Summary of GRAYMARK HEALTHCARE, INC.

Item 1.01. Entry into a Material Definitive Agreement.

On August 13, 2012, Graymark Healthcare, Inc. ("we," "the company," or "Graymark") and our wholly owned subsidiary, TSH Acquisition, LLC ("Acquisition Sub"), entered into a Membership Interest Purchase Agreement ("Purchase Agreement") with Foundation Healthcare Affiliates, LLC ("Seller") pursuant to which Graymark and Acquisition Sub will acquire from Seller (the "Acquisition") all of the outstanding membership interests of Foundation Surgery Affiliates, LLC and Foundation Surgical Hospital Affiliates, LLC (together the "Companies" or "Foundation"). Foundation has equity interests in and manages outpatient surgery centers and surgical hospitals in seven states.

In consideration for the Acquisition (the "Consideration"), Graymark will issue to Seller at closing approximately 3,029,600 shares of its Common Stock, approximately 319,704 shares of a newly-designated mandatorily convertible preferred stock (the "Preferred Shares"), and a warrant (the "Warrant") to purchase 40,000 Preferred Shares at an exercise price of $150.00 per share. The Preferred Shares will be automatically converted into shares of Common Stock at a 100:1 ratio (or approximately 31,970,400 shares of Common Stock) without further action by Graymark or Seller upon the approval of Graymark stockholders as described below. Beginning on the sixth month anniversary of the closing, the Preferred Shares will accrue dividends, payable semi-annually in arrears beginning on the first anniversary of closing. Dividends payable if, when and as declared by Graymark's Board of Directors will be, for each outstanding Preferred Share, payable in cash at an annual rate equal to $7.50 per Preferred Share. Graymark's existing Arvest Bank credit facility restricts the payment of cash dividends. If the dividends are not paid prior to conversion, such accrued but unpaid dividends shall be convertible into shares of Common Stock. The Warrant will automatically become exercisable for shares of Common Stock in lieu of Preferred Shares at a 100:1 ratio (or approximately 4,000,000 shares of Common Stock) and an exercise price proportionately reduced to $1.50, without further action by Graymark or Seller, upon the approval of Graymark stockholders as described below. The parties expect to complete the closing of the transactions contemplated by the Purchase Agreement in the third quarter of 2012.

Under the Purchase Agreement, Graymark has agreed to prepare and file with the Securities and Exchange Commission (the "SEC") promptly following the closing of the Acquisition a proxy statement to hold a special meeting of its stockholders in order to obtain approval for the issuance of shares of Common Stock upon conversion of the Preferred Shares and upon exercise of the Warrant, as required by the listing rules of The NASDAQ Stock Market, LLC ("Stockholder Approval").

Purchase Agreement

Pursuant to the Purchase Agreement and subject to the terms and conditions thereof, at the closing Seller will assign all of the membership interests in the Companies to Acquisition Sub in exchange for the Consideration. The Purchase Agreement contains customary representations, warranties and covenants of Seller including not to engage in certain significant actions prior to closing without the prior written consent of Graymark. Seller has agreed to indemnify us for losses resulting from breaches of their representations, warranties and covenants in the Purchase Agreement. These indemnification obligations are in certain cases limited to claims that in the aggregate exceed a $50,000 "deductible" amount such that claims for indemnification may not be made until the losses equal or exceed that amount.

Simultaneously with the closing of the transactions contemplated by the Agreement, Graymark will increase the size of its Board of Directors to no more than seven members and intends to appoint Thomas Michaud, Chief Executive Officer of Seller effective upon the closing. In addition, Seller has agreed for a period of three years from closing not to engage in the business of development, management, operation or ownership of ambulatory surgery centers, hospitals or other similar in-patient or out-patient medical facilities. Seller has also agreed not to solicit for a period of three years following the closing any person who is an employee of Foundation.

The closing of the Acquisition is subject to various conditions, including the receipt of consents from third parties and regulatory clearances. The Purchase Agreement may be terminated at any time prior to closing (i) by mutual consent of Graymark and Seller; (ii) by either Graymark or Seller if the closing of the transaction has not closed by September 30, 2012; or (iii) by either party if the other party is in breach of the Purchase Agreement and the breach is not cured after notice and causes a condition to completion of the transaction to fail.

Ancillary Agreements

Graymark and Seller will also enter into a number of additional ancillary agreements at closing, including a registration rights agreement, voting agreement and stockholders agreement. Graymark anticipates that it may also enter into employment agreements with certain employees of Seller at or following the closing.

On the closing date of the Acquisition, Graymark will enter into a registration rights agreement with Seller pursuant to which Graymark will file a registration . . .

Item 3.01. Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing.

On August 16, 2012, Graymark Healthcare, Inc. ("Graymark") received a written notice from The NASDAQ Stock Market LLC ("Nasdaq") indicating that Graymark is not in compliance with Nasdaq Listing Rule 5550(b), the continued listing standards for primary equity securities on The Nasdaq Capital Market, because its stockholders' equity was less than $2.5 million at June 30, 2012, and it does not meet the alternative standards of market value of listed securities or net income from continuing operations. On June 19, 2012, Graymark received a delisting determination letter from the staff of Nasdaq due to Graymark's failure to regain compliance with The Nasdaq Capital Market minimum bid price requirement for continued listing, as set forth in Nasdaq Listing Rule 5550(a)(2). Graymark filed an appeal regarding the June 19th delisting determination letter and on July 26, 2012 presented its proposed plan of compliance to a Nasdaq Hearings Panel (the "Panel"). At the Panel hearing Graymark informed the Panel of its expectation that it would not report at least $2.5 million in stockholders' equity in its Quarterly Report on Form 10-Q for the quarter ended June 30, 2012. Graymark believes that it's proposed plan of compliance will satisfactorily address both the bid price and stockholders' equity deficiencies once executed. Graymark's plan includes a discussion of the events that Graymark believes will enable it to timely regain compliance including consummation of the Foundation acquisition and a commitment to effect a reverse stock split, if necessary. Graymark's common stock is expected to remain listed on The NASDAQ Capital Market, under the symbol "GRMH," pending the conclusion of the hearing process and any extension of time granted by the Panel to allow Graymark to regain compliance. However, there can be no assurance that the Panel will grant Graymark's request for continued listing when it issues its written decision. If the Panel does not grant Graymark request for additional time to successfully execute its proposed plan of compliance, Graymark's common stock will be delisted from The Nasdaq Capital Market. In such event, it is expected that Graymark's common stock will be quoted and traded on the OTCQB market under the symbol "GRMH."