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UNITED STATES BANKRUPTCY COURT MIDDLE DISTRICT OF TENNESSEE (NASHVILLE DIVISION) --------------------------------------------------------------------------IN RE: CS DIP, LLC (f/k/a Church

Street Health Management, LLC), SSHC DIP, LLC (f/k/a Small Smiles Holding company, LLC ) FNY DIP, LLC (f/k/a FORBA NY, LLC) Debtors.1

) ) ) ) ) ) ) ) ) ) )

Chapter 11 Case No. 12-01573 Case No. 12-01574 Case No. 12-01575 Jointly Administered under Case No. 12-01573

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NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA.S OBJECTIONS TO FIRST AMENDED PROPOSED DISCLOSURE STATEMENT DATED DECEMBER 13, 2012, WITH RESPECT TO FIRST AMENDED JOINT PLAN OF REORGANIZATION UNDER CHAPTER 11 OF THE UNITED STATES BANKRUPTCY CODE National Union Fire Insurance Company of Pittsburgh, Pa. (National Union), by its attorneys, objects to the First Amended Proposed Disclosure Statement dated December 13, 2012 (the Disclosure Statement) filed by the Debtors and the Official Committee of Unsecured Creditors (the Committee), together, the Plan Proponents, with respect to the First Amended Plan of Reorganization dated December 13, 2012 (the Plan), because it lacks adequate information as required by section 1125 of the Bankruptcy Code and is otherwise misleading.

All capitalized terms not otherwise defined in these Objections shall refer to those terms as defined in the Plan and Disclosure Statement.

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The Debtors contend that National Union issued certain dental professional liability insurance policies. As set forth below, National Union contends that any such insurance policies between National Union and the Debtors should be rescinded or otherwise reformed for the reasons being contested in the Coverage Litigation (see below). However, National Union files this objection to the Disclosure Statement out of an abundance of caution because the Debtors contend that National Union issued binding policies and the validity of those policies is currently disputed. PRELIMINARY STATEMENT Through their proposed Plan, though not clearly disclosed, the Debtors apparently seek to obtain the extraordinary relief provided by the Bankruptcy Code in order to resolve a large, but unquantified, number of claims. The centerpiece of the Plan is a personal injury trust (the Liquidating Trust) to handle all of the Patient-Related Claims. Specifically, the Debtors intend to channel these liabilities to the Liquidating Trust, relieving themselves of the financial burden of these claims. In order to fund the Liquidating Trust, the Plan purports to or may attempt to bind National Union to the Plans provisions without its consent and to abrogate its contractual and legal rights. Indeed, the Debtors appear to be attempting, through confirmation of the Plan, to transform policies issued by National Union into a new form of obligation that the Debtors may simply draw upon irrespective of the terms and limitations of existing obligations. Although the Debtors appear to believe that they may do anything and everything under the guise of Plan confirmation, the Bankruptcy Code does not expand the Debtors rights against others beyond what they were at the commencement of the case, and neither the Code nor non-bankruptcy law authorizes the Debtors attempt to strip National Union of its contractual and legal rights, as the Plan purports or may attempt to do. Nor does the Court have subject 2

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matter jurisdiction, whether in the Plan confirmation process or otherwise, to finally resolve noncore issues concerning prepetition contractual rights. Under the circumstances, the Plan is patently unconfirmable as a matter of law. The Disclosure Statement is also fatally defective and cannot be approved. The purpose of a Disclosure Statement is to inform parties in interest of their treatment under the Plan and to provide information sufficient to allow interested parties to make intelligent decisions in voting on or objecting to the Plan. 11 U.S.C. 1125(a)(1). The Plan proposed here is hopelessly (and, perhaps, intentionally) vague and confusing and the Disclosure Statement clarifies none of its deficiencies. Most significantly the Debtors and their Disclosure Statements have not

provided key documents and critical information. Among the material inadequacies of the Disclosure Statement are the following: The Disclosure Statement fails to provide any information on the terms of the Liquidating Trust Agreement, Claim Approval Structure or Claim Distribution Procedures, thus depriving interested parties of crucial disclosure concerning the framework and criteria for the resolution of Patient-Related Claims. The Disclosure Statement does not adequately discuss the ways in which National Unions rights and interests are impaired by the Plan. Indeed, the Disclosure Statement is affirmatively misleading in that it fails to disclose that the Plan violates National Unions contractual and legal rights and that the Plan violates several provisions of the Bankruptcy Code. The Disclosure Statement does not explain that the Plans breaches of the Debtors contractual obligations may adversely affect and/or void coverage that otherwise might be available for certain claims against the Debtors. The Disclosure Statement does not disclose potential conflicts-of-interest inherent in the structure of the Liquidating Trust. The Disclosure Statement fails to provide a liquidation analysis as required by 11 U.S.C. 1129(a)(7).

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For these reasons, as further amplified below, the Court should reject the Debtors Disclosure Statement. BACKGROUND A. The Debtors and the Patient-Related Claims Debtor SSHC DIP, LLC was the parent of a group of companies that provided dental practice management services to 67 Dental Centers serving low income families in 22 states. (DS2 at 11.) In or around 2007, the Office of the Inspector General of the U.S.

Department of Health and Human Services (OIG) and the U.S. Department of Justice (DOJ) each commenced separate investigations of the Debtors and the Dental Centers. (DS at 15.) Subsequently, several state Attorneys General began parallel state investigations of the Debtors and the Dental Centers. (Id.) In January 2010, the Debtors entered into a settlement agreement with the U.S. Department of Justice and the 22 states where the Debtors did business, agreeing to pay $24,000,000 over a five year period and to certain compliance measures, including the engagement of an independent monitor to oversee the quality of care the Debtors provided at their Dental Centers. (Id.) Subsequent to the Debtors settlement with the DOJ and the various states, a number of lawsuits were filed throughout the country by or on behalf of the Dental Center patients against certain of the Debtors, Dental Centers and Dentists, alleging claims for damages based upon treatment received at the Dental Centers. In addition to the Patient Litigation, the Debtors contend that at least approximately 1100 additional patients or former patients have retained counsel to assert similar claims against the Debtors, the Dental Centers and the Dentists.

DS means the Disclosure Statement. 4

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(DS at 16.) The Debtors also contend that [i]t is unknown how many additional patients or former patients may eventually assert claims. (Id.) On May 24, 2012, the Court entered an order authorizing the sale of substantially all of the Debtors assets free and clear of all liens, claims and encumbrances, approving the asset sale agreement (the Sale Agreement) between the Debtors and the buyer, CSHM LLC (the Buyer), and authorizing the Debtors assumption and assignment of executory contracts and unexpired leases. ([Docket No. 418] the Amended Sale Order). Under the Sale Order and the Sale Agreement, the National Union Policies are Excluded Assets which were not acquired by the Buyer. (Sale Order, 11.) The Debtors contend that, upon consummation of the Sale Agreement, the principal assets of the Debtors estate will be insurance coverages and certain potential causes of action. (DS at 20.) B. The Debtors Insurance Program The Debtors contend that they maintained insurance coverage to protect against the risks of its business, including professional liability. (DS at 20.) Among this insurance coverage, the Debtors contend they maintain insurance policies from National Union: (i) naming certain of the Debtors as named insureds (the 2008-2010 Entity Policies); and (ii) naming certain Dentists employed by the Dental Centers as named insureds (the 2008-2010 Dentist Policies and collectively with the Entity Policies, the National Union Policies). (DS at 20-21.) As set forth below, the existence or validity of such coverage is under dispute. The National Union Policies each contain identical clauses providing National Union with the following contractual rights, among others: Notice. Written notice shall be given to National Union in the event of any dental incident which may reasonably be expected to give rise to a claim for damages to which the insurance applies being made against an insured. 5

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Defense. National Union has the right and duty to defend the insured against any claim to which the insurance applies, subject to National Unions right to investigate, defend and appoint an attorney to defend any suit as National Union deems expedient. Assistance and Cooperation. The insured shall cooperate with National Union in the investigation, settlement or defense of the claim or suit and will assist National Union in the enforcement or any right against any person or organization which may be liable to the insured because of injury or damage to which the insurance may also apply. No Action against National Union. No action shall lie against National Union unless, as a condition precedent thereto, there shall have been full compliance with all of the terms of the policy. Assignment. The insureds rights and duties under the insurance may not be transferred. OBJECTIONS TO APPROVAL OF DISCLOSURE STATEMENT Section 1125 of the Bankruptcy Code requires that the Disclosure Statement

provide adequate information, defined as: information of a kind, and in sufficient detail, as far as is reasonably practicable in light of the nature and history of the debtor and the condition of the debtors books and records, that would enable a hypothetical reasonable investor typical of holders of claims or interests of the relevant class to make an informed judgment about the plan, but adequate information need not include such information about any other possible or proposed plan. 11 U.S.C. 1125(a)(1). The determination of what constitutes adequate information is within the discretion of the bankruptcy court. See In re Cardinal Congregate I, 121 B.R. 760, 764-65 (Bankr. S.D. Ohio 1990). A disclosure statement should not be approved if it fails to provide sufficient information about risks regarding the means by which a plan is to be funded. See id. at 764. A disclosure statement must contain all material information relating to the risks posed to

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creditors and equity holders under the proposed plan of reorganization. See In re Unichem, 72 B.R. 95 (Bankr. N.D. Ill. 1987). A. The Disclosure Statement Should Not Be Approved Because It Fails To Provide Any Information About The Claims Resolution Procedures Necessary For Interested Parties To Make An Informed Judgment About The Plan. The Disclosure Statement fails to provide information concerning the procedures that the Liquidating Trustee may unilaterally implement for the allowance and payment of Patient-Related Claims (the Claim Approval Structure (CAS) and Claim Distribution Procedures (CDP) (DS at pp. 34-35.) Moreover, the Disclosure Statement fails to attach and provides only vague details about the Liquidating Trust Agreement that will establish the Liquidating Trust and describe the Liquidating Trustees duties, obligations and powers. (DS at 22, 34-35.) The CDP, CAS, and Liquidating Trust Agreement are essential to understanding the Debtors strategy for liquidating and paying Patient-Related Claims.3 The Debtors cannot deny that the CAS, CDP and Liquidating Trust are the primary centerpieces of its proposed reorganization, because they will describe the sole mechanism for liquidating, determining and paying holders of the over Patient-Related Claims: Pursuant to the Liquidating Trust Agreement, the Liquidating Trustee may, subsequent to the Effective Date, implement a structure for the submission, review and allowance of Class 5(a) Claims, and/or for the procedures for distribution from the Liquidating Trust to holders of Allowed Class 5(a) Claims. Any Claims Approval Structure and/or Claim Distribution Procedures shall be binding upon and will govern distributions to all Class 5(a)
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In addition, page 25 of the Disclosure Statement refers to Liquidating Trust Procedures and Trust Distribution Procedures that would govern the treatment of Patient-Related Claims. (DS at 25.) Neither the Disclosure Statement nor the Plan contains definitions for Liquidating Trust Procedures or Trust Distribution Procedures. To the extent that these procedures are different from the CAS and CDP, the Debtors failure to disclose these procedures is an additional and separate reason why the Disclosure Statement fails to provide adequate information under 11 U.S.C. 1125(a)(1). 7

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Claim holders whose claims are unsatisfied at the time of establishment of the structure or procedures, and will provide the exclusive remedy to all holders of unsatisfied Class 5(a) Claims. Any such Claim Approval Structure and/or Claim Distribution Procedures shall require approval by the Trustee Advisory Committee, the Bankruptcy Court, after notice and hearing, and be subject to such other approvals as provided for in the Liquidating Trust Agreement. Any monetary distribution to the Holders of Patient Interests will be determined and paid in accordance with the approved Claim Approval Structure and/or Claim Distribution Procedures and the Liquidating Trust Agreement. (DS at 34-35) (emphasis added). Without the CAS and CDP, National Union indeed all of the Debtors constituents and interested parties are in the impossible position of having to evaluate the Disclosure Statement without a complete Plan ever having been circulated. All interested parties are statutorily entitled to read, digest and analyze the CAS, CDP and Liquidating Trust Agreement for 25 days prior to the hearing or approval of the Disclosure Statement. They will provide information concerning the operational guidelines, governing principles and controlling entities of the Liquidating Trust. Without the CAS, CDP and Liquidating Trust Agreement, the Plan and Disclosure Statement are substantially incomplete.4 Because the CAS and CDP are missing, the Disclosure Statement fails to provide any information concerning how the CAS and CDP will value Patient-Related Claims. Such values lie at the heart of the entire claim resolution process. Moreover, because the Disclosure Statement fails to provide specific details about the provisions of the Liquidating Trust
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National Union will not speculate on the precise contents of the CDP but reserves all of its rights with respect to it, including without limitation, the right to amend and supplement these Objections if the CDP is eventually filed. On information and belief, National Union expects that the CDP may violate its contractual rights and may purport to discharge the Debtors from their contractual obligations under the Policies. As discussed below, this would create a substantial risk that the Policies will be violated or that other insurance coverage may be vitiated and that no insurance coverage would exist for the Patient-Related 8

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Agreement, the Disclosure Statement fails to provide crucial information about the administration of the Liquidating Trust. Without these documents, neither National Union nor any other interested party can possibly make an informed judgment about the merits of the Plan. Moreover, the Debtors failure to disclose the terms of the CAS, CDP and Liquidating Trust Agreement prevents National Union from evaluating whether the Liquidating Trust will ever be required to enforce appropriately rigorous standards to avoid payment of unmeritorious Patient-Related Claims, or those that are not insured by the National Union Policies under any theory. (See Section H below.) Without any of this crucial information it is impossible to understand how the Liquidating Trust will be implemented and, accordingly, whether the Plan is feasible and/or capable of satisfying the specific requirements for confirmation under the Bankruptcy Code. The absence of the CAS, CDP and Liquidating Trust Agreement renders the Plan incomplete and the Disclosure Statement wholly inadequate in disclosing the terms of the Plan. B. The Disclosure Statement Should Not Be Approved Because It Fails To Provide Any Liquidation Analysis for the Debtors If the Debtors were Liquidated Under Chapter 7 of the Bankruptcy Code 11 U.S.C. 1129(a)(7) provides that a plan may only be confirmed if each holder of an impaired claim either accepts the plan or will receive or retain under the plan on account of such claim or interest property of a value, as of the effective date of the plan, that is not less than the amount that such holder would so receive or retain if the debtor were liquidated under chapter 7 of this title on such date. 11 U.S.C. 1129(a)(7), commonly referred to as the best interests test, guarantees that unless it otherwise agrees, each claimholder will receive at least as much under a proposed plan of

Claims.

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reorganization as it would have received under a liquidation of the debtor under chapter 7 of the Bankruptcy Code. For this reason, every plan proponent who would rely on the best interests test must include a liquidation analysis in the disclosure statement. In re Sierra-Cal, 210 B.R. 168, 176 (Bankr. E.D.Cal. 1997). Here, the Disclosure Statement fails to include any liquidation analysis for the Debtors, even though the Disclosure Statement expressly states that a copy of the Debtors Liquidation Analysis is being provided as an Exhibit to the Disclosure Statement. (DS at 3.) Because the liquidation analysis is missing, the Disclosure Statement fails to provide any information that would allow a claimholder to determine whether they are truly receiving as much as they would otherwise receive if the Debtors were liquidated under Chapter 7 of the Bankruptcy Code. The Plan Proponents failure to provide a liquidation analysis is especially problematic because the Disclosure Statement does not explain how the holders of PatientRelated Claims would receive a better recovery from the proposed Liquidating Trust at the center of the Plan Proponents Plan than they would if the Debtors were liquidated. As the Disclosure Statement contemplates, the Debtors proposed Liquidating Trust would use a portion of its available funds to pay administrative costs (DS at 25), which would not exist if the holders pursued their claims in the tort system. The absence of a liquidation analysis renders the Plan incomplete and the Disclosure Statement wholly inadequate in disclosing the Plans potential economic benefit to claimholders.

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C.

The Disclosure Statement Fails To Disclose Adequate Information About The Liquidating Trustee Or The Trust Advisory Committee That Will Administer The Proposed Liquidating Trust The Disclosure Statement fails to disclose the identity of the proposed Liquidating

Trustee or provide any information about the individual. Instead, the Disclosure Statement provides that an informational notice that will identify the Plan Proponents proposed Liquidating Trustee will be provided sometime prior to the Confirmation Hearing along with the Plan Proponents proposed Confirmation Order. (DS at 22.) As the Liquidating Trust is central to the Plan, the Liquidating Trustee would play a crucial role in the Debtors proposed reorganization. As a result, knowing the identity of the Debtors proposed Liquidating Trustee would allow claimholders to determine whether or not the Debtors proposed Liquidating Trust will be adequately administered. Moreover, the Debtors do not explain why such information should be withheld from impaired claimholders until just prior to the Confirmation Hearing, and possibly after they would have voted to accept or reject a plan that largely turns upon the administration of the proposed Liquidating Trust. Similarly, the Disclosure Statement fails to identify adequate information about the Trust Advisory Committee. The Disclosure Statement only states that the Trust Advisory Committee will be established pursuant to the Liquidating Trust Agreement and identifies three individuals that the Committee has nominated to serve as initial members. (DS at 22.) Like the Liquidating Trustee, the Disclosure Statement and Plan make the Trust Advisory Committee responsible for advising the Liquidating Trustee about the administration of the Liquidating Trust and the reorganized debtors. (Id.) For this reason, the Disclosure Statement should identify each member of the Trust Advisory Committee. Alternatively, the Disclosure Statement should

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provide information about how the members of the Trust Advisory Committee will be selected and who will have the ability to nominate individuals to the Trust Advisory Committee. D. The Disclosure Statement Fails To Disclose The Details of Potential Contingent Fee Arrangements Between the Liquidating Trust and Potential Law Firms Regarding Retention for the Coverage Litigation Although the Disclosure Statement states that the Committee is currently negotiating with several law firms to represent the proposed Liquidating Trust in the Coverage Litigation (DS at 21), the Disclosure Statement provides no information about the potential contingent fee arrangements that they are proposing for the representation of the Liquidating Trust. Specifically, the Disclosure Statement does not explain how any contingent fee

arrangement would affect the potential recoveries for holders of Patient-Related Claims. This information is of critical importance because the Plan Proponents treatment of Patient-Related Claims would conceivably depend upon the Liquidating Trusts allocation of a finite sum of money, from which it will pay claims. A contingent fee arrangement between a law firm and the proposed Liquidating Trust could significantly impact the amount of funds available to distribute to holders of Patient-Related Claims. Therefore, the Disclosure Statement should provide

information concerning the contingent fee arrangement that they propose to offer to law firm that will represent the Liquidating Trust in the Coverage Litigation. E. The Disclosure Statement Fails to Adequately Disclose The Disputed Facts Concerning the 2008-2010 Entity Policies and 2008-2010 Dentist Policies The Disclosure Statement fails to provide adequate information about the National Union Policies. (DS at 20-21.) Indeed, the Disclosure Statements description of these Policies is inadequate and misleading. First, the Debtors descriptions of the National Union Policies are incomplete. The 2008-2010 Dentist Policies consist of two separate insurance policies National Union issued 12

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to debtor SSHC, LLC that potentially afford, subject to the terms, conditions, limitations and exclusions contained therein, professional liability coverage limited to damages because of a covered dental incident for certain Dentists scheduled as individual named insured dentists for the policy periods from December 1, 2008 through December 1, 2009 (the 2008-2009 Dentist Policy) and December 2009 through December 1, 2010 (the 2009-2010 Dentist Policy). The limits of insurance set forth under each of the 2008-2010 Dentist Policies are $1 million for Each Dental Incident Per Individual Named Insured Dentist subject to $3 million Individual Named Insured Dentist Aggregate. The limits of insurance for each of the 2008-2010 Dentist Policies are further identified as none for Each Dental Incident All Other Insureds Combined Limit and All Other Insureds Aggregate Limit. The 2008-2010 Entity Policies consist of two separate insurance policies National Union also issued to debtor SSHC, LLC that potentially afford, subject to the terms, conditions, limitations and exclusions contained therein, professional liability coverage limited to damages because of a covered dental incident for the Debtors, as named insureds, and certain other entities, including scheduled Dental Centers, as additional insureds for the policy periods from September 26, 2008 through September 26, 2009 (the 2008-2009 Entities Policy) and September 26, 2009 through September 26, 2010 (the 2009-2010 Entities Policy). The limits of insurance set forth under each of the 2008-2010 Entities Policies are $5 million Each Dental Incident Per Individual Named Insured Dentist subject to a $6 million Individual Named Insured Dentist Aggregate Limit. The limits of insurance for each of the 2008-2010 Entities Policies are further identified as none for Each Dental Incident All Other Insureds Combined Limit and All Other Insureds Aggregate Limit.

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Second, the Debtors descriptions of the National Union Policies either fail to disclose or mischaracterize relevant coverage exclusions under the National Union Policies. In this respect, each of the National Union Policies afford coverage, if any, for sums that National Unions respective insureds are legally obligated to pay as damages because of certain covered dental incidents, but only in connection with claims either first made in writing or deemed to have been made during the applicable policy period or otherwise reported during an Extended Reporting Period, if any. The 2008-2009 Dentist Policy and the 2008-2009 Entities Policy have long since expired and so, in the absence of an Extended Reporting Period, there can be no coverage under either of those policies absent claims reported or deemed to have been reported during the applicable policy period. Because all, or virtually all, of the Patient-Related Claims and similar claims against Dentists and Clinics that have been made and may in the future be asserted in the Patient Litigation will not have been reported during the applicable policy period, there can be no coverage under the 2008-2009 Dentist Policy or the 2008-2009 Entities Policy. Furthermore, there can be no coverage under any of the National Union Policies absent damages because of a dental incident, which is defined in each of the National Union Policies to mean as any act, error or omission in the rendering of or failure to render professional services by an insured or by any person for whose acts, errors, or omissions the insured is held legally liable. Professional services are defined under the National Union Policies to mean dental services provided to others by a person trained and qualified to perform those services pursuant to a valid and unrestricted dental, dental hygiene or dental assisting certificate or license. Additionally, coverage may further be limited or otherwise excluded under each of the National Union Policies based, among other things, on: (1) Exclusion B, which bars

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coverage for dental incidents arising out of any dishonest, fraudulent, criminal or knowingly wrongful acts, errors or omissions; (2) Exclusion O, which bars coverage for an expected or intended dental incident; (3) Exclusion A, which bars coverage for dental incidents that occurred prior to the inception date of each of the National Union Policies and which any insured knew or should have known would result in, or had resulted in, a claim; and (4) the Other Insurance Clause. Disclosure of these specific coverage exclusions is critical to a comprehensive understanding of the Debtors purported coverage under the National Union Policies. As a result, the Debtors descriptions of the National Union Policies in the Disclosure Statement should contain language that adequately informs potential claimholders about these additional facts concerning these Policies. F. The Disclosure Statement Fails to Adequately Disclose Relevant Facts Concerning the Governmental Investigations Involving the Debtors The Disclosure Statement also fails to provide adequate information concerning the U.S. Department of Justice and state Attorneys General Investigations. (DS at 15.) Specifically, the Debtors description of the DOJ Investigation and State Investigations is inaccurate and incomplete, in part, because the Debtors have not accounted for three qui tam lawsuits commenced by former employees of certain of the Dental Centers against the Company and the respective Dental Centers. These qui tam lawsuits preceded and, indeed, were

responsible for prompting the subsequent nationwide Medicaid fraud investigation of the Company by the DOJ, the OIG and various state authorities, including several Attorneys General offices. As acknowledged by the DOJs press release dated January 20, 2010, the governments investigation of the Company resulted in the settlement allegations of Medicaid fraud made against the Company under the False Claim Act in exchange for $24 million, plus interest. The 15

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press release further credits the governments investigation of the Company to three lawsuits filed under the qui tam, or whistleblower, provisions of the False Claims Act. The qui tam actions referenced in the DOJs press release were each filed by former employees of certain of the Dental Centers and include: United States ex rel. McDaniel v. FORBA Holdings, LLC, No. 07-3416 (D. Md.), filed December 21, 2007; United States of America and Commonwealth of Virginia ex rel. Angela Crawford v. Small Smiles of Roanoke LLC, Case No. 7:08-cv-00370 (W.D. Va.), filed June 12, 2008; and John J. Haney o/b/o United States of America v. Childrens Medicaid Dental of Columbia, LLC d/b/a Small Smiles, Case No. 3:08-CV2562 (D.D.C.), filed July 16, 2008. Furthermore, the Debtors suggestion that the investigative news report airing on WJLA ABC 7 local news, concerning alleged abuses at the Dental Centers in the Washington D.C. area, was either contemporaneous with or immediately followed the government investigation is misleading because those events occurred in the reverse order the government investigation by the DOJ, OIG and others followed the first of the qui tam actions, which was filed in December 2007, as well as the news report, which aired in November 2007. As a result, the Disclosure Statement should contain language that adequately discloses these additional facts concerning the governmental investigations to potential claimholders. G. The Disclosure Statement Fails to Adequately Disclose Relevant Facts Concerning the Patient Litigation and Coverage Litigation The Debtors version of the history of the underlying Patient Litigation and the Coverage Litigation is inaccurate and misleading. (DS at 16-17.) First, the Debtors description of the history of the Patient Litigation is incomplete. Since the Companys settlement of the Medicaid fraud investigation with the DOJ in 16

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January 2010, a total of ten lawsuits (four in New York, three in Ohio and three in Oklahoma) have been filed against the Company and certain of the Dentists and Dental Centers. To date, at least three of those lawsuits (two in Ohio and one in Oklahoma) have been dismissed and are no longer pending against the Debtors or the corresponding Dentists or Dental Centers. In addition, three lawsuits have been filed against certain of the Dentists and Dental Centers, but not the Company, in New York, Colorado and Oklahoma. Of these three lawsuits, none of which involve the Company, the Dental Center named in the Oklahoma lawsuit has since settled and been dismissed as a defendant. Accordingly, of the thirteen (13) lawsuits filed against the Company, the Dentists and/or the Dental Clinics (collectively, the Patient Litigation), three have been dismissed in their entirety and three do not involve the Company at all. At present, Patient Litigation involving the Company, certain Dentists and/or certain Dental Centers is underway in New York, Oklahoma, Ohio and Colorado. Second, the Plan Proponents inaccurately suggest that National Union denied coverage for the Patient Litigation and commenced the Coverage Litigation seeking rescission or reformation of the National Union Policies in connection therewith, presumably to avoid National Unions policy obligations. (DS at 16-17.) To the contrary, National Union has

honored and continues to honor all of its obligations under the National Union Policies irrespective of the rescission and reformation causes of action asserted in the Coverage Litigation. In that regard, under the terms, conditions, limitations and exclusions of each of the National Union Policies, National Union has a duty to defend any claim to which the National Union Policies apply, but has no such duty as to any claim to which the National Union Policies do not apply. Therefore, National Union has afforded a defense to its insureds under the National Union Policies subject to a full and complete reservation of rights with respect to any

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and all lawsuits, including the Patient Litigation, wherein National Unions duty to defend has been triggered by allegations of potentially covered dental incidents as set forth in each of the National Union Policies. National Union has also disclaimed coverage for lawsuits, including those comprising the Patient Litigation, whenever the corresponding allegations in those complaints did not implicate coverage under the National Union Policies. Accordingly, and notwithstanding any suggestion to the contrary by the Debtors, National Unions recognition of its duty to defend, and its corresponding agreement to undertake the defense of its insureds, under the National Union Policies was in no way influenced by the Coverage Litigation or otherwise offered in exchange for any consideration in the Coverage Litigation. Instead, National Unions decision to defend was solely based upon the allegations asserted in each of the pleadings filed in the Patient Litigation and the language of the National Union Policies. At present, National Union is defending the Debtors and those Dentists and/or Dental Centers that qualify as insureds under the National Union Policies in connection with each of the lawsuits comprising the Patient Litigation subject to a full and complete reservation of all of National Unions rights under the National Union Policies. Furthermore, the Debtors fail to disclose that their counterclaim for bad faith refusal to honor the National Union Policies as asserted in the Coverage Litigation was dismissed by the United States District Court for the Middle District of Tennessee upon motion brought by National Union. Third, the Debtors description of National Unions rescission and reformation causes of action as asserted in the Coverage Litigation is inadequate and thus misleading. In the Coverage Litigation, National Union is seeking to rescind the National Union Policies because of the Companys failure to disclose certain material information to National Union that increased

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National Unions risk of loss thereunder. National Union contends that the Company failed to disclose, among other things, prior to issuance of the National Union Policies: the governments nationwide Medicaid fraud investigation targeting the Company, the Dentists and the Dental Centers; the existence of and allegations raised in the three qui tam actions brought under the False Claim Act against the Company and certain of the Dental Centers that prompted the governments nationwide Medicaid fraud investigation; the multiple claims relating to the governments nationwide Medicaid fraud investigation that the Company made to its prior professional liability insurance carrier; the non-renewal of the Companys prior professional liability insurance by its former insurance carrier due to claims experience; and the Companys own knowledge of systemic problems with the Dental Centers while under the management of the former owners, including, according to allegations the Company made against the former owners in a lawsuit filed in a Colorado federal court, a pervasive business culture that emphasized production over quality dental care in contravention of applicable laws and accepted standards of dental care. Alternatively, National Union seeks in the Coverage Litigation to reform the National Union Policies to reflect the true intent of the parties, including but not limited to the intended limits of liability under the 2008-2010 Entities Policies. In that regard, National Union contends that, as currently written, neither of the 2008-2010 Entities Policies affords any coverage to scheduled named insureds, including SSHC DIP, LLC and the other Debtors, or scheduled additional insureds, including any of the scheduled Dental Centers, because none of them are Individual Named Insured Dentists. National Union further contends that neither National Union nor the Company intended for each of the 2008-2010 Entities Policy to provide no coverage to the entities scheduled as named insureds or additional insureds thereunder.

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Instead, National Union asserts that each of the 2008-2010 Entities Policies should be reformed, consistent with the 2008-2010 Dentist Policies, to afford limits of insurance of $5 million Each Dental Incident All Other Insureds Combined Limit subject to a $6 million All Other Insureds Aggregate Limit and none for Each Dental Incident Per Individual Named Insured Dentist and Individual Named Insured Dentist Aggregate Limit. As a result, the Disclosure Statement should contain language that adequately discloses these additional facts concerning the Patient Litigation and Coverage Litigation to potential claimholders. H. The Disclosure Statement Fails To Disclose That The Plan Violates National Unions Rights and the Debtors Contractual Obligations and Fails To Disclose The Risk That The Plan May Thus Vitiate Available Insurance Coverage For any insurance coverage to be potentially available, the Debtors must respect National Unions contractual rights and must honor their own contractual obligations. Because the Plan contemplates violating National Unions contractual rights and the Debtors contractual obligations, the Disclosure Statement must discuss the ways in which the National Unions rights are impaired under the Plan and must disclose the risk that no coverage will be available to satisfy Patient-Related Claims. 1. The Disclosure Statement Should Disclose That The Plan Violates National Unions Right To Defend, Investigate and Settle the PatientRelated Claims And As A Result, May Vitiate Coverage.

National Union has the contractual right to participate in the defense, investigation, and settlement of claims to which the insurance applies. The Disclosure

Statement, however, fails to adequately disclose that the Plan contemplates violating this contractual right. (DS at 35) (Any monetary distribution to the Holders of Patient Interests will be determined and paid in accordance with the approved Claim Approval Structure and/or Claim 20

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Distribution Procedures and the Liquidating Trust Agreement). In addition, the Disclosure Statement fails to disclose the material risk that the Plans violation of this fundamental contractual right could vitiate any available coverage under the 2008-2010 Entity Policies and 2008-2010 Dentist Policies. In Wallace & Gale, In re The Wallace & Gale Co., No. 85-4-0092 (Chapter 11), Transcript Of Oral Ruling (Bankr. D. Md. July 22, 1998), the bankruptcy court was asked to confirm a proposed plan of reorganization that like the Plan purported to eliminate the insurers rights to control the defense, investigation, and settlement of asbestos bodily injury claims for which coverage was sought. In a ruling from the bench, the Wallace & Gale court denied confirmation of the plan and acknowledged the importance of the insurers contractual rights, holding that a plan that violates such rights cannot be confirmed: If it is to be liable for any judgment rendered against the insured, [an insurer] has a right to make certain that a proper defense is made to the claim and that unwarranted or overstated and conclusive claims are exposed and defeated. . . . [W]e are dealing with a contract. The Court does not have the power to alter the terms giving the insurer the right to control the defense with the duty that is imposed upon that the insurers to defend and indemnify. . . . I find that the cornerstone of the Plan is the wrenching away of these controls bargained for by the [insurance] carriers. And in placing these same controls in the hands of the persons suing the Debtor. Trans. at 119-21 (citing Sherwood Brands, Inc. v. Hartford Acc. & Indem., 347 Md. 32, 689 A.2d 1078 (1997)); see also ACandS Inc. v. Aetna Cas. & Sur. Co., 764 F.2d 968 (3d Cir. 1985) (recognizing the enforceability of an insurers right to control the defense and settlement of claims in asbestos bodily injury context). Thus, the Disclosure Statement must disclose the

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violation of these contractual rights and the material risks associated with the Plans attempt to violate the contractual rights.5 Here, the National Union Policies (and related contractual agreements) provide that National Union will undertake the defense of the Patient Litigation, as well as the investigation, prosecution and settlement of Patient-Related Claims, including claims asserted in the Patient Litigation. As set forth in the insuring agreements contained in each of the National Union Policies, National Union has the right to investigate, defend, and appoint an attorney to defend any suit as [National Union] deem[s] expedient.6 If the CAS and CDP do not preserve National Unions contractual rights to undertake the investigation, prosecution and resolution of Patient Related Claims, the Plans provisions could vitiate the 2008-2010 Entity Policies and 2008-2010 Dentist Policies. Further, the risk that the CAS and CDP could vitiate coverage is evident because the Disclosure Statement admits that the amount of additional patients or former patients that may eventually assert claims is partially dependent upon the outcome of the pending Patient Litigation. (DS at 16) (The number of additional claims that may be asserted is likely

dependent in part on the extent to which the plaintiffs in the New York Litigation and the Oklahoma Litigation are successful in establishing liability in their cases.) Thus, if the as-yet undisclosed CAS and CDP contain generous procedures and structures that do not preserve

The Disclosure Statement also fails to disclose the risk that the Plan is not feasible because implementation of the Plan would purport to deprive National Union of its statutory right to object to unmeritorious Patient-Related Claims, which is independent of their contractual rights. See 11 U.S.C. 502(a); In re Keck, Mahin & Cate, 241 B.R. 583, 596 (Bankr. N.D. Ill. 1999); In re Standard Insulations, Inc., 138 B.R. 947 (Bankr. W.D. Mo. 1992). The National Union Policies also provide that National Union will not, however, settle any claim or suit without the consent of the designated representative of [the Company], which may not be unreasonably withheld. 22

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National Unions contractually mandated participation rights, such procedures and structures could increase the amount of future claimants which would have the effect of jeopardizing the Debtors contended insurance coverage. Moreover, such generous procedures and structures for the resolution of claims asserted in the Patient Litigation could also dilute the recoveries of all Patient-Related Claims. 2. The Disclosure Statement Should Disclose That The Plan May Vitiate Coverage By Violating the Debtors Continuing Duty To Cooperate With National Union In The Defense And Investigation of PatientRelated Claims

The Debtors have an affirmative, continuing duty to cooperate in the defense and investigation of all claims under the National Union Policies. The Disclosure Statement,

however, fails to adequately disclose that the Plan contemplates violating this contractual obligation and that such a violation could vitiate any available insurance coverage for PatientRelated Claims. See 14 Couch on Ins. 199:13 (2003) (As a general rule, an insureds breach of a cooperation clause precludes coverage and releases the insurer from its responsibilities). The Disclosure Statement fails to disclose that the Plan does not affirmatively require the Liquidating Trust or the Liquidating Trustee to satisfy all of their continuing contractual obligations that are conditions of continued insurance coverage. Moreover, although the Disclosure Statement states that the as-yet undisclosed CAS and CDP will be the exclusive means for treatment of Patient-Related Claims under the Plan (DS at 34-35), the Disclosure Statement fails to describe these procedures and structures to allow National Union to ascertain whether such structures and procedures protect National Unions contractual right to cooperation.

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Because the Plan purports to disregard the Debtors post-confirmation duties of cooperation and other contractual obligations to National Union, there is a substantial yet undisclosed risk that any available insurance coverage may be vitiated. The failure of the Disclosure Statement to adequately disclose the material risks that insurance coverage may not be available makes it materially misleading. 3. The Disclosure Statement Should Disclose That The Plan May Vitiate Coverage By Violating Certain Anti-Assignment Restrictions

The insurance coverage that the Plan Proponents contend is provided by National Union is subject to certain restrictions prohibiting the assignment of coverage. Indeed, as one of the condition precedent to coverage, each of the National Union Policies expressly states that the Companys rights and duties under this insurance may not be transferred. The Plan, however, contemplates that the Debtors will transfer certain Insurance Rights against the Insurance Carriers for the Coverage of the Patient-Related Claims by transferring the post-confirmation Debtors Equity Interest to the Liquidating Trust. (DS at 22.) The Disclosure Statement must disclose the material risk that this disguised transfer of the Insurance Rights may be unenforceable under applicable state insurance law and may vitiate any available insurance coverage. 4. The Disclosure Statement Should Disclose That The Plan May Vitiate Coverage By Violating National Unions Right To Pay Only Covered Claims

It is well settled that insurance proceeds may be used only for the payment of actually covered claims, not for the insureds general liabilities. See, e.g., Celotex Corp. v. AIU Ins. Co. (In re Celotex Corp.), 152 B.R. 661, 664-65 (M.D. Fl. 1993) (holding that even in bankruptcy, the insured continues to have the burden of proving that its excess losses are the 24

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result of a covered claim as defined by the policy).

The Disclosure Statement and Plan,

however, contemplate that insurance proceeds will be used to pay non-covered claims. Specifically, the Plan and Disclosure Statement propose to establish as-yet undisclosed CAS and CDP to treat Patient-Related Claims, which is defined as any Claim against, or remedy or liability sought from any Debtor, whether or not such Claim, remedy or liability is reduced to judgment, liquidated, unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured or unsecured, whether or not the facts of or legal bases therefor are known or unknown, under any theory of law, equity, admiralty or otherwise (including piercing he corporate veil, alter ego and similar theories), arising out of actual or alleged property damage, death, bodily injury, sickness, disease, medical monitoring or other personal injuries (whether physical, emotional or otherwise) to the extent allegedly arising out of or based on, directly or indirectly, in whole or in part, the provision of dental services by any Debtor or an Entity for which any Debtor allegedly has liability, including any Claim, remedy or liability for compensatory damages (such as loss of consortium, lost wages or other opportunities, wrongful death, medical monitoring, survivorship, proximate, consequential, general and special damages) or punitive damages related thereto, and any Claim under any settlement of a Patient-Related Claim entered into by or on behalf of any Debtor prior to the Commencement Date. (Plan at 7) (emphasis added). The Plans definition of Patient-Related Claim is broad enough to cover both covered claims under the 2008-2010 Entity Policies and 2008-2010 Dentist Policies and non-covered claims. This is of particular importance because many of the claims asserted in the Patient Litigation are for intentional torts such as battery. Indeed, the gravamen of the Patient-Related Claims is intentional misconduct allegedly motivated by financial gain. While such intentional torts would not be covered claims under the National Union Policies, they would be encompassed within the definition of Patient-Related Claim under the proposed Plan.

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Moreover, the definition of Patient-Related claim is also broad enough to cover non-valid claims. (Plan at 7) (definition of Patient-Related Claim covers claims whether or not the facts of or legal bases therefor are known or unknown) The Disclosure Statement must disclose that any available insurance coverage exists only for actually covered Claims under the National Union Policies, to the extent that such Policies are determined to exist and/or are not rescinded, and that attempts to use insurance proceeds for any other purpose could vitiate coverage in its entirety. I. The Disclosure Statement Should Not Be Approved Because It Fails To Disclose Any Legal Basis That Would Give The Liquidating Trust The Right To Assumption of Dentists And Clinics Rights To Compromise Or Settle Claims That They May Have Against Any Insurer Without Right To Any Distribution Under the Plan The Plan seems to purport to unilaterally appropriate to the Liquidating Trust the Dentists right to compromise or settle claims without the consent of the Dentists or any compensation: the Dentists do on the Effective Date irrecoverably grant the Liquidating Trust the right and power (subject to approval by the Trust Advisory Committee and the approval of the Bankruptcy Court after notice and a hearing) to compromise, settle, release, and receive the proceeds of any and all claims that the Dentists may have against any or all Insurance Carriers, subject in all events to the restrictions contained in Section 4.18(c) of the Plan. (DS at 35) Similarly, the Plan also purports to unilaterally appropriate to the Liquidating Trust the Clinics right to compromise or settle claims without consent or compensation: the Clinics do on the Effective Date irrecoverably grant the Liquidating Trust (subject to approval by the Trust Advisory Committee and the approval of the Bankruptcy Court after notice and a hearing) to compromise, settle, release and receive the proceeds of any and all claims that the Clinics may have against any or all Insurance Carriers, subject in all events to the restrictions contained in Section 4.19(c) of the Plan. 26

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(DS at 36). The Disclosure statement fails to identify a legal basis that would allow it to appropriate the Dentists and Clinics property without any compensation or consent, and fails to disclose that in the absence of consideration this unilateral appropriation may be unenforceable. RESERVATION OF RIGHTS National Union expressly reserves, and does not waive, all of its rights, defenses, limitations and/or exclusions in connection with the contractual rights, contractual obligations, applicable law or otherwise. National Union further reserves all rights to assert any and all such rights, defenses, limitations and/or exclusions in any appropriate manner or forum whatsoever (including, without limitation, any of its rights to have any non-core matter relating to the interpretation of its contractual rights and the Debtors contractual obligations adjudicated by the United States District Court). Nothing contained in these Objections shall be deemed to expand any coverage that may otherwise be available under any insurance policies or any rights to payment under settlements. National Union further reserves all of its rights to raise the issues contained in these Objections and any other related issues in any procedurally appropriate contested matter and/or adversary proceeding including, without limitation, objections to confirmation of the Plan and a separate adversary proceeding requesting any declaratory and/or injunctive relief with respect to any contractual rights that may be adversely affected by confirmation of the Plan. National Union further reserves all of its rights to object to any claim for coverage under any policies and/or any claim for payment under any settlement agreements, to seek declaratory and/or injunctive relief to the extent that treatment of the contractual rights, contractual obligations and/or confirmation of the Plan violates any terms or conditions of any of policies and/or settlements or gives rise to any defenses on behalf of National Union. 27

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Nothing in these Objections shall be construed as an acknowledgment that any policies or pre-petition settlement agreements cover or otherwise apply to any claims, losses or damages on account of any claims or otherwise, or that any such claims or causes of action are eligible for payment. National Union reserves the right to seek an adjudication that the Debtors have waived or forfeited any available coverage under the policies. Finally, National Union reserves its rights to amend, modify or supplement these Objections in response to, or as a result of, the filing of additional documents by the Debtors, any discovery being conducted in connection with the Plan and Disclosure Statement, and/or any submission in connection with the Plan, Disclosure Statement or this bankruptcy case filed by any party-in-interest. National Union also reserves the right to adopt any other objections to approval of the Disclosure Statement filed by any party. CONCLUSION For the reasons set forth above, the Disclosure Statement describes a Plan that is unconfirmable as a matter of law, fails to provide adequate information regarding material aspects of the Plan, fails to disclose that the Plan violates National Unions contractual and legal rights, fails to disclose material risks associated with the Plan. Without such fundamental information, the Disclosure Statement cannot satisfy the minimum standards required by section

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1125 of the Bankruptcy Code and is materially misleading. Statement should not be approved. Dated: December 28, 2012

Accordingly, the Disclosure

Respectfully submitted, /s/ H. Buckley Cole H. Buckley Cole, Esq. (BPR #011811) Hall Booth Smith & Slover, P.C. 611 Commerce Street The Tower, Suite 3000 Nashville, TN 37203 T: 615.313.9911 F: 615.313.8008 hbcole@hbss.net Michael S. Davis, Esq. (Pro Hac Vice) Zeichner Ellman & Krause, LLP 575 Lexington Avenue New York, NY 10022 T: 212-223-0400 F: 212-753-0396 mdavis@zeklaw.com Scott D. Greenspan, Esq. (Pro Hac Vice) Sedgwick LLP 225 Liberty Street 28th Floor New York, NY 10281-1008 T : 212-422-0202 F : 212-422-0925 scott.greenspan@sedgwicklaw.com

#694261v4/JVR/11120.001

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CERTIFICATE OF SERVICE I hereby certify that on this the 28th day of December, 2012 a true and correct copy of the foregoing Document was filed electronically. Notice of this filing was sent by operation of the Courts electronic filing system to all parties indicated on the electronic filing receipt (including the parties listed below). Parties may access this filing through the Courts electronic filing system. Katie G. Stenberg Waller Lansden Dortch & Davis, LLP 511 Union Street, Suite 2700 Nashville, TN 37219 Beth Roberts Derrick Office of the U. S. Trustee 701 Broadway Suite 318 Nashville, TN 37203 John H. Rowland Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C. 211 Commerce Street, Suite 800 Nashville, Tennessee 37201 Paul K. Ferdinands King & Spalding 1180 Peachtree Street Atlanta, Georgia 30309 Robert A. Guy, Jr. Frost Brown Todd, LLC The Pinnacle at Symphony Place 150 3rd Avenue South, Suite 1900 Nashville, Tennessee 37201 By: /s/ H. Buckley Cole H. Buckley Cole (BPR #011811) Hall Booth Smith, P.C. 611 Commerce Street, Suite 3000 Nashville, TN 37203

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