions, the results of operations of the Company in
recent periods, the market capitalization and stages of development of other
companies which the Company and the Representatives believe to be comparable
to the Company, estimates of the business potential of the Company, the
present state of the Company's development and other factors deemed relevant
by the Company and the Representatives.

55
<PAGE>

VALIDITY OF COMMON STOCK

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Baker & Hostetler LLP, Columbus, Ohio. Certain legal
matters related to the offering will be passed upon for the Underwriters by
Ropes & Gray, Boston, Massachusetts. Gary A. Wadman, a partner of Baker &
Hostetler LLP, is the Secretary of the Company.

EXPERTS

The consolidated financial statements of American Dental Partners, Inc. as
of December 31, 1996 and 1997 and for the years then ended have been included
herein and in the registration statement in reliance upon the reports of KPMG
Peat Marwick LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.

The combined financial statements of the Orthocare Companies as of December
31, 1996 and September 30, 1997 and for the year ended December 31, 1996 and
the nine months ended September 30, 1997 have been included herein and in the
registration statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, appearing elsewhere herein, and upon
the authority of said firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission ("SEC") a
Registration Statement (which term shall encompass any and all amendments
thereto) on Form S-1 (the "Registration Statement") under the Securities Act
with respect to the Common Stock offered hereby. This Prospectus, which is
part of the Registration Statement, does not contain all the information set
forth in the Registration Statement and the exhibits and schedules thereto,
certain items of which are omitted in accordance with the rules and
regulations of the SEC. Statements made in this Prospectus as to the contents
of any contact, agreement or other document referred to are not necessarily
complete. With respect to each such contract, agreement or other document
filed as an exhibit to the Registration Statement, reference is hereby made to
the exhibit for a more complete description of the matter involved, and each
such statement shall be deemed qualified in its entirety by such reference.
For further information with respect to the Company, reference is hereby made
to the Registration Statement and such exhibits and schedules filed as a part
thereof, which may be inspected, without charge, at the Public Reference
Section of the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the regional offices of the SEC located at
Seven World Trade Center, 13th Floor, New York, New York 10048 and at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. The SEC
maintains a web site that contains reports, proxy and information statements
regarding registrants that file electronically with the SEC. The address of
this web site is (http://www.sec.gov). Copies of all or any portion of the
Registration Statement may be obtained from the Public Reference Section of
the SEC, upon payment of the prescribed fees.

56
<PAGE>

INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AMERICAN DENTAL PARTNERS, INC. AND SUBSIDIARIES--UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
Introduction to Unaudited Pro Forma Consolidated Financial
Information........................................................... F-2
Unaudited Pro Forma Consolidated Balance Sheet at December 31, 1997.... F-3
Unaudited Pro Forma Consolidated Statement of Operations for the Year
Ended December 31, 1996............................................... F-4
Unaudited Pro Forma Consolidated Statement of Operations for the Year
Ended December 31, 1997............................................... F-5
Notes to Unaudited Pro Forma Consolidated Financial Information........ F-6
AMERICAN DENTAL PARTNERS, INC. AND SUBSIDIARIES--CONSOLIDATED FINANCIAL
STATEMENTS
Independent Auditors' Report........................................... F-8
Consolidated Balance Sheets as of December 31, 1996 and 1997........... F-9
Consolidated Statements of Operations for the Years Ended December 31,
1996 and 1997......................................................... F-10
Consolidated Statements of Stockholders' Equity for the Years Ended
December 31, 1996 and 1997............................................ F-11
Consolidated Statements of Cash Flows for the Years Ended December 31,
1996 and 1997......................................................... F-12
Notes to Consolidated Financial Statements............................. F-13
</TABLE>

AMERICAN DENTAL PARTNERS, INC. AND SUBSIDIARIES--ACQUISITIONS AND AFFILIATIONS
THE ORTHOCARE COMPANIES

The combined financial information presented for The Orthocare Companies
presents the financial position and results of operations of the dental group
practice that provides orthodontic services, an MSO and a related entity that
arranges for orthodontic services for insurance companies, all of which were
under common ownership prior to their affiliation with the Company. After
affiliation, the dentists employees formed a new PC which affiliated with the
MSO and the related entity became a wholly-owned subsidiary of the Company.
These financial statements are presented for information purposes only and are
not necessarily indicative of the results of operations or financial position
that would have been achieved by The Orthocare Companies pursuant to the
service agreement with the Company, had such service agreement been in place
during the periods presented. The information should be read in conjunction
with "The Company," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," Unaudited Pro forma Consolidated
Financial Information and the Consolidated Financial Statements of the
Company.

<TABLE>
<S> <C>
Financial Information
Independent Auditors' Report............................................ F-27
Combined Balance Sheets as of December 31, 1996 and September 30, 1997.. F-28
Combined Statements of Operations for the Year Ended December 31, 1996
and the Nine Months Ended September 30, 1997........................... F-29
Combined Statements of Stockholders' Equity for the Year Ended December
31, 1996 and the Nine Months Ended September 30, 1997.................. F-30
Combined Statements of Cash Flows for the Year Ended December 31, 1996
and the Nine Months Ended September 30, 1997........................... F-31
Notes to Combined Financial Statements.................................. F-32
</TABLE>

F-1
<PAGE>

AMERICAN DENTAL PARTNERS, INC.

INTRODUCTION TO UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION

Basis of Presentation

During 1996, the Company acquired substantially all the assets of three
dental practices, except those required by law to be owned or maintained by
dentists, and simultaneously entered into 40-year service agreements with the
affiliated dental groups. These transactions are referred to as the "1996
Transactions." For the year ended December 31, 1997, the Company acquired
substantially all the assets of six dental practices and a related entity
associated with one of these practices and simultaneously entered into 40-year
service agreements with four of the affiliated dental groups (two practices
joined existing affiliates). These transactions are referred to as the "1997
Transactions." In January 1998, the Company acquired substantially all the
assets of a dental practice and simultaneously entered into a 40-year service
agreement with the affiliated dental group. This transaction is referred to as
the "1998 Transaction."

The unaudited pro forma consolidated balance sheet at December 31, 1997
gives effect to (i) the 1998 Transaction completed subsequent to December 31,
1997, as if this transaction occurred on December 31, 1997 and (ii) this
offering and the application of the estimated net proceeds therefrom as set
forth in "Use of Proceeds," as if completed on December 31, 1997.

The unaudited pro forma consolidated statements of operations for the years
ended December 31, 1996 and 1997 give effect to (i) the 1996 Transactions,
1997 Transactions and 1998 Transaction and (ii) the effect of this offering
and the application of the estimated net proceeds therefrom, as if all of
these events had occurred on January 1, 1996.

The unaudited pro forma consolidated financial information does not purport
to represent what the Company's financial position or results of operations
would actually have been if such transactions had in fact occurred on those
dates or to project the Company's financial position or results of operations
for any future period. The unaudited pro forma consolidated financial
information is based on certain assumptions and adjustments described in the
notes hereto and should be read in conjunction therewith. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Consolidated Financial Statements and related notes thereto for American
Dental Partners, Inc. and the Combined Financial Statements for the Orthocare
Companies included elsewhere in this Prospectus.

F-2
<PAGE>

AMERICAN DENTAL PARTNERS, INC.

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

DECEMBER 31, 1997
(IN THOUSANDS)

<TABLE>
<CAPTION>
ACQUISITION PRO OFFERING PRO FORMA
ACTUAL ADJUSTMENTS(1) FORMA ADJUSTMENTS(2) AS ADJUSTED
------- -------------- ------- -------------- -----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents......... $ 4,675 $(2,908) $ 1,767 $ 4,961 $ 6,728
Accounts receivable.. 101 -- 101 -- 101
Receivables due from
affiliated
practices........... 3,207 -- 3,207 -- 3,207
Inventories.......... 387 -- 387 -- 387
Prepaid expenses and
other receivables... 1,631 -- 1,631 (557) 1,074
------- ------- ------- ------- -------
Total current
assets............ 10,001 (2,908) 7,093 4,404 11,497
------- ------- ------- ------- -------
Property and equipment,
net................... 8,752 489 9,241 -- 9,241
------- ------- ------- ------- -------
Non-current assets:
Intangible assets,
net................. 29,130 3,539 32,669 -- 32,669
Other assets......... 231 -- 231 -- 231
------- ------- ------- ------- -------
Total non-current
assets............ 29,361 3,539 32,900 -- 32,900
------- ------- ------- ------- -------
Total assets....... $48,114 $ 1,120 $49,234 $ 4,404 $53,638
======= ======= ======= ======= =======
LIABILITIES AND STOCKHOLDERS'
EQUITY
Current liabilities:
Accounts payable..... $ 2,620 $ 76 $ 2,696 $ -- $ 2,696
Accrued compensation,
benefits and taxes.. 3,001 125 3,126 -- 3,126
Accrued expenses..... 2,666 173 2,839 -- 2,839
Income taxes
payable............. 183 -- 183 -- 183
Current maturities of
debt................ 774 71 845 -- 845
------- ------- ------- ------- -------
Total current
liabilities....... 9,244 445 9,689 -- 9,689
------- ------- ------- ------- -------
Non-current
liabilities:
Long-term debt....... 21,253 429 21,682 (16,700) 4,982
Deferred income tax
liability........... 231 -- 231 -- 231
Other liabilities.... 27 -- 27 -- 27
------- ------- ------- ------- -------
Total non-current
liabilities....... 21,511 429 21,940 (16,700) 5,240
------- ------- ------- ------- -------
Total liabilities.. 30,755 874 31,629 (16,700) 14,929
------- ------- ------- ------- -------
Series A convertible
preferred stock....... 8,641 -- 8,641 (8,641)(3) --
Series B redeemable
preferred stock....... 7,656 -- 7,656 (7,656) --
Stockholders' equity:
Preferred Stock...... -- -- -- -- --
Common stock......... 24 -- 24 44 (3) 68
Additional paid-in
capital............. 2,307 246 2,553 37,357 (3) 39,910
Unearned
compensation........ (49) -- (49) -- (49)
Accumulated deficit.. (1,220) -- (1,220) -- (1,220)
------- ------- ------- ------- -------
Total stockholders'
equity............ 1,062 246 1,308 37,401 38,709
------- ------- ------- ------- -------
Total liabilities
and stockholders'
equity............ $48,114 $ 1,120 $49,234 $ 4,404 $53,638
======= ======= ======= ======= =======
</TABLE>

See accompanying notes to unaudited pro forma consolidated financial
information.

F-3
<PAGE>

AMERICAN DENTAL PARTNERS, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
ACQUISITION PRO OFFERING PRO FORMA
ACTUAL ADJUSTMENTS(4) FORMA ADJUSTMENTS(5) AS ADJUSTED
------- -------------- ------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Net revenue............. $ 3,933 $56,671 $60,604 $ -- $60,604
------- ------- ------- ------- -------
Operating expenses:
Salaries and
benefits............. 2,098 30,704 32,802 -- 32,802
Lab fees and dental
supplies............. 534 6,879 7,413 -- 7,413
Office occupancy...... 389 5,081 5,470 -- 5,470
Other operating
expenses............. 773 6,817 7,590 -- 7,590
General corporate
expenses............. 2,395 -- 2,395 -- 2,395
Depreciation.......... 177 1,607 1,784 -- 1,784
Amortization of
intangibles.......... 48 1,009 1,057 -- 1,057
------- ------- ------- ------- -------
Total operating
expenses........... 6,414 52,097 58,511 -- 58,511
------- ------- ------- ------- -------
Earnings (loss) from
operations............. (2,481) 4,574 2,093 -- 2,093
Interest expense
(income), net........ (38) 2,221 2,183 (1,516) 667
------- ------- ------- ------- -------
Earnings (loss) before
income taxes........... (2,443) 2,353 (90) 1,516 1,426
Income taxes.......... -- -- -- 578 578
------- ------- ------- ------- -------
Net earnings (loss)... $(2,443) $ 2,353 $ (90) $ 938 $ 848
======= ======= ======= ======= =======
Net earnings (loss) per
common share:(6)(7)
Basic................. $ (3.45) $ (0.12) $ 0.13
Diluted............... $ (3.45) $ (0.12) $ 0.13
Weighted average common
shares
outstanding:(6)(7)
Basic................. 768 2,415 6,519
Diluted............... 768 2,415 6,587
</TABLE>

See accompanying notes to unaudited pro forma consolidated financial
information.

F-4
<PAGE>

AMERICAN DENTAL PARTNERS, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
ACQUISITION PRO OFFERING PRO FORMA
ACTUAL ADJUSTMENTS(8) FORMA ADJUSTMENTS(9) AS ADJUSTED
------- -------------- ------- -------------- -----------
<S> <C> <C> <C> <C> <C>
Net revenue............. $53,270 $15,269 $68,539 $ -- $68,539
------- ------- ------- ------- -------
Operating expenses:
Salaries and
benefits............. 28,438 8,260 36,698 -- 36,698
Lab fees and dental
supplies............. 6,435 1,813 8,248 -- 8,248
Office occupancy...... 4,814 1,195 6,009 -- 6,009
Other operating
expenses............. 6,264 1,229 7,493 -- 7,493
General corporate
expenses............. 3,337 -- 3,337 -- 3,337
Depreciation.......... 1,580 211 1,791 -- 1,791
Amortization of
intangibles.......... 492 565 1,057 -- 1,057
------- ------- ------- ------- -------
Total operating
expenses........... 51,360 13,273 64,633 -- 64,633
------- ------- ------- ------- -------
Earnings from
operations............. 1,910 1,996 3,906 -- 3,906
Interest expense
(income), net........ 563 1,431 1,994 (1,367) 627
------- ------- ------- ------- -------
Earnings before income
taxes.................. 1,347 565 1,912 1,367 3,279
Income taxes.......... 124 650 774 554 1,328
------- ------- ------- ------- -------
Net earnings ......... $ 1,223 $ (85) $ 1,138 $ 813 $ 1,951
======= ======= ======= ======= =======
Net earnings (loss) per
common share:(10)(11)
Basic................. $ 0.01 $ (0.02) $ 0.30
Diluted............... $ 0.01 $ (0.02) $ 0.29
Weighted average common
shares
outstanding:(10)(11)
Basic................. 2,273 2,429 6,533
Diluted............... 2,460 2,429 6,720
</TABLE>

See accompanying notes to unaudited pro forma consolidated financial
information.

F-5
<PAGE>

AMERICAN DENTAL PARTNERS, INC.

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION

UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1997

(1) To include the 1998 Transaction which occurred subsequent to December
31, 1997. The aggregate consideration for this transaction consisted of
approximately $2.6 million in cash, $0.5 million in subordinated promissory
notes and 34,800 shares of the Company's Common Stock.

(2) Gives effect to the sale of 2,000,000 shares of Common Stock at an
assumed initial public offering price of $16.00 per share and receipt and
application of the net proceeds therefrom, estimated to be approximately
$28,760,000 after deducting underwriting discounts and commissions and
offering expenses, to (i) redeem the Series B Redeemable Preferred Stock in
the amount of $7,656,000 and (ii) repay indebtedness of $16,700,000 under the
revolving credit facility.

(3) Gives effect to the conversion of 400,000 shares Series A Convertible
Preferred Stock into 2,400,000 shares of Common Stock.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED
DECEMBER 31, 1996

(4) To include the effects of the 1996 Transactions, 1997 Transactions and
1998 Transaction as if such transactions occurred on January 1, 1996,
including: (i) the impact of applying the Company's service fee to the
historical adjusted gross revenue of each dental practice in accordance with
the service agreements entered into between the Company and the affiliated
dental practices, as if such service agreements were in place at the beginning
of the periods presented; (ii) the following significant adjustments made to
the operating results of Park for periods prior to its acquisition on November
12, 1996: (a) reduction of salary and bonus expense of $2,275,000; (b) the
elimination of costs of $320,000 incurred in connection with the transaction;
and (c) the write-off of property and equipment of $1,199,000 and related
adjustment to depreciation expense of $276,000; (iii) increased interest
expense associated with additional borrowings of $2,221,000 and (iv) increased
amortization of intangibles of $1,009,000. The Company believes that any
changes in the dentist-owner's incentive structure in connection with the
transactions are unlikely to have affected the conduct of the dental practices
in an adverse manner.

(5) Gives effect to the offering of 1,704,000 shares which would have been
necessary to redeem the Series B Redeemable Preferred Stock of $7,656,000, to
pay the $16,700,000 in outstanding indebtedness under the Company's revolving
credit facility and to pay approximately $1,000,000 of offering costs, which
include primarily accounting fees, legal fees, printing costs and other costs
directly attributable to the offering. Also includes an increase in income tax
expense as a result of the increase in earnings before income taxes to arrive
at an effective rate of 40.6% on a pro forma as adjusted basis.

(6) Pro forma earnings (loss) per share reflects an increase in weighted
average shares of 1,647,000 resulting from the issuance of shares issued in
connection with the 1996 Transactions, 1997 Transactions and 1998 Transaction
to arrive at pro forma earnings per share.

(7) Pro forma as adjusted earnings per share includes the issuance of an
additional 1,704,000 shares which would have been necessary to redeem the
Series B Redeemable Preferred Stock of $7,656,000, to pay the $16,700,000 in
outstanding indebtedness under the Company's revolving credit facility and to
pay approximately $1,000,000 of offering costs, which include primarily
accounting fees, legal fees, printing costs and other costs directly
attributable to the offering.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED
DECEMBER 31, 1997

(8) To include the effects of the 1997 Transactions and 1998 Transaction as
if such transactions occurred on January 1, 1996, including: (i) the impact of
applying the Company's service fee to the historical adjusted

F-6
<PAGE>

AMERICAN DENTAL PARTNERS, INC.

NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL INFORMATION--(CONTINUED)

gross revenue of each dental practice in accordance with the service
agreements entered into between the Company and the affiliated dental
practices, as if such service agreements were in place at the beginning of the
periods presented; (ii) increased interest expense of $1,431,000; (iii)
increased amortization of intangibles of $565,000 and (iv) increased tax
expense associated with these transactions of $650,000. The Company believes
that any changes in the dentist-owner's incentive structure in connection with
the transactions are unlikely to have affected the conduct of the dental
practices in an adverse manner.

(9) Gives effect to the offering of 1,704,000 shares which would have been
necessary to redeem the Series B Redeemable Preferred Stock of $7,656,000, to
pay the $16,700,000 in outstanding indebtedness under the Company's revolving
credit facility and to pay approximately $1,000,000 of offering costs, which
include primarily accounting fees, legal fees, printing costs and other costs
directly attributable to the offering. Also includes an increase in income tax
expense as a result of the increase in earnings before income taxes to arrive
at an effective rate of 40.6% on a pro forma as adjusted basis.

(10) Pro forma earnings (loss) per share reflects actual weighted average
shares and an increase in weighted average shares of 156,000 to reflect the
shares issued in connection with the 1996 Transactions, 1997 Transactions and
1998 Transaction to arrive at pro forma earnings per share.

(11) Pro forma as adjusted earnings per share includes the issuance of an
additional 1,704,000 shares which would have been necessary to redeem the
Series B Redeemable Preferred Stock of $7,656,000, to pay the $16,700,000 in
outstanding indebtedness under the Company's revolving credit facility and to
pay approximately $1,000,000 of offering costs, which include primarily
accounting fees, legal fees, printing costs and other costs directly
attributable to the offering.

F-7
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
American Dental Partners, Inc.:

We have audited the accompanying consolidated balance sheets of American
Dental Partners, Inc. and subsidiaries (the "Company") as of December 31, 1996
and 1997, and the related consolidated statements of operations, stockholders'
equity and cash flows for the years then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of American
Dental Partners, Inc. and subsidiaries as of December 31, 1996 and 1997, and
the results of their operations and their cash flows for the years then ended
in conformity with generally accepted accounting principles.

KPMG Peat Marwick LLP

Boston, Massachusetts

February 6, 1998

F-8
<PAGE>

AMERICAN DENTAL PARTNERS, INC.

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1997
------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................. $ 5,836 $ 4,675
Accounts receivable........................................ 996 101
Receivables due from affiliated practices.................. 1,595 3,207
Inventories................................................ 174 387
Prepaid expenses and other receivables..................... 1,405 1,631
------- -------
Total current assets..................................... 10,006 10,001
------- -------
Property and equipment, net.................................. 5,943 8,752
------- -------
Non-current assets:
Intangible assets, net..................................... 9,173 29,130
Other assets............................................... 172 231
------- -------
Total non-current assets................................. 9,345 29,361
------- -------
Total assets............................................. $25,294 $48,114
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable........................................... $ 1,730 $ 2,620
Accrued compensation, benefits and taxes................... 2,154 3,001
Accrued expenses........................................... 2,396 2,666
Income taxes payable....................................... -- 183
Current maturities of debt................................. 537 774
------- -------
Total current liabilities................................ 6,817 9,244
------- -------
Non-current liabilities:
Long-term debt............................................. 3,063 21,253
Deferred income tax liability.............................. -- 231
Other liabilities.......................................... 145 27
------- -------
Total non-current liabilities............................ 3,208 21,511
------- -------
Total liabilities........................................ 10,025 30,755
------- -------
Series A convertible preferred stock, par value $0.01 per
share, 400,000 shares authorized, issued and outstanding.... 8,009 8,641
Series B redeemable preferred stock, par value $0.01 per
share, 70,000 shares authorized, issued and outstanding..... 7,096 7,656
Stockholders' equity:
Preferred stock, par value $0.01 per share, 530,000 shares
authorized, no shares issued or outstanding............... -- --
Common stock, par value $0.01 per share, 25,000,000 shares
authorized, 2,213,384 and 2,394,212 shares issued and
outstanding............................................... 22 24
Additional paid-in capital................................. 2,659 2,307
Unearned compensation...................................... (74) (49)
Accumulated deficit........................................ (2,443) (1,220)
------- -------
Total stockholders' equity............................... 164 1,062
------- -------
Commitments and contingencies
Total liabilities and stockholders' equity............... $25,294 $48,114
======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

F-9
<PAGE>

AMERICAN DENTAL PARTNERS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
----------------
1996 1997
------- -------
<S> <C> <C>
Net revenue................................................... $ 3,933 $53,270
------- -------
Operating expenses:
Salaries and benefits....................................... 2,098 28,438
Lab fees and dental supplies................................ 534 6,435
Office occupancy............................................ 389 4,814
Other operating expenses.................................... 773 6,264
General corporate expenses.................................. 2,395 3,337
Depreciation................................................ 177 1,580
Amortization of intangibles................................. 48 492
------- -------
Total operating expenses.................................. 6,414 51,360
------- -------
Earnings (loss) from operations............................... (2,481) 1,910
Interest expense (income), net.............................. (38) 563
------- -------
Earnings (loss) before income taxes........................... (2,443) 1,347
Income taxes................................................ -- 124
------- -------
Net earnings (loss)......................................... $(2,443) $ 1,223
======= =======
Net earnings (loss) per common share:
Basic....................................................... $ (3.45) $ 0.01
Diluted..................................................... $ (3.45) $ 0.01
Weighted average common shares outstanding:
Basic....................................................... 768 2,273
Diluted..................................................... 768 2,460
</TABLE>

See accompanying notes to consolidated financial statements.

F-10
<PAGE>

AMERICAN DENTAL PARTNERS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997
(IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------- PAID-IN UNEARNED ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL COMPENSATION DEFICIT EQUITY
------ ------ ---------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1,
1996................... -- $ -- $ -- $ -- $ -- $ --
Issuance of common
stock for
acquisitions......... 1,613 16 2,673 -- -- 2,689
Sale of common stock.. 600 6 191 (97) -- 100
Amortization of
unearned
compensation......... -- -- -- 23 -- 23
Dividends on Series A
convertible preferred
stock................ -- -- (109) -- -- (109)
Dividends on Series B
redeemable preferred
stock................ -- -- (96) -- -- (96)
Net loss.............. -- -- -- -- (2,443) (2,443)
----- ----- ------ ----- ------- ------
Balance at December 31,
1996................... 2,213 22 2,659 (74) (2,443) 164
Issuance of common
stock for
acquisitions......... 181 2 840 -- -- 842
Amortization of
unearned
compensation......... -- -- -- 25 -- 25
Dividends on Series A
convertible preferred
stock................ -- -- (632) -- -- (632)
Dividends on Series B
redeemable preferred
stock................ -- -- (560) -- -- (560)
Net earnings.......... -- -- -- -- 1,223 1,223
----- ----- ------ ----- ------- ------
Balance at December 31,
1997................... 2,394 $ 24 $2,307 $ (49) $(1,220) $1,062
===== ===== ====== ===== ======= ======
</TABLE>

See accompanying notes to consolidated financial statements.

F-11
<PAGE>

AMERICAN DENTAL PARTNERS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------
1996 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss)............................... $ (2,443) $ 1,223
Adjustments to reconcile net earnings (loss) to
net cash provided by (used for) operating
activities:
Depreciation.................................... 177 1,580
Amortization of intangible assets............... 48 492
Other amortization.............................. 23 54
Changes in assets and liabilities, net of
acquisitions and affiliations:
Accounts receivable........................... 1,417 1,871
Receivables due from affiliated practices..... (1,707) (1,801)
Other current assets.......................... 237 (37)
Accounts payable and accrued expenses......... 941 (1,865)
Accrued compensation, benefits and taxes...... (232) 384
------------ -----------
Net cash provided by (used for) operating
activities................................. (1,539) 1,901
------------ -----------
Cash flows from investing activities:
Acquisitions and affiliations, net of cash
acquired......................................... (6,632) (14,878)
Capital expenditures, net......................... (386) (3,212)
Other assets...................................... 140 113
------------ -----------
Net cash used for investing activities...... (6,878) (17,977)
------------ -----------
Cash flows from financing activities:
Proceeds from issuance of Series A convertible
preferred stock.................................. 7,900 --
Proceeds from issuance of Series B redeemable
preferred stock.................................. 7,000 --
Proceeds from issuance of common stock............ 100 --
Borrowings under revolving line of credit, net.... -- 16,700
Repayment of borrowings........................... (747) (1,543)
Payment of debt issuance costs.................... -- (242)
------------ -----------
Net cash provided by financing activities... 14,253 14,915
------------ -----------
Increase (decrease) in cash and cash equivalents.... 5,836 (1,161)
Cash and cash equivalents at beginning of year...... -- 5,836
------------ -----------
Cash and cash equivalents at end of year............ $ 5,836 $ 4,675
============ ===========
Supplemental disclosure of cash flow information:
Cash paid during the year for interest............ $ 3 $ 470
============ ===========
Cash paid during the year for income taxes........ $ -- $ 344
============ ===========
Acquisitions and Affiliations:
Assets acquired................................... $ 20,099 $ 24,693
Liabilities assumed and issued.................... (10,063) (7,054)
Common stock issued............................... (2,689) (842)
------------ -----------
Cash paid......................................... 7,347 16,797
Less cash acquired................................ (715) (1,919)
------------ -----------
Net cash paid for acquisitions and
affiliations............................... $ 6,632 $ 14,878
============ ===========
</TABLE>

See accompanying notes to consolidated financial statements.

F-12
<PAGE>

AMERICAN DENTAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997

(1) DESCRIPTION OF BUSINESS

American Dental Partners, Inc. (the "Company") was formed in December 1995
to provide management services to dental practices and commenced operations in
January 1996. The Company acquires substantially all the assets of the dental
practices with which it affiliates, except those required by law to be owned
or maintained by dentists (such as third party contracts, certain governmental
receivables and patient records), and enters into long-term service agreements
with these affiliated dental practices. The Company provides all services
necessary for the administration of the non-clinical aspects of the dental
operations. Services provided to the affiliated dental practices include
assistance with information systems, budgeting, financial reporting,
facilities management, third-party payor contracting, supplies and equipment
procurement, billing and collecting accounts receivable, marketing and
recruiting, hiring and training support staff.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements have been prepared on the
accrual basis of accounting. The Company does not own any interests in or
control the activities of the affiliated dental practices. Accordingly, the
consolidated financial statements of the affiliated dental practices are not
consolidated with those of the Company.

Principles of Consolidation

The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries. All intercompany balances and transactions
have been eliminated in consolidation.

Use of Estimates

The preparation of these consolidated financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of revenue and expenses during the reporting period. Actual results could
differ from those estimates.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all
highly liquid instruments with an original maturity of three months or less to
be cash equivalents.

Fair Value of Financial Instruments

The Company believes the carrying amount of cash and cash equivalents,
accounts receivable, receivables due from affiliated practices, accounts
payable and accrued expenses approximate fair value because of the short-term
nature of these items. The carrying amount of long-term debt approximates fair
value because the interest rates approximate rates at which similar types of
borrowing arrangements could be obtained by the Company.

Net Revenue

The Company's net revenue represents the aggregate amounts charged to
affiliated dental practices pursuant to the terms of the service agreements.
Under such agreements, the affiliated dental practices reimburse the Company
for expenses incurred on their behalf in connection with the operation and
administration of the dental

F-13
<PAGE>

AMERICAN DENTAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997

facilities and pay fees to the Company for its management services. A portion
of these fees typically includes a fixed monthly amount. The Company typically
receives an additional fee if certain operating objectives are achieved. The
Company records all revenue monthly as earned.

Inventories

Inventories consist primarily of dental supplies and are stated at the lower
of cost or market.

Property and Equipment

Property and equipment are stated at cost. Depreciation and amortization are
recorded using the straight-line method over the estimated useful lives of the
related assets which are 30-40 years for buildings, 3-7 years for equipment
and 3-7 years for furniture and fixtures.

Property and equipment under capital leases are stated at the present value
of minimum lease payments at inception of the lease. Equipment held under
capital leases and leasehold improvements are amortized over the shorter of
the lease term or estimated useful life of the asset. Amortization of assets
subject to capital leases is included in depreciation expense.

Intangible Assets

Identifiable intangible assets result from management service agreements
with the affiliated dental groups and goodwill associated with the Company's
acquisition. The estimated fair value of the management service agreements is
the excess of the purchase price over the estimated fair value of the tangible
assets acquired and liabilities assumed of dental practices. Intangible assets
associated with management service agreements are generally amortized over the
period of expected benefit, which ranges from 25 to 40 years. In the event a
management service agreement is terminated, the related affiliated dental
practice is required to purchase, at the Company's option, the unamortized
balance of intangible assets at the current book value, as well as all related
other assets associated with the affiliated dental practice. Accumulated
amortization amounted to $48,000 and $518,000 at December 31, 1996 and 1997,
respectively.

The Company reviews the carrying value of intangible assets on an entity by
entity basis to determine if facts and circumstances exist which would suggest
that the intangible assets may be impaired or that the amortization period
needs to be modified. Among the factors the Company considers in making the
evaluation are changes in the practices' market position, reputation,
profitability and geographical penetration. If conditions are present which
indicate impairment is probable, the Company will prepare a projection of the
undiscounted cash flows of the specific practice and determine if the
intangible assets are recoverable based on these undiscounted cash flows. If
impairment is indicated, then an adjustment will be made to reduce the
carrying amount of the intangible assets to their fair value.

Income Taxes

Deferred income taxes are recognized for the tax consequences of temporary
differences by applying enacted statutory tax rates applicable to future years
to differences between the financial statement carrying amounts and the tax
basis of existing assets and liabilities. The effect on deferred taxes of
changes in the tax rate is recognized in operations in the period that
includes the enactment date.

Stock Option Plans

Statement of Financial Accounting Standards No. 123 ("SFAS 123"), Accounting
for Stock-Based Compensation, allows companies to recognize expense for the
fair value of stock-based awards or to continue to

F-14
<PAGE>

AMERICAN DENTAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997

apply the provisions of APB Opinion No. 25, Accounting for Stock Issued to
Employees, and disclose the effects of SFAS 123 as if the fair-value-based
method defined in SFAS No. 123 had been applied. Under APB Opinion No. 25,
compensation expense is recognized only if on the measurement date the fair
value of the underlying stock exceeds the exercise price. The Company has
elected to apply the provisions of APB Opinion No. 25 and provide the pro
forma disclosure provisions of SFAS 123.

Earnings Per Share

Earnings per share are computed based on Statement of Financial Accounting
Standards No. 128 "Earnings per Share" ("SFAS 128"). SFAS 128 requires
presentation of basic earnings per share ("Basic EPS") and diluted earnings
per share ("Diluted EPS") by all entities that have publicly traded common
stock or potential common stock (options, warrants, convertible securities or
contingent stock arrangements). SFAS 128 also requires presentation of
earnings per share by an entity that has made a filing or is in the process of
filing with a regulatory agency in preparation for the sale of those
securities in a public market. Basic EPS is computed by dividing income
available to common stockholders by the weighted average number of common
shares outstanding during the period. Diluted EPS gives effect to all dilutive
potential common shares outstanding during the period. The computation of
Diluted EPS does not assume conversion, exercise or contingent exercise of
securities that would have an antidilutive effect on earnings.

EITF Issue No. 97-2

The Emerging Issues Task Force ("EITF") has issued EITF Issue No. 97-2 which
addresses certain matters relating to the physician practice management
industry, which include the criteria for the consolidation of professional
service corporation revenue and the accounting for business combinations. The
Company believes that this EITF issue will not have any material impact on the
Company's consolidated financial statements.

(3) ACCOUNTS RECEIVABLE AND NET REVENUE

Accounts Receivable

Accounts receivable represent amounts due from patients and third party
payors for dental services provided by affiliated dental practices that were
outstanding at the time the Company acquired the assets of the practice.

Receivables Due From Affiliated Dental Practices

Receivables due from affiliated practices represent amounts due pursuant to
the terms of the service agreements as described below.

The Company's service fees typically consist of a fixed monthly fee and an
additional variable fee. The additional fee is determined by a comparison of
the actual financial performance of the affiliated dental group practice in
relation to its budget.

Net Revenue--Management Services

The Company's net revenue represents the aggregate fees charged to
affiliated dental practices pursuant to the terms of the service agreements.
Under such agreements, the affiliated dental practices reimburse the Company
for expenses incurred on their behalf in connection with the operation and
administration of the dental facilities and pay fees to the Company for its
management services. The Company's service fees typically consist of a fixed
monthly fee and an additional variable fee. The additional fee is determined
by a comparison of the actual financial performance of the affiliated dental
group practice to its budget. The Company records this revenue monthly as
earned. For the year ended December 31, 1997, the total amount of service fees
earned under the Company's service agreements ranged from approximately 9% of
the adjusted gross revenue of one PC to approximately 25% of the adjusted
gross revenue of another PC. The amount of the additional fee, in the
aggregate, was not material for the year ended December 31, 1997.

F-15
<PAGE>

AMERICAN DENTAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997

Revenue--Affiliated Dental Practices

The affiliated dental practices record revenue at established rates reduced
by contractual adjustments and allowances for doubtful accounts to arrive at
adjusted gross revenue. Contractual adjustments represent the difference
between gross billable charges at established rates and the portion of those
charges allowable by third party payors pursuant to certain reimbursement and
managed care contracts.

The Company does not consolidate the financial statements of its affiliated
dental practices with those of the Company. The adjusted gross revenue and
amounts retained by the affiliated dental practices are presented below for
illustrative purposes only:

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------------
1996 1997
--------------------- ----------------------
PARK ALL AFFILIATED PARK ALL AFFILIATED
DENTAL PRACTICES DENTAL PRACTICES
------ -------------- ------- --------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Adjusted gross revenue--
affiliated dental practices..... $4,459 $4,958 $38,515 $69,319
Amounts retained by affiliated
dental practices................ 858 1,025 8,461 16,049
------ ------ ------- -------
Net revenue (amounts earned by
the Company under service
agreements)..................... $3,601 $3,933 $30,054 $53,270
====== ====== ======= =======
</TABLE>

(4) ACQUISITIONS AND AFFILIATIONS

During the year ended December 31, 1996, the Company acquired substantially
all the assets of three dental practices and simultaneously entered into 40-
year service agreements with the affiliated dental groups. The aggregate
purchase price paid in connection with these transactions (the "1996
Transactions") consisted of approximately $7.3 million in cash, $2.2 million
in subordinated promissory notes and 1,613,400 shares of Common Stock.

During the year ended December 31, 1997, the Company acquired substantially
all the assets of six dental practices and a related entity associated with
one of these practices, Orthocare, Ltd., (now a wholly-owned subsidiary),
which contracts with third party payors and orthodontic providers to arrange
for the provision of orthodontic care to patients insured by such third party
payors. The Company simultaneously entered into 40-year service agreements
with four of the affiliated dental groups (two practices joined existing
affiliates). The aggregate purchase price paid in connection with these
transactions consisted of approximately $16.8 million in cash, $2.4 million in
subordinated promissory notes and 180,834 shares of Common Stock. All
transactions completed in 1997 are referred to as the "1997 Transactions".

The 1996 and 1997 Transactions are as follows.

<TABLE>
<CAPTION>
DATE AFFILIATED DENTAL GROUP LOCATION
---- ----------------------- ---------------
<S> <C> <C>
November 1996...................... Park Dental Minneapolis, MN
December 1996...................... Longhorn Dental Austin, TX
December 1996...................... Smileage Dental Care Milwaukee, WI
March 1997......................... Malcolm R. Scott D.D.S. San Marcos, TX
March 1997......................... Lakeside Dental Care Metaire, LA
May 1997........................... Soster Dental Group Pittsburgh, PA
July 1997.......................... Northpoint Dental Group Milwaukee, WI
October 1997....................... Wilkens Dental Group Milwaukee, WI
October 1997....................... Orthocare Group Minneapolis, MN
</TABLE>

F-16
<PAGE>

AMERICAN DENTAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997

The accompanying consolidated financial statements include the results of
operations under the service agreements from the date of acquisition. The
excess of the purchase price associated with all of the 1996 and 1997
Transactions over the estimated fair value of net assets acquired has been
recorded as intangible assets which are summarized as follows:

<TABLE>
<CAPTION>
AMOUNT
--------------
(IN THOUSANDS)
<S> <C>
Fair value of total consideration paid.................... $32,249
Fair value of net tangible assets acquired and liabilities
assumed.................................................. 2,601
-------
Excess of fair value of the consideration paid over the
fair value of net tangible assets acquired............... $29,648
=======
The excess of the fair value of the consideration paid
over the fair value of the net tangible assets acquired
has been allocated as follows:
Service agreements associated with affiliations........... $26,257
Goodwill associated with the acquisition.................. 3,391
-------
$29,648
=======
</TABLE>

If the acquisition of Orthocare, Ltd. occurred on January 1, 1996, the
Company's unaudited net revenue, earnings (loss) before income taxes, net
earnings (loss) and net earnings (loss) per share would have been $7,661,000,
$(2,442,000), $(2,442,000) and $(3.21) per share, respectively, for the year
ended December 31, 1996 and $56,346,000, $1,418,000, $1,231,000, and $0.02 per
share for the year ended December 31, 1997, respectively. Such pro forma
financial information reflects certain adjustments, including amortization of
intangibles, income tax effects and an increase in the weighted average shares
outstanding. This unaudited pro forma information does not necessarily reflect
the results of operations that would have occurred had the acquisition taken
place at the beginning of 1996 and is not necessarily indicative of results
that may be obtained in the future.

Subsequent to December 31, 1997, the Company acquired substantially all the
assets of a dental practice and simultaneously entered into a 40-year service
agreement with the affiliated dental group. The aggregate purchase price paid
in connection with this transaction consisted of approximately $2.6 million in
cash, $0.5 million in subordinated promissory notes and 34,800 shares of the
Company's Common Stock. This transaction is referred to as the "1998
Transaction."

(5) PROPERTY AND EQUIPMENT

Property and Equipment

Property and equipment consisted of the following at December 31:

<TABLE>
<CAPTION>
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Land, buildings and leasehold improvements............... $ 3,938 $ 6,376
Equipment................................................ 3,768 6,191
Furniture and fixtures................................... 1,450 2,868
------- -------
Total property and equipment............................. 9,156 15,435
Less accumulated depreciation............................ (3,213) (6,683)
------- -------
Property and equipment, net.............................. $ 5,943 $ 8,752
======= =======
</TABLE>

F-17
<PAGE>

AMERICAN DENTAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997

Operating Leases

The Company is obligated under non-cancelable operating leases for premises
and equipment expiring in various years through the year 2009. Rent expense
for the years ended December 31, 1996 and 1997 amounted to $319,000 and
$3,926,000, respectively, of which $267,000 and $3,476,000 were reimbursed
under service agreements. The Company has several leases with stockholders
that were assumed in connection with its 1996 and 1997 Transactions. Such
amounts are generally reimbursed pursuant to the terms of the service
agreements.

Minimum future rental payments under non-cancelable operating leases and
amounts to be reimbursed under service agreements as of December 31, 1997 are
as follows:

<TABLE>
<CAPTION>
AMOUNT TO BE
TOTAL REIMBURSED
AMOUNT UNDER SERVICE NET
DUE AGREEMENTS AMOUNT
------- ------------- ------
(IN THOUSANDS)
<S> <C> <C> <C>
1998............................................ $ 3,843 $ 3,622 $221
1999............................................ 3,283 3,134 149
2000............................................ 2,566 2,459 107
2001............................................ 1,913 1,805 108
2002............................................ 1,417 1,402 15
Thereafter...................................... 4,097 4,097 --
------- ------- ----
Total minimum lease payments.................. $17,119 $16,519 $600
======= ======= ====
</TABLE>

(6) INCOME TAXES

Income tax expense (benefit) attributable to income from continuing
operations for the years ended December 31 consists of the following:

<TABLE>
<CAPTION>
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Current:
Federal.................................................... $ -- $ 54
State...................................................... -- 102
------- ------
$ -- $ 156
======= ======
Deferred:
Federal.................................................... $ -- $ (32)
State...................................................... -- --
------- ------
$ -- $ (32)
======= ======
Total income taxes......................................... $ -- $ 124
======= ======
</TABLE>

F-18
<PAGE>

AMERICAN DENTAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997

The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities as of December 31
are as follows:
<TABLE>
<CAPTION>
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Operating loss and other carryforwards.................. $ 1,446 $ 989
Property and equipment.................................. 366 566
Organization and start-up costs......................... 251 243
Accrued expenses and other liabilities.................. 831 730
Other................................................... 168 --
------- -------
Total gross deferred tax assets......................... 3,062 2,528
Valuation allowance..................................... (3,062) (2,431)
------- -------
Net deferred tax assets................................. $ -- $ 97
------- -------
Deferred tax liabilities:
Intangibles............................................. $ -- $ (39)
Other................................................... -- (289)
------- -------
Total gross deferred tax liabilities.................... -- (328)
------- -------
Net deferred tax assets (liabilities)..................... $ -- $ (231)
======= =======
</TABLE>

The valuation allowance for deferred tax assets was $3,062,000 and
$2,431,000 as of December 31, 1996 and 1997, respectively. The net change in
the total valuation allowance for the years ended December 31, 1996 and 1997
was an increase of $3,062,000 and a decrease of $631,000, respectively. The
valuation allowance has been established because, based on the limited
operating history of the Company and other available evidence, it is more
likely than not that the deferred tax asset will not be realized.

Subsequent recognized tax benefits relating to the valuation allowance for
deferred tax assets as of December 31 will be allocated as follows:

<TABLE>
<CAPTION>
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Income tax benefit to be reported in the consolidated
statement of operations.................................. $ 1,549 $ 371
Intangibles............................................... 1,513 2,060
------- -------
$3,062 $ 2,431
======= =======
</TABLE>

The net deferred tax assets (liabilities) consisted of the following at
December 31:

<TABLE>
<CAPTION>
1996 1997
----------------------- -----------------------
FEDERAL STATE TOTAL FEDERAL STATE TOTAL
------- ----- ------- ------- ----- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Deferred tax assets:
Current ............... $ 240 $ 46 $ 286 $ 354 $ 95 $ 449
Non-current............ 2,320 456 2,776 1,457 622 2,079
Valuation allowance.... (2,560) (502) (3,062) (1,790) (641) (2,431)
------- ----- ------- ------- ----- -------
Net deferred tax
assets.............. $ -- $ -- $ -- $ 21 $ 76 $ 97
------- ----- ------- ------- ----- -------
Deferred tax liabilities:
Current................ $ -- $ -- $ -- $ -- $ -- $ --
Non-current............ -- -- -- (220) (108) (328)
------- ----- ------- ------- ----- -------
Total gross deferred
tax liabilities....... -- -- -- (220) (108) (328)
------- ----- ------- ------- ----- -------
Net deferred tax
assets
(liabilities)....... $ -- $ -- $ -- $ (199) $ (32) $ (231)
======= ===== ======= ======= ===== =======
</TABLE>

F-19
<PAGE>

AMERICAN DENTAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997

At December 31, 1997, the Company has net operating loss carryforwards for
Federal income tax purposes of approximately $2,092,000 which are available to
offset future Federal taxable income. The net operating loss carryforward
begins to expire in the year 2011 unless utilized.

The following table reconciles the Federal statutory income tax rate to the
Company's effective income tax rate for the years ended December 31:

<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Income taxes at Federal statutory rate................... (34.0)% 34.0%
State taxes, net of Federal benefit...................... (6.0) 4.0
Valuation reserve and other changes...................... 33.0 (37.0)
Intangibles and other permanent differences.............. 7.0 8.2
------- -------
Effective income tax rate................................ -- % 9.2%
======= =======

(7) DEBT

Long-term debt and capital lease obligations consist of the following at
December 31:

<CAPTION>
1996 1997
------- -------
(IN THOUSANDS)
<S> <C> <C>
Revolving line of credit advances, collateralized by
substantially all assets of the Company, all at a LIBOR
based rate of approximately 7.6%........................ $ -- $16,700
Mortgages payable, secured, interest rates ranging from
8.6% to 8.8% payable in installments through 2015....... 788 727
Note payable, unsecured, interest rate of 8.5% payable in
installments, maturing in 2004.......................... 524 45
Subordinated notes payable to stockholders and former
owners, bearing interest at 7%, maturing through 2003... 2,182 4,308
Capital lease obligations................................ 106 247
------- -------
Total long-term debt and capital lease obligations....... 3,600 22,027
Less current maturities.................................. 537 774
------- -------
Long-term debt and capital lease obligations, excluding
current maturities...................................... $ 3,063 $21,253
======= =======

Annual maturities of long-term debt and future minimum lease payments under
capital leases as of December 31, 1997 are as follows:

<CAPTION>
LONG-
TERM CAPITAL
DEBT LEASES
------- -------
(IN THOUSANDS)
<S> <C> <C>
1998..................................................... $ 692 $ 103
1999..................................................... 713 66
2000..................................................... 17,437 50
2001..................................................... 761 50
2002..................................................... 789 31
Thereafter............................................... 1,388 --
------- -------
Total payments......................................... $21,780 300
=======
Less amounts representing interest....................... 53
-------
Total obligations under capital leases................. $ 247
=======
</TABLE>

F-20
<PAGE>

AMERICAN DENTAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997

Revolving Line of Credit

In April 1997, the Company entered into a $30 million revolving line of
credit agreement with a bank. The credit facility is being used for general
corporate purposes including acquisitions. Borrowings under this line of
credit bear interest at either prime- or LIBOR-based rates, at the Company's
option, plus a margin based upon the Company's debt coverage ratio, which
ranges up to 0.50% for prime-based loans and up to 2.125% for LIBOR-based
loans. In addition, the Company pays a commitment fee of 0.25% of the average
daily balance of the unused line. Borrowings are limited to an availability
formula based on adjusted EBITDA. The credit facility is secured by a first
lien on substantially all of the Company's assets, including a pledge of the
stock of the Company's subsidiaries. The Company is also required to comply
with certain financial and other covenants. The line of credit matures in
April 2000.

Subordinated Debentures

The Company is a party to a Subordinated Debenture Purchase Agreement dated
January 8, 1996 pursuant to which it has received a commitment from a
principal stockholder for the purchase of up to $15,000,000 of 12%
subordinated debentures. The purchase of such debentures is contingent upon
the satisfaction of certain conditions. For each debenture issued, the Company
is also obligated to issue Common Stock at a purchase price equal to the $0.01
per share par value of the Company's Common Stock. The number of shares of
Common Stock to be issued is subject to a predetermined formula.

The principal amount of the debentures, if issued, will be payable in three
equal installments due in the years 2002, 2003 and 2004 or upon the occurrence
of a Liquidity Event, as defined. Any debentures outstanding are subordinated
to any indebtedness owed to any bank. The Company is not obligated to issue
any debentures and has not issued any debentures through December 31, 1997.
The obligation to purchase any debentures will automatically terminate upon
completion of an initial public offering.

(8) CONVERTIBLE AND REDEEMABLE PREFERRED STOCK

Series A Convertible Preferred Stock

The Company is authorized to issue up to 400,000 shares of Series A
convertible preferred stock, $0.01 par value, all of which were issued and
outstanding at December 31, 1996 and 1997.

Holders of Series A convertible preferred stock have the same number of
votes as the shares of Common Stock into which their Series A convertible
preferred stock could be converted. The Series A convertible preferred stock
is entitled to receive dividends at a cumulative rate of $1.58 per share,
compounded annually ($109,000 and $632,000 for the years ended December 31,
1996 and 1997, respectively) which have not been declared. Such dividends will
be paid when, as and if declared by the Board of Directors. In the event of
liquidation, dissolution, or winding up of the Company, holders of the Series
A convertible preferred stock will be entitled to receive, prior to any
distribution to holders of Common Stock, all accumulated unpaid dividends plus
$19.75 per share. However, if holders of the Series A convertible preferred
stock would receive a greater amount if their stock had been converted to
Common Stock immediately prior to such liquidation, dissolution, or winding
up, then they will be entitled to receive such greater amount. The Series A
convertible preferred stock is recorded at $8,009,000 and $8,641,000 at
December 31, 1996 and 1997, respectively, and includes accrued but unpaid
dividends.

The Series A convertible preferred stock may be converted into shares of
Common Stock at any time at the option of the holder. The 400,000 shares of
Series A convertible preferred stock will convert to 2,400,000 shares of
Common Stock upon completion of the Company's initial public offering and all
accrued dividends will be

F-21
<PAGE>

AMERICAN DENTAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997

canceled. This same conversion ratio applies in the event a holder of this
preferred stock converts such shares into Common Stock prior to the completion
of this offering.

If not previously converted, the Series A convertible preferred stock will
be subject to redemption at the option of the Company or a majority of the
holders of the Series A convertible preferred stock in three equal
installments in the years 2002, 2003 and 2004.

Series B Redeemable Preferred Stock

The Company is authorized to issue 70,000 shares of Series B redeemable
preferred stock, par value $0.01 per share, all of which were issued and
outstanding at December 31, 1996 and 1997.

Holders of Series B redeemable preferred stock have no voting rights. The
Series B redeemable preferred stock is entitled to receive dividends at a
cumulative rate of $8.00 per share, compounded annually ($96,000 and $560,000
for the years ended December 31, 1996 and 1997, respectively) which have not
been declared. Such dividends will be paid when, as and if declared by the
Board of Directors. In the event of liquidation, dissolution, or winding up of
the Company, holders of the Series B redeemable preferred stock will be
entitled to receive, prior to any distributions to holders of Common Stock,
all accumulated unpaid dividends plus $100 per share. The Series B redeemable
preferred stock is recorded at $7,096,000 and $7,656,000 at December 31, 1996
and 1997, respectively and includes accrued but unpaid dividends.

The Series B redeemable preferred stock will be redeemed concurrently, or
within 90 days thereafter, of the consummation of the first sale of securities
by the Company pursuant to a registration statement filed under the Securities
Act of 1933, as amended. If not previously redeemed, the Series B redeemable
preferred stock will be subject to redemption at the option of the Company or
of holders of a majority of the Series B redeemable preferred stock in three
equal installments in the years 2002, 2003 and 2004.

Authorized Shares

Effective October 31, 1997, the Company increased its authorized shares of
Preferred Stock from 470,000 to 1,000,000 shares. The additional 530,000
shares are undesignated Preferred Stock which can be issued in one or more
series.

(9) STOCKHOLDERS' EQUITY

Common Stock

The Company is authorized to issue up to 25,000,000 shares of Common Stock,
$0.01 par value, of which 2,213,384 and 2,394,212 shares were issued and
outstanding at December 31, 1996 and 1997, respectively. In January and
February of 1996, the Company sold 300,000 shares of its Common Stock for
$100,000. Additionally, in January 1996, the Company sold 300,000 shares of
its Common Stock, which were subject to certain restrictions, for $500. In
connection with this transaction, the Company is recording compensation
expense ratably as the restrictions lapse. Compensation expense amounted to
$22,809 and $24,884 for the years ended December 31, 1996 and 1997,
respectively.

Initial Public Offering

Effective October 27, 1997, the Company authorized the filing of a
registration statement for an initial public offering of the Company's Common
Stock.

F-22
<PAGE>

AMERICAN DENTAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997

Stock Split and Authorized Shares

Effective October 31, 1997, the Company increased its authorized shares of
Common Stock from 2,500,000 to 25,000,000 shares. The increase in authorized
shares has been reflected retroactively in the accompanying consolidated
financial statements.

On November 7, 1997, the Company approved a 6-for-1 split of the Company's
Common Stock effected in the form of a stock dividend. All share and per share
amounts in the accompanying consolidated financial statements have been
retroactively restated to reflect this split.

Dividend Restriction

The Company has not paid any cash dividends on its Common Stock and does not
plan to pay any cash dividends on its Common Stock in the foreseeable future.
Also, no dividends may be paid on the Common Stock (other than dividends paid
solely in Common Stock) without the consent of at least 51% of the then
current holders of the Series A convertible and Series B redeemable preferred
stock. Additionally, the terms of the Company's revolving credit facility
prohibit it from paying dividends or making other payments with respect to its
Common Stock without the lenders' consent.

(10) STOCK OPTION PLANS

1996 Stock Option Plan

The Company's 1996 Stock Option Plan (the "1996 Plan") provides for the
grant of stock options to key employees. The 1996 Plan permits the granting of
options that qualify as incentive stock options and non-qualified options. The
exercise price of such options is no less than the fair market value of the
Common Stock at the time of grant. Options granted pursuant to the 1996 Plan
expire ten years after the date of grant. At December 31, 1997, options for a
total of 873,246 shares were reserved for issuance and options for 648,420
shares were outstanding under this Plan.

1996 Time Accelerated Restricted Stock Option Plan

The Company's 1996 Time Accelerated Restricted Stock Option Plan ("TARSOP
Plan") provides for the grant of stock options to key employees. Only non-
qualified options may be granted pursuant to the TARSOP Plan. The exercise
price of such options is no less than the fair market value of the Common
Stock at the time of grant. These options vest at the end of the ninth year,
but are subject to accelerated vesting based on achievement of certain
performance measures. Options granted pursuant to the TARSOP Plan expire nine
and one-half years after the date of grant. At December 31, 1997, options for
a total of 360,360 shares were reserved for issuance under the TARSOP Plan,
all of which have been issued.

1996 Affiliate Stock Option Plan

The Company's 1996 Affiliate Stock Option Plan (the "Affiliate Plan")
provides for the grant of stock options to certain persons associated with the
affiliated dental practices. Only non-qualified options may be granted
pursuant to the Affiliate Plan. The exercise price of such options is no less
than the fair market value of the Common Stock at the time of grant. Options
granted pursuant to the Affiliate Plan expire ten years after the date of
grant. At December 31, 1997, options for a total of 210,000 shares were
reserved for issuance and options for 89,586 shares were outstanding under
this Plan.

F-23
<PAGE>

AMERICAN DENTAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997

1996 Directors Stock Option Plan

The Company's 1996 Directors Stock Option Plan (the "Directors Plan")
provides for the granting of options to outside directors. Only non-qualified
options may be granted pursuant to the Directors Plan. The exercise price of
such options is no less than the fair market value of the Common Stock at the
time of grant. Options granted pursuant to the Directors Plan expire ten years
after the date of grant. At December 31, 1997, options for a total of 60,000
shares were reserved for issuance and options for 19,800 shares were
outstanding under this Plan.

Stock Option Activity

A summary of stock option activity under all the Company's stock option
plans for the years ended December 31, 1996 and 1997 follows:

<TABLE>
<CAPTION>
EXERCISE PRICES
-----------------------
NUMBER WEIGHTED
OF OPTIONS RANGE AVERAGE
---------- -------------- --------
<S> <C> <C> <C>
Outstanding at January 1, 1996.............. -- -- --
Granted .................................... 571,170 $0.33 - $12.50 $ 3.50
Cancelled................................... (4,500) 0.33 0.33
--------- -------------- ------
Outstanding at December 31, 1996............ 566,670 $0.33 - $12.50 $ 3.50
Granted .................................... 552,096 $12.50 - 14.17 14.04
Cancelled................................... (600) 14.17 14.17
--------- -------------- ------
Outstanding at December 31, 1997............ 1,118,166 $0.33 - $14.17 $ 8.69
========= ============== ======
Options exercisable at:
December 31, 1996......................... 16,320
=========
December 31, 1997......................... 70,298
=========
</TABLE>

The Company has adopted the disclosure-only provisions of SFAS 123.
Accordingly, no compensation cost has been recognized for stock options
issued. In accordance with the provisions of SFAS No. 123, there would be no
compensation cost using the minimum value method with the following
assumptions: risk free interest rate of 6.7%, expected life of four years, no
volatility and no dividends.

The following table summarizes information about stock options outstanding
at December 31, 1997:

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------- --------------------
WEIGHTED
AVERAGE
REMAINING WEIGHTED WEIGHTED
CONTRACTUAL AVERAGE AVERAGE
RANGE OF NUMBER LIFE EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING (IN YEARS) PRICE EXERCISABLE PRICE
- --------------- ----------- ----------- ------------- ----------- --------
<S> <C> <C> <C> <C> <C>
$0.33 352,770 7.3 $0.33 16,500 $ 0.33
$8.33 194,700 8.5 $8.33 49,448 $ 8.33
$12.50-$14.17 570,696 9.0-9.6 $12.50-$14.17 4,350 $12.50
--------- ------
1,118,166 70,298
========= ======
</TABLE>

F-24
<PAGE>

AMERICAN DENTAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997

(11) EMPLOYEE BENEFIT PLANS

1997 Employee Stock Purchase Plan

Effective December 1, 1997, the Company adopted the 1997 Employee Stock
Purchase Plan (the "Employee Stock Purchase Plan"). The Employee Stock
Purchase Plan enables eligible employees to purchase shares of Common Stock at
a discount on a periodic basis through payroll deductions and is intended to
meet the requirements of Section 423 of the Internal Revenue Code. Purchases
will occur at the end of option periods, each of six months' duration, except
that the first such option period will begin concurrent with the commencement
of the Company's initial public offering and end on June 30, 1998. The
purchase price of Common Stock under the Employee Stock Purchase Plan will be
85% of the lesser of the value of the Common Stock at the beginning of an
option period and the value of the Common Stock at the end of the option
period. Participants may elect under the Employee Stock Purchase Plan, prior
to each option period, to have from 2% to 10% of their pay withheld and
applied to the purchase of shares at the end of the option period. The
Employee Stock Purchase Plan imposes a maximum of $10,000 on the amount that
may be withheld from any participant in any option period. A total of 200,000
shares of Common Stock has been reserved for issuance under the Employee Stock
Purchase Plan.

Retirement Plans

The Company has a Savings and Retirement Plan (401(k) Plan), adopted October
1, 1996, which is the Company's principal defined contribution retirement
plan, which provides for a match of up to 3% of an employee's compensation.
Additionally, at December 31, 1997, the Company had three other defined
contribution retirement plans. Total plan expense for the years ended December
31, 1996 and 1997 was $20,000 and $189,000, respectively.

(12) EARNINGS PER SHARE

Earnings per share are computed based on Statement of Financial Accounting
Standards No. 128 "Earnings per Share" ("SFAS 128"). SFAS 128 requires
presentation of basic earnings per share ("Basic EPS") and diluted earnings
per share ("Diluted EPS") by all entities that have publicly traded common
stock or potential common stock (options, warrants, convertible securities or
contingent stock arrangements). Basic EPS is computed by dividing income
available to common stockholders by the weighted average number of common
shares outstanding during the period. Diluted EPS gives effect to all dilutive
potential common shares outstanding during the period. The computation of
Diluted EPS does not assume conversion, exercise or contingent exercise of
securities that would have an antidilutive effect on earnings. Accordingly,
the Series A Convertible Preferred Stock was not included in the calculation
of Diluted EPS for the years ended December 31, 1996 and 1997.

F-25
<PAGE>

AMERICAN DENTAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)

FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1997

The following table provides a reconciliation of the numerators and
denominators of the basic and diluted earnings (loss) per share computations
for the years ended December 31:

<TABLE>
<CAPTION>
1996 1997
------- ------
<S> <C> <C>
BASIC EARNINGS (LOSS) PER SHARE
Net earnings (loss)............................................ $(2,443) $1,223
Less: Dividends on Series A Convertible Preferred Stock........ (109) (632)
Dividends on Series B Redeemable Preferred Stock............. (96) (560)
------- ------
Net earnings (loss) available to common stockholders........... $(2,648) $ 31
======= ======
Weighted average common shares outstanding..................... 768 2,273
======= ======
Net earnings (loss) per share.................................. $ (3.45) $ 0.01
======= ======
DILUTED EARNINGS (LOSS) PER SHARE
Net earnings (loss)............................................ $(2,443) $1,223
Less: Dividends on Series A Convertible Preferred Stock........ (109) (632)
Dividends on Series B Redeemable Preferred Stock............. (96) (560)
------- ------
Net earnings (loss) available to common stockholders........... $(2,648) $ 31
======= ======
Weighted average common shares outstanding..................... 768 2,273
Add: Dilutive effect of options................................ -- 187
------- ------
Weighted average common shares as adjusted..................... 768 2,460
======= ======
Net earnings (loss) per share.................................. $ (3.45) $ 0.01
======= ======
</TABLE>

F-26
<PAGE>

INDEPENDENT AUDITORS' REPORT

The Board of Directors
The Orthocare Companies:

We have audited the accompanying combined balance sheets of The Orthocare
Companies (the "Company") as of December 31, 1996 and September 30, 1997, and
the related combined statements of operations, stockholders' equity and cash
flows for the year ended December 31, 1996 and the nine months ended September
30, 1997. These combined financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
combined financial statements based on our audits.

In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the financial position of The Orthocare
Companies as of December 31, 1996 and September 30, 1997, and the results of
their operations and their cash flows for the year ended December 31, 1996 and
the nine months ended September 30, 1997, in conformity with generally
accepted accounting principles.

KPMG Peat Marwick LLP

Boston, Massachusetts
December 29, 1997

F-27
<PAGE>

THE ORTHOCARE COMPANIES

COMBINED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $1,558 $2,101
Accounts receivable, net of allowance for
uncollectible billings of $50,000 in 1996 and
1997............................................. 1,001 852
Inventories....................................... 46 48
Prepaid expenses.................................. 26 43
------ ------
Total current assets............................ 2,631 3,044
------ ------
Property and equipment, net......................... 252 240
------ ------
Total assets.................................... $2,883 $3,284
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................. $ 48 $ 134
Accrued compensation, benefits and taxes.......... 195 456
Accrued and deferred income tax liability......... 96 226
Amounts payable to providers...................... 250 241
Deferred revenue.................................. 703 816
Notes payable to stockholders..................... 103 22
------ ------
Total current liabilities....................... 1,395 1,895
------ ------
Noncurrent liabilities:
Deferred income tax liability..................... 326 231
------ ------
Total liabilities............................... 1,721 2,126
------ ------
Stockholders' equity:
Common stock...................................... 181 181
Additional paid-in capital........................ 105 105
Retained earnings................................. 876 872
------ ------
Total stockholders' equity...................... 1,162 1,158
------ ------
Commitments and contingencies
Total liabilities and stockholders' equity...... $2,883 $3,284
====== ======
</TABLE>

See accompanying notes to combined financial statements.

F-28
<PAGE>

THE ORTHOCARE COMPANIES

COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
Revenue.............................................. $8,868 $7,208
Operating expenses:
Salaries and benefits.............................. 6,821 5,671
Lab fees and dental supplies....................... 404 326
Office occupancy................................... 599 460
Other operating expenses........................... 528 535
Depreciation....................................... 129 51
------ ------
Total operating expenses......................... 8,481 7,043
------ ------
Earnings from operations............................. 387 165
Interest (income), net............................... (35) (40)
------ ------
Earnings before income taxes......................... 422 205
------ ------
Income taxes......................................... 152 144
------ ------
Net earnings ........................................ $ 270 $ 61
====== ======
</TABLE>

See accompanying notes to combined financial statements.

F-29
<PAGE>

THE ORTHOCARE COMPANIES

COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONAL TOTAL
PAID-IN RETAINED STOCKHOLDERS'
COMMON STOCK CAPITAL EARNINGS EQUITY
------------ ---------- -------- -------------
<S> <C> <C> <C> <C>
Balance at December 31, 1995.... $181 $105 $709 $ 995
Net earnings.................. -- -- 270 270
Dividends paid................ -- -- (103) (103)
---- ---- ---- ------
Balance at December 31, 1996.... 181 105 876 1,162
Net earnings.................. -- -- 61 61
Dividends paid................ -- -- (65) (65)
---- ---- ---- ------
Balance at September 30, 1997... $181 $105 $872 $1,158
==== ==== ==== ======
</TABLE>

See accompanying notes to combined financial statements.

F-30
<PAGE>

THE ORTHOCARE COMPANIES

COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -----------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings ................................. $ 270 $ 61
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation................................ 129 51
Deferred income tax liability............... 82 (95)
Changes in assets and liabilities:
Accounts receivable....................... 12 149
Other current assets...................... 86 (19)
Accounts payable.......................... 8 86
Accrued compensation, benefits and taxes.. 7 261
Accrued and deferred income tax liabili-
ty....................................... 19 130
Amounts payable to providers.............. 1 (9)
Deferred revenue.......................... 96 113
------ ------
Net cash provided by operating activi-
ties................................... 710 728
------ ------
Cash flows from investing activities:
Capital expenditures, net..................... (245) (39)
------ ------
Net cash used for investing activities.. (245) (39)
------ ------
Cash flows from financing activities:
Proceeds (repayments) of notes payable to
stockholders, net............................ 59 (81)
Dividends paid ............................... (103) (65)
------ ------
Net cash used for financing activities.. (44) (146)
------ ------
Increase in cash and cash equivalents........... 421 543
Cash and cash equivalents at beginning of peri-
od............................................. 1,137 1,558
------ ------
Cash and cash equivalents at end of period...... $1,558 $2,101
====== ======
Supplemental disclosure of cash flow informa-
tion:
Cash paid during the period for income taxes.. $ 51 $ 109
====== ======
Cash paid during the period for interest...... $ 2 $ 3
====== ======
</TABLE>

See accompanying notes to combined financial statements.

F-31
<PAGE>

THE ORTHOCARE COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS

(1) NATURE OF BUSINESS

The accompanying combined financial statements include Orthodontic Care
Specialists ("OCS"), Apple Park Associates, Inc. ("APA") and Orthocare Limited
("Orthocare"), collectively the ("Orthocare Companies", or the "Company"). The
Orthocare Companies provide orthodontic services to patients in the
Minneapolis/St. Paul, Minnesota area and arrange for the provision of
orthodontic services for insurance companies in Minnesota and Wisconsin.

(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying combined financial statements have been prepared on the
accrual basis of accounting. The operations of all entities described in Note
1 are combined for reporting purposes due to their common ownership.
Intercompany balances and transactions have been eliminated upon the
combination.

Use of Estimates

The preparation of these combined financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenue and
expenses during the reporting period. Actual results could differ from those
estimates.

Revenue Recognition

Revenue is recognized in accordance with the proportional performance method
of accounting for service contracts. Under this method, revenue is recognized
as services are performed and the costs associated therewith are incurred,
under the terms of contractual agreements with each patient. A significant
portion, approximately 20% of the services are performed and revenue
recognized in the initial month of the contract. Billings under each contract,
which vary in duration from 12 to 30 months, are made throughout the term of
the contract. Patient prepayments represent collections from patients or their
insurance companies which are received in advance of the performance of the
related services.

Accounts receivable represent billed and unbilled amounts due from patients
and third party payors for orthodontic services provided.

Cash and Cash Equivalents

For purposes of the statements of cash flows, the Company considers all
highly liquid instruments with an original maturity of three months or less to
be cash equivalents.

Fair Value of Financial Instruments

The Company believes the carrying amount of cash and cash equivalents,
accounts receivable, accounts payable, accrued expenses, deferred revenue and
notes payable to stockholders approximate fair value because of the short-term
nature of these items.

Inventories

Inventories consist primarily of dental supplies and are stated at the lower
of FIFO cost or market.

F-32
<PAGE>

THE ORTHOCARE COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

Property and Equipment

Property and equipment are stated at cost. Depreciation and amortization are
recorded using the straight-line method over the estimated useful lives of the
related assets which are 5 years for leasehold improvements, equipment and
furniture and fixtures.

Income Taxes

OCS and APA have elected to be treated as an "S Corporation" under Section
1362 of the Internal Revenue Code. As such, taxable income earned or taxable
losses incurred by these entities passes through to the shareholders and is
not subject to federal income tax at the corporate level. Accordingly, these
entities do not have a federal tax expense or benefit. Orthocare is a "C
Corporation" and is subject to federal and state income taxes.

Deferred income taxes are recognized for the tax consequences of temporary
differences by applying enacted statutory tax rates applicable to future years
to differences between the financial statement carrying amounts and the tax
basis of existing assets and liabilities. The effect on the deferred taxes of
changes in the tax rate is recognized in operations in the period that
includes the enactment date.

(3) PROPERTY AND EQUIPMENT

Property and Equipment

Property and equipment consisted of the following at December 31, 1996 and
September 30, 1997:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(IN THOUSANDS)
<S> <C> <C>
Leasehold improvements............................ $ 337 $ 337
Equipment......................................... 337 376
Furniture and fixtures............................ 120 120
----- -----
Total property and equipment...................... 794 833
Less accumulated depreciation..................... (542) (593)
----- -----
Property and equipment, net....................... $ 252 $ 240
===== =====
</TABLE>

Operating Leases

The Company is obligated under non-cancelable operating leases for premises
and equipment expiring in various years through the year 2001. Rent expense
for the year ended December 31, 1996 and nine months ended September 30, 1997
amounted to $552,000 and $416,000, respectively (see Note 7).

Minimum future rental payments under non-cancelable operating leases as of
September 30, 1997 are as follows:

<TABLE>
<CAPTION>
(IN THOUSANDS)
<S> <C>
Quarter ending December 31, 1997.............................. $ 101
Fiscal year ending:
1998........................................................ 415
1999........................................................ 317
2000........................................................ 260
2001........................................................ 200
------
Total minimum lease payments.............................. $1,293
======
</TABLE>

F-33
<PAGE>

THE ORTHOCARE COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(4) INCOME TAXES

Income tax expense (benefit) attributable to earnings before income taxes
consists of:

<TABLE>
<CAPTION>
CURRENT DEFERRED TOTAL
------- -------- -----
(IN THOUSANDS)
<S> <C> <C> <C>
Year ended December 31, 1996:
Federal............................................. $ 54 $ 65 $119
State............................................... 16 17 33
---- ---- ----
$ 70 $ 82 $152
==== ==== ====
Nine months ended September 30, 1997:
Federal............................................. $188 $(75) $113
State............................................... 51 (20) 31
---- ---- ----
$239 $(95) $144
==== ==== ====
</TABLE>

The tax effects of temporary differences that give rise to significant
portions of deferred tax assets and deferred tax liabilities as of December
31, 1996 and September 30, 1997 are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
(IN THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Property and equipment.......................... $ 4 $ 2
---- ----
Total gross deferred tax assets................. 4 2
---- ----
Deferred tax liabilities:
Cash to accrual adjustments..................... 407 310
---- ----
Total gross deferred tax liabilities............ 407 310
---- ----
Net deferred tax liability........................ $403 $308
==== ====
</TABLE>

The following table reconciles the Federal statutory income tax rate and the
Company's effective income tax rate for the year ended December 31, 1996 and
nine months ended September 30, 1997:

<TABLE>
<CAPTION>
NINE MONTHS
YEAR ENDED ENDED
DECEMBER 31, SEPTEMBER 30,
1996 1997
------------ -------------
<S> <C> <C>
Income taxes at Federal statutory rate............ 34% 34%
State taxes, net of Federal benefit............... 9 9
Effective S corporation losses.................... (7) 27
--- ---
Effective income tax rate......................... 36% 70%
=== ===
</TABLE>

(5) NOTES PAYABLE TO STOCKHOLDERS

Notes payable to stockholders consisted of the following at December 31,
1996 and September 30, 1997 (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER
1996 30, 1997
------------ ---------
(IN THOUSANDS)
<S> <C> <C>
Notes payable, unsecured, interest rate 8%, payable
in installments, maturing in February 1998........ $ 63 $22
Notes payable, unsecured, non-interest bearing,
payable on demand................................. 40 --
---- ---
$103 $22
==== ===
</TABLE>

F-34
<PAGE>

THE ORTHOCARE COMPANIES

NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)

(6) STOCKHOLDERS' EQUITY

Common Stock

Common stock for each of the combined entity's consisted of the following at
December 31, 1996 and September 30, 1997:

<TABLE>
<CAPTION>
SHARES
PAR VALUE AUTHORIZED OUTSTANDING AMOUNT
--------- ---------- ----------- ------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Orthocare............................ No Par 25,000 1,000 $ 1
OCS.................................. No Par 50,000 28,484 95
APA.................................. No Par 25,000 1,000 66
DSM.................................. No Par 25,000 600 19
------ ----
31,084 $181
====== ====
</TABLE>

(7) RELATED PARTY TRANSACTIONS

The Company has an Orthodontists Service Agreement with Midwest Dental Care
to provide orthodontic services to participants in Midwest Dental Plan.
Midwest Dental Plan, a Wisconsin corporation, is partially owned by Company
stockholders. The Company received capitated revenue of approximately $290,000
and $217,000 for the year ended December 31, 1996 and the nine months ended
September 30, 1997, respectively.

The Company leases space from Apple Park Partners, which is 100% owned by
the Company's majority stockholder. Payments made to Apple Park Partners under
the lease were approximately $178,000 and $157,000 for the year ended December
31, 1996 and the nine months ended September 30, 1997, respectively.

The Company has an informal agreement with College Park Lab, a Wisconsin
corporation, to contract labor for four administrative employees in its
Wisconsin office. Under the agreement, College Park Lab performs the hiring
and all payroll and benefit administration for the Company's administrative
staff. The Company reimburses College Park Lab for the cost of salaries and
benefits plus a 11% markup to cover administrative costs. Total amounts paid
to College Park Lab were approximately $99,000 and $91,000 for the year ended
December 31, 1996 and the nine months ended September 30, 1997, respectively.
College Park Lab is partially owned by a minority stockholder of the Company.

(8) SUBSEQUENT EVENTS

Effective October 1, 1997, substantially all the assets of the Company were
acquired by American Dental Partners, Inc. In connection with this transaction
Apple Park Associates, Inc. entered into a 40-year service agreement with
Orthodontic Care Specialists, Ltd.

F-35
<PAGE>

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PRO-
SPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER
TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEI-
THER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATIONS THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.

------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary....................................................... 3
Risk Factors............................................................. 7
The Company.............................................................. 13
Use of Proceeds.......................................................... 14
Dividend Policy.......................................................... 14
Capitalization........................................................... 15
Dilution................................................................. 16
Selected Historical and Pro Forma Consolidated Financial Data............ 17
Management's Discussion and Analysis of Financial Condition and Results
of Operations........................................................... 19
Business................................................................. 26
Management............................................................... 39
Certain Transactions..................................................... 46
Principal Stockholders................................................... 49
Description of Capital Stock............................................. 50
Shares Eligible for Future Sale.......................................... 52
Underwriting............................................................. 54
Validity of Common Stock................................................. 56
Experts.................................................................. 56
Additional Information................................................... 56
Index to Financial Statements............................................ F-1
</TABLE>

------------

UNTIL , 1998 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS EF-
FECTING TRANSACTIONS IN THE SECURITIES OFFERED HEREBY, WHETHER OR NOT PARTICI-
PATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS
IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

2,000,000 Shares

[LOGO OF AMERICAN DENTAL PARTNERS, INC. APPEARS HERE]

Common Stock

------------
PROSPECTUS
------------

BTALEX.BROWN

BANCAMERICA ROBERTSON STEPHENS

PIPER JAFFRAY INC.

, 1998

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the expenses (other than underwriting
compensation expected to be incurred) in connection with the offering
described in this Registration Statement. All of such amounts (except the SEC
Registration Fee, NASD Filing Fee and Nasdaq National Market Listing Fee) are
estimated.

<TABLE>
<S> <C>
SEC Registration Fee........................................... $ 11,849
NASD Filing Fee................................................ 4,410
Nasdaq National Market Listing Fee............................. 34,486
Blue Sky Fees and Expenses.....................................
Printing and Engraving Costs...................................
Legal Fees and Expenses........................................
Accounting Fees and Expenses...................................
Transfer Agent and Registrar Fees and Expenses.................
Miscellaneous..................................................
----------
Total........................................................ $1,000,000
==========
</TABLE>

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law, as amended (the
"DGCL"), provides that a corporation may indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, officer, employee or agent of the
corporation, or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amount paid in settlement actually and
reasonably incurred by him in connection with such action, suit or proceeding
if he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe his conduct
was unlawful. Section 145 further provides that a corporation similarly may
indemnify any such person serving in any such capacity who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment in
its favor, against expenses actually and reasonably incurred in connection
with the defense or settlement of such action or suit if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification shall be
made in respect to any claim, issue or matter as to which such person shall
have been adjudged to be liable to the corporation unless and only to the
extent that the Delaware Court of Chancery or such other court in which such
action or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case,
such person is fairly and reasonably entitled to indemnity for such expenses
which the Court of Chancery or such other court shall deem proper.

Article 6 of the Amended and Restated By-Laws of the Company, a copy of
which is filed as Exhibit 3(b), contains certain indemnification provisions
adopted pursuant to authority contained in Section 145 of the DGCL. The By-
Laws provide for the indemnification of its officers, directors, employees,
and agents against all expenses with respect to any judgments, fines, and
amounts paid in settlement, or with respect to any threatened, pending, or
completed action, suit, or proceeding to which they were or are parties or are
threatened to be made parties by reason of acting in such capacities, provided
that it is determined, either by a majority vote of a quorum of disinterested
directors of the Company or by the stockholders of the Company or otherwise as
provided in Section 6.4 of Article 6 of the By-Laws, that: (i) they acted in
good faith and in a manner they reasonably believed to be in or not opposed to
the best interests of the Company; (ii) in any action, suit, or proceeding by
or in the right of the Company, they were not, and have not been adjudicated
to have been liable to the Company;

II-1
<PAGE>

and (iii) with respect to any criminal action or proceeding, that they had no
reasonable cause to believe that their conduct was unlawful. Section 6.3 of
Article 6 of the By-Laws provides that to the extent a director, officer,
employee, or agent has been successful on the merits or otherwise in defense
of any such action, suit, or proceeding, he shall be indemnified against
expenses actually and reasonably incurred in connection therewith. At present,
there are no claims, actions, suits, or proceedings pending where
indemnification would be required under these provisions, and the Company does
not know of any threatened claims, actions, suits, or proceedings which may
result in a request for such indemnification.

Under Section 145 of the Delaware Law and Section 6.7 of the By-Laws, the
Company may purchase and maintain insurance on behalf of any person who is or
was a director, officer, employee, or agent of the Company, or who, while
serving in such capacity, is or was at the request of the Company, a director,
officer, employee or agent of another corporation or legal entity or of an
employee benefit plan, against liability asserted against or incurred by such
person in any such capacity whether or not the corporation would have the
power to provide indemnity under Section 145 or the By-Laws. The Company has
purchased a liability policy to indemnify its officers and directors against
loss arising from claims by reason of their legal liability for acts as
officers and directors, subject to limitations and conditions set forth in the
policy.

Section 102(b)(7) of the DGCL permits a corporation to include in its
certificate of incorporation a provision eliminating or limiting the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided that such
provision shall not eliminate or limit the liability of a director (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
of the DGCL (relating to unlawful payment of dividends and unlawful stock
purchase and redemption) or (iv) for any transaction from which the director
derived an improper personal benefit.

Article Ninth of the Second Amended and Restated Certificate of
Incorporation of the Company, a copy of which is filed as Exhibit 3(a),
eliminates personal liability of a director to the Company and its
stockholders for monetary damages for breach of fiduciary as a director to the
maximum extent permitted by Section 102(b)(7) of the DGCL.

The Underwriting Agreement (a form of which appears as Exhibit 1 hereto)
provides for indemnification of the Registrant's directors and officers in
certain circumstances. The indemnification provided for by the Underwriters is
limited to matters arising in connection with this Registration Statement.
Reference is made to paragraph eight of the Underwriting Agreement for
information concerning indemnification undertaken among the Company and the
Underwriters.

The above discussion of the Company's Certificate of Incorporation and By-
Laws and of Section 145 of the DGCL is not intended to be exhaustive and is
respectively qualified in its entirety by such Certificate of Incorporation,
By-Laws and statutes.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

Since the Company's formation in December 1995, the Company has issued the
following securities that were not registered under the Securities Act of
1933, as amended (the "Securities Act"). The following numbers give effect to
the 6-to-1 stock split effected in the form of a stock dividend on November 7,
1997. No underwriters were engaged in connection with any of the following
transactions, and accordingly, no underwriting discounts or commissions were
paid. The shares of capital stock and other securities issued in the following
transactions were offered and sold in reliance upon the following exemptions:
(i) in the case of the transactions described in (a), below, Section 4(2) of
the Securities Act or Regulation D promulgated thereunder relative to sales by
an issuer not involving a public offering; and (ii) in the case of the
transactions described in (b), below, Section 3(b) of the Securities Act and
Rule 701 promulgated thereunder relative to sales pursuant to certain
compensatory benefits plans.

II-2
<PAGE>

(a) Issuances of Capital Stock

(i) On January 8, 1996, the Company issued 300,000 shares of Common Stock to
Mr. Serrao for a cash purchase price of $500; (ii) pursuant to and in
connection with the Preferred Stock Purchase Agreement, between January 12,
1996 and December 11, 1996, the Company issued to the Purchasers a total of
300,000 shares of Common Stock for a total purchase price of $100,000, 400,000
shares of Series A Convertible Preferred Stock for a total purchase price of
$7,900,000, and 70,000 shares of Series B Redeemable Preferred Stock for a
total purchase price of $7,000,000; (iii) on November 12, 1996, the Company
issued 1,260,000 shares of Common Stock to the stockholders of Park as part of
the consideration (along with subordinated promissory notes in the aggregate
original principal amount of $1,500,000 and cash) paid by the Company in
exchange for all of the outstanding capital stock of Park; (iv) on December
13, 1996, the Company issued 49,200 shares of Common Stock to the sole
stockholder of Les L. Crane, D.D.S., P.C. as part of the consideration (along
with a subordinated promissory note in the original principal amount of
$435,000 and cash) paid by the Company in connection with the purchase of the
allowable assets of Les L. Crane, D.D.S., P.C.; (v) on December 23, 1996, the
Company issued 304,200 shares of Common Stock to the stockholders of Smileage
Dental Care, Inc. as part of the consideration (along with subordinated
promissory notes in the aggregate original principal amount of $247,500 and
cash) paid by the Company in exchange for all of the outstanding capital stock
of Smileage Dental Care, Inc.; (vi) on March 31, 1997, the Company issued
7,944 shares of Common Stock to Lakeside Dental Group as part of the
consideration (along with a subordinated promissory note in the original
principal amount of $225,000 and cash) paid by the Company in connection with
the purchase of the allowable assets of Lakeside Dental Group; (vii) on May
22, 1997, the Company issued 14,118 shares of Common Stock to the sole
stockholder of Soster Dental, Inc. as part of the consideration (along with a
subordinated promissory note in the original principal amount of $200,000 and
cash) paid by the Company in exchange for all of the outstanding capital stock
of Soster Dental, Inc.; (viii) on July 1, 1997, the Company issued 19,290
shares of Common Stock to the stockholders of Northpoint Dental Group, Ltd. as
part of the consideration (along with subordinated promissory notes in the
aggregate original principal amount of $65,000 and cash) paid by the Company
in connection with the purchase of the allowable assets of Northpoint Dental
Group, Ltd. and the performance of other obligations by the selling
stockholders; (ix) on October 1, 1997, the Company issued 83,010 shares of
Common Stock to the stockholders of Apple Park Associates, Inc. and
Orthodontic Care Specialists, Ltd. as part of the consideration (along with
subordinated promissory notes in the aggregate original principal amount of
$900,000 and cash) paid by the Company in connection with the purchase of the
allowable assets of Apple Park Associates, Inc. and Orthodontic Care
Specialists, Ltd.; (x) on October 1, 1997, the Company issued 56,472 shares of
Common Stock to the stockholders of Dental Specialty Management, Ltd.,
Orthocare, Ltd., and two 80%-owned subsidiaries of Orthocare, Ltd. as part of
the consideration (along with subordinated promissory notes in the aggregate
original principal amount of $600,000 and cash) paid by the Company in
exchange for all of the outstanding capital stock of those companies; and (xi)
on January 1, 1998, the Company issued 34,800 shares of Common Stock to the
stockholders of Innovative Practice Concepts, Inc. as part of the
consideration (along with subordinated promissory notes in the aggregate
original principal amount of $500,000 and cash) paid by the Company in
exchange for all of the outstanding capital stock of Innovative Practice
Concepts, Inc.

(b) Grants of Stock Options

(i) As of January 31, 1998, options to purchase 650,420 shares of Common
Stock were outstanding under the Company's 1996 Stock Option Plan, as amended,
of which options to purchase 70,981 shares were then exercisable. None of the
outstanding options had been exercised. All such options were granted between
January 8, 1996 and January 1, 1998 to executive officers and other key
employees of the Company and its subsidiaries in connection with their
employment; (ii) as of January 31, 1998, options to purchase 360,360 shares of
Common Stock were outstanding under the Company's 1996 Time Accelerated
Restricted Stock Option Plan, as amended, none of which were then exercisable.
All such options were granted between January 8, 1996 and August 1, 1997 to
executive officers and other key employees of the Company and its subsidiaries
in connection with their employment; (iii) as of January 31, 1998, options to
purchase 89,586 shares of Common Stock were outstanding under the Company's
Amended and Restated 1996 Affiliate Stock Option Plan, of which options to
purchase 6,000 shares were exercisable. All such options were granted between
November 12, 1996 and October 1, 1997

II-3
<PAGE>

to advisors and consultants of the Company and its subsidiaries; (iv) as of
January 31, 1998, options to purchase 19,800 shares of Common Stock were
outstanding under the Company's Amended and Restated 1996 Directors Stock
Option Plan, none of which were exercisable. All such options were granted
between February 17, 1997 and August 1, 1997 to directors of the Company.

On October 1, 1997, the Company issued a subordinated promissory note in the
aggregate original principal amount of $400,000 to the sole stockholder of
Terrance R. Wilkens, D.D.S., SC, Brookfield Dental Center, SC, Waukesha Dental
Center, SC, Hales Corner Dental Center, SC, and West Allis Dental Center, SC
(the "Wilkens Dental Group") as part of the consideration (along with cash)
paid by the Company in connection with the purchase of the allowable assets of
the Wilkens Dental Group. The Company does not believe that the promissory
notes issued in this or the other transactions described in (a), above,
constitute "securities" as defined in Section 2(1) of the Securities Act;
however, in the event the promissory notes are deemed to be securities, these
transactions were exempt from the registration requirements of the Securities
Act pursuant to Section 4(2) or Regulation D thereunder relative to sales by
an issuer not involving a public offering.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(A) EXHIBITS

II-4
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
10(h) American Dental Partners, Inc. Amended and Restated 1996 Directors
Stock Option Plan, as amended by Amendment No. 1.
10(i) Employment and Non-Competition Agreement dated January 8, 1996,
between American Dental Partners, Inc. and Gregory A. Serrao.
10(j) Employment Agreement dated April 22, 1996, between American Dental
Partners, Inc. and Ronald M. Levenson.
10(k) Employment Agreement dated May 31, 1996, between American Dental
Partners, Inc. and George W. Robinson, as amended by Amendment to
Employment Agreement dated August 27, 1997.
10(l) Employment and Noncompetition Agreement dated November 12, 1996,
between PDHC, Ltd. and Gregory T. Swenson, D.D.S.
10(m) Registration Rights Agreement dated November 11, 1996, among American
Dental Partners, Inc. and certain of its stockholders (the former
stockholders of PDHC, Ltd.).
10(n) Registration Rights Agreement dated December 13, 1996, between
American Dental Partners, Inc. and Les L. Crane, D.D.S.
10(o) Registration Rights Agreement dated December 23, 1996, among American
Dental Partners, Inc. and certain of its stockholders (the former
stockholders of Smileage Dental Care, Inc.)
10(p) Registration Rights Agreement dated March 31, 1997, between American
Dental Partners, Inc. and Lakeside Dental Group.
10(q) Registration Rights Agreement dated May 22, 1997, between American
Dental Partners, Inc. and Abel J. Soster, DMD.
**10(r) Service Agreement dated November 12, 1996, between PDHC, Ltd. and
PDG, P.A., as amended by First Amendment to Service Agreement dated
January 1, 1997 and Second Amendment to Service Agreement dated
January 1, 1998.
**10(s) Services Agreement dated December 23, 1996, between Smileage Dental
Care, Inc. and Wisconsin Dental Group, S.C., as amended by First
Amendment to Services Agreement dated January 1, 1997 and Second
Amendment to Service Agreement dated January 1, 1998.
10(t) Revolving Credit Agreement dated April 24, 1997, between Fleet
National Bank, as Agent, and American Dental Partners, Inc.
10(u) Acquisition and Exchange Agreement dated November 11, 1996, among
American Dental Partners, Inc., PDHC, Ltd., and the Shareholders of
PDHC, Ltd.
10(v) Asset Purchase Agreement dated December 13, 1996, among American
Dental Partners, Inc., Texas Dental Partners, Inc., Les L. Crane,
D.D.S., P.C., and Les L. Crane, D.D.S.
10(w) Agreement and Plan of Merger and Reorganization dated December 23,
1996, among American Dental Partners, Inc., American Dental Partners
of Wisconsin, Inc., Smileage Dental Care, Inc., and the Shareholders
of Smileage Dental Care, Inc.
10(x) Registration Rights Agreement dated July 1, 1997, among American
Dental Partners, Inc. and John M. Werwie, D.D.S., James F. Ruzicka,
D.D.S., and Jon J. Pagenkopf, D.D.S.
10(y) Registration Rights Agreement dated October 1, 1997, among American
Dental Partners, Inc. and Karl H. Biewald, D.D.S., J.E. Cutliffe,
D.D.S., Timothy J. Montgomery, D.D.S., Curtis R. Dunn, D.D.S., and
Christopher S. Hipp, D.D.S.
10(z) Registration Rights Agreement dated October 1, 1997, among American
Dental Partners, Inc. and Karl H. Biewald, D.D.S. and Terri M.
Lawler.
10(aa) Asset Purchase Agreement dated October 1, 1997, among American Dental
Partners, Inc., Apple Park Associates, Inc., APAM, Inc., OC
Specialists, Ltd., and the Shareholders of APAM, Inc. and OC
Specialists, Ltd.
</TABLE>

II-5
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
10(bb) Asset Purchase Agreement dated October 1, 1997 among American Dental
Partners, Inc., American Dental Partners of Wisconsin, Inc., Terrance
R. Wilkens, D.D.S., Terrance R. Wilkens, D.D.S., S.C., Brookfield
Dental Center, S.C., Waukesha Dental Center, S.C., Hales Corners
Dental Center, S.C., and West Allis Dental Center, S.C.
*10(cc) Employment and Noncompetition Agreement dated November 12, 1996
between American Dental Partners, Inc. and Forrest M. Flint.
*11 Computation of Earnings Per Share
21 Subsidiaries of American Dental Partners, Inc.
23(a) Consent of Baker & Hostetler LLP (included in Exhibit 5)
*23(b) Consent of KPMG Peat Marwick LLP
24 Powers of Attorney
*27 Financial Data Schedule
</TABLE>
- --------
* Filed herewith.

** Filed herewith--certain portions of this exhibit have been omitted pursuant
to a request for confidential treatment.

(B) FINANCIAL STATEMENT SCHEDULES

Not applicable

ITEM 17. UNDERTAKINGS

The undersigned registrant hereby undertakes as follows:

(1) The undersigned will provide to the underwriters at the closing
specified in the underwriting agreement certificates in such denominations
and registered in such names as required by the underwriters to permit
prompt delivery to each purchaser.

(2) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance on Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it is declared effective.

(3) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that
time shall be the initial bona fide offering thereof.

(4) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the provisions described
in Item 14, or otherwise, the registrant has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling precedent, submit to
a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issues.

II-6
<PAGE>

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT
HAS DULY CAUSED THIS AMENDMENT NO. 3 TO THE REGISTRATION STATEMENT TO BE
SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE
TOWN OF WAKEFIELD, COMMONWEALTH OF MASSACHUSETTS, OF THE 25TH DAY OF FEBRUARY,
1998.

American Dental Partners, Inc.

/s/ Gregory A. Serrao
By: _________________________________
GREGORY A. SERRAO
Chairman, President and Chief
Executive Officer

PURSUANT TO THE REQUIREMENT OF THE SECURITIES ACT OF 1933, THIS AMENDMENT
NO. 3 TO THE REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS
IN THE CAPACITIES AND ON THE DATES INDICATED.

<TABLE>
<CAPTION>
<S> <C> <C>
SIGNATURE CAPACITY IN WHICH SIGNED DATE

/s/ Gregory A. Serrao Chairman, President February 25, 1998
- ------------------------------------- and Chief Executive
GREGORY A. SERRAO Officer and
Director (principal
executive officer)

/s/ Ronald M. Levenson Senior Vice February 25, 1998
- ------------------------------------- President, Chief
RONALD M. LEVENSON Financial Officer
and Treasurer
(principal
financial and
accounting officer)

/s/ Dr. Gregory T. Swenson* Director February 25, 1998
- -------------------------------------
DR. GREGORY T. SWENSON

/s/ Martin J. Mannion* Director February 25, 1998
- -------------------------------------
MARTIN J. MANNION

/s/ James T. Kelly* Director February 25, 1998
- -------------------------------------
JAMES T. KELLY

/s/ Derril W. Reeves* Director February 25, 1998
- -------------------------------------
DERRIL W. REEVES
</TABLE>

* The undersigned, Gregory A. Serrao, by signing his name hereto, does hereby
execute this Amendment No. 3 to the Registration on his own behalf
personally and on behalf of each of the above-named directors of the
Registrant pursuant to the Powers of Attorney executed by such directors and
filed with the Securities and Exchange Commission as exhibits to the
Registration Statement.

/s/ Gregory A. Serrao
- -------------------------------------
GREGORY A. SERRAO

II-7
<PAGE>

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
1 Form of Underwriting Agreement
3(a) Second Amended and Restated Certificate of Incorporation of American
Dental Partners, Inc.
3(b) Amended and Restated By-laws of American Dental Partners, Inc.
4 Form of Stock Certificate
5 Opinion of Baker & Hostetler LLP
10(a) American Dental Partners, Inc. Series A and Series B Preferred Stock
Purchase Agreement dated January 8, 1996, among American Dental
Partners, Inc., Summit Ventures IV, L.P., Summit Investors, III,
L.P., and Gregory A. Serrao, as amended by First Amendment to Series
A and Series B Preferred Stock Purchase Agreement dated February 19,
1996, Second Amendment to Series A and Series B Preferred Stock
Purchase Agreement dated May 1, 1996, and Third Amendment to Series
A and Series B Preferred Stock Purchase Agreement dated November 1,
1996.
10(b) American Dental Partners, Inc. Subordinated Debenture Purchase
Agreement dated January 8, 1996, among American Dental Partners,
Inc., Summit Subordinated Debt Fund, L.P., and Summit Investors III,
L.P., as amended by First Amendment to Subordinated Debenture
Purchase Agreement dated May 1, 1996, and Second Amendment to
Subordinated Debenture Purchase Agreement dated November 1, 1996.
10(c) Registration Rights Agreement dated January 8, 1996, among American
Dental Partners, Inc., Summit Venture IV, L.P., Summit Investors
III, L.P., Gregory A. Serrao, and others, as amended by Amendment to
Registration Rights Agreement dated November 1, 1996.
10(d) Reformation Agreement dated December 23, 1996, among American Dental
Partners, Inc., Summit Ventures IV, L.P., Summit Investors III,
L.P., Summit Investors II, L.P., and Gregory A. Serrao.
10(e) American Dental Partners, Inc. Amended and Restated 1996 Stock
Option Plan.
10(f) American Dental Partners, Inc. 1996 Time Accelerated Stock Option
Plan, as amended by Amendment No. 1
10(g) American Dental Partners, Inc. Amended and Restated 1996 Affiliate
Stock Option Plan.
10(h) American Dental Partners, Inc. Amended and Restated 1996 Directors
Stock Option Plan, as amended by Amendment No. 1.
10(i) Employment and Non-Competition Agreement dated January 8, 1996,
between American Dental Partners, Inc. and Gregory A. Serrao.
10(j) Employment Agreement dated April 22, 1996, between American Dental
Partners, Inc. and Ronald M. Levenson.
10(k) Employment Agreement dated May 31, 1996, between American Dental
Partners, Inc. and George W. Robinson, as amended by Amendment to
Employment Agreement dated August 27, 1997.
10(l) Employment and Noncompetition Agreement dated November 12, 1996,
between PDHC, Ltd. and Gregory T. Swenson, D.D.S.
10(m) Registration Rights Agreement dated November 11, 1996, among
American Dental Partners, Inc. and certain of its stockholders (the
former stockholders of PDHC, Ltd.).
10(n) Registration Rights Agreement dated December 13, 1996, between
American Dental Partners, Inc. and Les L. Crane, D.D.S.
</TABLE>
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER EXHIBIT DESCRIPTION
------- -------------------
<C> <S>
10(o) Registration Rights Agreement dated December 23, 1996, among
American Dental Partners, Inc. and certain of its stockholders (the
former stockholders of Smileage Dental Care, Inc.)
10(p) Registration Rights Agreement dated March 31, 1997, between
American Dental Partners, Inc. and Lakeside Dental Group.
10(q) Registration Rights Agreement dated May 22, 1997, between American
Dental Partners, Inc. and Abel J. Soster, DMD.
**10(r) Service Agreement dated November 12, 1996, between PDHC, Ltd. and
PDG, P.A., as amended by First Amendment to Service Agreement dated
January 1, 1997 and Second Amendment to Service Agreement dated
January 1, 1998.
**10(s) Services Agreement dated December 23, 1996, between Smileage Dental
Care, Inc. and Wisconsin Dental Group, S.C., as amended by First
Amendment to Services Agreement dated January 1, 1997 and Second
Amendment to Service Agreement dated January 1, 1998.
10(t) Revolving Credit Agreement dated April 24, 1997, between Fleet
National Bank, as Agent, and American Dental Partners, Inc.
10(u) Acquisition and Exchange Agreement dated November 11, 1996, among
American Dental Partners, Inc., PDHC, Ltd., and the Shareholders of
PDHC, Ltd.
10(v) Asset Purchase Agreement dated December 13, 1996, among American
Dental Partners, Inc., Texas Dental Partners, Inc., Les L. Crane,
D.D.S., P.C., and Les L. Crane, D.D.S.
10(w) Agreement and Plan of Merger and Reorganization dated December 23,
1996, among American Dental Partners, Inc., American Dental
Partners of Wisconsin, Inc., Smileage Dental Care, Inc., and the
Shareholders of Smileage Dental Care, Inc.
10(x) Registration Rights Agreement dated July 1, 1997, among American
Dental Partners, Inc. and John M. Werwie, D.D.S., James F. Ruzicka,
D.D.S., and Jon J. Pagenkopf, D.D.S.
10(y) Registration Rights Agreement dated October 1, 1997, among American
Dental Partners, Inc. and Karl H. Biewald, D.D.S., J.E. Cutliffe,
D.D.S., Timothy J. Montgomery, D.D.S., Curtis R. Dunn, D.D.S., and
Christopher S. Hipp, D.D.S.
10(z) Registration Rights Agreement dated October 1, 1997, among American
Dental Partners, Inc. and Karl H. Biewald, D.D.S. and Terri M.
Lawler.
10(aa) Asset Purchase Agreement dated October 1, 1997, among American
Dental Partners, Inc., Apple Park Associates, Inc., APAM, Inc., OC
Specialists, Ltd., and the Shareholders of APAM, Inc. and OC
Specialists, Ltd.
10(bb) Asset Purchase Agreement dated October 1, 1997 among American
Dental Partners, Inc., American Dental Partners of Wisconsin, Inc.,
Terrance R. Wilkens, D.D.S., Terrance R. Wilkens, D.D.S., S.C.,
Brookfield Dental Center, S.C., Waukesha Dental Center, S.C., Hales
Corners Dental Center, S.C., and West Allis Dental Center, S.C.
*10(cc) Employment and Noncompetition Agreement dated November 12, 1996
between American Dental Partners, Inc., and Forrest M. Flint.
*11 Computation of Earnings Per Share
21 Subsidiaries of American Dental Partners, Inc.
23(a) Consent of Baker & Hostetler LLP (included in Exhibit 5)
* 23(b) Consent of KPMG Peat Marwick LLP
24 Powers of Attorney
*27 Financial Data Schedule
</TABLE>
- --------
* Filed herewith.

** Filed herewith--certain portions of this exhibit have been omitted pursuant
to a request for confidential treatment.

<PAGE>

EXHIBIT 10(R)

SERVICE AGREEMENT

BETWEEN

PDHC, INC.

and

PDG, P.A.

November 12, 1996

* This information has been omitted pursuant to a request for confidential
treatment and has been filed separately with the Securities and Exchange
Commission.
<PAGE>

TABLE OF CONTENTS
-----------------

<TABLE>
<S> <C>
ARTICLE I. DEFINITIONS............................................................................. 1
-----------

ARTICLE II. APPOINTMENT AND AUTHORITY OF SERVICE COMPANY............................................ 1
--------------------------------------------
(S)2.1 Appointment............................................................................. 1
-----------
(S)2.2 Authority............................................................................... 2
---------
(S)2.3 Patient Referrals....................................................................... 2
-----------------
(S)2.4 Internal Management of Provider......................................................... 2
-------------------------------
(S)2.5 Practice of Dentistry................................................................... 2
---------------------

ARTICLE III. POLICY BOARD............................................................................ 2
------------
(S)3.1 Formation and Operation of Policy Board................................................. 3
---------------------------------------
(S)3.2 Responsibilities of the Policy Board. .................................................. 3
------------------------------------
(a) Capital Improvements and Expansion... ............................................ 3
----------------------------------
(b) Budgeting......................................................................... 3
---------
(i) Annual Budgets........................................................... 3
--------------
(ii) Effect of Certain Changes................................................ 4
-------------------------
(iii) Variances................................................................ 4
---------
(c) Marketing and Advertising......................................................... 4
-------------------------
(d) Patient Fees; Collection Policies................................................. 4
---------------------------------
(e) Provider and Payor Relationships.................................................. 4
--------------------------------
(f) Strategic and Operational Planning................................................ 4
----------------------------------
(g) Capital Expenditures.............................................................. 4
--------------------
(h) Personnel Planning................................................................ 4
------------------
(i) Grievance Referrals............................................................... 5
-------------------
(j) Patient Concerns and Claims....................................................... 5
---------------------------
(k) Environmental Health and Safety................................................... 5
-------------------------------
(l) Emergency Care Services........................................................... 5
-----------------------
(m) Financial Review.................................................................. 5
----------------
(n) Provider Acquisitions............................................................. 5
---------------------
(o) Other............................................................................. 5
-----
(S)3.3 Dental Decisions........................................................................ 5
----------------

ARTICLE IV. RESPONSIBILITIES OF SERVICE COMPANY..................................................... 6
-----------------------------------
(S)4.1 Clinics................................................................................. 6
-------
(S)4.2 Equipment............................................................................... 6
---------
(S)4.4 Supplies................................................................................ 7
--------
(S)4.5 Capital Investment...................................................................... 7
------------------
(S)4.6 Support Services........................................................................ 7
----------------
(S)4.7 Quality Assurance, Risk Management, and Utilization Review.............................. 7
----------------------------------------------------------
</TABLE>

<PAGE>

<TABLE>
<S> <C>
(S)4.8 Licenses and Permits.................................................................... 8
--------------------
(S)4.9 Personnel............................................................................... 8
---------
(S)4.10 Contract Negotiations................................................................... 8
---------------------
(S)4.11 Billing and Collection.................................................................. 8
----------------------
(S)4.12 Provider Account........................................................................ 10
----------------
(a) Power of Attorney................................................................. 10
-----------------
(b) Priority of Payments.............................................................. 10
--------------------
(c) Further Assurances................................................................ 10
------------------
(S)4.13 Financial Matters....................................................................... 10
-----------------
(a) Annual Budget..................................................................... 10
-------------
(b) Accounting and Financial Records.................................................. 11
--------------------------------
(c) Review of Expenditures............................................................ 11
----------------------
(d) Tax Matters....................................................................... 11
-----------
(i) General..................................................................... 11
-------
(ii) Sales and Use Taxes......................................................... 11
-------------------
(S)4.14 Reports and Records..................................................................... 12
-------------------
(a) Dental Records.................................................................... 12
--------------
(b) Other Reports and Records......................................................... 12
-------------------------
(S)4.15 Recruitment of Provider Dentists........................................................ 12
--------------------------------
(S)4.16 Service Company's Insurance............................................................. 12
---------------------------
(S)4.17 License of Name and Marks............................................................... 13
-------------------------
(S)4.18 No Warranty............................................................................. 13
-----------

ARTICLE V. RESPONSIBILITIES OF PROVIDER............................................................ 13
----------------------------
(S)5.1 Organization and Operations............................................................. 13
---------------------------
(S)5.2 Provider Personnel...................................................................... 13
------------------
(a) Dentist Personnel................................................................. 13
-----------------
(b) Provider and Patient Scheduling................................................... 14
-------------------------------
(c) Paid Hours Reporting.............................................................. 14
--------------------
(d) Non-Dentist Dental Care Personnel................................................. 14
---------------------------------
(S)5.3 Professional Standards.................................................................. 14
----------------------
(S)5.4 Dental Care............................................................................. 15
-----------
(S)5.5 Peer Review and Quality Assurance....................................................... 15
---------------------------------
(S)5.6 Provider's Insurance.................................................................... 16
--------------------
(S)5.7 Noncompetition.......................................................................... 16
--------------
(S)5.8 Use of Name............................................................................. 17
-----------

ARTICLE VI. CONFIDENTIALITY......................................................................... 17
---------------
(S)6.1 Confidential and Proprietary Information................................................ 17
----------------------------------------
(S)6.2 Use of Practice Statistics.............................................................. 18
--------------------------

ARTICLE VII. FINANCIAL ARRANGEMENTS.................................................................. 18
----------------------
(S)7.1 Clinic Expense Reimbursement............................................................ 18
----------------------------
(S)7.2 Repayment of Advances................................................................... 18
---------------------
</TABLE>

ii
<PAGE>

<TABLE>
<S> <C>
(S)7.3 Fees................................................................................... 18
----
(a) Service Fee...................................................................... 18
-----------
(b) Performance Fee.................................................................. 19
---------------
(S)7.4 Adjustments to Fees.................................................................... 19
-------------------
(S)7.5 Reasonable Value....................................................................... 19
----------------
(S)7.6 Payment................................................................................ 19
-------
(S)7.7 Accounts Receivable.................................................................... 20
-------------------

ARTICLE VIII. TERM AND TERMINATION................................................................... 20
--------------------
(S)8.1 Initial and Renewal Term............................................................... 20
------------------------
(S)8.2 Termination............................................................................ 20
-----------
(a) Termination By Service Company................................................... 20
------------------------------
(b) Termination By Provider.......................................................... 21
-----------------------
(c) Termination by Agreement......................................................... 22
------------------------
(d) Legislative, Regulatory or Administrative Change................................. 22
------------------------------------------------
(S)8.3 Effects of Termination................................................................. 22
----------------------
(S)8.4 Purchase Obligation.................................................................... 23
-------------------
(S)8.5 Closing of Purchase.................................................................... 24
-------------------

ARTICLE IX. GENERAL................................................................................ 25
-------
(S)9.1 Administrative Services Only........................................................... 25
----------------------------
(S)9.2 Relationship of Parties................................................................ 25
-----------------------
(S)9.3 Notices................................................................................ 26
-------
(S)9.4 Execution of Documents................................................................. 26
----------------------
(S)9.5 Governing Law.......................................................................... 27
-------------
(S)9.6 Severability........................................................................... 27
------------
(S)9.7 Setoff................................................................................. 27
------
(S)9.8 Remedies............................................................................... 27
--------
(S)9.9 Non-waiver............................................................................. 27
----------
(S)9.10 Indemnification........................................................................ 28
---------------
(S)9.11 No Third Party Benefit................................................................. 28
----------------------
(S)9.12 Captions............................................................................... 28
--------
(S)9.13 Genders and Numbers.................................................................... 28
-------------------
(S)9.14 Complete Agreement..................................................................... 28
------------------
(S)9.15 Counterparts........................................................................... 28
------------
(S)9.16 Assignment............................................................................. 28
----------
(S)9.17 Successors............................................................................. 29
----------
(S)9.18 Force Majeure.......................................................................... 29
-------------

INDEX TO EXHIBITS..................................................................................... 30
- -----------------

DEFINITIONS........................................................................................... i
- -----------
</TABLE>

iii
<PAGE>

SERVICE AGREEMENT

This agreement is made effective November 12, 1996, between PDHC, Inc., a
Minnesota corporation ("Service Company"), and PDG, P.A., a Minnesota
professional association ("Provider").

Background Information
----------------------

A. Provider operates as a dental practice providing dental services to the
general public in and around the Minneapolis-St. Paul area through individual
dentists who are licensed to practice dentistry in the state of Minnesota and
who are employed or otherwise retained by Provider.

B. Service Company is engaged in the business of providing assets,
personnel, and services to dental practices other than such services as are
directly related to the provision of dental care or the practice of dentistry.
Service Company's services are intended to improve the efficiency and
profitability of dental practices and permit the dentists in such practices to
focus their efforts solely on rendering quality dental care.

C. Provider desires to focus its energies, expertise and time on the
practice of dentistry and on the delivery of dental services to patients. To
accomplish this goal, Provider desires to engage Service Company to provide such
services as are necessary and appropriate for the day-to-day administration of
the non-dental aspects of Provider's dental practice, and Service Company
desires to provide such services to Provider, all upon the terms and subject to
the conditions set forth in this agreement.

Statement of Agreement
----------------------

Service Company and Provider (the "Parties") hereby acknowledge the
accuracy of the foregoing Background Information and agree as follows:

ARTICLE I. DEFINITIONS
-----------

Capitalized terms used in this agreement but not otherwise defined herein
shall have the respective meanings given those terms in the attached Exhibit A.

ARTICLE II. APPOINTMENT AND AUTHORITY OF SERVICE COMPANY
--------------------------------------------

(S)2.1 Appointment. Provider hereby appoints Service Company as its sole
-----------
and exclusive agent for the performance of the Services, and Service Company
hereby accepts such appointment, subject at all times to the provisions of this
agreement.
<PAGE>

(S)2.2 Authority. Service Company shall have all power, authority, and
---------
responsibility reasonably necessary to provide the Services and carry out
Service Company's other obligations under this agreement. Without limiting the
foregoing, Service Company shall have the authority to provide the Services in
any reasonable manner Service Company deems appropriate to meet the day-to-day
requirements of the business functions of Provider. Subject to Article III of
this agreement, Service Company is also expressly authorized to negotiate and
execute on behalf of Provider contracts that do not relate to the provision of
Dental Care. Provider shall give Service Company 30 days prior written notice
of Provider's intent to execute any agreement obligating Provider to perform
Dental Care or otherwise creating a binding legal obligation on Provider.
Unless an expense is expressly designated as a Service Company Expense in this
agreement, all expenses incurred by Service Company in providing services
pursuant to this agreement shall be Clinic Expenses.

(S)2.3 Patient Referrals. The Parties agree that the benefits to Provider
-----------------
hereunder do not require, are not payment for, and are not in any way contingent
upon the referral, admission, treatment, or any other arrangement for the
provision of any item or service offered by Service Company to patients of
Provider in any facility, laboratory, or dental care operation controlled,
managed, or operated by Service Company.

(S)2.4 Internal Management of Provider. Matters involving the tax
-------------------------------
planning, investment planning, and internal management, control, or finances of
Provider, including without limitation the compensation of dentist employees of
Provider, shall remain the sole and exclusive responsibility of Provider and its
shareholders.

(S)2.5 Practice of Dentistry. The Parties acknowledge and agree that: (a)
---------------------
Service Company is not authorized or qualified to engage in any activity that
may be construed or deemed to constitute the practice of dentistry; and (b)
notwithstanding anything in this agreement to the contrary (i) Provider, through
its dentists, shall be solely responsible for and shall have complete authority,
responsibility, supervision, and control over the provision of all Dental Care
and that all Dental Care shall be provided and performed exclusively by or under
the supervision of dentists as such dentists, in their sole discretion, deem
appropriate, (ii) Service Company shall not have or exercise any control or
supervision over the provision of Dental Care, and (iii) to the extent any act
or service required of Service Company under this agreement is reasonably likely
to be construed by a court of competent jurisdiction or by any applicable
governmental agency to constitute the practice of dentistry, the requirement to
perform that act or service by Service Company shall be deemed waived and
unenforceable. For purposes of this agreement and as the context permits, the
term "dentist" shall be deemed to include those individuals licensed by the
State of Minnesota to practice general dentistry or a dental care specialty such
as orthodontics, endodontics, periodontics, prosthodontics, pediatric dentistry,
oral surgery, and oral medicine.

2
<PAGE>

ARTICLE III. POLICY BOARD
------------

(S)3.1 Formation and Operation of Policy Board. The Parties hereby
---------------------------------------
establish a policy board (the "Policy Board") which shall be responsible for
developing and implementing management and administrative policies for the
overall operation of Clinics. The Policy Board shall consist of six members, of
which three members shall be designated by Service Company, in its sole
discretion, and three members shall be designated by Provider; provided that,
unless otherwise agreed by the Parties, the Policy Board members designated by
Provider shall be licensed dentists employed by Provider. Each Party shall have
the right to designate, remove, and replace its Policy Board designees at any
time and from time to time upon notice to the other Party.

Except as may otherwise be expressly provided in this agreement or
any rules, bylaws, or regulations adopted by the Policy Board, the act of a
majority of the members of the Policy Board shall be the act of the Policy
Board. The Policy Board's decisions may be evidenced by either minutes of a
Policy Board meeting or written action taken by the Policy Board members making
the decision; provided that no written action signed by less than all of the
Policy Board members shall be effective unless notice of such action is given to
the Policy Board member who is not signing such action at least two business
days prior to the effective date of such action. The decisions, resolutions, and
actions of the Policy Board shall be binding on both Parties and, together with
the recommendations of the Policy Board, shall be implemented by the Parties, as
appropriate.

The Policy Board shall hold regular meetings at such places and at
such times (not less often than quarterly) as the Policy Board may determine
from time to time. Special Policy Board meetings may be called by either Party
or any two Policy Board members; provided that notice of any meeting which is
not a regularly scheduled meeting shall be given to all Policy Board members at
least five business days prior to the meeting, unless such notice is waived by
the Policy Board members. Policy Board meetings may be held through the use of
telecommunications equipment so long as all members can hear each other clearly.

(S)3.2 Responsibilities of the Policy Board. The Policy Board shall have
------------------------------------
the following duties, responsibilities, and authority:

(a) Capital Improvements and Expansion. Any renovation and expansion
----------------------------------
plans and capital equipment expenditures with respect to Clinics shall be
reviewed and approved by the Policy Board and shall be based upon economic
feasibility, dentist support, productivity, and then-current market conditions.

(b) Budgeting.
---------

(i) Annual Budgets. All annual capital and operating budgets
--------------
prepared in accordance with (S)4.13(a) by Service Company (in consultation with
Provider) shall be subject to the review, comment, and approval of the Policy
Board. Notwithstanding the foregoing

3
<PAGE>

sentence, such budgets shall be subject to the review, comment, and approval of
Parent. The Policy Board shall, upon approving any budget pursuant to this
section, deliver a copy of such approved budget to the Chief Financial Officer
of Parent for Parent's approval.

(ii) [*]

(iii) [*]

(c) Marketing and Advertising. All advertising and other marketing of
-------------------------
the dental services performed at any Clinic shall be subject to the prior review
and approval of the Policy Board.

(d) Patient Fees; Collection Policies. Subject to (S)3.3, as a part
---------------------------------
of the annual operating budget, in consultation with Provider and Service
Company, the Policy Board shall review and make recommendations concerning the
fee schedules and collection policies for all dental and ancillary services
rendered by Provider. Approval of the fee schedules shall be a Dental Decision.

(e) Provider and Payor Relationships. Subject to (S)3.3, decisions
--------------------------------
regarding the establishment or maintenance of contractual relationships between
Provider and outside or institutional dental care providers and third-party
payors shall be subject to the review and recommendations of the Policy Board.
Subject to (S)3.3, all discounted fee practices and schedules, including
individual provider or specialty discount arrangements, preferred provider
organization discounts and capitated fee arrangements, shall be subject to the
review and recommendations of the Policy Board. Where there is no clear
methodology for the allocation of capitated fees among Provider's Dental Care
Professionals, the Policy Board shall recommend the methodology intended to
result in the equitable and appropriate allocation of all related fees
consistent with the type and utilization of Dental Care covered under the
capitation arrangement.

(f) Strategic and Operational Planning. The Policy Board shall review
----------------------------------
and approve the long-term strategic and short-term operational goals, objectives
and plans developed by Service Company.

(g) Capital Expenditures. The Policy Board shall determine the
--------------------
priority of major capital expenditures.

(h) Personnel Planning. The Policy Board shall review and approve
------------------
Provider and support personnel manpower plans developed by Service Company. The
Policy Board shall review and approve any variations to the restrictive
covenants in the dentists' employment or other agreements.

* This information has been omitted pursuant to a request for confidential
treatment and has been filed separately with the Securities and Exchange
Commission.

4
<PAGE>

(i) Grievance Referrals. The Policy Board shall consider and make
-------------------
recommendations to the Parties regarding grievances pertaining to matters not
specifically addressed in this agreement as referred to it by key Provider or
Service Company management and supervisory personnel.

(j) Patient Concerns and Claims. The Policy Board shall review, approve
---------------------------
and monitor a patient claims tracking, monitoring and recovery procedure which
shall provide, without limitation, for (i) the timely and appropriate resolution
of all claims and related patient and Provider reimbursement decisions, and (ii)
the distribution of a summary report setting forth the status and proposed
actions with respect to each such claim to Provider and Service Company on a
regular basis. All Dental Care related patient concerns and claims
reimbursement decisions shall be a Provider Expense.

(k) Environmental Health and Safety. The Policy Board shall review,
-------------------------------
approve and monitor environmental and workplace health and safety guidelines,
the goal of which is to achieve compliance with current national, state and
local laws and regulations regarding environmental and workplace health and
safety.

(l) Emergency Care Services. The Policy Board shall review, approve and
-----------------------
periodically make suggestions for improving (i) the organization and delivery of
emergency Dental Care by Provider, and (ii) the process and guidelines for
ensuring an appropriate response by Provider to dental and in-Clinic medical
emergencies as they may occur from time to time.

(m) Financial Review. The Policy Board shall review and monitor the
----------------
financial performance of Provider with respect to the attainment of its budgeted
goals.

(n) Provider Acquisitions. The Policy Board shall have the authority to
---------------------
approve or disapprove any merger or combination with or acquisition of any
dental practice by Provider.

(o) Other. The Policy Board shall have such other duties,
-----
responsibilities, and authority as may be set forth in this agreement or agreed
upon by the Parties from time to time.

(S)3.3 Dental Decisions. Notwithstanding the preceding section or any
----------------
other provisions of this agreement to the contrary, all Dental Decisions
(defined below) will be made solely by the dentist members of the Policy Board;
provided that non-dentist members of the Policy Board may participate in the
analysis and discussion process. For purposes of this agreement, "Dental
Decisions" shall mean decisions relating directly to: (a) types and levels of
Dental Care to be provided; (b) recruitment of dentists for Provider, including
the evaluation of the background, experience, qualifications, specialties, and
other credentials of recruited dentists; (c) fee schedules for Provider's
services, including without limitation Provider's usual and customary fee
schedule; and (d) any other Dental Care related functions or decisions agreed
upon by the Parties.

5
<PAGE>

ARTICLE IV. RESPONSIBILITIES OF SERVICE COMPANY
-----------------------------------

During the Term, Service Company shall provide all such Services as are
necessary and appropriate for the day-to-day administration of the business
aspects of Provider's operations, including without limitation those services
set forth in this Article, provided that all such services shall be subject to
the applicable Budget.

(S)4.1 Clinics
-------

(a) Service Company shall lease, acquire or otherwise procure a Clinic
in such locations as are approved by the Policy Board, taking into consideration
the professional concerns of Provider. The expenses associated with any such
leasing, acquisition, or procurement shall be Clinic Expenses. Any Clinic
procured by Service Company for use by Provider shall be procured at
commercially reasonable rates. Any move from a present Provider practice
location shall be made only after Service Company has received Provider Consent.

(b) In the event Provider is the lessee of a Clinic under a lease with
an unrelated and nonaffiliated lessor, Service Company may require Provider to
assign such lease to Service Company upon receipt of consent from the lessor.
Provider shall exercise all reasonable efforts to assist in obtaining the
lessor's consent to the assignment. Any expenses incurred in the assignment
shall be Clinic Expenses.

(c) Service Company shall be responsible for the repair and maintenance
of each Clinic, in a manner consistent with Service Company's responsibilities
under the terms of any lease or other use arrangement relating to that Clinic,
the costs and expenses of which shall be a Clinic Expense; provided that the
costs and expenses of any repairs or maintenance necessitated by the negligence
or willful misconduct of Provider or its dentists, other personnel, agents, or
invitees shall be a Provider Expense.

(S)4.2 Equipment.
---------

(a) Service Company shall provide all non-dental equipment, fixtures,
office supplies, furniture and furnishings deemed reasonably necessary by
Service Company for the operation of each Clinic and reasonably necessary for
the provision of Dental Care.

(b) Service Company shall provide, finance, or cause to be provided or
financed such dental related equipment as is reasonably required by Provider.
Subject to economic feasibility as set forth in the budgets approved pursuant to
this agreement, Provider shall have final authority in all dental equipment
selections. Service Company may, however, advise Provider on the relationship
between its dental equipment decisions and the overall administrative and
financial operations of the Clinics. Except for Special Dental Supplies
(defined in (S) 4.3, below), all dental and non-dental equipment acquired for
the use of Provider shall be owned by Service Company.

6
<PAGE>

(c) Service Company shall be responsible for repairing, maintaining,
and keeping in reasonably good condition (ordinary wear and tear excepted), and
replacing (as necessary) all equipment provided by Service Company under this
agreement, the cost and expense of which shall be a Clinic Expense; and provided
that the cost and expense for any repairs, maintenance and replacement
necessitated by the negligence or willful misconduct of Provider or its
dentists, other personnel, or agents shall be a Provider Expense.

(S)4.3 Laboratory Services. Service Company shall arrange for laboratory
-------------------
services, including without limitation dental appliance laboratory service,
pathology laboratory service, medical laboratory service, and such other
laboratory services as are reasonably necessary and appropriate for the
operation of each Clinic and the provision of Dental Care therein.

(S)4.4 Supplies. Service Company shall order, procure, purchase, own, and
--------
provide to Provider a reasonable inventory of Ordinary Dental Supplies and
office supplies as are reasonably necessary and appropriate for the operation of
each Clinic and the provision of Dental Care therein. Unless otherwise
prohibited by federal and/or state law, Service Company shall also order,
procure, purchase and provide on behalf of and as agent for Provider all
reasonable Special Dental Supplies required by Provider to provide Dental Care,
the cost of which shall be a Clinic Expense. Service Company shall ensure that
each Clinic is at all times adequately stocked with all such supplies. The
ultimate oversight, supervision and ownership of (a) all office and Ordinary
Dental Supplies is and shall remain the sole responsibility of Service Company,
and (b) all Special Dental Supplies is and shall remain the sole responsibility
of Provider.

(S)4.5 Capital Investment. Access to all needed working capital and
------------------
capital expenditures approved by the Policy Board will be provided by Service
Company. Service Company shall determine the source of capital to be invested,
which may include (a) intracompany borrowings from Parent (at the rate set forth
in clause (j) in the definition of "Clinic Expenses"), and (b) borrowings,
leases, or other financing methods through independent third-party financial
institutions.

(S)4.6 Support Services. Service Company shall provide or arrange for all
----------------
printing, stationery, forms, postage, duplication, facsimile, photocopying, and
data transmission and processing services, information services (including
providing a computer system for clinic functions, billing, communications, and
management), and other support services as are reasonably necessary and
appropriate for the operation of each Clinic and the provision of Dental Care
therein.

(S)4.7 Quality Assurance, Risk Management, and Utilization Review. Service
----------------------------------------------------------
Company shall assist Provider in Provider's establishment and implementation of
procedures to ensure the consistency, quality, appropriateness, and necessity of
Dental Care provided by Provider, and shall provide administrative support for
Provider's overall quality assurance, risk management, and utilization review
programs. Service Company shall have the authority to monitor Provider's level
of conformance with such procedures and to report its findings to Provider.

7
<PAGE>

(S)4.8 Licenses and Permits. Although Provider shall be solely
--------------------
responsible for obtaining and maintaining all federal, state, and local licenses
and regulatory permits required for or in connection with the operation of
Provider and in connection with the operation of all dental equipment located in
each Clinic, Service Company shall assist Provider with the implementation of a
plan designed to ensure that all such licenses and permits are obtained and
shall provide reasonable assistance to Provider in obtaining the same. Service
Company also shall maintain all licenses and permits required for all equipment
(existing and future) located at each Clinic.

(S)4.9 Personnel. Except as provided in (S)5.2(d) of this agreement and
---------
subject to (S)3.3, Service Company shall employ or otherwise retain and shall be
responsible for recruiting, hiring, and terminating all management,
administrative, supervisory, clerical, secretarial, bookkeeping, accounting,
payroll, dental assistants, hygienists, laboratory technicians and personnel,
and other non-dentist personnel as Service Company deems necessary and
appropriate for Service Company's performance of its duties and obligations
under this agreement. The selection, training, and supervision of: (a) dental
assistants, hygienists, and other clinical personnel to be employed by Service
Company shall be the responsibility of Provider; and (b) all other personnel to
be employed by Service Company shall be the responsibility of Service Company.
Consistent with reasonably prudent personnel management policies, Service
Company shall seek and consider the advice, input, and requests of Provider in
regard to personnel matters. Service Company shall have sole responsibility for
determining the salaries and fringe benefits of such non-professional personnel,
and for withholding all appropriate amounts for income taxes, unemployment
insurance, social security, workers' compensation, and any other withholding
required by applicable law.

(S)4.10 Contract Negotiations. Service Company shall advise Provider with
---------------------
respect to and negotiate, either directly or on Provider's behalf, as
appropriate, such contractual arrangements with third parties as are reasonably
necessary and appropriate for Provider's provision of Dental Care, including
without limitation negotiated price agreements with third party payors,
alternative delivery systems, or other purchasers of group dental care services;
provided that no contract or arrangement regarding the provision of Dental Care
shall be entered into without Provider Consent.

(S)4.11 Billing and Collection. On behalf of and for the account of
----------------------
Provider, Service Company shall establish and maintain credit and billing and
collection policies and procedures, and shall exercise reasonable efforts to
bill and collect in a timely manner all professional and other fees for all
billable Dental Care provided by Dental Care Professionals. Service Company
shall advise and consult with Provider regarding the fees for Dental Care
provided by Provider (including any related discounting policy), it being
understood, however, that Provider shall establish the fees (subject to
(S)3.2(d), above) to be charged for Dental Care and that Service Company shall
have no authority whatsoever with respect to the establishment of such fees. In
connection with the billing and collection services to be provided hereunder,
Provider hereby grants to Service Company, throughout the Term (and thereafter
as provided in (S)8.3), an exclusive special power of attorney and appoints
Service Company as Provider's exclusive true

8
<PAGE>

and lawful agent and attorney-in-fact, and Service Company hereby accepts such
special power of attorney and appointment, for the following purposes:

(a) To bill Provider's patients, in Provider's name and on Provider's
behalf, for all billable Dental Care provided by or on behalf of Provider to
patients.

(b) To bill, in Provider's name and on Provider's behalf, all claims for
reimbursement or indemnification from insurance companies and plans, all state
or federally funded dental benefit plans, and all other third party payors or
fiscal intermediaries for all covered billable Dental Care provided by or on
behalf of Provider to patients.

(c) To collect and receive, in Provider's name and on Provider's behalf,
all accounts receivable generated by such billings and claims for reimbursement,
to administer such accounts including, but not limited to, extending the time of
payment of any such accounts for cash, credit or otherwise; discharging or
releasing the obligors of any such accounts; suing, assigning or selling at a
discount such accounts to collection agencies; or taking other measures to
require the payment of any such accounts; provided, however, that extraordinary
collection measures, such as filing lawsuits, discharging or releasing obligors,
or assigning or selling accounts at a discount to collection agencies shall not
be undertaken without Provider Consent.

(d) To deposit all amounts collected into the Provider Account which shall
be and at all times remain in Provider's name. Provider shall transfer and
deliver to Service Company all funds received by Provider from patients or third
party payors for Dental Care. Upon receipt by Service Company of any funds from
patients or third party payors or from Provider for Dental Care pursuant to this
agreement, Service Company shall promptly deposit the same into the Provider
Account.

(e) To take possession of, endorse in the name of Provider, and deposit
into the Provider Account any notes, checks, money orders, insurance payments,
and any other instruments received in payment of accounts receivable for Dental
Care.

(f) To sign checks, drafts, bank notes or other instruments on behalf of
Provider, and to make withdrawals from the Provider Account for payments
specified in this agreement and as requested from time to time by Provider.

Upon request of Service Company, Provider shall execute and deliver to the
financial institution at which the Provider Account is maintained such
additional documents or instruments as Service Company may reasonably request to
evidence or effect the special power of attorney granted to Service Company by
Provider pursuant to this section and (S)4.12. The special power of attorney
granted herein is coupled with an interest and shall be irrevocable except with
Service Company's written consent. The irrevocable power of attorney shall
expire when this agreement has been terminated, all accounts receivable
purchased by Service Company pursuant to (S)7.7, if any, have been collected,
and all amounts due to Service Company as described in Article VII have been
paid.

9
<PAGE>

(S)4.12 Provider Account.
----------------

(a) Power of Attorney. Service Company shall have access to the
-----------------
Provider Account solely for the purposes stated herein and shall use all funds
on deposit therein to pay all Clinic Expenses in accordance with the terms of
this agreement. Provider hereby grants to Service Company an exclusive special
power of attorney and appoints Service Company as Provider's true and lawful
agent and attorney-in-fact, throughout the Term (and thereafter as provided in
(S)8.3), and Service Company hereby accepts such special power of attorney and
appointment, to make withdrawals from Provider Account for payments specified in
this agreement and as requested from time-to-time by Provider. Notwithstanding
this exclusive special power of attorney, Provider may, upon reasonable advance
notice to Service Company, request that Service Company draw checks on the
Provider Account for Provider Expenses and such other amounts as may be due to
Provider under this agreement, subject to (S)4.12(b) of this agreement.
Disbursements shall be related to and in such amount so as to ensure that
disbursements made without prior Provider Consent are consistent with the
expenditures authorized by the Budget.

(b) [*]

(c) Further Assurances. Promptly upon request by Service Company,
------------------
Provider shall execute a separate power of attorney in form reasonably
satisfactory to Service Company for the purpose of further confirming or
evidencing the rights granted to Service Company under (S)(S)4.11 and 4.12.

(S)4.13 Financial Matters.
-----------------

(a) Annual Budget. At least 30 days prior to the commencement of each
-------------
calendar year, Service Company, in consultation with Provider, shall prepare and
deliver to the Policy Board for its approval a proposed Budget, setting forth an
estimate of Provider's revenue and expenses for the upcoming calendar year
(including without limitation the Service and Performance Fees associated with
the services provided by Service Company hereunder). The Budget with respect to
the remainder of calendar year 1996 will allocate to Provider Expenses an amount
necessary to cover Provider's current obligations to its professional personnel
and its other obligations identified herein, all of which shall be consistent
with such similar expenditures as were incurred by Service Company prior to the
acquisition of Service Company by Parent. The Budget with respect to calendar
year 1997 shall provide, among other things, that [*] of the Adjusted Gross
Revenue shall be allocated to Provider Expenses. In each succeeding Budget,
unless the Parties otherwise mutually agree, such percentage of the Adjusted
Gross Revenue shall be allocated to Provider Expenses.

* This information has been omitted pursuant to a request for confidential
treatment and has been filed separately with the Securities and Exchange
Commission.

10
<PAGE>

In the event a proposed Budget is disapproved by either the Policy Board or
Parent (pursuant to (S)3.2(b)(i)) or the Policy Board recommends revisions to
the then-current Budget (pursuant to (S)3.2(b)(ii)), Service Company, in
consultation with Provider, shall promptly revise such Budget, taking into
consideration the comments of the Policy Board or Parent, as applicable, and
shall deliver such revised Budget to the Policy Board for approval. In the
event that a proposed Budget has not been approved by both the Policy Board and
Parent by the beginning of the calendar year, the Budget for the prior year
shall be deemed to be adopted as the Budget for the current year until a new
Budget has been approved by both the Policy Board and Parent.

(b) Accounting and Financial Records. Service Company shall establish
--------------------------------
and administer accounting policies and procedures, internal controls, and
systems for the development, preparation, and safekeeping of administrative or
financial records and books of account relating to the business and financial
affairs of Provider, all of which shall be prepared and maintained in accordance
with GAAP. Service Company shall prepare and deliver to Provider, within 90 days
of the end of each calendar year, a balance sheet and an income statement
reflecting the financial status of Provider in regard to the provision of Dental
Care as of the end of such calendar year, all of which shall be prepared in
accordance with GAAP. In addition, Service Company shall prepare or assist in
the preparation of any other financial statements or records as Provider may
reasonably request.

(c) Review of Expenditures. One of Provider's representatives to the
----------------------
Policy Board shall review all expenditures related to the operation of Provider,
but such representative shall not have the power to prohibit or invalidate any
expenditure.

(d) Tax Matters.
-----------

(i) General. Service Company shall prepare or arrange for the
-------
preparation of all tax returns and reports of Provider required by applicable
law, which returns and reports shall be prepared by an accountant reasonably
acceptable to Provider.

(ii) Sales and Use Taxes. Service Company and Provider
-------------------
acknowledge and agree that to the extent that any of the services to be provided
by Service Company hereunder may be subject to any state sales and use taxes,
Service Company may have a legal obligation to collect such taxes from Provider
and to remit the same to the appropriate tax collection authorities. Provider
agrees to pay any and all applicable state sales, use, gross receipts, and other
similar taxes and charges (other than taxes on Service Company's net income)
with respect to any amount paid to Service Company hereunder and that such
amounts shall be a Provider Expense.

(S)4.14 Reports and Records.
-------------------

(a) Dental Records. Service Company shall establish, monitor, and
--------------
maintain procedures and policies for the timely creation, preparation, filing
and retrieval of all dental

11
<PAGE>

records generated by Provider in connection with Provider's provision of Dental
Care; and, subject to applicable law, shall ensure that dental records are
promptly available to dentists and any other appropriate persons. All such
dental records shall be retained and maintained in accordance with all
applicable state and federal laws relating to the confidentiality and retention
thereof. All dental records shall be and remain the property of Provider.

(b) Other Reports and Records. Service Company shall timely create,
-------------------------
prepare, and file such additional reports and records as are reasonably
necessary and appropriate for Provider's provision of Dental Care, and shall be
prepared to analyze and interpret such reports and records upon the request of
Provider.

(S)4.15 Recruitment of Provider Dentists. Upon Provider's request,
--------------------------------
Service Company shall perform all services reasonably necessary and appropriate
in connection with the recruitment of professional dental personnel. Service
Company shall provide Provider with model agreements to document Provider's
employment, retention or other service arrangements with such individuals.
However, it shall be and remain the sole and complete responsibility of Provider
to interview, select, contract with (subject to (S)5.2, below), supervise,
control and terminate all dentists performing Dental Care or other professional
services, and Service Company shall have no authority whatsoever with respect to
such activities.

(S)4.16 Service Company's Insurance. Throughout the Term, Service
---------------------------
Company shall, as a Clinic Expense, obtain and maintain with commercial
carriers, or through self-insurance, or some combination thereof: (a)
appropriate worker's compensation coverage for the employees of Service Company
provided pursuant to this agreement; and (b) professional and comprehensive
general liability insurance covering Service Company, Service Company's
personnel, and all of Service Company's equipment in such amounts and on such
terms and conditions as Service Company deems appropriate. Service Company
shall cause Provider to be named as an additional insured on Service Company's
property and casualty insurance policies. Upon the request of Provider, Service
Company shall provide Provider with a certificate evidencing such insurance
coverage. Service Company may also carry, at Service Company's option and as a
Clinic Expense, key person life and disability insurance on any shareholder or
dentist employee of Provider in amounts determined as reasonable and sufficient
by Service Company. Service Company shall be the owner and beneficiary of any
such insurance.

(S)4.17 License of Name and Marks. Service Company hereby grants to
-------------------------
Provider, for the Term, a non-exclusive royalty-free license to use the name
"Park Dental" and all related marks and logos owned by Service Company for the
purpose of fulfilling its obligations hereunder, including without limitation
providing Dental Care to its patients.

12
<PAGE>

limitation any representations or warranties that the services provided by
Service Company will result in any particular amount or level of dental practice
or income to Provider.

ARTICLE V. RESPONSIBILITIES OF PROVIDER
----------------------------

(S)5.1 Organization and Operations. As a continuing condition of Service
---------------------------
Company's obligations under this agreement, Provider shall at all times during
the Term: (a) be and remain legally organized and operated to provide Dental
Care in a manner consistent with all state and federal laws; (b) operate and
maintain within the Practice Territory a full time practice of dentistry
providing Dental Care in compliance with all applicable federal, state, and
local laws, rules, regulations, ordinances, and orders; (c) maintain and use its
best efforts to enforce its articles or certificate of incorporation (or other
instrument of organization), bylaws, shareholder agreements, and other
organizational documents (hereafter in this (S)5.1 simply "organizational
documents") in the respective forms provided to Service Company prior to
execution of this agreement; (d) have at least three executive officers at the
level of vice president or above who are also dentist employees of Provider; (e)
maintain and use its best efforts to enforce the written employment agreements
and independent contractor agreements described in (S)5.2(a), below; and (f)
not, without Service Company Consent, (i) amend any of its employment agreements
or organizational documents in any material respect or waive any material rights
thereunder, or (ii) engage in any transaction constituting a merger,
consolidation, reorganization, sale or purchase of assets outside of the
ordinary course of business, liquidation, or dissolution. Provider hereby
acknowledges that Service Company would not have entered into this agreement but
for Provider's covenant to maintain such organizational documents and employment
agreements, and Provider shall pay to Service Company, in addition to the
amounts set forth in Article VII, any damages, compensation, payment, or
settlement amounts received by Provider from a dentist who terminates his
employment agreement without cause or whose employment agreement is terminated
by Provider for cause.

(S)5.2 Provider Personnel.
------------------

(a) Dentist Personnel. Provider shall retain, as a Provider Expense and
-----------------
not as a Clinic Expense, that number of dentists during the Term which are
necessary and appropriate, in Provider's sole discretion, to provide Dental Care
to reasonably meet the demand therefor. Provider shall cause each dentist
retained by Provider to hold and maintain a valid and unrestricted license to
practice dentistry in the State of Minnesota, including without limitation any
licenses required for the provision of any specialty dental services, together
with all necessary or appropriate board or other certifications. Throughout the
Term, Provider shall enter into and maintain a written employment agreement
substantially in the form of Exhibit D for all dentists now and hereafter
employed by Provider; provided that: (i) Provider shall not be obligated to
enter into an employment agreement in the form of Exhibit D with any dentist
whose employment agreement was assigned by Service Company to Provider
contemporaneous with the execution of this agreement, so long as such dentist's
employment agreement remains in effect; (ii) Provider shall, throughout the
Term, enter into and maintain a written employment agreement substantially in
the form of Exhibit C with each dentist of Provider who now or

13
<PAGE>

hereafter is either an executive officer (at a level of vice president or above)
of, or Policy Board member designated by, Provider; and (iii) Provider shall,
immediately upon execution of this agreement, enter into and maintain a written
employment agreement substantially in the form of Exhibit C with each of the
dentists set forth in Exhibit E. Throughout the Term, Provider shall enter into
and maintain a written agreement with each independent contractor retained by
Provider, which agreements shall contain confidentiality provisions
substantially similar to those contained in the employment agreement in the form
of Exhibit D. Provider shall be responsible for paying the compensation and
benefits as applicable, for all dentists and any other dentist personnel or
other contracted or affiliated dentists, and for withholding all sums for income
tax, unemployment insurance, social security, or any other withholding required
by applicable law. Service Company may, on behalf of Provider, administer the
compensation and benefits with respect to such individuals in accordance with
the written agreement between Provider and each dentist. Service Company shall
neither control nor direct any dentist in the performance of Dental Care for
patients. Provider shall provide to Service Company evidence of such licensing,
certifications, and other credentials of the dentists retained by Provider as
Service Company may request from time to time.

(b) Provider and Patient Scheduling. Provider shall, with the
-------------------------------
reasonable assistance of Service Company, (i) develop a set of Provider and
patient scheduling guidelines and a corresponding scheduling system, and (ii)
support Service Company in the implementation of such guidelines and effective
operation of such system.

(c) Paid Hours Reporting. Provider shall support the development and
--------------------
effective operation by Service Company of a dentist paid hours reporting and
monitoring system.

(d) Non-Dentist Dental Care Personnel. All non-dentist personnel who
---------------------------------
provide Dental Care, including without limitation dental hygienists, denturists,
dental assistants, and other licensed or certified personnel shall be under such
control, supervision and direction of Provider and the dentists retained by
Provider in the performance of or in connection with Dental Care for patients as
is required under applicable state law and regulations.

14
<PAGE>

All costs and expenses associated with the retention of such temporary coverage
shall be Provider Expenses. With the assistance of the Service Company,
Provider and the dentists shall be responsible for scheduling dentist and non-
dentist dental care personnel coverage of all dental procedures. Provider shall
cause all dentists to exert their best efforts to develop and promote Provider
in such a manner as to ensure Provider is able to serve the diverse needs of the
community. Provider shall organize and maintain a high quality, cost-effective
process for ensuring that patients will have timely access to emergency Dental
Care on a 24-hour, seven day per week basis.

(S)5.5 Peer Review and Quality Assurance. Provider shall conduct its peer
---------------------------------
review and quality assurance activities in a manner that is consistent with
maintaining the confidentiality of the related processes, actions, and
documentation.

(a) Provider shall designate a committee of dentists to function as a
dental peer review committee to review credentials of potential dentist
recruits, periodically review the credentials of Provider's existing dentists,
determine the practice privileges of the dentists retained by Provider, perform
quality assurance, utilization review, and Provider profiling functions, and
otherwise resolve dental competency issues. The dental peer review committee
shall function pursuant to formal written policies and procedures established by
Provider upon consultation with and the assistance of Service Company.

(b) Provider also shall adopt a quality assurance program to monitor
and evaluate the quality and cost-effectiveness of the Dental Care provided by
the dentist personnel of Provider and other non-dentist personnel providing
Dental Care under the supervision of Provider's dentists. Upon request of
Provider, Service Company shall provide administrative assistance to Provider in
performing its quality assurance activities.

(c) Provider shall cooperate fully with Service Company in an effort to
achieve and maintain full accreditation status for Provider. For purposes of
facilitating accreditation and other related processes and without limiting
Provider's responsibilities under the preceding sentence, Provider shall develop
and maintain a philosophy of practice and a set of practice guidelines which are
acceptable to the Policy Board. Provider shall cause all personnel retained by
it to abide by such philosophy and guidelines at all times.

(d) Provider shall, at the direction of the Policy Board, support the
development, maintenance, and operation of a patient concerns and claims
recording, reporting, review, resolution, and tracking process which is
acceptable to the Policy Board. Provider shall cause all personnel retained by
it to comply fully with such process at all times.

(e) Provider shall, with the assistance of Service Company, develop a
set of quality standards and utilization, process monitoring, and reporting
guidelines. Provider shall cause all personnel retained by it to comply with
such standards and guidelines.

15
<PAGE>

(S)5.6 Provider's Insurance. Provider shall, obtain and maintain with
--------------------
commercial carriers reasonably acceptable to Service Company or through self
insurance or some combination thereof (reasonably acceptable to Service Company)
appropriate workers' compensation coverage for Provider's employed personnel
(which shall be a Provider Expense) and professional and comprehensive general
liability insurance covering Provider and each of the dentists Provider retains
to provide Dental Care (which shall be a Clinic Expense). All costs, expenses,
and liabilities incurred by Provider or Service Company in excess of the limits
of such policies shall be a Provider Expense. Provider shall actively support
the participation of all dentists retained by Provider in training and
continuing education programs in order to reduce the risk of exposure to and the
related cost of obtaining and maintaining such coverage. The comprehensive
general liability coverage and professional liability coverage shall be in such
minimum amounts as Service Company may establish from time to time. In
addition, Provider shall cause each dentist retained by Provider as an
independent contractor to obtain comparable professional and comprehensive
general liability insurance coverage. All such insurance policies shall name
Service Company as an additional insured and provide for at least 30 days
advance written notice to Provider and Service Company from the insurer with
respect to any alteration of coverage, cancellation, or proposed cancellation
for any reason. Provider shall cause to be issued to Service Company by such
insurer or insurers a certificate reflecting such coverage. Upon the
termination of this agreement for any reason, Provider shall continue to carry
professional liability insurance in the amounts specified in this section for 10
years after termination, or if Provider dissolves or ceases to practice
dentistry, Provider shall obtain and maintain as a Provider Expense "tail"
professional liability coverage, in the amounts specified in this section for an
extended reporting period of 10 years. Provider shall be responsible for paying
all premiums for "tail" insurance coverage. In no event shall the professional
liability insurance carrier be replaced or changed without Service Company
Consent. Service Company shall provide reasonable assistance to Provider to
obtain such coverage.

(S)5.7 Noncompetition. Provider acknowledges that Service Company will
--------------
incur substantial costs in providing the equipment, support services, personnel,
and other items and services that are the subject matter of this agreement and
that in the process of providing services under this agreement, Provider will
learn or have access to financial and other Confidential Information of Service
Company to which Provider would not otherwise be exposed. Provider also
recognizes that the services to be provided by Service Company will be feasible
only if Provider operates an active practice to which the dentists associated
with Provider devote their full time and attention. Accordingly, Provider
further agrees as follows:

(a) During the Term, except for its obligations under this agreement,
Provider shall not establish, operate, or provide Dental Care at any dental
office, clinic or other dental care facility anywhere within the Practice
Territory nor have an ownership interest, direct or indirect, in any entity, or
participate in any joint venture, which operates any such office, clinic, or
facility; and

(b) Except as specifically approved by Service Company in writing,
during the Term and for a period of five years immediately following the date
this agreement is terminated for

16
<PAGE>

any reason, Provider shall not directly or indirectly own (excluding ownership
of less than five percent (5%) of the equity of any publicly traded entity),
manage, operate, control, lend funds to, lend its name to, or maintain any
interest in any entity, business, or enterprise which (i) provides, distributes,
or promotes any type of management or administrative services or products to
third parties in competition with Service Company in the Practice Territory or
(ii) offers any type of service or product to third parties substantially
similar to those offered by Service Company to Provider in the Practice
Territory. Notwithstanding the above restriction, nothing herein shall prohibit
Provider or any of its shareholders from providing management and administrative
services to its or their own dental practices after the termination of this
agreement, and nothing herein shall prohibit Provider or its shareholders from
contracting with a third party manager to provide administrative or management
services for its or their dental practices after termination of this agreement
as long as such relationship complies with the provisions of this section.

(S)5.8 Use of Name. At all times during the Term, Provider shall, unless
-----------
otherwise directed by the Policy Board pursuant to (S)3.2(c), operate its dental
practice under the name "Park Dental", including without limitation using all
related marks and logos as are licensed to Provider pursuant to (S)4.17, above,
and filing an assumed or fictitious name application with the Minnesota
Secretary of State or other appropriate governmental agency; provided that
Provider shall, immediately upon the expiration of the Term, abstain from using
such name, marks, and logos and shall take such steps as are necessary to
terminate such applications and Provider's rights thereunder.

ARTICLE VI. CONFIDENTIALITY
---------------

(S)6.1 Confidential and Proprietary Information. Neither Party shall, in
----------------------------------------
any manner or at any time, directly or indirectly, disclose any of the
Confidential Information of the other Party to any person, firm, association,
organization, or entity, or use, or permit or assist any person, firm,
association, organization, or entity to use any such Confidential Information,
excepting only: (a) disclosures (i) required by law, as reasonably determined by
the disclosing Party or its legal counsel, or (ii) made on a confidential basis
to the disclosing Party's shareholders, directors, officers, employees (limited
to those who need to know such Confidential Information), and legal, accounting,
and other professional advisors (collectively, the "Permitted Recipients"); or
(b) use of such Confidential Information by Permitted Recipients in connection
with this agreement; provided that each Party shall (i) make its Permitted
Recipients aware of the requirements of this agreement, (ii) take reasonable
steps to prohibit disclosure of such Confidential Information by any Permitted
Recipient to any other person or entity except another Permitted Recipient,
including without limitation taking such steps as that Party customarily takes
to protect its own Confidential Information, and (iii) be responsible and liable
for any disclosure or use of such Confidential Information by any of its
Permitted Recipients, except disclosures or uses permitted by this agreement.

17
<PAGE>

professional corporations, associations, dental practices, or dental care
delivery entities the practice statistics of Provider, including utilization
review data, quality assurance data, cost data, outcomes data, or other practice
data, provided that such information shall only be disclosed to (i) affiliates
of Service Company, (ii) other dental groups with whom Service Company has a
management relationship, (iii) managed care dental benefit providers and other
third party payors for the purpose of obtaining or maintaining third party payor
contracts, (iv) financial analysts and underwriters, (v) employers and employee
benefit associations, (vi) quality assurance and accrediting organizations, or
(vii) financial institutions; and (b) disclose all practice-related information
necessary or desirable in connection with any public or private offering of any
security of Service Company. In addition, Service Company may disclose
practice-related information and data in connection with any survey,
presentation, published material, study, or research project which Service
Company deems appropriate for the purpose of gaining insight into existing and
changing patterns in the organization and delivery of Dental Care and related
issues. In no event will any such data disclose or divulge the identity of any
patient or, to the extent reasonably practicable, any dentist.

ARTICLE VII. FINANCIAL ARRANGEMENTS
----------------------

(S)7.1 Clinic Expense Reimbursement. Service Company shall be reimbursed
----------------------------
for the amount of all Clinic Expenses incurred by Service Company.

(S)7.2 Repayment of Advances. Service Company shall be reimbursed for any
---------------------
and all amounts advanced to Provider by Service Company.

(S)7.3 Fees. Provider and Service Company acknowledge and agree that the
----
compensation set forth in this Article is being paid to Service Company in
consideration of the substantial commitment being made by Service Company
hereunder and that such fees are fair and reasonable in all respects in
consideration of (i) the services performed by Service Company hereunder and
(ii) the capital being made available by Service Company. Service Company shall
be paid the following service fees:

(a) Service Fee. Service Company shall receive an annual Service Fee
-----------
equal to [*] or such other greater amount as may be agreed upon by the Parties,
payable in twelve equal monthly installments, subject to adjustment pursuant to
(S)7.4(a), below; and

(b) Performance Fee. Service Company shall receive a Performance Fee,
---------------
payable monthly, equal to the amount, if any, by which [*].

* This information has been omitted pursuant to a request for confidential
treatment and has been filed separately with the Securities and Exchange
Commission.

18
<PAGE>

(S)7.4 Adjustments to Fees.
-------------------

(a) [*]

(b) [*]

Each adjustment, if any, under this (S)7.4 shall be calculated and paid not
later than 60 days following the end of the applicable calendar year.

(S)7.5 Reasonable Value. Payment of the Service Fee or Performance Fee is
----------------
not intended to be and shall not be interpreted or applied as permitting Service
Company to share in Provider's fee for Dental Care or any other services, but is
acknowledged as the Parties' negotiated agreement as to the reasonable fair
market value of the equipment, contract analysis and support, other support
services, purchasing, personnel, office space, management, administration,
strategic management, and other items and services furnished by Service Company
pursuant to this agreement, considering the nature and volume of the services
required and the risks assumed by Service Company. Provider and Service Company
acknowledge that: (a) Service Company's administrative expertise will
contribute great value to Provider's performance; (b) Service Company will incur
substantial costs and business risks in arranging for Provider's use of each
Clinic and in providing the equipment, support services, personnel, marketing,
office space, management, administration, and other items and services that are
the subject matter of this agreement; and (c) certain of such costs and expenses
can vary to a considerable degree according to the extent of Provider's business
and services. It is the intent of the Parties that the Service Fee and
Performance Fee reasonably compensate Service Company for the value to Provider
of Service Company's administrative expertise, given the considerable business
risk to Service Company in providing the items and services that are the subject
of this agreement.

(S)7.6 Payment. The amounts to be paid to Service Company under this
-------
Article shall be calculated by Service Company on the accrual basis of
accounting and paid monthly. To facilitate the payments due to Service Company
under this Article, Provider hereby expressly authorizes Service Company to
make withdrawals of such amounts from the Provider Account during the Term in
accordance with (S)4.12(b), and after termination as provided in (S)8.3.

* This information has been omitted pursuant to a request for confidential
treatment and has been filed separately with the Securities and Exchange
Commission.

19
<PAGE>

recorded each month. Service Company shall be entitled to offset Clinic Expense
reimbursement plus all fees and advances due to Service Company under this
Article against the amount payable for the accounts receivable. Although it is
the intention of the Parties that Service Company purchase and thereby become
the owner of the accounts receivable of Provider, in the event such purchase
shall be ineffective for any reason, Provider hereby grants to Service Company a
security interest in the accounts receivable, and Provider shall cooperate with
Service Company and execute all documents which may be reasonably requested by
Service Company in connection with such security interest. All collections in
respect of such accounts receivable purchased by Service Company shall be
received by Provider as the agent of Service Company and shall be endorsed to
Service Company and deposited in a bank account at a bank designated by Service
Company. To the extent Provider comes into possession of any payments in
respect of such accounts receivable, Provider shall direct such payments to
Service Company for deposit in bank accounts designated by Service Company.

ARTICLE VIII. TERM AND TERMINATION
--------------------

(S)8.1 Initial and Renewal Term. The Term of this agreement shall be for
------------------------
an initial period of 40 years beginning on the date of this agreement, and shall
renew automatically for successive five-year periods thereafter unless and until
either Party gives notice to the other Party at least 120 days prior to the
expiration of the then-current term of its intent to terminate this agreement at
the end of the then-current term or unless otherwise terminated as provided in
(S)8.2 of this agreement.

(S)8.2 Termination.
-----------

(a) Termination By Service Company. Service Company may terminate this
------------------------------
agreement immediately upon notice to Provider upon the occurrence of any one of
the following events:

(i) The dissolution of Provider;

(ii) Provider admits in writing its inability to pay generally its
debts as they become due or makes an assignment for the benefit of creditors;

(iii) A receiver, trustee, liquidator, or conservator is appointed
for Provider or to take possession of all or substantially all of Provider's
property or a petition for insolvency, dissolution, liquidation, or
reorganization, or order for relief in which Provider is named as debtor, is
filed by, against, or with respect to Provider pursuant to any federal or state
statute, regulation, or law for the protection of debtors, and, with respect to
any such appointment or filing, Provider fails to secure a stay or discharge
thereof within 45 days after such appointment or filing;

(iv) Provider fails to pay when due any payment to be made by
Provider under this agreement, which failure continues for 10 days after notice
is given by Service Company

20
<PAGE>

to Provider thereof, provided that such failure is not directly attributable to
Service Company's failure to apply available funds in the Provider Account
according to (S)4.12(b); or

(v) Provider fails to comply with or perform any of its other
material duties or obligations under this agreement, which failure continues for
30 days after notice is given by Service Company to Provider thereof, or if
because of the nature of such failure it cannot reasonably be corrected within
such 30 day period, failure by Provider to commence such correction promptly
following its receipt of notice from Service Company and thereafter to
expeditiously and continuously prosecute the correction to completion.

(b) Termination By Provider. Provider may terminate this agreement
-----------------------
immediately upon notice to Service Company upon the occurrence of any of the
following events:

(i) A receiver, trustee, liquidator, or conservator is appointed
for Service Company or to take possession of all or substantially all of Service
Company's property or a petition for insolvency, dissolution, liquidation, or
reorganization, or order for relief in which Service Company is named as debtor,
is filed by, against, or with respect to Service Company pursuant to any federal
or state statute, regulation, or law for the protection of debtors, and, with
respect to any such appointment or filing, Service Company fails to secure a
stay or discharge thereof within 45 days after such appointment or filing;

(ii) Service Company fails to comply with or perform any of its
material duties or obligations under this agreement, which failure continues for
30 days after notice is given by Provider to Service Company thereof, or if
because of the nature of such failure it cannot reasonably be corrected within
such 30 day period, failure by Service Company to commence such correction
promptly following its receipt of notice from Provider and thereafter to
expeditiously and continuously prosecute the correction to completion; or

(iii) A court of competent jurisdiction makes a final determination
that Service Company has materially breached a fiduciary duty owed to Provider.

Notwithstanding the foregoing, any termination by Provider under this
section shall require the affirmative vote of three-fourths of the then-
outstanding shares of Provider entitled to vote on such a matter and Provider
shall, upon request by Service Company, provide evidence reasonably satisfactory
to Service Company of such vote.

(c) Termination by Agreement. Provider and Service Company may mutually
------------------------
agree to terminate this agreement at any time, such agreement to be in writing
and signed by both Parties.

21
<PAGE>

in this clause (d), a "ruling") which materially and adversely affects, or is
reasonably likely to affect, the manner in which either Party is to perform or
be compensated for its services under this agreement or which shall make this
agreement unlawful, the Parties shall immediately use their best efforts to
enter into a new service arrangement or basis for compensation for the services
furnished pursuant to this agreement that complies with that change or ruling
and approximates as closely as possible the economic position of the Parties
prior to such change or ruling.

If the Parties are unable to reach a new agreement within a
reasonable period of time following the date upon which it becomes reasonably
certain that such change will arise or ruling will be given, then either Party
may submit the issue to arbitration which shall be binding on the parties and
subject to the then-applicable Commercial Arbitration Rules of the American
Arbitration Association. In any such arbitration, the arbitrators shall be
consist of a panel of three arbitrators, which shall act by majority vote and
which shall consist of one arbitrator selected by the Party on one side of the
issue subject to the arbitration, one arbitrator selected by the Party on the
other side of the issue, and a third arbitrator selected by the two arbitrators
so selected, who shall be either a certified public accountant or an attorney at
law licensed to practice in the State of Minnesota and who shall act as chairman
of the arbitration panel; provided that if the Party on one side of the issue
selects its arbitrator for the panel and the other Party fails to so select its
arbitrator within 10 business days after being requested by the first Party to
do so, then the sole arbitrator shall be the arbitrator selected by the first
Party.

All costs and expenses of arbitration shall be borne by the Parties
as determined by the arbitrator or arbitration panel, except that the fees of
any arbitrator on an arbitration panel who is selected individually by a Party
shall be borne separately by the Party appointing him; provided that if one
Party fails to select an arbitrator for a panel, and the sole arbitrator is the
arbitrator selected by the other Party, then the fees of that arbitrator shall
be borne by the Parties as determined by that arbitrator.

(S)8.3 Effects of Termination. Upon termination of this agreement as
----------------------
herein provided, neither Party shall have any further obligations under this
agreement, except for: (a) obligations accruing prior to the date of
termination, including without limitation payment of the amounts set forth in
Article VII relating to services provided prior to the termination of this
agreement; (b) obligations set forth in this agreement that expressly extend
beyond the Term, including without limitation indemnities and noncompetition
provisions, which provisions shall survive the expiration or termination of this
agreement; (c) the obligations of each party set forth in Article VI; and (d)
the obligation of Provider described in (S)8.4. Provider specifically
acknowledges and agrees that Service Company shall continue to collect and
receive on behalf of Provider all cash collections from accounts receivable in
existence at the time this agreement is terminated (which have not otherwise
been purchased by Service Company pursuant to (S)7.7), it being understood that
such cash collections will be applied in accordance with (S)4.12(b), above,
until Service Company is compensated for the services rendered and reimbursed
for the expenditures made by it under this agreement up to the date of such
termination. Upon the expiration or termination of this agreement for any
reason or cause whatsoever, Service Company shall

22
<PAGE>

surrender to Provider all books and records pertaining to Provider's dental
practice; provided that Service Company may retain copies of such documents to
the extent reasonably necessary for Service Company to complete its post-
termination obligations and activities under this agreement.

(S)8.4 Purchase Obligation. Upon termination of this agreement for any
-------------------
reason, Provider shall, at Service Company's option:

(a) Purchase from Service Company at book value the intangible assets,
deferred charges, goodwill, and all other amounts on the books of the Service
Company relating to this agreement or the items or services provided by Service
Company pursuant to this agreement, including without limitation the amount, if
any, for the covenants described in (S)5.7, above, as adjusted through the last
day of the month most recently ended prior to the date of such termination in
accordance with GAAP to reflect amortization or depreciation of all such
amounts;

(b) Purchase from Service Company any real estate owned by Service
Company and used as a Clinic at the greater of the appraised fair market value
thereof or the then book value thereof;

(c) Purchase, at the greater of the appraised fair market value or the
then book value, all improvements, additions, or leasehold improvements that
have been made by Service Company at any Clinic and that relate to the
performance of Service Company's obligations under this agreement;

(d) Assume all debt, and all contracts, payables, and leases that are
obligations of Service Company and that relate to the performance of Service
Company's obligations under this agreement or the properties leased or subleased
by Service Company in connection with its obligations under this agreement; and

(e) Purchase from Service Company, at the greater of the appraised fair
market value or the then book value, all of the equipment then being supplied by
Service Company pursuant to Service Company's obligations under this agreement,
and all other assets, including inventory and supplies, tangibles and
intangibles, set forth on the books of Service Company as adjusted through the
last day of the month most recently ended prior to the date of such termination
in accordance with GAAP to reflect operations of each Clinic, depreciation,
amortization, and other adjustments of assets shown on the books of the Service
Company.

For purposes of subsection (b), above, the appraised value shall be
determined by an appraiser mutually agreed upon by the Parties. In the event
the Parties are unable to agree upon an appraiser within 10 days following the
date upon which either Party requests the other Party to agree to an appraiser,
then each Party shall appoint an appraiser, who shall in turn select a third
appraiser who shall serve as the appraiser hereunder. In the event either Party
fails to select an appraiser within 15 days of the selection of an appraiser by
the other Party, the

23
<PAGE>

appraiser selected by the other Party shall serve as the appraiser hereunder.
The determination of the appraised value of the assets identified in subsection
(b), above, by the appraiser selected hereunder shall be binding on both
Parties.

(S)8.5 Closing of Purchase. If Provider purchases assets pursuant to
-------------------
(S)8.4, Provider shall pay cash for the purchased assets; provided that the
amount of the purchase price allocable to an asset shall be reduced by the
amount of debt and liabilities of Service Company, if any, relating directly to
that asset which are assumed by Provider in connection with such purchase.
Provider and any dentist associated with Provider shall execute such documents
as may be required to assume the liabilities set forth in (S)8.4(d) and to
remove Service Company from any liability with respect to such purchased asset
and with respect to any property leased or subleased by Service Company. The
closing date for the purchase shall be determined by the Parties, but shall in
no event occur later than 180 days from the date of the notice of termination.
Provider shall be released from the covenants described in (S)5.7, above, upon
the successful consummation of such closing.

Notwithstanding the foregoing, Provider may, at its option, pay all or a
portion of the purchase price at the closing in shares of common stock of Parent
("Shares") for which Provider shall receive, as a credit to the purchase price,
an amount equal to the number of Shares transferred to Service Company by
Provider at the closing multiplied by the per Share fair market value (defined
below); provided that each Share transferred to Service Company is free and
clear of all liens, security interests, encumbrances, pledges, charges, claims,
voting trusts and restrictions on transfer of any nature whatsoever, except
restrictions on transfer imposed by or pursuant to federal and state securities
laws and such other restrictions as were expressly required by Parent in
connection with the acquisition of Service Company by Parent concurrently with
the execution of this agreement. For purposes of this section, the "per Share
fair market value" shall mean, as of any given date, the (i) last reported sale
price on the New York Stock Exchange on the most recent previous trading day,
(ii) last reported sale price on the NASDAQ National Market System on the most
recent previous trading day, (iii) mean between the high and low bid and ask
prices, as reported by the National Association of Securities Dealers, Inc. on
the most recent previous trading day, (iv) last reported sale price on any other
stock exchange on which the Shares are listed on the most recent previous
trading day, whichever is applicable, or (v) if none of the foregoing is
applicable, then the per Share fair market value of the Shares shall be the
value determined by the Board of Directors of Parent, in its discretion, based
upon the then-current Share value assigned by the Board of Directors of Parent
in connection with Parent's other activities; provided that, if Provider
disagrees with the determination of Parent's Board of Directors as to such
value, the per Share fair market value shall be determined by:

(A) Agreement between Service Company and Provider, if they are
able to agree upon a value within ten business days after being requested
to so agree; or, if not,

(B) An appraiser selected by agreement between Service Company and
Provider, if they are able to agree upon an appraiser within ten business
days after requested to so agree; or, if not,

24
<PAGE>

(C) The majority vote by an appraisal board consisting of three
appraisers, one member appointed by each of Service Company and Provider
and the third member appointed by the first two members so appointed who
shall act as chairman of the appraisal board, provided that in the event
either Party fails to so appoint its appointee to the appraisal board
within ten business days after being requested to do so by the other Party,
then the appraiser appointed by the requesting Party shall be the sole
appraiser.

ARTICLE IX. GENERAL
-------

(S)9.1 Administrative Services Only. Nothing in this agreement is
----------------------------
intended or shall be construed to allow Service Company to exercise control or
direction over the manner or method by which Provider and its dentists perform
Dental Care or other professional dental care services. The rendition of all
Dental Care shall be the sole responsibility of Provider and its dentists, and
Service Company shall not interfere in any manner or to any extent therewith.
Nothing contained in this agreement shall be construed to permit Service Company
to engage in the practice of dentistry, it being the sole intention of the
Parties hereto that the services to be rendered to Provider by Service Company
are solely for the purpose of providing non-dental administrative services to
Provider so as to enable Provider to devote its full time and energies to the
professional conduct of its dental practice and provision of Dental Care to its
patients and not to administration, or practice management.

(S)9.2 Relationship of Parties. The relationship of the Parties is and
-----------------------
shall be that of independent contractors, and nothing in this agreement is
intended, and nothing shall be construed to create an employer/employee,
partnership, or joint venture relationship between the Parties, or to allow
either to exercise control or direction over the manner or method by which the
other performs the services that are the subject matter of this agreement;
provided always that the services to be provided hereunder shall be furnished in
a manner consistent with the standards governing such services and the
provisions of this agreement.

(S)9.3 Notices. Any notice or other communication required or desired to
-------
be given to either Party shall be in writing and shall be deemed given when
deposited in the United States mail, first-class postage prepaid, addressed:

(a) If to Service Company

25
<PAGE>

PDHC, Ltd.
c/o American Dental Partners, Inc.
301 Edgewater Place, Suite 320
Wakefield, Massachusetts 01880-1249
Attention: Gregory A. Serrao, President
and Chief Executive Officer

and

Baker & Hostetler
65 East State Street
Suite 2100
Columbus, Ohio 43215
Attention: Gary A. Wadman, Esq.

(b) If to Provider

PDG, P.A.
6415 Brooklyn Blvd.
Minneapolis, MN 55429-2181
Attention: President

With a copy to:

Fredrikson & Byron, P.A.
1100 International Center
900 Second Avenue South
Minneapolis, Minnesota 55402
Attention: Neil A. Weikart, Esq.

Any Party may change the address to which notices and other communications
are to be given by giving the other Parties notice of such change.

(S)9.4 Execution of Documents. Each Party shall execute, acknowledge or
----------------------
verify, and deliver any and all documents, and take any and all other actions,
which from time to time may be reasonably requested by any other Party to carry
out the purposes and intent of this agreement.

(S)9.5 Governing Law. All questions concerning the validity, intention,
-------------
or meaning of this agreement or relating to the rights and obligations of the
Parties with respect to performance under this agreement shall be construed and
resolved under the laws of Minnesota, without reference to conflict of law
principles.

26
<PAGE>

(S)9.6 Severability. The intention of the Parties is to comply fully with
------------
all applicable laws and public policies, and this agreement shall be construed
consistently with all laws and public policies to the extent possible. If and
to the extent that any court of competent jurisdiction determines that it is
impossible to construe any provision of this agreement consistently with any law
or public policy and consequently holds that provision is invalid, such holding
shall in no way affect the validity of the other provisions of this agreement,
which shall remain in full force and effect. With respect to any provision in
this agreement finally determined by such a court to be invalid or
unenforceable, such court shall have jurisdiction to reform this agreement
(consistent with the intent of the Parties) to the extent necessary to make such
provision valid and enforceable, and, as reformed, such provision shall be
binding on the Parties.

(S)9.7 Setoff. Notwithstanding any provision of this agreement to the
------
contrary, Service Company shall have the right from time to time to setoff any
amounts owed by Service Company to Provider under this agreement against any
amounts owed by Provider to Service Company, whether pursuant to this agreement
or otherwise.

(S)9.8 Remedies. All rights and remedies of each Party under this
--------
agreement are cumulative and in addition to all other rights and remedies which
may be available to that Party from time to time, whether under any other
agreement, at law, or in equity.

Each Party hereby acknowledges that: (a) the provisions of (S)(S)5.7 and
6.1 of this agreement are fundamental for the protection of the other Party's
legitimate business interests; (b) such provisions are reasonable and
appropriate in all respects; and (c) in the event it violates any such
provisions, the other Party would suffer irreparable harm and its remedies at
law would be inadequate. Accordingly, in the event either Party violates or
attempts to violate any such provisions, the other Party shall be entitled to a
temporary restraining order, temporary and permanent injunctions, specific
performance, and other equitable relief without any showing of irreparable harm
or damage or the posting of any bond, in addition to any other rights or
remedies which may then be available to the other Party.

(S)9.9 Non-waiver. No failure by any Party to insist upon strict
----------
compliance with any term of this agreement, to exercise any option, enforce any
right, or seek any remedy upon any default of any other Party shall affect, or
constitute a waiver of, the first Party's right to insist upon such strict
compliance, exercise that option, enforce that right, or seek that remedy with
respect to that default or any prior, contemporaneous, or subsequent default;
nor shall any custom or practice of the Parties at variance with any provision
of this agreement affect or constitute a waiver of, any Party's right to demand
strict compliance with all provisions of this agreement.

(S)9.10 Indemnification. Each Party (the "Indemnifying Party") shall
---------------
indemnify and hold harmless the other Party and its shareholders, directors,
officers, employees, agents, representatives, and affiliates (the "Indemnified
Parties") from and against any and all losses, liabilities, damages, demands,
claims, suits, actions, judgments, assessments, costs and

27
<PAGE>

(S)9.11 No Third Party Benefit. This agreement is intended for the
----------------------
exclusive benefit of the Parties and their respective successors and assigns,
and nothing contained in this agreement shall be construed as creating any
rights or benefits in or to any third party.

(S)9.12 Captions. The captions of the various sections of this agreement
--------
are not part of the context of this agreement, are only labels to assist in
locating and reading those sections, and shall be ignored in construing this
agreement.

(S)9.13 Genders and Numbers. When permitted by the context, each pronoun
-------------------
used in this agreement includes the same pronoun in other genders or numbers and
each noun used in this agreement includes the same noun in other numbers.

(S)9.14 Complete Agreement. This document (including its exhibits and
------------------
all other documents referred to herein, all of which are hereby incorporated
herein by reference) contains the entire agreement among the Parties and
supersedes all prior or contemporaneous discussions, negotiations,
representations, or agreements relating to the subject matter of this agreement.
No changes to this agreement shall be made or be binding upon any Party unless
made in writing and signed by each Party to this agreement.

(S)9.15 Counterparts. This agreement may be executed in multiple
------------
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same agreement.

(S)9.16 Assignment. Provider may not assign this agreement without the
----------
prior written consent of Service Company, which consent may be withheld for any
reason. The sale, transfer, pledge, or assignment of any of the shares of
Provider held by any shareholder of Provider, the issuance by Provider of voting
shares to any other person, or any combination of such transactions within a
period of two years, such that the existing shareholders in Provider fail to
maintain a majority of the voting interest in Provider shall be deemed an
attempted assignment by Provider, and shall be null and void unless consented to
in writing by Service Company prior to any such transfer or issuance. Any
breach of this provision, whether or not void or voidable, shall constitute a
material breach of this agreement, and in the event of such breach, Service
Company may terminate this agreement upon 24 hours notice to Provider. Service
Company shall have the right to (i) assign its rights and obligations hereunder
to any third party and (ii) collaterally assign its interest in this agreement
and its right to collect the amounts set forth in Article VII hereunder to any
financial institution or other third party without the consent of Provider.

28
<PAGE>

(S)9.17 Successors. Subject to (S)9.16, above, this agreement shall be
----------
binding upon, inure to the benefit of, and be enforceable by and against the
successors and assigns of each Party.

(S)9.18 Force Majeure. Neither Party shall be liable or deemed to be in
-------------
default for any delay or failure in performance under this agreement or other
interruption of service deemed to result, directly or indirectly, from acts of
God, civil or military authority, acts of public enemy, war, accidents, fires,
explosions, earthquakes, floods, failure of transportation, strikes or other
work interruptions by either Party's employees, or any other similar cause
beyond the reasonable control of either Party unless such delay or failure in
performance is expressly addressed elsewhere in this agreement.

PDG, P.A.

By /s/ Gregory T. Swenson, D.D.S.
---------------------------------
Gregory T. Swenson, D.D.S.
President

PDHC, LTD.

By /s/ Gregory A. Serrao
---------------------------
Gregory A. Serrao
Chairman of the Board and
Chief Executive Officer

29
<PAGE>

INDEX TO EXHIBITS
-----------------

Exhibit A Definitions

Exhibit B [Intentionally Left Blank]

Exhibit C Five-Year Employment Agreement

Exhibit D Standard Employment Agreement

Exhibit E List of Current PDHC Shareholders to be Retained by Provider
<PAGE>

EXHIBIT A
---------

DEFINITIONS
-----------

Adjusted Gross Revenue. The term "Adjusted Gross Revenue" shall mean Gross
----------------------
Revenue less Adjustments.

Adjustments. The term "Adjustments" shall mean all adjustments on the
-----------
accrual basis for (i) third party payor contractual allowances, adjustments,
discounts, professional courtesies, (ii) uncollectible accounts and related
expenses, and (iii) other activities that do not to result in collectible
charges.

Ancillary Revenue. The term "Ancillary Revenue" shall mean all other
-----------------
revenue actually recorded each month that is not Professional Service Revenue.

Base Level. The term "Base Level" shall mean an amount equal to [*] of
----------
Adjusted Gross Revenue or such greater percentage of Adjusted Gross Revenue as
may be set forth in the Budget from time to time.

Budget. The term "Budget" shall mean an operating budget and capital
------
expenditure budget for each calendar year as prepared by Service Company, in
consultation with Provider, and approved by each of the Policy Board and Parent.

Capitation Revenue. The term "Capitation Revenue" shall mean all revenue
------------------
recorded under GAAP from managed care organizations or third party payors where
such revenue is recorded periodically on a per member basis for the partial or
total dental needs of an enrolled patient.

Clinic. The term "Clinic" shall mean any of the facilities, including
------
satellite facilities, that Service Company shall own, lease or otherwise procure
and provide for the use of Provider.

Clinic Expense. The term "Clinic Expense" shall mean all operating and
--------------
nonoperating expenses incurred by Service Company or Parent in the provision of
services to Provider and such expenses incurred by Provider which are expressly
identified in this agreement as Clinic Expense. Clinic Expense shall not
include any state or federal income tax, any expenses related to any Dental
Assets or the maintenance or protection of the same, or any other expense
reasonably designated by Service Company as a Provider Expense. Clinic Expense
shall not include amortization of goodwill and noncompete covenants arising as a
result of the acquisition of Service Company by Parent concurrently with the
execution of this agreement, but shall include amortization of other intangible
assets obtained in that transaction. Without limiting the foregoing, Clinic
Expense shall include:

* This information has been omitted pursuant to a request for confidential
treatment and has been filed separately with the Securities and Exchange
Commission.

i
<PAGE>

(a) The salaries, benefits, and other direct costs of all employees of
Service Company at a Clinic, but not the salaries, benefits, or other direct
costs of the dentists;

(b) The direct cost of any employee or consultant that provides services at
or in connection with a Clinic for improved clinic performance, such as
management, billing and collections, business office consultation, accounting
and legal services, but only when such services are coordinated by Service
Company;

(c) Reasonable recruitment costs and out-of-pocket expenses of Service
Company or Provider associated with the recruitment of additional dentist
employees of Provider;

(d) Dental malpractice liability insurance expenses for dentists, Service
Company employees, and non-dentist employees and comprehensive and general
liability insurance covering each Clinic and employees of Provider and Service
Company at each Clinic;

(e) The cost of laboratory services;

(f) The cost of dental supplies (including but not limited to products,
substances, items, or dental devices), and office supplies;

(g) The expense of using, leasing, purchasing or otherwise procuring
Clinics and related equipment, including utilities, depreciation, and repairs
and maintenance, provided that such expense shall not include the cost of
acquiring goodwill, noncompete covenants, or other intangible assets in
connection with such procurement;

(h) Personal property and intangible taxes assessed against Service
Company's assets which are provided or otherwise employed by Service Company for
the benefit of Provider;

(i) The reasonable travel expenses (except for the corporate staff of
Service Company and Parent) associated with attending meetings, conferences, or
seminars to benefit Provider;

(j) The cost of capital (whether as actual interest on indebtedness
incurred on behalf of Provider or as reasonable imputed interest on capital
advanced by Service Company or Parent) to finance or refinance obligations of
Provider, purchase dental and non-dental equipment, or finance new ventures of
Provider (interest expense will be charged for funds borrowed from outside
sources as well as from Parent; in the latter case, charges will be computed at
a floating rate that is equal to the current blended borrowing rate in effect
for actual and available outside borrowings of Parent; and such rate will be
computed as the sum of interest and related costs divided by the related total
of all borrowings), but specifically excluding any financing incurred by Parent
relating to the acquisition of Service Company by Parent concurrently with the
execution of this agreement;

(k) Other expenses incurred by Service Company or Parent in carrying out
its obligations under this agreement in accordance with the policies and budgets
established by the Policy Board, including without limitation the write-off of
any tangible or intangible assets on the balance sheet of Service Company or any
portion thereof other than costs incurred in

ii
<PAGE>

connection with the execution of this agreement and the issuance by Parent of
stock options to Provider or its dentists;

(l) Any tax assessed against Service Company in connection with the
services provided by Service Company hereunder; and

(m) Any other cost or expense designated as a Clinic Expense pursuant
to this agreement.

Confidential Information. The term "Confidential Information" shall mean,
------------------------
with respect to a Party, all trade secrets, proprietary data, and other
information (whether written or oral) of a confidential nature relating directly
or indirectly to that Party or its business, including without limitation all
business management, marketing, and economic studies and methods, patient lists,
proprietary forms, marketing data, fee schedules, customer lists, financial,
tax, accounting, and other information regarding business operations or
structure, business plans, ideas, concepts, policies, and procedures, and any
other information which that Party is obligated to treat as confidential
pursuant to any law, agreement, or course of dealing by which that Party is
bound, whether or not such Confidential Information is disclosed or otherwise
made available pursuant to this agreement. Confidential Information shall also
include the terms and provisions of this agreement and any transactions or
documents executed by the parties pursuant to this agreement. Confidential
Information shall not include any information which (i) is or becomes known or
available to the public and did not become so known through the breach of this
agreement by either Party, (ii) has been lawfully acquired from a third party
without any breach of any confidentiality restriction, or (iii) is already in
the possession of the receiving Party at the time it was disclosed to the
receiving Party by the disclosing Party.

Dental Assets. The term "Dental Assets" shall mean the following assets of
-------------
Provider:

(a) All of Provider's right, title and interest in, to or under, or
possession of, all drugs, pharmaceuticals, products, substances, items or
devices whose purchase, possession, maintenance, administration, prescription or
security requires the authorization or order of a Dental Care Professional or
requires a permit, registration, certification or any other governmental
authorization held by a Dental Care Professional as specified under any federal
or state law, or both;

(b) All of Provider's right, title and interest in and to records of
identity, diagnosis, evaluation or treatment of patients;

(c) All of Provider's right, title and interest in, to or under
insurance policies covering or relating to dental malpractice;

(d) The name of Provider;

(e) All franchises, licenses, permits, certificates, approvals and
other governmental authorizations necessary or desirable to own and operate any
of the other Dental Assets, a complete and correct list of which is set forth on
Schedule 1;

iii
<PAGE>

(f) All of Provider's right, title and interest in, to or under and
contract or agreement that requires performance by a licensed dental care
provider under federal or applicable state law.

Dental Care. The term "Dental Care" shall mean such intra-oral diagnostic
-----------
and therapeutic procedures, operations, and services as are included under the
definition of the "practice of dentistry" under the laws and regulations of the
state in which such procedures, operations, and services are performed and which
are provided by Provider to its patients through Provider's dentists and other
professional dental care personnel operating under the supervision of Provider's
dentists, including but not limited to the practice of general dentistry,
endodontics, periodontics, orthodontics, prosthodontics, pediatric dental care,
and oral surgery, and all dental care associated with any of the foregoing.

Dental Care Professional. The term "Dental Care Professional" shall mean
------------------------
any individual holding a current, unrestricted license issued by the appropriate
dental licensing board in the state in which the Dental Care Professional
renders Dental Care, which permits such individual to provide Dental Care,
including without limitation dentists (as that term is defined in (S)2.5) and
denturists, dental assistants, and hygienists.

GAAP. The term "GAAP" shall mean generally accepted accounting principles
----
set forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board and the Securities
and Exchange Commission or in such other statements by such other entity or
other practices and procedures as may be approved by a significant segment of
the accounting profession, which are applicable to the circumstances as of the
date of the determination.

Gross Revenue. The term "Gross Revenue" shall mean the sum of all
-------------
Professional Service Revenue and Ancillary Revenue before Adjustments.

Ordinary Dental Supplies. The term "Ordinary Dental Supplies" shall mean
------------------------
all products, substances, items, or devices which (i) are necessary or
appropriate for Provider's provision of Dental Care, and (ii) are not Special
Dental Supplies.

Parent. The term "Parent" shall mean American Dental Partners, Inc., a
------
Delaware corporation.

Performance Fee. The term "Performance Fee" shall mean the fee paid to
---------------
Service Company by Provider as described in (S)7.3(b).

Practice Territory. The term "Practice Territory" shall mean the
------------------
geographic area within which Provider provides Dental Care, which geographic
area shall include all of the following territories: (a) with respect to each
Clinic which offers general dentistry services only, the geographic area within
a radius of 30 miles of such Clinic, and (b) with respect to each Clinic which
offers specialty dental services, the geographic area within a radius of 50
miles of such Clinic.

iv
<PAGE>

Provider Account. The term "Provider Account" shall mean the bank account
----------------
of Provider established by Provider promptly following the execution of this
agreement at a financial institution reasonably acceptable to Service Company,
which account shall be administered by Service Company according to (S)(S)4.11
and 4.12 of this agreement.

Provider Consent. The term "Provider Consent" shall mean the consent
----------------
granted by Provider's representatives (or either representative) who serve on
the Policy Board. When any provision of this agreement requires Provider
Consent, Provider Consent shall not be unreasonably withheld and shall be
binding on Provider.

Provider Expense. The term "Provider Expense" shall mean an expense
----------------
incurred by the Service Company or Provider and for which Provider, and not the
Service Company, is financially liable. Provider Expense shall include dentist
(as defined in (S)2.5) salaries, benefits (which includes workers' compensation
coverage), and other direct costs related to the dentists employed or otherwise
retained by Provider for the provision of its Dental Care (including
professional dues, subscriptions, continuing dental education expenses, and
travel costs for continuing dental education or other business travel, but
excluding business travel requested by Service Company, which shall be a Clinic
Expense), together with any expenses related to any Dental Assets or the
maintenance and protection of the same and such other costs and expenses
designated as Provider Expense in or pursuant to this agreement (including
without limitation the amounts described in (S)4.13(d)(ii)). In the event
Provider incurs consulting, accounting, legal or other similar fees without
Service Company's approval of such engagement through Service Company, all fees
and expenses so incurred shall be Provider Expenses. For purposes of
calculating the Performance Fee, Provider Expenses shall equal [*] of Adjusted
Gross Revenues or such other percentage of Adjusted Gross Revenues as may be set
forth in the Budget less an amount equal to the Service Fee Adjustment.

Representatives. The term "Representatives" shall mean a Party's officers,
---------------
directors, employees, and other agents or representatives, and attorneys,
accountants, and other professional advisors.

Service Company Consent. The term "Service Company Consent" shall mean the
-----------------------
consent granted by Service Company's representatives (or either representative)
who serve on the Policy Board. When any provision of this agreement requires
Service Company Consent, Service Company Consent shall not be unreasonably
withheld and shall be binding on Service Company.

* This information has been omitted pursuant to a request for confidential
treatment and has been filed separately with the Securities and Exchange
Commission.

v
<PAGE>

Service Company Expense. The term "Service Company Expense" shall mean an
-----------------------
expense or cost incurred by Service Company or Parent and for which Service
Company or Parent, and not Provider, is financially liable. Service Company
Expense shall specifically include the costs of Service Company and Parent's
corporate personnel and the travel costs of such corporate personnel and shall
specifically exclude expenses incurred by Service Company or Parent that
directly benefit Provider or are otherwise incurred by Service Company or Parent
in providing services pursuant to this agreement.

Service Fee. The term "Service Fee" shall mean the fee paid to Service
-----------
Company by Provider as described in (S)7.3(a).

Services. The term "Services" shall mean the business, administrative, and
--------
management services to be provided for Provider by Service Company as set forth
in this agreement, including without limitation the provision of equipment,
supplies, support services, non-dentist personnel, office space, financial
recordkeeping and reporting, billing and collection and other business office
services. Services shall not include the provision of Dental Care to patients
of the Provider.

Special Dental Supplies. The term "Special Dental Supplies" shall mean all
-----------------------
products, substances, items or devices, the purchase, possession, maintenance,
administration, prescription or security of which requires the authorization or
order of a Dental Care Professional or requires a permit, registration,
certification or other governmental authorization held by a Dental Care
Professional as specified under any federal and/or state law.

Term. The term "Term" shall mean the initial term and any renewal periods
----
of this agreement as described in (S)8.1, subject to termination pursuant to
(S)8.2.

vi
<PAGE>

FIRST AMENDMENT TO SERVICE AGREEMENT
------------------------------------

This amendment is made effective January 1, 1997, between PDHC, Ltd., a
Minnesota corporation ("Service Company"), and PDG, P.A., a Minnesota
professional association ("Provider").

Background Information
----------------------

A. Service Company and Provider are all of the parties (the "Parties")
to a Service Agreement dated November 12, 1996 (the "Agreement").

B. The Parties have prepared a revised Budget (as defined in the
Agreement) for 1997 and desire to amend the Agreement so that the Agreement will
be consistent with such Budget.

Agreement
---------

The Parties hereby acknowledge the accuracy of the foregoing Background
Information and agree as follows:

(S)1. Definitions. All capitalized terms used in this amendment which
-----------
are not otherwise defined herein shall have the respective meanings given those
terms in the Agreement.

(S)2. Provider Expenses. The percentage set forth in (S)4.13(a) of the
-----------------
Agreement is hereby changed to [*]. The percentage set forth in the last
sentence of the definition of "Provider Expense" contained in Exhibit A to the
Agreement ("Exhibit A") is hereby changed to [*].

(S)3. Service Fee. The Service Fee set forth in (S)7.3(a) is hereby
-----------
changed to [*].

(S)4. Adjustment to Fees. The first sentence in (S)7.4(b) of the
------------------
Agreement is hereby replaced with the following: [*].

(S)5. Base Level. The percentage set forth in the definition of "Base
----------
Level" in Exhibit A is hereby changed to [*].

* This information has been omitted pursuant to a request for confidential
treatment and has been filed separately with the Securities and Exchange
Commission.
1
<PAGE>

(S)6. Construction. The modifications to the Agreement contained in this
------------
amendment shall apply prospectively only. In the event of any inconsistency
between the provisions of this amendment and the provisions of the Agreement,
the provisions of this amendment shall control; provided that this amendment
shall not be construed to limit the Parties' right to adjust amounts or
percentages pursuant to future Budgets as permitted by the Agreement. Except as
modified in this amendment, the Agreement shall continue in full force and
effect without change. This amendment shall be binding upon, inure to the
benefit of, and be enforceable by and against the respective successors and
assigns of each Party.

(S)7. Counterparts. This amendment may be executed in multiple
------------
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same amendment.

PDHC, LTD. PDG, P.A.

By /s/ Gregory A. Serrao By /s/ Gregory T. Swenson, D.D.S
--------------------- -----------------------------
Gregory A. Serrao Gregory T. Swenson, D.D.S.
Chairman of the Board and President
Chief Executive Officer

-2-
<PAGE>

SECOND AMENDMENT TO SERVICE AGREEMENT
-------------------------------------

This amendment is made effective January 1, 1998, between PDHC, Ltd., a
Minnesota corporation ("Service Company"), and PDG, P.A., a Minnesota
professional association ("Provider").

Background Information
----------------------

A. Service Company and Provider are all of the parties (the "Parties")
to a Service Agreement dated November 12, 1996, as amended January 1, 1997 (as
so amended, the "Agreement").

B. The Parties have prepared a revised Budget (as defined in the
Agreement) for 1998 and desire to amend the Agreement so that the Agreement will
be consistent with such Budget.

Agreement
---------

The Parties hereby acknowledge the accuracy of the foregoing Background
Information and agree as follows:

(S)1. Definitions. All capitalized terms used in this amendment which
-----------
are not otherwise defined herein shall have the respective meanings given those
terms in the Agreement.

(S)2. Provider Expenses. The percentage set forth in (S)4.13(a) of the
-----------------
Agreement and in the last sentence of the definition of "Provider Expense"
contained in Exhibit A to the Agreement ("Exhibit A") is hereby changed to [*].

(S)3. Service Fee. The Service Fee set forth in (S)7.3(a) is hereby
-----------
changed to [*].

(S)4. Adjustment to Fees. The first sentence in (S)7.4(b) of the
------------------
Agreement is hereby replaced with the following: [*].

(S)5. Base Level. The percentage set forth in the definition of "Base
----------
Level" in Exhibit A is hereby changed to [*].

* This information has been omitted pursuant to a request for confidential
treatment and has been filed separately with the Securities and Exchange
Commission.

1
<PAGE>

(S)6. Future Adjustments. Any or all of the percentages and amounts
------------------
described in (S)(S)2 through 5, inclusive, of this amendment may hereafter be
changed from time to time by the written agreement of the Parties, whether or
not such agreement is designated as an amendment to the Agreement.

(S)7. Construction. The modifications to the Agreement contained in this
------------
amendment shall apply prospectively only. In the event of any inconsistency
between the provisions of this amendment and the provisions of the Agreement,
the provisions of this amendment shall control; provided that this amendment
shall not be construed to limit the Parties' right to adjust amounts or
percentages pursuant to future Budgets as permitted by the Agreement. Except as
modified in this amendment, the Agreement shall continue in full force and
effect without change. This amendment shall be binding upon, inure to the
benefit of, and be enforceable by and against the respective successors and
assigns of each Party.

(S)8. Counterparts. This amendment may be executed in multiple
------------
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same amendment.

PDHC, LTD. PDG, P.A.

By /s/ Gregory A. Serrao By /s/ Gregory T. Swenson
---------------------------- ----------------------------
Gregory A. Serrao Gregory T. Swenson, D.D.S.
Chairman of the Board and President
Chief Executive Officer

<PAGE>

EXHIBIT 10(S)

SERVICES AGREEMENT

BETWEEN

SMILEAGE DENTAL CARE, INC.

and

WISCONSIN DENTAL GROUP, S.C.

December 23, 1996

* This information has been omitted pursuant to a request for confidential
treatment and has been filed separately with the Securities and Exchange
Commission.
<PAGE>

TABLE OF CONTENTS
-----------------

<TABLE>
<CAPTION>
<S> <C>
ARTICLE I. DEFINITIONS................................................................... 1
-----------

ARTICLE II. APPOINTMENT AND AUTHORITY OF SERVICE COMPANY.................................. 1
--------------------------------------------

(S)2.1 Appointment................................................................... 1
-----------
(S)2.2 Authority..................................................................... 2
---------
(S)2.3 Patient Referrals............................................................. 2
-----------------
(S)2.4 Internal Management of Provider............................................... 2
-------------------------------
(S)2.5 Practice of Dentistry......................................................... 2
---------------------

ARTICLE III. POLICY BOARD.................................................................. 3
------------
(S)3.1 Formation and Operation of Policy Board....................................... 3
---------------------------------------
(S)3.2 Responsibilities of the Policy Board.......................................... 3
------------------------------------
(a) Capital Improvements and Expansion....................................... 3
----------------------------------
(b) Annual Budgets........................................................... 4
--------------
(c) Marketing and Advertising................................................ 4
-------------------------
(d) Patient Fees; Collection Policies........................................ 4
---------------------------------
(e) Provider and Payor Relationships......................................... 4
--------------------------------
(f) Strategic and Operational Planning....................................... 4
----------------------------------
(g) Capital Expenditures..................................................... 4
--------------------
(h) Personnel Planning....................................................... 4
------------------
(i) Grievance Referrals...................................................... 4
-------------------
(j) Patient Concerns and Claims.............................................. 5
---------------------------
(k) Environmental Health and Safety.......................................... 5
-------------------------------
(l) Emergency Care Services.................................................. 5
-----------------------
(m) Financial Review......................................................... 5
----------------
(n) Other.................................................................... 5
-----
(S)3.3 Dental Decisions.............................................................. 5
----------------

ARTICLE IV. RESPONSIBILITIES OF SERVICE COMPANY........................................... 5
-----------------------------------

(S)4.1 Clinics....................................................................... 6
-------
(S)4.2 Equipment..................................................................... 6
---------
(S)4.4 Supplies...................................................................... 7
--------
(S)4.5 Capital Investment............................................................ 7
------------------
(S)4.6 Support Services.............................................................. 7
----------------
(S)4.7 Quality Assurance, Risk Management, and Utilization Review.................... 7
----------------------------------------------------------
(S)4.8 Licenses and Permits.......................................................... 7
--------------------
(S)4.9 Personnel..................................................................... 8
---------
(S)4.10 Contract Negotiations......................................................... 8
---------------------
(S)4.11 Billing and Collection........................................................ 8
----------------------
</TABLE>
<PAGE>

<TABLE>
<S> <C> <C>
(S)4.12 Provider Account........................................... 9
----------------
(a) Power of Attorney..................................... 9
-----------------
(b) Priority of Payments.................................. 10
--------------------
(c) Further Assurances.................................... 10
------------------
(S)4.13 Financial Matters.......................................... 10
------------------
(a) Annual Budget......................................... 10
-------------
(b) Accounting and Financial Records...................... 11
--------------------------------
(c) Review of Expenditures................................ 11
----------------------
(d) Tax Matters........................................... 11
-----------
(i) General.......................................... 11
-------
(ii) Sales and Use Taxes.............................. 11
-------------------
(S)4.14 Reports and Records........................................ 11
-------------------
(a) Dental Records........................................ 11
--------------
(b) Other Reports and Records............................. 12
-------------------------
(S)4.15 Recruitment of Provider Dentists........................... 12
--------------------------------
(S)4.16 Service Company's Insurance................................ 12
---------------------------
(S)4.17 License of Name and Marks.................................. 12
-------------------------
(S)4.18 No Warranty................................................ 12
-----------

ARTICLE V. RESPONSIBILITIES OF PROVIDER.............................. 13
----------------------------
(S)5.1 Organization and Operations................................ 13
---------------------------
(S)5.2 Provider Personnel......................................... 13
------------------
(a) Dentist Personnel..................................... 13
-----------------
(b) Provider and Patient Scheduling....................... 14
-------------------------------
(c) Paid Hours Reporting.................................. 14
--------------------
(d) Non-Dentist Dental Care Personnel..................... 14
---------------------------------
(S)5.3 Professional Standards..................................... 14
----------------------
(S)5.4 Dental Care................................................ 14
-----------
(S)5.5 Peer Review and Quality Assurance.......................... 15
---------------------------------
(S)5.6 Provider's Insurance....................................... 15
--------------------
(S)5.7 Noncompetition............................................. 16
--------------
(S)5.8 Use of Name................................................ 17
-----------

ARTICLE VI. CONFIDENTIALITY........................................... 17
---------------
(S)6.1 Confidential and Proprietary Information................... 17
----------------------------------------
(S)6.2 Use of Practice Statistics................................. 17
--------------------------

ARTICLE VII. FINANCIAL ARRANGEMENTS.................................... 18
----------------------
(S)7.1 Clinic Expense Reimbursement............................... 18
----------------------------
(S)7.2 Repayment of Advances...................................... 18
---------------------
(S)7.3 Fees....................................................... 18
----
(a) Service Fee........................................... 18
-----------
(b) Performance Fee....................................... 18
---------------
(S)7.4 Adjustments to Fees........................................ 18
-------------------
</TABLE>

ii
<PAGE>

<TABLE>
<S> <C> <C>
(S)7.5 Reasonable Value........................................... 19
----------------
(S)7.6 Payment.................................................... 19
-------
(S)7.7 Accounts Receivable........................................ 19
-------------------

ARTICLE VIII. TERM AND TERMINATION....................................... 20
--------------------
(S)8.1 Initial and Renewal Term................................... 20
------------------------
(S)8.2 Termination................................................ 20
-----------
(a) Termination By Service Company........................ 20
------------------------------
(b) Termination By Provider............................... 21
-----------------------
(c) Termination by Agreement.............................. 21
------------------------
(d) Legislative, Regulatory or Administrative Change...... 21
------------------------------------------------
(S)8.3 Effects of Termination..................................... 22
----------------------
(S)8.4 Purchase Obligation........................................ 23
-------------------
(S)8.5 Closing of Purchase........................................ 24
-------------------

ARTICLE IX. GENERAL................................................... 25
-------
(S)9.1 Administrative Services Only............................... 25
----------------------------
(S)9.2 Relationship of Parties.................................... 25
-----------------------
(S)9.3 Notices.................................................... 25
-------
(S)9.4 Execution of Documents..................................... 26
----------------------
(S)9.5 Governing Law.............................................. 26
-------------
(S)9.6 Severability............................................... 27
------------
(S)9.7 Setoff..................................................... 27
------
(S)9.8 Remedies................................................... 27
--------
(S)9.9 Non-waiver................................................. 27
----------
(S)9.10 Indemnification............................................ 27
---------------
(S)9.11 No Third Party Benefit..................................... 28
----------------------
(S)9.12 Captions................................................... 28
--------
(S)9.13 Genders and Numbers........................................ 28
-------------------
(S)9.14 Complete Agreement......................................... 28
------------------
(S)9.15 Counterparts............................................... 28
------------
(S)9.16 Assignment................................................. 28
----------
(S)9.17 Successors................................................. 29
----------
(S)9.18 Force Majeure.............................................. 29
-------------

INDEX TO EXHIBITS......................................................... 30
- -----------------

DEFINITIONS............................................................... i
- -----------
</TABLE>

iii
<PAGE>

SERVICES AGREEMENT

This agreement is made effective December 23, 1996, between Smileage Dental
Care, Inc., a Wisconsin corporation ("Service Company"), and Wisconsin Dental
Group, S.C., a Wisconsin corporation ("Provider").

Background Information
----------------------

A. Provider operates as a dental practice providing dental services to the
general public in and around the Greater Milwaukee, Wisconsin area through
individual dentists who are licensed to practice dentistry in the state of
Wisconsin and who are employed or otherwise retained by Provider.

Statement of Agreement
----------------------

Service Company and Provider (the "Parties") hereby acknowledge the
accuracy of the foregoing Background Information and agree as follows:

ARTICLE I. DEFINITIONS
-----------

Capitalized terms used in this agreement but not otherwise defined herein
shall have the respective meanings given those terms in the attached Exhibit A.

ARTICLE II. APPOINTMENT AND AUTHORITY OF SERVICE COMPANY
--------------------------------------------

(S)2.5 Practice of Dentistry. The Parties acknowledge and agree that: (a)
---------------------
Service Company is not authorized or qualified to engage in any activity that
may be construed or deemed to constitute the practice of dentistry; and (b)
notwithstanding anything in this agreement to the contrary (i) Provider, through
its dentists, shall be solely responsible for and shall have complete authority,
responsibility, supervision, and control over the provision of all Dental Care
and that all Dental Care shall be provided and performed exclusively by or under
the supervision of dentists as such dentists, in their sole discretion, deem
appropriate, (ii) Service Company shall not have or exercise any control or
supervision over the provision of Dental Care, and (iii) to the extent any act
or service required of Service Company under this agreement is reasonably likely
to be construed by a court of competent jurisdiction or by any applicable
governmental agency to constitute the practice of dentistry, the requirement to
perform that act or service by Service Company shall be deemed waived and
unenforceable. For purposes of this agreement and as the context permits, the
term "dentist" shall be deemed to include those individuals licensed by the
State of Wisconsin to practice general dentistry or a dental care specialty such
as orthodontics, endodontics, periodontics, prosthodontics, pediatric dentistry,
oral surgery, and oral medicine.

2
<PAGE>

ARTICLE III. POLICY BOARD
------------

(S)3.1 Formation and Operation of Policy Board. The Parties hereby
---------------------------------------
establish an advisory policy board (the "Policy Board") which shall provide
consultation and advice to Service Company in support of Service Company
discharging its responsibility for developing and implementing management and
administrative policies for the overall operation of Clinics. The Policy Board
shall consist of six members, of which three members shall be designated by
Service Company, in its sole discretion, and three members shall be designated
by Provider; provided that, unless otherwise agreed by the Parties, the Policy
Board members designated by Provider shall be licensed dentists employed by
Provider. Each Party shall have the right to designate, remove, and replace its
Policy Board designees at any time and from time to time upon notice to the
other Party.

Except as may otherwise be expressly provided in this agreement or
any rules, bylaws, or regulations adopted by the Policy Board, the act of a
majority of the members of the Policy Board shall be the act of the Policy
Board. The Policy Board's decisions may be evidenced by either minutes of a
Policy Board meeting or written action taken by the Policy Board members making
the decision; provided that no written action signed by less than all of the
Policy Board members shall be effective unless notice of such action is given to
the Policy Board member who is not signing such action at least two business
days prior to the effective date of such action. The decisions, resolutions, or
recommendations of the Policy Board shall be reviewed by Service Company and, if
deemed necessary or appropriate by Service Company, in its sole discretion,
shall be implemented by Service Company or Provider, as appropriate.

(S)3.2 Responsibilities of the Policy Board. The Policy Board shall have
------------------------------------
the following duties and responsibilities in its advisory capacity to the
Parties, provided, however, that no decision, resolution or recommendation of
the Policy Board shall be binding on either of the Parties unless specifically
agreed to by the Parties either pursuant to the express terms of this agreement
or in writing signed by the Party to be bound:

(a) Capital Improvements and Expansion. Any renovation and expansion
----------------------------------
plans and capital equipment expenditures with respect to Clinics shall be the
responsibility of Service Company, shall be reviewed by the Policy Board, and
shall be based upon economic feasibility, dentist support, productivity, and
then-current market conditions.

3
<PAGE>

(b) Annual Budgets. All annual capital and operating budgets prepared
-------------
in accordance with (S)4.13(a) by Service Company (in consultation with Provider)
shall be subject to the review and comment of the Policy Board. Notwithstanding
the foregoing sentence, such budgets shall be subject to the review, comment,
and approval of Parent. Service Company shall deliver a copy of such approved
budget to the Chief Financial Officer of Parent for Parent's approval.

(c) Marketing and Advertising. The Policy Board shall review and make
-------------------------
recommendations regarding advertising and other marketing of the dental services
performed at any Clinic.

(d) Patient Fees; Collection Policies. Subject to (S)3.3, as a part of
---------------------------------
the annual operating budget, in consultation with Provider and Service Company,
the Policy Board shall review and make recommendations concerning the fee
schedules and collection policies for all dental and ancillary services rendered
by Provider. Approval of the fee schedules shall be a Dental Decision.

(f) Strategic and Operational Planning. The Policy Board shall review
----------------------------------
and make recommendations regarding the long-term strategic and short-term
operational goals, objectives and plans developed by Service Company.

(g) Capital Expenditures. The Policy Board shall review and make
--------------------
recommendations regarding the priority of major capital expenditures.

(h) Personnel Planning. The Policy Board shall review and make
------------------
recommendations regarding Provider and support personnel manpower plans
developed by Service Company. The Policy Board shall review and make
recommendations regarding any variations to the restrictive covenants in the
dentists' employment or other agreements.

4
<PAGE>

(j) Patient Concerns and Claims. The Policy Board shall review and
---------------------------
monitor a patient claims tracking, monitoring and recovery procedure which shall
provide, without limitation, for (i) the timely and appropriate resolution of
all claims and related patient and Provider reimbursement decisions, and (ii)
the distribution of a summary report setting forth the status and proposed
actions with respect to each such claim to Provider and Service Company on a
regular basis. All Dental Care related patient concerns and claims
reimbursement decisions shall be a Provider Expense.

(k) Environmental Health and Safety. The Policy Board shall review
-------------------------------
and monitor environmental and workplace health and safety guidelines, the goal
of which is to achieve compliance with current national, state and local laws
and regulations regarding environmental and workplace health and safety.

(l) Emergency Care Services. The Policy Board shall review and
-----------------------

periodically make suggestions for improving (i) the organization and delivery of
emergency Dental Care by Provider, and (ii) the process and guidelines for
ensuring an appropriate response by Provider to dental and in-Clinic medical
emergencies as they may occur from time to time.

(m) Financial Review. The Policy Board shall review and monitor the
----------------
financial performance of Provider with respect to the attainment of its budgeted
goals.

(n) Other. The Policy Board shall have such other duties,
-----
responsibilities, and authority as may be set forth in this agreement or agreed
upon by the Parties from time to time.

(S)3.3 Dental Decisions. Notwithstanding the preceding section or any
----------------
other provisions of this agreement to the contrary, all Dental Decisions
(defined below) will be made solely by Provider and shall be binding on the
Parties; provided that the Policy Board may participate in the analysis and
discussion process. For purposes of this agreement, "Dental Decisions" shall
mean decisions relating directly to: (a) types and levels of Dental Care to be
provided; (b) recruitment of dentists for Provider, including the evaluation of
the background, experience, qualifications, specialties, and other credentials
of recruited dentists; (c) fee schedules for Provider's services, including
without limitation Provider's usual and customary fee schedule; and (d) any
other Dental Care related functions or decisions agreed upon by the Parties.

ARTICLE IV. RESPONSIBILITIES OF SERVICE COMPANY
-----------------------------------

5
<PAGE>

(S)4.1 Clinics
-------

(a) Service Company shall locate, lease, acquire or otherwise procure a
Clinic, taking into consideration the professional concerns of Provider. The
expenses associated with any such leasing, acquisition, or procurement shall be
Clinic Expenses. Any Clinic procured by Service Company for use by Provider
shall be procured at commercially reasonable rates.

(S)4.2 Equipment.
---------

(b) Service Company shall provide, finance, or cause to be provided or
financed such dental related equipment as is reasonably required by Provider.
Subject to economic feasibility as set forth in the budgets approved pursuant to
this agreement, Provider shall advise Service Company in all dental equipment
selections. Except for Special Dental Supplies (defined in (S) 4.3, below), all
dental and non-dental equipment acquired for the use of Provider shall be owned
by Service Company.

6
<PAGE>

(S)4.5 Capital Investment. Access to all needed working capital and
------------------
capital expenditures in accordance with the budget as approved in accordance
with (S)4.13(a) will be provided by Service Company. Service Company shall
determine the source of capital to be invested, which may include (a)
intracompany borrowings from Parent (at the rate set forth in clause (j) in the
definition of "Clinic Expenses"), and (b) borrowings, leases, or other financing
methods through independent third-party financial institutions.

7
<PAGE>

reasonable assistance to Provider in obtaining the same. Service Company also
shall maintain all licenses and permits required for all equipment (existing and
future) located at each Clinic.

(S)4.11 Billing and Collection. On behalf of and for the account of
----------------------
Provider, Service Company shall establish and maintain credit and billing and
collection policies and procedures, and shall exercise reasonable efforts to
bill and collect in a timely manner all professional and other fees for all
billable Dental Care provided by Dental Care Professionals, including any such
fees paid directly to Provider by Service Company pursuant to the then-current
Membership Agreement (or similar agreement for providing professional services
to dental plans) between Service Company and Provider. Service Company shall
advise and consult with Provider regarding the fees for Dental Care provided by
Provider (including any related discounting policy); it being understood,
however, that Provider's consent shall be necessary to establish the fees
(subject to (S)3.2(d), above) to be charged for Dental Care. In connection with
the billing and collection services to be provided hereunder, Provider hereby
grants to Service Company, throughout the Term (and thereafter as provided in
(S)8.3), an exclusive special power of attorney and appoints Service Company as
Provider's exclusive true and lawful agent and attorney-in-fact, and Service
Company hereby accepts such special power of attorney and appointment, for the
following purposes:

8
<PAGE>

(a) To bill Provider's patients, in either Provider's or Service
Company's name (as Service Company deems appropriate) and on Provider's behalf,
for all billable Dental Care provided by or on behalf of Provider to patients.

(b) To bill, in either Provider's or Service Company's name (as Service
Company deems appropriate) and on Provider's behalf, all claims for
reimbursement or indemnification from insurance companies and plans, all state
or federally funded dental benefit plans, and all other third party payors or
fiscal intermediaries for all covered billable Dental Care provided by or on
behalf of Provider to patients.

(c) To collect and receive, in either Provider's or Service Company's
name (as Service Company deems appropriate) and on Provider's behalf, all
accounts receivable generated by such billings and claims for reimbursement, to
administer such accounts including, but not limited to, extending the time of
payment of any such accounts for cash, credit or otherwise; discharging or
releasing the obligors of any such accounts; suing, assigning or selling at a
discount such accounts to collection agencies; or taking other measures to
require the payment of any such accounts; provided, however, that extraordinary
collection measures, such as filing lawsuits, discharging or releasing obligors
shall not be undertaken without Provider Consent.

(d) To deposit all amounts collected into the Provider Account.
Provider shall transfer and deliver to Service Company all funds received by
Provider from patients or third party payors for Dental Care. Upon receipt by
Service Company of any funds from patients or third party payors or from
Provider for Dental Care pursuant to this agreement, Service Company shall
promptly deposit the same into the Provider Account.

(f) To sign checks, drafts, bank notes or other instruments on behalf
of Provider, and to make withdrawals from the Provider Account for payments
specified in this agreement and otherwise as agreed upon from time to time by
the Parties.

(S)4.12 Provider Account.
----------------

9
<PAGE>

(a) Power of Attorney. Service Company shall have access to the
-----------------
Provider Account solely for the purposes stated herein and shall use all funds
on deposit therein to pay all Clinic Expenses in accordance with the terms of
this agreement. Provider hereby grants to Service Company an exclusive special
power of attorney and appoints Service Company as Provider's true and lawful
agent and attorney-in-fact, throughout the Term (and thereafter as provided in
(S)8.3), and Service Company hereby accepts such special power of attorney and
appointment, to make withdrawals from Provider Account for payments specified in
this agreement and as requested from time-to-time by Provider. Notwithstanding
this exclusive special power of attorney, Provider may, upon reasonable advance
notice to Service Company and subject to (S)4.12(b) of this agreement, request
that Service Company draw checks on the Provider Account for Provider Expenses
and such other amounts as may be due to Provider under this agreement.
Disbursements shall be related to and in such amount so as to ensure that
disbursements made without prior Provider Consent are consistent with the
expenditures authorized by the Budget.

(b) [*]

(c) Further Assurances. Promptly upon request by Service Company from
------------------
time to time, Provider shall execute a separate power of attorney in form
reasonably satisfactory to Service Company for the purpose of further confirming
or evidencing the rights granted to Service Company under (S)(S)4.11 and 4.12.

(S)4.13 Financial Matters.
-----------------

(a) Annual Budget. At least 30 days prior to the commencement of each
-------------
calendar year, Service Company, in consultation with Provider, shall prepare and
deliver to the Policy Board for its review a proposed Budget, setting forth an
estimate of Provider's revenue and expenses for the upcoming calendar year
(including without limitation the Service and Performance Fees associated with
the services provided by Service Company hereunder). However, the initial
Budget has been prepared by Service Company in consultation with Provider before
the execution of this agreement. The initial Budget shall provide, among other
things, that [*] of the Adjusted Gross Revenue shall be allocated to Provider
Expenses. In each succeeding Budget, unless the Parties otherwise mutually
agree, such percentage of the Adjusted Gross Revenue shall be allocated to
Provider Expenses.

In the event a proposed Budget is disapproved by Parent (pursuant to
(S)3.2(b)), Service Company, in consultation with Provider, shall promptly
revise such Budget, taking into consideration the comments of Parent, and shall
deliver such revised Budget to the Policy Board for review and to Parent for
approval. In the event that a proposed Budget has not been approved by Parent by
the beginning of the calendar year, the Budget for the prior year shall be
deemed to be adopted as the Budget for the current year until a new Budget as
been approved by Parent.

* This information has been omitted pursuant to a request for confidential
treatment and has been filed separately with the Securities and Exchange
Commission.

10
<PAGE>

(c) Review of Expenditures. Provider's chief executive officer shall
----------------------
review from time to time all expenditures related to the operation of Provider,
but such officer shall not have the power to prohibit or invalidate any
expenditure.

(d) Tax Matters.
-----------

(ii) Sales and Use Taxes. Service Company and Provider acknowledge
-------------------
and agree that to the extent that any of the services to be provided by Service
Company hereunder may be subject to any state sales and use taxes, Service
Company may have a legal obligation to collect such taxes from Provider and to
remit the same to the appropriate tax collection authorities. Provider agrees
to pay any and all applicable state sales, use, gross receipts, and other
similar taxes and charges (other than taxes on Service Company's net income)
with respect to any amount paid to Service Company hereunder and that such
amounts shall be a Provider Expense.

(S)4.14 Reports and Records.
-------------------

(a) Dental Records. Service Company shall establish, monitor, and
maintain procedures and policies for the timely creation, preparation, filing
and retrieval of all dental records generated by Provider in connection with
Provider's provision of Dental Care; and, subject to applicable law, shall
ensure that dental records are promptly available to dentists and any other
appropriate persons. All such dental records shall be retained and maintained in
accordance with all applicable state and federal laws relating to the
confidentiality and retention thereof. All dental records shall be and remain
the property of Provider.

(b) Other Reports and Records. Service Company shall timely create,
-------------------------
prepare, and file such additional reports and records as are reasonably
necessary and appropriate for

11
<PAGE>

Provider's provision of Dental Care, and shall be prepared to analyze and
interpret such reports and records upon the request of Provider.

(S)4.17 License of Name and Marks. Service Company hereby grants the
-------------------------
Provider, for the Term, a non-exclusive royalty-free license to use the names
"Smileage" and "Smileage Dental Care" and all related marks and logos owned by
Service Company for the purpose of fulfilling its obligations hereunder,
including without limitation providing Dental Care to its patients.

(S)4.18 No Warranty. Provider acknowledges that Service Company has not
-----------
made and will not make any representations or warranties, express or implied,
regarding Service Company's services under this agreement or the results of
those services, including without limitation any representations or warranties
that the services provided by Service Company will result in any particular
amount or level of dental practice or income to Provider.

ARTICLE V. RESPONSIBILITIES OF PROVIDER
----------------------------

12
<PAGE>

legally organized and operated to provide Dental Care in a manner consistent
with all state and federal laws; (b) operate and maintain within the Practice
Territory a full time practice of dentistry providing Dental Care in compliance
with all applicable federal, state, and local laws, rules, regulations,
ordinances, and orders; (c) maintain and use its best efforts to enforce its
articles or certificate of incorporation (or other instrument of organization),
bylaws, shareholder agreements, and other organizational documents (hereafter in
this (S)5.1 simply "organizational documents") in the respective forms provided
to Service Company prior to execution of this agreement; (d) have at least three
executive officers at the level of vice president or above who are also dentist
employees of Provider; (e) maintain and use its best efforts to enforce the
written employment agreements and independent contractor agreements described in
(S)5.2(a), below; and (f) not, without Service Company Consent, (i) amend any of
its employment agreements or organizational documents in any material respect or
waive any material rights thereunder, or (ii) engage in any transaction
constituting a merger, consolidation, reorganization, sale or purchase of assets
outside of the ordinary course of business, liquidation, or dissolution.
Provider hereby acknowledges that Service Company would not have entered into
this agreement but for Provider's covenant to maintain such organizational
documents and employment agreements, and Provider shall pay to Service Company,
in addition to the amounts set forth in Article VII, any damages, compensation,
payment, or settlement amounts received by Provider from a dentist who
terminates his employment agreement without cause or whose employment agreement
is terminated by Provider for cause.

(S)5.2 Provider Personnel.
------------------

(a) Dentist Personnel. Provider shall retain, as a Provider Expense
-----------------
and not as a Clinic Expense, that number of dentists during the Term which are
necessary and appropriate, in Provider's sole discretion after consultation with
Service Company, to provide Dental Care to reasonably meet the demand therefor.
Provider shall cause each dentist retained by Provider to hold and maintain a
valid and unrestricted license to practice dentistry in the State of Wisconsin,
including without limitation any licenses required for the provision of any
specialty dental services, together with all necessary or appropriate board or
other certifications. Throughout the Term, Provider shall enter into and
maintain a written employment agreement substantially in the form of Exhibit D
for all dentists now and hereafter employed by Provider; provided that Provider
shall, throughout the Term, enter into and maintain a written employment
agreement substantially in the form of Exhibit C with each dentist of Provider
who now or hereafter is either an executive officer (at a level of vice
president or above) of or Policy Board member designated by Provider; and
provided further that Provider shall, immediately upon execution of this
agreement, enter into and maintain a written employment agreement substantially
in the form of Exhibit C with each of the dentists set forth on Exhibit E.
Throughout the Term, Provider shall enter into and maintain a written agreement
with each independent contractor retained by Provider, which agreements shall
contain confidentiality provisions substantially similar to those contained in
the employment agreement in the form of Exhibit D. Provider shall be responsible
for paying the compensation and benefits as applicable, for all dentists and any
other dentist personnel or other contracted or affiliated dentists, and for
withholding all sums for income tax, unemployment insurance, social security, or
any other

13
<PAGE>

withholding required by applicable law. Service Company may, on behalf of
Provider, administer the compensation and benefits with respect to such
individuals in accordance with the written agreement between Provider and each
dentist. Service Company shall neither control nor direct any dentist in the
performance of Dental Care for patients. Provider shall provide to Service
Company evidence of such licensing, certifications, and other credentials of the
dentists retained by Provider as Service Company may request from time to time.

(c) Paid Hours Reporting. Provider shall support the development and
--------------------
effective operation by Service Company of a dentist paid hours reporting and
monitoring system.

(S)5.3 Professional Standards. As a continuing condition of Service
----------------------
Company's obligations hereunder, each dentist retained by Provider to provide
Dental Care must: (i) have and maintain a valid and unrestricted license to
practice dentistry in the state; and (ii) comply with, be controlled and
governed by, and otherwise provide Dental Care in accordance with applicable
federal, state and municipal laws, rules, regulations, ordinances and orders,
and the ethics and standard of care of the dental profession. All specialty
Dental Care shall be provided by a dentist who is either board certified or
board eligible in the related specialty or by another dentist licensed to
provide such specialty Dental Care operating under the general supervision of a
dentist who is either board certified or board eligible in that specialty.

(S)5.4 Dental Care. Provider shall ensure that dentists and non-dentist
-----------
dental care personnel are available in sufficient numbers as are necessary or
appropriate to provide Dental Care to reasonably meet the demand for such Dental
Care. In the event that dentists employed by, or shareholders of, Provider are
not available to provide Dental Care coverage, Provider shall engage and retain
dentists on a temporary coverage basis, which dentists shall meet or exceed the
qualifications required for Provider's Dental Care Professionals under this
agreement. All costs and expenses associated with the retention of such
temporary coverage shall be Provider Expenses. With the assistance of the
Service Company, Provider and the dentists shall be responsible for scheduling
dentist and non-dentist dental care personnel coverage of all dental procedures.
Provider shall cause all dentists to exert their best efforts to develop and
promote Provider in such a manner as to ensure Provider is able to serve the
diverse needs of the community. Provider shall organize and maintain a high
quality, cost-effective process for

14
<PAGE>

ensuring that patients will have timely access to emergency Dental Care on a 24-
hour, seven day per week basis.

(d) Provider shall, after consultation with Service Company and
consideration of the recommendations of the Policy Board, support the
development, maintenance, and operation of a patient concerns and claims
recording, reporting, review, resolution, and tracking process which meets the
quality standards of Service Company. Provider shall cause all personnel
retained by it to comply fully with such process at all times.

15
<PAGE>

costs, expenses, and liabilities incurred by Provider or Service Company in
excess of the limits of such policies shall be a Provider Expense. Provider
shall actively support the participation of all dentists retained by Provider in
training and continuing education programs in order to reduce the risk of
exposure to and the related cost of obtaining and maintaining such coverage.
The comprehensive general liability coverage and professional liability coverage
shall be in such minimum amounts as Service Company may establish from time to
time. In addition, Provider shall cause each dentist retained by Provider as an
independent contractor to obtain comparable professional and comprehensive
general liability insurance coverage. All such insurance policies shall name
Service Company as an additional insured and provide for at least 30 days
advance written notice to Provider and Service Company from the insurer with
respect to any alteration of coverage, cancellation, or proposed cancellation
for any reason. Provider shall cause to be issued to Service Company by such
insurer or insurers a certificate reflecting such coverage. Upon the
termination of this agreement for any reason, Provider shall continue to carry
professional liability insurance in the amounts specified in this section for 10
years after termination, or if Provider dissolves or ceases to practice
dentistry, Provider shall obtain and maintain as a Provider Expense "tail"
professional liability coverage, in the amounts specified in this section for an
extended reporting period of 10 years. Provider shall be responsible for paying
all premiums for "tail" insurance coverage. In no event shall the professional
liability insurance carrier be replaced or changed without Service Company
Consent. Service Company shall provide reasonable assistance to Provider to
obtain such coverage.

(b) Except as specifically approved by Service Company in writing,
during the Term and for a period of five years immediately following the date
this agreement is terminated for any reason, Provider shall not directly or
indirectly own (excluding ownership of less than five percent (5%) of the equity
of any publicly traded entity), manage, operate, control, lend funds to, lend
its name to, or maintain any interest in any entity, business, or enterprise
which (i) provides, distributes, or promotes any type of management or
administrative services or products to third parties in competition with Service
Company in the Practice Territory or (ii) offers any type of service or product
to third parties substantially similar to those offered by Service

16
<PAGE>

Company to Provider in the Practice Territory. Notwithstanding the above
restriction, nothing herein shall prohibit Provider or any of its shareholders
from providing management and administrative services to its or their own dental
practices after the termination of this agreement, and nothing herein shall
prohibit Provider or its shareholders from contracting with a third party
manager to provide administrative or management services for its or their dental
practices after termination of this agreement as long as such relationship
complies with the provisions of this section.

(S)5.8 Use of Name. At all times during the Term, Provider shall, unless
-----------
otherwise directed by the Policy Board pursuant to (S)3.2(c), operate its dental
practice under the name "Wisconsin Dental Group," including without limitation
using all related marks and logos as are licensed to Provider pursuant to
(S)4.17, above, and filing an assumed or fictitious name application with the
Wisconsin Secretary of State or other appropriate governmental agency; provided
that Provider shall, immediately upon the expiration of the Term, abstain from
using such name, marks, and logos and shall take such steps as are necessary to
terminate such applications and Provider's rights thereunder.

ARTICLE VI. CONFIDENTIALITY
---------------

(S)6.2 Use of Practice Statistics. Notwithstanding (S)6.1, above, but
--------------------------
subject to the restrictions of this section and applicable law, Service Company
may: (a) share with other professional corporations, associations, dental
practices, or dental care delivery entities the practice statistics of Provider,
including utilization review data, quality assurance data, cost data, outcomes
data, or other practice data, provided that such information shall only be
disclosed to (i) affiliates of Service Company, (ii) other dental groups with
whom Service Company has a management relationship, (iii) managed care dental
benefit providers and other third party payors

17
<PAGE>

for the purpose of obtaining or maintaining third party payor contracts, (iv)
financial analysts and underwriters, (v) employers and employee benefit
associations, (vi) quality assurance and accrediting organizations, or (vii)
financial institutions; and (b) disclose all practice-related information
necessary or desirable in connection with any public or private offering of any
security of Service Company. In addition, Service Company may disclose
practice-related information and data in connection with any survey,
presentation, published material, study, or research project which Service
Company deems appropriate for the purpose of gaining insight into existing and
changing patterns in the organization and delivery of Dental Care and related
issues. In no event will any such data disclose or divulge the identity of any
patient or, to the extent reasonably practicable, any dentist.

ARTICLE VII. FINANCIAL ARRANGEMENTS
----------------------

(S)7.1 Clinic Expense Reimbursement. Service Company shall be reimbursed
----------------------------
for the amount of all Clinic Expenses incurred by Service Company.

(S)7.2 Repayment of Advances. Service Company shall be reimbursed for any
---------------------
and all amounts advanced to Provider by Service Company.

(b) Performance Fee. Service Company shall receive a Performance Fee,
---------------
payable monthly, equal to the amount, if any, by which [*].

(S)7.4 Adjustments to Fees.
-------------------

(a) [*]

(b) [*]

* This information has been omitted pursuant to a request for confidential
treatment and has been filed separately with the Securities and Exchange
Commission.

18
<PAGE>

Each adjustment, if any, under this (S)7.4 shall be calculated and paid not
later than 60 days following the end of the applicable calendar year.

(S)7.7 Accounts Receivable. To assure that Provider receives the entire
-------------------
amount of professional fees for its services and to assist Provider in
maintaining reasonable cash flow for the payment of Clinic Expenses, Service
Company may, during the Term, purchase, with recourse to Provider for the amount
of the purchase, the accounts receivable of Provider arising during the previous
month by transferring the amount set forth below into the Provider Account. The
consideration for the purchase shall be an amount equal to the Adjusted Gross
Revenue recorded each month. Service Company shall be entitled to offset Clinic
Expense reimbursement plus all fees and advances due to Service Company under
this Article against the amount payable for the accounts receivable. Although
it is the intention of the Parties that Service Company purchase and thereby
become the owner of the accounts receivable of Provider, in the event such
purchase shall be ineffective for any reason, Provider hereby grants to Service
Company a security interest in the accounts receivable, and Provider shall
cooperate with Service Company and execute all documents which may be reasonably
requested by Service Company in connection with such security interest. All
collections in respect of such accounts receivable purchased by Service Company
shall be received by Provider as the agent of Service Company and shall be
endorsed to Service Company and deposited in a bank account at a bank designated

19
<PAGE>

by Service Company. To the extent Provider comes into possession of any
payments in respect of such accounts receivable, Provider shall direct such
payments to Service Company for deposit in bank accounts designated by Service
Company.

ARTICLE VIII. TERM AND TERMINATION
--------------------

(S)8.2 Termination.
-----------

(i) The dissolution of Provider;

(ii) Provider admits in writing its inability to pay generally
its debts as they become due or makes an assignment for the benefit of
creditors;

(iv) Provider fails to pay when due any payment to be made by
Provider under this agreement, which failure continues for 10 days after notice
is given by Service Company to Provider thereof, provided that such failure is
not directly attributable to Service Company's failure to apply available funds
in the Provider Account according to (S)4.12(b); or

20
<PAGE>

(b) Termination By Provider. Provider may terminate this agreement
-----------------------
immediately upon notice to Service Company upon the occurrence of any of the
following events:

(iii) A court of competent jurisdiction makes a final
determination that Service Company has materially breached a fiduciary duty owed
to Provider.

(c) Termination by Agreement. Provider and Service Company may
------------------------
mutually agree to terminate this agreement at any time, such agreement to be in
writing and signed by both Parties.

(d) Legislative, Regulatory or Administrative Change. In the event
------------------------------------------------
there is a change in any federal, state, or local statute, law, regulation,
legislation, rule, policy, or general instruction, or a change in any third
party reimbursement system, or a ruling, judgment, or decree by any court,
agency, or other governing body having jurisdiction over either Party (hereafter
in this clause (d), a "ruling") which materially and adversely affects, or is
reasonably likely to affect, the manner in which either Party is to perform or
be compensated for its services under this agreement or which shall make this
agreement unlawful, the Parties shall immediately use their best efforts to
enter into a new service arrangement or basis for compensation for the services
furnished pursuant to this agreement that complies with that change and
approximates as closely as possible the economic position of the Parties prior
to such change or ruling.

21
<PAGE>

on the parties and subject to the then-applicable Commercial Arbitration Rules
of the American Arbitration Association. In any such arbitration, the
arbitrators shall be consist of a panel of three arbitrators, which shall act by
majority vote and which shall consist of one arbitrator selected by the Party on
one side of the issue subject to the arbitration, one arbitrator selected by the
Party on the other side of the issue, and a third arbitrator selected by the two
arbitrators so selected, who shall be either a certified public accountant or an
attorney at law licensed to practice in the State of Wisconsin and who shall act
as chairman of the arbitration panel; provided that if the Party on one side of
the issue selects its arbitrator for the panel and the other Party fails to so
select its arbitrator within 10 business days after being requested by the first
Party to do so, then the sole arbitrator shall be the arbitrator selected by the
first Party.

(S)8.3 Effects of Termination. Upon termination of this agreement as
----------------------
herein provided, neither Party shall have any further obligations under this
agreement, except for: (a) obligations accruing prior to the date of
termination, including without limitation payment of the amounts set forth in
Article VII relating to services provided prior to the termination of this
agreement; (b) obligations set forth in this agreement that expressly extend
beyond the Term, including without limitation indemnities and noncompetition
provisions, which provisions shall survive the expiration or termination of this
agreement; (c) the obligations of each party set forth in Article VI; and (d)
the obligation of Provider described in (S)8.4. Provider specifically
acknowledges and agrees that Service Company shall continue to collect and
receive on behalf of Provider all cash collections from accounts receivable in
existence at the time this agreement is terminated (which have not otherwise
been purchased by Service Company pursuant to (S)7.7), it being understood that
such cash collections will represent, in part, compensation to Service Company
for Services already rendered and compensation on accounts receivable purchased
by Service Company, if any. Upon the expiration or termination of this
agreement for any reason or cause whatsoever, Service Company shall surrender to
Provider all books and records pertaining to Provider's dental practice;
provided that Service Company may retain copies of such documents to the extent
reasonably necessary for Service Company to complete its post-termination
obligations and activities under this agreement.

(S)8.4 Purchase Obligation. Upon termination of this agreement for any
-------------------
reason, Provider shall, at Service Company's option:

22
<PAGE>

adjusted through the last day of the month most recently ended prior to the date
of such termination in accordance with GAAP to reflect amortization or
depreciation of all such amounts;

(b) Purchase from Service Company any real estate owned by Service
Company and used as a Clinic at the greater of the appraised fair market value
thereof or the then book value thereof;

23
<PAGE>

Parties, but shall in no event occur later than 180 days from the date of the
notice of termination. Provider shall be released from the covenants described
in (S)5.7, above, upon the successful consummation of such closing.

(A) Agreement between Service Company and Provider, if they are able
to agree upon a value within ten business days after being requested to so
agree; or, if not,

(B) An appraiser selected by agreement between Service Company and
Provider, if they are able to agree upon an appraiser within ten business
days after requested to so agree; or, if not,

24
<PAGE>

ARTICLE IX. GENERAL
-------

(a) If to Service Company

Smileage Dental Care, Inc.
9052 North Deerbrook Trail
Milwaukee, Wisconsin 53223
Attention: President

25
<PAGE>

With a copies to:

American Dental Partners, Inc.
301 Edgewater Place
Suite 320
Wakefield, Massachusetts 01880-1249
Attention: Gregory A. Serrao, President
and Chief Executive Officer

and

Baker & Hostetler
65 East State Street
Suite 2100
Columbus, Ohio 43215
Attention: Gary A. Wadman, Esq.

(b) If to Provider

Wisconsin Dental Group, S.C.
9052 North Deerbrook Trail
Milwaukee, Wisconsin 53223
Attention: President

With a copy to:

Niebler & Muren, S.C.
P.O. Drawer 825
Milwaukee, Wisconsin 53008-0825
Attention: Joseph C. Niebler, Sr., Esq.

Any Party may change the address to which notices and other communications
are to be given by giving the other Parties notice of such change.

(S)9.5 Governing Law. All questions concerning the validity, intention,
------------
or meaning of this agreement or relating to the rights and obligations of the
Parties with respect to performance under this agreement shall be construed and
resolved under the laws of Wisconsin, without reference to conflict of law
principles.

26
<PAGE>

27
<PAGE>

expenses, including without limitation interest, penalties, attorneys' fees, any
and all expenses incurred in investigating, preparing, or defending against any
litigation, commenced or threatened, or any claim whatsoever, and any and all
amounts paid in settlement of any claim or litigation (collectively, "Damages"),
asserted against, imposed upon, or incurred or suffered by the Indemnified
Parties, directly or indirectly, as a result of or arising from: (i) any failure
of any representation or warranty of the Indemnifying Party in this agreement to
be accurate and complete in all material respects when made; or (ii) any failure
by the Indemnifying Party to perform and observe fully all obligations and
conditions to be performed or observed by the Indemnifying Party under this
agreement. In addition, Provider shall indemnify Service Company and its
shareholders, directors, officers, employees, agents, representatives, and
affiliates from and against any and all Damages asserted against, imposed upon,
or incurred or suffered by any of them, directly or indirectly, as a result of
or arising from the acts or omissions of Provider or its employees, contractors,
or other agents or representatives.

28
<PAGE>

shall have the right to (i) assign its rights and obligations hereunder to any
third party and (ii) collaterally assign its interest in this agreement and its
right to collect the amounts set forth in Article VII hereunder to any financial
institution or other third party without the consent of Provider.

(S)9.17 Successors. Subject to (S)9.16, above, this agreement shall be
----------
binding upon, inure to the benefit of, and be enforceable by and against the
successors and assigns of each Party.

WISCONSIN DENTAL GROUP, S.C.

By /s/ Jesley C. Ruff
---------------------------------
Jesley C. Ruff, President

SMILEAGE DENTAL CARE, INC.

By /s/ Don A. Deike
---------------------------------
Don A. Deike, President

29
<PAGE>

INDEX TO EXHIBITS
-----------------

Exhibit A Definitions

Exhibit B [Intentionally Left Blank]

Exhibit C Five-Year Employment Agreement

Exhibit D Standard Employment Agreement

Exhibit E List of Dentists with Five-Year Employment Agreements

<PAGE>

EXHIBIT A
---------

DEFINITIONS
-----------

Adjusted Gross Revenue. The term "Adjusted Gross Revenue" shall mean Gross
----------------------
Revenue less Adjustments.

Ancillary Revenue. The term "Ancillary Revenue" shall mean all other
-----------------
revenue actually recorded each month that is not Professional Service Revenue.

Clinic. The term "Clinic" shall mean any of the facilities, including
------
satellite facilities, that Service Company shall own, lease or otherwise procure
and provide for the use of Provider.

* This information has been omitted pursuant to a request for confidential
treatment and has been filed separately with the Securities and Exchange
Commission.

i
<PAGE>

(a) The salaries, benefits, and other direct costs of all employees of
Service Company at a Clinic, but not the salaries, benefits, or other direct
costs of the dentists;

(c) Reasonable recruitment costs and out-of-pocket expenses of Service
Company or Provider associated with the recruitment of additional dentist
employees of Provider;

(e) The cost of laboratory services;

(f) The cost of dental supplies (including but not limited to products,
substances, items, or dental devices), and office supplies;

(h) Personal property and intangible taxes assessed against Service
Company's assets which are provided or otherwise employed by Service Company for
the benefit of Provider;

(i) The reasonable travel expenses (except for the corporate staff of
Service Company and Parent) associated with attending meetings, conferences, or
seminars to benefit Provider;

ii
<PAGE>

connection with the execution of this agreement and the issuance by Parent of
stock options to Provider or its dentists;

(l) Any tax assessed against Service Company in connection with the
services provided by Service Company hereunder; and

(m) Any other cost or expense designated as a Clinic Expense pursuant to
this agreement.

Dental Assets. The term "Dental Assets" shall mean the following assets of
-------------
Provider:

(b) All of Provider's right, title and interest in and to records of
identity, diagnosis, evaluation or treatment of patients;

(c) All of Provider's right, title and interest in, to or under insurance
policies covering or relating to dental malpractice;

(d) The name of Provider;

(e) All franchises, licenses, permits, certificates, approvals and other
governmental authorizations necessary or desirable to own and operate any of the
other Dental Assets, a complete and correct list of which is set forth on
Schedule 1;

iii
<PAGE>

(f) All of Provider's right, title and interest in, to or under and
contract or agreement that requires performance by a licensed dental care
provider under federal or applicable state law.

Gross Revenue. The term "Gross Revenue" shall mean the sum of all
-------------
Professional Service Revenue and Ancillary Revenue before Adjustments.

Parent. The term "Parent" shall mean American Dental Partners, Inc., a
------
Delaware corporation.

Performance Fee. The term "Performance Fee" shall mean the fee paid to
---------------
Service Company by Provider as described in (S)7.3(b).

iv
<PAGE>

Professional Service Revenue. The term "Professional Service Revenue"
----------------------------
shall mean the sum of all (i) professional fees actually recorded each month on
an accrual basis under GAAP as a result of the Dental Care rendered by the
Dental Care Professional retained by Provider, and (ii) Capitation Revenue;
including any such fees or Capitation Revenue paid or payable directly to
Provider by Service Company pursuant to the then-current Membership Agreement
(or similar agreement for providing professional services to dental plans)
between Service Company and Provider.

Provider Consent. The term "Provider Consent" shall mean the consent
----------------
granted by Provider's chief executive officer or by another officer or
representative designated from time to time by Provider's chief executive
officer. When any provision of this agreement requires Provider Consent,
Provider Consent shall not be unreasonably withheld or delayed and shall be
binding on Provider.

Provider Expense. The term "Provider Expense" shall mean an expense
----------------
incurred by the Service Company or Provider and for which Provider, and not the
Service Company, is financially liable. Provider Expense shall include dentist
(as defined in (S)2.5) salaries, benefits (which includes workers' compensation
coverage), and other direct costs related to the dentists employed or otherwise
retained by Provider for the provision of its Dental Care (including
professional dues, subscriptions, continuing dental education expenses, and
travel costs for continuing dental education or other business travel, but
excluding business travel requested by Service Company, which shall be a Clinic
Expense), together with any expenses related to any Dental Assets or the
maintenance and protection of the same and such other costs and expenses
designated as Provider Expense in or pursuant to this agreement. In the event
Provider incurs consulting, accounting, legal or other similar fees without
Service Company's approval of such engagement through Service Company, all fees
and expenses so incurred shall be Provider Expenses. For purposes of
calculating the Performance Fee, Provider Expenses shall equal [*] of Adjusted
Gross Revenues or such other percentage of Adjusted Gross Revenues as may be set
forth in the Budget less an amount equal to the Service Fee Adjustment.

* This information has been omitted pursuant to a request for confidential
treatment and has been filed separately with the Securities and Exchange
Commission.

v
<PAGE>

Service Company Consent. The term "Service Company Consent" shall mean the
-----------------------
consent granted by Service Company's chief executive officer or by another
officer or representative designated from time to time by Service Company's
chief executive officer. When any provision of this agreement requires Service
Company Consent, Service Company Consent shall not be unreasonably withheld or
delayed and shall be binding on Service Company.

Service Fee. The term "Service Fee" shall mean the fee paid to Service
-----------
Company by Provider as described in (S)7.3(a).

Term. The term "Term" shall mean the initial term and any renewal periods
----
of this agreement as described in (S)8.1, subject to termination pursuant to
(S)8.2.

vi
<PAGE>

FIRST AMENDMENT TO SERVICE AGREEMENT
------------------------------------

This amendment is made effective January 1, 1997, between Smileage Dental
Care, Inc., a Wisconsin corporation ("Service Company"), and Wisconsin Dental
Group, S.C., a Wisconsin service corporation ("Provider").

Background Information
----------------------

A. Service Company and Provider are all of the parties (the "Parties")
to a Service Agreement dated December 23, 1996 (the "Agreement").

B. The Parties have prepared a revised Budget (as defined in the
Agreement) for 1997 and desire to amend the Agreement so that the Agreement will
be consistent with such Budget.

Agreement
---------

The Parties hereby acknowledge the accuracy of the foregoing Background
Information and agree as follows:

(S)1. Definitions. All capitalized terms used in this amendment which
-----------
are not otherwise defined herein shall have the respective meanings given those
terms in the Agreement.

(S)3. Service Fee. The Service Fee set forth in (S)7.3(a) is hereby
-----------
changed to [*].

(S)4. Adjustment to Fees. The first sentence in (S)7.4(b) of the
------------------
Agreement is hereby replaced with the following: [*].

(S)5. Base Level. The percentage set forth in the definition of "Base
----------
Level" in Exhibit A is hereby changed to [*].

* This information has been omitted pursuant to a request for confidential
treatment and has been filed separately with the Securities and Exchange
Commission.

1
<PAGE>

WISCONSIN DENTAL GROUP, S.C. SMILEAGE DENTAL CARE, INC.

By /s/ Jesley C. Ruff By /s/ Don A. Deike
-------------------------- ------------------------
Jesley C. Ruff, President Don A. Deike, President

2
<PAGE>

SECOND AMENDMENT TO SERVICES AGREEMENT
--------------------------------------

This amendment is made effective January 1, 1998, between Smileage Dental
Care, Inc., a Wisconsin corporation ("Service Company"), and Wisconsin Dental
Group, S.C., a Wisconsin service corporation ("Provider").

Background Information
----------------------

A. Service Company and Provider are all of the parties (the
"Parties") to a Services Agreement dated December 23, 1996, as amended January
1, 1997 (as so amended, the "Agreement").

B. The Parties have prepared a revised Budget (as defined in the
Agreement) for 1998 and desire to amend the Agreement so that the Agreement will
be consistent with such Budget.

Agreement
---------

The Parties hereby acknowledge the accuracy of the foregoing Background
Information and agree as follows:

(S)1. Definitions. All capitalized terms used in this amendment which
-----------
are not otherwise defined herein shall have the respective meanings given those
terms in the Agreement.

(S)3. Service Fee. The Service Fee set forth in (S)7.3(a) is hereby
-----------
changed to [*].

(S)4. Adjustment to Fees. The first sentence in (S)7.4(b) of the
------------------
Agreement is hereby replaced with the following: [*].

(S)5. Base Level. The percentage set forth in the definition of "Base
----------
Level" in Exhibit A is hereby changed to [*].

* This information has been omitted pursuant to a request for confidential
treatment and has been filed separately with the Securities and Exchange
Commission.

1
<PAGE>

WISCONSIN DENTAL GROUP, S.C. SMILEAGE DENTAL CARE, INC.

By /s/ Jesley C. Ruff By /s/ Don A. Deike
---------------------------- -----------------------------
Jesley C. Ruff, President Don A. Deike, President

<PAGE>

EXHIBIT 10(cc)

EMPLOYMENT AND NONCOMPETITION AGREEMENT
---------------------------------------

This agreement is made effective November 12, 1996, (the "Commencement
Date"), between American Dental Partners, Inc., a Delaware corporation (the
"Company"), and Forrest M. Flint (the "Employee").

Background Information
----------------------

Concurrently with the execution of this agreement the Company is acquiring
PDHC, Ltd., a Minnesota corporation ("PDHC"), pursuant to an Acquisition and
Exchange Agreement dated November 11, 1996 (the "Acquisition Agreement"). The
execution of this agreement is a condition to the Company's obligations to
complete the transactions contemplated by the Acquisition Agreement.

Statement of Agreement
----------------------

The Company and the Employee (the "Parties") hereby acknowledge the
accuracy of the above Background Information and agree as follows:

(S)1. Employment. Upon the terms and subject to the conditions described
----------
in this agreement, the Company hereby employs the Employee and the Employee
hereby accepts employment by the Company.

(S)2. Term. Employee's employment with the Company pursuant to this
----
agreement shall be for a three-year term beginning on the Commencement Date and
ending on the third anniversary of the Commencement Date (the "Initial Term"),
unless or until sooner terminated pursuant to (S)8 of this agreement. This
agreement may be extended or renewed after the expiration of the Initial Term,
but only by mutual written agreement of the Parties. When permitted by the
context, any reference in this agreement to the "term of this agreement" shall
include the Initial Term and the period of any such extensions or renewals.

(S)3. Services. The Employee shall serve as the Vice President-Business
--------
Development of the Company and shall devote his full business and professional
time, attention, energy, loyalty, and skill to the Company's business. The
Employee shall: (a) be generally responsible for (i) the Company's activities
relating to acquisitions of dental practices by the Company and managed care
agreements relating to such acquisitions and (ii) the Company's relationships
with dental benefit providers, subject in all cases to the business policies and
operating programs, budgets procedures, and directions established from time to
time by the board of directors of the Company (the "Board"); and (b) perform
such related or other executive and administrative tasks as may be reasonably
assigned to him from time to time by the Chief Executive Offer of the Company
(the "CEO") or the Board.
<PAGE>

The Employee shall not be required to relocate his home from the Twin
Cities Metropolitan Area during the term of this agreement. However, the
Employee acknowledges that he may be required to travel extensively to perform
his services for the Company.

(S)4. Compensation. As compensation for his services under this
------------
agreement, the Company shall pay the Employee a base salary at the annual rate
of $130,000 (the "Base Salary"), payable in accordance with the Company's
general policies and procedures for payment of salaries to its executive
personnel. The Employee's performance shall be reviewed annually for the
purpose of considering potential increases in the Base Salary. In addition, the
Employee may earn an annual bonus for each calendar year during the term of this
agreement in an amount up to (a) $26,250 multiplied by a fraction having as its
numerator the number of days in calendar year 1996 remaining after the date of
this agreement and having 365 as its denominator, (b) $26,250 for calendar year
1997, and (c) 25% of the Base Salary (as in effect from time to time) for each
calendar year during the term of this agreement thereafter, prorated on a daily
basis for any partial calendar year, which bonus shall be based upon and tied to
the achievement of various objectives proposed annually by the CEO and approved
by the Board.

(S)5. Fringe Benefits and Perquisites. During the term of this agreement,
-------------------------------
the Employee shall be entitled to the following fringe benefits and perquisites:

(a) Group health and welfare benefits comparable to those offered
generally to the Company's executive personnel from time to time;

(b) Three weeks paid vacation during each year of the agreement;

(c) Participation in such stock option plans as may be designated
from time to time by the Board (or a duly authorized committee of the
Board), in its discretion, subject to all terms and conditions of such
plans; and

(d) Such other benefits and perquisites as may be offered generally
to the Company's executive personnel from time to time pursuant to such
terms, conditions, and policies as may be approved by the Board.

(S)6. Stock Option. As additional consideration for the Employee's
------------
covenants contained in this agreement, concurrently with the execution of this
agreement, the Company shall grant to the Employee, as of the Commencement Date,
options (the "Options") to purchase up to 6,000 shares of common stock, par
value $.01, of the Company (the "Shares"), consisting of an Option to purchase
up to

2
<PAGE>

4,400 Shares pursuant to the Company's 1996 Stock Option Plan and an Option to
purchase up to 1,600 Shares pursuant to the Company's 1996 Time Accelerated
Restricted Stock Option Plan. The Options shall be evidenced by separate
agreements containing terms consistent with such stock option plans and which
the Board deems necessary or appropriate, in its discretion, including without
limitation an exercise price of $50 per Share and, with respect to the Option
granted under the Company's 1996 Stock Option Plan, a vesting schedule under
which, on the Commencement Date and each of the first four anniversaries of the
Commencement Date, such Option will vest with respect to 20% of the Shares
subject to such Option.

(S)7. Confidentiality; Noncompetition. The Employee shall not, directly
-------------------------------
or indirectly, at any time (whether during the term of this agreement or
thereafter), disclose any Confidential Information (defined below) to any
person, association, or other entity (other than the Affiliated Companies, as
defined below), or use, or permit or assist any person, association, or other
entity (other than the Affiliated Companies) to use, any Confidential
Information, excepting only Confidential Information which (i) is then generally
available to or obtainable by the public and which did not become so available
or obtainable through the breach of any provision of this agreement by the
Employee, or (ii) is obtained by the Employee on a non-confidential basis from a
source other than an Affiliated Company or any agent or other representative of
an Affiliated Company and such source had the right to disclose such
Confidential Information to the Employee without violating any legal,
contractual, fiduciary, or other obligation.

Upon termination of his employment by the Company (for any reason), the
Employee shall immediately deliver to the Company all documents and other
materials containing any Confidential Information which are in his possession or
under his control.

During the term of the Employee's employment with the Company or any
Affiliated Company (whether pursuant to this agreement or otherwise) and during
the Restricted Period (defined below), the Employee shall not, other than on
behalf of the Company, directly or indirectly (whether individually or as a
shareholder or other owner, partner, member, director, officer, employee,
consultant, creditor or agent of any person, association, or other entity):

(a) Enter into, engage in, or promote or assist (financially or
otherwise), whether directly or indirectly, any business which competes
with the business of any Affiliated Company (the "Business"); provided that
the foregoing shall not prohibit the Employee from (i) owning not more than
1% of the outstanding capital stock of any corporation whose shares are
publicly traded on a national securities exchange or system, or (ii)
becoming an employee of, or otherwise performing services for, after the
termination of the Employee's employment with the Company and

3
<PAGE>

any Affiliated Companies, a professional corporation or association or
other person or entity which provides professional dental care services to
the public (a "Dental Care Provider"), so long as such Dental Care Provider
is not an ADP Provider (as defined below) and was not an ADP Provider at
any time during the one-year period immediately preceding such Dental Care
Provider's employment or other engagement of the Employee;

(b) Solicit or attempt to solicit business from any Dental Care
Provider to which any Affiliated Company provides management, consulting,
or other services (an "ADP Provider"), or interfere or attempt to interfere
with any relationship of any Affiliated Company with any ADP Provider;

(c) Induce or encourage any employee, officer, director, agent,
supplier, or independent contractor of any Affiliated Company to terminate
its relationship with such Affiliated Company, or otherwise interfere or
attempt to interfere in any way with any Affiliated Company's relationships
with its employees, officers, directors, agents, suppliers, independent
contractors, or others;

(d) Employ or engage any person who, at any time within the one-year
period immediately preceding such employment or engagement, was an
employee, officer, or director of any Affiliated Company; or

(e) Make any statement (oral or written) or take any other action
which would tend to disparage or diminish the reputation of any Affiliated
Company.

For purposes of this agreement: (i) "Affiliated Companies" shall include
the Company and all subsidiaries or affiliates of the Company other than Summit
Ventures IV, L.P., Noro-Moseley Partners, and any of their respective affiliates
which are not engaged in a business similar to the Company or its subsidiaries,
(ii) "Confidential Information" shall mean all trade secrets, proprietary data,
and other confidential information of any Affiliated Company, including without
limitation financial information, information relating to business operations,
services, promotional practices, and relationships with ADP Providers,
suppliers, employees, independent contractors, or other parties, and any
information which any Affiliated Company is obligated to treat as confidential
pursuant to any course of dealing or any agreement to which it is a party or
otherwise bound; and (iii) the "Restricted Period" shall mean the two-year
period following the date of termination (for any reason) of Employee's
employment with the Company and any Affiliated Companies (whether pursuant to
this agreement or otherwise).

4
<PAGE>

The Employee acknowledges that (A) the provisions of this section are
fundamental and essential for the protection of the Company's legitimate
business and proprietary interests, (B) such provisions are reasonable and
appropriate in all respects, and (C) in the event of any violation by the
Employee of any of such provisions, the Company would suffer irreparable harm
and its remedies at law would be inadequate. In the event of any violation or
attempted violation of such provisions by the Employee, the Company shall be
entitled to a temporary restraining order, temporary and permanent injunctions,
specific performance, and other equitable relief, without any showing of
irreparable harm or damage or the posting of any bond, in addition to any other
rights or remedies which may then be available to the Company.

(S)8. Termination. The Employee's employment with the Company shall
-----------
terminate automatically upon the death of the Employee and may be terminated by
the Company, without any further obligation on the part of the Company (except
as provided in clause (c), below), immediately upon notice to the Employee under
any of the following circumstances:

(a) At any time for Cause (defined below);

(b) At any time if the Employee is under a Long-Term Disability (defined
below); or

(c) At any time without Cause; provided that if the Company terminates
the Employee's employment pursuant to this clause (c), and no other basis for
termination exists under this agreement, then: (i) if such termination occurs on
or before the first anniversary of the Commencement Date, the Employee shall be
entitled to severance payments in an aggregate amount equal to the Base Salary
for the period of two years following the date of such termination, (ii) if such
termination occurs after the first anniversary of the Commencement Date and on
or before the second anniversary of the Commencement Date, the Employee shall be
entitled to severance payments in an aggregate amount equal to the Base Salary
for the period of one year following the date of such termination, and (iii) if
such termination occurs after the second anniversary of the Commencement Date
and before the third anniversary of the Commencement Date, the Employee shall be
entitled to severance payments in an amount equal to the Base Salary for the
remainder of the Initial Term. Any such severance payments shall be payable
periodically in the same manner as the Base Salary is payable under (S)4 of this
agreement, and, notwithstanding any other provisions of this agreement to the
contrary, such severance payments shall be payable only so long as the Employee
is in full compliance with the provisions of (S)7 of this agreement.

5
<PAGE>

For purposes of this agreement:

(i) "Cause" shall mean:

(A) any act constituting (1) a felony under the federal laws of
the United States, the laws of any state, or any other applicable law, (2)
fraud, embezzlement, misappropriation of assets, willful misfeasance, or
dishonesty, or (3) other criminal conduct which in any way materially and
adversely affects the reputation, goodwill, or business position of the Company;

(B) the failure of the Employee to perform and observe all
obligations and conditions to be performed and observed by the Employee under
this agreement, or to perform his duties in accordance with the policies,
programs, budgets, procedures, and directions established from time to time by
the CEO or the Board (any such failure, a "Performance Failure"), and to correct
such Performance Failure promptly following notice from the Company to do so; or

(C) having corrected (or the Company having waived the
correction of) two Performance Failures, the occurrence of any subsequent
Performance Failure; and

(ii) "Long-Term Disability" shall mean that, because of physical or
mental incapacity, it is more likely than not that the Employee will be unable,
within 180 days after such incapacity commenced, to perform the essential
functions of his position with the Company, with or without reasonable
accommodation. In the event of any disagreement about whether or when the
Employee is under a Long-Term Disability, the question shall be determined: (A)
by a physician selected by agreement between the Employee and the Company if
such a physician is selected within 10 days after either of them requests the
other so to agree; or, if not, (B) by two physicians, the first of whom shall be
selected by the Employee and the second of whom shall be selected by the Company
or, if the Employee fails to make a selection within 10 days after being
requested to do so by the Company, the second physician shall be selected by the
first physician; or, if the two physicians fail to agree, (C) by a third
physician selected by the first two physicians. The Employee shall submit to
all reasonable examinations requested by any such physicians.

(S)9. Capacity. The Employee represents and warrants to the Company
--------
that he has the capacity and right to enter into this agreement and perform all
of his obligations under this agreement without any restriction.

(S)10. Remedies. All rights and remedies of either Party under this
--------
agreement are cumulative and in addition to all other rights and remedies which
may be available to that Party from time to time, whether under any other
agreement, at law, or in equity.

6
<PAGE>

(S)11. Survival. The termination of the Employee's employment with the
--------
Company (for any reason) shall not relieve either Party of any of that Party's
obligations under this agreement existing at, arising as a result of, or
relating to acts or omissions occurring prior to, such termination. Without
limiting the generality of the preceding sentence, in no event shall the
termination of such employment modify or affect any obligations of the Employee
or rights of the Company under (S)7 of this agreement or the Company's
obligations, if any, under (S)8(c) of this agreement, all of which shall survive
the termination of such employment.

(S)12. Notices. All notices and other communications under this agreement
-------
to any Party shall be in writing and shall be deemed given when delivered
personally, telecopied (which is confirmed) to that Party at the telecopy number
for that Party set forth below, mailed by certified mail (return receipt
requested) to that Party at the address for that Party (or at such other address
for such Party as such Party shall have specified in notice to the other Party)
or delivered to Federal Express, UPS, or any similar express delivery service
for delivery to that Party at that address:

(a) If to the Company:

American Dental Partners, Inc.
301 Edgewater Place
Suite 320
Wakefield, Massachusetts 01880-1249
Attention: Gregory A. Serrao
Telecopy No.: (617) 224-4216

with a copy to

Baker & Hostetler
65 East State Street
Columbus, Ohio 43215
Attention: Gary A. Wadman, Esq.
Telecopy No.: (614) 462-2616

(b) If to the Employee:

Forrest M. Flint
6837 Oaklawn Avenue
Edina, Minnesota 55435
Telecopy No.: (612) 920-3952

(S)13. Severability. The intention of the Parties is to comply fully
------------
with all rules, laws, and public policies to the extent possible. If and to the
extent that any court of competent jurisdiction is unable so to construe any
provision of this agreement and holds that provision to be invalid, such
invalidity shall not affect the remaining provisions of this agreement, which

7
<PAGE>

shall remain in full force and effect. With respect to any provision in this
agreement finally determined by such a court to be invalid or unenforceable,
such court shall have jurisdiction to reform this agreement to the extent
necessary to make such provision valid and enforceable, and, as reformed, such
provision shall be binding on the Parties.

(S)14. Non-Waiver. No failure by either Party to insist upon strict
----------
compliance with any term of this agreement, to exercise any option, to enforce
any right, or to seek any remedy upon any default of the other Party shall
affect, or constitute a waiver of, the other Party's right to insist upon such
strict compliance, exercise that option, enforce that right, or seek that remedy
with respect to that default or any prior, contemporaneous, or subsequent
default. No custom or practice of the Parties at variance with any provision of
this agreement shall affect, or constitute a waiver of, either Party's right to
demand strict compliance with all provisions of this agreement.

(S)15. Complete Agreement. This agreement and all documents referred to
------------------
in this agreement, all of which are hereby incorporated herein by reference,
contain the entire agreement between the Parties and supersede all other
agreements and understandings between the Parties with respect to the subject
matter of this agreement. No alterations, additions, or other changes to this
agreement shall be made or be binding unless made in writing and signed by both
Parties.

(S)16. Governing Law; Venue. This agreement shall be governed by and
--------------------
construed in accordance with the laws of the State of Minnesota without regard
to principles of conflicts of law.

(S)17. Captions. The captions of the various sections of this agreement
--------
are not part of the context of this agreement, are only guides to assist in
locating those sections, and shall be ignored in construing this agreement.

(S)18. Genders and Numbers. Where permitted by the context, each pronoun
-------------------
used in this agreement includes the same pronoun in other genders and numbers,
and each noun used in this agreement includes the same noun in other numbers.

(S)19. Successors. This agreement shall be personal to the Employee and
----------
no rights or obligations of the Employee under this agreement may be assigned by
the Employee to any third party. Any assignment or attempted assignment by the
Employee in violation of the preceding sentence shall be null and void. Subject
to the foregoing, this agreement shall be binding upon, inure to the benefit of,
and be enforceable by and against the successors and assigns of each Party.

8
<PAGE>

(S)20. Termination of Prior Agreements. The Employee hereby releases the
-------------------------------
Affiliated Companies and all of their respective affiliates, predecessors,
successors, and assigns from all obligations and liabilities under all
employment agreements and understandings, deferred compensation arrangements,
employee benefit obligations, and other employment or compensation arrangements,
whether oral or written, between PDHC or any of its affiliates and the Employee,
excepting only the obligations and liabilities of the Company under this
agreement.

AMERICAN DENTAL PARTNERS, INC.

By /s/ Gregory A. Serrao /s/ Forrest M. Flint
---------------------------- --------------------------
Gregory A. Serrao, President FORREST M. FLINT

<PAGE>

EXHIBIT 11
AMERICAN DENTAL PARTNERS, INC.

COMPUTATION OF BASIC AND DILUTED EARNINGS (LOSS) PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
PRO PRO
FORMA FORMA
AS AS
ACTUAL ADJUSTED ACTUAL ADJUSTED
1996 1996 1997 1997
------- -------- ------ --------
<S> <C> <C> <C> <C>
BASIC EARNINGS (LOSS) PER SHARE
Net earnings (loss)......................... $(2,443) $ 848 $1,223 $1,951
Less: Dividends on Series A Convertible
Preferred Stock............................ (109) -- (632) --
Dividends on Series B Redeemable Preferred
Stock.................................... (96) -- (560) --
------- ------ ------ ------
Net earnings (loss) available to common
stockholders............................... $(2,648) $ 848 $ 31 $1,951
======= ====== ====== ======
Weighted average common shares outstanding.. 768 2,415 2,273 2,429
Add: Assumed conversion of Series A
Convertible Preferred Stock(1)........... -- 2,400 -- 2,400
Add: Shares issued in connection with
initial public offering(2)................. -- 1,704 -- 1,704
------- ------ ------ ------
Weighted average common shares as adjusted.. 768 6,519 2,273 6,533
======= ====== ====== ======
Net earnings (loss) per share............... $ (3.45) $ 0.13 $ 0.01 $ 0.30
======= ====== ====== ======
DILUTED EARNINGS (LOSS) PER SHARE
Net earnings (loss)......................... $(2,443) $ 848 $1,223 $1,951
Less: Dividends on Series A Convertible
Preferred Stock............................ (109) -- (632) --
Dividends on Series B Redeemable Preferred
Stock.................................... (96) -- (560) --
------- ------ ------ ------
Net earnings (loss) available to common
stockholders............................... $(2,648) $ 848 $ 31 $1,951
======= ====== ====== ======
Weighted average common shares outstanding.. 768 2,415 2,273 2,429
Add: Dilutive effect of options............. -- 68 187 187
Add: Assumed conversion of Series A
Convertible Preferred Stock(1)........... -- 2,400 -- 2,400
Add: Shares issued in connection with
initial public offering(2)................. -- 1,704 -- 1,704
------- ------ ------ ------
Weighted average common shares as adjusted.. 768 6,587 2,460 6,720
======= ====== ====== ======
Net earnings (loss) per share............... $ (3.45) $ 0.13 $ 0.01 $ 0.29
======= ====== ====== ======
</TABLE>
- --------

(1) In connection with the initial public offering, Series A Convertible
Preferred shares will automatically convert to common stock on a one for
one basis.

(2) In connection with the initial public offering, gives effect to the
issuance of common shares which would have been necessary to pay
$16,700,000 of revolving credit facility indebtedness, redeem $7,656,000
of Series B Redeemable Preferred Stock and pay $1,000,000 of estimated
offering costs.

<PAGE>

EXHIBIT 23(B)

The Board of Directors
American Dental Partners, Inc.:

We consent to the use of our reports on American Dental Partners, Inc. and
subsidiaries dated February 6, 1998 and The Orthocare Companies dated December
29, 1997 included herein and to the reference to our firm under the headings
"Selected Historical and Pro Forma Consolidated Financial Data" and "Experts"
in the prospectus.

/s/ KPMG Peat Marwick LLP

Boston, Massachusetts

February 25, 1998

<PAGE>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1997
<PERIOD-START> JAN-01-1996 JAN-01-1997
<PERIOD-END> DEC-31-1996 DEC-31-1997
<CASH> 5,836 4,675
<SECURITIES> 0 0
<RECEIVABLES> 2,591 3,308
<ALLOWANCES> 0 0
<INVENTORY> 174 387
<CURRENT-ASSETS> 10,006 10,001
<PP&E> 5,943 8,752
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 25,294 4,814
<CURRENT-LIABILITIES> 6,817 9,244
<BONDS> 0 0
7,096 7,656
8,009 8,641
<COMMON> 22 24
<OTHER-SE> 142 1,038
<TOTAL-LIABILITY-AND-EQUITY> 25,294 48,114
<SALES> 3,933 53,270
<TOTAL-REVENUES> 3,933 53,270
<CGS> 0 0
<TOTAL-COSTS> 6,414 51,360
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (38) 563
<INCOME-PRETAX> (2,443) 1,347
<INCOME-TAX> 0 124
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (2,443) 1,223
<EPS-PRIMARY> (3.45) 0.13
<EPS-DILUTED> (3.45) 0.13

</TABLE>