IN THE UNITED STATES BANKRUPTCY COURT FOR THE DISTRICT OF DELAWARE

Inre CRDENTIA CORP., et al./ Debtors.

Chapter 11 CaseNo. 10-_ _ _ ( ) (Joint Administration Requested)

DECLARATION OF REBECCA IRISH IN SUPPORT OF THE DEBTORS' CHAPTER 11 PETITIONS AND FffiST DAY PLEADINGS

I, Rebecca Irish, hereby state and declare as follows: 1. I am the Secretary, Treasurer and Chief Financial Officer of Crdentia

Corp., a corporation duly organized under and existing pursuant to the laws of the State of Delaware (ilk/a Lifen, Inc.) ("Crdentia"). I have been employed as Secretary and Chief Financial Officer since December 18, 2009, and as Treasurer since March 16, 2010. I was appointed in such capacities by the board of directors as an expansion of Crdentia's engagement of RVR Consulting Group II, LLC, a business management firm ("RVR") of which I am a managing member. 2. I am also the Secretary, Treasurer and Chief Financial Officer of ATS Universal, LLC, a Florida limited liability company

Crdentia's subsidiaries:

("ATS"), Baker Anderson Christie, Inc. a California corporation ("BAC"), CRDE Corp. a Delaware corporation ("CRDE"), GHS Acquisition Corporation, a Delaware corporation ("GHS"), Health Industry Professionals, LLC, a Michigan limited liability company
The Debtors, along with the last four digits of their federal tax identification numbers, are: Crdentia Corp.(5701), ATS Universal, LLC (3980), Baker Anderson Christie, Inc. (3631), CRDE Corp. (2509), GHS Acquisition Corporation (9736), Health Industry Professionals, LLC (4246), HIP Holding, Inc. (3468), MP Health Corp. (4403), New Age Staffing, Inc. (1214) and Nurses Network, Inc. (6291). The Debtors' mailing address for purposes of these cases is 1964 Howell Branch Road, Ste. 206, Winter Park, Florida 32792.

("HIP LLC"), HIP Holding, Inc., a Delaware corporation ("HIP"), MP Health Corp., a Delaware corporation ("MP Health"), New Age Staffing, Inc., a Delaware corporation ("NAS"), and Nurses Network, Inc., a California corporation ("NNI"). (each of ATS, BAC, CRDE, GHS, HIP LLC, HIP, MP Health, NAS and NNI, a "Subsidiary" or a "Debtor" and collectively, the "Subsidiaries") (the Subsidiaries, together with Crdentia, the "Debtors"). 3.
In my capacity as SecretaTy, Treasurer and Chief Financial Officer of each

of the Debtors, I have been responsible for overseeing their management and credit functions and I am familiar with their day-to-day operations. 4. Concurrently with the filing of this declaration (the "Declaration"), each

Debtor has filed in this Court a voluntary petition for relief under Chapter 11 of Title 11 of the United States Code (the "Bankruptcy Code"). 5. To enable the Debtors and their affiliates to operate effectively and

mmimize ce1tain of the potential adverse effects of the commencement of their reorganization cases, the Debtors have requested certain relief in "first day" applications and motions filed with the Court (the "First Day Pleadings"). The First Day Pleadings, described in detail below, seek, among other things, to ensure the continuation of the Debtors' cash management system and other business operations without interruption, preserve valuable relationships with suppliers and customers, maintain employee morale and confidence and establish certain other administrative procedures to promote a seamless transition in Chapter 11. This relief will be critical to the Debtors' restructuring efforts.

6.

This Declaration is submitted to assist the Court and other parties in

interest in understanding the circumstances that compelled the commencement of these Chapter 11 cases and in support of the petitions for relief under the Bankruptcy Code filed on the date hereof (the "Petition Date") and the First Day Pleadings. Any

capitalized term used but not defined herein shall have the meaning ascribed to that term in the relevant First Day Pleading. Except as othetwise indicated, all facts set forth in this Declaration are based upon my personal know ledge, my discussions with other members of the Debtors' senior management, my review of relevant documents, or my opinion based upon my experience, knowledge and information concerning the Debtors' operations and financial affairs. Ifl were called upon to testif'y, I could and would testify competently to the facts set fmth herein. I am authorized to submit this Declaration on behalf of the Debtors. 7. This Declaration is intended to provide a summary overvtew of the

Debtors and their affiliates and the commencement of these Chapter 11 cases. Parts I through III of this Declaration provide an overview of the Debtors' background, business and capital structure, and the circumstances giving rise to the commencement of these Chapter 11 cases. herewith.
I. The Debtors' Business

Patt IV summarizes the First Day Pleadings filed concunently

8.

Crdentia's predecessor was originally formed in the State of Delaware on

November 10, 1997 with the name Digivision Intemational, Ltd. The company changed its name to Lifen, Inc. on June 22, 2000, and then to Crdentia Corp. on May 29, 2003. Until 2003, Crdentia existed as a shell company, without operations or revenues. In 2003,

Crdentia completed its first acquisition of a healthcare staffmg business and began offering healthcare staffing services. 9. Over the next five years, Crdentia acquired a total of twelve (12)

compan1es located throughout the United States, adding employees, services and customers.
10.

The Debtors provide healthcare staffing services to hospitals and other

healthcare facilities in eleven locales in 5 states and also provides home healthcare services to patients in their homes in 4 of those states. The Debtors cu!Tently serve over
1,000 hospital, government, clinic, nmsing home, and home care clients, and facilitates

the placement of staff across the following services groups: a. Travel Nurses are recruited domestically as well as internationally, and placed on temporary assignments at healthcare facilities across the United States; b. Per Diem and Block Assignment Nurses are local nurses placed at healthcare facilities on typically on short-tenn, day-to-day assignments, although this group also includes block assignments which are longer term contractual clinical services; c. Physicians (Locum Tenens) contract with Crdentia to perform medical services for health care organizations for a specified length of time; d. Allied Staffing consists of the per diem and shmi-teJ.m contractual use of non-nmsing medical professionals; assignments include: diagnostic imaging, respiratory, laboratory, therapies and administrative modalities; and

e. Private Duty Home Care group provides nursing case management and staffing for skilled and non-skilled care in the home. 11. Crdentia is headquartered in Winter Park, Florida (formerly headquartered

in Dallas, Texas), and is comprised of 11 hub locations throughout the Sunbelt states, between Nmth Carolina and Arizona. These hubs are located in Austin, TX;

Birmingham, AL; Charlotte, NC; Dallas, TX; Houston, TX; Jacksonville, FL; Lubbock, TX; Orlando, FL; Phoenix, AZ; Tampa, FL; and Tucson, AZ. Each hub is administered by local hub managers as supported by the Corporate office in Winter Park, FL. 12. Each Subsidiary is a wholly owned subsidiary of Crdentia. A current

entity organizational chatt is attached hereto as Exhibit A. Each Subsidiary is a Debtor in the Chapter 11 cases. The Subsidiaries cunently function as shell companies; the

Company's operations, employees and customer contracts are at the parent level. Crdentia's financial statements are prepared on a consolidated basis with those of the Subsidiaries.
ll. Capital Structure

Common Stock 13. Crdentia's common stock began quotation on the OTC Bulletin Board

under the symbol "CRNC" in 2003. In connection with a 1-for-3 reverse split of Crdentia's common stock on June 29, 2004, the trading symbol was changed to "CRDE", and in connection with a 1-for-10 reverse split of Crdentia's common stock on April 4, 2006, the symbol was changed again to "CRDT." 14. In August 2008, Crdentia initiated a 1,000:1 reverse split of its publicly-

traded common stock in order to take the Company private. The Board of Directors and

Crdentia's shareholders approved the split, and the split became effective on August 9, 2008. Prior to the stock split, Crdentia had 54,140,447 shares of its common stock

outstanding as of July 22, 2008, and approximately 491 holders of record. As a result of the split, there were approximately 54,000 shares of Crdentia's common stock (based on the number of shares outstanding on July 22, 2008), and less than 300 record holders. The reduction in the number of holders enabled Crdentia to satisfY the filing of a Certification And Notice Of Termination Of Registration Under Section 12(G) Of The Securities Exchange Act Of 1934 Or Suspension Of Duty To File Reports Under Sections 13 And 15(D) Of The Securities Exchange Act Of 1934 (a "Form 15") and cease its reporting responsibilities as required by the rules of the Securities and Exchange Commission. Crdentia filed the Form 15 on August 13, 2008. 15. As a result of filing the Form 15 and "going dark", Crdentia realized

substantial cost savings as it no longer incuned the public company costs associated with reporting, auditing, and filing. 16. As of the Petition Date, there are 56,898 shares of Crdentia's common

stock outstanding and 176 holders of record. SecmedDebt 17. On February 22, 2008, Crdentia entered into a $10.2 million debt

refinancing (the "Credit Facility") with ComVest Capital, LLC ("ComVest"). The Credit Facility was comprised of a two-year $5.2 million Revolving Credit Note, bearing interest at the greater of the Prime Rate plus 2% or 8.5%, and two separate three-year term loans, each amounting to $2.5 million and bearing annual interest at 12.5%. Upon the occunence of certain events of default, ComVest was entitled to immediately collect

any obligation under the Credit Facility and increase interest rates to much higher default rates. 18. The Company also issued ComVest a warrant to purchase 8,000,000

common shares at an exercise price of $0.001 per share which expire in February 2014. (Such watTant was subject to the 1,000:1 reverse stock split, resulting in 8,000 post-split share warrant.) This watTant was subsequently exchanged for the Tranche C Note; see paragraph 20 below. 19. On July 2, 2008, Crdentia and certain of its subsidiaries signed agreements

with Capital TempFunds ("Capital TempFunds"), a division of Capital Business Credit LLC, to have it take over from ComVest a majority of the then-outstanding revolving Credit Facility and to increase the Credit Facility from $5.2 million to $7.5 million. The expanded revolving Credit Facility bears interest at the greater of (a) the prime rate of interest quoted in the Wall Street Journal plus 2.0% or (b) 8.5% per annum. The Credit Facility with Capital TempFunds was funded on July 7, 2008. 20. On July 2, 2008 (effective as of July 7, 2008), Crdentia and certain of its

subsidiaries entered into a series of agreements revising its obligations with ComVest. As noted above, the existing revolving Credit Facility with ComVest was repaid and moved to Capital TempFunds. The term debts in place and owed to ComVest (two tranches of three-year term debts of $2.5 million each) were revised as follows: (i) the principal payments on the Tranche A Term Note were delayed and amortization will commence in September 2009, and (ii) $1.5 million was added to the principal amount of the Tranche B Term Note to increase the principal amount from $2.5 million to $4 million. The new Tranche B Term Note is convertible at the option of ComVest upon

certain triggering events at the same price of the equity financing ($0.30 per share). Finally, the original wanant to ComVest to purchase shares ofCrdentia's common stock was redeemed in exchange for a Tranche C Term Note in the principal amount of $2.4 million. 21. The Tranche A Term Note bears interest at I2.5% per annum and requires

that (a) interest payments be made on the first calendar day of each month commencing on July I, 2008 and (b) principal payments be made in seventeen (I7) equal monthly installments of$I04,I66.67 beginning on September I, 2009 and continuing through and including January I, 20II, with the final payment due on February 28, 20II in an amount equal to the entire remaining principal balance of the note. The Tranche B Term Note bears interest at I2. 5% per annum and requires that (a) interest payments be made on the first calendar day of each month commencing on July I, 2008 and (b) that the principal be paid in full on February 28, 20Il. ComVest, at its option, may convert all or any pmtion of the unpaid principal balance and/or any accrued interest thereon into shares of the Company's common stock at a price of $0.30 per share. The Tranche C Term Note bears interest at I2.5% per annun1 and requires that (a) interest be payable upon the maturity or required prepayment in full of the note and (b) the outstanding principal of the note shall be due and payable in full on February 28, 20II. 22. In addition to the above, Crdentia issued on July 2, 2008 a Warrant to

Purchase Shares of Common Stock to ComVest to purchase up to five hundred twenty five thousand (525,000) shares of Crdentia's common stock with an exercise price of $0.35 per share. (Such warrant was subject to the 1,000:1 reverse stock split, resulting in 525 post-split share warrant.) This warrant is exercisable at any time after July 2, 2008

and expires on June 30, 2013. The warrant contains put options that allow ComVest to require Crdentia to redeem and purchase 80% of the warrant for a cash purchase price ranging from $420,000 to $635,000 until June 30, 2013 in certain circumstances. 23. In September 2009, Wells Fargo Bank (new owner of Capital TempFunds)

terminated its relationship with Crdentia, and ComVest assumed the revolving Credit Facility. 24. Each of the Subsidiaries are obligors and/or guarantors of Crdentia's

obligations on the Credit Facility. 25. As of the Petition Date, Crdentia's total outstanding balance on the

ComVest debt is $18,995,353.01, comprised of $16,429,792.53 in principal amount and $2,562,569.02 in accrued and unpaid interest through the Petition Date, and $2,991.46 in fees. Recent Financial Information 26. As of February 28, 2010, the Debtors had consolidated assets totaling

approximately $7.5 million and consolidated liabilities totaling approximately $22.5 million. Total assets have declined from December 31, 2008 to 2009 by $15.6 million,

of which $12.0 million resulted fi-om the write down of intangible assets which were created as a large portion of the purchase price consideration given on various acquisition transactions. The Debtors' consolidated revenues for its fiscal year ended December 31, 2009 and 2008 were $22,974,000 and $40,130,000, respectively. The Debtors' accounts receivable, net of the allowance for doubtful accounts, were $2,549,000 and $5,374,000 at December 31, 2009 and 2008, respectively and represent the only liquid asset of the Company. The Debtors have generated negative cash from operations for more than two

years and frequently rely on additional funding extended by ComVest to support its operations, sometimes weekly.

III.

Events Leading to the Debtors' Chapter 11 Cases

27. The Debtors are in a severe liquidity crisis attributable to a host of factors,

including, among others, (a) an industry-wide decline in demand, (b) material deterioration of the travel nursing market segment, (c) re-entry of formerly retired or patttime healthcate professionals into institutional full-time positions, which causes a reduction in the need for personnel from staffing agencies, (d) a decline in markets served by Crdentia due to office closures, (e) the Debtors' lack of focus on building a sales organization with a disciplined approach to managing the sales function, (f) mix of types of business that was unfavorable to appropriate profitability, (g) inability to hire quality local hub managers in a timely matmer, (h) failure to capitalize on new contractual opportunities with new clients, (i) failure to reach critical scale at the operating locations sufficient to fund the corporate overhead, and (j) utilizing debt and equity funding to acquire entities/operations which did not produce the positive results expected. As the revenues declined and gross margins contracted, Crdentia's management chose a path of cost reductions and office closures which provided only a pattial solution and limited relief 28. Since the fall of 2008, the Debtors have been in default on their

obligations to ComVest. The first default occurred in the fall of2008 due to the Debtors' failure to satisfy an EBITDA covenant. Currently, the defaults include failure to pay interest, failure to pay interest timely, failure to provide audited financial statements, and

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failme to maintain required financial ratios in the debt covenants agreed to by the Debtors. 29. In light of their dire financial condition, the Debtors contemplated a

reorganization of the Debtors and considered a sale of substantially all of the assets and/or the equity of the Debtors, sale of certain operating units (locations), pursuit of other investors/lenders, foreclosure on the seemed debt and the commencement of a Chapter II proceeding. Management attempted to find a strategic or financial buyer of all or part of the Debtors, or one or more new investors of mezzanine debt or preferred equity in an effmi to satisfy the Debtors creditors. 30. Management engaged an investment banking firm, Genesis Capital, LLC

("Genesis") on September 12, 2008. Gensis' first repmi was rendered on February 20, 2009, and was updated in March 2009. Genesis contacted 57 potential acquirers, of

which five submitted official indications of initial interest by the March 17, 2009 deadline (the "Genesis Interested Parties"). Each of these five Genesis Interested Parties signed Non-Disclosme Agreements and obtained corporate information packages. 31. Solicitations were based upon annualized revenues of $39 million and

earnings before interest, taxes, depreciation and amortization ("EBITDA") of $244,000; however, the actual results for the period were revenues of $23 million and $2.7 million negative EBITDA. Potential valuation amounts of the Debtors ranged widely ($4.7

million to $8.2 million, per Genesis' calculations). 32. Despite Genesis' robust marketing efforts, no letters of intent were signed,

no due diligence was completed and no offers were made. During the smumer of 2009, one potential buyer expressed interest in one location of the Debtors' II locations, but

II

did not complete the due diligence process.

Of the 52 potential buyers that did not

submit indications of interest, 42 received Non-Disclosure Agreements, of which 15 were executed, and six potential buyers claimed they needed more time or othetwise did not pursue any further action. 33. The reasons for the lack of interest by the potential buyers as reported in

Genesis' March 2009 included, among other things, "discomfort with negative EBITDA/cashflow businesses, lack of visibility on 2009 projections and certainty of adequate restructuring to meet budgeted results, hub location margins too low, concerns related to the condition and outlook of the entire healthcare staffing industry, Per Diem component too great in overall business mix, other competing acquisition opportunities in the nurse staffing space, below size threshold/above size threshold, and inability to secure adequate debt financing in today' s market." 34. Genesis' engagement with the Debtors is still in effect. Genesis stands to

be paid a bonus upon sale and would be motivated to continue working toward a successful completion of a transaction post the March 17, 2009 submission date; however, no additional offers have been received since that time. 35. In September 2008, RVR was engaged to perform an independent analysis

on specific aspects of the operations of Crdentia and to provide a report thereon to ComVest. RVR's October 2008 report included validation of certain representations

made by management including new capital contributions, execution of specific costcutting measures, savings to be realized from ceasing to be a public reporting entity, review of the projections for the remainder of the 2009 calendar year, insurance coverages and costs, evaluation of Management, and recommendations on a course(s) of

12

action.

Based on their analysis, RVR valued the Debtors at $6 to $9 million, and

suggested four possible courses of action: (a) Sell the business in its entirety; (b) Sell non-performing offices, downsize corporate operations, and grow five regions and position them for sale in the next twelve (12) to eighteen (18) months; (c) Sell all branches in a parcel sale, or (d) Bankruptcy. 36. CornYest contracted with RVR again in June 2009 for an update of their

October 2008 report. The RVR report noted the following significant issues/metrics: (a) Annualized current revenue run rate of $25.8 million based on May 2009 revenue compared to $34.1 million trailing twelve month revenue at May 31, 2009, compared to $40.4 million trailing twelve month revenue at August 31, 2008; (b) the business mix had worsened with further shift toward Per Diem Staffmg and serious deterioration of the Travel Staffing business line; (c) Monthly negative cash flow of $150,000; and (d) $3.3 million in negative EBITDA for the twelve months ended May 31, 2009. Additionally, many of the operational issues noted in October 2008 were still present in June 2009. As a result, RVR determined a valuation of $3 to $7.5 million, only to a strategic buyer capable of leveraging their own corporate office to serve Crdentia's branches. suggested three possible courses of action: RVR

(a) Operational and Management

Restructuring, (b) Sell all branches individually or by region or as fits a strategic buyer, or (c) Bankruptcy. 37. As a result of the June 2009 work, Crdentia retruned RVR effective

August 1, 2009, to assist, and eventually take over, management of the Debtors' business. RVR's proposal to the stakeholders of Crdentia included the following: (a) Restructuring the organization to become a sales-driven company including training, accountability and

13

introduction of an incentive-based pay for the sales staff; (b) Outsourcing the Human Resources (HR) function including a centralized recruiting solution; (c) Mechanizing payroll-related tasks to increase accuracy, reduce costs of processing and improve speed of processing; and (d) Considering replacement of certain personnel and locations based on cost/benefit analysis of future returns. 38. RVR was instrumental in providing Crdentia and ComVest with an

evaluation of the Debtors' business and the potential restructuring alternatives, based on RVR's observations and interactions with Crdentia, its management and RVR's knowledge of the capital markets. In mid-October 2009, RVR presented to Crdentia and ComVest its findings and recommendations. A primary theme of the findings related to unfavorable decisions made by the Company's management and the resulting effects including missed opportunities for improvement. RVR implemented a sales and service strategy, established weekly sales goals, incentives, objectives and accountabilities, repaired relations between the corporate office and the hub locations and began streamlining and evaluating the corporate office staff and functions while studying the Company's results of operations. RVR determined a valuation of the Debtors of$2.6 to $6.6 million depending on one of three suggested possible courses of action: (a) Foreclosure by ComVest, the secured lender, on the Debtors' assets; (b) Maintain the current course by driving revenue and restructuring corporate office/structure for cost savings; or (c) filing for protection under Chapter 11 of the Bankruptcy Code or filing an Assignment for the Benefit of Creditors. 39. After considering the available alternatives, the Board of Directors, after

,I

consulting with its advisors, concluded, that negotiating a plan of reorganization with

14

ComVest, whereby ComVest receives all of the equity ofthe reorganized Crdentia was in the best interests of Crdentia and its creditors, and for the Debtors to commence the Chapter II cases. 40. The pre-negotiated Joint Chapter II Plan of Reorganization of the

Debtors, dated March 17, 2010 (the "Plan"), contemplates (i) the emergence of the Debtors from bankruptcy as Reorganized Crdentia and the re-vesting of the Debtors' assets in Reorganized Crdentia free and clear of any liens, encumbrances or other interests; (ii) the vesting of 100% of the equity in Reorganized Crdentia in ComVest or its designee (iii) the opportunity for third parties to purchase the assets of or the equity in the Debtors free and clear of any liens, encumbrances or other interests; and (iv); the resolution of all outstanding Claims against and Interests (as such terms are defined in the Plan) in the Debtors. The Plan is subject to approval by the Bankruptcy Comt and the consideration by the Debtors of higher or better competing bids at an Auction (as defined in the Plan) and establishes cettain provisions to distribute the proceeds of the auction of the assets among the Debtors' creditors in accordance with the priorities established under the Bankruptcy Code. 41. On the Petition Date, the Debtors filed a motion with the Banktuptcy

Court seeking an order approving the bidding and auction procedures by which third patties may bid for the Debtors or their assets (the "Bidding and Auction Procedures Order"). Pursuant to the Bidding and Auction Procedures Order, the initial bid amount will be set at $10 million, which is approximately 53% of ComVest's Claim. In the

event no patty submits a submit Qualified Bid (as defined in the Bidding and Auction Procedures Order) to become the Third Patty Purchaser (as defined in the Bidding and

15

Auction Procedures Order), ComVest will receive the equity in Reorganized Crdentia. In the event a single party submits a Qualified Bid to become the Third Party Purchaser, such party will become the Third Party Purchaser and no auction will be held. If two or more parties submit Qualified Bids to become the Third Party Purchaser, the Debtors will conduct an auction in accordance with the Bidding and Auction Procedures Order. 42. In order to increase the opportunity for the Debtors to receive competitive

bids for the transfer of the Assets at the Auction, the Debtors will engage in a marketing process. The Debtors' marketing effotis will include sending company information and bid packages to the Genesis Interested Parties as well as other potentially interested pmiies that RVR has identified based on its knowledge of the healthcme industry. 43. Additionally, pursuant to terms negotiated between the Debtors, on the

one hand, and ComVest, as lender (the "DIP Lender"), the DIP Lender has agreed to provide use of cash collateral and limited postpetition financing (the "DIP Loan'') to the Debtors to fund, to the extent necessary, their postpetition operations. The DIP Loan will provide the Debtors, as bonowers, with a secured loan in an amount not to exceed $900,000. Bonowings under the DIP Loan will accrue interest at a rate equal to 12% per annum The DIP Loan will expire on the earlier of May 31, 2010 or an occunence of event of default. Bmmwings under the DIP Loan will be secured shall be secured by the Replacement Liens (as defined in the DIP Loan documents). The DIP Loan shall be secured, and all interest that accrues thereon shall be secured, by the DIP Loan Documents, the Replacement Liens and by post-petition liens pursuant to sections 363(c)(2), 364(c)(3) and 364(d)(l) of the Bankruptcy Code. In addition, the DIP Loan

16

shall have superpriority administrative expense status under section 364(c)(1) of the Bankruptcy Code.

IV.

The First Day Pleadings

44. Concurrently with the filing of their Chapter 11 petitions, the Debtors have

filed the First Day Pleadings listed on Exhibit B. I submit this Declaration in support of the First Day Pleadings. I have reviewed each of the First Day Pleadings (including the exhibits and schedules attached thereto) and, to the best of my know ledge, believe that the facts set forth therein are tme and correct. Such representation is based upon

information and belief, through my review of various materials and other information, and my experience and knowledge of the Debtors' operations and financial condition. If called upon to testifY, I could and would, based on the foregoing, testifY competently to the facts set forth in each of the First Day Pleadings. 45. As a result of my first-hand experience, and through my review of various

materials and other information, discussions with the other Debtors' executives, and discussions with outside advisors, I have formed opinions as to (a) the necessity of obtaining the relief sought in the First Day Pleadings, (b) the importance of the relief sought in the First Day Pleadings for the Debtors to continue to operate effectively; and (c) the negative impact upon the Debtors of not obtaining the relief sought in the First Day Pleadings. 46. As described more fully below, the relief sought in the First Day Pleadings

will minimize the adverse effects of the Chapter 11 cases on the Debtors and ensure that the Debtors' reorganization efforts proceed as efficiently as possible and result in a minimum of disruption and loss of productivity and a maximum recovery for creditors,

17

and I believe that the relief sought in each of the First Day Pleadings is necessary to enable the Debtors to operate as debtors-in-possession. A description of the relief requested and the facts supporting each of the First Day Pleadings is set forth below.
MOTION OF DEBTORS FOR JOINT ADMINISTRATION OF CHAPTER 11 CASES

47.

In this case, all of the Debtors other than Crdentia are wholly-owned

subsidiaries of Crdentia. The Debtors believe it would be more efficient for these cases to be jointly administered for procedural purposes. The Debtors anticipate significant activity during these cases and believe that most hearings and contested matters will apply to all of the Debtors' cases equally. Joint administration of these cases will obviate the need for duplicative notices, motions, applications, hearings, and orders, and will therefore save considerable time and expense for the Debtors and their estates. Consequently, joint administration of these cases will promote the economical and efficient administration of the Debtors' estates, unencumbered by the procedural problems othetwise attendant to the administration of separate, albeit related, cases.
APPLICATION UNDER 11 U.S.C. 327(A) AND l107(B), FED. R. BANKR. P. 2014 & 2016, AND BANKR. D. DEL. L.R. 2014-1 & 2016-1 TO APPROVE THE EMPLOYMENT AND RETENTION OF GERSTEN SAVAGE, LLP AS ATTORNEYS FOR THE DEBTORS

48.

The Debtors are seeking approval of the employment and retention of

Gersten Savage LLP ("Gersten Savage") as their attorneys in the Chapter 11 cases, effective as of the Petition Date. 49. The Debtors are seeking to retain Gersten Savage for, in addition to others,

the following reasons: a. Gersten Savage has extensive experience and knowledge in the field of debtors' and creditors' rights and business reorganizations under Chapter

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Gersten Savage has expertise, experience, and knowledge practicing before bankruptcy courts in this and other districts throughout the country. Gersten Savage's appearance before the Court for the matters in the Chapter 11 cases will be efficient and cost effective for the Debtors' estates.
b.

11 of the Bankruptcy Code.

Gersten Savage is a full-service law firm with experience and expe1tise in all other legal areas that will have an impact on the Debtors' day-to-day operations and their reorganization under Chapter 11 of the Bankruptcy Code. The Debtors contemplate that Gersten Savage will render specialized legal

50.

services to the Debtors as needed throughout the Chapter 11 cases. Generally, the legal services that Gersten Savage will render may be summarized, in part, as follows: a. Advising the Debtors of their rights, powers and duties as debtors- inpossession under the Bankruptcy Code; b. Performing all legal services for and on behalf of the Debtors that may be necessary or appropriate in the administration of these bankruptcy cases and the Debtors' businesses; c. Advising the Debtors concerning, and assisting in, the negotiation and documentation of fmancing agreements and debt restructurings; d. Counseling the Debtors in connection with the formulation, negotiation, and consummation of a possible sale of the Debtors' or their assets; e. Reviewing the nature and validity of agreements relating to the Debtors' interests in real and personal property and advising the Debtors of their cmresponding rights and obligations;
f.

Advising the Debtors concerning preference, avoidance, recovery, or other actions that they may take to collect and to recover prope1iy for the benefit of the estates and their creditors, whether or not arising under Chapter 5 of the Bankruptcy Code;

g. Preparing on behalf of the Debtors all necessary and appropriate applications, motions, pleadings, draft orders, notices, schedules, and other documents and reviewing all financial and other repmis to be filed in these bankruptcy cases; h. Advising the Debtors concerning, and preparing responses to, applications, motions, complaints, pleadings, notices, and other papers that may be filed and served in these bankruptcy cases; 19

1.

Counseling the Debtors in connection with the formulation, negotiation, and promulgation of a plan of reorganization and related documents or other liquidation of the estates; Working with and coordinating efforts among other professionals to attempt to preclude any duplication of effort among those professionals and to gnide their efforts in the overall framework of Debtors' reorganization or liquidation; and

J.

k. Working with professionals retained by other parties in interest in this bankmptcy case to attempt to structure a consensual plan of reorganization, liquidation, or other resolution of the bankruptcy cases for Debtors.

51.

The nonexclusive services described above are essential to the Debtors'

successful reorganization. 52. Gersten Savage was engaged by Crdentia on February 3, 2010 to provide

advice conceming fmancial restructuring, pre-bankruptcy and bankmptcy planning. 53. Gersten Savage has expended significant resources over the past few

months working with Crdentia to prepare for the filing of these cases. Over the last few months, Gersten Savage has become intimately familiar with Crdentia's business operations and financial affairs and many of the legal issues that will likely arise in the context of these Chapter II cases. If Crdentia is forced to retain counsel other than Gersten Savage, the Debtors' estates would incur additional expenses and delays associated with familiarizing new counsel with the intricacies of Crdentia' s fmancial affairs and business. 54. To the best ofCrdentia's knowledge, information and belief, and except as

set fmth on Schedule A annexed to the Declaration of Paul Rachmuth attached to the motion as Exhibit A, Gersten Savage has no coooection with Crdentia's creditors, patties in interest or affiliates, or attomeys or accountants for any of them, the United States Trustee, or any person employed in the Office of the United States Tmstee.

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55.

To the best of Crdentia's knowledge based upon the Rachmuth

Declaration, Gersten Savage does not represent or hold any interest adverse to the Debtors, their estates, creditors, equity security holders, or affiliates in the matters upon which Gersten Savage is to be engaged, and is a "disinterested person" within the meaning of section 101(14) of the Bankruptcy Code, as modified by section 1107(b) of the Bankruptcy Code, and as required by section 327(a) of the Bankruptcy Code.
MOTION OF DEBTORS FOR ORDER (I) AUTHORIZING CONTINUED USE OF EXISTING BUSINESS FORMS AND RECORDS; (ll) AUTHORIZING MAINTENANCE OF EXISTING CORPORATE BANK ACCOUNTS AND CASH MANAGEMENT SYSTEM; (ill) WAIVING (IF NECESSARY) THE REQUIREMENTS OF 11 U.S.C. 345(B) AND (IT) GRANTING RELATED RELIEF
1.

Prior to commencing these cases, in the ordinary course of business, the

Debtors used a cash management system (the "Cash Management System'') to efficiently collect, transfer, and disburse funds generated by their business operations.
2.

Revenues generated by the receipt of staffing fees from clients are

deposited into a lockbox account ("Lockbox") controlled by ComVest. ComVest disburses these funds to the Debtors for their operations and use on an as-needed basis, but at least weekly. Funds are transferred by ComVest by wire from the Lockbox to one or both of Crdentia's operating bank accounts, which the Debtors use to conduct all of their cash-based operations in the regular course of business, including paying all cash liabilities, which include but are not limited to disbursements for operating expense, general and administrative expense, and restructuring expenses.
3.

The Debtors'

primary operating account is

at Valliance Bank

("Valliance"). The following details Crdentia' s primary bank account with Valliance (the "Valliance Account"):

21

Bank: Adchess: Account name: Account#:

V alliance Bank 1601 N.W. Expressway #100 Oklahoma City, OK 73118 Crdentia Corp. 107007007

4.

The Debtors' second operating account is at Florida Capital Bank, N.A.

("Florida Capital"). The following details Crdentia's bank account with Florida Capital (the "Florida Capital Account"): Bank: Address: Account name: Account#: Florida Capital Bank, N.A. 109 E. Church St. Suite 100 Orlando, FL 32801 Crdentia Corp. 0000041599

5.

Crdentia also maintains an account with Global Cash Card ("GCC").

Pursuant to a certain Payroll Cash Card Services Agreement dated February 12, 2009 between GCC and Crdentia Corp., as amended, GCC provides electronic funds transfer services through electronic cash cards. These cash cards are issued to Crdentia's Field Employees and permits Field Employees to take advances of up to 70% of their weekly paychecks. Crdentia funds its account with GCC by making daily or weekly wire

deposits into the account. GCC then allocates the funds to the cash card of each Field Employee that has requested an advance. Advances may be taken by Field Employees as often as daily. The following details Crdentia's account with GCC (the "GCC Account," and together with the V alliance Account and the Florida Capital Account, the "Bank Accounts"):

IGlobal Cash Card

22

Address: Account name: Account#:

7 Corporate Park, Suite 130 Irvine, CA 92606 Crdentia Corp. 153495267061

56.

The Debtors are requesting the entry of an order, among other things,

authorizing the Debtors to continue using their existing business forms and records and authorizing the Debtors to maintain their bank accounts and Cash Management System 57. The Debtors are also requesting the entry of an order waiving the

requirements of 11 U.S. C. 345(b) and granting related relief. The Office of the United States Trustee's Operating Guidelines for Chapter 11 Cases (the "Guidelines") require Chapter 11 debtors-in-possession to, among other things, close all existing bank accounts and open new debtor-in-possession ("DIP") bank accounts, establish one DIP account for

all estate monies required for the payment of taxes (including payroll taxes), maintain a
separate DIP account for cash collateral, and obtain checks for all DIP accounts that bear the designation, "debtor-in-possession." The Guidelines also require debtors to close their books and records as of the petition date and to open new books and records. The Guidelines are designed to provide, among other things, a clear demarcation between prepetition and postpetition transactions and operations, which would, in theory, prevent the inadvertent postpetition payment of a prepetition claim 58. The Debtors are seeking a waiver of certain of the Guidelines. The

Debtors' operations would be harmed by the disruption, confusion, delay, and cost that would most certainly result from rigid compliance with the Guidelines. The Debtors are seeking a waiver of the Guidelines' requirement that they open a new set of books and records as of the Petition Date. Opening a new set of books and records would create

23

unnecessaTy administrative burdens and hardship and would cause unnecessary expense, utilization of resources, and delay. In the ordinary course of their business, the Debtors use many invoices, stationery, and other business forms. By virtue of the nature and scope of the Debtors' business and the numerous parties with whom they deal, the Debtors need to use their existing business forms without alteration or change. Printing new business forms would take an undue amount of time and expense. Fulfillment of the requirement would likely delay the payment of postpetition claims and negatively impact operations and the value of these estates. Accordingly, the Debtors are requesting that they be authorized to continue to use their existing business forms and to maintain their existing business records. 59. The Debtors are requesting authority to maintain the Bank Accounts and

the Cash Management System in accordance with their usual and customary practices to ensure a smooth transition into Chapter 11 with minimal disruption to operations. The Debtors are also requesting authority to close any of the Bank Accounts if, in the exercise of their business judgment, the Debtors determine that such action is in the best interest of their estates. 60.
In order to conduct their postpetition business, the Debtors need to be able

to issue checks to vendors, service providers, employees, and others.

To open new

accounts and obtain checks for those accounts will cause delay and disruption to the Debtors' business and a delay in receipt of funds needed for the Debtors' operations. 61. The Debtors' Cash Management System constitutes an ordinary course,

essential business practice providing significant benefits to the Debtors including, among other things, the ability to (i) control funds, (ii) ensure the availability of funds when

24

necessaty, and (iii) reduce costs and administrative expenses by facilitating the movement of funds and the development of more timely and accurate account balance information. Any disruption of the Cash Management System could have a severe and adverse impact upon the Debtors' reorganization efforts. 62. The relief requested in the motion is vital to ensunng the Debtors'

seamless transition into bank:mptcy. Authorizing the Debtors to maintain their Cash Management System, as modified, will avoid many of the possible disruptions and distractions that could divert the Debtors' attention from more pressing matters during the initial days of these Chapter II cases. 63. Pursuant to 105(a) of the Bankruptcy Code, the Debtors are seeking a

waiver of the requirements of 345(b) of the Bank:mptcy Code. The Bank Accounts me maintained with a financial institution that is financially stable. The Debtors believe that their banks are authorized depositories in this and other jurisdictions. Out of an

abundance of caution, however, the Debtors request a waiver of the requirement to comply with 345(b)'s investment guidelines, ifnecessaty, as their deposits in the Bank Accounts should not pose a substantial risk to the Debtors' estates or creditors. 64. Requiring the Debtors to change their deposits and other procedures could

result in harm to the Debtors, their estates, and creditors because such change would disrupt the Cash Management System. Conversely, the Debtors' estates and creditors will not be harmed by the Debtors' maintenance of the status quo because of the safe and prudent practices already utilized by the Debtors.
MOTION OF DEBTORS FOR ENTRY OF AN ORDER PURSUANT TO 11 U.S.C. lOS(A), 363(B), 363(C), 541(B)(7), 541(D), 1107(A), AND 1108 AND FED. R. BANKR. P. 6003 AND 6004 (I) AUTHORIZING THE DEBTORS TO PAY CERTAIN PREPETITION (A) WAGES, SALARIES AND OTHER

25

COMPENSATION; (B) REIMBURSABLE EMPLOYEE EXPENSES; AND (C) EMPLOYEE MEDICAL AND SIMILAR BENEFITS; (II) AUTHORIZING AND DIRECTING BANKS AND OTHER FINANCIAL INSTITUTIONS TO HONOR ALL RELATED CHECKS AND ELECTRONIC PAYMENT REQUESTS; AND (llD GRANTING RELATED RELIEF

65.

The Debtors seek the entry of an order (i) authorizing, but not directing,

the Debtors to pay all prepetition (a) wages, salaries, overtime pay, commissions, bonuses, paid time off, holiday pay, and other accrued compensation, as well as all withholdings and deductions related thereto; (b) reimbursable employee expenses; and (c) contributions to and benefits under workers' compensation insurance programs, employee medical and similar benefit plans (collectively, the "Prepetition Employee Obligations"); (ii) authorizing and directing banks and other financial institutions to receive, process, honor and pay all checks presented for payment and electronic payment requests relating to the foregoing; and (iii) granting related relief 6.
It is axiomatic that continued loyalty of a debtor's employees is a

necessary component to any successful reorganization. This is particularly true in service oriented businesses such as the Debtors' business. The filing of a chapter II petition is a stressful and uncertain time for a debtor's employees, most of whom are not familiar with the nuances of bankruptcy that many practitioners often take for granted. Such stress and unce1tainty often cause poor employee morale just at that critical time when a debtor needs its employees to be most loyal. Low morale may be further compounded if certain employees perceive themselves to have received less favorable treatment than others. Moreover, some employees live paycheck to paycheck and would suffer severe adverse consequences if they failed to receive their full compensation. Additionally, the majority of such claims would be entitled to priority treatment under section 507 of the Bankruptcy Code.
26

66.

Honoring the Debtors' Prepetition Employee Obligations will minimize

the hardship that employees will certainly endure if payroll is intenupted and will prevent the wholesale loss of employees that would ensue if the employees lost the reasonable expectation that they will be paid for their work. As such, the Debtors seek to continue to compensate employees and provide benefits in the ordinary course regardless of when the applicable wages were earned or benefits were accrued. 67. As of the Petition Date, no Employees were owed wages that exceed the

Priority Limit. Furthermore, when adding the booked value for unaccrued vacation pay to wages owed, no Employees have Prepetition Employee Obligations that exceed the Priority Limit. 68. As of the Petition Date, the Debtors' workforce consists of eight hundred

seventy-four (874) employees (collectively, the "Employees"), comprised of sixty-five (65) office and administrative staff ("Administrative Employees") and eight hundred nine (809) field staff ("Field Employees"). Additionally, the Debtors have prepetition

COBRA obligations owed on behalf of six (6) former employees. The Debtors estimate that these COBRA obligations average approximately $1,270 per month and will continue for approximately thirteen (13) to eighteen (18) more months. 69. Crdentia. 70. Crdentia pays the Administrative Employees in anears every two weeks All of the Employees and former employees are or were employed by

for 26 pay periods per year. Of the Administrative Employees, forty (40) are full time and receive an annual salary with the same amount paid each pay period; fourteen (14) are full time employees and are paid hourly with approximately the same amount paid

27

each pay period; three (3) are part time employees and are paid hourly with the approximately the same amount paid each pay period; and eight (8) are paid on commission. Employees paid on commission are paid a set dollar amount per day, per case or per shift. Crdentia' s payroll each pay period for the Administrative Employees is approximately $140,000. 71. Crdentia pays the Field Employees in aiTears every week for 52 pay

periods per year. All Field Employees are part time employees and are paid hourly or a flat rate per visit, with approximately the same amount paid each pay period. Locum Tenens independent contractors are paid 1099 wages. Crdentia's payroll each pay period for the Field Employees is approximately $160,000- $180,000. 72. Payroll is paid through a third-party payroll administrator, Paycom

Payroll, LLC, (the "Payroll Service"), which charges a base fee per payroll plus per check/transaction charges of approximately $1,035 per week, plus actual delivery costs of approximately $198 per week. Crdentia pre-pays the payroll amount by wiring to the Payroll Service the payroll amount and processing fee(s). Crdentia receives the funds to pay the payroll amount by weekly wire transfers from its secured lender, ComVest. Upon receipt of the wire transfers by the Payroll Service, it distributes the payroll via physical check sent to the Employees or direct deposit of funds into the Employee's bank account, at the discretion of the Employee. As of the Petition Date, Crdentia is cuiTent on its payroll obligations and on its obligations to the Payroll Service. 73. Field Employees have the option of taking an advance of up to 70% of

their weekly paycheck through use of a cash card issued by Global Cash Card ("GCC"), the payroll advance administrator. Pursuant to a certain Payroll Cash Card Services

28

Agreement dated February 12, 2009 between GCC and Crdentia Corp., as amended, GCC provides electronic funds transfer services tlnough electronic cash cards which are issued to each Field Employee. The cash cards are similar to ATM or debit cards. Crdentia funds its account with GCC by making daily or weekly wire deposits into the account. GCC allocates the funds to the cash card of each Field Employee that has requested an advance. Advances may be taken as often as daily. Any advances taken during a weekly pay period will be deducted from the total payroll amount due to the Field Employee fiom the Payroll Service at the end of such pay period. Approximately 75-80% of the Field Employees take advantage of this advance option on a regular and habitual basis. Other than security authenticator fees and fees for notifications, which are paid per participant, Crdentia does not pay GCC for its services. Rather, GCC receives service and transaction fees from each Employee who uses the service. 74. Although at this time Crdentia does not request authority to assume the

contract with the Payroll Service and GCC, it requests authority to continue using the Payroll Service as its payroll administrator and GCC as its payroll advance administrator under the terms and conditions contained in their respective prepetition contracts. 75. During each pay period, Crdentia makes a deduction from the Employees'

pay for certain obligations, including, but not limited to, federal income taxes, federal unemployment and disability taxes, social security and Medicare taxes (collectively, the "Payroll Tax Deductions"), and subsequently remit the withholdings to the relevant governmental authorities. The Debtors estimate that the Payroll Tax Deductions average approximately $302,000 per month. As of the Petition Date, Crdentia is cunent with respect to the Payroll Tax Deductions.

29

76.

Crdentia also makes deductions from Employee pay for Employee

contributions with respect to a 401(k) plan administered by Principal Financial Group of Principal Life Insurance Company. There are cunently seven (7) active participants in the 401 (k) plan. The plan provides for discretionary matching contributions by Crdentia. Typically, such contributions to the 401 (k) plan are remitted by Crdentia to the thirdparty administrator of the plan (collectively, the "Benefits Deductions"). The Debtors estimate that the Benefits Deductions average approximately $9, 112 per month. During the year ended December 31, 2009, Crdentia did not make any discretionary matching contributions under this plan. 77. Crdentia customarily reimburses the Employees for a variety of business

expenses incuned in the ordinary course of their employment ("Reimbursement Obligations"). These Reimbursement Obligations include, among other things, businessrelated travel and business-related expenses, including but not limited to mileage, car/taxi rental, airfare, parking, meals, entertainment, lodging, office supplies, phone, dues and memberships fees. Crdentia typically reimburses Employees for business expenses on an as-needed basis via check or direct deposit. The average monthly reimbursements for the fiscal year ended December 31, 2009 was $10,633. Crdentia cannot determine the precise amount of Reimbursement Obligations at any given time, as Employees may always have reimbursable expenses that have not been submitted. 78. In the ordinary course of its business, Crdentia provides each of their

Employees with certain benefits, including medical, dental, life insurance and workers' compensation insurance. Crdentia covers approximately 70% of the cost of the medical insurance plans for Administrative Employees and their spouses and/or dependents, and

30

approximately 60% of the cost of medical insurance plans for Field Employees and their spouses and/or dependents. Employees may participate in a dental insurance plan, which is 100% Employee-paid. Additionally, Crdentia provides $15,000 of life insurance coverage to each employee at a cost to Crdentia of $2.40 per employee per month. Crdentia covers 100% of the cost of the life insurance premium for this benefit. Insurance premiums for voluntary life, dependent life, short-term disability and long term disability are 100% Employee-paid. Crdentia pays in the aggregate for all Employees

approximately $49,260 per month for the foregoing Employee benefits. 79. Crdentia offers paid vacation to the full-time Employees based upon the

Employees' experience. Pursuant to Crdentia's vacation policy, after employment for 90 days, employees will receive cash for accrued paid time off hours earned upon proper resignation, separation or retirement, provided the departure from the company is not due to gross negligence or unethical behavior. In addition, unused paid time off hours of between two and four days (depending on level of employment) may be carried over fiom year to year. Postpetition, the Debtors intend to continue this policy. Accordingly, during the postpetition period, the Debtors anticipate that most or all accrued prepetition vacation days will not be paid in cash, but, rather, will be used by the Employees. As of January 31, 2010, the total value of all accrued but unused vacation pay of the Employees is approximately $43,153. Additionally, the Debtors close for business on certain days throughout the year in recognition of holidays, which include but are not limited to, New Years, Memorial Day, Independence Day, Labor Day, Thanksgiving, and Christmas. 80. Denial of the Prepetition Employee Obligations will adversely impact the

Debtors' relationship with their Employees and Staffing Professionals and will

31

ineparably impair the morale, dedication, confidence, and cooperation of the very people upon whom the Debtors rely in order to see their business tlnough this difficult period. The stability of the Debtors may thus be undermined by the possibility that otherwise loyal employees will seek other employment alternatives. 81. The Debtors do not seek to alter their compensation, vacation, and other

benefit policies, and the motion is not to be deemed an assumption or adoption of any agreement or policy providing for any such benefits. Instead, it is intended only to pennit the Debtors, in their discretion, to make payments consistent with those policies and to permit the Debtors, in their discretion, to continue to honor their practices, programs, and policies with respect to their Employees and Staffing Professionals, as such practices, program, and policies were in effect as of the Petition Date.
MOTION OF DEBTORS FOR ENTRY OF AN INTERIM AND FINAL ORDER PURSUANT TO 11 U.S.C. lOS(A) AND 366 (I) PROillBITING UTILITIES FROM ALTERING, REFUSING, OR DISCONTINUING SERVICES ON ACCOUNT OF PREPETITION INVOICES, (II) DEEMING UTILITIES ADEQUATELY ASSURED OF FUTURE PERFORMANCE, AND (Ill) ESTABLISHING PROCEDURES FOR DETERMINING ADEQUATE ASSURANCE OF PAYMENT

82.

In the ordinary course of business, the Debtors regularly incur utility

expenses for electricity, natural gas, local and long-distance telephone service, and water and sewer services and waste management services, which are generally included as part of the common area and maintenance charges and paid as part of the Debtors' monthly lease payments. The Debtors' aggregate average monthly cost for utility services is

approximately $9,627. The utility services are provided by approximately twenty one (21) utility companies (the "Utility Providers"). A list of these Utility Providers
IS

attached as Exhibit A to the motion (the "Utility Provider List").

32

83.

As of the Petition Date and as qualified below, the Debtors are generally

cunent on payments to the Utility Providers for utility services. Overall, the Debtors have a long and established payment history with most of the Utility Providers indicating consistent payment for utility services. As of the Petition Date, however, the Debtors may have had (a) prepetition accounts payable to certain Utility Providers, (b) outstanding checks issued to certain Utility Providers in payment for prepetition charges for utility services that had not cleared the Debtors' bank account prior to the Petition Date or (c) liabilities for prepetition utility services for which the Debtors had not yet been billed. 84. Access to utility services is critical to tbe Debtors' ongoing operations

pending the sale of some or all of the Debtors' business and assets and thereafter during the transition period. Should any Utility Provider refuse or discontinue a utility service even for a brief period of time, the Debtors' retail operations and administrative functions would be severely disrupted. Any such disruption would diminish the value of the

Debtors' estates. In this regard, it is in the best interest of the Debtors, their estates and their creditors to maintain continuous and unintenupted utility services during these chapter 11 cases. Accordingly, the Debtors are seeking the relief requested in the motion. 85. The Debtors fully intend to pay all postpetition obligations owed to the

Utility Providers in a timely manner and expect that they will have funds sufficient to pay all postpetition utility obligations.
APPLICATION OF DEBTORS PURSUANT TO 28 U.S. C. 156(C) AND LOCAL RULE 2002-l(F) FOR AUTHORIZATION TO (1) EMPLOY AND RETAIN OMNI MANAGEMENT GROUP, LLC AS CLAIMS, BALLOTING, NOTICING AND ADMINISTRATIVE AGENT FOR THE DEBTORS AND (2) APPOINT OMNI MANAGEMENT GROUP, LLC AS AGENT OF THE BANKRUPTCY COURT NUNC PRO TUNC TO THE PETITION DATE

33

86.

By this application, the Debtors are seeking an order (i) retaining Omni

Management Group, LLC ("Omni" or the "Firm", at the expense of the estate and effective as of the Petition Date, as claims, balloting, noticing and administrative agent pursuant to 28 U.S.C. 156(c), and (ii) appointing Omni as agent of the Bankruptcy Court. The proposed terms of Omni's employment are set forth in the engagement agreement between the Debtors and Omni (the "Engagement Letter"), a copy of which is attached hereto as Exhibit B to the motion. 87. The creditor matrices in the Debtors' cases aggregate over 3,000 parties to

whom ce1iain notices must be sent. Such an extremely large number of creditors and parties in interest will undoubtedly impose heavy administrative and other burdens on the Court and the Office of the Clerk of the Comi (the "Clerk's Office"). The Debtors will also need assistance in managing and addressing the myriad of administrative issues that will likely arise in this case. In addition, in connection with any plan of reorganization proposed by the Debtors, the Debtors have determined that they will require the services of Omni to act as solicitation agent with respect to, inter alia, the mailing of a disclosure statement, the plan and related ballots, and maintaining and tallying ballots in connection with the voting on such plan. To relieve and assist with these burdens, the Debtors request the appointment of the Firm as claims, balloting, noticing and administrative agent in these Chapter 11 cases.
MOTION OF DEBTORS PURSUANT TO SECTIONS lOS(A) AND 363(B) OF THE BANKRUPTCY CODE FOR AUTHORIZATION TO PAY THE PREPETITION CLAIMS OF CERTAIN CREDITORS IN THE ORDINARY COURSE OF BUSINESS

88.

As described herein, the Debtors have negotiated the terms of the Plan

with its secured lender, ComVest. As more fully described in the Disclosure Statement,

34

the Plan provides for (i) the emergence of the Debtors from bankruptcy as Reorganized Crdentia and there-vesting of the Debtors' assets in Reorganized Crdentia free and clear of any liens, encumbrances or other interests; (ii) the vesting of all equity in Reorganized Crdentia in ComVest or its designee (iii) the oppmiunity for third parties to purchase the assets of or the equity in the Debtors free and clear of any liens, encumbrances or other interests; and (iv); the resolution of all outstanding Claims against and Interests in the Debtors, including the payment in full of all of the Debtors' prepetition unsecured obligations (the "Trade Claims") owed to creditors that supply goods and services to the Debtors ("Trade Creditors"). 89. The treatment of the Trade Creditors both in the bank:mptcy proceeding

and under the Plan was integral to the negotiations between ComVest and Crdentia. It was understood that the full cooperation of the Trade Creditors will be necessary for the Debtors' successful reorganization. Accordingly, ComVest, as likely recipient of the equity in Reorganized Crdentia, insisted that the Debtors continue to pay Trade Creditors in the ordinary course and that the Trade Creditors receive a full recovery on their prepetition claims. 90. The Debtors estimate that, as of the Petition Date, they owe a total of

approximately $75,000 on account of undisputed accounts payable to Trade Creditors. The Debtors estimate that many of these claims would either be entitled to administrative priority status pursuant to section 503(b)(9) of the Bankruptcy Code because they relate to goods delivered to the Debtors in the ordinary course of business within twenty days of the Petition Date or may be secured because they arise fiom capital projects with vendors that may be able to asse1i mechanics liens on the Debtors' property.

35

MOTION OF DEBTORS FOR ENTRY OF AN ORDER PURSUANT TO 11 U.S.C. lOS(A) AND 327 AND FED. R. BANKR. P. 2014 AUTHORIZING THE DEBTORS TO RETAIN AND EMPLOY PROFESSIONALS USED IN THE ORDINARY COURSE OF BUSINESS NUNC PRO TUNC TO THE PETITION DATE

91.

In the ordinary course of business, the Debtors employ vanous

professionals, including tax accountants (the "Ordinary Course Professionals") to render services relating to issues that arise in the Debtors' business. Prior to the Petition Date, the Ordinary Course Professionals were primarily accountants who represented or advised the Debtors in various capacities. A list of the Ordinary Course Professionals utilized by the Debtors is attached to the proposed Order accompanying the motion as Exhibit I. 92. These Ordinary Course Professionals are used by the Debtors to address

issues related to, among other things tax compliance, auditing and other matters requiring the expe1iise and assistance of tax professionals. The Debtors have many such

outstanding issues to address in the ordinary course of their business and anticipate that more will arise during these chapter 11 cases. Sufficient attention to these issues

common to the Debtors' business, however, camwt continue without the Order because few Ordinary Course Professionals would be willing to continue their vital work for the Debtors without the assurance that the relief requested herein will provide. 93.
It would be unduly burdensome to both the Debtors and the Court to

require the Debtors to apply separately to this Court for approval of the retention of each individual Ordinary Course Professional. Similarly, it would be unduly burdensome on the Comt for each Ordimll'y Course Professional to separately apply for compensation and reimbursement of expenses. Moreover, many of the Ordinary Course Professionals are Ullfamiliar with the fee application process employed in a bankruptcy case and might
36

be less inclined to work with the Debtors if they were forced to adhere to such requirements in order to be compensated for services rendered.
MOTION OF DEBTORS FOR ENTRY OF AN ADMINISTRATIVE ORDER PURSUANT TO 11 U.S.C. 105(A) AND 331, FED. R. BANKR. P. 2016 AND DEL. BANKR. L.R. 2016-2 ESTABLISillNG PROCEDURES FOR INTERIM COMPENSATION OF FEES AND REIMBURSEMENT OF EXPENSES OF PROFESSIONALS AND OFFICIAL COMMITTEE MEMBERS

94.

In addition to the applications to retain Gersten Savage and Bayard, P.A.,

as their bankruptcy co-counsel (collectively, "Debtors' Counsel"), the Debtors, and any committee that may be appointed, may also retain other professionals (together with the Debtors' Counsel the "Estate Professionals") in these chapter 11 cases as the need arises, including any necessary special counsel. In addition, the Office of the United States Trustee for the District of Delaware (the "United States Trustee") may appoint a Committee, which may also seek to retain various professionals (the "Committee Professionals" and, together with the Estate Professionals, the "Professionals").
MOTION OF DEBTORS AND DEBTORS IN POSSESSION FOR AN ORDER AUTHORIZING THEM TO PAY INSTALLMENTS UNDER INSURANCE PREMIUM FINANCING AGREEMENT

95.

In connection with the day-to-day operations of their business, the

Debtors are either required by law or compelled by sound business judgment to maintain various forms of insurance, including general liability, professional liability, locum tenens claims, property, automobile, fiduciary liability, crime, umbrella coverage and excess umbrella coverage. Cettain insurance policies obtained by the Debtors to provide such coverage require the Debtors to prepay the full premium for the applicable coverage period. Because all of these insurance policies cover policy periods 12 months, the

requirement to prepay the full premium would impose a significant financial burden on

37

the Debtors. To lessen this burden, prior to the Petition Date, the Debtors financed the premiums for certain insurance policies (collectively, the "Insurance Policies") pursuant to the Premium Finance Agreement with Heritage. 96. Pursuant to the Premium Finance Agreement, Heritage paid the premiums

due under the applicable Insurance Policies, and the Debtors thereby became obligated to repay $568,055.74 for the amount financed under the Premium Finance Agreement in installments over the term of the Premium Finance Agreement. 97. Pursuant to the Premium Finance Agreement, Heritage paid an aggregate

of $688,902.41 in insurance premiums to the issuers of certain of the Insurance Policies. In return, the Debtors paid $120,846.67 of the aggregate amount to Heritage upon execution of the Premium Finance Agreement and financed the remaining balance of $568,055.74 over nine (9) months at an annual interest rate of 6.460% and with finance charges of $15,399.59. The Debtors' monthly installment of $64,828.37 to Heritage is due on the 25th day of each month, commencing on August 25, 2009. 98. The Premium Finance Agreement contains an irrevocable limited power

of attorney granted by the Debtors to Heritage. Pursuant to this power of attorney, if the Debtors default on their payment obligations under the Premium Finance Agreement, Heritage may cancel the Insurance Policies. Upon such a cancellation, Heritage may be entitled to collect or receive any unearned premiums refunded by the issuers of the Insurance Policies as well as any loss payments which may become payable under the Insurance Policies.

38

99. Heritage.

As of the Petition Date, the Debtors are current with their obligation to The next installment payable by the Debtor under the Premium Finance

Agreement is due on March 25, 2010.

100.

If the Debtors do not pay the postpetition installments pursuant to the

Premium Finance Agreement as they come due, Heritage could seek relief from the automatic stay to terminate the Insurance Policies. If Heritage succeeds in such a request, the Debtors would be forced to seek replacement insurance coverage. Even if the

Debtors were able to procure replacement insurance coverage, it is doubtful that the Debtors would be able to do so on terms and conditions as favorable as those presently in place under the Insurance Policies. Moreover, there is no assurance that the Debtors would be able to obtain replacement insurance quickly enough to prevent a lapse in coverage.
101.

To ensure that (a) the insurance coverage provided under the Insurance

Policies is not interrupted and (b) the Debtors are not forced to procure replacement insurance coverage on less favorable terms and conditions, the Debtors must be able to continue to perform their obligations under the Premium Finance Agreement. The

Insurance Policies for which premiums are fmanced under the Premium Finance Agreement provide the Debtors with a wide variety of essential insurance coverage. Any interruption in such coverage would expose the Debtors to serious risks associated with lapses in coverage, including (a) direct liability for payment of claims that otherwise would have been payable by the Insurers under the Insurance Policies, and (b) the possible incunence of material prope1ty damage costs and other losses that otherwise would have been reimbursed by the Insurers under the Insurance Policies. The Debtors

39

thus believe that maintaining continued and uninterrupted insurance coverage under the favorable tenns and conditions provided by the Insurance Policies clearly is in the best interests of the Debtors and their estate and creditors. Accordingly, the Debtors seek authority to pay all of the postpetition installments under the Premium Finance Agreements as they come due.
MOTION OF DEBTORS FOR ENTRY OF AN ORDER PURSUANT TO 11 U.S.C. 341 AND 28 U.S.C. 156(C) AUTHORIZING THE DEBTORS TO (I) FILE (A) CONSOLIDATED LIST OF CREDITORS AND (B) CONSOLIDATED LIST OF DEBTORS' TOP THIRTY CREDITORS AND (ll) PROVIDE NOTICES, INCLUDING NOTICES OF COMMENCEMENT OF CASES AND SECTION 341 MEETING

102.

The Debtors have identified thousands of entities to which notice of

certain proceedings in the Chapter 11 Cases must be provided. The Debtors anticipate that such notices may comprise, without limitation, notice of: (a) the ftling of the Debtors' voluntary petitions under chapter 11 of the Bankruptcy Code, (b) the initial meeting of the Debtors' creditors in accordance with section 341 of the Bankruptcy Code, (c) applicable bar dates for the filing of claims, (d) the hearing on the sale of some or all of the Debtors' business or assets; (e) the hearing on adequacy of a disclosure statement in respect of a plan of reorganization or liquidation, and (f) the hearing to confirm a plan of reorganization or liquidation (collectively, the "Notices"). 103. The Debtors presently maintain various computerized lists of the names

and addresses of their respective creditors that are entitled to receive the Notices and other documents in the Chapter 11 Cases. The Debtors believe that the information, as maintained in computer files (or those of their agents), may be consolidated and utilized efficiently to provide interested parties with the Notices and other similar documents, as contemplated by Local Rule 1007-2. Accordingly, by this motion, the Debtors seek

40

authority to file the lists on a consolidated basis, identifYing their creditors and equity security holders in the format or formats currently maintained in the ordinary course of the Debtors' businesses. 104. The Debtors submit that a single consolidated list of their combined

twenty (20) largest unsecured creditors in these cases would be more reflective of the body of unsecured creditors that have the greatest stake in these cases than separate lists for each of the Debtors. Therefore, the Debtors respectfully request authorization to file a single consolidated list of their twenty (20) largest unsecured creditors in these cases (the "Consolidated Top 20 List"). 105. The Debtors believe that such relief is not only appropriate under the

circumstances, but necessary for the efficient and orderly administration of these cases. 106. In lieu of effecting service through the Office of the Clerk of this Court,

the Debtors also request that they (or their agents) be approved and authorized to complete all mailings to creditors and equity holders in these cases, including notice of the commencement of these cases and notice of the meeting of creditors pursuant to section 341 of the Bankruptcy Code. 107. Allowing the Debtors (or their agents) to complete their own mailings

will save significant time, cost and expense.

MOTION OF DEBTORS FOR AN ORDER (I) ESTABLISIDNG BAR DATES FOR FILING PROOFS OF CLAIM AND REQUESTS FOR PAYMENT OF ADMINISTRATIVE EXPENSES, (II) APPROVING PROOF OF CLAIM AND ADMINISTRATIVE EXPENSE PAYMENT REQUEST FORMS, BAR DATE NOTICES AND MAILING AND PUBLICATION PROCEDURES AND (Ill) PROVIDING CERTAIN SUPPLEMENTAL RELIEF

108.

By this motion, the Debtors seek entry of an order (a) fixing 4:00p.m.

(ET) on April 23, 2010, as the General Bar Date by which proofs of claim against the

41

Debtors must be filed, (b) fixing the Amended Schedule Bar Date as the later of the General Bar and twenty (20) days after the date that notice of the amendment is served on the affected claimant, (c) approving a tailored proof of claim form to be distributed to creditors, (d) approving the Debtors' proposed notice of the Bar Dates (the "Bar Date Notice"), (e) approving mailing and publication procedures with respect to the Bar Date Notice Package, and (f) providing certain supplemental relief.
MOTION OF THE DEBTORS FOR AN ORDER (I) APPROVING BIDDING PROCEDURES FOR THE SALE OF THE DEBTORS OR THEIR ASSETS, AND 0D SCHEDULING AN AUCTION

109.

As described above, Management engaged an investment banking firm, Gensis' first repmi was Genesis contacted 57

Genesis Capital, LLC ("Genesis") on September 12, 2008.

rendered on February 20, 2009, and was updated in March 2009.

potential acquirers, of which five submitted official indications of initial interest hy the March 17, 2009 deadline (the "Genesis Interested Parties"). Each of these five Genesis Interested Parties signed Non-Disclosure Agreements and obtained corporate information packages. 110. Solicitations were based upon annualized revenues of $39 million and

earnings before interest, taxes, depreciation and amortization ("EBITDA") of $244,000; however, the actual results for the period were revenues of $23 million and $2.7 million negative EBITDA. Potential valuation amounts of the Debtors ranged widely ($4.7

million to $8.2 million, per Genesis' calculations). 111. Despite Genesis' robust marketing efforts, no letters of intent were

signed, no due diligence was completed and no offers were made. During the summer of 2009, one potential buyer expressed interest in one location of the Debtors' 11 locations, but did not complete the due diligence process. Of the 52 potential buyers that did not 42

submit indications of interest, 42 received Non-Disclosure Agreements, of which 15 were executed, and six potential buyers claimed they needed more time or otherwise did not pursue any further action.
i 12.

The reasons for the lack of interest by the potential buyers as reported in

Genesis' Mmch 2009 included, among other things, "discomfmi with negative EBITDA/cashflow businesses, lack of visibility on 2009 projections and certainty of adequate restructuring to meet budgeted results, hub location mmgins too low, concerns related to the condition and outlook of the entire healthcme staffing industry, Per Diem component too great in overall business mix, other competing acquisition oppmtunities in the nurse staffing space, below size threshold/above size threshold, and inability to secure adequate debt financing in today's market." 113. Genesis' engagement with the Debtors is still in effect. Genesis stands to

be paid a bonus upon sale and would be motivated to continue working towmd a successful completion of a transaction post the March 17, 2009 submission date; however, no additional offers have been received since that time. 114. By this motion, the Debtors are seeking, pursuant to sections 105, 363,

and 503 of the Bankruptcy Code, ently of a Bidding Procedures Order: a. approving (i) the Debtors' proposed Bidding Procedures for mmketing the Assets, which procedures me attached hereto as Exhibit B and as Annex 1 to the proposed Bidding Procedures Order, and (ii) the Auction Notice; b. establishing May 11, 2010 at 5:00p.m. (Eastern Time) as the deadline for the submission of bids (the "Bid Deadline"); and c. scheduling the Auction, if necessary, no later than May 13, 2010. 115. The Debtors are requesting that the Comi approve the Bidding

Procedures for purposes of soliciting offers to acquire the Assets, which acquisition

43

would be consummated through the confirmation and implementation of the Plan.

MOTION FOR ORDER (A) AUTHORIZING DEBTORS TO OBTAIN INTERIM POST-PETITION FINANCING AND GRANT SECURITY INTERESTS AND SUPERPRIORITY ADMINISTRATNE EXPENSE STATUS PURSUANT TO 11 U.S.C. 105 AND 364(c); (B) MODIFYING THE AUTOMATIC STAY PURSUANT TO 11 U.S.C. 362; (C) AUTHORIZING DEBTORS TO ENTER INTO AGREEMENTS WITH COMVEST CAPITAL LLC; AND (D) SCHEDULING A FINAL HEARING PURSUANT TO BANKRUPTCY RULE 4001

116.

By this motion, the Debtors seek entry of interim and fmal orders (a)

authorizing the Debtors to use cash collateral; (b) authorizing the Debtors to assume the Ratification Agreement (as defined herein); (c) authorizing the Debtors to obtain postpetition secured financing from ComVest (i) on an interim basis up to an aggregate principal amount of $500,000 pursuant to an interim order (the "Interim Order"), and (ii) on a final basis up to an aggregate principal amount of $900,000 pursuant to a final order (the "Final Order" and, together with the Interim Order, the "DIP Orders"); (d) granting ComVest postpetition liens and providing it superpriority administrative expense status; (e) providing ComVest adequate protection; (f) modifYing the automatic stay in certain respects; (g) scheduling a final hearing; and (h) approving certain notice procedures. 117. Prior to the commencement of the Chapter 11 cases, ComVest (also

refened to as "Secured Lender" or "Lender") made loans and advances and provided credit accommodations to the Debtors (also refened to as "Bon-ower") pursuant to ( 1) Loan and Security Agreement, dated July 3, 2008, by and between Bonower and Lender, as successor to Capital Tempfunds, a division of Capital Business Credit LLC ("Tempfunds"), the First Amendment dated as of June 22, 2009, between Wells Fargo Bank, N.A., acting through its Wells Fargo Business Credit and Operating Division ("WFBC"), successor in interest to Tempfunds, and the Second Amendment to Loan and

44

Security Agreement, dated July 22, 2009 (as the same has heretofore been amended, supplemented, modified, extended, renewed, restated and/or replaced at any time prior to the Petition Date, the "Existing Loan Agreement"), and (2) all other agreements, documents, and instruments executed and/or delivered with, to, or in favor of Secured Lender, including, without limitation, the security agreements, notes, guarantees, mortgages, and Uniform Commercial Code ("UCC") financing statements and all other related agreements, documents, and instruments executed and/or delivered in connection therewith or related thereto, (collectively, the "Pre-Petition Financing Agreements").
118.

Prior to the commencement of the Chapter 11 cases, Borrower obtained

revolving and term loans fiom Secured Lender pursuant to the Revolving Credit and Te1m Loan Agreement dated February 22, 2008, executed by Crdentia in favor of Secured Lender in the aggregate principal amount of $16,700,000 (the "Term Loan Agreement" and together with all other agreements, documents and instruments executed and/or delivered in connection therewith, the "Term Loan Documents"). Pursuant to the Term Loan Documents, borrowings are secured by the Pre-Petition Collateral (as hereinafter defmed).
119.

As of the Petition Date, the aggregate amount of all Loans and other Pre-

Petition Obligations (as defined in the Ratification Agreement) owed by the Debtors to Secured Lender under and in connection with the Pre-Petition Financing Agreements, consisting of Revolving Loans with a principal due in an amount not less than
$5,736,551.72 and the Term Loans with principal due in an amount not less than $10,693,240.81 plus all interest accming thereon, and all fees, costs, expenses, and other

charges accrued, accming, or chargeable with respect thereto totaling $18,995,353.01

45

(the "Pre-Petition Obligations", as such term is more fully defined in the Ratification Agreement ), and that the Pre-Petition Obligations constitute allowed, legal, valid, binding, enforceable and non-avoidable obligations of the Debtors, and are not subject to any offset, defense, counterclaim, avoidance, recharacterization or subordination pursuant to the Bankruptcy Code or any other applicable law, and Debtors do not possess and shall not assert any claim, counterclaim, setoff or defense of any kind, nature or description which would in any way affect the validity, enforceability and non-avoidability of any of the Pre-Petition Obligations. 120. As of the Petition Date, the Pre-Petition Obligations were fully secured

pursuant to the Pre-Petition Financing Agreements by valid, perfected, enforceable and non-avoidable first priority security interests and liens granted by the Debtors to Secured Lender upon all of the Collateral (as defined in the Existing Loan Agreement) existing as of the Petition Date and all rents, issues, profits, proceeds, and products thereof (the "Prepetition Collateral", and collectively, together with any other property of the Debtors' bankruptcy estates (as defined under section 541 of the Bankruptcy Code, the "Estates"). Debtors do not possess and will not assert any claim, counterclaim, setoff or defense of any kind, nature or description, which would in any way affect the validity, enforceability and non-avoidability of any of Secured Lender's liens, claims and/or security interest in the Pre-Petition Collateral.

C.

Need for Access to DIP Financing

121. The Debtors' estates will suffer immediate and irreparable harm if the

Debtors do not obtain authorization to use cash collateral and immediate access to the proposed debtor-in-possession financing ("DIP Financing"). The Debtors do not have

46

sufficient available sources of working capital to operate their businesses in the ordinary course of their businesses without the financing requested herein. The Debtors' ability to maintain business relationships with their vendors, suppliers, and customers, to pay their employees, and to othe1wise fund their operations, is essential to Debtors' continued viability. The ability of the Debtors to obtain sufficient working capital and liquidity through the proposed post-petition financing arrangements with Secured Lender as set forth in this Motion is vital to the preservation and maintenance of the going concern values of the Debtors. Accordingly, the Debtors have an inrniediate need to obtain the post-petition financing in order to pennit, among other things, the orderly continuation of the operation of their businesses, to minimize the disruption of their business operations, and to manage and preserve the assets of their estates in order to maximize the recovery to all estate creditors. 122. The Debtors believe that it would be futile, under the circumstances, to

pursue alternative post-petition financing in the form of: (1) unsecured credit allowable as an administrative expense under Section 503(b)(l) of the Code; (2) unsecured credit allowable under Sections 364(a) and 364(b) of the Code; or (3) secured credit pursuant to Section 364(c) of the Code, on more favorable terms and conditions from sources other than the Secured Lender. Accordingly, the Secured Lender has agreed to fund the

Debtors' continued operations in chapter 11 in exchange for the reasonable protections proposed, including first-priority liens on all of the Debtors' assets.

D.

Events of Default under the Existing Loan Agreement

123. Since the fall of 2008, the Debtors have been m default on their

obligations to ComVest. The first default occurred in the fall of2008 due to the Debtors'

47

failure to satisfy an EBITDA covenant. Cunently, the defaults include failure to pay interest, failure to pay interest timely, failure to provide audited fmancial statements, and failure to maintain required financial ratios in the debt covenants agreed to by the Debtors.
E. Ratification Agreement

124.

On March 17, 2010, the Debtors and the Secured Lender entered into that

certain Ratification and Amendment Agreement (the "Ratification Agreement", and with the Existing Loan Agreement, the "DIP Loan Documents"). Pursuant to the Ratification Agreement, the Existing Loan Agreement is modified so as to allow the Debtors' use of cash collateral and DIP Financing as described herein.
F. Proposed Use of Cash Collateral and Proposed DIP Financing

125.

The Secured Lender is willing to pennit the Debtors to use cash collateral

(as defined by Section 363(a) of the Code, including, any pre-petition proceeds and, subject to Section 552 of the Code, any and all post-petition proceeds of the Pre-Petition Collateral as well as (the "Cash Collateral")) and to operate under the Existing Loan Agreement as modified in certain respects by the Ratification Agreement. In addition to permitting the use of Cash Collateral, the Ratification Agreement provides the Debtors with access to additional postpetition credit in the maximum amount of $900,000 (the "DIP Loan") on substantially the same terms and conditions of the Existing Loan Agreement prior to the Petition Date, with the amendments described in the motion. 126. Given the Debtors' current debt obligations and lack of liquidity, the

Debtors have had to rely for some time on protective advances from the Secured Lender made under the Existing Loan Agreement to meet daily operating needs and remain

48

unable to satisfY obligations as they come due. As indicated in the 13 week budget and which has been approved by the Secured Lender (as amended, modified or supplemented from time to time, the "DIP Budget"), the Debtors will need additional funds from the Secured Lender as well as the use of Cash Collateral to operate postpetition.
MOTION OF DEBTORS FOR THE ENTRY OF AN ORDER (I) APPROVING DISCLOSURE STATEMENT, (IT) ESTABLISHING PROCEDURES FOR SOLICITATION AND TABULATION OF VOTES TO ACCEPT OR REJECT JOINT CHAPTER 11 PLAN OF REORGANIZATION, (Ill) ESTABLISHING VOTING RECORD DATE, (IV) SCHEDULING A HEARING ON CONFIRMATION OF JOINT PLAN OF REORGANIZATION, (V) APPROVING THE FORM OF BALLOTS AND SOLICITATION MATERIALS, (VI) APPROVING RELATED NOTICE PROCEDURES, (VII) APPROVING THE BALLOTING AGENT, (VIU) APPROVING CURE PROCEDURES AND (IX) GRANTING RELATED RELIEF

127.

By this motion, the Debtors seek the entry of an order: (i) approving the

Disclosure Statement (as defined therein), (ii) establishing procedmes for solicitation and tabulation of votes to accept or reject the Plan (as defmed therein), (iii) establishing voting record date, (iv) scheduling a hearing on conflTillation of the Plan, (v) approving the fotm of ballots and solicitation materials, (vi) approving related notice procedmes, (vii) approving the balloting agent, (viii) approving cme procedmes and (ix) granting related relief
DEBTORS' MOTION FOR AN ORDER (I) UNDER 11 U.S.C. 102(1) SHORTENING NOTICE RELATING TO SOLICITATION PROCEDURES MOTION AND HEARING ON APPROVAL OF DISCLOSURE STATEMENT AND (II) APPROVING FORM, MANNER AND SUFFICIENCY OF NOTICE OF HEARING

128.

On the Petition Date, the Debtors filed, inter alia: (i) the Debtors' Joint

Chapter 11 Plan of Reorganization; (ii) Disclosure Statement; and (iii) the Solicitation Procedures Motion. 129. The Debtors have proposed the Plan pursuant to the terms of that cettain
49

Plan Support Agreement, dated March 17, 2010 (the "PSA"), among the Debtors and their secured lender, ComVest. Under the terms of the Plan, the Debtors will solicit bids for the sale of the Debtors or their assets. In the event one or more Qualified Bids (as defined in the Motion of The Debtors For An Order (I) Approving Bidding Procedures

.,i

For The Sale Of The Debtors Or Their Assets, And (II) Scheduling An Auction) is received, the Debtors will Sell the assets to the highest bidder. If no bids are received, ComVest will acquire substantially all of the equity interests of the reorganized Debtors in exchange for, inter alia, its financial contributions to the Debtors' bankruptcy estates, which will make possible meaningful distributions to the Debtors' creditors. 130. By this motion, the Debtors seek an order (i) shortening the notice period

required for a hearing on the Solicitation Procedures Motion (including, without limitation, the Debtors' request therein for approval of the Disclosure Statement), and setting on or about April 8, 2010 as the hearing date for said relief; (ii) setting April 6, 2010, at 4:00p.m. (prevailing Eastern Time) as the deadline to object to the Solicitation Procedures Motion and the Disclosure Statement; (iii) approving the form, manner and sufficiency of the notice of the hearing on the Solicitation Procedures Motion and Disclosure Statement, substantially in the form of the Disclosure Statement Notice; and (iv) granting such other and further relief as the Court deems just and proper.
DEBTORS' MOTION FOR AN ORDER PURSUANT TO BANKRUPTCY RULES 2002(1), 2002(rn) AND 9007 TO ESTABLISH NOTICE PROCEDURES AND TO ESTABLISH A MASTER SERVICE LIST

131.

The Debtors have thousands of creditors and parties in interest in these

chapter 11 cases. Huncheds of the creditors and other parties in interest likely will file requests for service of pleadings in these chapter 11 cases. The Debtors also expect that

50

numerous motions and applications will be filed in these chapter 11 cases in pursuit of various forms of relief. Due to the significant number of creditors and other parties in interest, and to reduce the administrative costs and burden on the Debtors and other patties, the Debtors request that this Court enter an order (i) establishing notice procedures and establishing a master service list which would include and limit notice to the parties and entities set out in the motion unless otherwise ordered by the Court or otherwise limited by the Federal Rules of Bankruptcy Procedure; (ii) authorizing service of pleadings by email; and (iii) establishing monthly omnibus hemings.

51

CONCLUSION

For the reasons stated herein and in each of the First Day Pleadings, I respectfully request that each of the First Day Pleadings be granted in its entirety, together with such fu1iher relief as the Court deems just and proper.

I declare under penalty of perjury pursuant to 28 U.S.C. 1746 that the foregoing is true and conect. Executed on March 17, 2010.

Is/ Rebecca Irish Rebecca Irish Secretary, Treasurer and Chief Financial Officer

Exhibit A

Updated: 3117110

Crdentia Corp. Legal Entity Organizational Chart

Crdentia Corp. 76-0585701 Delaware

I
CRDE Corp.

I
Nurses Network, Inc. 94-3286291 California

I
Baker Anderson Christie, Inc. 94-3243631

I
New Age Staffing, Inc. 30-0201214 Delaware

20-1472509 Delaware

California

Care Pros Staffing,

hlC.

75-2950403 Texas

nnactive)
Arizona Home & Hcalthcare, Inc. 86-0980138 Arizona (Inactive)
Staff Search

PSR Nurse
Recruiting, Inc.

PSR Nurses Holding

Corp.

75-2949923 Texas
(Inactive)

Acquisition Corp. 20-1942759 Texas nnactivc) ATS Universal, LLC 55-0863980 Florida

32-0094026 Texas (Inactive)

Lim ted Pa ner

'-----

Ge era I Pa ner
PSR Nurses, Ltd. 75-2949924 Texas (Inactive)

1--

,I

GHS Acquisition Corporation 20-2639736 Delaware

--

r,, Partner

,,

Prime Staff, LP 61-1405307 Texas

(fuactive)

imitorl

artner

General Partner

Mint Medical Staffing Odessa, LP 02-0661284 Texas (Inactive)

imited Partner

HlP Holding, Inc. Delaware

--

MP Health Corp. 26-1564403 Delaware

Health Industry Professionals, LLC 38-3374246 Michigan

ExhibitB 1. Disclosure Statement Pursuant To Section 1125 Of The Bankruptcy Code For Debtors' Joint Chapter 11 Plan Of Reorganization 2. Motion Of Debtors For Joint Administration Of Chapter 11 Cases

3. Application Under 11 US.C. 327(A) And 1107(B), Fed. R. Bankr. P. 2014 & 2016, And Bankr. D. Del. L.R. 2014-1 & 2016-1 To Approve The Employment And Retention Of Gersten Savage, Llp As Attomeys For The Debtors 4. Motion And Order For Admission Pro Hac Vice

5. Motion Of Debtors For Order (I) Authorizing Continued Use Of Existing Business Forms And Records; (Ii) Authorizing Maintenance Of Existing Corporate Bank Accounts And Cash Management System; (Iii) Waiving (IfNecessary) The Requirements Of 11 US.C. 345(B) And (Iv) Granting Related Relief 6. Motion Of Debtors For Entry Of An Order Pursuant To 11 US.C. 105(A), 363(B), 363(C), 541(B)(7), 541(D), 1107(A), And 1108 And Fed. R. Bankr. P 6003 And 6004 (I) Authorizing The Debtors To Pay Certain Prepetition (A) Wages, Salaries And Other Compensation; (B) Reimbursable Employee Expenses; And (C) Employee Medical And Similar Benefits; (Ii) Authorizing And Directing Banks And Other Financial Institutions To Honor All Related Checks And Electronic Payment Requests; And (Iii) Granting Related Relief 7. Motion Of Debtors For Entry Of An Interim And Final Order Pursuant To 11 US.C. 105(A) And 366 (I) Prohibiting Utilities From Altering, Refusing, Or Discontinuing Services On Account Of Prepetition Invoices, (Ii) Deeming Utilities Adequately Assured Of Future Performance, And (Iii) Establishing Procedures For Detennining Adequate Assurance Of Payment 8. Application Of Debtors Pursuant To 28 U.S.C. 156(C) And Local Rule 2002-1(F) For Authorization To (1) Employ And Retain Omni Management Group, Llc As Claims, Balloting, Noticing And Administrative Agent For The Debtors And (2) Appoint Omni Management Group, Llc As Agent Of The Bankruptcy Comt Nunc Pro Tunc To The Petition Date 9. Motion Of Debtors Pursuant To Sections 105(A) And 363(B) Of The Bankruptcy Code For Authmization To Pay The Prepetition Claims Of Certain Creditors In The Ordinary Course Of Business 10. Motion Of Debtors For Entry Of An Order Pursuant To 11 US.C. 105(A) And 327 And Fed. R. Bankr. P. 2014 Authorizing The Debtors To Retain And Employ Professionals Used In The Ordinary Course Of Business Nunc Pro Tunc To The Petition Date

11. Motion Of Debtors For Entry Of An Administrative Order Pursuant To 11 U.S.C. 105(A) And 331, Fed. R Bankr. P. 2016 And Del. Bankr. L.R 2016-2 Establishing Procedures For Interim Compensation Of Fees And Reimbursement Of Expenses Of Professionals And Official Committee Members 12. Motion Of Debtors And Debtors In Possession For An Order Authorizing Them To Pay Installments Under Insurance Premium Financing Agreement 13. Motion Of Debtors For Entry Of An Order Pursuant To 11 U.S.C. 341 And 28 U.S.C. 156(C) Authorizing The Debtors To (I) File (A) Consolidated List Of Creditors And (B) Consolidated List Of Debtors' Top Thirty Creditors And (Ii) Provide Notices, Including Notices Of Commencement Of Cases And Section 341 Meeting 14. Motion Of Debtors For An Order (I) Establishing Bar Dates For Filing Proofs Of Claim And Requests For Payment Of Administrative Expenses, (Ii) Approving Proof Of Claim And Administrative Expense Payment Request Forms, Bar Date Notices And Mailing And Publication Procedures And (Iii) Providing Certain Supplemental Relief 15. Motion Of The Debtors For An Order (I) Approving Bidding Procedures For The Sale Of The Debtors Or Their Assets, And (Ii) Scheduling An Auction 16. Motion For Order (A) Authorizing Debtors To Obtain Interim PostPetition Financing And Grant Security Interests And Superpriority Administrative Expense Status Pursuant To 11 U.S.C. 105 And 364(C); (B) Modifying The Automatic Stay Pmsuant To 11 U.S.C. 362; (C) Authorizing Debtors To Enter Into Agreements With Comvest Capital Lie; And (D) Scheduling A Final Hearing Pmsuant To Bankruptcy Rule 400 I 17. Motion Of Debtors For The Entry Of An Order (I) Approving Disclosure Statement, (Ii) Establishing Procedures For Solicitation And Tabulation Of Votes To Accept Or Reject Joint Chapter 11 Plan Of Reorganization, (Iii) Establishing Voting Record Date, (Iv) Scheduling A Hearing On Confirmation Of Joint Plan Of Reorganization, (V) Approving The Form Of Ballots And Solicitation Materials, (Vi) Approving Related Notice Procedures, (Vii) Approving The Balloting Agent, (Viii) Approving Cure Procedures And (Ix) Granting Related Relief 18. Debtors' Motion For An Order (I) Under 11 U.S.C. 102(1) Shmtening Notice Relating To Solicitation Procedures Motion And Hearing On Approval Of Disclosure Statement And (Ii) Approving Form, Manner And Sufficiency Of Notice Of Hearing 19. Debtors' Motion For An Order Pursuant To Bankruptcy Rules 2002(L), 2002(M) And 9007 To Establish Notice Procedures And To Establish A Master Service List