<PAGE>
 
                                                                   EXHIBIT 10.12

                             GMS DENTAL GROUP, INC.
                       1996 PERFORMANCE STOCK OPTION PLAN

                        NOTICE OF GRANT OF STOCK OPTION
                        -------------------------------

          Notice is hereby given of the following option grant (the "Option") to
purchase Shares of Stock of GMS Dental Group, Inc., a Delaware corporation (the
"Company"):
 
          Optionee:        Michael T. Fiore
          --------              

          Grant Date:      April 1, 1997
          ----------              

          Vesting Commencement Date:  April 1, 1997
          -------------------------

          Exercise Price:  $.20 per share
          --------------

          Number of Option Shares:  75,000 shares
          -----------------------

          Expiration Date: March 31, 2001
          ---------------

          Type of Option:   X  Incentive Stock Option
          --------------   ---            

                               Non-Statutory Stock Option
                           ---

          Date Exercisable:  Immediately Exercisable
          ----------------                          

          Vesting Schedule:  The Option Shares shall be unvested and subject to
          ----------------                                                     
          repurchase by the Company at the Exercise Price paid per share.
          Optionee shall acquire a vested interest in, and the Company's
          repurchase right shall accordingly lapse with respect to the Option
          Shares in accordance with the financial performance objectives and
          vesting schedule set forth in Schedule 1 to Exhibit A hereto.  In no
                                        ----------    ---------               
          event shall any additional Option Shares vest after Optionee's
          cessation of Service.

          Optionee understands and agrees that the Option is granted subject to
and in accordance with the terms of the GMS Dental Group, Inc. 1996 Performance
Stock Option Plan (the "Plan").  Optionee further agrees to be bound by the
terms of the Plan and the terms of the Option as set forth in the Incentive
Stock Option Agreement attached hereto as Exhibit A.  Optionee hereby
                                          ---------                  
acknowledges receipt of a copy of the Plan in the form attached hereto as
                                                                         
Exhibit B.
--------- 

                                       1
<PAGE>
 
          REPURCHASE RIGHTS.  OPTIONEE HEREBY AGREES THAT ALL OPTION SHARES
          -----------------                                                
ACQUIRED UPON THE EXERCISE OF THE OPTION SHALL BE SUBJECT TO CERTAIN REPURCHASE
RIGHTS EXERCISABLE BY THE COMPANY AND ITS ASSIGNS.  THE TERMS OF SUCH RIGHTS ARE
SPECIFIED IN THE INCENTIVE STOCK OPTION AGREEMENT ATTACHED HERETO AS EXHIBIT A.
                                                                     --------- 


          No Employment or Service Contract.  Nothing in this Notice or in the
          ---------------------------------                                   
attached Stock Option Agreement or Plan shall confer upon Optionee any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Company (or any Subsidiary
employing or retaining Optionee) or of Optionee, which rights are hereby
expressly reserved by each, to terminate Optionee's Service at any time for any
reason, with or without cause.  All rights to terminate Optionee 's Service
shall be as set forth in that certain offer of employment letter between the
Company and Optionee, dated February 26, 1997, as may be amended or superseded.

          Definitions.  All capitalized terms in this Notice shall have the
          -----------                                                      
meaning assigned to them in this Notice or in the attached Performance Stock
Option Agreement.

Dated:  April 1, 1997

                         GMS DENTAL GROUP, INC.


                         By: /s/ Grant M. Sadler
                            -------------------------------
                            Grant M. Sadler

                         Its: Chairman of the Board of Directors


                         MICHAEL T. FIORE, OPTIONEE


                         By: /s/ Michael T. Fiore
                            ------------------------
                            Michael T. Fiore

                         Address:
                                 --------------------------

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

ATTACHMENTS
-----------

Exhibit A - Stock Option Agreement
Exhibit B - 1996 Performance Stock Option Plan

                                       2
<PAGE>
 
                                   EXHIBIT A
                                   ---------

                       INCENTIVE STOCK OPTION AGREEMENT
                       --------------------------------
<PAGE>
 
                            GMS DENTAL GROUP, INC.
                      1996 PERFORMANCE STOCK OPTION PLAN

                       INCENTIVE STOCK OPTION AGREEMENT



INCENTIVE STOCK         This option is intended to be an incentive stock option
OPTION                  under Section 422 of the Internal Revenue Code and will
                        be interpreted accordingly.

VESTING                 The Option Shares shall be unvested and subject to
                        repurchase by the Company at the Exercise Price paid per
                        share. Optionee shall acquire a vested interest in, and
                        the Company's repurchase right shall accordingly lapse
                        with respect to the Option Shares in accordance with the
                        financial performance objectives and vesting schedule
                        set forth in Schedule 1 hereto. In no event shall any
                        additional Option Shares vest after Optionee's cessation
                        of Service.

TERM                    Your option will expire in any event at the close of
                        business at Company headquarters on the day before the
                        5th anniversary of the Date of Grant, as shown on the
                        cover sheet. (It will expire earlier if your Company
                        service terminates, as described below.)

REGULAR                 If your service as an employee of the Company (or any
TERMINATION             subsidiary) terminates for any reason except death or
                        Disability, then your Option will expire at the close of
                        business at Company headquarters no less than 30 days
                        after your termination date.

DEATH                   If you die as an employee of the Company (or any
                        subsidiary), then your Option will expire at the close
                        of business at Company headquarters on a day not less
                        than 6 months after the date of death. During the 6-
                        month period, your estate or heirs may exercise the
                        vested portion of your option.

DISABILITY              If your service as an employee of the Company (or any
                        subsidiary) terminates because of your Disability, then
                        your Option will expire at the close of business at the
                        Company headquarters on the day not less than 6 months
                        after your termination date.

                                      A-1
<PAGE>
 
LEAVES OF ABSENCE       For purposes of this Option, your status as an Employee
                        does not terminate when you go on a military leave, a
                        sick leave or another bona fide leave of absence that
                        was approved by the Company in writing if the terms of
                        the leave provide for continued service crediting, or
                        when continued service crediting is required by
                        applicable law. Your status as an Employee terminates in
                        any event when the approved leave ends, unless you
                        immediately return to active work.
 
                        The Company determines which leaves count for this
                        purpose, whether your option continues to vest during a
                        leave and when your service terminates for all purposes
                        under the Plan.

NOTICE OF EXERCISE      When you wish to exercise this Option, you must notify
                        the Company by filing the proper "Notice of Exercise"
                        form at the address given on the form. The Company may
                        prescribe a minimum number of shares of Common Stock
                        which may be purchased. Your notice must specify how
                        many shares of Common Stock you with to purchase. Your
                        notice must also specify how your Common Stock should be
                        registered (in your name only or in your and your
                        spouse's names as community property or as joint tenants
                        with right of survivorship). The notice will be
                        effective when it is received by the Company.
 
                        If someone else wants to exercise this option after your
                        death, that person must prove tot he Company's
                        satisfaction that he or she is entitled to do so.

RESTRICTIONS ON         The Company will not permit you to exercise this Option
EXERCISE                if the issuance of Common stock at that time would
                        violate any law or regulation.

                                      A-2
<PAGE>
 
PERIODS OF              Any other provision of this Agreement notwithstanding,
NONEXERCISABILITY       the Company shall have the right to designate one or
                        more periods of time, each of which shall not exceed 180
                        days in length, during which this Option shall not be
                        exercisable if the Company determines (in its sole
                        discretion) that such limitation on exercise could in
                        any way facilitate a lessening of any restriction on
                        transfer pursuant to the Securities Act of 1933 (the
                        "Securities Act") or any state securities laws with
                        respect to any issuance of securities by the Company,
                        facilitate the registration or qualification of any
                        securities by the Company under the Securities Act or
                        any state securities laws, or facilitate the perfection
                        of any exemption from the registration or qualification
                        requirements of the Securities Act or any applicable
                        state securities laws for the issuance or transfer of
                        any securities. Such limitation on exercise shall not
                        alter the vesting schedule set forth in this Agreement
                        other than to limit the periods during which this option
                        shall be exercisable.

*FORM OF PAYMENT        When you submit your notice of exercise, you must
                        include payment of the option exercise price for the
                        Shares you are purchasing. Payment may be made in one
                        (or a combination) of the following forms:
 
                        .  Your personal check, a cashier's check or a money
                           order.
                        .  Common Shares which have already been owned by you
                           for any time period specified by the Committee and
                           which are surrendered to the Company. The value of
                           the Shares, determined as of the effective date of
                           the option exercise, will be applied to the option
                           price.
 
                        .  To the extent that a public market for the Shares
                           exists as determined by the Company, by delivery (on
                           a form prescribed by the Committee) of an irrevocable
                           direction to a securities broker to sell Shares and
                           to deliver all or part of the sale proceeds to the
                           Company in payment of the aggregate Exercise Price.

WITHHOLDING TAXES       You will not be allowed to exercise this option unless
                        you make acceptable arrangements to pay any withholding
                        or other taxes that may be due as a result of the option
                        exercise or the sale of shares acquired upon exercise of
                        this option and the sale of the shares.

                                      A-3
<PAGE>
 
RESTRICTIONS ON         By signing this Agreement, you agree not to sell any
RESALE                  option Shares at a tine when applicable laws,
                        regulations or Company or underwriter trading policies
                        prohibit a sale.
 
                        You represent and agree that the Shares to be acquired
                        upon exercising this option will be acquired for
                        investment, and not with a view to the sale or
                        distribution thereof.
 
                        In the event that the sale of Share under the Plan is
                        not registered under the Securities Act of 1933, as
                        amended, but an exemption is available which requires an
                        investment representation or other representation, you
                        shall represent and agree at the time of exercise that
                        the Shares being acquired upon exercising this option
                        are being acquired for investment, and not with a view
                        to the sale or distribution thereof, and shall make such
                        other representations as are deemed necessary or
                        appropriate by the Company and its counsel.

THE COMPANY'S           In the event that you propose to sell, pledge or
RIGHT OF FIRST          otherwise transfer to a third party any Shares acquired
REFUSAL                 under this Agreement, or any interest in such Shares,
                        the Company shall have the "Right of First Refusal" with
                        respect to all (and not less than all) of such Shares.
                        If you desire to transfer Shares acquired under this
                        Agreement, you must give a written "Transfer Notice" to
                        the Company describing fully the proposed transfer,
                        including the number of Shares proposed to be
                        transferred, the proposed transfer price and the name
                        and address of the proposed transferee. The Transfer
                        Notice shall be signed both by you and by the proposed
                        new transferee and must constitute a binding commitment
                        of both parties to the transfer of the Shares. The
                        Company shall have the right to purchase all, and not
                        less than all, of the Shares on the terms of the
                        proposal described in the Transfer Notice (subject,
                        however, to any change in such terms permitted in the
                        next paragraph) by delivery of a notice of exercise of
                        the Right of First Refusal within 30 days after the date
                        when the Transfer Notice was received by the Company.
                        The Company's rights under this Subsection shall be
                        freely assignable, in whole or in part.

                                      A-4
<PAGE>
 

                        If the Company fails to exercise is Right of First
                        Refusal within 30 days after the date when it received
                        the Transfer Notice, you may, not later than 90 days
                        following receipt of the Transfer Notice by the Company,
                        conclude a transfer of the Shares subject to the
                        Transfer Notice on the terms and conditions described in
                        the Transfer Notice. Any proposed transfer on terms and
                        conditions different form those described in the
                        Transfer Notice, as well as any subsequent proposed
                        transfer by you, shall again be subject to the Right of
                        First Refusal and shall require compliance with the
                        procedure described in the paragraph above. If the
                        Company exercises its Right of First Refusal, the
                        parties shall consummate the sale of the Shares on the
                        terms set forth in the Transfer Notice within 60 days
                        after the date when the Company received the Transfer
                        Notice (or within such longer period as may have been
                        specified in the Transfer Notice); provided, however,
                        that in the event the Transfer Notice provided that
                        payment for the Shares was to be made in a form other
                        than lawful money paid at the time of transfer, the
                        Company shall have the option of paying for the Share
                        with lawful money equal to the present value of the
                        consideration described in the Transfer Notice.*

                        The Company's Right of First Refusal shall inure to the
                        benefit of its successors and assigns and shall be
                        binding upon any transferee of the shares.
 
                        The Company's Right of First Refusal shall terminate in
                        the event that Stock is listed on an established stock
                        exchange or is quoted regularly on the Nasdaq National
                        Market.

RIGHT OF                At any time following the Company's failure to achieve
REPURCHASE              the performance objectives set forth on Schedule 1 or
                        following termination of your employment for any reason,
                        the Company shall have the right to repurchase all of
                        those Option Shares that you have or will acquire under
                        this Option. If the Company fails to provide you with
                        written notice of its intention to purchase such shares
                        before or within 30 days of the date the Company
                        receives written notice from you of your termination of
                        employment, the Company's right to purchase such shares
                        shall terminate. If the Company exercises its right to
                        purchase such shares, the Company will consummate the
                        purchase of such shares within 60 days of the date of
                        its written notice to you. The purchase price for any
                        shares repurchased shall be equal to the Exercise Price
                        for those shares ($.20 per share) and shall be paid in
                        cash.

                                      A-5
<PAGE>
 
TRANSFER OF OPTION      Prior to your death, only you may exercise this Option.
                        You cannot transfer or assign this Option. For instance,
                        you may not sell this option or use it as security for a
                        loan. If you attempt to do any of these things, this
                        Option will immediately become invalid. You may,
                        however, dispose of this Option in your will or
                        designate a beneficiary.
 
                        Regardless of any marital property settlement agreement,
                        the Company is not obligated to honor a notice of
                        exercise from your spouse or former spouse, nor is the
                        Company obligated to recognize such individual's
                        interest in your Option in any other way.

RETENTION RIGHTS        Neither your Option or this Agreement do not give you
                        the right to be retained by the Company (or any
                        subsidiaries) in any capacity. The Company (and any
                        subsidiaries) reserve the right to terminate your
                        service at any time for any reason.

SHAREHOLDER RIGHTS      you, or your estate or heirs, have no rights as a
                        shareholder of the Company until a certificate for the
                        shares of Common stock acquired upon exercise of this
                        Option has been issued. No adjustments are made for
                        dividends or other rights if the applicable record date
                        occurs before your stock certificate is issued, except
                        as described in the Plan.

ADJUSTMENTS             On the event of a stock split, a stock dividend or a
                        similar change in the outstanding Common Stock of the
                        Company, the number of shares of Common Stock covered by
                        this Option and the exercise price per share may be
                        adjusted pursuant to the Plan. Your Option shall be
                        subject to the terms of the agreement of merger,
                        liquidation or reorganization in the event the Company
                        is subject to such corporate activity.

AMENDMENTS AND          This Agreement may be amended in writing signed by both
ADMINISTRATION          parties. The Committee shall have the sole discretion to
                        interpret and administer this Agreement and to adopt
                        rules and policies to administer and enforce this
                        Agreement.

                                      A-6
<PAGE>
 





LEGENDS                 All certificates representing the shares issued upon
                        exercise of this Option shall, where applicable, have
                        endorsed thereon the following legends:
 
                        "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
                        TO CERTAIN RESTRICTIONS ON TRANSFER AND OPTIONS TO
                        PURCHASE SUCH SHARES SET FORTH IN AN AGREEMENT BETWEEN
                        THE COMPANY AND THE REGISTERED HOLDER, OR HIS OR HER
                        PREDECESSOR IN INTEREST. A COPY OF SUCH AGREEMENT IS ON
                        FILE AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE
                        FURNISHED UPON WRITTEN REQUEST TO THE SECRETARY OF THE
                        COMPANY BY THE HOLDER OF RECORD OF THE SHARES
                        REPRESENTED BY THIS CERTIFICATE."
 
                        "THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN
                        REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
                        AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED
                        WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT
                        OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY
                        AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED."

APPLICABLE LAW          This Agreement will be interpreted and enforced under
                        the laws of the State of California.

THE PLAN AND            The text of the Plan is incorporated in this Agreement
OTHER AGREEMENTS        by reference. Certain capitalized terms used in this
                        Agreement are defined in the Plan.

ENTIRE AGREEMENT        This Agreement, that certain employment letter, dated
                        February 26, 1997, by and between you and the Company,
                        as amended or superseded from time to time, and the Plan
                        constitute the entire understanding between you and the
                        Company regarding this Option and the Option Shares. Any
                        prior agreements, commitments or negotiations concerning
                        this Option or the Option Shares are superseded.

     By signing the cover sheet of this Agreement, you agree to all of the terms
     and conditions described above and in the Plan.

                                      A-7
<PAGE>
 
                                  SCHEDULE 1
                                  ----------

                       Financial Performance Objectives


          The Repurchase Right as to the Option Shares subject to vesting based
on financial performance objectives (the "Performance Objectives") will expire
in 1997 with respect to up to one-half ( 1/2) of the Option Shares (the "Initial
Amount") and in 1998 with respect to the remaining half of the Option Shares
(the "Second Amount"), but only if the following conditions are met:

          (i)  the aggregate consideration paid by the Company for acquired
dental practices from (x) inception through  December 31, 1997 (with respect to
the Initial Amount) and (y) from inception through December 31, 1998 (with
respect to the Second Amount) does not exceed an amount equal to six (6)
multiplied by the aggregate of the earnings before interest, taxes, depreciation
and amortization ("EBITDA") for such practices for the immediately preceding
twelve (12) month period; and

          (ii) Adjusted EBITDA (as defined below) exceeds seventy-five percent
(75%) of Target EBITDA (as defined below) for (x) the Company's fiscal year
ended December 31, 1997 (with respect to the Initial Amount) or (y) the
Company's fiscal year ended December 31, 1998 (with respect to the Second
Amount).

          For purposes of this Schedule 1, the term "Target EBITDA" shall mean
                               ----------                                     
$6,298,000 for the fiscal year ended December 31, 1997 and $16,911,000 for the
fiscal year ended December 31, 1998.  For purposes of this Schedule 1, the term
                                                           ----------          
"Adjusted EBITDA" shall mean the Company's EBITDA less corporate general and
administrative expenses (but excluding direct expenses incurred in connection
with the employment of a CEO, such as salary, bonus, travel and entertainment,
car allowance and costs of administrative assistant).  All computation of
EBITDA, Target EBITDA and Adjusted EBITDA shall be based on audited financial
statements of the Company.

Vesting Formula

          If the conditions set forth above are met, that number of shares of
the Initial Amount and Second Amount shall vest as of the dates indicated above
as follows:

       Percentage of Target              Percentage of Initial Amount or
     EBITDA Achieved by Company       Second Amount Shares Which Will Vest
     --------------------------       ------------------------------------

    75% or less of Target EBITDA                       0%

  100% of Target EBITDA or greater                    100%

Greater than 75%, but less than 100%  The percentage which will vest shall
                                         decrease linearly to 0% as the 
                                      percentage of Target EBITDA achieved 
                                           decreases from 100% to 75%