FIRST
AMENDMENT TO STOCK SALE AGREEMENT
THIS
FIRST AMENDMENT TO STOCK SALE AGREEMENT (this
“Amendment”), dated as of August 23, 2009, is by
and among AVASTRA SLEEP CENTRES LIMITED 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, pursuant to which Buyer will acquire
the Somni Stock and the Eastern Stock (the
“Agreement”).
B. The
parties desire to amend the Agreement as set forth in this
Amendment.
C. Capitalized
terms used in this Amendment unless otherwise defined in this
Amendment shall have the meaning given 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 6(a)
of the Agreement. The parties agree that the provisions of Section
6(a) of the Agreement are hereby replaced with the terms of
Section 4 hereof to the extent, and only to the extent, such
provisions apply to the Somni Entities. Prior to the closing of the
acquisition of the Eastern Stock, the parties shall enter into a
second amendment to the Agreement to replace the terms of Section
6(a) with respect to the Eastern Entity on substantially the same
terms as this Amendment. No party shall be obligated to consummate
the closing of the sale and acquisition of the Eastern Stock unless
such second amendment has been executed.
2. Section 2(b)
of the Agreement. Section 2(b) of the Agreement is amended to read,
in full, as follows:
“The
closing of the sale of the Eastern Interests shall take place at
the Closing Location at 10:00 a.m. CDT on September 30,
2009 or such other earlier date as designated by Buyer by providing
Seller and Parent at least five (5) business days
prior written notice.”
3. Section 3(a)
of the Agreement. Section 3(a) of the Agreement is amended to
change the dollar amount of “US$6,000,000” to
“US$5,900,000.” Otherwise, Section 3(a) of the
Agreement remains unchanged.
4. Assumptions
Regarding the Condition of the Somni Entities. The following is a
list of assumptions made by Buyer in determining the Purchase Price
for the Somni Entities
1
(collectively,
the “Assumptions”). 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 Assumption being
inaccurate, solely as follows:
(i) against
Seller and only for a period of eighteen (18) months following
closing of the sale and purchase of the Somni Stock. Furthermore,
Seller’s maximum aggregate liability for all such claims
shall be $3,000,000; and
(ii) against
Parent for a period of one (1) year following the closing of
the sale and purchase of the Somni Stock and solely to the extent
of the Graymark Healthcare, Inc. 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 which is no longer subject to any prohibition on
transfer as set forth in Section 3(b)(iii) of the Agreement.
For purposes of illustration, the parties intend that on the first
day of the first month following the one-year anniversary of the
closing of the sale and purchase of the Somni Stock that only
seventy-five percent (75%) of the Graymark Stock issued to Parent
shall be subject to claims under the Agreement, as amended, and
that on the first day of the fourth month following the one-year
anniversary of the closing of the sale and purchase of the Somni
Stock, that only fifty percent (50%) of the Graymark Stock issued
to Parent shall be subject to claims under the Agreement, as
amended.
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 any of the officers or
directors of Seller. In addition, the accuracy of the Assumptions
shall be a condition precedent to Buyer’s obligation to close
on the acquisition of the Somni Stock. The remedies described in
this Section 4 shall be the sole and exclusive remedy with
respect to any and all claims of an Assumption being proven to be
inaccurate To the extent this Section 4 is inconsistent with
the provisions of Section 6(b) of the Agreement, the provisions of
this Section 4 shall prevail.
(a) Authorization.
The execution and delivery of the Agreement, the performance by
Seller and Parent of their obligations under the Agreement and the
consummation by Seller and Parent of the transactions contemplated
by the Agreement (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.
(b) Authority.
Each of the Sonmi Entities 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 their business as it has been and is
currently conducted.
2
(c) Subsidiaries.
There are no corporations, partnerships, joint ventures,
associations or other entities in which either of the Somni
Entities owns, of record or beneficially, any equity
interests.
(d) Capital
Stock. Seller owns all of the issued and outstanding capital stock
of each of Somni Entities free and clear of all liens and
encumbrances (other than those that will be satisfied at the
closing of the acquisition of the Somni Stock, exclusive of any
restrictions under applicable federal or state securities laws or
under the applicable entity’s certificate of incorporation or
bylaws) and is transferring all such capital stock to Buyer
pursuant to the Agreement; provided, however, Buyer is aware that
the failure to close and fund all amounts owed under the Merger
Agreement dated May 4, 2007 (and the addendum thereto) and the
Promissory Note dated October 3, 2008 to the Pamela R Gillis
Revocable Trust (and related security and pledge documents) prior
to 5:00 p.m. CDT on August 24, 2009 could trigger certain
rights that would affect the ownership of the Somni Stock and/or
the capitalization of the Somni Entities and would result in liens
related to such Somni Stock not being released.
(e) Minute
Books. The minute book of each of the Somni Entities contains
accurate records of all meetings and accurately reflects all other
actions taken by the holders of capital stock of such Somni Entity
and the board of directors of such Somni Entity. Complete and
accurate copies of all such minute books have 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
each of the Somni Ent
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