<PAGE>
 
                                                                EXHIBIT 10.27[*]


                       DENTAL GROUP MANAGEMENT AGREEMENT
                       ---------------------------------


     THIS DENTAL GROUP MANAGEMENT AGREEMENT (this "Agreement") is dated as of
June 30, 1997 and is effective as of the date set forth in Section 6.1
("Effective Date") by and between WARREN M. FRANCIS, JR. D.D.S., INC, a
                                  ----------------------------------   
California professional corporation ("Manager") and FRANCIS DENTAL CORPORATION,
                                                    -------------------------- 
a California professional dental corporation ("Dental Group").

     RECITALS:

     A.   Prior to the execution of this Agreement and pursuant to the terms of
that certain Assignment Agreement, dated June 19, 1997, by and between Manager
and Dental Group, all of Manager's right, title and interest in the "Dental
Practice Assets" relating to its Santa Rosa California dental center ("Doctors
Park Facility(ies)") were assigned to the Dental Group, which Dental Practice
Assets consist of all contracts and agreements with dentist employees and
independent contractors and other licensed health professional employees and
independent contractors, all independent practitioner association and managed
care plan contracts, all patient records, and any and all other assets required
by statute, rule or regulation to be owned or held by an entity licensed to
practice dentistry, together with all goodwill associated with the foregoing.
Dental Group operates a dental practice at the Doctors Park Facility(ies) and
may operate a dental practice at one or more additional sites in the future.

     B.   Dental Group engages in the practice of dentistry by providing dental
services to patients of Dental Group ("Group Patients") and to enrollees
("Beneficiaries") of dental plans ("Plans") under contracts ("Payor Contracts")
between Dental Group and Plans or between Beneficiaries and Plans.

     C.   Dental Group provides dental services to Beneficiaries and to Group
Patients through arrangements with licensed individuals ("Providers").  Such
arrangements may include contracts ("Employment Agreements") with dentist
employees and allied health professional employees (collectively "Employee
Providers") and agreements ("Provider Subcontracts") with independent contractor
dentists and non-dentist providers of various dental care services (collectively
"Subcontract Providers").

     D.   All activities of Dental Group subject to this Agreement are
referenced as the "Practice."  All references to "dental" care and services
include general and specialist dental services.  All references to "dentists"
include generalists and specialists.

     E.   Manager desires to provide certain support services for the Practice.

__________
[*] Confidential Treatment Requested.

                                      -1-
<PAGE>
 
     F.   Dental Group desires to retain Manager on an independent contractor
basis to provide management services that are more particularly described below,
and Manager desires to provide such management services under the terms and
conditions set forth in this Agreement.


                                  AGREEMENTS
                                  ----------

     NOW, THEREFORE, in consideration of the covenants and conditions contained
herein, Manager and Dental Group agree as follows:


                                   ARTICLE 1

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

     Terms that are capitalized within this Agreement and its addenda and
exhibits are defined in Addendum 1.


                                   ARTICLE 2

                              SCOPE OF AGREEMENT
                              ------------------

     2.1  General Scope of Agreement.  This Agreement shall apply to the
          --------------------------                                    
Practice, including, without limitation, all professional, administrative and
technical services, marketing, contracting, case management, ancillary dental
services, outpatient services and dental care facilities, equipment, supplies
and items, except as otherwise specifically provided in this Agreement.  Dental
Group's Employment Agreements shall encompass substantially all such activities
of Employee Providers and shall provide that all revenues derived from such
activities (and not excluded below) are Revenues.  Nothing in this Agreement
shall be construed to alter or in any way affect the legal, ethical and
professional relationship between and among Providers and Providers' patients,
nor shall anything contained in this Agreement abrogate any right or obligation
arising out of or applicable to the dentist-patient relationship.

     2.2  License.  Dental Group grants Manager an exclusive license to use any
          -------                                                              
and all of Dental Group's assets, whether tangible or intangible, in carrying
out Manager's duties and responsibilities under the provisions of this
Agreement.

     2.3  Intellectual Property.  Dental Group hereby grants to Manager a non-
          ---------------------                                              
exclusive, perpetual, royalty-free, worldwide license to use and sublicense the
use of any intellectual property owned by Dental Group.  This license shall
cover, but not be limited to, use of the following:

                                      -2-
<PAGE>
 
     (a)  Service Mark.  Dental Group hereby grants Manager the right to use all
          ------------                                                          
service marks and trademarks of Dental Group (the "Marks") for marketing and
promotional materials in connection with Dental Group's offering of dental
services.  Manager agrees to use the Marks solely in the design format used by
Dental Group as of the date of this Agreement or another design format approved
in advance in writing by Dental Group.  Dental Group shall have the opportunity
to review any marketing or other materials using the Marks in advance of any
public dis tribution.  Manager agrees that it will include these restrictions
on use in any sublicense of the Marks.

     (b)  Copyrighted Materials.  Dental Group hereby grants Manager the right
          ---------------------                                               
to use any and all copyrighted materials authored or owned by Dental Group
including, specifically, the Dental Group dental management system software
programs (the "Programs").  This license includes the right to sublicense the
Programs and the right to prepare and own derivative works based on the
Programs, all without a duty of accounting to Dental Group.  Dental Group shall
execute all documents required to enable Manager to own, use and exploit all
such rights.

     2.4  Revenues.  "Revenues" shall mean all of Dental Group's accounts
          --------                                                       
receivable (net of contractual adjustments and bad debt), and cash collections
which exist at the Effective Date or which are acquired after the Effective Date
and during the Term.  Revenues shall include all funds collected by, or legally
due to, Dental Group or any Affiliate of Dental Group, including, without
limitation, the following:  (a) all fee-for-service payments for services to
Group Patients or Beneficiaries; (b) all payments established under Payor
Contracts; (c) all coordination of benefits or deductibles and third-party
liability recoveries related to the Group's services; (d) all pay ments, dues,
fees or other compensation to Dental Group, (e) any income, profits, dividends,
distributions or other payments from Dental Group's investments; and (f) any
interest or other non-operating income of Dental Group.

     2.5  Deposit Accounts.  All cash received by Dental Group from whatever
          ----------------                                                  
source shall be deposited into an account or accounts ("Accounts") in the name
of Dental Group at a banking institution selected by Dental Group and approved
by Manager.  Dental Group authorizes Manager to bill and collect, in Dental
Group's name, all charges and reimbursements for Dental Group's dental related
activities and to deposit such collections in the Accounts.  Dental Group agrees
to assist and cooperate with Manager in the billing and collection process and
to immediately deliver to Manager for deposit any monies Dental Group may
receive.

     2.6  Assignment.
          ---------- 

     (a)  Assets.  Except as prohibited by contract or by law, Dental Group
          ------                                                           
hereby assigns, sells, conveys, transfers, and

                                      -3-
<PAGE>
 
delivers to Manager, and Manager hereby accepts from Dental Group, all of the
assets and properties of Dental Group of every kind, character and description,
whether tangible, intangible, real, personal, or mixed, and wherever located,
including, but not limited to, all Revenues, cash, accounts receivable,
advances, prepaid expenses, deposits, equipment and improvements which exist on
the Effective Date or which are acquired after the Effective Date and during the
Term.  Dental Group hereby grants to Manager a security interest in all such
assets to secure the performance of its obligation to assign such assets to
Manager and to secure the performance of its other obligations under this
Agreement.  The assets shall be valued at their fair market value which has been
determined to be their respective book values.  Manager shall have the
authority, and Dental Group shall execute any and all documents as may be
necessary or appropriate to transfer the assets to Manager, authorize Manager to
transfer the funds in the Accounts to a separate account in the name of Manager,
and effectuate the intention of this provision.  Dental Group shall execute and
deliver any and all financing statements and other documents as may be necessary
or appropriate to effectuate and perfect the grant of the security interest in
such assets made by Dental Group to Manager under this provision.

     (b)  Liabilities.  Manager shall be responsible for paying all claims and
          -----------                                                         
obligations associated with the operation of Dental Group pursuant to this
Agreement; provided, Manager shall be deemed to fully discharge its
responsibility to Dental Group for the liabilities described in this
subparagraph by its timely payment on Dental Group's behalf of, or delivery to
Dental Group of an amount sufficient to discharge, all of Dental Group's
obligations and liabilities now existing or arising in the future, including
those under Provider Subcontracts, Employment Agreements, Dental Group's
professional liability insurance and any other operational expenses for which
Dental Group retains responsibility or that are delegated to Dental Group,
whether pursuant to this Agreement or any other agreement of the parties or
action of the Joint Operations Committee ("Dental Expenses").  Notwithstanding
the foregoing, Manager does not assume any liabilities of Dental Group which are
unrelated to the dental business or any liabilities for income taxes.


                                   ARTICLE 3

                            GOVERNANCE AND CONTROL
                            ----------------------

     3.1  Appointment.  Dental Group hereby appoints Manager as its sole and
          -----------                                                       
exclusive manager for the operation of the Practice and covenants not to enter
into an agreement with any Person other than Manager to perform or assume any of
Manager's rights, duties or responsibilities as provided herein.  Manager hereby
accepts full responsibility for such management as more fully set forth herein.

                                      -4-
<PAGE>
 
     3.2  Professional Matters.  Pursuant to applicable laws and requirements
          --------------------                                               
governing the practice of dentistry, Dental Group shall retain ultimate
responsibility for all activities of Dental Group that are within the scope of a
dentist's licensure and cannot be performed by Manager due to Manager's non-
licensed status.  The parties understand and agree that during the term of this
Agreement, Dental Group shall be the provider of dental services for all
purposes, including, but not limited to, licensure and reimbursement.

     3.3  Relationship of Parties.  In the performance of its duties and
          -----------------------                                       
obligations under this Agreement, it is understood and agreed that Manager
shall, at all times, be acting and performing as an independent contractor and
not as an employee of Dental Group.  Except as provided in this Agreement or as
required by law, Dental Group shall neither have nor exercise any control or
direction over the methods by which Manager shall perform its obligation
thereunder; nor shall Manager have or exercise any control or direction over the
methods by which Dental Group shall practice dentistry.  It is expressly agreed
by the parties that no work, act, commission or omission of Manager pursuant to
the terms and conditions of this Agreement shall be construed to make or render
Manager or Manager's employees or agents, the employees of Dental Group.
Manager and Dental Group are not partners or joint venturers with each other and
nothing herein shall be construed so as to make them partners or joint venturers
or impose upon either of them any liability as partners or joint venturers.
Dental Group's responsibility is to assure that the services covered by this
Agreement shall be performed and rendered in a competent, efficient and
satisfactory manner.

     3.4  Authority and Control.  Strategic planning, overall direction and
          ---------------------                                            
control of the business and affairs of Dental Group, and authority over the day-
to-day activities of Dental Group shall be accomplished as follows:

     (a)  Exclusive Authority.
          ------------------- 

     (i)  Dental Group.  Dental Group shall have the sole responsibility and
          ------------                                                      
authority for all aspects of the practice of dentistry and delivery of dental
services by Providers.  Dental Group shall consult with Manager or the Joint
Operations Committee to the extent reasonable and not inconsistent with the
licensure of dentists.

     (ii) Manager.  After reasonable consultation with Dental Group or the
          -------                                                         
Joint Operations Committee, Manager shall have the sole responsibility and
authority for decisions related to the administration of the Practice.

     (b)  Joint Authority.  All other decision-making authority related to the
          ---------------                                                     
business and affairs of Dental Group shall be vested in a joint operations
committee (the "Joint Operations

                                      -5-
<PAGE>
 
Committee").  Nothing herein shall be construed as preventing the Joint
Operations Committee from appointing representatives and delegating authority to
such representatives so long as the Joint Operations Committee may revoke such
appointment and delegation at any time and so long as the Joint Operations
Committee retains ultimate responsibility for the decisions of such
representatives.

     3.5  Joint Operations Committee.  Strategic planning, overall direction and
          --------------------------                                            
control of the business and affairs of Dental Group, and authority over the day-
to-day activities of Dental Group, excluding the delivery of professional dental
services, shall be overseen by the Joint Operations Committee as follows:

     (a)  Joint Operations Committee Membership.  The Joint Operations Committee
          -------------------------------------                                 
shall consist initially of three (3) individuals (the "Committee Members").
Dental Group shall designate one (1) Committee Member (the "Dental Group
Member") and the remaining two (2) Committee Members (the "Manager Members")
shall be appointed by Manager.  The number of Committee Members may be increased
by agreement of the parties.  Each party shall continue to direct the
appointment of the same percentage of Committee Members as described above.
Each Committee Member shall serve at the pleasure of the party designating such
Committee Member and may be replaced, with or without cause, at any time by such
party upon the delivery of written notice thereof to the other Committee
Members.  Manager, Dental Group and their respective Committee Members shall
diligently pursue any preliminary activities that are necessary to allow the
Joint Operations Committee to take an action.  Where Committee Members are
required to consult with the organization appointing such Committee Members, the
Committee shall establish and agree on a deadline for accomplishing such
consultation.

     (b)  Joint Operations Committee Action.
          --------------------------------- 

     (i)  Joint Action.  Except as otherwise expressly set forth above, the
          ------------                                                     
Joint Operations Committee shall take all other actions that have been approved
by a majority of the Committee Members.

     (ii) Consultation Forum.  Consultation between Dental Group and Manager,
          ------------------                                                 
if any, shall take place at a meeting of the Joint Operations Committee, and
Dental Group and Manager hereby agree to be bound by the decision of their
Dental Group Members or Manager Members, as the case may be.

     (c)  Joint Operations Committee Meetings.  Meetings of the Joint Operations
          -----------------------------------                                   
Committee may be held by telephone or similar communications equipment so long
as all Committee Members participating in a meeting can hear and speak to each
other.  The Joint Operations Committee shall prepare and maintain

                                      -6-
<PAGE>
 
written minutes of all meetings and shall provide a copy of the minutes to the
parties within fifteen (15) business days following each meeting.

          (i)    Regular Meetings.  The Joint Operations Committee shall hold 
                 ----------------   
     not less than four (4) regular meetings each year, at such specific times
     and places as the Committee Members may determine.

          (ii)   Special Meetings.  A special meeting of the Joint Operations
                 ----------------                                            
     Committee may be called by a majority of the Committee Members.

          (iii)  Notice Requirement.  A Committee Member calling a special
                 ------------------                                       
     meeting must provide all other Committee Members with ten (10) days'
     advance written or telephonic notice.  Notice must be given or sent to the
     Committee Member's address or telephone number as shown on the records of
     the Joint Operations Committee.  Notice may be delivered directly to each
     Committee Member or to a person at the Committee Member's principal place
     of business who would reasonably be expected to communicate that notice
     promptly to the Committee Member.

          (iv)   Waiver of Notice Requirement.
                 ---------------------------- 

               (A)  Written Waiver, Consent or Approval.  Notice of a special
                    -----------------------------------                      
          meeting need not be given to any Committee Member who, either before
          or after the meeting, signs a waiver of notice or a written consent to
          the holding of the special meeting, or an approval of the minutes of
          the special meeting.  Such waiver, consent or approval need not
          specify the purpose of the special meeting.  All such waivers,
          consents, and approvals shall be filed with the Joint Operations
          Committee records or made a part of the minutes of the special
          meetings.

               (B)  Failure to Object.  Notice of a special meeting need not be
                    -----------------                                          
          given to any Committee Member who attends the special meeting and does
          not protest before or at the commencement of the special meeting such
          lack of notice.

          (v)    Quorum.  The smallest number of Committee Members that exceed
                 ------                                                       
     fifty percent (50%) of all Committee Members shall constitute a quorum of
     the Joint Operations Committee.

          (vi)   Proxies.  The Joint Operations Committee shall provide for the
                 -------                                                       
     use of proxies, telephonic conference calls, written consents or other

                                      -7-
<PAGE>
 
     appropriate methods by which the full participation of the Dental Group
     Members and Manager Members can be assured.

     (d)  Limitation of Responsibility.  Notwithstanding any other provisions
          ----------------------------                                       
hereof, Committee Members shall be liable to the parties only for actions
constituting bad faith, gross negligence or breach of an express provision of
this Agreement (so long as such breach remains uncured after ten (10) days of
receiving notice of the nature of such breach).  In all other respects,
Committee Members shall not be liable for negligence or mistakes of judgment.

     3.6  Budgets.  A capital and operating budget ("Annual Budget") shall be
          -------                                                            
established regarding all financial aspects of the Practice.  The Annual Budget
shall include the following elements and other items, as appropriate:

     (a)  A capital expenditure budget outlining a program of capital
expenditures, if any, that are required for the next succeeding fiscal year;

     (b)  An operating budget setting forth an estimate of Revenues and expenses
for the next succeeding fiscal year, together with an explanation of anticipated
changes or modifications, if any, in the Practice's utilization, rates, charges
to patients or third party payors, salaries, costs of Providers, non-wage cost
increases, and all other similar factors expected to differ significantly from
those prevailing during the current fiscal year;

     (c)  Other expenses of operation;

     (d)  The amount of a reasonable reserve to satisfy possible shortfalls from
operations.  The allocation of such reserve shall be made by the Joint
Operations Committee as and when necessary; and

     (e)  The Management Fee, as defined below, for the next succeeding fiscal
year.

     3.7  Budget Process.
          -------------- 

     (a)  Initial Annual Budget.  Not later than forty-five (45) days after the
          ---------------------                                                
Effective Date, the Joint Operations Committee will have prepared the initial
Annual Budget for the first fiscal year (which shall initially be the calendar
year) during the term of this Agreement.  If the Effective Date is other than
the first day of a fiscal year, then such initial Annual Budget shall encompass
only such portion of the then current fiscal year as remains, or, at the option
of the parties, such portion of the then current fiscal year plus the
immediately subsequent fiscal year.

                                      -8-
<PAGE>
 
     (b)  Preliminary Budget.  Not later than forty-five (45) days prior to the
          ------------------                                                   
end of each fiscal year during the term of this Agreement, the Manager shall
prepare and deliver to the Joint Operations Committee a preliminary Annual
Budget for the next succeeding fiscal year ("Preliminary Budget").

     (c)  Joint Operations Committee Approval.  The Joint Operations Committee
          -----------------------------------                                 
shall review and suggest modifications to the Preliminary Budget within ten (10)
days of receipt.  Manager shall prepare a revised budget based upon the Joint
Operations Committee's recommendations and the Preliminary Budget as revised
shall become the Annual Budget.

     (d)  Adjustments.  In the event of a material deviation between financial
          -----------                                                         
forecasts and financial performance during a fiscal year, Manager or Dental
Group may propose adjustments to the Annual Budget which adjustments shall be
approved or disapproved pursuant to the procedures set forth above.

     3.8  Personnel.
          --------- 

     (a)  Providers.  Except in unusual circumstances approved by the Joint
          ---------                                                        
Operations Committee and as permitted by law, Manager shall not employ or
contract with any Providers for the provision of dental services.  All Providers
who provide dental services to Group Patients or to Beneficiaries shall be
either (i) Employee Providers, (ii) Subcontract Providers or (iii) employees of
Subcontract Providers.

     (b)  Non-Providers.  With the exception of employees of Subcontract
          -------------                                                 
Providers, Manager shall employ all non-Provider personnel necessary for the
operation of the Practice.

     (c)  Salary and Benefits.  Each party to this Agreement shall remain liable
          -------------------                                                   
for the salary and benefits paid to such party's own employees and shall be
ultimately responsible for compliance with state and federal laws pertaining to
employment taxes, workers' compensation, unemployment compensation and other
employment-related statutes pertaining to the party's own employees.

     (d)  Payments to Subcontract Providers.  Dental Group shall be liable for
          ---------------------------------                                   
any payments due Subcontract Providers under Provider Subcontracts after receipt
of funds from Manager.


                                   ARTICLE 4

                              MANAGEMENT SERVICES
                              -------------------

     4.1  General Description of Services.  Within the limitations set out
          -------------------------------                                  
elsewhere in this Agreement, Manager shall provide or arrange for the provision
to Dental Group of all support services reasonably necessary and appropriate for
the efficient

                                      -9-
<PAGE>
 
operation of the Practice.  Such services include all administrative services
necessary to Dental Group's performance of its obligations under Payor
Contracts, contracting, marketing, capital formation and assistance with long
term strategic planning.

     4.2  Facilities.  When appropriate, Manager shall secure and maintain
          ----------                                                      
facilities, including, without limitation, office space, improvements,
furnishings, equipment, supplies and personal property, of a nature and in a
condition necessary and appropriate for the efficient and effective operations
of the Practice subject to the general approval of the Joint Operations
Committee.  Manager shall secure and maintain said facilities in the name of
Dental Group.

     4.3  Purchased Items and Services.  Manager shall serve as the purchasing
          ----------------------------                                        
agent for Dental Group and shall arrange for personnel benefits, insurance, and
any other items and services required for the proper operation of the Practice.

     4.4  Manager Personnel.
          ----------------- 

     (a)  Management Team.  Subject to any approval or consulting rights of the
          ---------------                                                       
Joint Operations Committee, Manager shall engage or designate one or more
individuals experienced in dental group management and direction, including, but
not limited to, an administrator, who will be responsible for the overall
administration of the Practice including day-to-day operations and strategic
development activities.

     (b)  Other Manager Personnel.  Manager shall select, hire, train,
          -----------------------                                     
supervise, monitor and terminate all non-Provider personnel necessary for the
operation and management of the Practice.

     4.5  Day-to-Day Management and Supervision.  Subject to any approval or
          -------------------------------------                             
consulting rights of the Joint Operations Committee, Manager shall provide
general management including, but not limited to, day-to-day supervision of:

     (a)  Manager personnel;

     (b)  Equipment and supply acquisition;

     (c)  Office space and facility maintenance;

     (d)  Patient records organization and retention;

     (e)  Third party payor contracting;

     (f)  Case management tracking;

     (g)  Billing, collections and accounting activities as set forth below;

                                      -10-
<PAGE>
 
     (h)  All operating aspects and policies of the Practice including, but not
limited to, hours of operation, work schedules, standard duties and job
descriptions, for all nondentist personnel; and

     (i)  Other related and incidental matters.

     4.6  Billing and Collection Payment of Expenses.  Manager shall be
          ------------------------------------------                   
responsible for all billing and collecting activities required by Dental Group.
Manager shall also be responsible for reviewing and paying accounts payable of
Dental Group.  Dental Group hereby appoints the Manager its true and lawful
attorney-in-fact to take the following actions for and on behalf of and in the
name of Dental Group:

     (a)  Bill and collect in Dental Group's name or the name of the individual
practicing dentist, all charges and reimbursements for Dental Group.  Dental
Group shall give Manager all necessary access to Patient records to accomplish
all billing and collection.  In so doing, Manager will use its best efforts but
does not guarantee any specific level of collections, and Manager will comply
with Dental Group's reasonable and lawful policies regarding courtesy discounts;

     (b)  Take possession of and endorse in the name of Dental Group any and all
instruments received as payment of accounts receivable;

     (c)  Deposit all such collections directly into Accounts and make
withdrawals from such Accounts in accordance with this Agreement; and

     (d)  Place accounts for collection, settle and compromise claims, and
institute legal action for the recovery of accounts.

     4.7  Bookkeeping and Accounting.  Manager shall provide bookkeeping
          --------------------------                                    
services, financial reports, and shall implement and manage a computerized
management information system appropriate for the Practice.

     (a)  Financial Reporting.  Manager shall prepare, analyze, and deliver to
          -------------------                                                 
the Joint Operations Committee financial reports to the extent necessary or
appropriate for the operation of the Practice, including the following:

          (i)    Financial statements, including balance sheets and statements
     of cash flow and income;

          (ii)   Accounts payable and accounts receivable analysis;

          (iii)  Billing status including any Medicaid remittances; and

                                      -11-
<PAGE>
 
          (iv)  Reconciliation of assets, liabilities and major expenses.

     (b)  Audits.  Dental Group shall have the right to review and, at its sole
          ------                                                               
cost and expense, obtain an audit (separate from any annual audit or review of
Dental Group's financial statements performed at the direction of the Manager)
of Dental Group's financial books and records maintained by the Manager.  Upon
five (5) days' prior written notice, Manager shall allow Dental Group access
during reasonable business hours to all information and documents reasonably
required for such review or audit.  Upon Dental Group's request and at Dental
Group's expense, Manager shall also provide copies of such documents.

     4.8  Marketing and Public Relations Services.  Manager shall provide such
          ---------------------------------------                             
marketing and public relations services as Manager determines reasonably
necessary to promote, market and develop the dental services of Dental Group.
Manager shall provide Dental Group with marketing materials and activities.

     4.9  Dental Group Agreements.  On behalf of Dental Group, Manager shall
          -----------------------                                           
review, evaluate and negotiate Payor Contracts and Provider Subcontracts and any
other contracts or agreements regarding the provision of dental related items or
services by Dental Group or Providers.

     4.10 Utilization Review Quality Improvement and Outcomes Monitoring.
          --------------------------------------------------------------  
Manager shall be responsible for providing administrative support for Dental
Group's utilization review, quality improvement and outcomes monitoring
activities, including, without limitation, data collection, analysis and
reporting for Group Patients and Beneficiaries.  Manager shall also support the
development and implementation of relevant policies, procedures, protocols,
practice guidelines and other interventions based on such activities.

     4.11 Applicable Law.  Manager and Dental Group shall comply with all
          --------------                                                  
applicable federal and state laws, statutes, rules and regulations, including
without limitation, those relating to Medicaid reimbursement and any other
applicable governmental rules or the guidelines governing the standards for
administering a professional dental practice.


                                   ARTICLE 5

                             DENTAL GROUP SERVICES
                             ---------------------

     5.1  Provision of Dental Services by Dental Group.  Dental Group shall
          --------------------------------------------                     
operate the Practice during the Term as a dental practice in accordance with
terms of this Agreement and the Annual Budget.

                                      -12-
<PAGE>
 
     5.2  Providers.
          --------- 

     (a)  Professional Dental Services.  Dental Group shall employ or contract
          ----------------------------                                        
with the number of Providers Dental Group deems necessary for the efficient and
effective operation of the Practice and in accordance with quality assurance,
credentialing and utilization management protocols approved by Manager.  Dental
Group shall provide full and prompt dental coverage for the Practice, including
emergency service twenty-four (24) hours per day, seven (7) days per week,
including holidays according to policies and schedules approved by the Joint
Operations Committee.

     (b)  Provider Subcontracts and Employment Agreements. Dental Group shall
          -----------------------------------------------                    
not negotiate or execute any Provider Subcontract, Employment Agreement, or any
amendment thereto, without the approval of the Joint Operations Committee.  The
Joint Operations Committee shall have the right of review and reasonable
approval of any Provider Subcontract and Employment Agreement.  Dental Group
shall be responsible for the payment, in accordance with the Annual Budget, of
all Employee and Subcontract Providers.

     5.3  Peer Review.  Dental Group, after consultation with the Joint
          -----------                                                  
Operations Committee, shall implement, regularly review, modify as necessary or
appropriate and obtain the commitment of Providers to actively participate in
peer review procedures for Providers.  Dental Group shall assist Manager in the
production of periodic reports describing the results of such procedures.
Dental Group shall provide Manager with prompt notice of any information that
raises a reasonable risk to the health and safety of Group Patients or
Beneficiaries.  In any event, after consultation with the Joint Operations
Committee, Dental Group shall take such action as may be reasonably warranted
under the facts and circumstances.

     5.4  Billing Information and Assignments.  Dental Group shall promptly
          -----------------------------------                              
provide Manager with all billing and patient encounter information reasonably
requested by Manager for purposes of billing and collecting for Dental Group's
services.  Dental Group shall use reasonable efforts to procure consents to
assignments and other approvals and documents necessary to enable Manager to
obtain payment or reimbursement from third party payors and patients.  With the
assistance of Manager, Dental Group shall obtain all provider numbers necessary
to obtain payment or reimbursement for its services.

     5.5  Third Party Contracts.  Dental Group shall be in compliance with all
          ---------------------                                               
contracts, agreements and arrangements, including any contracts that exist on
the Effective Date, between Dental Group and third parties.

     5.6  Use of Manager's Goods and Services.  Dental Group shall not use any
          -----------------------------------                                 
goods or services provided by Manager pursuant

                                      -13-
<PAGE>
 
to this Agreement for any purpose other than the provision of and management of
dental services as contemplated by this Agreement and purposes incidental
thereto.

     5.7  Negative Covenants.  During the Term, Dental Group shall not, without
          ------------------                                                   
the prior approval of the Joint Operations Committee, (a) assign, pledge,
mortgage or otherwise encumber any of its property, (b) transfer substantially
all of its assets, including its goodwill, (c) merge or consolidate with any
other entity, (d) allow the transfer or issuance of any of its stock (other than
in accordance with the terms and provisions of that certain Share Acquisition
Agreement dated June 19, 1997, between GMS Dental Group Management, Inc., a
Delaware corporation and Warren M. Francis, Jr., D.D.S.), or (e) take or allow
any act that would materially impair the ability of Dental Group to carry on the
business of the Practice or to fulfill its obligations under this Agreement.


                                   ARTICLE 6

                                     TERM
                                     ----

     6.1  Term.  This Agreement shall be effective as of June 19, 1997 (the
          ----                                                             
"Effective Date"), and shall remain in effect for an initial term of forty (40)
years from the Effective Date, expiring on the fortieth (40th) anniversary of
the Effective Date, unless earlier terminated pursuant to the terms of this
Agreement.  The word "Term" shall include such initial term and, where
applicable, any extension of such initial term (whether extended pursuant to
Section 6.2(a) or otherwise), subject to earlier termination pursuant to the
provisions of this Agreement.

     6.2  Termination and Extension.
          ------------------------- 

     (a)  Automatic Extension.  At the end of the initial term and any
          -------------------                                         
subsequent term, this Agreement shall automatically renewed for a five (5) year
term unless one of the parties provides the other party with written notice of
intent not to renew, not less than one hundred eighty (180) day prior to the
expiration of the then current term.

     (b)  Early Termination.  This Agreement may be terminated according to the
          -----------------                                                    
provisions of this Section.

          (i)  Material Breach.  In the event either party materially breaches
               ---------------                                                
     this Agreement and such breach is not cured to the reasonable satisfaction
     of the non-breaching party within thirty (30) days after the non-breaching
     party serves written notice of the default upon the defaulting party (the
     "Default Notice"), the Agreement shall automatically terminate at the 
     election of the non-breaching party upon the giving of a

                                      -14-
<PAGE>
 
     written notice of termination to the defaulting party not later than forty-
     five (45) days after service of the Default Notice; provided that if such
     uncured breach is only capable of being cured within a reasonable period
     of time in excess of thirty (30) days, the non-breaching party shall not be
     entitled to terminate this Agreement so long as the defaulting party has
     commenced such cure and thereafter diligently pursue such cure to
     completion.

          (ii)   Refusal To Comply.  In the event that Dental Group or Manager
                 -----------------                                            
     refuses or fails to comply with a decision of the Joint Operations
     Committee, the aggrieved party shall have the option to require the non-
     complying party to participate in good faith mediation under the auspices
     of the American Mediation Association, and if such dispute between Dental
     Group and Manager continues for sixty (60) days after the date the
     aggrieved party exercises its option regarding mediation, the non-
     complying party shall have thirty (30) days in which to comply with the
     decision of the Joint Operations Committee.  If the non-complying party has
     not complied by the end of such thirty (30) day period, the aggrieved party
     shall have the option to terminate this Agreement upon fifteen (15) days
     prior written notice.  During such mediation, Manager and Dental Group
     shall continue to operate and manage the Practice in good faith.  Neither
     Dental Group nor Manager shall be required to participate in such good
     faith mediation if it reasonably concludes that the delay associated with
     pursuing such mediation likely would cause harm or injury to it or the
     Practice.

          (iii)  Bankruptcy.  A party may, upon three (3) days' prior written
                 ----------                                                  
     notice, terminate this Agreement if the other party:

               (A)  Applies for or consents to the appointment of a receiver,
          trustee or liquidator of all or a substantial part of its assets,
          files a voluntary petition in bankruptcy or consents to an involuntary
          petition, makes a general assignment for the benefit of its
          creditors, files a petition or answer seeking reorganization or
          arrangement with its creditors, or admits in writing its inability to
          pay its debts when due, or

               (B)  Suffers any order, judgment or decree to be entered by any
          court of competent jurisdiction, adjudicating such party bankrupt or
          approving a petition seeking its reorganization or the appointment of
          a receiver, trustee or liquidator

                                      -15-
<PAGE>
 
          of such party or of all or a substantial part of its assets, and such
          order, judgment or decree continues unstayed and in effect for ninety
          (90) days after its entry.

          (iv)  Nonperformance.  Manager may terminate this Agreement in the
                --------------                                              
     event that in any two (2) consecutive fiscal quarters the Manager has not
     been paid the Management Fee and, in the sole discretion of the Manager, it
     is not reasonably likely that the Management Fee will be paid in the next
     fiscal quarter.  Any such termination shall be effective as of the last day
     of such third fiscal quarter provided at least ninety (90) days notice
     shall have been given; otherwise, such termination shall be effective on
     the sixtieth day after notice is given.

          (v)   Change in Law.  In the event of any material change in federal 
                -------------   
     or state law that has a significant adverse impact on either party hereto
     in connection with their performance under this Agreement, or if
     performance by a party of court or any duties under this Agreement be
     deemed illegal by any administrative agency or in a formal opinion rendered
     to Manager by legal counsel knowledgeable in health law matter retained by
     the Manager, the affected party shall have the right to require that the
     other party renegotiate the terms of this Agreement.  Unless the parties
     otherwise mutually agree in writing, such renegotiated terms shall be
     effective not later than twenty (20) days after receipt of written notice
     of such request for renegotiation.  Solely in the event of illegality, if
     the parties fail to reach an agreement within thirty (30) days of the
     request for renegotiation, either party may (subject to the severability
     provision of this Agreement) terminate this Agreement upon thirty (30)
     days' prior written notice to the other party.

     (c)  Effect of Termination.  Upon termination of this Agreement:
          ---------------------                                      

          (i)   Dental Group shall surrender to Manager all of Manager's
     property used primarily in the operation of the Practice in the same
     condition as received, reasonable wear and tear excepted.

          (ii)  Manager shall deliver to Dental Group all records related to the
     business of and provision of dental care through the Practice including,
     without limitation, patient records and any corporate, personnel and
     financial records maintained for the Practice and Providers, provided, that
     except as limited by law, including, but not limited to laws

                                      -16-
<PAGE>
 
     governing the confidentiality of patient records, Manager shall have the
     option to copy (or otherwise duplicate) at its sole cost and expense such
     records of Dental Group and to retain and utilize such records for its own
     use;

          (iii)  Manager shall deliver to Dental Group any other property of
     Dental Group in Manager's possession;

          (iv)   Both parties shall cooperate to ensure the provision of
     appropriate dental care to Group Patients and Beneficiaries;

          (v)    Dental Group shall promptly deliver to Manager any Revenues
     that it may receive in payment for dental services rendered by Dental Group
     prior to termination; and

          (vi)   Both parties shall cooperate to ensure the appropriate billing
     and collections for dental services rendered by Dental Group prior to the
     effective date of termination, and any such cash collected shall be
     retained by Dental Group and/or paid to Manager pursuant to Article 8.

     (d)  Manager's Option.  Upon the termination of this Agreement pursuant to
          ----------------                                                      
Section 6.2(b), Manager shall have the option exercisable within one hundred
eighty (180) days after the effective date of termination to require Dental
Group to:  (i) assume the accounts payable and other liabilities and obligations
under facilities leases, equipment leases and other contracts, and (ii) purchase
the accounts receivable, inventories and supplies, furniture, fixtures and
equipment, leasehold improvements and intangible assets, in each case which
relate solely to the performance by Manager of its obligations under this
Agreement, at their respective fair market values.  The fair market value of the
assumed liabilities and acquired assets shall be determined in each case based
upon their respective book values as reflected on the books and records of
Manager in accordance with GAAP, except that the fair market value of equipment
shall be the greater of its book value as so determined or its appraised value
as determined in good faith by a reputable appraiser selected by Manager.  The
consideration to be paid by Dental Group shall consist of (A) the amount of the
liabilities assumed by Dental Group in the transaction as valued based on their
book values, and (B) cash for the balance.  Dental Group shall indemnify and
hold harmless Manager from and against and to the extent practicable arrange for
the release of Manager from any and all labilities and obligations assumed by
Dental Group.  The option shall be exercisable by Manager by giving written
notice to Dental Group.  If Manager exercises its option pursuant to this
Section prior to the effective date of termination of this Agreement, then the
effective date of termi-

                                      -17-
<PAGE>
 
nation of this Agreement shall be continued until the closing date of the
acquisition transaction provided for under this Section.  The closing of the
transaction shall take place at the principal office of Manager not more than
thirty (30) days following the exercise of the option by Manager.


                                   ARTICLE 7

                 REPRESENTATIONS AND WARRANTIES OF DENTAL GROUP
                 ----------------------------------------------

     Dental Group hereby represents and warrants to Manager as of the date
hereof as follows:

     7.1  Organization.  Dental Group is a professional corporation duly
          ------------                                                   
organized, validly existing and in good standing under the laws of the State of
California.  Dental Group does not need to be qualified in any jurisdiction
other than where it is currently qualified except where the failure to be so
qualified will not have a material adverse effect on Dental Group.  Dental Group
has all requisite power to own, lease and operate its properties and assets, and
to carry on its business as presently conducted.  Complete and correct copies of
the Articles of Incorporation and Bylaws of Dental Group have been delivered to
the Manager.  Such copies are true, correct, complete and properly executed and
contain all amendments through the date of this Agreement.

     7.2  Capitalization.  The authorized capital stock of Dental Group consists
          --------------                                                        
of 1,000 shares of Common Stock, of which 100 shares are issued and outstanding
and owned of record and beneficially by Warren M. Francis, Jr., D.D.S.

     7.3  Subsidiaries; Conduct of Business.  The sole activity of Dental Group
          ---------------------------------                                    
is the operation of dental care centers and ancillary activities associated
therewith, and Dental Group is not now and has not engaged in any other
activities of any nature.  Dental Group has no subsidiaries, nor any long-term
or short-term investments in, nor ownership of securities of, any business,
corporation, partnership, enterprise, entity or organization, public or private.

     7.4  Authority.  Dental Group has all requisite power and authority to
          ---------                                                        
enter into this Agreement and to consummate the transactions contemplated
hereby.  The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary action on the part of Dental Group.  This Agreement has been duly
executed and delivered by Dental Group and constitutes a valid and binding
obligation of Dental Group, enforceable in accordance with its terms, subject to
the effect of applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance, moratorium or other similar federal or state laws affecting the
rights of creditors and the effect or availability of rules of

                                      -18-
<PAGE>
 
law governing specific performance, injunctive relief or other equitable
remedies (regardless of whether any such remedy is considered in a proceeding at
law or in equity).

     No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or commission or
other governmental authority or instrumentality is required by or with respect
to Dental Group in connection with the execution and delivery of this Agreement
by Dental Group or the consummation by Dental Group of the transactions
contemplated hereby.

     7.5  No Conflict.  The execution, delivery and performance of this
          -----------                                                  
Agreement by Dental Group and the consummation of the transactions contemplated
hereby and the conduct of the business of Dental Group as currently conducted
will not result in any violation of, be in conflict with, or constitute a
default or give rise to a right of termination, cancellation or acceleration
under any provision of (a) any judgment, decree or order or any material
agreement, contract, understanding, indenture or other instrument to which
Dental Group is a party or by which it is bound; or (b) any statute, rule or
governmental regulation applicable to Dental Group.

     7.6  Providers.  A list of all agreements between Dental Group and
          ---------                                                    
dentists, nurses, hygienists, and other dental care Providers are set forth on
the schedule delivered by Dental Group to Manager concurrently with the
execution hereof.  The Providers have all necessary credentials, licenses and
permits required for the work performed for Dental Group.  All Providers carry
malpractice insurance in amounts adequate for their per formance of services for
Dental Group.


                                   ARTICLE 8

                                MANAGEMENT FEE
                                --------------

     For its services hereunder, which shall include the providing of all
facilities and furniture, fixtures and equipment at the Practice, all non-
dentist employees of Manager who perform services at or for the Practice and all
management services provided hereunder but shall not include providing
professional dental services, Manager shall retain as a management fee
(collectively, the "Management Fee")  the following:

     8.1  Base Management Fee.  As a base management fee (the "Base Management
          -------------------                                                 
Fee") Manager shall retain that portion of Revenues equal to the sum of the
amount of Manager's Costs plus [*] percent ([*]%) of Revenues.

     8.2  Performance Management Fee.  As a bonus for meeting performance
          --------------------------                                     
standards goals as set by the Joint Operations Committee, Manager shall be
eligible for a Performance Manage-

__________
[*] Confidential Treatment Requested.

                                      -19-
<PAGE>
 
ment Bonus that is calculated in accordance with the applicable exhibit to the
Annual Budget.

     8.3  Adjustments.  If there are not sufficient funds to pay the Base
          -----------                                                    
Management Fee, all unpaid amounts shall accumulate and carry over until paid or
until the termination of this Agreement, in which case such unpaid amounts
shall be immediately due and payable as of the date of termination.

     8.4  Priorities.  Notwithstanding anything to the contrary contained in
          ----------                                                        
this Article 8, the Dental Expenses shall be paid prior to the payment of the
Base Management Fee or Performance Management Fee.  In addition, any accruals
pursuant to Section 8.3 will be eliminated prior to the payment of any
Performance Management Fee.

     8.5  Reasonable Value.  Payment of the Base Management Fee and the
          ----------------                                             
Performance Management Fee is acknowledged as the parties' negotiated agreement
as to the reasonable fair market value of the services furnished by Manager
pursuant to this Agreement, considering the nature and volume of the services
required and risks assumed by Manager.


                                   ARTICLE 9

                            INDEMNITY AND INSURANCE
                            -----------------------

     9.1  Indemnity.
          --------- 

     (a)  Indemnification.  Each party shall indemnify, defend and hold harmless
          ---------------                                                       
the other party from any and all liability, loss, claim, lawsuit, injury, cost,
damage or expense whatsoever (including reasonable attorneys' fees and court
costs) arising out of, incident to or in any manner occasioned by the 
performance or nonperformance of any duty or responsibility under this Agreement
by such indemnifying party, or any of their employees, agents, contractors or
subcontractors; provided, however, that neither party shall be liable to the
other party hereunder for any claim covered by insurance, except to the extent
that the liability of such party exceeds the amount of such insurance coverage.
Specifically, and without limiting the generality of the foregoing, Dental Group
agrees to indemnify, defend and hold harmless Manager for all liability, loss,
claim, lawsuit, injury, cost, damage or expense whatsoever (including reasonable
attorneys' fees and court costs) arising out of the professional negligence of
Dental Group, its employees, agents, contractors or subcontractors, including
any amounts in excess of the professional liability insurance coverage of Dental
Group or its employees, agents, contractors or subcontractors.

     (b)  Mutual Indemnity.  Each party to this Agreement shall be indemnified
          ----------------                                                    
by the other party for any claim under this Agreement or otherwise against the
indemnified party for vaca-

                                      -20-
<PAGE>
 
tion pay, sick leave, retirement benefits, Social Security benefits, workers'
compensation benefits, disability or unemployment, insurance benefits, or other
employee benefits of any kind accrued during the term of this Agreement by an
employee of the indemnifying party.

     9.2  Manager's Insurance.  Manager shall, on its own behalf and at its sole
          -------------------                                                   
cost and expense, procure and maintain in force during the term of this
Agreement policies in the following categories in the amount indicated:

     (a)  Comprehensive general liability insurance covering the risks of
Manager, in an amount determined by the Joint Operations Committee;

     (b)  Workers' compensation insurance covering the employees of Manager, in
such amounts as is usual and customary under the circumstances;

     (c)  Property insurance covering the facilities, equipment and supplies
owned or leased by Manager or Dental Group for use in the operation of the
Practice.

     9.3  Dental Group's Insurance.  At Dental Group's sole cost and expense,
          ------------------------                                           
Manager shall obtain, and maintain on behalf of Dental Group in full force and
effect during the Term, policies in the following categories in the amount
indicated:

     (a)  Comprehensive professional liability insurance coverage for Dental
Group and Dental Group's Employee Providers, in such amounts as Manager shall
reasonably deem necessary;

     (b)  Workers' compensation insurance covering the employees of Dental
Group, in such amounts as is usual and customary under the circumstances;

     (c)  Comprehensive general liability insurance covering the risks of Dental
Group, in an amount determined by the Joint Operations Committee.


                                   ARTICLE 10

                 PROPRIETARY INFORMATION AND UNFAIR COMPETITION
                 ----------------------------------------------

     10.1  Protection of Proprietary Information.  Dental Group recognizes that
           -------------------------------------                               
due to the nature of this Agreement, Dental Group will have access to trade
secrets and other confidential information of a proprietary nature owned by
Manager ("Proprietary Information").  "Proprietary Information" includes all
information and any idea which a reasonable person would believe is
confidential, in whatever form, tangible or intangible, pertaining in any
manner to the business of Manager or any subsidiary or affiliate of Manager,
unless (a) the information is or

                                      -21-
<PAGE>
 
becomes publicly known through lawful means, (b) the information was rightfully
in Dental Group's possession or part of its general knowledge prior to the
Effective Date or (c) the information is subsequently disclosed to Dental Group
by a third party without breach of this Agreement and without restriction on its
use.  Proprietary Information includes, but is not limited to, any and all
computer programs (whether or not completed or in use) and any and all
operating manuals or similar materials which constitute the non-medical systems,
policies and procedures, and methods of doing business developed by or for the
operation of facilities managed by Manager.  Dental Group acknowledges and
agrees that Manager has a proprietary interest in all such Proprietary
Information and that all such information constitutes confidential and
proprietary information and is the trade secret property of Manager.  Dental
Group hereby waives any and all right, title and interest in and to such
Proprietary Information and agrees to return all copies thereof and Proprietary
Information related thereto to Manager, at Dental Group's expense, upon the
termination of this Agreement.

     Dental Group further acknowledges and agrees that Manager is entitled to
prevent its competitors from obtaining and utilizing its Proprietary
Information.  Therefore, Dental Group agrees to hold Manager's Proprietary
Information in strictest confidence and not to disclose it or allow it to be
disclosed, directly or indirectly, to any person or entity other than those
persons or entities who are employed by or affiliated with Manager or Dental
Group, without the prior written consent of Manager.  Dental Group shall not,
either during the term of this Agreement, or at any time after the expiration or
earlier termination of this Agreement, disclose to anyone other than persons or
entities who are employed by or affiliated with Manager or Dental Group any
Proprietary Information obtained by Dental Group from Manager, except as
otherwise required by law.

     10.2  Restrictions on Unfair Competition.  Dental Group agrees that during
           ----------------------------------                                  
the term of this Agreement and for a period of two (2) years after termination
of this Agreement Dental Group shall not (a) solicit in any way on behalf of
itself or in conjunction with others for the purpose of providing management
services any dental group being managed by or being or having been solicited by
Manager or any subsidiary, affiliate or successor in interest thereof, and (b)
solicit in any way or make offers of employment to, on behalf of itself or in
conjunction with others, any person employed by Manager or any subsidiary,
affiliate or successor in interest thereof.  Dental Group acknowledges and
agrees that these restrictions are reasonable and necessary to protect Manager's
Proprietary Information and to ensure that it will not be subject to unfair
competition.

     10.3  Enforcement.  Dental Group agrees to require each independent
           -----------                                                  
contractor and employee of the Dental Group, and any persons or entities to whom
such Proprietary Information is disclosed for the purpose of performance of
Manager's or Dental

                                      -22-
<PAGE>
 
Group's obligations under this Agreement, to execute a proprietary information
agreement in the form supplied by or approved by Manager pursuant to which they
agree to abide by the restrictions on Dental Group's activities set forth in
this Article 10.  Dental Group acknowledges and agrees that a breach of the
provisions of this Article 10 will result in irreparable harm to Manager which
cannot be reasonably or adequately compensated in damages, and therefore Manager
shall be entitled to injunctive and/or equitable relief to prevent a breach and
to secure enforcement thereof, in addition to any of the relief or award to
which Manager may be entitled.


                                  ARTICLE 11

                               BOOKS AND RECORDS
                               -----------------

     11.1  Ownership of Records.  All business records and information relating
           --------------------                                                
exclusively to the business and activities of either party shall be the property
of that party, irrespective of identity of the party responsible for producing
or maintaining such records and information.  Without limiting the foregoing,
all patient charts and records maintained by Manager relating to the dental
services of Dental Group shall be the property of Dental Group.  Dental Group
also shall be entitled to a copy at Dental Group's sole cost of all business
records pertaining to Dental Group.  Except as limited by law, including, but
not limited to laws governing the confidentiality of patient records, Manager
shall be entitled to a copy at Manager's sole cost of all records of Dental
Group.


                                   ARTICLE 12

                            MISCELLANEOUS PROVISIONS
                            ------------------------

     12.1  Assignment.  Neither party shall assign this Agreement to any other
           ----------                                                          
party or parties without the prior written consent of the other party, which
consent may be withheld arbitrarily or capriciously, for any reason or for no
reason whatsoever and any attempted assignment in violation of this Agreement
shall be null and void provided, however, that Dental Group hereby consents in
advance to the assignment by Manager of this agreement to GMS Dental Group, Inc.
("Company") or any affiliate of Company, and to the assignment of this agreement
for the purpose of securing any and all obligations arising in connection with
the extension of credit to Company or any affiliate of Company, including,
without limitation, those obligations arising under that certain Credit
Agreement between Company and Imperial Bank dated October 10, 1996, and that
certain Security Agreement referenced therein (the "Loan Documents"), and Dental
Group hereby agrees that (a) upon receipt of a notice from the Agent that a
"Default" or an "Event of Default" under the Loan Documents has occurred, Dental
Group

                                      -23-
<PAGE>
 
will make all payments required to be made under this Agreement directly to the
Agent and the Agent shall be entitled to exercise any and all rights and
remedies of Manager under this Agreement and (b) Dental Group will not, without
the prior written consent of the Agent, terminate (except pursuant to the terms
thereof) or amend or otherwise modify this Agreement.

     12.2  Headings.  The article and section headings used in this Agreement
           --------                                                          
are for purposes of convenience only.  They shall not be construed to limit or
to extend the meaning of any part of this Agreement.

     12.3  Waiver.  Waiver by either Dental Group or Manager of any breach of
           ------                                                            
any provision of this Agreement shall not be deemed to be a waiver of such
provision or of any subsequent breach of the same or of any other provision of
this Agreement.

     12.4  Notices.  Any notice, demand, approval, consent, or other
           -------                                                  
communication required or desired to be given under this Agreement in writing
shall be personally served or given by overnight express carrier or by mail, and
if mailed, shall be deemed to have been given when five (5) business days have
elapsed from the date of deposit in the United States mails, certified and
postage prepaid, addressed to the party to be served at the following address or
such other address as may be given in writing to the parties.

     Dental Group:       Francis Dental Corporation
                         42 Doctors Park Drive
                         Santa Rosa, CA 95405
                         Attn:  President

     Manager:            Warren M. Francis, Jr. D.D.S., Inc.
                         42 Doctor's Park Drive
                         Santa Rosa, CA  95405
                         Attn:  President

     12.5  Attorneys' Fees.  If any legal action, arbitration, mediation or
           ---------------                                                 
other proceeding is commenced, whether by Manager or Dental Group concerning
this Agreement, the prevailing party shall recover from the losing party
reasonable attorneys' fees and costs and expenses, including those of appeal and
not limited to taxable costs, incurred by the prevailing party, in addition to
all other remedies to which the prevailing party may be entitled.  If a claim or
claims asserted by a third party against Manager or Dental Group or any of them
arise from an action or omission by the other, the party responsible for the
action or omission shall be the losing party, and the other party shall be the
prevailing party, for purposes of the foregoing sentence.

     12.6  Successors.  Without limiting or otherwise affecting any restrictions
           ----------                                                           
on assignments of this Agreement or rights or duties under this Agreement, this
Agreement shall be binding

                                      -24-
<PAGE>
 
upon and inure to the benefit of the successors and assigns of Dental Group and
Manager.

     12.7  Entire Agreement.  This Agreement sets forth the entire agreement
           ----------------                                                 
between Dental Group and Manager and supersedes all prior negotiations and
agreements, written or oral, concerning or relating to the subject matter of
this Agreement, and this Agreement may not be modified except by a writing
executed by all parties and subject to the provisions thereof.

     12.8  Governing Law.  This Agreement and the rights and obligations of the
           -------------                                                       
parties hereto shall be governed by, and construed according to, the laws of the
State of California.

     12.9  Severability.  If any provision of this Agreement is held to be
           ------------                                                   
invalid or unenforceable by any court or administrative agency of competent
jurisdiction, or in a written opinion to the Manager by legal counsel
knowledgeable in health law matters retained by the Manager, such holding or
opinion shall not affect the validity and enforceability of the other provisions
of this Agreement and the remainder of this Agreement shall be considered valid
and operative to the fullest extent permitted by law, but only if and to the
extent such enforcement would not materially and adversely frustrate the parties
essential objectives as expressed herein.

     12.10  Time is of the Essence.  Time is of the essence in this Agreement.
            ----------------------                                            

     12.11  Authority.  Any Person signing this Agreement on behalf of any
            ---------                                                     
entity hereby represents and warrants in its individual capacity that it has
full authority to do so on behalf of such entity.

     12.12  Counterparts.  This Agreement may be executed in two (2) or more
            ------------                                                    
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute on and the same instrument.

     IN WITNESS WHEREOF, Dental Group and Manager have caused their authorized
representatives to execute this Agreement on the date first above written.

                                  DENTAL GROUP
                                  ------------

                                  FRANCIS DENTAL CORPORATION, a California
                                  professional dental corporation



                                  By   /s/ Warren M. Francis, Jr.
                                     -------------------------------------
                                     Warren M. Francis, President

                                      -25-
<PAGE>
 
                                  MANAGER
                                  -------

                                  WARREN M. FRANCIS, JR. D.D.S., INC.  
                                  a California professional corporation



                                  By   /s/ Warren M Francis, Jr.
                                     -------------------------------------
                                      Warren M. Francis, President

                                      -26-
<PAGE>
 
                                  ADDENDUM 1
                                  ----------


     For purposes of this Agreement, the following terms shall have the meaning
indicated below or defined at the indicated section:

     1.  Accounts.  See Section 2.5(a).
         --------                      

     2.  Affiliate.  "Affiliate" shall mean, with respect to any Person,  any
         ---------                                                           
individual or entity directly or indirectly owned or controlled by such Person,
any individual or entity directly or indirectly owning or controlling such
Person or  any individual or entity directly or indirectly owned or controlled
by the same family member, individual or entity as owns or controls such Person.
For purposes of this Agreement, neither Dental Group nor Manager shall be deemed
an Affiliate of the other.

     3.  Agreement.  "Agreement" means this Dental Group Management Agreement.
         ---------                                                            

     4.  Annual Budget.  See Section 3.6, first sentence.
         -------------                                   

     5.  Beneficiaries.  See Recital C.
         -------------                 

     6.  Books and Records.  "Books and Records" means Dental Group's books of
         -----------------                                                    
account, accounting and financial records and all other records relating to and
used in the conduct of Manager's duties hereunder and also used in the
preparation of reports and financial statements.  The books and records at all
times shall be correct and complete and contain correct and timely entries made
with respect to transactions entered into pursuant hereto in accordance with
GAAP.

     7.  Capital Costs.  "Capital Costs" shall mean any and all investments that
         -------------                                                          
are or would be capitalized pursuant to GAAP.

     8.  Committee Members.  See Section 3.5(a).
         -----------------                      

     9.  Default Notice.  See Section 6.2(b)(1).
         --------------                         

     10.  Dental Group.  See first paragraph of this Agreement.
          ------------                                         

     11.  Dental Group Members.  See Section 3.5(a).
          --------------------                      

     12.  Dental Expenses.  See Section 2.6(b).
          ---------------                      

     13.  Effective Date.  See Section 6.1.
          --------------                   

     14.  Employee Providers.  See Recital D.
          ------------------                 

     15.  Employment Agreements.  See Recital D.
          ---------------------                 

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<PAGE>
 
     16.  GAAP.  "GAAP" means at any particular time generally accepted
          ----                                                         
accounting principles as in effect at such time.  Any accounting term used in
this Agreement shall have, unless otherwise specifically provided herein, the
meaning customarily given in accordance with GAAP, and all financial
computations hereunder shall be computed unless otherwise specifically provided
herein, in accordance with GAAP as consistently applied and using the same
method of valuation as used in the preparation of Manager's financial
statements.

     17.  Group Patients.  See Recital C.
          --------------                 

     18.  Joint Operations Committee.  See Section 3.4(b).
          --------------------------                      

     19.  Management Fee.  See Article 8.
          --------------                 

     20.  Manager.  See first paragraph of this Agreement.
          -------                                         

     21.  Manager Members.  See Section 3.5(a).
          ---------------                      

     22.  Manager's Costs.  "Manager's Costs" means all costs incurred by
          ---------------                                                
Manager including amortization associated with costs of acquiring assets of the
Dental Group or covering operations and Capital Costs, direct labor costs,
supplies, direct overhead and indirect overhead expense attributable to the
management and operation of the Practice and direct and indirect corporate
overhead of Manager including all interest expense and other expenses which are
attributable to Manager's business operations in accordance with Manager's
corporate allocation policies.

     23.  Marks.  See Section 2.3(a).
          -----                      

     24.  Payor Contracts.  See Recital C.
          ---------------                 

     25.  Person.  "Person" shall mean any natural person, corporation,
          ------                                                       
partnership or other business structure recognized as a separate legal entity.

     26.  Plans.  See Recital C.
          -----                 

     27.  Practice.  See Recital E.
          --------                 

     28.  Preliminary Budget.  See Section 3.7(b).
          ------------------                      

     29.  Programs.  See Section 2.3(b).
          --------                      

     30.  Proprietary Information.  See Section 10.1.
          -----------------------                    

     31.  Providers.  "Providers" shall mean individuals or organizations
          ---------                                                      
licensed to practice dentistry (including specialists) as well as other dental
professionals who provide ancillary reimbursable dental services.

     32.  Provider Subcontracts.  See Recital D.
          ---------------------                 

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<PAGE>
 
     33.  Revenues.  "Revenues"  means all amounts assigned hereunder by Dental
          --------                                                             
Group to Manager pursuant to Section 2.6(a).

     34.  Subcontract Providers.  See Recital D.
          ---------------------                 

     35.  Term.  See Section 6.1.
          ----                   

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