8-K

UNITED STATES
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): March 11, 2011

Graymark Healthcare, Inc.

(Exact name of registrant as specified in its charter)

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

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

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

(Former name or former address, if changed since last report.)

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 14d-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.

On March 16, 2011, Graymark Healthcare, Inc. (“we” or “Graymark”) entered into a Loan Agreement with Valiant Investments, LLC, an entity owned and controlled by Roy T. Oliver one of our controlling shareholders, of up to $1 million. We intend to use the loan to fund our working capital needs. The loan will be disbursed in amounts requested by the Company subject to the lender’s consent and compliance with other conditions contained in the Loan Agreement. The loan matures on August 1, 2011. Interest accrues at a rate of 6% and default interest accrues at a rate of 15%. We are also required to pay 1% of each advance on the loan as a loan fee. This loan is unsecured and subordinated to our Arvest Bank facility pursuant to a subordination agreement, the material terms of which are set forth in Item 8.01 below. The Subordination Agreement was entered into as of March 16, 2011 by and among Arvest Bank, Valiant Investments, LLC, Graymark and its subsidiaries, ApothecaryRx, LLC and SDC Holdings LLC. The Loan Agreement also contains restrictions on our ability to take action without the consent of the lender, these include: (i) acquisitions of other businesses, (ii) the sale of all or substantially all of our assets, (iii) the issuance of common stock or convertible securities unless the proceeds are to be used to repay the loan in full.

A copy of the Loan Agreement, Note and Subordination Agreement are filed herewith as Exhibits 10.1, 10.2 and 10.3, respectively, and is incorporated herein by reference. The foregoing summary of the each of the Loan Agreement, Note and Subordination Agreement is qualified in its entirety by reference to the exhibits filed herewith.

Item 8.01. Other Events.

On March 11, 2011, we entered into a Letter Agreement with Arvest Bank in which we received the consent of Arvest to obtain the loan described in Item 1.01 above and requirements for payments of interest and principal on this loan and Arvest will waive the debt service coverage ratio and minimum net worth covenants through December 31, 2011 on the following conditions:

• On or before June 30, 2011, Graymark will pay to Arvest the greater of $3 million or one-third of the proceeds of any public equity offering;

• On or before June 30, 2011, Graymark will pay Arvest a fee equal to 0.25% of the outstanding loan balance as of June 30, 2011;

• If Graymark is not in compliance with the debt service coverage ratio and minimum net worth covenants on December 31, 2011, Graymark will pay Arvest a fee equal to 0.50% of the then outstanding balance of the loan (which does not cure any default in such covenants);

• On June 30, 2011, Graymark will prepay all interest and principal payments due to Arvest between July 1, 2011 and December 31, 2011;

• On June 30, 2011, if Graymark has received at least $15 million in proceeds from a public equity offering then Graymark will escrow with Arvest all principal and interest payments due to Arvest between January 1, 2012 and June 30, 2012;

• Graymark may not repay any amounts on the $1 million loan from Valiant Investments before August 1, 2011 except that Graymark may repay such loan in full if Graymark has received more than $10 million in proceeds from a public equity offering and if Graymark has received less than $10 million from a public equity offering then Graymark will be permitted to make interest payments only on such loan; and

• The $1 million loan will be subordinated to Arvest’s credit facility in all respects.

A copy of the Letter Agreement is filed herewith as Exhibits 99.1 and is incorporated herein by reference. The foregoing summary of the Letter Agreement is qualified in its entirety by reference to the exhibit filed herewith.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.		Description
	10.1	Loan Agreement dated March 16, 2011 by and between Valiant Investments LLC and Graymark Healthcare, Inc.
	10.2	Note dated March 16, 2011 issued by Graymark Healthcare, Inc.
	10.3	Subordination Agreement dated March 16, 2011 by and among Valiant Investments, L.L.C., ApothecaryRX, LLC, SDC Holdings LLC and Graymark Healthcare, Inc., in favor of Arvest Bank
	99.1	Letter Agreement dated March 11, 2011 by and between Graymark Healthcare, Inc. and Arvest Bank

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.

	By: GRAYMARK HEALHCARE, INC.
Date: March 22, 2011	By:	/s/ Stanton Nelson
		Stanton Nelson
		Chief Executive Officer

EXHIBIT INDEX

Exhibit No.		Description
	10.1	Loan Agreement dated March 16, 2011 by and between Valiant Investments LLC and Graymark Healthcare, Inc.
	10.2	Note dated March 16, 2011 issued by Graymark Healthcare, Inc.
	10.3	Subordination Agreement dated as of March 16, 2011 by and among Arvest Bank, Graymark Healthcare, Inc., ApothecaryRx, LLC and SDC Holdings LLC
	99.1	Letter Agreement dated March 11, 2011 by and between Graymark Healthcare, Inc. and Arvest Bank

EX-10.1

Exhibit 10.1

LOAN AGREEMENT

THIS LOAN AGREEMENT (herein “Agreement”) is made as of the 16th day of March, 2011 by and between Valiant Investments, LLC, an Oklahoma limited liability company (“Lender”), whose address is 101 N. Robinson, Ste. 900 Oklahoma City, Oklahoma 73102 and Graymark Healthcare, Inc., an Oklahoma Corporation (the “Borrower”), whose address is 210 Park Avenue, Ste. 1350, Oklahoma City, OK 73102.

RECITALS:

A. Borrower has requested that Lender lend to Borrower up to One Million Dollars ($1,000,000.00) to finance working capital.

B. Subject to the terms, provisions, covenants and agreements hereinafter set forth, Lender has agreed to make the requested extension of credit.

AGREEMENTS:

NOW, THEREFORE, in consideration of the mutual covenants contained herein and the loan to be made pursuant hereto, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Lender and Borrower hereby covenant and agree as follows:

1. Definition of Terms. Certain terms are defined above or elsewhere in the context of this Agreement. Unless the context otherwise requires and except as may otherwise be provided herein, (a) accounting and financial terms used in this Agreement shall have the meanings ascribed to such terms by generally accepted accounting principles in effect from time to time, applied on a consistent basis, (b) definitions contained in the Code (herein defined) shall apply to terms, words and phrases used herein, except that in case of any conflict between such definitions and definitions contained in Article 9 of the Code, the Article 9 definitions shall apply, (c) the singular shall be deemed to include the plural and the plural shall be deemed to include the singular, and (d) the terms as used herein shall be construed and controlled by the following definitions:

1.1 Business Day: That portion of any day, other than a Saturday, a Sunday or a legal holiday for commercial banks under the laws of the State of Oklahoma, during which commercial banks are open for substantially all of their normal banking functions.

1.2 Code: The Uniform Commercial Code of Oklahoma, as the same may from time to time be in effect.

1.3 Loan: The loan to be made to Borrower by Lender pursuant to this Agreement and the Note (defined below), and all extensions, renewals, modifications, amendments, consolidations and restatements thereof.

1.4 Loan Documents: This Agreement and the following:

(a) the Promissory Note of even date herewith evidencing the Loan executed by Borrower in favor of Lender, in the face amount of One Million Dollars ($1,000,000.00), and any extensions, renewals, modifications, substitutions, consolidations and restatements thereof (the “Note”), and

(b) all other documents now or hereafter evidencing, securing, guaranteeing or otherwise executed in conjunction with the Loan, including any documents executed pursuant to any of the foregoing and specifically including a certificate of authority for the Borrower to enter into the Loan (the “Certificate of Authority”).

1.5 Loan Fee. An amount equal to One Percent (1%) of the amount advanced under the Note.

1.6 Request for Advance: Borrower’s written request for an advance under the Loan Documents for necessary working capital and overhead, as specified by Borrower and in such form and detail and with such other documents, resolutions and/or certifications as Lender may require and approve, all of which are a precondition to any advance of funds under the Loan Documents.

1.7 Arvest Loan Documents. Those certain loan documents as evidenced by the Amended and Restated Loan Agreement by and between Borrower (and others) and Arvest Bank, dated effective December 17, 2010, and all amendments, waivers and consents pertaining thereto (the “Arvest Loan Documents”).

2. Lending Agreement. Subject to the terms and conditions of this Agreement, Lender agrees to lend to Borrower and Borrower agrees to borrow from Lender a sum not to exceed One Million Dollars ($1,000,000.00) to be evidenced by the Note. The Loan will be made by a series of advances from time to time, provided that at the time of any such advance, all requirements, covenants, conditions and agreements of this Agreement required for such advance have been performed or satisfied, or otherwise waived or deferred by Lender. The Loan proceeds will be disbursed for the purpose of providing Borrower funds to pay for various costs outlined in the Request for Advance. No Loan proceeds will be disbursed for any other purpose.

3. Note. The Loan will be evidenced by the Note and payable on the terms set forth therein. Borrower may not re-borrow under the Note and the Note is not on a revolver basis.

4. No Security; Subordination to Arvest Loan Documents. The Loan Documents will be unsecured. Borrower has advised Lender that Arvest Bank has approved the Loan evidenced by the Loan Documents, subject to Lender agreeing to executing a subordination agreement in form and substance approved by Arvest Bank in connection with the Arvest Loan Documents. Lender agrees to execute a subordination agreement in favor of Arvest Bank upon request of Arvest Bank and Borrower; provided however, in the event that Lender shall determine the terms of the subordination agreement shall not be acceptable to Lender, in its sole discretion, Lender may terminate this Loan Agreement and shall not be obligated to advance funds, or further funds, under the Note. In all events however, and notwithstanding any provision of this Agreement or the Note, the Loan Documents and all rights and remedies of Lender pursuant thereto, shall be fully subordinate to the Arvest Loan Documents.

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5. Conditions of Lending. The obligation of Lender to perform this Agreement and to make the advance under the Note is subject to the performance by Borrower of the conditions precedent described below.

5.1 Conditions Precedent to Advance. The conditions precedent to advancing the funds under the Note are as follows:

5.1.1 Loan Documents. The Loan Documents shall have been duly executed by all parties thereto, acknowledged (where appropriate), delivered to Lender.

5.1.2 Borrower’s Existence; Good Standing; Authority. Lender shall have received and approved the Certificate of Authority evidencing that all necessary action has been taken to authorize the execution, delivery and performance of the Loan Documents by the parties thereto, including without limitation, approval of the Board of Directors of Borrower. Borrower shall be in good standing in the State of its organization.

5.1.3 No Default. Lender shall have received assurances that the Loan Documents and any advance thereunder shall not create or result in a default under Arvest Loan Documents. Further, no default shall have occurred under the Arvest Loan Documents, nor shall any event exist with which the passage of time or other event, may lead to a default under the Arvest Loan Documents.

5.1.4 Loan Fee. At the Maturity Date, Borrower shall pay to Lender a Loan Fee in the amount of One Percent (1%) of the Loan.

5.1.5 Receipt of Request for Advance. Lender shall have received a Request for Advance executed by Borrower as required under Section 6 below and the advance is not requested to be made on a day that is not a Business Day

5.1.5 No Event of Default. There shall exist no Event of Default, as defined below, under any of the Loan Documents or any other document evidencing a loan by and between Borrower and Lender.

5.1.6 No Litigation or Bankruptcy. Neither Borrower nor any subsidiary of Borrower shall be the subject of any pending or threatened litigation, claim or dispute which, in Lender’s good faith judgment, might materially adversely affect Borrower or the business of Borrower. Further, neither Borrower nor any of its subsidiaries shall be the subject of any pending or threatened bankruptcy, insolvency, reorganization or similar proceedings, or be involved in, or have made or are about to make, an assignment for the benefit of creditors or have a receiver appointed.

5.1.7 Consent. Lender shall have consented to the making of the advance under the Note, which may be given or not in the sole discretion of Lender.

5.2 Nonwaiver. The failure of Lender to demand the satisfaction of any one or more of the foregoing conditions precedent will not constitute a waiver of such condition or in any manner prejudice the rights of Lender thereafter to require full compliance with the terms of this Agreement.

6. Advances. Notwithstanding the fact that the Note is in the face amount of One Million Dollars ($1,000,000.0), and subject to the Conditions Precedent above, advances thereunder may be made by Lender from time to time on the written request of Borrower for the following purposes and subject to the following limitations:

6.1 Use of Proceeds. All proceeds of each advance under the Note shall be used solely for the approved costs as shown in the Request for Advance.

6.2 Request for Advance; Certifications. Lender shall not be required to make advances under the Note more often than monthly. A reasonable time before the date on which an advance is requested, Borrower will notify Lender of the total amount of the requested advance and will furnish to Lender, the Request for Advance and an itemized list of costs to be paid from such advance and containing such other certifications as Lender may require.

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7. Representations and Warranties. Borrower represents and warrants as follows:

7.1 Borrower Authorization. Borrower (a) has full power, authority and legal right to own, and is duly authorized, qualified and licensed under all applicable laws, regulations, ordinances and orders of public authorities to, conduct its business and (b) has full authority, power and legal right to enter into and carry out the provisions of the Loan Documents, to borrow money thereunder and to consummate the transactions contemplated hereby.

7.2 No Litigation; Default. There are no judgments filed or actions, suits, investigations or proceedings pending, or to the knowledge of Borrower, threatened, against or affecting Borrower or any of its subsidiaries, at law or in equity, before or by any person which, to the knowledge of Borrower, would have a material adverse effect on the business, assets, financial condition or results of operations of Borrower or any of its subsidiaries, or materially adversely affect the ability of Borrower to perform its obligations under the Loan Documents. Borrower is not in default of or in breach in any respect under any material contract, agreement or instrument to which Borrower is a party or by which it or any of its properties may be bound, including without limitation the Arvest Loan Documents. Execution and performance of the Loan Documents by Borrower shall not create or result in a default under any other agreement to which Borrower is a party, including without limitation the Arvest Loan Documents.

7.3 Place of Business and Certain Records. Borrowers principal office is the address set forth herein. Borrower shall provide written notice to Lender of any other office of Borrower where its records may be kept, if other than its principal office stated herein. Borrower shall not change its principal office unless fifteen (15) days’ prior written notice shall have been given to Lender.

7.4 No Financing of Corporate Takeovers. No proceeds of the Loan will be used to acquire any security in any transaction which is subject to Sections 13 or 14 of the Securities Exchange Act of 1934.

7.5 Purpose. The proceeds of the Note are to be used for working capital and no part of the proceeds are for personal, family or household purposes, or for personal investment.

7.6 Survival of Representations. All representations and warranties made herein or in any other Loan Documents will be continuing and survive the delivery of the Note and the making of the Loan or any advances thereunder, and any investigation at any time made by or on behalf of Lender shall not diminish Lender’s right to rely thereon. All statements contained in any certificate or other instrument delivered by or on behalf of any Borrower under or pursuant to this Agreement or any other Loan Documents or in connection with the transactions contemplated hereby or thereby shall constitute representations and warranties made hereunder.

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8. Borrower’s Covenants. Borrower hereby covenants with Lender as follows:

8.1 Notice of Litigation, Etc. Borrower will promptly advise Lender in writing of (a) all litigation, regardless of amount, affecting or threatened against the Borrower or any of its subsidiaries; (b) all complaints, claims, charges and contemplated complaints, claims and charges of which Borrower has knowledge made by any governmental authority in respect of Borrower or any subsidiary of Borrower, and (c) any notice of default under any material agreement to which Borrower or any subsidiary is a party, including without limitation under the Arvest Loan Documents.

8.2 Financial Information on Borrower, Guarantors and Real Property. Borrower shall furnish to Lender financial statements of Borrower in form and substance satisfactory to Lender upon written request of Lender, prepared in accordance with GAAP.

8.3 Liquidation, Merger, Issuance. Borrower and its subsidiaries shall not, without the prior written consent of Lender, (i) dissolve or liquidate, or become a party to any merger or consolidation, or (ii) acquire by purchase, lease or otherwise all or substantially all of the assets or capital stock of any person or corporation, or (iii) sell, transfer, lease or otherwise dispose of all or any substantial part of its property or assets or business, or discontinue or materially change its business, or (iv) issue capital stock (other than in accordance with established compensation plans of the Company) or convertible debt, unless, in each such case above, all amounts due under the Note and this Agreement are, (or are to be through an escrow acceptable to Lender), paid in full to Lender contemporaneous with or as a result of the specified event or closing thereof.

8.4 Compliance with Laws. Borrower and its subsidiaries shall comply with all applicable laws, rules and regulations applicable to any of them.

9. Defaults; Events of Default. Borrower will be in default (herein “Default”) under this Agreement or the other Loan Documents at any time Borrower fails to timely perform or observe any of its obligations under this Agreement. Lender may terminate all obligations of Lender to make an advance under this Agreement and the Note, and Lender may declare the Note, to be then immediately due and payable if any of the following (herein “Events of Default”) shall occur, unless otherwise waived by Lender:

9.1 Nonpayment. Any interest or principal required under the Note, or any other lending agreement between Lender and Borrower, is not paid when due (and as to which there shall be no grace period).

9.2 Other Defaults Under Loan Documents. Default by Borrower in the performance or observance of any agreement or covenant (other than for a default under 8.1 above, or the other defaults specified below) contained in the Loan Documents, or under the terms of any other instrument delivered to Lender in connection with the Loan, or any other lending agreement by and between Lender and Borrower, and the failure of Borrower to cure such Default within ten (10) days after written notice from Lender.

9.3 Representations and Warranties. Any representation, warranty, statement, certificate, schedule or report (herein collectively a “representation”) made or furnished to Lender by or on behalf of Borrower herein, or in connection with any other lending agreement between Lender and Borrower, proves to be false or erroneous in any material respect at the time of the making thereof or any representation ceases to be complied with in any material respect.

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9.4 Bankruptcy. Borrower becomes insolvent, or the institution of bankruptcy, reorganization, liquidation or receivership proceedings by or against Borrower or any subsidiary, or Borrower’s or any subsidiary making an assignment for the benefit of creditors, or a receiver is appointed for Borrower or any subsidiary of Borrower.

9.5 Default under Arvest Loan Documents. A default is declared under the Arvest Loan Documents or litigation is commenced in regard thereto by Arvest Bank.

9.6 Judgment: Attachment. Entry by any court of a final judgment against Borrower which, in the reasonable judgment of Lender, materially and adversely affects, or will affect, Borrower’s ability to perform its covenants and agreements under the Loan Documents.

9.7 Stock Exchange. The stock of Borrower shall be delisted from any stock exchange on which it is now traded, or trading shall be suspended.

10. Remedies. In the event of an Event of Default, Lender shall, at its option, have the right to declare all sums evidenced by the Loan Documents, and any other lending agreement between Lender and Borrower, to be immediately due and payable, and to enforce its rights and remedies hereunder or thereunder, or as otherwise provided by law or equity, or the Code. Lender shall further have the right to credit payments by Borrower to the Note or to any other loan obligation of Borrower to Lender, as Lender shall determine.

11. Miscellaneous. The parties further agree as follows:

11.1 No Waiver; Cumulative Remedies. No failure on the part of Lender to exercise, and no delay in exercising, any right or remedy hereunder, or otherwise provided by law or equity, will operate as a waiver thereof. Each right and remedy provided under the Loan Documents is distinct and cumulative to all other rights or remedies provided thereunder or afforded by law or equity, and may be exercised concurrently, independently, selectively, or successively, in any order whatsoever.

11.2 No Third Party Beneficiaries. Nothing in this Agreement, express or implied, is intended to confer upon any person, other than the parties hereto and their respective successors and permitted assigns, any rights or remedies under or by reason of this Agreement.

11.3 Notices; Time. Except as otherwise provided herein, any notices or other communications required or permitted hereunder shall be sufficient if made in writing and delivered personally, by messenger, by a nationally recognized overnight courier service, or sent by certified mail, return receipt requested, postage prepaid, and addressed to the appropriate party at its address stated on the first page hereof or to such other address as such party may substitute by written notice to the other as herein provided. The effective date of any notice shall be the date of delivery of the notice, if by personal delivery, messenger or courier service, or, if mailed, on the date upon which the return receipt is signed or delivery is refused or the notice is designated by the postal authorities as non-deliverable, as the case may be. Any notice or other communication given by Lender in a manner other than as stated above shall not be insufficient if actually received by Borrower. TIME IS OF THE ESSENCE.

11.4 Construction. This Agreement and the other Loan Documents shall be construed in accordance with the laws of the State of Oklahoma. The Loan Documents are entered into, issued by the Borrower and accepted by the Lender pursuant to a lending transaction negotiated, consummated and to be performed in Oklahoma City, Oklahoma County, Oklahoma. Nothing in this Agreement will be construed to constitute Lender as a joint venturer with Borrower or to constitute a partnership between Lender and Borrower, or to constitute Lender as a control person of Borrower. The descriptive headings of the Sections of this Agreement (except the definition sections) are for convenience only and are not to be used in the construction of the content of this Agreement. This Agreement may be executed in multiple counterparts, each of which will be an original instrument, but all of which will constitute one agreement. In the event of an inconsistency between this Agreement and any other Loan Document, this Agreement shall control.

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11.5 Binding Effect: Joint and Several Liability. This Agreement will be binding on Borrower and Lender and their respective successors and assigns and will inure to the benefit of Borrower and Lender and their respective successors and assigns. Notwithstanding the foregoing, Borrower will not assign its rights under this Agreement, without Lender’s prior written consent which may be withheld in Lender’s absolute discretion. Any such attempted assignment will be void without Lender’s prior written consent.

11.6 Entire Agreement; Amendment; Waiver. This Agreement and the other Loan Documents is the entire Agreement between the parties and no other oral agreements or understandings exist. This Agreement may not be amended or modified in any way, except by an instrument in writing executed by both parties hereto; provided, however, Lender may, in writing: (a) extend the time for performance of any of the obligations of Borrower; (b) waive any Event of Default by Borrower; and (c) waive the satisfaction of any condition that is precedent to the performance of Lender’s obligations under this Agreement. If Lender waives an Event of Default, such specific Event of Default shall be deemed to have been cured and not continuing, but no such waiver shall extend to any subsequent or other Event of Default or impair any consequence of such subsequent or other Event of Default.

11.7 Indemnity. Borrower hereby indemnifies and holds Lender harmless from and against any and all loss, cost, damages, judgments, expenses and attorney fees and costs, incurred by Lender as a result of the breach of any of Borrower’s representations and warranties or covenants as contained in Sections 6 and 7 hereof.

11.8 No Claims; Release. Borrower hereby warrants that is has no claims or causes of action against Lender or its principal, Roy T. Oliver (Lender and Roy T. Oliver, collectively the “Released Parties”). As further consideration for Lender to enter into the Loan Documents and which term is material to Lender, Borrower (on behalf of Borrower and all subsidiary entities of Borrower, collectively the “Borrower Parties”) does hereby irrevocably waive, release and forever discharge the Released Parties and each of their heirs, successors, assigns and personal representative, of and from any and all actions, causes of action, suits, damages, claims and demands whatsoever that the Borrower Parties, or any of them, ever had, now has, shall or may have for, upon or by reason of any matter, cause, act, omission, or thing from the beginning of the world through the date of this Release.

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11.9 Governing Law; Jurisdiction; Waiver of Jury Trial. The Loan Documents and the rights of the parties thereunder will be governed by, interpreted, and enforced in accordance with the internal laws of the State of Oklahoma, notwithstanding conflict of law principles. THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION AND VENUE OF ANY FEDERAL OR STATE COURT SITTING IN OKLAHOMA CITY, OKLAHOMA COUNTY, OKLAHOMA AND WAIVE ALL DEFENSES THERETO, WITH RESPECT TO ANY DEFUALT, DISPUTE OR ISSUE ARISING UNDER OR RELATING TO THE LOAN DOCUMENTS. THE PARTIES HERETO AGREE NOT TO ELECT A TRIAL BY JURY OF ANY ISSUE TRIABLE OF RIGHT BY JURY, AND WAIVE ANY RIGHT TO TRIAL BY JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT SHALL NOW OR HEREAFTER EXIST WITH REGARD TO THIS AGREEMENT OR THE COMPANY, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH INCLUDING, BUT NOT LIMITED TO, THOSE RELATING TO (A) ALLEGATIONS OF UNCONSCIONABLE ACTS, DECEPTIVE TRADE PRACTICE, LACK OF GOOD FAITH OR FAIR DEALING, LACK OF COMMERCIAL REASONABLENESS, OR SPECIAL RELATIONSHIPS (SUCH AS FIDUCIARY, TRUST OR CONFIDENTIAL RELATIONSHIP); (B) ALLEGATIONS OF DOMINION, CONTROL, ALTER EGO, INSTRUMENTALITY, FRAUD (INCLUDING BUT NOT LIMITED TO FRAUD IN The INDUCEMENT), MISREPRESENTATION, DURESS, COERCION, UNDUE INFLUENCE, INTERFERENCE OR NEGLIGENCE; (C) ALLEGATIONS OF TORTIOUS INTERFERENCE WITH PRESENT OR PROSPECTIVE BUSINESS RELATIONSHIPS OR OF ANTITRUST; OR (D) SLANDER, LIBEL OR DAMAGE TO REPUTATION. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY, AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY WOULD OTHERWISE ACCRUE. The prevailing party in such dispute shall be entitled to its reasonable attorney fees and costs.

11.10 Severability. If any provision of this Agreement are determined to be unenforceable, such unenforceability shall not affect the rest and remained of this Agreement, which shall continue in full force and effect.

Executed and delivered as of the date first above written.

“Lender”:	Valiant Investments, LLC
	By:
		Roy T. Oliver, Manager
“Borrower”:	Graymark Healthcare, Inc., an Oklahoma Corporation
		By
			Stanton M. Nelson, CEO

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EX-10.2

Exhibit 10.2

PROMISSORY NOTE

$1,000,000.00	Oklahoma City, Oklahoma
	March 16, 2011

FOR VALUE RECEIVED, the undersigned, Graymark Healthcare, Inc., an Oklahoma Corporation (the “Borrower”), promises to pay to the order of Valiant Investments, LLC, an Oklahoma limited liability company (the payee, its successors and assigns are hereinafter called the “Lender”), at 101 N. Robinson, Ste. 900, Oklahoma City, Oklahoma 73102, or at such other place as may be designated in writing by the Lender, the principal sum of up to One Million Dollars ($1,000,000.00), or so much thereof as is disbursed, together with interest thereon at the rates hereinafter stated. This Note will be payable on the following terms:

Prior to Default, the unpaid principal balance of this Note will bear interest from the date of advance at the rate of six percent (6%) per annum. Interest will be computed on a per diem charge based on a three hundred sixty (360) day year. The entire unpaid principal balance of this Note plus all accrued and unpaid interest thereon will be due and payable on August 1, 2011 (the “Note Maturity Date”).

This Note is executed and delivered in connection with an extension of credit by Lender and is subject to that certain Loan Agreement dated of even date herewith by and between Lender and Borrower (the “Loan Agreement”). Advances and payments hereunder may, at the option of the Lender, be recorded on this Note or on the books and records of the Lender and will be prima facie evidence of said advances, payments and unpaid balance of this Note. All payments will first be applied to the payment of accrued interest and the balance will be applied in reduction of the principal balance hereof provided that no payment will be applied to this Note until received by the Lender in collected funds. Funding of this Note will be made or not subject to the terms and conditions stated in the Loan Agreement. Unless otherwise defined herein, all terms defined or referenced in the Loan Agreement will have the same meanings herein as therein.

Borrower may not re-borrow under this Note and this Note is not on a revolver basis. The Borrower will have the right to prepay this Note in whole or in part at any time and from time to time without premium or penalty, but with interest accrued to the date of prepayment.

On the occurrence of any event of Default under the Loan Agreement or this Note which is not timely cured as provided in the Loan Agreement, at the option of the Lender, the entire indebtedness evidenced by this Note will become immediately due, payable and collectible then or thereafter as the Lender might elect, regardless of the date of maturity hereof. Failure by the Lender to exercise such option will not constitute a waiver of the right to exercise the same in the event of any subsequent default. A “Default” shall mean: (a) a default in payment when due of any interest on or principal of the Note, or (b) as provided in the Loan Agreement.

In the event of Default, the Lender will have available all remedies at law or equity, including all rights and remedies under the Uniform Commercial Code. The Lender will be entitled to proceed to selectively and successively enforce the Lender’s rights under the Loan Agreement and this Note, or any one or more of them without waiver or discharge.

The Borrower agrees that if, and as often as, this Note is placed in the hands of an attorney for collection or to defend or enforce any of the Lender’s rights hereunder or under any instrument securing payment of this Note, the Borrower will pay the Lender’s reasonable attorneys’ fees, all court costs and all other expenses incurred by the Lender in connection therewith.

During the continuance of an event of Default, all amounts due under the Note will bear interest at the per annum rate equal to fifteen percent (15%). During the existence of any such Default, the Lender may apply any payments received on any amount due hereunder or under the terms of any instrument now or hereafter evidencing or securing this indebtedness as the Lender determines from time to time. Any and all additional interest at the rate provided in this paragraph which has accrued shall be payable at the time of, and as a condition precedent to, the curing of any Default.

This Note is issued by the Borrower and accepted by the Lender pursuant to a lending transaction negotiated, consummated and to be performed in Oklahoma City, Oklahoma County, Oklahoma. This Note is to be construed according to the internal laws of the State of Oklahoma. All actions with respect to this Note may be instituted in the courts of the State of Oklahoma sitting in Oklahoma County, Oklahoma, or the United States District Court sitting in Oklahoma City, Oklahoma, as the Lender may elect, and by execution and delivery of this Note, the Borrower irrevocably and unconditionally submits to the exclusive jurisdiction (both subject matter and personal) of each such court and irrevocably and unconditionally waives: (a) any objection the Borrower might now or hereafter have to the venue in any such court; and (b) any claim that any action or proceeding brought in any such court has been brought in an inconvenient forum.

The makers, endorsers, sureties and all other persons who may become liable for all or any part of this obligation severally waive presentment for payment, protest and notice of nonpayment. Said parties consent to any extension of time (whether one or more) of payment hereof, release of all or any part of the security for the payment hereof or release of any party liable for the payment of this obligation. Any such extension or release may be made without notice to any such party and without discharging such party’s liability hereunder.

It is the intention of the Borrower and Lender to comply strictly with all applicable usury laws; accordingly, it is agreed that notwithstanding any provisions to the contrary in this Note, in no event shall this Note require the payment or permit the collection of an aggregate amount of interest in excess of the maximum amount permitted by any laws which may apply to this transaction, including the laws of the State of Oklahoma.

2

The Borrower and Lender intend and believe that each provision in this Note comports with all applicable local, state and federal laws and judicial decisions. However, if any provision or provisions, or if any portion of any provision or provisions, in this Note is found by a court of law to be in violation of any applicable local, state or federal ordinance, statute, law, administrative or judicial decision, or public policy, and if such court should declare such portion, provision or provisions of this Note to be illegal, invalid, unlawful, void or unenforceable as written, then it is the intent of all parties hereto that such portion, provision or provisions shall be given force to the fullest possible extent that they are legal, valid and enforceable, that the remainder of this Note shall be construed as if such illegal, invalid, unlawful, void or unenforceable portion, provision or provisions were not contained therein, and that the rights, obligations and interests of Borrower and Lender under the remainder of this Note shall continue in full force and effect.

Notwithstanding any provision of this Note or the Loan Agreement of even date herewith, both this Note and the Loan Agreement and all rights and remedies of Lender thereunder, shall be fully subordinate to the Amended and Restated Loan Agreement by and between Borrower (and others) and Arvest Bank, dated effective December 17, 2010, and all amendments, and waivers and consents pertaining thereto (the “Arvest Loan Documents”).

IN WITNESS WHEREOF, the Borrower has executed this instrument effective the date first above written.

Graymark Healthcare, Inc., an Oklahoma Corporation
By
	Stanton M. Nelson, CEO
(the “Borrower”)

3

EX-10.3

Exhibit 10.3

SUBORDINATION AGREEMENT

THIS SUBORDINATION AGREEMENT (the “Agreement”) is effective March 16, 2011, among VALIANT INVESTMENTS, L.L.C., an Oklahoma limited liability company (the “Subordinated Lender”), APOTHECARYRX, LLC, an Oklahoma limited liability company (“ARX”), SDC HOLDINGS, LLC, an Oklahoma limited liability company (“SDC”) and GRAYMARK HEALTHCARE, INC., an Oklahoma corporation (“Graymark” and together with ARX and SDC, the “Borrowers”), in favor of ARVEST BANK, an Arkansas banking corporation (the “Lender”).

W I T N E S S E T H :

A. The Lender has extended credit to the Borrowers and their affiliates pursuant to the Amended and Restated Loan Agreement dated December 17, 2010, executed and delivered by the Borrowers and the Borrowers’ affiliates (the “Loan Agreement”), evidenced by: (a) the Amended and Restated Promissory Note dated May 21, 2008, in the principal amount of $30,000,000.00, executed and delivered by the Borrowers, as amended (the “Term Note”); and (b) that certain Promissory Note dated May 21, 2008, in the principal amount of $15,000,000.00, executed and delivered by the Borrowers (the “Acquisition Note” and together with the Term Note, the “Notes”). The obligations of the Borrower under the Notes are secured by certain property of the Borrower (such property is referred to herein as the “Collateral”) under that certain Security Agreement dated May 21, 2008, executed and delivered by the Borrowers, as amended (the “Security Agreement,” and together with the Loan Agreement, the Security Agreement and any other documents and instruments executed and/or delivered to evidence or secure the Notes, the “Loan Documents”).

B. Graymark is currently attempting to secure equity financing for Graymark in a securities offering from which Graymark expects to receive $15,000,000.00 to $18,000,000.00 in proceeds (the “Equity Offering”).

C. Graymark has indicated to the Lender that Graymark needs to obtain a $1,000,000.00 unsecured line of credit to fund its operating expenses (the “Line of Credit”).

D. Pursuant to the Letter Agreement among the Lender and Graymark dated March 11, 2011, the Lender agreed to permit Graymark to pursue a Line of Credit from other lenders, subject to certain conditions.

E. The Subordinated Lender has agreed to make the Line of Credit available to Graymark pursuant to a Loan Agreement between the Subordinated Lender and Graymark dated March 16, 2011, as amended (the “Subordinated Loan Agreement”), and a Promissory Note in the original principal amount of $1,000,000.00 made by Graymark payable to the order of the Subordinated Lender dated March 16, 2011, as amended (the “Subordinated Note”), and any other documents entered into in connection with the Subordinated Loan Agreement or Subordinated Note (together, the “Subordinated Loan Documents”).

F. The Subordinated Lender, the Borrowers and the Lender desire to enter into this Agreement pursuant to which the Subordinated Lender and the Borrowers agree that all obligations now existing or arising in the future of the Borrowers under the Subordinated Loan Documents (the “Subordinated Debt”) will be subordinate in right of payment to all obligations of the Borrowers to the Lender.

NOW, THEREFORE, in consideration of the foregoing and the mutual covenants contained herein, the parties hereto, intending to be legally bound hereby, agree as follows:

1. Subordination. The Subordinated Lender hereby agrees that, except as and to the extent hereinafter provided, the Subordinated Debt is and will be subordinate and subject in right of payment to the prior payment in full of all obligations now existing or arising in the future of the Borrowers under the Note, the Loan Documents, this Agreement and any other agreements executed in connection with the Notes (the “Senior Debt”), whether or not the Senior Debt has been voided, disallowed or subordinated pursuant to Section 548 of the United States Bankruptcy Code or any applicable state fraudulent conveyance laws, whether asserted directly or under Section 544 of the United States Bankruptcy Code, and that should the Subordinated Lender have any security interest or other lien in the Collateral, that security interest or other lien will be subject and subordinate in all respects and for all purposes to the liens and security interests of the Lender in the Collateral, regardless of the order of creation, attachment, filing or other means of perfection.

1.1 Payments Not Permitted. None of the Borrowers is permitted to make any payments of interest or principal on the Subordinated Debt before August 1, 2011, except that if Graymark receives more than $10,000,000.00 in proceeds from the Equity Offering before June 30, 2011, then Graymark may pay off the Subordinated Debt in full on June 30, 2011. Beginning on August 1, 2011, and thereafter, while no default has occurred and is continuing under the Loan Documents, or would be caused thereby, the Subordinated Lender may from time to time receive from Graymark regularly scheduled payments of interest on the Subordinated Debt. Nothing in this Agreement will limit the right of the Subordinated Lender to receive payments on or in respect of the Subordinated Debt at any time after the Senior Debt has been indefeasibly paid in full. The aggregate of all advances under the Subordinated Loan Documents may not exceed $1,000,000.00.

1.2 Subordinated Debt Unsecured. The Subordinated Debt is unsecured and the Subordinated Lender will not take any action to obtain a security interest in any assets of the Borrowers or their respective affiliates.

1.3 Deferred Acceleration. The Subordinated Lender covenants and agrees that following notification of a default under the Loan Documents by the Lender until the earlier of: (a) payment in full of all of the Senior Debt, and (b) the passage of one hundred eighty (180) days from the date of notification, the Subordinated Lender will not take any action to accelerate, demand or collect the Subordinated Debt, to exercise any of its remedies in respect of the Subordinated Debt, to initiate a reorganization of, or litigation against, the Borrowers or to foreclose or otherwise realize on any security including, without limitation, the Collateral, given by the Borrowers or any other person to secure the Subordinated Debt, except that the Subordinated Lender may accelerate the Subordinated Debt, prior to repayment in full of the Senior Debt, if: (i) the Lender has first accelerated the Senior Debt, and (ii) the Subordinated Lender takes no further action to cause repayment of any portion of the Subordinated Debt until the Senior Debt is repaid in full.

1.4 Lender’s Remedies Not Impaired. The Subordinated Lender and the Borrowers acknowledge that after the occurrence and during the continuance of a default, the Lender, at its option, may take any action to foreclose or realize upon or enforce any of the Lender’s rights including, without limitation, any of its rights with respect to any Collateral, without the prior consent of the Borrowers or the Subordinated Lender.

1.5 Acceleration of Senior Debt. Upon the acceleration of the Senior Debt, the exercise of the Lender’s rights, the distribution of assets, winding up, total or partial liquidation, dissolution, reorganization or readjustment of debt, custodianship, bankruptcy, receivership, or insolvency or upon an assignment for the benefit of creditors or upon any other marshalling of the assets and liabilities of the Borrowers or upon any similar proceeding relating to the Borrowers or its property (whether voluntary or involuntary): (a) all of the Senior Debt, whether or not then due and payable, will first be paid in full before any payment of principal, interest, or any other amount due under the Subordinated Debt; and (b) any payment or distribution of assets of the Borrowers of any kind or character, whether in cash, property or securities to which the Subordinated Lender would be otherwise entitled (but for the terms hereof), will be paid or delivered by the trustee in bankruptcy, receiver, assignee for the benefit of creditors or other similar person making such distribution directly to the Lender for application to the payment of the Senior Debt until the Senior Debt is paid in full in cash.

1.6 Payments Received by Subordinated Lender. If, notwithstanding the provisions of this Agreement, any payment or distribution of any character (whether in cash, securities, or other property) or any security will be received, directly or indirectly, by the Subordinated Lender in contravention of the terms of this Agreement (a “Prohibited Transfer”), and before all of the Senior Debt will have been paid in full in cash, such Prohibited Transfer will not be commingled with any asset of the Subordinated Lender, will be held IN TRUST for the benefit of the Lender and will immediately be paid over or delivered or transferred to the Lender, or its representative, for application to the payment of all of the Senior Debt remaining unpaid, until all of the Senior Debt will has been paid in full in cash.

1.7 Continuing Subordination, Etc. The subordination effected by this Agreement is a continuing subordination, and the Subordinated Lender hereby agrees that at any time and from time to time, without notice to the Subordinated Lender:

1.7.1 the time for the Borrower’s performance of or compliance with any of its agreements contained in any of the Loan Documents may be extended or such performance or compliance may be waived by the Lender;

1.7.2 any of the acts mentioned in any of the Loan Documents may be done;

1.7.3 any of the Loan Documents may be amended for the purpose of adding any provisions thereto or increasing the amount of, or changing the terms of, the Senior Debt or changing in any manner the covenants or rights of the Lender or the Borrowers or any other person thereunder;

1.7.4 the amount of the Senior Debt may be increased or payment terms respecting any of the Senior Debt or any portion thereof may be extended;

1.7.5 the maturity of any of the Senior Debt may be accelerated, and any or all collateral security therefor may be exchanged, sold, surrendered, released or otherwise dealt with;

1.7.6 the Borrowers, any guarantor or any other person may be released of its obligations, whether or not in connection with a bankruptcy;

1.7.7 payments received by the Lender from any source which could lawfully be applied to payment, in full or in part, of the Senior Debt, but which could also lawfully be used for some other purpose may be used for such other purpose;

1.7.8 any other event which could, but for this provision, be used as a defense to the obligations of the Subordinated Lender hereunder may occur; and

1.7.9 the Senior Obligations may be refinanced or restructured by the Lender or any other lender (and in such event the Subordinated Lender will enter into a subordination agreement in form and substance as this Agreement with any such other lender);

all without impairing or affecting the obligations of the Subordinated Lender hereunder.

1.8 Waivers. The Subordinated Lender hereby unconditionally waives (a) notice of the incurring of the Senior Debt or any part thereof (b) reliance by the Lender upon the subordination of the Subordinated Debt to the Senior Debt (c) any marshalling rights or equities and (d) any other notice or rights provided by law, equity or contract.

1.9 Subrogation. No payment or distribution to the Lender pursuant to the provisions of this Agreement will entitle the Subordinated Lender to exercise any rights of subrogation in respect thereof (and any such rights existing under law are hereby waived) until such time as: (a) the Senior Debt has been indefeasibly paid in full; and (b) there exists no commitment under the Loan Documents.

1.10 Certain Covenants of Subordinated Lender. The Subordinated Lender agrees that promptly upon the written request of the Lender, it will take such other action as may be reasonably requested by the Lender to protect the rights of the Lender under this Agreement or effectuate the subordination provided herein.

1.11 No Amendments. The Subordinated Loan Documents may not be amended or supplemented without the Lender’s prior written consent.

2. Miscellaneous. The parties further agree as follows:

2.1 Governing Law. This Agreement and the rights and obligations of the parties hereunder will be construed and enforced in accordance with, and will be governed by, the laws of the State of Oklahoma (without giving effect to its choice of law principles).

2.2 Notice. Any notice, payment, demand, communication or delivery required or permitted to be given by any provision of this Agreement will be in writing and will be deemed to have been given when delivered personally or by telefacsimile to the party designated to receive such communication or on the date following the day sent by overnight courier, or on the third business day after the same is sent by certified mail, postage and charges prepaid, directed to the following address:

To Subordinated Lender:	Mr. Roy T. Oliver
	Valiant Investments, L.L.C.
	101 North Robinson, Suite 900
	Oklahoma City, Oklahoma 73102
To the Borrowers:	c/o Mr. Stanton Nelson
	101 North Robinson, Suite 900
	Oklahoma City, Oklahoma 73102
	Fax: (405) 239-2258
With a copy to:	John D. Singleton, Esquire
	1601 NW Expressway, Suite 510
	Oklahoma City, Oklahoma 73118
	Fax: (405) 463-0310
To the Lender:	Mr. Steve Faler
	Arvest Bank
	3900 North Lincoln Boulevard
	Oklahoma City, Oklahoma 73105
	Fax: (405) 523-4126
With a copy to:	Tom Blalock, Esquire
	Commercial Law Group, P.C.
	5520 North Francis Avenue
	Oklahoma City, Oklahoma 73118
	Fax: (405) 232-5553

2.3 Waivers. The terms of this Agreement may be waived, altered or amended only by an instrument in writing duly executed by the Subordinated Lender and the Lender, or their successors and assigns.

2.4 Successors and Assigns. This Agreement will be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors and assigns, provided, however, that neither the Subordinated Lender nor the Borrowers will assign or transfer their rights hereunder without the prior written consent of the Lender.

2.5 Counterparts. This Agreement may be executed in one or more counterparts, each of which will constitute an original, but all of which taken together will constitute one and the same instrument. Delivery of a photocopy or telecopy of an executed counterpart of a signature page to this Agreement will be effective as delivery of a manually executed counterpart of this Agreement.

2.6 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof in such jurisdiction, and any such prohibition or unenforceability in any jurisdiction will not invalidate or render unenforceable such provision in any other jurisdiction.

2.7 Inconsistencies with Loan Agreement. To the extent any terms hereof are inconsistent with the terms of the Loan Agreement, the terms of the Loan Agreement will control.

[SIGNATURE PAGES FOLLOW]

SIGNATURE PAGE TO SUBORDINATION AGREEMENT

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

SUBORDINATED LENDER: VALIANT INVESTMENTS, L.L.C., an Oklahoma limited liability company
By:
	Roy T. Oliver, Manager

SIGNATURE PAGE TO SUBORDINATION AGREEMENT

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

BORROWER:
GRAYMARK HEALTHCARE, INC., an Oklahoma Corporation
By:
	Stanton M. Nelson, CEO
BORROWER:
APOTHECARYRx LLC, an Oklahoma limited liability company
By:	GRAYMARK HEALTHCARE, INC., an Oklahoma Corporation, its Manager
	By
		Stanton M. Nelson, CEO
BORROWER:
SDC HOLDINGS, LLC, an Oklahoma limited liability company
By:	GRAYMARK HEALTHCARE, INC., an Oklahoma Corporation, its Manager
	By
		Stanton M. Nelson, CEO

SIGNATURE PAGE TO SUBORDINATION AGREEMENT

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written.

LENDER:
ARVEST BANK, an Arkansas banking corporation
By	Steve Faler, Senior Vice President

EX-99.1

Exhibit 99.1

March 11, 2011

VIA EMAIL

Mr. Stanton Nelson
Graymark Healthcare, Inc.
101 North Robinson, Suite 900
Oklahoma City, Oklahoma 73102

Dear Stanton:

We are writing this letter in connection with the Amended and Restated Loan Agreement among Arvest Bank, Graymark Healthcare, Inc., and others dated effective December 17, 2010 (the “Loan Agreement”). Except as otherwise defined in this letter, capitalized terms used in this letter will have the same meaning as those terms are defined in the Loan Agreement.

At our meeting on February 16, 2011, you indicated that Graymark is continuing to pursue a securities offering of between $15,000,000.00 and $18,000,000.00, which Graymark hopes to consummate before June 30, 2011 (the “Equity Offering”) and that the SEC has elected to review Graymark’s registration statement filed in connection with the Equity Offering.

Additionally, you advised us that Graymark had upcoming working capital needs that would require access of up to $1,000,000. As provided in the Loan Agreement, you requested Arvest’s prior approval to establish an unsecured and subordinated line of credit with First State Bank. After Arvest obtained approval for such line, you advised us that Graymark would not be borrowing from First State Bank because of unfavorable terms and requested that Arvest approve an unsecured and subordinated line of credit with another third party financing source to be identified later.

Arvest is willing to make the following accommodations, subject to the terms and conditions set forth in this letter:

(a) Arvest would waive the prohibition on incurring additional debt so that Graymark could borrow up to $1,000,000.00 on a nonrevolving basis, which loan will be unsecured and subordinate to Arvest’s loans in all respects. This waiver would be limited to the proposed line of credit, and would not be a waiver of any other rights or remedies under the Loan Agreement or permit any future borrowings without Arvest’s prior, written consent, as provided in the Loan Agreement.

(b) Arvest would waive the Borrowers’ compliance with the Debt Service Coverage Ratio and Minimum Net Worth covenants set forth in Sections 10.11 and 10.12 of the Loan Agreement from the date of the Loan Agreement through December 31, 2011.

arvest.com

Arvest is willing to make the foregoing accommodations on the following conditions:

1. On or before June 30, 2011, Graymark will pay to Arvest, the greater of: (a) $3,000,000.00; or (b) one-third of the proceeds of the Equity Offering.

2. On or before June 30, 2011, Graymark will pay Arvest in immediately available funds a fee equal to 25 basis points on the outstanding balance of the loan as of June 30, 2011.

3. If Graymark is not in compliance with the Debt Service Coverage Ratio and Minimum Net Worth Covenants on December 31, 2011, Graymark will pay Arvest in immediately available funds a fee equal to 50 basis points on the then outstanding balance of the loan and such payment will not cure any default under the Loan Agreement resulting from such noncompliance.

4. On June 30, 2011, Graymark will prepay all principal and interest payments due to Arvest between July 1, 2011, and December 31, 2011, to be applied in accordance with the Loan Agreement.

5. On June 30, 2011, if Graymark has received at least $15,000,000.00 in proceeds from the Equity Raise, Graymark will pay into escrow with Arvest all principal and interest payments due to Arvest between January 1, 2012, and June 30, 2012, to be held and disbursed pursuant to an Escrow Agreement in form and substance satisfactory to Arvest.

6. The documents evidencing the unsecured line of credit will provide that Graymark may not make any payments of principal or interest on the unsecured line of credit before August 1, 2011, except that Graymark may pay off the unsecured loan in full on June 30, 2011, if Graymark has received more than $10,000,000.00 in proceeds from the Equity Raise. If the Equity Raise results in proceeds of less than $10,000,000.00, Graymark will be permitted to make interest payments only on the unsecured line so long as there are no existing defaults under the Loan Agreement or other loan documents executed in connection with the Loan Agreement.

7. The unsecured line of credit will be subordinated to Arvest’s loans to Graymark in all respects and Graymark and the lender will execute and deliver in favor of Arvest a Subordination Agreement in form and substance satisfactory to Arvest. The unsecured line cannot “revolve” and the aggregate of all advances under the unsecured line of credit may not exceed $1,000,000.00.

Except as specifically amended by this letter, the terms and conditions of the Loan Agreement and all of the other Loan Documents remain in full force and effect. This Letter will not affect Graymark’s obligation to pay Arvest $27,996.17 on or before March 31, 2011, pursuant to the Letter Agreement between Graymark and Arvest dated January 6, 2011.

arvest.com

If the terms of this letter are acceptable, please sign where indicated below and return the signed letter to Arvest before 5:00 CST on March 15, 2011.

Should you have any questions, please do not hesitate to contact us.

Sincerely,

Steve Faler
Senior Vice President

cc: Tom Blalock, Esquire
John Singleton, Esquire

AGREED TO AND ACCEPTED MARCH 14, 2011
GRAYMARK HEALTHCARE, INC., an Oklahoma corporation
By:	/s/ Stanton M. Nelson Stanton M. Nelson, CEO

arvest.com