<PAGE>
 
                      DENTAL PRACTICES PURCHASE AGREEMENT
                      -----------------------------------

          THIS DENTAL PRACTICES PURCHASE AGREEMENT (this "Agreement") is made
and entered into effective as of the 1st day of August, 1997 (the "Effective
Date"), by and between GUARDS DENTAL, INC., a California corporation ("Guards")
and PACIFIC COAST DENTAL, INC., a California corporation ("Pacific").

                              W I T N E S S E T H:

          WHEREAS, Guards desire to sell and Pacific desires to purchase certain
nonorthodontic dental practices and all of the intangible nonorthodontic assets
related thereto, as defined below.

          NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements, promises, covenants and conditions contained herein, and for other
valuable consideration, the receipt of which is hereby acknowledged, the parties
hereto agree as follows:

          1.  The Assets.  The assets sold hereunder shall consist of those
              ----------
certain nonorthodontic dental practices as set forth on Schedule 1(a) (the
                                                        ------------
"Dental Practices") attached hereto and all of the intangible nonorthodontic
assets associated with such Dental Practices as set forth on Schedule 1(b)
                                                             ------------
attached hereto (the "Assets").

          2.  Assumption of Liabilities.  As a material part of the
              -------------------------
consideration for the purchase and sale of the Assets, Pacific shall assume,
perform, discharge and pay when due any and all of the obligations and
liabilities of Guards relating to the Dental Practices and the Assets; except
for: (i) liabilities and obligations of Guards relating to Guards' orthodontic
practices at the Dental Practices; (ii) liabilities and obligations of Guards
relating to malpractice claims for which work was performed prior to the
Effective Date; (iii) transactions and invoices for services rendered or debt
incurred prior to the Effective Date; and (iv) liabilities and obligations,
including grievances and/or claims, relating to employee discrimination matters
arising from events prior to the Effective Date.

          3.  Sale and Purchase of Assets.  Upon the execution of this
              ---------------------------
Agreement, Guards shall sell, transfer, convey, assign and deliver the Dental
Practices and the Assets to Pacific, and Pacific shall purchase, acquire and
accept the Dental Practices and the Assets from Guards, on the terms and subject
to the conditions set forth herein.

          4.  Purchase Price.  As full payment for the transfer of the Dental
              --------------
Practices and the Assets by Guards to Pacific, Pacific shall pay to Guards an
aggregate purchase price of Three Million Five Hundred Thousand Dollars
($3,500,000) (the "Purchase Price"), which aggregate amount shall be paid to
Guards by Pacific by delivering to Guards an eight and one-half percent (8.5%)
thirty (30) year negotiable promissory note in the principal amount of Three
Million Five Hundred Thousand Dollars ($3,500,000) in the form of Exhibit A
attached hereto (the "Note").
                            
          5.  Representations and Warranties of Guards.  As of the date hereof,
              ----------------------------------------
Guards represents and warrants to Pacific as follows:
<PAGE>
 
               5.1.  Compliance with Laws; No Litigation.  To the best of
                     -----------------------------------
Guards' knowledge, Guards has complied with all applicable laws, orders, rules
and regulations promulgated by any federal, state, municipal or other
governmental authority relating to the operation and conduct of the Dental
Practices. To the best of Guards' knowledge, Guards has not received any notice
of violation of any applicable regulation or law or requirement relating to the
operation of the Dental Practices.

               5.2.  No Breach.  This Agreement does not constitute a breach or
                     ---------
violation of any deed, agreement or other contract by which Guards may be bound.

               5.3.  Title to Assets.  Guards is the owner of the Dental
                     ---------------
Practices and the Assets, beneficially and of record, and has full right, power
and authority to sell, transfer and deliver such Dental Practices and the Assets
to Pacific upon consummation of the purchase contemplated hereby, Pacific will
acquire from Guards good and marketable title to the Dental Practices and the
Assets, free and clear of any and all covenants, conditions, pledges, security
agreements, voting trust arrangements, liens, charges, claims, equities,
restrictions, options and encumbrances, except as specified in Section 10
                                                               ----------
hereof.

               5.4.  Enforceability.  This Agreement is a valid and binding
                     --------------
obligation of Guards, enforceable against Guards in accordance with its terms.

          6.  Representations and Warranties of Pacific.  As of the date hereof,
              -----------------------------------------
Pacific represents and warrants to Guards as follows:

               6.1.  Compliance with Laws; No Litigation.  Pacific has complied
                     -----------------------------------
with and is complying with all applicable laws, orders, rules and regulations
promulgated by any federal, state, municipal or other governmental authority
relating to Pacific's activities in connection with the Dental Practices.
Pacific has not received any notice of violation of any applicable regulation or
law or requirement relating to its operation regarding the Dental Practices and
each dentist member of Pacific is duly qualified and licensed to practice
dentistry within the State of California.

               6.2.  No Breach.  This Agreement does not constitute a breach or
                     ---------
violation of any deed, agreement or other contract by which Pacific may be
bound.

               6.3  Enforceability.  This Agreement is a valid and binding
                    --------------
obligation of Pacific, enforceable against Pacific in accordance with its terms.

               6.4.  Organization and Good Standing.  Pacific is a corporation
                     ------------------------------
duly organized, validly existing and in good standing under the laws of
California and it has all requisite power to own, lease and operate its assets,
properties and business and to carry on its business as now conducted and as
proposed to be conducted.

               6.5  Authority to Execute and Perform Agreements.  Pacific has
                    -------------------------------------------
all requisite power, authority and approval required to enter into, execute and
deliver this Agreement and all other agreements and instruments to be executed
by Pacific in connection herewith (the "Purchase Documents") and to perform
fully Pacific's obligations hereunder and thereunder.

                                       2
<PAGE>
 
               6.6  Due Authorization; Compliance with Laws.  Pacific has taken
                    ---------------------------------------
all actions necessary to authorize it to enter into and perform its obligations
under this Agreement and the Purchase Documents and to perform fully Pacific's
obligations hereunder and thereunder. This Agreement and the Purchase Documents
constitute the legal, valid and binding obligations of Pacific, enforceable in
accordance with their respective terms except as such enforceability may be
limited by any applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws or by legal or equitable principles relating to or limiting the
rights of contracting parties generally.

               6.7.  Covenant of Pacific After Effective Date.  Pacific
                     ----------------------------------------
covenants and agrees that for as long as any of Pacific's obligations and duties
remain outstanding under the Note, Pacific and any dentists under its control
shall comply with all applicable laws, orders, rules and regulations promulgated
by any federal, state, municipal or other governmental authority, including
without limitation, any of the foregoing applicable to Pacific and any dentists
under its control regarding activities in connection with the Dental Practices.

          7.  Access to Records and Property of Dental Practices.  Each party
              --------------------------------------------------
agrees to cooperate with the other party's efforts in assessing the affairs of
the Dental Practices, and to facilitate each party's and its representatives'
access to all the property, contracts, books, records and all other information
concerning the affairs and condition of the Dental Practices as such party may
reasonably request. All such data and information shall be kept confidential,
except insofar as disclosure may be necessary in order to comply with applicable
legal requirements; and all documents and other information supplied to Pacific
or its representatives by Guards shall, upon request, be returned to Guards if
such information is not reasonably required for the ongoing operations of the
Dental Practices.

          8.  Practice Management Agreement.  Concurrently with the execution of
              -----------------------------
this Agreement, Pacific shall execute a dental practice management services
agreement with Associated Dental Services, Inc., who in turn will execute a
dental practice management services agreement in the form of Exhibit B attached
                                                             ---------
hereto with Imprimis Dental Practice Management.

          9.  Execution of Documents.  Each party shall execute and file, or
              ----------------------
join in the execution and filing of, any applications or other documents that
may be necessary in order to obtain the authorization, approval, or consent of
any governmental body that may be required or which the other party may
reasonably request in connection with the execution of this Agreement or
consummation of the transactions contemplated by this Agreement.

          10.  Additional Security.  To secure the performance of Pacific's
               -------------------
duties and obligations under this Agreement, the Note and any and all other
agreements, documents or instruments executed by Pacific in connection with this
Agreement, any and all agreements, documents or instruments executed by
Associated Dental Services, Inc. ("Associated") relating to and including that
certain Dental Practice Asset Purchase Agreement by and between Guards and
Associated (collectively, the "Guards Agreements") Pacific hereby collaterally
assigns and grants a security interest to Guards in and to all of its assets,
including without limitation the Assets transferred hereunder, now existing or
hereafter acquired and/or accrued, including any proceeds or replacements
relating to same. In connection with the granting of this security interest,
Pacific shall, immediately upon the request of Guards, execute appropriate Form
UCC-l and/or financing

                                       3
<PAGE>
 
statements necessary to perfect Guards' security interest as granted hereunder.
Upon the event of breach of this Agreement or any of the Guards Agreements,
Guards shall have all rights and remedies available at law or in equity to the
collateral herein described, including but not limited to those afforded a
secured creditor under the Uniform Commercial Code as adopted by the State of
California and may, at Guards' sole discretion terminate any and/or all of the
Guards Agreements.

          11.  Covenant Not to Compete.
               -----------------------

               11.1  Noncompetition.  Pacific will not, without the prior
                     --------------
written consent of Guards, compete directly or indirectly with the orthodontic
practices of Guards as set forth on Schedule 11 attached hereto (the "Guards
                                    -----------
Site") by engaging in the business of orthodontics within 5 miles of the Guards
Site (these areas are hereinafter collectively referred to as the "Covered
Areas") nor will Pacific lease or sublease the Guards Site to persons or
entities who will engage in the practice of orthodontics other than Guards.
Concurrently, Guards will not, without the prior consent of Pacific, compete
directly or indirectly with Pacific's operations relating to the Dental
Practices within five (5) miles of any such site. The phrase "compete directly
or indirectly with the orthodontic practice of Guards," shall mean engaging, or
having an interest, directly or indirectly, as owner, partner, shareholder,
independent contractor, capital investor, renderer of consultation services or
advice or otherwise, either alone or in association with others, in the
operation of any aspect of any type of business or enterprise competitive with
the orthodontic practice of Guards. Guards' covenant not to compete shall be
effective at all times for a period of five (5) years from the Effective Date,
or until such earlier time as (i) either party, its successors and assigns,
shall cease to do business; or (ii) upon default by Pacific under this Agreement
or the Guards Agreements. Pacific's covenant not to compete shall be effective
at all times for a period of five (5) years from the Effective Date, or until
such earlier time as either party, its successors and assigns, shall cease to do
business.

               11.2  Interpretation of Covenant.  The parties hereto agree that
                     --------------------------
both the scope and nature of the covenant and the duration and area for which
the covenant not to compete set forth in this Section 11 is to be effective are
                                              ----------
reasonable in light of all facts and circumstances. In the event that any
provision of this Section 11 shall to any extent be held invalid, unreasonable
                  ----------
or enforceable in any circumstances, the parties hereto agree that the remainder
of this Section 11 and the application of such provision of this Section 11 to
        ----------                                               ----------
other circumstances shall be valid and enforceable to the fullest extent
permitted by law. If any provision of this Section 11, or any part thereof, is
                                           ----------
held to be unenforceable because of the scope or duration of or the area covered
by such provision, the parties hereto agree that the court making such
determination shall reduce the scope, duration and/or area of such provisions
(and shall substitute appropriate provisions for any such unenforceable
provisions) in order to make such provisions enforceable to the fullest extent
permitted by law, and/or shall delete specific words and phrases, and such
modified provisions shall then be enforceable and shall be enforced.


          12.  Indemnification by Pacific.  Pacific shall indemnify, defend and
               --------------------------
hold Guards, its directors, officers, shareholders, attorneys, agents and
representatives, and their respective successors and assigns, harmless from and
against any and all losses, liabilities, obligations, judgments, settlements,
damages, costs and expenses, including without limitation, attorneys' fees,
court costs and other expenses of litigation (collectively "Losses") suffered by

                                       4
<PAGE>
 
any of such parties and arising out of, resulting from or due to: (i) any breach
of any representation, warranty, covenant or agreement of Pacific contained in
this Agreement or any other instrument contemplated by this Agreement; (ii) any
misrepresentation contained in any statement or certificate furnished by Pacific
pursuant to this Agreement or in connection with the transactions contemplated
by this Agreement; (iii) the liabilities and obligations assumed by Pacific
pursuant to Section 2 or (iv) any liability or obligation of Pacific in
connection with the Assets, or the operation or conduct relating to the Dental
Practices after the date hereof.

          13.  Brokers.  Pacific, on the one hand, and Guards, on the other
               -------
hand, represent to each other that there are no brokers' commissions or finder's
fees payable in connection with the transactions contemplated by this Agreement
and each party hereby agrees to indemnify and hold harmless the other from and
against any demand, claim and/or liability asserted or established by or in
favor of any third party for brokerage commission or finder's fee based on an
agreement with or the actions of such party. This provision shall survive the
consummation of the sale hereunder.

          14.  Notices.  All notices, requests, demands, consents and other
               -------
communications hereunder shall be in writing and shall be given or made in
person, by fax or telecopy or by overnight delivery service, or mailed by first
class registered or certified mail, postage prepaid, return receipt requested
and addressed to the person and address set forth under each party's name on the
signature page. Any party may change its address hereunder by notice in writing
to the other party. Any notice, request, consent or other communication shall be
deemed to have been given or made as of the date sent or given.

          15.  Governing Law.  This Agreement shall be interpreted and construed
               -------------
in accordance with, and governed by, the internal laws, and not the laws
pertaining to conflicts or choice of law, of the State of California. The
exclusive forum for the determination of any action relating to the validity and
enforceability hereof shall be either an appropriate court of said State or a
court of the United States which includes said State within its territorial
jurisdiction.

          16.  Entire Agreement.  This Agreement, including all exhibits
               ----------------
referenced herein and attached hereto, constitutes the entire agreement between
the parties hereto pertaining to the subject matter hereof (except for documents
executed contemporaneously herewith or pursuant hereto), and supersedes all
negotiations, preliminary agreements, and all prior and contemporaneous
agreements, representations and understandings of the parties hereto in
connection with the subject matters hereof. No supplement, modification,
amendment or termination of any of the terms, provisions, or conditions of this
Agreement shall be binding unless made in writing signed by all parties hereto,
their successors and assigns. No waiver of any of the provisions of this
Agreement shall be deemed to constitute a waiver of any other provision, whether
or not similar, nor shall any waiver constitute a continuing waiver. No waiver
shall be binding unless executed in writing signed by the party making the
waiver.

          17.  Successors and Assigns. This Agreement shall be binding upon, and
               ----------------------
shall inure to the benefit of, the parties hereto and to their executors,
administrators, legatees, beneficiaries, personal representatives and assigns,
except that no assignment by Pacific may be made without the prior written
consent of Guards.

                                       5
<PAGE>
 
          18.  Descriptive Headings.  The descriptive headings of the several
               --------------------
paragraphs and subparagraphs of this Agreement are inserted for convenience only
and do not constitute a part of this Agreement.

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

          20.  Severability.  In the event that any provision of this Agreement
               ------------
is found to be invalid or otherwise unenforceable under any applicable law, such
invalidity or unenforceability shall not be construed as rendering other
provisions contained herein invalid or unenforceable, and all such other
provisions shall be given full force and effect as though the invalid or
unenforceable provision was not contained herein.

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

PACIFIC COAST DENTAL, INC.             GUARDS DENTAL, INC.


 
By:_______________________             By:_____________________
Name:_____________________             Name:  Kenneth E. Keating
Title:____________________             Title: Vice President - Operations

 
Address:__________________             Address:   505 North Euclid Street
        __________________             Anaheim, CA  92803-4685

                                       6
<PAGE>
 
                                 SCHEDULE 1(a)

                       Locations of the Dental Practices
                       ---------------------------------

          The Dental Practices are located at the following sites:


1.   CHULA VISTA                      9.   MODESTO
     510 Broadway, Suites 4 & 5            2900 Standford Avenue, Suite #2
     Chula Vista, CA  91910                Modesto, CA  95350
     619-476-9400                          209-577-5008

2.   EL CAJON                         10.  NORTHRIDGE
     2990 Jamacha Road, #132               17017 Devonshire Blvd.
     El Cajon, CA  92019                   Northridge, CA  91324
     619-670-1700                          818-360-2216

3.   FAIRFIELD                        11.  PALMDALE
     1955 West Texas Street                38745 Tierra Subida St., Ste. #150
     Fairfield, CA  94533                  Palmdale, CA  93550
     707-428-5400                          805-272-9091

4.   FREMONT                          12.  SACRAMENTO
     40756 Grimmer Blvd.                   3901 Madison Avenue
     Freemont, CA  94533                   Sacramento, CA  95660
                                           916-339-9000

5.   FRESNO                           13.  SANTA ROSA
     2745 W. Shaw Avenue #103              2525 Cleveland Avenue, Ste. B
     Fresno, CA  93711-3366                Santa Rosa, CA  95401
     209-227-2900                          707-578-3118

6.   LA MESA                          14.  SAN RAMON
     5601 Grossmont Center Drive           9130-A East Alcosta Blvd.
     La Mesa, CA  91942                    San Ramon, CA  94593
     619-462-2272                          510-803-9700

7.   LANCASTER                        15.  VISTA
     1228 West Avenue K                    1010 E. Vista Way, #A & #B
     Lancaster, CA  91942                  Vista, CA  92083
     805-949-1970                          619-940-8811

8.   LONG BEACH
     17236 Downey Avenue
     Bellflower, CA  90706
     310-531-0221

                                       
<PAGE>
 
                                 SCHEDULE 1(b)

                             The Intangible Assets
                             ---------------------

     The following intangible nonorthodontic-related assets associated with the
Dental Practices are sold to Pacific under this Agreement:

     .    All patient charts;
     .    All patient lists;
     .    All patient records;
     .    Goodwill of the Dental Practices;
     .    The "doing business as" registered names/trade names; and
     .    The accounts receivable.

                                       
<PAGE>
 
                     PROMISSORY NOTE AND SECURITY INTEREST

                                        

$3,500,000                                                  August 1, 1997
                                                            Irvine, California

          FOR VALUE RECEIVED, the undersigned, PACIFIC COAST DENTAL, INC., a
California corporation ("Pacific"), hereby unconditionally promises to pay to
GUARDS DENTAL, INC., a California corporation ("Guards"), or its successors and
assigns, at its offices at 505 North Euclid Street, Anaheim, CA 92803-4685, or
at such other place as the holder of this promissory note (this "Note") may from
time to time designate in writing, the principal amount of Three Million Five
Hundred Thousand Dollars ($3,500,000), together with interest from the date
hereof, at the rate of eight and one-half percent (8.5%) per annum or the
maximum rate allowed by law, whichever rate is lower (the "Coupon Rate"),
principal and interest payable in lawful money of the United States, without any
deduction whatsoever, including but not limited to any deduction for any set-off
or counterclaim over three hundred sixty (360) months (the "Term"), in monthly
installments beginning one (1) month from the date of this Note, and in
accordance with paragraphs 1 and 2 below.

          1.    Payments.
                -------- 

          1.1.  Interest Only Payments.  For the first twenty-four (24) months
                --------------                                                
of the Term, Pacific shall pay to Guards monthly interest only payments of
________________________________________ Dollars and __________ Cents
($____.___) (the "Interest Only Payments") commencing on September 1, 1997 and
payable thereafter on the first day of each month (a "Due Date").

          1.2.  Principal and Interest Payments.  Commencing on August 1, 1999,
                -------------------------------                                
Pacific shall pay to Guards monthly principal and interest payments of
_________________________ Dollars and _______________ Cents ($____.__) and
payable thereafter on the first (1st) day of each month with the final such
payment due on August 1, 2027 (the "Principal and Interest Payments") (the
Interest Only Payments and the Principal and Interest Payments are collectively
referred to herein as "Payments").

          1.3.  Manner of Payments.  All Payments due hereunder shall be made to
                ------------------                                              
Guards by check delivered to the address set forth below (or such other address
as Guards may designate from time to time by written notice), or by wire
transfer of immediately available funds to such bank account as Guards may
designate.  Interest payable with respect to any period that is less than a full
calendar month shall be calculated on the daily outstanding principal balance
according to the actual number of days in such period as a fraction of a 360 day
year.
<PAGE>
 
          2.  Delinquent Payment.  If any Payment is not paid within ten (10)
              ------------------                                             
days after any Due Date, Pacific shall pay to Guards, in addition to the Payment
and without any requirement of notice or demand by Guards, a late payment charge
equal to one percent (1%) per month of the amount of the Payment or the maximum
amount permitted under applicable law from such Due Date until Pacific pays the
Payment and accrued interest.  Pacific expressly acknowledges and agrees that
the foregoing late payment charge provision is reasonable under the
circumstances existing on the date of this Note, that it would be extremely
difficult and impractical to fix Guards' actual damages arising out of any late
payment and that the foregoing late payment charge shall be presumed to be the
actual amount of such damages incurred by Guards.  No provision in this Note
(including without limitation the provisions for a late payment charge and for
interest on any amounts remaining unpaid after any Due Date) shall be construed
as in any way excusing Pacific from its obligation to make any Payment under
this Note promptly when due.

          3.  Security Interest.  As security for the payment of principal and
              -----------------                                               
accrued interest under this Note, Pacific hereby grants to Guards a security
interest in and to all of Pacific's assets related to or associated with the
dental practices located on Schedule 3 attached hereto, or any other dental
                            ----------
practices owned by Pacific, now existing or hereafter acquired and/or accrued,
including any proceeds or replacements relating to the same (the "Collateral").
The security interest hereby created shall attach immediately upon execution of
this Note and concurrently herewith, Pacific shall execute any financing
statement or financing statements requested by Guards to perfect the security
interest created hereby. Such financing statement or statements shall be on a
form or forms approved by the California Secretary of State and Pacific shall
forthwith pay to Guards the filing fees required to file such statement or
statements in the manner required by the Uniform Commercial Code of California.
In addition, Pacific shall pay from its own funds, as they become due, all taxes
and assessments levied or assessed against the Collateral, or any part of the
Collateral, prior to the final termination of this Note. Upon any event of
default hereunder, Guards shall be entitled to all the rights and remedies of a
secured creditor with respect to such Collateral as provided for in the Uniform
Commercial Code of California.

          4.  Presentment, Notice of Dishonor and Protest.  Pacific consents to
              -------------------------------------------                      
renewals, replacements and extensions of time for any payment hereof, before, at
or after maturity and waives, to the fullest extent permitted by applicable law,
diligence, grace, presentment, exhibition, protest, demand, dishonor, exemption
rights, nonpayment and notice, of every kind with respect to this Note or any
payment hereunder.  No delay or omission on the part of Guards in exercising any
power, right, privilege or remedy under this Note shall operate as a waiver of
such power, right, privilege or remedy or of any other power, right, privilege
or remedy hereunder.  It is agreed that the granting to Pacific or any other
party of an extension or renewal or extensions of the time for the payment or
renewal of any sum or sums due hereunder or under any other instrument or for
the performance of any covenant or stipulation thereof or the taking of security
shall not in any way release or effect the liability of Pacific on this Note.

                                       2
<PAGE>
 
          5.  Assignment.  Guards shall have the right to sell, assign or
              ----------                                                 
otherwise transfer this Note, either in part or in its entirety, without
Pacific's consent.  This Note may not be assigned by Pacific without the prior
written consent of Guards or Guards' successors, heirs, representatives or
assigns.

          6.  Successors and Assigns.  This Note and all of the covenants,
              ----------------------                                      
promises and agreements contained in it shall be binding on and inure to the
benefit of the respective legal and personal representatives, devisees, heirs,
successors and assigns of Guards and Pacific.

          7.  Modification.  This Note may not be changed, modified, or
              ------------                                             
terminated except by an agreement in writing signed by the parties or their
successors and assigns.

          8.  Severability.  If any provision of this Note, or the application
              ------------                                                    
of it to any party or circumstance, is held to be invalid, illegal or
unenforceable, the remainder of this Note, and the application of such provision
to other parties or circumstances, shall not be affected thereby, the provisions
of this Note being severable in any such instance.

          9.  Attorneys' and Other Fees.  Pacific hereby agrees to pay all costs
              -------------------------                                         
and expenses, including without limitation attorneys' fees and disbursements
incurred by Guards, or adjudged by a court, in connection with the collection or
enforcement of this Note or any portion of this Note, whether or not a suit is
filed.  This provision is separate and severable and shall survive any merger of
this Note into any judgment.

          10.  Notice.  Notice to either party provided for in this Note shall
               ------                                                         
be given by personal delivery or by mailing such notice by first class or
certified mail, return receipt requested, to the addresses stated below or such
other address as either party may hereafter specify in writing:

               To Pacific:
               ----------

               25522 Marguerite Parkway
               Mission Viejo, CA  92692
               Attention:  Robert Stalcup/Frank Pellkofer

               To Guards:
               ----------

               505 North Euclid Street
               Anaheim, CA  92803-4685
               Attention:  Kenneth E. Keating


          11.  Governing Law.   This Note shall be interpreted and construed in
               -------------                                                   
accordance with, and governed by, the internal laws, and not the laws pertaining
to conflicts or

                                       3
<PAGE>
 
choice of law, of the State of California. The exclusive forum for the
determination of any action relating to the validity and enforceability hereof
shall be either an appropriate court of said State or a court of the United
States which includes said State within its territorial jurisdiction.

          12.  Prepayment.  Pacific may prepay the principal amount outstanding
               ----------                                                      
in whole or in part at any time and from time to time without penalty and
without any discount.

        Executed at Irvine, California, on the 1st day of August, 1997.


                              PACIFIC COAST DENTAL, INC.

                              By:________________________

                              Name:______________________

                              Title:_____________________


                                       4
<PAGE>
 
                                  Schedule 3

                           Dental Practice Locations