DECLARATION OF WILLIAM J. HIGGINSON IN SUPPORT OF DEBTORS CHAPTER 11 PETITIONS AND FIRST DAY MOTIONS

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1 Pg 1 of 81 UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK ) In re: ) Chapter 11 ) JOURNAL REGISTER COMPANY, et al., 1 ) Case No ( ) ) Debtors. ) (Joint Administration Requested) ) DECLARATION OF WILLIAM J. HIGGINSON IN SUPPORT OF DEBTORS CHAPTER 11 PETITIONS AND FIRST DAY MOTIONS I, William J. Higginson, hereby deposes and says: 1. I am the Executive Vice President of Operations of Journal Register Company ( JRC ), a company organized under the laws of the State of Delaware and one of the above-captioned debtors and debtors in possession (collectively, the Debtors ). In this capacity, I am familiar with the Debtors day-to-day operations, businesses, financial affairs, and books and records. 2. On the date hereof (the Petition Date ), JRC and 28 of its direct and indirect subsidiaries each filed a voluntary petition for relief under chapter 11 of title 11 of the United States Code (the Bankruptcy Code ). The Debtors continue to operate their businesses and manage their properties as debtors in possession pursuant to 1107(a) and 1108 of the Bankruptcy Code. Concurrently herewith, the Debtors filed a motion seeking joint 1 The Debtors in these chapter 11 cases, along with the last four digits of each Debtor s federal tax identification number, are: Journal Register Company (8615); Register Company, Inc. (6548); Chanry Communications Ltd. (3704); Pennysaver Home Distributions Corp. (9476); All Home Distribution Inc. (0624); JR East Holdings, LLC (N/A); Journal Register East, Inc. (8039), Journal Company, Inc. (8220); JRC Media, Inc. (4264); Orange Coast Publishing Co. (7866), St. Louis Sun Publishing Co. (1989); Middletown Acquisition Corp. (3035); JiUS, Inc. (3535); Journal Register Supply, Inc. (6546); Northeast Publishing Company, Inc. (6544); Hometown Newspapers, Inc. (8550); The Goodson Holding Company (2437); Acme Newspapers, Inc. (6478); 21st Century Newspapers, Inc. (6233); Morning Star Publishing Company (2543); Heritage Network Incorporated (6777); Independent Newspapers, Inc. (2264); Voice Communications Corp. (0455); Great Lakes Media, Inc. (5920); Up North Publications, Inc. (2784); Greater Detroit Newspaper Network, Inc. (4228); Digital First Media Inc. (0431); Great Northern Publishing, Inc. (0800); and Saginaw Area Newspapers, Inc. (8444). The mailing address for each of the Debtors is Lower Makefield Corporate Center, 790 Township Road, 3rd Floor, Yardley, PA DB1/

2 Pg 2 of 81 administration of these chapter 11 cases pursuant to Rule 1015(b) of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ). 3. I submit this declaration (this First Day Declaration ) pursuant to Rule 1007 of the Federal Rules of Bankruptcy Procedure (the Bankruptcy Rules ) and Rule of the Local Bankruptcy Rules for the Southern District of New York (the Local Rules ) to (i) provide an overview of the Debtors and these chapter 11 cases (ii) support the Debtors chapter 11 petition and first day motions (each, a First Day Motion, and collectively, the First Day Motions ) 2 and (iii) to provide certain information required by Local Rule Except as otherwise indicated herein, all facts set forth in this First Day Declaration are based upon my personal knowledge of the Debtors operations and finances, information learned from my review of relevant documents, information supplied to me by other members of the Debtors management and the Debtors advisors, or my opinion based on my experience, knowledge, and information concerning the Debtors operations and financial condition. I am authorized to submit this First Day Declaration on behalf of the Debtors, and, if called upon to testify, I could and would testify competently to the facts set forth herein. I. General Background. A. Debtors Business and Overview. 4. JRC is a national multi-regional, multi-platform media company. Formally established in 1997, JRC went public in May of that year. The Debtors are committed to being a customer-focused provider of local news, sports, business and lifestyle information to its customers on the platforms of the customers choice print and digital. Until a few years ago, 2 All capitalized terms used but otherwise not defined herein shall have the meanings set forth in the relevant First Day Motion. DB1/

3 Pg 3 of 81 the Debtors products were predominantly print products. The Debtors digital and print titles are geographically clustered around Greater Philadelphia; Greater Detroit; Connecticut; Greater Cleveland; and the Capital Saratoga and Mid-Hudson regions of New York State providing its advertising customers with comprehensive, multi-media solutions, and its online and print customers with comprehensive local and regional news coverage. The Debtors newspapers are characterized by their intense focus on the coverage of local news and local sports. The Debtors manage their newspapers to best serve the needs of their local readers and advertisers. The editorial content of their newspapers is tailored to the specific interests of each local community served and includes coverage of local youth, high school, college and professional sports, as well as local business, politics, entertainment and culture. 5. The Debtors pursue a strategy which leverages the power of their print brands to drive both digital audience and revenue on the media platforms of the customer s choice while preserving and enhancing the Debtors print products. 6. The Debtors print products are geographically clustered. This clustering strategy creates significant synergies, efficiencies, and cost savings for their print products within each cluster. These synergies include: (i) increased reach for advertisers; (ii) regional cross-selling of advertising and promotion and (iii) regionalized news gathering and production efficiencies through the consolidation of printing, distribution and back-office activities. 7. In response to industry wide challenges, which include the migration of advertising revenue from print to digital and customers increasing preference to access news digitally, the Debtors in early 2010 increased their investments to meet these challenges. The Debtors launched a strategy that leveraged the power of their print brands to drive both digital DB1/

4 Pg 4 of 81 audience and revenue on the media platforms of the customer s choice while preserving and enhancing the Debtors print products. 8. On February 21, 2009, JRC and its then-existing wholly owned subsidiaries each filed a voluntary petition to reorganize under chapter 11 of the United States Bankruptcy Code in the Southern District of New York. Upon consummation of their bankruptcy reorganization plan, the Debtors implemented a significant change in their balance sheet whereby certain of their outstanding secured and unsecured obligations were compromised and discharged, and new equity in certain of the reorganized entities was issued to certain of their lenders. JRC emerged from the chapter 11 proceedings in August As of the Petition Date, the Debtors employ approximately 1,832 full-time and 525 part-time employees, or approximately 2,107 full-time equivalents. This reflects a decrease of 25.1 percent from 2009 full-time equivalents. Approximately 23 percent of the Debtors employees are employed under collective bargaining agreements. As of the Petition Date, the Debtors own 41 properties and are the tenants under leases of 34 properties. 10. JRC, the direct or indirect parent of all of the Debtors, leases and occupies a substantial space at 5 Hanover Square, New York, New York ( 5 Hanover ), which serves as the nerve center for most of the Debtors critical operations. JRC has some of its principal assets located at 5 Hanover, and many of the Debtors employees, including their Chief Executive Officer, John Paton, work full time at 5 Hanover. The Debtors established their presence at 5 Hanover as part of an effort to consolidate certain key editorial and other services in one central location. As such, 5 Hanover now serves as the brains of the Debtors entire business operations and is, in many respects, the most important asset of the Debtors. In addition, the Debtors hold themselves out to the general public as being located at 5 Hanover. For DB1/

5 Pg 5 of 81 example, on their website, the Debtors list only two addresses as their location, to wit: 5 Hanover and 790 Township Line Road, 3rd Floor, Yardley, Pennsylvania Moreover, many of the Debtors key stakeholders are located or have a presence in Manhattan e.g. the Alden Lenders and Wells Fargo, the Debtors largest secured creditors, both have a significant location in Manhattan. Finally, as discussed above, the Debtors prior chapter 11 cases were administered in the Southern District of New York in 2009, which led to confirmation of chapter 11 plans by this Court and consummation of such plans thereafter. In those cases, the Southern District of New York proved to be an appropriate and convenient venue for the Debtors and all of their stakeholders, and the Debtors believe that it will continue to be a convenient venue for these cases. Finally, several of the Debtors are incorporated in New York and have several key assets located in New York State and a significant presence throughout New York (including four daily and ten nondaily publications in New York, with over 37,100 paid subscribers and free distribution to 88,000). B. Newspaper and Digital Operations 12. The Debtors digital presence consists of 237 individual websites, 38 smartphone and digital applications and 19 mobile sites which are affiliated with its daily newspapers and non-daily publications and its JobsInTheUS network of employment websites, as well as a number of other online sites. The Debtors digital/online objective is to provide multi-platform media to more fully satisfy the demands of the Debtors customers and advertisers for content and advertising opportunities on the media platforms of their choice. 13. The Debtors own six daily newspapers and 42 non-daily publications serving areas surrounding Philadelphia, Pennsylvania. These publications include, in Pennsylvania: The Delaware County Daily and Sunday Times (Primos); The Daily Local News (West Chester); The Mercury (Pottstown); The Times Herald (Norristown); The Reporter (Lansdale); Montgomery DB1/

6 Pg 6 of 81 Newspapers, a group of 18 non-daily publications serving Montgomery County; Berks-Mont Newspapers, a group of five non-daily publications serving Berks and Montgomery counties; Intercounty Media Group, two publications serving Bucks County, PA and southern New Jersey. Also, in New Jersey, the Debtors own The Trentonian (Trenton), a daily newspaper operation focusing on news in New Jersey s capital and its surrounding communities. 14. The Debtors also own two commercial printing companies in Pennsylvania: Nittany Valley Offset in State College, Pennsylvania and InterPrint in Bristol, Pennsylvania. JRC owns and operates an inter-company printing facility, Journal Register Offset in Exton, PA, which prints 43 of the Debtors publications in addition to printing for nonaffiliated customers. The Debtors six Greater Philadelphia daily newspapers have aggregate daily circulation of 125,029 and aggregate Sunday circulation of approximately 119,676. The aggregate non-daily distribution in the Greater Philadelphia Cluster is approximately 222, Each of the Debtors titles in the Greater Philadelphia area has a significant digital presence as well as regional online titles such as serving the Greater Philadelphia Area. Content and sales resources and expenses are shared effectively and efficiently between the print and the digital titles. 16. In Michigan, the Debtors operate three daily newspapers and 43 non-daily publications primarily in the Greater Detroit area and other parts of Michigan. The daily newspapers are The Oakland Press serving Pontiac and the surrounding communities, The Macomb Daily serving Mt. Clemens and the surrounding communities and The Morning Sun serving Isabella County. The non-daily publications are primarily aggregated into three groups: the INI non-daily-group including Voice Newspapers, Advisor Source Newspapers and The Daily Tribune collectively serving Macomb, St. Clair and Southern Oakland counties; the DB1/

7 Pg 7 of 81 Morning Star Group serving Grand Traverse, Benzie, Alpena and Kalkaska counties; and the Heritage Newspapers Group serving Wayne and Monroe counties. The aggregate circulation of the daily newspapers is approximately 127,697 daily and approximately 165,802 Sunday circulation. The non-daily publications have an aggregate distribution of approximately 671,375. Each of the Debtors publications in the Michigan area has a significant digital presence as well. Content and sales resources and expenses are shared effectively and efficiently between the print and digital titles. 17. In Connecticut, the Debtors own The New Haven Register, a small metropolitan daily newspaper with circulation of approximately 54,630 and Sunday circulation of approximately 84,169, two suburban daily newspapers and 29 suburban non-daily publications. Other suburban daily newspapers in the Connecticut Cluster are The Register Citizen (Torrington) and The Middletown Press (Middletown). These two daily newspapers and The New Haven Register have aggregate daily circulation of approximately 65,352 and approximately 95,596 Sunday circulation. The non-daily publications have an aggregate distribution of approximately 612,918. Included in the non-daily publications is Connecticut Magazine, the state s premier lifestyle magazine. The Connecticut daily newspapers and nondaily publications serve a statewide audience with concentrations in western Connecticut (Litchfield and Fairfield counties) to Hartford and its suburban areas, to the Greater New Haven area, as well as the Connecticut shoreline from New Haven northeast to New London. Each of the Debtors titles in Connecticut has a significant digital presence as well. Content and sales resources and expenses are shared effectively and efficiently between the print and the digital titles. DB1/

8 Pg 8 of The Debtors own two Cleveland, Ohio area daily newspaper operations, The News Herald (Willoughby) and The Morning Journal (Lorain). The aggregate daily circulation of the Cleveland area newspapers is approximately 54,355 and aggregate Sunday circulation of the Cleveland area newspapers is approximately 58,514. The three non-daily publications in the Greater Cleveland cluster have aggregate distribution of approximately 87,850. Each of the Debtors titles in Cleveland has a significant digital presence as well. Content and sales resources and expenses are shared effectively and efficiently between the print and digital titles. 19. The Debtors own three daily and eight non-daily publications in the Capital- Saratoga Region of New York. The Debtors daily publications in this area include The Record (Troy), The Saratogian (Saratoga Springs), The Oneida Daily Dispatch (Oneida), and eight nondaily publications including the weekly Community News, serving Clifton Park. The daily newspapers have aggregate daily circulation of approximately 22,858 and aggregate Sunday circulation of approximately 16,877. The non-daily publications in this cluster have total distribution of approximately 80, The Debtors own one daily newspaper in the Mid-Hudson Region of New York, The Daily Freeman in Kingston. The Debtors also operate a non-daily Spanish-language newspaper, Las Noticias, as well as a real estate publication, Doorways. The Mid-Hudson Region paper has a daily circulation of approximately 14,287, Sunday circulation of approximately 18,140 and total non-daily distribution of approximately 8, Each of the Debtors publications in the New York area has a significant digital presence as well. Content and sales resources and expenses are shared effectively and efficiently between the print and digital titles. DB1/

9 Pg 9 of 81 C. Revenues. 22. Given the Debtors make-up of local and regional print and online titles, substantially all advertising revenues are derived from a diverse group of local retailers and classified advertisers rather than national and major account advertising. Historically, local advertisers had fewer effective advertising vehicles from which to choose. In recent years, the Debtors have experienced declining total advertising revenues due to the growing digital outlets available to advertisers and general economic conditions. The newspaper industry, including the Debtors, have experienced: declining print readership and circulation; declining print advertising revenues due to alternative media platform choices for customers and advertisers; ongoing margin pressure; and an ongoing free cash flow decline as print media pricing adapts to a more digitally-oriented and highly-competitive marketplace. In response to these industry wide challenges, the Debtors launched a strategy that leveraged the power of their print brands to drive both digital audience and revenue on the media platforms of the customer s choice while preserving and enhancing the Debtors print products. 23. In an effort to directly combat recent advertising trends, the Debtors realigned their sales resources to maximize national, regional and multi-media platform sales. In addition, they have increased their digital offerings, such as online video, and launched a mobile platform for content and advertising, and they have entered into sales, content and marketing relationships to improve its monetizable content, increase their digital audience and revenue through online revenue-sharing arrangements. Advertising revenues accounted for approximately 66.9 percent of the Debtors total revenues from continuing operations for fiscal year The Debtors advertising rate structures vary among their publications and are a function of various factors, including advertising effectiveness, local market conditions and competition, as well as circulation, readership, demographics and type of advertising (whether display, classified or DB1/

10 Pg 10 of 81 national) and size of digital audience. In fiscal year 2011, local and regional display advertising accounted for the largest share of the Debtors advertising revenues (approximately 34.4 percent), followed by classified advertising (approximately 28.4 percent), preprints (approximately 19.3 percent), digital advertising (approximately 15.3 percent) and national advertising (approximately 2.6 percent). The Debtors advertising revenues are not reliant upon any one company or industry, but rather are supported by a variety of companies and industries, including financial institutions, telecom, realtors, car dealerships, grocery stores, universities, hospitals and many other local businesses. 24. The Debtors circulation revenues are derived from home delivery sales of publications to subscribers and single-copy sales made through retailers and vending racks as well as sponsored copies. Circulation from continuing operations accounted for approximately 29.2 percent of the Debtors total revenues in fiscal year Approximately 67.6 percent of fiscal year 2011 circulation newspaper revenues were derived from subscription sales, which provide readers with the convenience of home delivery, and are an important component of the Debtors circulation base. Single-copy rates range from $0.50 to $1.00 per daily copy and $1.50 to $2.00 per Sunday copy. The Debtors heavily promote single copy sales of their newspapers, which comprised 32.4 percent of fiscal year 2011 circulation newspaper revenue, because they believe that since single copy readers tend to be more active consumers of goods and services, and such sales have even higher readership than subscription sales. Single copy sales also tend to generate a higher profit margin than subscription sales, as single copy sales generally have higher per unit prices and lower distribution costs. As of the Petition Date, the Debtors have a total daily circulation of approximately 409,578, Sunday circulation of approximately 474,695, DB1/

11 Pg 11 of 81 and non-daily distribution of approximately 1.7 million-most of which is distributed free of charge. D. The Debtors Prepetition Organizational Structure. 25. In June 2011, certain affiliates of Alden Global Capital Limited ( Alden ) completed a purchase of the outstanding stock of JRC for $10.00 a share 3. The stock of JRC is currently held by Alden Global Distressed Opportunities Master Fund, L.P. and Alden Global Value Recovery Master Fund, L.P. The chart attached hereto as Annex A depicts the Debtors organizational structure as of the Petition Date. E. The Debtors Prepetition Capital Structure. 26. As of the Petition Date, the Debtors have outstanding debt obligations in the aggregate principal amount of approximately $162,300,000, consisting primarily of secured debt incurred in connection with the 2009 exit financing arrangements as the Debtors emerged from bankruptcy. The Debtors primary debt obligations are set forth in three separate agreements (a) that certain Loan and Security Agreement (the Revolving Loan Agreement ); (b) that certain Term Loan Agreement (Tranche A) (the Tranche A Loan Agreement ) and (c) that certain Term Loan Agreement (Tranche B) (the Tranche B Loan Agreement ). (i) Revolving Loan Agreement. 27. The Revolving Loan Agreement was entered into on August 7, 2009, by and among the Debtors as borrowers, and Wells Fargo, National Association (as successor in interest to Wachovia Bank, National Association) as lender, and consists of (i) a revolving loan with a maximum borrowing limit of $25,000,000 and (i) the issuance of letters of credit in an amount 3 100% of the stock of JRC had previously been issued to secured lenders pursuant to the confirmed plan of reorganization in the prior chapter 11 cases in August of Such stock was then sold to Alden in June of DB1/

12 Pg 12 of 81 not to exceed $13,000,000. The obligations under the Revolving Loan Agreement are secured by all assets of the Debtors, as set forth in the Revolving Loan Agreement. Pursuant to that Intercreditor Agreement, dated as of August 7, 2009 (the Intercreditor Agreement ), with respect to (i) newsprint inventory, accounts receivables, deposit accounts, general intangibles to the extent related to inventory, accounts receivable, deposit accounts and the real estate collateral described in clause (ii), and related assets, subject to certain exceptions as set forth in the Revolving Loan Agreement and (ii) some real estate collateral (the Revolving Loan Agreement Collateral ), the liens securing the obligations under the Revolving Loan Agreement are senior in priority, operation and effect to those securing the obligations under the Tranche A Loan Agreement and the Tranche B Loan Agreement. With respect to other collateral, the Revolving Loan Agreement liens are junior to the Tranche A liens and senior to the Tranche B liens. As of the Petition Date, $10,057,921 of principal amount is outstanding and $3.2 million in letters of credit is outstanding under the Revolving Loan Agreement. Currently, there are events of default existing under the Revolving Loan Agreement. (ii) Tranche A Loan Agreement. 28. The Tranche A Loan Agreement was entered into on August 7, 2009, by and among JRC as borrower, JPMorgan Chase Bank, N.A. as administrative agent, and the lenders party thereto. Pursuant to an amendment to the Tranche A Loan Agreement executed in June 2011 (the Tranche A 2011 Amendment ), Wells Fargo, National Association became the administrative agent for the Tranche A Loan Agreement lenders. The Tranche A Term Loan Agreement consists of a term loan in the original principal amount of $150,000,000. The loans under the Tranche A Term Loan Agreement are secured by all assets of the Debtors, pursuant to that certain Guarantee and Security Agreement, dated as of August 7, 2009, by and among JRC, its subsidiaries as guarantors and Wells Fargo, National Association. Pursuant to the DB1/

13 Pg 13 of 81 Intercreditor Agreement, with respect to the Revolving Loan Agreement Collateral, the liens securing the obligations under the Tranche A Loan Agreement are junior in priority, operation and effect to the liens securing the obligations under the Revolving Loan Agreement. The Tranche A liens are senior to the Revolving Loan Agreement liens with respect to other collateral, and are senior to the Tranche B liens with respect to all collateral. 29. Pursuant to the Tranche A 2011 Amendment, Alden Global Distressed Opportunities Master Fund, L.P. and Alden Global Value Recovery Master Fund, L.P. (the Alden Lenders ), made additional loans in the amount of $104,214, and the Debtors prepaid the then-existing Tranche A loan obligations (other than those held by the Alden Lenders) such that the Alden Lenders are now the only remaining lenders under the Tranche A Loan Agreement. As of the Petition Date, approximately $112.3 million in principal balance remains outstanding under the Tranche A Loan Agreement. As of the Petition Date, there were outstanding Event of Defaults under the Tranche A Loan Agreement and a cross-default with the Revolving Loan Agreement. (iii) Tranche B Loan Agreement. 30. The Tranche B Loan Agreement was entered into on August 7, 2009, by and among JRC as borrower, Wells Fargo, National Association as administrative agent and the lenders party thereto. The Tranche B Term Loan Agreement consists of a term loan in the original principal amount of $75,000,000. Interest payments may be made entirely in cash or by increasing the amount of the outstanding loans. The loans under the Tranche B Loan Agreement are a secured by all assets of the Debtors, pursuant to that certain Guarantee and Security Agreement, dated as of August 7, 2009, by and among JRC, its subsidiaries as guarantors and Wells Fargo, National Association. Pursuant to the Intercreditor Agreement, the liens securing the obligations under the Tranche B Loan Agreement are junior in priority, operation and effect DB1/

14 Pg 14 of 81 to the liens securing the obligations under both (i) the Revolving Loan Agreement and (ii) the Tranche A Loan Agreement. 31. Pursuant to an amendment to the Tranche B Loan Agreement executed in June 2011, the Alden Lenders made additional loans in the amount of $40,470, and the Debtors prepaid the then-existing Tranche B loan obligations (other than those held by the Alden Lenders) such that the Alden Lenders are now the only remaining lenders under the Tranche B Loan Agreement. As of the Petition Date, approximately $40,000,000 in principal balance remains outstanding under the Tranche B Loan Agreement. As of the Petition Date, there was an outstanding Event of Default under the Tranche B Loan Agreement, a cross default due to the defaults under the Revolving Loan Agreement and the Tranche A Loan Agreement. II. Events Leading to These Chapter 11 Cases. 32. Since the beginning of 2010, the Debtors have focused on a strategy of growing and investing in its digital businesses while maintaining as much value as possible from a declining print business. It is expected that by year end 2012, overall annual operating costs will have been reduced by $27.0 million, after taking into account $12.8 million in additional costs associated with digital growth since the beginning of In addition, since August 2009, the Debtors have reduced their outstanding debt by 28%. From year-end 2009 through 2011, the Debtors have grown their digital revenue by 235% compared to a digital growth rate of 18.5% for the industry during that time frame, with digital revenue growth of 107.7% in 2010, 61.0% in 2011 and 32.5% during the first six months of Despite its success in digital media growth, the Debtors have been challenged by a recent downturn in print advertising that was more severe than had been anticipated. In 2010, newspaper industry print advertising declined 8.2 percent over the previous year. Based on the 2010 second-half trend, the industry expectation for print advertising in 2011 ranged from DB1/

15 Pg 15 of 81 declines of 4-8 percent. However, the actual industry decline for Full Year 2011 was above that range at 9.2 percent. Industry print decline projections for 2012 ranged from 4-8 percent, and in the first quarter of 2012, revenues are 8.2 percent lower than the first quarter of 2011, according to the Newspaper Association of America (the NAA ). In total, print advertising from 2009 to 2011 has declined approximately 17% for the newspaper industry, according to the NAA, while the Debtors print advertising has declined 19%. As print advertising revenues represented 56.7% of the Debtors total revenues for 2011, these declines have had a significant impact on the Debtors financial results. 34. In addition to the decline in print advertising revenue, the Debtors have been severely negatively impacted by costs relating to their legacy operations. The Debtors have substantial lease, tax, trade and pension obligations, which have grown approximately 52% since 2009, relating to their legacy operations that, together with servicing their debt, leave the Debtors in a position in which their projected cash flow is insufficient to meet their ongoing obligations. 35. The Debtors intend to implement a prompt sale of substantially all of their assets subject to a public auction process. Currently, an affiliate of Alden has provided purchase terms that the Debtors believe are in the best interests of their creditors, customers and employees. However, the Debtors financial advisor will be running a marketing process seeking higher or better competing bids on even more favorable terms, if any, to be obtained at an upcoming auction. This process is designed to minimize the disruption and time spent in chapter 11 and to allow the Debtors to continue operating smoothly in the ordinary course of business. The stalking horse agreement contemplates that the vast majority of the existing unsecured creditors (including trade and suppliers) will have their claims assumed by the buyer and thus paid in full in the ordinary course of business. Moreover, the secured lenders of the Debtors (i.e. the Alden DB1/

16 Pg 16 of 81 Lenders and Wells Fargo) have consented to the proposed sale process and, in fact, the sale will have a significant positive impact on the balance sheet and businesses currently operated by the Debtors because the Alden Lenders, as stalking horse bidder and holder of the largest secured debt liability, will be credit bidding its debt in exchange for the assets. After the sale, the businesses will not be burdened with the extensive secured and other debt and the costs of the Debtors legacy operations, which will make such businesses currently better able to compete and to weather the current stresses in the industry. III. Evidentiary Support for First Day Motions Concurrently with the filing of the their chapter 11 petitions, the Debtors have filed a number of First Day Motions seeking relief that the Debtors believe is necessary to enable them to operate with minimal disruption and loss of productivity. The Debtors request that the relief requested in each of the First Day Motions be granted as critical elements in ensuring a smooth transition into, and stabilizing and facilitating the Debtors operations during the pendency of, these chapter 11 cases. I have reviewed each of the First Day Motions discussed below, and the facts set forth in each First Day Motion are true and correct to the best of my knowledge and belief with appropriate reliance on corporate officers and advisors. 1. ADMINISTRATIVE MOTIONS A. Motion for Entry of an Order Directing Joint Administration of ther Debtors Related Chapter 11 Cases 37. By this motion (the Joint Administration Motion ), the Debtors seek entry of an order directing joint administration of their chapter 11 cases for procedural purposes only. The Debtors request that the Court maintain one file and one docket for all of the jointly administered 4 Capitalized terms used herein but not otherwise defined shall have the meaning ascribed to them in such motion as set forth below. DB1/

17 Pg 17 of 81 cases under the case number assigned to Journal Register Company and that their chapter 11 cases be administered under a consolidated caption. 38. The Debtors also request that an entry be made on the docket of the Journal Register Company chapter 11 case that is substantially similar to the following: An order has been entered in accordance with Rule 1015(b) of the Federal Rules of Bankruptcy Procedure directing joint administration of the chapter 11 cases of Journal Register Company, Digital First Media Inc., Register Company, Inc., Chanry Communications Ltd., Pennysaver Home Distribution Corp., All Home Distribution Inc., JR East Holdings, LLC, Journal Register East, Inc., Journal Company, Inc., JRC Media, Inc., Orange Coast Publishing Co., St. Louis Sun Publishing Co., Middletown Acquisition Corp., JiUS, Inc., Journal Register Supply, Inc., Northeast Publishing Company, Inc., Hometown Newspapers, Inc., The Goodson Holding Company, Acme Newspapers, Inc., 21st Century Newspapers, Inc., Morning Star Publishing Company, Heritage Network Incorporated, Independent Newspapers, Inc., Voice Communications Corp., Great Lakes Media, Inc., Up North Publications, Inc., Greater Detroit Newspaper Network, Inc., Great Northern Publishing, Inc., and Saginaw Area Newspapers, Inc. All further pleadings and other papers shall be filed in, and all further docket entries shall be made in, Case No. 12- ( ). 39. The Debtors also seek authority to file the monthly operating reports required by the Operating Guidelines and Reporting Requirements for Debtors in Possession and Trustees, issued by the Office of the United States Trustee for the Southern District of New York, on a consolidated basis. However, the Debtors intend to track and break out disbursements on a debtor-by-debtor basis. 40. I have reviewed the Joint Administration Motion and verify that the facts set forth therein are accurate, and I believe the relief requested in the Joint Administration Motion is in the best interest of the Debtors estates, their creditors, and all other parties in interest, and will enable the Debtors to continue to operate their businesses in chapter 11 without disruption. DB1/

18 Pg 18 of 81 Accordingly, on behalf of the Debtors, I respectfully submit that the Joint Administration Motion should be approved. B. Debtors Motion for an Order Authorizing the Debtors to (A) Prepare a List of Creditors in Lieu of a Formatted Mailing Matrix, (B) File a Consolidated List of the Debtors 50 Largest Unsecured Creditors and (C) Mail Initial Notices 41. By this motion (the Consolidation Motion ), the Debtors seek entry of the Proposed Order authorizing the Debtors to (a) prepare a consolidated list of creditors in the format or formats currently maintained in the ordinary course of business in lieu of submitting any required mailing matrix, (b) file a consolidated list of the Debtors 50 largest unsecured creditors, and (c) mail initial notices through the Proposed Claims and Noticing Agent. 42. I have reviewed the Consolidation Motion and verify that the facts set forth therein are accurate, and I believe the relief requested in the Consolidation Motion is in the best interest of the Debtors estates, their creditors, and all other parties in interest, and will enable the Debtors to continue to operate their businesses in chapter 11 without disruption. Accordingly, on behalf of the Debtors, I respectfully submit that the Consolidation Motion should be approved. C. Debtors Motion for an Order Extending the Time to File (I) Schedules of Assets and Liabilities, Schedules of Current Income and Expenditures, Schedules of Executory Contracts and Unexpired Leases and Statements of Financial Affairs and (II) Reports of Financial Information 43. By this motion (the Extension Motion ), the Debtors seek entry of the Proposed Order extending the deadline to file (i) the Schedules and Statements for an additional 45 days, without prejudice to the Debtors ability to request additional time should it become necessary, and (ii) the Reports or to file a motion with the Court seeking a modification of such reporting requirements until 45 days after the meeting of creditors to be held pursuant to section 341 of the Bankruptcy Code for cause. DB1/

19 Pg 19 of I have reviewed the Extension Motion and verify that the facts set forth therein are accurate, and I believe the relief requested in the Extension Motion is in the best interest of the Debtors estates, their creditors, and all other parties in interest, and will enable the Debtors to continue to operate their businesses in chapter 11 without disruption. Accordingly, on behalf of the Debtors, I respectfully submit that the Extension should be approved. 2. OPERATIONAL MOTIONS A. Debtors Motion for Entry of Interim and Final Orders Pursuant to 11 U.S.C. 105, 361, 362, 363, 364 and 507 and Rules 2002, 4001 and 9014 of the Federal Rules of Bankruptcy Procedure (I) Authorizing the Debtors to Incur Postpetition Secured Indebtedness with Priority over Existing Secured Indebtedness and with Administrative Superpriority, (II) Granting Liens, (III) Authorizing the Debtors to Use Cash Collateral Pursuant to 11 U.S.C. 363 and Providing for Adequate Protection, (IV) Modifying Automatic Stay and (V) Scheduling a Final Hearing 45. By this motion (the DIP Motion ), the Debtors seek entry of the Interim and Final Orders, inter alia: (a) under Bankruptcy Code Sections 363 and 364, authorizing them to obtain postpetition financing consisting of a revolving credit and letter of credit facility and a term loan from Wells Fargo under the DIP Credit Agreement, with funds thereunder available for use in accordance with the terms set forth in the Ratification Agreement, which generally provides for the following: i. funding the Debtors day-to-day operations and working capital needs in accordance with the Budget (defined below, a copy of which is attached hereto); ii. pay over time all outstanding prepetition amounts under the Revolving Credit Agreement; and iii. conversion of all existing letters of credit under the Revolving Credit Agreement into postpetition obligations under the DIP Credit Agreement; DB1/

20 Pg 20 of 81 (b) authorizing the Debtors to enter into and approving the Ratification Agreement and the other DIP Financing Agreements; (c) under Bankruptcy Code Section 364(c)(1), and subject to the Carve Out, granting superpriority claim status to the claims of the DIP Lender under the DIP Financing Agreements; (d) under Bankruptcy Code Sections 364(c)(2), (c)(3) and (d), as security for the repayment of the borrowings and other obligations arising under the DIP Credit Agreement, authorizing the Debtors to grant to Wells Fargo, as DIP lender under the DIP Credit Agreement, priming security interests in and liens upon the Collateral, subject to the Carve Out and specified priority liens; (e) under Bankruptcy Code Sections 361, 363(c)(2) and 363(e), authorizing the consensual use by the Debtors in accordance with the Budget of the Prepetition Collateral, including the Cash Collateral, and to provide adequate protection with respect to any diminution in the value of the Prepetition Collateral; (f) under Bankruptcy Code Section 362, modifying the automatic stay to the extent set forth in the DIP Credit Agreement and the DIP Orders; (g) pursuant to Bankruptcy Rule 4001, scheduling a preliminary hearing on this Motion and authorizing the Debtors from the entry of the Interim Order until the Final Hearing to obtain credit under the terms contained in the DIP Credit Agreement and to utilize Collateral, including Cash Collateral, on the terms set forth in the Interim Order; and (h) pursuant to Bankruptcy Rule 4001, scheduling a Final Hearing on this Motion and establishing notice procedures in respect of the Final Hearing by this Court to consider DB1/

21 Pg 21 of 81 entry of the Final Order authorizing the Debtors to borrow the balance of the DIP Credit Facility on a final basis. 46. I have reviewed the DIP Motion and verify that the facts set forth therein are accurate, and I believe the relief requested in the DIP Motion is in the best interest of the Debtors estates, their creditors, and all other parties in interest, and will enable the Debtors to continue to operate their businesses in chapter 11 without disruption. Accordingly, on behalf of the Debtors, I respectfully submit that the DIP Motion should be approved. B. Motion for Entry of Interim and Final Orders (A) Authorizing, but not Directing, the Debtors to Pay Certain Pre-Petition Wages, Compensation and Employee Benefits and Continue Payment of Wages, Compensation and Employee Benefits in the Ordinary Course of Business; and (B) Authorizing and Directing Applicable Banks and Other Financial Institutions to Process and Pay All Checks Presented for Payment and to Honor All Funds Transfer Requests Made by the Debtors Relating to the Foregoing 47. By this motion (the Employee Wage Motion ), the Debtors seek entry of interim and final orders (i) authorizing (but not directing) them to pay, in their sole discretion, the prepetition Employee Obligations as described in the Employee Wage Motion and all costs incident thereto; (ii) authorizing (but not directing) the Debtors to continue to honor their practices, programs and policies with respect to the Employees, including ADP administration as such practices, programs and policies were in effect as of the Petition Date, with authorization (but not direction) to pay the Employee Obligations that become due and owing during the pendency of these cases; (iii) authorizing (but not directing) the Debtors to pay, in their sole discretion, all payments as of the petition date due and owing in connection with Employee Expense Obligations, and to continue to make any payments occurring in the ordinary course of business, including any such payments to Amex and (iv) authorizing and directing Disbursement Banks to receive, process and pay any and all checks drawn on the Debtors accounts and automatic DB1/

22 Pg 22 of 81 transfers to the extent that such checks or transfers relate to any of the foregoing. This Motion is intended only to permit the Debtors, in their discretion, to make payments consistent with those pre-petition policies to the extent that, without the benefit of an order approving this Motion, such payments would be inconsistent with the Bankruptcy Code. 48. Preservation of the value of the estates depends upon a stable work force. Thus, any significant number of Employee departures or deterioration in morale at this time will substantially and adversely impact the Debtors business and result in immediate and irreparable harm to the estates and their creditors. There is a real, immediate risk that if the Debtors are not authorized to continue to satisfy Employee Obligations in the ordinary course, Employees would no longer support and maintain the operations of the Debtors, thereby crippling the Debtors business operations and instantly destroying the prospects of realizing maximum value for the Debtors assets. Consequently, it is critical that the Debtors continue, in their ordinary course, personnel policies, programs and procedures that were in effect prior to the Petition Date, except as otherwise set forth in the Employee Wage Motion, for all of their Employees. 49. I have reviewed the Employee Wage Motion and verify that the facts set forth therein are accurate, and I believe the relief requested in the Employee Wage Motion is in the best interest of the Debtors estates, their creditors, and all other parties in interest, and will enable the Debtors to continue to operate their businesses in chapter 11 without disruption. Accordingly, on behalf of the Debtors, I respectfully submit that the Employee Wage Motion should be approved. C. Motion for Entry of Interim and Final Orders Pursuant to Sections 105(a) and 363(b) of the Bankruptcy Code and Bankruptcy Rule 6003 Authorizing Debtors to Continue Insurance Policies and Agreements Relating Thereto and to Honor Certain Prepetition Obligations in Respect Thereof DB1/

23 Pg 23 of By this motion (the Insurance Motion ), the Debtors seek entry of interim and final orders authorizing them, to maintain the Insurance Policies, as defined in the Insurance Motion and to make certain premium, deductible and other payments in their discretion with respect to the Insurance Policies, on an uninterrupted basis, in accordance with the Debtors prepetition practices, including with respect to Insurance Policies that will expire by their terms in the early weeks of these chapter 11 cases. 51. In connection with the operation of their respective businesses, the Debtors maintain various insurance programs, including those providing coverage for liability related to workers compensation, property damage, automobile use and directors and officers through different insurance carriers. Continued maintenance of the Insurance Policies serves to preserve the value of the Debtors estates. The nonpayment of any premiums, deductibles, or related fees in connection with the Debtors obligations in connection with the Insurance Policies could result in one or more of the Insurance Carriers cancelling an existing policy and/or declining to renew their insurance policies. If the Debtors insurance is allowed to lapse, the Debtors could be exposed to substantial liability for damages resulting to persons and property of the Debtors and others, which exposure could have an extremely negative impact on the Debtors estates. Furthermore, the Debtors would then be required to obtain replacement policies on a highly expedited basis at a potentially significant cost to the estate. Accordingly, the Debtors respectfully request that they be authorized to make all payments in respect of their insurance obligations currently due and going forward. 52. I have reviewed the Insurance Motion and verify that the facts set forth therein are accurate, and I believe the relief requested in the Insurance Motion is in the best interest of the Debtors estates, their creditors, and all other parties in interest, and will enable the Debtors to DB1/

24 Pg 24 of 81 continue to operate their businesses in chapter 11 without disruption. Accordingly, on behalf of the Debtors, I respectfully submit that the Insurance Motion should be approved. D. Debtors Motion for Entry of an Interim and Final Order Authorizing the Debtors to Continue to Honor Customer Programs in the Ordinary Course of Business 53. By this motion (the Customer Programs Motion ), the Debtors seek the entry of interim and final orders authorizing them to temporarily continue the Customer Programs in the ordinary course of business. In the ordinary course of business and as is customary in the newspaper industry, the Debtors engage in certain activities to develop and sustain a positive reputation and relationship with their customers, advertisers and vendors to effectively promote their newspapers and online presence. To that end, the Debtors have implemented various customer programs and policies designed to ensure customer satisfaction, increase sales, maintain customer loyalty, improve profitability, and generate goodwill for the Debtors and their products. 53. The Customer Programs, which include, among others, reimbursements related to prepaid advertising and subscriptions, and adjustments for advertising and billing errors, are commonplace in the Debtors industry and among the Debtors competitors. The universal goals of the Customer Programs are to meet competitive pressures, maximize sales, ensure customer satisfaction, and generate brand loyalty and goodwill for the Debtors, thereby retaining current customers, attracting new ones and ultimately enhancing net revenue. 54. I have reviewed the Customer Program Motion and verify that the facts set forth therein are accurate, and I believe the relief requested in the Customer Program Motion is in the best interest of the Debtors estates, their creditors, and all other parties in interest, and will enable the Debtors to continue to operate their businesses in chapter 11 without disruption. DB1/

25 Pg 25 of 81 Accordingly, on behalf of the Debtors, I respectfully submit that the Customer Program Motion should be approved. E. Debtors Motion for Entry of an Interim and Final Order (A) Authorizing the Debtors to (I) Continue Use of Existing Cash Management System, Bank Accounts and Business Forms and (II) Authorizing Debtors to Open New Debtors-in-Possession Accounts, and (B) Extending the Debtors Time to Comply With Section 345(b) of the Bankruptcy Code 54. By this motion (the Cash Management Motion ), the Debtors seek entry of interim and final orders authorizing them to: (a) continue to use their Cash Management System, Bank Accounts and business forms, (b) treat the Bank Accounts for all purposes as accounts of the Debtors as debtors-in-possession; (c) if appropriate, open new debtor-in-possession accounts and/or close any existing accounts, provided that the Debtors give prior notice to the Office of the United States Trustee for the Southern District of New York and any official committees appointed in these chapter 11 cases; and (d) use, in their present form, all correspondence and business forms (including, without limitation, letterhead, purchase orders and invoices), and documents related to the Bank Accounts, existing immediately before the Petition Date, without reference to their status as debtors-in-possession. 55. The Debtors further request that the Court authorize and direct the Cash Management Banks to, subject to the Account Control Agreements and the Proposed Cash Collateral Order: (i) continue to maintain, service and administer such accounts, and (ii) debit the Debtors accounts in the ordinary course of business on account of: (a) all checks drawn on the Debtors accounts that are cashed at the Cash Management Banks or exchanged for cashier s checks by the payees, thereof, prior to the Petition Date; (b) all checks or other items deposited in one of the Debtors accounts with the Cash Management Banks prior to the Petition Date that have been dishonored or returned unpaid for any reason, together with any fees and costs in DB1/