8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): September 15, 2009

GRAYMARK HEALTHCARE, INC.

(Exact name of registrant as specified in its charter)

Oklahoma
(State or other jurisdiction
of incorporation) 001-34171
(Commission File Number) 20-0180812
(I.R.S. Employer
Identification No.)

210 Park Avenue, Suite 1350
Oklahoma City, Oklahoma 73102 (Address of principal executive offices)	73102 (Zip Code)

Registrant’s telephone number, including area code: (405) 601-5300

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o     Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o     Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o     Pre-commencement communications pursuant to Rule 14a-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement.

As previously reported on Form 8-K filed with the U.S. Securities and Exchange Commission on August 26, 2009, on August 19, 2009, we at Graymark Healthcare, Inc. caused our subsidiary, SDC Holdings, LLC (“SDC”), to execute a Stock Sale Agreement with AvastraUSA, INC. (“Seller”) and Avastra Sleep Centres Limited providing for the purchase of the outstanding stock of somniTech, Inc. and somniCare, Inc. (the “Somni Stock”) and Avastra Eastern Sleep Centers, Inc. (the “Eastern Stock”). On August 23, 2009, the First Amendment to Stock Sale Agreement was executed, which amended the earlier executed Stock Sale Agreement (collectively, the “Purchase Agreement”). SDC’s obligation to purchase the Somni Stock did not become binding until 5:00 p.m. CDT on August 23, 2009.

On September 15, 2009, the Second Amendment to Stock Sale Agreement, which amended the earlier executed Purchase Agreement and the terms of SDC’s purchase of the Eastern Stock, was executed and we completed the purchase of the Eastern Stock. SDC purchased the Eastern Stock for the following (collectively the “Eastern Purchase Price”):

• SDC’s assumption of the earnout obligations and liabilities of Avastra Sleep Centres Limited under the Asset Purchase Agreement dated October 10, 2007 as they become due;

• the payment of $1,156,000 (in accordance with the directions of Seller) to the Seller; and

• the delivery to Avastra Sleep Centres Limited (at the direction of Seller) 652,795 shares of our common stock having an aggregate value of $1,344,000.

The common stock to be issued for the Eastern Stock will be subject to a 12-month lockup agreement prohibiting the transfer of the shares for a period of 12 months and for the following 12 months permitting the transfer 25% of the shares in any three month period. Furthermore, for so long as Avastra Sleep Centres Limited owns 100,000 or more common stock shares a representative of Seller may serve as an advisory (non-voting) member of our board of directors; provided, however, that Seller’s designated representative must be acceptable to our Chairman of the Board. Seller’s representative while serving as an advisory (non-voting) member of our Board of Directors will be entitled to receive all notices of and written consents in lieu of meetings and may attend all meetings of directors. All fees, costs and expenses associated with the Advisory Director’s attendance at all meetings of directors, including, but not limited to, roundtrip commercial first class airfare, accommodations at a hotel of such Advisory Director’s reasonable choosing and reimbursement for any meals and other transportation expenses reasonably incurred by the Advisory Director in connection with his or her attendance at such meetings of directors will be paid by us up to a maximum of US$5,000 per meeting.

The Eastern Purchase Price was based on certain assumptions (collectively, the “Assumptions”). If any of the Assumptions are proven to be inaccurate, SDC will have a claim, for the damages actually incurred by SDC solely as follows:

• against Seller for an 18-month period following September 14, 2009 limited to $3,000,000; and

• against Avastra Sleep Centres Limited until September 14, 2010 and solely to the extent of the “market value” of the 652,795 common stock shares delivered to Avastra Sleep Centres Limited. Furthermore, after September 14, 2014, a claim may be brought for an Assumption being proven to be inaccurate against Avastra Sleep Centres Limited for an additional six-month period, but only to the “market value” of

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• (i) the 489,596 common stock shares during the three-month period ending December 13, 2010,

• (ii) the 326,398 common stock shares during the three-month period ending March 13, 2011, and

• (iii) 163,199 common stock shares during the three-month period ending June 13, 2011.

For this purpose, “market value” of the common stock shares will be based upon the average closing sale price of our common stock shares for the 20 trading days ending on the last trading day prior to the day of payment of SDC’s claim by Avastra Sleep Centres Limited.

The Assumptions are the following:

• Authorization. The execution and the consummation of the transactions contemplated by the Purchase Agreement were duly authorized by Seller and Avastra Sleep Centres Limited and do not violate any applicable law.

• Authority. Avastra Eastern Sleep Centers, Inc. (the “Eastern Entity”) has all necessary power and authority to own, operate or lease the assets now owned, operated or leased by it and to carry on the its business as it has been and is currently conducted.

• Subsidiaries. There are no corporations, partnerships, joint ventures, associations or other entities in which the Eastern Entity owns, of record or beneficially, any equity interests.

• Capital Stock. Seller owns all of the issued and outstanding capital stock of the Eastern Entity free and clear of all liens and encumbrances (exclusive of any restrictions under applicable federal or state securities laws or under the Eastern Entity’s certificate of incorporation or bylaws).

• Minute Books. The minute book of the Eastern Entity contains accurate records of all meetings and accurately reflects all other actions taken by the holders of capital stock of the Eastern Entity and the board of directors of the Eastern Entity. Complete and accurate copies of all minute books have been delivered by Seller to SDC for review.

• Financial Information; Books and Records. Seller (i) has delivered to SDC true and complete copies of the unaudited consolidated balance sheet of Seller for each of the two fiscal years ended June 30, 2008 and 2009, and the related unaudited statements of income of Seller, accompanied by the reports thereon of Seller’s accountants (collectively referred to herein as the “Financial Statements”), and (ii) has delivered to Buyer true and complete copies of the unaudited balance sheet of each of the Eastern Entity for the fiscal years ended June 30, 2009 (the “2009 Balance Sheet”) and 2008 and the related statements of income for the period then ending (such unaudited balance sheets and statements of income, collectively the “Eastern Financial Statements”). The Financial Statements and the Eastern Financial Statements (i) were prepared in accordance with the books of account and other financial records of Seller and each of the Eastern Entity, (ii) are complete and accurate in all material respects, (iii) present fairly the financial condition and results of operations of Seller and the Eastern Entity as of the dates thereof or for the periods covered thereby, (iv) were prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) on a basis consistent with the past practices of Seller and each of the Eastern Entity (with the exception that the Eastern Financial Statements lack certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP) and (v) include all adjustments (consisting only of normal recurring accruals) that are necessary to present fairly in all material respects the financial condition of

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Seller and the Eastern Entity and the results of the operations of Seller and the Eastern Entity as of the dates thereof or for the periods covered thereby.

• Absence of Undisclosed Liabilities. The Eastern Entity has not incurred any liabilities, other than liabilities (i) as are reflected or reserved against in the Eastern Financial Statements (or the notes thereto), (ii) incurred in the ordinary course of business consistent with past practices since July 1, 2009, or (iii) that would not be required to be disclosed in financial statements if audited statements were prepared in accordance with U.S. GAAP.

• Cash Balances. The cash available in the bank accounts of the Eastern Entity as of September 14, 2009 is substantially the same as reflected in the 2009 Balance Sheet, subject to changes for deposits and payments in the ordinary course of business.

• Asset Information. All fixed assets on the 2009 Balance Sheet represent identifiable assets of the Eastern Entity.

• Accounting Policies. Since July 1, 2007, there have been no changes in accounting policy, method or estimates that impacted the recorded revenue of the Eastern Entity in fiscal year 2008 or 2009.

• Accounts Receivable. Accounts receivable reflected in the Eastern Financial Statements and those arising after June 30, 2009

• represent actual good and collectable claims for services provided and were billed in compliance with all applicable laws;

• were billed in material compliance with all third party requirements;

• are collectable at a rate of at least 75% of their net value thereof; and

• as of September 14, 2009, the net value of all the accounts receivable of the Eastern Entity are substantially the same as the amounts reflected in the Eastern Financial Statements, subject to changes in the ordinary course of business.

• Compliance with Laws. The Eastern Entity has conducted its business in material compliance with all applicable laws.

• Taxes. Each of the Eastern Entity and Seller has filed all tax returns that it was required to file under applicable laws and will file all income tax returns and pay all income taxes related to the fiscal year ending June 30, 2009 and the stub period ending September 14, 2009. All tax returns were or upon filing will be, correct and complete in all material respects and have been or will be prepared in compliance with all applicable laws. The Eastern Entity has not ever been a party to any tax allocation or sharing agreement.

• Title and Sufficiency of Assets. The Eastern Entity has good and marketable title to, or, in the case of leased or subleased assets, valid and subsisting leasehold interests in, all its assets, free and clear of all liens and encumbrances. The Eastern Entity owns or otherwise has the right to use all the properties, assets and rights used in the conduct of its business as presently conducted.

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• Litigation. There are no lawsuits, arbitrations or similar proceedings pending by or against the Eastern Entity nor has Seller or the Eastern Entity sent or received written correspondence threatening such lawsuits, arbitrations or similar proceedings.

• Contracts. Seller has provided SDC with true, accurate and complete copies (either in hard copy or electronic copy form) of each material contract or agreement (including all real estate leases) to which the Eastern Entity is a party. The Eastern Entity is not in breach of, or default under, any of those contracts or agreements.

• Acquisition Documentation. Seller has provided Buyer with true, accurate and correct copies of all correspondence and documentation related to the transactions pursuant to which of the Eastern Entity acquired its business and/or Seller obtained ownership of the Eastern Stock.

• Ordinary Course. Since July 1, 2009, the Eastern Entity has operated only in the ordinary course of business consistent with past practice.

• Effect of Transaction. In connection with the sale and acquisition of the Eastern Stock, the Eastern Entity will not suffer a material adverse effect resulting from a change in control provision under any contract or agreement to which it is a party.

• Directed Payments. All payments and all obligations assumed by SDC are in consideration of the acquisition of the Somni Stock and the Eastern Stock from Seller. Any payments to Avastra Sleep Centers Limited by SDC or obligations of Avastra Sleep Centers Limited assumed by SDC are being paid to Avastra Sleep Centres Limited or assumed by SDC, as the case may be, for the benefit of Seller and at Seller’s direction in partial payment of the outstanding principal balance of existing debt obligations of Seller owed to Avastra Sleep Centres Limited (the “Debt Obligations”). The gross amount of stated interest payable with respect to the Debt Obligations on September 14, 2009, calculated in accordance with United States Treasury Regulation 1.1441-3(b)(1) is $3,423,730. Avastra Sleep Centres Limited does not carry on business in the United States through a “permanent establishment” as that term is defined in Article 5 of the Convention Between the Government of the United States of America and the Government of Australia for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion With Respect to Taxes on Income, dated August 6, 1982.

          Furthermore, effective September 15, 2009, SDC entered into the Settlement Agreement and Release with Daniel I. Rifkin, M.D. in payment and settlement of certain obligations existing under the Asset Purchase Agreement dated October 10, 2007 by and among Avastra Sleep Centres Limited, Avastra Eastern Sleep Centers, Inc. and Dr. Rifkin, M.D., as amended by the First Amendment to October 10, 2007 Asset Purchase Agreement dated May 2, 2008 (together, the “Asset Purchase Agreement”). Dr. Rifkin held a security interest in the accounts receivable of Eastern in accordance with the Asset Purchase Agreement. In addition, Dr. Rifkin was entitled to receive payments under the earnout terms of the Asset Purchase Agreement. Pursuant to the Settlement Agreement and Release, we issued 100,000 of our common stock shares and paid $2,000,000 to Dr. Rifkin.

Item 2.01 Completion of Acquisition or Disposition of Assets.

On September 15, 2009, our subsidiary, SDC Holdings, LLC, completed the purchase of the issued and outstanding stock of Avastra Eastern Sleep Centers, Inc. (see Item 1.01 Entry into a Material Definitive Agreement, above).

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Item 3.02 Unregistered Sales of Equity Securities

On September 15, 2009, we delivered 652,795 shares of our common stock to Avastra Sleep Centres Limited in payment of $1,344,000 of the purchase price of the outstanding stock of Avastra Eastern Sleep Centers, Inc., and 100,000 shares of our common stock to Daniel I. Rifkin, M.D. (see Item 1.01 Entry into a Material Definitive Agreement and Item 2.01 Completion of Acquisition or Disposition of Assets, above). These common stock shares were sold without registration under the Securities Act of 1933, as amended (the “Securities Act”) in accordance with Regulation D and without payment of any sales commissions or other form of remuneration. The further transferability of these common stock shares is prohibited unless pursuant to an effective registration statement and prospectus or pursuant to an registration exemption available under the Securities Act or the rules and regulations promulgated under the Securities Act.

Item 7.01 Regulation FD Disclosure.

On September 16, 2009, we issued a press release announcing the completion of the acquisition of Avastra Eastern Sleep Centers by SDC Holdings, LLC, one of our wholly-owned subsidiaries.

Item 9.01 Financial Statements and Exhibits.

(a)	Financial Statements of Businesses Acquired.
	In the event we are required to file financial statements related to our acquisition of somniTech, Inc., somniCare, Inc. and Avastra Eastern Sleep Centers, Inc. in accordance with Rule 8-04(b) of Regulation S-X, those financial statements will be filed pursuant to amendment of this Report on or before December 1, 2009.
(b)	Pro Forma Financial Information.
	In the event we are required to file pro forma financial statements related to our acquisition of somniTech, Inc., somniCare, Inc. and Avastra Eastern Sleep Centers, Inc. in accordance with Rule 8-05 of Regulation S-X, those pro forma financial statements will be filed pursuant to amendment of this Report on or before December 1, 2009.
(d)	Exhibits.

10.1	Second Amendment to Stock Sale Agreement dated September 14, 2009 among SDC Holdings, LLC, AvastraUSA, Inc. and Avastra Sleep Centers Limited.
10.2	Lock-up and Stock Pledge Agreement dated September 14, 2009 among Graymark Healthcare, Inc., SDC Holdings, LLC, AvastraUSA, Inc. and Avastra Sleep Centers Limited.
10.3*	Settlement Agreement and Release dated September 14, 2009 among Daniel I. Rifkin, M.D., Graymark Healthcare, Inc., SDC Holdings, LLC, Avastra Sleep Centers Limited, AvastraUSA, Inc.
99.1	Press Release issued September 16, 2009.

* To be provided by amendment.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

GRAYMARK HEALTHCARE, INC. (Registrant)
By:	/S/ STANTON NELSON
	Stanton Nelson, Chief Executive Officer

Date: September 16, 2009

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EX-10.1

EXHIBIT 10.1

SECOND AMENDMENT TO STOCK SALE AGREEMENT

     THIS SECOND AMENDMENT TO STOCK SALE AGREEMENT (this “Amendment”), dated as of September 14, 2009, is by and among AVASTRA SLEEP CENTRES LIMITED (in liquidation) f/k/a Avastra, Ltd., an Australian corporation (“Parent”), AVASTRAUSA, INC., a Delaware corporation (“Seller”), and SDC HOLDINGS, LLC, an Oklahoma limited liability company (“Buyer”).

     A. Parent, Seller and Buyer are parties to that certain Stock Sale Agreement, dated August 19, 2009 (the “Original Agreement”).

     B. The parties amended the Original Agreement pursuant to that certain First Amendment to Stock Sale Agreement dated August 23, 2009, pursuant to which Buyer acquired the Somni Stock and will acquire the Eastern Stock (the “First Amendment”). The Original Agreement as amended by the First Amendment is referred to herein as the “Agreement”.

     C. The parties desire to amend the Agreement as set forth in this Amendment.

     D. Capitalized terms used in this Amendment unless otherwise defined in this Amendment shall have the meaning given to such terms in the Agreement.

     NOW, THEREFORE, in consideration of the premises, and the mutual representations, warranties, covenants and agreements hereinafter set forth, the parties agree as follows

     1. Section 3(b) of the Agreement. The parties agree that paragraph (ii) of subsection (b) of Section 3 of the Agreement is hereby deleted in its entirety and replaced by the following:

“(ii) US$1,156,000 in cash to be paid at the direction of Seller to Parent on the closing of the acquisition of the Eastern stock; and”

     2. Section 3(b) of the Agreement.

          (a) The parties agree that paragraph (iii) of subsection (b) of Section 3 of the Agreement is hereby deleted in its entirety and replaced by the following:

“(iii) an amount of US$1,344,000 to be paid at the direction of Seller to Parent in the form of common stock of Graymark Healthcare, Inc. based on the average of the closing NASDAQ sale price for the common stock for the twenty (20) trading days prior to the closing on the Eastern Stock.”

          (b) The parties agree that the paragraph immediately following paragraph (iii) of subsection (b) of Section 3 of the Agreement is hereby deleted in its entirety and replaced by the following:

“The common stock issued as consideration for the Eastern Stock under (iii) above will be subject to a 12-month lockup agreement that will prohibit the transfer of the shares for a period of twelve months, and for the next twelve months, Parent may only transfer 25% of the shares in any three month period. Graymark will allow a representative of Parent to be an advisory (non-voting) member of Graymark’s board of directors (the “Advisory Director”) provided, however, that such representative must be reasonably acceptable to the Chairman of the Board of Directors of Graymark. Such Advisory Director shall be entitled to all notices of and written consents in lieu of meetings and may attend all meetings of directors. All fees, costs and expenses associated with such Advisory Director’s attendance at all meetings of directors, including, but not limited to, roundtrip commercial first class airfare, accommodations at a hotel of such Advisory Director’s reasonable choosing and reimbursement for any meals and other transportation expenses reasonably incurred by the Advisory Director in connection with his or her attendance at such meetings of directors, shall be paid by Graymark up to a maximum of US$5,000 per meeting. Parent’s right to have the Advisory Director shall terminate at such time as Parent owns less than 100,000 shares of the Graymark Stock.”

     3. Section 6(a) of the Agreement. The parties agree that Section 6(a) of the Agreement is replaced in its entirety by Section 4 of the First Amendment (as amended by this Amendment) and by Section 5 and Section 6 of this Amendment.

     4. Section 4 of the First Amendment. The first four paragraphs (everything before subsection (a) of Section 4) of the First Amendment are hereby deleted in their entirety and replaced with the following:

“The following is a list of assumptions made by Buyer in determining the Purchase Price for the Somni Entities (collectively, the “Somni Assumptions”).”

     5. Assumptions Regarding the Condition of the Eastern Entity. Except as otherwise set forth on Parent/Seller’s Disclosure Schedule attached hereto, the following is a list of assumptions made by Buyer in determining the Purchase Price for the Eastern Entity (together with the Somni Assumptions, the “Assumptions”).

          (a) Authorization. The execution and delivery of the Agreement, the performance by Seller and Parent of their obligations under the Agreement and this Amendment and the consummation by Seller and Parent of the transactions contemplated by the Agreement and this Amendment (i) have been duly authorized by all requisite corporate action on the part of Seller and Parent, and (ii) do not violate any applicable law.

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          (b) Authority. The Eastern Entity has all necessary power and authority to own, operate or lease the assets now owned, operated or leased by it and to carry on its business as it has been and is currently conducted.

          (c) Subsidiaries. There are no corporations, partnerships, joint ventures, associations or other entities in which the Eastern Entity owns, of record or beneficially, any equity interests.

          (d) Capital Interests. Seller owns all of the issued and outstanding capital stock of the Eastern Entity free and clear of all liens and encumbrances (exclusive of any restrictions under applicable federal or state securities laws or under the Eastern Entity’s certificate of incorporation or bylaws) and is transferring all such capital stock to Buyer pursuant to the Agreement.

          (e) Minute Books. The minute book of the Eastern Entity contains accurate records of all meetings and accurately reflects all other actions taken by the holders of capital stock of the Eastern Entity and the board of directors of such the Eastern Entity. A complete and accurate copy of such minute book has been delivered by Seller to Buyer for review.

          (f) Financial Information; Books and Records. Seller (i) has delivered to Buyer true and complete copies of the unaudited consolidated balance sheet of Seller for each of the two fiscal years ended June 30, 2008 and 2009, and the related unaudited statements of income of Seller, accompanied by the reports thereon of Seller’s accountants (collectively referred to herein as the “Financial Statements”) and (ii) has delivered to Buyer true and complete copies of the unaudited balance sheet of the Eastern Entity for the fiscal years ended June 30, 2008 and 2009 and the related statements of income for the period then ending (such unaudited balance sheets and statements of income, collectively the “Eastern Financial Statements”). The Financial Statements and the Eastern Financial Statements (i) were prepared in accordance with the books of account and other financial records of Seller and the Eastern Entity, (ii) are complete and accurate in all material respects, (iii) present fairly the financial condition and results of operations of Seller and the Eastern Entity, as of the dates thereof or for the periods covered thereby, (iv) were prepared in accordance with U.S. GAAP on a basis consistent with the past practices of Seller and the Eastern Entity (with the exception that the Eastern Financial Statements lack certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP) and (v) include all adjustments (consisting only of normal recurring accruals) that are necessary to present fairly in all material respects the financial condition of Seller and the Eastern Entity and the results of the operations of Seller and the Eastern Entity as of the dates thereof or for the periods covered thereby. For purposes of this Amendment, “2009 Balance Sheet” mean the Balance Sheet of the Eastern Entity as of June 30, 2009 included within the Eastern Financial Statements.

          (g) Absence of Undisclosed Liabilities. The Eastern Entity has not incurred any liabilities, other than liabilities (i) as are reflected or reserved against in the Eastern Financial Statements (or the notes thereto), (ii) incurred in the ordinary course of business consistent with past practices since July 1, 2009, or (iii) that would not be required to be disclosed in financial statements if audited statements were prepared in accordance with U.S. GAAP.

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          (h) Cash Balances. The cash available in the bank accounts of the Eastern Entity as of September 14, 2009 is substantially the same as reflected in the 2009 Balance Sheet subject to changes for deposits and payments in the ordinary course of business.

          (i) Asset Information. All fixed assets on the 2009 Balance Sheet represent identifiable assets of the Eastern Entity.

          (j) Accounting Policies. Since July 1, 2007, there have been no changes in accounting policy, method or estimates that impacted the recorded revenue of the Eastern Entity in fiscal year 2008 or 2009.

          (k) Accounts Receivable. Accounts receivable reflected in the Eastern Financial Statements and those arising after June 30, 2009: (i) represent actual good and collectable claims for services provided; (ii) were billed in compliance with all applicable laws; (iii) were billed in material compliance with all third party requirements; (iv) are collectable at a rate of at least 75% of the net value thereof; provided, however, that no representations are made by Seller or Parent with respect to the collectibility of the intercompany receivables reflected in the Eastern Financial Statements. As of September 14, 2009, the net value of all the accounts receivable of the Eastern Entity are substantially the same as the amounts reflected in the Eastern Financial Statements, subject to changes in the ordinary course of business. Pursuant to the Asset Purchase Agreement (as such term is defined in Section 5(n)), Rifkin has a security interest in certain of the accounts receivable of the Eastern Entity transferred by Rifkin (as defined below) (or his affiliates), to the Eastern Entity in connection with such Asset Purchase Agreement. It is contemplated that such security interest will be released at closing of the acquisition of the Eastern Stock.

          (l) Compliance with Laws. The Eastern Entity has conducted its business in material compliance with all applicable laws.

          (m) Taxes. Each of the Eastern Entity and Seller has filed all tax returns that it was required to file under applicable laws and will file all income tax returns and pay all income taxes related to the fiscal year ending June 30, 2009 and the stub period ending as of September 14, 2009. All such tax returns were or upon filing will be, correct and complete in all material respects and have been or will be prepared in compliance with all applicable laws. The Eastern Entity has not ever been a party to any tax allocation or sharing agreement.

          (n) Title and Sufficiency of Assets. The Eastern Entity has good and marketable title to, or, in the case of leased or subleased assets, valid and subsisting leasehold interests in, all its assets, free and clear of all liens and encumbrances. The Eastern Entity owns or otherwise has the right to use all the properties, assets and rights used in the conduct of its business as presently conducted.

          (o) Litigation. There are no lawsuits, arbitrations or similar proceedings pending by or against the Eastern Entity nor has Seller or the Eastern Entity sent or received written correspondence threatening such lawsuits, arbitrations or similar proceedings.

          (p) Contracts. Seller has provided Buyer with true, accurate and complete copies (either in hard copy or electronic copy form) of each material contract or agreement

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(including all real estate leases) to which the Eastern Entity is a party. The Eastern Entity is not in breach of, or default under, any such contract or agreement.

          (q) Acquisition Documentation. Seller has provided Buyer with true, accurate and correct copies of all correspondence and documentation related to the transactions pursuant to which (i) the Eastern Entity acquired its business and/or (ii) Seller obtained ownership of the Eastern Stock.

          (r) Ordinary Course. Since July 1, 2009, the Eastern Entity has operated only in the ordinary course of business consistent with past practice.

          (s) Effect of Transaction. In connection with the sale and acquisition of the Eastern Stock as contemplated by the Agreement, the Eastern Entity will not suffer a material adverse effect resulting from a change in control provision under any contract or agreement to which it is a party.

          (t) Directed Payments. All payments and all obligations assumed by Buyer pursuant to this Agreement are in consideration of the acquisition of the Somni Stock and the Eastern Stock from Seller. Any payments to Parent by Buyer or obligations of Parent assumed by Buyer pursuant to this Agreement are being paid to Parent or assumed by Buyer, as the case may be, for the benefit of Seller and at Seller’s direction in partial payment of the outstanding principal balance of existing debt obligations of Seller owed to Parent (the “Debt Obligations”). The gross amount of stated interest payable with respect to the Debt Obligations on the date hereof, calculated in accordance with United States Treasury Regulation 1.1441-3(b)(1) is $3,423,730. Parent does not carry on business in the United States through a “permanent establishment” as that term is defined in Article 5 of the Convention Between the Government of the United States of America and the Government of Australia for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion With Respect to Taxes on Income, dated August 6, 1982.

     6. Remedies for Breach. If any of the Assumptions prove to be inaccurate, Buyer shall have a claim for the damages actually incurred by Buyer as a result of the particular Assumptions being inaccurate, solely as follows:

          (a) against Seller and only for a period of eighteen (18) months following September 14, 2009. Furthermore, Seller’s maximum aggregate liability for all such claims shall be $3,000,000; and

          (b) against Parent for a period of one (1) year following September 14, 2009 and solely to the extent of the Graymark Healthcare, Inc. (“Graymark”) common stock delivered to Parent in connection with the closing of the acquisition of the Eastern Stock (the “Graymark Stock”) as described in Section 3(b)(iii) of the Agreement. Notwithstanding the one-year limitation described immediately above, the parties agree that, after such one year period, a claim may be brought for an Assumption being proven to be inaccurate against the Parent for an additional period of six (6) months, but only to the extent of the Graymark Stock that remains subject to a prohibition on transfer as set forth in the Lock-Up and Stock Pledge Agreement, dated as of September 14, 2009, by and among Graymark, Parent, Buyer and Seller. For

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purposes of illustration, the parties intend that on the first day of the first month following the one-year anniversary of September 14, 2009 that only seventy-five percent (75%) of the Graymark Stock issued to Parent shall be subject to claims under the Agreement, as amended hereby, and that on the first day of the fourth month following the one-year anniversary of September 14, 2009, that only fifty percent (50%) of the Graymark Stock issued to Parent shall be subject to claims under the Agreement, as amended hereby, and that on the first day of the seventh month following the one-year anniversary of September 14, 2009, that no Graymark Stock issued to the Parent shall be subject to claims under the Agreement, as amended hereby.

     The parties further agree that no claim may be brought for any Assumption being proven to be inaccurate, regardless of the amount of the claim, against any of Parent’s officers or directors, or the administrators of Parent, or liquidators appointed to Parent, or any of the officers or directors of Seller. The remedies described in this Section 6 shall be the sole and exclusive remedy with respect to any and all claims of any Assumptions being proven to be inaccurate. To the extent this Section 6 is inconsistent with the provisions of Section 6(b) of the Agreement, the provisions of this Section 6 shall prevail.

     Notwithstanding anything in the Agreement, this Amendment, or the Lock-Up and Stock Pledge Agreement, dated as of the date hereof, by and between Graymark, SDC, Parent and Seller (the “Lock-Up Agreement”) to the contrary, no claim for damages by Buyer may be satisfied by offset against the Graymark Stock unless (i) Parent consents to the settlement of such claim or (ii) a binding decision is made by an arbitrator with regard to such claim (in accordance with Section 10 of the Agreement) where the Parent was a named party to the arbitration.

     The parties acknowledge and agree that the Assumptions are being used to allocate various risks between Buyer, on the one hand, and Seller and Parent, on the other hand, and whilst there may be inaccuracies in the Assumptions it is understood that no inference of intent, fraud, misrepresentation or the like on the part of Seller and Parent should be drawn from the existence of any such inaccuracies.

     7. Section 10 of Agreement. Section 10 of the Agreement is hereby amended and restated in its entirety as follows:

     “10. Arbitration. In the event of any dispute or any action or proceeding arising under or in connection with this Agreement, the parties shall resolve such dispute only by arbitration with a single arbitrator, conducted in Oklahoma City, Oklahoma, by the American Arbitration Association pursuant to its Commercial Arbitration Rules. Notwithstanding the choice of law provisions set forth in Section 9, the Federal Arbitration Act shall govern all proceedings brought hereunder.”

     8. Delivery of Stock Certificates. As soon as practical after the date hereof, Buyer shall cause a certificate representing the Graymark Stock to be issued by Graymark in the name of Parent and delivered to Buyer to be held pursuant to the terms of the Lock-Up Agreement. Upon receipt of the certificate, Buyer shall provide a copy to Parent.

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     9. Ratification. Except as amended by this Amendment, all of the terms, covenants and conditions of the Agreement are hereby ratified and confirmed and shall remain in full force and effect.

     10. Counterparts. This Amendment may be signed executed in any number of counterparts. A counterpart may be a facsimile or an electronic copy. Together all counterparts make up one document.

     11. Withholding Cooperation. With respect to the Withholding Amount identified in the Closing Statement dated on or about the date hereof and executed in connection with the closing of the sale and acquisition of the Eastern Stock (the “Withholding Amount”), Buyer agrees (i) to promptly remit to the U.S. Internal Revenue Service (the “IRS”) the Withholding Amount; (ii) to, promptly after such remittance, verify to Parent in writing such remittance and, all to the extent available to Buyer under the electronic filing procedures prescribed by the IRS, provide to Parent copies of the final return(s) accompanying such remittance, as well as evidence of the remittance itself; (iii) to, thereafter, take, at the request of Parent, all other actions, execute all documents and provide all information as reasonably requested or necessary to assist Parent with obtaining a refund of the Withholding Amount from the IRS; (iv) other than the withholding and remittance of the Withholding Amount pursuant to United States Treasury Regulation 1.1441-3(b)(1), not to take any position or action inconsistent with the intent and understanding of Parent and Seller that all payments paid to Parent or obligations assumed by Buyer, as the case may be, pursuant to the Agreement, as amended, were in partial payment of the outstanding principal balance (and not interest payments) on the Debt Obligations; and (v) that Parent shall be entitled to any refunded amount of the Withholding Amount, that any refunded amount shall not be deemed an adjustment to the purchase price for the Somni Stock or the Eastern Stock, and that neither Buyer nor Graymark shall have any right to any portion thereof. The parties agree that all actions taken pursuant to subparagraphs (i) and (ii) above shall be at the sole cost and expense of Buyer, and all actions taken at the request of Parent pursuant to subparagraph (iii) above shall be at the sole cost and expense of Parent.

[Signature Pages to Follow]

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     IN WITNESS WHEREOF, the parties have duly executed this Amendment, all as of the date first written above.

SELLER:	AVASTRAUSA, INC.
	By	/S/ MILTON ERMAN
		Name:	Milton Erman
		Title:	President
PARENT	AVASTRA SLEEP CENTRES LIMITED
	By	/S/ JOHN SHEAHAN
		Name:	John Sheahan
		Title:	Administrator
BUYER:	SDC HOLDINGS, LLC
	By	/S/ STANTON NELSON
		Name:	Stanton Nelson
		Title:	CEO

EX-10.2

EXHIBIT 10.2

LOCK-UP AND STOCK PLEDGE AGREEMENT

     THIS LOCK-UP AND STOCK PLEDGE AGREEMENT (this “Agreement”), dated September 14, 2009, by and among GRAYMARK HEALTHCARE, INC., an Oklahoma corporation (the “Company”), SDC HOLDINGS, LLC, an Oklahoma limited liability company (“SDC”), AVASTRA SLEEP CENTRES LIMITED (in liquidation) f/k/a Avastra, Ltd., an Australian corporation (“Parent”) and AVASTRAUSA, INC., a Delaware corporation (“Avastra”). Parent and Avastra are referred to collectively herein, as the “Stockholders.”

     A. SDC is a wholly owned subsidiary of the Company.

     B. SDC, Parent and Avastra entered into that certain Stock Sale Agreement dated August 19, 2009, as amended by that certain First Amendment to Stock Sale Agreement dated August 23, 2009, and as further amended by that certain Second Amendment to Stock Sale Agreement dated as of the date hereof (the “Stock Sale Agreement”) pursuant to which SDC agreed to purchase and Avastra agreed to sell 100% of the issued and outstanding capital stock of (i) somniTech, Inc., a Kansas corporation, and somniCare, Inc., a Kansas corporation (collectively “Somni”), and (ii) Avastra Eastern Sleep Centers, Inc., a New York corporation (“Eastern”).

     C. Pursuant to the Stock Sale Agreement, as a portion of the consideration for the purchase of the Eastern capital stock, Avastra directed the Company to issue to Parent a number of shares of its common stock, par value $.0001 (the “Company Common Stock”) valued at $1,344,000 based on the average of the closing price of the Company Common Stock on the Nasdaq Capital Market for the twenty (20) trading days prior to the closing of the purchase of the Eastern capital stock (the “Stock Consideration”).

     D. Pursuant to the Stock Sale Agreement, the Stock Consideration shall be subject to the terms of a lock-up agreement.

     E. SDC may make claims against Parent pursuant to Section 7(b) of the Second Amendment to Stock Sale Agreement dated as of the date hereof (a “Claim”).

     F. The parties desire to enter into this Agreement contemporaneously with the closing of the purchase of the Eastern capital stock to (i) provide for the issuance of the Stock Consideration, (ii) restrict the sale, assignment, transfer, conveyance, hypothecation or alienation of the Stock Consideration, (iii) provide for the pledge of the Stock Consideration to SDC to secure SDC’s rights to make a Claim against the Stock Consideration, and (iv) provide for the procedures for asserting and recovering for a Claim against the Stock Consideration, all on the terms set forth below.

     NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants contained herein, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

     1. Issuance of Company Common Stock. Upon closing of the purchase of the Eastern capital stock, the Company shall issue in the name of Parent stock certificates representing ownership of an aggregate of 652,795 shares of Company Common Stock. The parties acknowledge and agree that the 652,795 shares of Company Common Stock issued pursuant hereto have a value of $1,344,000.

     2. Stockholders’ Representations and Warranties. The Stockholders jointly and severally represent and warrant as follows:

          (a) The Stock Consideration will be acquired for the Stockholders’ own accounts without the participation of any other person, with the intent of holding the Stock Consideration for investment and without the intent of participating, directly or indirectly, in a distribution of the Stock Consideration and not with a view to, or for resale in connection with, any distribution of the Stock Consideration.

          (b) The Stockholders have such knowledge and experience in financial, tax and business matters as to be capable of evaluating the merits and risks of, and bearing the economic risks entailed by, an investment in the Company and of protecting its interests in connection with this transaction. The Stockholders recognize and acknowledge that an investment in the Company involves a high degree of risk. The Stockholders are able to bear the economic risks of the investment in the Stock Consideration, including the risk of a complete loss of the value of the Stock Consideration.

          (c) The Stockholders have had adequate opportunity to review the Company’s reports filed with the Securities and Exchange Commission (the “Company SEC Reports”) and to ask questions of and receive answers from the Company with respect to the information contained in the Company SEC Reports.

          (d) The Stockholders acknowledge that neither the Company nor any of its agents, employees or affiliates has made any representations or warranties, oral or otherwise, concerning the Company, other than those set forth herein or contained in the Company SEC Reports. In making the decision to accept Stock Consideration as a portion of the consideration for SDC’s purchase of the Eastern capital stock, the Stockholders did not rely upon any information other than as set forth herein or the results of the Stockholders’ independent review of the Company SEC Reports.

          (e) The Stockholders understand and agree that the Stock Consideration will be issued to Parent without registration under any state law relating to the registration of securities for sale, and will be issued and sold in reliance on the exemptions from registration under the Securities Act of 1933, as amended (the “Securities Act”), provided by Section 4(2) thereof and the rules and regulations promulgated thereunder.

          (f) The Stock Consideration cannot be offered for sale, sold or transferred by Parent other than pursuant to: (i) (A) an effective registration under the Securities Act, or (B) an exemption from registration under the Securities Act; (ii) evidence satisfactory to the Company of compliance with the applicable securities laws of other jurisdictions; and (iii) the restrictions

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on sale contained in Section 4 of this Agreement. The Company shall be entitled to rely upon an opinion of counsel satisfactory to it with respect to compliance with the above laws.

          (g) The Stockholders understand that there will be placed on the certificates for the Stock Consideration, or any substitution therefore, in addition to any other legend which may be required, a legend stating in substance:

THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER THE SECURITIES ACT OF ANY OTHER STATE, AND THE SHARES MAY NOT BE RESOLD, ASSIGNED OR TRANSFERRED BY A PURCHASER THEREOF WITHOUT BEING REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY OTHER APPLICABLE STATE SECURITIES LAW OR UNLESS AN EXEMPTION FROM REGISTRATION IS AVAILABLE IN THE OPINION OF COUNSEL TO THE COMPANY.

FURTHERMORE, THE SHARES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO THE TERMS OF A LOCK-UP AND PLEDGE AGREEMENT DATED SEPTEMBER 14, 2009, A COPY OF WHICH MAY BE INSPECTED AT THE COMPANY’S PRINCIPAL OFFICE.

     3. Representations of the Company. The Company hereby represents and warrants to the Stockholders that:

          (a) The Stock Consideration has been duly authorized and, when issued in accordance with the Stock Sale Agreement, will be duly and validly issued, fully paid, and nonassessable, free and clear of all liens and preemptive rights.

          (b) The Company has filed all Company SEC Reports required to be filed with the Securities and Exchange Commission and as of their respective dates, such Company SEC Reports complied in all material respects with the applicable securities laws. As of their respective dates, none of the Company SEC Reports contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, except for such statements, if any, as have been corrected by subsequent filings with the Securities and Exchange Commission.

          (c) No person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the sale of the Stock Consideration.

     4. Lock-Up.

          (a) Parent irrevocably agrees that, without the prior written consent of the Company, Parent will not have the right to, directly or indirectly: (a) offer for sale, sell or

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otherwise dispose of (or enter into any transaction or device that is designed to, or could be expected to, result in the disposition at any time in the future of) any Restricted Company Common Stock (as defined below) or (b) publicly disclose the intention to do any of the foregoing. For purposes of this Agreement, “Restricted Company Common Stock” means: (i) for the period beginning on the date of this Agreement and ending on September 13, 2010, all of the Stock Consideration; (ii) for the period beginning on September 14, 2010 and ending on December 13, 2010, 489,596 shares of the Stock Consideration; (iii) for the period beginning on December 14, 2010 and ending on March 13, 2011, 326,398 shares of the Stock Consideration; (iv) for the period beginning on March 14, 2011 and ending on June 13, 2011, 163,199 shares of the Stock Consideration; and (v) after June 14, 2011, none of the Stock Consideration.

          (b) Nothing herein shall prohibit Parent from (i) acquiring any of the Company’s securities, (ii) surrendering any of the Company’s securities pursuant to the terms of a merger or consolidation approved by the Board of Directors of the Company and a majority of the shareholders of the Company, (iii) tendering any of the Company’s securities pursuant to a tender offer made in compliance with Sections 13 and 14 of the Securities Exchange Act of 1934, as amended, and approved by the Company, (iv) disposing of any of the Company’s securities acquired by Parent in open market transactions, or (v) disposing of any of the Company’s securities by distributions to Parent’s shareholders, partners or members, provided such shareholders, partners or members agree to be bound in writing by the restrictions set forth in this Agreement.

          (c) Once Parent is entitled to sell shares of the Company Common Stock comprising the Stock Consideration pursuant to Section 4(a), which shares are represented by a certificate on which appears a legend referencing the restrictions set forth in Section 4(a), the Company shall deliver to Parent (i) a replacement certificate without such legend for such shares within five (5) business days of Parent’s request therefor and delivery to the Company of the certificate bearing such restrictive legend (the “original certificate”) and (ii) a replacement certificate with the restrictive legend for any additional shares evidenced by the original certificate that remain subject to the restrictions set forth in Section 4(a).

     5. Stock Pledge.

          (a) Parent hereby pledges and grants to SDC a security interest in all of the Restricted Company Common Stock.

          (b) SDC shall perfect the security interest granted pursuant to Section 5(a) above by taking possession of the stock certificates representing the Restricted Company Common Stock. The Company shall deliver the stock certificates for the Restricted Company Common Stock directly to SDC upon the date of this Agreement. Additionally, Parent shall execute an assignment separate from certificate with respect to the Restricted Company Common Stock and deliver it to SDC upon closing of this Agreement.

          (c) That portion of the Restricted Company Common Stock that is pledged pursuant to Section 5(a) above, shall secure the payment of any and all Claims made by SDC against the Stockholders under the terms of the Stock Sale Agreement, subject to the last

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sentence of the third to last paragraph of Section 6 of the Second Amendment to Stock Sale Agreement dated as of the date hereof.

          (d) Following closing of the acquisition of the Eastern capital stock, upon request by SDC, Parent shall execute and deliver any such documents reasonably requested by SDC (including additional blank assignments separate from certificate) to be used by SDC in enforcing its rights under this Agreement.

          (e) During the period any Restricted Company Common Stock is pledged hereunder, Parent shall be entitled to vote all such Restricted Company Common Stock, have the inspection rights as a shareholder of the Company (in accordance with applicable Oklahoma law), and receive all dividends or distributions with respect to such Restricted Company Common Stock.

     6. Opinion of Counsel. Subject to the terms of Section 4(a), within ten (10) business days of Parent’s request therefor, the Company shall use commercially reasonable efforts to cause the Company’s counsel to deliver to Parent an opinion of counsel in a form satisfactory to the Company, which provides that Parent may sell shares of the Company Common Stock comprising the Stock Consideration within the limitation of the exemptions provided by Rule 144 under the Securities Act; provided that Parent has satisfied the requirements for such exemptions.

     7. Claim Procedures.

          (a) SDC may make a Claim against the Restricted Company Common Stock by giving notice (a “Notice”) to Parent specifying (i) the Assumption contained in the Stock Sale Agreement that it asserts has been breached or otherwise entitles SDC to recovery for a Claim and (ii) in reasonable detail, the damage actually incurred by SDC, and the nature and dollar amount of such Claim.

          (b) If Parent shall give a notice to SDC (a “Counter Notice”) within 30 days following the giving of a Notice disputing the existence of a Claim, SDC and Parent shall attempt to resolve such dispute by voluntary settlement as provided in paragraph 6(c) below. If no Counter Notice with respect to a Claim is received by SDC from Parent within such 30-day period, the Claim shall be deemed to be an Established Claim (as defined below) for purposes of this Agreement.

          (c) If Parent delivers a Counter Notice to SDC, Parent and SDC shall, during the period of 60 days following the giving of such Counter Notice or such greater period of time as the parties may agree to in writing, attempt to resolve the dispute with respect to which the Counter Notice was given. If Parent and SDC shall reach a settlement with respect to any such dispute, they shall execute a written agreement setting forth the terms of such settlement. If Parent and SDC shall be unable to reach a settlement with respect to a dispute, such dispute shall be resolved by arbitration pursuant to Section 10 of the Stock Sale Agreement.

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          (d) As used in this Agreement, “Established Claim” means any (i) Claim deemed established pursuant to the last sentence of Section 7(b) above, (ii) Claim resolved in favor of SDC by settlement pursuant to Section 7(c) above, to the extent that it results in a dollar award to SDC, or (iii) Claim established by the decision of an arbitrator pursuant to Section 7(c) above, to the extent that it results in a dollar award to SDC.

          (e) Payment of an Established Claim shall be made in shares of the Company Common Stock pledged to SDC pursuant to this Agreement. For purposes of each payment, such shares shall be valued at the “Fair Market Value” (as defined below). After a Claim becomes an Established Claim, SDC shall have the authority to deliver to the Company’s transfer agent, with simultaneous notice to Parent (i) stock certificates representing Parent’s Company Common Stock pledged pursuant to this Agreement, (ii) any necessary assignments separate from certificate executed by Parent, and (iii) written instructions to transfer to SDC a number of shares having a Fair Market Value equal to the amount of the Established Claim. The written instructions to the transfer agent shall instruct the transfer agent to issue new certificates in the name of Parent representing the shares of Company Common Stock remaining, if any, after payment of the Established Claim. SDC shall continue to hold any such new certificates pursuant to the terms of this Agreement. As used herein, “Fair Market Value” means the average reported closing price for the Company Common Stock for the twenty (20) trading days ending on the last trading day prior to the day the Established Claim is paid.

          (f) Parent and SDC shall cooperate in all respects with one another in the calculation of any amounts determined to be payable to SDC in accordance with this Agreement and in implementing the procedures necessary to effect such payments.

     8. Release of Pledged Shares. Unless there is a pending Claim at such time, SDC shall release the security interest with respect to shares of Company Common Stock and shall deliver stock certificates representing such shares as promptly as reasonably practicable to Parent and shall execute any and all documents necessary to release the security interest upon the earlier of: (a) such Company Common Stock no longer being Restricted Company Common Stock and (b) eighteen months from the date of this Agreement.

     Any shares of Company Common Stock that were due to be released but were not released because of the existence of a pending Claim shall be promptly released following resolution of all pending Claims pursuant to Section 7 of this Agreement. Shares transferred to SDC in payment of an Established Claim shall be counted as shares that have been released when determining the number of shares to release according to the percentages set forth above.

     9. Advisory Director. The Company shall comply with the obligations relating to the Advisory Director (as such term is defined in the Stock Sale Agreement) set forth in Section 3(b)(iii) of the Stock Sale Agreement.

     10. Successors and Assigns. This Agreement is binding upon and inures to the benefit of the parties and their respective successors, heirs and permitted assigns.

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     11. Governing Law. The laws of the State of Oklahoma applicable to contracts made and to be performed entirely within the State of Oklahoma shall govern all matters arising out of or relating to this Agreement.

     12. Notices. Any notice, request, instruction or other communication to be given hereunder by any party to another shall be given by hand delivery, facsimile, certified or registered mail (return receipt requested) or by recognized overnight express service, addressed to the respective party or parties at the following addresses:

(a)	If to the Company or SDC at
	c/o Graymark Healthcare, Inc. 210 Park Avenue, Suite 1350 Oklahoma City, Oklahoma 73102 Attn: Ashley Tate Fax No.: (405) 601-4550
(b)	If to Parent, at
	c/o Sheahan Lock Partners Level 8, 26 Flinders Street Adelaide SA 5000, Australia Attn: Messrs Ian Lock and John Sheahan Fax No.: +61 8 8231 0370
	With copy to:
	Hartzog Conger Cason & Neville 201 Robert S. Kerr Avenue 1600 Bank of Oklahoma Plaza Oklahoma City, Oklahoma 73102 Attn: Armand Paliotta and Jay Griffin

or to such other address or addresses as any party may designate to the others by like notice as hereinabove set forth. Any notice given hereunder shall be deemed given and received on the date of hand delivery, the date sent by facsimile so long as the notice and confirmation are sent the same day and such day is a business day (otherwise on the next business day) or three (3) business days after deposit with the United States Postal Service if sent by mail to an address within the United States as provided above (otherwise, notice will be deemed given and received seven (7) business days after deposit with the United States Postal Service if sent by mail to an address outside the United States as provided above), or one business day after delivery to a recognized overnight express service for next day delivery, as the case may be.

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          IN WITNESS WHEREOF, each of the parties hereto has duly executed this Agreement as of the date first above written.

GRAYMARK HEALTHCARE, INC.
By:	/s/ Stanton Nelson
	Name:	Stanton Nelson
	Title:	Chief Executive Officer
SDC HOLDINGS, LLC
By:	/s/ Stanton Nelson
	Name:	Stanton Nelson
	Title:	Chief Executive Officer
AVASTRA SLEEP CENTRES LIMITED
By:	/s/ JOHN SHEAHAN
	Name:	John Sheahan
	Title:	Administrator
AVASTRAUSA, INC.
By:	/s/ MILTON ERMAN
	Name:	Milton Erman
	Title:	President

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EX-99.1

EXHIBIT 99.1

Graymark Healthcare Becomes Second-Largest U.S. Sleep Diagnostic and Treatment Company

Completing Somni and Avastra Eastern Sleep Centers Acquisitions, Graymark Is Poised To Be the Industry’s National Leader in Standards of Patient Care

Oklahoma City—(September 16, 2009)—Graymark Healthcare, Inc. (NASDAQ: GRMH) today announced the acquisition of Avastra Eastern Sleep Centers, Inc. from Avastra USA, a division of Avastra Sleep Centres Limited (ASX: AVS), a public company listed on the Australian Securities Exchange. Graymark will change Avastra Eastern Sleep Centers, Inc.’s name to Nocturna East, Inc. Late last month, Graymark acquired somniCare, Inc. and somniTech, Inc. from Avastra. With these acquisitions, Graymark becomes the second-largest U.S. sleep diagnostic and treatment company, owning and/or operating 28 free-standing sleep care centers and contracting with 62 hospitals in 11 states.

“This acquisition helps us achieve scale and geographical breadth as we become a national leader in quality sleep medicine,” said Graymark CEO Stanton Nelson. “As this industry matures, our high standards for specialized physician-supervised diagnostics and therapies will ensure that patients around the country can receive the care they need.”

“I speak on behalf of all Nocturna East employees when I say we are proud to be a part of the Graymark family,” said Dr. Dan Rifkin, the President of Nocturna East, Inc. “Graymark is the future of sleep medicine, not only in terms of nationally providing the necessary resources for the provision of high-quality care in sleep medicine, but also in seeing the regulatory reform to come and taking action now to prepare for it.”

Graymark is a diversified medical holding company. After the acquisitions, Graymark projects annual revenue of approximately $120 million and will have 554 employees total with approximately 250 working in the sleep side of the business. In addition to owning and operating diagnostic sleep centers that treat a wide range of sleep disorders, Graymark owns and operates independent retail pharmacies under its ApothecaryRx subsidiary in five states, and a medical equipment company that provides both disposable and durable medical equipment.

The National Institutes of Health estimates that 50-70 million Americans suffer from sleep-related problems. As the public and medical community have become increasingly aware of the importance of the accurate diagnosis and treatment of sleep disorders, demand for sleep medicine is rising at a rapid rate.

Graymark provides patients with the highest standards of care and treatment uniformly in the company’s facilities. With these acquisitions, Graymark’s size will ensure that the company can meet the growing demand for its medical services. Graymark has set the standard for quality care and has been acknowledged for its work:

• Advance Magazine for Respiratory Care named one of Graymark’s facilities one of the top three U.S. sleep-medicine facilities;

• Before any study, all patients have the opportunity to be seen in clinic by Graymark’s local medical director and clinical staff;

• All Graymark patients are treated by a physician who is board certified in sleep medicine;

• Graymark’s commitment to patient care has led to their sleep apnea patients who participate in their proprietary CPAP Success Program having a treatment compliance rate of over 83% versus the national average of just 50%;

• Graymark’s facilities use the gold standards of care set by the American Academy of Sleep Medicine; and

• Graymark had the first free-standing sleep facility to be accredited by the American Academy of Sleep Medicine in the State of Oklahoma.

Some common primary sleep disorders are sleep apnea, insomnia, circadian rhythm disruption, and narcolepsy. Risks associated with sleep apnea include heart disease, high blood pressure, sexual dysfunction, stroke, diabetes, and fatigue-related motor vehicle accidents.

“We are on a path to becoming this market’s national leader. In addition, our commitment to anticipating and complying with a rapidly evolving state and federal regulatory and legal framework for sleep medicine is second to none,” added Mr. Nelson.

A Frost & Sullivan report estimates that the U.S. market for all sleep diagnostic services is more than $3.5 billion for 2009, and that the average industry growth rate in revenues from 2004-2011 is over 15%.

Graymark will now help patients in 11 states: New York; Texas; Florida; Nevada; Missouri; Kansas; Oklahoma; Minnesota; Iowa; Nebraska; and South Dakota.

Graymark plans to continue its growth both internally and through strategic acquisitions within the medical industry.

This press release may contain forward-looking statements which are based on the Company’s current expectations, forecasts and assumptions. Forward-looking statements involve risks and uncertainties which could cause actual outcomes and results to differ materially from the Company’s expectations, forecasts and assumptions. These risks and uncertainties include risks and uncertainties not in the control of the Company, including, without limitation, the current economic climate and other risks and uncertainties, including those enumerated and described in the Company’s filings with the Securities and Exchange Commission, which filings are available on the SEC’s website at www.sec.gov. Unless otherwise required by law, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

CONTACTS:
Joseph Harroz, President & COO
Graymark Healthcare, Inc.
(405) 601-5300

MEDIA:
Josh Galper
Orrick, Herrington & Sutcliffe LLP
202-339-8468
jgalper@orrick.com

INVESTORS:
Jeff Elliott
Halliburton Investor Relations
(972) 458-8000
jelliott@halliburtonir.com

What do you think?

Sep 16, 2009