FIRST AMENDMENT TO STOCK SALE AGREEMENT
EXHIBIT 10.2
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.”
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
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(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.
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(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
Xxxxxx X Xxxxxx 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 Entities 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 “Somni Financial Statements”). The Financial Statements and
the Somni Financial Statements (i) were prepared in accordance with the books of account and other
financial records of Seller and each of the Somni Entities, (ii) are complete and accurate in all
material respects, (iii) present fairly the financial condition and results of operations of Seller
and each of the Somni Entities 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 each of the Somni Entities (with the exception that the Somni 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 each of the Somni Entities and the results of the operations of Seller and each of the
Somni Entities as of the dates thereof or for the periods covered thereby. For purposes of this
Amendment, “2009 Balance Sheets” mean the Balance Sheets of each of the Somni Entities as of June
30, 2009 included within the Somni Financial Statements.
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(g) Absence of Undisclosed Liabilities. Neither of the Somni Entities has incurred any
liabilities, other than liabilities (i) as are reflected or reserved against in the Somni
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.
GAAP.
(h) Cash Balances. The cash available in the bank accounts of the Soirmi Entities as of the
closing of the acquisition of the Somni Stock will be substantially the same as reflected in the
2009 Balance Sheets subject to changes for deposits and payments in the
ordinary course of business.
(i) Asset Information. All fixed assets and computer software balances on the 2009 Balance
Sheets represent: (i) identifiable assets of the Somni Entities and (ii) the right to all items
included in the “Deposits” line item on the 2009 Balance Sheets will be retained by the applicable
Subsidiary following the closing of the acquisition of the Somni Stock.
(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 Somni Entities in fiscal year 2008 or
2009.
(k) Accounts Receivable. Accounts receivable reflected in the Somni 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 At closing of the acquisition of the Somni Stock, the net value of all the
accounts receivable of the Somni Entities will be substantially the same as the amounts reflected
in the Somni Financial Statements, subject to changes in the ordinary course of business.
(l) Inventory. Inventory reflected in the Somni Financial Statements represents tangible
identifiable inventory in good condition, on hand and available for sale. The net value of the
Inventory of the Somni Entities will be substantially the same on the closing of the acquisition of
the Somni Stock as it was on June 30, 2009 allowing for purchases and sales in
the ordinary course of business.
(m) Compliance with Laws. Each of the Somni Entities has conducted its business in material
compliance with all applicable laws.
(n) Taxes. Each of the Somni Entities 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 the closing
date of the acquisition of the Somni Stock. 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. None of the Somni Entities has ever nor will be prior to the closing date
of the acquisition of the Somni Stock a party to any tax allocation or sharing agreement.
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(o) Title and Sufficiency of Assets. Each of the Somni Entities 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, except Permitted Liens. Each of the Somni
Entities owns or otherwise has the right to use all the properties, assets and rights used in the
conduct of its business as presently conducted. For purposes of this Amendment, “Permitted Liens”
means (i) liens and encumbrances for taxes or governmental assessments, charges or claims the
payment of which is not yet due; (ii) liens and encumbrances of carriers, warehousemen, mechanics,
materialmen and other similar persons and other liens and encumbrances imposed by applicable law
incurred in the ordinary course of business
for sums not yet delinquent; (iii) liens and encumbrances relating to deposits made in the
ordinary course of business in connection with workers’ compensation, unemployment insurance and
other types of social security or to secure the performance of trade contracts or other similar
agreements; (iv) liens and encumbrances in favor of First National Bank of Kansas; (v)
imperfections of title, if any, none of which are substantial in amount, materially detract from
the value or impair the use of the property subject thereto, or impair the operations of any Somni
Entity; or (vi) any liens or encumbrances reflected in the UCC searches obtained by or for the
benefit of Buyer in connection with its due diligence (other than liens disclosed on such searches
as held by Commerce Bank and identified as Original filing number (12/26/2002): 5428271;
Termination filing number (6/23/2004): 92690677; and Continuation filing number (9/5/2007):
95705001).
(p) Litigation. There are no lawsuits, arbitrations or similar proceedings pending by or
against the Somni Entities nor has Seller or the Somni Entities sent or received
written correspondence threatening such lawsuits, arbitrations or similar proceedings.
(q) 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
(including all real estate leases) to which either Somni Entity is a party. Neither of the Somni
Entities is in breach of, or default under, any such contract or agreement.
(r) Acquisition Documentation. Seller has provided Buyer with true, accurate and correct
copies of all correspondence and documentation related to the transactions
pursuant to which either of the Somni Entities acquired its business and/or Seller obtained
ownership of the Somni Stock.
(s) Ordinary Course. Since July 1, 2009 through the closing of the acquisition of the Somni
Stock, the Somni Entities have operated only in the ordinary course of business consistent with
past practice.
(t) Effect of Transaction. In connection with the sale and acquisition of the Somni
Stock as contemplated by the Agreement, neither of the Sonmi Entities will suffer a material
adverse effect resulting from a change in control provision under any contract or agreement to
which it is a party; provided, however, that no effect of a change in control provision under the
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following contracts and agreements shall constitute a material adverse effect or otherwise give
rise to a claim by Buyer under this Section 4(t) or any other provision of this Agreement: (i) that
certain lease contract with Xxxx Family Enterprises, L.P. dated April 5, 2000, as amended from time
to time, for premises located at 000 Xxxxxxxx Xxx, Xxx’s Summit, Missouri, (ii) that certain lease
contract with Boardwalk Shopping Center, L.L.L.P. dated September 15, 2001, as amended from time to
time, for certain premises located at 0000 Xxxxxxxxxx Xxxxx, Xxxxxx Xxxx, Xxxxxxxx, (iii) all
documents, instruments, agreements and other contracts related to the following: (a) debt owed to
First National Bank of Kansas in the approximate principal amount of $1,128,817.45 as of the date
hereof; (b) debt owed to
GMAC in the approximate principal amount of $7,071.00 as of the date hereof; (c) debt owed to
Citizens Automobile Finance, Inc. in the approximate principal amount of $10,320.00 as of the date
hereof; (d) debt owed to Advantage Financial Services, L.L.C. in the approximate principal amount
of $11,319.00 as of the date hereof; and (e) debt owed to Embla Systems, Inc. in the approximate
principal amount of $278,490.85 as of the date hereof
5. Section 5(b) of Agreement. Section 5(b) of the Agreement is hereby amended and restated in
its entirety as follows:
“For a period of up to six (6) months following the closing of
the acquisition of the Somni Stock, Seller shall provide billing and
accounting services and associated information technology services
for the Somni Entities in substantially the same manner that it is
providing such services currently. The charge to be paid by the
Somni Entities to Seller for such services shall be $8,666.67 per
month for the first three (3) months following closing and $26,000
per month (or partial month) for each month thereafter. For a period
of up to six (6) months following the closing of the acquisition of
the Somni Stock, the Sorrmi Entities shall provide employee payroll
and benefits administration services for Seller in substantially the
same manner that they are providing such services currently, and the
charge to be paid by Seller to the Somni Entities for such services
shall be the actual and reasonable costs incurred by the Somni
Entities to provide such services.”
6. Closing Deliveries. At the closing of the acquisition of the Sornni Stock, the
parties shall make the deliveries contemplated by the Section B of the Closing Checklist attached
as Exhibit A; provided, however, no party shall be in breach of this Amendment or the Agreement for
the failure to make any delivery contemplated by Section B to the extent such party is not in
control of the applicable delivery (e.g., real property lease consents). Unless waived by the party
for whom the delivery is to be made, no party shall be obligated to close unless all such
deliveries are made. Any documents delivered shall be in form and substance reasonably satisfactory
to the party to whom the documents are to be delivered.
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7. 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.
8. 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.
[Signature Pages to Follow]
IN WITNESS WHEREOF, the parties have duly executed this Amendment, all as of the date first
written above.
PARENT:
|
AVASTRA SLEEP CENTRES LIMITED | |
| By: /S/ XXXX XXXXXXX | ||
| Name: Xxxx Xxxxxxx | ||
| Title: Administrator | ||
SELLER:
|
AVASTRAUSA, INC. | |
| By: /S/ XXXXXX XXXXX, M.D. | ||
| Name: Xxxxxx Xxxxx, M.D. | ||
| Title: President | ||
BUYER:
|
SDC HOLDINGS, LLC | |
| By: /S/ XXXXXXX XXXXXX | ||
| Name: Xxxxxxx Xxxxxx | ||
| Title: CEO |
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