<PAGE>   1
                                                                   EXHIBIT 10.26

                           MONARCH DENTAL CORPORATION
                        1999 STOCK OPTION AND GRANT PLAN


SECTION 1.  GENERAL PURPOSE OF THE PLAN; DEFINITIONS

         The name of the plan is the Monarch Dental Corporation 1999 Stock
Option and Grant Plan (the "Plan"). The purpose of the Plan is to encourage and
enable the employees of Monarch Dental Corporation (the "Company") and its
Subsidiaries (as defined below) upon whose judgment, initiative and efforts the
Company largely depends for the successful conduct of its business to acquire a
proprietary interest in the Company. It is anticipated that providing such
persons with a direct stake in the Company's welfare will assure a closer
identification of their interests with those of the Company, thereby stimulating
their efforts on the Company's behalf and strengthening their desire to remain
with the Company.

         The following terms shall be defined as set forth below:

         "Act" means the Securities Exchange Act of 1934, as amended.

         "Award" or "Awards," except where referring to a particular category of
grant under the Plan, shall include Non-Qualified Stock Options, Restricted
Stock Awards and Unrestricted Stock Awards.

         "Board" means the Board of Directors of the Company.

         "Code" means the Internal Revenue Code of 1986, as amended, and any
successor Code, and related rules, regulations and interpretations.

         "Committee" has the meaning specified in Section 2.

         "Fair Market Value" of the Stock on any given date means (i) if the
Stock is admitted to quotation on the National Association of Securities Dealers
Automated Quotation System ("NASDAQ"), the Fair Market Value on any given date
shall not be less than the average of the highest bid and lowest asked prices of
the Stock reported for such date or, if no bid and asked prices were reported
for such date, for the last day preceding such date for which such prices were
reported; or (ii) if the Stock is admitted to trading on a national securities
exchange or the NASDAQ National Market, then clause (i) shall not apply and the
Fair Market Value on any date shall not be less than the closing price reported
for the Stock on such exchange or system for such date or, if no sales were
reported for such date, for the last date preceding such date for which a sale
was reported; and (iii) if the Stock is not publicly traded on a 





<PAGE>   2


securities exchange or traded in the over-the-counter market or, if traded or
quoted, there are no transactions or quotations within the last ten trading days
or trading has been halted for extraordinary reasons, the Fair Market Value on
any given date shall be determined in good faith by the Committee with reference
to the rules and principles of valuation set forth in Section 20.2031-2 of the
Treasury Regulations.

         "Incentive Stock Option" means any Stock Option designated and
qualified as an "incentive stock option" as defined in Section 422 of the Code.

         "Independent Director" means a member of the Board who is neither an
employee or officer of the Company or any Subsidiary.

         "Non-Qualified Stock Option" means any Stock Option that is not an
Incentive Stock Option.

         "Option" or "Stock Option" means any option to purchase shares of Stock
granted pursuant to Section 5.

         "Restricted Stock Award" means any Award granted pursuant to Section 6.

         "Stock" means the Common Stock, par value $.01 per share, of the
Company, subject to adjustments pursuant to Section 3.

         "Subsidiary" means any corporation or other entity (other than the
Company) in any unbroken chain of corporations or other entities, beginning with
the Company, if each of the corporations or entities (other than the last
corporation or entity in the unbroken chain) owns stock or other interests
possessing 50% or more of the economic interest or the total combined voting
power of all classes of stock or other interests in one of the other
corporations or entities in the chain, as well as any professional corporation
for which the Company or any Subsidiary thereof provides management services.

         "Unrestricted Stock Award" means any Award granted pursuant to Section
7.


SECTION 2.     ADMINISTRATION OF PLAN; COMMITTEE AUTHORITY TO SELECT 
               PARTICIPANTS AND DETERMINE AWARDS

         (a) Committee. The Plan shall be administered by the Board of Directors
of the Company, or at the discretion of the Board, by a committee or committees
of the Board consisting of not less than two Independent Directors, except as
contemplated by Section 2(c). Each member of the Committee shall be a
"Non-Employee Director" within the meaning of Rule 16b-3(a)(3) under the Act.
All references herein to the Committee shall be deemed to 




                                       2


<PAGE>   3


refer to the entity then responsible for administration of the Plan at the
relevant time (i.e., either the Board of Directors or a committee of the Board,
as applicable).

         (b) Powers of Committee. The Committee shall have the power and
authority to grant Awards consistent with the terms of the Plan, including the
power and authority:

                  (i) to select the employees of the Company and its
         Subsidiaries to whom Awards may from time to time be granted;

                  (ii) to determine the time or times of grant, and the extent,
         if any, of NonQualified Stock Options, Restricted Stock Awards and
         Unrestricted Stock Awards, or any combination of the foregoing, granted
         to any one or more participants;

                  (iii) to determine the number of shares of Stock to be covered
         by any Award;

                  (iv) to determine and modify from time to time the terms and
         conditions, including restrictions, not inconsistent with the terms of
         the Plan, of any Award, which terms and conditions may differ among
         individual Awards and participants, and to approve the form of written
         instruments evidencing the Awards;

                  (v) to accelerate at any time the exercisability or vesting of
         all or any portion of any Award and/or to include provisions in Awards
         providing for such acceleration;

                  (vi) to impose any limitations on Awards granted under the
         Plan, including limitations on transfers, repurchase provisions and the
         like and to exercise repurchase rights or obligations;

                  (vii) to extend at any time the period in which Stock Options
         may be exercised;

                  (viii) to determine at any time whether, to what extent, and
         under what circumstances Stock and other amounts payable with respect
         to an Award shall be deferred either automatically or at the election
         of the participant and whether and to what extent the Company shall pay
         or credit amounts constituting interest (at rates determined by the
         Committee) or dividends or deemed dividends on such deferrals; and

                  (ix) at any time to adopt, alter and repeal such rules,
         guidelines and practices for administration of the Plan and for its own
         acts and proceedings as it shall deem advisable; to interpret the terms
         and provisions of the Plan and any Award (including related written
         instruments); to make all determinations it deems advisable for the
         administration of the Plan; to decide all disputes arising in
         connection with the Plan; and to otherwise supervise the administration
         of the Plan.



                                       3


<PAGE>   4



         All decisions and interpretations of the Committee shall be binding on
all persons, including the Company and Plan participants.

         (c) Delegation of Authority to Grant Awards. The Board, in its
discretion, may appoint the Chief Executive Officer of the Company as a
one-person Committee in addition to the Committee contemplated by Section 2(a)
having authority (co-extensive with such other Committee) to grant Awards to
individuals who are not subject to the reporting and other provisions of Section
16 of the Act or "covered employees" within the meaning of Section 162(m) of the
Code.


SECTION 3.  STOCK ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION

         (a) Stock Issuable. The maximum number of shares of Stock reserved and
available for issuance under the Plan shall be 1,000,000 shares of Stock. For
purposes of the foregoing limitations, the shares of Stock underlying any Awards
which are forfeited, canceled, reacquired by the Company, satisfied without the
issuance of Stock or otherwise terminated (other than by exercise) shall be
added back to the shares of Stock available for issuance under the Plan. Subject
to such overall limitation, shares of Stock may be issued up to such maximum
number pursuant to any type or types of Award. The shares available for issuance
under the Plan may be authorized but unissued shares of Stock or shares of Stock
reacquired by the Company.

         (b) Recapitalizations. If, through or as a result of any merger,
consolidation, sale of all or substantially all of the assets of the Company,
reorganization, recapitalization, reclassification, stock dividend, stock split,
reverse stock split or other similar transaction, the outstanding shares of
Stock are increased or decreased or are exchanged for a different number or kind
of shares or other securities of the Company or any successor company, or
additional shares or new or different shares or other securities of the Company
or other non-cash assets are distributed with respect to such shares of Stock or
other securities, the Committee shall make an appropriate or proportionate
adjustment in (i) the maximum number of shares reserved for issuance under the
Plan, (ii) the number of Stock Options or other Awards that can be granted to
any one individual participant, (iii) the number and kind of shares or other
securities subject to any then outstanding Awards under the Plan, and (iv) the
price for each share subject to any then outstanding Stock Options or other
Awards under the Plan, without changing the aggregate exercise price (i.e., the
exercise price multiplied by the number of shares) as to which such Stock
Options remain exercisable and the repurchase price for shares subject to
repurchase. The adjustment by the Committee shall be final, binding and
conclusive. No fractional shares of Stock shall be issued under the Plan
resulting from any such adjustment, but the Committee in its discretion may make
a cash payment in lieu of fractional shares.





                                       4


<PAGE>   5

         (c) Mergers and Other Transactions. In the case of (i) the dissolution
or liquidation of the Company, (ii) a merger, reorganization or consolidation in
which the Company is acquired by another person or entity (other than a holding
company formed by the Company and other than a merger, reorganization or
consolidation where shareholders of the Company immediately prior to the
transaction continue immediately after the transaction, to own shares
representing in the aggregate 50 percent or more of the voting shares of the
corporation issuing cash or securities in the merger, reorganization or
consolidation), (iii) the sale of all or substantially all of the assets of the
Company to an unrelated person or entity, or (iv) the sale of all of the Stock
of the Company to an unrelated person or entity, then unless otherwise provided
in the Award agreement the outstanding Options shall become fully vested. Upon
the effectiveness of any such transaction or event, the Plan and all outstanding
Options and other Awards granted hereunder shall terminate, unless provision is
made in connection with such transaction for the assumption of such awards
heretofore granted, or the substitution of such Awards of new Awards of the
successor entity or parent thereof, with appropriate adjustment as to the number
and kind of shares and, if appropriate, the per share exercise prices, as
provided in Section 3(b) above. In the event of such termination, each optionee
shall be permitted to exercise for a period of at least 15 days prior to the
termination all outstanding vested Options. The treatment of Restricted Stock
Awards and Unrestricted Stock Awards in connection with any such transaction
shall be as specified in the relevant Award agreement.

         (d) Substitute Awards. The Committee may grant Awards under the Plan in
substitution for stock and stock based awards held by employees of another
corporation who become employees of the Company or a Subsidiary as the result of
a merger or consolidation of the employing corporation with the Company or a
Subsidiary or the acquisition by the Company or a Subsidiary of property or
stock of the employing corporation. The Committee may direct that the substitute
awards be granted on such terms and conditions as the Committee considers
appropriate in the circumstances.

SECTION 4.  ELIGIBILITY

         Participants in the Plan will be such employees of the Company and its
Subsidiaries who are responsible for or contribute to the management, growth or
profitability of the Company and its Subsidiaries as are selected from time to
time by the Committee, in its sole discretion.

SECTION 5.  STOCK OPTIONS

         Any Stock Option granted under the Plan shall be pursuant to a stock
option agreement which shall be in such form as the Committee may from time to
time approve. Option agreements need not be identical.



                                       5


<PAGE>   6

         Stock Options granted under the Plan shall be Non-Qualified Stock
Options, which may be granted to employees of the Company and its Subsidiaries.

         (a) Terms of Stock Options. Stock Options granted under the Plan shall
be subject to the following terms and conditions and shall contain such
additional terms and conditions, not inconsistent with the terms of the Plan, as
the Committee shall deem desirable:

                  (i) Exercise Price. The exercise price per share for the Stock
         covered by a Stock Option shall be determined by the Committee at the
         time of grant.

                  (ii) Option Term. The term of each Stock Option shall be fixed
         by the Committee.

                  (iii) Exercisability; Rights of a Stockholder. Stock Options
         shall become vested and exercisable at such time or times, whether or
         not in installments, as shall be determined by the Committee at or
         after the grant date. The Committee may at any time accelerate the
         exercisability of all or any portion of any Stock Option. An optionee
         shall have the rights of a stockholder only as to shares acquired upon
         the exercise of a Stock Option and not as to unexercised Stock Options.

                  (iv) Method of Exercise. Stock Options may be exercised in
         whole or in part, by giving written notice of exercise to the Company,
         specifying the number of shares to be purchased. Payment of the
         purchase price may be made by one or more of the following methods:

                           (A) In cash, by certified or bank check or other
                  instrument acceptable to the Committee;

                           (B) In the form of shares of Stock that are not then
                  subject to restrictions under any Company plan and that have
                  been held by the optionee free of such restrictions for at
                  least six months, if permitted by the Committee in its
                  discretion. Such surrendered shares shall be valued at Fair
                  Market Value on the exercise date; or

                           (C) By the optionee delivering to the Company a
                  properly executed exercise notice together with irrevocable
                  instructions to a broker to promptly deliver to the Company
                  cash or a check payable and acceptable to the Company to pay
                  the purchase price; provided that in the event the optionee
                  chooses to pay the purchase price as so provided, the optionee
                  and the broker shall comply with such procedures and enter
                  into such agreements of indemnity and other agreements as the
                  Committee shall prescribe as a condition of such payment
                  procedure.





                                       6


<PAGE>   7


         Payment instruments will be received subject to collection. The
         delivery of certificates representing the shares of Stock to be
         purchased pursuant to the exercise of a Stock Option will be contingent
         upon receipt from the optionee (or a purchaser acting in his stead in
         accordance with the provisions of the Stock Option) by the Company of
         the full purchase price for such shares and the fulfillment of any
         other requirements contained in the Stock Option or applicable
         provisions of laws.

                  (v) Termination. Unless otherwise provided in the option
                  agreement or determined by the Committee, upon the optionee's
                  termination of employment (or other business relationship)
                  with the Company and its Subsidiaries, the optionee's rights
                  in his Stock Options shall automatically terminate.

         (b) Reload Options. At the discretion of the Committee, Options granted
under the Plan may include a "reload" feature pursuant to which an optionee
exercising an option by the delivery of a number of shares of Stock in
accordance with Section 5(a)(v)(B) hereof would automatically be granted an
additional Option (with an exercise price equal to the Fair Market Value of the
Stock on the date the additional Option is granted and with the same expiration
date as the original Option being exercised, and with such other terms as the
Committee may provide) to purchase that number of shares of Stock equal to the
number delivered to exercise the original Option.

         (c) Non-transferability of Options. No Stock Option shall be
transferable by the optionee otherwise than by will or by the laws of descent
and distribution and all Stock Options shall be exercisable, during the
optionee's lifetime, only by the optionee. Notwithstanding the foregoing, the
Committee may provide in an option agreement that the optionee may transfer,
without consideration for the transfer, his Non-Qualified Stock Options to
members of his immediate family, to trusts for the benefit of such family
members, to partnerships in which such family members are the only partners; or
to charitable organizations; provided, however, that the transferee agrees in
writing to be bound by the terms and conditions of this Plan and the applicable
Option Agreement.

SECTION 6.  RESTRICTED STOCK AWARDS

         (a) Nature of Restricted Stock Awards. A Restricted Stock Award is an
Award entitling the recipient to acquire, at par value or such other purchase
price determined by the Committee, shares of Stock subject to such restrictions
and conditions as the Committee may determine at the time of grant ("Restricted
Stock"). Conditions may be based on continuing employment (or other business
relationship) and/or achievement of pre-established performance goals and
objectives.




                                       7


<PAGE>   8

         (b) Rights as a Stockholder. Upon execution of a written instrument
setting forth the Restricted Stock Award and paying any applicable purchase
price, a participant shall have the rights of a stockholder with respect to the
voting of the Restricted Stock, subject to such conditions contained in the
written instrument evidencing the Restricted Stock Award. Unless the Committee
shall otherwise determine, certificates evidencing the Restricted Stock shall
remain in the possession of the Company until such Restricted Stock is vested as
provided in Section 6(d) below.

         (c) Restrictions. Restricted Stock may not be sold, assigned,
transferred, pledged or otherwise encumbered or disposed of except as
specifically provided herein or in the written instrument evidencing the
Restricted Stock Award. If a participant's employment (or other business
relationship) with the Company and its Subsidiaries terminates under the
conditions specified in the relevant instrument relating to the Award, or upon
such other event or events as may be stated in the instrument evidencing the
Award, the Company or its assigns shall have the right or shall agree, as may be
specified in the relevant instrument, to repurchase some or all of the shares of
Stock subject to the Award at such purchase price as is set forth in such
instrument.

         (d) Vesting of Restricted Stock. The Committee at the time of grant
shall specify the date or dates and/or the attainment of pre-established
performance goals, objectives and other conditions on which Restricted Stock
shall become vested, subject to such further rights of the Company or its
assigns as may be specified in the instrument evidencing the Restricted Stock
Award.

         (e) Waiver, Deferral and Reinvestment of Dividends. The written
instrument evidencing the Restricted Stock Award may require or permit the
immediate payment, waiver, deferral or investment of dividends paid on the
Restricted Stock.

SECTION 7.  UNRESTRICTED STOCK AWARDS

         (a) Grant or Sale of Unrestricted Stock. The Committee may, in its sole
discretion, grant (or sell at a purchase price determined by the Committee) an
Unrestricted Stock Award to any participant, pursuant to which such participant
may receive shares of Stock free of any vesting restrictions ("Unrestricted
Stock") under the Plan. Unrestricted Stock Awards may be granted or sold as
described in the preceding sentence in respect of past services or other valid
consideration, or in lieu of any cash compensation due to such individual.

         (b) Elections to Receive Unrestricted Stock In Lieu of Compensation.
Upon the request of a participant and with the consent of the Committee, each
such participant may, pursuant to an advance written election delivered to the
Company no later than the date specified by the Committee, receive a portion of
the cash compensation otherwise due to such participant in the form of shares of
Unrestricted Stock either currently or on a deferred basis.


                                       8

<PAGE>   9

         (c) Restrictions on Transfers. The right to receive shares of
Unrestricted Stock on a deferred basis may not be sold, assigned, transferred,
pledged or otherwise encumbered, other than by will or the laws of descent and
distribution.

SECTION 8.  TAX WITHHOLDING

         (a) Payment by Participant. Each participant shall, no later than the
date as of which the value of an Award or of any Stock or other amounts received
thereunder first becomes includable in the gross income of the participant for
Federal income tax purposes, pay to the Company, or make arrangements
satisfactory to the Committee regarding payment of, any federal, state, or local
taxes of any kind required by law to be withheld with respect to such income.
The Company and its Subsidiaries shall, to the extent permitted by law, have the
right to deduct any such taxes from any payment of any kind otherwise due to the
participant.

         (b) Payment in Stock. Subject to approval by the Committee, a
participant may elect to have such tax withholding obligation satisfied, in
whole or in part, by (i) authorizing the Company to withhold from shares of
Stock to be issued pursuant to any Award a number of shares with an aggregate
Fair Market Value (as of the date the withholding is effected) that would
satisfy the withholding amount due, or (ii) transferring to the Company shares
of Stock owned by the participant with an aggregate Fair Market Value (as of the
date the withholding is effected) that would satisfy the withholding amount due.

SECTION 9.  TRANSFER, LEAVE OF ABSENCE, ETC.

         For purposes of the Plan, the following events shall not be deemed a
termination of employment:

         (a) a transfer to the employment of the Company from a Subsidiary or
from the Company to a Subsidiary, or from one Subsidiary to another; or

         (b) an approved leave of absence for military service or sickness, or
for any other purpose approved by the Company, if the employee's right to
re-employment is guaranteed either by a statute or by contract or under the
policy pursuant to which the leave of absence was granted or if the Committee
otherwise so provides in writing.

SECTION 10.  AMENDMENTS AND TERMINATION

         The Board may, at any time, amend or discontinue the Plan and the
Committee may, at any time, amend or cancel any outstanding Award (or provide
substitute Awards at the same or 



                                       9


<PAGE>   10


reduced exercise or purchase price or with no exercise or purchase price in a
manner not inconsistent with the terms of the Plan), but such price, if any,
must satisfy the requirements which would apply to the substitute or amended
Award if it were then initially granted under this Plan for the purpose of
satisfying changes in law or for any other lawful purpose, but no such action
shall adversely affect rights under any outstanding Award without the holder's
consent.

SECTION 11.  STATUS OF PLAN

         With respect to the portion of any Award which has not been exercised
and any payments in cash, Stock or other consideration not received by a
participant, a participant shall have no rights greater than those of a general
creditor of the Company unless the Committee shall otherwise expressly determine
in connection with any Award or Awards. In its sole discretion, the Committee
may authorize the creation of trusts or other arrangements to meet the Company's
obligations to deliver Stock or make payments with respect to Awards hereunder,
provided that the existence of such trusts or other arrangements is consistent
with the foregoing sentence.

SECTION 12.  GENERAL PROVISIONS

         (a) No Distribution; Compliance with Legal Requirements. The Committee
may require each person acquiring Stock pursuant to an Award to represent to and
agree with the Company in writing that such person is acquiring the shares
without a view to distribution thereof.

         No shares of Stock shall be issued pursuant to an Award until all
applicable securities law and other legal and stock exchange or similar
requirements have been satisfied. The Committee may require the placing of such
stop-orders and restrictive legends on certificates for Stock and Awards as it
deems appropriate.

         (b) Other Compensation Arrangements; No Employment Rights. Nothing
contained in this Plan shall prevent the Board from adopting other or additional
compensation arrangements, including trusts, and such arrangements may be either
generally applicable or applicable only in specific cases. The adoption of this
Plan and the grant of Awards do not confer upon any employee any right to
continued employment with the Company or any Subsidiary.


                                       10


<PAGE>   11

SECTION 13.  GOVERNING LAW

         This Plan shall be governed by Delaware law except to the extent such
law is preempted by federal law.


Adopted and Effective: March 2, 1999