PENTEGRA DENTAL GROUP INC, S-1, 1997-10-10

PENTEGRA DENTAL GROUP INC
S-1, 1997-10-10

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<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 10, 1997

REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PENTEGRA DENTAL GROUP, INC.

(Exact name of registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 8021 76-0545043
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification
incorporation or organization) Number)
</TABLE>

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

<TABLE>
<S> <C>
PENTEGRA DENTAL GROUP, INC. GARY S. GLATTER
2999 NORTH 44TH STREET, STE. 650 2999 NORTH 44TH STREET, STE. 650
PHOENIX, ARIZONA 85018 PHOENIX, ARIZONA 85018
(602) 952-1200 (602) 952-1200
(Address, including zip code, and (Name and address, including zip code,
telephone number, including area code, and telephone number, including area
of registrant's principal executive code, of agent for service)
offices)
</TABLE>

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

COPIES TO:

<TABLE>
<S> <C>
RICHARD S. ROTH TED W. PARIS
JACKSON WALKER L.L.P. BAKER & BOTTS, L.L.P.
1100 LOUISIANA 910 LOUISIANA
SUITE 4200 SUITE 3000
HOUSTON, TEXAS 77002 HOUSTON, TEXAS 77002
</TABLE>

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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, 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, 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 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. / /
--------------------------

CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED MAXIMUM
PROPOSED MAXIMUM AGGREGATE
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SHARE(1) PRICE(2),(3) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, $.001 par value............ -- -- $40,250,000 $12,197
</TABLE>

(1) In accordance with Rule 457(o) under the Securities Act of 1933, as amended,
the number of shares being registered and the proposed maximum offering
price per share are not included in this table.

(2) Includes shares of Common Stock issuable upon exercise of the Underwriters'
over-allotment option.

(3) Estimated solely for purposes of calculating the registration fee.
--------------------------

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 SAID SECTION 8(a),
MAY DETERMINE.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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.
<PAGE>
Subject To Completion, Dated October 10, 1997

PROSPECTUS

2,500,000 SHARES

PENTEGRA DENTAL GROUP, INC.

COMMON STOCK
----------------

All of the shares of Common Stock, par value $.001 per share ("Common
Stock"), offered hereby (the "Offering") are being offered by Pentegra Dental
Group, Inc. (the "Company"). Prior to the Offering, there has been no public
market for the Common Stock. It is currently estimated that the initial public
offering price will be between $ and $ per share. See "Underwriting" for
a discussion of the factors to be considered in determining the initial public
offering price. The Company has applied to have the Common Stock approved for
quotation on the Nasdaq National Market under the symbol "PDGI."

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

THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 7.

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

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.

<TABLE>
<CAPTION>
Underwriting
Discounts
Price to and Proceeds to
Public Commissions(1) Company(2)
<S> <C> <C> <C>
Per Share......................................... $ $ $
Total(3).......................................... $ $ $
</TABLE>

(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended (the "Securities Act"). See "Underwriting."

(2) Before deducting estimated expenses of $2,300,000, payable by the Company.

(3) The Company has granted the Underwriters a 30-day option to purchase up to
375,000 additional shares of Common Stock on the same terms and conditions
as set forth above, solely to cover over-allotments, if any. If such option
is exercised in full, the total Price to Public, Underwriting Discounts and
Commissions and Proceeds to Company will be $ , $ and
$ , respectively. See "Underwriting."

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

The shares of Common Stock offered by this Prospectus are offered by the
Underwriters, subject to prior sale, to withdrawal, cancellation or modification
of the offer without notice, to delivery to and acceptance by the Underwriters
and to certain further conditions. It is expected that delivery of certificates
representing the shares of Common Stock will be made at the offices of Lehman
Brothers Inc., New York, New York, on or about , 1997.

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

LEHMAN BROTHERS RAUSCHER PIERCE REFSNES, INC.

, 1997
<PAGE>
[MAP]

CERTAIN PERSONS PARTICIPATING IN THE OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH
TRANSACTIONS MAY INCLUDE THE PURCHASE OF SHARES OF COMMON STOCK FOLLOWING THE
PRICING OF THE OFFERING TO COVER A SYNDICATE SHORT POSITION IN THE COMMON STOCK
OR FOR THE PURPOSE OF MAINTAINING THE PRICE OF THE COMMON STOCK, AND THE
IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE ACTIVITIES, SEE
"UNDERWRITING."

2
<PAGE>
PROSPECTUS SUMMARY

PENTEGRA DENTAL GROUP, INC. ("PENTEGRA" OR THE "COMPANY") WAS RECENTLY
FORMED TO SERVE, UPON COMPLETION OF THE OFFERING, AS THE PARENT CORPORATION OF
PENTEGRA INVESTMENTS, INC. ("PII"). CONCURRENTLY WITH THE CLOSING OF THE
OFFERING, (I) THE COMPANY WILL ACQUIRE, IN SEPARATE TRANSACTIONS (THE
"ACQUISITIONS"), SUBSTANTIALLY ALL THE TANGIBLE AND INTANGIBLE ASSETS, AND
ASSUME CERTAIN LIABILITIES, OF 51 DENTAL PRACTICES (COLLECTIVELY, THE "FOUNDING
AFFILIATED PRACTICES") IN EXCHANGE FOR CASH AND SHARES OF COMMON STOCK, (II) THE
HOLDERS OF COMMON STOCK OF PII WILL EXCHANGE THEIR SHARES FOR SHARES OF COMMON
STOCK ON A ONE-FOR-ONE BASIS (THE "SHARE EXCHANGE"), (III) THE COMPANY WILL
ACQUIRE (THE "PENTEGRA/NAPILI TRANSACTION") SUBSTANTIALLY ALL OF THE ASSETS OF
TWO COMPANIES CONTROLLED BY THE COMPANY'S CHAIRMAN OF THE BOARD, PENTEGRA, LTD.
AND NAPILI, INTERNATIONAL ("NAPILI") AND (IV) PII WILL REPURCHASE 245,835 SHARES
OF ITS CLASS B PREFERRED STOCK, PAR VALUE $0.01 PER SHARE ("CLASS B PREFERRED"),
AT THE SUBSCRIPTION PRICE PER SHARE PAID TO PII FOR THOSE SHARES AND,
IMMEDIATELY THEREAFTER, REDEEM ALL OF THE REMAINING SHARES OF ITS CLASS A
PREFERRED STOCK, PAR VALUE $0.01 PER SHARE ("CLASS A PREFERRED") AND CLASS B
PREFERRED AT A REDEMPTION PRICE OF $2.00 PER SHARE (THE "REPURCHASE AND
REDEMPTION"). THE NUMBER OF SHARES OF COMMON STOCK TO BE ISSUED IN EACH
ACQUISITION WILL DEPEND ON THE INITIAL PUBLIC OFFERING PRICE OF THE COMMON
STOCK. ACCORDINGLY, THE DISCLOSURES HEREIN RELATING TO THE SHARES OF COMMON
STOCK ISSUED IN CONNECTION WITH THE ACQUISITIONS ARE ESTIMATED, BASED ON AN
ASSUMED INITIAL PUBLIC OFFERING PRICE OF $ PER SHARE (THE MIDPOINT OF THE
ESTIMATED INITIAL PUBLIC OFFERING PRICE RANGE). UNLESS OTHERWISE INDICATED BY
THE CONTEXT, REFERENCES HEREIN TO (I) "PENTEGRA" OR THE "COMPANY" INCLUDE
PENTEGRA DENTAL GROUP, INC., PII, PENTEGRA, LTD. AND NAPILI AND (II) "AFFILIATED
PRACTICES" MEAN THE FOUNDING AFFILIATED PRACTICES AND ANY DENTAL PRACTICES WITH
WHICH THE COMPANY MAY ENTER INTO SIMILAR RELATIONSHIPS IN THE FUTURE. UNLESS
OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS (I) GIVES EFFECT TO A
REVERSE STOCK SPLIT OF THE OUTSTANDING SHARES OF COMMON STOCK OF PII AND (II)
ASSUMES THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED. THE FOLLOWING
SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND
FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, APPEARING ELSEWHERE IN THIS
PROSPECTUS.

THE COMPANY

Pentegra Dental Group, Inc. was recently formed to provide management,
administrative, development and other services to dental practices throughout
the United States. The Company's approach to dental practice management (the
"Pentegra Dental Program") was developed by Dr. Omer K. Reed, the Chairman of
the Board of the Company, and is designed to increase revenues and lower costs
at Affiliated Practices while freeing the practicing dentists to focus on the
delivery of high-quality care. The Company will earn management service fees
under long-term service agreements with Affiliated Practices (the "Service
Agreements"). In most cases, service fees payable to the Company under the
Service Agreements represent a share of the Affiliated Practices' operating
profits, thereby providing incentives for the Company and the Affiliated
Practices to work together to maximize practice profitability. The Company will
also seek to grow by acquiring and affiliating with additional dental practices.

The Company has entered into definitive acquisition agreements and Service
Agreements with 51 Founding Affiliated Practices, which include 78 dentists and
63 dental offices located in 18 states. The Founding Affiliated Practices are
primarily general dentistry practices, but also include specialists such as
periodontists, pedodontists and oral surgeons. For the year ended December 31,
1996, total patient revenue for the Founding Affiliated Practices was
approximately $39.2 million and pro forma revenue for the Company would have
been approximately $27.1 million. In addition, the Company will acquire from Dr.
Reed the assets of a consulting firm, Pentegra, Ltd., which was founded in 1988,
and a seminar company, Napili, which was founded in 1963. The clinical,
administrative and marketing training developed and provided by these companies
to practicing dentists and their teams are the foundation for the Pentegra
Dental Program. After completion of the Offering, the Pentegra Dental Program
will be available exclusively to Affiliated Practices.

The Health Care Finance Administration ("HCFA") estimates that in 1995
approximately $43 billion was spent in the United States on dental services, and
projects annual dental expenditures will reach $79

3
<PAGE>
billion in the year 2005. In a 1995 survey, the American Dental Association
("ADA") reported that there were approximately 153,000 active dentists in the
United States, approximately 88% of whom were practicing either alone or with
only one other dentist. In recent years, dentists have begun to consolidate into
affiliated groups and with practice management companies. Dentists who affiliate
with practice management companies gain several benefits, such as opportunities
to achieve economies of scale, to implement cost management techniques and to
gain access to capital for new equipment and other working capital needs.

The Company's objective is to become a leader in providing dental practice
management services. In order to achieve this objective, the Company's strategy
includes the following elements:

- FOCUS ON TRADITIONAL FEE-FOR-SERVICE DENTAL CARE. According to the 1993
Foster Higgins National Survey of Employer-Sponsored Health Plans,
approximately 78% of the plans surveyed pay for dental services on a
fee-for-service basis. The Company believes that fee-for-service care is
high-quality, highly profitable and professionally rewarding for dentists.

- INCREASE PRODUCTIVITY AND PROFITABILITY OF AFFILIATED PRACTICES BY
IMPLEMENTING THE PENTEGRA DENTAL PROGRAM. The Pentegra Dental Program
involves proven techniques to increase revenues and lower costs, as well
as methods to make the dentist and his or her practice team more efficient
in the delivery of dental care.

- LOWER OPERATING COSTS BY ACHIEVING ECONOMIES OF SCALE. The Company
believes that, as a result of its size and resources, it will be able to
provide Affiliated Practices with certain management functions at lower
cost than if the Affiliated Practices were to perform the services by
themselves.

- FREE THE DENTIST TO FOCUS MORE TIME ON THE PRACTICE OF DENTISTRY. The
Company will relieve practicing dentists of administrative tasks. The
Company believes management and administrative support will substantially
reduce the amount of time affiliated dentists are required to spend on
administrative matters and enable them to dedicate more time and effort
toward the growth of their professional practices.

- GROW THROUGH ACQUISITIONS AND AFFILIATIONS OF ADDITIONAL DENTAL
PRACTICES. The Company will generally seek to affiliate with practices
that have high potential for future growth, particularly through
implementation of the Pentegra Dental Program, an established reputation
for high-quality care and a strategic fit either in an existing market or
as an entry into a new market.

The Pentegra Dental Program is based on a cooperative approach that
emphasizes patient wellness and involves the dentist and his or her patient
mutually agreeing on a program to achieve and maintain optimal oral health. The
Company believes that the average dentist has the skills necessary to diagnose
and provide appropriate care to patients, but many of them have not developed
the skills needed to obtain patient acceptances of, and commitments to, the
treatment plans. As a result, a significant amount of recommended care may not
be completed, with correspondingly lower revenues to the dentists. The Company
will provide training and support to assist affiliated dentists and their teams
to communicate effectively with each patient regarding the type and value of
care needed, to obtain the patient's commitment to a treatment plan and then to
implement the agreed-upon treatment. In order to promote operational efficiency
and assure quality of care at Affiliated Practices, the Company's information
systems will monitor patient treatment plans and track the number and type of
procedures performed by each practice. Additionally, the Company will provide
the Affiliated Practices with billing and collections, purchasing, inventory
management, invoice processing and payment, payroll processing, patient
scheduling and financial reporting and analysis.

4
<PAGE>
THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company...... 2,500,000 shares
Common Stock to be outstanding after the
Offering............................... 6,319,178 shares(1)
Use of proceeds.......................... To fund the cash portion of the aggregate
purchase price of the assets of the Founding
Affiliated Practices, to fund the Pentegra/Napili
Transaction, to repurchase or redeem the
outstanding shares of preferred stock of PII, to
repay certain indebtedness of Pentegra and the
Founding Affiliated Practices and for general
corporate purposes. See "Use of Proceeds."
Proposed Nasdaq National Market symbol... PDGI
</TABLE>

- ---------

(1) Includes 2,062,511 shares of Common Stock to be issued in connection with
the Acquisitions and excludes (i) an aggregate of 646,667 shares of Common
Stock issuable upon exercise of stock options to be granted under the
Company's 1997 Stock Compensation Plan (the "1997 Stock Compensation Plan")
effective on the date the Offering closes at an exercise price equal to the
initial public offering price per share and (ii) 1,353,333 shares reserved
for future issuance under the 1997 Stock Compensation Plan. See
"Management--1997 Stock Compensation Plan." The number of shares to be
outstanding on completion of the Offering will decrease if the initial
public offering price is higher, and will increase if the initial public
offering price is lower, than $ per share. For example, an aggregate of
shares of Common Stock would be outstanding if that price is $
per share, while an aggregate of shares of Common Stock would be
outstanding if that price is $ per share.

RISK FACTORS

The Common Stock offered hereby involves a high degree of risk. See "Risk
Factors."

5
<PAGE>
SUMMARY FINANCIAL DATA
(IN THOUSANDS EXCEPT PER SHARE DATA)

The following financial information is derived from the historical combined
financial statements of Pentegra, Ltd. and Napili (the "Combined Predecessor
Companies") and the historical financial statements and the notes thereto
included in this Prospectus. Except as indicated, this information does not
reflect the effects of the Offering, the Acquisitions, the Share Exchange, the
Pentegra/Napili Transaction and the Repurchase and Redemption. For certain
information concerning the Acquisitions, see Note 4 of Notes to the Pentegra
Dental Group, Inc. Financial Statements.

<TABLE>
<CAPTION>
COMBINED PREDECESSOR
COMPANIES
COMBINED PREDECESSOR --------------------
COMPANIES PENTEGRA
------------------------------- SIX MONTHS ENDED -----------
SIX MONTHS
YEAR ENDED DECEMBER 31 JUNE 30 ENDED JUNE
------------------------------- -------------------- 30,
1994 1995 1996 1996 1997 1997
--------- --------- --------- --------- --------- -----------
UNAUDITED
<S> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenue......................................................... $ 943 $ 841 $ 922 $ 371 $ 508 $ --
Expenses
Staff salaries, wages and benefits............................ 181 246 292 122 126 --
Lecture and seminar expenses.................................. 117 96 70 47 161 --
Rent.......................................................... 148 144 159 46 74 --
General and administrative expenses........................... 364 313 360 93 125 91
Advertising expenses.......................................... 17 4 3 3 -- --
Depreciation.................................................. 21 24 8 4 4 --
Other expenses................................................ 15 9 2 2 11 148
--------- --------- --------- --------- --------- -----------
Total expenses.............................................. 863 836 894 317 501 239
--------- --------- --------- --------- --------- -----------
Income (loss) from operations................................... 80 5 28 54 7 (239)
Interest expense................................................ 49 46 52 27 5 --
--------- --------- --------- --------- --------- -----------
Income (loss) before income taxes and extraordinary gain........ 31 (41) (24) 27 2 (239)
Provision (benefit) for income taxes............................ 26 (13) 7 3 -- --
--------- --------- --------- --------- --------- -----------
Income (loss) before extraordinary gain......................... 5 (28) (31) 24 2 (239)
Extraordinary gain, net of income tax effect of $5.............. -- 7 -- -- -- --
--------- --------- --------- --------- --------- -----------
Net income (loss)............................................. $ 5 $ (21) $ (31) $ 24 $ 2 $ (239)
--------- --------- --------- --------- --------- -----------
--------- --------- --------- --------- --------- -----------
Net income (loss) per share................................... $ (0.14)
-----------
-----------
Weighted average outstanding shares............................. 1,757
-----------
-----------
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1996 1997
------------- -----------
<S> <C> <C>
Supplemental Data(1):
Total patient revenue for the Founding Affiliated Practices.......................................... $ 39,214 $ 19,586
Total pro forma Service Agreement revenue of the Company............................................. $ 27,072 $ 13,403
</TABLE>
<TABLE>
<CAPTION>
COMBINED PREDECESSOR
COMPANIES COMBINED
---------------------- PREDECESSOR
COMPANIES PENTEGRA
DECEMBER 31 --------------- -----------
---------------------- JUNE 30, JUNE 30,
1995 1996 1997 1997
--------- ----- --------------- -----------
<S> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents(3)........................................... $ 9 $ 38 $ 66 $ 845
Working capital (deficit).............................................. (352) (29) (4) 1,175
Total assets........................................................... 48 74 88 1,396
Notes payable, net of current portion.................................. -- 9 5 --
Redeemable preferred stock............................................. -- -- -- 1,089
Stockholders' equity (deficit)......................................... (329) (17) 10 297

AS ADJUSTED(2)
---------------
JUNE 30,
1997
---------------
<S> <C>
Balance Sheet Data:
Cash and cash equivalents(3)........................................... $ 16,170
Working capital (deficit).............................................. 15,678
Total assets........................................................... 20,049
Notes payable, net of current portion.................................. --
Redeemable preferred stock............................................. --
Stockholders' equity (deficit)......................................... 18,663
</TABLE>

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

(1) See Note 4 of Notes to the Pentegra Dental Group, Inc. Financial Statements.

(2) As adjusted gives effect to (i) the Offering, (ii) the Acquisitions, (iii)
the repayment of certain debt of Pentegra and the Founding Affiliated
Practices, (iv) the Pentegra/Napili Transaction, (v) the Share Exchange and
(vi) the Repurchase and Redemption, as if such transactions had occurred on
June 30, 1997. See the Unaudited Pro Forma Balance Sheet of Pentegra and the
notes thereto included in this Prospectus.

(3) See "Use of Proceeds."

6
<PAGE>
RISK FACTORS

IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS,
PROSPECTIVE INVESTORS SHOULD CONSIDER THE FOLLOWING FACTORS IN EVALUATING THE
COMPANY AND ITS BUSINESS BEFORE PURCHASING ANY OF THE SHARES OF THE COMMON STOCK
OFFERED HEREBY. THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE
RISKS AND UNCERTAINTIES. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
DISCUSSED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS,
INCLUDING THOSE SET FORTH BELOW AND ELSEWHERE IN THIS PROSPECTUS.

ABSENCE OF COMBINED OPERATING HISTORY

The Company was incorporated in 1997 and has conducted no operations to date
other than in connection with the Offering and the Acquisitions. The Company has
entered into agreements to acquire substantially all the assets and assume
certain liabilities of the Founding Affiliated Practices concurrently with the
closing of the Offering. In connection with the Acquisitions, the Company is
entering into Service Agreements with the Founding Affiliated Practices for
initial terms of 40 years (subject to early termination by either party for
"cause," which includes a material default by or bankruptcy of the other party).
See "Business--Service Agreements." Historically, the Founding Affiliated
Practices have operated as separate independent entities. There can be no
assurance that the process of integrating the management and administrative
functions of the Founding Affiliated Practices will be successful or that the
Company's management will be able to manage these operations effectively or
implement the Company's operating or expansion strategies successfully. Failure
by the Company to implement its operating and expansion strategies successfully
would have a material adverse effect on the Company. See "Business--Business
Strategy" and "--Service Agreements."

RELIANCE ON AFFILIATED PRACTICES AND DENTISTS

The Company will receive fees for management services provided to the
Affiliated Practices under the Service Agreements. It will not employ dentists
or control the practice of dentistry by the dentists employed by the Affiliated
Practices, and its management services revenue generally will depend on revenue
generated by the Affiliated Practices. In some cases, the management fees will
be based on the costs and expenses the Company incurs in connection with
providing management services. While the laws of some states permit the Company
to participate in the negotiations by Affiliated Practices of managed care
contracts, preferred provider arrangements and other negotiated price
agreements, the Affiliated Practices will be the contracting parties for those
relationships, and the Company will be dependent on its Affiliated Practices for
the success of any such relationships. Accordingly, the profitability of those
payor relationships, as well as the performance of the individual dentists
employed by the Affiliated Practices, will affect the Company's profitability.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Overview" and "Business--Service Agreements."

The revenue of the Affiliated Practices (and, therefore, the success of the
Company) is dependent on fees generated by the dentists employed by the
Affiliated Practices. In connection with the Service Agreements, each dentist
who owns a Founding Affiliated Practice will enter into a five-year employment
agreement with the professional corporation or other entity with which that
dentist is affiliated (and which is a party to a Service Agreement). The dentist
employment agreements provide that the employee dentist will not compete with
the Affiliated Practice during the term of the agreement and following the
termination of the agreement for a term of two years in a specified geographical
area. In most states, however, a covenant not to compete will be enforced only
to the extent it is necessary to protect a legitimate business interest of the
party seeking enforcement, does not unreasonably restrain the party against whom
enforcement is sought and is not contrary to the public interest. This
determination is made based on all the facts and circumstances of the specific
case at the time enforcement is sought. Thus, there can be no assurance that a
court will enforce such a covenant in a given situation. In addition, no
judicial precedents have addressed whether a dental practice management
company's interest under a management or service agreement will be viewed as the
type of protectable business interest that would permit it

7
<PAGE>
to enforce such a covenant or to require an affiliated practice to enforce such
covenants against an employee dentist. A substantial reduction in the number of
dentists employed by or associated with the Affiliated Practices could have a
material adverse effect on the financial performance of the Company. Failure by
the Affiliated Practices to employ a sufficient number of dentists (whether by
renewals of existing employment agreements or otherwise) would have a material
adverse effect on the Company. See "Business--Dentist Employment Agreements."

INTEGRATION OF MANAGEMENT INFORMATION SYSTEMS

The success of the Company's business strategy will be dependent on, among
other things, the successful implementation of new management information
systems and other operating systems to permit the effective integration of the
administrative operations of the Affiliated Practices into the Company's
operations. For example, the Company will be required to integrate its financial
information system with existing practice management systems at the Affiliated
Practices, which may be different from those used by the Company. Any
significant delay or increase in expense associated with the conversion and
integration of management information systems used by Affiliated Practices could
have a material adverse effect on the successful implementation of the Company's
expansion strategy. In addition, the Company will have some systems that are
decentralized, including cash collections. Accordingly, the Company will rely on
local staff for certain functions, including upstreaming cash to the Company.
See "Business-- Management Information Systems."

RISKS ASSOCIATED WITH EXPANSION STRATEGY

The success of the Company's expansion strategy will depend on a number of
factors, including the Company's ability to (i) identify attractive and willing
candidates to become Affiliated Practices in suitable markets and in suitable
locations within those markets, (ii) affiliate with acceptable Affiliated
Practices on favorable terms, (iii) adapt the Company's structure to comply with
present or future legal requirements affecting the Company's arrangements with
Affiliated Practices and comply with regulatory and licensing requirements
applicable to dentists and facilities operated and services offered by dentists,
(iv) obtain suitable financing to facilitate its expansion program and (v)
expand the Company's infrastructure and management to accommodate expansion. A
shortage of available dentists with the skills and experience sought by the
Company would have a material adverse effect on the Company's expansion
opportunities, and the Company anticipates facing substantial competition from
other companies to establish affiliations with additional dental practices.
There can be no assurance that the Company's expansion strategy will be
successful, that modifications to the Company's strategy will not be required,
that the Company will be able to manage effectively and enhance the
profitability of additional Affiliated Practices or that the Company will be
able to obtain adequate financing on reasonable terms to support its expansion
program. Furthermore, using shares of Common Stock as consideration for (or in
order to provide financing for) future acquisitions could result in significant
dilution to then-existing stockholders. In addition, future acquisitions
accounted for as purchases may result in substantial annual noncash amortization
charges for intangible assets in the Company's statements of operations. There
can be no assurance that the Company will be able to achieve planned growth,
that the assets of dental practices will continue to be available for
acquisition by the Company, that the Company will be able to realize expected
operating and economic efficiencies from pending or future acquisitions or that
the addition of Affiliated Practices will be profitable. See "--Competition,"
"--Immediate and Substantial Dilution and Absence of Dividends," "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Overview" and "Business--Business Strategy."

NEED FOR ADDITIONAL FINANCING

The Company's expansion program will require substantial capital resources.
Capital is needed not only for the acquisition of the assets of additional
Affiliated Practices, but also for the effective integration,

8
<PAGE>
operation and expansion of the Affiliated Practices. The Affiliated Practices
may from time to time require capital for renovation and expansion and for the
addition of equipment and technology. The Company believes the net proceeds from
the Offering and cash flow from operations will be sufficient to meet the
Company's anticipated expansion and working capital needs through the end of
1998. Thereafter, however, the Company may require additional capital from
outside financing sources in order to continue its expansion program. There can
be no assurance that the Company will be able to obtain additional funds when
needed on satisfactory terms or at all. Any significant limitation on the
Company's ability to obtain additional financing could have a material adverse
effect on the Company. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."

PROCEEDS OF OFFERING PAYABLE TO AFFILIATES

In connection with the closing of the Acquisitions, the Company will pay,
out of proceeds from the Offering, approximately $6.5 million in cash to the
owners of the Founding Affiliated Practices, including approximately $216,326 to
Ronnie L. Andress, D.D.S., $130,027 to James H. Clarke, Jr., D.D.S., $143,183 to
Mack E. Greder, D.D.S., $144,017 to Roger Allen Kay, D.D.S., and $295,830 to
Ronald M. Yaros, D.D.S. In addition, the Company will use $200,000 of the
proceeds from the Offering to purchase substantially all of the tangible and
intangible assets of Pentegra, Ltd. and Napili, both of which entities are
controlled by Dr. Reed. The Company will also use approximately $2.8 million of
the proceeds from the Offering in connection with the Repurchase and Redemption
of PII's Class A Preferred and Class B Preferred, including approximately
$37,500 to Dr. Reed, $37,500 to Gary S. Glatter, $334 to James L. Dunn, Jr.,
$667 to J. Michael Casas, $50,000 to Dr. Greder and $50,000 to Dr. Kay. See "Use
of Proceeds" and "Certain Transactions--Organization of the Company."

GOVERNMENT REGULATION

Various federal and state laws regulate the dental services industry.
Regulatory oversight includes, but is not limited to, considerations of
corporate practice of dentistry, fee splitting, fraud and abuse, self-referral,
false claims and insurance regulation.

CORPORATE PRACTICE OF DENTISTRY AND FEE SPLITTING RESTRICTIONS

The laws of many states prohibit business corporations such as the Company
from engaging in the practice of dentistry or employing dentists to practice
dentistry and prohibit dentists from splitting fees with non-dentists. The
specific restrictions against the corporate practice of dentistry, as well as
the interpretation of those restrictions by state regulatory authorities, vary
from state to state. The restrictions are generally designed to prohibit a
non-dental entity (such as the Company) from controlling the professional assets
of a dental practice (such as patient records and payor contracts), employing
dentists to practice dentistry (or, in certain states, employing dental
hygienists or dental assistants), or controlling the content of a dentist's
advertising or professional practice. The laws of many states also prohibit
dentists from sharing professional fees with non-dental entities. State dental
boards do not generally interpret these prohibitions as preventing a non-dental
entity from owning non-professional assets used by a dentist in a dental
practice or providing management services to a dentist for a fee, provided
certain conditions are met. The Company believes that its operations will not
contravene any applicable restriction on the corporate practice of dentistry and
that the management fees it intends to charge for its services are consistent
with the laws and regulations of the jurisdictions in which it will operate
concerning fee-splitting. There can be no assurance, however, that a review of
the Company's business relationships by courts or regulatory authorities will
not result in determinations that could prohibit or otherwise adversely affect
the operations of the Company or that the regulatory environment will not
change, requiring the Company to reorganize or restrict its existing or future
operations. The laws regarding fee-splitting and the corporate practice of
dentistry and their interpretation are enforced by regulatory authorities with
broad discretion. There can be no assurance that the legality of the Company's
business or its relationship with the Affiliated

9
<PAGE>
Practices will not be successfully challenged or that the enforceability of the
provisions of any Service Agreement will not be limited.

FRAUD AND ABUSE LAWS AND RESTRICTIONS ON REFERRALS AND SELF-REFERRALS

Many states in which the Founding Affiliated Practices are located have
fraud and abuse laws that, in many cases, apply to referrals for items or
services reimbursable by any insurer, not just by Medicare and Medicaid. A
number of states, including many of the states in which the Founding Affiliated
Practices are located, also impose significant penalties for submitting false
claims for dental services. In addition, most states have laws prohibiting
paying or receiving any remuneration, direct or indirect, that is intended to
induce referrals for health care items or services, including dental items and
services. Many states in which the Founding Affiliated Practices are located
either prohibit or require disclosure of self-referral arrangements and impose
penalties for the violation of these laws. Many states, including Alaska,
Florida and Maine, limit the ability of a person other than a licensed dentist
to own or control equipment or offices used in a dental practice. Some of these
states allow leasing of equipment and office space to a dental practice under a
bona fide lease, if the equipment and office remain under the control of the
dentist.

ADVERTISING RESTRICTIONS AND LIMITATIONS ON DELEGATION

Some states prohibit the advertising of dental services under a trade or
corporate name. Some states, including Texas, 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. In
addition, many states impose limits on the tasks that may be delegated by
dentists to hygienists and dental assistants. These laws and their
interpretations vary from state to state and are enforced by the courts and by
regulatory authorities with broad discretion.

INSURANCE REGULATION

There are certain state insurance regulatory risks associated with the
Company's anticipated role in negotiating and administering managed care
contracts on behalf of the Affiliated Practices. The application of state
insurance laws to third-party payor arrangements, other than fee-for-service
arrangements, is an unsettled area of law with little guidance available. State
insurance laws are subject to broad interpretation by regulators and, in some
states, state insurance regulators may determine that the Company or the
Affiliated Practices are engaged in the business of insurance because of the
capitation features (or similar features under which an Affiliated Practice
assumes financial risk) that may be contained in managed care contracts. In the
event the Company or an Affiliated Practice is determined to be engaged in the
business of insurance, the Company or the Affiliated Practice could be required
to either seek licensure as an insurance company or change the form of its
relationships with the third-party payors. There can be no assurance that the
Company's operations would not be adversely affected if the Company or any of
the Affiliated Practices were to become subject to state insurance regulations.

HEALTH CARE REFORM

The United States Congress has considered various types of health care
reform, including comprehensive revisions to the current health care system. It
is uncertain what legislative proposals, if any, will be adopted in the future
or what actions federal or state legislatures or third-party payors may take in
anticipation of or in response to any health care reform proposals or
legislation. There can be no assurance that applicable federal or state laws and
regulations will not change or be interpreted in the future either to restrict
or adversely affect the Company's relationships with dentists or the operation
of Affiliated Practices. See "Business--Government Regulation."

10
<PAGE>
RISKS ASSOCIATED WITH COST CONTAINMENT INITIATIVES

The health care industry, including the dental services market, is
experiencing a trend toward cost containment, as third-party and government
payors seek to impose lower reimbursement rates on providers. The Company
believes this trend will continue and will increasingly affect dental services.
This may result in a reduction in per-patient and per-procedure revenue from
historical levels. There can be no assurance that any reductions in revenues and
operating margins could be offset through cost reductions, increased volume,
introduction of new procedures or otherwise. Accordingly, significant reductions
in payments to Affiliated Practices or other changes in reimbursement by
third-party payors for dental services performed by Affiliated Practices may
have a material adverse effect on the Company.

RISKS ASSOCIATED WITH MANAGED CARE CONTRACTS; CAPITATED FEE REVENUE

The Company believes that managed care arrangements are becoming more
prevalent in certain sectors of the dental services industry. As an increasing
percentage of the population is covered by managed care organizations that
provide dental coverage, the Company believes its future success may be
dependent, in part, on its ability to assist the Affiliated Practices in
negotiating contracts with dental health maintenance organizations, insurance
companies, self insurance plans and other private third-party payors pursuant to
which services will be provided on some type of fee-for-service or capitated
basis by some of its Affiliated Practices. Under certain capitated contracts,
the health care provider accepts a predetermined amount per patient per month as
its sole payment in exchange for providing a specific schedule of services to
enrollees. These contracts shift much of the risk of providing health care from
the payor to the provider. To the extent that the Affiliated Practices enter
into capitated managed care arrangements, they are exposed to the risk that the
cost of providing dental care required by these contracts exceeds the amount
that the Affiliated Practice receives for providing such dental care. To the
extent the Affiliated Practices enter into additional managed care contracts,
the Affiliated Practices may achieve greater predictability of revenues but
greater unpredictability of expenses due to the fluctuating costs of the
services provided. There can be no assurance that the Company will be able to
negotiate on behalf of the Affiliated Practices satisfactory arrangements on a
capitated basis, regardless of the amount of risk sharing. In addition, to the
extent that patients or enrollees covered by certain of these contracts require,
in the aggregate, more frequent or extensive care than anticipated, operating
margins may be reduced, or the revenues derived from these agreements may be
insufficient to cover the costs of the services provided. As a result,
Affiliated Practices would be at risk for additional costs which would reduce or
eliminate any earnings for the Affiliated Practices under these contracts with a
corresponding reduction in or elimination of the service fee payable to the
Company.

CONTROL BY EXISTING MANAGEMENT AND STOCKHOLDERS

Following the completion of the Acquisitions and the Offering, Dr. Reed, the
Company's Chairman of the Board, the other executive officers and directors of
the Company as a group and the owners of the Founding Affiliated Practices other
than Dr. Reed will beneficially own approximately 2.9%, 18.5% and 32.6%,
respectively, of the outstanding shares of Common Stock. These persons, if
acting in concert, will be able to exercise control over the Company's affairs,
elect the entire Board of Directors and (subject to Section 203 of the Delaware
General Corporation Law ("DGCL")) control the outcome of any matter submitted to
a vote of stockholders. The Company's Bylaws provide that a majority of the
members of the Board of Directors must be licensed dentists who are affiliated
with Affiliated Practices. Each of Dr. Reed and the other board members who own
an Affiliated Practice will be a party to a Service Agreement with the Company.
In connection with the provision of management services by the Company to the
Affiliated Practices owned by those dentists, potential conflicts may arise. See
"Security Ownership of Certain Beneficial Owners and Management" and "Certain
Transactions."

11
<PAGE>
DEPENDENCE ON KEY PERSONNEL

The Company's future performance depends in significant part on the
continued service of its senior management, including Dr. Reed and Gary S.
Glatter, the President and Chief Executive Officer of the Company. There can be
no assurance that these individuals will continue to work for the Company. Loss
of services of those persons could have a material adverse effect on the
Company. The success of the
Company's growth strategy will also depend on the Company's ability to attract
and retain additional high quality personnel. See "Business--Employees" and
"Management."

COMPETITION

The Company anticipates facing substantial competition from other companies
to establish affiliations with additional dental practices. The Company is aware
of several practice management companies focused on dentistry and several
companies pursuing similar strategies in other segments of the health care
industry (including dentistry). Certain of these competitors have greater
financial and other resources than the Company and have operations in areas
where the Company may seek to expand in the future. Additional companies with
similar objectives are expected to enter the Company's markets and compete with
the Company. In addition, the business of providing dental services is highly
competitive in each market in which the Company will operate. Each of the
Founding Affiliated Practices faces local competition from other dentists,
pedodontists (dentists specializing in the care of children's teeth) and other
providers of specialty dental services (such as periodontists, orthodontists and
oral surgeons) some of whom have more established practices. There can be no
assurance that the Company or the Affiliated Practices will be able to compete
effectively with their respective competitors, that additional competitors will
not enter their markets or that additional competition will not have a material
adverse effect on the Company or the Affiliated Practices. See
"Business--Competition."

MALPRACTICE RISKS OF PROVIDING DENTAL SERVICES

The Affiliated Practices provide dental services to the public and are
exposed to the risk of professional liability and other claims. In recent years,
dentists have become subject to an increasing number of lawsuits alleging
malpractice and related legal theories. Some of these lawsuits may involve large
claims and significant defense costs. Any suits involving the Company or
dentists at the Affiliated Practices, if successful, could result in substantial
damage awards to the claimants that may exceed the limits of any applicable
insurance coverage. Although the Company will not control the practice of
dentistry by the Affiliated Practices, it could be asserted that the Company
should be held liable for malpractice of a dentist employed by an Affiliated
Practice. Each Affiliated Practice has undertaken to comply with all applicable
regulations and legal requirements, and the Company maintains liability
insurance for itself. There can be no assurance, however, that a future claim or
claims will not be successful or, if successful, will not exceed the limits of
available insurance coverage or that such coverage will continue to be available
at acceptable costs. Malpractice insurance, moreover, can be expensive and
varies from state to state. Successful malpractice claims asserted against the
Affiliated Practices (or their dentists) or the Company may have a material
adverse effect on the Company. See "Business--Litigation and Insurance."

POTENTIAL EFFECT OF SHARES ELIGIBLE FOR FUTURE SALE ON PRICE OF COMMON STOCK

The market price of the Common Stock of the Company could be adversely
affected by the sale of substantial amounts of the Common Stock in the public
market following the Offering. The shares being sold in the Offering will be
freely tradable unless acquired by affiliates of the Company.

Concurrently with the closing of the Offering, the owners of the Founding
Affiliated Practices will receive, in the aggregate, 2,062,511 shares of Common
Stock as a portion of the consideration for the assets of their practices.
Certain other stockholders of the Company will hold, in the aggregate, an

12
<PAGE>
additional 1,756,667 shares of Common Stock. Those shares are not being offered
and sold pursuant to this Prospectus. None of those 3,819,178 shares were
acquired in transactions registered under the Securities Act and, accordingly,
such shares may not be sold except in transactions registered under the
Securities Act or pursuant to an exemption from registration. In addition, the
Company's executive officers, directors and current stockholders and the persons
acquiring shares of Common Stock in connection with the Acquisitions have agreed
with the Company that they will not sell any of the 3,819,178 shares of Common
Stock owned by them immediately after the consummation of the Acquisitions for a
period of one year following the closing of the Offering, subject to their right
to exercise certain piggy-back registration rights. After the expiration of that
restricted period, all of those shares may be sold in accordance with Rule 144
under the Securities Act, subject to the applicable volume limitations, holding
period and other requirements of Rule 144.

The Company, its directors, executive officers and current stockholders, and
all persons acquiring shares of Common Stock in connection with the Acquisitions
have agreed not to offer or sell any shares of Common Stock for a period of 180
days (the "180-Day Lockup Period") following the date of this Prospectus without
the prior written consent of Lehman Brothers Inc., except that the Company may,
subject to certain conditions, issue Common Stock in connection with
acquisitions and awards under the 1997 Stock Compensation Plan.

Following completion of the Offering, the Company intends to register the
issuance of an additional 1,500,000 shares of its Common Stock under the
Securities Act subsequent to completion of the Offering for use by the Company
as all or a portion of the consideration to be paid in future acquisitions.
Those shares will generally be freely tradable by nonaffiliates after their
issuance, unless the resale thereof is contractually restricted, and resales of
those shares during the 180-Day Lockup Period would require the prior written
consent of Lehman Brothers Inc.

The Company anticipates that, prior to the consummation of the Offering, the
Company will have outstanding under the 1997 Stock Compensation Plan options to
purchase approximately 646,667 shares of Common Stock. The Company intends to
register the shares issuable upon exercise of options granted under the 1997
Stock Compensation Plan. See "Management--1997 Stock Compensation Plan" and
"Shares Eligible for Future Sale."

NO PRIOR MARKET; POSSIBLE VOLATILITY OF STOCK PRICE

Prior to the Offering, there has been no public market for the Common Stock,
and there can be no assurance that an active trading market will develop or, if
a trading market does develop, that it will continue after the Offering. The
initial public offering price of the Common Stock, which will be determined
through negotiations between the Company and the Underwriters, may not be
indicative of the price at which the Common Stock will trade after the Offering.
See "Underwriting" for a description of the factors considered in determining
the initial public offering price. The securities markets have, from time to
time, experienced significant price and volume fluctuations that may be
unrelated to the operating performance of particular companies. These
fluctuations often substantially affect the market price of a company's common
stock. The market prices for securities of medical and dental practice
management companies have in the past been, and can be expected to be,
particularly volatile. The market price of the Common Stock could be subject to
significant fluctuations in response to numerous factors, including variations
in financial results or announcements of material events by the Company or its
competitors. Regulatory changes, developments in the health care industry or
changes in general conditions in the economy or the financial markets could also
adversely affect the market price of the Common Stock.

CERTAIN ANTI-TAKEOVER PROVISIONS

Certain provisions of the Company's Restated Certificate of Incorporation
(the "Certificate of Incorporation") and Bylaws and of Delaware law could,
together or separately, discourage potential

13
<PAGE>
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. The Certificate of Incorporation provides for "blank
check" preferred stock, which may be issued without stockholder approval and
provides for a "staggered" Board of Directors. In addition, certain provisions
of the Company's Bylaws restrict the right of the stockholders to call a special
meeting of stockholders, to nominate directors, to submit proposals to be
considered at stockholders' meetings and to adopt amendments to the Bylaws, and
the Bylaws require that at least a majority of the members of the Board of
Directors be licensed dentists who are affiliated with Affiliated Practices. The
Company also is subject to Section 203 of the 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 AND ABSENCE OF DIVIDENDS

Purchasers of shares of Common Stock offered hereby will experience
immediate and substantial dilution in the pro forma net tangible book value of
their shares in the amount of $ per share. See "Dilution." In the event the
Company issues additional Common Stock in the future, including shares that may
be issued in connection with future acquisitions, purchasers of Common Stock in
the Offering may experience further dilution in the net tangible book value per
share of Common Stock. The Company has never paid any cash dividends and does
not anticipate paying cash dividends on its Common Stock in the foreseeable
future. See "Dividend Policy."

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<PAGE>
THE COMPANY

The Company was organized in 1997 and has conducted no operations to date
other than in connection with the Offering and the Acquisitions. The Company has
entered into agreements to acquire substantially all the assets and assume
certain liabilities of the Founding Affiliated Practices, Pentegra, Ltd. and
Napili concurrently with the closing of the Offering. The Company's principal
executive offices are located at 2999 N. 44th Street, Suite 650, Phoenix,
Arizona 85018, and its telephone number is (602) 952-1200.

USE OF PROCEEDS

The net proceeds to the Company from the sale of the shares of Common Stock
offered hereby (after deducting the underwriting discounts and commissions and
estimated offering expenses (excluding the offering expenses previously funded
with proceeds from the issuance of capital stock of PII, including all the Class
A Preferred and Class B Preferred being acquired in the Repurchase and
Redemption)) are estimated to be approximately $ million (approximately $
million if the Underwriters' over-allotment option is exercised in full),
assuming an initial public offering price of $ per share (the midpoint of
the estimated initial public offering price range). Of those net proceeds, (i)
approximately $6.5 million will be used to pay the cash portion of the
consideration for the Acquisitions, (ii) $200,000 will be used to effect the
Pentegra/Napili Transaction, (iii) approximately $2.8 million will be used in
connection with the Redemption and Repurchase, (iv) approximately $2.9 million
will be used to repay certain indebtedness of the Company and the Founding
Affiliated Practices and (v) approximately $300,000 will be used to repay the
$300,000 aggregate principal amount outstanding under the Company's 9.5%
promissory notes issued on September 30, 1997 to fund certain of the Company's
offering and operating expenses. The indebtedness of the Founding Affiliated
Practices to be repaid bears interest at an average rate of eight percent and
would otherwise mature at various dates through 2002. The remaining net proceeds
will be used for general corporate purposes, which are expected to include
future acquisitions and future capital expenditures. Other than with respect to
the Acquisitions, the Company currently has no agreement or understanding with
respect to any future acquisition. Pending such uses, the net proceeds will be
invested in short-term, interest-bearing, investment-grade securities. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."

DIVIDEND POLICY

It is the Company's current intention to retain earnings for the foreseeable
future to support operations and finance expansion. The payment of any future
dividends will be at the discretion of the Company's Board of Directors and will
depend upon, among other things, the Company's earnings, financial condition,
cash flow from operations, capital requirements, expansion plans, the income tax
laws then in effect, the requirements of Delaware law and restrictions that may
be imposed by the Company's future financing arrangements.

15
<PAGE>
DILUTION

The net tangible book value of the Company as of June 30, 1997 was $0.05 per
share of Common Stock as determined by dividing the tangible net worth of the
Company (tangible assets less total liabilities and the aggregate stated value
of the Class A Preferred and Class B Preferred) by the number of shares of
Common Stock outstanding. After giving effect to (i) the Acquisitions and (ii)
the sale by the Company of 2,500,000 shares of Common Stock offered at a price
of $ per share (the midpoint of the estimated initial public offering price
range) and the application of the estimated net proceeds therefrom as set forth
under "Use of Proceeds," the net pro forma tangible book value of the Company as
of June 30, 1997 would have been $2.93 per share. This represents an immediate
increase in the net tangible book value of $2.88 per share to existing
stockholders and an immediate dilution to new investors purchasing Common Stock
in the Offering of $ per share. The following table illustrates the per share
dilution to new investors purchasing Common Stock in the Offering:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share(1)........... $
Historical net tangible book value......................... $ 0.05
Increase due to Acquisitions and the Offering.............. $ 2.88
---------
Pro forma net tangible book value per share after the
Offering................................................. $ 2.93
---------
Dilution per share to initial public offering investors...... $
---------
---------
</TABLE>

- ---------

(1) Before deducting estimated underwriting discounts and estimated expenses of
the Offering payable by the Company.

The dilution to new investors purchasing shares in the Offering will
increase if the initial public offering price is higher, and will decrease if
the initial public offering price is lower, than $ per share.

The following table sets forth, on a pro forma basis to give effect to the
Acquisitions as of June 30, 1997, the number of shares of Common Stock purchased
from the Company, the total consideration to the Company and the average price
per share paid to the Company by existing stockholders and the new investors
purchasing shares from the Company in the Offering (before deducting
underwriting discounts and commissions and estimated offering expenses):

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION(1) AVERAGE
----------------------- -------------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
---------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Existing stockholders............... 3,819,178 60.4% $ (6,609,018) % $
New investors....................... 2,500,000 39.6% $ %
---------- ----- ------------- -----
Total........................... 6,319,178 100.0% $ 100.0%
---------- ----- ------------- -----
---------- ----- ------------- -----
</TABLE>

- ---------

(1) Total consideration paid by existing stockholders represents the combined
stockholders' equity of the Founding Affiliated Practices before the
Offering, adjusted to reflect the payment of $6.5 million in cash as part of
the consideration for the Acquisitions. See "Use of Proceeds" and
"Capitalization."

All of the calculations above exclude an aggregate of 646,667 shares of
Common Stock issuable upon exercise of stock options anticipated to be
outstanding on the date the Offering closes at an exercise price equal to the
initial public offering price per share under the 1997 Stock Compensation Plan
and 1,353,333 shares reserved for future issuance under the 1997 Stock
Compensation Plan. See "Management--1997 Stock Compensation Plan."

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<PAGE>
CAPITALIZATION

The following table sets forth the short-term debt and the capitalization of
the Company at June 30, 1997 on a historical basis and as adjusted to give
effect to (i) the Offering, (ii) the Acquisitions, (iii) the repayment of
certain debt of the Company and the Founding Affiliated Practices, (iv) the
Share Exchange, (v) the Pentegra/Napili Transaction and (vi) the Repurchase and
Redemption. See "Use of Proceeds." This table should be read in conjunction with
the unaudited Pro Forma Balance Sheet of Pentegra and the notes thereto included
elsewhere in this Prospectus.

<TABLE>
<CAPTION>
AS OF JUNE 30, 1997
---------------------------
HISTORICAL AS ADJUSTED(1)
----------- --------------
(IN THOUSANDS)
<S> <C> <C>
Short-term debt:
Current portion of long-term debt.................................................... $ -- $ --
----------- -------
Total short-term debt................................................................ $ -- $ --
----------- -------
----------- -------
Long-term debt:
Long-term debt, net of current portion............................................... -- --
Redeemable Preferred Stock............................................................. 1,089 --
Stockholders' equity (deficit):
Common Stock, 40,000,000 shares authorized; 1,756,667 shares issued and outstanding
and shares issued and outstanding as adjusted(1)........................... 18
Additional paid-in capital(2)........................................................ 518
Accumulated deficit.................................................................. (239)
----------- -------
Total stockholders' equity......................................................... 297
----------- -------
Total capitalization............................................................... $ 1,386 $
----------- -------
----------- -------
</TABLE>

- ---------

(1) Excludes 646,667 shares of Common Stock subject to options granted pursuant
to the 1997 Stock Compensation Plan. See "Management--1997 Stock
Compensation Plan."

(2) The effect of the Acquisitions on additional paid-in capital is equal to the
net of the aggregate liabilities to be assumed from the Founding Affiliated
Practices (including $2.9 million of certain indebtedness to be assumed by
the Company), and the aggregate book value of the assets to be acquired of
$95,000, plus aggregate cash payments of $6.5 million to be made as part of
the consideration for the Acquisitions less the par value of the Common
Stock to be issued in connection with the Acquisitions.

17
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS EXCEPT PER SHARE DATA)

The selected historical financial data of the Company and the Combined
Predecessor Companies should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the historical financial statements and the notes thereto included in this
Prospectus. The selected historical financial data of the Combined Predecessor
Companies as of December 31, 1995 and 1996 and for each of the years ended
December 31, 1994, 1995 and 1996 and the historical financial data of the
Company as of June 30, 1997 and for the period from inception, February 21,
1997, through June 30, 1997, set forth below, have been derived from the audited
financial statements of the Combined Predecessor Companies and the Company. The
selected historical financial data of the Combined Predecessor Companies set
forth below as of June 30, 1997 and for the years ended December 31, 1992 and
1993 and the six months ended June 30, 1996 and 1997 have been derived from the
unaudited financial statements of the Combined Predecessor Companies, which were
prepared on the same basis as the audited financial statements of the Combined
Predecessor Companies included elsewhere herein and which, in the opinion of
management of the Company, include all adjustments (consisting of normal
recurring adjustments) necessary to present fairly the information set forth
below. Except as indicated, this information does not reflect the effects of the
Offering, the Acquisitions, the Share Exchange, the Pentegra/Napili Transaction
and the Repurchase and Redemption. For certain information concerning the
Acquisitions, see Note 4 of Notes to the Pentegra Dental Group, Inc. Financial
Statements.

<TABLE>
<CAPTION>
COMBINED
PREDECESSOR
COMPANIES
---------- PENTEGRA
YEAR ENDED DECEMBER 31 --------
------------------------------ SIX MONTHS SIX
ENDED JUNE MONTHS
COMBINED PREDECESSOR COMPANIES 30 ENDED
------------------------------ ---------- JUNE 30,
1992 1993 1994 1995 1996 1996 1997 1997
------ ---- ---- ---- ---- ---- ---- --------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue.............................................. $1,209 $680 $943 $841 $922 $371 $508 $ --
Expenses
Staff salaries, wages and benefits................. 421 193 181 246 292 122 126 --
Lecture and seminar expenses....................... 321 199 117 96 70 47 161 --
Rent............................................... 141 73 148 144 159 46 74 --
General and administrative expenses................ 193 122 364 313 360 93 125 91
Advertising expenses............................... 24 9 17 4 3 3 -- --
Depreciation....................................... 45 15 21 24 8 4 4 --
Other expenses..................................... 5 11 15 9 2 2 11 148
------ ---- ---- ---- ---- ---- ---- --------
Total expenses................................. 1,150 622 863 836 894 317 501 239
------ ---- ---- ---- ---- ---- ---- --------
Income (loss) from operations...................... 59 58 80 5 28 54 7 (239)
Interest expense................................... 50 42 49 46 52 27 5 --
------ ---- ---- ---- ---- ---- ---- --------
Income (loss) before income taxes and extraordinary
gain............................................. 9 16 31 (41) (24) 27 2 (239)
Provision (benefit) for income taxes............... 2 4 26 (13) 7 3 -- --
------ ---- ---- ---- ---- ---- ---- --------
Income (loss) before extraordinary gain............ 7 12 5 (28) (31) 24 2 (239)
Extraordinary gain, net of income tax effect of
$5............................................... -- -- -- 7 -- -- -- --
------ ---- ---- ---- ---- ---- ---- --------
Net income (loss).............................. $ 7 $ 12 $ 5 $(21) $(31) $ 24 $ 2 $ (239)
------ ---- ---- ---- ---- ---- ---- --------
------ ---- ---- ---- ---- ---- ---- --------
Net income (loss) per share.................... $(0.14)
--------
--------
Weighted average outstanding shares.................. 1,757
--------
--------
</TABLE>

18
<PAGE>

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1996 1997
------------ -----------
<S> <C> <C>
Supplemental Data(1):
Total patient revenue for the Founding Affiliated Practices................................ $ 39,214 $ 19,586
Total pro forma Service Agreement revenue of the Company................................... $ 27,072 $ 13,403
</TABLE>

<TABLE>
<CAPTION>
COMBINED COMBINED
PREDECESSOR PREDECESSOR
COMPANIES COMPANIES PENTEGRA AS ADJUSTED(2)
-------------------- --------------- ----------- --------------
DECEMBER 31 JUNE 30, JUNE 30, JUNE 30,
1995 1996 1997 1997 1997
--------- --------- --------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents(3).................................... $ 9 $ 38 $ 66 $ 845 $ 16,170
Working capital (deficit)....................................... (352) (29) (4) 1,175 15,678
Total assets.................................................... 48 74 88 1,396 20,049
Notes payable, net of current portion........................... -- 9 5 -- --
Redeemable preferred stock...................................... -- -- -- 1,089 --
Stockholders' equity (deficit).................................. (329) (17) 10 297 18,663
</TABLE>

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

(1) See Note 4 of Notes to the Pentegra Dental Group, Inc. Financial Statements.

(3) See "Use of Proceeds."

19
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

THE FOLLOWING DISCUSSION AND ANALYSIS CONTAINS CERTAIN STATEMENTS OF A
FORWARD-LOOKING NATURE RELATING TO FUTURE EVENTS OR THE FUTURE FINANCIAL
PERFORMANCE OF THE COMPANY. SUCH STATEMENTS ARE ONLY PREDICTIONS AND THE ACTUAL
EVENTS OR RESULTS MAY DIFFER MATERIALLY FROM THE RESULTS DISCUSSED IN THE
FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH
DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS,"
AS WELL AS THOSE DISCUSSED ELSEWHERE IN THIS PROSPECTUS. THE HISTORICAL RESULTS
SET FORTH IN THIS DISCUSSION AND ANALYSIS ARE NOT INDICATIVE OF TRENDS WITH
RESPECT TO ANY ACTUAL OR PROJECTED FUTURE FINANCIAL PERFORMANCE OF THE COMPANY.
THIS DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH THE PRO FORMA
BALANCE SHEET, THE FINANCIAL STATEMENTS AND THE RELATED NOTES THERETO INCLUDED
ELSEWHERE IN THIS PROSPECTUS.

OVERVIEW

Although the Company has conducted no significant operations to date, it
will succeed to the business of Pentegra, Ltd. and Napili, which developed the
Pentegra Dental Program. In connection with the Acquisitions, the Company will
acquire certain tangible and intangible assets and assume certain liabilities
of, and enter into Service Agreements with, the Founding Affiliated Practices.
Through the Service Agreements, the Company will be providing practice
management services to the Founding Affiliated Practices in return for
management service fees.

The expenses incurred by the Company in fulfilling its obligations under the
Service Agreements are generally of the same nature as the operating costs and
expenses that were otherwise incurred by the Founding Affiliated Practices,
including salaries, wages and benefits of practice personnel (excluding dentists
and certain other licensed dental care professionals), dental supplies and
office supplies used in administering their practices and the office (general
and administrative) expenses of the practices. In addition to the operating
costs and expenses discussed above, the Company will be incurring personnel and
administrative expenses in connection with establishing and maintaining a
corporate office, which will provide management, administrative, marketing and
development and acquisition services that are generally of the same nature as
those that have historically been incurred by Pentegra, Ltd. and Napili in
connection with the provision of services to dental practices.

RESULTS OF OPERATIONS

PENTEGRA AND PII

Pentegra and PII have conducted no significant operations to date and will
not conduct significant operations until the Acquisitions, the Pentegra/Napili
Transaction and the Offering are completed. Nominal general and administrative
expenses were incurred during the six months ended June 30, 1997. The Company
has incurred and will continue to incur various legal, accounting, travel,
personnel and marketing costs in connection with the Acquisitions and the
Offering. Of these expenses, $1,450,000 is being funded with proceeds from the
issuances of the Common Stock, Class A Preferred and Class B Preferred in the
second quarter of 1997 and $300,000 is being funded with proceeds from the
issuance of $300,000 aggregate principal amount of 9.5% promissory notes of the
Company to two separate lenders in October 1997.

PENTEGRA, LTD. AND NAPILI

Pentegra, Ltd. and Napili provide clinical, administrative and marketing
consulting and training programs to dentists and their personnel. The
period-to-period comparisons set forth below for the combined operations of
Pentegra, Ltd. and Napili should be considered in conjunction with the
discussion of pro forma results of operations below.

20
<PAGE>
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30,
1996. Total revenue for the six months ending June 30, 1997 was $508,000, a
$137,000 increase over the same period in 1996. The increase resulted primarily
from an increase in the number of seminars held by Napili and a 15 percent
increase in the number of persons participating in Pentegra, Ltd. consulting
programs. Expenses generally increased in proportion to the increase in seminars
and consulting programs except for lecture and seminar expenses, which increased
approximately 240% to $161,000. During 1997, Napili committed substantial
additional resources to improving the setting and amenities offered in
connection with its seminars to attract more participants. The Company expects
lecture and seminar expenses to decrease in future periods as it limits
participation to dentists employed by Affiliated Practices. In September 1996,
the owners of Pentegra, Ltd. and Napili contributed capital of $343,000, which
was used to repay indebtedness. Consequently, interest expense decreased by
$22,000 to $5,000 for the six months ended June 30, 1997 compared to the
corresponding period in the prior year.

YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31,
1995. Total revenue was $922,000 in 1996, an increase of $81,000 over 1995,
resulting from an increase in the number of participants in Pentegra, Ltd.
consulting programs. Staff salaries, wages and benefits increased by $46,000 to
$292,000 because of additions of professional personnel by Pentegra, Ltd. Rent
and general and administrative expenses increased in support of the additional
personnel and enhanced consulting programs. Lecture and seminar expenses
decreased $26,000 to $70,000, reflecting a general change in venues for seminars
and lectures. Depreciation decreased by $16,000 to $8,000 because leasehold
improvements were fully depreciated in 1996.

YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31,
1994. Total revenue decreased $102,000 to $841,000 in 1995, primarily as a
result of reduced marketing and promotional expenses of Pentegra, Ltd.
consulting programs due to the implementation of a new marketing strategy that
was subsequently abandoned. Staff additions also occurred in 1996, which
increased salaries, wages and benefits and increased focus on training new
personnel, rather than marketing. Lecture and seminar expenses decreased by
$21,000 to $96,000, reflecting more modest venues and a decrease in promotion,
which is also reflected in the $13,000 decrease in advertising.

PLANNED OPERATIONS

The Company intends to complete the Acquisitions and the Pentegra/Napili
Transaction concurrently with the Offering. See Note 4 of Notes to the Pentegra
Dental Group, Inc. Financial Statements. It is anticipated that substantially
all the Company's revenues will consist of fees under the Service Agreements.
Pro forma revenues of $27.1 million and $13.4 million for the year ended
December 31, 1996 and the six months ended June 30, 1997, respectively, are
based on the service fees that would have been payable pursuant to the Service
Agreements with the Founding Affiliated Practices. Revenues may be expected to
vary proportionately with the level of dental care provided by Affiliated
Practices.

LIQUIDITY AND CAPITAL RESOURCES

PENTEGRA AND PII

The Company had cash of approximately $845,000 at June 30, 1997. In July
1997, the Company received an additional $326,000 proceeds from its June 1997
private placement of Common Stock, Class A Preferred and Class B Preferred and,
in October 1997, the Company received an additional $300,000 through the
issuance of $300,000 aggregate principal amount of 9.5% promissory notes
aggregating to that amount to two lenders. In connection with the issuance of
the 9.5% promissory notes, PII issued an aggregate of 20,000 shares of its
common stock to the lenders for cash consideration of $.01 per share. The
Company anticipates receiving approximately $ million, net of underwriters'
commissions and other offering costs, as proceeds from the Offering. The Company
will use the net proceeds of the Offering to pay (i) the costs of the Offering
not previously funded from the proceeds of the issuance of capital stock of

21
<PAGE>
PII, (ii) the cash portion of the consideration for the Acquisitions of
approximately $6.5 million, (iii) the consideration for the Pentegra/Napili
Transaction of $200,000, (iv) approximately $2.8 million in connection with the
Repurchase and Redemption, (v) approximately $2.9 million to retire certain
indebtedness of the Founding Affiliated Practices and (vi) approximately
$300,000 to repay the aggregate principal amount outstanding under the Company's
9.5% promissory notes. The remaining net proceeds will be used for general
corporate purposes, which are expected to include future acquisitions and
capital expenditures.

Management believes the net proceeds of the Offering, combined with the
Company's cash flows from operations, will be sufficient to fund planned capital
expenditures and ongoing operations of the Company through the end of 1998. The
Company intends to register 1,500,000 shares of Common Stock under the
Securities Act for use in the Company's acquisition program.

PENTEGRA, LTD. AND NAPILI

Pentegra, Ltd. and Napili had a working capital deficit of $4,000 at June
30, 1997. Management believes that cash flows from operations will be adequate
to fund these companies' operations through the date the Pentegra/Napili
Transaction is completed.

ACCOUNTING TREATMENT

The acquisition of the assets and assumption of certain liabilities of the
Founding Affiliated Practices pursuant to the Acquisitions will be accounted for
by the Company at the transferors' historical cost basis. The Common Stock being
issued in the Acquisitions will be recorded at the historical net book value of
the net assets being acquired, as reflected on the books of the Founding
Affiliated Practices. Cash consideration paid in the Acquisitions will be
treated for accounting purposes as a dividend to the Founding Affiliated
Practices and their owners.

RECENT PRONOUNCEMENTS

In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 128, "Earnings Per
Share." SFAS No. 128 specifies the computation, presentation, and disclosure
requirements of earnings per share and supersedes Accounting Principles Board
Opinion No. 15, "Earnings Per Share." SFAS No. 128 requires a dual presentation
of basic and diluted earnings per share. Basic earnings per share, which
excludes the impact of common stock equivalents, replaces primary earnings per
share. Diluted earnings per share, which utilizes the average market price per
share as opposed to the greater of the average market price per share or ending
market price per share when applying the treasury stock method in determining
common stock equivalents, replaces fully diluted earnings per share. SFAS No.
128 is effective for both interim and annual periods ending after December 15,
1997.

The Emerging Issues Task Force of the FASB is currently evaluating certain
matters relating to the physician practice management industry, which the
Company expects will include a review of accounting for affiliated dental
practices. The Company is unable to predict the impact, if any, that this review
may have on the Company's financial statement presentation.

22
<PAGE>
BUSINESS

OVERVIEW

The Company believes it has several advantages that would lead dental
practices to seek to affiliate with the Company: (i) the Company and the
Founding Affiliated Practices focus on providing traditional fee-for-service
dental care, which the Company believes is highly profitable and professionally
rewarding for dentists; (ii) the Pentegra Dental Program offers proven
techniques to increase practice profitability substantially; (iii) both the
Company and the Affiliated Practices will have incentives to work together to
maximize practice profitability; and (iv) affiliation with the Company will
enable Affiliated Practices to benefit from professional management techniques,
economies of scale in administrative and other functions, and enable affiliated
dentists to dedicate more time and effort towards the growth of their practices.

INDUSTRY

The Health Care Finance Administration ("HCFA") estimates that in 1995,
approximately $43 billion was spent in the United States on dental services.
HCFA projects annual dental expenditures to increase at an average annual rate
of six percent per year, reaching $79 billion in the year 2005. The Company
believes there are several factors that will drive growth in dental expenditures
in the United States, including (i) the aging of the population, which increases
the demand for restorative and maintenance procedures (E.G., crowns, bridges and
implants) that tend to be more profitable than routine procedures (E.G.,
cleanings and fillings); (ii) the increasing attention to dental health and
wellness, with greater emphasis on personal appearance, which increases the
demand for general dentistry services and, in particular, cosmetic dental
procedures (E.G., porcelain bonding and bleaching), which also tend to be more
profitable than routine procedures; and (iii) the increasing percentage of the
population covered by some form of dental insurance, which, according to the
National Center for Health Statistics, makes patients more likely to seek
treatment from their dentist.

Payments for dental services are made either directly by patients or by
third-party payors. Third-party payors primarily consist of private insurance
indemnity plans, preferred provider organizations ("PPOs") and dental health
maintenance organizations and other managed care programs ("DHMOs"). Private

23
<PAGE>
indemnity insurance companies typically pay for a patient's dental care on a
fee-for-service basis, while PPO plans pay on a discounted fee-for-service
basis. DHMO plans typically pay on a per-person, per-month basis regardless of
the level of service provided to the patient. In the case of both PPOs and
DHMOs, patients typically must pay on a fee-for-service basis for any services
outside the limited range of dental procedures covered. According to the 1993
Foster Higgins National Survey of Employer-Sponsored Health Plans, approximately
78% of the plans surveyed pay for dental services on a fee-for-service basis,
while approximately 22% of the plans surveyed are PPO and DHMO plans (I.E.,
discounted fee-for-service payments or capitated payments). According to HCFA,
only approximately four percent of all payments for dental care are made under
the Medicaid program (which provides limited coverage for indigent children),
with no coverage being provided by the Medicare program.

In a 1995 survey, the ADA reported that there were approximately 153,000
active dentists in the United States, approximately 88% of whom were practicing
either alone or with only one other dentist. In recent years, dentists have
begun to consolidate into affiliated groups and with practice management
organizations. Dentists who affiliate with practice management companies gain
several benefits, such as opportunities to achieve economies of scale, to
implement cost management techniques and to gain access to capital for new
equipment and other working capital needs.

BUSINESS STRATEGY

The Company's objective is to become a leader in providing dental practice
management services. In order to achieve this objective, the Company's strategy
includes the following elements:

- FOCUS ON TRADITIONAL FEE-FOR-SERVICE DENTAL CARE. According to the 1993
Foster Higgens National Survey of Employer-Sponsored Health Plans,
approximately 78% of the plans surveyed pay for dental services on a
fee-for-service basis. The Company believes that fee-for-service care is
high-quality, highly profitable and professionally rewarding for dentists.

- GROW THROUGH ACQUISITIONS AND AFFILIATIONS OF ADDITIONAL DENTAL PRACTICES.
The Company will generally seek to affiliate with practices that have high
potential for future growth, particularly through implementation of the
Pentegra Dental Program, an established reputation for high-quality care
and a strategic fit either in an existing market or as an entry into a new
market.

SERVICES AND OPERATIONS

THE PENTEGRA DENTAL PROGRAM

The Company intends to implement the Pentegra Dental Program at each
Affiliated Practice. The Pentegra Dental Program was developed by Dr. Reed
through Pentegra, Ltd. and Napili. Napili was founded in 1963 and has conducted
technical and management seminars for several thousand practicing

24
<PAGE>
dentists, including many who have attended these seminars more than once. As a
result of demand by attendees of Napili seminars, Dr. Reed established Pentegra,
Ltd. in 1988 to provide hands-on training and services to small groups of
dentists. Shortly after completion of the Offering, Pentegra, Ltd. and Napili
will no longer operate independently and their services will be available
exclusively to Affiliated Practices.

The Company focuses on traditional fee-for-service practices, which generate
revenue by providing care to their established patient bases and typically grow
through patient referrals. The Company believes that the average dentist has the
skills necessary to diagnose and provide appropriate care to patients, but many
of them have not developed the skills needed to obtain patient acceptances of,
and commitments to, the treatment plans. As a result, a significant amount of
recommended care may not be completed, with correspondingly lower revenues to
the dentists.

The Pentegra Dental Program is based on a cooperative approach that
emphasizes patient wellness and involves the dentist and his or her patient
mutually agreeing on a program to achieve and maintain optimal oral health. The
Company will provide training and support to assist affiliated dentists and
their teams to communicate effectively with each patient regarding the type and
value of care needed, obtain the patient's commitment to a treatment plan and
then implement the agreed-upon treatment plan. The Company and the Affiliated
Practices will monitor the patients' treatment plans by using active recall
systems to ensure that scheduled treatments are actually performed. The Pentegra
Dental Program stresses quality of care and personal attention, both of which
the Company believes are highly valued by patients and help achieve treatment
plan acceptance. The Company intends to develop and maintain a statistical
database for each Affiliated Practice to define and measure the standard of care
and assure that the desired standards are being achieved.

The Pentegra Dental Program also analyzes and rationalizes fee structures to
increase profitability. The Company believes that typical fee structures do not
accurately reflect all direct and indirect costs of various procedures. In order
to address this, the Company will use time-related cost allocation models to
recommend fee structures for Affiliated Practices that are designed to reflect
the true cost of procedures and, hence, increase profitability.

In addition, the Pentegra Dental Program focuses on increasing the
productivity of the dentist and his or her team. The Company will seek to
increase hygienic use and production at the Affiliated Practices. A number of
dental services can be provided by hygiene teams with only limited involvement
by the dentist, thereby enabling dentists to use their extra time on higher
margin procedures requiring greater expertise and skill. The Company will also
monitor patient scheduling and time spent with patients in order to increase
utilization of existing dental equipment and personnel.

MANAGEMENT INFORMATION SYSTEMS

The Company will utilize an integrated server-based information system to
track important operational and financial data related to each Affiliated
Practice's performance. The Company's management information system will
interface with the practice management software currently being used by the
Founding Affiliated Practices and enable the Company to collect from each
Affiliated Practice, on a daily basis, data on patients seen, number and type of
procedures performed, billing and collections, and other data needed for
financial reporting and analysis. The Company will then compile and analyze this
data in order to promote efficiency and assure high quality care at Affiliated
Practices, as well as maintain necessary financial controls. The Company's
management information system will also enable the Company to centralize certain
functions, such as purchasing, accounts payable and payroll processing, and
achieve economies of scale.

The Company is currently in the process of refining and testing its
management information system at beta sites at selected Founding Affiliated
Practices. The Company expects its integrated system to be operational at all of
the Founding Affiliated Practices at the closing of the Offering, and will be
installed promptly at all future Affiliated Practices as they affiliate with the
Company. Any significant delay or

25
<PAGE>
increase in expense associated with the conversion and integration of management
information systems used by Affiliated Practices could have a material adverse
effect on the successful implementation of the Company's expansion strategy. In
addition, the Company will have some systems that will remain decentralized for
at least some time, such as cash collections. Accordingly, the Company will rely
on local staff for certain functions, including upstreaming cash to the Company.

OTHER PRACTICE MANAGEMENT SERVICES

The Company will provide other practice management services to the
Affiliated Practices, including staffing, education and training, employee
benefits administration, advertising and other marketing support and, where
permitted by applicable law, dentist recruiting. This management and
administrative support should substantially reduce the amount of time affiliated
dentists are required to spend on administrative matters and enable them to
dedicate more time and effort toward the growth of their professional practices.
In addition, the Company expects to be able to negotiate on behalf of Affiliated
Practices discounts on, among other things, dental and office supplies, health
and malpractice insurance and equipment.

In certain markets, the Company may assist Affiliated Practices in securing
reimbursement contracts from third-party payors. In those situations, the
Company's role will be to negotiate and administer the contracts on behalf of
the Affiliated Practices.

LOCATIONS

Upon consummation of the Acquisitions, the Company will provide management
services to the practices and offices in the following states:

<TABLE>
<CAPTION>
NUMBER OF
--------------------
STATE OFFICES DENTISTS
- --------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
Alaska..................................................................... 1 1
Arizona.................................................................... 6 7
California................................................................. 1 1
Colorado................................................................... 4 6
Florida.................................................................... 3 3
Louisiana.................................................................. 1 1
Maine...................................................................... 1 1
Maryland................................................................... 1 1
Massachusetts.............................................................. 1 2
Michigan................................................................... 1 1
Nebraska................................................................... 2 2
New Mexico................................................................. 1 2
New York................................................................... 4 4
North Dakota............................................................... 1 1
Oregon..................................................................... 1 1
Texas...................................................................... 31 41
Washington................................................................. 2 2
Wisconsin.................................................................. 1 1
--------- ---------
Totals................................................................... 63 78
--------- ---------
--------- ---------
</TABLE>

All office facilities are leased, in some cases from the owner of the
Affiliated Practice using the facility. Pursuant to its Service Agreements, the
Company will provide all the office facilities (which it intends to lease),
dental equipment and furnishings to the Affiliated Practices.

26
<PAGE>
SUMMARY OF TERMS OF ACQUISITIONS

The aggregate consideration that will be paid by Pentegra to acquire the
Founding Affiliated Practices consists of (i) approximately $6.5 million in cash
and (ii) approximately 2,062,511 shares of Common Stock. The number of shares to
be outstanding on completion of the Offering will decrease if the initial public
offering price is higher, and will increase if the initial public offering price
is lower, than $ per share. The Company will also assume certain indebtedness
of the Founding Affiliated Practices of approximately $2.9 million. Pentegra
will acquire substantially all the assets necessary to operate the business of
each of the Founding Affiliated Practices, except as limited by applicable
restrictions on the corporate practice of dentistry. See Note 4 of Notes to the
Pentegra Dental Group, Inc. Financial Statements and "--Government Regulation."

The consideration being paid by Pentegra for each Founding Affiliated
Practice was determined by arm's-length negotiations between Pentegra and a
representative of that Founding Affiliated Practice. Pentegra used valuation
methods to negotiate the consideration being paid to each of the Founding
Affiliated Practices, including the practice wholly owned by Dr. Reed, which
methods were based upon the Founding Affiliated Practice's gross revenue, net
income and growth potential.

The closing of each Acquisition is subject to customary conditions. These
conditions include, among others, the accuracy, on the closing date of the
Acquisitions, of the representations and warranties made by the Founding
Affiliated Practices and their stockholders and by the Company; the performance
of each of their respective covenants included in the agreements relating to the
Acquisitions; and the absence of any material adverse change in the results of
operations, financial condition or business of each Founding Affiliated
Practice.

Any Founding Affiliated Practice's acquisition agreement may be terminated,
under certain circumstances, prior to the closing of the Offering: (i) by the
mutual consent of Pentegra and the Founding Affiliated Practice; (ii) if the
Offering and the acquisition of that Founding Affiliated Practice are not closed
by March 31, 1998; or (iii) by the Founding Affiliated Practice or Pentegra if a
material breach or default is made by the other party in the observance or in
the due and timely performance of any of the covenants, agreements or conditions
contained in the acquisition agreement.

SERVICE AGREEMENTS

Upon consummation of the Acquisitions, the Company will enter into a Service
Agreement with each Founding Affiliated Practice under which the Company will
become the exclusive manager and administrator of non-dental services relating
to the operation of the Founding Affiliated Practices. The following is intended
to be a brief summary of the typical form of Service Agreement the Company will
enter into with each Founding Affiliated Practice. The Company expects to enter
into similar agreements with Affiliated Practices in the future. The actual
terms of the various Service Agreements vary from the description below on a
case-by-case basis, depending on negotiations with the individual Founding
Affiliated Practices and the requirements of applicable law and governmental
regulations.

The service fees (the "Service Fees") payable to the Company by the Founding
Affiliated Practices under the Service Agreements vary based on the fair market
value, as determined in arm's-length negotiations, of the nature and amount of
services provided. Such fees, together with reimbursement for operating and
non-operating expenses of the Founding Affiliated Practice to be paid by the
Company pursuant to the Service Agreement, are payable monthly, and the Service
Fees consist of various combinations of the following: (i) a percentage (ranging
from 35% to 40%) of the difference between the sum of revenues related to dental
services less operating expenses associated with the Founding Affiliated
Practices; (ii) a percentage (16%) of the revenues relating to dental services,
not to exceed a percentage (35%) of the difference between the revenues related
to dental services and operating expenses associated with the Founding
Affiliated Practices; or (iii) the greater of (a) a percentage (not to exceed
35%) of the difference between the revenues related to dental services and
operating expenses associated with the Founding Affiliated Practices or (b) a
specified fixed fee. In addition, with respect to four of the Founding

27
<PAGE>
Affiliated Practices, the service fees are based on flat fees that are subject
to renegotiation or adjustment on an annual basis. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Overview."

Pursuant to each Service Agreement, the Company will, among other things,
(i) act as the exclusive manager and administrator of non-dental services
relating to the operation of the Founding Affiliated Practice, subject to
matters reserved to the Founding Affiliated Practice, (ii) administer the
billing of patients, insurance companies and other third-party payors and
collect on behalf of the Founding Affiliated Practice the fees for professional
dental and other services and products rendered or sold by the Founding
Affiliated Practice, (iii) provide, as necessary, clerical, accounting, payroll,
legal, bookkeeping and computer services and personnel, information management,
printing, postage and duplication services and transcribing services, (iv)
supervise and maintain custody of substantially all files and records (other
than patient records if prohibited by applicable law), (v) provide facilities,
equipment and furnishings for the Founding Affiliated Practice, (vi) order and
purchase inventory and supplies as reasonably requested by the Founding
Affiliated Practice and (vii) implement, in consultation with the Founding
Affiliated Practice, public relations or advertising programs.

Pursuant to each Service Agreement, the respective Founding Affiliated
Practice retains the decision-making power and responsibility for, among other
things, (i) hiring, compensating and supervising dentist employees and other
licensed dental professionals, (ii) ensuring that dentists have the required
licenses, credentials, approvals and other certifications appropriate to the
performance of their duties and (iii) complying with federal and state laws,
regulations and ethical standards applicable to the practice of dentistry. In
addition, the Founding Affiliated Practice will be exclusively in control of all
aspects of the practice of dentistry and the provision of dental services.

Each Service Agreement is for an initial term of 40 years, with automatic
extensions (unless specified notice is given) of five years. The Service
Agreement may be terminated by either party if the other party (i) files a
petition in bankruptcy or other similar events occur or (ii) defaults on the
performance of a material duty or obligation, which default continues for a
specified term after notice. In addition, the Service Agreement may be
terminated by the Company (i) if the Founding Affiliated Practice or a dental
employee engages in conduct for which the dental employee's license to practice
dentistry is revoked or suspended or is the subject of any restrictions or
limitations by any governmental authority to such an extent that he, she or it
cannot engage in the practice of dentistry or (ii) upon a breach by the dentist
of the employment agreement between the Founding Affiliated Practice and the
dentist.

The Service Agreement requires the Founding Affiliated Practice to enforce
the employment agreements between the Founding Affiliated Practice and the
dentists associated with the Founding Affiliated Practice (the "Dentist
Employment Agreements"). If the Founding Affiliated Practice does not enforce
such employment agreement, the Company may, at its option, require the Founding
Affiliated Practice to either assign (i) such employment agreement or (ii) the
rights to enforce the covenant not to compete set forth therein to the Company
or its designee.

The Founding Affiliated Practice is responsible for obtaining professional
liability insurance for the employees of the Founding Affiliated Practice and
the Company is responsible for obtaining general liability and property
insurance for the Founding Affiliated Practice.

Upon termination of a Service Agreement, the Founding Affiliated Practice
has the option to purchase and assume, and the Company has the option to require
the Founding Affiliated Practice to purchase and assume, the assets and
liabilities related to the Founding Affiliated Practice at the fair market value
thereof, except in certain circumstances where the Founding Affiliated Practice
or the Company, as applicable, was in breach of the Service Agreement.

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DENTIST AGREEMENT

Each dentist who has an ownership interest in a Founding Affiliated Practice
will enter into a dentist agreement, which provides the Company such dentist's
guarantee (for the initial five years and for so long thereafter as he or she
owns any interest in the Founding Affiliated Practice) of the Founding
Affiliated Practice's obligations under the applicable Service Agreement. In
addition, such agreement provides that the dentist may not sell his or her
ownership interest during the dentist's five-year employment term without the
Company's prior written consent. In the event of a default under the Service
Agreement by the Founding Affiliated Practice, the dentist agreement provides
that the Company may, at its option, require the Founding Affiliated Practice to
convey its patient records and the capital stock of the Founding Affiliated
Practice to the Company's authorized designee.

DENTIST EMPLOYMENT AGREEMENTS

Upon consummation of the Acquisitions, each Founding Affiliated Practice
will be a party to a Dentist Employment Agreement with each dentist owner,
including the dentist who owns such Founding Affiliated Practice. The Dentist
Employment Agreements with dentists who will receive cash or Common Stock in the
Acquisitions are for an initial term of five years and continue thereafter on a
year-to-year basis until terminated under the terms of the agreements. The
Dentist Employment Agreements provide that the employee dentist will not compete
with the Affiliated Practice during the term of the agreement and following the
termination of the agreement for a term of two years in a specified geographical
area. If employment of a dentist is terminated during the initial five-year term
without the consent of Pentegra for any reason other than the dentist's death or
disability or the occurrence of certain events outside the dentist's control, an
event of default will occur under the Service Agreement. In certain
jurisdictions a covenant not to compete may not be enforceable under certain
circumstances. See "Risk Factors-- Reliance on Affiliated Practices and
Dentists."

COMPETITION

The Company anticipates facing substantial competition from other companies
to establish affiliations with additional dental practices. The Company is aware
of several practice management companies focused on dentistry and several
companies pursuing similar strategies in other segments of the health care
industry (including dentistry). Certain of these competitors have greater
financial and other resources than the Company and have operations in areas
where the Company may seek to expand in the future. Additional companies with
similar objectives are expected to enter the Company's markets and compete with
the Company. In addition, the business of providing dental services is highly
competitive in each market in which the Company will operate. Each of the
Founding Affiliated Practices faces local competition from other dentists and
providers of specialty dental services (pedodontists, orthodontists, oral
surgeons, etc.), some of whom have more established practices. There can be no
assurance that the Company or the Affiliated Practices will be able to compete
effectively with their respective competitors, that additional competitors will
not enter their markets or that additional competition will not have a material
adverse effect on the Company.

EMPLOYEES

As of September 30, 1997, the Company employed three persons. Upon
consummation of the Acquisitions, the Company expects that it will have
approximately 390 employees, of which approximately 15 will be employed at the
Company's headquarters or at the Company's regional office in Houston, Texas,
and approximately 375 will be employed at the locations of the Founding
Affiliated Practices. None of the Company's employees are represented by
collective bargaining agreements. The Company considers its employee relations
to be good.

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<PAGE>
LITIGATION AND INSURANCE

The Affiliated Practices provide dental services to the public and are
exposed to the risk of professional liability and other claims. In recent years,
dentists have become subject to an increasing number of lawsuits alleging
malpractice and related legal theories. Some of these lawsuits involve large
claims and significant defense costs. Any suits or claims involving the Company
or dentists at the Affiliated Practices, if successful, could result in
substantial damage awards to the claimants that may exceed the limits of any
applicable insurance coverage. Although the Company does not control the
practice of dentistry by the Affiliated Practices, it could be asserted that the
Company should be held liable for malpractice of a dentist employed by an
Affiliated Practice. Each Affiliated Practice has undertaken to comply with all
applicable regulations and legal requirements, and the Company maintains
liability insurance for itself. There can be no assurance, however, that a
future claim or claims will not be successful or, if successful, will not exceed
the limits of available insurance coverage or that such coverage will continue
to be available at acceptable costs.

The Company is currently not a party to any claims, suits or complaints. The
Company may become subject to certain pending claims as the result of successor
liability in connection with the Acquisitions; however, it is management's
opinion that the ultimate resolution of those claims will not have a material
adverse effect on the financial position, operating results or cash flows of the
Company.

The Founding Affiliated Practices have maintained professional liability
insurance coverage, generally on a claims-made basis. Such insurance provides
coverage for claims asserted when the policy is in effect regardless of when the
events that caused the claim occurred. The Company intends to acquire similar
coverage after the closing of the Acquisitions, since the Company, as a result
of the Acquisitions, will in some cases succeed to the liabilities of the
Founding Affiliated Practices. Therefore, claims may be asserted against the
Company after the closing of Acquisitions for events that occurred prior to such
closing.

GOVERNMENT REGULATION

The dental services industry is regulated extensively at both the state and
federal levels. Regulatory oversight includes, but is not limited to,
considerations of fee-splitting, corporate practice of dentistry and state
insurance regulation.

CORPORATE PRACTICE OF DENTISTRY AND FEE-SPLITTING RESTRICTIONS

The laws of many states prohibit business corporations such as the Company
from engaging in the practice of dentistry or employing dentists to practice
dentistry and prohibit dentists from splitting fees with non-dentists. The
specific restrictions against the corporate practice of dentistry, as well as
the interpretation of those restrictions by state regulatory authorities, vary
from state to state. The restrictions are generally designed to prohibit a
non-dental entity (such as the Company) from controlling the professional assets
of a dental practice (such as patient records and payor contracts), employing
dentists to practice dentistry (or, in certain states, employing dental
hygienists or dental assistants) or controlling the content of a dentist's
advertising or professional practice. The laws of many states also prohibit
dentists from sharing professional fees with non-dental entities. State dental
boards do not generally interpret these prohibitions as preventing a non-dental
entity from owning non-professional assets used by a dentist in a dental
practice or providing management services to a dentist for a fee provided
certain conditions are met. The Company believes that its operations will not
contravene any restriction on the corporate practice of dentistry and that the
management fees it intends to charge for its services are consistent with the
laws and regulations of the jurisdictions in which it will operate concerning
fee-splitting. There can be no assurance, however, that a review of the
Company's business relationships by courts or regulatory authorities will not
result in determinations that could prohibit or otherwise adversely affect the
operations of the Company or that the regulatory environment will not change,
requiring the Company to reorganize or restrict its existing or future
operations. The laws regarding fee-splitting and the corporate practice of

30
<PAGE>
dentistry and their interpretation are enforced by regulatory authorities with
broad discretion. There can be no assurance that the legality of the Company's
business or its relationship with the Affiliated Practices will not be
successfully challenged or that the enforceability of the provisions of any
Service Agreement will not be limited.

FRAUD AND ABUSE LAWS AND RESTRICTIONS ON REFERRALS AND SELF-REFERRALS

ADVERTISING RESTRICTIONS AND LIMITATIONS ON DELEGATION

INSURANCE REGULATION

There are certain state insurance regulatory risks associated with the
Company's anticipated role in negotiating and administering managed care
contracts on behalf of the Affiliated Practices. The application of state
insurance laws to third-party payor arrangements, other than fee-for-service
arrangements, is an unsettled area of law with little guidance available. State
insurance laws are subject to broad interpretation by regulators and, in some
states, state insurance regulators may determine that the Company or the
Affiliated Practices are engaged in the business of insurance because of the
capitation features (or similar features under which an Affiliated Practice
assumes financial risk) that may be contained in managed care contracts. In the
event that the Company or an Affiliated Practice is determined to be engaged in
the business of insurance, the Company or the Affiliated Practice could be
required to either seek licensure as an insurance company or change the form of
its relationships with the third-party payors. There can be no assurance that
the Company's operations would not be adversely affected if the Company or any
of the Affiliated Practices were to become subject to state insurance
regulations.

HEALTH CARE REFORM

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

As required by the Company's Bylaws, after the closing of the Offering, a
majority of the Company's Board of Directors will be dentists who are affiliated
with Affiliated Practices. The following table sets forth certain information
concerning the Company's directors, the nine persons nominated to become
directors on the closing of the Offering and the executive officers of the
Company (ages are as of September 30, 1997):

<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------- --- ----------------------------------------------------------------
<S> <C> <C>
Omer K. Reed, D.D.S.................... 65 Chairman of the Board and Clinical Officer
Gary S. Glatter........................ 44 President, Chief Executive Officer and Director
Sam H. Carr(1)......................... 41 Senior Vice President, Chief Financial Officer and Director
James L. Dunn, Jr.(2).................. 35 Senior Vice President, Chief Development Officer and Director
John G. Thayer......................... 43 Senior Vice President and Chief Operating Officer
Kimberlee K. Rozman.................... 37 Senior Vice President, General Counsel and Secretary
Ronnie L. Andress, D.D.S.(1)........... 42 Director
J. Michael Casas....................... 35 Director
James H. Clarke, Jr., D.D.S.(1)........ 49 Director
Ronald E. Geistfeld, D.D.S.(1)......... 63 Director
Allen M. Gelwick(2).................... 38 Director
Mack E. Greder, D.D.S.(1).............. 53 Director
Roger Allen Kay, D.D.S.(1)............. 52 Director
Gerald F. Mahoney(1)................... 53 Director
Anthony P. Maris(1).................... 63 Director
George M. Siegel....................... 59 Director
Ronald M. Yaros, D.D.S.(1)............. 51 Director
</TABLE>

- ---------

(1) Appointment as a director will become effective upon the closing of the
Offering.

(2) Each of Mr. Gelwick and Mr. Dunn intends to resign as a director upon the
closing of the Offering.

OMER K. REED, D.D.S. has served as the Company's Chairman of the Board and
Clinical Officer since May 1997. He founded Pentegra, Ltd. in 1988 and Napili in
1963, and is a practicing dentist with one of the Founding Affiliated Practices.
Since inception, Pentegra, Ltd. and Napili have provided comprehensive
management and consulting services to dental practices around the nation. In
1965, Dr. Reed founded the CeramDent Laboratory and he has maintained a private
dental practice in Phoenix since 1959. He has held associate professorships in
the Departments of Ecological Dentistry at the University of North Carolina,
Chapel Hill (1978-1988) and the University of Minnesota (1982-1991), and has
lectured extensively around the world on various subjects related to the
practice of dentistry. Dr. Reed also serves on the Board of Directors of Century
Companies of America, CUNA Mutual Insurance Group and the American Volunteer
Medical Team. Pursuant to the terms of his employment agreement with the
Company, the Company has undertaken to use its best efforts to elect Dr. Reed as
a director of the Company.

GARY S. GLATTER has served as the Company's President, Chief Executive Officer
and a Director since May 1997. Prior thereto, he was President and Chief
Operating Officer of H.E.R.C. Products Incorporated, a public company engaged in
manufacturing and selling chemical rehabilitation products for water
distribution systems. From 1989 until 1993, Mr. Glatter served as President and
Chief Executive Officer of Classic Properties, a New York-based real estate
company. Pursuant to the terms of his employment agreement with the Company, the
Company has undertaken to use its best efforts to elect Mr. Glatter as a
director of the Company.

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<PAGE>
SAM H. CARR has served as the Company's Senior Vice President and Chief
Financial Officer since September 1997. From September 1996 until August of
1997, Mr. Carr served as Vice President--Finance and Corporate Development of
Ankle & Foot Centers of America, LLP, a podiatry practice management company.
From February 1995 until July 1996, Mr. Carr was a Senior Manager with Arthur
Andersen LLP. Prior thereto, Mr. Carr was Chief Financial Officer of
Columbia/HCA's Bellaire Hospital in Houston, Texas from January 1994 until
January 1995, and Vice President of Finance of St. Vincent Hospital in Santa Fe,
New Mexico from 1990 until 1994. Mr. Carr is a certified public accountant.
Pursuant to the terms of his employment agreement with the Company, the Company
has undertaken to use its best efforts to elect Mr. Carr as a director of the
Company.

JAMES L. DUNN, JR. has served as the Company's Senior Vice President and Chief
Development Officer since July 1997 and as a Director since March 1997. Since
1987, Mr. Dunn has been an attorney practicing as a sole practitioner in
Houston, Texas. His legal practice is focused on providing services to members
of the dental community. He has been actively involved in the valuation or sale
of dental practices over the past five years. In 1995, Mr. Dunn was appointed to
the Texas Medical Disclosure Panel, the body that determines which dental
procedures require informed consent. Mr. Dunn is a member of the American
Society of Pension Actuaries and is a certified public accountant.

JOHN G. THAYER has served as the Company's Senior Vice President and Chief
Operating Officer since March 1997. Prior thereto, Mr. Thayer was Managing
General Partner of England and Company, a public accounting firm he co-founded
in 1983, which provides accounting and practice management counseling to health
care professionals in the Texas Gulf Coast area. In 1994, he co-founded Medtek
Management, Inc., a privately held management information company specializing
in the data processing needs of health care professionals.

KIMBERLEE K. ROZMAN has served as the Company's Senior Vice President, General
Counsel and Secretary since July 1997. Prior thereto, she served as Vice
President, Senior Counsel (January to July 1997) and Associate General Counsel
(1996) of Physicians Resource Group, Inc., a public company engaged in providing
ophthalmic practice management services. From 1990 to 1996, Ms. Rozman was an
associate with the law firm of Jackson Walker L.L.P.

RONNIE L. ANDRESS, D.D.S. has been engaged in the private practice of dentistry
in Freeport, Texas since 1995 and is President of Ronnie L. Andress, D.D.S.,
Inc., one of the Founding Affiliated Practices. Prior to 1995, Dr. Andress was
engaged in the private practice of dentistry in Houston, Texas for over 12
years.

J. MICHAEL CASAS has served as a Vice President of Physicians Resource Group,
Inc. since June 1995. From October 1991 to June 1995, Mr. Casas served as
Administrator of Texas Eye Institute Assoc., a comprehensive eye care provider
in the greater Houston, Texas area.

JAMES H. CLARKE, JR., D.D.S. has been engaged in the private practice of
dentistry in Houston, Texas since 1974 and is President of James H. Clark, Jr.,
D.D.S., Inc., one of the Founding Affiliated Practices.

RONALD E. GEISTFELD, D.D.S. is Professor Emeritus at the University of Minnesota
School of Dentistry, where he has taught since 1982. Dr. Geistfeld also
maintained a part-time dental practice in Minnesota from 1973 to 1992. He is a
member of the Minnesota Dental Association, the Minneapolis District Dental
Society, the American College of Dentists, the Academy of Operative Dentistry,
the Minnesota Academy of Restorative Dentistry and the Minnesota Academy for
Gnathological Research.

ALLEN M. GELWICK has served as a Senior Vice President of Alexander & Alexander,
an insurance brokerage firm, since 1995 and previously was a member of Alexander
& Alexander's Chairman's Council. From 1992 until 1994, he served as Senior Vice
President for Minet Insurance Services. Prior thereto, Mr. Gelwick served as
Senior Vice President for Frank B. Hall & Co. and was an underwriter for Chubb
Insurance.

MACK E. GREDER, D.D.S. has been engaged in the private practice of dentistry in
Omaha, Nebraska since 1970 and is President of Mack E. Greder, D.D.S., P.C., one
of the Founding Affiliated Practices.

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<PAGE>
ROGER ALLEN KAY, D.D.S. has been engaged in the private practice of dentistry in
Farmington and Livermore Falls, Maine since 1972 and is President of Roger Allen
Kay, D.D.S., P.A., one of the Founding Affiliated Practices. He is a member of
the Maine Dental Association, the American Dental Association, the Academy of
General Dentistry and the American Society of Dentistry for Children.

GERALD F. MAHONEY has been Chairman of the Board and Chief Executive Officer of
Mail-Well, Inc., a public company engaged in printing and envelope manufacturing
with over 50 printing offices throughout the United States, since 1994. Prior
thereto, he served as Chairman of the Board, President and Chief Executive
Officer of Pavey Envelope beginning in 1991. Mr. Mahoney is a certified public
accountant.

ANTHONY P. MARIS is a consultant to health care businesses. From 1987 to 1996,
Mr. Maris was a Director, Vice President, Chief Financial Officer and Treasurer
of Roberts Pharmaceutical Corporation, a public company engaged in
pharmaceuticals manufacturing. Prior thereto, Mr. Maris was a Director and Chief
Financial Officer of Hoffmann--La Roche Inc., a pharmaceutical manufacturer.

GEORGE M. SIEGEL was President and Chief Executive Officer of Parcelway Courier
Systems, Inc., a publicly traded messenger and courier business with operations
throughout North America, from 1990 to 1997. In 1993, Mr. Siegel co-founded U.S.
Delivery Systems, a public company engaged in consolidating local messenger and
delivery companies. Prior thereto, Mr. Siegel founded and was the President and
Chief Executive Officer of U.S. Messenger & Delivery Service and Direct Dispatch
Corporation, two messenger and courier service companies that he sold to Mayne
Nickless Courier System, Inc.

RONALD M. YAROS, D.D.S. has been engaged in the private practice of dentistry in
Aurora, Colorado since 1973 and is President of Ronald M. Yaros, D.D.S., P.C.,
one of the Founding Affiliated Practices. He is a member of the American Dental
Association, the Colorado Dental Association, the Metro Denver Dental Society
and the Academy of General Dentistry.

BOARD OF DIRECTORS

The Board of Directors will be divided into three classes with at least four
directors in each class, with the term of one class expiring at the annual
meeting of stockholders in each year, commencing 1998. At each annual meeting of
stockholders, directors of the class the term of which then expires will be
elected by the holders of the Common Stock to succeed those directors whose
terms are expiring. The Company's Bylaws provide that a majority of the members
of the Board of Directors must be licensed to practice dentistry and affiliated
with one of the Affiliated Practices.

On closing of the Offering, there will be three committees of the Board:
Audit, Compensation and Executive. The initial members of the Audit Committee
will be Messrs. Maris and Mahoney. The initial members of the Compensation
Committee will be Messrs. Maris, Siegel and Casas. The initial members of the
Executive Committee will be Dr. Reed and Messrs. Glatter and Siegel. The members
of the Audit and Compensation Committees will not be employees of the Company.

Directors who are employees of the Company or a Founding Affiliated Practice
do not receive additional compensation for serving as directors. Each director
who is not an employee of the Company or a Founding Affiliated Practice will
receive a fee of $1,500 for attendance at each Board of Directors meeting and
$750 for each committee meeting (unless held on the same day as a Board of
Directors meeting), and an initial grant of nonqualified options to purchase
10,000 shares of Common Stock (except with respect to Messrs. Casas and Siegel,
who have waived their right to receive those options). Directors who are not
employees of the Company will also receive annual grants of nonqualified options
to purchase 5,000 shares on the first business day of the month following the
date on which each annual meeting of the Company's stockholders is held. See
"--1997 Stock Compensation Plan." All directors of the Company are reimbursed
for out-of-pocket expenses incurred in attending meetings of the Board of
Directors or committees thereof, and for other expenses incurred in their
capacity as directors of the Company.

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<PAGE>
EXECUTIVE COMPENSATION

Pentegra has conducted no operations to date other than in connection with
the Offering and the Acquisitions. The Company anticipates that during 1997 its
most highly compensated executive officers will be Dr. Reed and Messrs. Glatter,
Carr, Dunn and Thayer (the "Named Executive Officers"), each of whom has entered
or will enter into an employment agreement providing for an annual salary of
$175,000, $175,000, $175,000, $125,000 and $125,000, respectively. See
"--Employment Agreements."

In addition to base salary, Messrs. Glatter, Carr, Dunn and Thayer through
their employment agreements are eligible for certain bonuses described under
"--Employment Agreements" and performance bonuses based on the achievement of
specific financial targets of the Company. Performance bonuses will not exceed
50% of base salary for each of those officers, except Mr. Glatter (whose bonus
will not exceed 200% of his base salary).

In September 1997, the Company granted options to purchase 333,333 shares,
66,667 shares, 33,333 shares and 33,333 shares of Common Stock to Messrs.
Glatter, Carr, Dunn and Thayer, respectively, under the Company's 1997 Stock
Compensation Plan, exercisable at the initial public offering price per share
set forth on the cover page of this Prospectus. Of the options granted to Mr.
Glatter, options to acquire 166,667 shares vest on the first anniversary of the
date of this Prospectus, options to acquire 66,667 shares vest on each of the
second and third anniversaries of the date of this Prospectus, and options to
acquire 33,333 shares vest on the fourth anniversary of the date of this
Prospectus. The options granted to Messrs. Carr, Dunn and Thayer vest annually
in 20% increments beginning on the first anniversary of the date of this
Prospectus. See "--1997 Stock Compensation Plan."

EMPLOYMENT AGREEMENTS

The Company has entered into employment agreements with Dr. Reed, Messrs.
Glatter, Carr, Dunn and Thayer and Ms. Rozman. The following summary of these
agreements, which will be effective on the closing of the Acquisitions and the
Offering, does not purport to be complete and is qualified by reference to such
agreements, copies of which have been filed as exhibits to the Registration
Statement of which this Prospectus is a part. Each of these agreements provides
for an annual base salary in an amount not less than the initial specified
amount and entitles the employee to participate in all the Company's
compensation plans (as defined) in which other executive officers of the Company
participate. Dr. Reed's employment agreement provides that he will serve as the
Company's clinical officer and has a three-year term commencing on completion of
the Offering. Dr. Reed's base salary under the employment agreement will be
$175,000 per year, or as increased from time to time by the Board of Directors,
and provides for bonus payments aggregating $1,250,000 payable by the Company in
increments of $10,000 on closing of each future dental practice affiliation
subsequent to the Offering until the bonus has been paid in full, provided that
the bonus must be paid in full by the third anniversary of the date of this
Prospectus. Mr. Glatter's employment agreement provides that he will serve as
the Company's chief executive officer and president and has at least a four-year
term commencing on July 1, 1997. Mr. Glatter's base salary under the employment
agreement will be as follows: (i) $175,000 per year for the period from July 1,
1997 through June 30, 1998, (ii) $200,000 per year for the period from July 1,
1998 through June 30, 1999, (iii) $225,000 per year for the period from July 1,
1999 through June 30, 2000 and (iv) $250,000 per year from July 1, 2000
thereafter or as increased from time-to-time by the Board of Directors. Each of
the agreements for Messrs. Carr, Dunn and Thayer and Ms. Rozman has a continuous
five-year term with an annual base salary of $175,000 for Mr. Carr and of
$125,000 for each of the other officers, and is subject to the right of the
Company to terminate the employee's employment at any time. If the employee's
employment is terminated by the Company without cause (as defined), Messrs.
Carr, Dunn and Thayer and Ms. Rozman will be entitled to a payment equal to
either 12 months' or six months' salary depending on whether such employee has
relocated to Phoenix, Arizona, and Dr. Reed and Mr. Glatter will be entitled to
a payment equal to the salary payable over the remaining term of their
respective agreements. Mr. Thayer will also receive a $25,000 bonus on the
closing of the Offering and a $25,000 bonus on the first anniversary of that

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<PAGE>
closing. Each of the foregoing agreements also contain a covenant limiting
competition with the Company for one year following termination of employment.

Each Founding Affiliated Practice will enter into an employment agreement
with its dentist employees. See "Business--Dentist Employment Agreements."

1997 STOCK COMPENSATION PLAN

In August 1997, the Board of Directors adopted, and the stockholders of the
Company approved, the 1997 Stock Compensation Plan. The purpose of the 1997
Stock Compensation Plan is to provide the Company's employees, non-employee
directors and advisors and employees and directors of Affiliated Practices with
additional incentives by increasing their proprietary interest in the Company.
The aggregate number of shares of Common Stock with respect to which options and
awards may be granted under the 1997 Stock Compensation Plan may not exceed
2,000,000 shares.

The 1997 Stock Compensation Plan provides for the grant of incentive stock
options ("ISOs"), as defined in Section 422 of the Code, nonqualified stock
options (collectively with ISOs, "Options") and restricted stock awards
("Awards"). Following the consummation of the Offering, the 1997 Stock
Compensation Plan will be administered by the Compensation Committee of the
Board of Directors, which will be comprised of not less than two members of the
Board of Directors (the "Committee"). Prior to the consummation of the Offering,
the 1997 Stock Compensation Plan had been administered by the Company's full
Board of Directors. The Committee has, subject to the terms of the 1997 Stock
Compensation Plan, the sole authority to grant Options and Awards under the 1997
Stock Compensation Plan, to interpret the 1997 Stock Compensation Plan and to
make all other determinations necessary or advisable for the administration of
the 1997 Stock Compensation Plan.

All of the Company's employees, non-employee directors and advisors and
employees and directors of Affiliated Practices are eligible to receive
nonqualified stock options and Awards under the 1997 Stock Compensation Plan,
but only employees of the Company are eligible to receive ISOs. Options will be
exercisable during the period specified in each option agreement and will
generally be exercisable in installments pursuant to a vesting schedule to be
designated by the Committee. Notwithstanding the provisions of any option
agreement, options will become immediately exercisable in the event of certain
events including certain merger or consolidation transactions and changes in
control of the Company. No Option will remain exercisable later than ten years
after the date of grant (or five years from the date of grant in the case of
ISOs granted to holders of more than 10% of the outstanding Common Stock). An
Award grants the recipient the right to receive a specified number of shares of
Common Stock, which shall become vested over a period of time, not exceeding 10
years, specified by the Committee. Restricted stock transferred to a recipient
shall be forfeited upon the termination of the recipient's employment or service
other than for death, permanent disability or retirement unless the Committee,
in its sole discretion, waives the restrictions for all or any part of an Award.

The exercise price for ISOs granted under the 1997 Stock Compensation Plan
may be no less than the fair market value of the Common Stock on the date of
grant (or 110% of the fair market value in the case of ISOs granted to employees
owning more than 10% of the Common Stock). The exercise price for nonqualified
options granted under the 1997 Stock Compensation Plan may not be less than the
fair market value of the Common Stock on the date of grant.

Payment upon exercise of an Option may be made in cash or by check, by means
of a "cashless exercise" involving the sale of shares by, or a loan from, a
broker, or, in the discretion of the Committee, by delivery of shares of Common
Stock, by payment of the par value of the shares subject to the Option plus a
promissory note for the balance of the exercise price or in any other form of
valid consideration permitted by the Committee.

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<PAGE>
There are generally no federal income tax consequences upon the grant of an
Option under the 1997 Stock Compensation Plan. Upon exercise of a nonqualified
option, the optionee generally will recognize ordinary income in the amount
equal to the difference between the fair market value of the shares at the time
of exercise and the exercise price, and the Company is generally entitled to a
corresponding deduction. When an optionee sells shares issued upon the exercise
of a nonqualified stock option, the optionee realizes short-term, mid-term or
long-term capital gain or loss, depending on the length of the holding period.
If the optionee holds the shares for more than 18 months, the capital gain or
loss will be long-term capital gain or loss. If the optionee holds the shares
for more than one year but not more than 18 months, the capital gain or loss
will be mid-term capital gain or loss. Otherwise, the capital gain or loss will
be short-term capital gain or loss. The Company is not entitled to any deduction
in connection with such sale.

An optionee will not be subject to federal income taxation upon the exercise
of ISOs granted under the 1997 Stock Compensation Plan, and the Company will not
be entitled to a federal income tax deduction by reason of such exercise. A sale
of shares of Common Stock acquired upon exercise of an ISO that does not occur
within one year after the date of exercise or within two years after the date of
grant of the option generally will result in the recognition of long-term or
mid-term capital gain or loss by the optionee in an amount equal to the
difference between the amount realized on the sale and the exercise price, and
the Company is not entitled to any deduction in connection therewith. If a sale
of shares of Common Stock acquired upon exercise of an ISO occurs within one
year from the date of exercise of the option or within two years from the date
of the option grant (a "disqualifying disposition"), the optionee generally will
recognize ordinary income equal to the lesser of (i) the excess of the fair
market value of the shares on the date of exercise of the options over the
exercise price or (ii) the excess of the amount realized on the sale of the
shares over the exercise price. Any amount realized on a disqualifying
disposition in excess of the amount treated as ordinary income will be long-term
or short-term capital gain, depending upon the length of time the shares were
held. The Company generally will be entitled to a tax deduction on a
disqualifying disposition corresponding to the ordinary income recognized by the
optionee.

For alternative minimum tax purposes, the difference between the fair market
value, on the date of exercise, of Common Stock purchased upon the exercise of
an ISO, and the exercise price increases alternative minimum taxable income.
Additional rules apply if an optionee makes a disqualifying disposition of the
Common Stock.

There are generally no federal income tax consequences upon the grant of an
Award, except as described below regarding a section 83(b) election. Upon the
expiration of the restrictions on shares of Common Stock subject to an Award,
except as provided in the next sentence, the recipient of the Award will
recognize taxable ordinary income equal to the fair market value of the shares
at the time of such expiration. If the recipient of an Award elects, pursuant to
section 83(b) of the Code, within 30 days of the date shares of restricted stock
are considered transferred to the recipient, to recognize taxable ordinary
income at the time of the transfer in an amount equal to the fair market value
of such shares, no additional income will be recognized upon the lapse of the
restrictions on the shares and no deduction will be allowed to the recipient if
the shares are subsequently forfeited. A recipient who makes such an election
under section 83(b) is required to give notice of such election to the Company
immediately after making the election, and the Company will be entitled to a
deduction equal to the amount of income recognized by the recipient. For capital
gains purposes the recipient's holding period for the shares received will begin
at the time taxable income is recognized under these rules and his or her basis
in the shares will be the amount of ordinary income recognized.

The Company anticipates that upon the consummation of the Offering it will
have (i) outstanding options to purchase a total of approximately 646,667 shares
of Common Stock under the 1997 Stock Compensation Plan and (ii) options to
purchase 1,353,333 additional shares available for grant under the 1997 Stock
Compensation Plan.

37
<PAGE>
CERTAIN TRANSACTIONS

ORGANIZATION OF THE COMPANY

In connection with the formation of the Company, in February 1997, PII
issued common stock to J. Michael Casas (200,000 shares), James L. Dunn, Jr.
(100,000 shares), John G. Thayer (66,667 shares) and Allen M. Gelwick (66,667
shares), at a purchase price per share of $0.01. In May 1997, PII issued Class B
Preferred to J. Michael Casas (66,667 shares) and James L. Dunn, Jr. (33,334
shares), at a purchase price per share of $0.01. In May 1997, PII issued Common
Stock to George M. Siegel (300,000 shares), Dr. Reed (150,000 shares), Gary S.
Glatter (100,000 shares), Kelly W. Reed (150,000 shares) and Kimberlee K. Rozman
(33,333 shares), at a purchase price per share of $0.01. In September 1997 and
October 1997, PII purchased 46,667 shares and 20,000 shares, respectively, of
its common stock from George M. Siegel at a purchase price per share of $0.01.
In September 1997, the Company issued 66,667 shares of common stock to Sam H.
Carr at a purchase price of $0.01 per share.

In connection with the raising of $1,450,000 by PII in order to fund a
portion of the expenses for the Offering and the Acquisitions, in June 1997, PII
issued capital stock to Dr. Reed (37,500 shares of Class B Preferred and 7,500
shares of common stock), Gary S. Glatter (37,500 shares of Class B Preferred and
7,500 shares of common stock), George M. Siegel (37,500 of Class B Preferred and
7,500 shares of common stock), Mack E. Greder, D.D.S. (25,000 shares of Class B
Preferred and 5,000 shares of common stock), Roger Allen Kay, D.D.S. (25,000
shares of Class B Preferred and 5,000 shares of common stock), Bruce A. Kanehl,
D.D.S. (25,000 shares of Class B Preferred and 5,000 shares of common stock),
Brian K. Kniff, D.D.S. (25,000 shares of Class B Preferred and 5,000 shares of
common stock), Richard W. Mains, Jr., D.M.D., RBM Trust (25,000 shares of Class
B Preferred and 5,000 shares of common stock), James W. Medlock, D.D.S. (25,000
shares of Class B Preferred and 5,000 shares of common stock), Thomas L.
Mullooly, D.D.S. (25,000 shares of Class B Preferred and 5,000 shares of common
stock), Richard H. Fettig, D.D.S. (25,000 shares of Class B Preferred and 5,000
shares of common stock), Marvin V. Cavallino, D.D.S. (50,000 shares of Class B
Preferred and 10,000 shares of common stock), Alan H. Gerbholz, D.D.S. (25,000
shares of Class B Preferred and 5,000 shares of common stock), Victor H.
Burdick, D.D.S. (25,000 shares of Class B Preferred and 5,000 shares of common
stock), Steve Anderson, D.D.S. (25,000 shares of Class B Preferred and 5,000
shares of common stock) and James P. Allen, D.D.S. (25,000 shares of Class B
Preferred and 5,000 shares of common stock), at a purchase price per share of
$1.00 for the Class B Preferred and of $0.01 for the common stock.

In September 1997, (i) each owner of shares of common stock of PII agreed to
exchange those shares for shares of Common Stock on a one-for-one basis and (ii)
each of Dr. Reed and Messrs. Glatter, Dunn, Casas and Siegel agreed to sell to
PII all shares of Class B Preferred he owns at a price per share equal to the
subscription price he paid to PII for those shares, which transactions will
occur concurrently with the closing of the Offering and the Acquisitions. In
addition, immediately after the completion of the repurchases described in the
foregoing sentence, all outstanding shares of Class A Preferred and Class B
Preferred will be redeemed by PII at a redemption price of $2.00 per share from
the proceeds of the Offering.

The Company has entered into an agreement with Pentegra, Ltd., Napili and
Dr. Reed to purchase substantially all of the tangible and intangible assets of
Pentegra, Ltd. and Napili for $200,000 upon completion of the Offering.

Since February 1997, the Company has occupied and had access to the
facilities, equipment and staff of James L. Dunn & Assoc., Inc, an affiliate of
James L. Dunn, Jr. Beginning June 1, 1997, the Company agreed to compensate
James L. Dunn & Assoc., Inc. for use of and access to its office facilities,
equipment and staff at the rate of $10,000 per month. James L. Dunn & Assoc.,
Inc. will provide the Company a monthly invoice and obtain reimbursement for
those expenses from the Company. The Company believes that the compensation to
be paid to James L. Dunn & Assoc., Inc. represents the fair market value of the
services that will be provided to the Company. Subsequent to the Offering, this
arrangement may continue on a month-to-month basis at the discretion of the
Company.

38
<PAGE>
The Company has leased a portion of the office facilities, equipment and
staff of Pentegra, Ltd., which is wholly owned by Dr. Reed, beginning June 1,
1997. The Company has agreed to compensate Pentegra, Ltd. for use of and access
to its office facilities, equipment and staff at the rate of $11,000 per month.
Pentegra, Ltd. will provide the Company a monthly invoice and obtain
reimbursement for those expenses from the Company. The Company believes that the
compensation to be paid to Pentegra, Ltd. represents the fair market value of
the goods and services that will be provided to the Company. This lease will be
assumed by the Company in the Pentegra/Napili Transaction.

The following table provides certain information concerning the
Acquisitions:

<TABLE>
<CAPTION>
CONSIDERATION TO BE
RECEIVED
------------------------
ASSETS TO BE NUMBER OF
FOUNDING AFFILIATED PRACTICES CONTRIBUTED(1) SHARES(2) CASH
- ----------------------------------------------------------------------- -------------- ---------- ------------
<S> <C> <C> <C>
James P. Allen, D.D.S.................................................. $ (12,845) 42,554 $ 138,301
Anderson Dental Group, Inc............................................. (194,444) 112,615 366,000
Ronnie L. Andress, D.D.S., Inc......................................... (62,257) 66,562 216,326
Kenneth W. Baker, D.D.S., P.C.......................................... (44,262) 45,384 147,496
Victor H. Burdick, D.D.S., P.C......................................... (4,344) 35,116 114,126
Marvin V. Cavallino, D.D.S., A Professional Corporation................ (32,086) 44,138 143,447
James H. Clarke, Jr., D.D.S., Inc...................................... 2,448 40,008 130,027
Henry F. Cuttler, D.D.S................................................ (22,323) 24,372 79,211
Edward T. Dougherty, Jr., D.D.S., P.A.................................. 13,284 71,640 232,830
Family Dental Center, P.A.............................................. 61,038 67,966 220,889
Richard H. Fettig, D.D.S............................................... (5,548) 29,940 97,303
Alan H. Gerbholz, D.D.S., P.C.......................................... 15,154 28,139 91,451
Michael J. Gershtenson, D.D.S., P.C.................................... 67,846 30,174 98,067
Mack E. Greder, D.D.S., P.C............................................ 5,706 44,056 143,183
Salvatore Guarnieri, D.D.S............................................. 48,447 30,860 100,295
Kent Hamilton, D.D.S................................................... (39,219) 73,311 238,262
David R. Henderson, D.D.S.............................................. 6,202 26,187 85,109
Stephen Hwang, D.D.S................................................... 14,198 23,056 74,931
Jackson Dental Partnership............................................. 79,736 33,405 --
Bruce A. Kanehl, D.D.S................................................. (22,532) 45,347 147,378
Roger Allen Kay, D.D.S., P.A........................................... 15,067 44,313 144,017
Patrick T. Kelly, D.D.S., P.C.......................................... 8,133 12,003 39,008
Brian K. Kniff, D.D.S., P.C............................................ 158,300 70,060 227,696
Lakeview Dental, P.C................................................... (15,217) 31,440 102,180
Donald W. Lanning, D.D.S............................................... 39,167 19,128 40,000
David A. Little, D.D.S................................................. (141,340) 32,566 105,840
Susan Lunson, D.D.S.................................................... (117,218) 18,232 59,253
Richard W. Mains, Jr., D.M.D., P.C..................................... 86,785 51,739 168,152
James M. McDonough, D.D.S., P.C........................................ (12,524) 38,900 126,424
James W. Medlock, D.D.S., P.A.......................................... (14,784) 55,366 179,940
James Randy Mellard, D.D.S., M.S., P.C................................. (16,915) 9,842 31,986
Mary B. Mellard, D.D.S., P.C........................................... (102,614) 39,558 128,562
TL Mullooly, D.D.S., Inc............................................... 48,812 29,821 96,918
Byron L. Novosad, D.D.S., Inc.......................................... 6,594 30,745 99,923
Randy O'Brien, D.D.S., Inc............................................. (6,226) 23,634 76,811
Terrence C. O'Keefe, D.D.S............................................. 15,416 18,692 81,000
Harold A. Pebbles, Jr., D.D.S., P.C.................................... -- 36,813 119,641
Jimmy F. Pinner, D.D.S................................................. 6,664 11,267 36,619
Omer K. Reed, D.D.S.................................................... 17,806 24,075 --
Richard Reinitz, D.D.S., P.C........................................... (129,725) 97,227 315,988
Greg Richards, D.D.S................................................... (9,806) 12,711 41,305
Richard N. Smith, D.M.D., P.C.......................................... (60,599) 62,501 203,129
John N. Stellpflug, D.D.S.............................................. (16,671) 30,771 100,006
Jack Stephens, D.D.S................................................... 54,409 78,930 256,523
Y. Paul Suzuki, D.D.S., P.C............................................ 17,036 29,498 95,870
Donald F. Tamborello, D.D.S............................................ 6,243 35,280 114,660
</TABLE>

(TABLE CONTINUED)

39
<PAGE>
<TABLE>
<CAPTION>
CONSIDERATION TO BE
RECEIVED
------------------------
ASSETS TO BE NUMBER OF
FOUNDING AFFILIATED PRACTICES CONTRIBUTED(1) SHARES(2) CASH
- ----------------------------------------------------------------------- -------------- ---------- ------------
<S> <C> <C> <C>
Helena Thomas, D.D.S................................................... (17,949) 18,943 61,566
Louis J. Thornley, D.D.S., P.C......................................... 25,843 27,381 88,988
S. Victor Uhrenholdt, D.D.S., P.C...................................... (7,441) 38,990 126,718
Scott Van Zandt, D.D.S................................................. 6,066 26,230 85,248
Ronald M. Yaros, D.D.S., P.C........................................... 187,368 91,025 295,830
-------------- ---------- ------------
$ (95,121) 2,062,511 $ 6,514,433
-------------- ---------- ------------
-------------- ---------- ------------
</TABLE>

- ---------
(1) Net assets to be contributed reflects the historical book value of the
assets of each practice, including their patient receivable balance, net of
prepayments and liabilities of the practice to be assumed or repaid by the
Company. These nonmonetary assets are reflected at historical cost in
accordance with SAB No. 48. All monetary assets are recorded at fair value,
which is approximated by the historical costs recorded by the practices.

(2) Assumes an initial public offering price of $ per share. The actual
number of shares to be issued as consideration for the Acquisitions may be
higher or lower depending on the actual initial public offering price per
share.

COMPANY POLICY

It is anticipated that future transactions with affiliates of the Company
will be minimal, will be approved by a majority of the disinterested members of
the Board of Directors and will be made on terms no less favorable to the
Company than could be obtained from unaffiliated third parties. The Company does
not intend to incur any further indebtedness to, or make any loans to, any of
its executive officers, directors or other affiliates.

40
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT

The following table shows, as of September 30, 1997 and immediately after
giving effect to the closing of the Acquisitions and the Offering, the then
"beneficial ownership" of the Common Stock of (i) each director and person
nominated to become a director on closing of the Offering, (ii) each executive
officer, (iii) all executive officers and directors of the Company as a group
and (iv) each person who owns more than 5% of the outstanding Common Stock. The
table assumes none of such persons intend to acquire shares in the Offering.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED OWNED
BEFORE OFFERING AFTER OFFERING(1)
----------------------- -----------------------
NUMBER PERCENT NUMBER PERCENT
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Omer K. Reed, D.D.S.................................................. 157,500 9.0% 181,575 2.9%
Gary S. Glatter...................................................... 107,500 6.1% 107,500 1.7%
Sam H. Carr.......................................................... 66,667 3.8% 66,667 1.1%
James L. Dunn, Jr.................................................... 93,333 5.3% 93,333 1.5%
John G. Thayer....................................................... 66,667 3.8% 66,667 1.1%
Kimberlee K. Rozman.................................................. 33,333 1.9% 33,333 *
Ronnie L. Andress, D.D.S............................................. 0 * 66,652 *
J. Michael Casas..................................................... 200,000 11.4% 200,000 3.2%
James H. Clarke, Jr., D.D.S.......................................... 0 * 40,008 *
Ronald E. Geistfeld, D.D.S........................................... 0 * 0 *
Allen M. Gelwick..................................................... 66,667 3.8% 66,667 1.1%
Mack E. Greder, D.D.S................................................ 5,000 * 49,056 *
Roger Allen Kay, D.D.S............................................... 5,000 * 49,313 *
Gerald F. Mahoney.................................................... 0 * 0 *
Anthony P. Maris..................................................... 0 * 0 *
George M. Siegel..................................................... 240,833 13.7% 240,833 3.8%
Ronald M. Yaros, D.D.S............................................... 0 * 91,025 1.6%
Kelly W. Reed(2)..................................................... 150,000 8.5% 150,000 2.4%
All executive officers and directors as a group (17 persons)......... 1,042,500 59.3% 1,352,629 21.4%
</TABLE>

- ---------

* less than 1%.

(1) Shares shown in the above table do not include shares that could be acquired
upon exercise of currently outstanding stock options which do not vest
within 60 days of the date of this Prospectus. The number of shares to be
issued in connection with the Acquisitions assumes an initial public
offering price of $ per share. The actual number of such shares may be
higher or lower depending on the actual initial public offering price per
share.

(2) Kelly W. Reed, Vice President of Operations of the Company, is the son of
Omer K. Reed, D.D.S.

41
<PAGE>
DESCRIPTION OF CAPITAL STOCK

The Company's authorized capital stock consists of 40,000,000 shares of
Common Stock, par value $.001 per share, and 10,000,000 shares of preferred
stock, par value $.001 per share ("Preferred Stock"). At September 30, 1997,
1,756,667 shares of Common Stock were issued and outstanding. The following
summary is qualified in its entirety by reference to the Certificate of
Incorporation, which is included as an exhibit to the Registration Statement of
which this Prospectus is a part.

COMMON STOCK

The Common Stock possesses ordinary voting rights for the election of
directors and in respect of other corporate matters, and each share has one
vote. The Common Stock affords no cumulative voting rights, and the holders of a
majority of the shares voting for the election of directors can elect all the
directors if they choose to do so. The Common Stock carries no preemptive
rights, is not convertible, redeemable or assessable. The holders of Common
Stock are entitled to dividends in such amounts and at such times as may be
declared by the Board of Directors out of funds legally available therefor. See
"Dividend Policy" for information regarding the Company's dividend policy.

PREFERRED STOCK

The Preferred Stock may be issued from time to time by the Board of
Directors as shares of one or more series. Subject to the provisions of the
Certificate of Incorporation and limitations prescribed by law, the Board of
Directors is expressly authorized to adopt resolutions to issue the shares, to
fix the number of shares and to change the number of shares constituting any
series and to provide for or change the voting powers, designations, preferences
and relative, participating, optional, exchange or other special rights,
qualifications, limitations or restrictions thereof, including dividend rights
(including whether dividends are cumulative), dividend rates, terms of
redemption (including sinking fund provisions), redemption prices, conversion
rights and liquidation preferences of the shares constituting any class or
series of the Preferred Stock, in each case without any further action or vote
by the holders of Common Stock.

Although the Company has no present intention to issue shares of Preferred
Stock, the issuance of shares of Preferred Stock, or the issuance of rights to
purchase such shares, could be used to discourage an unsolicited acquisition
proposal. For example, the issuance of a series of Preferred Stock might impede
a business combination by including class voting rights that would enable the
holders to block such a transaction; or such issuance might facilitate a
business combination by including voting rights that would provide a required
percentage vote of the stockholders. In addition, under certain circumstances,
the issuance of Preferred Stock could adversely affect the voting power of the
holders of the Common Stock. Although the Board of Directors is required to make
any determination to issue such stock based on its judgment as to the best
interests of the stockholders of the Company, the Board of Directors could act
in a manner that would discourage an acquisition attempt or other transaction
that some or a majority of the stockholders might believe to be in their best
interests or in which stockholders might receive a premium for their stock over
the then-market price of such stock. The Board of Directors does not at present
intend to seek stockholder approval prior to any issuance of currently
authorized stock, unless otherwise required by law or the rules of any market on
which the Company's securities are traded.

STATUTORY BUSINESS COMBINATION PROVISION

The Company is a Delaware corporation and is subject to Section 203 of the
DGCL. In general, Section 203 prevents an "interested stockholder" (defined
generally as a person owning 15% or more of a corporation's outstanding voting
stock) from engaging in a "business combination" (as defined) with a Delaware
corporation for three years following the date such person became an interested
stockholder unless (i) before such person became an interested stockholder, the
board of directors of the corporation approved the transaction in which the
interested stockholder became an interested stockholder or

42
<PAGE>
approved the business combination, (ii) upon consummation of the transaction
that resulted in the interested stockholder's 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
stock held by directors who are also officers of the corporation and by employee
stock plans that do not provide employees with the rights to determine
confidentially whether shares held subject to the plan will be tendered in a
tender or exchange offer) or (iii) following the transaction in which such
person became an interested stockholder, the business combination was approved
by the board of directors of the corporation and authorized at a meeting of
stockholders by the affirmative vote of the holders of 66 2/3% of the
outstanding voting stock of the corporation not owned by the interested
stockholder. Under Section 203, the restrictions described above also do not
apply to certain business combinations proposed by an interested stockholder
following the announcement or notification of one of certain extraordinary
transactions involving the corporation and a person who had not been an
interested stockholder during the previous three years or who became an
interested stockholder with the approval of a majority of the corporation's
directors, if such extraordinary transaction is approved or not opposed by a
majority of the directors who were directors prior to any person becoming an
interested stockholder during the previous three years or were recommended for
election or elected to succeed such directors by a majority of such directors.

OTHER MATTERS

Delaware law authorizes corporations to limit or eliminate the personal
liability of directors to corporations and their stockholders for monetary
damages for breach of a director's fiduciary duty of care. The duty of care
requires that, when acting on behalf of the corporation, directors must exercise
an informed business judgment based on all material information reasonably
available to them. Absent the limitations authorized by Delaware law, directors
are accountable to corporations and their stockholders for monetary damages for
conduct constituting gross negligence in the exercise of their duty of care.
Delaware law enables corporations to limit available relief to equitable
remedies such as injunction or rescission. The Certificate of Incorporation
limits the liability of directors of the Company to the Company or its
stockholders to the fullest extent permitted by Delaware law. Specifically,
directors of the Company will not be personally liable for monetary damages for
breach of a director's fiduciary duty as a director, except for liability for
unlawful payments of dividends or unlawful stock repurchases or redemptions as
provided in Section 174 of the DGCL.

The inclusion of this provision in the Certificate of Incorporation may have
the effect of reducing the likelihood of derivative litigation against directors
and may discourage or deter stockholders or management from bringing a lawsuit
against directors for breach of their duty of care, even though such an action,
if successful, might otherwise have benefitted the Company and its stockholders.
The Company's Bylaws provide indemnification to the Company's officers and
directors and certain other persons with respect to certain matters.

The Bylaws provide that, from and after the first date that the Company has
received funding from the sale of capital stock in an initial public offering,
the stockholders may act only at an annual or special meeting of stockholders
and may not act by written consent. The Bylaws provide that special meetings of
the stockholders can be called only by the Chairman of the Board, the Chief
Executive Officer, the President or the Board of Directors.

The Certificate of Incorporation provides that the Board of Directors shall
consist of three classes of directors serving for staggered terms. As a result,
it is currently contemplated that approximately one-third of the Company's Board
of Directors will be elected each year. The classified board provision could
prevent a party who acquires control of a majority of the outstanding voting
stock of the Company from obtaining control of the Board of Directors until the
second annual stockholders' meeting following the date the acquirer obtains the
controlling interest. In addition, the Company's Bylaws provide that a

43
<PAGE>
majority of the members of the Board of Directors must be licensed dentists
affiliated with one of the Affiliated Practices. See "Management--Directors and
Executive Officers."

The Certificate of Incorporation provides that the number of directors shall
be as specified in the Bylaws. The Bylaws provide that the number of directors
shall be determined by the Board of Directors from time to time, but shall be at
least one and not more than nineteen. It also provides that directors may be
removed only for cause, and then only by the affirmative vote of the holders of
at least a majority of all outstanding voting stock entitled to vote. This
provision, in conjunction with the provision of the Bylaws authorizing the Board
of Directors to fill vacant directorships, will prevent stockholders from
removing incumbent directors without cause and filling the resulting vacancies
with their own nominees.

STOCKHOLDER PROPOSALS

The Company's Bylaws contain provisions (i) requiring that advance notice be
delivered to the Company of any business to be brought by a stockholder before
an annual meeting of stockholders and (ii) establishing certain procedures to be
followed by stockholders in nominating persons for election to the Board of
Directors. Generally, such advance notice provisions provide that written notice
must be given to the Secretary of the Company by a stockholder (i) in the event
of business to be brought by a stockholder before an annual meeting, not less
than 90 days nor more than 180 days prior to the earlier of the date of the
meeting or the corresponding date on which the immediately preceding annual
meeting of stockholders was held, and (ii) in the event of nominations of
persons for election to the Board of Directors by any stockholder, (a) with
respect to an election to be held at the annual meeting of stockholders, not
less than 90 days nor more than 180 days prior to the earlier of the date of the
meeting or the corresponding date on which the immediately preceding annual
meeting of stockholders was held, and (b) with respect to an election to be held
at a special meeting of stockholders for the election of directors, not later
than the close of business on the 10th day following the day on which notice of
the date of the special meeting was mailed to stockholders or public disclosure
of the date of the special meeting was made, whichever first occurs. Such notice
must set forth specific information regarding such stockholder and such business
or director nominee, as described in the Company's Bylaws. The foregoing summary
is qualified in its entirety by reference to the Company's Bylaws, which are
included as an exhibit to the Registration Statement of which this Prospectus is
a part.

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for the Common Stock is Continental Stock
Transfer & Trust Company.

SHARES ELIGIBLE FOR FUTURE SALE

Upon consummation of the Acquisitions and the Offering, the Company will
have outstanding 6,319,178 shares of Common Stock (6,694,178 if the
Underwriters' over-allotment option is exercised in full) of which the 2,500,000
shares sold in the Offering (2,875,000 if the Underwriters' over-allotment
option is exercised in full) will be freely tradable without restriction or
further registration under the Securities Act, except for those held by
"affiliates" (as defined in the Securities Act) of the Company, which shares
will be subject to the resale limitations of Rule 144 under the Securities Act.
The remaining 3,819,178 shares of Common Stock are deemed "restricted
securities" under Rule 144 in that they were originally issued and sold by the
Company in private transactions in reliance upon exemptions under the Securities
Act, and may be publicly sold only if registered under the Securities Act or
sold in accordance with an applicable exemption from registration, such as those
provided by Rule 144 promulgated under the Securities Act as described below.

In general, under Rule 144 as currently in effect, if a minimum of one year
has elapsed since the later of the date of acquisition of restricted securities
from the issuer or from an affiliate of the issuer, the

44
<PAGE>
acquirer or subsequent holder would be entitled to sell within any three-month
period a number of those shares that does not exceed the greater of one percent
of the number of shares of such class of stock then outstanding or the average
weekly trading volume of the shares of such class of 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 issuer. In addition, if a period of at least two years has elapsed since the
later of the date of acquisition of restricted securities from the issuer or
from any affiliate of the issuer, and the acquirer or subsequent holder thereof
is deemed not to have been an affiliate of the issuer of such restricted
securities at any time during the 90 days preceding a sale, such person would be
entitled to sell such restricted securities under Rule 144(k) without regard to
the requirements described above. Rule 144 does not require the same person to
have held the securities for the applicable periods. The foregoing summary of
Rule 144 is not intended to be a complete description thereof. The Commission
has proposed certain amendments to Rule 144 that would, among other things,
eliminate the manner of sale requirements and revise the notice provisions of
that rule. The Commission has also solicited comments on other possible changes
to Rule 144, including possible revisions to the one- and two-year holding
periods and the volume limitations referred to above.

As of September 30, 1997, options to purchase an aggregate of 646,667 shares
of Common Stock were outstanding under the Company's 1997 Stock Compensation
Plan. See "Management--1997 Stock Compensation Plan." In general, pursuant to
Rule 701 under the Securities Act, any employee, officer or director of, or
consultant to, the Company who purchased his or her shares pursuant to a written
compensatory plan or contract is entitled to rely on the resale provisions of
Rule 701, which permit non-affiliates to sell such shares without compliance
with the public information, holding period, volume limitation or notice
provisions of Rule 144, and permit affiliates to sell such shares without
compliance with the holding period provisions of Rule 144, in each case
commencing 90 days after the date of this Prospectus. In addition, the Company
intends to file a registration statement covering the 1,500,000 shares of Common
Stock issuable upon exercise of stock options that may be granted in the future
under the 1997 Stock Compensation Plan, in which case such shares of Common
Stock generally will be freely tradable by non-affiliates in the public market
without restriction under the Securities Act.

The Company, its executive officers, directors and current stockholders, and
the persons acquiring shares of Common Stock in connection with the Acquisitions
have agreed not to offer for sale, sell, contract to sell, grant any option or
other right for the sale of, or otherwise dispose of (or enter into any
transaction or device which is designed to, or could be expected to, result in
the disposition by any person at any time in the future of) any shares of Common
Stock or any securities, indebtedness or other rights exercisable for or
convertible or exchangeable into shares of Common Stock owned or acquired in the
future in any manner prior to the expiration of 180 days after the date of this
Prospectus (the "180-Day Lockup Period") without the prior written consent of
Lehman Brothers Inc., except that the Company may, subject to certain
conditions, issue shares of Common Stock in connection with future acquisitions
and may grant Options or Awards (or issue shares of Common Stock upon exercise
of Options or Awards) under the 1997 Stock Compensation Plan. These restrictions
will be applicable to any shares acquired by any of those persons in the
Offering or otherwise during the 180-Day Lockup Period. In addition, the
Company's executive officers, directors and current stockholders and the persons
acquiring shares of Common Stock in connection with the Acquisitions have agreed
with the Company that they generally will not sell, transfer or otherwise
dispose of any of their shares for one year following the closing of the
Offering.

In connection with the Acquisitions, the Company will enter into
registration rights agreements with former stockholders of the Founding
Affiliated Practices (the "Registration Rights Agreements"), which will provide
certain registration rights with respect to the Common Stock issued to such
stockholders in the Acquisitions. Each Registration Rights Agreement will
provide the holders of Common Stock subject to such agreement with the right to
participate in registrations by the Company of its equity securities in

45
<PAGE>
underwritten offerings. The registration rights conferred by the Registration
Rights Agreements will terminate on the second anniversary of the closing of the
Offering. The Company is generally required to pay the costs associated with
such an offering, other than underwriting discounts and commissions and transfer
taxes attributable to the shares sold on behalf of the selling stockholders. The
Registration Rights Agreements provide that the number of shares of Common Stock
to be registered on behalf of the selling stockholders is subject to limitation
if the managing underwriter determines that market conditions require a
limitation. Under the Registration Rights Agreements, the Company will indemnify
the selling stockholders thereunder, and such stockholders will indemnify the
Company against, certain liabilities in respect of any registration statement or
offering covered by the Registration Rights Agreements. The Company and each of
its current stockholders are parties to a stockholders agreement, which provides
those stockholders registration rights substantially equivalent to the
registration rights in the Registration Rights Agreements.

Prior to the Offering, there has been no established public market for the
Common Stock. No prediction can be made of the effect, if any, that sales of
shares under Rule 144, or otherwise, or the availability of shares for sale will
have on the market price of the Common Stock prevailing from time to time after
the Offering. The Company is unable to estimate the number of shares that may be
sold in the public market under Rule 144, or otherwise, because such amount will
depend on the trading volume in, and market price for, the Common Stock and
other factors. Nevertheless, sales of substantial amounts of shares in the
public market, or the perception that such sales could occur, could adversely
affect the market price of the Common Stock. See "Underwriting."

Following the consummation of the Offering, the Company intends to register
1,500,000 shares of Common Stock under the Securities Act for use in connection
with future acquisitions. These shares generally will be freely tradable after
their issuance by persons not affiliated with the Company unless the Company
contractually restricts their resale. Resales of any of those shares during the
180-Day Lockup Period would require the prior written consent of Lehman Brothers
Inc.

46
<PAGE>
UNDERWRITING

Under the terms and subject to the conditions contained in an Underwriting
Agreement dated the date of this Prospectus (the "Underwriting Agreement"), the
underwriters named below (the "Underwriters"), for whom Lehman Brothers Inc. and
Rauscher Pierce Refsnes, Inc. are acting as representatives (the
"Representatives"), have severally agreed to purchase, and the Company has
agreed to sell, the respective number of shares of Common Stock set forth
opposite the name of each such Underwriter below:

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
- --------------------------------------------------------------------------------- -----------
<S> <C>
Lehman Brothers Inc..............................................................
Rauscher Pierce Refsnes, Inc.....................................................

-----------
Total........................................................................ 2,500,000
-----------
-----------
</TABLE>

The Underwriting Agreement provides that the obligations of the Underwriters
to purchase the shares of Common Stock are subject to certain conditions, and
that, if any of the foregoing shares of Common Stock are purchased by the
Underwriters pursuant to the Underwriting Agreement, then all the shares of
Common Stock agreed to be purchased by the Underwriters pursuant to the
Underwriting Agreement must be so purchased.

The Company has been advised by the Representatives that the Underwriters
propose to offer the shares of Common Stock in part directly to the public at
the public offering price set forth on the cover page of this Prospectus, and in
part to certain dealers (who may include the Underwriters) at such public
offering price, less a selling concession not in excess of $ per share. The
Underwriters may allow, and such dealers may reallow, a concession not in excess
of $ per share to certain brokers or dealers. After the initial offering to
the public, the public offering price, the concession to selected dealers and
the reallowance may be changed by the Underwriters.

The Company has granted the Underwriters an option to purchase up to 375,000
additional shares of Common Stock at the initial public offering price less the
underwriting discounts and commissions shown on the cover page of this
Prospectus, solely to cover over-allotments, if any. Such option may be
exercised at any time until 30 days after the date of the Underwriting
Agreement. To the extent that the option is exercised, each Underwriter will be
committed, subject to certain conditions, to purchase a number of additional
shares of Common Stock proportionate to such Underwriter's initial commitment as
indicated in the preceding table.

The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act, or to contribute,
under certain circumstances, to payments that the Underwriters may be required
to make in respect thereof.

The Company, its executive officers, directors and current stockholders and
the persons acquiring shares of Common Stock in connection with the Acquisitions
have agreed not to, directly or indirectly, offer for sale, sell, contract to
sell, grant any option or other right for the sale of, or otherwise dispose of
(or enter into any transaction or device which is designed to, or could be
expected to, result in the disposition by any person at any time in the future
of) any shares of Common Stock or any securities, indebtedness or other rights
exercisable for or convertible or exchangeable into shares of Common Stock prior
to the expiration of 180 days after the date of this Prospectus, without the
prior written consent of Lehman Brothers Inc., except that the Company may,
subject to certain conditions, issue shares of Common Stock in connection with
future acquisitions and grant Options or Awards (or issue shares of

47
<PAGE>
Common Stock upon exercise of Options or Awards) under the 1997 Stock
Compensation Plan. For information respecting additional restrictions on sales
by the Company's executive officers, directors, current stockholders and the
persons acquiring shares of Common Stock in connection with the Acquisitions,
see "Shares Eligible for Future Sale."

Prior to the Offering, there has been no public market for the Common Stock.
The initial public offering price will be negotiated between the Company and the
Representatives. Among the factors to be considered in determining the initial
public offering price, in addition to prevailing market conditions, will be the
history of and the prospects for the industry in which the Company competes, the
past and present operations of the Founding Affiliated Practices, the historical
results of operations of the Founding Affiliated Practices, the Company's
capital structure, estimates of the business potential and earnings prospects of
the Company, an overall assessment of the Company, an assessment of the
Company's management and the consideration of the above factors in relation to
market valuation of companies in related businesses. There can be no assurance
that an active trading market will develop for the Common Stock or that the
Common Stock will trade in the public market subsequent to the Offering at or
above the initial public offering price.

Until the distribution of the Common Stock is completed, rules of the
Commission may limit the ability of the Underwriters and certain selling group
members to bid for and purchase shares of Common Stock. As an exception to these
rules, the Representatives are permitted to engage in certain transactions that
stabilize the price of the Common Stock. Such transactions may consist of bids
or purchases for the purposes of pegging, fixing or maintaining the price of the
Common Stock.

If the Underwriters create a short position in the Common Stock in
connection with the Offering (I.E., if they sell more shares of Common Stock
than are set forth on the cover page of this Prospectus), the Representatives
may reduce that short position by purchasing Common Stock in the open market.
The Representatives also may elect to reduce any short position by exercising
all or part of the over-allotment option described herein.

The Representatives also may impose a penalty bid on certain Underwriters
and selling group members. This means that, if the Representatives purchase
shares of Common Stock in the open market to reduce the Underwriters' short
position or to stabilize the price of the Common Stock, they may reclaim the
amount of the selling concession from the Underwriters and selling group members
who sold those shares as part of the Offering.

In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of such purchases. The
imposition of a penalty bid might have an effect on the price of a security to
the extent that it were to discourage resales of the security by purchasers in
the Offering.

Neither the Company nor any of the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor any of the Underwriters makes any representation that the
Representatives will engage in such transactions or that such transactions, once
commenced, will not be discontinued without notice.

At the request of the Company, the Underwriters have reserved up to of
the shares of Common Stock offered hereby for sale at the initial public
offering price to employees of the Company and other persons associated with the
Company.

The Representatives have informed the Company that the Underwriters do not
intend to confirm sales of shares of Common Stock offered hereby to accounts
over which they exercise discretionary authority.

48
<PAGE>
LEGAL MATTERS

The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Jackson Walker L.L.P., Houston, Texas. Certain legal
matters in connection with the sale of the Common Stock offered hereby will be
passed upon for the Underwriters by Baker & Botts, L.L.P., Houston, Texas.

EXPERTS

The financial statements of Pentegra Dental Group, Inc. as of June 30, 1997
and for the period from inception, February 21, 1997, through June 30, 1997 and
the combined financial statements of Pentegra, Ltd. and Napili, International as
of December 31, 1995 and 1996 and for each of the three years ended December 31,
1996, as detailed in the index on page F-1, included in this Prospectus, have
been audited by Coopers & Lybrand L.L.P., independent accountants, as indicated
in their reports with respect thereto, and are included herein in reliance upon
the authority of said firm as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Commission a Registration Statement on Form
S-1 (together with all exhibits, schedules and amendments relating thereto, the
"Registration Statement") with respect to the Common Stock offered hereby. This
Prospectus, filed as part of the Registration Statement, does not contain all
the information contained in the Registration Statement, certain portions of
which have been omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the Common
Stock offered hereby, reference is made to the Registration Statement including
the exhibits and schedules thereto. Statements contained in this Prospectus as
to the contents of any contract or other document filed as an exhibit to the
Registration Statement accurately describe the material provisions of such
document and are qualified in their entirety by reference to such exhibits for
complete statements of their provisions. All of these documents may be inspected
without charge at the Public Reference Section of the Commission at Judiciary
Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at the
following regional offices of the Commission: Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661; and 7 World Trade Center, 13th
Floor, New York, New York 10048. Copies can also be obtained from the Commission
at prescribed rates. The Commission maintains a Web site (http://www.sec.gov)
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.

49
<PAGE>
INDEX TO FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
--------------
<S> <C>
Pentegra Dental Group, Inc. Unaudited Pro Forma Balance Sheet..................................... F-2
Unaudited Pro Forma Balance Sheet as of June 30, 1997........................................... F-3
Notes to Unaudited Pro Forma Balance Sheet...................................................... F-4

Pentegra Dental Group, Inc. Financial Statements
Report of Independent Public Accountants........................................................ F-5
Balance Sheet as of June 30, 1997............................................................... F-6
Statement of Operations for the period from inception,
February 21, 1997, through June 30, 1997...................................................... F-7
Statement of Changes in Stockholders' Equity for the period from inception, February 21, 1997,
through June 30, 1997......................................................................... F-8
Statement of Cash Flows for the period from inception, February 21, 1997, through June 30,
1997.......................................................................................... F-9
Notes to Financial Statements................................................................... F-10

Pentegra, Ltd. and Napili, International Combined Financial Statements
Report of Independent Public Accountants........................................................ F-19
Combined Balance Sheets as of December 31, 1995 and 1996 and
June 30, 1997 (Unaudited)..................................................................... F-20
Combined Statements of Operations for the years ended December 31, 1994, 1995 and 1996 and for
the six months ended June 30, 1996 and 1997 (Unaudited)....................................... F-21
Combined Statements of Changes in Stockholders' Equity (Deficit) for the years ended December
31, 1994, 1995 and 1996 and for the six months ended
June 30, 1997 (Unaudited)..................................................................... F-22
Combined Statements of Cash Flows for the years ended December 31, 1994, 1995 and 1996 and for
the six months ended June 30, 1996 and 1997 (Unaudited)....................................... F-23
Notes to Combined Financial Statements.......................................................... F-24
</TABLE>

F-1
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET

The unaudited pro forma balance sheet dated June 30, 1997 of Pentegra Dental
Group, Inc. (together with its parent entity, Pentegra Investments, Inc.,
"Pentegra" or the "Company") has been prepared as if (a) the acquisition by the
Company of certain assets and assumption of certain liabilities of 51 dental
practices (the "Founding Affiliated Practices") for consideration consisting of
a combination of cash and shares of its common stock, par value $.001 per share
(the "Common Stock"), and the execution of agreements to provide management
services to the Founding Affiliated Practices (collectively, the
"Acquisitions"), (b) the repayment of certain debt of the Founding Affiliated
Practices, (c) the acquisition by the Company (the "Pentegra/Napili
Transaction") of certain assets of Pentegra, Ltd. and Napili, International
("Napili"), (d) the repurchase by PII of 245,845 shares of Class B Preferred
Stock of Pentegra Investments, Inc, ("PII") from affiliates of the Company at
the subscription price per share paid to PII for those shares and the redemption
by PII of an aggregate of 1,337,500 shares of its Class A Preferred Stock and
Class B Preferred Stock for $2.00 per share (the "Repurchase and Redemption"),
(e) the exchange of all outstanding shares of common stock of PII for shares of
Common Stock on a one-for-one basis (the "Share Exchange") and (f) the initial
public offering of 2,500,000 shares of Common Stock (the "Offering") and the
application of the proceeds therefrom (as described in "Use of Proceeds"), all
had been completed, as if those transactions had occurred on June 30, 1997. The
Acquisitions, the repayment of certain debt of the Founding Affiliated
Practices, the Pentegra/Napili Transaction, the Repurchase and Redemption, the
Share Exchange and the Offering are each contingent on the occurrence of the
others.

The Company will not employ dental professionals or control the practice of
dentistry by the dentists. As the Company will not be acquiring the future
patient revenues to be earned by the Founding Affiliated Practices, the
Acquisitions are not deemed to be business combinations. In accordance with the
Securities and Exchange Commission's Staff Accounting Bulletin No. 48,
"Transfers of Nonmonetary Assets by Promoters or Shareholders," the Acquisitions
will be accounted for at their historical cost basis with the shares of Common
Stock to be issued in the Acquisitions being valued at the historical net book
value of the nonmonetary assets acquired, net of liabilities assumed. The cash
consideration will be reflected as a dividend by the Company to the owners of
the Founding Affiliated Practices. The acquisition of certain assets of
Pentegra, Ltd. and Napili will be accounted for as a purchase in accordance with
Accounting Principles Board Opinion No. 16.

The unaudited pro forma balance sheet has been prepared by the Company based
on the audited historical financial statements of the Company, Pentegra, Ltd.
and Napili included elsewhere in this Prospectus, including the audited combined
financial information of the Founding Affiliated Practices included in the notes
to the Company's financial statements, and assumptions deemed appropriate by the
Company.

F-2
<PAGE>
PENTEGRA DENTAL GROUP, INC.

UNAUDITED PRO FORMA BALANCE SHEET

JUNE 30, 1997

(IN THOUSANDS)

<TABLE>
<CAPTION>
PENTEGRA, LTD./
PENTEGRA NAPILI ADJUSTMENTS PRO FORMA
----------- --------------- ------------- -----------

<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $ 845 $ 66 $ 28,125(A) $ 16,170(1)
(6,942 (B)
(200 (C)
(2,789 (D)
(2,869 (E)
(66 (F)
Accounts receivable, net.............................. -- 2 554(B) 554
(2 (F)
Other current assets.................................... 340 1 (1 (F) 340
----------- ------ ------------- -----------
Total current assets................................ 1,185 69 15,810 17,064

Property and equipment, net............................. 5 19 2,774(B) 2,809
11(C)
Deferred offering costs................................. 200 -- (200 (A) --
Other noncurrent assets, net............................ 6 -- 170(C) 176
----------- ------ ------------- -----------
Total assets........................................ $ 1,396 $ 88 $ 18,565 $ 20,049
----------- ------ ------------- -----------
----------- ------ ------------- -----------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities.............. $ 10 $ 66 $ 126(B) $ 1,386
(66 (F)
1,250(G)
Current portion of long-term debt..................... -- 7 785(B) --
(785 (E)
(7 (F)
----------- ------ ------------- -----------
Total current liabilities........................... 10 73 1,303 1,386

Long-term debt.......................................... -- 5 2,084(B) --
(2,084 (E)
(5 (F)
Class A redeemable preferred stock...................... 675 (675 (D) --
Class B redeemable preferred stock...................... 414 -- (414 (D) --

Stockholders' equity:
Common stock.......................................... 18 952 3(A) 7
2(B)
(952 (F)
(16 (H)
Additional paid-in capital............................ 518 -- 27,923(A) 20,145
(6,612 (B)
(1,700 (D)
16(H)
Accumulated deficit................................... (239 ) (942 ) 942(F) (1,489 )
(1,250 (G)
----------- ------ ------------- -----------
Total stockholders' equity.......................... 297 10 18,356 18,663
----------- ------ ------------- -----------
Total liabilities and stockholders' equity.......... $ 1,396 $ 88 $ 18,565 $ 20,049
----------- ------ ------------- -----------
----------- ------ ------------- -----------
</TABLE>

- ---------

(1) See "Use of Proceeds."

The accompanying notes are an integral part of the unaudited pro forma financial
statements.

F-3
<PAGE>
PENTEGRA DENTAL GROUP, INC.

NOTES TO UNAUDITED PRO FORMA BALANCE SHEET

UNAUDITED PRO FORMA BALANCE SHEET ADJUSTMENTS

The accompanying unaudited pro forma balance sheet as of June 30, 1997 gives
effect to the Acquisitions, the payment of debt assumed from the Founding
Affiliated Practices, the Pentegra/Napili Transaction, the Repurchase and
Redemption, the Share Exchange and the Offering and the application of the
proceeds therefrom (as described in "Use of Proceeds," except for the repayment
of $300,000 aggregate principal amount outstanding under the Company's 9.5%
promissory notes), as if those transactions had occurred on June 30, 1997. The
unaudited pro forma balance sheet does not represent the historical or future
financial position of the Company.

(A) Reflects the issuance of 2,500,000 shares Common Stock in the Offering, net
of (i) estimated underwriters' discounts and commissions and (ii) estimated
offering costs of $2,300,000 less previously funded offering costs to be
paid with proceeds from the issuance of capital stock of Pentegra
Investment, Inc., including all Class A Preferred Stock and Class B
Preferred Stock. The resulting net proceeds are reflected as Common Stock
and additional paid-in capital. The Company had deferred offering costs of
$200,000 at June 30, 1997.

(B) Reflects completion of the Acquisitions, which will involve (i) the issuance
of 2,062,511 shares of Common Stock valued at the historical net book value
of the assets transferred less the liabilities assumed, (ii) the deemed
declaration of dividends totaling $6,514,000, taken together, and (iii) the
purchase of monetary assets from the Founding Affiliated Practices for cash
of $428,000, which assets are recorded at fair value. The historical net
book value of the assets transferred and the liabilities assumed from the
Founding Affiliated Practices are as follows (in thousands):

<TABLE>
<CAPTION>
<S> <C>
Property and equipment transferred.................................................. $ 2,774
Less
Current portion of notes payable.................................................. (785)
Long-term portion of notes payable................................................ (2,084)
---------
Liabilities assumed, net of assets transferred.................................. $ (95)
---------
---------
</TABLE>

(C) Reflects completion of the Pentegra/Napili Transaction for consideration of
$200,000 cash. As of June 30, 1997, the assets to be acquired in the
Pentegra/Napili Transaction have a fair value of approximately $30,000. The
cost in excess of the fair value of the net assets acquired will be
amortized over a five-year period.

(D) Reflects the repurchase of 245,835 shares of Class B Preferred Stock from
affiliates of the Company at the price per share paid to PII for those
shares and the redemption of an aggregate of 1,337,500 shares of Class A
Preferred Stock and Class B Preferred Stock for $2.00 per share and
recognition of the related deemed dividend of $1,700,000.

(E) Reflects the use of proceeds from the Offering to repay the debt assumed in
the Acquisitions.

(F) Reflects certain assets not acquired and liabilities not assumed of
Pentegra, Ltd. and Napili in the Pentegra/Napili Transaction and elimination
of those companies' historical equity accounts.

(G) Reflects the accrual of an employment bonus of $1,250,000 to the Chairman of
the Board of Directors (the "Chairman"). Payment of the bonus will be made
in increments of $10,000 on the closing of each future dental practice
affiliation until the bonus has been paid in full. Management expects the
bonus will be paid within the year following the Offering. In any event,
pursuant to the terms of the Company's employment agreement with the
Chairman, the employment bonus must be paid in full within three years of
the Offering. The bonus will be expensed upon closing of the Offering
because its payment is not contingent on future services.

(H) Reflects the exchange at the offering of 1,756,667 shares of $0.001 par
value common stock of Pentegra Dental Group, Inc. for 1,756,667 shares of
$0.01 par value common stock of PII.

F-4
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of
Pentegra Dental Group, Inc.:

We have audited the accompanying balance sheet of Pentegra Dental Group,
Inc. as of June 30, 1997, and the related statements of operations, changes in
stockholders' equity, and cash flows for the period from inception, February 21,
1997, through June 30, 1997. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audit.

We conducted our audit 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 audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Pentegra Dental Group, Inc.
as of June 30, 1997, and the results of its operations and its cash flows for
the period from inception, February 21, 1997, through June 30, 1997 in
conformity with generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

Houston, Texas
October 10, 1997

F-5
<PAGE>
PENTEGRA DENTAL GROUP, INC.

BALANCE SHEET

JUNE 30, 1997

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................................... $ 845
Stock subscriptions receivable.................................................... 326
Prepaid expenses and other current assets......................................... 14
---------
Total current assets............................................................ 1,185
Property and equipment.............................................................. 5
Deferred offering costs............................................................. 200
Organizational costs................................................................ 6
---------
Total assets................................................................ $ 1,396
---------
---------

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities.......................................... $ 10
---------
Total current liabilities....................................................... 10
---------
Commitments and contingencies (See Notes)...........................................
Class A redeemable preferred stock, $0.01 par value, 5,000,000 shares authorized,
900,000 shares issued and outstanding (liquidation preference of $900)............ 675
Class B redeemable preferred stock, $0.01 par value, 5,000,000 shares authorized,
683,335 shares issued and outstanding (liquidation preference of $683)............ 414
Stockholders' equity:
Common stock, $0.01 par value, 40,000,000 shares authorized, 1,756,667 shares
issued and outstanding.......................................................... 18
Additional paid-in capital.......................................................... 518
Accumulated deficit................................................................. (239)
---------
Total stockholders' equity...................................................... 297
---------
Total liabilities and stockholders' equity.................................. $ 1,396
---------
---------
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-6
<PAGE>
PENTEGRA DENTAL GROUP, INC.

STATEMENT OF OPERATIONS

FOR THE PERIOD FROM INCEPTION, FEBRUARY 21, 1997, THROUGH JUNE 30, 1997

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
Revenue......................................................................... $ --
<S> <C>
Expenses:
General and administrative expenses........................................... 91
Compensation expense in connection with issuance of common stock.............. 148
---------
Total expenses............................................................ 239
---------
Net loss before income taxes.................................................... (239)
Provision for income taxes...................................................... --
---------
Net loss........................................................................ $ (239)
---------
---------
Net loss per share.............................................................. $ (0.14)
---------
---------
Weighted average common shares outstanding...................................... 1,757
---------
---------
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-7
<PAGE>
PENTEGRA DENTAL GROUP, INC.

STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

FOR THE PERIOD FROM INCEPTION, FEBRUARY 21, 1997, THROUGH JUNE 30, 1997

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------------------ PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT EQUITY
----------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at February 21, 1997........................... -- $ -- $ -- $ -- $ --
Issuance of common stock
($0.01 per share cash on February 21, 1997).......... 667 7 3 -- 10
Issuance of common stock
($0.01 per share cash and $0.14 per share
compensation on May 22, 1997)........................ 767 8 107 -- 115
Issuance of common stock
($1.27 per share cash on June 13, 1997).............. 290 3 366 -- 369
Issuance of common stock
($0.01 per share cash and $1.26 per share
compensation on June 13, 1997)....................... 33 -- 42 -- 42
Net loss............................................... -- -- -- (239) (239)
----- ----- ----- ----- -----
Balance at June 30, 1997............................... 1,757 $ 18 $ 518 $ (239) $ 297
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-8
<PAGE>
PENTEGRA DENTAL GROUP, INC.

STATEMENT OF CASH FLOWS

FOR THE PERIOD FROM INCEPTION, FEBRUARY 21, 1997, THROUGH JUNE 30, 1997

(IN THOUSANDS)

<TABLE>
<CAPTION>
Cash flows from operating activities:
<S> <C>
Net loss.......................................................................... $ (239)
Compensation associated with issuance of common stock............................. 148
Increase in prepaid expenses and other current assets............................. (14)
Increase in accounts payable and accrued liabilities.............................. 10
---------
Net cash used by operating activities......................................... (95)
---------
Net cash used in investing activities--additions to property and equipment.......... (5)
---------
Cash flows provided by financing activities:
Proceeds from issuance of common and preferred stock.............................. 1,151
Offering costs.................................................................... (200)
Organizational costs.............................................................. (6)
---------
Net cash provided by financing activities..................................... 945
---------
Net increase in cash and cash equivalents........................................... 845

Balance at inception, February 21, 1997............................................. --
---------
Balance at June 30, 1997............................................................ $ 845
---------
---------
Noncash investing activities:
Stock subscriptions receivable.................................................... $ 326
---------
---------
</TABLE>

The accompanying notes are an integral part of the financial statements.

F-9
<PAGE>
PENTEGRA DENTAL GROUP, INC.

NOTES TO FINANCIAL STATEMENTS

1. BUSINESS AND ORGANIZATION:

Pentegra Dental Group, Inc. (the "Company") was organized as a Delaware
corporation on February 21, 1997, for the purpose of creating a dental practice
management company.

In July 1997, the Company changed its name to Pentegra Investments, Inc. and
formed a new wholly owned subsidiary named Pentegra Dental Group, Inc.
("Pentegra Dental"). Pentegra Dental's operations to date have consisted
primarily of seeking affiliations with dental practices, negotiating to acquire
the tangible assets of those practices, and negotiating agreements to provide
management services to those practices. Pentegra Dental plans to complete an
initial public offering of its common stock, par value $0.001 per share (the
"Offering") and simultaneously exchange cash and shares of its common stock for
selected assets and liabilities (the "Acquisitions") of 51 dental practices (the
"Affiliated Practices") (see Note 4). Additionally, the current shareholders
will exchange on a share-for-share basis, all of their shares of the Company's
common stock, par value $0.01 per share, for shares of common stock of Pentegra
Dental. It is contemplated that 245,835 shares of Class B preferred stock held
by affiliates of the Company will be repurchased at their original issuance
prices ranging from $0.01 to $1.00 per share and 1,337,500 shares of Class A and
Class B preferred stock held by nonaffiliates will be redeemed at a price of
$2.00 per share with the proceeds of the Offering. Pentegra Dental has also
entered into an agreement to acquire substantially all the assets and operations
of a dental management consulting firm, Pentegra, Ltd., and a dental management
seminar company, Napili, International (the "Pentegra/Napili Transaction") (see
Note 3). The Acquisitions, the Pentegra/Napili Transaction and the Offering are
each contingent on the occurrence of the others.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

CASH AND CASH EQUIVALENTS

Cash and cash equivalents are defined as highly liquid financial instruments
with maturities of three months or less at the date of purchase.

DEFERRED OFFERING COSTS

Deferred offering costs include legal, accounting and other costs directly
related to the Offering. All deferred offering costs will be charged against the
proceeds of the Offering upon its completion. Such costs would be charged to
expense if the Offering were not completed.

ORGANIZATIONAL COSTS

Organizational costs are being amortized on a straight-line basis over a
five-year period.

PREFERRED STOCK

In May 1997, the Company divided the authorized and unissued preferred stock
into two classes of 5,000,000 shares each called "Class A" and "Class B." The
Company issued 133,335 shares of Class B nonvoting preferred stock for cash of
approximately $1,000. In June 1997, the Company issued 900,000 shares of Class A
nonvoting preferred stock, 550,000 shares of Class B nonvoting preferred stock
and 435,000 shares of common stock for $1,457,000, of which $1,131,000 was
collected in June 1997 and $326,000 was collected in July 1997. The Company
allocated $675,000 of the proceeds to the Class A preferred stock, $413,000 to
the Class B preferred stock and $369,000 to the common stock based on their
values of $0.75, $0.75 and $0.85 per share, respectively, as determined by an
independent valuation of the

F-10
<PAGE>
PENTEGRA DENTAL GROUP, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
fair value of those shares as of the date of issuance. The proceeds from these
stock issuances are reserved for legal and accounting costs associated with the
Offering, as well as operating costs. The Class A and Class B preferred stock
will not be registered with the Securities and Exchange Commission as part of
the Offering. Holders of both classes of preferred stock are entitled to per
share dividends equivalent to any dividends that may be declared on the common
stock, but not to cumulative dividends. The preferred stock entitles the holders
thereof to preference in liquidation over the common stock.

COMMON STOCK

In February 1997, the Company issued 666,667 shares of common stock for cash
at a price of $0.01 per share. The Company issued an additional 766,667 shares
of common stock to members of management during May 1997 for cash at a price of
$0.01 per share. The Company valued these shares at $0.15 per share, based on an
independent valuation of the fair value of those shares as of the date of
issuance. In June 1997, in addition to the 290,000 shares of common stock issued
in connection with the issuance of the Class A and Class B preferred stock,
described above, the Company issued 33,333 shares of common stock for cash at a
price of $0.01 per share. Those shares were valued at $1.27 per share based on
an independent valuation of the fair value of those shares as of the date of
issuance. The difference between the cash received for common stock and its fair
value has been recognized as compensation expense.

STOCK OPTION PLAN

In September 1997, the board of directors of Pentegra Dental adopted the
1997 Stock Compensation Plan (the "Plan"). Employees, non-employee directors and
advisors and directors will be eligible to receive awards under the Plan and
only employees of the Company will be eligible to receive incentive stock
options. The aggregate number of options to purchase shares of common stock and
other awards of shares of common stock that may be granted under the Plan may
not exceed 2,000,000 shares. In August 1997, Pentegra Dental authorized issuance
of options to purchase 646,667 shares to employees, practice employees and
directors on the date the initial public offering price is determined. The
exercise price of these options will be the initial public offering price per
share. Pentegra Dental will account for options issued to employees and
non-employee directors under the Plan in accordance with APB Opinion No. 25.

EARNINGS PER SHARE

All share and per share information in the accompanying financial statements
have been retroactively restated to reflect the effects of a 2-for-3 reverse
split of the Company's common stock which was approved by the Company's Board of
Directors in October 1997.

Earnings per share is based on the weighted average number of common and
equivalent shares outstanding during the period. Common shares issued at less
than the Offering price within one year of the Offering are treated as
outstanding during the entire period for all periods presented. Fully diluted
earnings per share are not presented because such amounts would be the same as
amounts computed for primary earnings per share or would be antidilutive.

USE OF ESTIMATES

The preparation of 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 and
disclosure of contingent assets and liabilities at the date of the financial
statements and the

F-11
<PAGE>
PENTEGRA DENTAL GROUP, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
reported amounts of revenues and expenses during the reporting period. Actual
results may in some instances differ from previously estimated amounts.

INCOME TAXES

The Company utilizes the liability method of accounting for income taxes.
Under this method, deferred taxes are determined based on differences between
the financial reporting and tax bases of assets and liabilities and are measured
using the enacted marginal tax rates currently in effect when the differences
reverse.

As reflected in the accompanying statement of operations, the Company
incurred a net loss of $239,000 during the period from inception, February 21,
1997, through June 30, 1997. The Company has recognized no tax benefit from this
net loss. Due to the limited operations of the Company since its inception, a
valuation allowance has been established to offset the deferred tax asset
related to these net losses that have been capitalized for tax purposes. There
is no other significant difference in the tax and book bases of the Company's
assets or liabilities that would give rise to deferred tax balances.

RECENT PRONOUNCEMENTS

3. RELATED PARTY TRANSACTIONS:

Pentegra Dental has entered into an agreement with the Chairman of its Board
of Directors effective at the date the Offering closes, to purchase
substantially all the assets and the operations of Pentegra, Ltd. and Napili,
International for cash consideration of $200,000. Pentegra Dental will enter
into an employment agreement, effective at the date the Offering closes, that
provides for the payment to the Chairman of the Board of Directors of an
employment bonus of $1,250,000. Payment of the bonus is based on $10,000 on the
closing of each future dental practice affiliation subsequent to the
Acquisitions. However, the bonus must be paid in full within three years. The
employment bonus will be charged to operations in the period in which the
Offering closes.

Since the Company's inception, it has occupied and had access to the
facilities, equipment and staff of a relative of an executive officer and
director of the Company. Prior to June 1, 1997, that use was

F-12
<PAGE>
PENTEGRA DENTAL GROUP, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

3. RELATED PARTY TRANSACTIONS: (CONTINUED)
insignificant. Effective June 1, 1997, the Company has agreed to compensate the
affiliate for use of and access to its office facilities, equipment and staff at
the rate of $10,000 per month.

The Company has agreed to lease a portion of the office facilities,
equipment and staff of Pentegra, Ltd., which is wholly owned by the Company's
Chairman of the Board. The Company has agreed to compensate Pentegra, Ltd. for
use of and access to its office facilities, equipment and staff at the rate of
$11,000 per month until the Pentegra/Napili Transaction is completed, whereupon
the entire lease of those facilities will be assumed by Pentegra Dental.

The Company believes that the compensation being paid to these related
parties represents the fair market value of the services that are being provided
to the Company.

4. PLANNED TRANSACTIONS:

Pentegra Dental plans to complete, through a series of mergers and asset
transfers, the acquisition of certain assets and assumption of certain
liabilities of the Founding Affiliated Practices (the "Acquisitions"). Owners of
the Founding Affiliated Practices will receive shares of Pentegra Dental common
stock and cash as consideration in the Acquisitions. In connection with the
Acquisitions, the selling dentists and their professional corporations,
professional associations or other entities (collectively, the "PCs") will enter
into long-term service agreements with Pentegra Dental. Additionally, those
dentists will enter into employment and noncompete agreements with the PCs.

Pentegra Dental will not employ dentists or control the practice of
dentistry by the dentists employed by the PCs. As Pentegra Dental will be
executing management service agreements and will not hold any equity ownership
in the PCs, the Acquisitions are deemed not to be business combinations. In
accordance with the Securities and Exchange Commission's Staff Accounting
Bulletin No. 48, "Transfers of Nonmonetary Assets by Promoters or Shareholders,"
(i) each of the Founding Affiliated Practices will be deemed a promoter of the
Offering, (ii) the transferred nonmonetary assets and assumed liabilities will
be accounted for at the historical cost basis of the Founding Affiliated
Practices, (iii) any monetary assets included in the Acquisitions will be
recorded at fair value, (iv) the net book value of the net assets acquired by
Pentegra Dental will be recorded as the value of the common stock issued and (v)
cash consideration paid to selling dentists in conjunction with the Acquisitions
will be reflected as a dividend paid by Pentegra Dental.

The information set forth below assumes all the Founding Affiliated
Practices will participate in the Acquisitions. Although management expects that
all the practices will participate, there is no assurance that will be the case.

F-13
<PAGE>
PENTEGRA DENTAL GROUP, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

4. PLANNED TRANSACTIONS: (CONTINUED)
The net assets to be transferred and liabilities to be assumed from the
Founding Affiliated Practices are summarized, on a combined basis, in the
following table (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
1996
------------ JUNE 30,
1997
-----------
(UNAUDITED)
<S> <C> <C>
Patient receivables, net of allowances............................ $ 787 $ 554
Property, equipment and improvements, net......................... 2,958 2,774
------------ -----------
Assets transferred.............................................. 3,745 3,328
Accounts payable and accrued liabilities.......................... (81) (126)
Current portion of notes payable.................................. (1,103) (785)
Long-term portion of notes payable................................ (1,460) (2,084)
------------ -----------
Assets transferred, net of liabilities assumed.................. $ 1,101 $ (333)
------------ -----------
------------ -----------
</TABLE>

The management service revenues that will be earned by Pentegra Dental
subsequent to the Acquisitions and the execution of the service agreements will
be based on various arrangements. In general, the resulting fee will be based
primarily on the dental service revenues less certain operating expenses
associated with each PC. The Company's standard form of service agreement (the
"Standard Contract") will be applied to all practices operating in jurisdictions
where permitted. In those instances where the Standard Contract may not be
permitted by applicable law, an alternative form of agreement (the "Alternative
Contract") will be used. In any jurisdiction where neither the Standard Contract
nor the Alternative Contract is permitted, the fee will be based on a flat fee
(the "fixed-fee agreements") that will be subject to annual renegotiation or
adjustment. The patient revenue and operating expenses of the

F-14
<PAGE>
PENTEGRA DENTAL GROUP, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

4. PLANNED TRANSACTIONS: (CONTINUED)
Founding Affiliated Practices are summarized, on a combined basis, in the
following tables for the year ended December 31, 1996 and the six months ended
June 30, 1997 (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
----------------------
PATIENT OPERATING
REVENUE EXPENSES
--------- -----------
<S> <C> <C>
Practices participating under the Standard Contract..................... $ 35,415 $ 19,442
Practices participating under the Alternative Contract.................. 1,200 797
Practices participating under fixed-fee agreements...................... 2,599 1,393
--------- -----------
Totals for Founding Affiliated Practices................................ $ 39,214 $ 21,632
--------- -----------
--------- -----------
</TABLE>

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1997
----------------------
PATIENT OPERATING
REVENUES EXPENSES
--------- -----------
(UNAUDITED)
<S> <C> <C>
Practices participating under the Standard Contract..................... $ 17,690 $ 9,433
Practices participating under the Alternative Contract.................. 631 460
Practices participating under fixed-fee agreements...................... 1,265 706
--------- -----------
Totals for Founding Affiliated Practices................................ $ 19,586 $ 10,599
--------- -----------
--------- -----------
</TABLE>

F-15
<PAGE>
PENTEGRA DENTAL GROUP, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

4. PLANNED TRANSACTIONS: (CONTINUED)

Subsequent to the Acquisitions, the operating expenses of the Founding
Affiliated Practices will be the responsibility of Pentegra Dental. Pentegra
Dental will have discretion to control the level of those expenses in
conjunction with providing the related services to the PCs. The historical
operating expenses of the Founding Affiliated Practices for the year ended
December 31, 1996 and the six months ended June 30, 1997 that will be assumed by
Pentegra Dental in the future are summarized, on a combined basis, in the
following table (in thousands):

<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEAR ENDED JUNE 30,
DECEMBER 31, 1997
1996 -----------
------------ (UNAUDITED)
<S> <C> <C>
Salaries, wages and benefits of employees, excluding the
dentists........................................................ $ 6,542 $ 3,351
Dental supplies................................................... 5,865 2,982
Rent.............................................................. 1,936 954
Advertising and marketing expenses................................ 605 257
General and administrative expenses............................... 5,915 2,682
Other expenses.................................................... 769 373
------------ -----------
Total operating expenses...................................... 21,632 10,599
Depreciation and amortization..................................... 901 449
------------ -----------

Total expenses................................................ $ 22,533 $ 11,048
------------ -----------
------------ -----------
</TABLE>

The combined historical financial information of the Founding Affiliated
Practices presented herein is not related to the financial position or results
of operations of Pentegra Dental or the Company. This information is presented
solely for the purpose of providing disclosures to potential investors regarding
the group of entities with which Pentegra Dental will be contracting to provide
future services. The Founding Affiliated Practices were not operated under
common control or management during the fiscal year ended December 31, 1996 or
the six months ended June 30, 1997.

UNAUDITED PRO FORMA MANAGEMENT SERVICES FEES

Upon consummation of the Acquisitions, Pentegra Dental will enter into a
service agreement with each Founding Affiliated Practice under which Pentegra
Dental will become the exclusive manager and administrator of nondental services
relating to the operation of the Founding Affiliated Practices. Under each
service agreement, the Founding Affiliated Practice will retain the
decision-making power and responsibility for, among other things, (i) hiring,
compensating and supervising dental employees and other licensed dental
professionals, (ii) ensuring that dentists have the required licenses,
credentials, approvals and other certifications appropriate to the performance
of their duties and (iii) complying with federal and state laws, regulations and
ethical standards applicable to the practice of dentistry. In addition, each
Founding Affiliated Practice will be exclusively in control of all aspects of
the practice of dentistry and the provision of dental services by it. The
following is a summary of the typical form of service agreement the Company will
enter into with each Founding Affiliated Practice. The Company expects to enter
into similar agreements with Affiliated Practices in the future. The actual
terms of the service agreements may vary

F-16
<PAGE>
PENTEGRA DENTAL GROUP, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

4. PLANNED TRANSACTIONS: (CONTINUED)
from the description below on a case-by-case basis, depending on negotiations
with the individual Founding Affiliated Practice and the requirements of
applicable laws and governmental regulations.

The management service fees (the "Service Fees") payable to Pentegra Dental
by the Founding Affiliated Practices under the service agreements vary based on
the fair market value, as determined in arm's-length negotiations, or the nature
and amount of services provided. The Service Fees, together with reimbursement
for operating and non-operating expenses of the Founding Affiliated Practice to
be paid by Pentegra Dental pursuant to the service agreement, are payable
monthly, and consist of various combinations of the following: (i) Standard
Contract-a percentage (ranging from 35% to 40%) of the difference between the
sum of revenue related to dental services less operating expenses associated
with the Founding Affiliated Practices; (ii) Alternative Contract-a percentage
(16%) of the dental service revenue, not to exceed a percentage (35%) of the
difference between the sum of revenue related to dental services less operating
expenses associated with the Founding Affiliated Practices or (iii) Alternative
Contract-the greater of (a) a percentage (not to exceed 35%) of the difference
between the revenue related to dental services less operating expenses
associated with the Founding Affiliated Practices or (b) a specified fixed fee.
In addition, with respect to four of the Founding Affiliated Practices, the
Service Fees are based on flat fees that are subject to renegotiation or
adjustment on an annual basis.

Each service agreement is for an initial term of 40 years, with automatic
extensions (unless specified notice is given) of five years. The service
agreement may be terminated by either party if the other party (i) files a
petition in bankruptcy (or other similar events occur) or (ii) defaults on the
performance of a material duty or obligation, which default continues for a
specified term after notice. In addition, the service agreement may be
terminated by the Company (i) if the Founding Affiliated Practice or a dental
employee engages in conduct for which the dental employee's license to practice
dentistry is revoked or suspended or is the subject of any restrictions or
limitations by any governmental authority to such an extent that he or she
cannot engage in the practice of dentistry, (ii) upon the death or disability of
the dentist or (iii) upon a breach by the dentist of the employment agreement
between the Founding Affiliated Practice and the dentist.

The service agreement requires the Founding Affiliated Practice to enforce
the employment agreements between the Founding Affiliate Practice and the
dentists associated with the Founding Affiliated Practice (the "Dentist
Employment Agreements"). If the Founding Affiliated Practice does not enforce
such employment agreements, Pentegra Dental may, at its option, require the
Founding Affiliated Practice to assign such employment agreements to Pentegra
Dental or its designee.

Under each service agreement, the Founding Affiliated Practice will be
responsible for obtaining professional liability insurance for the employees of
the Founding Affiliated Practice and Pentegra Dental will be responsible for
obtaining general liability and property insurance for the Founding Affiliated
Practice.

Upon termination of a service agreement, the Founding Affiliated Practice
will have the option to purchase and assume, and Pentegra Dental will have the
option to require the Founding Affiliated Practice to purchase and assume, the
assets and liabilities related to the Founding Affiliated Practice at the fair
market value thereof, except in certain circumstances where the Founding
Affiliated Practice or Pentegra Dental, as applicable, was in breach of the
service agreement.

F-17
<PAGE>
4. PLANNED TRANSACTIONS: (CONTINUED)
The unaudited pro forma management service fee for the Founding Affiliated
Practices, based on the historical patient revenues and operating expenses set
forth above is summarized in the following table for the year ended December 31,
1996 and the six months ended June 30, 1997 (in thousands):

<TABLE>
<CAPTION>
SIX-MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1996 1997
------------ -----------
<S> <C> <C>
Practices participating under the Standard Contract................ $ 24,442 $ 12,002
Practices participating under the Alternative Contract............. 832 493
Practices participating under the fixed-fee arrangement............ 1,798 908
------------ -----------
Total pro forma service agreement revenues..................... $ 27,072 $ 13,403
------------ -----------
------------ -----------
</TABLE>

5. SUBSEQUENT EVENTS

In September 1997, the Company purchased 66,667 shares of its common stock
at a purchase price of $0.01 per share, of which 46,667 shares were purchased
from a director of the Company. The Company issued 66,667 shares of common stock
to a member of management at a purchase price of $0.01 per share and will
recognize the difference between the cash received and the shares' market value
as compensation expense.

In October 1997, the Company purchased an additional 20,000 shares of its
common stock from a director at a purchase price per share of $0.01, and issued
20,000 shares of common stock and $300,000 of 9.5% promissory notes due on the
earlier of 30 days after the closing of the Offering or October 8, 1998.

F-18
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders of

Pentegra, Ltd. and Napili, International:

We have audited the accompanying combined balance sheets of Pentegra, Ltd.
and Napili, International (collectively, "the Company") as of December 31, 1995
and 1996, and the related combined statements of operations, changes in
stockholders' equity (deficit) and cash flows for each of the three years in the
period ended December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these 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 audits 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 financial statements referred to above present fairly,
in all material respects, the financial position of the Company as of December
31, 1995 and 1996, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1996 in conformity with
generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

Houston, Texas
August 8, 1997

F-19
<PAGE>
PENTEGRA, LTD. AND NAPILI, INTERNATIONAL

COMBINED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1995 1996
--------- --------- JUNE 30, 1997
-------------
(UNAUDITED)
<S> <C> <C> <C>
ASSETS

Current assets:
Cash and cash equivalents........................................................ $ 9 $ 38 $ 66
Accounts receivable, net......................................................... 15 15 2
Prepaid expenses and other current assets........................................ 1 -- 1
--------- --------- -----
Total current assets......................................................... 25 53 69

Property and equipment, net........................................................ 23 21 19
--------- --------- -----
Total assets..................................................................... $ 48 $ 74 $ 88
--------- --------- -----
--------- --------- -----

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

Current liabilities:
Current portion of notes payable................................................. $ 318 $ 7 $ 7
Accounts payable and accrued liabilities......................................... 59 75 66
--------- --------- -----
Total current liabilities.................................................... 377 82 73

Notes payable, net of current portion.............................................. -- 9 5

Commitments and contingencies (Note 5)............................................. -- -- --

Stockholders' equity (deficit):
Pentegra, Ltd. common stock, no par value, 100,000,000 shares authorized;
20,357,762 issued and outstanding.............................................. 576 898 925
Napili, International common stock, no par value, 1,000,000 shares authorized;
1,000 shares issued and outstanding............................................ 8 29 27

Accumulated deficit................................................................ (913) (944) (942)
--------- --------- -----
Total stockholders' equity (deficit)............................................. (329) (17) 10
--------- --------- -----
Total liabilities and stockholders' equity................................... $ 48 $ 74 $ 88
--------- --------- -----
--------- --------- -----
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

F-20
<PAGE>
PENTEGRA, LTD. AND NAPILI, INTERNATIONAL

COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS
ENDED JUNE 30,
------------------------------- ----------------------------
1994 1995 1996 1996 1997
--------- --------- --------- ------------- -------------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Consulting revenue............................................. $ 687 $ 588 $ 654 $ 231 $ 266
Lecture and seminar revenue.................................... 256 253 268 140 242
--------- --------- --------- ----- -----
Total revenue................................................ 943 841 922 371 508
--------- --------- --------- ----- -----
Expenses:
Staff salaries, wages and benefits........................... 181 246 292 122 126
Lecture and seminar expenses................................. 117 96 70 47 161
Rent......................................................... 148 144 159 46 74
General and administrative expenses.......................... 364 313 360 93 125
Advertising expenses......................................... 17 4 3 3 --
Depreciation................................................. 21 24 8 4 4
Other expenses............................................... 15 9 2 2 11
--------- --------- --------- ----- -----
Total expenses............................................. 863 836 894 317 501
--------- --------- --------- ----- -----
Income from operations....................................... 80 5 28 54 7
Interest expense............................................... 49 46 52 27 5
--------- --------- --------- ----- -----
Income (loss) before income taxes and extraordinary item....... 31 (41) (24) 27 2
Provision (benefit) for income taxes........................... 26 (13) 7 3 --
--------- --------- --------- ----- -----
Income (loss) before extraordinary gain........................ 5 (28) (31) 24 2
Extraordinary gain, net of income tax effect of $5............. -- 7 -- -- --
--------- --------- --------- ----- -----
Net income (loss).......................................... $ 5 $ (21) $ (31) $ 24 $ 2
--------- --------- --------- ----- -----
--------- --------- --------- ----- -----
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

F-21
<PAGE>
PENTEGRA, LTD. AND NAPILI, INTERNATIONAL

COMBINED STATEMENTS OF CHANGES IN STOCKHOLDER'S EQUITY (DEFICIT)

(IN THOUSANDS)

<TABLE>
<CAPTION>
COMMON STOCK STOCKHOLDERS'
---------------------- ACCUMULATED EQUITY
SHARES AMOUNT DEFICIT (DEFICIT)
--------- ----------- ------------- ---------------
<S> <C> <C> <C> <C>
Balance, January 1, 1994.......................................... 20,359 $ 526 $ (897) $ (371)
Net income........................................................ -- -- 5 5
Capital distribution.............................................. -- (40) -- (40)
--------- ----- ----- -----

Balance, December 31, 1994........................................ 20,359 486 (892) (406)
Net loss.......................................................... -- -- (21) (21)
Capital contribution.............................................. -- 98 -- 98
--------- ----- ----- -----

Balance, December 31, 1995........................................ 20,359 584 (913) (329)
Net loss.......................................................... -- -- (31) (31)
Capital contribution.............................................. -- 343 -- 343
--------- ----- ----- -----

Balance, December 31, 1996........................................ 20,359 927 (944) (17)
Income (Unaudited)................................................ -- -- 2 2
Capital contribution (Unaudited).................................. -- 25 -- 25
--------- ----- ----- -----

Balance, June 30, 1997 (Unaudited)................................ 20,359 $ 952 $ (942) $ 10
--------- ----- ----- -----
--------- ----- ----- -----
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

F-22
<PAGE>
PENTEGRA, LTD. AND NAPILI, INTERNATIONAL

COMBINED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED JUNE 30,
------------------------------- ----------------------------
1994 1995 1996 1996 1997
--------- --------- --------- ------------- -------------
<S> <C> <C> <C> <C> <C>
(UNAUDITED)
Cash flows from operating activities:
Net income (loss)........................................... $ 5 $ (21) $ (31) $ 24 $ 2
Adjustments:
Depreciation and amortization............................. 21 24 8 4 4
Deferred income taxes (benefit)........................... 22 (13) 1 -- --
Gain on early extinguishment of debt, net................. -- (7) -- -- --
Changes in operating assets and liabilities:
Accounts receivable, net................................ 39 (11) -- 14 13
Prepaid expenses and other current assets............... (22) 21 1 1 (1)
Accounts payable and accrued liabilities................ 60 (72) 15 (18) (9)
--- --------- --------- --- ---
Net cash provided by (used in) operating activities..... 125 (79) (6) 25 9
--- --------- --------- --- ---
Net cash used in investing activities--capital expenditures... (9) (2) (6) (1) (2)

Cash flows from financing activities
Proceeds from long-term debt................................ -- 25 22 22 --
Repayment of debt........................................... (2) (120) (324) (25) (4)
Capital contributions (distributions)....................... (40) 98 343 25 25
--- --------- --------- --- ---
Net cash provided by (used in) financing activities....... (42) 3 41 22 21
--- --------- --------- --- ---
Net change in cash and cash equivalents................... 74 (78) 29 46 28
Cash and cash equivalents, beginning of period................ 13 87 9 9 38
--- --------- --------- --- ---
Cash and cash equivalents, end of period...................... $ 87 $ 9 $ 38 $ 55 $ 66
--- --------- --------- --- ---
--- --------- --------- --- ---
</TABLE>

The accompanying notes are an integral part of the combined financial
statements.

F-23
<PAGE>
PENTEGRA, LTD. AND NAPILI, INTERNATIONAL

NOTES TO COMBINED FINANCIAL STATEMENTS

1. CORPORATE ORGANIZATION AND BASIS OF PRESENTATION:

Pentegra, Ltd., a consulting firm, and Napili, International ("Napili"), a
seminar company (collectively, "the Company"), provide clinical, administrative
and marketing consulting and training programs to dentists and their personnel.
Pentegra, Ltd. and Napili have common ownership and management.

The combined financial statements reflect the operations of Pentegra, Ltd.
and Napili, the predecessor companies of Pentegra Dental Group, Inc. All
intercompany accounts and transactions have been eliminated in combination.

CASH AND CASH EQUIVALENTS

The Company considers all highly liquid debt investments with original
maturities of three months or less at the date of acquisition to be cash
equivalents. The carrying amounts approximate fair value.

PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation and amortization are
provided using the straight-line method over the estimated useful lives of the
various classes of depreciable assets, ranging from five to seven years. Fully
depreciated assets are retained in property and equipment until they are removed
from service. Maintenance and repairs are charged to expense, whereas renewals
and major replacements are capitalized. Gains and losses from dispositions are
included in operations.

ADVERTISING

Costs incurred for advertising are expensed when incurred.

USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS

The preparation of 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 and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

DENTAL PRACTICE MANAGEMENT CONSULTING AND LECTURE AND SEMINAR REVENUE

The Company recognizes revenue from (i) consulting and (ii) lecture and
seminar services, in each case, at the time services are performed.

INTERIM FINANCIAL INFORMATION

The financial statements as of June 30, 1997 and for the six months ended
June 30, 1996 and 1997 have been prepared by the Company pursuant to the rules
and regulations of the Securities and Exchange Commission. Certain information
and footnote disclosures normally included in annual financial statements
prepared in accordance with generally accepted accounting principles have been
omitted pursuant to such rules and regulations. The financial statements should
be read in conjunction with the annual financial statements of the Company
included herein. In management's opinion, such interim financial statements
include all normal recurring adjustments considered necessary for a fair
presentation of such financial statements. Interim results are not necessarily
indicative of results for a full year.

F-24
<PAGE>
PENTEGRA, LTD. AND NAPILI, INTERNATIONAL

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

2. PROPERTY AND EQUIPMENT:

Property and equipment were as follows (in thousands):

<TABLE>
<CAPTION>
DECEMBER 31,
-------------------- JUNE 30, 1997
1995 1996 -------------
--------- --------- (UNAUDITED)
<S> <C> <C> <C>
Property and equipment:
Equipment.................................................... $ 22 $ 27 29
Furniture and fixtures....................................... 121 122 122
--------- --------- ---
Total property and equipment............................. 143 149 151
Less accumulated depreciation................................ (120) (128) (132)
--------- --------- ---
Property and equipment, net.............................. $ 23 $ 21 19
--------- --------- ---
--------- --------- ---
</TABLE>

Fully depreciated assets utilized in operations were approximately $95,000
at December 31, 1995 and 1996.

3. INCOME TAXES:

Pentegra, Ltd. and Napili file separate federal and state income tax
returns. The Company uses the liability method of accounting for income taxes.
Under this method, deferred taxes are determined based on the difference between
the financial reporting and tax bases of assets and liabilities and are measured
using the enacted marginal tax rates currently in effect when the differences
are reversed.

Significant components of the Company's deferred tax liabilities and assets
at December 31, 1995 and 1996, respectively, were as follows (in thousands):

<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Excess of book over tax basis in property and
equipment.............................................. $ (5) $ (9)
--------- ---------
Total deferred tax liabilities......................... (5) (9)
Net operating loss carryforward.......................... 4 --
Other.................................................... 1 7
--------- ---------
Total deferred tax assets.............................. 5 7
--------- ---------
Net deferred tax asset (liability)....................... $ -- (2)
--------- ---------
--------- ---------
</TABLE>

F-25
<PAGE>
PENTEGRA, LTD. AND NAPILI, INTERNATIONAL

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

3. INCOME TAXES: (CONTINUED)
Significant components of the provision for income taxes for the years ended
December 31, 1995 and 1996, respectively, were as follows (in thousands):

<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Current tax expense:
Federal............................................................. $ -- $ -- $ 5
State............................................................... 4 -- 1
--------- --------- ---------
Total current..................................................... 4 -- 6
--------- --------- ---------
Deferred tax expense (benefit):
Federal............................................................. 19 (6) 1
State............................................................... 3 (2) --
--------- --------- ---------
Total deferred.................................................... 22 (8) 1
--------- --------- ---------
Total................................................................. $ 26 $ (8) $ 7
--------- --------- ---------
--------- --------- ---------
</TABLE>

The differences between the tax computed at the statutory federal tax rate
and the Company's provision (benefit) for income taxes for the years ended
December 31, 1994, 1995 and 1996, respectively, were as follows (in thousands):

<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Tax at U.S. statutory rate......................................... $ 10 $ (10) $ (8)
State income taxes, net of federal taxes........................... 2 (2) (1)
Nondeductible expenses and other................................... 14 3 17
Other.............................................................. -- 1 (1)
--------- --------- ---------
$ 26 $ (8) $ 7
--------- --------- ---------
--------- --------- ---------
Total effective tax rate......................................... 82% (29%) 31%
--------- --------- ---------
--------- --------- ---------
</TABLE>

Income taxes paid for the years ending December 31, 1994 and 1996 were
approximately $3,600 and $5,700, respectively. Income taxes paid during 1995
were insignificant.

4. NOTES PAYABLE:

Notes payable at December 31, 1996 and 1995 included notes issued by
financial institutions and individuals with varying maturities in 1999, which
are uncollateralized and guaranteed by a stockholder of the Company. Interest
rates on these notes ranged from 8% to 12%. The following are the scheduled
payments for the outstanding notes payable as of December 31, 1996 (in
thousands):

In 1995, the Company recognized a $7,000 gain on the early retirement of
debt.

F-26
<PAGE>
PENTEGRA, LTD. AND NAPILI, INTERNATIONAL

NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)

5. COMMITMENTS AND CONTINGENCIES:

LEASE COMMITMENTS

Future minimum lease payments under noncancelable operating leases with
remaining terms of one or more years consisted of the following at December 31,
1996 (in thousands):

<TABLE>
<S> <C>
1997................................................................. $ 146
1998................................................................. 117
1999................................................................. 6
2000................................................................. 4
---------
Total minimum lease obligation....................................... $ 273
---------
---------
</TABLE>

LITIGATION

The Company is from time to time subject to claims and suits arising in the
ordinary course of operations. In the opinion of management, the ultimate
resolution of such pending legal proceedings will not have a material adverse
effect on the Company's financial position, results of operations or liquidity.

6. CREDIT RISK AND FAIR VALUE OF FINANCIAL INSTRUMENTS:

CREDIT RISK

The Company grants customers credit in the normal course of business. The
Company does not obtain collateral on the extension of credit. Procedures are in
effect to monitor the creditworthiness of customers and appropriate allowances
are made to reduce accounts to their net realizable values.

The Company maintains cash balances at various financial institutions.
Accounts at each institution are insured by the Federal Deposit Insurance
Corporation up to $100,000. The Company's accounts at these institutions may, at
times, exceed the federally insured limits. The Company has not experienced any
losses in such accounts.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The following estimated fair values of financial instruments have been
determined by the Company using available market information and appropriate
valuation methodologies.

The carrying amounts of cash and cash equivalents, accounts receivable and
accounts payable approximate fair values due to the short-term maturities of
these instruments. The carrying amounts of the Company's fixed-rate long-term
borrowings approximate fair value.

F-27
<PAGE>
- ---------------------------------------------------------
---------------------------------------------------------
- ---------------------------------------------------------
---------------------------------------------------------

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFERING OTHER
THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER
INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED ON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY OF THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN
THE SHARES OF COMMON STOCK TO WHICH IT RELATES OR ANY OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, TO ANY PERSON IN ANY JURISDICTION IN WHICH IT
IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY
SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO ITS DATE.

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

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary................................ 3
Risk Factors...................................... 7
The Company....................................... 15
Use of Proceeds................................... 15
Dividend Policy................................... 15
Dilution.......................................... 16
Capitalization.................................... 17
Selected Financial Data........................... 18
Management's Discussion and Analysis of Financial
Condition and Results of Operations............. 20
Business.......................................... 23
Management........................................ 32
Certain Transactions.............................. 38
Security Ownership of Certain Beneficial Owners
and Management.................................. 41
Description of Capital Stock...................... 42
Shares Eligible for Future Sale................... 44
Underwriting...................................... 47
Legal Matters..................................... 49
Experts........................................... 49
Additional Information............................ 49
Index to Financial Statements..................... F-1
</TABLE>

UNTIL , 1997 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR
NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A
PROSPECTUS.THIS DELIVERY REQUIREMENT IS IN ADDITION TO THE OBLIGATIONS OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.

2,500,000 SHARES

PENTEGRA DENTAL GROUP, INC.

COMMON STOCK

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

PROSPECTUS

, 1997

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

LEHMAN BROTHERS
RAUSHER PIERCE REFSNES, INC.

- ---------------------------------------------------------
---------------------------------------------------------
- ---------------------------------------------------------
---------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

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

<TABLE>
<S> <C>
SEC Registration Fee............................................ $ 12,197
NASD Filing Fee................................................. 4,525
Nasdaq National Market Listing Fee..............................
Blue Sky Fees and Expenses...................................... *
Printing Costs.................................................. *
Legal Fees and Expenses......................................... *
Accounting Fees and Expenses.................................... *
Transfer Agent and Registrar Fees and Expenses.................. *
---------
Miscellaneous................................................... *
---------
Total......................................................... $ *
---------
---------
</TABLE>

- ---------

* To be provided by amendment.

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

DELAWARE GENERAL CORPORATION LAW

Section 145(a) of the General Corporation Law of the State of Delaware (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, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that the person 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 amounts paid in settlement actually and reasonably
incurred by the person in connection with such action, suit or proceeding if the
person acted in good faith and in a manner the person 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 the
person's conduct was unlawful. The termination of any action, suit or proceeding
by judgment, order, settlement, conviction, or upon a plea of NOLO CONTENDERE or
its equivalent, shall not, of itself, create a presumption that the person did
not act in good faith and in a manner which the person 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 reasonable cause to believe that the
person's conduct was unlawful.

Section 145(b) of the DGCL states 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 or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that the
person 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) actually and
reasonably incurred by the person in connection with the defense or settlement
of such action or suit if the person acted in good

II-1
<PAGE>
faith and in a manner the person 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 of 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 Court of Chancery or the 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.

Section 145(c) of the DGCL provides that to the extent that a director,
officer, employee or agent of a corporation has been successful on the merits or
otherwise in defense of any action, suit or proceeding referred to in
subsections (a) and (b) of Section 145, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.

Section 145(d) of the DGCL states that any indemnification under subsections
(a) and (b) of Section 145 (unless ordered by a court) shall be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee or agent is proper in the
circumstances because he has met the applicable standard of conduct set forth in
subsections (a) and (b). Such determination shall be made (1) by a majority vote
of the directors who are not parties to such action, suit or proceeding, even
though less than a quorum, or (2) if there are no such directors or, if such
directors so direct, by independent legal counsel in a written opinion, or (3)
by the stockholders.

Section 145(e) of the DGCL provides that expenses (including attorneys'
fees) incurred by an officer or director in defending any civil, criminal,
administrative or investigative action, suit or proceeding may be paid by the
corporation in advance of the final disposition of such action, suit or
proceeding upon receipt of an undertaking by or on behalf of such director or
officer to repay such amount if it shall ultimately be determined that he is not
entitled to be indemnified by the corporation as authorized in Section 145. Such
expenses (including attorneys' fees) incurred by other employees and agents may
be so paid upon such terms and conditions, if any, as the board of directors
deems appropriate.

Section 145(f) of the DGCL states that the indemnification and advancement
of expenses provided by, or granted pursuant to, the other subsections of
Section 145 shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any
bylaw, agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while holding such office.

Section 145(g) of the DGCL provides that a corporation shall have the power
to purchase and maintain insurance on behalf of any person who 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 any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the corporation
would have the power to indemnify him against such liability under the
provisions of Section 145.

Section 145(j) of the DGCL states that the indemnification and advancement
of expenses provided by, or granted pursuant to, Section 145 shall, unless
otherwise provided when authorized or ratified, continue as to a person who has
ceased to be a director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of such a person.

CERTIFICATE OF INCORPORATION

The Certificate of Incorporation of the Company provides that a director of
the Company shall not be personally liable to the Company or its stockholders
for monetary damages for breach of fiduciary duty as a director, except for
liability for unlawful payments of dividends or unlawful stock repurchases or

II-2
<PAGE>
redemptions as provided for in Section 174 of the DGCL. If the DGCL is amended
to authorize the further elimination or limitation of the liability of
directors, then the liability of a director of the Company, in addition to the
limitation on personal liability described above, shall be limited to the
fullest extent permitted by the amended DGCL. Further, any repeal or
modification of such provision of the Certificate of Incorporation by the
stockholders of the Company shall be prospective only, and shall not adversely
affect any limitation on the personal liability of a director of the Company
existing at the time of such repeal or modification.

BYLAWS

The Bylaws of the Company provide that the Company will indemnify any
director or officer of the Company to the fullest extent permitted by applicable
law, from and against judgments, fines, amounts paid in settlement and expenses
(including attorneys' fees) whatsoever arising out of any event or occurrence
related to the fact that such person is or was a director or officer of the
Company and further provide that the Company may, but is not required to,
indemnify any employee or agent of the Company or a director, officer, employee
or agent of any other corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise who is or was serving in such capacity at the
request of the Company; provided, however, that the Company is only required to
indemnify persons serving as directors and officers (and to the extent
authorized by the Board of Directors, such other persons) for the expenses
incurred in a proceeding if such person has met the standards of conduct that
make it permissible under the laws of the State of Delaware for the Company to
indemnify the claimant for the amount claimed. The Bylaws further provide that,
in the event of any threatened, or pending action, suit or proceeding in which
any director or officer of the Company is a party or is involved and that may
give rise to a right of indemnification under the Bylaws, following written
request by such person, the Company will promptly pay to such person amounts to
cover expenses reasonably incurred by such person in such proceeding in advance
of its final disposition upon such person undertaking to repay the advance if it
is ultimately determined that such person is not entitled to be indemnified by
the Company as provided in the Bylaws.

UNDERWRITING AGREEMENT

The Underwriting Agreement provides for the indemnification of the directors
and officers of the Company in certain circumstances.

INSURANCE

The Company intends to maintain liability insurance for the benefit of its
directors and officers.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.

The following information relates to securities issued or sold by the
Company within the last three years:

(i) In connection with the formation of the Company, on February 22, 1997 the
Company issued Common Stock to J. Michael Casas (200,000 shares), James L.
Dunn, Jr. (100,000 shares), John G. Thayer (66,667 shares), Allen M.
Gelwick (66,667 shares), Stephen P. Schmitt (33,333 shares), Dunn Family
Trust, James L. Dunn, Jr., Trustee (33,333 shares), JoAn Majors (66,667
shares), John W. Parsons (66,667 shares) and Richard M. Vento (33,333
shares), at a purchase price per share of $0.01. On May 12, 1997, PII
issued Class B Preferred to J. Michael Casas (66,667 shares), James L.
Dunn, Jr. (33,334 shares) and John W. Parsons (33,334 shares), at a
purchase price per share of $0.01. On May 22, 1997, the Company issued
Common Stock to George M. Siegel (300,000 shares), Omer K. Reed, D.D.S.
(150,000 shares), Gary S. Glatter (100,000 shares), Kelly W. Reed (150,000
shares), Stephen E. Stapleton (33,333 shares) and Kimberlee K. Rozman
(33,333 shares), at a purchase price per share of $0.01. On June 13, 1997,
(i) PII issued Class A Preferred to Marie Adamo (50,000

II-3
<PAGE>
shares), Peter Anderson, Aurous, Ltd. (25,000 shares), Scott Bolding
(25,000 shares), William Decker (100,000 shares), Peter Anderson, Dufo,
Ltd. (25,000 shares), Daniel Goldman, Goldfam, Ltd. (75,000 shares), Peter
Anderson, Laguna Enterprises, Ltd. (25,000 shares), James Landers (50,000
shares), Gary Nagler (25,000 shares), Debra Novosad (50,000 shares), Edward
Pitts, P/S Plan (125,000 shares), RTT Investments (150,000 shares), Candy
Segall (25,000 shares), Annie Smith (50,000 shares) and Ken W. Smith
(100,000 shares), at a purchase price per share of $1.00; (ii) PII issued
Class B Preferred to Omer K. Reed, D.D.S. (37,500 shares), Gary S. Glatter
(37,500 shares), George M. Siegel (37,500 shares), Stephen E. Stapleton
(12,500 shares), Mack E. Greder, D.D.S. (25,000 shares), Roger Allen Kay,
D.D.S. (25,000 shares), Debra Novosad (50,000 shares), Bruce A. Kanehl,
D.D.S. (25,000 shares), George King, D.D.S. (25,000 shares), Brian K.
Kniff, D.D.S. (25,000 shares), Richard W. Mains, D.D.S., RBM Trust (25,000
shares), James W. Medlock, D.D.S. (25,000 shares), Thomas L. Mullooly,
D.D.S. (25,000 shares), Richard H. Fettig, D.D.S. (25,000 shares), Marvin
V. Cavallino, D.D.S. (50,000 shares), Alan H. Gerbholz, D.D.S. (25,000
shares), Victor H. Burdick, D.D.S. (25,000 shares), Steve Anderson, D.D.S.
(25,000 shares) and James P. Allen, D.D.S. (25,000 shares), at a purchase
price per share of $1.00; and (iii) the Company issued Common Stock to Omer
K. Reed, D.D.S. (7,500 shares), Gary S. Glatter (7,500 shares), George M.
Siegel (7,500 shares), Stephen E. Stapleton (2,500 shares), Mack E. Greder,
D.D.S. (5,000 shares), Roger Allen Kay, D.D.S. (5,000 shares), Marie Adamo
(10,000 shares), Peter Anderson, Aurous, Ltd. (5,000 shares), Scott Bolding
(5,000 shares), William Decker (20,000 shares), Peter Anderson, Dufo, Ltd.
(5,000 shares), Daniel Goldman, Goldfam, Ltd. (35,000 shares), Peter
Anderson, Laguna Enterprises, Ltd. (5,000 shares), James Landers (10,000
shares), Gary Nagler (5,000 shares), Debra Novosad (20,000 shares), Edward
Pitts, P/S Plan (38,333 shares), RTT Investments (30,000 shares), Candy
Segall (5,000 shares), Annie Smith (10,000 shares), Ken W. Smith (20,000
shares), Marvin V. Cavallino, D.D.S. (10,000 shares), Bruce A. Kanehl,
D.D.S. (5,000 shares), Richard H. Fettig, D.D.S. (5,000 shares), Victor H.
Burdick, D.D.S. (5,000 shares), Thomas L. Mullooly, D.D.S. (5,000 shares),
James W. Medlock, D.D.S. (5,000 shares), Alan H. Gerbholz, D.D.S. (5,000
shares), Richard W. Mains, D.D.S., RBM Trust (5,000 shares), Brian K.
Kniff, D.D.S. (5,000 shares), George King, D.D.S. (5,000 shares), Steve
Anderson, D.D.S. (5,000 shares) and James P. Allen, D.D.S. (5,000 shares),
at a purchase price of $0.01 per share. On September 1, 1997, the Company
issued 66,667 shares of Common Stock to Sam H. Carr at a purchase price of
$0.01 per share. On October 8, 1997, the Company issued 6,667 shares of
Common Stock to Manhattan Group Funding and 13,333 shares of Common Stock
to Daniel A. Bock, at a purchase price of $0.01 per share.

(ii)

ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a) Exhibits.

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------
<S> <C> <C>
1.1* -- Form of Underwriting Agreement.

2.1 -- Form of Asset Contribution Agreement between Pentegra Dental Group, Inc. and a sole
proprietorship

2.2 -- Form of Asset Contribution Agreement between Pentegra Dental Group, Inc. and a partnership

2.3 -- Form of Asset Contribution Agreement between Pentegra Dental Group, Inc. and an entity

2.4 -- Form of Agreement and Plan of Reorganization between Pentegra Dental Group, Inc. and an entity
</TABLE>

II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------
<S> <C> <C>
2.5 -- Exchange Agreement dated July 31, 1997 among Pentegra Investments, Inc., Pentegra Dental Group,
Inc. and the stockholders named therein

2.6 -- Asset Contribution Agreement dated as of August 20, 1997 among Pentegra Dental Group, Inc.,
Pentegra, Ltd., Napili International and Omer K. Reed, D.D.S.
The schedules and exhibits to the foregoing acquisition agreements have not been filed as
exhibits to this Registration Statement. Pursuant to Item 601(b)(2) of Regulation S-K, Pentegra
Dental Group, Inc. agrees to furnish a copy of such schedules and exhibits to the Commission
upon request.

3.1 -- Restated Certificate of Incorporation of Pentegra Dental Group, Inc.

3.2 -- Bylaws of Pentegra Dental Group, Inc.

4.1* -- Form of certificate evidencing ownership of Common Stock of Pentegra Dental Group, Inc.

4.2 -- Form of Registration Rights Agreement for Owners of Founding Affiliated Practices

4.3 -- Registration Rights Agreement dated September 30, 1997 between Pentegra Dental Group, Inc. and
the stockholders named therein

5.1* -- Opinion of Jackson Walker L.L.P.

10.1 -- Pentegra Dental Group, Inc. 1997 Stock Compensation Plan

10.2 -- Employment Agreement dated July 31, 1997 between Pentegra Dental Group, Inc. and Omer K. Reed,
D.D.S.

10.3 -- Employment Agreement dated July 1, 1997 between Pentegra Dental Group, Inc. and Gary S. Glatter

10.4 -- Employment Agreement dated July 12, 1997 between Pentegra Dental Group, Inc. and John Thayer

10.5 -- Employment Agreement dated September 1, 1997 between Pentegra Dental Group, Inc. and Sam H. Carr

10.6 -- Employment Agreement dated July 12, 1997 between Pentegra Dental Group, Inc. and James Dunn, Jr.

10.7 -- Employment Agreement dated July 12, 1997 between Pentegra Dental Group, Inc. and Kimberlee K.
Rozman

10.8 -- Form of Service Agreement

11.1 -- Computation of Earnings Per Share

23.1 -- Consent of Coopers & Lybrand, L.L.P.

23.2* -- Consent of Jackson Walker L.L.P. (contained in Exhibit 5)

23.3 -- Consents of Director Nominees.

24.1 -- Power of Attorney (contained on the signature page of this Registration Statement).

27.1* -- Financial Data Schedule.
</TABLE>

- ---------

* To be filed by amendment.

(b) Financial Statement Schedules.

All schedules are omitted because they are not applicable or because the
required information is contained in the Financial Statements or Notes thereto.

II-5
<PAGE>
ITEM 17. UNDERTAKINGS.

The undersigned registrant hereby undertakes as follows:

(1) To 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) Insofar as indemnification for liabilities arising under the
Securities Act 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
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payments 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 Securities Act and will be governed by the
final adjudication of such issue.

(3) That, for the purposes of determining any liability under the
Securities Act, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon 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 was declared effective.

(4) That, for the purpose of determining any liability under the
Securities Act, 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 deemed to be the initial bona fide offering thereof.

II-6
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended,
Pentegra Dental Group, Inc. has duly caused this Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Houston, State of Texas, on October 10, 1997.

<TABLE>
<S> <C> <C>
PENTEGRA DENTAL GROUP, INC.

By: /s/ GARY S. GLATTER
-----------------------------------------
Gary S. Glatter
PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>

Each person whose signature appears below hereby appoints Kimberlee K.
Rozman and James L. Dunn, Jr. and each of them, each of whom may act without
joinder of the other, as his true and lawful attorneys-in-fact and agents, with
full power of substitution and resubstitution, for him and in his name, place
and stead, in any and all capacities, to execute in the name of each such person
who is then an officer or director of the Registrant, and to file, any
amendments (including post-effective amendments) to this Registration Statement
and any registration statement for the same offering filed pursuant to Rule 462
under the Securities Act of 1933, as amended, and to file the same, with all
exhibits thereto and all other documents in connection therewith, with the
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing appropriate or
necessary to be done, as fully and for all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or their substitute or substitutes may lawfully do
or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Registration Statement has been signed by the following persons in the
capacities indicated on October 10, 1997.

SIGNATURES TITLE
- ------------------------------ ----------------------------------------------

/s/ GARY S. GLATTER
- ------------------------------ President, Chief Executive Officer and
Gary S. Glatter Director (Principal Executive Officer)

/s/ SAM H. CARR Senior Vice President and Chief Financial
- ------------------------------ Officer (Principal Financial and Accounting
Sam H. Carr Officer)

/s/ OMER K. REED, D.D.S.
- ------------------------------ Chairman of the Board
Omer K. Reed, D.D.S.

/s/ J. MICHAEL CASAS
- ------------------------------ Director
J. Michael Casas

/s/ ALLEN M. GELWICK
- ------------------------------ Director
Allen M. Gelwick

/s/ GEORGE M. SIEGEL
- ------------------------------ Director
George M. Siegel

/s/ JAMES L. DUNN, JR.
- ------------------------------ Director
James L. Dunn, Jr.

II-7

<PAGE>

EXHIBIT 2.1

FORM OF ASSET CONTRIBUTION AGREEMENT

BY AND AMONG

PENTEGRA DENTAL GROUP, INC.,

and

______________________________ [sole proprietorship]

<PAGE>
TABLE OF CONTENTS

Page
----
Section 1. TERMS OF THE CONTRIBUTION
1.2 CONTRIBUTION OF ASSETS............................................. 1
1.3 EXCLUDED ASSETS.................................................... 1
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES.......................... 2
1.5 SUBSEQUENT ACTIONS................................................. 2

Section 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.
2.1 EXISTENCE.......................................................... 2
2.2 POWER AND AUTHORITY................................................ 2
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS.................. 3
2.4 CONSENTS........................................................... 3
2.5 [INTENTIONALLY DELETED]............................................ 3
2.6 [INTENTIONALLY DELETED]............................................ 3
2.7 DENTIST'S FINANCIAL INFORMATION.................................... 3
2.8 LEASES............................................................. 3
2.9 CONDITION OF ASSETS................................................ 3
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY.............................. 3
2.11 INVENTORIES........................................................ 3
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES................................ 3
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES............. 4
2.14 LEGAL PROCEEDINGS.................................................. 4
2.15 CONTRACTS.......................................................... 4
2.16 SUBSEQUENT EVENTS.................................................. 5
2.17 TAXES.............................................................. 6
2.18 COMMISSIONS AND FEES............................................... 6
2.19 LIABILITIES; DEBT.................................................. 6
2.20 INSURANCE POLICIES................................................. 6
2.21 EMPLOYEE BENEFIT PLANS............................................. 6
2.22 ADVERSE AGREEMENTS................................................. 7
2.23 COMPLIANCE WITH LAWS IN GENERAL.................................... 7
2.24 THIRD PARTY PAYORS................................................. 7
2.25 NO UNTRUE REPRESENTATIONS.......................................... 7
2.26 BANKING RELATIONS.................................................. 7
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS............. 8
2.28 PAYORS............................................................. 8

Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING................................. 8
3.2 POWER AND AUTHORITY................................................ 8
3.3 COMMISSIONS AND FEES............................................... 8
3.4 CAPITAL STOCK...................................................... 8
3.5 NO UNTRUE REPRESENTATIONS.......................................... 8

Section 4. COVENANTS OF DENTIST.
4.1 CONSUMMATION OF AGREEMENT.......................................... 9
4.2 BUSINESS OPERATIONS................................................ 9
4.3 ACCESS AND NOTICE.................................................. 9
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS................ 9

-i-
<PAGE>

4.5 ACQUISITION PROPOSALS.............................................. 9

4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS............................... 9
4.7 EMPLOYEE MATTERS................................................... 9
4.8 [INTENTIONALLY OMITTED]............................................ 10
4.9 REQUIREMENTS TO EFFECT ACQUISITION................................. 10
4.10 ACCOUNTING AND TAX MATTERS......................................... 10
4.11 WAIVER OF BULK TRANSFER COMPLIANCE................................. 10
4.12 LEASE.............................................................. 10
4.13 HIRING OF EMPLOYEES................................................ 10
4.14 EMPLOYEE BENEFIT PLANS............................................. 10
4.15 INSURANCE.......................................................... 10
4.16 FORMATION OF THE PRACTICE.......................................... 10
4.17 CORPORATE RECORDS.................................................. 11
4.18 POWER AND AUTHORITY FOR TRANSACTIONS............................... 11
4.19 NO BUSINESS........................................................ 11
4.20 COMPLIANCE WITH LAWS............................................... 11

Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT.......................................... 11
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS................ 11

Section 6. COVENANTS OF PENTEGRA AND DENTIST
6.1 FILINGS; OTHER ACTIONS............................................. 12

Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES..................................... 12
7.2 COVENANTS AND CONDITIONS........................................... 12
7.3 PROCEEDINGS........................................................ 12
7.4 NO MATERIAL ADVERSE CHANGE......................................... 12
7.5 DUE DILIGENCE REVIEW............................................... 12
7.6 APPROVAL BY THE BOARD OF DIRECTORS................................. 12
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT.............................. 13
7.8 EMPLOYMENT ARRANGEMENTS............................................ 13
7.9 CONSENTS AND APPROVALS............................................. 13
7.10 CLOSING DELIVERIES................................................. 13
7.11 DEBT AND RECEIVABLES............................................... 13
7.12 INSURANCE.......................................................... 13
7.13 NO CHANGE IN WORKING CAPITAL....................................... 13
7.14 SECURITIES APPROVAL................................................ 13

Section 8. DENTIST'S CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES..................................... 13
8.2 COVENANTS AND CONDITIONS........................................... 13
8.3 PROCEEDINGS........................................................ 13
8.4 CLOSING DELIVERIES................................................. 13
8.5 SECURITIES APPROVAL................................................ 14

Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF DENTIST.............................................. 14
9.2 DELIVERIES OF PENTEGRA............................................. 15

-ii-
<PAGE>

Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION
10.1 NATURE AND SURVIVAL................................................ 15
10.2 INDEMNIFICATION BY PENTEGRA........................................ 16
10.3 INDEMNIFICATION BY DENTIST......................................... 16
10.4 INDEMNIFICATION PROCEDURE.......................................... 17
10.5 RIGHT OF SETOFF.................................................... 18

Section 11. TERMINATION

Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS.............................................. 18
12.2 INVESTMENTS; COMPLIANCE WITH LAW................................... 19
12.3 ECONOMIC RISK; SOPHISTICATION...................................... 19

Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION

Section 14. MISCELLANEOUS
14.1 TAX COVENANT....................................................... 19
14.2 NOTICES............................................................ 20
14.3 FURTHER ASSURANCES................................................. 20
14.4 EACH PARTY TO BEAR COSTS........................................... 20
14.5 PUBLIC DISCLOSURES................................................. 20
14.6 GOVERNING LAW...................................................... 21
14.7 CAPTIONS........................................................... 21
14.8 INTEGRATION OF EXHIBITS............................................ 21
14.9 ENTIRE AGREEMENT/AMENDMENT......................................... 21
14.10 COUNTERPARTS....................................................... 21
14.11 BINDING EFFECT/ASSIGNMENT.......................................... 21
14.12 NO RULE OF CONSTRUCTION............................................ 21
14.13 COSTS OF ENFORCEMENT............................................... 21
14.14 PRORATIONS......................................................... 21
14.15 AMENDMENTS; WAIVERS................................................ 21
14.16 ARBITRATION........................................................ 22
14.17 SEVERABILITY....................................................... 23

-iii-
<PAGE>

ASSET CONTRIBUTION AGREEMENT

WITNESSETH:

WHEREAS, Dentist operates a dental practice ("Business") and Pentegra is
engaged in the business of managing certain non-dentistry aspects of dental
practices;

WHEREAS, Dentist desires to contribute to Pentegra, and Pentegra desires to
receive from Dentist, certain assets of Dentist;

WHEREAS, it is intended for Federal income tax purposes that the transfers
contemplated by this Agreement, the Other Agreements and Pentegra's initial
public offering ("Initial Public Offering") of shares of its common stock, par
value $.01 per share ("Pentegra Common Stock") shall qualify as an exchange
within the meaning of Section 351 of the Internal Revenue Code of 1986, as
amended ("IRC" or "Code");

WHEREAS, the consummation of the transfers to Pentegra pursuant to this
Agreement is intended to occur in connection with, and is conditioned upon, the
simultaneous consummation of the transfers contemplated by the Other Agreements
and the Initial Public Offering.
.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:

SECTION

1. TERMS OF THE CONTRIBUTION.

1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common Stock
is consummated. The date on which the Closing occurs is hereinafter referred to
as the "Closing Date".

1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and conditions
contained herein, on the Closing Date, Dentist shall convey, transfer, deliver
and assign to Pentegra or any affiliate of Pentegra designated by Pentegra all
of Dentist's right, title and interest in and to those certain assets described
on EXHIBIT 1.1 attached hereto (individually, "Asset", and collectively
"Assets"), free and clear of all obligations, security interests, claims, liens
and encumbrances, except as specifically assumed, or taken subject to, by
Pentegra pursuant to SECTION 1.3(b) hereof.

1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be
transferred and contributed hereunder, and Dentist shall retain all of its
right, title and interest in and to, the assets not specifically transferred
hereunder, including without limitation, the assets described on EXHIBIT 1.2
(the "Excluded Assets").

1
<PAGE>

1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for the
Assets and the representations, warranties and agreements of Dentist contained
herein, Pentegra shall, on the Closing Date:

(a) Cause to be transferred to Dentist the consideration specified in
ANNEX I attached hereto (the "Acquisition Consideration"); and.

(b) Except as otherwise provided herein, assume and perform or
discharge on or after the Closing Date, the contracts, leases, obligations,
commitments, liabilities and indebtedness of Dentist listed on EXHIBIT 1.3(b)
attached hereto to the extent that such obligations, commitments, liabilities
and indebtedness are current and not otherwise in default. (the "Assumed
Liabilities"). Notwithstanding any contrary provision contained herein,
Pentegra shall not be deemed to have assumed, nor shall Pentegra assume: (i)
any liability, commitment or obligation or trade payable or indebtedness not
specifically disclosed on EXHIBIT 1.3(b), (ii) any liability set forth on
EXHIBIT 1.3(b) which may be incurred by reason of any breach of or default under
such contracts, leases, commitments or obligations which occurred on or before
the Closing Date; (iii) any liability for any employee benefits payable to
employees of Dentist, including, but not limited to, liabilities arising under
any Dentist Plan (as defined in SECTION 2.21 hereof); (iv) any liability based
upon or arising out of a violation of any antitrust or similar restraint-of-
trade laws by Dentist, including, without limiting the generality of the
foregoing, any such antitrust liability which may arise in connection with
agreements, contracts, commitments or orders for the sale of goods or provision
of services by Dentist reflected on the books of Dentist at or prior to the
Closing Date; (v) any liability based upon or arising out of any tortious or
wrongful actions of Dentist, any licensed professional employee or independent
contractor of Dentist, (vi) any liability for the payment of any taxes of
Dentist, including without limitation, sales, use and other transfer taxes and
income taxes arising from or by reason of the transactions contemplated by this
Agreement; (vii) any indebtedness secured by deeds of trust or mortgages on real
property; nor (viii) any liability incurred or to be incurred pursuant to any
malpractice or other suits or actions pending against Dentist.

1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date, Pentegra
shall consider or be advised that any deeds, bills of sale, assignments,
assurances or any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in Pentegra its right, title or
interest in, to or under any of the Assets or otherwise to carry out this
Agreement, in return for the consideration set forth in this Agreement, the
Dentist shall execute and deliver all such deeds, bills of sale, assignments and
assurances and take and do all such other actions and things as may be necessary
or desirable to vest, perfect or confirm any and all right, title and interest
in, to and under the Assets in Pentegra or otherwise to carry out this
Agreement.

SECTION 2. REPRESENTATIONS AND WARRANTIES OF DENTIST.

Dentist hereby represents and warrants to Pentegra as follows:

2.1 EXISTENCE. Dentist is a sole proprietorship under the laws of the
State of __________________. Dentist does not have any assets, employees or
offices in any state other than the state set forth in the first sentence of
this SECTION 2.1.

2.2 POWER AND AUTHORITY. Dentist has the legal capacity to enter into and
perform this Agreement and the other agreements to be executed and delivered in
connection herewith. This Agreement and all agreements and documents executed
and delivered in connection herewith have been, or will be as of the Closing
Date, duly executed and delivered by Dentist and constitute or will constitute
the legal, valid and binding obligations of Dentist in accordance with their
respective terms, except as may be limited by applicable bankruptcy, insolvency
or similar laws affecting creditors' rights generally or the availability of
equitable remedies. The execution and delivery of this Agreement, and the
agreements executed and delivered pursuant to this Agreement or to be executed
and delivered on the Closing Date, do not, and, subject to the receipt of
consents described on EXHIBIT 2.4, the consummation of the actions contemplated
hereby will not, result in the acceleration of, any obligation under any
mortgage, lien, lease, agreement, rent, instrument, order, arbitration award,
judgment or decree to which Dentist is a party or by which Dentist is bound, or
violate any material restrictions of any kind to which Dentist is subject, or
result in any lien or encumbrance on any of Dentist's assets or the Assets.

2
<PAGE>

2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets, or
waivers thereof, have been duly obtained and are in full force and effect and
are described on EXHIBIT 2.3. There are no proceedings pending or, to the
knowledge of Dentist, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses or
permits.

2.4 CONSENTS. Except as set forth on EXHIBIT 2.4, no consent,
authorization, permit, license or filing with any governmental authority, any
lender, lessor, any manufacturer or supplier or any other person or entity is
required to authorize, or is required in connection with, the execution,
delivery and performance of this Agreement and the agreements and documents
contemplated hereby on the part of Dentist.

2.5 [INTENTIONALLY DELETED].

2.6 [INTENTIONALLY DELETED].

2.7 DENTIST'S FINANCIAL INFORMATION. Dentist has heretofore furnished
Pentegra with copies of its unaudited balance sheet and related unaudited
statements of income, retained earnings and cash flows for its prior two full
fiscal years, as well as copies of its unaudited balance sheet as of December
31, 1996 and June 30, 1997 (collectively, the "Balance Sheet" and the latest
date thereof shall be referred to as the "Balance Sheet Date") and any related
unaudited statements of income, retained earnings, schedule of accounts
receivable, accounts payable and accrued liabilities, and cash flows for the
twelve months then ended (collectively, with the related notes thereto, the
"Financial Statements"). The Financial Statements fairly present the financial
condition and results of operations of Dentist as of the dates and for the
periods indicated and reflect all fixed and contingent liabilities of Dentist.

2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all leases
pursuant to which Dentist leases, as lessor or lessee, real or personal property
used in operating the Business, related to the Assets or otherwise. All such
leases listed on EXHIBIT 2.8 are valid and enforceable in accordance with their
respective terms, and there is not under any such lease any existing default by
Dentist, as lessor or lessee, or any condition or event of which Dentist has
knowledge which with notice or lapse of time, or both, would constitute a
default, in respect of which Dentist has not taken adequate steps to cure such
default or to prevent a default from occurring.

2.9 CONDITION OF ASSETS. All of the Assets are in good condition and
repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Dentist has no knowledge of any
latent defects therein.

2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Dentist has good, valid and
marketable title to all of the Assets, free and clear of any liens, claims,
charges, exceptions or encumbrances, except for those, if any, which are set
forth in EXHIBIT 2.10 attached hereto. Dentist shall cause all encumbrances set
forth on EXHIBIT 2.10 (other than those encumbrances indicated on EXHIBIT
1.3(b)) to be released or terminated prior to the Closing Date and evidence of
such releases of liens and claims shall be provided to Pentegra on the Closing
Date and the Assets shall not be used to satisfy such liens, claims or
encumbrances.

2.11 INVENTORIES. All of the Assets constituting inventory are owned or
used by Dentist, are in good, current, standard and merchantable condition and
are not obsolete or defective.

2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on EXHIBIT
2.12, Dentist has no right, title or interest in or to patents, patent rights,
corporate names, assumed names, manufacturing processes, trade names,
trademarks, service marks, inventions, specialized treatment protocols,
copyrights, formulas and trade secrets or similar items. Set forth in EXHIBIT
2.12 is a listing of all names of all predecessor companies of Dentist,
including the names of any entities from whom Dentist previously acquired
significant assets. Except for off-the-shelf software licenses and except as
set forth on EXHIBIT 2.12, Dentist is not a licensee in respect of any patents,
trademarks, service marks, trade names, copyrights or applications therefor, or
manufacturing processes, formulas or trade secrets or similar items and

3
<PAGE>

no such licenses are necessary for the conduct of the Business or the use of
the Assets. No claim is pending or has been made to the effect that the
Assets or the present or past operations of Dentist in connection with the
Assets or Business infringe upon or conflict with the asserted rights of
others to any patents, patent rights, manufacturing processes, trade names,
trademarks, service marks, inventions, licenses, specialized treatment
protocols, copyrights, formulas, know-how and trade secrets. Dentist has the
sole and exclusive right to use all Assets constituting proprietary rights
without infringing or violating the rights of any third parties and no
consents of any third parties are required for the use thereof by Pentegra.

2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set forth on
EXHIBIT 2.13 attached hereto is a true and complete list, as of the date of this
Agreement of: (a) the most recent payroll report of Dentist, showing all current
employees of Dentist and their current levels of compensation, (b) promised
increases in compensation of employees of Dentist that have not yet been
effected, (c) oral or written employment agreements, consulting agreements or
independent contractor agreements (and all amendments thereto) to which Dentist
is a party, copies of which have been delivered to Pentegra, and (d) all
employee manuals, materials, policies, procedures and work-related rules, copies
of which have been delivered to Pentegra. Dentist is in compliance with all
applicable laws, rules, regulations and ordinances respecting employment and
employment practices. Dentist has not engaged in any unfair labor practice.
There are no unfair labor practices charges or complaints pending or threatened
against Dentist, and Dentist has never been a party to any agreement with any
union, labor organization or collective bargaining unit.

2.14 LEGAL PROCEEDINGS. Neither Dentist nor the Business nor any of the
Assets is subject to any pending, nor does Dentist have knowledge of any
threatened, litigation, governmental investigation, condemnation or other
proceeding against or relating to or affecting Dentist, the Business, the Assets
or the transactions contemplated by this Agreement, and, to the knowledge of
Dentist, no basis for any such action exists, nor is there any legal impediment
of which Dentist has knowledge to the continued operation of its business or the
use of the Assets in the ordinary course, subject to consents set forth on
EXHIBIT 2.4.

2.15 CONTRACTS. Dentist has delivered to Pentegra true copies of all
written, and disclosed to Pentegra all oral, outstanding contracts, obligations
and commitments of Dentist ("Contracts"), entered into in connection with and
related to the Assets or the Business, all of which are listed or incorporated
by reference on EXHIBIT 2.8 (in the case of leases), EXHIBIT 2.13 (in the case
of employment agreements) and EXHIBIT 2.15 (in the case of Contracts other than
leases) attached hereto. Except as otherwise indicated on such Exhibits, all of
such Contracts are valid, binding and enforceable in accordance with their terms
and are in full force and effect, and no defenses, offsets or counterclaims have
been asserted or may be made by any party thereto. Except as indicated on such
Exhibits, there is not under any such Contract any existing default by Dentist,
or any condition or event of which Dentist has knowledge which with notice or
lapse of time, or both, would constitute a default. Dentist has no knowledge
of any default by any other party to such Contracts. Dentist has not received
notice of the intention of any party to any Contract to cancel or terminate any
Contract and have no reason to believe that any amendment or change to any
Contract is contemplated by any party thereto. Other than those contracts,
obligations and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT
2.15, Dentist is not a party to any material written or oral agreement contract,
lease or arrangement, including without limitation, any:

(a) Contract related to the Assets other than this Agreement;

(b) Employment, consulting or compensation agreement or arrangement;

(d) Lease agreement with respect to any property, whether as lessor
or lessee;

(e) Deed, bill of sale or other document evidencing an interest in or
agreement to purchase or sell real or personal property;

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(f) Contract for the purchase of materials, supplies or equipment (i)
which is in excess of the requirements of the Business now booked or for normal
operating inventories, or (ii) which is not terminable upon notice of thirty
(30) days or less;

(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product or
service;

(h) Loan agreement or other contract for money borrowed or lent or to
be borrowed or lent to another;

(i) Contracts containing non-competition covenants;

(j) Financial or similar contracts or agreements with patients of the
Dentist, oral or written, that provide for prepayments or deferred installment
payments; or

(k) Other contracts or agreements that involve either an unperformed
commitment in excess of $1,000 or that terminate or can only be terminated by
Dentist on more than 30 days after the date hereof.

2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16, Dentist
has not, since the Balance Sheet Date:

(a) Incurred any material obligation or liability (absolute, accrued,
contingent or otherwise) or entered into any contract, lease, license or
commitment, except in connection with the performance of this Agreement;

(b) Discharged or satisfied any material lien or encumbrance, or paid
or satisfied any material obligation or liability (absolute, accrued, contingent
or otherwise) other than (i) liabilities shown or reflected on the Balance
Sheet, (ii) liabilities incurred since the Balance Sheet Date in the ordinary
course of business;

(d) Lost or terminated any employee, patient, customer or supplier
that has or may have, individually or in the aggregate, a material adverse
effect on the Business;

(e) Increased or established any reserve for taxes or any other
liability on its books or otherwise provided therefor, except as may have been
required due to income or operations of Dentist since the Balance Sheet Date;

(f) Mortgaged, pledged or subjected to any lien, charge or other
encumbrance any of the Assets, tangible or intangible;

(g) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;

(h) Except in the ordinary course or business consistent with past
practices, granted any increase in the rates of pay of employees, consultants or
agents, or by means of any bonus or pension plan, contract or other commitment,
increased the compensation of any officer, employee, consultant or agent;

(i) Authorized or incurred any capital expenditures in excess of Five
Thousand and No/100 Dollars ($5,000.00);

(j) Except for this Agreement and any other agreement executed and
delivered pursuant to this Agreement, entered into any material transaction
other than in the ordinary course of business or permitted hereunder;

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(k) Experienced damage, destruction or loss (whether or not covered
by insurance) materially and adversely affecting any of its properties, assets
or business or the Business or the Assets, or experienced any other material
adverse change in its financial condition, assets, prospects, liabilities or
business; or

(l) Suffered any material adverse change in the Business or to the
Assets.

2.17 TAXES. (a) Dentist has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to have been
paid by it. All such tax returns are complete and accurate in all respects and
properly reflect the relevant taxes for the periods covered thereby. Dentist
has not received any notice that any tax deficiency or delinquency has been or
may be asserted against Dentist. There are no audits relating to taxes of
Dentist pending or in process or, to the knowledge of Dentist, threatened.
Dentist is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of any extension of time within which to
file any tax return or to pay any tax assessment or deficiency. There are no
liens or encumbrances relating to taxes on or threatened against any of the
assets of Dentist. Dentist has withheld and paid all taxes required by law to
have been withheld and paid by it. Neither Dentist nor any predecessor of
Dentist is or has been a party to any tax allocation or sharing agreement or a
member of an affiliated group of corporations filing a consolidated Federal
income tax return. Dentist has delivered to Pentegra correct and complete
copies of Dentist's three most recently filed annual state, local and Federal
income tax returns, together with all examination reports and statements of
deficiencies assessed against or agreed to by Dentist during the three calendar
year period preceding the date of this Agreement. Dentist has neither made any
payments, is obligated to make any payments, or is a party to any agreement that
under any circumstance could obligate it to make any payments that will not be
deductible under Code section 280G.

(b) Dentist does not intend to dispose of any of the shares of Pentegra
Common Stock to be received hereunder and is not a party to any plan,
arrangement or agreement for the disposition of such shares. Nothing contained
herein shall prohibit Dentist from selling such shares of Pentegra Common Stock
after the designated holding period and in accordance with SECTION 12.1 hereof.

2.18 COMMISSIONS AND FEES. There are no claims for brokerage commissions
or finder's or similar fees in connection with the transactions contemplated by
this Agreement which may be now or hereafter asserted against Pentegra, Dentist
resulting from any action taken by Dentist or their respective agents or
employees, or any of them.

2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved against
on the Balance Sheet, Dentist did not have, as of the Balance Sheet Date, and
has not incurred since that date and will not have incurred as of the Closing
Date, any liabilities or obligations of any nature, whether accrued, absolute,
contingent or otherwise, and whether due or to become due, other than those
incurred in the ordinary course of business or as set forth on EXHIBIT 2.16.
Dentist does not know, or have reasonable grounds to know, of any basis for the
assertion against Dentist as of the Balance Sheet Date, of any claim or
liability of any nature in any amount not fully reflected or reserved against on
the Balance Sheet, or of any claim or liability of any nature arising since that
date other than those incurred in the ordinary course of business or
contemplated by this Agreement. All indebtedness of Dentist (including without
limitation, indebtedness for borrowed money, guaranties and capital lease
obligations) is described on EXHIBIT 2.19 attached hereto.

2.20 INSURANCE POLICIES. Dentist and each licensed professional of Dentist
carries property, liability, malpractice, workers' compensation and such other
types of insurance as is customary in the industry. Valid and enforceable
policies in such amounts are outstanding and duly in force and will remain duly
in force through the Closing Date. All such policies are described in EXHIBIT
2.20 attached hereto and true and correct copies have been delivered to
Pentegra. Dentist has not received notice or other communication from the
issuer of any such insurance policy cancelling or amending such policy or
threatening to do so. Neither Dentist nor any licensed professional employee of
Dentist has any outstanding claims, settlements or premiums owed against any
insurance policy.

2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21 attached
hereto, Dentist has neither established, nor maintains, nor is obligated to make
contributions to or under or otherwise participate in, (a) any bonus or other
type of compensation or employment plan, program, agreement, policy, commitment,
contract or arrangement

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(whether or not set forth in a written document); (b) any pension, profit-
sharing, retirement or other plan, program or arrangement; or (c) any other
employee benefit plan, fund or program, including, but not limited to, those
described in SECTION 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"). All such plans listed on EXHIBIT 2.20 (individually
"Dentist Plan," and collectively "Dentist Plans") have been operated and
administered in all material respects in accordance with all applicable laws,
rules and regulations, including without limitation, ERISA, the Internal Revenue
Code of 1986, as amended, Title VII of the Civil Rights Act of 1964, as amended,
the Equal Pay Act of 1967, as amended, the Age Discrimination in Employment Act
of 1967, as amended, and the related rules and regulations adopted by those
Federal agencies responsible for the administration of such laws. No act or
failure to act by Dentist has resulted in a "prohibited transaction" (as defined
in ERISA) with respect to the Dentist Plans. No "reportable event" (as defined
in ERISA) has occurred with respect to any of the Dentist Plans. Dentist has
not previously made, is not currently making, and is not obligated in any way
to make, any contributions to any multiemployer plan within the meaning of the
Multi-Employer Pension Plan Amendments Act of 1980. With respect to each Dentist
Plan, either (i) the value of plan assets (including commitments under insurance
contracts) is at least equal to the value of plan liabilities or (ii) the value
of plan liabilities in excess of plan assets is disclosed on the Balance Sheet,
all as of the Closing Date.

2.22 ADVERSE AGREEMENTS. Dentist is not, and will not be as of the Closing
Date, a party to any agreement or instrument or subject to any charter or other
corporate restriction or any judgment, order, writ, injunction, decree, rule or
regulation that materially and adversely affects the condition (financial or
otherwise), operations, assets, liabilities, business or prospects of Dentist,
the Business or the Assets.

2.23 COMPLIANCE WITH LAWS IN GENERAL. Dentist and Dentist's licensed
professional employees, and the conduct of the Business and use of the Assets,
have complied with all applicable laws, rules, regulations and licensing
requirements, including, without limitation, the Federal Environmental
Protection Act, the Occupational Safety and Health Act, the Americans with
Disabilities Act and any environmental laws and medical waste laws, and there
exist no violations by Dentist or any licensed professional employee of Dentist
of any Federal, state or local law or regulation. Dentist has not received any
notice of a violation of any Federal, state and local laws, regulations and
ordinances relating to the operations of the Business and Assets and no notice
of any pending inspection or violation of any such law, regulation or ordinance
has been received by Dentist.

2.24 THIRD PARTY PAYORS. Dentist and each licensed professional employee
or independent contractor of Dentist has timely filed all claims or other
reports required to be filed with respect to the purchase of services by third-
party payors, and all such claims or reports are complete and accurate, and has
no liability to any payor with respect thereto. There are no pending appeals,
overpayment determinations, adjustments, challenges, audit, litigation or
notices of intent to open Medicare or Medicaid claim determinations or other
reports required to be filed by Dentist and each licensed professional employee
of Dentist. Neither Dentist nor any licensed professional employee of Dentist
has been convicted of, or pled guilty or nolo contendere to, patient abuse or
negligence, or any other Medicare or Medicaid program related offense and none
has committed any offense which may serve as the basis for suspension or
exclusion from the Medicare and Medicaid programs or any other third party payor
program. With respect to payors, Dentist and Dentist's licensed professional
employees has not (a) knowingly and willfully making or causing to be made a
false statement or representation of a material fact in any application for any
benefit or payment; (b) knowingly and willfully making or causing to be made any
false statement or representation of a material fact for use in determining
rights to any benefit or payment; (c) failed to disclose knowledge of the
occurrence of any event affecting the initial or continued right to any benefit
or payment on its own behalf or on behalf of another, with the intent to
fraudulently secure such benefit or payment; and (d) violated any applicable
state anti-remuneration or self-referral statutes, rules or regulations.

2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by Dentist
in this Agreement, and no Exhibit or certificate issued or executed by, or
information furnished by Dentist or to be furnished by Dentist to Pentegra
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.

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2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Dentist has with any bank or other
financial institution, indicating with respect to each relationship the type of
arrangement maintained (such as checking account, borrowing arrangements, safe
deposit box, etc.) and the person or persons authorized in respect thereof.

2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No officer or
employee or family member of Dentist, or their respective spouses, children or
affiliates, owns directly or indirectly, on an individual or joint basis, any
interest in, has a compensation or other financial arrangement with, or serves
as an officer or director of, any customer or supplier or competitor of Dentist
or any organization that has a material contract or arrangement with Dentist.

2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct list of
the names and addresses of each payor of Dentist's services which accounted for
more than 10% of revenues of Dentist in the preceding fiscal year. Dentist has
good relations with all such payors and other material payors of Dentist and
none of such payors has notified Dentist that it intends to discontinue its
relationship with Dentist or to deny any claims submitted to such payor for
payment.

SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.

Pentegra hereby represents and warrants to Dentist as follows:

3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation duly
organized and existing and in good standing under the laws of the State of
Delaware.

3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions required
by law, its Certificate of Incorporation, its Bylaws or otherwise, to authorize
the execution, delivery and performance of this Agreement and such related
documents. This Agreement and all agreements and documents executed and
delivered in connection herewith have been, or will be as of the Closing Date,
duly executed and delivered by Pentegra and constitute or will constitute the
legal, valid and binding obligations of Pentegra, enforceable against Pentegra
in accordance with their respective terms, except as may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally or the availability of equitable remedies. The execution and delivery
of this Agreement, and the agreements executed and delivered pursuant to this
Agreement or to be executed and delivered on the Closing Date, do not, and, the
consummation of the actions contemplated hereby will not, violate any provision
of the Certificate of Incorporation or Bylaws of Pentegra or any provisions of,
or result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or decree
to which Pentegra is a party or by which Pentegra is bound, or violate any
material restrictions of any kind to which Pentegra is subject, or result in any
lien or encumbrance on any of Pentegra's assets. Other than as have been
obtained or as would not have a material adverse effect, there are no consents
of any person or entity required for the transaction contemplated hereby on
behalf of Pentegra.

3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building or
other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Penegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would not
have a material adverse effect, there are no proceedings pending or, to the
knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses or
permits.

3.4 LEGAL PROCEEDINGS. Other than as would not have a material adverse
effect, neither Pentegra nor its business or assets is subject to any pending,
nor does Pentegra have knowledge of any threatened, litigation, governmental
investigation, condemnation or other proceeding against or relating to or
affecting Pentegra, its business, assets or the transactions contemplated by
this Agreement, and, to the knowledge of Pentegra, no basis for any such

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action exists, nor is there any legal impediment of which Pentegra has knowledge
to the continued operation of its business or the use of its Assets in the
ordinary course.

3.5 TAXES. Pentegra has filed all tax returns (including tax reports and
other statements) required to have been filed by it, and has paid all taxes
(including any interest, penalty or additions thereto) required to have been
paid by it, other than as would not have a material adverse effect. Pentegra
has not received any notice that any tax deficiency or delinquency has been or
may be asserted against Pentegra. There are no audits relating to taxes of
Pentegra pending or in process or, to the knowledge of Pentegra, threatened.
Pentegra is not currently the beneficiary of any waiver of any statute of
limitations in respect of taxes nor of any extension of time within which to
file any tax return or to pay any tax assessment or deficiency.

3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation for
any finder's, broker's or similar fees in connection with the transactions
contemplated hereby.

3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares of
Pentegra Common Stock in connection with the acquisition contemplated hereby
will be as of the Closing Date duly and validly authorized by all necessary
corporate action on the part of Pentegra. The Pentegra Common Stock to be
issued in connection with the acquisition contemplated hereby, when issued in
accordance with the terms of this Agreement, will be validly issued, fully paid
and nonassessable.

3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by Pentegra
in this Agreement, and no Exhibit or certificate issued by officers or directors
of Pentegra and furnished or to be furnished to Dentist pursuant hereto, or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact, or omits or will omit to state a
material fact necessary to make the statements or facts contained therein not
misleading.

SECTION 4. COVENANTS OF DENTIST.

Dentist agrees that between the date hereof and the Closing Date:

4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Dentist shall use his best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and conditions. Dentist agrees to complete the
Exhibits hereto to be provided by him in form and substance satisfactory to
Pentegra.

4.2 BUSINESS OPERATIONS. Dentist shall operate the Business and use the
Assets in the ordinary course. Dentist shall not enter into any lease,
contract, indebtedness, commitment, purchase or sale or acquire or dispose of
any capital asset relating to the Business or the Assets except in the ordinary
course of business. Dentist shall use their best efforts to preserve the
Business and Assets intact and shall not take any action that would have an
adverse effect on the Business or Assets. Dentist shall use their best efforts
to preserve intact the relationships with payors, customers, suppliers, patients
and others having significant business relations with Dentist. Dentist shall
collect its receivables and pay its trade payables in the ordinary course of
business. Dentist shall not introduce any new method of management, operations
or accounting.

4.3 ACCESS AND NOTICE. Dentist shall permit Pentegra and its authorized
representatives access to, and make available for inspection, all of the assets
and business of Dentist, the Business and the Assets, including employees,
customers and suppliers and permit Pentegra and its authorized representatives
to inspect and make copies of all documents, records and information with
respect to the business or assets of Dentist, the Business or the Assets as
Pentegra or its representatives may request. Dentist shall promptly notify
Pentegra in writing of (a) any notice or communication relating to a default or
event that, with notice or lapse of time or both, could become a default, under

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any contract, commitment or obligation to which Dentist is a party or relating
to the Business or the Assets, and (b) any adverse change in Dentist's or the
Business' financial condition or the Assets.

4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Dentist shall
use his best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby, including
consents described on EXHIBIT 2.4. Dentist shall use his best efforts to obtain
all licenses, permits, approvals or other authorizations required under any law,
rule, regulation, or otherwise to provide the services of the Practice
contemplated by the Service Agreement and to conduct the intended business of
the Practice and operate the Business and use the Assets.

4.5 ACQUISITION PROPOSALS. From the execution of this Agreement until the
earlier of Closing or the termination of this Agreement in accordance with the
provisions hereof, Dentist shall not, and shall use its best efforts to cause
Dentist's employees, agents and representatives not to, initiate, solicit or
encourage, directly or indirectly, any inquiries or the making or implementation
of any proposal or offer, including without limitation, any proposal or offer to
the Dentist, with respect to a merger, acquisition, consolidation or similar
transaction involving, or the purchase of all or any significant portion of the
assets or any equity securities of Dentist or engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to such proposal or offer, and Dentist
will immediately cease any such activities, discussions or negotiations
heretofore conducted with respect to any of the foregoing. Dentist shall
immediately notify Pentegra if any such inquiries or proposals are received.

4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Dentist hereby covenants and
agrees that it will take whatever steps are necessary to pay or fund completely
for any accrued benefits, where applicable, or vested accrued benefits for which
Dentist or any entity might have any liability whatsoever arising from any
insurance, pension plan, employment tax or similar liability of Dentist to any
employee or other person or entity (including, without limitation, any Dentist
Plan and any liability under employment contracts with Dentist) allocable to
services performed prior to the Closing Date. Dentist acknowledges that the
purpose and intent of this covenant is to assure that Pentegra shall have no
liability whatsoever at any time after the Closing Date with respect to any of
Dentist's employees or similar persons or entities, including, without
limitation, any Dentist Plan for the period prior to the Closing Date.

4.7 EMPLOYEE MATTERS. Dentist shall not, without the prior written
approval of Pentegra, except as required by law, increase the cash compensation
of the Dentist (other than in the ordinary course of business) or other employee
or an independent contractor of Dentist, adopt, amend or terminate any
compensation plan, employment agreement, independent contractor agreement,
employee policies and procedures or employee benefit plan, take any action that
could deplete the assets of any employee benefit, or fail to pay any premium or
contribution due or file any report with respect to any employee benefit plan,
or take any other actions with respect to its employees or employee matters
which might have an adverse effect upon Dentist, its business, assets or
prospects.

4.8 [INTENTIONALLY OMITTED].

4.9 REQUIREMENTS TO EFFECT ACQUISITION. Dentist shall use his best
efforts to take, or cause to be taken, all actions necessary to effect the
acquisition contemplated hereby under applicable law.

4.10 ACCOUNTING AND TAX MATTERS. Dentist will not change in any material
respect the tax or financial accounting methods or practices followed by Dentist
(including any material change in any assumption underlying, or any method of
calculating, any bad debt, contingency or other reserve), except as may be
required by law or generally accepted accounting principles. Dentist will
duly, accurately and timely (without regard to any extensions of time) file all
returns, information statements and other documents relating to taxes of Dentist
required to be filed by it, and pay all taxes required to be paid by it, on or
before the Closing Date.

4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra and Dentist hereby waive
any compliance with the applicable state Bulk Transfers Act, if any. Dentist
covenants and agrees that all of the creditors with respect to the Business and
the Assets will be paid in full by Dentist prior to the Closing Date, except to
extent that any liability to such creditors is assumed by Pentegra pursuant to
this Agreement. If required by Pentegra, Dentist shall furnish Pentegra

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with proof of payment of all creditors with respect to the Business and the
Assets. Notwithstanding the foregoing, Dentist may dispute the validity or
amount of any such creditor's claim without being deemed to be in violation
of this SECTION 4.11, provided that such dispute is in good faith and does
not unreasonably delay the resolution of the claim and provided, further that
Dentist agrees to indemnify and bond Pentegra for such amounts as is
satisfactory to Pentegra.

4.12 LEASE. If Dentist leases any of its premises from the Dentist or
other affiliate of Dentist, Pentegra shall have entered into a building lease
(the "Building Lease") with the owner of such premises on terms and conditions
satisfactory to Pentegra, the terms and conditions of which shall include,
without limitation, (i) a five year initial term plus three five-year renewal
options, (ii) a lease rate equal to the fair market value lease rate, as agreed
to by Pentegra, and (iii) such other provisions to be acceptable to Pentegra.

4.13 HIRING OF EMPLOYEES. Dentist shall cooperate with all requests made
by Pentegra for the purpose of allowing Pentegra to hire those non-dental
employees of Dentist designated by Pentegra, such employment to be effective as
of the Closing Date. Notwithstanding the above, Dentist shall remain liable
under any Dentist Plans for any claims incurred by any employees or their
spouses or dependents, and for all compensation, bonuses, benefits and other
such items and other liabilities related to Dentist's employees incurred by
Dentist prior to the Closing Date.

4.14 EMPLOYEE BENEFIT PLANS. Dentist agrees and acknowledges that all
employees of Dentist hired by Pentegra pursuant to SECTION 4.13 above, shall be
treated as "leased employees" (as defined in Code Section 414(n)) of Dentist and
shall be treated as Clinic employees for purposes of eligibility and
participation in Dentist Plans.

4.15 INSURANCE. Dentist shall cause Pentegra and its affiliates to be
named as an additional insured on its liability insurance programs, effective as
of the Closing Date.

4.16 FORMATION OF THE PRACTICE. Dentist shall have formed a limited
liability company, partnership or other legal entity (the "Practice") approved
by Pentegra for the purpose of practicing dentistry and entering into the
Service Agreement. The Practice shall be duly organized, in existing and in
good standing under the laws of the State in which the Dentist and the Practice
are to practice dentistry. The Practice shall have all necessary power to own
all of its assets and to carry on its business as such business is now being
conducted. The Dentist shall be the sole member/shareholder/partner of the
Practice and own all such interests free of all security interests, claims,
encumbrances and liens. Each interest in the Practice shall be legally and
validly issued and fully paid and nonassessable. There shall be no outstanding
(a) bonds, debentures, notes or other obligations the holders of which have the
right to vote with the members/partners/shareholders of the Practice on any
matter, (b) securities of the Practice convertible into equity interests in the
Practice, or (c) commitments, options, rights or warrants to issue any such
equity interests in the Practice, to issue securities of the Practice
convertible into such equity interests, or to redeem any securities of the
Practice. No interests of the Practice shall have been issued or disposed of in
violation of the preemptive rights, rights of first refusal or similar rights of
any of the Practice's members/partners/shareholders. The Practice shall quality
to do business as a foreign entity in any other state or jurisdiction by reason
of its business, properties or activities in or relating to such other state or
jurisdiction.

4.17 CORPORATE RECORDS. True and correct copies of the Articles of
Organization/Partnership Agreement\Articles of Incorporation, Bylaws/Regulations
and minutes of the Practice and all amendments thereto of the Practice shall
have been delivered to Pentegra and shall be in form and substance satisfactory
to Pentegra. The minute books of the Practice shall contain all accurate
minutes of the meetings of and consents to actions taken without meetings of the
members\managers/partners/board of directors of the Practice since its
formation. The books of account of the Practice shall have been kept accurately
in the ordinary course of business and the revenues, expenses, assets and
liabilities of the Practice shall have been properly recorded in such books.

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contemplated hereby shall have been duly executed and delivered by the Practice
and constitute or will constitute the legal, valid and binding obligations of
the Practice enforceable against the Practice in accordance with their
respective terms, except as may be limited by applicable bankruptcy, insolvency
or similar laws affecting creditors' rights generally or the availability of
equitable remedies. The execution and delivery of the Service Agreement, the
Employment Agreements and the other agreements contemplated hereby will not
violate any provision of the organizational documents of the Practice or any
provisions of, or result in the acceleration of, any obligation under any
mortgage, lien, lease, agreement, rent, instrument, order, arbitration award,
judgment or decree to which the Practice is a party or by which the Practice is
bound, or violate any material restrictions of any kind to which the Practice is
subject, or result in any lienor encumbrance on any of the Practice's assets.

4.19 NO BUSINESS. Other than its Articles of Organization/Partnership
Agreement/Articles of Incorporation, Bylaws/Regulations and as of the Closing
Date, the Service Agreement and the Employment Agreements, the Practice shall
not be a party to or subject to any agreement, indenture or other instrument.

4.20 COMPLIANCE WITH LAWS. The Practice shall have complied with all
applicable laws, regulations and licensing requirements and has filed with the
proper authorities all necessary statements and reports.

SECTION 5. COVENANTS OF PENTEGRA.

Pentegra agrees that between the date hereof and the Closing:

5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Pentegra shall use its best
efforts to cause the consummation of the transactions contemplated hereby in
accordance with their terms and provisions. Pentegra agrees to complete the
Exhibits hereto to be provided by it.

5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra shall
use its best efforts to secure all necessary approvals and consents of third
parties to the consummation of the transactions contemplated hereby.

SECTION 6. COVENANTS OF PENTEGRA AND DENTIST.

Pentegra and Dentist agree as follows:

6.1 FILINGS; OTHER ACTIONS. Pentegra and Dentist shall cooperate to
promptly prepare and file with the Securities Exchange Commission ("SEC") the
Registration Statement on Form S-1 (or other appropriate Form) to be filed by
Pentegra in connection with its Initial Public Offering (including the
prospectus constituting a part thereof, the "Registration Statement"). Pentegra
shall obtain all necessary state securities laws or "Blue Sky" permits and
approvals required to carry out the transactions contemplated by this Agreement
and the Dentist shall furnish all information concerning Dentist as may be
reasonable requested in connection with any such action.

Dentist represents and warrants that none of the information or documents
supplied or to be supplied by it specifically for inclusion in the Registration
Statement, by exhibit or otherwise, will, at the time the Registration Statement
and each amendment or supplement thereto, if any, becomes effective under the
Securities Act of 1933, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. Dentist shall be entitled to review the Registration
Statement and each amendment thereto, if any, prior to the time each becomes
effective under the Securities Act of 1933.

Dentist shall furnish Pentegra will all information concerning itself and
such other matters as may be reasonable requested by Pentegra in connection with
the preparation of the Registration Statement and each amendment or supplement
thereto, or any other statement, filing, notice or application made by or on
behalf of each such party or any of its subsidiaries to any governmental entity
in connection with the transactions contemplated by the Other Agreements or this
Agreement.

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SECTION 7. PENTEGRA CONDITIONS PRECEDENT.

The obligations of Pentegra hereunder are subject to the fulfillment at or
prior to the Closing of each of the following conditions:

7.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Dentist contained herein shall have been true and correct in all respects when
initially made and shall be true and correct in all respects as of the Closing
Date.

7.2 COVENANTS AND CONDITIONS. Dentist shall have performed and complied
with all covenants and conditions required by this Agreement to be performed and
complied with by Dentist prior to the Closing Date.

7.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.

7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business or
prospects of Dentist shall have occurred since the Balance Sheet Date.

7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Dentist, the Business and the Assets, the results of which shall
be satisfactory to Pentegra in its sole discretion.

7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.

7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. The Practice and Pentegra
shall have executed and delivered a Service Agreement (the "Service Agreement"),
in substantially the form attached hereto as EXHIBIT 7.7, pursuant to which
Pentegra will provide management services to the Practice. Dentist shall have
executed and delivered a Guaranty Agreement in substantially the form attached
as EXHIBIT 4.10 of the Service Agreement pursuant to which Dentist shall, among
other things, guaranty the obligations of the Practice under the Service
Agreement.

7.8 EMPLOYMENT ARRANGEMENTS. Dentist shall have terminated his or her
employment agreement and executed an employment agreement ("Employment
Agreement") with the Practice in form and substance attached hereto as EXHIBIT
7.8 and otherwise satisfactory to Dentist and Pentegra.

7.9 CONSENTS AND APPROVALS. Dentist shall have obtained all necessary
government and other third-party approvals and consents.

7.10 CLOSING DELIVERIES. Pentegra shall have received all documents, duly
executed in form satisfactory to Pentegra and its counsel, referred to in
SECTION 9.1.

7.11 DEBT AND RECEIVABLES. There shall be no indebtedness, receivables or
payables between Dentist and its affiliates and Dentist shall not have any
liabilities, including indebtedness, guaranties and capital leases, that are not
set forth on EXHIBIT 2.19.

7.12 INSURANCE. Dentist shall have named Pentegra as an additional insured
on irs liability insurance program in accordance with SECTION 4.15.

7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Dentist since the Balance Sheet Date.

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proceedings for that purpose shall have been initiated or threatened by the SEC.
At or prior to the date that the Registration Statement is declared effective by
the SEC, Pentegra shall have received all state securities and "Blue Sky"
permits necessary to consummate the transactions contemplated hereby. The
Pentegra Common Stock shall have been approved for listing on Nasdaq or other
exchange selected by Pentegra, subject only to official notification of
issuance.

SECTION 8. DENTIST'S CONDITIONS PRECEDENT.

The obligations of Dentist hereunder are subject to fulfillment at or prior
to the Closing of each of the following conditions:

8.1 REPRESENTATIONS AND WARRANTIES. The representations and warranties of
Pentegra contained herein shall have been true and correct in all respects when
initially made and shall be true and correct in all respects as of the Closing
Date.

8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and complied
with all covenants and conditions required by this Agreement to be performed and
complied with by Pentegra prior to the Closing Date.

8.3 PROCEEDINGS. No action, proceeding or order by any court or
governmental body shall have been threatened orally or in writing, asserted,
instituted or entered to restrain or prohibit the carrying out of the
transactions contemplated hereby.

8.4 CLOSING DELIVERIES. Dentist shall have received all documents, duly
executed in form satisfactory to Dentist and its counsel, referred to in SECTION
9.2.

8.5 SECURITIES APPROVAL. The Registration Statement shall have become
effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the SEC.
At or prior to the date that the Registration Statement is declared effective by
the SEC, Pentegra shall have received all state securities and "Blue Sky"
permits necessary to consummate the transactions contemplated hereby. The
Pentegra Common Stock shall have been approved for listing on Nasdaq or other
exchange selected by Pentegra, subject only to official notification of
issuance.

SECTION 9. CLOSING DELIVERIES.

9.1 DELIVERIES OF DENTIST. Within five business days after requested by
Pentegra, Dentist shall deliver to Pentegra the following, all of which shall be
in a form satisfactory to counsel to Pentegra and shall be held by Jackson &
Walker, L.L.P. (counsel for Pentegra) in escrow pending Closing, pursuant to an
escrow agreement or letter agreement in form and substance mutually acceptable
to the parties hereto:

(a) an executed original Service Agreement and executed originals of
all documents required by that agreement, including but not limited to the
Guaranty Agreemen and security agreement referred to therein;

(b) executed Employment Agreements;

(d) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra;

(e) certificates of Dentist dated as of the Closing Date, (i) as to
the truth and correctness of the representations and warranties of Dentist
contained herein; (ii) as to the performance of and compliance by Dentist with

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all covenants contained herein; and (iii) certifying that all conditions
precedent of Dentist to the Closing have been satisfied;

(f) an opinion of counsel to Dentist opining as to the execution and
delivery of this Agreement and the other documents and agreements to be executed
pursuant hereto, the good standing and authority of Dentist, the enforceability
of this Agreement and the other agreements and documents to be executed in
connection herewith, and other matters reasonably requested by Pentegra;

(g) non-foreign affidavits executed by Dentist;

(h) all authorizations, consents, approvals, permits and licenses
referred to in SECTIONS 2.3 and 2.4;

(i) an executed Registration Rights Agreement between Pentegra and
Dentist, in substantially the form attached hereto as EXHIBIT 9.1(l) (the
"Registration Rights Agreement"); and

(j) such other instruments and documents as reasonably requested by
Pentegra to carry out and effect the purpose and intent of this Agreement.

9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra shall
deliver to Dentist the following, all of which shall be in a form satisfactory
to counsel to Dentist and shall be held by Jackson & Walker, L.L.P. (counsel for
Pentegra) in escrow pending Closing, pursuant to an escrow agreement or letter
agreement in form and substance mutually acceptable to the parties hereto:

(a) the Acquisition Consideration;

(b) an executed Service Agreement;

(d) a copy of the resolutions of the Board of Directors of Pentegra
(or a committee thereof) authorizing the execution, delivery and performance of
this Agreement and all related documents and agreements each certified by the
Secretary as being true and correct copies of the original thereof;

(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii) certifying
that all conditions precedent of Pentegra to the Closing have been satisfied;

(f) a certificate of the Secretary of Pentegra certifying as to the
incumbency of the directors and officers of Pentegra and as to the signatures of
such directors and officers who have executed documents delivered at the Closing
on behalf of Pentegra;

(g) certificates, dated within 30 days of the Closing Date, of the
Secretary of the State of Delaware establishing that Pentegra is in existence
and are in good standing to transact business in the State of Delaware and the
State of incorporation of Dentist;

(h) an opinion of counsel to Pentegra opining as to the execution and
delivery of this Agreement and the other documents and agreements to be executed
pursuant hereto, the good standing and authority of Pentegra, the enforceability
of this Agreement and the other agreements and documents to be executed in
connection herewith, and other matters reasonably requested by Dentist;

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(i) the executed Registration Rights Agreement; and

(j) such other instruments and documents as reasonably requested by
Dentist to carry out and effect the purpose and intent of this Agreement.

SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.

10.1 NATURE AND SURVIVAL. All statements contained in this Agreement or in
any Exhibit attached hereto, any agreement executed pursuant hereto, and any
certificate executed and delivered by any party pursuant to the terms of this
Agreement, shall constitute representations and warranties of Dentist or of
Pentegra, as the case may be. All such representations and warranties, and all
representations and warranties expressly labeled as such in this Agreement shall
survive the date of this Agreement and the Closing Date for a period of five (5)
years following the Closing Date, except that (i) the representations and
warranties with respect to environmental and medical waste laws and health care
laws and matters shall survive for a period of fifteen (15) years and tax
representations shall survive until one year after the expiration of the
applicable statute of limitations. Each party covenants with the other parties
not to make any claim with respect to such representations and warranties,
against any party after the date on which such survival period shall terminate.
No party shall be entitled to claim indemnity from any other party pursuant to
SECTION 10.2 or 10.3 hereof, unless such party has timely given the notice
required in SECTION 10.2, 10.3 or 10.4 hereof, as the case may be. Each party
hereby releases, acquits and discharges the other party from any and all claims
and demands, actions and causes of action, damages, costs, expenses and rights
of setoff with respect to which the notices required by SECTION 10.2, 10.3 or
10.4, as applicable, are not timely provided.

10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS SECTION
10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY
AND HOLD DENTIST AND ITS AGENTS AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING
DENTIST FOR PURPOSES OF THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION
10.4, AN "INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL
LIABILITIES, LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES
(INCLUDING, BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL
THROUGH APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM:

(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER, AND

(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND

(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN ANY PRELIMINARY
PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF,
OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.

IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES, INDEMNITOR
SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS THEY ARE
INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED PERSON
AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE EXTENT
THAT IT IS FINALLY

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JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON IS NOT ENTITLED TO
INDEMNIFICATION HEREUNDER.

10.3 INDEMNIFICATION BY DENTIST. DENTIST (FOR PURPOSES OF THIS SECTION
10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"), SHALL INDEMNIFY
AND HOLD PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS
AND EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS
SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED
PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS,
DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT
LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL) ARISING
FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO:

(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY, AGREEMENT
OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS HERETO) AND EACH
DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE FURNISHED BY
INDEMNITOR HEREUNDER,

(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT AND
CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS, AND

(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES, AGENTS
AND INDEPENDENT CONTRACTORS IN OR ABOUT DENTIST'S BUSINESS WHETHER ON OR AFTER
THE CLOSING DATE,

(D) ANY VIOLATION BY DENTIST OR ITS CONSULTANTS, OFFICERS, DIRECTORS,
EMPLOYEES, AGENTS AND AFFILIATES OF STATE OR FEDERAL LAWS GOVERNING HEALTHCARE
FRAUD AND ABUSE, OR ANY OVERPAYMENT OR OBLIGATION ARISING OUT OF OR RESULTING
FROM ACTIONS OF THE DENTIST RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY
PAYOR, WHETHER ON OR AFTER THE CLOSING DATE,

(E) TAXES OF DENTIST OR ANY OTHER PERSON OR ENTITY RELATED TO OR
AFFILIATED WITH DENTIST ARISING FROM OR AS A RESULT OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT,

(F) ANY LIABILITY OF DENTIST FOR COSTS AND EXPENSES (INCLUDING, WITHOUT
LIMITATION, ATTORNEYS' FEES) INCURRED IN CONNECTION WITH THE NEGOTIATION,
PREPARATION OF CLOSING OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT OR THE
OTHER DOCUMENTS TO BE EXECUTED IN CONNECTION HEREWITH,

(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,

(H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR

(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY OTHER
FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON LAW OR
OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED UNTRUE
STATEMENT OF A MATERIAL FACT RELATING TO DENTIST AND PROVIDED TO PENTEGRA OR ITS
COUNSEL BY THE DENTIST SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS,
THE REGISTRATION STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY
AMENDMENT THEREOF OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY
OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
DENTIST REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.

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10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after Indemnified
Person receives written notice of the commencement of any action or other
proceeding in respect of which indemnification or reimbursement may be sought
hereunder, or within such lesser time as may be provided by law for the defense
of such action or proceeding, such Indemnified Person shall notify Indemnitor
thereof. If any such action or other proceeding shall be brought against any
Indemnified Person, Indemnitor shall, upon written notice given within a
reasonable time following receipt by Indemnitor of such notice from Indemnified
Person, be entitled to assume the defense of such action or proceeding with
counsel chosen by Indemnitor and reasonably satisfactory to Indemnified Person;
provided, however, that any Indemnified Person may at its own expense retain
separate counsel to participate in such defense. Notwithstanding the foregoing,
Indemnified Person shall have the right to employ separate counsel at
Indemnitor's expense and to control its own defense of such action or proceeding
if, in the reasonable opinion of counsel to such Indemnified Person, (a) there
are or may be legal defenses available to such Indemnified Person or to other
Indemnified Persons that are different from or additional to those available to
Indemnitor and which could not be adequately advanced by counsel chosen by
Indemnitor, or (b) a conflict or potential conflict exists between Indemnitor
and such Indemnified Person that would make such separate representation
advisable; provided, however, that in no event shall Indemnitor be required to
pay fees and expenses hereunder for more than one firm of attorneys of
Indemnified Person in any jurisdiction in any one action or proceeding or group
of related actions or proceedings. Indemnitor shall not, without the prior
written consent of any Indemnified Person, settle or compromise or consent to
the entry of any judgment in any pending or threatened claim, action or
proceeding to which such Indemnified Person is a party unless such settlement,
compromise or consent includes an unconditional release of such Indemnified
Person from all liability arising or potentially arising from or by reason of
such claim, action or proceeding.

10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Dentist giving rise to indemnification
under SECTION 10.3 or SECTION 10.4 hereof, Pentegra shall be entitled to offset
the amount of damages incurred by it as a result of such breach of warranty,
representation, covenant or agreement against any amounts payable by Pentegra,
including the amounts payable under the Service Agreement.

SECTION 11. TERMINATION. This Agreement may be terminated:

(a) at any time by mutual agreement of all parties;

(b) at any time by Pentegra if any representation or warranty of Dentist
contained in this Agreement or in any certificate or other document executed and
delivered by Dentist pursuant to this Agreement is or becomes untrue or breached
in any material respect or if Dentist fails to comply in any material respect
with any covenant or agreement contained herein, and any such misrepresentation,
noncompliance or breach is not cured, waived or eliminated within twenty (20)
days after receipt of written notice thereof;

(c) at any time by Dentist if any representation or warranty of Pentegra
contained in this Agreement or in any certificate or other document executed and
delivered by Pentegra pursuant to this Agreement is or becomes untrue or
breached in any material respect or if Pentegra fails to comply in any material
respect with any covenant or agreement contained herein and such
misrepresentation, noncompliance or breach is not cured, waived or eliminated
within twenty (20) days after receipt of written notice thereof;

(d) by Pentegra or Dentist if the transaction contemplated hereby shall
not have been consummated by December 31, 1997; or

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(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Dentist, that such termination is
desirable and in the best interests of Pentegra.

SECTION 12. TRANSFER REPRESENTATIONS.

12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing Date,
Dentist shall not voluntarily (a) sell, assign, exchange, transfer, encumber,
pledge, distribute, appoint or otherwise dispose of (i) any shares of Pentegra
Common Stock received by such party hereunder, (ii) any interest (including
without limitation, an option to buy or sell) in any shares of Pentegra Common
Stock, in whole or in part, and no such attempted transfer shall be treated as
effective for any purpose or (b) engage in any transaction, whether or not with
respect to any shares of Pentegra Common Stock or any interest therein, the
intent or effect of which is to reduce the risk of owning shares of Pentegra
Common Stock. The certificates evidencing the Pentegra Common Stock delivered
to Dentist pursuant to the terms hereof will bear a legend substantially in the
form set forth below and containing such other information as Pentegra may deem
necessary or appropriate:

The shares represented by this certificate may not be voluntarily sold,
assigned, exchanged, transferred, encumbered, pledged, distributed,
appointed or otherwise disposed of, and the issuer shall not be required to
give effect to any attempted voluntary sale, assignment, exchange,
transfer, encumbrance, pledge, distribution, appointment or other
disposition prior to _________ [date that is one year from the Closing
Date]. Upon the written request of the holder of this certificate, the
issuer agrees to remove this restrictive legend (and any stop order placed
with the transfer agent) after the date specified above.

12.2 INVESTMENTS; COMPLIANCE WITH LAW. Dentist acknowledges that the
shares of Pentegra Common Stock to be delivered to Dentist pursuant to this
Agreement have not been and will not be registered under the Securities Act of
1933 and may not be resold without compliance with the Securities Act of 1933.
The Pentegra Common Stock to be acquired by Dentist pursuant to this Agreement
is being acquired solely for its own account, for investment purposes only and
with no present intention of distributing, selling or otherwise disposing of it
in connection with a distribution. Dentist covenants, warrants and represents
that none of the shares of Pentegra Common Stock issued to it will be offered,
sold, assigned, pledged, hypothecated, transferred or otherwise disposed of
except after full compliance with all of the applicable provisions of the
Securities Act, as amended, and the rules and regulations of the Securities
Exchange Commission and applicable state securities laws and regulations. All
certificates evidencing shares of Pentegra Common Stock shall bear the following
legend in addition to the legend referenced in SECTION 12.1.

The shares represented hereby have not been registered under the Securities
Act of 1933 (the "Act") and may only be sold or otherwise transferred if
the holder hereof complies with the Act and applicable securities laws.

In addition, certificates evidencing shares of Pentegra Common Stock shall
bear any legend required by the securities or blue sky laws of any state where
Dentist resides.

12.3 ECONOMIC RISK; SOPHISTICATION. Dentist is able to bear the economic
risk of an investment in Pentegra Common Stock acquired pursuant to this
Agreement and can afford to sustain a total loss of such investment and has such
knowledge and experience in financial and business matters that they are capable
of evaluating the merits and risks of the proposed investment and therefore have
the capacity to protect its own interests in connection with the acquisition of
the Pentegra Common Stock. Dentist and its representatives have had an adequate
opportunity to ask questions and receive answers from the officers of Pentegra
concerning any and all matters relating to the background and experience of the
officers and directors of Pentegra, the plans for the operations of the business
of Pentegra, and any plans for additional acquisitions and the like. Dentist
and its representatives have asked any and all questions in the nature described
in the preceding sentence and all questions have been answered to their
satisfaction. Dentist is an "accredited investors" as defined in Regulation D
of the Securities Act of 1933, as amended.

SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Dentist recognizes
and acknowledges that it had in the past, currently have, and in the future may
possibly have, access to certain confidential information of Pentegra that is

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valuable, special and unique assets of Pentegra's businesses. Dentist agrees
that it will not disclose such confidential information to any person, firm,
corporation, association or other entity for any purpose or reason whatsoever,
unless (i) such information becomes available to or known by the public
generally through no fault of Dentist, (ii) disclosure is required by law or the
order of any governmental authority under color of law, provided, that prior to
disclosing any information pursuant to this clause (ii), Dentist shall, if
possible, give prior written notice thereof to the other parties hereto, and
provide such other parties hereto with the opportunity to contest such
disclosure, (iii) Dentist reasonably believes that such disclosure is required
in connection with the defense of a lawsuit against the disclosing party, or
(iv) Dentist is the sole and exclusive owner of such confidential information as
a result of the transactions contemplated hereunder or otherwise. In the event
of a breach or threatened breach by Dentist of the provisions of this SECTION
13, Pentegra shall be entitled to an injunction restraining Dentist from
disclosing, in whole or in part, such confidential information. Nothing herein
shall be construed as prohibiting Pentegra from pursuing any other available
remedy for such breach or threatened breach, including the recovery of damages.
The obligations of the parties under this SECTION 13 shall survive the
termination of this Agreement.

SECTION 14. MISCELLANEOUS.

14.1 TAX COVENANT. The parties intend that the transactions contemplated
by this Agreement, together with the transactions contemplated by the Other
Agreement and the Initial Public Offering, will qualify as an exchange meeting
the requirements of Section 351 of the Code. The tax returns (and schedules
thereto) of Dentist and Pentegra shall be filed in a manner consistent with
such intention and Dentist and Pentegra shall each provide the other with such
tax information, reports, returns or schedules as may be reasonably required to
assist the other in so reporting the transactions contemplated hereby.

14.2 NOTICES. Any communications required or desired to be given hereunder
shall be deemed to have been properly given if sent by hand delivery, or by
facsimile AND overnight courier, to the parties hereto at the following
addresses, or at such other address as either party may advise the other in
writing from time to time:

If to Pentegra:

Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554

with a copy of each notice directed to Pentegra to:

James S. Ryan, III, Esquire
Jackson Walker L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822

If to Dentist:

To address set forth on EXHIBIT 14.2

with a copy to:

Person and address set forth on EXHIBIT 14.2

20
<PAGE>

All such communications shall be deemed to have been delivered on the date of
hand delivery or on the next business day following the deposit of such
communications, properly addressed and postage prepaid with the overnight
courier.

14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any further
acts and to execute and deliver any documents which may be reasonably necessary
to carry out the provisions of this Agreement.

14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this Agreement,
whether or not such transactions are consummated. Without limiting the
generality of the foregoing and whether or not such liabilities may be deemed to
have been incurred in the ordinary course of business, Pentegra shall not be
liable to or required to pay, either directly or indirectly, any fees and
expenses of legal counsel, accountants, auditors or other persons or entities
retained by Dentist for services rendered in connection with negotiating and
closing the transactions contemplated by this Agreement or the documents to be
executed in connection herewith, whether or not such costs or expenses are
incurred before or after the Closing Date.

14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure, either
written or oral, regarding the transactions contemplated by this Agreement
without the prior written consent of the other party, provided that the
foregoing shall not prohibit any disclosure (a) by press release, filing or
otherwise that Pentegra has determined in good faith judgment to be required by
Federal securities laws or the rules of the National Association of Securities
Dealers, (b) to attorneys, accountants, investment bankers or other agents of
the parties assisting the parties in connection with the transactions
contemplated by this Agreement, and (c) by Pentegra in connection with the
conduct of its Initial Public Offering and conducting an examination of the
operations and assets of Dentist.

14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF Dentist
AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS PRINCIPLES.

14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to describe,
define or limit the scope or intent of the provisions of this Agreement.

14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement are
integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and not
only in connection with the specific representation in which they are explicitly
referenced.

14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL EXHIBITS
ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND SUPERSEDES ANY
AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR
ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY.

14.10 COUNTERPARTS. This Agreement may be executed in several counterparts,
each of which when so executed shall be deemed to be an original, and such
counterparts shall together constitute and be one and the same instrument.

14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any entity
that, through one or more intermediaries is, controlled, controlled by or under
common control with, Pentegra. Upon any such assignment prior to the Closing,
all references herein to Pentegra (including those to Pentegra Common Stock)
shall be deemed to include references to the assignee and the assignee's common
stock. Notwithstanding any such assignment, Pentegra shall not, absent a
written release from Dentist, be relieved from its obligations to Dentist under
this Agreement.

21
<PAGE>

14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one hand,
or Dentist, on the other hand, file suit in any court against any other party
to enforce the terms of this Agreement against the other party or to obtain
performance by it hereunder, the prevailing party will be entitled to recover
all reasonable costs, including reasonable attorneys' fees, from the other
party as part of any judgment in such suit. The term "prevailing party" shall
mean the party in whose favor final judgment after appeal (if any) is rendered
with respect to the claims asserted in the Complaint. "Reasonable attorneys'
fees" are those reasonable attorneys' fees actually incurred in obtaining a
judgment in favor of the prevailing party.

14.13 PRORATIONS. Dentist agrees to reimburse Pentegra at Closing a pro
rata portion of all taxes levied upon the Assets for the calendar year in
which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Dentist and Pentegra as of the Closing Date, and the prorated
amount due Pentegra shall be credited to the cash portion of the Purchase
Consideration. Upon payment by Pentegra of such taxes actually assessed and
paid on the Assets, Pentegra shall calculate the apportionment of such taxes
and shall pay Dentist or may demand from Dentist, and Dentist agrees to pay,
the amount necessary to correct the estimate and proration made at Closing.

14.14 AMENDMENTS; WAIVERS. This Agreement may be amended, modified or
supplemented only by an instrument in writing executed by all the parties
hereto. Any waiver of the terms and conditions hereof must be in writing,
and signed by the parties hereto. The waiver of any of the terms and
conditions of this Agreement shall not be construed as a waiver of any other
terms and conditions hereof.

14.15 ARBITRATION. Upon the request of either Pentegra or the Dentist
(hereinafter referred to as a "Party"), whether made before or after the
institution of any legal proceeding, any dispute among the parties hereto in
any way arising out of, related to, or in connection with this Agreement
(hereinafter a "Dispute"), shall be resolved by binding arbitration in
accordance with the terms of this Section (hereinafter the "Arbitration
Program").

All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in accordance
with the terms of this Arbitration Program, the Commercial Arbitration Rules of
the AAA. In the event of any inconsistency between this Arbitration Program and
those rules or statutes, then the terms of this Arbitration Program shall
control.

The parties hereto agree to adhere to all warranties and covenants (as
described herein) until such time as the arbitration process has been completed
and the arbitrators have determined each party's post-arbitration obligations
and responsibilities as it relates to such warranties and covenants. No
provision of, nor the exercise of any rights under, this Arbitration Program
shall limit the right of any Party at any time to seek or use ancillary or
preliminary judicial or non-judicial self help remedies for the purposes of
obtaining, perfecting, preserving, or foreclosing upon any personal property in
which there has been granted a security interest or lien by a Party in the
Documents. In Disputes involving indebtedness or other monetary obligations,
each Party agrees that the other Party may proceed against all liable persons,
jointly and severally against one or more of them, without impairing rights
against other liable persons. Nor shall a Party be required to join the
principal obligor or any other liable persons (e.g., sureties or guarantors) in
any proceeding against a particular person. A Party may release or settle with
one or more liable persons as the Party deems fit without releasing or impairing
rights to proceed against any persons not so released. All statutes of
limitation that would otherwise be applicable shall apply to any arbitration
proceeding.

22
<PAGE>

as is necessary to make effective the award. In all arbitration proceedings the
arbitrators shall make specific and written findings of fact and conclusions of
law. In all arbitration proceedings in which the amount in controversy exceeds
$100,000.00, in the aggregate, the Parties shall have in addition to the
statutory right to seek vacation or modification of any award pursuant to
applicable law, the right to seek vacation or modification of any award that is
based in whole, or in part, on an incorrect or erroneous ruling of law by appeal
to an appropriate court having jurisdiction; provided, however, that any such
application for vacation or modification of an award based on an incorrect
ruling of law must be filed in a court having jurisdiction over the Dispute
within 15 days from the date the award in rendered. The arbitrators' findings
of fact shall be binding on all Parties and shall not be subject to further
review except as otherwise allowed by applicable law.

To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in writing
by the Parties or, in the absence of such agreement in Phoeniz, Arizona or the
headquarters of Pentegra if other than Phoeniz, Arizona. The provisions of this
Arbitration Program shall survive any termination, amendment, or expiration of
the Documents, unless the Parties otherwise expressly agree in writing making
specific reference to this Arbitration Program. To the extent permitted by
applicable law, the arbitrator shall have the power to award recovery of all
costs and fees (including attorney's fees, administrative fees, and arbitrators'
fees) to the prevailing Party. This Arbitration Program may be amended,
changed, or modified only by a writing which specifically refers to this
Arbitration Program and which is signed by all the Parties. If any term,
covenant, condition or provision of the Arbitration Program is found to be
unlawful or invalid or unenforceable, such illegality or invalidity or
unenforceable shall not affect the legality, validity or enforceability of the
remaining parts of this Arbitration Program, and all such remaining parts hereof
shall be valid and enforceable and have full force and effect as if the illegal,
invalid or unenforceable part had not been included. Each Party agrees to keep
all Disputes and arbitration proceedings strictly confidential, except for
disclosures of information required in the ordinary course of business of the
Parties or by applicable law or regulation.

14.16 SEVERABILITY. If any provision of this Agreement shall be found
to be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable and this Agreement shall be construed and
enforced as if such provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect. In lieu of such
provision, there shall be added automatically as part of this Agreement, a
provision as similar in its terms to such provision as may be possible and be
legal, valid and enforceable.

[End of Page]

23
<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.

PENTEGRA DENTAL GROUP, INC.

By:
----------------------------------
Its:
----------------------------------

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

-----------------------
, D.D.S.

24
<PAGE>
INDEX TO EXHIBITS

EXHIBIT DESCRIPTION
------- -----------

Annex I Acquisition Consideration
A Target Companies
1.1 Assets
1.2(b) Excluded Assets
1.3(b) Assumed Liabilities
2.1 [intentionally omitted]
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Payroll Information; Employment Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice

25
<PAGE>

ANNEX I

ACQUISITION CONSIDERATION

The aggregate consideration to be received by the Dentist pursuant to the
Agreement (the "Acquisition Consideration") is the following:

Shares of Pentegra Common Stock equal to $_________ divided by the initial
public offering price of Pentegra.

Cash in the amount of $________________________.

No fractional shares of Pentegra Common Stock will be issued; rather,
shares of Pentegra Common Stock to be issued to Dentist shall be rounded to the
nearest whole share.

<PAGE>

EXHIBIT 2.2

FORM OF ASSET CONTRIBUTION AGREEMENT

BY AND AMONG

PENTEGRA DENTAL GROUP, INC.,

__________________________________ [target entity]

and

_______________________________[partners]

<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. TERMS OF THE CONTRIBUTION
1.2 CONTRIBUTION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . .1
1.3 EXCLUDED ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. . . . . . . . . . . . . . . .2
1.5 SUBSEQUENT ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . .2

Section 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND PARTNERS.
2.1 EXISTENCE; GOOD STANDING . . . . . . . . . . . . . . . . . . . . . . . .2
2.2 POWER AND AUTHORITY FOR TRANSACTIONS . . . . . . . . . . . . . . . . . .3
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. . . . . . . . . . . .3
2.4 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.5 DISTRIBUTIONS AND REPURCHASES. . . . . . . . . . . . . . . . . . . . . .3
2.6 CORPORATE RECORDS. . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.7 CONTRIBUTOR'S FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . .3
2.8 LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.9 CONDITION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. . . . . . . . . . . . . . . . . .4
2.11 INVENTORIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. . . . . . . . . . . . . . . . . . .4
2.13 PAYROLL INFORMATION; EMPLOYEES . . . . . . . . . . . . . . . . . . . . .4
2.14 LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.15 CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.16 SUBSEQUENT EVENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.17 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.18 COMMISSIONS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.19 LIABILITIES; DEBT. . . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.20 INSURANCE POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.21 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . .7
2.22 ADVERSE AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.23 COMPLIANCE WITH LAWS IN GENERAL. . . . . . . . . . . . . . . . . . . . .8
2.24 THIRD PARTY PAYORS . . . . . . . . . . . . . . . . . . . . . . . . . . .8
2.25 NO UNTRUE REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . .8
2.26 BANKING RELATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . .8
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS . . . . . . . . .8
2.28 PAYORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING . . . . . . . . . . . . . . . . . . .9
3.2 POWER AND AUTHORITY; CONSENTS. . . . . . . . . . . . . . . . . . . . . .9
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. . . . . . . . . . . .9
3.4 LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.5 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.6 COMMISSIONS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.7 CAPITAL STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.8 NO UNTRUE REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . 10

Section 4. COVENANTS OF CONTRIBUTOR AND PARTNERS.
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. . . . . . . . . . . . . . . . . . 10

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<PAGE>

4.2 BUSINESS OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 10

4.3 ACCESS AND NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. . . . . . . . . . 10
4.5 ACQUISITION PROPOSALS. . . . . . . . . . . . . . . . . . . . . . . . . 10
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . . 10
4.7 EMPLOYEE MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 DISTRIBUTIONS AND REPURCHASES. . . . . . . . . . . . . . . . . . . . . 11
4.9 REQUIREMENTS TO EFFECT ACQUISITION . . . . . . . . . . . . . . . . . . 11
4.10 ACCOUNTING AND TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . 11
4.11 WAIVER OF BULK TRANSFER COMPLIANCE . . . . . . . . . . . . . . . . . . 11
4.12 LEASE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.13 HIRING OF EMPLOYEES. . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.14 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . 11
4.15 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. . . . . . . . . . . . . . . . . . 12
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. . . . . . . . . . 12

Section 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND PARTNERS
6.1 FILINGS; OTHER ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . 12

Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 12
7.2 COVENANTS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . 13
7.3 PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.4 NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . . . 13
7.5 DUE DILIGENCE REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.6 APPROVAL BY THE BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . 13
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. . . . . . . . . . . . . . . . . 13
7.8 EMPLOYMENT ARRANGEMENTS. . . . . . . . . . . . . . . . . . . . . . . . 13
7.9 CONSENTS AND APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . 13
7.10 CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.11 DEBT AND RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.12 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.13 NO CHANGE IN WORKING CAPITAL . . . . . . . . . . . . . . . . . . . . . 13
7.14 SECURITIES APPROVAL. . . . . . . . . . . . . . . . . . . . . . . . . . 13

Section 8. CONTRIBUTOR'S AND PARTNERS' CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 14
8.2 COVENANTS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . 14
8.3 PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.4 CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.5 SECURITIES APPROVAL. . . . . . . . . . . . . . . . . . . . . . . . . . 14

Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF CONTRIBUTOR AND PARTNERS . . . . . . . . . . . . . . . . 14
9.2 DELIVERIES OF PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . . 15

Section 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION
10.1 NATURE AND SURVIVAL. . . . . . . . . . . . . . . . . . . . . . . . . . 16
10.2 INDEMNIFICATION BY PENTEGRA. . . . . . . . . . . . . . . . . . . . . . 16
10.3 INDEMNIFICATION BY CONTRIBUTOR AND PARTNERS. . . . . . . . . . . . . . 17

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<PAGE>

10.4 INDEMNIFICATION PROCEDURE. . . . . . . . . . . . . . . . . . . . . . . 18
10.5 RIGHT OF SETOFF. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Section 11. TERMINATION

Section 12. TRANSFER REPRESENTATIONS
12.1 TRANSFER RESTRICTIONS. . . . . . . . . . . . . . . . . . . . . . . . . 19
12.2 INVESTMENTS; COMPLIANCE WITH LAW . . . . . . . . . . . . . . . . . . . 19
12.3 ECONOMIC RISK; SOPHISTICATION. . . . . . . . . . . . . . . . . . . . . 19

Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION

Section 14. MISCELLANEOUS
14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . . 21
14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . 21
14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . . 21
14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . 21
14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>

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<PAGE>

ASSET CONTRIBUTION AGREEMENT

This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed
as ________________, 1997, is by and among PENTEGRA DENTAL GROUP, INC., a
Delaware corporation ("Pentegra"), _____________________________________________
("Contributor") and __________________________________, partners of Contributor
(referred to herein as "Partner" or "Partners").

WITNESSETH:

WHEREAS, Contributor operates a dental practice ("Business") and Pentegra
is engaged in the business of managing certain non-dentistry aspects of
dental practices;

WHEREAS, Contributor desires to contribute to Pentegra, and Pentegra
desires to receive from Contributor, certain assets of Contributor;

WHEREAS, it is intended for Federal income tax purposes that the
transfers contemplated by this Agreement, the Other Agreements and Pentegra's
initial public offering ("Initial Public Offering") of shares of its common
stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an
exchange within the meaning of Section 351 of the Internal Revenue Code of
1986, as amended ("IRC" or "Code");

NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, and for other good and valuable consideration, the
sufficiency of which are hereby acknowledged, the parties agree as follows:

SECTION

1. TERMS OF THE CONTRIBUTION.

1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson Walker
L.L.P., on the day on which the Initial Public Offering of Pentegra Common
Stock is consummated. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date".

1.2 CONTRIBUTION OF ASSETS. Subject to and upon the terms and
conditions contained herein, on the Closing Date, Contributor shall convey,
transfer, deliver and assign to Pentegra or any affiliate of Pentegra
designated by Pentegra all of Contributor's right, title and interest in and
to those certain assets described on EXHIBIT 1.1 attached hereto
(individually, "Asset", and collectively "Assets"), free and clear of all
obligations, security interests, claims, liens and encumbrances, except as
specifically assumed, or taken subject to, by Pentegra pursuant to SECTION
1.3(b) hereof.

1.3 EXCLUDED ASSETS. There shall be excluded from the Assets to be
transferred and contributed hereunder, and Contributor shall retain all of
its right, title and interest in and to, the assets not specifically
transferred hereunder, including without limitation, the assets described on
EXHIBIT 1.2 (the "Excluded Assets").

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1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for
the Assets and the representations, warranties and agreements of Contributor
contained herein, Pentegra shall, on the Closing Date:

(a) Cause to be transferred to Contributor the consideration
specified in ANNEX I attached hereto (the "Acquisition Consideration"); and.

(b) Except as otherwise provided herein, assume and perform or
discharge on or after the Closing Date, the contracts, leases, obligations,
commitments, liabilities and indebtedness of Contributor listed on EXHIBIT
1.3(b) attached hereto to the extent that such obligations, commitments,
liabilities and indebtedness are current and not otherwise in default. (the
"Assumed Liabilities"). Notwithstanding any contrary provision contained
herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra
assume: (i) any liability, commitment or obligation or trade payable or
indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability
set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of
or default under such contracts, leases, commitments or obligations which
occurred on or before the Closing Date; (iii) any liability for any employee
benefits payable to employees of Contributor, including, but not limited to,
liabilities arising under any Contributor Plan (as defined in SECTION 2.21
hereof); (iv) any liability based upon or arising out of a violation of any
antitrust or similar restraint-of-trade laws by Contributor or any Partner,
including, without limiting the generality of the foregoing, any such
antitrust liability which may arise in connection with agreements, contracts,
commitments or orders for the sale of goods or provision of services by
Contributor reflected on the books of Contributor at or prior to the Closing
Date; (v) any liability based upon or arising out of any tortious or wrongful
actions of Contributor, any licensed professional employee or independent
contractor of Contributor or any Partner, (vi) any liability for the payment
of any taxes of Contributor or any Partner, including without limitation,
sales, use and other transfer taxes and income taxes arising from or by
reason of the transactions contemplated by this Agreement; (vii) any
indebtedness secured by deeds of trust or mortgages on real property; nor
(viii) any liability incurred or to be incurred pursuant to any malpractice
or other suits or actions pending against Contributor or any Partner.

1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date,
Pentegra shall consider or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in Pentegra its
right, title or interest in, to or under any of the Assets or otherwise to
carry out this Agreement, in return for the consideration set forth in this
Agreement, Contributor and Partners shall execute and deliver all such deeds,
bills of sale, assignments and assurances and take and do all such other
actions and things as may be necessary or desirable to vest, perfect or
confirm any and all right, title and interest in, to and under the Assets in
Pentegra or otherwise to carry out this Agreement.

SECTION 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND PARTNERS.

Contributor and Partners, jointly and severally, hereby represent and
warrant to Pentegra as follows:

2.1 EXISTENCE; GOOD STANDING. Contributor is a partnership duly
organized, validly existing and in good standing under the laws of the State
of ___________. Contributor has all necessary partnership power to own all
of its assets and to carry on its business as such business is now being
conducted. Contributor does not own stock in or control, directly or
indirectly, any other corporation, association or business organization, nor
is Contributor a party to any joint venture or partnership. The Partners are
the sole partners of Contributor and own all outstanding partnership
interests free of all security interests, claims, encumbrances and liens in
the amounts set forth on EXHIBIT 2.1. Each partnreship interest of
Contributor has been legally and validly issued and fully paid and
nonassessable. There are no outstanding (a) bonds, debentures, notes or
other obligations the holders of which have the right to vote with the
partners of Contributor on any matter, (b) securities of Contributor
convertible into equity interests in Contributor, or (c) commitments,
options, rights or warrants to issue any such equity interests in
Contributor, to issue securities of Contributor convertible into such equity
interests, or to redeem any securities of Contributor. No partnership
interests of Contributor have been issued or disposed of in violation of the
preemptive rights, rights of first refusal or similar rights of any of
Contributor's partners. Contributor is not required to qualify to do
business as a foreign corporation in any other state or jurisdiction by
reason of its business, properties or activities in or relating to such other
state or

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jurisdiction. Contributor does not have any assets, employees or offices in
any state other than the state set forth in the first sentence of this
SECTION 2.1.

2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Contributor has the
partnership power to execute, deliver and perform this Agreement and all
agreements and other documents executed and delivered by it pursuant to this
Agreement or to be executed and delivered on the Closing Date, and has taken
all action required by law, its Partnership Agreement or otherwise, to
authorize the execution, delivery and performance of this Agreement and such
related documents. Each Partner has the legal capacity to enter into and
perform this Agreement and the other agreements to be executed and delivered
in connection herewith. Contributor has obtained the approval of its
partners necessary to the consummation of the transactions contemplated
herein. This Agreement and all agreements and documents executed and
delivered in connection herewith have been, or will be as of the Closing
Date, duly executed and delivered by Contributor and Partners, as
appropriate, and constitute or will constitute the legal, valid and binding
obligations of Contributor and Partners, enforceable against Contributor and
Partners in accordance with their respective terms, except as may be limited
by applicable bankruptcy, insolvency or similar laws affecting creditors'
rights generally or the availability of equitable remedies. The execution and
delivery of this Agreement, and the agreements executed and delivered
pursuant to this Agreement or to be executed and delivered on the Closing
Date, do not, and, subject to the receipt of consents described on EXHIBIT
2.4, the consummation of the actions contemplated hereby will not, violate
any provision of the Partnership Agreement of Contributor or any provisions
of, or result in the acceleration of, any obligation under any mortgage,
lien, lease, agreement, rent, instrument, order, arbitration award, judgment
or decree to which Contributor or any Partner is a party or by which
Contributor or any Partner is bound, or violate any material restrictions of
any kind to which Contributor is subject, or result in any lien or
encumbrance on any of Contributor's assets or the Assets.

2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building
or other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets,
or waivers thereof, have been duly obtained and are in full force and effect
and are described on EXHIBIT 2.3. There are no proceedings pending or, to
the knowledge of Contributor and Partners, threatened, which may result in
the revocation, cancellation or suspension, or any adverse modification, of
any such licenses or permits.

2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or
dividend of any kind has been declared or paid by Contributor on any of its
partnership interests since the Balance Sheet Date. No repurchase of any of
Contributor's partnership interests has been approved, effected or is
pending, or is contemplated by Contributor.

2.6 CORPORATE RECORDS. True and correct copies of the Partnership
Agreement and minutes of Contributor and all amendments thereto have been
delivered to Pentegra. The books of account of Contributor have been kept
accurately in the ordinary course of business and the revenues, expenses,
assets and liabilities of Contributor have been properly recorded in such
books.

2.7 CONTRIBUTOR'S FINANCIAL INFORMATION. Contributor has heretofore
furnished Pentegra with copies of its unaudited balance sheet and related
unaudited statements of income, retained earnings and cash flows for its
prior two full fiscal years, as well as copies of its unaudited balance sheet
as of December 31, 1996 and June 30, 1997 (collectively, the "Balance Sheet"
and the latest date thereof shall be referred to as the "Balance Sheet Date")
and any related unaudited statements of income, retained earnings, schedule
of accounts receivable, accounts payable and accrued liabilities, and cash
flows for the twelve months then ended (collectively, with the related notes
thereto, the "Financial Statements"). The Financial Statements fairly
present the financial condition and results of operations of Contributor as
of the dates and for the periods indicated and reflect all fixed and
contingent liabilities of Contributor.

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2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all
leases pursuant to which Contributor or any Partner leases, as lessor or
lessee, real or personal property used in operating the Business, related to
the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and
enforceable in accordance with their respective terms, and there is not under
any such lease any existing default by Contributor, as lessor or lessee, or
any condition or event of which any Partner or Contributor has knowledge
which with notice or lapse of time, or both, would constitute a default, in
respect of which Contributor or Partners have not taken adequate steps to
cure such default or to prevent a default from occurring.

2.9 CONDITION OF ASSETS. All of the Assets are in good condition
and repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Contributor and Partners have no
knowledge of any latent defects therein.

2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. Contributor has good,
valid and marketable title to all of the Assets, free and clear of any liens,
claims, charges, exceptions or encumbrances, except for those, if any, which
are set forth in EXHIBIT 2.10 attached hereto. Contributor shall cause all
encumbrances set forth on EXHIBIT 2.10 (other than those encumbrances
indicated on EXHIBIT 1.3(b)) to be released or terminated prior to the
Closing Date and evidence of such releases of liens and claims shall be
provided to Pentegra on the Closing Date and the Assets shall not be used to
satisfy such liens, claims or encumbrances.

2.11 INVENTORIES. All of the Assets constituting inventory are
owned or used by Contributor, are in good, current, standard and merchantable
condition and are not obsolete or defective.

2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. Except as set forth on
EXHIBIT 2.12, Contributor has no right, title or interest in or to patents,
patent rights, corporate names, assumed names, manufacturing processes, trade
names, trademarks, service marks, inventions, specialized treatment
protocols, copyrights, formulas and trade secrets or similar items. Set
forth in EXHIBIT 2.12 is a listing of all names of all predecessor companies
of Contributor, including the names of any entities from whom Contributor
previously acquired significant assets. Except for off-the-shelf software
licenses and except as set forth on EXHIBIT 2.12, Contributor is not a
licensee in respect of any patents, trademarks, service marks, trade names,
copyrights or applications therefor, or manufacturing processes, formulas or
trade secrets or similar items and no such licenses are necessary for the
conduct of the Business or the use of the Assets. No claim is pending or has
been made to the effect that the Assets or the present or past operations of
Contributor in connection with the Assets or Business infringe upon or
conflict with the asserted rights of others to any patents, patent rights,
manufacturing processes, trade names, trademarks, service marks, inventions,
licenses, specialized treatment protocols, copyrights, formulas, know-how and
trade secrets. Contributor has the sole and exclusive right to use all
Assets constituting proprietary rights without infringing or violating the
rights of any third parties and no consents of any third parties are required
for the use thereof by Pentegra.

2.13 PAYROLL INFORMATION; EMPLOYEES. Set forth on EXHIBIT 2.13
attached hereto is a true and complete list, as of the date of this Agreement
of: (a) the most recent payroll report of Contributor, showing all current
employees of Contributor and their current levels of compensation, (b)
promised increases in compensation of employees of Contributor that have not
yet been effected, (c) oral or written employment agreements, consulting
agreements or independent contractor agreements (and all amendments thereto)
to which Contributor is a party, copies of which have been delivered to
Pentegra, and (d) all employee manuals, materials, policies, procedures and
work-related rules, copies of which have been delivered to Pentegra.
Contributor is in compliance with all applicable laws, rules, regulations and
ordinances respecting employment and employment practices. Contributor has
not engaged in any unfair labor practice. There are no unfair labor practices
charges or complaints pending or threatened against Contributor, and
Contributor has never been a party to any agreement with any union, labor
organization or collective bargaining unit.

2.14 LEGAL PROCEEDINGS. Neither any Partner, Contributor nor the
Business nor any of the Assets is subject to any pending, nor does
Contributor or any Partner have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Contributor, any Partner, the Business, the Assets
or the transactions contemplated by this Agreement, and, to the knowledge of
Contributor and Partners, no basis for any such action exists, nor is there
any legal impediment of which Contributor or any Partner has

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knowledge to the continued operation of its business or the use of the Assets
in the ordinary course, subject to consents set forth on EXHIBIT 2.4.

2.15 CONTRACTS. Contributor has delivered to Pentegra true copies of
all written, and disclosed to Pentegra all oral, outstanding contracts,
obligations and commitments of Contributor ("Contracts"), entered into in
connection with and related to the Assets or the Business, all of which are
listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases),
EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the
case of Contracts other than leases) attached hereto. Except as otherwise
indicated on such Exhibits, all of such Contracts are valid, binding and
enforceable in accordance with their terms and are in full force and effect,
and no defenses, offsets or counterclaims have been asserted or may be made
by any party thereto. Except as indicated on such Exhibits, there is not
under any such Contract any existing default by Contributor or any Partner,
or any condition or event of which Contributor or any Partner has knowledge
which with notice or lapse of time, or both, would constitute a default.
Contributor and Partners have no knowledge of any default by any other party
to such Contracts. Contributor and Partners have not received notice of the
intention of any party to any Contract to cancel or terminate any Contract
and have no reason to believe that any amendment or change to any Contract is
contemplated by any party thereto. Other than those contracts, obligations
and commitments listed on EXHIBIT 2.8, EXHIBIT 2.13 and EXHIBIT 2.15,
Contributor are not a party to any material written or oral agreement
contract, lease or arrangement, including without limitation, any is:

(a) Contract related to the Assets other than this Agreement;

(b) Employment, consulting or compensation agreement or
arrangement;

(d) Lease agreement with respect to any property, whether as
lessor or lessee;

(e) Deed, bill of sale or other document evidencing an interest
in or agreement to purchase or sell real or personal property;

(f) Contract for the purchase of materials, supplies or equipment
(i) which is in excess of the requirements of the Business now booked or for
normal operating inventories, or (ii) which is not terminable upon notice of
thirty (30) days or less;

(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product
or service;

(h) Loan agreement or other contract for money borrowed or
lent or to be borrowed or lent to another;

(i) Contracts containing non-competition covenants;

(j) Financial or similar contracts or agreements with patients
of Contributor or Partners, oral or written, that provide for prepayments or
deferred installment payments; or

(k) Other contracts or agreements that involve either an
unperformed commitment in excess of $1,000 or that terminate or can only be
terminated by Contributor on more than 30 days after the date hereof.

2.16 SUBSEQUENT EVENTS. Other than as set forth on EXHIBIT 2.16,
Contributor has not, since the Balance Sheet Date:

(a) Incurred any material obligation or liability (absolute,
accrued, contingent or otherwise) or entered into any contract, lease,
license or commitment, except in connection with the performance of this
Agreement;

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(b) Discharged or satisfied any material lien or encumbrance,
or paid or satisfied any material obligation or liability (absolute, accrued,
contingent or otherwise) other than (i) liabilities shown or reflected on the
Balance Sheet, (ii) liabilities incurred since the Balance Sheet Date in the
ordinary course of business;

(d) Made any payments to or loaned any money to any person or
entity other than in the ordinary course of business;

(e) Lost or terminated any employee, patient, customer or
supplier that has or may have, individually or in the aggregate, a material
adverse effect on the Business;

(f) Increased or established any reserve for taxes or any
other liability on its books or otherwise provided therefor, except as may
have been required due to income or operations of Contributor since the
Balance Sheet Date;

(g) Mortgaged, pledged or subjected to any lien, charge or
other encumbrance any of the Assets, tangible or intangible;

(h) Sold or contracted to sell or transferred or contracted to
transfer any of the Assets or any other assets used in the conduct of the
Business, canceled any debts or claims or waived any rights, except in the
ordinary course of business;

(i) Except in the ordinary course or business consistent with
past practices, granted any increase in the rates of pay of employees,
consultants or agents, or by means of any bonus or pension plan, contract or
other commitment, increased the compensation of any officer, employee,
consultant or agent;

(j) Authorized or incurred any capital expenditures in excess
of Five Thousand and No/100 Dollars ($5,000.00);

(k) Except for this Agreement and any other agreement executed
and delivered pursuant to this Agreement, entered into any material
transaction other than in the ordinary course of business or permitted
hereunder;

(l) Redeemed, purchased, sold or issued any stock, bonds or
other securities;

(m) Experienced damage, destruction or loss (whether or not
covered by insurance) materially and adversely affecting any of its
properties, assets or business or the Business or the Assets, or experienced
any other material adverse change in its financial condition, assets,
prospects, liabilities or business;

(n) Declared or paid a distribution, payment or dividend of
any kind on the equity interests of Contributor;

(o) Repurchased, approved any repurchase or agreed to
repurchase any of Contributor's partnership interests; or

(p) Suffered any material adverse change in the Business or to
the Assets.

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limitations in respect of taxes nor of any extension of time within which to
file any tax return or to pay any tax assessment or deficiency. There are no
liens or encumbrances relating to taxes on or threatened against any of the
assets of Contributor. Contributor has withheld and paid all taxes required
by law to have been withheld and paid by it. Neither Contributor nor any
predecessor of Contributor is or has been a party to any tax allocation or
sharing agreement or a member of an affiliated group of corporations filing a
consolidated Federal income tax return. Contributor has delivered to
Pentegra correct and complete copies of Contributor's three most recently
filed annual state, local and Federal income tax returns, together with all
examination reports and statements of deficiencies assessed against or agreed
to by Contributor during the three calendar year period preceding the date of
this Agreement. Contributor has neither made any payments, is obligated to
make any payments, or is a party to any agreement that under any circumstance
could obligate it to make any payments that will not be deductible under Code
section 280G.

(b) Contributor does not intend to dispose of any of the shares of
Pentegra Common Stock to be received hereunder and is not a party to any
plan, arrangement or agreement for the disposition of such shares.
Contributor and Partners have no knowledge, after due inquiry, of any such
intent, plan, arrangement or agreement by any Partner. Nothing contained
herein shall prohibit Contributor from selling such shares of Pentegra Common
Stock after the designated holding period and in accordance with SECTION 12.1
hereof.

2.18 COMMISSIONS AND FEES. There are no claims for brokerage
commissions or finder's or similar fees in connection with the transactions
contemplated by this Agreement which may be now or hereafter asserted against
Pentegra, Contributor or Contributor's Partners resulting from any action
taken by Contributor or any Partner or their respective agents or employees,
or any of them.

2.19 LIABILITIES; DEBT. Except to the extent reflected or reserved
against on the Balance Sheet, Contributor did not have, as of the Balance
Sheet Date, and has not incurred since that date and will not have incurred
as of the Closing Date, any liabilities or obligations of any nature, whether
accrued, absolute, contingent or otherwise, and whether due or to become due,
other than those incurred in the ordinary course of business or as set forth
on EXHIBIT 2.16. Contributor and Partners do not know, or have reasonable
grounds to know, of any basis for the assertion against Contributor or any
Partner as of the Balance Sheet Date, of any claim or liability of any nature
in any amount not fully reflected or reserved against on the Balance Sheet,
or of any claim or liability of any nature arising since that date other than
those incurred in the ordinary course of business or contemplated by this
Agreement. All indebtedness of Contributor (including without limitation,
indebtedness for borrowed money, guaranties and capital lease obligations) is
described on EXHIBIT 2.19 attached hereto.

2.20 INSURANCE POLICIES. Contributor, each Partner and each licensed
professional of Contributor carries property, liability, malpractice,
workers' compensation and such other types of insurance as is customary in
the industry. Valid and enforceable policies in such amounts are outstanding
and duly in force and will remain duly in force through the Closing Date.
All such policies are described in EXHIBIT 2.20 attached hereto and true and
correct copies have been delivered to Pentegra. Neither Partners nor
Contributor have not received notice or other communication from the issuer
of any such insurance policy cancelling or amending such policy or
threatening to do so. Neither Contributor, nor any Partner nor any licensed
professional employee of Contributor has any outstanding claims, settlements
or premiums owed against any insurance policy.

2.21 EMPLOYEE BENEFIT PLANS. Except as set forth on EXHIBIT 2.21
attached hereto, Contributor has neither established, nor maintains, nor is
obligated to make contributions to or under or otherwise participate in, (a)
any bonus or other type of compensation or employment plan, program,
agreement, policy, commitment, contract or arrangement (whether or not set
forth in a written document); (b) any pension, profit-sharing, retirement or
other plan, program or arrangement; or (c) any other employee benefit plan,
fund or program, including, but not limited to, those described in SECTION
3(3) of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"). All such plans listed on EXHIBIT 2.20 (individually "Contributor
Plan," and collectively "Contributor Plans") have been operated and
administered in all material respects in accordance with all applicable laws,
rules and regulations, including without limitation, ERISA, the Internal
Revenue Code of 1986, as amended, Title VII of the Civil Rights Act of 1964,
as amended, the Equal Pay Act of 1967, as amended, the Age Discrimination in
Employment Act of 1967, as amended, and the related rules and regulations
adopted by those Federal agencies responsible for the administration of such
laws. No act or failure to act by Contributor has resulted in a "prohibited
transaction" (as defined in ERISA) with respect to

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the Contributor Plans. No "reportable event" (as defined in ERISA) has
occurred with respect to any of the Contributor Plans. Contributor has not
previously made, is not currently making, and is not obligated in any way to
make, any contributions to any multiemployer plan within the meaning of the
Multi-Employer Pension Plan Amendments Act of 1980. With respect to each
Contributor Plan, either (i) the value of plan assets (including commitments
under insurance contracts) is at least equal to the value of plan liabilities
or (ii) the value of plan liabilities in excess of plan assets is disclosed
on the Balance Sheet, all as of the Closing Date.

2.22 ADVERSE AGREEMENTS. Contributor is not, and will not be as of
the Closing Date, a party to any agreement or instrument or subject to any
charter or other corporate restriction or any judgment, order, writ,
injunction, decree, rule or regulation that materially and adversely affects
the condition (financial or otherwise), operations, assets, liabilities,
business or prospects of Contributor, the Business or the Assets.

2.23 COMPLIANCE WITH LAWS IN GENERAL. Contributor, Partners and
Contributor's licensed professional employees, and the conduct of the
Business and use of the Assets, have complied with all applicable laws,
rules, regulations and licensing requirements, including, without limitation,
the Federal Environmental Protection Act, the Occupational Safety and Health
Act, the Americans with Disabilities Act and any environmental laws and
medical waste laws, and there exist no violations by Contributor, any Partner
or any licensed professional employee of Contributor of any Federal, state or
local law or regulation. Contributor and Partners have not received any
notice of a violation of any Federal, state and local laws, regulations and
ordinances relating to the operations of the Business and Assets and no
notice of any pending inspection or violation of any such law, regulation or
ordinance has been received by Contributor.

2.24 THIRD PARTY PAYORS. Contributor, Partners and each licensed
professional employee or independent contractor of Contributor has timely
filed all claims or other reports required to be filed with respect to the
purchase of services by third-party payors, and all such claims or reports
are complete and accurate, and has no liability to any payor with respect
thereto. There are no pending appeals, overpayment determinations,
adjustments, challenges, audit, litigation or notices of intent to open
Medicare or Medicaid claim determinations or other reports required to be
filed by Contributor, any Partner and each licensed professional employee of
Contributor. Neither Contributor, nor any Partner, nor any licensed
professional employee of Contributor has been convicted of, or pled guilty or
nolo contendere to, patient abuse or negligence, or any other Medicare or
Medicaid program related offense and none has committed any offense which may
serve as the basis for suspension or exclusion from the Medicare and Medicaid
programs or any other third party payor program. With respect to payors,
Contributor, Partners and Contributor's licensed professional employees has
not (a) knowingly and willfully making or causing to be made a false
statement or representation of a material fact in any application for any
benefit or payment; (b) knowingly and willfully making or causing to be made
any false statement or representation of a material fact for use in
determining rights to any benefit or payment; (c) failed to disclose
knowledge of the occurrence of any event affecting the initial or continued
right to any benefit or payment on its own behalf or on behalf of another,
with the intent to fraudulently secure such benefit or payment; and (d)
violated any applicable state anti-remuneration or self-referral statutes,
rules or regulations.

2.25 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Contributor or Partners in this Agreement, and no Exhibit or certificate
issued or executed by, or information furnished by, officers or directors of
Contributor or any Partner and furnished or to be furnished to Pentegra
pursuant hereto, or in connection with the transactions contemplated hereby,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state a material fact necessary to make the statements or facts
contained therein not misleading.

2.26 BANKING RELATIONS. Set forth in EXHIBIT 2.26 is a complete and
accurate list of all arrangements that Contributor has with any bank or other
financial institution, indicating with respect to each relationship the type
of arrangement maintained (such as checking account, borrowing arrangements,
safe deposit box, etc.) and the person or persons authorized in respect
thereof.

2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS. No
officer, employee, director or stockholder of Contributor, or their
respective spouses, children or affiliates, owns directly or indirectly, on
an individual or joint basis, any interest in, has a compensation or other
financial arrangement with, or serves as an officer or director

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of, any customer or supplier or competitor of Contributor or any organization
that has a material contract or arrangement with Contributor.

2.28 PAYORS. EXHIBIT 2.28 sets forth a true, complete and correct
list of the names and addresses of each payor of Contributor's services which
accounted for more than 10% of revenues of Contributor in the preceding
fiscal year. Contributor has good relations with all such payors and other
material payors of Contributor and none of such payors has notified
Contributor that it intends to discontinue its relationship with Contributor
or to deny any claims submitted to such payor for payment.

SECTION 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA.

Pentegra hereby represents and warrants to Contributor and Partners as
follows:

3.1 CORPORATE EXISTENCE: GOOD STANDING. Pentegra is a corporation
duly organized and existing and in good standing under the laws of the State
of Delaware.

3.2 POWER AND AUTHORITY; CONSENTS. Pentegra has corporate power to
execute, deliver and perform this Agreement and all agreements and other
documents executed and delivered by it pursuant to this Agreement or to be
executed and delivered on the Closing Date, and has taken all actions
required by law, its Certificate of Incorporation, its Bylaws or otherwise,
to authorize the execution, delivery and performance of this Agreement and
such related documents. This Agreement and all agreements and documents
executed and delivered in connection herewith have been, or will be as of the
Closing Date, duly executed and delivered by Pentegra and constitute or will
constitute the legal, valid and binding obligations of Pentegra, enforceable
against Pentegra in accordance with their respective terms, except as may be
limited by applicable bankruptcy, insolvency or similar laws affecting
creditors' rights generally or the availability of equitable remedies. The
execution and delivery of this Agreement, and the agreements executed and
delivered pursuant to this Agreement or to be executed and delivered on the
Closing Date, do not, and, the consummation of the actions contemplated
hereby will not, violate any provision of the Certificate of Incorporation or
Bylaws of Pentegra or any provisions of, or result in the acceleration of,
any obligation under any mortgage, lien, lease, agreement, rent, instrument,
order, arbitration award, judgment or decree to which Pentegra is a party or
by which Pentegra is bound, or violate any material restrictions of any kind
to which Pentegra is subject, or result in any lien or encumbrance on any of
Pentegra's assets. Other than as have been obtained or as would not have a
material adverse effect, there are no consents of any person or entity
required for the transaction contemplated hereby on behalf of Pentegra.

3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building
or other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the business of Penegra or waivers
thereof, have been duly obtained and are in full force and effect, except as
would not have a material adverse effect upon Pentegra. Other than as would
not have a material adverse effect, there are no proceedings pending or, to
the knowledge of Pentegra, threatened, which may result in the revocation,
cancellation or suspension, or any adverse modification, of any such licenses
or permits.

3.4 LEGAL PROCEEDINGS. Other than as would not have a material
adverse effect, neither Pentegra nor its business or assets is subject to any
pending, nor does Pentegra have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Pentegra, its business, assets or the transactions
contemplated by this Agreement, and, to the knowledge of Pentegra, no basis
for any such action exists, nor is there any legal impediment of which
Pentegra has knowledge to the continued operation of its business or the use
of its Assets in the ordinary course.

3.5 TAXES. Pentegra has filed all tax returns (including tax reports
and other statements) required to have been filed by it, and has paid all
taxes (including any interest, penalty or additions thereto) required to have
been paid by it, other than as would not have a material adverse effect.
Pentegra has not received any notice that any tax deficiency or delinquency
has been or may be asserted against Pentegra. There are no audits relating
to taxes of Pentegra pending or in process or, to the knowledge of Pentegra,
threatened. Pentegra is not currently the beneficiary

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of any waiver of any statute of limitations in respect of taxes nor of any
extension of time within which to file any tax return or to pay any tax
assessment or deficiency.

3.6 COMMISSIONS AND FEES. Pentegra has not incurred any obligation
for any finder's, broker's or similar fees in connection with the
transactions contemplated hereby.

3.7 CAPITAL STOCK. The issuance and delivery by Pentegra of shares
of Pentegra Common Stock in connection with the acquisition contemplated
hereby will be as of the Closing Date duly and validly authorized by all
necessary corporate action on the part of Pentegra. The Pentegra Common
Stock to be issued in connection with the acquisition contemplated hereby,
when issued in accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable.

3.8 NO UNTRUE REPRESENTATIONS. No representation or warranty by
Pentegra in this Agreement, and no Exhibit or certificate issued by officers
or directors of Pentegra and furnished or to be furnished to Contributor or
any Partner pursuant hereto, or in connection with the transactions
contemplated hereby, contains or will contain any untrue statement of a
material fact, or omits or will omit to state a material fact necessary to
make the statements or facts contained therein not misleading.

SECTION 4. COVENANTS OF CONTRIBUTOR AND PARTNERS.

Contributor and Partners, jointly and severally, agree that between the
date hereof and the Closing Date:

4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. Contributor and Partners
shall use their best efforts to cause the consummation of the transactions
contemplated hereby in accordance with their terms and conditions.
Contributor and Partners agree to complete the Exhibits hereto to be provided
by them in form and substance satisfactory to Pentegra.

4.2 BUSINESS OPERATIONS. Contributor and Partners shall operate the
Business and use the Assets in the ordinary course. Contributor and Partners
shall not enter into any lease, contract, indebtedness, commitment, purchase
or sale or acquire or dispose of any capital asset relating to the Business
or the Assets except in the ordinary course of business. Contributor and
Partners shall use their best efforts to preserve the Business and Assets
intact and shall not take any action that would have an adverse effect on the
Business or Assets. Contributor and Partners shall use their best efforts to
preserve intact the relationships with payors, customers, suppliers, patients
and others having significant business relations with Contributor.
Contributor and Partners shall collect its receivables and pay its trade
payables in the ordinary course of business. Contributor and Partners shall
not introduce any new method of management, operations or accounting.

4.3 ACCESS AND NOTICE. Contributor and Partners shall permit
Pentegra and its authorized representatives access to, and make available for
inspection, all of the assets and business of Contributor, the Business and
the Assets, including employees, customers and suppliers and permit Pentegra
and its authorized representatives to inspect and make copies of all
documents, records and information with respect to the business or assets of
Contributor, the Business or the Assets as Pentegra or its representatives
may request. Contributor and Partners shall promptly notify Pentegra in
writing of (a) any notice or communication relating to a default or event
that, with notice or lapse of time or both, could become a default, under any
contract, commitment or obligation to which Contributor is a party or
relating to the Business or the Assets, and (b) any adverse change in
Contributor's or the Business' financial condition or the Assets.

4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Contributor
and Partners shall use their best efforts to secure all necessary approvals
and consents of third parties to the consummation of the transactions
contemplated hereby, including consents described on EXHIBIT 2.4.
Contributor and Partners shall use their best efforts to obtain all licenses,
permits, approvals or other authorizations required under any law, rule,
regulation, or otherwise to provide the services of Contributor contemplated
by the Service Agreement and to conduct the intended business of Contributor
and operate the Business and use the Assets.

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4.5 ACQUISITION PROPOSALS. From the execution of this Agreement
until the earlier of the Closing or the termination of this Agreement in
accordance with the provisions hereof, Contributor and Partners shall not,
and shall use its best efforts to cause Contributor's employees, agents and
representatives not to, initiate, solicit or encourage, directly or
indirectly, any inquiries or the making or implementation of any proposal or
offer, including without limitation, any proposal or offer to any Partner,
with respect to a merger, acquisition, consolidation or similar transaction
involving, or the purchase of all or any significant portion of the assets or
any equity securities of Contributor or engage in any negotiations
concerning, or provide any confidential information or data to, or have any
discussions with, any person relating to such proposal or offer, and
Contributor and Partners will immediately cease any such activities,
discussions or negotiations heretofore conducted with respect to any of the
foregoing. Contributor and Partners shall immediately notify Pentegra if any
such inquiries or proposals are received.

4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS. Contributor hereby
covenants and agrees that it will take whatever steps are necessary to pay or
fund completely for any accrued benefits, where applicable, or vested accrued
benefits for which Contributor or any entity might have any liability
whatsoever arising from any insurance, pension plan, employment tax or
similar liability of Contributor to any employee or other person or entity
(including, without limitation, any Contributor Plan and any liability under
employment contracts with Contributor) allocable to services performed prior
to the Closing Date. Contributor and Partners acknowledge that the purpose
and intent of this covenant is to assure that Pentegra shall have no unfunded
liability whatsoever at any time after the Closing Date with respect to any
of Contributor's employees or similar persons or entities, including, without
limitation, any Contributor Plan for the period prior to the Closing Date.

4.7 EMPLOYEE MATTERS. Contributor shall not, without the prior
written approval of Pentegra, except as required by law, increase the cash
compensation of any Partner (other than in the ordinary course of business)
or other employee or an independent contractor of Contributor, adopt, amend
or terminate any compensation plan, employment agreement, independent
contractor agreement, employee policies and procedures or employee benefit
plan, take any action that could deplete the assets of any employee benefit,
or fail to pay any premium or contribution due or file any report with
respect to any employee benefit plan, or take any other actions with respect
to its employees or employee matters which might have an adverse effect upon
Contributor, its business, assets or prospects.

4.8 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or
dividend of any kind will be declared or paid by Contributor, nor will any
repurchase of any of Contributor's partnership interests be approved or
effected.

4.9 REQUIREMENTS TO EFFECT ACQUISITION. Contributor and Partners
shall use their best efforts to take, or cause to be taken, all actions
necessary to effect the acquisition contemplated hereby under applicable law.

4.10 ACCOUNTING AND TAX MATTERS. Contributor and Partners will not
change in any material respect the tax or financial accounting methods or
practices followed by Contributor (including any material change in any
assumption underlying, or any method of calculating, any bad debt,
contingency or other reserve), except as may be required by law or generally
accepted accounting principles. Contributor and Partners will duly,
accurately and timely (without regard to any extensions of time) file all
returns, information statements and other documents relating to taxes of
Contributor required to be filed by it, and pay all taxes required to be paid
by it, on or before the Closing Date.

4.11 WAIVER OF BULK TRANSFER COMPLIANCE. Pentegra, Partners and
Contributor hereby waive any compliance with the applicable state Bulk
Transfers Act, if any. Contributor and Partners covenant and agree that all
of the creditors with respect to the Business and the Assets will be paid in
full by Contributor prior to the Closing Date, except to extent that any
liability to such creditors is assumed by Pentegra pursuant to this
Agreement. If required by Pentegra, Contributor and Partners shall furnish
Pentegra with proof of payment of all creditors with respect to the Business
and the Assets. Notwithstanding the foregoing, Contributor and Partners may
dispute the validity or amount of any such creditor's claim without being
deemed to be in violation of this SECTION 4.11, provided that such dispute is
in good faith and does not unreasonably delay the resolution of the claim and
provided, further that Contributor and Partners agree to indemnify and bond
Pentegra for such amounts as is satisfactory to Pentegra.

4.12 LEASE. If Contributor leases any of its premises from any
Partner or other affiliate of Contributor or any Partner of Contributor,
Pentegra shall have entered into a building lease (the "Building Lease") with
the owner of

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<PAGE>

such premises on terms and conditions satisfactory to Pentegra, the terms and
conditions of which shall include, without limitation, (i) a five year
initial term plus three five-year renewal options, (ii) a lease rate equal to
the fair market value lease rate, as agreed to by Pentegra, and (iii) such
other provisions to be acceptable to Pentegra.

4.13 HIRING OF EMPLOYEES. Contributor and Partners shall cooperate
with all requests made by Pentegra for the purpose of allowing Pentegra to
hire those non-dentist employees of Contributor designated by Pentegra, such
employment to be effective as of the Closing Date. Notwithstanding the
above, Contributor and Partners shall remain liable under any Contributor
Plans for any claims incurred by any employees or their spouses or
dependents, and for all compensation, bonuses, benefits and other such items
and other liabilities related to Contributor's employees incurred by
Contributor prior to the Closing Date.

4.14 EMPLOYEE BENEFIT PLANS. Contributor agrees and acknowledges that
all employees of Contributor hired by Pentegra pursuant to SECTION 4.13
above, shall be treated as "leased employees" (as defined in Code Section
414(n)) of Contributor and shall be treated as Clinic employees for purposes
of eligibility and participation in Contributor Plans.

4.15 INSURANCE. Contributor shall cause Pentegra and its affiliates
to be named as an additional insured on its liability insurance programs,
effective as of the Closing Date.

SECTION 5. COVENANTS OF PENTEGRA.

Pentegra agrees that between the date hereof and the Closing:

5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. Pentegra
shall use its best efforts to secure all necessary approvals and consents of
third parties to the consummation of the transactions contemplated hereby.

SECTION 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND PARTNERS.

Pentegra, Partners and Contributor agree as follows:

6.1 FILINGS; OTHER ACTIONS. Pentegra, Contributor and Partners
shall cooperate to promptly prepare and file with the Securities Exchange
Commission ("SEC") the Registration Statement on Form S-1 (or other
appropriate Form) to be filed by Pentegra in connection with its Initial
Public Offering (including the prospectus constituting a part thereof, the
"Registration Statement"). Pentegra shall obtain all necessary state
securities laws or "Blue Sky" permits and approvals required to carry out the
transactions contemplated by this Agreement and the Contributor and Partners
shall furnish all information concerning Contributor and Partners as may be
reasonable requested in connection with any such action.

Contributor and Partner represent and warrant that none of the
information or documents supplied or to be supplied by it specifically for
inclusion in the Registration Statement, by exhibit or otherwise, will, at
the time the Registration Statement and each amendment or supplement thereto,
if any, becomes effective under the Securities Act of 1933, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading.
Contributor and Partners shall be entitled to review the Registration
Statement and each amendment thereto, if any, prior to the time each becomes
effective under the Securities Act of 1933.

Contributor and Partners shall furnish Pentegra will all information
concerning themselves, their subsidiaries, if any, directors, officers and
stockholders and such other matters as may be reasonable requested by
Pentegra in

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<PAGE>

connection with the preparation of the Registration Statement and each
amendment or supplement thereto, or any other statement, filing, notice or
application made by or on behalf of each such party or any of its subsidiaries
to any governmental entity in connection with the transactions contemplated by
the Other Agreements or this Agreement.

SECTION 7. PENTEGRA CONDITIONS PRECEDENT.

The obligations of Pentegra hereunder are subject to the fulfillment at
or prior to the Closing of each of the following conditions:

7.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Contributor and Partners contained herein shall have been true
and correct in all respects when initially made and shall be true and correct
in all respects as of the Closing Date.

7.2 COVENANTS AND CONDITIONS. Contributor and Partners shall have
performed and complied with all covenants and conditions required by this
Agreement to be performed and complied with by Contributor and Partners prior
to the Closing Date.

7.4 NO MATERIAL ADVERSE CHANGE. No material adverse change in the
condition (financial or otherwise), operations, assets, liabilities, business
or prospects of Contributor shall have occurred since the Balance Sheet Date.

7.5 DUE DILIGENCE REVIEW. By the Closing Date, Pentegra shall have
completed a due diligence review of the business, operations and financial
statements of Contributor, the Business and the Assets, the results of which
shall be satisfactory to Pentegra in its sole discretion.

7.6 APPROVAL BY THE BOARD OF DIRECTORS. This Agreement and the
transactions contemplated hereby shall have been approved by the Board of
Directors of Pentegra or a committee thereof.

7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. Contributor and Pentegra
shall have executed and delivered a Service Agreement (the "Service
Agreement"), in substantially the form attached hereto as EXHIBIT 7.7,
pursuant to which Pentegra will provide management services to the
Contributor. Each Partner shall have executed and delivered a Guaranty
Agreement in substantially the form attached as EXHIBIT 4.10 of the Service
Agreement pursuant to which Partner shall, among other things, guaranty the
obligations of Contributor under the Service Agreement.

7.8 EMPLOYMENT ARRANGEMENTS. Contributor shall have terminated, and
caused each Partner of Contributor that has an existing employment agreement
with Contributor to have terminated his or her employment agreement with
Contributor and shall have executed an employment agreement ("Employment
Agreement") with Contributor in form and substance attached hereto as EXHIBIT
7.8 and otherwise satisfactory to Contributor and Pentegra.

7.9 CONSENTS AND APPROVALS. Contributor and Partners shall have
obtained all necessary government and other third-party approvals and consents.

7.10 CLOSING DELIVERIES. Pentegra shall have received all documents,
duly executed in form satisfactory to Pentegra and its counsel, referred to
in SECTION 9.1.

7.11 DEBT AND RECEIVABLES. There shall be no indebtedness,
receivables or payables between Contributor and its Partners or affiliates
and Contributor shall not have any liabilities, including indebtedness,
guaranties and capital leases, that are not set forth on EXHIBIT 2.19.

7.12 INSURANCE. Contributor and Partners shall have named Pentegra as
an additional insured on their liability insurance program in accordance with
SECTION 4.15.

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7.13 NO CHANGE IN WORKING CAPITAL. There shall have been no material
change in the working capital of Contributor since the Balance Sheet Date.

7.14 SECURITIES APPROVAL. The Registration Statement shall have
become effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the
SEC. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.

SECTION 8. CONTRIBUTOR'S AND PARTNERS' CONDITIONS PRECEDENT.

The obligations of Contributor and Partners hereunder are subject to
fulfillment at or prior to the Closing of each of the following conditions:

8.1 REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Pentegra contained herein shall have been true and correct in
all respects when initially made and shall be true and correct in all
respects as of the Closing Date.

8.2 COVENANTS AND CONDITIONS. Pentegra shall have performed and
complied with all covenants and conditions required by this Agreement to be
performed and complied with by Pentegra prior to the Closing Date.

8.4 CLOSING DELIVERIES. Contributor shall have received all
documents, duly executed in form satisfactory to Contributor and its counsel,
referred to in SECTION 9.2.

8.5 SECURITIES APPROVAL. The Registration Statement shall have
become effective under the Securities Act and no stop order suspending the
effectiveness of the Registration Statement shall have been issued and no
proceedings for that purpose shall have been initiated or threatened by the
SEC. At or prior to the date that the Registration Statement is declared
effective by the SEC, Pentegra shall have received all state securities and
"Blue Sky" permits necessary to consummate the transactions contemplated
hereby. The Pentegra Common Stock shall have been approved for listing on
Nasdaq or other exchange selected by Pentegra, subject only to official
notification of issuance.

SECTION 9. CLOSING DELIVERIES.

9.1 DELIVERIES OF CONTRIBUTOR AND PARTNERS. Within five business days
after requested by Pentegra, Contributor and Partners shall deliver to
Pentegra the following, all of which shall be in a form satisfactory to
counsel to Pentegra and shall be held by Jackson Walker L.L.P. (counsel for
Pentegra) in escrow pending Closing, pursuant to an escrow agreement or
letter agreement in form and substance mutually acceptable to the parties
hereto:

(a) an executed original Service Agreement and executed
originals of all documents required by that agreement, including but not
limited to the Guaranty Agreement and security agreement referred to therein;

(b) executed Employment Agreements;

(c) a copy of the resolutions of the Partners authorizing the
execution, delivery and performance of this Agreement, the Service Agreement,
the Employment Agreements and all related documents and agreements each
certified by the Secretary as being true and correct copies of the original
thereof;

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(d) a bill of sale conveying the Assets to Pentegra;

(e) an assignment of each contract, agreement and lease being
assigned to and assumed by Pentegra;

(f) certificates of the Partners and a duly authorized officer
of Contributor dated as of the Closing Date, (i) as to the truth and
correctness of the representations and warranties of Contributor and Partners
contained herein; (ii) as to the performance of and compliance by Contributor
and Partner with all covenants contained herein; and (iii) certifying that
all conditions precedent of Contributor and Partners to the Closing have been
satisfied;

(g) a certificate, dated within 30 days of the Closing Date,
of the Secretary of the State of incorporation of Contributor and any state
of required foreign qualification of Contributor establishing that
Contributor is in existence and is in good standing to transact business in
its state of incorporation;

(h) an opinion of counsel to Contributor and Partner opining
as to the execution and delivery of this Agreement and the other documents
and agreements to be executed pursuant hereto, the good standing and
authority of Contributor, the enforceability of this Agreement and the other
agreements and documents to be executed in connection herewith, and other
matters reasonably requested by Pentegra;

(i) non-foreign affidavits executed by Contributor;

(j) all authorizations, consents, approvals, permits and
licenses referred to in SECTIONS 2.3 and 2.4;

(k) an executed Registration Rights Agreement between Pentegra
and Contributor, in substantially the form attached hereto as EXHIBIT 9.1(l)
(the "Registration Rights Agreement"); and

(l) such other instruments and documents as reasonably
requested by Pentegra to carry out and effect the purpose and intent of this
Agreement.

9.2 DELIVERIES OF PENTEGRA. On or before the Closing Date, Pentegra
shall deliver to Contributor and Partner, the following, all of which shall
be in a form satisfactory to counsel to Contributor and Partners and shall be
held by Jackson Walker L.L.P. (counsel for Pentegra) in escrow pending
Closing, pursuant to an escrow agreement or letter agreement in form and
substance mutually acceptable to the parties hereto:

(a) the Acquisition Consideration;

(b) an executed Service Agreement;

(d) a copy of the resolutions of the Board of Directors of
Pentegra (or a committee thereof) authorizing the execution, delivery and
performance of this Agreement and all related documents and agreements each
certified by the Secretary as being true and correct copies of the original
thereof;

(e) certificates of the President of Pentegra, dated as of the
Closing Date, (i) as to the truth and correctness of the representations and
warranties of Pentegra contained herein; (ii) as to the performance of and
compliance by Pentegra with all covenants contained herein; and (iii)
certifying that all conditions precedent of Pentegra to the Closing have been
satisfied;

(f) a certificate of the Secretary of Pentegra certifying as
to the incumbency of the directors and officers of Pentegra and as to the
signatures of such directors and officers who have executed documents
delivered at the Closing on behalf of Pentegra;

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<PAGE>

(g) certificates, dated within 30 days of the Closing Date, of
the Secretary of the State of Delaware establishing that Pentegra is in
existence and are in good standing to transact business in the State of
Delaware and the State of incorporation of Contributor;

(h) an opinion of counsel to Pentegra opining as to the
execution and delivery of this Agreement and the other documents and
agreements to be executed pursuant hereto, the good standing and authority of
Pentegra, the enforceability of this Agreement and the other agreements and
documents to be executed in connection herewith, and other matters reasonably
requested by Contributor;

(i) the executed Registration Rights Agreement; and

(j) such other instruments and documents as reasonably
requested by Contributor to carry out and effect the purpose and intent of
this Agreement.

SECTION 10. NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES;
INDEMNIFICATION.

10.1 NATURE AND SURVIVAL. All statements contained in this Agreement
or in any Exhibit attached hereto, any agreement executed pursuant hereto,
and any certificate executed and delivered by any party pursuant to the terms
of this Agreement, shall constitute representations and warranties of
Contributor and Partners, jointly and severally, or of Pentegra, as the case
may be. All such representations and warranties, and all representations and
warranties expressly labeled as such in this Agreement shall survive the date
of this Agreement and the Closing Date for a period of five (5) years
following the Closing Date, except that (i) the representations and
warranties with respect to environmental and medical waste laws and health
care laws and matters shall survive for a period of fifteen (15) years and
tax representations shall survive until one year after the expiration of the
applicable statute of limitations. Each party covenants with the other
parties not to make any claim with respect to such representations and
warranties, against any party after the date on which such survival period
shall terminate. No party shall be entitled to claim indemnity from any
other party pursuant to SECTION 10.2 or 10.3 hereof, unless such party has
timely given the notice required in SECTION 10.2, 10.3 or 10.4 hereof, as the
case may be. Each party hereby releases, acquits and discharges the other
party from any and all claims and demands, actions and causes of action,
damages, costs, expenses and rights of setoff with respect to which the
notices required by SECTION 10.2, 10.3 or 10.4, as applicable, are not timely
provided.

10.2 INDEMNIFICATION BY PENTEGRA. PENTEGRA (FOR PURPOSES OF THIS
SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, "INDEMNITOR"),
SHALL INDEMNIFY AND HOLD CONTRIBUTOR AND ITS PartnerS, AGENTS AND EMPLOYEES
(EACH OF THE FOREGOING, INCLUDING CONTRIBUTOR AND PartnerS, FOR PURPOSES OF
THIS SECTION 10.2 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN
"INDEMNIFIED PERSON"), HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES,
LOSSES, DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING,
BUT NOT LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH
APPEAL) ARISING FROM OR BY REASON OF OR RESULTING FROM:

(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY,
AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS
HERETO) AND EACH DOCUMENT, CERTIFICATE OR OTHER INSTRUMENT FURNISHED OR TO BE
FURNISHED BY INDEMNITOR HEREUNDER, AND

(B) AFTER THE CLOSING DATE, INDEMNITOR'S OWNERSHIP OF THE ASSETS, AND

(C) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR
ALLEGED UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO PENTEGRA CONTAINED IN
ANY PRELIMINARY PROSPECTUS, THE REGISTRATION STATEMENT OR ANY PROSPECTUS
FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF OR SUPPLEMENT THERETO,
ARISING OUT OF OR BASED UPON ANY

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OMISSION OR ALLEGED OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO
PENTEGRA REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.

10.3 INDEMNIFICATION BY CONTRIBUTOR AND PARTNERS. CONTRIBUTOR AND
PARTNERS (FOR PURPOSES OF THIS SECTION 10.3 AND, TO THE EXTENT APPLICABLE,
SECTION 10.4, "INDEMNITOR"), JOINTLY AND SEVERALLY, SHALL INDEMNIFY AND HOLD
PENTEGRA AND ITS AFFILIATES, OFFICERS, DIRECTORS, PARTNERS, AGENTS AND
EMPLOYEES (EACH OF THE FOREGOING, INCLUDING PENTEGRA, FOR PURPOSES OF THIS
SECTION 10.3 AND, TO THE EXTENT APPLICABLE, SECTION 10.4, AN "INDEMNIFIED
PERSON") HARMLESS FROM AND AGAINST ANY AND ALL LIABILITIES, LOSSES, CLAIMS,
DAMAGES, ACTIONS, SUITS, COSTS, DEFICIENCIES AND EXPENSES (INCLUDING, BUT NOT
LIMITED TO, REASONABLE FEES AND DISBURSEMENTS OF COUNSEL THROUGH APPEAL)
ARISING FROM OR BY REASON OF OR RESULTING FROM OR WITH RESPECT TO:

(A) ANY BREACH BY INDEMNITOR OF ANY REPRESENTATION, WARRANTY,
AGREEMENT OR COVENANT CONTAINED IN THIS AGREEMENT (INCLUDING THE EXHIBITS
HERETO) AND EACH DOCUMENT, CERTIFICATE, OR OTHER INSTRUMENT FURNISHED OR TO BE
FURNISHED BY INDEMNITOR HEREUNDER,

(B) PRIOR TO AND AFTER THE CLOSING DATE, THE INDEMNITOR'S MANAGEMENT
AND CONDUCT OF THE BUSINESS AND OWNERSHIP OR OPERATION OF THE ASSETS,

(C) ANY ALLEGED ACT OR NEGLIGENCE OF INDEMNITOR OR ITS EMPLOYEES,
AGENTS AND INDEPENDENT CONTRACTORS IN OR ABOUT CONTRIBUTOR'S BUSINESS WHETHER
ON OR AFTER THE CLOSING DATE,

(D) ANY VIOLATION BY CONTRIBUTOR OR ITS PARTNERS OR THEIR
CONSULTANTS, OFFICERS, DIRECTORS, EMPLOYEES, AGENTS AND AFFILIATES OF STATE
OR FEDERAL LAWS GOVERNING HEALTHCARE FRAUD AND ABUSE, OR ANY OVERPAYMENT OR
OBLIGATION ARISING OUT OF OR RESULTING FROM ACTIONS OF THE CONTRIBUTOR OR
PARTNERS RELATING TO CLAIMS SUBMITTED TO ANY THIRD PARTY PAYOR, WHETHER ON OR
AFTER THE CLOSING DATE,

(E) TAXES OF CONTRIBUTOR OR ANY PARTNER OR ANY OTHER PERSON OR ENTITY
RELATED TO OR AFFILIATED WITH THE CONTRIBUTOR OR ANY PARTNER ARISING FROM OR
AS A RESULT OF THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT,

(F) ANY LIABILITY OF CONTRIBUTOR OR THE PARTNERS FOR COSTS AND
EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS' FEES) INCURRED IN
CONNECTION WITH THE NEGOTIATION, PREPARATION OF CLOSING OF THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT OR THE OTHER DOCUMENTS TO BE EXECUTED IN
CONNECTION HEREWITH,

(G) ANY ACCRUED UNFUNDED RETIREMENT OR PENSION PLAN LIABILITIES,

(H) ANY LIABILITIES THAT ARE NOT SET FORTH ON EXHIBIT 1.3(b), OR

(I) ANY LIABILITY UNDER THE SECURITIES ACT, THE EXCHANGE ACT OR ANY
OTHER FEDERAL OR STATE "BLUE SKY" OR SECURITIES LAWS OR REGULATION, AT COMMON
LAW OR

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<PAGE>

OTHERWISE, ARISING OUT OF OR BASED UPON ANY UNTRUE STATEMENT OR ALLEGED
UNTRUE STATEMENT OF A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS PARTNERS
AND PROVIDED TO PENTEGRA, OR ITS COUNSEL BY THE CONTRIBUTOR OR ITS PARTNERS
SPECIFICALLY FOR INCLUSION IN ANY PRELIMINARY PROSPECTUS, THE REGISTRATION
STATEMENT OR ANY PROSPECTUS FORMING A PART THEREOF, OR ANY AMENDMENT THEREOF
OR SUPPLEMENT THERETO, ARISING OUT OF OR BASED UPON ANY OMISSION OR ALLEGED
OMISSION TO STATE THEREIN A MATERIAL FACT RELATING TO CONTRIBUTOR OR ITS
PARTNERS REQUIRED TO BE STATED THEREIN OR NECESSARY TO MAKE THE STATEMENTS
THEREIN NOT MISLEADING.

IN CONNECTION WITH INDEMNITOR'S OBLIGATION TO INDEMNIFY FOR EXPENSES,
INDEMNITOR SHALL REIMBURSE EACH INDEMNIFIED PERSON FOR ALL SUCH EXPENSES AS
THEY ARE INCURRED BY SUCH INDEMNIFIED PERSON, PROVIDED THAT SUCH INDEMNIFIED
PERSON AGREES IN WRITING TO REFUND ALL SUCH REIMBURSED EXPENSES IF AND TO THE
EXTENT THAT IT IS FINALLY JUDICIALLY DETERMINED THAT SUCH INDEMNIFIED PERSON
IS NOT ENTITLED TO INDEMNIFICATION HEREUNDER.

10.4 INDEMNIFICATION PROCEDURE. Within sixty (60) days after
Indemnified Person receives written notice of the commencement of any action
or other proceeding in respect of which indemnification or reimbursement may
be sought hereunder, or within such lesser time as may be provided by law for
the defense of such action or proceeding, such Indemnified Person shall
notify Indemnitor thereof. If any such action or other proceeding shall be
brought against any Indemnified Person, Indemnitor shall, upon written notice
given within a reasonable time following receipt by Indemnitor of such notice
from Indemnified Person, be entitled to assume the defense of such action or
proceeding with counsel chosen by Indemnitor and reasonably satisfactory to
Indemnified Person; provided, however, that any Indemnified Person may at its
own expense retain separate counsel to participate in such defense.
Notwithstanding the foregoing, Indemnified Person shall have the right to
employ separate counsel at Indemnitor's expense and to control its own
defense of such action or proceeding if, in the reasonable opinion of counsel
to such Indemnified Person, (a) there are or may be legal defenses available
to such Indemnified Person or to other Indemnified Persons that are different
from or additional to those available to Indemnitor and which could not be
adequately advanced by counsel chosen by Indemnitor, or (b) a conflict or
potential conflict exists between Indemnitor and such Indemnified Person that
would make such separate representation advisable; provided, however, that in
no event shall Indemnitor be required to pay fees and expenses hereunder for
more than one firm of attorneys of Indemnified Person in any jurisdiction in
any one action or proceeding or group of related actions or proceedings.
Indemnitor shall not, without the prior written consent of any Indemnified
Person, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action or proceeding to which such Indemnified
Person is a party unless such settlement, compromise or consent includes an
unconditional release of such Indemnified Person from all liability arising
or potentially arising from or by reason of such claim, action or proceeding.

10.5 RIGHT OF SETOFF. In the event of any breach of warranty,
representation, covenant or agreement by Contributor or any Partner giving
rise to indemnification under SECTION 10.3 or SECTION 10.4 hereof, Pentegra
shall be entitled to offset the amount of damages incurred by it as a result
of such breach of warranty, representation, covenant or agreement against any
amounts payable by Pentegra, including the amounts payable under the Service
Agreement.

SECTION 11. TERMINATION. This Agreement may be terminated:

(a) at any time by mutual agreement of all parties;

(b) at any time by Pentegra if any representation or warranty of
Contributor or any Partner contained in this Agreement or in any certificate
or other document executed and delivered by Contributor or any Partner
pursuant to this Agreement is or becomes untrue or breached in any material
respect or if Contributor or any Partner fails to comply in any material
respect with any covenant or agreement contained herein, and any such
misrepresentation, noncompliance or breach is not cured, waived or eliminated
within twenty (20) days after receipt of written notice thereof;

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<PAGE>

(c) at any time by Contributor or any Partner if any representation
or warranty of Pentegra contained in this Agreement or in any certificate or
other document executed and delivered by Pentegra pursuant to this Agreement
is or becomes untrue or breached in any material respect or if Pentegra fails
to comply in any material respect with any covenant or agreement contained
herein and such misrepresentation, noncompliance or breach is not cured,
waived or eliminated within twenty (20) days after receipt of written notice
thereof;

(d) by Pentegra, Partners or Contributor if the transaction
contemplated hereby shall not have been consummated by December 31, 1997; or

(e) by Pentegra at any time prior to the Closing Date if Pentegra
determines in its sole discretion as the result of its legal, financial and
operational due diligence with respect to Contributor, that such termination
is desirable and in the best interests of Pentegra.

SECTION 12. TRANSFER REPRESENTATIONS.

12.1 TRANSFER RESTRICTIONS. For a period of one year from the Closing
Date, Contributor shall not voluntarily (a) sell, assign, exchange, transfer,
encumber, pledge, distribute, appoint or otherwise dispose of (i) any shares
of Pentegra Common Stock received by such party hereunder, (ii) any interest
(including without limitation, an option to buy or sell) in any shares of
Pentegra Common Stock, in whole or in part, and no such attempted transfer
shall be treated as effective for any purpose or (b) engage in any
transaction, whether or not with respect to any shares of Pentegra Common
Stock or any interest therein, the intent or effect of which is to reduce the
risk of owning shares of Pentegra Common Stock. The certificates evidencing
the Pentegra Common Stock delivered to Contributor pursuant to the terms
hereof will bear a legend substantially in the form set forth below and
containing such other information as Pentegra may deem necessary or
appropriate:

12.2 INVESTMENTS; COMPLIANCE WITH LAW. Contributor and Partners
acknowledge that the shares of Pentegra Common Stock to be delivered to
Contributor pursuant to this Agreement have not been and will not be
registered under the Securities Act of 1933 and may not be resold without
compliance with the Securities Act of 1933. The Pentegra Common Stock to be
acquired by Contributor pursuant to this Agreement is being acquired solely
for its own account, for investment purposes only and with no present
intention of distributing, selling or otherwise disposing of it in connection
with a distribution. Contributor covenants, warrants and represents that
none of the shares of Pentegra Common Stock issued to it will be offered,
sold, assigned, pledged, hypothecated, transferred or otherwise disposed of
except after full compliance with all of the applicable provisions of the
Securities Act, as amended, and the rules and regulations of the Securities
Exchange Commission and applicable state securities laws and regulations.
All certificates evidencing shares of Pentegra Common Stock shall bear the
following legend in addition to the legend referenced in SECTION 12.1.

In addition, certificates evidencing shares of Pentegra Common Stock shall
bear any legend required by the securities or blue sky laws of any state where
Contributor resides.

12.3 ECONOMIC RISK; SOPHISTICATION. Contributor and Partners are able
to bear the economic risk of an investment in Pentegra Common Stock acquired
pursuant to this Agreement and can afford to sustain a total loss of such
investment and have such knowledge and experience in financial and business
matters that they are capable of

19
<PAGE>

evaluating the merits and risks of the proposed investment and therefore have
the capacity to protect their own interests in connection with the
acquisition of the Pentegra Common Stock. Contributor, Partners and their
representatives have had an adequate opportunity to ask questions and receive
answers from the officers of Pentegra concerning any and all matters relating
to the background and experience of the officers and directors of Pentegra,
the plans for the operations of the business of Pentegra, and any plans for
additional acquisitions and the like. Contributor, Partners and their
representatives have asked any and all questions in the nature described in
the preceding sentence and all questions have been answered to their
satisfaction. Contractor and Partners are "accredited investors" as defined
in Regulation D of the Securities Act of 1933, as amended.

SECTION 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION. Contributor and
Partners recognize and acknowledge that they had in the past, currently have,
and in the future may possibly have, access to certain confidential
information of Pentegra that is valuable, special and unique assets of
Pentegra's businesses. Contributor and Partners agree that it will not
disclose such confidential information to any person, firm, corporation,
association or other entity for any purpose or reason whatsoever, unless (i)
such information becomes available to or known by the public generally
through no fault of Contributor or Partners, (ii) disclosure is required by
law or the order of any governmental authority under color of law, provided,
that prior to disclosing any information pursuant to this clause (ii),
Contributor and Partners shall, if possible, give prior written notice
thereof to the other parties hereto, and provide such other parties hereto
with the opportunity to contest such disclosure, (iii) Contributor and
Partners reasonably believe that such disclosure is required in connection
with the defense of a lawsuit against the disclosing party, or (iv)
Contributor and Partners are the sole and exclusive owner of such
confidential information as a result of the transactions contemplated
hereunder or otherwise. In the event of a breach or threatened breach by
Contributor or Partners of the provisions of this SECTION 13, Pentegra shall
be entitled to an injunction restraining Contributor and Partners from
disclosing, in whole or in part, such confidential information. Nothing
herein shall be construed as prohibiting Pentegra from pursuing any other
available remedy for such breach or threatened breach, including the recovery
of damages. The obligations of the parties under this SECTION 13 shall
survive the termination of this Agreement.

SECTION 14. MISCELLANEOUS.

14.1 TAX COVENANT. The parties intend that the transactions
contemplated by this Agreement, together with the transactions contemplated
by the Other Agreement and the Initial Public Offering, will qualify as an
exchange meeting the requirements of Section 351 of the Code. The tax
returns (and schedules thereto) of Partners, Contributor and Pentegra shall
be filed in a manner consistent with such intention and Contributor and
Pentegra shall each provide the other with such tax information, reports,
returns or schedules as may be reasonably required to assist the other in so
reporting the transactions contemplated hereby.

14.2 NOTICES. Any communications required or desired to be given
hereunder shall be deemed to have been properly given if sent by hand
delivery, or by facsimile AND overnight courier, to the parties hereto at the
following addresses, or at such other address as either party may advise the
other in writing from time to time:

If to Pentegra:

Pentegra Dental Group, Inc.
2999 N. 44th Street, Suite 650
Phoenix, Arizona 85018
Attn: President
Facsimile: (602) 952-0554

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<PAGE>

with a copy of each notice directed to Pentegra to:

James S. Ryan, III, Esquire
Jackson Walker L.L.P.
901 Main Street
Dallas, Texas 75202
Facsimile: (214) 953-5822

If to Contributor or Partners:

To address set forth on EXHIBIT 14.2

with a copy to:

Person and address set forth on EXHIBIT 14.2

14.3 FURTHER ASSURANCES. Each party hereby agrees to perform any
further acts and to execute and deliver any documents which may be reasonably
necessary to carry out the provisions of this Agreement.

14.4 EACH PARTY TO BEAR COSTS. Subject to SECTION 14.12, each of the
parties to this Agreement shall pay all of the costs and expenses incurred by
such party in connection with the transactions contemplated by this
Agreement, whether or not such transactions are consummated. Without
limiting the generality of the foregoing and whether or not such liabilities
may be deemed to have been incurred in the ordinary course of business,
Pentegra shall not be liable to or required to pay, either directly or
indirectly, any fees and expenses of legal counsel, accountants, auditors or
other persons or entities retained by Contributor or any Partner for services
rendered in connection with negotiating and closing the transactions
contemplated by this Agreement or the documents to be executed in connection
herewith, whether or not such costs or expenses are incurred before or after
the Closing Date.

14.5 PUBLIC DISCLOSURES. Each party shall keep this Agreement and its
terms confidential, and shall make no press release or public disclosure,
either written or oral, regarding the transactions contemplated by this
Agreement without the prior written consent of the other party, provided that
the foregoing shall not prohibit any disclosure (a) by press release, filing
or otherwise that Pentegra has determined in good faith judgment to be
required by Federal securities laws or the rules of the National Association
of Securities Dealers, (b) to attorneys, accountants, investment bankers or
other agents of the parties assisting the parties in connection with the
transactions contemplated by this Agreement, and (c) by Pentegra in
connection with the conduct of its Initial Public Offering and conducting an
examination of the operations and assets of Contributor.

14.6 GOVERNING LAW. THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED
AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF INCORPORATION OF
CONTRIBUTOR AND APPLIED WITHOUT GIVING EFFECT TO ANY CONFLICTS OF LAWS
PRINCIPLES.

14.7 CAPTIONS. The captions or headings in this Agreement are made for
convenience and general reference only and shall not be construed to
describe, define or limit the scope or intent of the provisions of this
Agreement.

14.8 INTEGRATION OF EXHIBITS. All Exhibits attached to this Agreement
are integral parts of this Agreement as if fully set forth herein, and all
statements appearing therein shall be deemed disclosed for all purposes and
not only in connection with the specific representation in which they are
explicitly referenced.

14.9 ENTIRE AGREEMENT/AMENDMENT. THIS INSTRUMENT, INCLUDING ALL
EXHIBITS ATTACHED HERETO, CONTAINS THE ENTIRE AGREEMENT OF THE PARTIES AND
SUPERSEDES ANY

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<PAGE>

AND ALL PRIOR OR CONTEMPORANEOUS AGREEMENTS BETWEEN THE PARTIES, WRITTEN OR
ORAL, WITH RESPECT TO THE TRANSACTIONS CONTEMPLATED HEREBY.

14.10 COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which when so executed shall be deemed to be an
original, and such counterparts shall together constitute and be one and the
same instrument

14.11 BINDING EFFECT/ASSIGNMENT. This Agreement shall be binding on,
and shall inure to the benefit of, the parties hereto, and their respective
successors and assigns, and no other person shall acquire or have any right
under or by virtue of this Agreement. No party may assign any right or
obligation hereunder without the prior written consent of the other parties;
provided, however, that Pentegra may assign its rights and delegate its
obligations hereunder to any entity that is an affiliate of Pentegra. For
purposes of this Agreement an "affiliate" of Pentegra shall include any
entity that, through one or more intermediaries is, controlled, controlled by
or under common control with, Pentegra. Upon any such assignment prior to
the Closing, all references herein to Pentegra (including those to Pentegra
Common Stock) shall be deemed to include references to the assignee and the
assignee's common stock. Notwithstanding any such assignment, Pentegra shall
not, absent a written release from Contributor, be relieved from its
obligations to Contributor under this Agreement.

14.12 COSTS OF ENFORCEMENT. In the event that Pentegra, on the one
hand, or Contributor, on the other hand, file suit in any court against any
other party to enforce the terms of this Agreement against the other party or
to obtain performance by it hereunder, the prevailing party will be entitled
to recover all reasonable costs, including reasonable attorneys' fees, from
the other party as part of any judgment in such suit. The term "prevailing
party" shall mean the party in whose favor final judgment after appeal (if
any) is rendered with respect to the claims asserted in the Complaint.
"Reasonable attorneys' fees" are those reasonable attorneys' fees actually
incurred in obtaining a judgment in favor of the prevailing party.

14.13 PRORATIONS. Contributor agrees to reimburse Pentegra at Closing
a pro rata portion of all taxes levied upon the Assets for the calendar year
in which the Closing occurs. Such taxes shall be estimated, apportioned and
pro-rated among Contributor and Pentegra as of the Closing Date, and the
prorated amount due Pentegra shall be credited to the cash portion of the
Purchase Consideration. Upon payment by Pentegra of such taxes actually
assessed and paid on the Assets, Pentegra shall calculate the apportionment
of such taxes and shall pay Contributor or may demand from Contributor, and
Contributor agrees to pay, the amount necessary to correct the estimate and
proration made at Closing.

14.15 ARBITRATION. Upon the request of either Pentegra or the
Contributors or Partners (hereinafter referred to as a "Party"), whether made
before or after the institution of any legal proceeding, any dispute among
the parties hereto in any way arising out of, related to, or in connection
with this Agreement (hereinafter a "Dispute"), shall be resolved by binding
arbitration in accordance with the terms of this Section (hereinafter the
"Arbitration Program").

All Disputes between the Parties shall be resolved by binding arbitration
administered by the American Arbitration Association (the "AAA") in
accordance with the terms of this Arbitration Program, the Commercial
Arbitration Rules of the AAA. In the event of any inconsistency between this
Arbitration Program and those rules or statutes, then the terms of this
Arbitration Program shall control.

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<PAGE>

judicial or non-judicial self help remedies for the purposes of obtaining,
perfecting, preserving, or foreclosing upon any personal property in which
there has been granted a security interest or lien by a Party in the
Documents. In Disputes involving indebtedness or other monetary obligations,
each Party agrees that the other Party may proceed against all liable
persons, jointly and severally against one or more of them, without impairing
rights against other liable persons. Nor shall a Party be required to join
the principal obligor or any other liable persons (e.g., sureties or
guarantors) in any proceeding against a particular person. A Party may
release or settle with one or more liable persons as the Party deems fit
without releasing or impairing rights to proceed against any persons not so
released. All statutes of limitation that would otherwise be applicable
shall apply to any arbitration proceeding.

The party seeking arbitration shall notify the other Party, in writing,
of that Party's desire to arbitrate a dispute; and each Party shall, within
twenty (20) days from the date such notification is received, select an
arbitrator, and those two arbitrators shall select a third arbitrator within
ten (10) days thereafter. The issues or claims in dispute shall be committed
to writing, separately stated and numbered, and each party's proposed answers
or contentions shall be signed below the questions. Failure by a party to
select an arbitrator within the prescribed time period shall serve as that
Party's acquiescence and acceptance of the other party's selection of
arbitrator. The arbitrators shall resolve all Disputes in accordance with the
applicable substantive law. Any Dispute shall be decided by a majority vote
of three arbitrators, unless the claim or amount in controversy does not
exceed $100,000.00, in which case a single arbitrator (who shall have
authority to render a maximum award of $100,000.00, including all damages of
any kind, costs and fees) may decide the Dispute. The arbitrators may grant
any remedy or relief that the arbitrators deem just and equitable and within
the scope of this Arbitration Program. The arbitrators may also grant such
ancillary relief as is necessary to make effective the award. In all
arbitration proceedings the arbitrators shall make specific and written
findings of fact and conclusions of law. In all arbitration proceedings in
which the amount in controversy exceeds $100,000.00, in the aggregate, the
Parties shall have in addition to the statutory right to seek vacation or
modification of any award pursuant to applicable law, the right to seek
vacation or modification of any award that is based in whole, or in part, on
an incorrect or erroneous ruling of law by appeal to an appropriate court
having jurisdiction; provided, however, that any such application for
vacation or modification of an award based on an incorrect ruling of law must
be filed in a court having jurisdiction over the Dispute within 15 days from
the date the award in rendered. The arbitrators' findings of fact shall be
binding on all Parties and shall not be subject to further review except as
otherwise allowed by applicable law.

To the maximum extent practicable, an arbitration proceeding hereunder
shall be concluded within 180 days of the filing of the Dispute with AAA.
Arbitration proceedings hereunder shall be conducted where agreed to in
writing by the Parties or, in the absence of such agreement in Phoeniz,
Arizona or the headquarters of Pentegra if other than Phoeniz, Arizona. The
provisions of this Arbitration Program shall survive any termination,
amendment, or expiration of the Documents, unless the Parties otherwise
expressly agree in writing making specific reference to this Arbitration
Program. To the extent permitted by applicable law, the arbitrator shall
have the power to award recovery of all costs and fees (including attorney's
fees, administrative fees, and arbitrators' fees) to the prevailing Party.
This Arbitration Program may be amended, changed, or modified only by a
writing which specifically refers to this Arbitration Program and which is
signed by all the Parties. If any term, covenant, condition or provision of
the Arbitration Program is found to be unlawful or invalid or unenforceable,
such illegality or invalidity or unenforceable shall not affect the legality,
validity or enforceability of the remaining parts of this Arbitration
Program, and all such remaining parts hereof shall be valid and enforceable
and have full force and effect as if the illegal, invalid or unenforceable
part had not been included. Each Party agrees to keep all Disputes and
arbitration proceedings strictly confidential, except for disclosures of
information required in the ordinary course of business of the Parties or by
applicable law or regulation.

14.16 SEVERABILITY. If any provision of this Agreement shall be found to
be illegal, invalid or unenforceable under present or future laws, such
provision shall be fully severable and this Agreement shall be construed and
enforced as if such provision never comprised a part hereof; and the remaining
provisions hereof shall remain in full force and effect. In lieu of such
provision, there shall be added automatically as part of this Agreement, a
provision as similar in its terms to such provision as may be possible and be
legal, valid and enforceable.

[End of Page]

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<PAGE>

IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.

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

By:
--------------------------------------
Its:
-------------------------------------

PENTEGRA DENTAL GROUP, INC.

By:
--------------------------------------
It:
--------------------------------------

-----------------------------------------
, D.D.S.
----------------------------

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<PAGE>

INDEX TO EXHIBITS

Exhibit Description
------- -----------
Annex I Acquisition Consideration
A Target Companies
1.1 Assets
1.2(b) Excluded Assets
1.3(b) Assumed Liabilities
2.1 Existence; Good Standing; Partners/Ownership
2.3 Permits and Licenses
2.4 Consents
2.8 Leases
2.10 Real and Personal Property; Encumbrances
2.12 Patents and Trademarks; Names
2.13 Payroll Information; Employment Agreements
2.15 Contracts (other than Leases and Employment Agreements)
2.16 Subsequent Events
2.19 Debt
2.20 Insurance Policies
2.21 Employee Benefit Plans
2.26 Banking Relations
2.28 Payors
7.7 Form of Service Agreement
7.8 Form of Employment Agreement
9.1(l) Form of Registration Rights Agreement
14.2 Addresses for Notice

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<PAGE>

ANNEX I

ACQUISITION CONSIDERATION

The aggregate consideration to be received by the Contributor pursuant to
the Agreement (the "Acquisition Consideration") is the following:

Shares of Pentegra Common Stock equal to $_________ divided by the initial
public offering price of Pentegra.

Cash in the amount of $________________________.

No fractional shares of Pentegra Common Stock will be issued; rather,
shares of Pentegra Common Stock to be issued to Contributor shall be rounded to
the nearest whole share.

<PAGE>

EXHIBIT 2.3

FORM OF ASSET CONTRIBUTION AGREEMENT

BY AND AMONG

PENTEGRA DENTAL GROUP, INC.,

_________________________________ [target entity]

and

_______________________________ [shareholders]

<PAGE>

TABLE OF CONTENTS

Section 1. TERMS OF THE CONTRIBUTION
1.2 CONTRIBUTION OF ASSETS . . . . . . . . . . . . . . . . . . . . . . . . .1
1.3 EXCLUDED ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . . . .1
1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. . . . . . . . . . . . . . . .2
1.5 SUBSEQUENT ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . .2

Section 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS.
2.1 CORPORATE EXISTENCE; GOOD STANDING . . . . . . . . . . . . . . . . . . .2
2.2 POWER AND AUTHORITY FOR TRANSACTIONS . . . . . . . . . . . . . . . . . .3
2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. . . . . . . . . . . .3
2.4 CONSENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.5 DISTRIBUTIONS AND REPURCHASES. . . . . . . . . . . . . . . . . . . . . .3
2.6 CORPORATE RECORDS. . . . . . . . . . . . . . . . . . . . . . . . . . . .3
2.7 CONTRIBUTOR'S FINANCIAL INFORMATION. . . . . . . . . . . . . . . . . . .3
2.8 LEASES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.9 CONDITION OF ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.10 TITLE TO AND ENCUMBRANCES ON PROPERTY. . . . . . . . . . . . . . . . . .4
2.11 INVENTORIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.12 INTELLECTUAL PROPERTY RIGHTS; NAMES. . . . . . . . . . . . . . . . . . .4
2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES . . . . . . . . .4
2.14 LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . .4
2.15 CONTRACTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.16 SUBSEQUENT EVENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . .5
2.17 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6
2.18 COMMISSIONS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.19 LIABILITIES; DEBT. . . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.20 INSURANCE POLICIES . . . . . . . . . . . . . . . . . . . . . . . . . . .7
2.21 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . .7
2.22 ADVERSE AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . .8
2.23 COMPLIANCE WITH LAWS IN GENERAL. . . . . . . . . . . . . . . . . . . . .8
2.24 THIRD PARTY PAYORS . . . . . . . . . . . . . . . . . . . . . . . . . . .8
2.25 NO UNTRUE REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . .8
2.26 BANKING RELATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . .8
2.27 OWNERSHIP INTERESTS OF INTERESTED PERSONS; COMPETITORS . . . . . . . . .8
2.28 PAYORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

Section 3. REPRESENTATIONS AND WARRANTIES OF PENTEGRA
3.1 CORPORATE EXISTENCE: GOOD STANDING . . . . . . . . . . . . . . . . . . .9
3.2 POWER AND AUTHORITY; CONSENTS. . . . . . . . . . . . . . . . . . . . . .9
3.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. . . . . . . . . . . .9
3.4 LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.5 TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
3.6 COMMISSIONS AND FEES . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 CAPITAL STOCK. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8 NO UNTRUE REPRESENTATIONS. . . . . . . . . . . . . . . . . . . . . . . 10

Section 4. COVENANTS OF CONTRIBUTOR AND SHAREHOLDERS.
4.1 CONSUMMATION OF AGREEMENT; EXHIBITS. . . . . . . . . . . . . . . . . . 10

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<PAGE>

4.2 BUSINESS OPERATIONS. . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.3 ACCESS AND NOTICE. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
4.4 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. . . . . . . . . . 10
4.5 ACQUISITION PROPOSALS. . . . . . . . . . . . . . . . . . . . . . . . . 10
4.6 FUNDING OF ACCRUED EMPLOYEE BENEFITS . . . . . . . . . . . . . . . . . 11
4.7 EMPLOYEE MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.8 DISTRIBUTIONS AND REPURCHASES. . . . . . . . . . . . . . . . . . . . . 11
4.9 REQUIREMENTS TO EFFECT ACQUISITION . . . . . . . . . . . . . . . . . . 11
4.10 ACCOUNTING AND TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . 11
4.11 WAIVER OF BULK TRANSFER COMPLIANCE . . . . . . . . . . . . . . . . . . 11
4.12 LEASE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
4.13 HIRING OF EMPLOYEES. . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.14 EMPLOYEE BENEFIT PLANS . . . . . . . . . . . . . . . . . . . . . . . . 12
4.15 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

Section 5. COVENANTS OF PENTEGRA
5.1 CONSUMMATION OF AGREEMENT; EXHIBITS. . . . . . . . . . . . . . . . . . 12
5.2 APPROVALS OF THIRD PARTIES AND PERMITS AND CONSENTS. . . . . . . . . . 12

Section 6. COVENANTS OF PENTEGRA AND CONTRIBUTOR AND SHAREHOLDERS
6.1 FILINGS; OTHER ACTIONS . . . . . . . . . . . . . . . . . . . . . . . . 12

Section 7. PENTEGRA CONDITIONS PRECEDENT
7.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 13
7.2 COVENANTS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . 13
7.3 PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.4 NO MATERIAL ADVERSE CHANGE . . . . . . . . . . . . . . . . . . . . . . 13
7.5 DUE DILIGENCE REVIEW . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.6 APPROVAL BY THE BOARD OF DIRECTORS . . . . . . . . . . . . . . . . . . 13
7.7 SERVICE AGREEMENT; GUARANTY AGREEMENT. . . . . . . . . . . . . . . . . 13
7.8 EMPLOYMENT ARRANGEMENTS. . . . . . . . . . . . . . . . . . . . . . . . 13
7.9 CONSENTS AND APPROVALS . . . . . . . . . . . . . . . . . . . . . . . . 13
7.10 CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.11 DEBT AND RECEIVABLES . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.12 INSURANCE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.13 NO CHANGE IN WORKING CAPITAL . . . . . . . . . . . . . . . . . . . . . 13
7.14 SECURITIES APPROVAL. . . . . . . . . . . . . . . . . . . . . . . . . . 14

Section 8. CONTRIBUTOR'S AND SHAREHOLDERS' CONDITIONS PRECEDENT
8.1 REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . 14
8.2 COVENANTS AND CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . 14
8.3 PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.4 CLOSING DELIVERIES . . . . . . . . . . . . . . . . . . . . . . . . . . 14
8.5 SECURITIES APPROVAL. . . . . . . . . . . . . . . . . . . . . . . . . . 14

Section 9. CLOSING DELIVERIES
9.1 DELIVERIES OF CONTRIBUTOR AND SHAREHOLDERS . . . . . . . . . . . . . . 14
9.2 DELIVERIES OF PENTEGRA . . . . . . . . . . . . . . . . . . . . . . . . 15

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<PAGE>

10.4 INDEMNIFICATION PROCEDURE. . . . . . . . . . . . . . . . . . . . . . . 18
10.5 RIGHT OF SETOFF. . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

Section 11. TERMINATION

Section 13. NONDISCLOSURE OF CONFIDENTIAL INFORMATION

Section 14. MISCELLANEOUS
14.1 TAX COVENANT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.2 NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
14.3 FURTHER ASSURANCES . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.4 EACH PARTY TO BEAR COSTS . . . . . . . . . . . . . . . . . . . . . . . 21
14.5 PUBLIC DISCLOSURES . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.6 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.7 CAPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
14.8 INTEGRATION OF EXHIBITS. . . . . . . . . . . . . . . . . . . . . . . . 21
14.9 ENTIRE AGREEMENT/AMENDMENT . . . . . . . . . . . . . . . . . . . . . . 21
14.10 COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.11 BINDING EFFECT/ASSIGNMENT. . . . . . . . . . . . . . . . . . . . . . . 22
14.12 COSTS OF ENFORCEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.13 PRORATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.14 AMENDMENTS; WAIVERS. . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.15 ARBITRATION. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
14.16 SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
</TABLE>

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<PAGE>
ASSET CONTRIBUTION AGREEMENT

This ASSET CONTRIBUTION AGREEMENT (this "Agreement"), made and executed
as of ________________, 1997, is by and among PENTEGRA DENTAL GROUP, INC.,
a Delaware corporation ("Pentegra"), __________________________________________
("Contributor") and _________________________________, shareholders of
Contributor (referred to herein as "Shareholder" or "Shareholders").

WITNESSETH:

WHEREAS, Contributor operates a dental practice ("Business") and Pentegra
is engaged in the business of managing certain non-dentistry aspects of
dental practices;

WHEREAS, Contributor desires to contribute to Pentegra, and Pentegra
desires to receive from Contributor, certain assets of Contributor;

WHEREAS, it is intended for Federal income tax purposes that the
transfers contemplated by this Agreement, the Other Agreements and Pentegra's
initial public offering ("Initial Public Offering") of shares of its common
stock, par value $.01 per share ("Pentegra Common Stock") shall qualify as an
exchange within the meaning of Section 351 of the Internal Revenue Code of
1986, as amended ("IRC" or "Code");

SECTION 1. TERMS OF THE CONTRIBUTION.

1.1 THE CLOSING. The closing of the transactions contemplated hereby
shall take place at 10:00 am local time, at the offices of Jackson & Walker,
L.L.P., on the day on which the Initial Public Offering of Pentegra Common
Stock is consummated. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date".

<PAGE>

1.4 PURCHASE PRICE; ASSUMPTION OF LIABILITIES. As consideration for
the Assets and the representations, warranties and agreements of Contributor
contained herein, Pentegra shall, on the Closing Date:

(a) Cause to be transferred to Contributor the consideration
specified in ANNEX I attached hereto (the "Acquisition Consideration"); and.

(b) Except as otherwise provided herein, assume and perform or
discharge on or after the Closing Date, the contracts, leases, obligations,
commitments, liabilities and indebtedness of Contributor listed on EXHIBIT
1.3(b) attached hereto to the extent that such obligations, commitments,
liabilities and indebtedness are current and not otherwise in default. (the
"Assumed Liabilities"). Notwithstanding any contrary provision contained
herein, Pentegra shall not be deemed to have assumed, nor shall Pentegra
assume: (i) any liability, commitment or obligation or trade payable or
indebtedness not specifically disclosed on EXHIBIT 1.3(b), (ii) any liability
set forth on EXHIBIT 1.3(b) which may be incurred by reason of any breach of
or default under such contracts, leases, commitments or obligations which
occurred on or before the Closing Date; (iii) any liability for any employee
benefits payable to employees of Contributor, including, but not limited to,
liabilities arising under any Contributor Plan (as defined in SECTION 2.21
hereof); (iv) any liability based upon or arising out of a violation of any
antitrust or similar restraint-of-trade laws by any Shareholder or
Contributor, including, without limiting the generality of the foregoing, any
such antitrust liability which may arise in connection with agreements,
contracts, commitments or orders for the sale of goods or provision of
services by Contributor reflected on the books of Contributor at or prior to
the Closing Date; (v) any liability based upon or arising out of any tortious
or wrongful actions of Contributor, any licensed professional employee or
independent contractor of Contributor or any Shareholder, (vi) any liability
for the payment of any taxes of Contributor or any Shareholder, including
without limitation, sales, use and other transfer taxes and income taxes
arising from or by reason of the transactions contemplated by this Agreement;
(vii) any indebtedness secured by deeds of trust or mortgages on real
property; nor (viii) any liability incurred or to be incurred pursuant to any
malpractice or other suits or actions pending against Contributor or any
Shareholder.

1.5 SUBSEQUENT ACTIONS. If, at any time after the Closing Date,
Pentegra shall consider or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in Pentegra its
right, title or interest in, to or under any of the Assets or otherwise to
carry out this Agreement, in return for the consideration set forth in this
Agreement, Contributor and Shareholders shall execute and deliver all such
deeds, bills of sale, assignments and assurances and take and do all such
other actions and things as may be necessary or desirable to vest, perfect or
confirm any and all right, title and interest in, to and under the Assets in
Pentegra or otherwise to carry out this Agreement.

SECTION 2. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR AND SHAREHOLDERS.

Contributor and Shareholders, jointly and severally, hereby represent and
warrant to Pentegra as follows:

2.1 CORPORATE EXISTENCE; GOOD STANDING. Contributor is a
professional corporation or association, as applicable, duly organized,
validly existing and in good standing under the laws of the State of
__________________. Contributor has all necessary corporate powers to own
all of its assets and to carry on its business as such business is now being
conducted. Contributor does not own stock in or control, directly or
indirectly, any other corporation, association or business organization, nor
is Contributor a party to any joint venture or partnership. The Shareholders
are the sole shareholders of Contributor and own all outstanding shares of
capital stock free of all security interests, claims, encumbrances and liens
in the amounts set forth on EXHIBIT 2.1. Each share of Contributor's common
stock has been legally and validly issued and fully paid and nonassessable.
No shares of capital stock of Contributor are owned by Contributor in
treasury. There are no outstanding (a) bonds, debentures, notes or other
obligations the holders of which have the right to vote with the stockholders
of Contributor on any matter, (b) securities of Contributor convertible into
equity interests in Contributor, or (c) commitments, options, rights or
warrants to issue any such equity interests

<PAGE>

in Contributor, to issue securities of Contributor convertible into such
equity interests, or to redeem any securities of Contributor. No shares of
capital stock of Contributor have been issued or disposed of in violation of
the preemptive rights, rights of first refusal or similar rights of any of
Contributor's stockholders. Contributor is not required to qualify to do
business as a foreign corporation in any other state or jurisdiction by
reason of its business, properties or activities in or relating to such other
state or jurisdiction. Contributor does not have any assets, employees or
offices in any state other than the state set forth in the first sentence of
this SECTION 2.1.

2.2 POWER AND AUTHORITY FOR TRANSACTIONS. Contributor has the
corporate power to execute, deliver and perform this Agreement and all
agreements and other documents executed and delivered by it pursuant to this
Agreement or to be executed and delivered on the Closing Date, and has taken
all action required by law, its Articles or Certificate of Incorporation, its
Bylaws or otherwise, to authorize the execution, delivery and performance of
this Agreement and such related documents. Each Shareholder has the legal
capacity to enter into and perform this Agreement and the other agreements to
be executed and delivered in connection herewith. Contributor has obtained
the approval of its stockholders necessary to the consummation of the
transactions contemplated herein. This Agreement and all agreements and
documents executed and delivered in connection herewith have been, or will be
as of the Closing Date, duly executed and delivered by Contributor and
Shareholders, as appropriate, and constitute or will constitute the legal,
valid and binding obligations of Contributor and Shareholders, enforceable
against Contributor and Shareholders in accordance with their respective
terms, except as may be limited by applicable bankruptcy, insolvency or
similar laws affecting creditors' rights generally or the availability of
equitable remedies. The execution and delivery of this Agreement, and the
agreements executed and delivered pursuant to this Agreement or to be
executed and delivered on the Closing Date, do not, and, subject to the
receipt of consents described on EXHIBIT 2.4, the consummation of the actions
contemplated hereby will not, violate any provision of the Articles or
Certificate of Incorporation or Bylaws of Contributor or any provisions of,
or result in the acceleration of, any obligation under any mortgage, lien,
lease, agreement, rent, instrument, order, arbitration award, judgment or
decree to which Contributor or any Shareholder is a party or by which
Contributor or any Shareholder is bound, or violate any material restrictions
of any kind to which Contributor is subject, or result in any lien or
encumbrance on any of Contributor's assets or the Assets.

2.3 PERMITS, LICENSES AND GOVERNMENTAL AUTHORIZATIONS. All building
or other permits, certificates of occupancy, concessions, grants, franchises,
licenses, certificates of need and other governmental authorizations and
approvals required for the conduct of the Business or the use of the Assets,
or waivers thereof, have been duly obtained and are in full force and effect
and are described on EXHIBIT 2.3. There are no proceedings pending or, to
the knowledge of Contributor and Shareholders, threatened, which may result
in the revocation, cancellation or suspension, or any adverse modification,
of any such licenses or permits.

2.5 DISTRIBUTIONS AND REPURCHASES. No distribution, payment or
dividend of any kind has been declared or paid by Contributor on any of its
capital stock since the Balance Sheet Date. No repurchase of any of
Contributor's capital stock has been approved, effected or is pending, or is
contemplated by Contributor.

2.6 CORPORATE RECORDS. True and correct copies of the Articles or
Certificate of Incorporation, Bylaws and minutes of Contributor and all
amendments thereto have been delivered to Pentegra. The minute books of
Contributor contain accurate minutes of all meetings of and consents to
actions taken without meetings of the Board of Directors and stockholders of
Contributor since its formation. The books of account of Contributor have
been kept accurately in the ordinary course of business and the revenues,
expenses, assets and liabilities of Contributor have been properly recorded
in such books.

<PAGE>

(collectively, the "Balance Sheet" and the latest date thereof shall be
referred to as the "Balance Sheet Date") and any related unaudited statements
of income, retained earnings, schedule of accounts receivable, accounts
payable and accrued liabilities, and cash flows for the twelve months then
ended (collectively, with the related notes thereto, the "Financial
Statements"). The Financial Statements fairly present the financial
condition and results of operations of Contributor as of the dates and for
the periods indicated and reflect all fixed and contingent liabilities of
Contributor.

2.8 LEASES. EXHIBIT 2.8 attached hereto sets forth a list of all
leases pursuant to which Contributor or any Shareholder leases, as lessor or
lessee, real or personal property used in operating the Business, related to
the Assets or otherwise. All such leases listed on EXHIBIT 2.8 are valid and
enforceable in accordance with their respective terms, and there is not under
any such lease any existing default by Contributor, as lessor or lessee, or
any condition or event of which any Shareholder or Contributor has knowledge
which with notice or lapse of time, or both, would constitute a default, in
respect of which Contributor or Shareholders have not taken adequate steps to
cure such default or to prevent a default from occurring.

2.9 CONDITION OF ASSETS. All of the Assets are in good condition
and repair subject to normal wear and tear and conform with all applicable
ordinances, regulations and other laws, and Contributor and Shareholders have
no knowledge of any latent defects therein.

2.11 INVENTORIES. All of the Assets constituting inventory are
owned or used by Contributor, are in good, current, standard and merchantable
condition and are not obsolete or defective.

2.13 DIRECTORS AND OFFICERS; PAYROLL INFORMATION; EMPLOYEES. Set
forth on EXHIBIT 2.13 attached hereto is a true and complete list, as of the
date of this Agreement of: (a) the name of each director and officer of
Contributor and the offices held by each, (b) the most recent payroll report
of Contributor, showing all current employees of Contributor and their
current levels of compensation, (c) promised increases in compensation of
employees of Contributor that have not yet been effected, (d) oral or written
employment agreements, consulting agreements or independent contractor
agreements (and all amendments thereto) to which Contributor is a party,
copies of which have been delivered to Pentegra, and (e) all employee
manuals, materials, policies, procedures and work-related rules, copies of
which have been delivered to Pentegra. Contributor is in compliance with all
applicable laws, rules, regulations and ordinances respecting employment and
employment practices. Contributor has not engaged in any unfair labor
practice. There are no unfair labor practices charges or complaints pending
or threatened against Contributor, and Contributor has never been a party to
any agreement with any union, labor organization or collective bargaining
unit.

<PAGE>

2.14 LEGAL PROCEEDINGS. Neither any Shareholder, Contributor nor the
Business nor any of the Assets is subject to any pending, nor does
Contributor or any Shareholder have knowledge of any threatened, litigation,
governmental investigation, condemnation or other proceeding against or
relating to or affecting Contributor, any Shareholder, the Business, the
Assets or the transactions contemplated by this Agreement, and, to the
knowledge of Contributor and Shareholders, no basis for any such action
exists, nor is there any legal impediment of which Contributor or any
Shareholder has knowledge to the continued operation of its business or the
use of the Assets in the ordinary course, subject to consents set forth on
EXHIBIT 2.4.

2.15 CONTRACTS. Contributor has delivered to Pentegra true copies of
all written, and disclosed to Pentegra all oral, outstanding contracts,
obligations and commitments of Contributor ("Contracts"), entered into in
connection with and related to the Assets or the Business, all of which are
listed or incorporated by reference on EXHIBIT 2.8 (in the case of leases),
EXHIBIT 2.13 (in the case of employment agreements) and EXHIBIT 2.15 (in the
case of Contracts other than leases) attached hereto. Except as otherwise
indicated on such Exhibits, all of such Contracts are valid, binding and
enforceable in accordance with their terms and are in full force and effect,
and no defenses, offsets or counterclaims have been asserted or may be made
by any party thereto. Except as indicated on such Exhibits, there is not
under any such Contract any existing default by Contributor or any
Shareholder, or any condition or event of which Contributor or any
Shareholder has knowledge which with notice or lapse of time, or both, would
constitute a default. Contributor and Shareholders have no knowledge of any
default by any other party to such Contracts. Contributor and Shareholders
have not received notice of the intention of any party to any Contract to
cancel or terminate any Contract and have no reason to believe that any
amendment or change to any Contract is contemplated by any party thereto.
Other than those contracts, obligations and commitments listed on EXHIBIT
2.8, EXHIBIT 2.13 and EXHIBIT 2.15, Contributor are not a party to any
material written or oral agreement contract, lease or arrangement, including
without limitation, any:

(a) Contract related to the Assets other than this Agreement;

(b) Employment, consulting or compensation agreement or
arrangement;

(d) Lease agreement with respect to any property, whether as
lessor or lessee;

(e) Deed, bill of sale or other document evidencing an
interest in or agreement to purchase or sell real or personal property;

(f) Contract for the purchase of materials, supplies or
equipment (i) which is in excess of the requirements of the Business now
booked or for normal operating inventories, or (ii) which is not terminable
upon notice of thirty (30) days or less;

(g) Agreement for the purchase from a supplier of all or
substantially all of the requirements of the Business of a particular product
or service;

(h) Loan agreement or other contract for money borrowed or
lent or to be borrowed or lent to another;

(i) Contracts containing non-competition covenants;

(j) Financial or similar contracts or agreements with patients
of the Contributor or Shareholders, oral or written, that provide for
prepayments or deferred installment payments; or