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                                                                    EXHIBIT 10.4

                SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT
                             (Lisa Corbett Peterson)

         This SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "Agreement")
is made as of October 27, 2000 (the "Effective Date"), by and between Monarch
Dental Corporation, a Delaware corporation (the "Company"), and Lisa Corbett
Peterson (the "Executive").

         WHEREAS, Company recognizes that Executive has made significant
contributions to the financial success of the Company, and that Executive has
certain knowledge and business contacts in Company's business;

         WHEREAS, Company desires to continue Executive's employment and to
obtain the benefit of Executive's contacts and knowledge in the business as well
as her valuable judgment, extensive experience, good counsel and advice;

         WHEREAS, to reward Executive for her contributions to the financial
success of the Company, to induce Executive to continue her employment with the
Company, and to encourage Executive to exert her very best efforts towards the
completion of a Transaction (as defined below), the Company has agreed to
provide Executive certain compensation, management arrangements, and incentives
as set forth in this Agreement;

         WHEREAS, the Board of Directors of the Company has determined that it
is in the best interests of the Company to retain the Executive's services and
to reinforce and encourage the continued attention and dedication of members of
the Company's management, including the Executive, to their assigned duties
without distraction arising from the possibility of a change in control of the
Company; and

         WHEREAS, the Company desires to assure itself of the services of the
Executive for the period provided in this Agreement and the Executive desires to
stay in the employ of the Company on the terms and conditions hereinafter
provided:

         NOW, THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties hereto agree as follows:

         1. Employment. The Company agrees to employ the Executive and the
Executive agrees to be employed by the Company for the period and on the terms
and conditions set forth in this Agreement.

         2. Capacity. During the Term (as defined below), the Executive shall
serve the Company as Chief Financial Officer, reporting to the Chief Executive
Officer of the Company (the "CEO"), with authority, duties and responsibilities
not less than the Executive has on the date of this Agreement, with her actions
at all times subject to the direction of the CEO or the Board of Directors (but
not any one individual director who is not the CEO). The Executive

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hereby accepts such employment, agrees to serve the Company in the capacities
indicated, and agrees to use her best efforts in, and shall devote her full
working time, attention, skill and energies to, the advancement of the interests
of the Company and its subsidiaries and the performance of her duties and
responsibilities hereunder.

         3. Term. Subject to the provisions of Section 5 hereof, the term of
employment pursuant to this Agreement (the "Term") shall be four (4) years from
August 9, 1999, the Effective Date of the 1999 Employment Agreement; provided,
however, that this Agreement shall be extended automatically for successive
one-year periods ending on the relevant anniversary of the Effective Date of the
1999 Employment Agreement, unless either party gives the other notice no later
than 180 days prior to the scheduled termination date (i.e., the fourth
anniversary of the Effective Date of the 1999 Employment Agreement or any later
anniversary) of her or its determination not to extend this Agreement, whereupon
it shall terminate as of such anniversary date.

         4. Compensation and Benefits. The compensation and benefits payable to
the Executive under this Agreement shall be as follows:

                  (a) Salary. For all services rendered by the Executive under
this Agreement, the Company shall pay the Executive a salary (the "Salary") at
the annual rate of One Hundred Eighty-Two Thousand Five Hundred Dollars
($182,500), subject to increase from time to time in the discretion of the
Compensation Committee of the Board of Directors (the "Compensation Committee").
Notwithstanding the foregoing, effective January 1, 2001, the Company shall pay
the Executive a salary at the annual rate of Two Hundred Thousand Seven Hundred
Fifty Dollars ($200,750). The Salary shall be payable in periodic installments
in accordance with the Company's usual practice for its senior executives.

                  (b) Bonus. In addition to the Salary payable to the Executive
pursuant to subsection 4(a), during the Term, the Executive shall be eligible to
receive a bonus of up to 40% of her annual Salary based upon achievement (i) by
the Company of certain corporate and financial goals (the "Corporate Goals") and
(ii) by the Executive of certain management goals (the "Management Goals"). The
Corporate Goals and Management Goals will be set in the sole discretion of the
Board of Directors of the Company acting in good faith. Nothing in this
subsection 4(b) shall be deemed to create any right of the Executive to receive
any bonus, such decision on the amount of a bonus, if any, to be made in the
sole and absolute discretion of the Board of Directors of the Company or a duly
appointed committee thereof. Notwithstanding any other provision in this
subsection or this Agreement, Executive shall receive a bonus for the Company's
2000 and 2001 fiscal years of not less than 40% of her annual Salary. For the
bonus year of 2000 the Bonus shall be paid on January 2, 2001, and for bonus
years thereafter, the Bonus shall be paid on the earlier to occur of (i) the
Closing Date, (ii) December 31 of the year in which the Bonus is earned, or
(iii) the date upon which Executive's employment with the Company terminates for
any reason other than pursuant to subsection 5(a) (Termination by the Company
for Cause). If the Bonus is paid on the Closing Date or on the date of
Executive's termination of employment, the Bonus shall be prorated based on the
number of full or partial months to the Closing Date or the date of termination,
as the case may be. If the

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Executive continues in employment after the Closing Date, Executive shall
receive an additional pro rata portion of the Bonus, based on the number of full
or partial months after the Closing Date, on a date which conforms to the
Company's usual practice.

         (c) Retention Payment. The Executive shall be paid by the Company, on
the dates set forth below, provided Executive is employed by the Company on such
date, a monthly retention payment, as provided below:

<TABLE>
<CAPTION>
  Payment Date     Amount of Retention Payment
----------------   ---------------------------
<S>                     <C>
October 31, 2000        $    3,906.25
November 1, 2000        $   11,406.25
December 1, 2000        $   11,406.25
January 1, 2001         $   12,546.88
February 1, 2001        $   12,546.88
March 1, 2001           $   12,546.88
</TABLE>

                  (d) Transaction Incentive Fee. Contemporaneously with, as a
part of, and as a condition to, the Transaction and, except as set forth in
subsection 5(h) hereto, provided Executive is employed by the Company on such
date and provided further the Closing Date occurs on or before March 31, 2002,
Executive shall be paid a Transaction incentive fee ("Transaction Fee") in lump
sum, cash, as provided below (with linear interpolation between share points):

<TABLE>
<CAPTION>
                                 Transaction Incentive Fee
       Price Per Share      (bps below times Total Equity Value)
       ---------------      ------------------------------------
<S>                                       <C>
          $   7.00                        24 bps
          $   7.50                        26 bps
          $   8.00                        28 bps
          $   8.50                        30 bps
          $   9.00                        32 bps
</TABLE>

The Transaction Fee will be equal to the Total Equity Value times the applicable
basis point figure. For any Transaction below $7.00, the Transaction Fee will be
20 basis points multiplied by the Total Equity Value. Notwithstanding the
foregoing, in no event shall the Transaction Fee be less than the amount
determined as follows:

         R  = (S minus T) minus U, where:

         R  means the minimum Transaction Fee;

         S  means $370,000;

         T  means the aggregate retention payments paid to Executive under
            subsection 4(c) hereof; and

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         U  means the aggregate "spread" on the stock options granted
            under subsection 4(e) of the 2000 Employment Agreement,
            outstanding as of the date of the Transaction. The aggregate
            "spread" shall mean the positive difference between the
            exercise price per share and X (as defined in subsection 20(d)
            hereof), times the number of options granted pursuant to
            subsection 4(e) of the 2000 Employment Agreement that remain
            outstanding as of the date of the Transaction.

                  (e) Special Bonus. In addition to all other compensation and
benefits provided for in this Agreement, the Company agrees to pay the Executive
in cash contemporaneously with the execution of this Agreement a special
one-time bonus in the amount of $60,000 (net of withholding taxes).

                  (f) Certain Additional Payments by the Company.
Notwithstanding anything to the contrary in this Agreement, in the event that
any payment or distribution to or for the benefit of the Executive, whether paid
or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise (a "Payment"), would be subject to the excise tax imposed
by Section 4999 of the Internal Revenue Code of 1986, as amended, or any
interest or penalties with respect to such excise tax (such excise tax, together
with any such interest or penalties, are hereinafter collectively referred to as
the "Excise Tax"), the Company shall pay to the Executive an additional payment
(a "Gross-up Payment") in an amount such that after payment by the Executive of
all taxes upon such Gross-up Payment (including any interest or penalties
imposed with respect to such taxes), including any Excise Tax imposed on any
Gross-up Payment, the Executive retains an amount of the Gross-up Payment equal
to the Excise Tax imposed upon the Payments. (The Gross-up Payment is not
intended to compensate the Executive for any income taxes payable with respect
to the Payment.) All determinations required to be made under this subsection
4(f), including whether a Gross-up Payment is required and the amount of such
Gross-up Payment, shall be made by Arthur Andersen LLP or any other nationally
recognized accounting firm selected by the Company and Executive (the
"Accounting Firm"), which shall provide detailed supporting calculations both to
the Company and the Executive as is reasonably requested by the Company or the
Executive. Any determination by the Accounting Firm shall be binding upon the
Company and the Executive. The amount of the Gross-up Payment shall be paid (in
estimate) either contemporaneously with, as a part of and as a condition, to the
Closing, with the actual amount finally to be determined, settled and paid by
the Company to Executive or by Executive to the Company, as the case may be, at
the time of filing of the applicable federal income tax return, or as otherwise
provided in this Agreement. The Executive shall notify the Company immediately
in writing of any claim by the Internal Revenue Service which, if successful,
would require the Company to make a Gross-up Payment (or a Gross-up Payment in
excess of that, if any, initially determined by the Accounting Firm) within five
(5) days of the receipt of such claim. The Company shall notify the Executive in
writing at least five days prior to the due date of any response required with
respect to such claim if it plans to contest the claim. If the Company decides
to contest such claim, the Executive shall cooperate fully with the Company in
such action; provided, however, the Company shall bear and pay directly or
indirectly all costs and expenses (including additional interest and penalties)
incurred in

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connection with such action and shall indemnify and hold the Executive harmless,
on an after-tax basis, for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of the Company's action. If,
as a result of the Company's action with respect to a claim, the Executive
receives a refund of any amount paid by the Company with respect to such claim,
the Executive shall promptly pay such refund to the Company. If the Company
fails to timely notify the Executive whether it will contest such claim or the
Company determines not to contest such claim, then the Company shall immediately
pay to the Executive the portion of such claim, if any, which it has not
previously paid to the Executive.

                  (g) Regular Benefits. During the Term, the Executive shall be
entitled to participate in any employee benefit plans, medical insurance plans,
life insurance plans, disability income plans, retirement plans and
arrangements, vacation plans, expense reimbursement plans and other benefit
plans which the Company may determine from time to time in its sole discretion
to have in effect for all or most of its senior executives. Such participation
shall be subject to the terms of the applicable plan documents, generally
applicable policies of the Company, applicable law and the discretion of the
Board of Directors or any administrative or other committee provided for in or
contemplated by any such plan.

                  (h) Taxation of Payments and Benefits. The Company shall
undertake to make deductions, withholdings and tax reports with respect to
payments and benefits under this Agreement to the extent that it reasonably and
in good faith believes that it is required to make such deductions, withholdings
and tax reports. Payments under this Agreement shall be in amounts net of any
such deductions or withholdings. Except as set forth in subsection 4(f), nothing
in this Agreement shall be construed to require the Company to make any payments
to compensate the Executive for any adverse tax effect associated with any
payments or benefits or for any deduction or withholding from any payment or
benefit.

                  (i) Exclusivity of Salary and Benefits. The Executive shall
not be entitled to any payments or benefits other than those provided under this
Agreement. Compliance with the provisions of this Section 4 shall in no way
create or be deemed to create any obligation, express or implied, on the part of
the Company or any of its affiliates with respect to the continuation of any
particular benefit or other plan or arrangement maintained by them or their
subsidiaries as of or prior to the date hereof or the creation and maintenance
of any particular benefit or other plan or arrangement at any time after the
date hereof.

                  (j) Expenses. The Company shall promptly reimburse the
Executive for all reasonable business expenses incurred by the Executive during
the Term in accordance with the Company's practices for executive officers of
the Company with a similar level of responsibility, as in effect from time to
time.

                  (k) Vacation. During the Term, the Employee shall receive paid
vacation annually in accordance with the Company's practices for executive
officers, as in effect from time to time, but in any event not less than three
(3) weeks during each 365 days of the Term.

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         5. Termination and Termination Benefits. Notwithstanding the provisions
of Section 3, the Executive's employment under this Agreement shall terminate
under the following circumstances set forth in this Section 5.

                  (a) Termination by the Company for Cause. The Executive's
employment under this Agreement may be terminated for cause without further
liability on the part of the Company effective immediately upon written notice
to the Executive by the Company. Only the following shall constitute "cause" for
such termination:

                           (i) willful gross misconduct by the Executive that
         causes material economic harm to the Company or that brings substantial
         discredit to the Company's reputation;

                           (ii) final, nonappealable conviction of a felony
         involving moral turpitude; or

                           (iii) the Executive shall commit a material breach of
         any of the covenants, terms or provisions hereof, which breach has not
         been remedied within sixty (60) days after delivery to the Executive by
         the Company of written notice, specifying in reasonable detail the
         basis therefor and stating that it is grounds for Cause.

         The Executive shall be permitted to respond and to defend herself
before the Board of Directors or any appropriate committee thereof within a
reasonable time after written notification of any proposed termination for Cause
under item (i) or (iii) of this subsection.

         Upon termination for Cause as provided in this subsection 5(a), the
Company shall have any and all rights and remedies under this Agreement and
applicable law in addition to its rights under subsection 5(m).

                  (b) Termination by the Company Without Cause. During the Term,
the Company may terminate the Executive's Employment Without Cause, subject to
the provisions of subsection 5(h) (Certain Termination Benefits). Termination
"Without Cause" shall mean termination of the Executive's employment by the
Company other than termination for Cause or for Disability or by reason of the
non-renewal of this Agreement, by either party, at the end of the Term.

                  (c) Termination by the Executive for Good Reason. The
Executive may terminate her employment hereunder for Good Reason. For purposes
of this Agreement, the termination of Executive's employment hereunder by
Executive because of the occurrence of one or more of the following events shall
be deemed to have occurred for "Good Reason":

                           (i) any material breach of this Agreement by the
         Company, provided, however, that a material breach of this Agreement by
         the Company shall not constitute Good Reason unless the Executive
         notifies the Company in writing of the breach, specifying in reasonable
         detail the nature of the breach and stating that such

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         breach is grounds for Good Reason, and unless the Company fails to cure
         such breach within sixty (60) days after such notice is sent or given
         under this Agreement;

                           (ii) a relocation of the Company's principal
         executive offices to any county other than Dallas County; provided,
         however, that no relocation shall constitute Good Reason unless the
         Executive advises the Board of Directors, in writing and prior to the
         relocation, of the Executive's objection to such relocation;

                           (iii) a material change in the nature or scope of
         Executive's authorities, powers, functions, duties or responsibilities
         that the Executive has on the date of this Agreement and that is
         reasonably determined by Executive in good faith to be adverse to
         Executive (specifically including, but not limited to, a material
         increase in travel or a change in Executive's reporting relationship to
         someone other than the CEO or the Board of Directors); or

                           (iv) any reduction in Executive's Salary or Bonus
         compensation or any other failure by the Company to comply with Section
         4 hereof that is not consented to or approved by Executive.

                  (d) Termination by Executive upon a Change in Control. Upon a
Change in Control, the Executive may terminate this Agreement. For purposes of
this Agreement, "Change in Control" shall mean any of the following:

                           (i) any consolidation or merger of the Company in
         which the Company is not the continuing or surviving corporation or
         pursuant to which shares of the Company's common stock would be
         converted into cash securities or other property, other than a merger
         of the Company in which the holders of the Company's common stock
         immediately prior to the merger own more than 50% of the combined
         voting power of the merged or consolidated company's then outstanding
         voting securities entitled to vote generally in the election of
         directors;

                           (ii) any sale, lease, exchange or other transfer (in
         one transaction or a series of related transactions) of more than 50%
         of the assets of the Company;

                           (iii) any approval by the stockholders of the Company
         of any plan or proposal for the liquidation or dissolution of the
         Company;

                           (iv) the cessation of control (by virtue of their not
         constituting a majority of directors) of the Company's Board of
         Directors by the individuals (the "Continuing Directors") who (x) at
         the date of this Agreement were directors or (y) become directors after
         the date of this Agreement and whose election or nomination for
         election by the Company's stockholders was approved by a vote of at
         least two-thirds of the directors then in office who were directors at
         the date of this Agreement or whose election or nomination for election
         was previously so approved; or

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                           (v) the acquisition of beneficial ownership (within
         the meaning of Rule 13d-3 under the Securities Exchange Act of 1934, as
         amended) of an aggregate of 50% or more of the voting power of the
         Company's outstanding voting securities by any person or group (as such
         term is used in Rule 13d-5 under such Act); provided, however, that
         notwithstanding the foregoing, an acquisition shall not constitute a
         Change in Control hereunder if the acquiror is (w) the Executive, (x) a
         trustee or other fiduciary holding securities under an employee benefit
         plan of the Company and acting in such capacity, or (y) a corporation
         owned, directly or indirectly, by the stockholders of the Company in
         substantially the same proportions as their ownership of voting
         securities of the Company;

                           (vi) subject to applicable law, in a Chapter 11
         bankruptcy proceeding, the appointment of a trustee or the conversion
         of a case involving the Company to a case under Chapter 7.

                  (e) Termination by Executive Without Good Reason. During the
Term, the Executive may terminate her employment Without Good Reason.
Termination "Without Good Reason" shall mean termination of the Executive's
employment by the Executive other than Termination for Good Reason.

                  (f) Explanation of Termination of Employment. Any party
terminating this Agreement shall give prompt written notice ("Notice of
Termination") to the other party hereto advising such other party of the
termination of this Agreement. Within five (5) days after notification that the
Agreement has been terminated, the terminating party shall deliver to the other
party hereto a written explanation (the "Explanation of Termination of
Employment"), which shall state in reasonable detail the basis for such
termination and shall indicate whether termination is being made With Cause,
Without Cause or for Disability (if the Company has terminated the Agreement) or
for Good Reason, a Change in Control or Without Good Reason (if the Executive
has terminated the Agreement).

                  (g) Date of Termination. "Date of Termination" shall mean the
date on which Notice of Termination is sent or given under this Agreement.

                  (h) Certain Termination Benefits. Unless otherwise
specifically provided in this Agreement or otherwise required by law, all
compensation and benefits payable to the Executive under this Agreement shall
terminate on the date of termination of the Executive's employment under this
Agreement. Notwithstanding the foregoing, in the event of termination of the
Executive's employment with the Company (A) pursuant to subsection 5(b)
(Termination by the Company Without Cause) above, (B) pursuant to subsection
5(c) (Termination by the Executive for Good Reason) above, (C) pursuant to
subsection 5(d) (Termination by the Executive upon a Change in Control) above,
or (D) after March 31, 2001 for any reason other than pursuant to subsection
5(a) (Termination by the Company for Cause), then the Company shall, in addition
to any Gross-up Payment under subsection 4(f) (Certain Additional Payments by
the Company), (i) pay to the Executive as severance pay, at Executive's option
in a lump sum or as a continuation of compensation in accordance with this
Agreement, Executive's total

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compensation hereunder for a twelve-month period beginning on the date on which
such termination takes place, including without limitation under subsections
4(a) (Salary) and 4(b) (Bonus) and (ii) continue for the 12-month period
beginning on the date on which such termination takes place, group health plan
benefits to the extent authorized by and consistent with 29 U.S.C. Section 1161
et seq. (commonly known as "COBRA"), with the cost of the regular premium for
such benefits shared in the same relative proportion by the Company and the
Executive as in effect on the date of termination. Notwithstanding the
foregoing, if, at the time of such termination (w) by the Company Without Cause,
(x) by the Executive for Good Reason, (y) by the Executive upon a Change in
Control or (z) after March 31, 2001 for any reason other than pursuant to
subsection 5(a) (Termination by the Company for Cause), the Company is in
discussion with a person or entity regarding a Transaction, and such discussion
results in the consummation of a Transaction, or execution of a definitive
agreement regarding a Transaction, within 15 months of such termination then
the Executive shall also receive the Transaction Fee under subsection 4(d) upon
the closing of the Transaction, provided such consummation of a Transaction, or
execution of a definitive agreement regarding a Transaction, as the case may be,
occurs on or before March 31, 2002.

The parties hereto agree that the Termination Benefits are to be in full
satisfaction, compromise and release of any claims arising out of any
termination of the Employee's employment pursuant to subsections 5(b) or 5(c),
and in either case with such amounts to be contingent upon the Employee's
delivery upon termination of employment of a general release of any and all
claims arising out of facts or circumstances which occurred prior to the date of
such termination in a form reasonably satisfactory to the Company, it being
understood that no Termination Benefits shall be provided unless and until the
Employee determines to execute and deliver such release.

                  (i) No Mitigation. The Executive shall not be required to
mitigate the amount of payment provided for in subsection 5(h) by seeking other
employment or otherwise.

                  (j) Reduction in Compensation. If the Executive terminates her
employment for Good Reason based upon a reduction by the Company of the
Executive's Salary or Bonus Compensation, then for purposes of calculating the
Termination Benefits under subsection 5(h), the Executive's Salary as of the
Date of Termination shall be deemed to be the Executive's Salary immediately
prior to the reduction that the Executive claims as grounds for Good Reason or
Change in Control.

                  (k) Disability. Upon the permanent disability (as defined
below) of the Executive continuing for a period in excess of one hundred eighty
(180) consecutive days, all obligations of the Company under this Agreement
shall immediately terminate other than any obligation of the Company with
respect to earned but unpaid Salary and Regular Benefits contemplated hereby to
the extent accrued or vested through the date of termination. As used herein,
the terms "permanent disability" or "permanently disabled" shall mean the
inability of the Executive, by reason of injury, illness or other similar cause,
to perform essential functions of her position as described in Section 2 above,
as determined reasonably and in good faith by the Company. Nothing in this
subsection 5(k) shall be construed to waive the Executive's

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rights, if any, under existing law including, without limitation, the Family and
Medical Leave Act of 1993, 29 U.S.C. Section 2601 et seq. and the Americans with
Disabilities Act, 42 U.S.C. Section 12101 et seq.

                  (l) Death of Executive. If the Executive dies prior to the
expiration of this Agreement, the Executive's employment and other obligations
under this Agreement shall automatically terminate and all compensation to which
the Executive is or would have been entitled hereunder, including without
limitation under subsections 4(a) (Salary) and 4(b) (Bonus), but excluding
compensation under subsections 4(c) (Retention Payment) and 4(d) (Transaction
Incentive Fee), shall terminate as of the end of the month in which the
Executive's death occurs; provided, however, that the Executive's named
beneficiary or beneficiaries shall receive such reimbursement as may have been
due to the Executive pursuant to subsection 4(h) (Expenses) hereof.
Notwithstanding the foregoing, if, at the time of Executive's death, the Company
is in discussion with a person or entity regarding a Transaction, and such
discussion results in the consummation of a Transaction, or execution of a
definitive agreement regarding a Transaction, within 15 months after the
Executive's death, then the Executive shall also receive the Transaction Fee
under subsection 4(d) upon the closing of the Transaction.

                  (m) Non-Competition and Related Agreements. Notwithstanding
termination of this Agreement as provided in this Section 5 or any other
termination of the Executive's employment with the Company, the Executive's
obligations under Section 6 hereof shall survive any termination of the
Executive's employment with the Company at any time and for any reason as
provided therein.

                  (n) Outplacement Services. Upon the termination of the
Executive's employment with the Company for any reason other than pursuant to
subsection 5(a) (Termination by the Company for Cause) or subsection 5(l) (Death
of Executive), the Company shall provide to the Executive outplacement services
at the executive level (not to exceed $20,000 in the aggregate) for twelve (12)
months following such termination of employment.

         6. Non-Competition; Non-Disparagement; Confidential Information and
Cooperation.

                  (a) Non-Competition; Non-Solicitation. Executive recognizes
that if she were to attempt to perform as an employee of a competitor of the
Company, there would be a genuine and inevitable threat that Executive would use
or disclose Confidential Information. Therefore, and in consideration for
Executive's employment by the Company under the terms provided in this Agreement
and as a means to aid in the performance and enforcement of the terms of the
confidentiality provisions of Paragraph 6(c), the Executive hereby agrees that
during the period commencing on the date hereof and ending on the date which is
the first anniversary of the date on which the Executive's employment with the
Company terminates (the "Noncompetition Period"), the Executive will not,
without the express written consent of the Company, directly or indirectly,
anywhere in the United States, engage in any activity

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which is, or participate or invest in, or provide or facilitate the provision of
financing to, or assist (whether as owner, part-owner, shareholder, member,
partner, director, officer, trustee, employee, agent or consultant, or in any
other capacity), any business, organization or person other than the Company (or
any subsidiary or affiliate of the Company), and including any such business,
organization or person involving, or which is, a family member of the Executive,
whose business, activities, products or services are competitive with any of the
business, activities, products or services conducted or offered by the Company
or its subsidiaries or affiliates during any period in which the Executive
serves as an officer or employee of the Company or any of its subsidiaries or
affiliates, which business, activities, products and services shall include in
any event and without limitation consulting services regarding information
systems relating to the management of dental practices. Without implied
limitation, the foregoing covenant shall be deemed to prohibit (a) hiring or
engaging or attempting to hire or engage for or on behalf of the Executive or
any such competitor any officer or employee of the Company or any of its direct
and/or indirect subsidiaries and affiliates, or any former employee of the
Company and any of its direct and/or indirect subsidiaries and affiliates who
was employed during the six (6) month period immediately preceding the date of
such attempt to hire or engage, (b) encouraging for or on behalf of the
Executive or any such competitor any such officer or employee to terminate his
or her relationship or employment with the Company or any of its direct or
indirect subsidiaries and affiliates, (c) soliciting for or on behalf of
Executive or any such competitor any client of the Company or any of its direct
or indirect subsidiaries and affiliates, or any former client of the Company or
any of its direct or indirect subsidiaries and affiliates who was a client
during the six (6) month period immediately preceding the date of such
solicitation and (d) diverting to any person (as hereinafter defined) any client
or business opportunity of the Company or any of its direct or indirect
subsidiaries and affiliates.

         Notwithstanding anything herein to the contrary, the Executive may make
passive investments in any enterprise the shares of which are publicly traded if
such investment constitutes less than one percent (1%) of the equity of such
enterprise.

         Neither the Executive nor any business entity controlled by the
Executive is a party to any contract, commitment, arrangement or agreement which
could, following the date hereof, restrain or restrict the Company or any
subsidiary or affiliate of the Company from carrying on its business or restrain
or restrict the Executive from performing his employment obligations, and as of
the date of this Agreement the Executive has no business interests whatsoever in
or relating to the industries in which the Company or its subsidiaries or
affiliates currently engage and other than passive investments in the shares of
public companies of less than one percent (1%).

                  (b) Confidential Information. As used in this Agreement,
"Confidential Information" means information belonging to the Company which is
of value to the Company in the course of conducting its business and the
disclosure of which could result in a competitive or other disadvantage to the
Company. Confidential Information includes, without limitation, financial
information, reports, and forecasts; inventions, improvements and other
intellectual property; trade secrets; know-how; designs, processes or formulae;
software;

                                       11
<PAGE>   12

market or sales information or plans; customer lists; and business plans,
prospects and opportunities (such as possible acquisitions or dispositions of
businesses or facilities) which have been discussed or considered by the
management of the Company. Confidential Information includes information
developed by the Executive in the course of the Executive's employment by the
Company, as well as other information to which the Executive may have access in
connection with the Executive's employment. Confidential Information also
includes the confidential information of others with which the Company has a
business relationship. Notwithstanding the foregoing, Confidential Information
does not include information in the public domain, unless due to breach of the
Executive's duties under subsection 6(c).

                  (c) Confidentiality. The Executive understands and agrees that
her employment creates a relationship of confidence and trust between the
Executive and the Company with respect to all Confidential Information.
Executive acknowledges that in the course of her employment with the Company,
she will be allowed to become acquainted with the Company's Confidential
Information. The Company agrees to provide on an ongoing basis such Confidential
Information as the Company deems necessary or desirable to aid Executive in the
performance of her duties. At all times, both during the Executive's employment
with the Company and after her termination, the Executive will keep in
confidence and trust all such Confidential Information, and will not use or
disclose any such Confidential Information without the written consent of the
Company, except as may be necessary in the ordinary course of performing the
Executive's duties to the Company.

                  (d) Inventions. The Executive recognizes that the Company and
its affiliates possess a proprietary interest in all of the Confidential
Information and have the exclusive right and privilege to use, protect by
copyright, patent or trademark, or otherwise exploit the processes, ideas and
concepts described therein to the exclusion of the Executive, except as
otherwise agreed between the Company and the Executive in writing. The Executive
expressly agrees that any products, inventions, discoveries or improvements made
by the Executive or her agents or affiliates in the course of the Executive's
employment, including any of the foregoing which is based on or arises out of
the Confidential Information, shall be the property of and inure to the
exclusive benefit of the Company. The Executive further agrees that any and all
products, inventions, discoveries or improvements developed by the Executive
(whether or not able to be protected by copyright, patent or trademark) during
the course of her employment, or involving the use of the time, materials or
other resources of the Company or any of its affiliates, shall be promptly
disclosed to the Company and shall become the exclusive property of the Company,
and the Executive shall execute and deliver any and all documents necessary or
appropriate to implement the foregoing.

                  (e) Business Opportunities. The Executive agrees, while she is
employed by the Company, to offer or otherwise make known or available to it, as
directed by the Board of Directors of the Company and without additional
compensation or consideration, any business prospects, contracts or other
business opportunities that she may discover, find, develop or otherwise have
available to her in any field in which the Company or its affiliates are engaged
or propose to be engaged, and further agrees that any such prospects, contacts
or other business opportunities shall be the property of the Company.

                                       12
<PAGE>   13

                  (f) Documents, Records, etc. All documents, records, data,
apparatus, equipment and other physical property, whether or not pertaining to
Confidential Information, which are furnished to the Executive by the Company or
are produced by the Executive in connection with the Executive's employment will
be and remain the sole property of the Company. The Executive will return to the
Company all such materials and property as and when requested by the Company. In
any event, the Executive will return all such materials and property immediately
upon termination of the Executive's employment for any reason. The Executive
will not retain with the Executive any such material or property or any copies
thereof after such termination.

                  (g) Third-Party Agreements and Rights. The Executive hereby
confirms that the Executive is not bound by the terms of any agreement with any
previous company or other party which restricts in any way the Executive's use
or disclosure of information or the Executive's engagement in any business. The
Executive represents to the Company that the Executive's execution of this
Agreement, the Executive's employment with the Company and the performance of
the Executive's proposed duties for the Company will not violate any obligations
the Executive may have to any such previous company or other party. In the
Executive's work for the Company, the Executive will not disclose or make use of
any information in violation of any agreements with or rights of any such
previous company or other party, and the Executive will not bring to the
premises of the Company any copies or other tangible embodiments of non-public
information belonging to or obtained from any such previous employment or other
party.

                  (h) Litigation and Regulatory Cooperation. During and after
the Executive's employment, the Executive shall cooperate fully with the Company
in the defense or prosecution of any claims or actions now in existence or which
may be brought in the future against or on behalf of the Company which relate to
events or occurrences that transpired while the Executive was employed by the
Company. The Executive's full cooperation in connection with such claims or
actions shall include, but not be limited to, being available to meet with
counsel to prepare for discovery or trial and to act as a witness on behalf of
the Company at mutually convenient times. During and after the Executive's
employment, the Executive also shall cooperate fully with the Company in
connection with any investigation or review of any federal, state or local
regulatory authority as any such investigation or review relates to events or
occurrences that transpired while the Executive was employed by the Company. The
Company shall reimburse the Executive for any reasonable out-of-pocket expenses
incurred in connection with the Executive's performance of obligations pursuant
to this subsection 6(h).

                  (i) Injunction. The Executive agrees that it would be
difficult to measure any damages caused to the Company which might result from
any breach by the Executive of the promises set forth in this Section 6, and
that in any event money damages would be an inadequate remedy for any such
breach. Accordingly, subject to Section 8 of this Agreement, the Executive
agrees that if the Executive breaches, or proposes to breach, any portion of
this Agreement, the Company shall be entitled, in addition to all other remedies
that it may have, to an injunction or other appropriate equitable relief,
including, without limitation, specific

                                       13
<PAGE>   14

performance, to restrain any such breach without posting bond or showing or
proving any actual damage to the Company.

                  (j) Non-Disparagement and Cooperation. During the Executive's
employment and for a period of one year after termination of the Executive's
employment, the Executive agrees not to make or cause to be made, directly or
indirectly, any statement to any person criticizing or disparaging the Company
or any of its stockholders, directors, officers or employees or commenting
unfavorably or falsely on the character, business judgment, business practices
or business reputation of the Company or any of its stockholders, directors,
officers or employees. During and after the Executive's employment, the
Executive agrees that the Executive will cooperate fully with the Company in
arranging for an orderly and professional transition of her responsibilities.
During and after the Executive's employment, the Executive further agrees that
the Executive will present the circumstances of her termination of employment in
a light that will not reflect unfavorably on the Company. In the event Executive
breaches the covenants set forth in this subsection 6(j), the Executive will be
responsible for repaying to the Company any amounts received by the Executive
pursuant to subsection 5(h) (Certain Termination Benefits) within thirty (30)
days of such breach.

         7. Indemnification. The Company and the Executive have executed an
Indemnification Agreement which provides the same terms and conditions as
similar agreements between the Company and its directors. The stated purpose of
the Indemnification Agreement is to provide greater indemnification than that
which is afforded by the Company's charter, by-laws and, to the extent insurance
is available, the coverage of Executive under the Company's directors and
officers liability insurance policies.

         8. Dispute Resolution. Any controversy or claim arising out of or
relating to this Agreement or the breach thereof or otherwise arising out of the
Executive's employment or the termination of that employment (including, without
limitation, any claims of unlawful employment discrimination whether based on
age or otherwise) shall, to the fullest extent permitted by law, be settled by
arbitration under the auspices of the American Arbitration Association ("AAA")
in Dallas, Texas in accordance with the Employment Dispute Resolution Rules of
the AAA, including, but not limited to, the rules and procedures applicable to
the selection of arbitrators. The arbitrators shall be governed by the United
States Arbitration Act, 9 U.S.C. Sections 1-16. Judgment upon the award rendered
by the arbitrator may be entered in any court having jurisdiction thereof. This
Section 8 shall be specifically enforceable.

         Notwithstanding anything to the contrary contained herein, the
provisions of this Section 8 shall not apply with regard to any equitable
remedies to which any party may be entitled hereunder.

         Each of the parties hereto (a) hereby irrevocably submits to the
jurisdiction of the United States District Court for the Northern District of
Texas and the courts of general jurisdiction of the State of Texas in Dallas
county, Texas for all disputes hereunder including for the purposes of enforcing
the award or decision in any arbitration proceeding under this Section 8, (b)
hereby waives, and agrees not to assert, by way of motion, as a defense, or

                                       14
<PAGE>   15

otherwise, in any such suit, action or proceeding, any claim that it is not
subject personally to the jurisdiction of the above-named courts, that the suit,
action or proceeding is brought in an inconvenient forum, or that the venue of
the suit, action or proceeding is improper. Each of the parties hereto hereby
consents to service of process by registered mail at the address to which
notices are to be given. Each of the parties hereto agrees that its or her
submission to jurisdiction and its or her consent to service of process by mail
is made for the express benefit of the other parties hereto. Final judgment
against any party hereto in any such action, suit or proceeding may be enforced
in other jurisdictions by suit, action or proceeding on the judgment, or in any
other manner provided by or pursuant to the laws of such other jurisdiction;
provided, however, that any party hereto may at its or her option bring suit or
institute other judicial proceedings, in any state or federal court of the
United States or of any country or place where the other parties or their
assets, may be found.

         9. Integration. Except as provided herein, this Agreement constitutes
the entire agreement between the parties with respect to the subject matter
hereof and supersedes all prior agreements between the parties with respect to
any related subject matter.

         10. Assignment; Successors and Assigns, etc. Neither the Company nor
the Executive may make any assignment of this Agreement or any interest herein,
by operation of law or otherwise, without the prior written consent of the other
party; that the Company may assign its rights under this Agreement without the
consent of the Executive in the event that the Company shall effect a
reorganization, consolidate with or merge into any other corporation,
partnership, organization or other entity, or transfer all or substantially all
of its properties or assets to any other corporation, partnership, organization
or other entity. This Agreement shall inure to the benefit of and be binding
upon the Company and the Executive, their respective successors, executors,
administrators, heirs and permitted assigns.

         11. Enforceability. If any portion or provision of this Agreement
(including, without limitation, any portion or provision of any section of this
Agreement) shall to any extent be declared illegal or unenforceable by a court
of competent jurisdiction, then the remainder of this Agreement, or the
application of such portion or provision in circumstances other than those as to
which it is so declared illegal or unenforceable, shall not be affected thereby,
and each portion and provision of this Agreement shall be valid and enforceable
to the fullest extent permitted by law.

         12. Waiver. No waiver of any provision hereof shall be effective unless
made in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.

         13. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by a nationally recognized overnight courier service or by
registered or certified mail, postage prepaid, return receipt requested, to the
Executive at the last address the Executive has filed in

                                       15

<PAGE>   16
writing with the Company or, in the case of the Company, at its main offices,
attention of the President and/or Secretary, and shall be effective on the date
received.

         14. Amendment. This Agreement may be amended or modified only by a
written instrument signed by the Executive and by a duly authorized
representative of the Company.

         15. Governing Law. This contract shall be construed under and be
governed in all respects by the laws of the State of Texas, without giving
effect to the conflict of laws principles thereof.

         16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be taken to be
an original; but such counterparts shall together constitute one and the same
document.

         17. Period of Limitations. No legal action shall be brought and no
cause of action shall be asserted by or on behalf of the Company or any
affiliate of the Company against the Executive, the Executive's spouse, heirs,
executors or personal or legal representatives after the expiration of two (2)
years from the date of accrual of such cause of action, and any claim or cause
of action of the Company or any affiliate shall be extinguished and deemed
released unless asserted by the timely filing of a legal action within such
two-year period; provided, however, that if any shorter period of limitations is
otherwise applicable to any such cause of action, such shorter period shall
govern.

         18. Legal Fees. If Executive seeks to enforce the provisions of
Sections 4 and 5 of this Agreement , then all of her reasonable legal fees and
expenses shall be paid and indemnified by the Company to Executive as they come
due upon presentation thereof (with supporting detail) by Executive to the
Company. All reasonable legal fees (not to exceed $7,000 in the aggregate) and
expenses incurred by Executive in connection with the negotiation and execution
of this Agreement shall be paid or reimbursed to Executive by the Company.

         19. 2000 Employment Agreement. This Agreement shall supersede and
replace in all respects the 2000 Employment Agreement, which superseded and
replaced in all respects the 1999 Employment Agreement. Notwithstanding the
foregoing, the Indemnification Agreement referenced in Section 7 of this
Agreement and the Stock Option Agreement dated as of August 9, 1999 and the
Stock Option Agreement dated as of May 8, 2000, shall remain in full force and
effect.

         20. Defined Terms. As used herein, the following terms shall have the
following meanings:

                  (a) "1999 Employment Agreement" shall mean that Employment
Agreement between Monarch Dental Corporation and Lisa Corbett Peterson dated as
of August 9, 1999.

                  (b) "Transaction" shall mean any transaction described in
subsection 5(d)(i), (ii) or (v).

                                       16
<PAGE>   17

                  (c) "Closing Date" shall mean the date upon which a
Transaction is closed.

                  (d) "Total Equity Value," for purposes of calculating the
Transaction Fee with respect to a Transaction, shall mean:

                  V = W times X, where:

                  V means the Total Equity Value;

                  W  means total number of shares of the Company's equity
                     securities outstanding at the time of the Transaction
                     on a fully diluted basis to be determined by the
                     Accounting Firm in accordance with Generally Accepted
                     Accounting Principles under the terms of the second
                     sentence of subsection 4(f) hereof; and

                  X  means the per share value received by any holder of
                     the Company's equity securities who sells, exchanges,
                     converts, or otherwise disposes of shares held
                     thereby under and/or pursuant to the Transaction.

                  (e) "2000 Employment Agreement" shall mean that Amended and
Restated Employment Agreement between Monarch Dental Corporation and Lisa
Corbett Peterson dated as of May 26, 2000.

                                       17
<PAGE>   18

                         [PAGE INTENTIONALLY LEFT BLANK]

                                       18
<PAGE>   19
         IN WITNESS WHEREOF, this Second Amended and Restated Employment
Agreement has been executed as a sealed instrument by the Company, by its duly
authorized officer, and by the Executive, as of the Effective Date.

                                   COMPANY:

                                   MONARCH DENTAL CORPORATION

                                   By:
                                      -----------------------------------------
                                      Glenn E. Hemmerle, By Direction of the
                                      Board of Directors

                                   EXECUTIVE:

                                   --------------------------------------------
                                   Lisa Corbett Peterson

                                       19<PAGE>   1

                                                                    EXHIBIT 10.5

                               FIFTH AMENDMENT TO
                   SECOND AMENDED AND RESTATED LOAN AGREEMENT

         THIS FIFTH AMENDMENT TO SECOND AMENDED AND RESTATED LOAN AGREEMENT
(this "Amendment") is executed as of September 1, 2000, by and among MONARCH
DENTAL CORPORATION, a Delaware corporation ("Borrower"), BANK OF AMERICA, N.A.,
a national banking association ("Administrative Agent"), as administrative
agent, and the entities from time to time designated as "Lenders" under the Loan
Agreement (herein defined) ("Lenders"), and is consented to by the GUARANTORS
listed on the signature pages attached hereto.

                                   WITNESSETH:

         WHEREAS, Borrower, Administrative Agent and Lenders entered into that
certain Second Amended and Restated Loan Agreement, dated as of June 30, 1999,
pursuant to which Lenders agreed to make the Credit Facility (as therein
defined) available to Borrower (as heretofore or hereafter amended, the "Loan
Agreement")(each capitalized term used but not otherwise defined herein shall
have the same meaning given to it in the Loan Agreement); and

         WHEREAS, Borrower, Administrative Agent and Lenders amended the Loan
Agreement pursuant to that certain Third Amendment to Second Amended and
Restated Loan Agreement dated as of June 30, 2000 (the "Third Amendment") which
(i) extended the deadline for Borrower to raise the Required Institutional Debt
and (ii) permitted the sale of all of the outstanding capital stock of Borrower
to the Proposed Purchaser identified therein; and

         WHEREAS, Borrower, Administrative Agent and Lenders amended the Loan
Agreement pursuant to that certain Fourth Amendment to Second Amended and
Restated Loan Agreement dated as of August 11, 2000 (the "Fourth Amendment")
which provided for a substitute Proposed Purchaser, and extended the timeframe
for certain delivery requirements contained in the Third Amendment; and

         WHEREAS, Borrower has requested that such delivery requirements be
restructured and extended; and

         WHEREAS, subject to the terms and conditions contained herein,
Administrative Agent and the Lenders have agreed to such request.

         NOW, THEREFORE, in consideration of the covenants, conditions and
agreements hereinafter set forth, and for other good and valuable consideration,
the receipt and adequacy of

FIFTH AMENDMENT TO SECOND AMENDED
AND RESTATED LOAN AGREEMENT (Monarch Dental)         Page 1

<PAGE>   2

which are all hereby acknowledged, Borrower, Administrative Agent and Lenders
hereby covenant and agree as follows:

                             ARTICLE I - AMENDMENTS

         Section 1.1. Corporate Restructure. Borrower has requested, and
Administrative Agent and the Lenders hereby agree, that Section 8.1(m) of the
Loan Agreement shall be deleted in its entirety. In lieu of the requirements
previously set forth in Section 8.1(m), Borrower hereby covenants and agrees
that:

                  (a) On or before October 2, 2000, Borrower shall deliver to
         Administrative Agent a written proposal (the "Financing Proposal") to
         refinance the Credit Facility and the Short Term Loan in full, which
         proposal shall include, without limitation, (i) an engagement letter
         (with term sheet) in form and substance acceptable to the Required
         Lenders authorizing an agent to obtain mezzanine financing (the
         "Subordinate Debt") for Borrower of at least $15,000,000, and (ii) an
         engagement letter (with term sheet) in form and substance acceptable to
         Required Lenders appointing a syndication agent on behalf of Borrower
         which is authorized to obtain commitments to refinance the balance of
         the Credit Facility and the Short Term Loan after reducing the Credit
         Facility and the Short Term Loan by the proceeds of the Subordinate
         Debt. Additionally, on or before October 2, 2000, Borrower shall
         deliver to Administrative Agent a time line in detail satisfactory to
         Required Lenders (the "Time Line") of the significant actions (e.g.
         execution of a definitive financing agreement, a due diligence
         schedule, and obtaining sufficient commitments from a bank group) which
         will be necessary to cause the Financing Proposal to be consummated on
         or before December 15, 2000.

                  (b) Borrower has notified Administrative Agent and Lenders
         that Borrower is continuing to pursue strategic alternatives, including
         a potential sale of Borrower, however, Borrower covenants and agrees
         that Borrower shall not enter into any exclusivity agreement or other
         binding agreement for the sale of all or substantially all of the
         assets or stock of Borrower, or for any merger or other consolidation
         of Borrower with any other company, without the prior written consent
         of Required Lenders.

         Borrower understands and agrees that Borrower's failure to consummate
the actions above set forth by the date indicated or to comply with the terms of
this Section 1.1 or the Time Line once approved by the Required Lenders shall
constitute a default under the Credit Facility and the Short Term Loan for which
Borrower shall not be entitled to a cure period.

                           ARTICLE II - MISCELLANEOUS

         Section 2.1. Closing. The closing (the "Closing") of the transactions
contemplated by this Amendment shall occur on and as of the date that all
conditions hereto contained in Section 2.2 of this Amendment have been satisfied
(the "Modification Closing Date").

FIFTH AMENDMENT TO SECOND AMENDED
AND RESTATED LOAN AGREEMENT (Monarch Dental)         Page 2

<PAGE>   3

         Section 2.2. Conditions to the Closing. As conditions precedent to the
Closing, Borrower, each Guarantor and Required Lenders shall have executed and
delivered this Amendment.

         Section 2.3. Continuing Effect. Except as modified and amended hereby,
the Loan Agreement and other Loan Documents are and shall remain in full force
and effect in accordance with their terms.

         Section 2.4. Representations and Warranties. Borrower hereby represents
and warrants to Administrative Agent and the Lenders that (i) except as has been
disclosed by Borrower to Administrative Agent in writing, all representations
and warranties made by Borrower in the Loan Agreement as of the date thereof are
true and correct as of the date hereof, as if such representations and
warranties were recited herein in their entirety and (ii) Borrower is not in
default of any covenant or agreement contained in the Loan Agreement.

         Section 2.5. Payment of Expenses. Borrower agrees to pay to
Administrative Agent the reasonable attorneys' fees and expenses of
Administrative Agent's counsel and other expenses incurred by Administrative
Agent in connection with this Amendment.

         Section 2.6. Binding Agreement. This Amendment shall be binding upon,
and shall inure to the benefit of, the parties' respective representatives,
successors and assigns.

         Section 2.7. Ratification. Except as otherwise expressly modified by
this Amendment, all terms and provisions of the Loan Agreement, the Notes and
the other Loan Documents, shall remain unchanged and hereby are ratified and
confirmed and shall be and shall remain in full force and effect, enforceable in
accordance with their terms.

         Section 2.8. No Defenses. Borrower and each Guarantor, by its execution
of this Amendment, hereby declares that it has no set-offs, counterclaims,
defenses or other causes of action against Administrative Agent or any Lender
arising out of the Credit Facility, the modification of the Credit Facility, any
documents mentioned herein or otherwise; and, to the extent any such set-offs,
counterclaims, defenses or other causes of action may exist, whether known or
unknown, such items are hereby waived by Borrower and each Guarantor.

         Section 2.9. Further Assurances. The parties hereto shall execute such
other documents as may be necessary or as may be required, in the opinion of
counsel to Administrative Agent, to effect the transactions contemplated hereby
and the liens and/or security interests of all other collateral instruments, as
modified by this Amendment. Borrower also agrees to provide to Administrative
Agent such other documents and instruments as Lenders reasonably may request in
connection with the modification of the Credit Facility effected hereby.

FIFTH AMENDMENT TO SECOND AMENDED
AND RESTATED LOAN AGREEMENT (Monarch Dental)         Page 3

<PAGE>   4

         Section 2.10. Usury Savings Clause. Notwithstanding anything to the
contrary in this Amendment, the Notes or any other Loan Document, or in any
other agreement entered into in connection with the Notes or securing the
indebtedness evidenced by the Notes, whether now existing or hereafter arising
and whether written or oral, it is agreed that the aggregate of all interest and
other charges constituting interest, or adjudicated as constituting interest,
and contracted for, chargeable or receivable under the Notes or otherwise in
connection with the Notes shall under no circumstances exceed the maximum rate
of interest permitted by applicable law. In the event the maturity of the Notes
is accelerated by reason of an election by any of the holders thereof resulting
from a default thereunder or under any other document executed as security
therefor or in connection therewith, or by voluntary prepayment by the maker, or
otherwise, then earned interest may never include more than the maximum rate of
interest permitted by applicable law. If from any circumstance any holder of any
of the Notes shall ever receive interest or any other charges constituting
interest, or adjudicated as constituting interest, the amount, if any, which
would exceed the maximum rate of interest permitted by applicable law shall be
applied to the reduction of the principal amount owing on such Notes or on
account of any other principal indebtedness of the maker to the holders of such
Notes, and not to the payment of interest, or if such excessive interest exceeds
the unpaid balance of principal thereof and such other indebtedness, the amount
of such excessive interest that exceeds the unpaid balance of principal thereof
and such other indebtedness shall be refunded to the maker. All sums paid or
agreed to be paid to the holders of the Notes for the use, forbearance or
detention of the indebtedness of the maker to the holders of such Notes shall be
amortized, prorated, allocated and spread throughout the full term of such
indebtedness until payment in full for the purpose of determining the actual
rate on such indebtedness is uniform throughout the term thereof.

                  The terms "maximum amount" or "maximum rate" as used in this
Amendment or the Notes, or in any other agreement entered into in connection
with the Notes or securing the indebtedness evidenced by the Notes, whether now
existing or hereafter arising and whether written or oral, include, as to
Chapter 303 of the Texas Finance Code (and as same may be incorporated by
reference in other statutes of the State of Texas), but otherwise without
limitation, that rate based upon the "weekly ceiling"; provided, however, that
this designation shall not preclude the rate of interest contracted for, charged
or received in connection with the Credit Facility from being governed by, or
construed in accordance with, any other state or federal law, including but not
limited to, Public Law 96-221.

         Section 2.11. Non-Waiver of Events of Default. Neither this Amendment
nor any other document executed in connection herewith constitutes or shall be
deemed (a) a waiver of, or consent by Administrative Agent or any Lender to, any
default or event of default which may exist or hereafter occur under any of the
Loan Documents, (b) a waiver by Administrative Agent or any Lender of any of
Borrower's obligations under the Loan Documents, or (c) a waiver by
Administrative Agent or any Lender of any rights, offsets, claims, or other
causes of action that any Lender may have against Borrower.

FIFTH AMENDMENT TO SECOND AMENDED
AND RESTATED LOAN AGREEMENT (Monarch Dental)         Page 4

<PAGE>   5

         Section 2.12. Enforceability. In the event the enforceability or
validity of any portion of this Amendment, the Loan Agreement, the Notes, or any
of the other Loan Documents is challenged or questioned, such provision shall be
construed in accordance with, and shall be governed by, whichever applicable
federal or Texas law would uphold or would enforce such challenged or questioned
provision.

         Section 2.13. Counterparts. This Amendment may be executed in several
counterparts, all of which are identical, each of which shall be deemed an
original, and all of which counterparts together shall constitute one and the
same instrument, it being understood and agreed that the signature pages may be
detached from one or more of such counterparts and combined with the signature
pages from any other counterpart in order that one or more fully executed
originals may be assembled.

         Section 2.14. Choice of Law. THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS, EXCEPT TO THE
EXTENT FEDERAL LAWS PREEMPT THE LAWS OF THE STATE OF TEXAS.

         Section 2.15. Entire Agreement. This Amendment and the other Loan
Documents, contain the entire agreements between the parties relating to the
subject matter hereof and thereof. This Amendment and the other Loan Documents
may be amended, revised, waived, discharged, released or terminated only by a
written instrument or instruments, executed by the party against which
enforcement of the amendment, revision, waiver, discharge, release or
termination is asserted. Any alleged amendment, revision, waiver, discharge,
release or termination which is not so documented shall not be effective as to
any party.

         Section 2.16. Partial Execution. This Amendment shall be effective for
all purposes upon execution by Borrower, Guarantors, and Required Lenders (as
defined in the Loan Agreement). If a particular provision of this Amendment is
of the nature described in subsection (b) of the definition of Required Lenders
(a "Material Change"), then that provision shall only be effective upon
execution of all of the Lenders, but the failure of all of the Lenders to so
execute this Amendment shall not affect the effectiveness of those portions of
this Amendment which do not constitute a Material Change.

         THIS AMENDMENT AND THE OTHER LOAN DOCUMENTS REPRESENT THE FINAL
AGREEMENT BETWEEN THE PARTIES RELATED TO THE SUBJECT MATTER HEREIN CONTAINED AND
MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL
AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE
PARTIES.

FIFTH AMENDMENT TO SECOND AMENDED
AND RESTATED LOAN AGREEMENT (Monarch Dental)         Page 5

<PAGE>   6

         IN WITNESS WHEREOF, this Amendment is executed effective as of the date
first written above.

                                 BORROWER:

                                 MONARCH DENTAL CORPORATION,
                                 a Delaware corporation

                                 By:
                                    --------------------------------------
                                 Name:
                                      ------------------------------------
                                 Title:
                                       -----------------------------------

                                 ADMINISTRATIVE AGENT:

                                 BANK OF AMERICA, N.A., a national banking
                                 association, as Administrative Agent

                                 By:
                                    --------------------------------------
                                 Name:
                                      ------------------------------------
                                 Title:
                                       -----------------------------------

                                 LENDERS:

                                 BANK OF AMERICA, N.A., a national banking
                                 association,

                                 By:
                                    --------------------------------------
                                 Name:
                                      ------------------------------------
                                 Title:
                                       -----------------------------------

FIFTH AMENDMENT TO SECOND AMENDED
AND RESTATED LOAN AGREEMENT (Monarch Dental)         Page 6

<PAGE>   7

                                 FLEET NATIONAL BANK,
                                 a national banking association

                                 By:
                                    --------------------------------------
                                 Name:
                                      ------------------------------------
                                 Title:
                                       -----------------------------------

                                 COOPERATIEVE CENTRALE RAIFFEISEN-
                                 BOERENLEENBANK B.A., "Rabobank Nederland",
                                 New York Branch

                                 By:
                                    --------------------------------------
                                 Name:
                                      ------------------------------------
                                 Title:
                                       -----------------------------------

                                 By:
                                    --------------------------------------
                                 Name:
                                      ------------------------------------
                                 Title:
                                       -----------------------------------

FIFTH AMENDMENT TO SECOND AMENDED
AND RESTATED LOAN AGREEMENT (Monarch Dental)         Page 7

<PAGE>   8

         CONSENT OF GUARANTORS

Each Guarantor hereby (a) acknowledges its consent to this Agreement and the
changes to the Credit Facility effected hereby, (b) ratifies and confirms all
terms and provisions of its respective Guaranty and the security instruments
relating to the Collateral , (c) agrees that such Guaranty and security
instruments are and shall remain in full force and effect, (d) acknowledges that
there are no claims or offsets against, or defenses or counterclaims to, the
terms and provisions of and the obligations created and evidenced by such
Guaranty or security instruments, (e) reaffirms all agreements and obligations
under such Guaranty and such security instruments with respect to the Credit
Facility, the Notes, this Agreement and all other documents, instruments or
agreements governing, securing or pertaining to the Credit Facility, as the same
may be modified by this Agreement, (f) and acknowledges that the Obligations
described in this Agreement are the guaranteed obligations under such Guaranty
and are the obligations secured by such security instruments and (g) represents
and warrants that all requisite corporate or partnership action necessary for it
to execute this Agreement has been taken.

         EXECUTED as of the 1st day of September, 2000.

                   GUARANTORS:

                   Managed Dental Care Centers, Inc., a Texas corporation
                   Monarch Dental Associates (Arkansas), Inc.,  an Arkansas
                     corporation (f/k/a United Dental Care, Inc.)
                   Dental Care One (Monarch), Inc., an Ohio corporation
                   Midwest Dental Management, Inc., a Wisconsin corporation
                   Dental Centers of Indiana (Monarch), Inc., an Indiana
                     corporation;
                   Midwest Dental Care, Mondovi, Inc., a Wisconsin
                     corporation;
                   Midwest Dental Care, Sheboygan, Inc., a Wisconsin
                     corporation;
                   Monarch Dental Management, Inc., a Texas corporation;
                   Three Peaks Dental Management, Inc., a Colorado
                     corporation;
                   Monarch Dental Associates (Utah), Inc., a Utah corporation

                   By:
                      ------------------------------------
                   Name:
                        ----------------------------------
                   Title:
                         ---------------------------------

                   MacGregor Dental Associates, L.P., a Texas limited
                   partnership

                   By:      Monarch Dental Management, Inc., a Texas
                            corporation, its general partner

FIFTH AMENDMENT TO SECOND AMENDED
AND RESTATED LOAN AGREEMENT (Monarch Dental)         Page 8

<PAGE>   9

                            By:
                               -------------------------------
                            Name:
                                 -----------------------------
                            Title:
                                  ----------------------------

FIFTH AMENDMENT TO SECOND AMENDED
AND RESTATED LOAN AGREEMENT (Monarch Dental)         Page 9

<PAGE>   10

                             Monarch Dental Associates, L.P., a Texas limited
                             partnership

                             By:      Monarch Dental Management, Inc., a Texas
                                      corporation, its general partner

                                      By:
                                         -------------------------------------
                                      Name:
                                           -----------------------------------
                                      Title:
                                            ----------------------------------

                             Monarch Dental (Press) Associates, L.P., a Texas
                             limited partnership

                             By:      Monarch Dental Management, Inc., a Texas
                                      corporation, its general partner

                                      By:
                                         -------------------------------------
                                      Name:
                                           -----------------------------------
                                      Title:
                                            ----------------------------------

                             Monarch Dental Associates (Midland/Odessa), L.P.,
                             a Texas limited partnership

                             By:      Monarch Dental Management, Inc., a Texas
                                      corporation, its general partner

                                      By:
                                         --------------------------------------
                                      Name:
                                           ------------------------------------
                                      Title:
                                            -----------------------------------

                             Monarch Dental Associates (Abilene), L.P., a Texas
                             limited partnership

                             By:      Monarch Dental Management, Inc., a Texas
                                      corporation, its general partner

                                      By:
                                         --------------------------------------
                                      Name:
                                           ------------------------------------
                                      Title:
                                            -----------------------------------

FIFTH AMENDMENT TO SECOND AMENDED
AND RESTATED LOAN AGREEMENT (Monarch Dental)                            Page 10

<PAGE>   11

                                Monarch Dental Associates (Arizona), L.L.C.,
                                an Arizona limited liability company

                                By:      Monarch Dental Associates (Utah), Inc.,
                                         a Utah corporation, its manager

                                By:
                                   ---------------------------------------------
                                Name:
                                     -------------------------------------------
                                Title:
                                      ------------------------------------------

                                Partners Dental Corporation,
                                a Delaware corporation

                                By:
                                   ---------------------------------------------
                                Name:
                                     -------------------------------------------
                                Title:
                                      ------------------------------------------

                                Valley Forge Dental Associates, Inc.,
                                a Delaware corporation

                                By:
                                   ---------------------------------------------
                                Name:
                                     -------------------------------------------
                                Title:
                                      ------------------------------------------

                                VFD of Pennsylvania, Inc.,
                                a Delaware corporation

                                By:
                                   ---------------------------------------------
                                Name:
                                     -------------------------------------------
                                Title:
                                      ------------------------------------------

                                Horizon Group International, Inc.,
                                an Ohio corporation

                                By:
                                   ---------------------------------------------
                                Name:
                                     -------------------------------------------
                                Title:
                                      ------------------------------------------

FIFTH AMENDMENT TO SECOND AMENDED
AND RESTATED LOAN AGREEMENT (Monarch Dental)                             Page 11

<PAGE>   12

                                Precise Dental Lab, Inc.,
                                an Ohio corporation

                                By:
                                   -------------------------------------
                                Name:
                                     -----------------------------------
                                Title:
                                      ----------------------------------

                                VFD of Georgia, Inc.,
                                a Delaware corporation

                                By:
                                   -------------------------------------
                                Name:
                                     -----------------------------------
                                Title:
                                      ----------------------------------

                                VFD of Pittsburgh, Inc.,
                                a Pennsylvania corporation

                                By:
                                   -------------------------------------
                                Name:
                                     -----------------------------------
                                Title:
                                      ----------------------------------

                                Pro Dent, Inc.,
                                a Pennsylvania corporation

                                By:
                                   -------------------------------------
                                Name:
                                     -----------------------------------
                                Title:
                                      ----------------------------------

                                VFD Realty, Inc.,
                                a Delaware corporation

                                By:
                                   -------------------------------------
                                Name:
                                     -----------------------------------
                                Title:
                                      ----------------------------------

FIFTH AMENDMENT TO SECOND AMENDED
AND RESTATED LOAN AGREEMENT (Monarch Dental)         Page 12

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