PENTEGRA DENTAL GROUP INC, S-1/A, 1998-01-12

PENTEGRA DENTAL GROUP INC
S-1/A, 1998-01-12
OFFICES & CLINICS OF DOCTORS OF MEDICINE

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 12, 1998

REGISTRATION NO. 333-37633
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------

AMENDMENT NO. 2

TO
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>

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<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. / /
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CALCULATION OF REGISTRATION FEE

<TABLE>
<CAPTION>
PROPOSED PROPOSED MAXIMUM
TITLE OF EACH MAXIMUM AGGREGATE AMOUNT OF
CLASS OF SECURITIES AMOUNT TO BE OFFERING PRICE OFFERING REGISTRATION
TO BE REGISTERED REGISTERED(1) PER SHARE(1) PRICE(2),(3) FEE(4)
<S> <C> <C> <C> <C>
Common Stock, $.001 par value............ -- -- $31,625,000 $9,584
</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.

(4) Previously paid.
------------------------------

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.

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<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>

Subject To Completion, Dated January 12, 1998

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 $9.00 and $11.00 per share. See "Underwriting"
for a discussion of the factors to be considered in determining the initial
public offering price. The Common Stock has been approved for listing on the
American Stock Exchange under the symbol "PEN."

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

THE SHARES OF COMMON STOCK OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 8.

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

<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 , 1998.

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

LEHMAN BROTHERS DAIN RAUSCHER INCORPORATED

, 1998
<PAGE>
[MAP]

* Pentegra does not intend to employ dentists to practice dentistry or
otherwise control the practice of dentistry by dentists employed by
Affiliated Practices to which it will provide administrative and management
services.

THE COMPANY INTENDS TO FURNISH ITS STOCKHOLDERS WITH ANNUAL REPORTS
CONTAINING FINANCIAL STATEMENTS AUDITED BY INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS AND WITH QUARTERLY REPORTS CONTAINING UNAUDITED SUMMARY FINANCIAL
INFORMATION FOR EACH OF THE FIRST THREE QUARTERS OF EACH FISCAL YEAR.

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
"AFFILIATIONS"), SUBSTANTIALLY ALL THE TANGIBLE AND INTANGIBLE ASSETS, AND
ASSUME CERTAIN LIABILITIES, OF 50 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 EACH SHARE OUTSTANDING IMMEDIATELY
PRIOR TO THE CLOSING OF THE OFFERING (BUT AFTER GIVING EFFECT TO A REPURCHASE BY
PII OF SHARES OF ITS COMMON STOCK, AT A PURCHASE PRICE OF $.015 PER SHARE, SUCH
THAT THE TOTAL NUMBER OF SHARES OF COMMON STOCK ISSUABLE IN CONNECTION WITH THE
AFFILIATIONS AND THE SHARE EXCHANGE WILL NOT EXCEED 3,941,898 SHARES) FOR SHARES
OF COMMON STOCK ON A ONE-FOR-ONE BASIS (THE "SHARE EXCHANGE") PURSUANT TO AN
EXCHANGE AGREEMENT, (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"), (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") AND (V) THE COMPANY WILL REPAY
APPROXIMATELY $350,000 OF INDEBTEDNESS OUTSTANDING UNDER PROMISSORY NOTES ISSUED
BY THE COMPANY IN CONNECTION WITH ITS ORGANIZATIONAL FINANCING. THE NUMBER OF
SHARES OF COMMON STOCK TO BE ISSUED IN EACH AFFILIATION 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
AFFILIATIONS AND THE SHARE EXCHANGE ARE ESTIMATED, BASED ON AN ASSUMED INITIAL
PUBLIC OFFERING PRICE OF $10.00 PER SHARE (THE MIDPOINT OF THE ESTIMATED INITIAL
PUBLIC OFFERING PRICE RANGE). HOWEVER, IN ANY EVENT, THE NUMBER OF SHARES OF
COMMON STOCK TO BE ISSUED IN CONNECTION WITH THE AFFILIATIONS AND THE SHARE
EXCHANGE WILL NOT EXCEED 3,941,898 SHARES IN THE AGGREGATE. PENTEGRA DOES NOT
EMPLOY DENTISTS TO PRACTICE DENTISTRY NOR DOES IT OTHERWISE CONTROL THE PRACTICE
OF DENTISTRY.

UNLESS OTHERWISE INDICATED BY THE CONTEXT, REFERENCES HEREIN TO (I)
"PENTEGRA" OR THE "COMPANY" INCLUDE PENTEGRA DENTAL GROUP, INC. AND PII 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 50 professional corporations or associations owned by the
dentist-owners of the Founding Affiliated Practices, which include 77 dentists
and 63 dental offices located in 18 states. These acquisition agreements provide
that the Company will acquire substantially all of the tangible and intangible
assets, and assume certain liabilities, of the Founding Affiliated Practices.
The Founding Affiliated Practices are primarily general

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dentistry practices, but also include specialists such as periodontists,
pedodontists and oral surgeons. 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 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 1997
Mercer Consulting Group Survey of Employer-Sponsored Health Plans,
approximately 86% of the respondents in that survey reported that they
offer their employees dental plans that 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 implementing techniques designed 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 its 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

4
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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 relating to
the implementation of the Pentegra Dental Program. The Company anticipates that
the cost of implementing the Pentegra Dental Program in Affiliated Practices
primarily consists of compensation expenses to existing Pentegra, Ltd. and
Napili employees and will be comparable to the historical compensation expense
levels for those two entities.

The Service Agreements with the professional corporations or associations to
be formed by the dentist owners of the Founding Affiliated Practices have
initial terms of 40 years, subject to earlier termination under certain
circumstances. Pursuant to the Service Agreements, the Company will become the
exclusive manager and administrator of non-dental services relating to the
operation of the Founding Affiliated Practices, and will, among other things,
(i) administer the billing and collections for the Founding Affiliated
Practices, (ii) provide the necessary clerical, accounting and other non-dental
services to the Founding Affiliated Practices and (iii) provide facilities and
equipment for the Founding Affiliated Practices. The service fees payable by the
Founding Affiliated Practices to the Company under the Service Agreements were
determined in arm's length negotiations among the parties. Generally the service
fees are computed based on (i) a percentage of revenues less operating expenses,
(ii) a percentage of revenues not to exceed a percentage of revenues less
operating expenses, (iii) a specific fixed service fee or (iv) some combination
of these. See "Business--Service Agreements."

Dentist compensation is determined by the Affiliated Practices pursuant to
employment arrangements between the Affiliated Practice and the individual
dentists. The Company does not participate in the negotiation of dentist
compensation. Pursuant to the terms of the Service Agreements, the Affiliated
Practices will continue to provide dental services and will be exclusively in
control of all aspects of the practice of dentistry and the provision of dental
services. The Company will not engage in the practice of dentistry.

As a result of the Affiliations and upon completion of the Offering, the
dentist-owners of the Founding Affiliated Practices and the executive officers
and directors of the Company will beneficially own approximately 53.6% of the
outstanding shares of Common Stock. In addition, the Company's Bylaws provide
that a majority of the members of the Board of Directors must be (i) licensed to
practice dentistry and (ii) affiliated with one of the Affiliated Practices. See
"Risk Factors--Board Composition" and
"--Certain Anti-takeover Provisions," "Certain Transactions--Organization of the
Company" and "Principal Stockholders."

5
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THE OFFERING

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<S> <C>
Common Stock offered by the Company...... 2,500,000 shares
Common Stock to be outstanding after the
Offering............................... 6,441,898 shares(1)
Use of proceeds.......................... To fund the cash distribution to the
dentist-owners of the Founding Affiliated
Practices (approximately $6.4 million), to fund
the Pentegra/Napili Transaction (approximately
$200,000), to repurchase or redeem the
outstanding shares of preferred stock of PII
(approximately $2.8 million), to repay certain
indebtedness of Pentegra and the Founding
Affiliated Practices (approximately $2.7 million)
and the 9.5% promissory notes issued by the
Company in connection with its organizational
financing ($350,000), to purchase certain
accounts receivable of the Founding Affiliated
Practices (approximately $428,000) and for
general corporate purposes. See "Use of
Proceeds."
American Stock Exchange symbol........... PEN
</TABLE>

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(1) Includes 2,630,295 shares of Common Stock to be issued in connection with
the Affiliations and 1,311,603 shares of Common Stock to be issued in
connection with the Share Exchange and excludes (i) an aggregate of 671,667
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)
1,328,333 shares reserved for future issuance under the 1997 Stock
Compensation Plan. See "Management--1997 Stock Compensation Plan." The
actual number of shares to be issued as consideration for the Affiliations
may be higher or lower depending on the actual initial public offering price
per share. For example, an aggregate of 2,391,177 shares of Common Stock
would be issued to the dentist-owners of the Founding Affiliated Practices
if that price is $11.00 per share, while an aggregate of 2,922,549 shares of
Common Stock would be issued to the dentist-owners of the Founding
Affiliated Practices if that price is $9.00 per share. However, in any
event, the number of shares of Common Stock to be issued in connection with
the Affiliations and the Share Exchange will not exceed 3,941,898 shares in
the aggregate.

RISK FACTORS

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

6
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SUMMARY FINANCIAL DATA
(IN THOUSANDS EXCEPT PER SHARE DATA)

Upon completion of the Offering and pursuant to the Affiliations, the
Company will acquire substantially all the tangible and intangible assets and
assume certain liabilities of the Founding Affiliated Practices. Due to the fact
that the Company has had no significant operations to date, no pro forma
statement of operations has been included in this Prospectus. The nature and
amount of costs to be incurred by the Company in connection with the management
services it will provide to the Founding Affiliated Practices may differ from
the costs historically incurred by the Founding Affiliated Practices. The
summary historical financial information presented below has been derived from
the audited financial statements of Pentegra Dental Group, Inc. included in this
Prospectus. Except as indicated, the following information does not reflect the
effects of the Offering, the Affiliations, the Share Exchange, the Pentegra/
Napili Transaction and the Repurchase and Redemption. For certain information
concerning the Affiliations, see "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Note 4 of Notes to the
Pentegra Dental Group, Inc. financial statements.

<TABLE>
<CAPTION>
FOR THE PERIOD FROM
INCEPTION (FEBRUARY
21, 1997) THROUGH
SEPTEMBER 30,
1997
-------------------
<S> <C>
Statement of Operations Data:
Revenue...................................................................................... $ --
Expenses
General and administrative expenses........................................................ 411
Other expenses............................................................................. 339
------
Total expenses........................................................................... 750
------
Net loss................................................................................... $ (750)
------
------
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
----------------------------
HISTORICAL AS ADJUSTED(1)
----------- ---------------
<S> <C> <C>
Balance Sheet Data:
Cash and cash equivalents(2)........................................................... $ 354 $ 9,457
Working capital (deficit).............................................................. (652) 8,572
Total assets........................................................................... 2,071 12,983
Redeemable preferred stock............................................................. 1,089 --
Stockholders' equity (deficit)......................................................... (24) 11,544
</TABLE>

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(1) As adjusted gives effect to (i) the Offering, (ii) the Affiliations, (iii)
the repayment of certain indebtedness 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 September 30, 1997. See the Unaudited Pro Forma Balance Sheet of
Pentegra and the notes thereto included in this Prospectus.

(2) See "Use of Proceeds."

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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; NO PRIOR OPERATING EXPERIENCE

The Company was incorporated in 1997 and has conducted no operations to date
other than in connection with the Offering and the Affiliations. 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 Affiliations, 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 to enforce such a
covenant or to require an affiliated practice to enforce such covenants against
an

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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."

DEPENDENCE ON 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 transferring cash from the
Affiliated Practices to the Company. See "Business--Management Information
Systems."

RISKS ASSOCIATED WITH EXPANSION STRATEGY

GENERAL

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. In
addition, 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
or that the Company will be able to manage effectively and enhance the
profitability of additional Affiliated Practices. 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 affiliations or that future affiliations with additional
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."

POTENTIAL DILUTION OF EXISTING STOCKHOLDERS; NONCASH AMORTIZATION CHARGES

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.

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,

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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, and there can be no assurance that an
Affiliated Practice to which the Company advances working capital loans for
these purposes will be able to repay those loans in full. 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 Affiliations, the Company will pay,
out of the net proceeds from the Offering, an aggregate of approximately $7.9
million to promoters (including $6.4 million to be paid to the dentist-owners of
the Founding Affiliated Practices as the cash portion of the consideration in
the Affiliations), officers and directors of the Company. Of this amount,
approximately $6.4 million will be paid to the owners of the Founding Affiliated
Practices, including approximately $216,326 to Ronnie L. Andress, D.D.S.,
$150,092 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.
(each of whom will become a member of the Board of Directors of the Company (the
"Board of Directors"). In addition, the Company will use $200,000 of the net
proceeds from the Offering to purchase substantially all of the tangible and
intangible assets of Pentegra, Ltd. and Napili, both of which entities are
affiliates of Dr. Reed, the Company's Chairman of the Board. The Company will
also use approximately (i) $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, $37,500 to George M. Siegel, $334 to James L. Dunn, Jr., $667 to J.
Michael Casas, $50,000 to Dr. Greder and $50,000 to Dr. Kay (each of whom is, or
on closing of the Offering will be, a member of the Board of Directors or an
officer of the Company), (ii) approximately $350,000 of the proceeds from the
Offering in connection with the repayment of 9.5% promissory notes issued by the
Company to fund certain offering and operating expenses, including approximately
$25,000 to each of James M. McDonough, D.D.S. and Harold A. Pebbles, Jr., D.D.S.
(both of whom are dentist-owners of Founding Affiliated Practices), and (iii) an
aggregate of approximately $428,000 of the net proceeds of the Offering in
connection with the purchase of certain accounts receivable from the Founding
Affiliated Practices. 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 fee
splitting, corporate practice of dentistry, prohibitions on fraud and abuse,
restrictions on referrals and self-referrals, advertising restrictions,
restrictions on delegation and state insurance regulation.

CORPORATE PRACTICE OF DENTISTRY AND FEE SPLITTING RESTRICTIONS

The laws of many states, including all the states in which the Founding
Affiliated Practices are located other than New Mexico and Wisconsin, prohibit
business corporations such as the Company from engaging in the practice of
dentistry or employing dentists to practice dentistry. 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.

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The laws of many states, including all the states in which the Founding
Affiliated Practices are located other than Alaska, Maine, Massachusetts, New
Mexico and Wisconsin, 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. 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
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,
including California, Florida, Maine, Maryland, Michigan, New York, Texas and
Washington, 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 of the states in
which the Founding Affiliated Practices are located, including Alaska, Arizona,
California, Florida, Louisiana, Maine, Maryland, Michigan, New York, Texas and
Washington, 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.

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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."

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 an Affiliated Practice enters into
capitated managed care arrangements, it will be exposed to the risk that the
cost of providing dental care required by these contracts exceeds the amount the
Affiliated Practice receives for providing such care. If those costs exceed the
revenues received for the service provided, the Affiliated Practice will remain
responsible under its Service Agreement for reimbursing the Company for all of
the costs associated with providing those services, even if no service fee is
due thereunder. To the extent an Affiliated Practice enters into additional
managed care contracts, it 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 in those cases where the Service Agreements provide for percentage-based
service fees.

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CONTROL BY EXISTING MANAGEMENT AND STOCKHOLDERS

Following the completion of the Affiliations 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 2.3%, 16.2% and 40.3%,
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.

CONFLICTS OF INTEREST

Each of Drs. Reed, Andress, Clarke, Greder, Kay and Yaros is the sole
shareholder of a Founding Affiliated Practice and a professional corporation or
association owned by them 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 Practice owned by these dentists, there are conflicts of
interest that may arise from time to time in connection with negotiating terms
of working capital loans from the Company to that practice, if any, and certain
other arrangements under the Service Agreement.

BOARD COMPOSITION

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. As a result, there will be a limited group of persons from which
candidates to fill these board positions may be selected, and it is not
anticipated that many of these persons will have had prior experience as board
members of publicly held companies. This provision could also discourage
potential acquisition proposals, delay or prevent a change in control of the
Company or limit the price that certain investors might be willing to pay in the
future for shares of Common Stock. In addition, 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,
conflicts of interest may arise. See "--Certain Anti-takeover Provisions,"
"Security Ownership of Certain Beneficial Owners and Management" and "Certain
Transactions."

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

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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, 2,630,295 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
additional 1,311,603 shares of Common Stock. Those shares are not being offered
and sold pursuant to this Prospectus. All of those 3,941,898 shares were or are
being issued in transactions that have not been 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 Affiliations have agreed with the Company that they will not
sell any of the shares of Common Stock owned by them immediately after the
consummation of the Affiliations 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 and its directors, executive officers and current stockholders
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

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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 671,667 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 to be 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 the DGCL could, together
or separately, discourage potential acquisition proposals, delay or prevent a
change in control of the Company or limit the price that certain investors might
be willing to pay in the future for shares of the Common Stock. 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; 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 $8.24 per share. Existing stockholders will
receive an increase of $2.71 per share in the pro forma net tangible book value
of their shares, which have a historical deficit in net tangible book value per
share of $(0.95) as of September 30, 1997. 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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THE COMPANY

The Company has conducted no operations to date other than in connection
with the Offering and the Affiliations. PII was formed in February 1997 and
changed its name from "Pentegra Dental Group, Inc." to "Pentegra Investments,
Inc." in July 1997. PII then organized Pentegra Dental Group, Inc. as its wholly
owned subsidiary in July 1997 to, among other things, complete the Offering, the
Affiliations, the Share Exchange, the Pentegra/Napili Transaction and the
Repurchase and Redemption. 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.

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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 promissory notes and capital stock of PII,
including all the Class A Preferred and Class B Preferred involved in the
Repurchase and Redemption)) are estimated to be approximately $22.0 million
(approximately $24.8 million if the Underwriters' over-allotment option is
exercised in full), assuming an initial public offering price of $10.00 per
share (the midpoint of the estimated initial public offering price range). Of
those net proceeds, (i) approximately $6.4 million will be used to pay the cash
portion of the consideration for the Affiliations, (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 (approximately $1.5
million has been received by the Company as proceeds in connection with the 1997
issuances of the shares of Class A Preferred and Class B Preferred to be
repurchased or redeemed), (iv) approximately $2.7 million will be used to repay
certain indebtedness of the Company and the Founding Affiliated Practices
(approximately $543,000 of which was incurred in 1997 by certain Founding
Affiliated Practices to acquire dental equipment), (v) approximately $350,000
will be used to repay 9.5% promissory notes issued by the Company subsequent to
September 30, 1997 to fund certain offering and operating expenses, which notes
mature on the earlier of the first anniversary of the date of issuance or 30
days following consummation of the Offering, and (vi) approximately $428,000
will be used to purchase certain accounts receivable of the Founding Affiliated
Practices. The remaining net proceeds will be used for general corporate
purposes, which are expected to include future acquisitions and future capital
expenditures. Pending such uses, the net proceeds will be invested in
short-term, interest-bearing, investment-grade securities. The promoters
(including the dentist-owners of the Founding Affiliated Practices), officers
and directors of the Company will receive an aggregate of approximately $7.9
million out of the net proceeds of the Offering. Other than with respect to the
Affiliations, the Company currently has no agreement or understanding with
respect to any future affiliation. See "Risk Factors--Proceeds of Offering
Payable to Affiliates" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."

The consideration being paid by the Company in connection with each
Affiliation was determined by negotiations between executive officers of the
Company not affiliated with any Founding Affiliated Practice and a
representative of that Founding Affiliated Practice. The Company used the same
valuation method to negotiate the consideration being paid to each of the
Founding Affiliated Practices, including the respective practices wholly owned
by Drs. Reed, Andress, Clarke, Greder, Kay and Yaros, which method was based
upon the Founding Affiliated Practice's gross revenue, net of certain operating
expenses, and the Company's assessment of growth potential. See "Certain
Transactions" for information concerning the identification of the owners of the
Founding Affiliated Practices and the respective amounts of cash being paid to
them out of the proceeds of the Offering and shares of Common Stock being issued
to them in connection with the Affiliations.

The indebtedness of the Founding Affiliated Practices to be repaid bears
interest at an average rate of 8.0% and would otherwise mature at various dates
through 2002.

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.

17
<PAGE>
DILUTION

The deficit in net tangible book value of the Company as of September 30,
1997 was approximately $(1.7) million, or $(0.95) 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 Affiliations and (ii) the sale by the Company of
2,500,000 shares of Common Stock offered at a price of $10.00 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 September
30, 1997 would have been approximately $11.4 million, or $1.76 per share of
Common Stock. This represents an immediate increase in the net tangible book
value of $2.71 per share to existing stockholders consisting of a decrease of
$1.11 per share attributed to the assumption of net liabilities of the Founding
Affiliated Practices and the related cash distribution of approximately $6.4
million to promoters (which is the aggregate cash consideration to be
distributed in the Affiliations) and an increase of $3.82 per share relating to
the Offering. The deficit in pro forma net tangible book value immediately after
the Affiliations is $8.1 million, or $(2.06) per share. This is an immediate
dilution to new investors purchasing Common Stock in the Offering of $8.24 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).......... $ 10.00
Historical deficit in net tangible book value............. $ (0.95)
Decrease due to assumption of net liabilities and related
cash distribution to promoters.......................... (1.11)
---------
Pro forma net tangible book value per share after the
Affiliations............................................ (2.06)
Increase due to the Offering.............................. $ 3.82
---------
Pro forma net tangible book value per share after the
Affiliations and Offering............................... $ 1.76
---------
Dilution per share to initial public offering investors..... $ 8.24
---------
---------
</TABLE>

- ---------

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

The following table sets forth, on a pro forma basis to give effect to the
Affiliations as of September 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 AVERAGE
------------------------- ------------------------------- PRICE PER
NUMBER PERCENT AMOUNT PERCENT SHARE
------------ ----------- ------------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Existing stockholders...................... 1,311,603 20.4% $ 726,000 3.8% $ 0.55
Stockholders receiving shares in connection
with the Affiliations.................... 2,630,295 40.8% (6,431,651)(1) (33.3)% $ (2.45)(1)
New investors.............................. 2,500,000 38.8% $ 25,000,000 129.5% $ 10.00
------------ ----- ------------------ -----
Total.................................. 6,441,898 100.0% $ 19,294,349 100.0%
------------ ----- ------------------ -----
------------ ----- ------------------ -----
</TABLE>

- ---------

(1) Represents the cash distribution of approximately $6.4 million and the
aggregate historical book value of the assets to be acquired, net of
liabilities of the Founding Affiliated Practices to be assumed by the
Company (a net amount of approximately $(45,000)), in the Affiliations.

All of the calculations above exclude an aggregate of 671,667 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 1,328,333 shares reserved for future issuance under the 1997 Stock
Compensation Plan. See "Management--1997 Stock Compensation Plan."

18
<PAGE>
CAPITALIZATION

The following table sets forth the short-term debt and the capitalization of
the Company at September 30, 1997 (a) on a historical basis, (b) on a pro forma
basis, to give effect to the Affiliations and (c) on that pro forma basis, as
adjusted to give effect to the Offering and the use of the estimated net
proceeds therefrom as described under "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 SEPTEMBER 30, 1997
----------------------------------------
HISTORICAL PRO FORMA AS ADJUSTED(1)
----------- ----------- --------------
(IN THOUSANDS)
<S> <C> <C> <C>
Short-term debt:
Distribution liability(2)................................................ $ -- $ 6,587 $ --
Current portion of long-term debt........................................ -- 746 --
----------- ----------- -------
Total short-term debt.................................................... $ -- $ 7,333 $ --
----------- ----------- -------
----------- ----------- -------
Long-term debt:
Long-term debt, net of current portion................................... -- 1,997 --
Redeemable Preferred Stock................................................. 1,089 1,089 --
Stockholders' equity (deficit):
Common Stock, 40,000,000 shares authorized; 1,756,667 shares issued and
outstanding, 3,941,898 shares issued and outstanding, pro forma, and
6,441,898 shares issued and outstanding, as adjusted(1)................ 18 21 6
Additional paid-in capital(3)............................................ 708 (5,727) 13,552
Accumulated deficit...................................................... (750) (750) (2,000)
----------- ----------- -------
Total stockholders' equity............................................. (24) (6,456) 11,558
----------- ----------- -------
Total capitalization................................................... $ 1,065 $ (3,370) $ 11,558
----------- ----------- -------
----------- ----------- -------
</TABLE>

- ---------
(1) Excludes 671,667 shares of Common Stock to become subject to option awards
that have been authorized pursuant to the 1997 Stock Compensation Plan. See
"Management--1997 Stock Compensation Plan."

(2) Includes approximately $6,387,000 for the cash portion of the consideration
in the Affiliations payable as a distribution to promoters and $200,000
payable in connection with the Pentegra/Napili Transaction.

(3) The $(6,435,000) effect of the Affiliations on additional paid-in capital is
equal to the aggregate liabilities in excess of the aggregate historical
book value of the assets to be acquired (a net amount of approximately
$(45,000)), plus aggregate cash payments of approximately $6,387,000 to be
made to promoters as part of the consideration for the Affiliations, plus
the par value of the Common Stock to be issued in connection with the
Affiliations.

19
<PAGE>
SELECTED FINANCIAL DATA
(IN THOUSANDS EXCEPT PER SHARE DATA)

Upon completion of the Offering and pursuant to the Affiliations, the
Company will acquire substantially all the tangible and intangible assets and
assume certain liabilities of the Founding Affiliated Practices. Due to the fact
that the Company has had no significant operations to date, no pro forma
statement of operations has been included in this Prospectus. The nature and
amount of costs to be incurred by the Company in connection with the management
services it will provide to the Founding Affiliated Practices may differ from
the costs historically incurred by the Founding Affiliated Practices. The
selected historical financial data of the Company 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
Company as of September 30, 1997 and for the period from inception, February 21,
1997, through September 30, 1997, set forth below, have been derived from the
audited financial statements of Pentegra Dental Group, Inc. included in this
Prospectus. Except as indicated, the following information does not reflect the
effects of the Offering, the Affiliations, the Share Exchange, the
Pentegra/Napili Transaction and the Repurchase and Redemption. For certain
information concerning the Affiliations, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and Note 4 of Notes
to the Pentegra Dental Group, Inc. financial statements.

<TABLE>
<CAPTION>
FOR THE
PERIOD
FROM
INCEPTION
(FEBRUARY
21,
1997)
THROUGH
SEPTEMBER
30, 1997
--------
(UNAUDITED)
<S> <C>
STATEMENT OF OPERATIONS DATA:
Revenue.............................................. $ --
General and administrative expenses................ 411
Other expenses..................................... 339
--------
Total expenses................................. 750
--------
Net loss........................................... $ (750)
--------
--------
</TABLE>

<TABLE>
<CAPTION>
SEPTEMBER 30, 1997
---------------------------
HISTORICAL AS ADJUSTED(1)
----------- --------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents(2)........................................................... $ 354 $ 9,457
Working capital (deficit).............................................................. (652) 8,572
Total assets........................................................................... 2,071 12,983
Redeemable preferred stock............................................................. 1,089 --
Stockholders' equity (deficit)......................................................... (24) 11,544
</TABLE>

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

(2) See "Use of Proceeds."

20
<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
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 Affiliations, 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 those 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 will be 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 to Affiliated Practices.

The Service Agreements with the professional corporations or associations to
be formed by the dentist-owners of the Founding Affiliated Practices have
initial terms of 40 years, subject to earlier termination under certain
circumstances. Pursuant to those Service Agreements, the Company will become the
exclusive manager and administrator of non-dental services relating to the
operation of the Founding Affiliated Practices, and will, among other things,
(i) administer the billing and collections for the Founding Affiliated
Practices, (ii) provide the necessary clerical, accounting and other non-dental
services to the Founding Affiliated Practices and (iii) provide facilities and
equipment for the Founding Affiliated Practices. The service fees payable by the
Founding Affiliated Practices to the Company under the Service Agreements are
based on fair market value of the services to be provided. Generally, the
service fees are computed based on (i) a percentage of revenues less operating
expenses, (ii) a percentage of revenues not to exceed a percentage of revenues
less operating expenses, (iii) a specific fixed service fee or (iv) some
combination of these. See "--Planned Operations" and "Business--Service
Agreements."

The Company does not participate in the negotiation of dentist compensation.
Under each Service Agreement, the Affiliated Practice will retain the
decision-making power and responsibility for, among other things, (i) hiring,
compensating and supervising dentists 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. Pursuant to the terms of the Service
Agreements, the Affiliated Practices will continue to provide dental services
and will be exclusively in control of all aspects of the practice of dentistry
and the provision of dental services. The Company will not engage in the
practice of dentistry.

21
<PAGE>

As a result of the Affiliations and upon completion of the Offering, the
dentist-owners of the Founding Affiliated Practices and certain officers and
directors of the Company will beneficially own approximately 53.6% of the
outstanding shares of Common Stock. See "Certain Transactions--Organization of
the Company" and "Principal Stockholders."

RESULTS OF OPERATIONS

PENTEGRA AND PII

Pentegra and PII have conducted no significant operations to date and will
not conduct significant operations until the Affiliations, the Pentegra/Napili
Transaction and the Offering are completed. The Company had no revenues and a
net loss of $750,000 for the period from inception, February 21, 1997, through
September 30, 1997. General and administrative expenses totalling approximately
$750,000 were incurred during the period from inception through September 30,
1997. The Company has incurred and will continue to incur various legal,
accounting, travel, personnel and marketing costs in connection with the
Affiliations 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 $350,000 is being funded
with proceeds from the issuance of $350,000 aggregate principal amount of 9.5%
promissory notes of the Company to four separate lenders in October and November
1997.

PLANNED OPERATIONS

The Company intends to complete the Affiliations and the Pentegra/Napili
Transaction concurrently with the closing of the Offering. Upon consummation of
the Affiliations, 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 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 from the description below on a case-by-case basis, depending on
negotiations with the individual Founding Affiliated Practices and the
requirements of applicable laws and governmental regulations.

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 dentist
engages in conduct for which the dentist'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 management service fees (the "Service Fees") payable to the Company by
the Founding Affiliated Practices under the Service Agreements, together with
operating and non-operating expenses of each Affiliated Practice to be paid to
the Company pursuant to the Service Agreements, are payable monthly and consist
of various combinations of the following: (i) "Standard Service Agreement",
which provides for (a) a percentage (ranging from 30% to 40%) of the Affiliated
Practice's revenues related to dental services less operating expenses
associated with the operation of the Affiliated Practice or (b) a percentage
(16%) of the Affiliated Practice's dental service revenues, not to exceed a
percentage (35%) of the difference between those revenues and operating expenses
associated with the operation of the Affiliated Practice; or (ii) "Alternative
Service Agreement," which provides for the greater of (a) a percentage (35%) of
the Affiliated Practice's revenues related to dental services less operating
expenses associated with the operation of the Affiliated Practice or (b) a
specified fixed Service Fee (ranging from

22
<PAGE>

$54,000 to $305,000 annually). In addition, with respect to four of the Founding
Affiliated Practices, the Service Fees are based on fixed fees that are subject
to renegotiation on an annual basis.

Service Fees payable to the Company under clause (i)(a) above are payable by
37 of the Founding Affiliated Practices, located in each state in which the
Founding Affiliated Practices are located other than New York and California,
and are calculated by subtracting the operating expenses of the Founding
Affiliated Practice (including non-dental salaries, insurance, rent and other
non-dentist costs) from the net revenues of the Founding Affiliated Practice and
multiplying the resulting amount by 30%, 35% or 40%, depending on the terms of
the particular Service Agreement. One Founding Affiliated Practice located in
California will pay its Service Fee according to the formula set forth in clause
(i)(b) above, equal to the greater of 16% of its net revenues or 35% of the
difference between its net revenues and operating expenses. Service Fees to be
received by the Company under clause (ii)(b) above are payable by eight of the
Founding Affiliated Practices in Texas and will result in a minimum service fee
being received by the Company (ranging from $54,000 to $305,000 annually). The
annual fixed fees payable by the four Founding Affiliated Practices in New York
are $66,009, $115,251, $83,579 and $140,127 and will be subject to renegotiation
each year based on the fair value of the services to be received by those
Founding Affiliated Practices from the Company. On a monthly basis, the Company
will calculate the Service Fee due from each Founding Affiliated Practice
pursuant to the terms of each Service Agreement. In addition, if the costs
related to providing dental services pursuant to capitated managed care
arrangements exceed the revenues received for those services, the Affiliated
Practice will remain responsible for reimbursing the Company for all of the
costs associated with providing those services, even if no Service Fee is due to
the Company under its Service Agreement.

Dentist compensation will be determined by the Affiliated Practices pursuant
to employment arrangements between the Affiliated Practices and the individual
dentists. The Company does not participate in the negotiation of dentist
employment compensation.

The Company will not engage in the practice of dentistry. To the extent that
a Founding Affiliated Practice, with the assistance of the Company pursuant to
its Service Agreement, increases its revenues and/ or decreases its operating
expenses, the Service Fees payable to the Company may increase. The Service Fees
for each Founding Affiliated Practice will be calculated individually and will
not be based on the operations of any other Founding Affiliated Practice.

It is anticipated that substantially all the Company's revenues will consist
of Service Fees and the operating expenses that the Affiliated Practices will
pay to the Company under the Service Agreements. Service Fees may be expected to
vary proportionately with the level of dental services provided by Founding
Affiliated Practices and future affiliations with additional Affiliated
Practices.

SERVICE FEE CALCULATION

The following table categorizes by the type of Service Agreement, the
historical 1996 patient revenues of the Founding Affiliated Practices and the
historical 1996 operating expenses excluding depreciation and

23
<PAGE>
dentists' salaries. It also demonstrates the calculation of the Service Fees
under each type of Service Agreement (in thousands):

<TABLE>
<CAPTION>
ALTERNATIVE SERVICE
STANDARD AGREEMENT FIXED FEE
SERVICE -------------------------- SERVICE
AGREEMENT PERCENTAGE(C) FIXED AGREEMENT TOTAL
----------- --------------- --------- ----------- ---------

<S> <C> <C> <C> <C> <C>
Number of Founding Affiliated Practices..... 38 -- 8 4 50
----------- ----- --------- ----------- ---------
----------- ----- --------- ----------- ---------
Historical 1996 patient revenues of Founding
Affiliated Practices....................... $ 28,371 $ -- $ 6,921 $ 2,599 $ 37,891
Historical 1996 operating expenses of
Founding Affiliated Practices(a)........... 16,913 -- 4,776 1,393 23,082
----------- ----- --------- ----------- ---------
Historical 1996 operating income(a)....... $ 11,458 -- $ 2,145 $ 1,206 $ 14,809
--------- ----------- ---------
--------- ----------- ---------
Contractual rate applied to operating income
to determine Services Fees under the
Service Agreements(b)...................... 35% 35% -- -- --
----------- -----
Percentage Service Fees based on operating
income..................................... $ 4,010 $ -- -- -- $ 4,010
----------- ----- ---------
----------- ----- ---------
Contractual fixed Service Fees under terms
of the Service Agreements.................. $ 881 $ 405 $ 1,286
--------- ----------- ---------
--------- ----------- ---------
</TABLE>

- ---------

(a) Under the terms of the Service Agreements, operating expenses and operating
income exclude depreciation and the effects of dentists' salaries.

(b) Represents the contractual rate that, under 36 of the Standard Service
Agreements and all of the Alternative Service Agreements, will be applied to
operating income to calculate percentage-based Service Fees.

(c) Under the contract terms, all of the Company's Alternative Service
Agreements would have resulted in fixed fee payments.

The information presented in the table above is provided solely to illustrate
the terms of the Service Agreements and does not represent any expectation of
results that may be realized in the future.

Total fees payable to the Company under the Service Agreements will consist
of the sum of (i) the operating expenses that the Affiliated Practices will pay
the Company, (ii) the percentage-based Services Fees and (iii) the fixed Service
Fees.

LIQUIDITY AND CAPITAL RESOURCES

The Company had cash of approximately $354,000 at September 30, 1997. In
October and November 1997, the Company received an additional $350,000 through
the issuance of $350,000 aggregate principal amount of 9.5% promissory notes to
four 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 certain of those
lenders for cash consideration of $.015 per share and authorized the grant of
options to acquire 25,000 shares of Common Stock at the initial public offering
price. The Company anticipates receiving approximately $22.0 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 and notes of the Company, (ii) the cash portion of the
consideration for the Affiliations of approximately $6.4 million, (iii) the
consideration for the Pentegra/

24
<PAGE>

Napili Transaction of $200,000, (iv) approximately $2.8 million in connection
with the Repurchase and Redemption, (v) approximately $2.7 million to retire
certain indebtedness of the Founding Affiliated Practices and (vi) approximately
$350,000 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. The cost of implementing the Company's management
information systems is estimated to be approximately $550,000, including
enhanced microcomputer and related hardware in certain dental practice offices.
Approximately half of this amount has been paid with proceeds from the sale of
Class A Preferred and Class B Preferred, with the remainder to be paid from the
net proceeds of the Offering. Any significant delay or increase in expense
associated with the implementation of the Company's management information
systems could have a material adverse effect on the Company's results of
operations and liquidity.

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 is also seeking to establish a revolving bank credit facility and
intends to register an additional 1,500,000 shares of Common Stock under the
Securities Act following the Offering which, when combined with the Company's
cash resources, will be used in the Company's expansion program. In addition,
the Company may seek to utilize seller financing debt in future affiliations or
additional equity offerings to finance the Company's operations.

ACCOUNTING TREATMENT

In accordance with Staff Accounting Bulletin No. 48, "Transfers of
Nonmonetary Assets by Promoters or Shareholders" ("SAB 48"), the acquisition of
the assets and assumption of certain liabilities pursuant to the Affiliations
from certain promoters of the Company (the dentists who own the Founding
Affiliated Practices) will be accounted for by the Company at the transferors'
historical cost basis. The Common Stock being issued in the Affiliations 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 to the promoters in the Affiliations of approximately $6.4 million and the
assumption of approximately $45,000 of net liabilities of the Founding
Affiliated Practices will be treated for accounting purposes as a dividend to
the promoters. See "Business--Summary of Terms of Affiliations" and "Certain
Transactions--Organization of the Company."

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.

In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," and SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information." SFAS No. 130 establishes standards for reporting and
displaying comprehensive income and its components in a full set of general
purpose financial statements. SFAS No. 131 establishes standards for reporting
segment information by public enterprises in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports to shareholders. Both of these statements
are effective for fiscal years beginning after December 15, 1997. The Company
believes

25
<PAGE>
implementation of SFAS Nos. 130 and 131 will not have a material effect on its
financial position, results of operations or cash flows.

In November 1997, the Emerging Issues Task Force of the FASB (the "EITF")
reached a consensus relating to the conditions under which a physician or dental
practice management company would consolidate the accounts of an affiliated
physician or dental practice. The Company believes that its accounting policies
conform to the EITF consensus.

26
<PAGE>
BUSINESS

OVERVIEW

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 50 Founding Affiliated Practices, which include 77 dentists and
63 dental offices located in 18 states. These dentists have practiced an average
of 21 years. Of these dentists, 68 are general dentists, one is a
prosthodontist, five are periodontists, one is a pedodontist and two are oral
surgeons. 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 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
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

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dental procedures covered. According to the 1997 Mercer Consulting Group survey
of Employer-Sponsored Health Plans, approximately 86% of the respondents in that
survey reported that they offer their employees dental plans that 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:

- 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 over 15,000 practicing 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, on-site 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.

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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 seminars and on-site training and support to assist
affiliated dentists (who will control the practice of dentistry at Affiliated
Practices) 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. An initial
on-site consulting and training session will be provided to Affiliated Practices
lasting from one to three days, with subsequent sessions provided as necessary.
At each initial session, the Company will perform an analysis that includes
on-site observation of the dental practice, monitoring of the clinical staff and
patient flow, as well as a review of the charting and record documentation of
the care provided. The purpose of this analysis is to identify areas where
improvements might be made in the day-to-day operations of the dental practice,
including changes in personnel and facility utilization, patient scheduling and
communication (both between the dentist and his or her staff and between all
dental practice personnel and its patients). In addition, the dental practice's
personnel, including its dentists, are introduced to techniques designed to (i)
improve communication among them and (ii) sensitize them to becoming more
confident and consistent in their communications with patients in order to
ensure that each patient is fully informed and agrees with the dentist on a
mutually acceptable 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 the use of hygienists 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 the Affiliated Practices' patient scheduling and time spent with
patients, and will provide office design services, 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 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

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centralize certain functions, such as purchasing, accounts payable and payroll
processing, and achieve economies of scale.

The centralized data repository of the Company's management information
system has been completed. The Company is currently in the process of refining
and testing the interfacing of its management information system with beta sites
at selected Founding Affiliated Practices. The Company has successfully
completed testing to ensure access to the Company's data repository via the
internet at the beta sites, but has not yet completed testing of the entry and
retrieval of statistical data into the data repository from the beta sites. 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 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 transferring cash from the Affiliated Practices to the Company.

OTHER PRACTICE MANAGEMENT SERVICES

The Company will provide other practice management services to the
Affiliated Practices, including staffing, general business and professional
dental education and training to affiliated dentists, dental hygenists and
office staff, 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. The
Company does not currently intend to enter into any agreements with third-party
payors.

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.

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LOCATIONS

Upon consummation of the Affiliations, the Company will provide management
services to the Founding Affiliated Practices, with offices in the following
states:

<TABLE>
<CAPTION>
NUMBER OF
-------------------------------
STATE OFFICES DENTISTS CITIES
- ------------------------------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Alaska............................................................. 1 1 1
Arizona............................................................ 6 7 4
California......................................................... 1 1 1
Colorado........................................................... 4 6 4
Florida............................................................ 3 3 2
Louisiana.......................................................... 1 1 1
Maine.............................................................. 1 1 1
Maryland........................................................... 1 1 1
Massachusetts...................................................... 1 2 1
Michigan........................................................... 1 1 1
Nebraska........................................................... 2 2 1
New Mexico......................................................... 1 2 1
New York........................................................... 4 4 3
North Dakota....................................................... 1 1 1
Oregon............................................................. 1 1 1
Texas.............................................................. 31 40 12
Washington......................................................... 2 2 2
Wisconsin.......................................................... 1 1 1
--------- --------- ---------
Totals........................................................... 63 77 39
--------- --------- ---------
--------- --------- ---------
</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.

SUMMARY OF TERMS OF AFFILIATIONS

The aggregate consideration that will be paid by Pentegra to the promoters
consists of (i) approximately $6.4 million in cash and (ii) shares of Common
Stock having a value of approximately $26.3 million, based on the initial public
offering price (2,630,295 shares of Common Stock, based on an assumed initial
public offering price of $10.00 per share). The number of shares to be issued in
connection with the Affiliations will decrease if the initial public offering
price is higher, and will increase if the initial public offering price is
lower, than $10.00 per share. For example, an aggregate of 2,391,177 shares of
Common Stock would be issued to the dentist-owners of the Founding Affiliated
Practices (all of whom are promoters of the Company) if that price is $11.00 per
share, while an aggregate of 2,922,549 shares of Common Stock would be issued to
those persons if that price is $9.00 per share. The Company will also assume
certain indebtedness of the Founding Affiliated Practices of approximately $2.7
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 assets to be acquired include furniture, fixtures, computer
equipment, dental chairs, lights, autoclaves, mixers, vacuum and suction
systems, cabinets, hand instruments and hand pieces of each Founding Affiliated
Practice. Pentegra will also acquire the intangible assets of each Founding
Affiliated Practice and will employ the non-professional staff of each Founding
Affiliated Practice. Prior to consummation of the Offering, each dentist-owner
who owns a Founding Affiliated Practice will form a new professional corporation
or association that will (i) employ the dentists-owner and all other dentists
working at the Founding Affiliated Practice and (ii) be a party to a Service
Agreement to whom the Company will provide services thereunder. The Company will
own no interest in those professional corporations or associations. In the event
of a breach of the Service Agreement by an Affiliated Practice, the Company will
have the right to designate a dentist to purchase the ownership interests of the
applicable professional corporation or association.

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The consideration being paid by Pentegra for each Founding Affiliated
Practice was determined by negotiations between executive officers of Pentegra
not affiliated with any Founding Affiliated Practice 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 respective practices wholly owned by Drs. Reed, Andress, Clarke,
Greder, Kay and Yaros, which methods were based upon the Founding Affiliated
Practice's gross revenue, net of certain operating expenses, and the Company's
assessment of growth potential.

The closing of each Affiliation is subject to customary conditions. These
conditions include, among others, the accuracy, on the closing date of the
Affiliations, 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
Affiliations; 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 Affiliations, 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 payable under the Service Agreements to the Company by the
professional corporations or associations to be formed by the dentist-owners of
the Founding Affiliated Practices were determined in arm's-length negotiations
among the parties. Those Affiliated Practices that have revenues greater than
the average amount of revenues generated by the Affiliated Practices will
typically require more administrative and other services from the Company than
those Affiliated Practices with lower than average revenues. Such fees, together
with reimbursement for operating and non-operating expenses of each Affiliated
Practice to be paid by the Company pursuant to the Service Agreements, are
payable monthly and consist of various combinations of the following: (i) a
percentage (ranging from 30% to 40%) of the Affiliated Practice's revenues
related to dental services less operating expenses associated with the operation
of the Affiliated Practice; (ii) a percentage (16%) of the Affiliated Practice's
dental service revenues, not to exceed a percentage (35%) of the difference
between those revenues and operating expenses associated with the operation of
the Affililated Practice; or (iii) the greater of (a) a percentage (not to
exceed 35%) of the Affiliated Practice's revenues related to dental services
less operating expenses associated with the operation of the Affiliated Practice
or (b) a specified fixed fee. In addition, with respect to four of the Founding
Affiliated Practices, the Service Fees are based on fixed fees that are subject
to renegotiation on an annual basis. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Results of Operations--Planned
Operations."

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
certain matters reserved to the Founding Affiliated Practice, (ii) administer
the billing

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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 for 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.

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

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Affiliated Practice to the Company's authorized designee, who, in any such case,
the Company anticipates will be a dentist affiliated with an Affiliated
Practice.

DENTIST EMPLOYMENT AGREEMENTS

Upon consummation of the Affiliations, 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
Affiliations 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 publicly traded dental practice management companies that have
operations in jurisdictions where one or more Founding Affiliated Practices
conduct business (including Castle Dental Centers, Inc., Monarch Dental
Corporation, Coast Dental Services, Inc., Gentle Dental Service Corp., Apple
Orthodontix, Inc., OrthAlliance, Inc. and Orthodontic Centers of America, Inc.)
and several companies pursuing similar strategies in other segments of the
health care industry. 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 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.

EMPLOYEES

As of December 1, 1997, the Company employed three persons. Upon
consummation of the Affiliations, the Company expects that it will have
approximately 390 employees, of which approximately 15 will be employed at the
Company's headquarters in Phoenix, Arizona 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 is, or upon
consummation of the Affiliations will be, represented by collective bargaining
agreements. The Company considers its employee relations to be good.

LITIGATION AND INSURANCE

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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 (each of which is an
ordinary routine proceeding incidental to the business of the applicable
Founding Affiliated Practice) as the result of successor liability in connection
with the Affiliations; 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 Affiliations, since the Company, as a result
of the Affiliations, 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 Affiliations 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, prohibitions
on fraud and abuse, restrictions on referrals and self-referrals, advertising
restrictions, restrictions on delegation and state insurance regulation.

CORPORATE PRACTICE OF DENTISTRY AND FEE-SPLITTING RESTRICTIONS

The laws of many states, including all of the states in which the Founding
Affiliated Practices are located other than New Mexico and Wisconsin, permit a
dentist to conduct a dental practice only as an individual, a member of a
partnership or an employee of a professional corporation, professional
association, limited liability company or limited liability partnership. These
laws prohibit business corporations such as the Company from engaging in the
practice of dentistry or employing dentists to practice dentistry. 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, including all of
the states in which the Founding Affiliated Practices are located other than
Alaska, Maine, Massachusetts, New Mexico and Wisconsin, 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. 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
Practices will not be successfully challenged or that the enforceability of the
provisions of any Service Agreement will not be limited.

In many states in which the Founding Affiliated Practices are located, there
is no case law or other authority interpreting the foregoing provisions. There
are, however, interpretations in some states of

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analogous medical provisions. One recent example is in the State of Florida,
where the Florida Board of Medicine recently considered the issue of whether a
physician practice is permitted to enter into a management agreement pursuant to
which the managing entity earns a management fee which includes a percentage of
the practice's net income as consideration for providing certain management and
operational services. The Florida Board of Medicine issued an opinion indicating
that such a management agreement is prohibited by applicable fee-splitting
statutes. However, that order has been stayed pending its appeal to the Florida
courts. Although the Florida Board of Medicine's decision did not apply to
dental practices, the court considering the appeal of the Board of Medicine's
order could reach conclusions or make statements that affect the application of
fee-splitting provisions applicable to dental management agreements. Pursuant to
the terms of the Service Agreements, in the event such a Service Agreement were
determined to be in violation of applicable law, the agreement would have to be
amended in a manner that complies with applicable law and preserves, to the
greatest extent possible, the economic interests of the parties thereto.

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

Many states in which the Founding Affiliated Practices are located,
including California, Florida, Maine, Maryland, Michigan, New York, Texas and
Washington, 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 in which
the Founding Affiliated Practices are located, including Alaska, Arizona,
California, Florida, Louisiana, Maine, Maryland, Michigan, New York, Texas and
Washington, 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. The Service Agreements that will be
entered into by the Company with respect to Affiliated Practices in Florida and
Maine will provide that equipment and offices owned or leased by the Company and
used at an Affiliated Practice will remain under the exclusive control of the
dentists employed by that Affiliated Practice.

Federal laws regulating the provision of dental care apply only to dental
services which are reimbursed under the Medicare and Medicaid programs. Because
none of the Founding Affiliated Practices receive any revenue under Medicare or
Medicaid, the impact of these laws on the Company is anticipated to be
negligible. There can be no assurance, however, that Affiliated Practices will
not have patients in the future covered by these laws, or that the scope of
these laws will not be expanded in the future, and if expanded, such laws or
interpretations thereunder could have a material adverse effect on the Company.

The federal fraud and abuse statute prohibits, subject to certain safe
harbors, the payment, offer, solicitation or receipt of any form of remuneration
in return for, or in order to induce: (i) the referral of a person for service,
(ii) the furnishing or arranging to furnish items or services or (iii) the
purchase, lease or order or the arrangement or recommendation of a purchase,
lease or order of any item or service which is, in each case, reimbursable under
Medicare or Medicaid. The statute reflects the federal government's policy of
increased scrutiny of joint ventures and other transactions among healthcare
providers in an effort to reduce potential fraud and abuse related to Medicare
and Medicaid costs. Because dental services are covered under various government
programs, including Medicare and Medicaid, this federal law applies to dentists
and the provision of dental services under those programs.

Significant prohibitions against dentist self-referrals for services covered
by Medicare and Medicaid programs were enacted, subject to certain exceptions,
by Congress in the Omnibus Budget Reconciliation Act of 1993. These
prohibitions, commonly known as Stark II, amended prior physician and dentist
self-referral legislation known as Stark I (which applied only to clinical
laboratory referrals) by dramatically

36
<PAGE>

enlarging the list of services and investment interests to which the
self-referral prohibitions apply. Stark II prohibits a physician or dentist, or
a member of his or her immediate family, from making referrals for certain
"designated health services" to entities in which the physician or dentist has
an ownership or investment interest, or with which the physician or dentist has
a compensation arrangement. "Designated health services" include, among other
things, clinical laboratory services, radiology and other diagnostic services,
radiation therapy services, durable medical equipment, prosthetics, outpatient
prescription drugs, home health services and inpatient and outpatient hospital
services. Stark II prohibitions include referrals within the physician's or
dentist's own group practice (unless such practice satisfies the "group
practice" exception) and referrals in connection with the physician's or
dentist's employment arrangements with the practice (unless the arrangement
satisfies the employment exception). Stark II also prohibits billing the
Medicare or Medicaid programs for services rendered following prohibited
referrals. Noncompliance with, or violation of, Stark II can result in exclusion
from the Medicare and Medicaid programs and civil and criminal penalties. The
Company believes that its operations as presently conducted do not pose a
material risk under Stark II, primarily because the Company does not provide
"designated health services." Nevertheless, there can be no assurance that Stark
II will not be interpreted or hereafter amended in a manner that has a material
adverse effect on the Company's operations.

OTHER FEDERAL REGULATIONS

Federal regulations also allow state licensing boards to revoke or restrict
a dentist's license in the event such dentist defaults in the payment of a
government-guaranteed student loan, and further allow the Medicare program to
offset such overdue loan payments against Medicare income due to the defaulting
dentist's employer. The Company cannot assure compliance by dentists with the
payment terms of their student loans, if any.

The operations of the Affiliated Practices are also subject to compliance
with regulations promulgated by the Occupational Safety and Health
Administration ("OSHA"), relating to such matters as heat sterilization of
dental instruments and the use of barrier techniques such as masks, goggles and
gloves.

LICENSURE, ADVERTISING RESTRICTIONS AND LIMITATIONS ON DELEGATION

The dentists associated with the Affiliated Practices must possess a license
from the applicable state Board of Dental Examiners and a permit from the U.S.
Drug Enforcement Agency.

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.

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<PAGE>
HEALTH CARE REFORM

38
<PAGE>
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 December 1, 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).................. 36 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. Dunn and Mr. Gelwick 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. From January 1994 to March 1997, 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 and 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 been the President of Gustavia Investments, L.L.C. (a newly
organized venture capital firm) since October 1997. Prior thereto, he served as
a Vice President of Physicians Resource Group, Inc. from June 1995 to October
1997. 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 was previously 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.

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<PAGE>
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.

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 in 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 first class, whose term of office will expire at the
first annual meeting of stockholders in 1998, is comprised of Drs. Andress,
Geistfeld and Kay, and Mr. Casas; the second class, whose term will expire one
year thereafter, is comprised of Drs. Clarke, Greder and Yaros and Mr. Carr; and
the third class, whose term will expire two years thereafter, is comprised of
Dr. Reed and Messrs. Glatter, Mahoney, Maris and Siegel. 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. See "Risk Factors--Board Composition" and "--Certain Anti-takeover
Provisions."

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

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<PAGE>
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.

EXECUTIVE COMPENSATION

Pentegra has conducted no operations to date other than in connection with
the Offering and the Affiliations. 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. These agreements, which will be
effective on the closing of the Affiliations and the Offering, 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 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 installments 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

42
<PAGE>
employee's employment at any time. Mr. Glatter is eligible to receive an annual
cash bonus in an amount equal to 50%, 100%, 150% or 200% of his base salary in
the event that the Company experiences from 5% to 9.99%, 10% to 19.99%, 20% to
29.99% or greater than 30%, respectively, growth in earnings per share on a
year-to-year basis (calculated on a pro forma basis for the calendar year prior
to the Company's first fiscal year of operations). For purposes of determining
the applicable year's earnings per share change, the cash bonuses payable to Mr.
Glatter and under all other employment agreements between the Company and its
officers will be taken into account. Each of the other named officers (except
Dr. Reed and Mr. Glatter) is eligible to receive an annual cash bonus in an
amount equal to 10%, 20%, 30%, 40% or 50% of his or her base salary in the event
that the Company experiences 20% to 22.5%, 22.5% to 25%, 25% to 27.5%, 27.5% to
30% or greater than 30%, respectively, growth in earnings per share on a
year-to-year basis (calculated on a pro forma basis for the calendar year prior
to the Company's first fiscal year of operations). For purposes of determining
the applicable year's earnings per share change, the cash bonuses payable to the
officer and under all other employment agreements between the Company and its
officers will be taken into account.

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 employment 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 closing. Each of the foregoing agreements also contains 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

43
<PAGE>
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.

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.

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<PAGE>
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
gain 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 671,667 shares of Common
Stock under the 1997 Stock Compensation Plan and (ii) 1,328,333 additional
shares available for future awards under the 1997 Stock Compensation Plan.

45
<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 $0.015. 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), Stephen E. Stapleton
(33,333 shares) and Kimberlee K. Rozman (33,333 shares), at a purchase price per
share of $0.015. In September 1997 and October 1997, PII repurchased 46,667
shares and 20,000 shares, respectively, of its common stock from George M.
Siegel at a purchase price per share of $0.015. In September 1997, the Company
issued 66,667 shares of common stock to Sam H. Carr at a purchase price per
share of $0.015.

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 Affiliations, 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 $0.015 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 Affiliations. 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.

In December 1997, the owners of the outstanding shares of common stock of
PII agreed that, in the event the initial public offering price is less than
$12.04 per share, PII will repurchase from those stockholders, on a pro rata
basis, at a purchase price of $.015 per share, that number of shares as will be
necessary so that the aggregate number of shares of Common Stock issuable in
connection with the Affiliations and the Share Exchange will not exceed
3,941,898 shares. Pursuant to that agreement, assuming an initial public
offering price of $10.00 per share, PII would repurchase approximately 25.3% of
each such stockholder's shares of PII common stock, or an aggregate of 445,064
shares.

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. This
purchase price was negotiated by Mr. Glatter, on behalf of the Company,

46
<PAGE>

by Dr. Reed, on behalf of himself, and by the administrators of the Reed Family
Trust, and was approved unanimously by the Company's Board of Directors, which
Dr. Reed serves on as Chairman of the Board. Dr. Reed beneficially owns
approximately 51.0% of the capital stock of each of Pentegra, Ltd. and Napili
and the Reed Family Trust (which is administered by, and whose beneficiaries
are, the children of Dr. Reed) beneficially owns 49% of the capital stock of
each of Pentegra, Ltd. and Napili. The assets that the Company will acquire from
Pentegra, Ltd. and Napili include office furniture and equipment, marketing
systems, recall systems, telephone systems, customer/client lists, books and
records and video tapes.

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 also provide the Company a monthly invoice for delivery, postage,
telephone, travel and other out-of-pocket expenses and obtain reimbursement for
those expenses from the Company. Through October 31, 1997, the Company has
reimbursed James L. Dunn & Assoc., Inc. for approximately $9,000 of such
expenses. The Company believes that the compensation paid to James L. Dunn &
Assoc., Inc. represents the fair market value of the services (which includes
the shared use of two clerical employees, use of office furniture, copy
machines, computers and other office equipment, and office supplies) provided to
the Company. Subsequent to the Offering, this arrangement may continue on a
month-to-month basis at the discretion of the Company.

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 also provide the Company a monthly invoice for delivery,
postage, telephone, travel and other out-of-pocket expenses and obtain
reimbursement for those expenses from the Company. Through October 31, 1997, the
Company has reimbursed Pentegra, Ltd. and Napili for approximately $6,000 of
such expenses. The Company believes that the compensation to be paid to
Pentegra, Ltd. represents the fair market value of the goods and services (which
includes utilities, furniture, office equipment and clerical services) being
provided to the Company under this arrangement. This lease will be assumed by
the Company in the Pentegra/Napili Transaction.

The following table provides certain information concerning each of the
Affiliations and each person who has an ownership interest in a Founding
Affiliated Practice (all of whom are promoters of the Company):

(TABLE CONTINUED)

47
<PAGE>

<TABLE>
<CAPTION>
CONSIDERATION TO BE RECEIVED
DEBT AND ---------------------------------------
ASSETS TO BE LIABILITIES NUMBER OF VALUE OF
FOUNDING AFFILIATED PRACTICE(1) CONTRIBUTED(2) ASSUMED SHARES(3) SHARES(3) CASH
- ----------------------------------------- -------------- ------------ ---------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Edward T. Dougherty, Jr., D.D.S., P.A.... 13,284 -- 93,132 931,320 232,830
Family Dental Center, P.A.:
Steve Anderson, D.D.S.................. 48,830 -- 70,685 706,850 176,711
Lindi B. Anderson, D.D.S............... 12,208 -- 17,671 176,710 44,178
Richard H. Fettig, D.D.S................. 14,288 19,836 38,921 389,210 97,303
Alan H. Gerbholz, D.D.S., P.C............ 15,154 -- 36,581 365,810 91,451
Michael J. Gershtenson, D.D.S., P.C...... 92,794 24,948 39,227 392,270 98,067
Mack E. Greder, D.D.S., P.C.............. 43,211 37,505 57,273 572,730 143,183
Salvatore Guarnieri, D.D.S............... 76,652 28,205 40,118 401,180 100,295
Kent Hamilton, D.D.S..................... 160,781 200,000 95,305 953,050 238,262
David R. Henderson, D.D.S................ 6,202 -- 34,044 340,440 85,109
Stephen Hwang, D.D.S..................... 14,198 -- 29,973 299,730 74,931
Jackson Dental Partnership:
Penn Jackson, Sr., D.D.S............... 47,842 -- 26,056 260,560 --
Penn Jackson, Jr., D.D.S............... 31,894 -- 17,371 173,710 --
Bruce A. Kanehl, D.D.S................... -- 22,532 58,951 589,510 147,378
Roger Allen Kay, D.D.S., P.A............. 19,883 4,816 57,607 576,070 144,017
Patrick T. Kelly, D.D.S., P.C............ 20,133 12,000 15,603 156,030 39,008
Brian K. Kniff, D.D.S., P.C.:
Brian K. Kniff, D.D.S.................. 102,477 23,327 45,539 455,390 113,848
Gordon Ledingham, D.D.S................ 102,477 23,327 45,539 455,390 113,848
Lakeview Dental, P.C. (Kevin Gasser,
D.D.S.)................................ 19,586 34,803 40,872 408,720 102,180
Donald W. Lanning, D.D.S................. 39,167 -- 24,867 248,670 40,000
David A. Little, D.D.S................... 89,519 230,859 42,336 423,360 105,840
Susan Lunson, D.D.S...................... 73,457 190,675 23,701 237,010 59,253
Richard W. Mains, Jr., D.M.D., P.C....... 86,785 -- 67,261 672,610 168,152
James M. McDonough, D.D.S................ 43,476 56,000 50,570 505,700 126,424
James W. Medlock, D.D.S., P.A............ 18,282 33,066 71,976 719,760 179,940
James Randy Mellard, D.D.S. M.S., P.C.... 48,327 65,242 12,794 127,940 31,986
Mary B. Mellard, D.D.S., P.C............. 128,119 230,733 51,425 514,250 128,562
TL Mullooly, D.D.S., Inc................. 48,812 -- 38,767 387,670 96,918
Byron L. Novosad, D.D.S., Inc............ 6,594 -- 39,969 399,690 99,923
Randy O'Brien, D.D.S., Inc............... 21,527 27,753 30,725 307,250 76,811
Terrence C. O'Keefe, D.D.S............... 45,442 52,139 24,300 243,000 81,000
Harold A. Pebbles, Jr., D.D.S., P.C...... -- -- 47,857 478,570 119,641
Jimmy F. Pinner, D.D.S................... 18,664 12,000 14,647 146,470 36,619
Omer K. Reed, D.D.S...................... 17,806 0 31,298 312,980 --
Richard Reinitz, D.D.S., P.C............. 96,284 226,009 126,395 1,263,950 315,988
Greg Richards, D.D.S..................... 49,194 59,000 16,524 165,240 41,302
Richard N. Smith, D.M.D., P.C............ 34,399 94,998 81,252 812,520 203,129
John N. Stellpflug, D.D.S................ 20,079 36,750 40,002 400,020 100,006
Jack Stephens, D.D.S..................... 54,409 -- 102,609 1,026,090 256,523
Y. Paul Suzuki, D.D.S., P.C.............. 18,900 -- 38,348 383,480 95,870
Donald F. Tamborello, D.D.S.............. 13,808 7,565 45,864 458,640 114,660
Helena Thomas, D.D.S..................... 93,011 113,013 24,626 246,260 61,566
</TABLE>

(TABLE CONTINUED)

48
<PAGE>

- ---------

(1) Unless otherwise noted, the dentist who owns all of the capital stock of the
Founding Affiliated Practice is set forth in the name of that Founding
Affiliated Practice.

(2) Assets to be contributed reflects the historical book value of the
nonmonetary assets of each practice to be transferred to 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.

(3) Assumes an initial public offering price of $10.00 per share. The actual
number of shares to be issued as consideration for the Affiliations may be
higher or lower depending on the actual initial public offering price per
share. For example, an aggregate of 2,391,177 shares of Common Stock would
be issued to the dentist-owners of the Founding Affiliated Practices if that
price is $11.00 per share, while an aggregate of 2,922,549 shares of Common
Stock would be issued to the dentist-owners of the Founding Affiliated
Practices if that price is $9.00 per share.

The consideration being paid by the Company for each Founding Affiliated
Practice was determined by negotiations between executive officers of the
Company not affiliated with any Founding Affiliated Practice and a
representative of that Founding Affiliated Practice. The Company used the same
valuation method to negotiate the consideration being paid to each of the
Founding Affiliated Practices, including the respective practices wholly owned
by Drs. Reed, Andress, Clarke, Greder, Kay and Yaros, which method was based
upon the Founding Affiliated Practice's gross revenue net of certain operating
expenses, and the Company's assessment of growth potential.

All of the 2,630,295 shares of Common Stock issued in the Affiliations to
the dentists named in the foregoing table and all of 1,311,603 shares of Common
Stock issued in the Share Exchange will have certain piggy-back registration
rights. See "Shares Eligible for Future Sale."

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.

49
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT

The following table shows, as of December 1, 1997 and immediately after
giving effect to the closing of the Affiliations 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. The
address of each person in the table is c/o Pentegra Dental Group, Inc., 2999
North 44th Street, Suite 650, Phoenix, Arizona 85018.

<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% 148,894 2.3%
Gary S. Glatter...................................................... 107,500 6.1% 80,264 1.2%
Sam H. Carr.......................................................... 66,667 3.8% 49,776 *
James L. Dunn, Jr.................................................... 93,333 5.3% 69,686 1.1%
John G. Thayer....................................................... 66,667 3.8% 49,776 *
Kimberlee K. Rozman.................................................. 33,333 1.9% 24,888 *
George M. Siegel..................................................... 240,833 13.7% 179,816 2.8%
J. Michael Casas..................................................... 200,000 11.4% 149,329 2.3%
Ronald M. Yaros, D.D.S............................................... 0 -- 118,332 1.8%
Kelly W. Reed(2)..................................................... 150,000 8.5% 111,996 1.7%
Ronnie L. Andress, D.D.S............................................. 0 -- 86,531 1.3%
Roger Allen Kay, D.D.S............................................... 5,000 * 61,340 *
Mack E. Greder, D.D.S................................................ 5,000 * 61,006 *
James H. Clarke, Jr., D.D.S.......................................... 0 -- 60,037 *
Allen M. Gelwick..................................................... 66,667 3.8% 49,776 *
Ronald E. Geistfeld, D.D.S........................................... 0 -- 0 --
Gerald F. Mahoney.................................................... 0 -- 0 --
Anthony P. Maris..................................................... 0 -- 0 --
All executive officers and directors as a group (17 persons)......... 1,042,500 59.3% 1,189,451 18.5%
</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 of
Common Stock to be issued in connection with the Affiliations (2,630,295
shares) and the Share Exchange (1,311,603 shares) assumes an initial public
offering price of $10.00 per share. The actual number of such shares may be
higher or lower depending on the actual initial public offering price per
share. The actual number of shares to be issued as consideration for the
Affiliations may be higher or lower depending on the actual initial public
offering price per share. For example, an aggregate of 2,391,177 shares of
Common Stock would be issued to the dentist-owners of the Founding
Affiliated Practices if that price is $11.00 per share, while an aggregate
of 2,922,549 shares of Common Stock would be issued to the dentist-owners of
the Founding Affiliated Practices if that price is $9.00 per share. However,
in any event, the number of shares of Common Stock to be issued in
connection with the Affiliations and the Share Exchange will not exceed
3,941,898 shares in the aggregate.

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

50
<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 and held of record
by 52 stockholders. 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

51
<PAGE>
approved the transaction in which the interested stockholder became an
interested stockholder or 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

52
<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 Affiliations and the Offering, the Company will
have outstanding 6,441,898 shares of Common Stock (6,816,898 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 3,941,898 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 date of acquisition of restricted securities from the
issuer or from an affiliate of the issuer, the acquirer or

53
<PAGE>
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 671,667 shares
of Common Stock were authorized for issuance 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 and its executive officers, directors and current stockholders
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 Affiliations 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 Affiliations, 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 Affiliations. 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
underwritten offerings. The registration rights conferred by the Registration
Rights Agreements will

54
<PAGE>
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.

55
<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
Dain Rauscher Incorporated 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..............................................................
Dain Rauscher Incorporated.......................................................

-----------
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 and its executive officers, directors and current stockholders
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 Common Stock
upon exercise of Options or Awards) under the 1997 Stock Compensation

56
<PAGE>
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 Affiliations, 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 over-allot (I.E., if they sell more shares of Common
Stock than are set forth on the cover page of this Prospectus), and thereby
create a short position in the Common Stock in connection with the Offering, 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 125,000
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.

57
<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 September 30,
1997 and for the period from inception, February 21, 1997, through September 30,
1997, 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 report 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.

58
<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 September 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-6
Balance Sheet as of September 30, 1997................................................................... F-7
Statement of Operations for the period from inception,
February 21, 1997, through September 30, 1997.......................................................... F-8
Statement of Changes in Stockholders' Deficit for the period from inception, February 21, 1997, through
September 30, 1997..................................................................................... F-9
Statement of Cash Flows for the period from inception, February 21, 1997, through September 30, 1997..... F-10
Notes to Financial Statements............................................................................ F-11
</TABLE>

F-1
<PAGE>
UNAUDITED PRO FORMA BALANCE SHEET

The unaudited pro forma balance sheet dated September 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 50 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
"Affiliations"), (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 Pentegra Investments, Inc. ("PII") of 245,845
shares of Class B Preferred Stock of 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") (after giving effect to a
repurchase by PII of shares of its common stock, at a purchase price of $.015
per share, such that the total number of shares of Common Stock issuable in
connection with the Affiliations and the Share Exchange will not exceed
3,941,898 shares) and (f) the initial public offering of 2,500,000 shares of
Common Stock (the "Offering") and the application of the net proceeds therefrom
(as described in "Use of Proceeds, " except for the issuance and repayment of
$350,000 aggregate principal amount outstanding under the Company's 9.5%
promissory notes (the "Promissory Notes") which were issued in October and
November of 1997), all had been completed, as if those transactions had occurred
on September 30, 1997. The Affiliations, 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
Affiliations 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 Affiliations
will be accounted for at their historical cost basis with the shares of Common
Stock to be issued in the Affiliations 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.

The Company has not presented a pro forma statement of operations for the
transactions described above based on the requirements set forth in Article 11
of Regulation S-X, because it is a newly formed entity with no significant
operations to date and no operating history in the business of managing a large
number of geographically diverse dental practices.

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

UNAUDITED PRO FORMA BALANCE SHEET

SEPTEMBER 30, 1997

(IN THOUSANDS)

<TABLE>
<CAPTION>
TOTAL
AFFILIATION OFFERING PRO FORMA,
PENTEGRA ADJUSTMENTS SUBTOTAL ADJUSTMENTS AS ADJUSTED
----------- ------------- --------- ------------- ------------

<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................... $ 354 $ -- $ 354 $ (6,387)(A) $ 9,457(1)
21,650(B)
(200)(C)
(2,789)(D)
(2,743 (E)
(428 (F)
Accounts receivable, net........................ -- -- -- 554 (F) 554
----------- ------------- --------- ------------- ------------
Total current assets.......................... 354 -- 354 9,657 10,011

Property and equipment, net....................... 69 2,698 (A) 2,767 17 (C) 2,784
Deferred offering costs........................... 1,643 -- 1,643 (1,643 (B) --
Other noncurrent assets, net...................... 5 -- 5 183 (C) 188
----------- ------------- --------- ------------- ------------
Total assets.................................. $ 2,071 $ 2,698 $ 4,769 $ 8,214 $ 12,983
----------- ------------- --------- ------------- ------------
----------- ------------- --------- ------------- ------------

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable and accrued liabilities........ $ 1,006 $ 6,387 (A) $ 7,393 $ (6,387 (A) $ 1,439
(943 (B)
126 (F)
1,250 (G)
Current portion of long-term debt............... -- 746 (A) 746 (746 (E) --
----------- ------------- --------- ------------- ------------
Total current liabilities..................... 1,006 7,133 8,139 (6,700 ) 1,439

Long-term debt.................................... -- 1,997 (A) 1,997 (1,997 (E) --
Class A redeemable preferred stock................ 675 -- 675 (675 (D) --
Class B redeemable preferred stock................ 414 -- 414 (414 (D) --

Stockholders' equity (deficit):
Common stock.................................... 18 3 (A) 21 3 (B) 7
(17 (H)
Additional paid-in capital...................... 708 (6,435 (A) (5,727) 20,947 (B) 13,537
(1,700 (D)
17 (H)
Accumulated deficit............................. (750 ) -- (750) (1,250 (G) (2,000 )
----------- ------------- --------- ------------- ------------
Total stockholders' equity (deficit).......... (24 ) (6,432 ) (6,456) 18,000 11,544
----------- ------------- --------- ------------- ------------
Total liabilities and stockholders' equity
(deficit)................................... $ 2,071 $ 2,698 $ 4,769 $ 8,214 $ 12,983
----------- ------------- --------- ------------- ------------
----------- ------------- --------- ------------- ------------
</TABLE>

- ----------

(1) See "Use of Proceeds."

The accompanying notes are an integral part of this unaudited pro forma
financial statement.

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

NOTES TO UNAUDITED PRO FORMA BALANCE SHEET

The accompanying unaudited pro forma balance sheet as of September 30, 1997
gives effect to the Affiliations, 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 issuance
and repayment of $350,000 aggregate principal amount outstanding under the
Promissory Notes, which were issued in October and November 1997), as if those
transactions had occurred on September 30, 1997. The unaudited pro forma balance
sheet does not represent the historical or future financial position of the
Company.

(A) Reflects completion of the Affiliations, which will involve (i) the issuance
of 2,630,295 shares of Common Stock, valued at the historical net book value
of the assets transferred less the liabilities assumed, and (ii) cash
distributions to be treated as dividends aggregating $6,387,000. 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.................................................. $ 2,698
Less
Current portion of notes payable.................................................. (746)
Long-term portion of notes payable................................................ (1,997)
---------
Liabilities assumed, net of assets transferred.................................. $ (45)
---------
---------
</TABLE>

Certain assets and liabilities will not be transferred from the Founding
Affiliated Practices. The assets not transferred are cash, certain accounts
receivable, prepaids and other current assets, and certain accounts payable.

Certain assets that are not reflected in the balance sheets of the Founding
Affiliated Practices will be transferred to the Company in the Affiliations.
These assets have no recorded book value, and therefore, are not reflected
in the pro forma balance sheet. They include items such as contract rights,
marketing systems, all transferable licenses, trade secrets, books, records
and policy and procedure manuals.

(B) 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 primarily consisting of legal, accounting and
printing expenses, less offering costs previously funded with proceeds from
the issuance of capital stock of PII, including all PII Class A Preferred
Stock and Class B Preferred Stock, and the Promissory Notes. The resulting
net proceeds are reflected as Common Stock and additional paid-in capital.
The Company has deferred offering costs of $1,643,000, of which $700,000 had
been paid at September 30, 1997.

(C) Reflects completion of the Pentegra/Napili Transaction for consideration of
$200,000 cash. As of September 30, 1997, the assets to be acquired in the
Pentegra/Napili Transaction have a fair value of approximately $17,000. The
cost in excess of the fair value of the net tangible 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

F-4
<PAGE>
PENTEGRA DENTAL GROUP, INC.

NOTES TO UNAUDITED PRO FORMA BALANCE SHEET

the related deemed dividend of $1,700,000. The cash payment for the
Repurchase and Redemption and dividend are as follows (in thousands):

<TABLE>
<S> <C>
Cash payment for Repurchase......................................... 114
Cash payment for Redemption......................................... 2,675
---------
2,789
Less
Recorded value of Class A and B preferred stock at September 30,
1997............................................................ 1,089
---------
Dividend to Class A and B preferred stockholders.................. $ 1,700
---------
---------
</TABLE>

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

(F) Reflects the purchase of net monetary assets from the Founding Affiliated
Practices for cash of $428,000, which assets will be recorded at fair value.
The fair value of the net assets purchased are as follows (in thousands):

<TABLE>
<S> <C>
Accounts receivable, net............................................. $ 554
Less
Accounts payable................................................... (126)
---------
Total................................................................ $ 428
---------
---------
</TABLE>

(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 in the fourth quarter of 1997
because its payment is not contingent on future services actually being
provided by the Chairman.

(H) Reflects repurchase by PII of 445,064 shares of its common stock and the
exchange at the closing of the Offering of 1,311,603 shares of Common Stock
for 1,311,603 shares of common stock, par value $0.01 per share, of PII.

F-5
<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 September 30, 1997, and the related statements of operations, changes
in stockholders' deficit, and cash flows for the period from inception, February
21, 1997, through September 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 September 30, 1997, and the results of its operations and its cash flows
for the period from inception, February 21, 1997, through September 30, 1997 in
conformity with generally accepted accounting principles.

COOPERS & LYBRAND L.L.P.

Houston, Texas
December 10, 1997, except for note 4
as to which the date is January 9,
1997

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

BALANCE SHEET

SEPTEMBER 30, 1997

(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

<TABLE>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................................... $ 354
---------
Total current assets............................................................ 354
---------
Property and equipment.............................................................. 69
Deferred offering costs............................................................. 1,643
Organizational costs................................................................ 5
---------
Total assets................................................................ $ 2,071
---------
---------

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued liabilities.......................................... $ 1,006
---------
Total current liabilities....................................................... 1,006
---------
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' deficit:
Common stock, $0.01 par value, 40,000,000 shares authorized, 1,756,667 shares
issued and outstanding.......................................................... 18
Additional paid-in capital........................................................ 708
Accumulated deficit............................................................... (750)
---------
Total stockholders' deficit..................................................... (24)
---------
Total liabilities and stockholders' deficit................................. $ 2,071
---------
---------
</TABLE>

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

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

STATEMENT OF OPERATIONS

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

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
Revenue............................................................................. $ --
<S> <C>
Expenses:
General and administrative expenses............................................... 411
Compensation expense in connection with issuance of common stock.................. 339
---------
Total expenses................................................................ 750
---------
Net loss............................................................................ $ (750)
---------
---------
</TABLE>

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

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

STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT

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

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------------------ PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT CAPITAL DEFICIT DEFICIT
----------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Balance at February 21, 1997........................... -- $ -- $ -- $ -- $ --
Issuance of common stock
($0.015 per share cash on February 21, 1997)......... 667 7 3 -- 10
Issuance of common stock
($0.015 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 3 365 -- 368
Issuance of common stock
($0.015 per share cash and $1.26 per share
compensation on June 13, 1997)....................... 33 -- 42 -- 42
Purchases of common stock.............................. (67) (1) -- -- (1)
Issuance of common stock ($0.015 per share cash and
$2.87 per share compensation on September 1, 1997)... 67 1 191 -- 192
Net loss............................................... -- -- -- (750) (750)
----- ----- ----- ----- -----
Balance at June 30, 1997............................... 1,757 $ 18 $ 708 $ (750) $ (24)
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>

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

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

STATEMENT OF CASH FLOWS

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

(IN THOUSANDS)

<TABLE>
<CAPTION>
Cash flows from operating activities:
<S> <C>
Net loss.......................................................................... $ (750)
Compensation associated with issuance of common stock............................. 339
Increase in accounts payable and accrued liabilities.............................. 63
---------
Net cash used by operating activities......................................... (348)
---------
Net cash used in investing activities--additions to property and equipment.......... (69)
---------
Cash flows provided by financing activities:
Proceeds from issuance of common and preferred stock.............................. 1,476
Offering costs.................................................................... (700)
Organizational costs.............................................................. (5)
---------
Net cash provided by financing activities..................................... 771
---------
Net increase in cash and cash equivalents........................................... 354

Balance at inception, February 21, 1997............................................. --
---------
Balance at September 30, 1997....................................................... $ 354
---------
---------
Non-cash financing activities:
Offering costs accrued............................................................ $ 943
---------
---------
</TABLE>

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

F-10
<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 "Affiliations") of 50 dental practices (the
"Founding Affiliated Practices" and, together with dental practices with which
the Company may enter into similar transactions in the future, 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 $0.015 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 Affiliations, 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.

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. As of September 30, 1997, Pentegra Dental had
authorized for issuance options to acquire approximately 647,000 shares to
employees, practice employees and directors on the date the initial public
offering price is determined.

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

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
The exercise price of these options will be the initial public offering price
per share. The Company has adopted Statement of Financial Accounting Standards
("SFAS") No. 123, "Accounting for Stock-Based Compensation," which establishes
accounting and reporting standards for stock-based compensation plans. The
Company will account for options issued to employees and non-employee directors
under the Plan in accordance with APB Opinion No. 25 and provide disclosure of
the pro forma effect of using the fair value of options granted to employees to
measure compensation. Of the amounts authorized as of September 30, 1997,
options to purchase approximately 57,000 shares will be issued to owners of
Founding Affiliated Practices, practice employees and other advisors. The fair
value of such options will be charged to operations over their vesting period.

EARNINGS PER SHARE

Earnings per share has been excluded from the financial statements because
the Company has limited historical operations and does not have a significant
operating history. Additionally, the historical operations do not reflect the
planned distribution to promoters in connection with the Affiliations, which
will be paid with a portion of the proceeds of the Offering (See Note 4).

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 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 $750,000 during the period from inception, February 21,
1997, through September 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

In February 1997, the Financial Accounting Standards Board ("FASB") issued
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

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

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
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.

In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," and SFAS No. 131, "Disclosures About Segments of an Enterprise and
Related Information." SFAS No. 130 establishes standards for reporting and
displaying comprehensive income and its components in a full set of general
purpose financial statements. SFAS No. 131 establishes standards for reporting
segment information by public enterprises in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports to shareholders. Both these statements are
effective for fiscal years beginning after December 15, 1997. The Company
believes implementation of SFAS Nos. 130 and 131 will not have a material effect
on its financial position, results of operations or cash flows.

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 in the fourth quarter of 1997, that provides for
the payment to the Chairman of the Board of Directors of an employment bonus of
$1,250,000. The bonus is due in installments of $10,000 on the closing of each
future dental practice affiliation subsequent to the Affiliations. However, the
bonus must be paid in full within three years. The employment bonus will be
charged to operations in the fourth quarter of 1997 because its payment is not
contingent on any future services to be provided by the Chairman.

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 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 the Affiliations through a series of
mergers and asset transfers. Owners of the Founding Affiliated Practices (the
"Promoters") will receive shares of Common Stock

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

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

4. PLANNED TRANSACTIONS: (CONTINUED)

having a value of approximately $26.3 million, based on the initial public
offering price (2,630,295 shares of Common Stock, based on an assumed initial
public offering price of $10.00 per share), and approximately $6,400,000 in
cash. In December 1997, the owners of the outstanding shares of common stock of
PII agreed that, in the event the initial public offering price is less than
$12.04 per share, PII will repurchase from those stockholders, on a pro rata
basis, at a purchase price of $.015 per share, that number of shares as will be
necessary so that the aggregate number of shares of Common Stock issuable in
connection with the Affiliations and the Share Exchange will not exceed
3,941,898 shares. Pursuant to that agreement, assuming an initial public
offering price of $10.00 per share, PII would repurchase approximately 25.3% of
each such stockholder's shares of PII common stock, or an aggregate of 445,064
shares. Each Founding Affiliated Practice transaction was individually
negotiated between the Company and the Founding Affiliated Practice as to all
material terms, including, but not limited to, valuation. The shares to be
issued were based on a common allocation method that considered each Founding
Affiliated Practice's gross revenue, net of certain operating expenses, and the
Company's assessment of growth potential. No independent appraisals of the
Founding Affiliated Practices were obtained. Of the total consideration for each
transaction, each Founding Affiliated Practice could elect to receive up to 20%
in cash and the balance in shares of Common Stock. The actual number of shares
will be calculated by subtracting the cash portion from the total consideration
and dividing the resulting amount by the initial public offering price per
share. The assets to be transferred in the Affiliations include supplies
inventory, equipment and certain other current and non-current assets. The
liabilities to be transferred primarily consist of long-term debt. In connection
with the Affiliations, the Promoters and their professional corporations,
professional associations or other entities (collectively, the "PCs") will enter
into long-term service agreements with Pentegra Dental (the "Service
Agreements"). Additionally, those Promoters will enter into employment and
noncompete agreements with their respective PCs.

As of September 30, 1997, officers and directors of the Company and certain
Promoters held common and preferred stock that was issued in connection with the
funding of a portion of the expenses for the Offering, as follows (in
thousands):

<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK
------------------------ ------------------------
CARRYING CARRYING
SHARES AMOUNT SHARES AMOUNT
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Officers and directors........................................... 1,116 $ 303 263 $ 123
Promoters who are not officers and directors..................... 60 76 300 225
----- ----- --- -----
1,176 $ 379 563 $ 348
----- ----- --- -----
----- ----- --- -----
</TABLE>

All of the preferred stock will be repurchased or redeemed upon completion
of the Offering as described in Note 5.

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 Affiliations are deemed not to be business combinations. Because
each of the owners of the Founding Affiliated Practices is a promoter of the
Offering, Securities and Exchange Commission's Staff Accounting Bulletin No. 48,
"Transfers of Nonmonetary Assets by Promoters or Shareholders" requires (i) the
transferred nonmonetary assets to be accounted for at the historical cost basis
of the Founding Affiliated Practices, (ii) any monetary assets and assumed
monetary liabilities included in the Affiliations to be recorded at fair value
and (iii) cash consideration paid and assumed liabilities in excess of net
assets transferred, to be reflected as a dividend paid by Pentegra Dental.

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

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

4. PLANNED TRANSACTIONS: (CONTINUED)
The information set forth below assumes all the Founding Affiliated
Practices will participate in the Affiliations. Although management expects that
all the practices will participate, there is no assurance that will be the case.

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
------------ SEPTEMBER 30,
1997
-------------
(UNAUDITED)
<S> <C> <C>
Property, equipment and improvements, net....................... 2,912 2,698
------------ -------------
Assets transferred............................................ 2,912 2,698
Current portion of notes payable................................ (1,078) (746)
Long-term portion of notes payable.............................. (1,411) (1,997)
------------ -------------
Net assets transferred, net of liabilities assumed............ $ 423 $ (45)
------------ -------------
------------ -------------
</TABLE>

The Company will also purchase certain net monetary assets from the founding
Affiliated Practices for a cash amount of $428,000. The net assets purchased
will be recorded at their fair value as of September 30, 1997. The fair value of
the net monetary assets to be acquired as of September 30, 1997 was as follows
(in thousands):

<TABLE>
<CAPTION>
Accounts receivable, net....................................... $ 554
<S> <C>
Less accounts payable.......................................... (126)
-----
Net monetary assets to be acquired........................... $ 428
-----
-----
</TABLE>

Upon consummation of the Affiliations, 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 non-dental
services relating to the operation of the Founding Affiliated Practices. 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 management service revenues that will be earned by Pentegra Dental
subsequent to the closing of the Affiliations and the execution of the Service
Agreements will be based on various arrangements. In general, the resulting fee
will be based primarily on the patient revenues less operating expenses
associated with each PC excluding dentists' salaries and depreciation. Patient
revenues are determined based on net patient revenues, as determined under
generally accepted accounting principles, including adjustments for contractual
allowances and other discounts, less an adjustment for uncollectable accounts.
The Company will pay all operating expenses incurred by each Affiliated Practice
that are required to operate a dental office, and the Affiliated Practice will
be responsible for reimbursing the Company for such expenses. These expenses
will include the following:

- Salaries, benefits, payroll taxes, workers compensation, health insurance
and other benefit plans, and other direct expenses of all employees of the
Company at each location of the Affiliated Practice, excluding those costs
associated with the dentists and any other classification of employee
which the Company is prohibited from employing by law;

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

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

4. PLANNED TRANSACTIONS: (CONTINUED)

- Direct costs of all employees or consultants that provide services to each
location of the Affiliated Practice;

- Dental and office supplies, as permitted by law;

- Lease or rent payments, as permitted by law, and utilities, telephone and
maintenance expenses for practice facilities;

- Property taxes on the Company's assets located at the Affiliated
Practice's offices;

- Property, casualty, liability and malpractice insurance premiums relating
to the operations of the Affiliated Practice;

- Dentist recruiting expenses relating to the operations of the Affiliated
Practice; and

- Advertising and other marketing costs attributable to the promotion of the
Affiliated Practice's offices.

All of the above expenses will be incurred and paid by the Company directly
to the third-party provider of the goods or services indicated. In exchange for
incurring these expenses and providing management services, the Company will
record revenues in amounts equal to those incurred expenses, which the
Affiliated Practice will reimburse to the Company, together with a service fee
based on the type of Service Agreement entered into by the Affiliated Practice.

The Founding Affiliated Practices will retain responsibility for the payment
of any and all direct employment expenses, including benefits, for any dentist
or other employee that the Company is prohibited from employing by law.

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

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

4. PLANNED TRANSACTIONS: (CONTINUED)

greater of 16% of its net revenues or 35% of the difference between its net
revenues and operating expenses. Service Fees to be received by the Company
under clause (ii)(b) above are payable by eight of the Founding Affiliated
Practices in Texas and will result in a minimum service fee being received by
the Company (ranging from $54,000 to $305,000 annually). The annual fixed fees
payable by the four Founding Affiliated Practices in New York are $66,009,
$115,251, $83,579 and $140,127 and will be subject to renegotiation each year
based on the fair value of the services to be received by those Founding
Affiliated Practices from the Company. On a monthly basis, the Company will
calculate the Service Fee due from each Founding Affiliated Practice pursuant to
the terms of each Service Agreement. In addition, if the costs related to
providing dental services pursuant to capitated managed care arrangements exceed
the revenues received for those services, the Affiliated Practice will remain
responsible for reimbursing the Company for all of the costs associated with
providing those services, even if no Service Fee is due to the Company under its
Service Agreement. The patient revenues and operating expenses (excluding
depreciation and dentists' salaries) of the Founding Affiliated Practices are
summarized, on a combined basis, in the following tables for the year ended
December 31, 1996 and the nine months ended September 30, 1997 (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31, 1996
----------------------
PATIENT OPERATING
REVENUES EXPENSES
--------- -----------
<S> <C> <C>
Practices participating under the Standard Service Agreement............ $ 28,371 $ 16,913
Practices participating under the Alternative Service Agreement......... 6,921 4,776
Practices participating under fixed-fee agreements...................... 2,599 1,393
--------- -----------
Totals for Founding Affiliated Practices................................ $ 37,891 $ 23,082
--------- -----------
--------- -----------

NINE MONTHS ENDED
SEPTEMBER 30, 1997
----------------------
PATIENT OPERATING
REVENUES EXPENSES
--------- -----------
(UNAUDITED)
<S> <C> <C>
Practices participating under the Standard Service Agreement............ $ 21,506 $ 12,155
Practices participating under the Alternative Service Agreement......... 5,605 3,997
Practices participating under fixed-fee agreements...................... 1,893 1,112
--------- -----------
Totals for Founding Affiliated Practices................................ $ 29,004 $ 17,264
--------- -----------
--------- -----------
</TABLE>

Subsequent to the Affiliations, substantially all the operating expenses of
the Founding Affiliated Practices (excluding dentists' salaries) will be paid by
Pentegra Dental and billed to the PCs. The historical operating expenses of the
Founding Affiliated Practices for the year ended December 31, 1996 and the nine
months ended September 30, 1997, excluding those employment expenses for any
dentist or other

F-17
<PAGE>
PENTEGRA DENTAL GROUP, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

4. PLANNED TRANSACTIONS: (CONTINUED)

employee that the Company is prohibited from employing by law, are summarized,
on a combined basis, in the following table (in thousands):

<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1996
------------ NINE MONTHS
ENDED
SEPTEMBER 30,
1997
-------------
(UNAUDITED)
<S> <C> <C>
Salaries, wages and benefits of employees, excluding the
dentists...................................................... $ 8,495 $ 6,432
Dental supplies................................................. 5,680 4,340
Rent............................................................ 1,884 1,395
Advertising and marketing expenses.............................. 567 400
General and administrative expenses............................. 5,716 4,116
Other expenses.................................................. 740 581
------------ -------------
Total operating expenses.................................... 23,082 17,264
Depreciation and amortization................................... 879 699
------------ -------------

Total expenses.............................................. $ 23,961 $ 17,963
------------ -------------
------------ -------------
</TABLE>

The Company will continue to recognize depreciation and amortization on
assets transferred in connection with the Affiliations. However, such charges
are not considered operating expenses under the Service Agreements and will not
enter into the calculation of the service fees.

The combined historical financial information of the Founding Affiliated
Practices presented herein does not represent the financial position or results
of operations of Pentegra Dental or the Company. Because of the significant
relationship that will exist among the Company and the Founding Affiliated
Practices upon completion of the Offering, 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 nine months ended September 30, 1997. However, combined financial
information has been presented because entering into the Service Agreements with
all of the Founding Affiliated Practices is contingent upon a single event, the
completion of the Offering.

5. REDEEMABLE PREFERRED STOCK

In May 1997, the Company authorized the designation, out of the authorized
and unissued preferred stock, of two classes of 5,000,000 shares each,
designated as "Class A" and "Class B." In May 1997, 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. 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 the value of $0.75, $0.75 and $0.85 per
share, respectively, as determined by an independent valuation of the fair value
of those shares as of the date of issuance. The proceeds from these stock
issuances were reserved for legal and accounting costs associated with the
Offering, as well as operating costs. 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

F-18
<PAGE>
PENTEGRA DENTAL GROUP, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

5. REDEEMABLE PREFERRED STOCK (CONTINUED)
dividends. The preferred stock entitles the holders thereof to preference in
liquidation over the common stock.

The terms of the Class A and B preferred stock provide for it to be redeemed
for $1.00 to $3.00 per share, as determined by the Company's Board of Directors,
upon completion of an initial public offering. The Board of Directors has
established the redemption price at $2.00 per share. In connection with
negotiating the Offering and the Affiliations, certain officers and directors
agreed that the Company may repurchase their shares of Class B Preferred Stock
at the subscription price. Accordingly, the Company will use a portion of the
net proceeds of the Offering to repurchase 245,835 shares of its Class B
preferred stock held by those officers and directors at repurchase prices equal
to the subscription prices, which ranged from $0.01 to $1.00 per share
(aggregating to $114,000). The remaining 1,337,500 shares of Class A and B
preferred stock outstanding will be redeemed at a price of $2.00 per share
(aggregating to $2,675,000). The Company will recognize a dividend on the
preferred stock for the difference between the redemption amount and the
recorded value at the date of redemption. That difference has not been accreted
to the redemption amount during the current period because the date of the
Offering is not determinable.

6. COMMON STOCK

All share information in the accompanying financial statements have been
retroactively restated to reflect a two-for-three share reverse stock split of
the Company's common stock, which was effected in October 1997.

In February 1997, the Company issued 666,667 shares of common stock for cash
at a price of $0.015 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
$0.015 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 in Note 5 above, the Company issued 33,333 shares of common stock for
cash at a price of $0.015 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.

In September 1997, the Company repurchased 66,667 shares of its common stock
at a purchase price of $0.01 per share, of which 46,667 shares were repurchased
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 $0.015 per share. Those shares
were valued at $2.88 per share, based on an independent valuation of the fair
value of those shares as of the date of issuance. The differences between the
cash received for shares of common stock and the fair value of those shares as
of the respective dates of issuance have been recognized as compensation
expense.

7. SUBSEQUENT EVENTS

In October 1997, the Company repurchased an additional 20,000 shares of its
common stock from a director at a purchase price per share of $0.015, and issued
(i) 20,000 shares of common stock for a purchase price of $0.015 and (ii)
$300,000 of 9.5% promissory notes due on the earlier of 30 days after the
closing of the Offering or October 1998. The Company will record the value of
the shares based on an independent valuation of those shares as of the date of
issuance. The difference between the cash received

F-19
<PAGE>
PENTEGRA DENTAL GROUP, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

7. SUBSEQUENT EVENTS (CONTINUED)
for those shares of common stock and the fair value of those shares will be
recognized as a discount on the promissory notes. The Company will accrete the
discount over the term of the promissory notes.

In November 1997, the Company authorized (i) options to purchase 25,000
shares of common stock at the Offering price per share (bringing the total
number of shares subject to options authorized through November 1997 to
approximately 672,000) and (ii) the issuance of an additional $50,000 of 9.5%
promissory notes due on the earlier of 30 days after the closing of the Offering
or July 1998.

F-20
<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...................................... 8
The Company....................................... 16
Use of Proceeds................................... 17
Dividend Policy................................... 17
Dilution.......................................... 18
Capitalization.................................... 19
Selected Financial Data........................... 20
Management's Discussion and Analysis of Financial
Condition and Results of Operations............. 21
Business.......................................... 27
Management........................................ 39
Certain Transactions.............................. 46
Security Ownership of Certain Beneficial Owners
and Management.................................. 50
Description of Capital Stock...................... 51
Shares Eligible for Future Sale................... 53
Underwriting...................................... 56
Legal Matters..................................... 58
Experts........................................... 58
Additional Information............................ 58
Index to Financial Statements..................... F-1
</TABLE>

UNTIL , 1998 (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

, 1998

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

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 American Stock
Exchange.

<TABLE>
<S> <C>
SEC Registration Fee............................................ $ 12,197
NASD Filing Fee................................................. 4,525
American Stock Exchange Listing Fee............................. 35,000
Blue Sky Fees and Expenses...................................... 10,000
Printing Costs.................................................. 150,000
Legal Fees and Expenses......................................... 350,000
Accounting Fees and Expenses.................................... 1,600,000
Transfer Agent and Registrar Fees and Expenses.................. 5,000
Miscellaneous................................................... 133,278
---------
Total......................................................... $2,300,000
---------
---------
</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 faith and in a manner the
person reasonably believed to be in or not opposed to the best interests of the

II-1
<PAGE>
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.

RESTATED CERTIFICATE OF INCORPORATION

The Restated 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 redemptions as provided for in Section 174 of the DGCL. If the
DGCL is amended to

II-2
<PAGE>
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 PII
issued shares of its 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 $0.015. 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, PII issued shares of
its 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 $0.015. On June 13, 1997,
(i) PII issued shares of its Class A Preferred to Marie Adamo (50,000
shares), Peter Anderson, Aurous, Ltd. (25,000 shares), Scott Bolding
(25,000 shares), William

II-3
<PAGE>

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 shares of its 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) PII issued shares of its 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 $0.015 per share. On September 1, 1997, PII issued
66,667 shares of its common stock to Sam H. Carr at a purchase price of
$0.015 per share. On October 8, 1997, PII issued 6,667 shares of its common
stock to Manhattan Group Funding and 13,333 shares of its common stock to
Daniel A. Bock, at a purchase price of $0.015 per share. Each of the
above-mentioned issuances was exempt from the registration requirements of
the Securities Act pursuant to Section 4(2) thereof as transactions not
involving any public offering.

(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 as of 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.
2.7+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and James
P. Allen, D.D.S.
2.8+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Walter J. Anderson, D.D.S, Donald H. Plotkin, D.D.S, William H. Swilley, D.D.S., William
A. Cerny, D.D.S. and Graham A. Satchell, D.D.S., Inc., dba Anderson Dental Group and Walter J.
Anderson, D.D.S., Donald H. Plotkin, D.D.S., William A. Cerny, D.D.S., Brian M. Ellis, D.D.S.
and Afshan Kaviani, D.D.S.
2.9+ -- Asset Contribution Agreement dated August 15, 1997 by and among Pentegra Dental Group, Inc.,
Ronnie Andress, D.D.S., Inc., and Ronnie Andress, D.D.S.
2.10+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Victor H. Burdick, D.D.S., P.C., and Victor H. Burdick, D.D.S.
2.11+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Marvin V. Cavallino, D.D.S., A Professional Corporation, and Marvin Cavallino, D.D.S.
2.12+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., James H. Clarke, Jr., D.D.S., Inc. and James H. Clarke, Jr., D.D.S.
2.13+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Henry
Cuttler, D.D.S.
2.14+ -- Agreement and Plan of Reorganization dated August 11, 1997 by and among Pentegra Dental Group,
Inc., Edward T. Dougherty, Jr., D.D.S., P.A., and Edward T. Dougherty, Jr., D.D.S.
2.15+ -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc.,
Family Dental Centers, P.A., Steve Anderson, D.D.S. and Lindi B. Anderson, D.D.S.
2.16+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
Richard H. Fettig, D.D.S.
2.17+ -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc., Alan
H. Gerbholz, D.D.S., P.C. and The AMG Trust.
2.18+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Michael J. Gershtenson, D.D.S., P.C. and Michael J. Gershtenson, D.D.S.
2.19+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Mack E. Greder, D.D.S, P.C. and Mack Greder, D.D.S.
2.20+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
Salvatore J. Guarnieri, D.D.S.
2.21+ -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc., Kent
M. Hamilton, D.D.S, P.C. and Kent M. Hamilton, D.D.S.
2.22+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and David
R. Henderson, D.D.S.
2.23+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
Stephen Hwang, D.D.S.
</TABLE>

II-5

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------
<S> <C> <C>
2.24+ -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc.,
Jackson Dental Partnership, Penn Jackson, Sr. and Penn Jackson, Jr.
2.25+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Bruce
A. Kanehl, D.D.S.
2.26+ -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc.,
Roger Allen Kay, D.D.S, P.A. and Roger A. Kay, D.D.S.
2.27+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Patrick T. Kelly, D.D.S, P.C. and Patrick T. Kelly, D.D.S.
2.28+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Brian K. Kniff, D.D.S, P.C., Brian K. Kniff, D.D.S and Gordon Ledingham, D.D.S.
2.29+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Lakeview Dental, P.C. and Kevin Gasser, D.D.S.
2.30+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Donald
W. Lanning, D.D.S.
2.31+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and David
A. Little, D.D.S.
2.32+ -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc.,
Susan E. Lunson, D.D.S., P.C. and Susan E. Lunson, D.D.S.
2.33+ -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc.,
Richard W. Mains, Jr., D.M.D, P.C. and Richard W. Mains, Jr., D.M.D.
2.34+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and James
M. McDonough, D.D.S.
2.35+ -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc.,
James W. Medlock, D.D.S., P.A. and James Medlock, D.D.S.
2.36+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., James Randy Mellard, D.D.S., M.S., P.C. and James Randy Mellard, D.D.S., M.S.
2.37+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Mary B. Mellard, D.D.S., P.C. and Mary B. Mellard, D.D.S.
2.38+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., T.L. Mullooly, D.D.S., Inc. and T.L. Mullooly, D.D.S.
2.39+ -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc.,
Byron L. Novosad, D.D.S., Inc. and Byron L. Novosad, D.D.S.
2.40+ -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc.,
Randy O'Brien, D.D.S., Inc. and Randy O'Brien, D.D.S.
2.41+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
Terrence C. O'Keefe, D.D.S.
2.42+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Harold A. Pebbles, D.D.S., P.C. and Harold Pebbles, D.D.S.
2.43+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Jimmy
F. Pinner, D.D.S.
2.44+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Omer K. Reed, D.D.S., Ltd. and Omer K. Reed, D.D.S.
2.45+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Richard Reinitz, D.D.S., P.C. and Richard Reinitz, D.D.S.
</TABLE>

II-6

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------
<S> <C> <C>
2.46+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Greg
Richards, D.D.S.
2.47+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Richard N. Smith, DMD, P.C. and The Paradise Trust
2.48+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and John
N. Stellpflug, D.D.S.
2.49+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Jack
Stephens, D.D.S.
2.50+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Y. Paul Suzuki, D.D.S., P.S. and Paul Suzuki, D.D.S.
2.51+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Donald
F. Tamborello, D.D.S.
2.52+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Helena
Thomas, D.D.S.
2.53+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Louis J. Thornley, D.D.S., P.S. and Louis J. Thornley, D.D.S.
2.54+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and S.
Victor Uhrenholdt, D.D.S.
2.55+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and Scott
Van Zandt, D.D.S.
2.56+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental Group,
Inc., Ronald M. Yaros, D.D.S., P.C. and Ron Yaros, 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.
</TABLE>

II-7

<PAGE>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ----------- -------------------------------------------------------------------------------------------------
<S> <C> <C>
10.7+ -- Employment Agreement dated July 12, 1997 between Pentegra Dental Group, Inc. and Kimberlee K.
Rozman
10.8+ -- Form of Service Agreement
10.9 -- Amendment to Employment Agreement dated July 31, 1997 between Pentegra Dental Group, Inc. and
Omer K. Reed, D.D.S.
23.1 -- Consent of Coopers & Lybrand L.L.P.
23.2+ -- Consent of Jackson Walker L.L.P. (contained in Exhibit 5.1)
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>

- ---------

+ Previously filed.

(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.

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-8
<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 January 9, 1998.

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

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

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 January 9, 1998.

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.

*By /s/ KIMBERLEE K.
ROZMAN
- ------------------------------
Kimberlee K. Rozman, as
ATTORNEY-IN-FACT

II-9
<PAGE>
INDEX TO EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION NUMBERED PAGE
- ---------- -------------------------------------------------------------------------------------------- ---------------
<C> <C> <S> <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
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.
2.7+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
James P. Allen, D.D.S.
2.8+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., Walter J. Anderson, D.D.S, Donald H. Plotkin, D.D.S, William H. Swilley,
D.D.S., William A. Cerny, D.D.S. and Graham A. Satchell, D.D.S., Inc., dba Anderson Dental
Group and Walter J. Anderson, D.D.S., Donald H. Plotkin, D.D.S., William A. Cerny, D.D.S.,
Brian M. Ellis, D.D.S. and Afshan Kaviani, D.D.S.
2.9+ -- Asset Contribution Agreement dated August 15, 1997 by and among Pentegra Dental Group, Inc.,
Ronnie Andress, D.D.S., Inc., and Ronnie Andress, D.D.S.
2.10+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., Victor H. Burdick, D.D.S., P.C., and Victor H. Burdick, D.D.S.
2.11+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., Marvin V. Cavallino, D.D.S., A Professional Corporation, and Marvin
Cavallino, D.D.S.
2.12+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., James H. Clarke, Jr., D.D.S., Inc. and James H. Clarke, Jr., D.D.S.
2.13+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
Henry Cuttler, D.D.S.
2.14+ -- Agreement and Plan of Reorganization dated August 11, 1997 by and among Pentegra Dental
Group, Inc., Edward T. Dougherty, Jr., D.D.S., P.A., and Edward T. Dougherty, Jr., D.D.S.
2.15+ -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc.,
Family Dental Centers, P.A., Steve Anderson, D.D.S. and Lindi B. Anderson, D.D.S.
2.16+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
Richard H. Fettig, D.D.S.
2.17+ -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc.,
Alan H. Gerbholz, D.D.S., P.C. and The AMG Trust.
2.18+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., Michael J. Gershtenson, D.D.S., P.C. and Michael J. Gershtenson, D.D.S.
2.19+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., Mack E. Greder, D.D.S, P.C. and Mack Greder, D.D.S.
</TABLE>

<PAGE>

<TABLE>
<C> <C> <S> <C>
2.20+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
Salvatore J. Guarnieri, D.D.S.
2.21+ -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc.,
Kent M. Hamilton, D.D.S, P.C. and Kent M. Hamilton, D.D.S.
2.22+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
David R. Henderson, D.D.S.
2.23+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
Stephen Hwang, D.D.S
2.24+ -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc.,
Jackson Dental Partnership, Penn Jackson, Sr. and Penn Jackson, Jr.
2.25+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
Bruce A. Kanehl, D.D.S.
2.26+ -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc.,
Roger Allen Kay, D.D.S, P.A. and Roger A. Kay, D.D.S.
2.27+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., Patrick T. Kelly, D.D.S, P.C. and Patrick T. Kelly, D.D.S.
2.28+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., Brian K. Kniff, D.D.S, P.C., Brian K. Kniff, D.D.S and Gordon Ledingham,
D.D.S.
2.29+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., Lakeview Dental, P.C. and Kevin Gasser, D.D.S.
2.30+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
Donald W. Lanning, D.D.S.
2.31+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
David A. Little, D.D.S.
2.32+ -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc.,
Susan E. Lunson, D.D.S., P.C. and Susan E. Lunson, D.D.S.
2.33+ -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc.,
Richard W. Mains, Jr., D.M.D, P.C. and Richard W. Mains, Jr., D.M.D.
2.34+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
James M. McDonough, D.D.S.
2.35+ -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc.,
James W. Medlock, D.D.S., P.A. and James Medlock, D.D.S.
2.36+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., James Randy Mellard, D.D.S., M.S., P.C. and James Randy Mellard, D.D.S., M.S.
2.37+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., Mary B. Mellard, D.D.S., P.C. and Mary B. Mellard, D.D.S.
2.38+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., T.L. Mullooly, D.D.S., Inc. and T.L. Mullooly, D.D.S.
2.39+ -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc.,
Byron L. Novosad, D.D.S., Inc. and Byron L. Novosad, D.D.S.
2.40+ -- Asset Contribution Agreement dated August 20, 1997 by and among Pentegra Dental Group, Inc.,
Randy O'Brien, D.D.S., Inc. and Randy O'Brien, D.D.S.
2.41+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
Terrence C. O'Keefe, D.D.S.
</TABLE>

<PAGE>

<TABLE>
<C> <C> <S> <C>
2.42+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., Harold A. Pebbles, D.D.S., P.C. and Harold Pebbles, D.D.S.
2.43+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
Jimmy F. Pinner, D.D.S.
2.44+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., Omer K. Reed, D.D.S., Ltd. and Omer K. Reed, D.D.S.
2.45+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., Richard Reinitz, D.D.S., P.C. and Richard Reinitz, D.D.S.
2.46+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
Greg Richards, D.D.S.
2.47+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., Richard N. Smith, DMD, P.C. and The Paradise Trust
2.48+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
John N. Stellpflug, D.D.S.
2.49+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
Jack Stephens, D.D.S.
2.50+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., Y. Paul Suzuki, D.D.S., P.S. and Paul Suzuki, D.D.S.
2.51+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
Donald F. Tamborello, D.D.S.
2.52+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
Helena Thomas, D.D.S.
2.53+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., Louis J. Thornley, D.D.S., P.S. and Louis J. Thornley, D.D.S.
2.54+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
S. Victor Uhrenholdt, D.D.S.
2.55+ -- Asset Contribution Agreement dated August 20, 1997 between Pentegra Dental Group, Inc. and
Scott Van Zandt, D.D.S.
2.56+ -- Agreement and Plan of Reorganization dated August 20, 1997 by and among Pentegra Dental
Group, Inc., Ronald M. Yaros, D.D.S., P.C. and Ron Yaros, 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.
</TABLE>

<PAGE>

<TABLE>
<C> <C> <S> <C>
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
10.9 -- Amendment to Employment Agreement dated July 31, 1997 between Pentegra Dental Group, Inc.
and Omer K. Reed, D.D.S.
23.1 -- Consent of Coopers & Lybrand, L.L.P.
23.2+ -- Consent of Jackson Walker L.L.P. (contained in Exhibit 5.1)
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>

- ---------

+ Previously filed.

<PAGE>

AMENDMENT TO EMPLOYMENT AGREEMENT

Amendment to Employment Agreement (the "Amendment"), dated effective
July 31, 1997, by and between Pentegra Dental Group, Inc., a Delaware
corporation (the "Company"), and Omer K. Reed, D.D.S. ("Employee").

W I T N E S S E T H

WHEREAS, the parties hereto entered into that certain Employment
Agreement ("Employment Agreement") dated July 31, 1997 among the Company and
Employee.

WHEREAS, the parties hereto desire to amend the Employment Agreement as
set forth herein.

NOW, THEREFORE, for and in consideration of the mutual promises and
covenants contained herein and other good and valuable consideration, the
undersigned do hereby agree as follows:

1. Section 6(b) is hereby amended in its entirety to read as follows:

(b) FOR CAUSE. The Company may terminate the Employee's employment
for "Cause" immediately upon written notice by the Company to Employee. For
purposes of this Agreement, a termination will be for Cause if: (i) Employee
willfully and continuously fails to perform his duties with the Company
(other than any such failure resulting from incapacity due to physical or
mental illness), (ii) Employee willfully engages in gross misconduct
materially and demonstrably injurious to the Company or (iii) Employee has
been convicted of a felony. In the event of the termination of this Agreement
pursuant to this subsection, the Company shall pay Employee, as Employee's
sole remedy in connection with such termination, severance pay in the amount
of Employee's base salary accrued but unpaid from the last monthly payment
date to the date of termination, expense reimbursements under Section 5
hereof for expenses incurred in the performance of his duties hereunder prior
to termination, together with the sum of $1,250,000 less the amounts paid by
the Company to Employee pursuant to Section 4(b) hereof.

2. The Employment Agreement shall be hereby amended to reflect the
foregoing agreement of the parties hereto. Except as amended hereby, the
Employment Agreement shall remain unchanged.

3. Terms used herein with their initial letter capitalized and not
otherwise defined shall have the meaning assigned to such terms in the
Employment Agreement.

<PAGE>

Executed to be effective as of the day and year first set forth above.

PENTEGRA DENTAL GROUP, INC.

By: /s/ Gary S. Glatter
---------------------------------
Gary S. Glatter, President

EMPLOYEE

/s/ Omer K. Reed
------------------------------------
Omer Reed, DDS

<PAGE>
EXHIBIT 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion in this registration statement on Form S-1 (File
No. 333-37633) relating to the registration of 2,500,000 shares of $0.001 par
value common stock of our report dated December 10, 1997, except for Note 4 as
to which the date is January 9, 1998, on our audit of the financial statements
of Pentegra Dental Group, Inc. as of September 30, 1997 and for the period from
inception, February 21, 1997, through September 30, 1997. We also consent to the
reference to our firm under the caption "Experts."

/s/ COOPERS & LYBRAND L.L.P.

Houston, Texas
January 9, 1998