10-K

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

ý	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the year ended December 31, 2007
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                        to

Commission file number: 333-97721

VERTIS, INC.
(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	13-3768322 (I.R.S. Employer Identification)
250 West Pratt Street, Baltimore, MD (Address of principal executive offices)	21201 (Zip Code)
Registrant's telephone number, including area code: (410) 528-9800
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant of Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o    No ý

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ý    No o

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes o    No ý

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    ý

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer ý
(Do not check if a smaller reporting company) Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o    No ý

The number of shares outstanding of Registrant's common stock as of March 31, 2008 was 1,000 shares.

Documents Incorporated By Reference: None

VERTIS, INC.

ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2007

TABLE OF CONTENTS

Form 10-K Item No.	Name of Item	Page
Part I
Item 1	Business	3
Item 1A	Risk Factors	7
Item 1B	Unresolved Staff Comments	11
Item 2	Properties	12
Item 3	Legal Proceedings	13
Item 4	Submission of Matters to Vote of Security Holders	13
Part II
Item 5	Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	14
Item 6	Selected Financial Data	14
Item 7	Management's Discussion and Analysis of Financial Condition and Results of Operations	17
Item 7A	Quantitative and Qualitative Disclosures about Market Risk	38
Item 8	Financial Statements and Supplementary Data	39
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	39
Item 9A	Controls and Procedures	39
Item 9B	Other Information	40
Part III
Item 10	Directors, Executive Officers and Corporate Governance	41
Item 11	Executive Compensation	43
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	60
Item 13	Certain Relationships and Related Transactions and Director Independence	62
Item 14	Principal Accountant Fees and Services	63
Part IV
Item 15	Exhibits and Financial Statement Schedules	64
Signatures		69
Index to Financial Statements and Financial Statement Schedule		F-1

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CAUTIONARY STATEMENTS

        We have included in this Annual Report on Form 10-K, and from time to time our management may make statements which may constitute "forward-looking statements". You may find discussions containing such forward-looking statements in "Business" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" as well as within this Annual Report generally. In addition, when used in this Annual Report, the words "believes," "anticipates," "expects," "estimates," "plans," "projects," "intends" and similar expressions are intended to identify forward-looking statements. These forward-looking statements include statements other than historical information or statements of current condition, but instead represent only our belief regarding future events, many of which, by their nature, are inherently uncertain and outside of our control. It is possible that our actual results may differ, possibly materially, from the anticipated results indicated in these forward-looking statements. Important factors that could cause actual results to differ from those in our specific forward-looking statements include, but are not limited to, those discussed under "Risk Factors," as well as:

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our ability to refinance our existing indebtedness, obtain new financing and/or effect a strategic acquisition or merger to continue as a going concern;

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general economic and business conditions;

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our financial condition and liquidity and our leverage and debt service obligations;

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changes in the advertising, marketing, printing and information services markets;

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the financial condition of our customers;

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our ability to execute key strategies;

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our ability to realize expected cost savings from restructuring activities;

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the level of capital resources required for our operations;

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actions by our competitors;

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the effects of supplier price fluctuations on our operations, including fluctuations in the price of raw materials we use;

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downgrades in our credit ratings;

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changes in interest rates;

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changes in the legal and regulatory environment;

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the demand for our products and services;

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the possibility of future terrorist activities or the continuation or escalation of hostilities in the Middle East or elsewhere; and

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other matters discussed in this Annual Report generally.

        Consequently, readers of this Annual Report should consider these forward-looking statements only as our current plans, estimates and beliefs. We do not undertake and specifically decline any obligation to publicly release the results of any revisions to these forward-looking statements that may be made to reflect future events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. We undertake no obligation to update or revise any forward-looking statement in this Annual Report to reflect any new events or any change in conditions or circumstances. All of the forward-looking statements in this Annual Report are expressly qualified by these cautionary statements. Even if these plans, estimates or beliefs change because of future events or circumstances after the date of these statements, or because anticipated or unanticipated events occur, we disclaim any obligation to update these forward-looking statements.

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PART I

ITEM 1    BUSINESS

Overview

        Vertis, Inc. is one of the leading printers of advertising inserts, newspaper products and direct mail services in the United States. Our world-class consulting, creative, research, direct mail, media, technology and printing services provide our customers with deep product and service offerings. We offer our clients insert advertising, direct mail production and distribution, and premedia services. By offering an extensive list of solutions across a broad spectrum of media, we enable our clients to reach target customers with the most effective message. Customers may employ these services individually or on a combined basis to create an integrated end-to-end targeted marketing solution.

        Vertis has built a strong and longstanding customer base over time by providing high quality, on-time and consistent solutions through its extensive network. For over three decades, we have provided complex solutions to some of the world's largest companies, including many of today's Fortune 500 companies. Our clients include grocery stores, drug stores and other retail chains, general merchandise producers and manufacturers, financial and insurance service providers, newspapers, and advertising agencies. We believe that the diversity of our client base limits our reliance on any individual customer. Our top ten customers in 2007 accounted for 33.4% of our revenue, and no customer accounted for more than 8.2% of our revenue. We have longstanding relationships with our customers as evidenced by the average length of our relationships with our ten largest customers, which is over 15 years tenure with us.

        Vertis, Inc. is a Delaware corporation incorporated in 1993. In 2007, Vertis had approximately $1.4 billion of revenue and 5,800 employees in North America. Our principal executive offices are located at 250 West Pratt Street, Baltimore, Maryland 21201. Our Internet address is www.vertisinc.com. Although we are not subject to the information requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), we file annual, quarterly and special reports and other information with the Securities and Exchange Commission, or SEC, pursuant to certain contractual obligations. Our filings are available to the public at the SEC's website at www.sec.gov and also at our website, under "investor relations", at the internet address shown above. You may read and copy any documents we file with the SEC at its public reference facility in Washington, D.C. Please call the SEC at 1-800-SEC-0330 for further information on the public reference facilities.

        In this Annual Report, when we use the terms "Vertis," "we," "our," and the "Company," we mean Vertis, Inc. and its consolidated subsidiaries. The words "Vertis Holdings" refer to Vertis Holdings, Inc., the parent company of Vertis and its sole stockholder.

Business Segments

        We operate through two reportable business segments based on the way management views and manages the Company. These business segments are Advertising Inserts and Direct Mail. Advertising Inserts provides a full product line of printed targeted advertising products inserted primarily into newspapers. Direct Mail provides personalized direct mail and marketing products. In addition, we also provide premedia and related services ("Premedia") as well as media planning and placement services ("Media Services"). Premedia and Media Services are included in "Corporate and Other" within this Annual Report, together with corporate costs incurred by the Company.

        Financial and other information relating to our business segments for each of 2007, 2006 and 2005 can be found in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations", and Note 21, "Segment Information", to our consolidated financial statements included in this Annual Report.

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Advertising Inserts

        General.    Advertising Inserts provides a full array of targeted advertising insert products and services. Our products and services include:

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targetable advertising insert programs for retailers and manufacturers;

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newspaper products (TV magazines, Sunday magazines, color comics and special supplements); and

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consumer research.

        We are a leading provider of advertising inserts, newspaper TV listing guides and Sunday comics in the United States. In 2007, we produced more than 31 billion advertising inserts. Advertising inserts are typically produced in color and on better quality paper than run-of-press newspaper advertisements. In addition, advertising inserts allow marketers to vary layout, artwork, design, trim size, paper type, color and format. Different versions of the same advertising program may be targeted by newspaper zones and by specific customer demographics. We provide 74 of the top 100 Sunday newspapers in the United States with circulation-building newspaper products and services through production of comics, TV listing guides, Sunday supplements and special sections. In 2007, we produced 1.3 billion Sunday comics, and approximately 242 million TV listing guides.

        Revenue and Customers.    Total Advertising Insert revenue for 2007 accounted for 66.7% of Vertis' total 2007 revenue. Advertising Inserts employs sales representatives to market this segment's specific products and services. Our customers in the advertising inserts space include grocery stores, drug stores, other retailers, newspapers, and consumer goods manufacturers. Our advertising insert products are distributed in national and local newspapers and, depending on their target audience, through various complementary forms of distribution including mail, door to door and in-store circulation. Advertising Insert's ten largest customers accounted for approximately 48.8% of the segment's 2007 revenue and the largest customer accounted for approximately 12% of the Advertising Insert's 2007 revenue. We have established and maintained long-standing customer relationships with our major customers.

Direct Mail

        General.    Direct Mail provides a full array of targeted direct marketing products and services. Our products and services include:

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highly customized one-to-one marketing programs;

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direct mail production with varying levels of personalization;

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data design, collection and management to identify target audiences;

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mailing management services;

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automated digital fulfillment services;

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effectiveness measurement; and

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response management, warehousing and fulfillment services.

        We are one of the largest providers of highly customized direct mail, one-to-one marketing programs, mailing management services, automated digital fulfillment and specialty advertising products in the United States. We derive the majority of our revenues from the design, production, and execution of personalized advertising mailings rather than traditional, broad-based direct mailings. Personalized direct mail enables consumer goods retailers and other marketers to communicate with their customers on an individual-by-individual basis, an approach that provides higher response rates than broad, non-personalized mailings.

        We use sophisticated, data-driven techniques to target prospects and deliver full color, individualized marketing messages. We can process and manipulate databases to enable our customers to target direct mail recipients based on many attributes, ranging from age, gender, and address to spending habits, type of car owned, whether the recipient is a pet owner, and many others. These

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highly individualized marketing campaigns are designed to enhance customer response levels and improve client marketing efficiencies through on-demand workflow automation. The growth in customer data availability, the increasing sophistication of database marketing tools and the growing use of the Internet for integrated marketing campaigns have significantly increased demand for these services.

        Revenue and Customers.    Total Direct Mail revenue for 2007 accounted for 26.4% of Vertis' total 2007 revenue. Direct Mail employs sales representatives to market this segment's specific products and services. Our customers include consumer goods manufacturers, financial institutions, Internet advertisers, not-for-profit organizations, retailers and government agencies. While a majority of our sales are made directly to clients, we also sell our products and services through agencies and brokers. Direct Mail's ten largest customers accounted for approximately 42.5% of the segment's 2007 revenue and the largest customer accounted for approximately 6.2% of Direct Mail's 2007 revenue. We have established and maintained long-standing customer relationships with our major customers.

Corporate and Other

        General.    Corporate and Other consists of a broad range of Premedia, Media Services and other technologies to assist clients with their advertising campaigns, including:

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digital content management;

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graphic design and animation;

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digital photography, compositing and retouching;

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in-store displays, billboards and building wraps;

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consulting services;

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newspaper advertising development; and

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media planning and placement and software solutions.

        We are a leading provider of digital media production and content management solutions to retailers, consumer and commercial products companies and advertising agencies. Our services and technologies enable clients to more efficiently create, produce and manage traditional print and advertising content. Additionally, our Media Services division is designed to support our targeted capabilities and marketing efforts. Corporate and Other employs sales representatives devoted to these specific products and services. Additionally, Corporate and Other includes corporate costs incurred by the Company.

Seasonality of Business

        A large portion of our revenue is generally seasonal in nature, resulting in higher fourth quarter revenue than in the three preceding quarters. This seasonal impact on revenue has been somewhat mitigated over recent years due to our efforts to expand our product lines, as well as expand the market for our advertising inserts to year-round customers. Our profitability, however, continues to follow a more seasonal pattern due to the higher margins and efficiencies gained from running at higher capacity during the fourth quarter holiday production season.

Raw Materials

        In 2007, we spent approximately $510 million on raw materials. The primary raw materials required in our operations are paper and ink. We also use other raw materials, such as chemicals, computer supplies and proofing materials. We believe that there are adequate sources of supply for our primary raw materials and that our relationships with our suppliers yield improved quality, pricing and overall service to our customers; however, there can be no assurance that we will not be adversely affected by a tight market for our primary raw materials. In recent years, the number of suppliers of paper has declined, and we have formed stronger commercial relationships with selected suppliers, allowing us to achieve more assured sourcing of high quality paper that meets our specifications.

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        The cost of paper is a principal factor in our overall pricing to our customers. As a result, changes in paper costs or in the proportion of paper supplied by our customers may have a significant impact on our reported sales, as we generally pass through to our customers increases or decreases in the cost of paper in the price of our printed products.

Competition

        The principal methods of competition in our businesses are pricing, quality, flexibility, customer targeting capabilities, breadth of service, timeliness of delivery, customer service and other value-added services. Pricing depends in large part on the price of paper, which is our major raw material (see "Raw Materials" above). Pricing is also influenced by product type, shipping costs, operating efficiencies and the ability to control costs. We believe that the introduction of new technologies, continued excess capacity in this industry, consolidation in our customers' markets as well as our own, and softness in traditional brand advertising spending, combined with the cost pressures facing customers resulting from other factors, including the cost of paper, have resulted in margin pressures and increased competition in our core businesses. We expect this trend to continue for the near-term.

        Our major competitors in North America include R.R. Donnelley & Sons Company, Quebecor World, Inc. and American Color Graphics. In addition, we compete with other marketing service providers such as Valassis Communications, Inc., Harte-Hankes, Inc., Acxiom Corporation, Experian, Inc., and Schawk, Inc. We also compete for advertising dollars with regional and local printers as well as television, radio, Internet and other forms of electronic media.

Trade Names, Trademarks and Patents

        We own certain trade names, trademarks and patents used in our business. The loss of any such trade name, other than "Vertis", or any trademark or patent would not have a material adverse effect on our consolidated financial condition or results of operations.

Governmental Regulations

        Our business is subject to a variety of federal, state and local laws, rules and regulations. Our production facilities are governed by laws and regulations relating to workplace safety and worker health, primarily the Occupational Safety and Health Act ("OSHA") and the regulations promulgated thereunder. Additionally, the federal and state legislatures have passed a variety of laws in recent years relating to direct marketing and related areas. Except as described herein, we are not aware of any pending legislation that in our view is likely to affect significantly the operations of our business. We believe that our operations comply substantially with all applicable governmental rules and regulations.

Environmental Matters

        Our operations are subject to a number of federal, state, local and foreign environmental laws and regulations including those regarding the discharge, emission, storage, treatment, handling and disposal of hazardous or toxic substances as well as remediation of contaminated soil and groundwater. While these laws and regulations could impose significant capital and operating costs on our business and there are significant penalties for violations, these costs currently are not material.

        Certain environmental laws hold current owners or operators of land or businesses liable for their own and for previous owners' or operators' releases of hazardous or toxic substances. Because of our operations, the long history of industrial operations at some of our facilities, the operations of predecessor owners or operators of certain of our businesses, and the use, production and release of hazardous substances at these sites and at surrounding sites, we may be subject to liability under these environmental laws. Various facilities of ours have experienced some level of regulatory scrutiny in the past and are, or may become, subject to further regulatory inspections, future requests for investigation or liability for past practices.

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        The Comprehensive Environmental Response, Compensation & Liability Act of 1980, as amended ("CERCLA"), provides for strict, and under certain circumstances, joint and several liability, for among other things, generators of hazardous substances disposed of at contaminated sites. We have received requests for information or notifications of potential liability from the Environmental Protection Agency under CERCLA for a few off-site locations. We have not incurred any significant costs relating to these matters and we do not believe that we will incur material costs in the future in responding to conditions at these sites.

        The nature of our operations exposes us to certain risks of liabilities and claims with respect to environmental matters. We believe our operations are currently in material compliance with applicable environmental laws and regulations. In many jurisdictions, environmental requirements may be expected to become more stringent in the future which could affect our ability to obtain or maintain necessary authorizations and approvals or result in increased environmental compliance costs.

        We do not believe that environmental compliance requirements are likely to have a material effect on us. We cannot predict what additional environmental legislation or regulations will be enacted in the future or how existing or future laws or regulations will be administered or interpreted, or the amount of future expenditures that may be required in order to comply with these laws. There can be no assurance that future environmental compliance obligations or discovery of new conditions will not arise in connection with our operations or facilities and that these would not have a material adverse effect on our business, financial condition or results of operations.

Employees

        As of December 31, 2007, we had approximately 5,800 employees. Most of the hourly employees at our North Brunswick and Newark, New Jersey facilities (approximately 138 employees) are represented by the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied-Industrial, and Service Workers International Union. We believe we have satisfactory employee and labor relations.

ITEM 1A    RISK FACTORS

Our highly leveraged status may impair our financial condition and we may incur additional debt.

        As of December 31, 2007, our total consolidated debt was $1.2 billion. Our substantial debt could have important consequences for our financial condition, including:

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making it more difficult for us to satisfy our obligations under the outstanding indebtedness;

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making it more difficult to refinance our obligations as they come due;

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increasing our vulnerability to general adverse economic and industry conditions;

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limiting our ability to obtain additional financing to fund future working capital, capital expenditures, acquisitions and other general corporate requirements;

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requiring a substantial portion of our cash flow from operations for the payment of interest on our debt and reducing our ability to use our cash flow to fund working capital, capital expenditures, acquisitions and general corporate requirements;

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limiting our ability to purchase paper and other raw materials under satisfactory credit terms thereby limiting our sources of supply and/or increasing cash required to fund operations;

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limiting our flexibility in planning for, or reacting to, changes in our business and the industry in which we operate; and

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placing us at a competitive disadvantage to other less-leveraged competitors.

        The indentures governing our debt instruments, subject to specified limitations, permit us and our subsidiaries to incur additional debt. In addition, as of December 31, 2007, our senior credit facility would permit us to borrow up to an additional $52.6 million. If new debt is added to our and our subsidiaries' current debt levels, the related risks that we and they now face could intensify.

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There is substantial doubt about our ability to continue as a going concern.

        We are highly leveraged with a history of recording net losses, mainly due to large interest payments on our long-term debt. Additionally, our primary sources of financing, our senior credit facility and our accounts receivable securitization facility, both mature in December 2008. We will not have sufficient liquidity to make the principal payment on our senior credit facility upon the maturity date unless we are able to refinance or replace our existing indebtedness. Our ability to continue as a going concern beyond this maturity date is dependent upon our ability to refinance our senior credit facility and our accounts receivable securitization facility or obtain alternate financing. We have initiated conversations with our debtholders to explore restructuring opportunities and have retained consultants to help us effectuate a restructuring plan, should we choose to do so. We are exploring several other financing alternatives in addition to amending our senior credit facility and our accounts receivable securitization facility, however, we cannot assure you that we will be able to amend these facilities or successfully obtain alternative financing. The refinancing of these facilities will likely require an agreement with our noteholders.

Servicing our debt, including the refinancing of our existing debt, will require a significant amount of cash, and our ability to generate sufficient cash depends upon many factors, some of which are beyond our control.

        Our ability to make payments on and refinance our debt and to fund planned capital expenditures depends on our ability to generate cash flow in the future. To some extent, this is subject to general economic, financial, competitive and other factors that are beyond our control. We have debt instruments that mature in 2008 and 2009 in the amounts of $165.5 million and $993.5 million, respectively. See "Contractual Obligations" in the "Management's Discussion and Analysis of Financial Condition and Results of Operations" section, included elsewhere in this Annual Report, for a summary of our contractual obligations over the next five years. We cannot assure you that our business will continue to generate cash flow at or above current levels. If we are unable to generate sufficient cash flows from operations in the future to service our debt, we will have to refinance all or a portion of our existing debt or obtain additional financing. We are exploring various alternatives, including refinancing our senior credit facility, obtaining new financing, and/or effectuating a strategic acquisition or merger. Specifically, management has engaged in discussions with debtholders on the terms of a debt exchange, which would restructure a portion of our debt and provide us with increased liquidity. As an option, a debt exchange may be accomplished on a negotiated basis with our lenders through a pre-packaged or pre-arranged bankruptcy restructuring plan. Additionally, we have engaged in discussions with our lenders regarding amendments to or replacement of the senior credit facility and our accounts receivable securitization facility. We cannot assure you that any debt restructuring or refinancing will be possible or that any additional financing could be obtained, thus the Company is considering all available options. The inability to obtain additional financing could materially impact our ability to meet our future debt service, capital expenditure and working capital requirements.

Covenant restrictions under our indebtedness may limit our ability to operate our business.

        Our indentures and other debt agreements contain, among other things, covenants that may restrict our ability to finance future operations or capital needs or to engage in other business activities. The indentures and agreements restrict, among other things, our and the subsidiary guarantors' ability to:

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borrow money;

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pay dividends or make distributions;

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purchase or redeem stock;

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make investments and extend credit;

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engage in transactions with affiliates;

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engage in sale-leaseback transactions;

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consummate certain asset sales;

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effect a consolidation or merger or sell, transfer, lease or otherwise dispose of all or substantially all of our assets; and

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create liens on our assets.

        In addition, our senior credit facility requires us to maintain a minimum Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") amount of $125 million, as calculated per the credit agreement. Also, as is customary in asset-based agreements, there is a provision for the credit facility agent (the "Agent"), in its reasonable credit judgment, to establish reserves against availability based on a change in circumstances. The Agent's right to alter existing reserves requires written consent from the borrowers when our minimum EBITDA, as calculated per the credit agreement, is in excess of $180 million on a quarterly trailing twelve-month basis. The Agent is not required to obtain written consent when our minimum EBITDA on a quarterly trailing twelve-month basis is less than $180 million. Our trailing twelve-month EBITDA as calculated under the credit agreement was $131.9 million at December 31, 2007. There were no reserves established by the Agent that would impair our ability to borrow from our senior credit facility in 2007. For more information about the restrictions and requirements under our senior credit facility, see Note 11 "Long-Term Debt" to our consolidated financial statements included elsewhere in this Annual Report and "Liquidity and Capital Resources" in Item 7, "Management's Discussion and Analysis of Financial Condition and Results of Operations".

        Events beyond our control, including changes in general economic and business conditions, may affect our ability to meet the minimum EBITDA test. We cannot assure you that we will meet this test or that the lenders will waive any failure to meet this test. A breach of any of these covenants would result in a default under our indentures and debt agreements. All of our debt instruments have customary cross-default provisions, including cross-default provisions for failure to pay principal or interest as required. If an event of default under our debt instruments occurs, the lenders could elect to declare all amounts outstanding thereunder, together with accrued interest, to be immediately due and payable and the lenders under our senior credit facility and our accounts receivable securitization facility could terminate advances to us. In that event, we might not have sufficient assets to pay amounts due on our outstanding debt.

The high level of competition in the advertising and marketing services industry could have a negative impact on our ability to service debt, particularly in a prolonged economic downturn.

        The advertising and marketing services industry is highly competitive in most product categories and geographic regions. Competition is largely based on price, quality and servicing the specialized needs of customers. Moreover, rapid changes in information technology may result in more intense competition, as existing and new entrants seek to take advantage of new products, services and technologies that could render our products, services and technologies less competitive or, in some instances, even obsolete. See "Competition" in the "Business" section. Technological advances in digital transmission of data and advertising creation have resulted in the in-house production of advertising content by certain end-users which has had a negative impact on our profitability. In addition, our industry has experienced competitive pricing pressure due to industry over-capacity which affects the margin on our advertising insert and direct mail products. The competitive pricing pressures have resulted in a decline in our margins. In addition, changes in product and equipment mix can have an impact on margins.

        Any future periods of economic downturn could result in continuing increased competition and possibly affect our sales and profitability. A decline in sales and profitability may decrease our cash flow, and make it more difficult for us to service our level of debt.

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Demand for our services may decrease due to a decline in clients' or an industry's financial condition or due to an economic downturn.

        We cannot assure you that the demand for our services will continue at current levels. Our clients' demands for our services may change based on their needs and financial condition. In addition, when economic downturns affect particular clients or industry groups, demand for advertising and marketing services provided to these clients or industry groups is often adversely affected. For example, a substantial portion of our revenue is generated from customers in various sectors of the retail industry. There can be no assurance that economic conditions or the level of demand for our services will improve or that they will not deteriorate. If there is a period of economic downturn or stagnation, our results of operations may be adversely affected.

The development of the Internet has had, and may continue to have, a significant impact on the printing business.

        Over time newspaper circulation, print advertising, and the use of premedia services has been impacted by technology. Decline in newspaper circulation due to the Internet has had a significant impact on circulation and subscription rates. Print advertising has been impacted by the Internet and other competing forms of digital media, such as e-mail, and is expected to continue. Continued decline in newspaper circulation would be likely to adversely affect our results of operations.

Changes in the cost of paper could have a negative impact on our ability to service our indebtedness.

        An increase in the cost of paper, a key raw material in our operations, may reduce our production volume and profits. If we are not able to pass paper cost increases to our customers or if our customers reduce the size of their print advertising programs, our sales and profitability could be negatively affected. A decline in volume may decrease our cash flow, and make it difficult for us to service our level of debt.

        Increases or decreases in demand for paper have led to corresponding pricing changes and, in periods of high demand, to limitations on the availability of certain grades of paper, including grades used by us. A loss of the sources of paper supply or a disruption in those sources' business or failure by them to meet our product needs on a timely basis could cause temporary shortages in needed materials which could have a negative effect on our revenue and profitability.

The expiration of contractual relationships may have a significant effect on Vertis' revenues

        While we typically enter into multi-year contracts with our customers to provide for printing advertising, direct mailing, and premedia services, there is no assurance that contracts coming to expiration will be renewed on favorable terms or at all. The expiration or other termination of those contracts could have a significant impact on our revenue. We cannot assure you that our customers will renew, extend the term of those contracts or enter into new contracts with us when the terms of such contracts expire.

We have a history of net losses and negative cash flows that may continue into the foreseeable future

        We have a history of net losses and negative cash flows, primarily due to our highly leveraged status and the large interest payments we are required to make under our debt agreements, which reduce the operating income we have achieved. If we fail to execute our strategy to achieve and maintain profitability in the future, it could adversely affect our ability to meet the financial covenants contained in our credit facility agreement with the financial institutions and to meet our debt service. Further, if we continue to incur net losses and negative cash flow, we may have to implement significant cost cutting measures, in addition to those measures taken in 2007 and the first two months of 2008, which could include a substantial reduction in work force, location closures, and/or the sale or

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disposition of certain subsidiaries. We cannot assure you that any of the cost cutting measures we implement will be effective or result in profitability or positive cash flow. To achieve profitability, we will also need to increase our revenue base, reduce our cost structure and realize economies of scale.

Regulations and government actions on direct marketing may affect us.

        Federal and state legislatures have passed a variety of laws in recent years relating to direct marketing and related areas. This and similar future legislation, as well as other government actions, could negatively affect direct marketing activities by imposing restrictions on telemarketing and on advertising in certain industries such as tobacco and sweepstakes, increasing the postal rate and tightening privacy regulations. Therefore, this might have a substantial impact on our direct mail services, which represent approximately 26% of our consolidated revenues for the twelve months ended December 31, 2007, as we and our customers adjust our behaviors in response to such legislation and government actions.

We rely on key management personnel.

        Our success will depend, in part, on the efforts of our executive officers and other key employees, including Mr. Michael DuBose and Mr. Barry Kohn. Mr. DuBose was appointed chairman and chief executive officer of the Company in November 2006 and Mr. Kohn has been serving as the Company's chief financial officer since May 2007. We believe Mr. DuBose and Mr. Kohn provide us with the leadership skills and prior experience that will greatly benefit us, as well as our customers and employees. The market for qualified personnel is competitive and our future success will depend upon, among other factors, our ability to attract and retain key personnel. The loss of the services of any of our key management personnel or the failure to attract and retain employees could have a material adverse effect on our results of operations and financial condition due to disruptions in leadership and continuity of our business relationships.

There can be no assurance that Thomas H. Lee Partners L.P. and its affiliates ("THL L.P."), as controlling shareholder, will exercise its control in our best interests as opposed to its own best interests.

        Because of its position as controlling shareholder of Vertis, THL L.P. is able to exercise control over decisions affecting us, including:

•

composition of our board of directors, and, through it, our direction and policies, including the appointment and removal of officers;

•

mergers or other business combinations and opportunities involving us;

•

further issuance of capital stock or other securities by us;

•

payment of dividends; and

•

approval of our business plans and general business development.

        There can be no assurance that THL L.P. will exercise its control in our best interests as opposed to its best interests as controlling shareholder.

        In addition, THL L.P. owns debt securities in Vertis and Vertis Holdings, and may choose to take actions that are in its best interests as a debt holder, rather than a shareholder.

ITEM 1B    UNRESOLVED STAFF COMMENTS

        None.

11

ITEM 2    PROPERTIES

Executive Offices

        Our principal executive offices are located at 250 West Pratt Street, Baltimore, Maryland, and comprise approximately 33,767 square feet of leased space, pursuant to a lease agreement expiring on August 31, 2014. We also lease an additional 18,237 square feet under this lease agreement, which are being sub-leased through August 31, 2014.

Production Facilities

        As of December 31, 2007, we owned 11 and leased 28 production facilities, with an aggregate area of approximately 3,500,000 square feet. The leased production facilities have lease terms expiring at various times from 2008 to 2017. We believe that our facilities are suitable and adequate for our business. We continually evaluate our facilities to ensure they are consistent with our operational needs and business strategy. A summary of production facilities is set forth in the table below:

Locations	Square Footage	Lease Term Expiration
Advertising Inserts Locations
Atlanta, GA(1)	94,700	Fee Ownership
Charlotte, NC.	105,700	April 30, 2013
City of Industry, CA(2)	103,000	September 30, 2011
Columbus, OH	141,185	December 31, 2014
Dallas, TX	50,400	September 30, 2012
East Longmeadow, MA.	159,241	February 2, 2016
Elk Grove Village, IL.	80,665	August 31, 2012
Greenville, MI	130,000	Fee Ownership
Lenexa, KS	89,403	Fee Ownership
Manassas, VA	108,120	May 31, 2014
Niles, MI(2)	90,000	Fee Ownership
Pomona, CA	144,542	May 31, 2011
Portland, OR	125,250	November 30, 2012
Riverside, CA	112,500	Fee Ownership
Sacramento, CA	57,483	Fee Ownership
Salt Lake City, UT	103,600	June 14, 2009
San Antonio, TX.	67,900	Fee Ownership
San Leandro, CA(3)	143,852	November 30, 2014
Saugerties, NY.	209,000	Fee Ownership
Tampa, FL.	72,418	December 31, 2008
Direct Mail Locations
Bristol, PA.	123,000	Fee Ownership
Chalfont, PA	347,076	Fee Ownership
Chicago, IL	38,302	July 31, 2009
Irvine, CA	28,000	September 30, 2009
Monroe Township, NJ	57,987	June 30, 2012
Newark, NJ	48,692	December 31, 2012
Newark, NJ	23,000	Fee Ownership
North Brunswick, NJ	119,266	October 31, 2017
York, PA	203,133	December 31, 2012

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Other Locations
Chicago, IL(4)	52,024	May 31, 2011
Earth City, MO	23,023	June 30, 2012
Harrison, NJ(5)	32,538	May 31, 2010
Houston, TX	14,670	May 31, 2009
Irving, TX	91,649	October 31, 2012
Minneapolis, MN(5)	12,577	March 31, 2009
North Haven, CT	31,600	December 27, 2012
Richmond, VA(5).	4,600	June 30, 2009
San Antonio, TX.	26,227	April 30, 2011
San Antonio, TX.	6,311	May 31, 2012

(1)

Comprised of two adjacent facilities.

(2)

Idle.

(3)

In February 2008, we announced a plan to close this facility. This facility is expected to be idle as of the third quarter of 2008.

(4)

27,552 square feet are subleased to another party with the remaining square footage idle.

(5)

Subleased to another party.

Sales Offices and Other Facilities

        We maintain a large number of facilities for use as warehouses, sales offices and other administrative purposes. All of the sales offices and other facilities are leased, with lease terms expiring at various times from 2008 to 2010.

ITEM 3    LEGAL PROCEEDINGS

        Certain claims, suits and complaints (including those involving environmental matters) which arise in the ordinary course of our business have been filed or are pending against us. We believe, based upon the currently available information, that all the results of such proceedings, individually, or in the aggregate would not have a material adverse effect on our consolidated financial condition or results of operations.

ITEM 4    SUBMISSION OF VOTE TO SECURITY HOLDERS

        There were no matters submitted to a vote of security holders during the fourth quarter of our fiscal year ended December 31, 2007.

13

PART II

ITEM 5    MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

        Vertis is a wholly-owned subsidiary of Vertis Holdings. There is no established public trading market for Vertis Holdings' common stock. As of January 31, 2008, there were approximately 74 shareholders of Vertis Holdings' common stock and an additional 31 shareholders of Vertis Holdings' common stock subject to restriction. We did not make any dividend payments in 2006 and 2007. We do not intend to pay any dividends except for those necessary for the normal operating expenses of Vertis Holdings, but reserve the right to do so. Our debt instruments contain customary covenants imposing certain limitations on the payment of dividends or other distributions.

ITEM 6    SELECTED FINANCIAL DATA

        The following table sets forth selected historical consolidated financial data for Vertis and its subsidiaries as of and for the years ended December 31, 2007, 2006, 2005, 2004, and 2003. The historical data as of December 31, 2007 and 2006 and for the three-year period ended December 31, 2007 has been derived from our audited consolidated financial statements included elsewhere in this Annual Report. The historical data as of December 31, 2005, 2004 and 2003, and for the two-year period ended December 31, 2004 has been derived from our audited consolidated financial statements not included herein. We sold our fragrance business in 2006 and our subsidiaries in Europe (the "European Subsidiaries") in 2005. The table below presents the operating results of our fragrance business and European Subsidiaries as discontinued operations for all applicable periods.

        EBITDA is included in this Annual Report as it is the primary measure we use to evaluate our performance. EBITDA, as we use it for this purpose, represents income (loss) from continuing operations before cumulative effect of accounting change, plus:

•

interest expense (net of interest income);

•

income tax expense (benefit); and

•

depreciation and amortization of intangibles.

        We present EBITDA here to provide additional information regarding our performance and because it is the measure by which we gauge the profitability and assess the performance of our segments. EBITDA is not a measure of financial performance in accordance with accounting principles generally accepted in the United States of America ("GAAP"). You should not consider it an alternative to net income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. Our calculation of EBITDA may be different from the calculation used by other companies and therefore comparability may be limited. A full quantitative reconciliation of EBITDA to income (loss) from continuing operations before cumulative effect of accounting change, is set forth in Note 13 to the following table.

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        You should read the following selected historical consolidated financial data in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the related historical consolidated financial statements and notes included elsewhere in this Annual Report.

	Year ended December 31,
	2007			2006			2005			2004			2003
	(in thousands)
Operating data:
Revenue	$	1,365,154		$	1,468,661		$	1,470,088		$	1,474,359		$	1,410,306
Goodwill impairment		246,527
Operating (loss) income		(183,777)	(1)		90,564	(2)		100,163	(3)		109,518	(4)		79,730	(5)
Interest expense, net(6)		134,644			131,023			128,821			132,809			136,557
Loss from continuing operations before income tax expense (benefit) and cumulative effect of accounting change		(326,106	)		(47,796	)		(36,311	)		(70,976	)		(51,068	)
Loss from continuing operations before cumulative effect of accounting change		(326,494	)		(47,795	)		(28,241	)		(4,923	)		(99,502	)
(Loss) gain from discontinued operations, net(7)		(251	)		21,600	(8)		(143,389)	(9)		(6,210	)		3,577
Cumulative effect of accounting change, net								(1,600)	(10)		—			—
Net loss		(326,745	)		(26,195	)		(173,230	)		(11,133	)		(95,925	)
Balance sheet data (at year end):
Working capital(11)	$	(217,701)	(12)	$	(40,527	)	$	(74,064	)	$	(72,738	)	$	(60,857	)
Net property, plant and equipment		328,026			330,039			336,248			358,872			380,503
Total assets(11)		528,166			844,686			872,639			1,049,795			1,147,498
Long-term debt (including current portion)		1,152,572			1,096,041			1,049,059			1,024,035			1,051,917
Accumulated deficit		(1,279,960	)		(953,090	)		(926,895	)		(753,661	)		(742,512	)
Other stockholder's equity		404,877			403,007			401,017			405,101			400,314
Total stockholder's deficit		(875,083	)		(550,083	)		(525,878	)		(348,560	)		(342,198	)
Other data:
Capital expenditures	$	65,217		$	48,985		$	42,197		$	45,636		$	40,195
Cash flows provided by operating activities		17,496			11,690			5,693			47,545			89,046
Cash flows used in investing activities		(53,153	)		(28,146	)		(43,765	)		(18,992	)		(40,903	)
Cash flows provided by (used in) financing activities		36,050			20,307			39,332			(29,608	)		(53,176	)
EBITDA(13)		(134,106	)		142,015			155,339			127,263			158,222
Dividends to parent		—			—			4			15			—
Ratio of earnings to fixed charges		—	(14)		—	(14)		—	(14)		—	(14)		—	(14)

(1)

Includes a $246.5 million non-cash impairment charge to reflect the impairment of goodwill in each of the Company's reporting units (see Note 5 to our consolidated financial statements included elsewhere in this annual report for a more detailed discussion) and $10.9 million of restructuring expenses.

(2)

Includes $16.0 million of restructuring expenses.

(3)

Includes $17.1 million of restructuring expenses.

(4)

Includes $4.5 million of restructuring expenses.

(5)

Includes $14.6 million of restructuring expenses.

(6)

Interest expense, net includes interest expense, amortization of deferred financing fees, interest income and the write-off of deferred financing fees.

(7)

In 2006 and 2005, we sold our fragrance business and our Europe Subsidiaries, respectively, both of which are accounted for as discontinued operations in all periods presented.

(8)

Includes $1.1 million of income from our fragrance business, which was sold in 2006, and a $21.4 million gain on the sale of the fragrance business offset by $1.0 million in additional expenses recorded in 2006 related to the sale of our European Subsidiaries.

15

(9)

Includes $136.2 million in asset impairment charges, $111.2 million of which resulted from the write-off of the goodwill of our Europe segment and $25.0 million of Europe long-lived assets written off; a $1.6 million loss on sale of our European Subsidiaries based on net proceeds of $2.4 million; and an $11.0 million loss from the operations of our European Subsidiaries in 2005 offset by $5.4 million of income from the operations of our fragrance business.

(10)

Effective December 31, 2005, we adopted FIN 47 "Accounting for Conditional Asset Retirement Obligations". FIN 47 requires that companies recognize a liability for the fair value of a conditional asset retirement obligation if the fair value of the liability can be reasonably estimated. Upon adoption of FIN 47, we estimated and accrued for the cost to retire our leasehold improvements based on the present value of these costs. As a result of the adoption, we recorded a cumulative effect of accounting change of $1.6 million for the year ended December 31, 2005.

(11)

We are a party to an agreement to sell certain trade accounts receivable of certain of our subsidiaries (see Note 7 to our consolidated financial statements for a more detailed discussion). The agreement allows for a maximum of $130.0 million of trade accounts receivable to be sold at any time based on the level of eligible receivables. We sell our trade accounts receivable through a bankruptcy-remote wholly-owned subsidiary, however, we maintain an interest in the receivables and are still responsible for the servicing and collection of those accounts receivable. We sold accounts receivable in excess of this $130.0 million facility at December 31, 2007, 2006, 2005, and 2004, and we sold $122.5 million of eligible receivables under this facility at December 31, 2003. These amounts are reflected as reductions of Accounts receivable, net on our consolidated balance sheet included elsewhere in this Annual Report.

(12)

Included in the working capital calculation as of December 31, 2007, is $165.5 million, which represents the balance owed under our senior credit facility at December 31, 2007, which we have classified as current in the consolidated balance sheet included elsewhere in this Annual Report. This classification stems from the fact that the maturity date of the senior credit facility is December 22, 2008, and while we have begun discussion with our lenders regarding amending the senior credit facility, we have not received any assurance that we will be able to do so. In the years ended December 31, 2006 and prior, the balance of our senior credit facility was classified as long-term and, as such, is not included as a component of working capital in the table above.

(13)

A full quantitative reconciliation of EBITDA to income (loss) from continuing operations before cumulative effect of accounting change, is provided as follows:

	Year ended December 31,
	2007			2006			2005			2004			2003
	(in thousands)
Loss from continuing operations before cumulative effect of accounting change	$	(326,494)	(1)	$	(47,795	)	$	(28,241	)	$	(4,923	)	$	(99,502	)
Interest expense, net		134,644			131,023			128,821			132,809			136,557
Income tax expense (benefit)		388			(1	)		(8,070	)		(66,053	)		48,436
Depreciation and amortization of intangibles		57,356			58,788			62,829			65,430			72,731
EBITDA	$	(134,106	)	$	142,015		$	155,339		$	127,263		$	158,222

(1)

Includes a $246.5 million non-cash impairment charge to reflect the impairment of goodwill in each of the Company's reporting units (see Note 5 to our consolidated financial statements included elsewhere in this annual report for a more detailed discussion).

(14)

Earnings were inadequate to cover fixed charges by $326.8 million, $48.3 million, $36.5 million, $71.0 million and $51.3 million for the years ended December 31, 2007, 2006, 2005, 2004 and 2003, respectively. See Exhibit 12.1 to this Annual Report for this computation. Net loss for the years ended December 31, 2007, 2006, 2005, 2004 and 2003, includes $57.4 million, $58.8 million, $62.8 million, $65.4 million and $72.7 million, respectively, of non-cash depreciation and amortization expense.

16

ITEM 7    MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

        This section provides a review of the financial condition and results of operations of Vertis during the three years ended December 31, 2007. The analysis is based on the consolidated financial statements and related notes that are included elsewhere in this Annual Report, prepared in accordance with GAAP. The consolidated financial statements and management's discussion and analysis herein are prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

Introductory Overview

Executive Summary

        Vertis, Inc. is a premier provider of print advertising, direct marketing solutions and related value added services to America's leading retail and consumer services companies. We deliver marketing products that create strategic value for clients by using creative advertising, color management technologies, proprietary research, customer targeting expertise, premedia and media services, combined with its world-class printing expertise.

        We operate through two reportable business segments: Advertising Inserts and Direct Mail. Advertising Inserts provides a full product line of printed targeted advertising products inserted into newspapers. Direct Mail provides personalized direct mail and marketing products. In addition, we also provide Premedia and Media Services. These services are included in Corporate and Other, together with corporate costs incurred by the Company.

        The advertising insert business in general has been impacted by excess industry capacity causing industry-wide price pressure and competition for volume. Marketers have trended toward multi-channel advertising campaigns, which leverage more than one type of medium in addition to advertising inserts to expand their coverage. There has also been consolidation in end-user groups who traditionally use advertising inserts to convey their messages. Additionally, changes in the cost of paper and changes in the proportion of paper supplied by our customers is a major contributing factor in the Advertising Inserts revenue fluctuation, and to a lesser extent, fluctuations in Direct Mail revenue. These factors contributed to the revenue decline at our Advertising Inserts segment. Pricing, including the effects of product, customer and equipment mix, in Advertising Inserts improved largely reflecting normal changes in product and customer mix as opposed to a change in the competitive pricing environment for advertising inserts. The conditions in Advertising Inserts, specifically the industry-wide dynamics around pricing as well as the competitive pressure on sales volume, are expected to continue. Direct Mail revenue increased in 2007 due to an increase in volume as well as an increase in revenue related to our acquisition of USA Direct, Inc. ("USA Direct") and our fulfillment and other businesses. These increases were offset by a decline in price and mix.

        Liquidity continues to be a primary focus. At December 31, 2007, we had approximately $52.6 million available to borrow under our revolving senior credit facility ("Credit Facility"), our primary source of funds, and $6.2 million of cash on hand. The Credit Facility provides for availability of $250 million until the December 22, 2008 maturity date, consisting of $200 million available under a revolving credit facility and a $50 million fully drawn term loan. We will not have sufficient liquidity to make the principal payment on the Credit Facility upon the maturity date unless we are able to refinance, restructure, amend or otherwise replace these facilities. Our ability to continue as a going concern beyond December 2008 is dependent upon our ability to refinance the Credit Facility, as well as the accounts receivable facility, or obtain alternate financing. We have initiated conversations with our debtholders to explore restructuring opportunities and have retained consultants to help us effectuate a restructuring plan, should we choose to do so. We are exploring several other financing alternatives in addition to amending our senior credit facility and our accounts receivable securitization

17

facility, however, we cannot assure you that we will be able to amend these facilities or successfully obtain alternative financing. The refinancing of these facilities will likely require an agreement with our noteholders, as described below. As part of our strategy to preserve and enhance near-term liquidity, we may elect to forego making the $17.1 million interest payment on our 9³/4% senior secured second lien notes due on April 1, 2008. Under the terms of the indenture governing these notes, we have a thirty-day grace period in which to make this interest payment before it would be an event of default. If we elect not to make the interest payments, we will be seeking a waiver from the holders of the notes; to the extent waivers are not received and the interest payments are not made within a thirty-day grace period, it will be an event of default under the indenture. Additionally, our independent auditors have included an explanatory paragraph in their report expressing substantial doubt about our ability to continue as a going concern.

        We have engaged in discussions with our lenders to amend, extend or replace the Credit Facility and our accounts receivable securitization facility prior to their December 2008 maturity. Additionally, we have engaged in discussions with the holders of our 9³/4% senior secured lien notes, 10⁷/8% senior notes and 13¹/2% senior subordinated notes on the terms of a debt exchange, which would restructure a portion of our debt and provide us with increased liquidity. As an option, a debt exchange may be accomplished on a negotiated basis with our lenders through a pre-packaged or pre-arranged bankruptcy restructuring plan. There is no assurance that a debt exchange would be agreed to, and we are considering all available options.

        Under the Credit Facility, we are also subject to a minimum EBITDA covenant requiring us to maintain EBITDA, as defined by the Credit Facility, of $125 million on a trailing twelve-month basis. The Company's trailing twelve-month Compliance EBITDA, as calculated under the credit agreement, was $131.9 million at December 31, 2007. As of December 31, 2007, we were in compliance with all of our covenants, financial or otherwise. While we currently expect to be in compliance in future periods, there can be no assurance that we will continue to meet the minimum EBITDA required under the covenant. Based upon the latest projections for 2008, including results from January and February, we believe we will be in compliance with this covenant through the maturity date.

        In the fourth quarter of 2007, we recorded a non-cash charge of $246.5 million to reflect the impairment of goodwill in each of our reporting units due to a combination of factors including the decline in the fair value of our debt in the fourth quarter of 2007, declines in the market values of the guideline companies used to estimate the fair values of our reporting units and our operating performance.

        Capital expenditures amounted to approximately $65.2 million, $49.0 million and $42.2 million in 2007, 2006 and 2005, respectively. Capital spending has been directed toward projects that improve efficiency, maintain our infrastructure, and upgrade our equipment base. We currently expect the level of capital expenditures in 2008 to be between $35 million and $45 million.

        Cost management continues to be a major focus of ours. Cost reductions have been accomplished through streamlining of shared service and corporate functions, combining operations, closing unprofitable locations, staff reductions and asset write-offs. Our 2007 restructuring activities yielded year-over-year savings of approximately $3.7 million.

        A large portion of the Company's revenue is generally seasonal in nature. However, our efforts to expand our other product lines as well as expand the market for our advertising inserts to year-round customers, have reduced the overall seasonality of our revenues. Of our full year 2007 revenue, 24.2% of revenue was generated in the first quarter, 24.3% in the second, 23.4% in the third and 28.1% in the fourth. Profitability continues to follow a more seasonal pattern due to the higher margins and efficiencies gained from running at higher capacity during the fourth quarter holiday production season. On the other hand, lower volume negatively impacts margins since we are not able to fully leverage fixed depreciation, amortization, interest and other costs that are incurred evenly throughout the year.

18

Based on our historical experience and projected operations, we expect our operating results in the near future to be strongest in the fourth quarter and softest in the first. As a result, our overall yearly performance depends, to a significant degree, on our performance in the second half of the year, particularly in the fourth quarter.

        We use independent third-party source materials to track statistics pertaining to advertising growth. Based on these publications, the estimates for 2007 domestic advertising spending indicate growth ranging from 1.7% to 5.1%. US advertising growth estimates for 2008 range from 3.7% to 5.6%. These advertising growth percentages include many forms of advertising, not exclusively print advertising, as most sources do not track these statistics separately. A few of the sources we used to obtain the estimates above do not include direct mail advertising in their estimates, however, based on estimates by one independent third-party source, domestic direct mail advertising growth for 2008 is estimated to be 4.5%.

Discontinued Operations

        On September 8, 2006, we entered into an agreement to sell our fragrance business, which included two presses and our fragrance lab and microencapsulation facility, all of which were located in one of our Direct Mail facilities, as well as fragrance receivables, inventory and payables, the fragrance business customer list, certain employees and all intellectual property related to the business. The sale agreement was entered into as the result of a strategic decision to move away from this line of business and focus our resources on the growth of our other Direct Mail activities.

        Included in the agreement to sell the fragrance business was a transition services agreement (the "Transition Agreement") under which we provided services on a subcontracting basis to the purchaser of the fragrance business (the "Purchaser"), utilizing certain assets of the business that was sold. These assets remained at our Direct Mail facility during the time of the Transition Agreement. As of December 31, 2006, we had completed our performance of the subcontracting services under the Transition Agreement and the remaining assets of the fragrance business were transferred to the Purchaser's facilities. We received proceeds of $42.1 million from the sale, resulting in a $21.2 million gain on the sale, which is included in income (loss) from discontinued operations on our consolidated statement of operations included elsewhere in this Annual Report.

        Revenue from the fragrance business, which was reported under our Direct Mail segment, was $26.7 million and $40.2 million for the twelve months ended December 31, 2006 and 2005, respectively. The net income from the fragrance business was $1.1 million and $5.4 million for twelve months ended December 31, 2006 and 2005, respectively. The results of the fragrance business have been accounted for as discontinued operations and, as such, are included in income (loss) from discontinued operations on our consolidated statements of operations. No taxes were recorded for the fragrance business due to pre-tax losses and tax benefits being offset by deferred tax valuation allowances. Interest was not allocated to discontinued operations as the divestiture of the fragrance business was on a debt-free basis. Prior year financial statements have been restated to present the operations of our fragrance business as a discontinued operation. See Note 4 to our consolidated financial statements included elsewhere in this Annual Report for further discussion.

        During the third quarter of 2005, we decided to sell the two divisions in our European segment primarily because each had incurred operating losses and neither was deemed a fit within the Company's overall strategy. As a result, the Company accounted for the operations of its European segment as a discontinued operation. The direct mail division of this segment was sold on October 3, 2005 and the premedia division of this segment was sold on December 14, 2005. In 2005, a $1.6 million loss on the sale of our Europe segment was recognized based on net proceeds of $2.4 million. Additionally, in 2006 we paid $0.6 million to settle a lawsuit brought against us by a customer of our

19

European segment. These amounts are included in income (loss) from discontinued operations on our consolidated income statement included elsewhere in this Annual Report.

        The net operating loss for our European Subsidiaries was $0.4 million and $147.2 million for the years ended December 31, 2006 and 2005, respectively, and is included in discontinued operations on our consolidated financial statements included elsewhere in this Annual Report. The Europe loss we recorded in 2006 represents a $0.4 million payment made to a former employee of our European segment in respect of the employee's termination agreement. Included in the 2005 loss are impairment charges of $136.2 million to write off the Europe goodwill and write-down other Europe long-lived assets. Revenue for Vertis Europe, which is also included in the loss from discontinued operations for the year ended December 31, 2005 was $100.0 million. Interest was not allocated to discontinued operations as the European business was divested on a debt-free basis. Prior year financial statements have been restated to present the operations of Vertis Europe as a discontinued operation. See Note 4 to our consolidated financial statements included in this Annual Report for further discussion.

Restructuring and Impairment Charges

        In the fourth quarter of 2007, we recorded a non-cash charge of $246.5 million to reflect the impairment of goodwill in each of our reporting units. The goodwill impairment was recorded in the following segments: Advertising Inserts, $187.9 million; Direct Mail, $54.6 million; and Corporate and Other, $4.0 million. Impairment in all reporting units was due to a combination of factors including the decline in the fair value of our debt in the fourth quarter of 2007, declines in the market values of the guideline companies used to estimate the fair values of our reporting units and our operating performance. We estimated the fair value of our reporting units using the discounted cash flow and guideline company approaches. Because the fair value of each of the reporting units, which includes an allocation of our debt, was below its carrying amount including goodwill, we performed an additional fair value measurement calculation to determine the amount of the goodwill impairment loss noted above. We performed an additional impairment evaluation on the other long-lived assets and determined there was no impairment as the undiscounted cash flows exceeded the carrying value of these assets.

        We began a restructuring program in the first quarter of 2007 (the "2007 Program") aimed at streamlining operations to capitalize on operating efficiencies and to reduce overhead, thus reducing our overall cost base, as well as addressing the continuing issue of industry-wide overcapacity. The goal of this restructuring program is to allow us to more effectively compete in today's highly competitive business environment. The restructuring actions approved under the 2007 Program include reductions in work force of approximately 275 employees, the closure of an Inserts production facility, the closure of a Direct Mail programming support facility and the vacating of a floor in our corporate office. Costs associated with approved restructuring actions under the 2007 Program were $10.0 million, net of estimated sublease income of $4.1 million, all of which were recorded in 2007. Restructuring actions under the 2007 Program were complete as December 31, 2007. Cost savings achieved in 2007 as a result of the 2007 Program were approximately $3.7 million, $3.1 million of which were staffing related with the remainder related to decreased facility costs. These savings impacted both the cost of production and the selling, general and administrative line items on the consolidated statement of operations included elsewhere in this Annual Report. Annual cost savings expected in future years as a result of the 2007 Program are estimated to be approximately $13.4 million, $12.1 million of which relate to expected staffing cost savings and $1.3 million related to facility costs savings.

        In the year ended December 31, 2007, under the 2007 Program, the Advertising Inserts segment recorded $1.7 million in severance and related costs associated with the elimination of approximately 150 positions as well as $2.7 million in facility closure costs and $2.8 million in asset write-downs primarily related to the closure of an inserts production facility in the City of Industry, California. The decision to close this inserts facility was made based on an analysis conducted to identify areas where

20

consolidation of operations could occur with minimal disruption to our customers. As there are two Advertising Inserts production facilities within close proximity to the facility that was closed, this decision allows for higher utilization of our other presses in the region and lowers overall costs, which should allow us to more effectively compete with our competitors in this industry. Advertising Inserts also recorded $0.2 million in additional facility closure costs and $0.3 million in asset write-downs related to the closure of a production facility that took place in 2006. The Direct Mail segment recorded $0.8 million of severance and related costs associated with the elimination of approximately 98 positions and $0.7 million in facility costs, $0.4 million of which represents additional restructuring costs for the closure of a fulfillment facility in 2006 and the remainder of which represents costs associated with the closure of a direct mail programming support facility and an adjustment to the restructuring accrual to reflect the present value of the leases for closed Direct Mail facilities. Corporate and Other recorded $1.2 million in severance and related costs in 2007 associated with the elimination of 15 positions as well as $0.4 million in facility closure costs and $0.1 million in assets written off.

        Included in the 2007 segment restructuring expense are approximately $0.2 million of severance costs related to the elimination of 12 shared services positions and $0.8 million of facilities costs associated with the vacating of a floor in our corporate office, which have been allocated to the segments.

        Our 2006 restructuring program (the "2006 Program") included reductions in work force of 537 employees and the closure of one advertising inserts production facility, one inserts sales office, one direct mail fulfillment facility and two premedia production facilities. All approved restructuring actions under the 2006 Program were complete as of December 31, 2006. Costs associated with approved restructuring actions under the 2006 Program were $16.0 million, all of which were recorded in 2006.

        In the year ended December 31, 2006, under the 2006 Program, the Advertising Inserts segment recorded $3.7 million in severance and related costs associated with the elimination of 243 positions and $0.6 million in facility closing costs as well as a $1.4 million write-down of assets associated with the closure of a production facility. The Direct Mail segment recorded $1.8 million in severance and related costs in 2006 associated with the elimination of 126 positions and the closure of a fulfillment facility. Corporate and Other recorded $5.6 million in severance and related costs in 2006 associated with the elimination of 137 positions and $2.9 million in facility closure costs, $1.4 million of which reflects an adjustment to restructuring expense primarily related to a recalculation of facility closure costs expected to be paid based on a revised assumption of estimated sublease income, and the remainder associated with the closure of two premedia production facilities in 2006.

        Included in the 2006 segment restructuring expense amounts above are $0.9 million of severance costs related to the elimination of 31 shared services positions and facilities costs which represent accretion expense, which are allocated to the segments.

        In 2005, the Advertising Inserts segment recorded $7.0 million in severance and related costs associated with the elimination of approximately 186 positions and $0.8 million in facility closure costs associated with the closure of two regional offices and one warehouse. The Direct Mail segment recorded $2.0 million in severance and related costs in 2005 associated with the elimination of approximately 33 positions. Corporate and Other recorded $5.1 million in severance and related costs in 2005 associated with the elimination of approximately 91 positions and $1.7 million in facility closure costs associated with the closure of six premedia facilities offset by $0.1 million in gains from the sale of assets related to the closure of one of the premedia facilities. Additionally, $0.7 million in costs were recorded in the first quarter of 2005 related to the amendment of an executive level employment agreement announced in 2004, as discussed below.

21

        Included in the 2005 segment severance amounts above are approximately $2.5 million of severance related to the elimination of approximately 50 shared services positions, which have been allocated to the segments.

        In connection with our restructuring actions discussed above, we recorded $10.9 million, $16.0 million, and $17.1 million of restructuring charges in the years ended December 31, 2007, 2006 and 2005, respectively. We expect to pay $5.0 million of the accrued restructuring costs in 2008 and the remainder, approximately $3.1 million, by 2014.

        We are continuously evaluating the need to implement restructuring programs to rationalize our costs and improve operating efficiency. In February 2008, we announced the consolidation of our San Leandro advertising inserts operation into our three remaining California-based regional facilities. This consolidation will include the relocation of San Leandro's printing presses. The decision to close our San Leandro facility was made with the intent of properly aligning our cost structure with current marketplace conditions by improving the utilization of presses and lowering overall operating costs which we believe will allow us to more effectively compete in today's highly competitive business environment. It is likely that we will incur additional restructuring costs in 2008 in an on-going effort to achieve these objectives and best position Vertis for growth.

        For more information about our restructuring charges, see Note 5 to our consolidated financial statements included in this Annual Report.

Factors Affecting Comparability

        Several factors can affect the comparability of our results from one period to another. Primary among these factors are the cost of paper, changes in business mix, the timing of restructuring expenses and the realization of the associated benefits.

        The cost of paper is a principal factor in our pricing to certain customers since a substantial portion of revenue includes the cost of paper. Therefore, changes in the cost of paper and changes in the proportion of paper supplied by our customers significantly affects our revenue generated from the sale of advertising insert and direct mail products, both of which are products where paper is a substantial portion of the costs of production. We are generally able to pass on increases in the cost of paper to our customers, subject to a short time lag, while decreases in paper costs generally result in lower prices to customers.

        Variances in expenses expressed in terms of percentage of revenue can fluctuate based on changes in business mix and are influenced by the change in revenue directly resulting from changes in paper prices and the proportion of paper supplied by our customers. As our business mix changes, the nature of products sold in a period can lead to offsetting increases and decreases in different expense categories as a percentage of revenue.

        Also affecting year-over-year comparability is the non-cash impairment charge we recorded in the fourth quarter of 2007 to write-off our goodwill and the acquisition of USA Direct in May 2006. The financial results of USA Direct are included in our consolidated financial statements within our Direct Mail segment from the date of acquisition. See Note 6 to our consolidated financial statements included elsewhere in this Annual Report for our proforma results including USA Direct as though the acquisition had occurred at the beginning of 2006.

        You should consider all of these factors in reviewing the discussion of our operating results.

22

Results of Operations

        The following table presents major components from our consolidated statements of operations and consolidated statements of cash flows.

	Year ended December 31,									Percentage of Revenue
	2007			2006			2005			2007		2006		2005
	(in thousands)
Revenue	$	1,365,154		$	1,468,661		$	1,470,088		100.0	%	100.0	%	100.0	%
Costs of production		1,081,612			1,160,392			1,140,582		79.2	%	79.0	%	77.6	%
Selling, general and administrative		152,524			142,916			149,395		11.2	%	9.7	%	10.2	%
Goodwill impairment		246,527								18.1	%
Restructuring charges		10,912			16,001			17,119		0.8	%	1.1	%	1.1	%
Depreciation and amortization of intangibles		57,356			58,788			62,829		4.2	%	4.0	%	4.3	%
Total operating costs		1,548,931			1,378,097			1,369,925		113.5	%	93.8	%	93.2	%
Operating (loss) income	$	(183,777	)	$	90,564		$	100,163		N/A		6.2	%	6.8	%
Other data:
Cash flows provided by operating activities	$	17,496		$	11,690		$	5,693
Cash flows used in investing activities		(53,153	)		(28,146	)		(43,765	)
Cash flows provided by financing activities		36,050			20,307			39,332
EBITDA		(134,106	)		142,015			155,339		N/A		9.7	%	10.6	%

        EBITDA represents income (loss) from continuing operations before cumulative effect of accounting change, plus

•

interest expense (net of interest income)

•

income tax expense (benefit), and

•

depreciation and amortization of intangibles.

        We present EBITDA here to provide additional information regarding our performance and because it is the measure by which we gauge the profitability and assess the performance of our segments. EBITDA is not a measure of financial performance in accordance with GAAP. You should not consider it an alternative to net income as a measure of operating performance or to cash flows from operating activities as a measure of liquidity. Our calculation of EBITDA may be different from the calculation used by other companies and therefore comparability may be limited. A full quantitative reconciliation of EBITDA to loss from continuing operations before cumulative effect of accounting change, is provided as follows:

	Year ended December 31,
	2007			2006			2005
	(in thousands)
Loss from continuing operations before cumulative effect of accounting change	$	(326,494	)	$	(47,795	)	$	(28,241	)
Interest expense, net		134,644			131,023			128,821
Income tax expense (benefit)		388			(1	)		(8,070	)
Depreciation and amortization of intangibles		57,356			58,788			62,829
EBITDA	$	(134,106	)	$	142,015		$	155,339

23

Results of Operations—2007 compared to 2006

Revenue

        For the year ended December 31, 2007, our consolidated revenue decreased $103.5 million, or 7.0%, from $1,468.7 million in 2006 to $1,365.2 million in 2007. The decrease in revenue is due to a decline in Advertising Inserts revenue, of which approximately 75% is attributable to a decline in paper, offset by an increase in revenue for our Direct Mail segment. See the "Segment Performance" section for further discussion.

Operating Expenses

        For the year ended December 31, 2006, our consolidated costs of production decreased $78.8 million, or 6.8%, from $1,160.4 million in 2006 to $1,081.6 million in 2007. The decrease in costs of production is primarily due to declines in the cost of paper, contract services, freight expense, utilities and other supplies used in the production process offset by increased labor costs, ink and other materials consumed and repairs and maintenance. Additionally, included in costs of production in 2007, as an offset to expenses, is a $2.9 million gain on a sale-leaseback transaction we entered into in the fourth quarter of 2007 (see Note 12 to the consolidated financial statements included elsewhere in this Annual Report). The remainder of the change is due to fluctuations in various miscellaneous costs of production.

        Selling, general and administrative expenses increased $9.6 million, or 6.7%, for the year ended December 31, 2007. We incurred increased staffing costs, professional fees and travel and entertainment expenses in 2007, offset by declines in telecommunications costs, and bad debt expense. The remainder of the change is due to fluctuations in various miscellaneous selling, general and administrative expenses. The increase in selling, general and administrative costs reflects an overall company-wide effort begun in the first quarter of 2007 toward lean and continuous improvement aimed at improved productivity and performance as well as upgrading our quality and customer service. Additionally, we are focusing on improving our sales organization by adding new sales resources.

        Goodwill impairment and restructuring charges for the year ended December 31, 2007 totaled $257.4 million compared to $16.0 million in 2006. See the "Restructuring and Impairment Charges" section for a detailed discussion of restructuring charges.

Interest and Other Expenses (Income)

        Interest expense, net increased $3.6 million, or 2.8%, for the year ended December 31, 2007, from $131.0 million in 2006 to $134.6 million in 2007. This increase was due to an increase in average borrowings under the Credit Facility as well as an increase in the interest rates on the Credit Facility.

Loss from continuing operations before cumulative effect of accounting change

        Loss from continuing operations before cumulative effect of accounting change was $326.5 million for the year ended December 31, 2007, an increase of $278.7 million compared to a loss of $47.8 million for the year ended December 31, 2006. Goodwill impairment charges of $246.5 million, which we recorded in the fourth quarter of 2007, represent the majority of this increase in loss. The remaining increase reflects the aforementioned changes in revenue and costs.

Segment Performance

        Set forth below is a discussion of the performance of our business segments based on revenue and EBITDA, which is the measure reported to our chief operating decision maker for the purpose of making decisions about allocating resources to the segment and assessing performance of the segment. A tabular reconciliation of segment EBITDA to income (loss) from continuing operations before cumulative effect of accounting change, in accordance with Financial Accounting Standards Board ("FASB") Statement No. 131, "Disclosure about Segments of an Enterprise and Related Information", is contained in Note 21 to our consolidated financial statements included elsewhere in this Annual Report.

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Advertising Inserts

		Year ended December 31, 2007
		Revenue			EBITDA
		(in thousands)
2006		$	1,030,471		$	117,884
Increase (decrease):
Volume			(48,502	)		(23,109	)
Price/Mix(1)			18,143			18,143
Paper(2)			(89,478	)
Variable Costs, rate adjusted(3)						(7,299	)
Fixed Costs(4)						(8,429	)
Selling, general and administrative(5)						(1,816	)
Goodwill impairment (non-cash)						(187,867	)
Restructuring charges						(1,953	)
	Total change		(119,837	)		(212,330	)
2007		$	910,634		$	(94,446	)

(1)

Includes product, customer and equipment mix.

(2)

See "Factors Affecting Comparability" section.

(3)

Primarily related to increases in ink and labor costs offset by declines in freight costs and contract services.

(4)

Primarily related to increased staffing, maintenance and travel and entertainment expense.

(5)

Primarily related to increased staffing, professional fees and travel and entertainment expense offset by a decline in telecommunications costs.

        Advertising Inserts revenue decreased $119.8 million, or 11.6%, in the year ended December 31, 2007 as compared to 2006 and EBITDA decreased $212.3 million in the same period. The decline in Advertising Inserts volume is indicative of the trend by marketers toward multi-channel advertising campaigns, which leverage more than one type of medium in addition to advertising inserts as a means to expand their advertising coverage. In addition, 2007 volume, most notably in the first quarter, was negatively impacted by less than optimal execution of certain 2006 cost reductions, reorganizations and order management changes, all resulting in certain customers seeking alternative suppliers, which was disclosed in previous filings.

        With respect to price and mix, excess industry capacity continues to cause overall price pressure in 2007, as compared to 2006. However, the decline in price is more than offset by normal changes in product and customer mix.

        The decrease in EBITDA of $212.3 million is primarily made up of the $187.9 million non-cash impairment charge. The remaining decline in EBITDA of $24.4 million was made up of the volume shortfall noted above, offset by favorable price and mix as well as increased expenses. Generally, the year-to-date cost increases noted in the table above are the result of the overall company wide investment in lean and continuous improvement aimed at improved productivity and performance as well as upgrading our quality and customer service in an effort to grow our revenue. Additionally, we have added resources to our sales organization with a focus on improved new business capture.

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Direct Mail

		Year ended December 31, 2007
		Revenue			EBITDA
		(in thousands)
2006		$	330,794		$	36,565
Increase (decrease):
Volume			28,714			11,406
Price/Mix(1)			(7,646	)		(7,646	)
Paper(2)			2,770
Variable Costs, rate adjusted(3)						4,053
Fixed Costs(4)						(5,160	)
Selling, general and Administrative(5)						(2,314	)
Goodwill impairment (non-cash)						(54,588	)
Restructuring charges						367
Other(6)			6,226			(2,533	)
	Total change		30,064			(56,415	)
2007		$	360,858		$	(19,850	)

(1)

Includes product, customer and equipment mix.

(2)

See "Factors Affecting Comparability" section.

(3)

Primarily related to improved labor efficiencies and cost containment, improved freight margins, and declines in maintenance expense.

(4)

Primarily related to increases in rent expense, staffing costs, consulting expenses and telecommunications costs.

(5)

Primarily related to an increase in staffing costs, consulting fees and insurance.

(6)

Includes the change in revenue and EBITDA for USA Direct and our fulfillment and other businesses.

        Direct Mail revenue increased $30.1 million, or 9.1%, in the year ended December 31, 2007 as compared to 2006. EBITDA declined $56.4 million, or 5.0%, in 2007 as compared to 2006. The 2006 Direct Mail revenue and EBITDA amounts include the operations of USA Direct from the date of acquisition, which was May 31, 2006. The increase in Direct Mail volume of $28.7 million was driven by strength at our Chalfont facility, which produces highly-customized personalized direct mail pieces, and higher non-personalized pieces at our North Brunswick facility. This growth was offset by lower program work within our digital print business and sales reduction from the shut-down of our Rochester facility.

        The decrease in EBITDA of $56.4 million is primarily made up of the $54.6 million non-cash impairment charge. The remaining decline in EBITDA of $1.8 million was made up of increases in fixed costs, selling, general and administrative expenses, and the decline in price and mix somewhat offset by the increase in volume and lower variable costs.

Corporate and Other

        Corporate and Other revenue decreased $17.0 million, or 14.7%, for the year ended December 31, 2007 compared to 2006. Premedia and Media Services accounted for $6.9 million and $5.5 million of the decline, respectively. The EBITDA loss at Corporate and Other for the year ended December 31, 2007 increased by $7.4 million, or 59.3%, compared to 2006. This change is largely due to a $4.0 million non-cash goodwill impairment charge recorded in the fourth quarter of 2007 as well as the

26

decline in Premedia and Media Services revenue, discussed above. as Additionally, labor costs and selling, general and administrative expenses increased offset by declines in contract services and restructuring costs.

Results of Operations—2006 compared to 2005

Revenue

        For the year ended December 31, 2006, our consolidated revenue decreased $1.4 million, or 0.1%, from $1,470.1 million in 2005 to $1,468.7 million in 2006.

Operating Expenses

        For the year ended December 31, 2006, our consolidated costs of production increased $19.8 million, or 1.7%, from $1,140.6 million in 2005 to $1,160.4 million in 2006. Included within these cost variances are $16.9 million of USA Direct costs of production, which are included in the Company's 2006 results. The balance of the change in costs of production is attributable to increases in the cost of paper, other materials consumed, contract services, repairs and maintenance, freight expense, property taxes and other supplies used in the production process, offset by decreases in labor costs and rent expense. The remainder of the change is due to fluctuations in various miscellaneous costs of production.

        Selling, general and administrative expenses decreased $6.5 million, or 4.4%, for the year ended December 31, 2006, from $149.4 million in 2005 to $142.9 million in 2006. Included within these cost variances are $2.7 million of USA Direct costs, which are included in the Company's 2006 results. The balance of the decrease is due to lower staffing, telecommunications costs and rent expense offset by increases in professional and consulting fees, travel and entertainment expenses, repairs and maintenance, contract services and sales and property taxes. The remainder of the change is due to fluctuations in various miscellaneous selling and general and administrative expenses.

        Restructuring charges for the year ended December 31, 2006 totaled $16.0 million as compared to $17.1 million in 2005. See the "Restructuring" section for a detailed discussion of restructuring charges.

Interest and Other Expenses (Income)

        Interest expense, net increased $2.2 million, or 1.7%, for the year ended December 31, 2006, from $128.8 million in 2005 to $131.0 million in 2006. This increase was due to a higher revolver balance and slightly higher interest rates on the revolver in 2006.

        Other, net decreased $0.4 million, or 5.2%, for the year ended December 31, 2006 from $7.7 million in 2005 to $7.3 million in 2006. This increase is primarily due to a $1.4 million increase in fees associated with our trade receivables facility (see "Off-Balance Sheet Arrangements" section). For a more detailed discussion of the other miscellaneous components of Other, net see Note 18 to our consolidated financial statements included in this Annual Report.

Loss from continuing operations before cumulative effect of accounting change

        Loss from continuing operations before cumulative effect of accounting change was $47.8 million for the year ended December 31, 2006, an increase of $19.6 million compared to a loss of $28.2 million for the year ended December 31, 2005. Included in the 2005 loss is an $8.3 million income tax benefit related to an agreement with the Internal Revenue Service to settle a tax liability relating to the termination of leasehold interests discussed in the "Sources of Funds" section (see also the "Other Factors" section below). Excluding this item, loss from continuing operations before cumulative effect of accounting change increased $27.9 million as compared to 2005. This decrease reflects the aforementioned changes in revenue and costs. See also "Segment Performance" below.

27

Segment Performance

        Set forth below is a discussion of the performance of our business segments based on revenue and EBITDA, which is the measure reported to our chief operating decision maker for the purpose of making decisions about allocating resources to the segment and assessing performance of the segment. A tabular reconciliation of segment EBITDA to income (loss) from continuing operations before cumulative effect of accounting change, in accordance with Financial Accounting Standards Board ("FASB") Statement No. 131, "Disclosure about Segments of an Enterprise and Related Information", is contained in Note 21 to our consolidated financial statements included elsewhere in this Annual Report.

Advertising Inserts

		Year ended December 31, 2006
		Revenue			EBITDA
		(in thousands)
2005		$	1,048,417		$	125,294
Increase (decrease):
Volume			(12,738	)		(6,222	)
Price/Mix(1)			(9,066	)		(9,066	)
Paper(2)			3,858
Variable costs, rate adjusted(3)						(2,123	)
Fixed costs(4)						1,341
Selling, general and administrative(5)						6,593
Restructuring charges						2,067
	Total change		(17,946	)		(7,410	)
2006		$	1,030,471		$	117,884

(1)

Includes product, customer and equipment mix.

(2)

See "Factors Affecting Comparability" section.

(3)

Primarily related to increased freight costs and increased cost of production supplies offset by a decline in labor costs.

(4)

Primarily related to decreased staffing costs offset by increased maintenance costs.

(5)

Primarily related to decreased staffing costs.

        Advertising Inserts revenue decreased $17.9 million, or 1.7%, from $1,048.4 million for the year ended December 31, 2005 to $1,030.5 million for the year ended December 31, 2006. Inserts EBITDA decreased $7.4 million, or 5.9% when comparing EBITDA of $117.9 million for the year ended December 31, 2006 to $125.3 million for the same period in 2005. The Advertising Insert business in general has been impacted by excess industry capacity causing industry-wide price pressure and intense competition for volume. Marketers have trended toward multi-channel advertising campaigns, which leverage more than one type of medium in addition to advertising inserts to expand their coverage. There has also been consolidation in end-user groups who traditionally use advertising inserts to convey their messages.

        The decline in revenue in Advertising Inserts reflects the continued price pressure, intense competition for volume, and changes in product type. The revenue decline was generally broad-based and impacted both the retail and the newspaper and publishing end-user groups. These two major end-user groups represented approximately 85% and 13%, respectively, of total Advertising Inserts revenue.

28

        The challenging conditions in Advertising Inserts, specifically the industry-wide dynamics around price and mix as well as the intense competitive pressure to maintain and grow sales volume, are expected to continue in the near-term.

Direct Mail

		Year ended December 31, 2006
		Revenue		EBITDA
		(in thousands)
2005		$	293,814	$	36,652
Increase (decrease):
Volume			159		(91	)
Price/Mix(1)			10,187		10,187
Paper(2)			1,361
Variable costs, rate adjusted(3)					(8,259	)
Fixed costs(4)					(3,535	)
Selling, general and administrative(5)					2,262
Restructuring charges(6)					228
Other			25,273		(879	)
	Total change		36,980		(87	)
2006		$	330,794	$	36,565

(1)

Includes product, customer and equipment mix.

(2)

See "Factors Affecting Comparability" section.

(3)

Primarily related to increased costs related to materials used in production, freight and utilities, partially offset by lower direct labor costs.

(4)

Primarily related to increased staffing, maintenance costs and rent expense.

(5)

Primarily related to decreased staffing costs offset by increases in professional fees and contract services.

(6)

Principally the decline in EBITDA for our fulfillment and other businesses.

29

        Direct Mail revenue increased $37.0 million, or 12.6%, from $293.8 million for the year ended December 31, 2005 to $330.8 million for the year ended December 31, 2006. Direct Mail EBITDA remained relatively flat when comparing EBITDA for the year ended December 31, 2006 to 2005. The year-over-year increase in Direct Mail revenue includes $20.1 million for USA Direct which was acquired in May 2006. (See Note 6 to our consolidated financial statements for further discussion of this acquisition.) The balance of the increase in revenue, approximately $16.9 million, reflects increased volume albeit at lower margins, as well as an increase in price and mix, of which greater than 100% was the result of a change in product mix which necessitated an increase in contract services. As such, the increase in revenue from price and mix did not result in an increase in EBITDA as contract services are largely a pass-through.

        Corporate and Other revenue decreased $22.8 million, or 16.4%, from $138.7 million for the year ended December 31, 2005 to $115.9 million for the year ended December 31, 2006. Premedia accounted for $24.2 million of the decline in revenue in 2006, offset by a $2.5 million increase in Media Services revenue.

Liquidity and Capital Resources

Sources of Funds

        We fund our operations, acquisitions and investments with internally generated funds, revolving credit facility borrowings, sales of accounts receivable and issuances of debt.

        The Company will not have sufficient liquidity to make the principal payment on the Credit Facility at the maturity date unless we are able to refinance or replace our existing indebtedness. Our ability to continue as a going concern beyond the Credit Facility maturity date is dependent upon our ability to refinance the Credit Facility, as well as the A/R Facility (as defined in "Off-Balance Sheet Arrangements"), which also expires in December 2008, or obtain alternate financing. We have initiated conversations with our debtholders to explore restructuring opportunities and have retained consultants to help us effectuate a restructuring plan, should we choose to do so. We are exploring several other financing alternatives in addition to amending our senior credit facility and our accounts receivable securitization facility, however, we cannot assure you that we will be able to amend these facilities or successfully obtain alternative financing. The refinancing of these facilities will likely require an agreement with our noteholders, as described below. As part of the Company's strategy to preserve and enhance near-term liquidity, we may elect to forego making the $17.1 million interest payment on our 9³/4% senior secured second lien notes due on April 1, 2008. Under the terms of the indenture governing these notes, we have a thirty-day grace period in which to make this interest payment before it would be an event of default. If we elect not to make the interest payments, we will be seeking a waiver from the holders of the notes; to the extent waivers are not received and the interest payments are not made within a thirty-day grace period, it will be an event of default under the indenture. Additionally, our independent auditors have included an explanatory paragraph in their report expressing substantial doubt about our ability to continue as a going concern.

        We have engaged in discussions with our debtholders to restructure our outstanding indebtedness and our lenders regarding amendments to or replacements of the Credit Facility and the A/R Facility, but we have not received any assurance that they will be able to amend these facilities upon reasonable terms, or at all. Additionally, we are exploring other alternatives including taking advantage of industry consolidation opportunities, such as an acquisition or a merger; seeking to exchange some or all of our 9³/4% senior secured second lien notes, 10⁷/8% senior notes or 13¹/2% senior subordinated notes; or proposing a stand-alone restructuring to the holders of the aforementioned notes. We currently have no plans for asset sales other than excess real estate or in the normal course of business, nor do we foresee any potential discontinued operations.

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        Additional items that could impact our liquidity are described below.

Contractual Obligations

        The following table discloses aggregate information about our contractual obligations as of December 31, 2007 and the periods in which payments are due:

Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		After 5 years		Other
	(In thousands)
Long-term debt	$	1,158,949	$	165,454	$	993,495
Interest payments(1)		189,308		125,911		63,397
Operating leases		94,147		24,742		37,532	$	25,567	$	6,306
Restructuring payments(2)		2,466		2,183		283
Pension payments(3)		20,412		2,343		4,536		4,393		9,140
Deferred compensation(4)		3,413		2,812							$	601
Income tax contingencies(5)		1,766										1,766
Total contractual cash obligations	$	1,470,461	$	323,445	$	1,099,243	$	29,960	$	15,446	$	2,367

(1)

Interest payments include an estimate of interest owed under our Credit Facility, for which the interest rates fluctuate. The balance of the Credit Facility at December 31, 2007, consisted of a $115.5 million revolving credit facility and a $50.0 million term loan. The interest payments under the Credit Facility were calculated using the weighted-average interest rate at December 31, 2007, which was 8.1% on the revolving credit facility and 9.5% on the term loan. For further discussion, see Note 11 to the condensed consolidated financial statements included in this Annual Report.

(2)

Restructuring payments exclude lease payments associated with facilities exited under a restructuring plan as these costs are included in the Operating lease amounts above.

(3)

Pension amounts represent the estimated future benefit payments under our non-qualified defined benefit plan and estimated contributions related to our qualified defined benefit plans.

(4)

In the first two months of 2008, we have made payments of $2.8 million to employees who participate in our compensation deferral program (see "Retirement and Other Benefits" included in Item 11 elsewhere in this Annual Report for further discussion of our compensation deferral program). The timing of payments for the remainder of our obligation under the deferred compensation plan at December 31, 2007, $0.6 million, cannot be reasonably estimated and therefore is reflected in the Other column.

(5)

The timing of future cash flows from income tax contingencies cannot be reasonably estimated therefore they are reflected in the Other column. See Note 13 to our condensed consolidated financial statements for further discussion of these contingencies

        As of December 31, 2007, we do not have any contracts requiring us to purchase any specified minimum quantities. Therefore, we do not have any purchase obligations that require disclosure in the table above.

        On August 17, 2006, the Pension Protection Act (the "Act") was signed into law. The Act requires that all single employer defined benefit plans are to be fully funded within a seven-year period, beginning in 2008. The Act replaces the prior funding rules with rules based on a plan's funded status. As of December 31, 2007, the Company's defined benefit plans are underfunded. Under the funding rules set forth by the Act, our contributions are expected to be fairly level beginning in 2008 through 2015, at which time we expect our qualified defined benefit plans will be fully funded. We estimate the amount of expected contributions under the Act to be approximately $1.0 million per year for our qualified defined benefit plans.

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Debt Financing

        Our Credit Facility provides for availability of $250 million until the December 22, 2008 maturity date. Under the amended Credit Facility, up to $200 million consists of a revolving credit facility and the remaining $50 million represents a fully drawn term loan.

        At December 31, 2007, the maximum availability under the revolving credit facility is limited to a borrowing base calculated as follows: 85% of our eligible receivables; 65% of the net amount of eligible raw materials, finished goods, maintenance parts, unbilled receivables and the residual interest in our $130 million trade receivables securitization (see Note 7); the lesser of 55% of the book value of eligible machinery and equipment at owned locations or 100% of the orderly liquidation value-in-place (as defined in the credit agreement); the lesser of 55% of the book value of eligible machinery and equipment at leased locations or 100% of the net orderly liquidation value (as defined in the credit agreement) and 80% of the fair market value of owned real estate. The eligibility of such assets included in the calculation is set forth in the credit agreement. At December 31, 2007, our borrowing base was calculated to be $184.8 million. We had approximately $52.6 million available to borrow under the revolving credit facility and $6.2 million cash on hand at December 31, 2007.

        The Credit Facility requires us to maintain Compliance EBITDA of $125 million on a trailing twelve-month basis as set forth by the March 2007 amendment to the Credit Facility. At December 31, 2007, our trailing twelve-month Compliance EBITDA as calculated under the credit agreement was $131.9 million. If the Company is unable to maintain this minimum Compliance EBITDA amount, the bank lenders could require the Company to repay any amounts owing under the Credit Facility. In addition, as is customary in asset-based agreements, there is a provision for the agent, in its reasonable credit judgment, to establish reserves against availability based on a change in circumstances. The agent's right to alter existing reserves requires written consent from the borrowers when Compliance EBITDA is in excess of $180 million on a rolling twelve fiscal month basis. The agent is not required to obtain written consent when Compliance EBITDA on a rolling twelve fiscal month basis is less than $180 million. There were no reserves established by the agent that would impair our ability to borrow from our senior credit facility in 2007.

        Our Credit Facility, which matures on December 22, 2008, the outstanding 9³/4% notes due April 1, 2009, the outstanding 10⁷/8% notes due June 15, 2009, and the outstanding 13¹/2% senior subordinated notes due December 7, 2009 all contain customary covenants. In addition, the Credit Facility requires us to maintain Compliance EBITDA as set forth under the credit agreement. The Compliance EBITDA covenant at December 31, 2007 is $125 million on a trailing twelve-month basis. If we are unable to maintain this minimum Compliance EBITDA amount, the bank lenders could require us to repay any amounts owing under the Credit Facility. At December 31, 2007, we were in compliance with our debt covenants. While we currently expect to be in compliance in future periods, there can be no assurance that our financial covenants will continue to be met. Based upon the latest projections for 2008, including actual results for January and February, we believe we will be in compliance through the maturity date of the Credit Facility. For further information on our long-term debt, see Note 11 to the consolidated financial statements included elsewhere in this Annual Report.

Off-Balance Sheet Arrangements

        We are party to a three-year agreement, terminating in December 2008 (the "A/R Facility"), to sell substantially all trade accounts receivable generated by our subsidiaries through the issuance of $130 million variable rate trade receivable backed notes.

        Under the A/R Facility, we sell our trade accounts receivable through a bankruptcy-remote wholly-owned subsidiary. However, we maintain an interest in the receivables and have been contracted to service the accounts receivable. We received cash proceeds for servicing of $1.2 million and in both 2007 and 2006, respectively. These proceeds are fully offset by servicing costs.

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        The A/R Facility allows for a maximum of $130.0 million of trade accounts receivable to be advanced at any time based on the level of eligible receivables and limited to a borrowing base linked to net receivables balances and collections. Additional deductions may be made if we fail to maintain a consolidated Compliance EBITDA of at least $180 million for any rolling four fiscal quarter period. In addition, the A/R Facility includes certain targets related to its receivables collections and credit experience including a minimum Compliance EBITDA of $160 million, amended to $125 million effective March 2007 (see "Sources of Funds" for further discussion). There are also covenants customary for facilities of this type including requirements related to the characterization of receivables transactions, credit and collection policies, deposits of collections, maintenance by each party of its separate corporate identity including maintenance of separate records, books, assets and liabilities and disclosures about the transactions in the financial statements of Vertis Holdings and its consolidated subsidiaries. Failure to meet the targets or the covenants could lead to an acceleration of the obligations under the A/R Facility or the sale of assets securing the A/R Facility. As of December 31, 2007, we are in compliance with all targets and covenants under the A/R Facility.

        At December 31, 2007 and 2006, we sold accounts receivable in excess of the $130.0 million A/R Facility and as such $130 million was reflected as a reduction of accounts receivable. At December 31, 2007 and 2006, we retained an interest in the pool of receivables in the form of overcollateralization and cash reserve accounts of $38.6 million and $92.3 million, respectively, under the A/R Facility, which is included in Accounts receivable, net on the consolidated balance sheet at allocated cost, which approximates fair value. The proceeds from collections reinvested in securitizations amounted to $1,664.2 million and $1,680.3 million in 2007 and 2006, respectively.

        Fees for the program vary based on the amount of interests sold and the London Inter Bank Offered Rate ("LIBOR") plus an average margin of 50 basis points. We also pay an unused commitment fee of 37.5 basis points on the difference between $130 million and the amount of any advances. The loss on sale, which approximated the fees, totaled $6.8 million in 2007, $6.5 million in 2006 and $5.2 million in 2005, and is included in Other, net in the consolidated statement of operations included elsewhere in this Annual Report.

        We have no other off-balance sheet arrangements that may have a material current or future effect on financial condition, changes in financial condition, results of operations, liquidity, capital expenditures, capital resources or significant components of revenues or expenses.

Working Capital

        Our current liabilities exceeded current assets by $217.7 million at December 31, 2007 and by $40.5 million at December 31, 2006. This represents a decrease in working capital of $177.2 million for the year ended December 31, 2007. Included in the working capital calculation as of December 31, 2007, is $165.5 million, which represents the balance owed under our Credit Facility at December 31, 2007, which we have classified as current in the consolidated balance sheet included elsewhere in this Annual Report. This classification stems from the fact that the maturity date of the Credit Facility is December 22, 2008, and while we have begun discussions with our debtholders to restructure our outstanding indebtedness and our lenders regarding amendments to or replacements of the Credit Facility, we have not received any assurance that we will be able to do so. At December 31, 2006, the balance of our Credit Facility was classified as long-term and, as such, is not included as a component of working capital. The ratio of current assets to current liabilities as of December 31, 2007 was 0.43 to 1 compared to 0.85 to 1 as of December 31, 2006.

        In the year ended December 31, 2007, cash provided by working capital, adjusted for acquisitions and divestitures as well as the reclassification of our Credit Facility in 2007, was $10.1 million. This was an increase of $47.1 million compared to cash used for working capital in the year ended December 31, 2006. The 2007 increase was primarily driven by the timing of receivable collections, most notably in our Media Services business.

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Summary of Cash Flows

Cash Flows from Operating Activities

        Net cash provided by continuing operating activities in 2007 increased by $4.5 million from the 2006 level. This increase is primarily the result of changes in the timing of the settlement of payables and collection of receivables.

        Net cash provided by continuing operating activities in 2006 increased by $7.4 million from the 2005 level. This increase is primarily the result of changes in the timing of the settlement of payables and collection of receivables.

Cash Flows from Investing Activities

        Net cash used in investing activities in 2007 increased by $25.0 million from the 2006 level, primarily due to a $16.2 million increase in capital expenditures related to a focus by management in 2007 to re-invest in the business. Offsetting this use of cash in 2007, is $10.7 million in proceeds received, net of fees and letters of credit, from the sale of three Direct Mail facilities, which we subsequently leased back (see Note 12 to our financial statements included elsewhere within this Annual Report). Additionally, net cash used in investing activities fluctuated due to the $41.1 million in proceeds received in 2006 related to the sale of our fragrance business. We received the remaining $1.0 million in proceeds from the sale of our fragrance business in 2008, when the funds were released from escrow.

        Net cash used in investing activities in 2006 decreased by $15.6 million from the 2005 level, primarily due to the $41.1 million in proceeds received in 2006 related to the sale of our fragrance business. Offsetting these proceeds were $21.0 million of expenditures related to the acquisition of USA Direct (see Note 6 to our financial statements included elsewhere within this Annual Report) and a $6.8 million increase in capital expenditures. Additionally, impacting the change in cash used for investing activities is a $1.5 million decrease associated with investing activities of our discontinued operations. Our European segment, which was sold in 2005, had $1.5 million of cash used for investing activities in 2005. There were no investing activities associated with our fragrance business, which was sold in 2006. See the "Discontinued Operations" section for further discussion on these transactions.

Cash Flows from Financing Activities

        In 2007, net cash provided by financing activities increased by $15.7 million from the 2006 level. The majority of this change relates to an $11.1 million increase in funding under our Credit Facility which reflects the relative levels of cash provided by operating activities and capital expenditures in each respective year. Additionally, $7.5 million relates to a fluctuation in the amount of outstanding checks drawn on controlled disbursement accounts which is primarily due to timing differences.

        In 2006, net cash provided by financing activities in 2006 decreased by $19.0 million from the 2005 level. The majority of this change relates to a $36.8 million fluctuation in the amount of outstanding checks drawn on controlled disbursement accounts which is primarily due to timing differences. Offsetting this change is a $20.3 million fluctuation in funding under our Credit Facility. Additionally, financing activities of our discontinued operations contributed $1.6 million of this fluctuation.

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Tax Matters

        At the end of 2007 our federal net operating loss carryforwards were $323.9 million. The carryforwards expire beginning in 2010 through 2027. The U.S. capital loss carryforward was $100.4 million as of December 31, 2007 and expires in 2011.

        Our valuation allowance related to our deferred tax asset, which was $128.6 million at the beginning of 2007, was increased by $68.8 million to $197.4 million at the end of 2007. The valuation allowance reserves all deferred tax assets that will not be offset by reversing taxable temporary differences. This treatment is required under SFAS No. 109, "Accounting for Income Taxes", when in the judgment of management, it is not more likely than not that sufficient taxable income will be generated in the future to realize the deductible temporary differences. Our deferred tax assets and tax carryforwards remain available to offset taxable income in future years, thereby lowering any future cash tax obligations. We intend to maintain a valuation allowance until sufficient positive evidence exists to support its reversal.

        On August 30, 2005, we reached a tentative settlement agreement with the IRS resolving disputes over the tax deductibility of net losses relating to the five leasehold interests in real estate properties that we entered into in 1998. On January 23, 2006, we signed a closing agreement with the IRS. The closing agreement received final approval from the Congressional Joint Committee on Taxation on May 16, 2006.

        As a result of the 2005 settlement agreement with the IRS, we reduced our tax reserves related to the IRS examination from $10.3 million to $2.0 million. The reduction resulted in an $8.3 million tax benefit in 2005. During 2006, the Company paid $1.1 million and received refunds of $0.2 million in settlement.

        In the fourth quarter of 2005, we sold the stock of our Europe direct mail subsidiary which generated a capital loss carryforward in the U.S. of $137.0 million. Also in the fourth quarter, our Europe premedia subsidiary sold the stock of its subsidiaries generating a U.K. capital loss carryforward of $29.0 million. The U.S. capital loss carryforward expires in 2011. The U.K. capital loss can be carried forward indefinitely.

New Accounting Pronouncements

        In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS 157"). SFAS 157 establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS 157 clarifies the principle that fair value should be based on the assumption market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. This Statement is effective for fiscal years beginning after November 15, 2007. We do not expect the adoption of this Statement to have a material impact on our results of operations or financial position.

        In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS 159"). SFAS 159 permits entities to choose to measure eligible items at fair value at specified election dates. If an entity chooses this practice, it shall report unrealized gains and losses on the items for which the fair value option has been elected at each subsequent reporting date. The fair value option may be elected for a single eligible item without electing it for other identical items, with certain exceptions specified in the Statement. Additional disclosures are required for an entity that chooses to elect the fair value option. The provisions of this Statement are effective for us on January 1, 2008. Early adoption is permitted under certain circumstances as specified in this Statement. We do not expect the adoption of this Statement to have a material impact on our results of operations or financial position.

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        In December 2007, the FASB issued SFAS No. 141(R), "Business Combinations" ("SFAS 141R"). SFAS 141R retains the fundamental requirements of SFAS No. 141 that the acquisition method of accounting, previously referred to as the purchase method, be used for all business combinations and for an acquirer to be identified for each business combination. SFAS 141R defines the acquirer, and requires that they recognize the assets acquired, liabilities assumed and any non-controlling interest in the acquiree at fair value as of the acquisition date. SFAS 141R requires an acquirer to recognize acquisition-related costs and anticipated restructuring costs separately from the business combination. Additionally, SFAS 141R requires an acquirer to recognize assets acquired and liabilities assumed arising from contractual contingencies as of the acquisition date, measured at their acquisition date fair value. The provisions of this Statement are effective for us on January 1, 2009. Early adoption is not permitted. We are not able to assess at this time the future impact of this Statement on our consolidated financial position or results of operations, however if we do not enter into an acquisition in the future, then there is no impact on us related to the provisions of this Statement.

        In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51" ("SFAS 160"). SFAS 160 amends Accounting Research Bulletin 51 to establish accounting and reporting standards for the noncontrolling interest, or minority interest, in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as a component of equity in the consolidated financial statements. SFAS 160 requires consolidated net income be reported to include the amounts attributable to both the parent and the noncontrolling interest. Disclosure of the amounts of consolidated net income attributable to the parent and to the noncontrolling interest is required on the face of the consolidated statement of income. Additionally, SFAS 160 establishes a single method of accounting for changes in a parent's ownership interest in a subsidiary that do not result in deconsolidation and requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated. The provisions of this statement are effective for fiscal years beginning after December 15, 2008. Early adoption is not permitted. We do not expect the adoption of this Statement to have a material impact on our results of operations or financial position.

Application of Critical Accounting Policies

        Our significant accounting policies are described in Note 3 to our consolidated financial statements included in this Annual Report. Several accounting policies require the application of significant judgment by management in selecting the appropriate assumptions for calculating financial estimates. By their nature, these judgments are subject to an inherent degree of uncertainty. We base our estimates and judgments on historical experience, terms of existing contracts, observance of trends in the industry, information provided by customers and outside sources and various other assumptions that we believe to be reasonable under the circumstances. Significant accounting policies that we believe involve the application of significant judgment and discretion by management and are therefore "critical" accounting policies include:

Revenue Recognition

        We provide a wide variety of print and print related services and products for specific customers, primarily under contract. Revenue is not recognized until the earnings process has been completed in accordance with the terms of the contracts. Print revenue is recognized when the product is shipped. Revenue from premedia operations is recognized upon the completion of orders. Unbilled receivables are recorded for completed services or products which remain unbilled as of the period end.

        In 2005, we revised our revenue recognition policy. Under the new policy, revenue for printed materials is recognized when the product is shipped. Previously, revenue was recorded when these materials were completed and off press. This revision resulted in a $12.7 million decrease in revenue

36

and a $2.9 million decrease in net income for the year ended December 31, 2005. We charge customers for shipping and handling charges. The amounts billed to customers are recorded as revenue and actual charges paid by us are included in costs of production in the consolidated statements of operations.

        We bill our customers for sales tax calculated on each sales invoice and record a liability for the sales tax payable, which is included in other current liabilities on our consolidated balance sheet included elsewhere in this Annual Report. Sales tax billed to a customer is not included in our revenue.

Provision for Doubtful Accounts

        We maintain allowances for doubtful accounts for estimated losses resulting from the failure of our customers to make payments. Our estimates are based on historical trends and specific customer risks on a customer-by-customer basis. If actual customer payments are less than our estimates, we would need to increase the allowance for doubtful accounts, which would adversely affect our results of operations. Amounts are charged against the allowance for doubtful accounts reserve when deemed uncollectible. See the Financial Statement Schedule, which accompanies the financial statements included elsewhere in this Annual Report, for a history of our charges to the allowance for doubtful accounts and write-offs taken over the three-year period ended December 31, 2007.

Inventory

        We maintain a reserve against certain raw materials that due to age have become obsolete, principally paper and ink. The reserve reduces the cost basis to approximately scrap value unless specific jobs can be identified to use these materials.

Long-lived Assets

        We evaluate the recoverability of our long-lived assets, including property, plant and equipment and intangible assets, when there are changes in economic circumstances or business objectives that indicate the carrying value may not be recoverable. Our evaluations include estimated future cash flows, profitability and estimated future operating results and other factors determining fair value. As these assumptions and estimates may change over time, it may or may not be necessary to record impairment charges.

        Our goodwill is tested for impairment on an annual basis at January 1 of each year or if events occur or circumstances change that would likely cause the fair value of goodwill to be below the carrying value. Each of the our reporting units is tested for impairment by comparing the fair value of the reporting unit with the carrying value of that unit. Fair value is determined based on a valuation study we perform using the discounted cash flow method and the guideline company approach to estimate the fair values of our reporting units.

        Depreciation on property, plant and equipment is computed using the straight-line method over the assets' estimated useful lives, or when applicable, the terms of the leases, if shorter. Amortization of capitalized software development costs is recorded based on a useful like of one to five years beginning at the respective release date. Intangible assets other than goodwill, which include trademarks, a customer base and a non-compete agreement, are amortized over the terms of the related agreements or life of the intangible asset. Deferred financing costs are amortized over the terms of the related financing instruments.

Income Taxes

        We record a valuation allowance to reduce our deferred tax assets to the amount that we believe is more likely than not to be realized. We estimate future taxable income in assessing the need for the valuation allowance. In the event we determine that we would not be able to realize all or part of our

37

net deferred tax assets in the future, an adjustment to the deferred tax assets would be charged to income in the period such determination was made. Likewise, should we determine that we would be able to realize our deferred tax assets in the future in excess of our net recorded amount, an adjustment to the deferred tax assets would increase income in the period that determination was made

Defined Benefit Pension Plans

        Accounting for defined benefit pension plans requires various assumptions, including, but not limited to discount rates, expected rates of return on plan assets and future compensation rates. We evaluate these assumptions at least once each year and make changes as conditions warrant. Changes to these assumptions will increase or decrease our reported income, which will result in changes to the recorded benefit plan assets and liabilities.

        We determined the discount rates using a measurement date of December 31, 2007. The weighted average discount rate assumed in 2007 was 5.75%. We developed our expected long-term rate of return assumption based on historical experience and by evaluating input from the trustee managing the plans' assets. Our expected long-term rate of return on plan assets is based on a target allocation of assets as follows: 60% for equity and 40% for fixed income securities. We assumed returns of 9%-11% for the equity securities and 6.5% for fixed income securities.

Restructuring Charges

        We evaluate our restructuring charges upon a decision to change business strategy, corporate structure or the way we operate in order to improve future operations. Our typical restructuring charges include severance, facility closure costs, including obligations under facility leases, and asset disposals and impairments, all of which require assumptions in building estimates. As amounts of severance required, assumptions on sublease income and proceeds for assets to be disposed of may change over time, it may or may not be necessary to record additional restructuring charges.

Item 7A.    QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

Qualitative Information

        Our primary exposure to market risks relates to interest rate fluctuations on variable rate debt, which bears interest at the LIBOR rate.

        The objective of our risk management program is to seek a reduction in the potential negative earnings effects from changes in interest rates. To meet this objective, consistent with past practices, we intend to vary the proportions of fixed-rate and variable-rate debt based on our perception of interest rate trends and the marketplace for various debt instruments. We currently do not have any derivatives.

Quantitative Information

        At December 31, 2007, 14.3% of our long-term debt held a variable interest rate.

        Based on a hypothetical 10% increase in interest rates, the expected effect related to variable-rate debt would be to increase net loss for the twelve months ended December 31, 2007 by approximately $2.0 million.

        For the purpose of sensitivity analysis, we assumed the same percentage change for all variable-rate debt and held all factors constant. The sensitivity analysis is limited in that it is based on balances outstanding at December 31, 2007 and does not provide for changes in borrowings that may occur in the future.

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ITEM 8    FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

        Reference is made to the Index to the consolidated financial statements and schedule on Page F-1 for our consolidated financial statements and notes thereto and supplementary schedule.

ITEM 9    CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

        None.

ITEM 9A    CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

        Our management, including our principal executive and principal financial officers, has evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2007. Our disclosure controls and procedures are designed to provide reasonable assurance that the information required to be disclosed in this Annual Report on Form 10-K has been appropriately recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our principal executive and principal financial officers, to allow timely decisions regarding required disclosure. Based on that evaluation, our principal executive and principal financial officers have concluded that our disclosure controls and procedures are effective at the reasonable assurance level.

Management's Annual Report on Internal Control over Financial Reporting

        The Company's management is responsible for establishing and maintaining adequate internal controls over financial reporting. The Company's internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation and fair presentation of published financial statements in accordance with GAAP and includes those policies and procedures that:

•

pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of its assets;



•

provide reasonable assurance that transactions are recorded as necessary to permit preparation of its financial statements in accordance with GAAP, and that its receipts and expenditures are being made only in accordance with authorizations of its management and directors; and



•

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on its financial statements.

        Internal control over financial reporting may not prevent or detect misstatements due to its inherent limitations. Management's projections of any evaluation of the effectiveness of internal controls over financial reporting as to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

        The Company's management assessed the effectiveness of the Company's internal control over financial reporting as of December 31, 2007, and in making this assessment, used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework in accordance with the standards of the Public Company Accounting Oversight Board (United States).

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        The Company's management determined that as of December 31, 2007, the Company's internal controls over financial reporting were effective.

        This annual report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the company's registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the company to provide only management's report in this annual report.

Changes in Internal Control Over Financial Reporting

        No changes were made in our internal controls over financial reporting during the fourth quarter of the year ended December 31, 2007, that materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

ITEM 9B    OTHER INFORMATION

        None.

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PART III

ITEM 10    DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

        The following table sets forth certain information regarding the directors and executive officers of Vertis.

Name	Age	Positions
Michael T. DuBose	54	Chairman and Chief Executive Officer
Barry C. Kohn	52	Chief Financial Officer
Douglas L. Mann	44	Senior Vice President and General Manager—Advertising Inserts
Charles Miotke	54	President—Direct Marketing
Gary L. Sutula	63	Senior Vice President and General Manager—Premedia
John Colarossi	55	Senior Vice President and General Manager—Vertis Media
John V. Howard, Jr.	46	Chief Legal Officer and Secretary
Richard Guetzloff	49	Senior Vice President and Chief Information Officer
John T. Dillon	69	Director
Anthony J. DiNovi	45	Director
Soren L. Oberg	37	Director
Donald E. Roland	65	Director
Scott M. Sperling	50	Director

Michael T. DuBose was named Chairman and Chief Executive Officer of Vertis in November 2006. Prior to that he had served as senior advisor to Aurora Capital and chairman of Anthony International. Mr. DuBose served as chairman, president and chief executive officer of Aftermarket Technology Company from 1998 to 2005. Prior to his role at Aftermarket, Mr. DuBose was chairman and CEO of Grimes Aerospace Company. Mr. DuBose has also held executive positions at SAIC, General Instrument and General Electric Company.

Barry C. Kohn was named Chief Financial Officer of Vertis in May 2007. Prior to that, Mr. Kohn served as Chief Financial Officer of United Plastics Group from 2005 to 2006 and Aftermarket Technology Corporation from 1999 to 2004. Prior to his role at Aftermarket, Mr. Kohn held executive positions, including Chief Financial Officer at Grimes Aerospace Company.

Douglas L. Mann was named Senior Vice President and General Manager of the Advertising Inserts segment of Vertis in January 2007. Prior to that, Mr. Mann was employed by Gannett Company, Inc., where he served a dual role as president of Minneapolis Offset and group vice president of sales and marketing for the Gannett Offset Group. Prior to joining Gannett in 2001, Mr. Mann held various sales leadership positions at C2 Media, Ariston, and Reynolds & Reynolds.

Charles Miotke was named President of the Direct Marketing segment of Vertis in January 2008. Prior to that, Mr. Miotke served in senior leadership roles for over nineteen years for Quebecor World, Inc., including serving as vice president of global technology and president of U.S. magazine groups in the last five years. Prior to his time at Quebecor World, Inc., Mr. Miotke worked at Brown Printing Company for more than ten years.

Gary L. Sutula transitioned to the position of Senior Vice President and General Manager—Premedia in January 2008 from the Chief Information Officer position, which he had held since February 2005. Prior to joining Vertis, Mr. Sutula worked as an independent consultant from 2004 to 2005; served as Chief Operating Officer and Chief Information Officer of gLimit, Inc. from 2003 to 2004; and served as Corporate Senior Vice President and Chief Information Officer at R.R. Donnelley & Sons, Inc. from 1997 to 2003. Mr. Sutula has also served as Vice President and Chief Information Officer at Transamerica Financial Services and Senior Vice President and Chief Information Officer at American Savings Bank (Washington Mutual).

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John Colarossi was named Senior Vice President and General Manager of Vertis Media in January 2007. Prior to joining Vertis, Mr. Colarossi served as president of the aftermarket segment of Aftermarket Technology Corporation from January 2003 to October 2006 and as Chief Operating Officer at Cottman Transmission Systems LLC from February 2000 to November 2002. He has also held management positions at various other companies including Digihut.com and Moran Industries.

John V. Howard, Jr. was named Chief Legal Officer and Secretary of Vertis in February 2005. In January 2008, Mr. Howard assumed the leadership of the Company's technology business d/b/a the Digital Solutions Group in Boulder, Colorado. In July 2000, Mr. Howard was named Senior Vice President—General Counsel of Vertis, having served as general counsel of several Vertis subsidiaries beginning in 1998. Prior to joining Vertis, Mr. Howard was Counsel and Chief Intellectual Property Counsel for Andersen Worldwide, S.C. in Chicago, the parent entity of Arthur Andersen and Andersen Consulting, in charge of all worldwide intellectual property matters for the Andersen organization. Before leaving for Andersen he was Chief Counsel for Quark, Inc., in Denver, a developer of QuarkXPress, in charge of all worldwide legal matters.

Richard Guetzloff was named Senior Vice President and Chief Information Officer of Vertis in January 2008. From July 2005 to January 2008, Mr. Guetzloff served as Vice President of Infrastructure Services, Information Technology for Vertis. Prior to joining Vertis, Mr. Guetzloff served as Senior Director of Service Delivery at AB Electrolux beginning in 2004, as a special consultant to ProSoft Consulting, Inc. from 2003 to 2004 and as Senior Director of IT Infrastructure at R.R. Donnelley and Sons Company from 1999 to 2003. He has also held positions at U.S. Cellular Corporation and TDS Telecommunications Corporation.

John T. Dillon has been a director of Vertis and Vertis Holdings since April 2005. In March 2005, Mr. Dillon became Vice Chairman of Evercore Capital Partners, a private equity fund, and a Senior Managing Director of Evercore Partners, an advisory and investment firm. Prior to that, Mr. Dillon served as Chairman and chief executive officer of paper and forest products company International Paper from April 1996 until October 2003. Following his retirement, Mr. Dillon served, and continues to serve, as a director of Caterpillar Inc., Kellogg Co. and E.I. DuPont de Nemours, and currently sits on the board of two privately held companies. Mr. Dillon is a past Chairman of the Business Roundtable.

Anthony J. DiNovi has been a director of Vertis since March 2001 and Vertis Holdings since December 1999. Mr. DiNovi has been employed by Thomas H. Lee Partners, L.P. and its predecessor Thomas H. Lee Company since 1988 and currently serves as Co-President. Mr. DiNovi is currently a Director of American Media Operations, Inc., Dunkin' Brands, Inc., Michael Foods, Inc., Nortek, Inc., and West Corporation as well as various other private companies.

Soren L. Oberg has been a director of Vertis and Vertis Holdings since May 2001. Mr. Oberg has been employed by Thomas H. Lee Partners, L.P., and its predecessor Thomas H. Lee Company since 1993. From 1992 to 1993, Mr. Oberg worked at Morgan Stanley & Co., Inc. in the Merchant Banking Division. Mr. Oberg also serves on the boards of American Media Operations, Inc., Cumulus Media Partners, Grupo Corporativo Ono, S.A., West Corporation and several other private companies.

Donald E. Roland has served as a director of Vertis and Vertis Holdings since June 2000 and served as Chairman of the Board from April 2001 to November 2006. From March 2006 to November 2006 he served as non-executive Chairman of the Board of Directors. Mr. Roland was Chief Executive Officer of Vertis from June 2000 until February 2006. Prior to June 2000, Mr. Roland was the President beginning in October 1994 and, starting in June 1995, Chief Executive Officer of TC Advertising, a Vertis subsidiary. Mr. Roland joined TC Advertising in 1983 as Senior Vice President of Operations and became Executive Vice President in 1993. Prior to joining TC Advertising, he was at Times Mirror Press where he held numerous management positions including Director of Computer Graphics and Vice President of Operations. Mr. Roland also serves on the board of the University of Maryland,

42

Baltimore Foundation, as well as the advisory board of the School of Continuing and Professional Studies, Center for Graphic Communications Management & Technology at New York University, the board of directors of Hess Printing Solutions, and the Board of Trustees of the Hammond Harwood House Association.

Scott M. Sperling has been a director of Vertis since May 2001 and Vertis Holdings since December 1999. Mr. Sperling has been employed by Thomas H. Lee Partners, L.P. and its predecessor Thomas H. Lee Company since 1994 and currently serves as Co- President. Mr. Sperling is currently a Director of Thermo Fisher Scientific, Inc., Warner Music Group, ProSiebensat.1 Media AG, as well as several private companies.

        The term of office of each executive officer is until a successor is elected and qualified, or until that officer's resignation or removal.

        Each of our directors was elected to hold office until the next annual meeting of our stockholders and until his successor is elected and qualified and subject to his death, resignation, retirement, disqualification or removal.

Audit Committee and Audit Committee Financial Expert

        The Company has established a separate Audit Committee of the Board of Directors. The Company's Board of Directors has determined that it does not have an audit committee financial expert as defined under the regulations of the Securities and Exchange Commission serving on its Audit Committee, and it is not required to do so. Our Board of Directors believes that the current members of the Board of Directors have substantial investment and management experience and significant financial expertise, and as a consequence, are fully capable of discharging their responsibilities as members of the Company's Board of Directors notwithstanding that no current member of the Audit Committee is an "audit committee financial expert" as so defined.

Code of Ethics

        The Company has adopted a code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller and certain other senior financial personnel. The code of ethics can be viewed on our website at www.vertisinc.com.

ITEM 11    EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

        The following discussion relates to the compensation of Michael T. DuBose, Vertis' Chairman and Chief Executive Officer; Barry C. Kohn, Vertis' Chief Financial Officer; and the other most highly compensated executive officers of Vertis named in the Summary Compensation Table below (collectively, the "Named Executive Officers") who were employed by the Company at December 31, 2007.

Compensation Philosophy

        The general philosophy of the Company's executive compensation program is to attract and retain talented management while ensuring that the Named Executive Officers are compensated in a way that advances the interests of shareholders. To that end, the compensation program provides the Named Executive Officers with incentives to enhance the growth and profitability of the Company. The program is designed to reward both individual and collective achievement, with emphasis placed on year-over-year improvement, closely aligning the interests of management with the interests of shareholders. This is accomplished by emphasizing short-term reward opportunities, which are

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measured by annual EBITDA improvements and by each Named Executive Officer's individual accomplishments that support EBITDA growth.

Compensation Program Components

        The compensation of the Company's Named Executive Officers is comprised of the following primary elements:

•

base salary,

•

annual cash incentive awards,

•

discretionary cash bonuses,

•

equity based compensation,

•

retirement and other benefits,

•

perquisites and other personal benefits and

•

severance upon termination or change-in-control.

        Each of these components is designed to be consistent with the Company's compensation philosophy and to achieve the goals described above. The following is a discussion of each compensation component and the items considered when determining the level of each component to be provided to each of the Named Executive Officers. See the Summary Compensation Table for the amounts of compensation by component for each Named Executive Officer.

Base Salary

        In reviewing and approving the base salaries of the Named Executive Officers, the Company considers the terms of any employment contract with the executive; the recommendations of the Chief Executive Officer (except in the case of his own compensation, which is determined by the Board of Directors ("the Board")); a determination of what other companies might pay the executive for his or her services; the executive's experience; and a subjective assessment of the nature of the executive's performance and contribution to the Company. In 2004, the Company retained the services of an independent compensation consulting firm to benchmark key positions throughout the company. The survey conducted by the consulting firm considers such variables as geographic location, annual revenues for each business unit, and standard industry classification. Base pay levels for the Named Executive Officers are reviewed annually to ensure they remain competitive and appropriate within our industry and various geographic locations. The Company utilizes various independent survey sources when performing its review, comparing its current pay practices to the survey data. The predominant survey utilized in 2007 was the CompAnalyst survey tool which is published electronically. The survey tool allows data segmentation by industry classification, geographically, and by annual revenues.

Annual Cash Incentive Compensation

        In 2007, key management, including the Named Executive Officers, participated in the Management Incentive Compensation Plan (the "MICP"), formerly known as the Executive Incentive Plan, or EIP. The purpose of the MICP is to drive superior performance, ensure alignment between management and shareholder objectives and to provide a meaningful reward for exceptional results. In reviewing and approving the annual cash incentive compensation of the Named Executive Officers, the Board considers the overall Company performance as compared to the prior fiscal year, the Named Executive Officer's own performance as measured against their individual objectives and the extent to which the Company achieved its overall financial goals. Financial goals are based upon the Company's EBITDA. For certain of the Named Executive Officers, the goals may also have a component that is based upon a particular segment's EBITDA performance. If performance for the year is below minimum targeted Company EBITDA levels, no cash incentive is typically awarded. However, the Board may make exceptions in the case of extraordinary individual achievement. If the Company's or

44

the respective segment's targeted performance for the year is met or exceeded, each Named Executive Officer receives a formula-based payout. The formula is comprised of an individual performance factor, the Named Executive Officer's target bonus percentage of pay, and a factor reflecting the level of Company achievement against performance goals. The Chief Executive Officer establishes individual performance goals for each Named Executive Officer other than himself. The Board establishes the individual objectives for the Chief Executive Officer. All goals and awards are subject to review and approval by the Board.

        Under the MICP the target bonus for each Named Executive Officer, expressed as a percentage of base salary was 75% for Mr. DuBose and 50% for Messers. Kohn, Colatriano, Mann and Howard. Bonuses are paid at these targets if all plan goals, both individual and company, are achieved. Awards can rise to 200% of the target incentive if the Company exceeds its goals. No payments were made in 2007 or 2006 under the MICP due to the Company's failure to achieve targeted EBITDA goals. However, in 2007, the Board approved a discretionary bonus for a select group of management, including several Named Executive Officers. The Board approved the discretionary bonus in recognition of the aggressiveness of the 2007 financial goals, the tremendous effort involved in implementing the 2007 business strategy to achieve those goals, and the initial successes resulting from that effort. The discretionary bonuses paid to the Named Executive Officers represent 40% to 50% of their target MICP award. The Board also considered the fact that the Company's failure to pay bonuses for the past several years was affecting the Company's ability to retain and motivate current employees and also the Company's ability to attract new talent. The total amount spent on the discretionary bonus awards was approximately one-third of the aggregate target payout under the 2007 MICP. In 2006, the Company paid discretionary cash bonuses of $100,000 each to Mr. Howard and Mr. Tremblay in recognition of performance efforts prior to 2006. The Company did not pay any discretionary cash bonuses to the other Named Executive Officers for performance in 2006.

        Base salary and annual cash incentive compensation are the primary components of the Named Executive Officers' compensation. These components provide the Board the most effective means to reward achievement of the near-term goals, which are appropriate for the Company's current ownership and capital structure. Emphasis on annual EBITDA improvement is consistent with the goals of the Company's debt and equity holders. Differences in the base salary and the MICP target bonus between the CEO and the other Named Executive Officers, as well as between the Named Executive Officers, is directly related to the scope and responsibility of the position and the experience of the executive. The Company believes the base salary and annual cash incentive targets are appropriate based upon our review of available survey data and the fact that we have been actively recruiting for several executive positions throughout 2006 and 2007, and consequently have gained significant insight into the compensation levels paid by companies in similar industries that are faced with challenges similar to Vertis for filling senior management positions.

        In addition, the Named Executive Officers may be provided other forms of compensation, as discussed below, to further align their efforts with those of the shareholders. While these other forms of compensation provide further enhancement to the executives' total compensation package, they do not, individually and collectively, form a significant portion of the Named Executive Officer's compensation

Equity-Based Compensation

        The Board may, in its full discretion, choose to grant restricted shares of Vertis Holdings to the Named Executive Officers. The Company does not have an established program for the award of restricted shares. Awards are made on a case-by-case basis as determined by the Board. Restricted shares are granted subject to such restrictions as are set forth in the restricted share agreement for each executive. Shares typically do not become vested until immediately prior to a liquidity event ("Liquidity Event"), generally defined as a public offering of our common stock (where immediately

45

following such offering, the aggregate number of shares of common stock held by the public, not including affiliates of the Company, represents at least 20% of the total number of outstanding shares), merger or other business combination, or a sale or other disposition of all or substantially all of our assets to another entity for cash and/or publicly traded securities. The number of shares allocated to the Named Executive Officers is governed by a desire to provide a meaningful award in the event of a liquidity event without significantly impacting the level of ownership or control of the Company. In 2007, restricted shares were granted to Mr. Mann. In 2006, restricted shares were granted to Mr. Colatriano, Mr. Howard and Mr. Tremblay. These grants are pursuant to the Restricted Stock Agreements that were entered into as discussed in the "Employment Arrangements with Executive Officers" section.

Retirement and Other Benefits

•

Employee Benefit Plans—The Named Executive Officers are eligible to participate in the same benefit programs made available to other full-time employees of the Company. Such plans include a 401(k) retirement plan with company match, health and welfare plans, short-term disability, life insurance and other programs consistent with similarly situated companies. The level of benefit offered to the Named Executive Officers, with the exception of Mr. DuBose, is consistent with those offered to all other employees who meet the eligibility rules of each plan. Mr. DuBose receives additional benefits in the form of coverage under an additional disability and health insurance policy. The Company purchased these additional policies to satisfy the requirements of Mr. Dubose's employment contract (see "DuBose Employment Agreement"). Such additional medical and disability policies are not offered as part of a structured plan or program intended to provide benefits to other executives.



•

Executive Compensation Deferral Program—In 2007 and prior years the Named Executive Officers, in addition to certain other eligible employees, were entitled to participate in the Company's deferred compensation plan. Pursuant to the deferred compensation plan, eligible employees could defer up to 100% of earnings from their base annual salary, annual bonus and commissions. The Company could also, in its sole discretion, credit the account of any participant under the Deferred Compensation Plan, but the Company has not elected to do so. For each plan year for which a Named Executive Officer elected to defer compensation, the Named Executive Officer elected the time and form of payment for that plan year, and such election may not be changed, except as allowed for scheduled in-service withdrawals under the plan. The Named Executive Officer could elect to have a plan year's annual deferral amount paid in a scheduled in-service withdrawal or upon separation from service. For payment by scheduled in-service withdrawal, the Named Executive Officer may elect a lump sum or equal annual installments over 2, 3, 4 or 5 years. For payment upon separation from service, the Named Executive Officer may elect a lump sum or equal annual installments over 5, 10, or 15 years. This program was effectively frozen in 2008. As a result, no Named Executive Officers were provided the opportunity to defer compensation into this plan for the 2008 plan year.



•

Frozen Benefit Plans—Several benefit plans were offered to certain Named Executive Officers by companies that were acquired, or merged together to form Vertis, Inc. Eligibility for these programs was generally frozen prior to 2006. Named Executive Officers that participated in these plans prior to the date eligibility was frozen continue to receive benefits under these plans. Such plans include the Company's executive long-term disability plan and a qualified and non-qualified pension plan. The non-qualified pension plan is the Vertis Supplemental Executive Retirement Plan (the "SERP"). Benefits under the SERP are computed by multiplying the participant's average salary for the last five years prior to retirement by a percentage equal to one percent for each year of service up to a maximum of 30 years. Benefits under the SERP are not subject to a deduction for Social Security. Benefits under the SERP are subject to an offset

46

for amounts paid to participants under the Retirement Income Plan as of June 30, 2002, which allowed for discretionary contributions to plan participants and was merged into the Vertis 401(k) plan on July 1, 2002, and for matching contributions under the Vertis 401(k) plan. The qualified pension plan is the Webcraft Retirement Income Plan ("Webcraft RIP"). This plan pays a lump sum equal to the participant's aggregate percentage credits multiplied by the highest five year average annual total compensation. The participant earns a specified amount of percentage credits for each year of employment that increases as the participant ages (1% at age 20 increasing to 10.6% at age 65). Extra credits are earned for compensation above the level counted for Social Security benefits (0% at age 20 increasing to 3.4% at age 65). The Webcraft RIP was frozen at November 30, 1998, and no percentage credits are earned and no compensation is counted after that date. However, the frozen accrued benefit at that date is increased by 3% per year until termination of employment.

Perquisites and Other Personal Benefits

        The Company provides the Named Executive Officers with perquisites and other personal benefits that the Company believes are reasonable and consistent with its overall compensation program and are targeted to attract and retain superior employees for key positions in the Company. The following perquisites are generally made available to the Named Executive Officers: automobile allowance, 401(k) match, relocation benefits and temporary housing expenses. Additionally, per their respective employment agreements (see "Employment Arrangements with Executive Officers"), Mr. DuBose and Mr. Kohn are compensated for commuting expenses and the taxes associated with this compensation.

Severance upon Termination or Change-in-Control

        The Named Executive Officers each have provisions in their employment agreements providing for severance upon termination or a change-in-control of the Company. The Company provides the Named Executive Officers with such severance that it believes is reasonable and consistent with its overall compensation program. The Company makes a case-by-case determination of the appropriate severance to provide each of the Named Executive Officers and such determination is reflected in the employment agreement negotiated by the Company with the Named Executive Officer.

Compensation Related Tax and Accounting Implications

        The American Jobs Creation Act of 2004, which was enacted on October 22, 2004, changed the tax rules applicable to nonqualified deferred compensation arrangements, under which certain of the Named Executive Officers participate. While the final regulations have not become effective yet, the Company believes it is operating in good faith compliance with the provisions that were effective January 1, 2005.

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        The following table sets forth the compensation earned by the Named Executive Officers in the year ended December 31, 2007.

Summary Compensation Table

Name and Principal Position	Year	Salary		Bonus(1)		Stock Awards(2)	Change in Pension Value and Non- Qualified Deferred Compensation Earnings(3)			All Other Compensation Earnings			Total
Michael T. DuBose Chairman and Chief Executive Officer	2007 2006	$	750,000 69,231	$	275,000					$	309,687 1,980	(4)   (5)	$	1,334,687 71,211
Barry C. Kohn Chief Financial Officer(6)	2007		298,269		117,500						74,081	(7)		489,850
David P. Colatriano(8) Senior Vice President and General Manager—Direct Mail	2007 2006		328,945 312,692		25,000	614,400	$	15,312 8,149	(9)		12,870 16,789	(5)   (10)		382,127 952,030
John V. Howard, Jr. Chief Legal Officer and Secretary	2007 2006		305,580 295,932			614,400		1,541 810			36,352 16,588	(11)   (10)		343,473 927,730
Douglas L. Mann Senior Vice President and General Manager—Advertising Inserts	2007		343,269		155,000	4,800					19,092	(10)		522,161
Stephen E. Tremblay Former Chief Financial Officer(12)	2007 2006		288,254 322,308			865,812		4,037			588,000 18,415	(13)   (10)		876,254 1,210,572

(1)

Represents discretionary cash bonuses for the Named Executive Officers which were earned and paid in 2007, as well as a $75,000 signing bonus for Douglas L. Mann pursuant to his employment agreement (see "Mann Employment Agreement").

(2)

Represents grants of restricted shares in 2007 and 2006 with a grant date fair value of $0.64 per share and $20.48 per share, respectively. See Note 16 to the consolidated financial statements included elsewhere in this Annual Report for further discussion of the assumptions used by the Company to determine this fair value in accordance with SFAS 123R.

(3)

Represents the increase in the actuarial present value of the respective Named Executive Officer's benefit under the SERP. As discussed in the preceding "Frozen Benefit Plans" section, the SERP was frozen prior to 2006, therefore Messrs. DuBose, Kohn and Mann are not eligible participants in this plan.

(4)

Represents $155,118 in commuting expenses reimbursed to Mr. DuBose as well as $129,241 to compensate Mr. DuBose for the taxes on this reimbursement, $11,880 for an auto allowance paid to Mr. DuBose and $7,615 contributed to the Company's 401(k) plan for Mr. DuBose. Other compensation for Mr. DuBose also includes $5,833 which represents the 2007 premiums paid by the Company on an executive disability policy and a health insurance policy which cover Mr. DuBose pursuant to his employment agreement (see "DuBose Employment Agreement"). These policies provide coverage to Mr. DuBose in addition to the policies provided generally to other Vertis employees.

(5)

Represents an auto allowance.

(6)

Mr. Kohn was appointed Chief Financial Officer of Vertis in May 2007. See "Kohn Employment Agreement" section for Mr. Kohn's annual base salary. In addition to the compensation described in the table above, Mr. Kohn also received payment from Vertis in the amount of $153,663 in 2007 for consulting services provided prior to his appointment as Chief Financial Officer (see "Item 13—Certain Relationships and Related Transactions and Director Independence").

(7)

Represents $32,988 in commuting expenses reimbursed to Mr. Kohn as well as $24,891 to compensate Mr. Kohn for the taxes on this reimbursement, $8,910 for an auto allowance paid to Mr. Kohn and $7,292 contributed to the Company's 401(k) plan for Mr. Kohn.

(8)

Mr. Colatriano left the Company on January 25, 2008.

(9)

Represents the increase in the actuarial present value of Mr. Colatriano's benefit under the SERP. Mr. Colatriano also participates in the Webcraft Retirement Income Plan, under which the actuarial present value of his benefit decreased in 2006 by $1,634. This amount is not included in the summary compensation table above.

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(10)

Represents an auto allowance and an amount contributed to the Company's 401(k) plan for the Named Executive Officer.

(11)

Represents $19,979 in relocation expenses, $11,880 for an auto allowance paid to Mr. Howard and $4,493 contributed to the Company's 401(k) plan for Mr. Howard.

(12)

Mr. Tremblay resigned his position as Chief Financial Officer in May 2007.

(13)

Represents $564,500 in severance accrued for Mr. Tremblay in accordance with his transition agreement as discussed in the "Tremblay Severance Arrangement" section, $9,900 for an auto allowance paid to Mr. Tremblay, $6,290 contributed to the Company's 401(k) plan for Mr. Tremblay and a $7,310 lump-sum payment Mr. Tremblay received from the SERP upon his separation from the Company.

        The following table summarizes the grants in the year ended December 31, 2007 under our equity based compensation plan (see "Equity-Based Compensation" section).

Grants of Plan-Based Awards

								All Other Stock Awards: Number of Shares of Stock or Units (#)(2)
		Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1)
									Grant Date Fair Value ($)(3)
Name	Grant Date	Threshold ($)		Target ($)		Maximum ($)
Michael T. DuBose		$	562,500	$	562,500	$	1,125,000
Barry C. Kohn			235,000		235,000		470,000
David P. Colatriano(4)			162,225		162,225		324,450
John V. Howard, Jr.			153,530		153,530		307,060
Douglas L. Mann	February 23, 2007							7,500	4,800
			200,000		200,000		400,000
Stephen E. Tremblay(5)

(1)

These amounts represent the potential bonus payments set forth in the Company's MICP assuming bonus targets under the MICP, which are based upon the percentages of the achievement of an internally calculated pro forma EBITDA measure, are met. The bonus targets under the MICP were not met for the year ended December 31, 2007 and therefore the Named Executive Officers were not paid these bonuses. Several Named Executive Officers were, however, paid a discretionary bonus in 2007, which is included in the Summary Compensation Table. Discretionary bonuses are paid from time to time with approval from the Board.

(2)

Represents the number of shares of restricted stock granted to the Named Executive Officer on the respective grant date.

(3)

The grant date fair value of the restricted shares granted in 2007 was $0.64 per share. See Note 16 to the consolidated financial statements included elsewhere in this Annual Report for further discussion of the assumptions used by the Company to determine this fair value in accordance with SFAS 123R.

(4)

Mr. Colatriano left the Company on January 25, 2008.

(5)

Mr. Tremblay resigned from the Company in November 2007, therefore there is no estimated future payout for him under the Company's MICP.

Employment Arrangements and Other Agreements with Executive Officers

        DuBose Employment Agreement.    The Company entered into an employment agreement with Michael T. DuBose effective as of November 28, 2006 (as amended to date, the "DuBose Agreement"), pursuant to which Mr. DuBose currently serves as Chief Executive Officer and Chairman of the Board. The DuBose Agreement may be terminated by either Mr. DuBose or the Company at any time for any reason. Under the DuBose Agreement, Mr. DuBose receives an annual base salary, as adjusted by the Board, and various employment benefits. In 2007, Mr. DuBose received an annual base salary of $750,000. The DuBose Agreement also provides that Mr. DuBose will receive an annual bonus targeted

49

at not less than 75% of his base salary (assuming bonus targets under the MICP, which are based upon the percentages of the achievements of an internally calculated pro forma EBITDA measure, are met) and which can rise to 200% of the target incentive if the Company exceeds its goals. Additionally, the DuBose Agreement provides that Mr. DuBose receive certain fringe benefits, including an automobile allowance, relocation reimbursement, temporary housing, commuting expense reimbursements, tax gross-up and insurance. Additionally, the Company shall purchase and maintain through December 31, 2014, a single-family policy equivalent in all material aspects to the Company's health coverage. This policy shall remain in effect even upon Mr. DuBose's termination from the Company. The Company entered into a Restricted Stock Agreement with Mr. DuBose effective January 7, 2008 pursuant to which Mr. DuBose received a grant of 600,000 restricted shares of common stock of Vertis Holdings.

        Kohn Employment Agreement.    The Company entered into an employment agreement with Barry C. Kohn effective as of December 18, 2007 (as amended to date, the "Kohn Agreement"), pursuant to which Mr. Kohn currently serves as Chief Financial Officer. The Kohn Agreement may be terminated by either Mr. Kohn or the Company at any time for any reason. Under the Kohn Agreement, Mr. Kohn receives an annual base salary, as adjusted by the Board, and various employment benefits. In 2007, Mr. Kohn's annual base salary was $470,000, of which he received a pro rated salary of $298,269. The Kohn Agreement also provides that Mr. Kohn will receive an annual bonus targeted at not less than 50% of his base salary (assuming bonus targets under the MICP, which are based upon the percentages of the achievements of an internally calculated pro forma EBITDA measure, are met) and which can rise to 200% of the target incentive if the Company exceeds its goals. Additionally, the Kohn Agreement provides that Mr. Kohn receive certain fringe benefits, including an automobile allowance, relocation reimbursement, temporary housing, commuting expense reimbursements and tax gross-up. The Company entered into a Restricted Stock Agreement with Mr. Kohn effective February 5, 2008 pursuant to which Mr. Kohn received a grant of 250,000 restricted shares of common stock of Vertis Holdings.

        Colatriano Employment Agreement.    The Company entered into an employment agreement with David P. Colatriano, effective August 15, 2003 (the "Colatriano Agreement"), pursuant to which Mr. Colatriano served as Senior Vice President and General Manager for Direct Mail. Under the Colatriano Agreement, Mr. Colatriano received an annual base salary, as adjusted by the Board, and various employment benefits. In 2007, Mr. Colatriano received a base salary of $328,945. The Colatriano Agreement also provides an annual bonus targeted at 50% of his base salary (assuming bonus targets under the MICP, which are based upon the percentages of the achievements of an internally calculated pro forma EBITDA measure, are met) and which can rise to 200% of the target incentive if the Company exceeds its goals. Additionally, the Colatriano Agreement provides that Mr. Colatriano receive certain fringe benefits, including participation in the SERP. The Company entered into a Restricted Stock Agreement with Mr. Colatriano effective May 20, 2004 pursuant to which Mr. Colatriano exchanged certain options to purchase shares of the common stock of the Company for 6,683 restricted shares of common stock of Vertis Holdings. Additionally, Mr. Colatriano received a grant of 30,000 restricted shares of common stock of Vertis Holdings pursuant to a Restricted Stock Agreement effective March 6, 2006. Mr. Colatriano terminated his service with the Company on January 25, 2008 (the "Colatriano Date of Separation"). On the Colatriano Date of Separation, Mr. Colatriano forfeited all of the restricted shares of common stock of Vertis Holdings previously issued to him.

        Howard Employment Agreement.    The Company entered into an employment agreement with John V. Howard, Jr., effective August 31, 2003 (as amended to date, the "Howard Agreement"), pursuant to which Mr. Howard currently serves as Chief Legal Officer and Secretary. The Howard Agreement may be terminated by either Mr. Howard or the Company at any time for any reason. Under the Howard Agreement, Mr. Howard receives an annual base salary, as adjusted by the Board, and various employment benefits. In 2007, Mr. Howard received a base salary of $305,580. The Howard

50

Agreement also provides that Mr. Howard receive an annual bonus targeted at not less than 50% of base salary (assuming bonus targets under the MICP, which are based upon the percentages of the achievements of an internally calculated pro forma EBITDA measure, are met) and which can rise to 200% of the target incentive if the Company exceeds its goals. Additionally, the Howard Agreement provides that Mr. Howard receive certain fringe benefits, including participation in the SERP. The Company entered into a Restricted Stock Agreement with Mr. Howard effective May 20, 2004 pursuant to which Mr. Howard exchanged certain options to purchase shares of the common stock of the Company for 6,610 restricted shares of common stock of Vertis Holdings. Mr. Howard also received a grant of 30,000 restricted shares of common stock of Vertis Holdings pursuant to a Restricted Stock Agreement effective March 6, 2006.

        Howard Relocation Agreement.    The Company is party to an agreement with an independent relocation company (the "Buyer") whereby eligible employees receive certain relocation assistance and related services. John V. Howard, Jr. received approximately $0.4 million under a relocation real estate purchase and sale agreement with the Buyer dated December 26, 2007 (the "Howard Relocation Agreement"). Under the Howard Relocation Agreement, the Buyer paid to Mr. Howard and his spouse an equity advance for their personal residence in the amount of approximately $0.9 million (the "Purchase Price") plus relocation expenses, funded by the Company, less an outstanding mortgage of approximately $0.5 million as of December 10, 2007. Based on an independent appraisal, the Company believes that the Purchase Price approximated the fair market value of the personal residence. The Buyer will then market the property for resale to an unrelated buyer, and the Company will incur the costs associated with or receive the net proceeds from that resale.

        Mann Employment Agreement.    The Company entered into an employment agreement with Douglas L. Mann effective as of January 12, 2007 (the "Mann Agreement") pursuant to which Mr. Mann currently serves as Senior Vice President and General Manager of Advertising Inserts. The Mann Agreement may be terminated by either Mr. Mann or the Company at any time for any reason. Under the Mann Agreement, Mr. Mann receives an annual base salary, as adjusted by the Board, and various employment benefits. Per the Mann Agreement, Mr. Mann's starting annual base salary was $350,000, which was increased to $400,000 in September 2007. In 2007, Mr. Mann received a pro rated salary of $343,269. The Mann agreement also provided that Mr. Mann receive a $75,000 signing bonus. Additionally, the Mann Agreement also provides that Mr. Mann will receive an annual bonus targeted at not less than 50% of his base salary (assuming bonus targets under the MICP, which are based upon the percentages of the achievements of an internally calculated pro forma EBITDA measure, are met) and which can rise to 200% of the target incentive if the Company exceeds its goals. Additionally, the Mann Agreement provides that Mr. Mann receive certain fringe benefits including an automobile allowance. The Company entered into a Restricted Stock Agreement with Mr. Mann effective February 23, 2007 pursuant to which Mr. Mann received a grant of 7,500 restricted shares of common stock of Vertis Holdings.

        Tremblay Employment Agreement.    The Company entered into an employment agreement with Stephen E. Tremblay dated April 22, 1997 (as amended to date, the "Tremblay Agreement"), pursuant to which Mr. Tremblay served as Chief Financial Officer. Under the Tremblay Agreement, Mr. Tremblay received an annual base salary, as adjusted by the Board, and various employment benefits. In 2007, Mr. Tremblay received a base salary of $288,254. The Company entered into a Restricted Stock Agreement with Mr. Tremblay effective May 20, 2004 pursuant to which Mr. Tremblay exchanged certain options to purchase shares of the common stock of the Company for 1,167 restricted shares of common stock of Vertis Holdings. Mr. Tremblay also received a grant of 42,276 restricted shares of common stock of Vertis Holdings pursuant to a Restricted Stock Agreement effective March 6, 2006.

51

        On May 21, 2007, Mr. Tremblay transitioned from his position as Chief Financial Officer of the Company to Senior Vice President, Corporate Development. In connection with Mr. Tremblay's transition, the Company and Mr. Tremblay entered into a transition agreement effective May 31, 2007. See the 'Tremblay Severance Arrangement" section for a detailed discussion of this transition agreement. Mr. Tremblay terminated his service with the Company on November 16, 2007 ("Tremblay Date of Separation"). On the Tremblay Date of Separation, Mr. Tremblay forfeited all of the restricted shares of common stock of Vertis Holdings previously issued to him.

        The following table sets forth the number of unvested stock awards outstanding at December 31, 2007 for each Named Executive Officer and the market value of such awards.

Outstanding Equity Awards at Fiscal Year-End

	Stock Awards
Name	Type of Award(1)	Number of Shares or Units of Stock That Have Not Vested (#)	Market Value of Shares or Units of Stock That Have Not Vested ($)(2)
Michael T. DuBose
Barry C. Kohn
David P. Colatriano	Restricted shares(3)	36,683	23,477
	Rights	2,335	1,494
John V. Howard, Jr.	Restricted shares	36,610	23,430
Douglas L. Mann	Restricted shares	7,500	4,800
Stephen E. Tremblay(4)

(1)

The Company, under the direction of its Board, may grant restricted shares to the Named Executive Officers under the Company's equity based compensation plan. The restricted shares do not become vested until immediately prior to a Liquidity Event as defined in the "Equity-Based Compensation" section. Additionally, certain Named Executive Officers own rights (the "Rights") to shares of common stock subject to a management subscription agreement. These management subscription agreements were entered into in connection with the Company's recapitalization in 1999 with the intent to replace previously issued nonqualified stock options at equivalent economic value.

(2)

In calculating the market value of restricted shares and rights that have not vested as of December 31, 2007, the Company used a value of $0.64 per share, based upon the assumptions used by the Company in accordance with SFAS 123R (See Note 16 to the consolidated financial statements elsewhere in this Annual Report).

(3)

Note that Mr. Colatriano's restricted shares were forfeited in January 2008 on the Colatriano Date of Separation.

(4)

Mr. Tremblay's restricted shares were forfeited on the Tremblay Date of Separation.

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        The following table presents detail of the Named Executive Officers' benefits under the Company's defined benefit plans.

Pension Benefits

Name	Plan Name	Number of Years of Credited Service (#)(1)		Present Value of Accumulated Benefit ($)		Payments During Last Fiscal Year ($)
Michael T. DuBose(2)
Barry C. Kohn(2)
David P. Colatriano	Webcraft Retirement Income Plan	18.2	(3)	$	42,072
	SERP	21.0			86,193
John V. Howard, Jr.	SERP	9.8			3,200
Douglas L. Mann(2)
Stephen E. Tremblay	SERP	10.7				$	7,310	(4)

(1)

The Board has the ability to grant extra years of service under these defined benefit plans at its discretion. As of December 31, 2007, the Board had not granted any extra years of service to the participating Named Executive Officers.

(2)

As discussed in the preceding "Frozen Benefit Plans" section, the SERP was frozen prior to 2006, therefore Messrs. DuBose, Kohn and Mann are not eligible participants in this plan.

(3)

The benefits under the Webcraft Retirement Income Plan were frozen as of April 2005, therefore the number of years of credited service for Mr. Colatriano under this plan is less than his actual number of years of service with the Company.

(4)

Represents a $7,310 lump-sum payment Mr. Tremblay received from the SERP upon his separation from the Company. See further discussion of the rules governing SERP distributions below.

        The Company has two pension plans under which certain of the Named Executive Officers participate: the SERP and the Webcraft RIP. The actuarial valuation methods used for determining the present value of the accumulated benefit under the SERP and the Webcraft RIP are the projected unit credit cost method and the unit credit cost method, respectively. See Note 14 to the Company's consolidated financial statements for further discussion of pension plan assumptions.

        The "Frozen Benefit Plans" section discusses the benefit computation under the SERP and the Webcraft RIP. The optional forms of payment under the SERP are a single life annuity with payments ending upon the death of the Named Executive Officer; a 50% joint and survivor annuity which provides a reduced monthly benefit for the lifetime of the Named Executive Officer, with continuation of the benefit payable to the Named Executive Officer's beneficiary after his death equal to 50% of the benefit received prior to his death; or a 100% joint and survivor annuity which provides a reduced monthly benefit for the lifetime of the Named Executive Officer, with continuation of the benefit payable to the Named Executive Officer's beneficiary after his death equal to 100% of the benefit received prior to his death. The optional forms of payment under the Webcraft RIP are a single life annuity; a joint and survivor annuity where a certain percentage of the Named Executive Officer's benefit is payable to their spouse at the death of the Named Executive Officer; a 10 year certain and life annuity which guarantees payments expiring at the later of the end of 120 monthly payments or the death of the Named Executive Officer; or a lump sum calculated as the actuarial equivalent of the accrued monthly benefit payable at the severance from service date.

        Participants in the SERP are eligible for benefits at age 62 if they retire from the Company after age 55 and have completed at least 15 years of service. The SERP also allows for distribution of benefits upon retirement if the vested value of the participant's benefit is less than $25,000. The Webcraft RIP allows for distribution of benefits upon termination from the Company whereby the benefit is adjusted for the actuarial difference between the date of termination and retirement.

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Potential Payments upon Termination or Change-in-Control

        For purposes of the discussion of the Named Executive Officers' severance arrangements, the terms "Cause", "Good Reason" and "Change in Control" have the following meanings:

        "Cause" means termination of the Named Executive Officer by Vertis because of:

i.

gross negligence or willful misconduct by the Named Executive Officer in connection with the performance of his duties that is materially injurious to the Company, monetarily or otherwise;



ii.

the conviction of the Named Executive Officer by a court of competent jurisdiction for felony criminal conduct; or



iii.

a material violation by the Named Executive Officer of the confidentiality provisions of his employment agreement, as amended.

        Unless, in the case of clauses (i) or (iii), the event constituting Cause is curable and has been cured by the Named Executive Officer within ten business days of his receipt of written notice from the Company that an event constituting Cause has occurred and specifying in reasonable detail the actions required to effect a cure. Following a Change in Control, as defined herein, Cause shall only mean clauses (i) or (ii) above.

        "Good Reason" means the occurrence of any of the following events, without the Named Executive Officer's consent (other than in connection with an event constituting Cause):

i.

any action by the Company which results in a significant diminution in the Named Executive Officer's position, authority, duties or responsibilities as contemplated by his employment agreement;



ii.

a reduction in the Named Executive Officer's annual base salary or annual cash bonus opportunity under the MICP or a failure by the Company to timely pay any portion of the Named Executive Officer's current or deferred compensation;



iii.

the Company requiring the Named Executive Officer to be based at an office that is greater than 50 miles from where he is located at such time except for required travel for the Company's business to an extent it is substantially consistent with the business travel obligations which the Named Executive Officer undertook on behalf of the Company prior to a Change in Control; or



iv.

failure by the Company to obtain from any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) of all or substantially all of the business and/or assets of the Company an express written assumption and agreement to perform the Named Executive Officer's employment agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken.

        A "Change in Control" shall be deemed to have occurred on the first date after the effective date on which:

i.

any Person, as defined below, shall acquire, whether by purchase, exchange, tender offer, merger, consolidation or otherwise, beneficial ownership of securities of the Company constituting fifty percent or more of the combined voting power of the securities of the Company;



ii.

any Person shall acquire all or substantially all of the assets of the Company pursuant to a sale, dissolution or liquidation;



iii.

any Person shall acquire the ability to appoint or elect a majority of the members of the Board; or

54

iv.

the Designated Investors, as defined below, together with the senior management of the Company, cease to beneficially own at least thirty percent or more of the combined voting power of the securities of the Company.

        For purposes of the preceding sentence, the term "Person" does not include (1) Vertis Holdings, Thomas H. Lee Partners or Thomas H. Lee Equity Fund IV, L.P., Evercore Capital Partners L.P. and each of their respective affiliates (the "Designated Investors"), (2) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its affiliates, (3) an underwriter temporarily holding securities pursuant to an offering of such securities and (4) a corporation owned, directly or indirectly, by the Designated Investors.

        DuBose Severance Arrangement.    The DuBose Agreement contains provisions regarding severance (the "DuBose Severance Arrangement"). If Mr. DuBose leaves the Company absent a Change in Control of the Company, the DuBose Severance Arrangement provides the following payments and benefits:

•

if Mr. DuBose's employment is terminated upon his death or disability, the Company will pay to Mr. DuBose or his estate a lump sum equal to any unpaid annual base salary and earned annual bonus for completed fiscal years. In the instance of Mr. DuBose's death, the Company will pay to his estate a cash payment equal to two times the sum of his annual base salary in effect immediately prior to the date of termination and the Applicable Bonus Amount (as defined below). If Mr. DuBose becomes disabled, the Company shall have in place disability insurance, in addition to the Company's standard short term and long term disability policies for all executives, providing a minimum of $20,000 per month of benefits payable to Mr. DuBose or a representative for the period of his disability. In addition, Mr. DuBose or his estate will receive a pro-rata bonus payment. In addition, Mr. DuBose may elect to continue medical, dental, prescription and vision coverage from the Company for himself and his eligible dependents (the "Applicable Healthcare Coverage") in accordance with the continuation of coverage requirements of Internal Revenue Code Section 4980B ("COBRA"), provided that the Company will not require any premium payment for such COBRA coverage greater than the premium for such coverage then being charged for active employees. If such COBRA coverage ends before December 31, 2014, then upon expiration of COBRA coverage the Company will at the Company's expense continue to cover Mr. DuBose and his eligible dependents under the Company's medical, dental, prescription and vision coverages (or substantially equivalent coverage under an alternative arrangement) through December 31, 2014, provided that the Company may charge a premium for such coverages no greater than the premium for such coverages then being charged for active employees. However, this coverage will end before December 31, 2014, for any such person who becomes eligible for coverage under another employer provided health insurance plan or Medicare. In addition, Mr. DuBose and/or his eligible dependents will continue to be covered by the single-family policy purchased by the Company pursuant to the DuBose Employment Agreement, through December 31, 2014 ("the Secondary Policy");



•

if the Company terminates Mr. DuBose's employment for Cause or he resigns other than for Good Reason, the Company will pay to him a lump sum equal to any unpaid portion of his annual base salary and earned annual bonus for completed years prior to the date of termination. In addition Mr. DuBose will continue to be covered by the Secondary Policy and may elect the Applicable Healthcare Coverage; and



•

if Mr. DuBose's employment is terminated by the Company without Cause, or by Mr. DuBose for Good Reason absent a Change in Control, he will receive a cash payment equal to two times the sum of his (i) annual base salary in effect immediately prior to the date of termination and (ii) the greater of his annual bonus earned under the MICP in the year immediately preceding

55

that in which the date of termination occurs, the annual bonus he would have earned for the fiscal year in which the date of termination occurs absent such termination or the annual target bonus he would have been eligible to earn for the fiscal year in which the date of termination occurs (the greater of these amounts being hereafter referred to as the "Applicable Bonus Amount"). In addition, he will receive a prorated annual bonus equal to the bonus he would have received had he remained employed by the company through the last day of the fiscal year during which the date of termination occurs. The Company shall also pay the cost of providing Mr. DuBose with outplacement services up to a maximum of 5% of the sum of his base salary and Applicable Bonus Amount provided that such services are utilized by Mr. DuBose within six months following the date of termination. In addition Mr. DuBose will continue to be covered by the Secondary Policy and may elect the Applicable Healthcare Coverage.

        Pursuant to the DuBose Severance Arrangement, if Mr. DuBose's employment is terminated within the 13-month period immediately following a Change in Control by the Company other than for Cause or by Mr. DuBose for Good Reason, he will receive a cash payment equal to three times the sum of his (i) annual base salary in effect immediately prior to the date of termination and the Applicable Bonus Amount and (ii) any unpaid portion of his annual base salary and earned annual bonus for completed years prior to the date of termination. In addition, Mr. DuBose will receive a pro-rata bonus payment as well as the cost of Mr. DuBose's applicable outplacement services. Mr. DuBose will also continue to be covered by the Secondary Policy and may elect the Applicable Healthcare Coverage.

        Kohn Severance Arrangement.    The Kohn Agreement contains provisions regarding severance (the "Kohn Severance Arrangement"). If Mr. Kohn leaves the Company absent a change of control of the Company, the Kohn Severance Arrangement provides the following payments and benefits:

•

if Mr. Kohn's employment is terminated due to disability or upon his death, the Company will pay to Mr. Kohn or his estate a lump sum equal to any unpaid portion of his annual base salary earned through the date of termination and earned annual bonus for completed years prior to the date of termination. The Company shall also provide to Mr. Kohn and his eligible dependents the Applicable Healthcare Coverage for a period of 18 months following the date of termination, or, if earlier, until the date Mr. Kohn obtains alternative coverage from a subsequent employer. In addition, Mr. Kohn or his estate will receive a pro-rata bonus payment;



•

if Mr. Kohn's employment is terminated for Cause, or if Mr. Kohn resigns from the Company for other than Good Reason, the Company will pay to Mr. Kohn a lump sum equal to any unpaid portion of his annual base salary earned through the date of termination and earned annual bonus for completed years prior to the date of termination; and



•

if Mr. Kohn's employment is terminated by the Company without Cause or by Mr. Kohn for Good Reason absent a Change in Control, he will receive a cash payment equal to 1.5 times the sum of his (i) annual base salary in effect immediately prior to the date of termination and (ii) the greater of his annual bonus earned under the MICP in the year immediately preceding that in which the date of termination occurs, the annual bonus he would have earned for the fiscal year in which the date of termination occurs absent such termination or the annual target bonus he would have been eligible to earn for the fiscal year in which the date of termination occurs (the greater of these amounts being hereafter referred to as the "Applicable Bonus Amount"). In addition, he will receive a prorated annual bonus equal to the bonus he would have received had he remained employed by the company through the last day of the fiscal year during which the date of termination occurs. The Company shall also provide to Mr. Kohn and his eligible dependents continued participation in the Company's medical, dental, prescription and vision care insurance plans or substantially equivalent coverage under an alternate arrangement at the Company's expense, for a period of 18 months following the date of

56

termination, or, if earlier, until the date Mr. Kohn obtains alternative coverage from a subsequent employer. The Company shall also pay the cost of providing Mr. Kohn with outplacement services up to a maximum of 5% of the sum of his base salary and Applicable Bonus Amount provided that such services are utilized by Mr. Kohn within six months following the date of termination.

        If Mr. Kohn's employment is terminated within the 13-month period immediately following a Change in Control by the Company other than for Cause or by Mr. Kohn for Good Reason, he will receive (i) a cash payment equal to three times the sum of his annual base salary in effect immediately prior to the date of termination and the Applicable Bonus Amount and (ii) any unpaid portion of his annual base salary earned through the date of termination and earned annual bonus for completed years prior to the date of termination. The Company shall also provide to Mr. Kohn and his eligible dependents the Applicable Healthcare Coverage for a period of 36 months following the date of termination, or, if earlier, until the date Mr. Kohn obtains alternative coverage from a subsequent employer. In addition, Mr. Kohn will receive the Pro-rata Bonus payment as well as the cost of Mr. Kohn's Applicable Outplacement Services.

        Colatriano Severance Arrangement.    The Colatriano Agreement contains provisions regarding severance (the "Colatriano Severance Arrangement"). Pursuant to the Colatriano Severance Arrangement, if Mr. Colatriano's employment is terminated by the Company without Cause or if the Company requires that he be based at a location which is more than fifty miles from the office at which he is based at the time of the relocation, he will receive severance pay, in the form of payroll continuation of his annual base salary as of his date of separation for a period of twelve months. If Mr. Colatriano remains unemployed at the end of those payments, he is eligible for a continuation of the severance pay for each month in which he remains unemployed up to a maximum of six months. Mr. Colatriano resigned from the Company on January 25, 2008. See the "Triggering Event" table for the amount of severance accrued by the Company in 2008 for Mr. Colatriano upon his departure.

        Howard Severance Arrangement.    The Howard Agreement contains provisions regarding severance (the "Howard Severance Arrangement"). Pursuant to the Howard Severance Arrangement, if Mr. Howard's employment is terminated by the Company without Cause or by Mr. Howard for Good Reason following a Change in Control of the Company, he will receive a lump sum amount equal to three times the sum of (i) his annual base salary in effect immediately prior to the date of termination and (ii) the greater of his target bonus under the MICP in the year immediately preceding that in which the termination occurs or the annual bonus he would have earned for the fiscal year in which the date of termination occurs absent such termination. In addition, he will receive a prorated annual bonus equal to the bonus he would have received had he remained employed by the company through the last day of the fiscal year during which the date of termination occurs. The prorated bonus shall be determined, as near as practicable, based on actual performance achieved for the fiscal year through the date of termination, expressed as a percentage of targeted performance for that period. Finally, Mr. Howard and his eligible dependents will be entitled to one year of continued medical, dental, prescription and vision care insurance coverages (the "Continued Coverage"). If Mr. Howard resigns or is terminated for Cause, prior to November 1, 2009, he will be required to repay the Company a percentage of the relocation expenses incurred by the Company on his behalf.

        If Mr. Howard leaves the Company absent a Change of Control of the Company, the Howard Severance Arrangement provides the following payments and benefits:

•

if Mr. Howard's employment is terminated upon his death or disability, the Company will pay to Mr. Howard or his estate a lump sum equal to earned annual base salary and earned annual bonus for completed fiscal years. In addition, the Company will provide Mr. Howard or his eligible dependents six months of the Continued Coverage and he will then be entitled to elect

57

continuation coverage in accordance with the Internal Revenue Code of 1986 (the "COBRA coverage");

•

if the Company terminates Mr. Howard's employment for Cause or he resigns other than for Good Reason, the Company will pay to him a lump sum equal to his annual base salary earned through the date of termination that has not been paid and earned annual bonus prior to the date of termination; and



•

if the Company terminates Mr. Howard's employment other than for Cause, death or disability, or he terminates for Good Reason, in addition to the payment of any unpaid amounts of his earned annual base salary and earned annual bonus for completed fiscal years which shall be paid within 30 days of termination, the Company will also pay a cash payment equal to 1.5 times the sum of (i) his annual base salary in effect immediately prior to the date of termination and (ii) the greater of his target bonus under the MICP in the year immediately preceding that in which the termination occurs and the annual bonus he would have earned for the fiscal year in which the date of termination occurs absent such termination. In addition, he will receive a prorated annual bonus equal to the bonus he would have received had he remained employed by the company through the last day of the fiscal year during which the date of termination occurs. The prorated bonus shall be based on the actual results for the completed fiscal year during which the date of termination occurs.

        Also, the Company will (i) provide Mr. Howard and his eligible dependents six months of the Continued Coverage and he will then be eligible for COBRA coverage, and (ii) credit Mr. Howard with an additional year of vesting for purposes of his then outstanding options, which will remain exercisable in accordance with the terms of the applicable option grants and equity plan.

        Mann Severance Arrangement.    The Mann Agreement contains provisions regarding severance. If the Company terminates Mr. Mann's employment for any reason other than Cause, Mr. Mann will receive severance pay in the form of payroll continuation of Mr. Mann's annual base salary for a period of 12 months

        Tremblay Severance Arrangement.    In connection with Mr. Tremblay's transition described in the "Tremblay Employment Agreement" section, the Company and Mr. Tremblay entered into a transition agreement effective May 31, 2007 (the "Tremblay Arrangement"). Pursuant to the Tremblay Arrangement, the Company will provide Mr. Tremblay with eighteen months of severance at his then current salary, a pro-rata portion of his bonus under the MICP based on the number of months in 2007 he was employed by the Company and reimbursement of outplacement services, not to exceed $20,000, if completed within six months of Mr. Tremblay's termination date. Mr. Tremblay resigned from the Company on November 16, 2007. See the "Triggering Event" table for the amount of severance accrued by the Company for Mr. Tremblay upon his departure.

58

        The following table presents an estimate of severance payments that would be provided to the Named Executive Officers if the applicable triggering event took place on December 31, 2007.

Triggering Event

Name	Termination by the Company Without Cause or Termination by the Executive Officer for Good Reason Following a Change in Control		Termination by the Company Without Cause or Termination by the Executive Officer for Good Reason Absent a Change in Control			Termination by the Company for Cause or by the Executive for Other than Good Reason		Termination Upon Disability			Termination Upon Death
Michael T. DuBose(1)	$	4,087,514	$	2,775,014		$	112,514	$	2,602,514	(2)	$	2,737,514
Barry C. Kohn		2,150,992		1,087,246					6,246			6,246
David P. Colatriano				346,450	(3)
Douglas L. Mann		400,000		400,000
John V. Howard, Jr.		1,385,932		692,966					2,082			2,082
Stephen E. Tremblay				515,000	(4)

(1)

Mr. DuBose's estimated severance payments include estimates for the Applicable Healthcare Coverage and the Secondary Policy discussed in the "DuBose Severance Arrangement" Section. An estimated 8% annual inflation factor was used by the Company to calculate the future costs of the Applicable Healthcare Coverage and the Secondary Policy through December 31, 2014. The Company used this inflation factor based on a historical and expected trend in medical inflation for plans of similar design and in a similar industry as the Company.

(2)

In the event of Mr. DuBose disability, he shall receive a monthly benefit of $20,000 for the period of his disability, not to extend beyond the date Mr. DuBose turns 65. The amount included in the table above assumes the maximum benefit period under the separate disability policy held by the Company.

(3)

Represents severance accrued for Mr. Colatriano in January 2008 upon his separation from the Company on January 25, 2008 in accordance with the Colatriano Severance Arrangement

(4)

Represents severance accrued for Mr. Tremblay upon his separation from the Company on November 16, 2007 in accordance with the Tremblay Severance Arrangement.

Compensation of Directors

        Michael T. DuBose was the only director of Vertis at December 31, 2007, who was also an executive officer of the Company. Mr. DuBose did not receive any additional compensation for service as a member of the Board. Donald E. Roland is a director of Vertis as well as a non-executive employee of the Company. Mr. Roland did not receive any additional compensation for service as a member of the Board.

        All non-employee directors of Vertis are directly affiliated with either Thomas H. Lee Partners ("THL") or Evercore Capital Partners ("ECP"), two significant shareholders of Vertis Holdings. None of the non-employee directors individually receive any compensation from Vertis for serving on the Board. Vertis, however, entered into consulting agreements with Thomas H. Lee Capital, LLC (an affiliate of THL), THL Equity Advisors IV, LLC (an affiliate of THL) and Evercore Advisor Inc. (an affiliate of ECP), pursuant to which Vertis pays annual fees to these parties in amounts of approximately $220,000, $780,000 and $250,000. In 2007, the payment of these fees was deferred. See "Certain Relationships and Related Transactions."

Compensation Committee Interlocks and Insider Participation

        The Company does not have a compensation committee. Michael T. DuBose, the Company's Chief Executive Officer, serves on the Board and participates in deliberations with the Board regarding compensation of executive officers, other than his own compensation.

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ITEM 12    SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCK MATTERS

        Vertis is a wholly-owned subsidiary of Vertis Holdings.

        The following table sets forth certain information regarding the beneficial ownership of Vertis Holdings' common stock as of February 29, 2008 for (i) each stockholder who is known by us to beneficially own more than 5% of Vertis Holdings common stock, (ii) each director and executive officer of Vertis and Vertis Holdings, and (iii) all of the directors and executive officers of Vertis and Vertis Holdings as a group.

	Shares Beneficially Owned
Name and Address of Beneficial Owner	Amount and Nature of Ownership(1)	Percentage of Class
Thomas H. Lee Partners L.P. and Affiliates(2) c/o Thomas H. Lee Partners, L.P., 75 State Street, Boston, MA 02109	8,844,938	61.9	%
Evercore Capital Partners L.P. and Affiliates(3) 65 East 55th Street, 33rd Floor, New York, NY 10022	2,114,415	14.8	%
Michael T. DuBose c/o Vertis, Inc., 250 West Pratt Street, Baltimore, MD 21201	600,000	4.2	%
Barry C. Kohn c/o Vertis, Inc., 250 West Pratt Street, Baltimore, MD 21201	250,000	1.7	%
John Colarossi c/o Vertis, Inc., 250 West Pratt Street, Baltimore, MD 21201	7,500	*
John V. Howard, Jr. c/o Vertis, Inc., 250 West Pratt Street, Baltimore, MD 21201	36,610	*
Douglas L. Mann c/o Vertis, Inc., 250 West Pratt Street, Baltimore, MD 21201	7,500	*
Gary L. Sutula c/o Vertis, Inc., 250 West Pratt Street, Baltimore, MD 21201	25,668	*
Donald E. Roland(4) c/o Vertis, Inc., 250 West Pratt Street, Baltimore, MD 21201	72,469	*
Anthony J. DiNovi(5) c/o Thomas H. Lee Partners, L.P., 100 Federal Street, 35th Floor, Boston, MA 02110	7,166,451	50.2	%
Scott M. Sperling(6) c/o Thomas H. Lee Partners, L.P., 100 Federal Street, 35th Floor, Boston, MA 02110	7,166,451	50.2	%
Soren L. Oberg(7) c/o Thomas H. Lee Partners, L.P., 100 Federal Street, 35th Floor, Boston, MA 02110	7,146,253	50.0	%
John T. Dillon(8) c/o Evercore Capital Partners, 55 East 52nd Street, 43rd Floor, New York, NY 10055	2,114,415	14.8	%
Neeraj Mital(9) c/o Evercore Capital Partners, 55 East 52nd Street, 43rd Floor, New York, NY 10055	2,114,415	14.8	%
All Directors and Executive Officers of Vertis and Vertis Holdings as a group (12 persons)(10)	1,044,217	7.3	%

*

Less than one percent.

(1)

This column includes shares which directors and executive officers of Vertis have the right to acquire within 60 days. This column also includes shares of the Company's restricted stock that vest immediately prior to a liquidity event, generally defined as a public offering of the Company's common stock (where immediately following such offering, the aggregate number of shares of

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common stock held by the public, not including affiliates of the Company, represents at least 20% of the total number of outstanding shares), merger or other business combination, or a sale or other disposition of all or substantially all of our assets to another entity for cash and/or publicly traded securities ("Liquidity Event"). Except as otherwise indicated, each person and entity has sole voting and dispositive power with respect to the shares set forth in the table.

(2)

Includes 6,135,560 shares of common stock and warrants to purchase 177,906 shares of common stock held by Thomas H. Lee Equity Fund IV, L.P. ("Fund IV"); 212,097 shares of common stock and warrants to purchase 6,149 shares of common stock held by Thomas H. Lee Foreign Fund IV, L.P. ("Foreign IV"); 595,905 shares of common stock and warrants to purchase 17,278 shares of common stock held by Thomas H. Lee Foreign Fund IV-B, L.P. ("Foreign IV-B"); 1,032 shares of common stock and warrants to purchase 30 shares of common stock held by Thomas H. Lee Investors Limited Partnership ("THLILP"); and 399,727 shares of common stock and warrants to purchase 11,585 shares of common stock held by other affiliates of Thomas H. Lee Partners, L.P. Also includes 1,248,295 shares of common stock and warrants to purchase 39,374 shares of common stock held by CLI/THLEF IV Vertis LLC ("CLI/THLEF").

(3)

Includes 925,225 shares of common stock held by Evercore Capital Partners L.P. ("Evercore Capital"); 222,199 shares of common stock held by Evercore Capital Partners (NQ) L.P. ("Evercore Capital NQ"); and 966,991 shares of common stock controlled by EBF Group LLC ("EBF"), which include 243,936 shares of common stock held by Evercore Capital Offshore Partners L.P., 30,262 shares of common stock held by Evercore Co-Investment Partnership L.P., 277,117 shares of common stock held by Aetna Life Insurance Company and 415,676 shares of common stock held by Capital Communications CDPQ Inc.

(4)

Includes 52,003 shares of common stock and rights entitling Mr. Roland to 20,466 shares of common stock upon the occurrence of certain sales or liquidation of Vertis Holdings.

(5)

Director of Vertis Holdings and Vertis; includes 17,899 shares of common stock and warrants to purchase 519 shares of common stock which are currently exercisable and owned directly by Mr. DiNovi; and 3,042 shares of common stock and warrants to purchase 96 shares of common stock held by CLI/THLEF, which represent Mr. DiNovi's pro rata ownership of those entities. Also includes the 6,135,560 shares of common stock and warrants to purchase 177,906 shares of common stock held by Fund IV; 212,097 shares of common stock and warrants to purchase 6,149 shares of common stock held by Foreign IV; and 595,905 shares of common stock and warrants to purchase 17,278 shares of common stock held by Foreign IV-B. Mr. DiNovi disclaims beneficial ownership of the shares held by Fund IV, Foreign IV, and Foreign IV-B except to the extent of his pecuniary interest therein.

(6)

Director of Vertis Holdings and Vertis; includes 17,899 shares of common stock and warrants to purchase 519 shares of common stock which are currently exercisable and owned directly by Mr. Sperling; 3,042 shares of common stock and warrants to purchase 96 shares of common stock held by CLI/THLEF, which represent Mr. Sperling's pro rata ownership of those entities. Also includes the 6,135,560 shares of common stock and warrants to purchase 177,906 shares of common stock held by Fund IV; 212,097 shares of common stock and warrants to purchase 6,149 shares of common stock held by Foreign IV; and 595,905 shares of common stock and warrants to purchase 17,278 shares of common stock held by Foreign IV-B. Mr. Sperling disclaims beneficial ownership of the shares held by Fund IV, Foreign IV, and Foreign IV-B except to the extent of his pecuniary interest therein.

(7)

Director of Vertis Holdings and Vertis; includes 1,127 shares of common stock and warrants to purchase 33 shares of common stock which are currently exercisable and owned directly by Mr. Oberg; 192 shares of common stock and warrants to purchase 6 shares of common stock held by CLI/THLEF, which represent Mr. Oberg's pro rata ownership of those entities. Also includes the 6,135,560 shares of common stock and warrants to purchase 177,906 shares of common stock held by Fund IV; 212,097 shares of common stock and warrants to purchase 6,149 shares of common stock held by Foreign IV; and 595,905 shares of common stock and warrants to purchase 17,278 shares of common stock held by Foreign IV-B. Mr. Oberg disclaims beneficial ownership of

61

the shares held by Fund IV, Foreign IV and Foreign IV-B except to the extent of his pecuniary interest therein.

(8)

Director of Vertis Holding and Vertis; includes beneficially owned shares in the amount of 925,225 shares of common stock held by Evercore Capital; 222,199 shares of common stock held by Evercore Capital NQ; and 966,991 shares of common stock controlled by EBF. Mr. Dillon disclaims beneficial ownership of the shares held by Evercore Capital, Evercore Capital NQ and EBF except to the extent of her pecuniary interest therein.

(9)

Director of Vertis Holding and Vertis; includes beneficially owned shares in the amount of 925,225 shares of common stock held by Evercore Capital; 222,199 shares of common stock held by Evercore Capital NQ; and 966,991 shares of common stock controlled by EBF. Mr. Mital disclaims beneficial ownership of the shares held by Evercore Capital, Evercore Capital NQ and EBF except to the extent of his pecuniary interest therein. Mr. Mital resigned from his position as a director of Vertis Holdings and Vertis in March 2008.

(10)

Includes 95,204 shares of common stock; rights to 20,466 shares of common stock upon the occurrence of certain sales or liquidation of Vertis Holdings, warrants to purchase 1,269 shares of common stock; and 927,278 shares of restricted stock that vest immediately prior to a Liquidity Event.

ITEM 13    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

        On December 7, 1999, we entered into consulting agreements commencing January 1, 2000 with each of Thomas H. Lee Capital, LLC (an affiliate of Thomas H. Lee Equity Fund IV, LP, a significant stockholder of Vertis Holdings), THL Equity Advisors IV, LLC (an affiliate of Thomas H. Lee Equity Fund IV, LP), and Evercore Advisors Inc. (an affiliate of Evercore Capital Partners, LP, a significant stockholder of Vertis Holdings). Under each agreement, these parties have agreed to provide us with consulting services on matters involving corporate finance, strategic corporate planning and other management skills and services. The annual fees payable to these parties under these agreements amount to approximately $220,000, $780,000 and $250,000, respectively. The payment of these fees was deferred in 2007. Unless otherwise agreed, the consulting agreements with Thomas H. Lee Capital, LLC and THL Equity Advisors IV, LLC expire when certain persons affiliated with THL cease to own at least one third of the number of Vertis Holdings common shares they collectively held immediately after December 7, 1999. The consulting agreement with Evercore Advisors Inc. expires when Evercore Capital Partners, LP and certain of its affiliates cease to own at least one third of the number of Vertis Holdings common shares they collectively held immediately after December 7, 1999. Among our directors of the board, Messrs. DiNovi, Oberg and Sperling are affiliated with THL and Mr. Dillon is affiliated with ECP. See Item 10, "Directors, Executive Officers and Corporate Governance".

        On December 7, 1999, Vertis Holdings issued to certain of its equity investors $100.0 million aggregate principal amount of 12.0% mezzanine notes as part of a unit including warrants to purchase common stock of Vertis Holdings at the time of Vertis Holdings' recapitalization. Effective December 2004, interest will continue to be 13% payable in-kind unless certain conditions set forth in the credit agreement are met. In addition, the Company's indentures include covenants that restrict payments from the Company to Vertis Holdings.

        Prior to Barry Kohn's appointment to Chief Financial Officer in May 2007, Mr. Kohn was engaged by the Company to provide consulting services under a consulting agreement entered into in 2007. Under this agreement, the Company paid Mr. Kohn approximately $0.2 million in consulting fees and expenses in 2007.

        Our audit committee charter requires that the audit committee review and approve all related party transactions and discuss such transactions and their appropriate disclosure in our financial statements with management and the independent auditors.

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ITEM 14    PRINCIPAL ACCOUNTANT FEES AND SERVICES

        The following table presents fees for professional audit services rendered by Deloitte & Touche LLP, the member firms of Deloitte Touche Tohmatsu, and their respective affiliates (collectively, the "Deloitte Entities") for the audit of our consolidated annual financial statements for the years ended December 31, 2007 and 2006, and fees billed for other services rendered by Deloitte Entities.

	Year ended December 31,
	2007		2006
	(in thousands)
Audit fees(1)	$	1,330	$	1,295
Audit-related fees(2)		836		175
Tax fees(3)		60		143
Total fees billed	$	2,226	$	1,613

(1)

Audit fees consist of fees for professional services rendered for the audit of our consolidated financial statements, review of financial statements included in our quarterly reports, comfort letters and other services related to SEC matters, as well as services that are normally provided by the independent registered public accounting firm in connection with statutory and regulatory filings or engagements.

(2)

Audit-related fees in 2007 consist mainly of $0.1 million in fees for services related to Sarbanes-Oxley Section 404 readiness and $0.7 million in fees related to due-diligence.

(3)

Tax fees primarily consist of fees paid for tax consulting related to some leveraged lease and UK tax issues.

Audit Committee Pre-Approval Policies

        The audit committee has established pre-approval policies and procedures pursuant to which the audit committee must approve all audit and non-audit engagement fees and terms on a case-by-case basis (other than with respect to de minimis exceptions permitted by the Sarbanes-Oxley Act of 2002). The audit committee is also responsible for considering, to the extent applicable, whether the independent auditors' provision of other non-audit services to the Company is compatible with maintaining the independence of the independent auditors. In accordance with the pre-approval policies and procedures of the audit committee, the Company's management is authorized to retain the independent auditors to provide audit related services in addition to the annual audit, including services related to SEC filings, accounting and reporting research and consultations, internal control reviews, quarterly reviews, benefit plan audits, consultations as to regulatory issues regarding benefit plans, statutory audits of subsidiaries, attest services, acquisition due diligence services and corporate and subsidiary tax compliance and consulting services. Any additional services must be specifically pre-approved on an individual basis by the audit committee prior to the engagement of the independent auditor. The authority for such pre-approval may be delegated to one or more designated members of the audit committee with any such pre-approval reported to the audit committee at its next regularly scheduled meeting.

        All services provided by Deloitte Entities in fiscal 2007 were pre-approved by the audit committee or its designee.

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PART IV

Item 15.    Exhibits and Financial Statement Schedules

(a)

Documents filed as part of this Report:

1.

Consolidated Financial Statements

The consolidated financial statements required to be filed in this Annual Report on Form 10-K are listed on page F-1 hereof.

2.

Financial Statement Schedules

The financial statement schedule required in this Annual Report on Form 10-K is listed on page F-1 hereof. The required schedule appears on page F-42 hereof.

3.

Exhibits

3.1	Restated Certificate of Incorporation of Vertis, Inc.(7)
3.2	Amended and Restated By-Laws of Vertis, Inc.(1)
4.1	Indenture, dated as of June 24, 2002, among Vertis, Inc, (the "Company"), as Issuer, the Company's subsidiaries listed on the signature pages thereof (the "Subsidiary Guarantors") and the Bank of New York, as trustee(1)
4.2	Indenture, dated as of June 6, 2003 (the "Indenture"), among the Company as Issuer, the Subsidiary Guarantors and the Bank of New York, as Trustee.(2)
4.3	U.S. Security Agreement, dated December 7, 1999 and amended and restated as of June 6, 2003, among the Company, the Subsidiary Guarantors, Vertis Holdings, Inc. and certain of its subsidiaries listed on the signature page thereto, and GE Capital, as Collateral Agent(4)
4.4	Indenture, dated as of February 28, 2003, among the Company as Issuer, the subsidiary guarantors listed on the signature pages thereof and the Bank of New York, as Trustee.(7)
10.1	$200,000,000 Credit Agreement dated December 22, 2004 by and among Vertis, Vertis Limited, Vertis Digital Services Limited, General Electric Capital Corporation, GECC Capital Markets Group, Inc., Bank of America, N.A. and the other lenders and credit parties named therein.(5)
10.2	Limited Consent and Amendment No. 1 to Credit Agreement, dated as of October 3, 2005 by and among Vertis, Vertis Limited and Vertis Digital Services Limited, as Borrowers, the other Credit Parties signatory hereto, General Electric Capital Corporation, as a Lender and as Agent for Lenders and the other Lenders.(6)
10.3	Amendment No. 2 to Credit Agreement, dated as of November 22, 2005 by and among Vertis and Vertis Digital Services Limited, as Borrowers, the other Credit Parties signatory hereto, General Electric Capital Corporation, as a Lender and as Agent for Lenders, and the other Lenders.(6)
10.4	Limited Consent and Amendment No. 3 to Credit Agreement, dated as of December 12, 2005 by and among Vertis and Vertis Digital Services Limited, as Borrowers, the other Credit Parties signatory hereto, General Electric Capital Corporation, as a Lender and as Agent for Lenders, and the other Lenders.(6)

64

10.5	Amendment No. 4 to Credit Agreement, dated as of May 30, 2006 by and among Vertis as Borrower, the other Credit Parties signatory hereto, General Electric Capital Corporation, as a Lender and as Agent for Lenders, and the other Lenders.(7)
10.6	Limited Consent and Amendment No. 5 to Credit Agreement, dated as of September 5, 2006 by and among Vertis as Borrower, the other Credit Parties signatory hereto, General Electric Capital Corporation, as a Lender and as Agent for Lenders, and the other Lenders.(7)
10.7	Limited Consent and Amendment No. 6 to Credit Agreement, dated as of November 27, 2006 by and among Vertis as Borrower, the other Credit Parties signatory hereto, General Electric Capital Corporation, as a Lender and as Agent for Lenders, and the other Lenders.(7)
10.8	Receivables Sale and Servicing Agreement dated November 25, 2005 by and among each of the Entities Party Hereto From Time to Time as Originators, Vertis Receivables II, LLC as Buyer and Vertis, Inc. as Servicer.(6)
10.9	Receivables Funding Administration Agreement dated as of November 25, 2005 by and among Vertis Receivables II, LLC, as Borrower, the Financial Institutions Signatory Hereto From Time to Time, as Lenders, and General Electric Capital Corporation, as a Lender, as Swing Line Lender and as Administrative Agent.(6)
10.10	Annex X to Receivables Sale and Servicing Agreement and Receivables Funding Administration Agreement dated as of November 25, 2005.(6)
10.11	First Amendment to Receivables Funding Administration Agreement dated as of September 5, 2006 by and among Vertis Receivables II, LLC, as Borrower, the Financial Institutions Signatory Hereto From Time to Time, as Lenders, and General Electric Capital Corporation, as a Lender, as Swing Line Lender and as Administrative Agent.(7)
10.12	Stock Purchase Agreement dated September 18, 2002 by and among Vertis Holdings and Dean D. Durbin.(3)†
10.13	Stock Purchase Agreement dated September 20, 2002 by and among Vertis Holdings and John V. Howard, Jr.(3)†
10.14	Letter Agreement dated March 29, 2006 by and among Vertis, Vertis Holdings and Donald Roland.(7)†
10.15	Employment Agreement dated August 31, 2003 by and among Vertis, Vertis Holdings and Dean D. Durbin.(4)†
10.16	Employment Agreement dated August 31, 2003 by and among Vertis, Vertis Holdings and John Howard.(4)†
10.17	Memo of Understanding dated November 12, 2004 by and between Vertis and Dean D. Durbin amending Mr. Durbin's Employment Agreement dated August 31, 2003.(5)†
10.18	Employment Agreement dated January 11, 2005 by and between Vertis and Gary L. Sutula.(5)†
10.19	Letter Agreement dated March 9, 2006 amending Employment Agreement dated August 31, 2003 by and among Vertis, Vertis Holdings and Dean D. Durbin.(6)†

65

10.20	Employment Agreement dated November 28, 2006, by and among Vertis, Vertis Holdings and Michael T. DuBose.(8)†
10.21	Letter Agreement dated January 2, 2007 by and between Vertis and Dean D. Durbin regarding separation from employment.(7)†
10.22	Offer Letter and Business Responsibility Agreement dated January 10, 2007 by and between Vertis and Doug L. Mann.(7)†
10.23	Independent Contractor Agreement dated February 12, 2007, by and between Vertis and Barry C. Kohn(10)
10.24	Letter Agreement dated May 31, 2007 by and between Vertis and Stephen E. Tremblay regarding transition arrangement.(9)
10.25	Letter Agreement dated September 17, 2007 by and among Vertis, Vertis Holdings and John Howard.(10)†
10.26	Letter Agreement dated November 18, 2007, by and among Vertis, Vertis Holdings and Michael T. DuBose.(10)†
10.27	Employment Agreement dated December 18, 2007, by and among Vertis, Vertis Holdings and Barry C. Kohn.(10)†
10.28	Letter Agreement dated January 31, 2008, by and among Vertis, Vertis Holdings and Michael T. DuBose.(10)†
10.29	Letter Agreement dated February 18, 2008, by and among Vertis, Vertis Holdings and Barry C. Kohn.(10)†
10.30	Restricted Stock Incentive Memo dated April 5, 2004 on behalf of Vertis Holdings, Inc to Dean D. Durbin.(5)†
10.31	Restricted Stock Incentive Memo dated April 5, 2004 on behalf of Vertis Holdings, Inc to John V. Howard, Jr.(5)†
10.32	Restricted Stock Incentive Memo dated April 5, 2004 on behalf of Vertis Holdings, Inc to Donald E. Roland.(5)†
10.33	Restricted Stock Agreement dated May 20, 2004 by and among Vertis Holdings, Inc., Thomas H. Lee Equity Fund IV, L.P. and Dean D. Durbin.(5)†
10.34	Restricted Stock Agreement dated May 20, 2004 by and among Vertis Holdings, Inc., Thomas H. Lee Equity Fund IV, L.P. and John V. Howard, Jr.(5)†
10.35	Restricted Stock Agreement dated May 20, 2004 by and among Vertis Holdings, Inc., Thomas H. Lee Equity Fund IV, L.P. and Donald E. Roland.(5)†
10.36	Restricted Stock Agreement dated February 23, 2007, by and among Vertis Holdings, Inc., Thomas H. Lee Equity Fund IV, L.P. and John R. Colarossi(10)†
10.37	Restricted Stock Agreement dated February 23, 2007, by and among Vertis Holdings, Inc., Thomas H. Lee Equity Fund IV, L.P. and Doug L. Mann(10)†
10.38	Restricted Stock Agreement dated January 7, 2008, by and among Vertis Holdings, Inc., Thomas H. Lee Equity Fund IV, L.P. and Michael T. DuBose(10)†
10.39	Restricted Stock Agreement dated February 5, 2008, by and among Vertis Holdings, Inc., Thomas H. Lee Equity Fund IV, L.P. and Barry C. Kohn (10)†

66

10.40	Relocation Agreement dated December 26, 2007, by and between John V. Howard and American International Relocation Solutions, LLC.(10)†
10.41	Executive Incentive Plan for Vertis Executives dated March 1, 2005.(6)†
10.42	Employee Incentive Plan for Vertis Executives dated February 1, 2006.(6)†
10.43	Employee Incentive Plan for Vertis Executives dated January 1, 2007.(7)†
10.44	Vertis Holdings, Inc. 1999 Equity Award Plan.(6)†
10.45	Unanimous Written Consent of the Board of Directors of Vertis Holdings, Inc. changing the name of the Equity Award Plan to Vertis Holdings, Inc. 1999 Equity Award Plan.(6)†
10.46	Management Services Agreement dated December 7, 1999 between Thomas H. Lee Capital, LLC and Big Flower Holdings, Inc., predecessor in interest to Vertis Holdings, Inc.(7)
10.47	First Amendment to the Management Services Agreement between Thomas H. Lee Capital, LLC and Big Flower Holdings, Inc., predecessor in interest to Vertis Holdings, Inc. dated July 17, 2007(9)
10.48	Management Services Agreement dated December 7, 1999 between THL Equity Advisors IV, LLC and Big Flower Holdings, Inc., predecessor in interest to Vertis Holdings, Inc.(7)
10.49	First Amendment to the Management Services Agreement between THL Equity Advisors IV, LLC and Big Flower Holdings, Inc., predecessor in interest to Vertis Holdings, Inc. dated April 11, 2007(9)
10.50	Management Services Agreement dated December 7, 1999 between Evercore Advisors, Inc. and Big Flower Holdings, Inc., predecessor in interest to Vertis Holdings, Inc.(7)
10.51	First Amendment to the Management Services Agreement between Evercore Advisors, Inc. and Big Flower Holdings, Inc., predecessor in interest to Vertis Holdings, Inc. dated April 4, 2007(9)
10.52	Limited Consent and Amendment No. 7 to Credit Agreement, dated as of March 30, 2007, by and among Vertis, as Borrower, the other Credit Parties signatory hereto, General Electric Capital Corporation, as a Lender and as Agent for Lenders, the other Lenders, and Crystal Capital Fund, L.P, as a Joint-Lead Arranger.(7)
10.53	Second Amendment, dated March 30, 2007, to (i) that certain Receivables Funding and Administration Agreement, dated as of November 25, 2005 (as amended pursuant to that certain First Amendment dated as of September 5, 2006), among Vertis Receivables II, LLC, as Borrower, the Financial Institutions From Time To Time Party Thereto, as Lenders, and General Electric Capital Corporation, as administrative agent for the Lenders and (ii) that certain Receivables Sale and Servicing Agreement, dated as of November 25, 2005 among Borrower, Vertis, as Servicer, and each of the Entities Party Hereto From Time to Time as Originators.(7)
12.1	Statement re computation of ratios of earnings to fixed charges.(10)
21.1	List of subsidiaries of Vertis, Inc.(10)
31.1	Certification of Michael T. DuBose, Chairman and Chief Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act 0f 2002.(10)

67

31.2
Certification of Barry C. Kohn, Chief Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act 0f 2002.(10)

(1)

Incorporated by reference from the Registrant's registration statement on Form S-4 (No. 333-97721).

(2)

Incorporated by reference from the Registrant's registration statement on Form S-4 (No. 333-106435).

(3)

Incorporated by reference from the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2002.

(4)

Incorporated by from the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2003.

(5)

Incorporated by reference from the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2004.

(6)

Incorporated by reference from the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2005.

(7)

Incorporated by reference from the Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 2006.

(8)

Incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the three months ended March 31, 2007

(9)

Incorporated by reference from the Registrant's Quarterly Report on Form 10-Q for the three months ended June 30, 2007

(10)

Filed herewith.

†

This exhibit is a management contract or a compensatory plan or arrangement.

68

SIGNATURES

        Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

VERTIS, INC.
BY:	/s/  MICHAEL T. DUBOSE Name: Michael T. DuBose Title: Chairman and Chief Executive Officer

Date: March 31, 2008

        Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below on behalf of the registrant and in the capacities and on the dates indicated.

Signatures	Capacity	Date
/s/  MICHAEL T. DUBOSE Michael T. DuBose	Chairman and Chief Executive Officer (Principal Executive Officer)	March 31, 2008
/s/  BARRY C. KOHN Barry C. Kohn	Chief Financial Officer (Principal Financial and Accounting Officer)	March 31, 2008
/s/  JOHN T. DILLON John T. Dillon	Director	March 31, 2008
/s/  ANTHONY J. DINOVI Anthony J. DiNovi	Director	March 31, 2008
/s/  DONALD E. ROLAND Donald E. Roland	Director	March 31, 2008
/s/  SOREN L. OBERG Soren L. Oberg	Director	March 31, 2008
/s/  SCOTT M. SPERLING Scott M. Sperling	Director	March 31, 2008

69

VERTIS, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets at December 31, 2007 and 2006	F-3
Consolidated Statements of Operations for the Years Ended December 31, 2007, 2006 and 2005	F-4
Consolidated Statements of Stockholder's Deficit for the Years Ended December 31, 2007, 2006 and 2005	F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2007, 2006 and 2005	F-6
Notes to Consolidated Financial Statements	F-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholder of
Vertis, Inc. and subsidiaries:
Baltimore, Maryland

        We have audited the accompanying consolidated balance sheets of Vertis, Inc. and subsidiaries (the "Company"), a wholly-owned subsidiary of Vertis Holdings, Inc. as of December 31, 2007 and 2006, and the related consolidated statements of operations, stockholder's deficit, and cash flows for each of the three years in the period ended December 31, 2007. Our audits also included the financial statement schedule referred to in the Index at Item 15. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audits.

        We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Vertis, Inc. and subsidiaries at December 31, 2007 and 2006, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

        The accompanying financial statements have been prepared assuming that Vertis, Inc. will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company has incurred recurring net losses and is experiencing difficulty in generating sufficient cash flow to meet its obligations and sustain its operations, which raise substantial doubt about its ability to continue as a going concern. Management's plans concerning these matters are also discussed in Note 2 to the consolidated financial statements. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ Deloitte & Touche LLP

Baltimore, Maryland
March 31, 2008

F-2

Vertis, Inc. and Subsidiaries

Consolidated Balance Sheets

In thousands, except per share amounts

As of December 31,			2007			2006
ASSETS
Current Assets:
	Cash and cash equivalents		$	6,217		$	5,710
	Accounts receivable			84,267			139,426
	Inventories			42,776			48,227
	Maintenance parts, net			20,291			22,292
	Prepaid expenses and other current assets			10,366			8,578
		Total current assets		163,917			224,233
Property, plant and equipment, net				328,026			330,039
Goodwill							246,260
Deferred financing costs, net				9,629			14,838
Other intangible assets				2,659			4,219
Other assets, net				23,935			25,097
		Total assets	$	528,166		$	844,686
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current Liabilities:
	Accounts payable		$	136,758		$	186,638
	Compensation and benefits payable			39,733			34,755
	Accrued interest			13,889			14,300
	Current portion of long-term debt			165,454			5
	Other current liabilities			25,784			29,062
		Total current liabilities		381,618			264,760
Due to parent				3,277			3,491
Long-term debt				987,118			1,096,036
Other long-term liabilities				31,236			30,482
		Total liabilities		1,403,249			1,394,769
Stockholder's deficit:
	Common stock—authorized 3,000 shares; $0.01 par value; issued and outstanding 1,000 shares
	Contributed capital			409,689			409,689
	Accumulated deficit			(1,279,960	)		(953,090	)
	Accumulated other comprehensive loss			(4,812	)		(6,682	)
		Total stockholder's deficit		(875,083	)		(550,083	)
		Total liabilities and stockholder's deficit	$	528,166		$	844,686

See Notes to Consolidated Financial Statements.

F-3

Vertis, Inc. and Subsidiaries

Consolidated Statements of Operations

In thousands

Year Ended December 31,			2007			2006			2005
Revenue			$	1,365,154		$	1,468,661		$	1,470,088
Operating expenses:
	Costs of production			1,081,612			1,160,392			1,140,582
	Selling, general and administrative			152,524			142,916			149,395
	Goodwill impairment			246,527
	Restructuring charges			10,912			16,001			17,119
	Depreciation and amortization of intangibles			57,356			58,788			62,829
		Total operating expenses		1,548,931			1,378,097			1,369,925
Operating (loss) income				(183,777	)		90,564			100,163
Other expenses:
	Interest expense, net			134,644			131,023			128,821
	Other, net			7,685			7,337			7,653
Total other expenses				142,329			138,360			136,474
Loss from continuing operations before income taxes and cumulative effect of accounting change				(326,106	)		(47,796	)		(36,311	)
Income tax expense (benefit)				388			(1	)		(8,070	)
Loss from continuing operations before cumulative effect of accounting change				(326,494	)		(47,795	)		(28,241	)
Discontinued operations:
	(Loss) income from discontinued operations			(251	)		21,600			(143,389	)
Loss before cumulative effect of accounting change				(326,745	)		(26,195	)		(171,630	)
Cumulative effect of accounting change				—			—			(1,600	)
Net loss			$	(326,745	)	$	(26,195	)	$	(173,230	)

See Notes to Consolidated Financial Statements.

F-4

Vertis, Inc. and Subsidiaries

Consolidated Statements of Stockholder's Deficit

In thousands, except where otherwise noted

		Shares	Common Stock		Contributed Capital			Accumulated Deficit			Accumulated Other Comprehensive Income (Loss)			Total
Balance at January 1, 2005		1	$	—	$	409,059		$	(753,661	)	$	(3,958	)	$	(348,560	)
Net loss(1)									(173,230	)					(173,230	)
Currency translation adjustment(1)												(4,294	)		(4,294	)
Minimum pension liability adjustment												(420	)		(420	)
	Comprehensive loss														(177,944	)
Dividends to parent									(4	)					(4	)
Capital contributions by parent						660									660
Other						(30	)								(30	)
Balance at December 31, 2005		1		—		409,689			(926,895	)		(8,672	)		(525,878	)
Net loss									(26,195	)					(26,195	)
Currency translation adjustment												31			31
Minimum pension liability adjustment												3,208			3,208
	Comprehensive loss														(22,956	)
Adjustment related to the adoption of SFAS 158												(1,249	)		(1,249	)
Balance at December 31, 2006		1				409,689			(953,090	)		(6,682	)		(550,083	)
Net loss									(326,745	)					(326,745	)
Currency translation adjustment												115			115
Defined benefit plan liability adjustment												1,755			1,755
	Comprehensive loss														(324,875	)
Adjustment related to the adoption of FIN 48									(125	)					(125	)
Balance at December 31, 2007		1	$	—	$	409,689		$	(1,279,960	)	$	(4,812	)	$	(875,083	)

(1)

Includes a $1.4 million reclassification adjustment related to a translation gain realized upon the sale of the Company's Europe segment (see Note 4.)

See Notes to Consolidated Financial Statements.

F-5

Vertis, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

In thousands

Year Ended December 31,			2007			2006			2005
Cash Flows from Operating Activities:
	Net loss		$	(326,745	)	$	(26,195	)	$	(173,230	)
	Adjustments for discontinued operations			251			(21,600	)		143,389
	Net loss from continuing operations			(326,494	)		(47,795	)		(29,841	)
	Adjustments to reconcile net loss from continuing operations to net cash provided by continuing operating activities:
		Depreciation and amortization		57,356			58,788			62,829
		Amortization of deferred financing costs		7,193			6,306			7,265
		Accretion of long-term debt discounts		3,962			3,961			3,961
		Goodwill impairment		246,527
		Gain on sale leaseback		(2,940	)
		Cumulative effect of accounting change								1,600
		Provision for doubtful accounts		463			942			1,544
		Other, net		1,707			2,544			1,532
		Changes in operating assets and liabilities (excluding effect of acquisitions and dispositions):
		Decrease (increase) in accounts receivable		54,632			9,078			(7,537	)
		Decrease (increase) in inventories		5,451			5,211			(10,664	)
		Decrease (increase) in prepaid expenses and other assets		441			2,234			(5,574	)
		Decrease in accounts payable and other liabilities		(30,551	)		(28,033	)		(19,263	)
Net cash provided by continuing operating activities				17,747			13,236			5,852
	Net (loss) income from discontinued operations			(251	)		21,600			(143,389	)
	Change in net assets of discontinued operations held for sale						(23,146	)		143,230
Net cash used in discontinued operations				(251	)		(1,546	)		(159	)
Net cash provided by operating activities				17,496			11,690			5,693
Cash Flows from Investing Activities:
	Capital expenditures			(63,914	)		(46,936	)		(40,165	)
	Software development costs capitalized			(1,303	)		(2,049	)		(2,032	)
	Proceeds from sale of property, plant and equipment			576			785			1,021
	Proceeds from sale leaseback transaction			10,691
	Acquisition of business, net of cash acquired			(203	)		(21,017	)		(3,430	)
	Proceeds from sale of discontinued operations, net			1,000			41,071			2,361
	Investing activities of discontinued operations									(1,520	)
Net cash used in investing activities				(53,153	)		(28,146	)		(43,765	)
Cash Flows from Financing Activities:
	Net borrowings under revolving credit facilities			2,574			41,470			21,197
	Borrowing under term loan			50,000
	Repayments of long-term debt						(34	)		(6	)
	Deferred financing costs			(1,982	)		(388	)		(1,204	)
	(Decrease) increase in outstanding checks drawn on controlled disbursement accounts			(14,328	)		(21,807	)		15,030
	Dividends to parent									(4	)
	(Advances to) distributions from parent			(214	)		(480	)		1,150
	Financing activities of discontinued operations						1,546			3,169
Net cash provided by financing activities				36,050			20,307			39,332
Effect of exchange rate changes on cash				114			31			(2,070	)
Net increase (decrease) in cash and cash equivalents				507			3,882			(810	)
Cash and cash equivalents at beginning of year				5,710			1,828			2,638
Cash and cash equivalents at end of year			$	6,217		$	5,710		$	1,828

See Notes to Consolidated Financial Statements.

F-6

Vertis, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

1.     BASIS OF PRESENTATION

        Principles of Consolidation—The consolidated financial statements include those of Vertis, Inc. and its subsidiaries (together, the "Company"). All significant intercompany balances and transactions have been eliminated.

        Ownership—The Company is a wholly-owned subsidiary of Vertis Holdings, Inc. ("Vertis Holdings").

        Business—The Company is one of the leading printers of advertising inserts, newspaper products and direct mail services in the United States. The Company operates in two segments: Advertising Inserts and Direct Mail. Additionally, the Company provides other services which will be referred to as "Corporate and Other" for discussion in these financial statements (see Note 21).

        Use of Estimates—The Company's management must make estimates and assumptions in preparing financial statements in conformity with accounting principles generally accepted in the United States of America ("generally accepted accounting principles"). These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses. Actual results could differ from those estimates.

2.     GOING CONCERN

        The Company's ability to continue as a going concern is uncertain. The primary factors contributing to this uncertainty are twofold: the Company is highly leveraged with a history of recording net losses, mainly due to large interest payments on the Company's long-term debt, and the Company's primary sources of financing, the Credit Facility (as defined in Note 11) and the A/R Facility (as defined in Note 7), both mature in December 2008. The Company will not have sufficient liquidity to make the principal payment on the Credit Facility upon the maturity date unless the Company is able to refinance or replace its existing indebtedness. The Company's ability to continue as a going concern is dependent upon the Company's ability to refinance the Credit Facility and the A/R Facility or obtain alternate financing. The refinancing of these facilities will likely require an agreement with the holders of the Company's notes, as described below. The Company's consolidated financial statements do not include any adjustments that might result from this uncertainty.

        To preserve the Company as a going concern and strengthen the Company's business, management is exploring various alternatives, including refinancing the Credit Facility, obtaining new financing, and/or effectuating a strategic acquisition or merger. Further, the Company's management has engaged in discussions with holders of the Company's 9³/4% senior secured second lien notes, 10⁷/8% senior notes and 13¹/2% senior subordinated notes on the terms of a debt exchange, which would restructure a portion of the Company's debt and provide the Company with increased liquidity. As an option, the debt exchange may be accomplished on a negotiated basis with our lenders through a pre-packaged or pre-arranged bankruptcy restructuring plan. There is no assurance that a debt exchange will be agreed to, and the Company is considering all available options. The Company currently has no plans for asset sales other than excess real estate or in the normal course of business, nor does it foresee any potential discontinued operations.

        While management is committed to pursuing one or more options, due to the factors discussed above, there are doubts about the Company's ability to continue as a going concern, and thus, the Company's ability to realize its assets or satisfy its liabilities in the normal course of business. As part of the Company's strategy to preserve and enhance near-term liquidity, it may elect to forego making

F-7

the $17.1 million interest payment on the 9³/4% senior secured second lien notes due on April 1, 2008. Under the terms of the indenture governing these notes, the Company has a thirty-day grace period in which to make this interest payment before it would be an event of default. If the Company elects not to make the interest payments, they will be seeking a waiver from the holders of the notes; to the extent waivers are not received and the interest payments are not made within a thirty-day grace period, it will be an event of default under the indenture. A failure to make the interest payment could result in an election by our lenders to accelerate the Company's indebtedness as well as terminate availability under our Credit Facility. The Company's consolidated financial statements were prepared on a going-concern basis, which contemplates the realization of assets and satisfaction of liabilities in the normal course of business.

3.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

        Revenue Recognition—The Company provides a wide variety of print and print related services and products for specific customers, primarily under contract. Revenue is not recognized until the earnings process has been completed. Print revenue is recognized when the product is shipped. Revenue from premedia operations is recognized upon the completion of orders. Unbilled receivables are recorded for completed services or products which remain unbilled as of the period end.

        The Company charges customers for shipping and handling charges. The amounts billed to customers are recorded as revenue and actual charges paid by the Company are included in costs of production in the consolidated statements of operations.

        The Company bills its customers for sales tax calculated on each sales invoice and records a liability for the sales tax payable, which is included in other current liabilities on the Company's consolidated balance sheet. Sales tax billed to a customer is not included in the Company's revenue.

        Cash and Cash Equivalents—Cash equivalents include all investments with initial maturities of 90 days or less. As the Company's cash management program utilizes zero-balance accounts, book overdrafts in these accounts are reclassified as current liabilities, and the fluctuation within these accounts is shown as the change in outstanding checks drawn on controlled disbursement accounts in the financing section of the Company's consolidated statements of cash flows.

        Provision for Doubtful Accounts—The Company maintains allowances for doubtful accounts for estimated losses resulting from the failure of its customers to make payments. The Company estimates the allowance based on historical trends and specific customer risks on a customer-by-customer basis. Amounts are charged against the allowance for doubtful accounts reserve when deemed uncollectible.

        Inventories—Inventories are recorded at the lower of cost or market determined primarily on the first-in, first-out method.

        Maintenance Parts—The Company maintains a supply of maintenance parts, primarily cylinders, drive motors, rollers and gear boxes, which are classified as current assets on the Company's consolidated balance sheets with the long-term portion included in Other assets, net.

        Long-lived Assets—Property, plant and equipment are stated at cost. Depreciation is computed using the straight-line method over the assets' estimated useful lives, or when applicable, the terms of the leases, if shorter. Capitalized interest is computed on projects over $0.5 million, if they extend over a period of time, and is calculated using an estimated rate that approximates the interest rate on the Company's revolving credit facility (see Note 11). Capitalized interest is included in the machinery and equipment component of property, plant and equipment (see Note 9) as the larger dollar-value projects primarily represent the rebuilding of press equipment for the Company's internal use.

        The Company evaluates the recoverability of its long-lived assets, including property, plant and equipment and intangible assets, when there are changes in economic circumstances or business objectives that indicate the carrying value may not be recoverable. The Company's evaluations include

F-8

estimated future cash flows, profitability and estimated future operating results and other factors determining fair value. As these assumptions and estimates may change over time, it may or may not be necessary to record impairment charges. The Company performed an impairment evaluation on its long-lived assets, excluding goodwill, at December 31, 2007, and determined there was no impairment on its other long-lived assets as the undiscounted cash flows exceeded the carrying value of these assets. The Company also tested its goodwill for impairment at this time, the results of which are discussed below and in Note 5.

        Certain direct development costs associated with internal-use software are capitalized, including payroll costs for employees devoting time to the software projects and external costs of material and services by third-party providers. These costs are included in internally developed computer software on the consolidated balance sheet and are being amortized beginning when the asset is substantially ready for use. Costs incurred during the preliminary project stage, as well as maintenance and training costs, are expensed as incurred.

        Intangible assets other than goodwill, which include trademarks, a customer base and a non-compete agreement, are amortized over the terms of the related agreements or life of the intangible asset. Deferred financing costs are amortized over the terms of the related financing instruments.

        Goodwill—Goodwill is accounted for under the Statement of Financial Accounting Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). Under the provisions of this statement, the Company's goodwill is tested for impairment on an annual basis or if events occur or circumstances change that would likely cause the fair value of the goodwill to be below the carrying value. The Company elected January 1 of each year as the annual test date. Each of the Company's reporting units is tested for impairment by comparing the fair value of the reporting unit with the carrying value of that unit. Fair value is determined based on a valuation study performed by the Company using the discounted cash flow method and the guideline company approach to estimate the fair value of the reporting units. See Note 5 for discussion of the Company's non-cash goodwill impairment charge recorded in the fourth quarter of 2007. See Note 4 for discussion of the Europe impairment loss recorded in 2005. There was no goodwill impairment noted in 2006.

        Income Taxes—Income taxes are accounted for under the asset and liability method as outlined in SFAS No. 109 "Accounting for Income Taxes" ("SFAS 109"). Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes, and operating loss and tax credit carryforwards. The Company records net deferred tax assets to the extent they believe these assets will more likely than not be realized. In making such determination, the Company considers all available positive and negative evidence, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies and recent financial operations. In the event the Company were to determine that it would be able to realize its deferred income tax assets in the future in excess of its net recorded amount, the Company would make an adjustment to the valuation allowance, which would reduce the provision for income taxes.

        In July 2006, the FASB issued Financial Interpretation ("FIN") No. 48, "Accounting for Uncertainty in Income Taxes" ("FIN 48"), which clarifies the accounting for uncertainty in income taxes recognized in the financial statements in accordance with SFAS 109. FIN 48 provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation processes, based on the technical merits. Income tax positions must meet a more-likely-than-not recognition threshold at the effective date to be recognized upon the adoption of FIN 48 and in subsequent periods. This interpretation also provides guidance on measurement, derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. FIN 48 is effective for fiscal years beginning after December 15, 2006. The Company adopted the provisions of

F-9

FIN 48 on January 1, 2007. As a result of the implementation of FIN 48, the Company recognized approximately a $0.1 million increase in the liability for unrecognized tax benefits, which was accounted for as an increase to the January 1, 2007, balance of stockholder's deficit.

        The Company recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the accompanying consolidated statement of operations. Accrued interest and penalties are included within the related tax liability line in the consolidated balance sheet.

        The provision for federal income taxes recorded by the Company represents the amount calculated as outlined by SFAS 109 and allocated in accordance with a tax-sharing arrangement with Vertis Holdings. State and foreign income taxes represent actual amounts paid or payable by the Company.

        Fair Value of Financial Instruments—The Company determines the fair value of its financial instruments as follows:

        Cash and Cash Equivalents, Accounts Receivable and Accounts Payable—Carrying amounts approximate fair value because of the short maturities of these instruments.

        Credit Facility—Carrying amount approximates fair value because its interest rates are based on variable reference rates.

        Long-Term Debt (Excluding Revolving Credit Facility)—The fair value of the senior secured second lien notes, with a principal amount of $350.0 million, approximated $322 million and $361 million at December 31, 2007 and 2006, respectively. The fair value of the senior unsecured notes, with a principal amount of $350.0 million, approximated $213 million and $351 million at December 31, 2007 and 2006, respectively. The aggregate fair value of the remaining debt outstanding at December 31, 2007 and 2006, with a principal amount of $294 million, approximated $87 million and $264 million, respectively. See Note 2 for factors contributing to the decline in the fair value of our long-term debt.

        Asset Retirement Obligations—The Company accounts for asset retirement obligations under SFAS 143, "Accounting for Asset Retirement Obligations", as interpreted by FIN 47, "Accounting for Conditional Asset Retirement Obligations", whereby the Company recognizes a liability for the fair value of conditional asset retirement obligations if the fair value of the liability can be reasonably estimated. The Company recorded a $1.6 million cumulative effect of accounting change for the twelve months ended December 31, 2005 as a result of adopting FIN 47 on December 31, 2005. There were no material changes to the liability recognized for asset retirement obligations in 2006 or 2007, except for normal accretion expense.

        Stock Based Compensation—Employees of the Company participate in Vertis Holdings' 1999 Equity Award Plan (the "Stock Plan"), which authorizes grants of stock options, restricted stock, performance shares and other stock based awards. The Company has options, restricted shares, retained shares and rights outstanding under the Stock Plan at December 31, 2007. The Company accounts for these stock based awards under SFAS No. 123 (revised), "Share-Based Payments" ("SFAS 123R"), which requires all share-based payments to employees, including grants of employee stock options and restricted stock, to be recognized in the Company's financial statements based on their grant date fair values. The Company adopted SFAS 123R on January 1, 2006, applying the modified prospective transition method outlined in the Statement. The adoption of this Statement did not have a material impact on the Company's consolidated financial position or results of operations. See Note 16, "Vertis Holdings Share Based Compensation", for further discussion.

        Concentration of Credit Risk—The Company provides services to a wide range of clients who operate in many industry sectors in varied geographic areas. The Company grants credit to all qualified clients and does not believe that it is exposed to undue concentration of credit risk to any significant degree.

F-10

        New Accounting Pronouncements—In February 2006, the Financial Accounting Standards Board ("FASB") issued the Statement of Financial Accounting Standards ("SFAS") No. 155, "Accounting for Certain Hybrid Financial Instruments—an amendment of Statements No. 133 and 140" ("SFAS 155"), which amends SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" and SFAS No. 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities". SFAS 155 permits fair value remeasurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No. 133, establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives, and amends SFAS No. 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS 155 was effective for the Company for all financial instruments acquired or issued after January 1, 2007. The adoption of this statement did not have a material impact on the Company's results of operations or financial position.

        In March 2006, the FASB issued SFAS No. 156, "Accounting for Servicing of Financial Assets—an amendment of Statement No. 140" ("SFAS 156"). SFAS 156 requires all separately recognized servicing assets and liabilities to be initially measured at fair value. For subsequent measurements, SFAS 156 permits companies to choose, on a class-by-class basis, either an amortization method or a fair value measurement method. The provisions of this Statement were effective for the Company beginning January 1, 2007. The adoption of this Statement did not have a material impact on the Company's results of operations or financial position.

        In September 2006, the FASB issued SFAS No. 157, "Fair Value Measurements" ("SFAS 157"). SFAS 157 establishes a framework for measuring fair value and expands disclosures about fair value measurements. SFAS 157 clarifies the principle that fair value should be based on the assumption market participants would use when pricing an asset or liability and establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. This Statement is effective for fiscal years beginning after November 15, 2007. The Company does not expect the adoption of this Statement to have a material impact on the Company's results of operations or financial position.

        In February 2007, the FASB issued SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities" ("SFAS 159"). SFAS 159 permits entities to choose to measure eligible items at fair value at specified election dates. If an entity chooses this practice, it shall report unrealized gains and losses on the items for which the fair value option has been elected at each subsequent reporting date. The fair value option may be elected for a single eligible item without electing it for other identical items, with certain exceptions specified in the Statement. Additional disclosures are required for an entity that chooses to elect the fair value option. The provisions of this Statement are effective for the Company on January 1, 2008. Early adoption is permitted under certain circumstances as specified in this Statement. The Company does not expect the adoption of this Statement to have a material impact on the Company's results of operations or financial position.

        In December 2007, the FASB issued SFAS No. 141(R), "Business Combinations" ("SFAS 141R"). SFAS 141R retains the fundamental requirements of SFAS No. 141 that the acquisition method of accounting, previously referred to as the purchase method, be used for all business combinations and for an acquirer to be identified for each business combination. SFAS 141R defines the acquirer, and requires that they recognize the assets acquired, liabilities assumed and any non-controlling interest in the acquiree at fair value as of the acquisition date. SFAS 141R requires an acquirer to recognize acquisition-related costs and anticipated restructuring costs separately from the business combination. Additionally, SFAS 141R requires an acquirer to recognize assets acquired and liabilities assumed arising from contractual contingencies as of the acquisition date, measured at their acquisition date fair value. The provisions of this Statement are effective for the Company on January 1, 2009. Early

F-11

adoption is not permitted. The Company is not able to assess at this time the future impact of this Statement on its consolidated financial position or results of operations, however if the Company does not enter into an acquisition in the future, then there is no impact on the Company related to the provisions of this Statement.

        In December 2007, the FASB issued SFAS No. 160, "Noncontrolling Interests in Consolidated Financial Statements—an amendment of ARB No. 51" ("SFAS 160"). SFAS 160 amends Accounting Research Bulletin 51 to establish accounting and reporting standards for the noncontrolling interest, or minority interest, in a subsidiary and for the deconsolidation of a subsidiary. SFAS 160 clarifies that a noncontrolling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as a component of equity in the consolidated financial statements. SFAS 160 requires consolidated net income be reported to include the amounts attributable to both the parent and the noncontrolling interest. Disclosure of the amounts of consolidated net income attributable to the parent and to the noncontrolling interest is required on the face of the consolidated statement of income. Additionally, SFAS 160 establishes a single method of accounting for changes in a parent's ownership interest in a subsidiary that do not result in deconsolidation and requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated. The provisions of this statement are effective for fiscal years beginning after December 15, 2008. Early adoption is not permitted. The Company does not expect the adoption of this Statement to have a material impact on the Company's results of operations or financial position.

4.     DISCONTINUED OPERATIONS

        On September 8, 2006, the Company entered into an agreement to sell its fragrance business, which included two presses and the Company's fragrance lab and microencapsulation facility, all of which were located in one of the Company's Direct Mail facilities, as well as fragrance receivables, inventory and payables, the fragrance business customer list, certain employees and all intellectual property related to the business. The sale agreement was entered into as the result of a strategic decision by the Company to move away from this line of business and focus its resources on the growth of its other Direct Mail activities.

        Included in the agreement to sell the fragrance business was a transition services agreement (the "Transition Agreement") under which the Company provided services on a subcontracting basis to the purchaser of the fragrance business (the "Purchaser"), utilizing certain assets of the business that was sold. These assets remained at the Company's Direct Mail facility during the time of the Transition Agreement. As of December 31, 2006, the Company has completed its performance of the subcontracting services under the Transition Agreement and the remaining assets of the fragrance business were transferred to the Purchaser's facilities.

        The Company received proceeds of $42.1 million from the sale, resulting in a $21.2 million gain on the sale, which is included in income (loss) from discontinued operations on the consolidated statements of operations. The results of the fragrance business, which had been reported under the Direct Mail segment, have been accounted for as discontinued operations. These results are included in (loss) income from discontinued operations on the consolidated statements of operations. No taxes were recorded for the fragrance business due to pretax losses and tax benefits being offset by deferred tax valuation allowances, see Note 13. Interest was not allocated to discontinued operations as the

F-12

divestiture of the fragrance business was on a debt-free basis. Select results of this business, are presented in the following table.

	2007			2006			2005
	(in thousands)
Revenue				$	26,683		$	40,200
Income from operations					1,146			5,401
(Loss) gain on sale of discontinued operations	$	(251)	(1)		21,443	(2)
Income from discontinued operations	$	(251	)	$	22,589		$	5,401

(1)

In the third quarter of 2007, the Company resolved a dispute with the Purchaser regarding certain matters related to the sale, and recorded a loss of $0.3 million.

(2)

The gain on sale of discontinued operations is net of the costs incurred to sell the fragrance business.

        During the third quarter of 2005, the Company decided to sell the two divisions in its European segment primarily because each had incurred operating losses and neither was deemed a fit within the Company's overall strategy. As a result, the Company accounted for the operations of its European segment as a discontinued operation. The direct mail division of this segment was sold on October 3, 2005 and the premedia division of this segment was sold on December 14, 2005.

        The results of the Company's European segment, which are included in the (loss) income from discontinued operations on the consolidated statements of operations, are presented in the following table. No taxes were recorded in this segment due to pretax losses and tax benefits being offset by deferred tax valuation allowances, see Note 13. Interest was not allocated to discontinued operations as the divestiture of the European business was on a debt-free basis. The 2006 discontinued operations amounts presented in the table below represent adjustments related to the divestiture of the Company's European segment. See the footnotes to the following table for further discussion.

	2006			2005
	(in thousands)
Revenue				$	99,982
Loss from operations	$	(422)	(1)		(147,238)	(3)
Loss on sale of discontinued operations		(567)	(2)		(1,552)	(4)
Loss from discontinued operations	$	(989	)	$	(148,790	)

(1)

Amount represents a payment made to a former employee of the Company's European segment in respect of the employee's termination agreement.

(2)

Amount represents a settlement paid in relation to a lawsuit brought against the Company by one of the European segment's customers.

(3)

Includes $136.2 million of other impairment charges, as discussed below, and write-downs of long-lived assets recorded prior to the sale.

(4)

The loss on sale of discontinued operations is net of the costs incurred to sell the Europe segment.

        As a result of the Company's impairment testing, the Company recorded an impairment loss of $111.2 million at its Europe segment to reduce the carrying value of goodwill to its implied fair value. See Note 3 for discussion of the Company's goodwill accounting policy. In addition, as a result of the conclusion of a direct mail contract within our Europe segment, long-lived assets with a carrying value of $1.2 million were deemed impaired and written off in the second quarter of 2005. The Company also recorded a $23.8 million loss to write-down the carrying value of the remaining long-lived assets of its discontinued operations to their estimated fair values, less cost to sell. These impairment losses are shown as discontinued operations for the year ended December 31, 2005.

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5.     RESTRUCTURING AND IMPAIRMENT CHARGES

        In the fourth quarter of 2007, the Company recorded a non-cash charge of $246.5 million to reflect the impairment of goodwill in each of the Company's reporting units. The goodwill impairment was recorded in the following segments: Advertising Inserts, $187.9 million; Direct Mail, $54.6 million; and Corporate and Other, $4.0 million. Impairment in all reporting units was due to a combination of factors including increased uncertainty regarding the Company's liquidity, the decline in the fair value of the Company's debt in the fourth quarter of 2007 and operating performance. The Company estimated the fair value of its reporting units using the discounted cash flow and guideline company approaches. Because the fair value of each of the reporting units, which includes an allocation of the Company's debt, was below its carrying amount including goodwill, the Company performed an additional fair value measurement calculation to determine the amount of the goodwill impairment loss noted above. The Company performed an additional impairment evaluation on the other long-lived assets and determined there was no impairment.

        The Company began a restructuring program in the first quarter of 2007 (the "2007 Program") aimed at streamlining operations to capitalize on operating efficiencies and to reduce overhead, thus reducing the Company's overall cost base, as well as addressing the continuing issue of industry-wide overcapacity. The restructuring actions approved under the 2007 Program include reductions in work force of approximately 275 employees, the closure of an Inserts production facility, the closure of a Direct Mail programming support facility and the vacating of a floor in the Company's corporate office. Costs associated with approved restructuring actions under the 2007 Program were $10.0 million, net of estimated sublease income of $4.1 million, all of which were recorded in 2007. Restructuring actions under the 2007 Program were complete as of December 31, 2007.

        The Company is continuously evaluating the need to implement restructuring programs to rationalize its costs and improve operating efficiency. It is likely that the Company will incur additional restructuring costs in 2008 in an on-going effort to achieve these objectives.

        In the year ended December 31, 2007, under the 2007 Program, the Advertising Inserts segment recorded $1.7 million in severance and related costs associated with the elimination of approximately 150 positions as well as $2.7 million in facility closure costs and $2.8 million in asset write-downs primarily related to the closure of an inserts production facility. The decision to close this inserts facility was made based on an analysis done by the Company to identify areas where consolidation of operations could occur with minimal disruption to Vertis customers. As there are two Advertising Inserts production facilities within close proximity to the facility that was closed, this decision allows for higher utilization of other Vertis presses in the region and lowers overall costs, which should allow the Company to more effectively with competitors in this industry. Advertising Inserts also recorded $0.2 million in additional facility closure costs and $0.3 million in asset write-downs related to the closure of a production facility that took place in 2006. The Direct Mail segment recorded $0.8 million of severance and related costs associated with the elimination of approximately 98 positions and $0.7 million in facility costs, $0.4 million of which represents additional restructuring costs for the closure of a fulfillment facility in 2006 and the remainder of which represents costs associated with the closure of a direct mail programming support facility and an adjustment to the restructuring accrual to reflect the present value of the leases for closed Direct Mail facilities. Corporate and Other recorded $1.2 million in severance and related costs in 2007 associated with the elimination of 15 positions as well as $0.4 million in facility closure costs and $0.1 million in assets written off.

        Included in the 2007 segment restructuring expense are approximately $0.2 million of severance costs related to the elimination of 12 shared services positions and $0.8 million of facilities costs associated with the vacating of a floor in the Company's corporate office, which have been allocated to the segments.

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        The Company's 2006 restructuring program (the "2006 Program") included reductions in work force of 537 employees and the closure of one advertising inserts production facility, one inserts sales office, one direct mail fulfillment facility and two premedia production facilities. All approved restructuring actions under the 2006 Program were complete as of December 31, 2006. Costs associated with approved restructuring actions under the 2006 Program were $16.0 million, all of which were recorded in 2006.

        In the year ended December 31, 2006, under the 2006 Program, the Advertising Inserts segment recorded $3.7 million in severance and related costs associated with the elimination of 243 positions and $0.6 million in facility closing costs as well as a $1.4 million write-down of assets associated with the closure of a production facility. The Direct Mail segment recorded $1.8 million in severance and related costs in 2006 associated with the elimination of 126 positions and the closure of a fulfillment facility. Corporate and Other recorded $5.6 million in severance and related costs in 2006 associated with the elimination of 137 positions and $2.9 million in facility closure costs, $1.4 million of which reflects an adjustment to restructuring expense primarily related to a recalculation of facility closure costs expected to be paid based on a revised assumption of estimated sublease income, and the remainder associated with the closure of two premedia production facilities in 2006.

        Included in the 2006 segment restructuring expense amounts above are $0.9 million of severance costs related to the elimination of 31 shared services positions and facilities costs which represent accretion expense, which have been allocated to the segments.

        In 2005, the Advertising Inserts segment recorded $7.0 million in severance and related costs associated with the elimination of approximately 186 positions and $0.8 million in facility closure costs associated with the closure of two regional offices and one warehouse. The Direct Mail segment recorded $2.0 million in severance and related costs in 2005 associated with the elimination of approximately 33 positions. Corporate and Other recorded $5.1 million in severance and related costs in 2005 associated with the elimination of approximately 91 positions and $1.7 million in facility closure costs associated with the closure of six premedia facilities offset by $0.1 million in gains from the sale of assets related to the closure of one of the premedia facilities. Additionally, $0.7 million in costs were recorded in the first quarter of 2005 related to the amendment of an executive level employment agreement announced in 2004, as discussed below.

        Included in the 2005 segment severance amounts above are approximately $2.5 million of severance costs related to the elimination of approximately 50 shared services positions, which have been allocated to the segments.

        The significant components of the restructuring and asset impairment charges were as follows:

	Severance and Related Costs			Asset Write Off & Disposal Costs			Facility Closing Costs			Other Costs			Total
	(in thousands)
Balance at January 1, 2005	$	744		$	—		$	6,872		$	575		$	8,191
Restructuring charges in 2005		14,748			(109	)		2,480						17,119
Restructuring payments and usage in 2005		(12,572	)		109			(3,557	)		(575	)		(16,595	)
Balance at December 31, 2005		2,920			—			5,795			—			8,715
Restructuring charges in 2006		11,128			1,354			3,519						16,001
Restructuring payments and usage in 2006		(10,855	)		(1,354	)		(4,296	)					(16,505	)
Balance at December 31, 2006		3,193			—			5,018			—			8,211
Restructuring charges in 2007		3,684			3,297			3,931						10,912
Restructuring payments and usage in 2007		(4,412	)		(3,297	)		(3,319	)					(11,028	)
Balance at December 31, 2007	$	2,465		$	—		$	5,630		$	—		$	8,095

F-15

        Accrued restructuring reserves total approximately $8.1 million at December 31, 2007. The Company expects to pay approximately $5.0 million of the accrued restructuring costs during the next year, and the remainder, approximately $3.1 million, by 2014. The portion of this accrual attributable to facility closing costs is recorded net of estimated sublease income at its present value. Actual future cash requirements may differ from the accrual, particularly if actual sublease income differs from current estimates.

        The restructuring charges are comprised of the following:

	2007		2006		2005
	(in thousands)
Charges requiring cash payments	$	7,615	$	14,647	$	17,228
(Gain) loss on asset disposals in closed locations		3,297		1,354		(109	)
	$	10,912	$	16,001	$	17,119

6.     ACQUISITIONS

        On May 31, 2006, the Company acquired USA Direct, Inc. ("USA Direct") for $21.2 million in cash. The financial results of USA Direct are included in the Company's consolidated financial statements, within the Company's Direct Mail segment, from the date of acquisition. USA Direct is a full-service provider of direct marketing services based in York, Pennsylvania.

        Goodwill arising in connection with the USA Direct acquisition was approximately $8.0 million, calculated as the excess of the purchase price over the fair value of the net assets acquired. This goodwill was subsequently written off in the fourth quarter of 2007 along with the rest of the Company's goodwill, the total of which was deemed to be impaired (see Note 5 for further discussion). However, the Company expects to deduct the full amount of this goodwill for tax purposes, the amount of which will increase the Company's net tax benefit carryforwards (See Note 13). Also purchased in the USA Direct acquisition was a customer base valued at $3.6 million which is being amortized over a period of four years, a non-compete agreement in the amount of $90,000 which is being amortized over its three-year useful term and a trademark valued at $40,000.

        The following unaudited pro forma information reflects the Company's results adjusted to include USA Direct as though the acquisition had occurred at the beginning of 2005.

	Twelve months ended December 31,
	2006			2005
	(in thousands)
Revenue	$	1,482,806		$	1,499,703
Loss from continuing operations before cumulative effect of accounting change		(48,111	)		(25,333	)
Net loss		(26,511	)		(170,322	)

F-16

7.     ACCOUNTS RECEIVABLE

        Accounts receivable consisted of the following:

	2007			2006
	(in thousands)
Trade—billed	$	41,880		$	114,263
Trade—unbilled		38,254			20,522
Other receivables		7,056			7,500
		87,190			142,285
Allowance for doubtful accounts(1)		(2,923	)		(2,859	)
	$	84,267		$	139,426

(1)

The Company recorded a provision for doubtful accounts of $0.5 million, $0.9 million and $1.5 million in the twelve months ended December 31, 2007, 2006 and 2005, respectively.

        The Company is party to a three-year agreement, terminating in December 2008 (the "A/R Facility"), to sell substantially all trade accounts receivable generated by the Company's subsidiaries through the issuance of $130 million variable rate trade receivable backed notes. Management has begun discussions with its lenders regarding amendment of the A/R Facility, but has not received any assurance that they will be able to amend this facility.

        Under the A/R Facility the Company sells its trade accounts receivable through a bankruptcy-remote wholly-owned subsidiary. However, the Company maintains an interest in the receivables and has been contracted to service the accounts receivable. The Company received cash proceeds for servicing of $1.2 million in both 2007 and 2006, respectively. These proceeds are fully offset by servicing costs.

        The A/R Facility allows for a maximum of $130.0 million of trade accounts receivable to be advanced at any time based on the level of eligible receivables and limited to a borrowing base linked to net receivables balances and collections. Additional deductions may be made if the Company fails to maintain a consolidated Compliance EBITDA (as defined in Note 11) of at least $180 million for any rolling twelve fiscal month period. In addition, the A/R Facility includes certain targets related to its receivables collections and credit experience including a minimum Compliance EBITDA of $125 million on a trailing twelve-month basis. There are also covenants customary for facilities of this type including requirements related to the characterization of receivables transactions, credit and collection policies, deposits of collections, maintenance by each party of its separate corporate identity including maintenance of separate records, books, assets and liabilities and disclosures about the transactions in the financial statements of Vertis Holdings and its consolidated subsidiaries. Failure to meet the targets or the covenants could lead to an acceleration of the obligations under the A/R Facility or the sale of assets securing the A/R Facility. As of December 31, 2007, the Company is in compliance with all targets and covenants under the A/R Facility.

        At December 31, 2007 and 2006, the Company sold accounts receivable in excess of the $130 million A/R Facility and as such $130 million was excluded from accounts receivable on the consolidated balance sheet. At December 31, 2007 and 2006, the Company retained an interest in the pool of receivables in the form of overcollateralization and cash reserve accounts of $38.6 million and $92.3 million, under the A/R Facility, which is included in Accounts receivable, net on the consolidated balance sheet at allocated cost, which approximates fair value. The proceeds from collections reinvested in securitizations amounted to $1,664.2 million and $1,680.3 million in 2007 and 2006, respectively.

        Fees for the program vary based on the amount of interests sold and LIBOR plus an average margin of 50 basis points. The Company also pays an unused commitment fee of 37.5 basis points on

F-17

the difference between $130 million and the amount of any advances. The loss on sale, which approximated the fees, totaled $6.8 million in 2007, $6.5 million in 2006 and $5.2 million in 2005, and is included in Other, net on the consolidated statement of operations.

8.     INVENTORIES

        Inventories consisted of the following:

	2007		2006
	(in thousands)
Paper	$	21,614	$	29,858
Ink and chemicals		4,246		3,160
Work in process		3,214		4,439
Finished goods		8,090		5,576
Other		5,612		5,194
	$	42,776	$	48,227

9.     PROPERTY, PLANT AND EQUIPMENT

        The components and useful lives of property, plant and equipment were:

	Estimated Useful Life (Years)	2007			2006
		(in thousands)
Land		$	6,988		$	8,361
Machinery and equipment(1)	3 to 15		672,254			646,960
Buildings and leasehold improvements	1 to 40		92,621			91,388
Furniture and fixtures	3 to 10		129,858			113,837
Internally developed computer software	3 to 5		22,109			21,002
Vehicles	3		974			968
Construction in progress and deposits on equipment purchases			13,684			23,988
			938,488			906,504
Accumulated depreciation and amortization			(610,462	)		(576,465	)
		$	328,026		$	330,039

(1)

Includes capitalized interest of $11.4 million and $9.4 million at December 31, 2007 and 2006, respectively.

        The Company recorded depreciation of $55.6 million, $57.4 million and $62.0 million in the twelve months ended December 31, 2007, 2006 and 2005, respectively.

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10.   OTHER INTANGIBLE ASSETS

        Other intangible assets consisted of the following:

			2007			2006
			(in thousands)
Gross:
	Customer base		$	3,600		$	3,600
	Trademarks			3,265			3,265
	Non-compete agreement			90			90
	Other intangibles			100			100
		Total gross other intangibles		7,055			7,055
Accumulated amortization:
	Customer base			(1,345	)		(497	)
	Trademarks			(2,903	)		(2,256	)
	Non-compete agreement			(48	)		(18	)
	Other intangibles			(100	)		(65	)
		Total accumulated amortization		(4,396	)		(2,836	)
			$	2,659		$	4,219

        The Company recorded amortization of $1.8 million, $1.4 million and $0.9 million in the twelve months ended December 31, 2007, 2006 and 2005, respectively. Scheduled amortization expense for the Company's intangible assets as of December 31, 2007 was:

	(in thousands)
2008	$	1,292
2009		912
2010		455
	$	2,659

11.   LONG-TERM DEBT

        Long-term debt consisted of the following in the order of priority:

	2007			2006
	(in thousands)
Revolving credit facility (due December 2008)	$	115,454		$	112,880
Term loan (due December 2008)		50,000
$350 million 93/4% senior secured second lien notes, net of discount (due April 2009)		348,010			346,418
$350 million 107/8% senior notes, net of discount (due June 2009)		349,470			349,113
$294 million 131/2% senior subordinated notes, net of discount (due December 2009)		289,638			287,625
Other notes					5
		1,152,572			1,096,041
Current portion		(165,454	)		(5	)
	$	987,118		$	1,096,036

        The Company entered into a four-year revolving credit agreement (the "Credit Facility") in December 2004. In March 2007, we amended the Credit Facility to provide for availability of

F-19

$250 million until December 22, 2008, the maturity date. Under the amended Credit Facility, up to $200 million consists of a revolving credit facility and the remaining $50 million represents a term loan. The Credit Facility also provides for issuances of up to $45 million in letters of credit. There is no repayment of the principal due until maturity. Management has engaged in discussions with its lenders regarding amendments of the Credit Facility, but has not received any assurance that it will be able to further amend this facility, and as such, the balances of the revolving credit facility and the term loan have been classified as current in the Company's consolidated balance sheet.

        At December 31, 2007, the maximum availability under the revolving credit facility is limited to a borrowing base calculated as follows: 85% of the Company's eligible receivables; 65% of the net amount of eligible raw materials, finished goods, maintenance parts, unbilled receivables and the residual interest in the Company's $130 million trade receivables securitization (see Note 7); the lesser of 55% of the book value of eligible machinery and equipment at owned locations or 100% of the orderly liquidation value-in-place (as defined in the credit agreement); the lesser of 55% of the book value of eligible machinery and equipment at leased locations or 100% of the net orderly liquidation value (as defined in the credit agreement) and 80% of the fair market value of owned real estate. The eligibility of such assets included in the calculation is set forth in the credit agreement. At December 31, 2007, the Company's borrowing base was calculated to be $184.8 million. The Company had approximately $52.6 million available to borrow under the revolving credit facility at December 31, 2007.

        The Credit Facility requires the Company to maintain Compliance EBITDA, as defined below, of $125 million on a trailing twelve-month basis as set forth by the March 2007 amendment to the Credit Facility. At December 31, 2007, the Company's trailing twelve-month Compliance EBITDA as calculated under the credit agreement was $131.9 million. If the Company is unable to maintain this minimum Compliance EBITDA amount, the bank lenders could require the Company to repay any amounts owing under the Credit Facility.

        In addition, as is customary in asset-based agreements, there is a provision for the agent, in its reasonable credit judgment, to establish reserves against availability based on a change in circumstances. The agent's right to alter existing reserves requires written consent from the borrowers when Compliance EBITDA, as defined below, is in excess of $180 million on a rolling twelve fiscal month basis. The agent is not required to obtain written consent when Compliance EBITDA on a rolling twelve fiscal month basis is less than $180 million. There were no reserves established by the agent that would impair the Company's ability to borrow from the Credit Facility in 2007.

        "Compliance EBITDA" is the Consolidated EBITDA as reflected in Note 21 to these financial statements adjusted for certain items as defined in the Credit Facility.

F-20

        The interest rate on the revolving credit facility portion of the Credit Facility is either (a) the US Prime rate, plus a margin which fluctuates based on the Company's senior secured leverage ratio ("Leverage Ratio"), defined as the ratio of senior secured debt to EBITDA, or (b) the LIBOR rate plus a margin that fluctuates based on the Company's Leverage Ratio. The EBITDA amount used in this calculation is not equivalent to the amount included in these financial statements, but rather is net of adjustments to exclude certain items as defined in the credit agreement. The interest rate on the term loan portion of the Credit Facility is the LIBOR rate plus a margin that fluctuates based on the Company's leverage ratio. At December 31, 2007, the margin was 300 basis points above LIBOR for the revolving credit facility and 475 points above LIBOR for the term loan. The Company also pays an unused commitment fee of 50 basis points on the difference between $200 million and the amount of loans and letters of credit outstanding.

        At December 31, 2007, the weighted-average interest rates on the revolving credit facility and the term loan were 8.1% and 9.5%, respectively. The weighted average interest rate on the Credit Facility at December 31, 2006 was 8.3%.

        The Credit Facility, the 9³/4% senior secured second lien notes (the "9³/4% Notes"), the 10⁷/8% senior notes and the 13¹/2% senior subordinated notes contain customary covenants including restrictions on dividends and investments. In particular, these debt instruments all contain customary high-yield debt covenants imposing limitations on the payment of dividends or other distributions on or in respect of the Company or the capital stock of its restricted subsidiaries. Substantially all of the Company's assets are pledged as collateral for the outstanding debt under the Credit Facility, and, on a second lien basis, the 9³/4% Notes. All of the Company's debt has customary provisions requiring prepayment in the event of a change in control and from the proceeds of asset sales, as well as cross-default provisions. At December 31, 2007, the Company was in compliance with its debt covenants.

        At December 31, 2007, the aggregate maturities of long-term debt were:

	(in thousands)
2008	$	165,454
2009		993,495
	$	1,158,949

12.   LEASES

        Facilities and certain equipment are leased under agreements that expire at various dates through 2017. Rental expense for continuing operations under operating leases for the years ended December 31, 2007, 2006 and 2005, was $26.2 million, $25.6 million, and $25.9 million, respectively.

        At December 31, 2007, minimum annual rentals under non-cancelable operating leases (net of subleases totaling $6.2 million) were:

	(in thousands)
2008	$	24,742
2009		19,955
2010		17,577
2011		14,283
2012		11,284
Thereafter		6,306
	$	94,147

        Commitments under the lease agreements also extend in most instances to property taxes, insurance and maintenance. Certain leases contain escalation clauses and extension options.

F-21

        On October 1, 2007, the Company sold three of its Direct Mail facilities, consisting of two production facilities and one maintenance facility, for $10.7 million, net of fees and letters of credit, and simultaneously leased these facilities back under three separate lease agreements, ranging from less than one year to ten years, with varying lease terms. The Company has accounted for this transaction as a sale-leaseback. The transaction resulted in a net gain of $7.3 million, $2.7 million of which was recognized up-front and the remainder of which the Company has deferred and is amortizing over the life of each respective lease term. For the year ended December 31, 2007, a $2.9 million gain on this sale-leaseback transaction is included in costs of production on the Company's consolidated statement of operations.

13.   INCOME TAXES

        Income tax (benefit) expense consisted of the following components:

		2007		2006			2005
		(in thousands)
Current:
	Federal						$	(8,324	)
	State and foreign	$	388	$	(1	)		254
Total income tax expense (benefit)		$	388	$	(1	)	$	(8,070	)

        Vertis Holdings files a consolidated Federal income tax return with all of its subsidiaries, including the Company. The components of income tax disclosed above have been allocated to the Company as if the Company had filed a separate consolidated tax return.

        The Company's tax allocation arrangement does not provide for remuneration in years in which the Company has a current taxable loss as in 2007, 2006, and 2005. There are no tax related intercompany balances due to or due from the Company.

        The following is a reconciliation of the U.S. statutory federal income tax rate to the Company's effective tax rates:

	2007		2006		2005
	(percent of pre-tax loss)
Statutory income tax rate	(35.0	)%	(35.0	)%	(35.0	)%
State income taxes, net of federal income tax benefits	(1.8	)
Change in valuation allowance	20.6		30.4		29.4
Goodwill impairment	15.2
Foreign income taxed at other rates	0.0		(2.1	)	(0.1	)
Adjustment to contingency reserve	0.0		0.0		(23.0	)
Officer's life insurance	0.0		(0.7	)	(0.4	)
Other	1.1		7.4		6.8
Effective tax rate	0.1	%	0.0	%	(22.3	)%

F-22

        The tax effects of significant items comprising deferred income taxes were:

	2007			2006
	(in thousands)
Employee benefits	$	16,707		$	14,564
Net tax benefit carry forwards		183,387			160,843
Accrued expenses and reserves		10,374			7,101
Other deductible differences		21,332
Deferred tax assets		231,800			182,508
Property, plant and equipment		(33,766	)		(44,542	)
Other taxable differences		(633	)		(9,382	)
Deferred tax liabilities		(34,399	)		(53,924	)
Valuation allowance		(197,401	)		(128,584	)
Net deferred income tax liability	$	0		$	0

        At the end of 2007 the Company's federal net operating loss carryforwards were $323.9 million. This amount is included in the consolidated Vertis Holdings net operating loss carryforward. The carryforwards expire beginning in 2010 through 2027. The U.S. capital loss carryforward was $100.4 million as of December 31, 2007 and expires in 2011.

        The Company's valuation allowance related to its deferred tax asset, which was $128.6 million at the beginning of 2007, was increased by $68.8 million to $197.4 million at the end of 2007. The valuation allowance reserves all deferred tax assets that will not be offset by reversing taxable temporary differences. This treatment is required under SFAS 109, when in the judgment of management, it is not more likely than not that sufficient taxable income will be generated in the future to realize the deductible temporary differences. The Company's deferred tax assets and tax carryforwards remain available to offset taxable income in future years, thereby lowering any future cash tax obligations. The Company intends to maintain a valuation allowance until sufficient positive evidence exists to support its reversal.

        On January 23, 2006, the Company signed a closing agreement with the IRS for tax years 1998 through 2003. The closing agreement received final approval from the Congressional Joint Committee on Taxation on May 16, 2006. During 2006, the Company paid out $1.1 million and received refunds of $0.2 million related to the settlement. During 2007, the Company paid out $0.5 million and received refunds of $0.3 million related to the settlement. The U.S federal return is open for the years 1999 and forward.

        FIN 48, which became effective on January 1, 2007, clarifies the accounting for unrecognized income tax positions. The total amount of unrecognized tax benefits as of the date of adoption was approximately $0.4 million. In addition, accrued interest and penalties amounted to approximately $0.6 million as of the date of adoption.

F-23

        A reconciliation of the change in the unrecognized tax benefits from January 1, 2007 to December 31, 2007 is as follows:

	Unrecognized Income Tax Benefits
	(in thousands)
Balance at January 1, 2007	$	380
Additions for tax positions related to prior years		781
Reductions for tax positions related to prior years		(38	)
Balance at December 31, 2007	$	1,123

        The Company recognizes interest accrued related to unrecognized tax benefits and penalties as income tax expense. As of December 31, 2007, the Company had recognized approximately $0.7 million, consisting primarily of interest.

        The Company made income tax payments of $0.1 million, $0.7 million and $0.2 million for the years ended December 31, 2007, 2006, and 2005, respectively.

14.   RETIREMENT PLANS

        Defined Benefit Plans—The Company maintains defined benefit plans, including pension and supplemental executive retirement plans. On December 31, 2006, the Company adopted SFAS 158, "Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106 and 132(R) ("SFAS 158"), which required us to recognize the underfunded status of our defined benefit plans in our consolidated balance sheet and to recognize as a component of other comprehensive loss, net of tax, the actuarial gains or losses and prior service costs or credits that have arisen during the period but are not included in our net periodic pension cost.

        Information regarding the defined benefit plans, collectively, is as follows:

	2007			2006			2005
	(in thousands)
Components of net periodic pension cost:
Service cost	$	416		$	481		$	673
Interest cost		2,190			2,218			2,271
Expected return on assets		(1,359	)		(1,309	)		(1,358	)
Net amortization and deferral		711			963			1,155
Settlements and curtailments					873			443
	$	1,958		$	3,226		$	3,184
Changes in benefit obligations:
Benefit obligation at beginning of year	$	38,754		$	40,788
Service cost		416			481
Interest cost		2,190			2,218
Actuarial loss (gain)		(1,514	)		(757	)
Benefits paid		(2,663	)		(3,403	)
Curtailments		(348	)		(573	)
Benefit obligation at end of year	$	36,835		$	38,754
Accumulated benefit obligation at end of year	$	36,620		$	38,276

F-24

	2007			2006
	(in thousands)
Changes in plan assets:
Fair value of plan assets at beginning of year	$	18,100		$	16,602
Actual return on assets		592			1,765
Employer contributions		2,668			3,136
Benefits paid		(2,663	)		(3,403	)
Fair value of plan assets at end of year	$	18,697		$	18,100
Funded status of the plan:
Benefit obligation at end of year	$	36,835		$	38,754
Fair value of plan assets at end of year		18,697			18,100
Unfunded status of the plan at end of year	$	18,138		$	20,654
Current liabilities	$	1,343		$	1,086
Long-term liabilities		16,795			19,568
Net amount recognized	$	18,138		$	20,654
Amounts recognized in accumulated other comprehensive loss:
Net actuarial loss	$	(9,069	)	$	(10,726	)
Prior service cost		(672	)		(770	)
Net amount recognized	$	(9,741	)	$	(11,496	)
Changes recognized in other comprehensive loss(1):
Net actuarial gain during the period	$	(1,044	)
Recognized actuarial loss		(612	)
Recognized prior service cost		(99	)
Total recognized in other comprehensive loss	$	(1,755	)
Amounts expected to be recognized in net periodic pension cost in the subsequent year:
Prior service cost	$	99		$	99
Actuarial loss		425			554
Total	$	524		$	653

(1)

This is a required disclosure in the years following the adoption of SFAS 158, therefore there is no 2006 disclosure included in the table above.

F-25

        The weighted-average assumptions used to determine net periodic pension cost and the Company's benefit obligation were as follows:

	2007	2006		2005
Weighted-average assumptions used to calculate net periodic pension cost:
Discount rate	5.75%	5.50	%	5.75	%
Expected return on plan assets	7.50%	7.50	%	8.75	%
Annual compensation increase	3.00%	3.00	%	3.00	%
Weighted-average assumptions used to determine benefit obligation:
Discount rate	6.00%–6.25%	5.75	%
Annual compensation increase	3.00%	3.00	%

        The Company expects to make approximately $3.1 million of cash contributions to its pension plans in 2008.

        The Company expects to make the following benefit payments, which reflect expected future service:

	(in thousands)
2008	$	2,795
2009		2,718
2010		2,335
2011		1,867
2012		2,159
2013–2017		13,559
	$	25,433

        For the Company's pension plans, the percentage of fair value of plan assets by asset category as of the measurement date are as follows:

	2007		2006
Asset category:
Equity securities	54	%	56	%
Fixed Income	41	%	38	%
Cash and cash equivalents	5	%	6	%
	100	%	100	%

        The Company's investment strategy for the pension plans is to maximize the long-term rate of return on plan assets within an acceptable level of risk in order to minimize the cost of providing pension benefits. The investment policy establishes a target allocation for each asset class. Target allocations for 2007 are shown in the table below.

        The Company developed its expected long-term rate of return assumption based on historical experience and by evaluating input from the trustee managing the plans' assets, including the trustee's review of asset class return expectations by several consultants and economists as well as long-term inflation assumptions. The Company's expected long-term rate of return on plan assets is based on a target allocation of assets, which is based on the Company's investment strategy. The plans strive to

F-26

have assets sufficiently diversified so that adverse or unexpected results from one security class will not have an unduly detrimental impact on the entire portfolio. The target allocation of assets is as follows:

Asset category:	Percent of Total		Expected Long-term Rate of Return
Large Cap Equities	47	%	9.0	%
Small/ Mid Cap Equities	8	%	11.0	%
International Equities	5	%	10.2	%
Fixed Income	40	%	6.5	%
	100	%

        Deferred Compensation—The Company also maintains a deferred compensation plan in which certain members of management may defer up to 100% of their total compensation through the date of their retirement. This plan was frozen in 2008, thus Vertis employees will not be allowed to defer compensation into this plan for the 2008 plan year. Long-term liabilities on the consolidating balance sheet include balances related to this plan of $3.4 million and $4.0 million as of December 31, 2007 and 2006, respectively.

        Defined Contribution Plans—The Company maintains 401(k) and other investment plans for eligible employees. The Company recorded expenses related to these plans of $4.2 million, $3.7 million and $5.0 million for the years ended December 31, 2007, 2006 and 2005, respectively.

15.   STOCKHOLDER'S DEFICIT

        Contributed Capital—In December 2005, in conjunction with the sale of the premedia division of the Vertis Europe segment (see Note 4), Vertis Holdings assigned its rights to a $0.7 million receivable from the Vertis Europe premedia division to Vertis, Inc. as a contribution of capital. This receivable was subsequently written off by Vertis, Inc.

        Vertis Holdings has 700,000 warrants outstanding at December 31, 2007. These warrants are held by the lenders of the senior subordinated credit facility which entitle the holders to purchase one share of Vertis Holdings' stock for $0.01 per share. The warrants are immediately exercisable and expire on June 30, 2011.

        Dividends to Parent—The Company paid approximately $4,000 of cash dividends to Vertis Holdings in 2005. No dividends were paid in 2007 and 2006. The Company's debt instruments contain customary covenants imposing certain limitations on the payment of dividends or other distributions.

        Accumulated Other Comprehensive Loss—The components of accumulated other comprehensive loss at December 31 were:

	2007									2006									2005
	Gross			Tax			Net			Gross			Tax			Net			Gross			Tax			Net
	(in thousands)
Cumulative translation adjustments	$	223					$	223		$	108					$	108		$	76					$	76
Minimum pension liability adjustment																				(13,454	)	$	(4,706	)		(8,748	)
Defined benefit plans		(9,741	)	$	(4,706	)		(5,035	)		(11,496	)	$	(4,706	)		(6,790	)
	$	(9,518	)	$	(4,706	)	$	(4,812	)	$	(11,388	)	$	(4,706	)	$	(6,682	)	$	(13,378	)	$	(4,706	)	$	(8,672	)

F-27

16.   VERTIS HOLDINGS SHARE BASED COMPENSATION

        Employees of the Company participate in the Vertis Holdings 1999 Equity Award Plan (the "Stock Plan"), which authorizes grants of stock options, restricted stock, performance shares and other stock based awards up to an aggregate of 10 million shares. Vertis Holdings has options, restricted shares, retained shares and rights outstanding under the Stock Plan at December 31, 2007. SFAS 123R requires that share based payments for compensation made by Vertis Holdings to employees of the Company be accounted for in the financial statements of the Company.

        Certain current and former members of the Company's management own shares of common stock subject to retained share agreements (the "Retained Shares"). These retained share agreements were issued in connection with the Company's recapitalization in 1999 (the "1999 Recapitalization") with the intent to replace previously issued incentive stock options at equivalent economic value. The retained share agreements restrict transfers of the Retained Shares unless there is a liquidity event, generally defined as a public offering of Vertis Holdings' common stock (where immediately following such offering, the aggregate number of shares of common stock held by the public, not including affiliates of the Company, represents at least 20% of the total number of outstanding shares), merger or other business combination, or a sale or other disposition of all or substantially all of our assets to another entity for cash and/or publicly traded securities ("Liquidity Event"). Additionally, included in the retained share agreements, employees (or their estates) have the right to put ("Put Right") the Retained Shares to the Company for the fair market value of the stock within 90 days of termination due to retirement, disability or death (the "Put Right Period"). Retirement for this purpose is defined as the employee's retirement from the Company at age 65 after at least three years of continuous service. The Retained Shares are considered equity awards under SFAS 123R.

        Certain current and former members of the Company's management own rights (the "Rights") to shares of common stock subject to a management subscription agreement. These management subscription agreements were issued in connection with the 1999 Recapitalization with the intent to replace previously issued nonqualified stock options at equivalent economic value. The management subscription agreements are similar to the retained share agreements discussed above, including the Put Right and the restrictions on transfer. As a result, the Rights held by employees are also considered equity awards under SFAS 123R.

        In 2007, employees holding 16,079 Rights with Put Rights attached left the Company. However, the employees' manner of separation from the Company did not fit the criteria, as discussed above, for them to exercise the Put Right attached to their Rights and therefore the Put Rights were forfeited. As of December 31, 2007, there were 34,018 Retained Shares and Rights that have the Put Rights Available.

        The Company has the ability to issue restricted stock to certain members of management under the Stock Plan. The restricted stock awards do not vest until immediately prior to a Liquidity Event or upon death or disability during employment, and they cannot be transferred until vesting occurs. Additionally, if an employee leaves the Company prior to a Liquidity Event, they forfeit their restricted shares. The probability of each of these events occurring is currently indeterminable, therefore compensation expense will not be recorded by the Company related to the restricted shares until a Liquidity Event takes place, or is probable of occurring, or in the event of a shareholder's death or disability.

        Vertis Holdings issued 20,000 shares of restricted stock and cancelled 158,128 shares of restricted stock in the year ended December 31, 2007, due to forfeiture and employees departure from the Company. The Company estimates the fair value of the restricted stock to be $0.64 per share, based on a fair-value calculation conducted in 2007. At December 31, 2007 there were 208,168 shares of restricted stock outstanding under the Stock Plan.

F-28

        The Company also has the ability to issue options to certain members of management under the Stock Plan. At December 31, 2007, there are 2,956 options outstanding under the Stock Plan. These options were fully vested at January 1, 2006 therefore no compensation expense is recorded.

        A summary of activity under the Stock Plan for the twelve months ended December 31, 2007 is as follows:

	Retained Shares	Rights		Restricted Stock(1)		Options(2)
	(thousands of shares)
Outstanding at December 31, 2006	18	31		346		8
Granted				20
Forfeited/ Cancelled		(16	)	(158	)	(5	)
Outstanding at December 31, 2007	18	15		208		3
Nonvested at December 31, 2007				208
Exercisable at December 31, 2007						3

(1)

The weighted-average grant-date fair value of the restricted shares granted in 2007 is $0.64 per share. Prior to 2007, the weighted-average grant-date fair value of restricted shares was $20.48. As of December 31, 2007 there was $3.9 million of unrecognized compensation cost related to nonvested restricted stock awards granted under the Stock Plan.

(2)

The weighted-average exercise price of the vested options outstanding at December 31, 2007 is $31.50 per share. The outstanding options have ten-year terms, with 2,063 options expiring in 2009 and the remainder expiring in 2012.

        In 2005, the Company accounted for the Stock Plan under the intrinsic value method, which followed the recognition and measurement principles of Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees." Approximately $0.1 million of employee compensation cost was reflected in net income for 2005. The following table summarizes the effect of accounting for the awards under the Stock Plan as if the fair value recognition provisions of SFAS No. 123, "Accounting for Stock Based Compensation," as amended by SFAS No. 148, "Accounting for Stock-Based Compensation—Transition and Disclosure, an amendment of FASB Statement No. 123," had been applied.

	2005
	(in thousands)
Net loss:
As reported	$	(173,230	)
Deduct: total stock-based compensation determined under the fair value based method for all awards, net of tax		(7	)
Pro forma	$	(173,237	)

F-29

17.   INTEREST EXPENSE, NET

        Interest expense, net consists of the following:

	2007			2006			2005
	(in thousands)
Interest cost	$	125,802		$	123,118		$	119,359
Amortization of long-term debt discounts		3,962			3,961			3,961
Amortization of deferred financing fees		7,193			6,306			7,265
Capitalized interest		(1,667	)		(1,250	)		(929	)
Interest income		(646	)		(1,112	)		(835	)
	$	134,644		$	131,023		$	128,821

        The Company made interest payments of $126.2 million, $122.9 million and $118.8 million in the years ended December 31, 2007, 2006 and 2005, respectively.

18.   OTHER, NET

        Other, net consists of the following:

	2007		2006		2005
	(in thousands)
A/R Facility fees (see Note 7)	$	6,752	$	6,529	$	5,163
Bank commitment fees		919		804		927
Other expenses		14		4		1,563
	$	7,685	$	7,337	$	7,653

19.   RELATED PARTY TRANSACTIONS

        The Company has consulting agreements with the owners of Vertis Holdings under which these parties have agreed to provide the Company with consulting services on matters involving corporate finance, strategic corporate planning and other management skills and services. The payment of these fees was deferred by the owners of Vertis Holdings in 2007 and therefore a liability for these fees is included in other current liabilities on the consolidated balance sheet. The annual fees payable to these parties under these agreements amount to approximately $1.3 million. The Company paid approximately $1.3 million in fees under these agreements in 2006 and 2005.

        The Company appointed Barry C. Kohn as its Chief Financial Officer in May 2007. Prior to Mr. Kohn's appointment, he was engaged by the Company to provide consulting services under a consulting agreement entered into in 2007. Under this agreement, the Company paid Mr. Kohn approximately $0.2 million in consulting fees and expenses in 2007, which are included in selling, general and administrative expenses on the consolidated statement of operations.

F-30

20.   QUARTERLY FINANCIAL INFORMATION—UNAUDITED

        The results of operations for the years ended December 31, 2007 and 2006 are presented below.

		First Quarter			Second Quarter			Third Quarter			Fourth Quarter
		(in thousands)
Year Ended December 31, 2007
Revenue		$	330,666		$	332,130		$	319,310		$	383,048
Gross profit			49,661			54,930			53,498			75,604
Loss from continuing operations before
	cumulative effect of accounting change		(25,200	)		(19,727	)		(24,641	)		(256,926	) (1)
Loss from discontinued operations									(251	)
Net loss			(25,200	)		(19,727	)		(24,892	)		(256,926	) (1)
Year Ended December 31, 2006
Revenue		$	349,171		$	351,167		$	352,748		$	415,575
Gross profit			58,153			66,315			58,172			74,441
Loss from continuing operations before income
	taxes and cumulative effect of accounting change		(20,866	)		(4,808	)		(18,563	)		(3,559	)
Loss from continuing operations before cumulative
	effect of accounting change		(20,941	)		(4,872	)		(18,398	)		(3,584	)
Income (loss) from discontinued operations			1,060			(170	)		302			20,408
Cumulative effect of accounting change(2)			(1,654	)								1,654
Net (loss) income			(21,535	)		(5,042	)		(18,096	)		18,478

(1)

Includes a $246.5 million non-cash impairment charge to reflect the impairment of goodwill in each of the Company's reporting units (see Note 5 for further discussion)

(2)

First quarter results include the effect of adopting SFAS 123R on January 1, 2006. This amount was reversed in the fourth quarter of 2006.

21.   SEGMENT INFORMATION

        The Company operates in two reportable segments. The accounting policies of the business segments are the same as those described in Note 3 to the consolidated financial statements. The Company uses EBITDA as the measure by which it gauges the profitability and assesses the performance of its segments. The segments are:

•

Advertising Inserts—provides a full array of targeted advertising products inserted into newspapers.



•

Direct Mail—provides personalized direct mail products and various direct marketing. This segment previously included the Company's fragrance business, which was sold in the third quarter of 2006. The operational results of the Company's fragrance business are included in discontinued operations for 2006 and 2005. See Note 4 for further discussion.

        In addition, the Company also provides outsourced digital premedia and image content management, creative services for advertising insert page layout and design, and media planning and placement services. These services are included in the table below as "Corporate and Other". Corporate and Other also includes the Company's general corporate costs, which reflect costs associated with the Company's executive officers as well as other transactions that are not allocated to the Company's business segments.

F-31

        Following is information regarding the Company's segments:

			2007			2006			2005
			(in thousands)
External Revenue		Advertising Inserts	$	910,301		$	1,027,724		$	1,045,756
		Direct Mail		359,433			329,428			291,131
		Corporate and Other		95,420			111,509			133,201
		Consolidated	$	1,365,154		$	1,468,661		$	1,470,088
Intersegment Revenue		Advertising Inserts	$	333		$	2,747		$	2,661
		Direct Mail		1,425			1,366			2,683
		Corporate and Other		3,433			4,350			5,470
		Consolidated		5,191			8,463			10,814
		Elimination of intersegment sales		(5,191	)		(8,463	)		(10,814	)
		Consolidated revenue	$	1,365,154		$	1,468,661		$	1,470,088
EBITDA		Advertising Inserts	$	(94,446)	(1)	$	117,884		$	125,294
		Direct Mail		(19,850)	(2)		36,565			36,652
		Corporate and Other		(19,810)	(3)		(12,434	)		(6,607	)
		Consolidated EBITDA		(134,106	)		142,015			155,339
		Depreciation and amortization
		of intangibles		57,356			58,788			62,829
		Interest expense, net		134,644			131,023			128,821
		Income tax benefit		388			(1	)		(8,070	)
		Consolidated loss from continuing operations before cumulative effect of accounting change	$	(326,494	)	$	(47,795	)	$	(28,241	)
Restructuring charges		Advertising Inserts	$	7,690		$	5,737		$	7,804
		Direct Mail		1,462			1,828			2,056
		Corporate and Other		1,760			8,436			7,259
		Consolidated	$	10,912		$	16,001		$	17,119
Depreciation and		Advertising Inserts	$	37,009		$	39,749		$	38,555
	amortization of intangibles	Direct Mail		15,097			13,550			14,302
		Corporate and Other		5,250			5,489			9,972
		Consolidated	$	57,356		$	58,788		$	62,829
Additions to long-lived		Advertising Inserts	$	24,948		$	20,970		$	23,900
	assets (excluding	Direct Mail		21,464			12,614			7,298
	acquisitions)	Corporate and Other		18,805			15,401			10,999
		Consolidated	$	65,217		$	48,985		$	42,197
Identifiable Assets		Advertising Inserts	$	324,376		$	535,510		$	542,958
		Direct Mail		151,799			203,341			183,636	(4)
		Corporate and Other		51,991			105,835			146,045
		Consolidated	$	528,166		$	844,686		$	872,639
Goodwill		Advertising Inserts	$	—		$	187,867		$	187,867
		Direct Mail		—			54,320			46,626
		Corporate and Other		—			4,073			4,073
		Consolidated	$	—		$	246,260		$	238,566

(1)

Includes a $187.9 million non-cash impairment charge to reflect the impairment of Advertising Inserts goodwill (see Note 5 for further discussion).

(2)

Includes a $54.6 million non-cash impairment charge to reflect the impairment of Direct Mail goodwill (see Note 5 for further discussion).

F-32

(3)

Includes a $4.0 million non-cash impairment charge to reflect the impairment of Corporate and Other goodwill (see Note 5 for further discussion).

(4)

Includes assets held for sale of $18.6 million.

22.   GUARANTOR/NON-GUARANTOR CONDENSED CONSOLIDATED FINANCIAL INFORMATION

        The Company has senior notes (see Note 11), which are general unsecured obligations of Vertis, Inc., and guaranteed by certain of Vertis, Inc.'s domestic subsidiaries. Accordingly, the following condensed consolidated financial information as of December 31, 2007 and 2006, and for the years ended December 31, 2007, 2006 and 2005 are included for (a) Vertis, Inc. (the "Parent") on a stand-alone basis, (b) the guarantor subsidiaries, (c) the non-guarantor subsidiaries and (d) the Company on a consolidated basis.

        As of December 31, 2007, the guarantor subsidiaries include Enteron Group LLC, Vertis Mailing LLC, Webcraft LLC, USA Direct LLC and Webcraft Chemicals LLC, all of which are wholly-owned subsidiaries of Vertis, Inc. The operations of Enteron Group LLC are reported in Corporate and Other elsewhere in the financial statements, while the operations of Webcraft LLC and Webcraft Chemicals LLC are reported in the Direct Mail segment. The non-guarantor subsidiary is Laser Tech Color Mexico, S.A. de C.V., which is a wholly-owned subsidiary of Vertis, Inc., and whose operations are included in Corporate and Other elsewhere in the financial statements. The Parent includes the operations of Advertising Inserts as well as some Direct Mail operations and operations reported under Corporate and Other.

        In 2005, the operations of our Europe segment are included in the non-guarantor subsidiaries as discontinued operations.

        Investments in subsidiaries are accounted for using the equity method for purposes of the consolidating presentation. The principal elimination entries eliminate investments in subsidiaries, intercompany balances and intercompany transactions. Separate financial statements and other disclosures with respect to the subsidiary guarantors have not been made because the subsidiaries are wholly-owned and the guarantees are full and unconditional and joint and several.

F-33

Condensed Consolidating Balance Sheet Information at December 31, 2007

In thousands

	Parent			Guarantor Companies		Non-Guarantor Companies			Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	1,805		$	2,653	$	1,759					$	6,217
Accounts receivable, net		71,973			11,969		325						84,267
Inventories		30,007			12,767		2						42,776
Maintenance parts		18,489			1,802								20,291
Prepaid expenses and other current assets		6,341			4,015		10						10,366
Total current assets		128,615			33,206		2,096						163,917
Intercompany receivable		42,231							$	(42,231	)
Investments in subsidiaries		27,214			850					(28,064	)
Property, plant and equipment, net		249,341			78,570		115						328,026
Deferred financing costs, net		9,629											9,629
Other assets, net		21,473			5,121								26,594
Total Assets	$	478,503		$	117,747	$	2,211		$	(70,295	)	$	528,166
LIABILITIES AND STOCKHOLDER'S (DEFICIT) EQUITY
Current Liabilities:
Accounts payable	$	106,789		$	29,958	$	11					$	136,758
Compensation and benefits payable		33,712			5,976		45						39,733
Accrued interest		13,889											13,889
Current portion of long-term debt		165,454											165,454
Other current liabilities		20,578			5,387		(181	)					25,784
Total current liabilities		340,422			41,321		(125	)					381,618
Due to parent		3,277			22,211		20,020		$	(42,231	)		3,277	(1)
Long-term debt, net of current portion		987,118											987,118
Other long-term liabilities		22,769			8,467								31,236
Total liabilities		1,353,586			71,999		19,895			(42,231	)		1,403,249
Stockholder's (deficit) equity		(875,083	)		45,748		(17,684	)		(28,064	)		(875,083	)
Total Liabilities and Stockholder's (Deficit) Equity	$	478,503		$	117,747	$	2,211		$	(70,295	)	$	528,166

(1)

Represents the amount due to Vertis Holdings

F-34

Condensed Consolidating Balance Sheet Information at December 31, 2006

In thousands

	Parent			Guarantor Companies		Non-Guarantor Companies			Eliminations			Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	554		$	4,001	$	1,155					$	5,710
Accounts receivable, net		123,953			14,830		643						139,426
Inventories		35,321			12,844		62						48,227
Maintenance parts		18,572			3,720								22,292
Prepaid expenses and other current assets		6,921			1,657								8,578
Total current assets		185,321			37,052		1,860						224,233
Intercompany receivable		68,139							$	(68,139	)
Investments in subsidiaries		55,490			859					(56,349	)
Property, plant and equipment, net		254,935			74,958		146						330,039
Goodwill		196,828			49,432								246,260
Deferred financing costs, net		14,838											14,838
Other assets, net		25,350			3,966								29,316
Total Assets	$	800,901		$	166,267	$	2,006		$	(124,488	)	$	844,686
LIABILITIES AND STOCKHOLDER'S (DEFICIT) EQUITY
Current Liabilities:
Accounts payable	$	154,555		$	32,061	$	22					$	186,638
Compensation and benefits payable		29,564			5,145		46						34,755
Accrued interest		14,300											14,300
Current portion of long-term debt					5								5
Other current liabilities		23,000			5,898		164						29,062
Total current liabilities		221,419			43,109		232						264,760
Due to parent		3,491			48,522		19,617		$	(68,139	)		3,491	(1)
Long-term debt, net of current portion		1,096,036											1,096,036
Other long-term liabilities		30,038			444								30,482
Total liabilities		1,350,984			92,075		19,849			(68,139	)		1,394,769
Stockholder's (deficit) equity		(550,083	)		74,192		(17,843	)		(56,349	)		(550,083	)
Total Liabilities and Stockholder's (Deficit) Equity	$	800,901		$	166,267	$	2,006		$	(124,488	)	$	844,686

(1)

Represents the amount due to Vertis Holdings

F-35

Condensed Consolidating Statement of Operations

Year ended December 31, 2007

In thousands

	Parent			Guarantor Companies			Non-Guarantor Companies			Eliminations			Consolidated
Revenue	$	1,059,932		$	308,161		$	1,884		$	(4,823	)	$	1,365,154
Operating expenses:
Costs of production		848,654			236,190			1,591			(4,823	)		1,081,612
Selling, general and administrative		114,147			38,353			24						152,524
Goodwill impairment		196,828			49,699									246,527
Restructuring charges		9,837			1,075									10,912
Depreciation and amortization of intangibles		45,871			11,442			43						57,356
		1,215,337			336,759			1,658			(4,823	)		1,548,931
Operating (loss) income		(155,405	)		(28,598	)		226						(183,777	)
Other expenses (income):
Interest expense, net		134,651			1			(8	)					134,644
Other, net		7,685												7,685
		142,336			1			(8	)					142,329
Equity in net income of subsidiaries		(28,440	)		(9	)					28,449
(Loss) income from continuing operations before income taxes		(326,181	)		(28,608	)		234			28,449			(326,106	)
Income tax expense		313						75						388
(Loss) income from continuing operations		(326,494	)		(28,608	)		159			28,449			(326,494	)
Loss from discontinued operations		(251	)											(251	)
Net (loss) income	$	(326,745	)	$	(28,608	)	$	159		$	28,449		$	(326,745	)

F-36

Condensed Consolidating Statement of Operations

Year ended December 31, 2006

In thousands

	Parent			Guarantor Companies			Non-Guarantor Companies			Eliminations			Consolidated
Revenue	$	1,201,282		$	272,000		$	1,564		$	(6,185	)	$	1,468,661
Operating expenses:
Costs of production		962,523			203,184			870			(6,185	)		1,160,392
Selling, general and administrative		111,045			31,819			52						142,916
Restructuring charges		14,662			1,339									16,001
Depreciation and amortization of intangibles		48,362			10,402			24						58,788
		1,136,592			246,744			946			(6,185	)		1,378,097
Operating income		64,690			25,256			618						90,564
Other expenses (income):
Interest expense, net		131,106			(80	)		(3	)					131,023
Other, net		7,337												7,337
		138,443			(80	)		(3	)					138,360
Equity in net income of subsidiaries		47,383									(47,383	)
(Loss) income from continuing operations before income taxes		(26,370	)		25,336			621			(47,383	)		(47,796	)
Income tax (benefit) expense		(175	)					174						(1	)
(Loss) income from continuing operations		(26,195	)		25,336			447			(47,383	)		(47,795	)
Income (loss) from discontinued operations					22,464			(864	)					21,600
Net (loss) income	$	(26,195	)	$	47,800		$	(417	)	$	(47,383	)	$	(26,195	)

F-37

Condensed Consolidating Statement of Operations

Year ended December 31, 2005

In thousands

	Parent			Guarantor Companies			Non-Guarantor Companies			Eliminations			Consolidated
Revenue	$	1,164,835		$	307,748		$	1,173		$	(3,668	)	$	1,470,088
Operating expenses:
Costs of production		917,296			226,569			385			(3,668	)		1,140,582
Selling, general and administrative		116,132			33,231			32						149,395
Restructuring charges		13,317			3,802									17,119
Depreciation and amortization of intangibles		49,383			13,423			23						62,829
		1,096,128			277,025			440			(3,668	)		1,369,925
Operating income		68,707			30,723			733						100,163
Other expenses (income):
Interest expense, net		128,807			15			(1	)					128,821
Other, net		7,653												7,653
		136,460			15			(1	)					136,474
Equity in net loss of subsidiaries		(112,235	)		(96,292	)					208,527
(Loss) income before income taxes		(179,988	)		(65,584	)		734			208,527			(36,311	)
Income tax (benefit) expense		(8,358	)		34			254						(8,070	)
(Loss) income from continuing operations before cumulative effect of accounting change		(171,630	)		(65,618	)		480			208,527			(28,241	)
Income (loss) from discontinued operations					5,256			(148,645	)					(143,389	)
Cumulative effect of accounting change		(1,600	)											(1,600	)
Net (loss) income	$	(173,230	)	$	(60,362	)	$	(148,165	)	$	208,527		$	(173,230	)

F-38

Condensed Consolidating Statement of Cash Flows

Twelve months ended December 31, 2007

In thousands

	Parent			Guarantor Companies			Non- Guarantor Companies			Consolidated
Cash Flows from Operating Activities	$	(27,414	)	$	44,701		$	209		$	17,496
Cash Flows from Investing Activities:
Capital expenditures		(45,035	)		(18,871	)		(8	)		(63,914	)
Software development costs capitalized		(1,303	)								(1,303	)
Proceeds from sale of property, plant and equipment		537			39						576
Proceeds from sale leaseback transactions		10,691									10,691
Acquisition of business, net of cash acquired					(203	)					(203	)
Proceeds from sale of discontinued operations, net		1,000									1,000
Net cash used in investing activities		(34,110	)		(19,035	)		(8	)		(53,153	)
Cash Flows from Financing Activities:
Net borrowings under revolving credit facilities		2,574									2,574
Borrowings under term loan		50,000									50,000
Deferred financing costs		(1,982	)								(1,982	)
Decrease in outstanding checks drawn on controlled disbursement accounts		(13,461	)		(867	)					(14,328	)
Other financing activities		25,644			(26,147	)		289			(214	)
Net cash provided by (used in) financing activities		62,775			(27,014	)		289			36,050
Effect of exchange rate changes on cash								114			114
Net increase (decrease) in cash and cash equivalents		1,251			(1,348	)		604			507
Cash and cash equivalents at beginning of year		554			4,001			1,155			5,710
Cash and cash equivalents at end of period	$	1,805		$	2,653		$	1,759		$	6,217

F-39

Condensed Consolidating Statement of Cash Flows

Twelve months ended December 31, 2006

In thousands

	Parent			Guarantor Companies			Non- Guarantor Companies			Consolidated
Cash Flows from Operating Activities	$	(24,311	)	$	36,608		$	(607	)	$	11,690
Cash Flows from Investing Activities:
Capital expenditures		(36,476	)		(10,376	)		(84	)		(46,936	)
Software development costs capitalized		(2,049	)								(2,049	)
Proceeds from sale of property, plant and equipment		776			9						785
Proceeds from sale of subsidiaries, net					41,071						41,071
Acquisition of business, net of cash acquired					(21,017	)					(21,017	)
Net cash (used in) provided by investing activities		(37,749	)		9,687			(84	)		(28,146	)
Cash Flows from Financing Activities:
Net borrowings under revolving credit facilities		41,470									41,470
Repayments of long-term debt					(34	)					(34	)
Deferred financing costs		(388	)								(388	)
Decrease in outstanding checks drawn on controlled disbursement accounts		(20,488	)		(1,319	)					(21,807	)
Other financing activities		41,716			(41,042	)		392			1,066
Net cash provided by (used in) financing activities		62,310			(42,395	)		392			20,307
Effect of exchange rate changes on cash								31			31
Net increase (decrease) in cash and cash equivalents		250			3,900			(268	)		3,882
Cash and cash equivalents at beginning of year		304			101			1,423			1,828
Cash and cash equivalents at end of period	$	554		$	4,001		$	1,155		$	5,710

F-40

Condensed Consolidating Statement of Cash Flows

Twelve months ended December 31, 2005

In thousands

	Parent			Guarantor Companies			Non- Guarantor Companies			Consolidated
Cash Flows from Operating Activities	$	(36,842	)	$	48,437		$	(5,902	)	$	5,693
Cash Flows from Investing Activities:
Capital expenditures		(36,238	)		(3,927	)					(40,165	)
Software development costs capitalized		(2,032	)								(2,032	)
Proceeds from sale of property, plant and equipment and divested assets		794			227						1,021
Proceeds from sale of subsidiaries, net		2,361									2,361
Acquisition of business, net of cash acquired		(3,430	)								(3,430	)
Other investing activities					(3	)		(1,517	)		(1,520	)
Net cash used in investing activities		(38,545	)		(3,703	)		(1,517	)		(43,765	)
Cash Flows from Financing Activities:
Net borrowings under revolving credit facilities		21,197									21,197
Repayments of long-term debt		(6	)								(6	)
Deferred financing costs		(1,204	)								(1,204	)
Increase in outstanding checks drawn on controlled disbursement accounts		14,349			681						15,030
Other financing activities		41,058			(45,347	)		8,604			4,315
Net cash provided by (used in) financing activities		75,394			(44,666	)		8,604			39,332
Effect of exchange rate changes on cash								(2,070	)		(2,070	)
Net increase (decrease) in cash and cash equivalents		7			68			(885	)		(810	)
Cash and cash equivalents at beginning of year		297			33			2,308			2,638
Cash and cash equivalents at end of period	$	304		$	101		$	1,423		$	1,828

F-41

23.   COMMITMENTS AND CONTINGENCIES

        Certain claims, suits and allegations that arise in the ordinary course of business and certain environmental claims have been filed or are pending against the Company. Management believes that all such matters in the aggregate would not have a material effect on the Company's consolidated financial statements.

* * * * *

F-42

VERTIS, INC. AND SUBSIDIARIES

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

In thousands

	Balance at Beginning of Year		Charges (Credits) to Costs and Expenses			Write offs Net of Recoveries			Balance at End of Year
Allowance for Doubtful Accounts
Year ended December 31, 2007	$	2,859	$	463		$	(399	)	$	2,923
Year ended December 31, 2006		1,494		942			423	(1)		2,859
Year ended December 31, 2005		3,320		1,544			(3,370	)		1,494
Deferred Tax Valuation Allowance
Year ended December 31, 2007	$	128,584	$	68,817					$	197,401
Year ended December 31, 2006		132,531		(3,947	)					128,584
Year ended December 31, 2005		40,490		92,041						132,531

(1)

In 2006, recoveries of accounts receivable previously written off were greater than the amount of accounts receivable written off.

F-43

QuickLinks

VERTIS, INC.
ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2007
TABLE OF CONTENTS
CAUTIONARY STATEMENTS
PART I

ITEM 1 BUSINESS
ITEM 1A RISK FACTORS

ITEM 1B UNRESOLVED STAFF COMMENTS
ITEM 2 PROPERTIES
ITEM 3 LEGAL PROCEEDINGS
ITEM 4 SUBMISSION OF VOTE TO SECURITY HOLDERS

PART II

ITEM 5 MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
ITEM 6 SELECTED FINANCIAL DATA

ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
ITEM 9A CONTROLS AND PROCEDURES
ITEM 9B OTHER INFORMATION

PART III

ITEM 10 DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 11 EXECUTIVE COMPENSATION

Summary Compensation Table
Grants of Plan-Based Awards
Outstanding Equity Awards at Fiscal Year-End
Pension Benefits
Triggering Event

ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCK MATTERS
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE
ITEM 14 PRINCIPAL ACCOUNTANT FEES AND SERVICES

PART IV

Item 15. Exhibits and Financial Statement Schedules

SIGNATURES
VERTIS, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Vertis, Inc. and Subsidiaries Consolidated Balance Sheets In thousands, except per share amounts
Vertis, Inc. and Subsidiaries Consolidated Statements of Operations In thousands
Vertis, Inc. and Subsidiaries Consolidated Statements of Stockholder's Deficit In thousands, except where otherwise noted
Vertis, Inc. and Subsidiaries Consolidated Statements of Cash Flows In thousands
Vertis, Inc. and Subsidiaries Notes to Consolidated Financial Statements
Condensed Consolidating Balance Sheet Information at December 31, 2007 In thousands
Condensed Consolidating Balance Sheet Information at December 31, 2006 In thousands
Condensed Consolidating Statement of Operations Year ended December 31, 2007 In thousands
Condensed Consolidating Statement of Operations Year ended December 31, 2006 In thousands
Condensed Consolidating Statement of Operations Year ended December 31, 2005 In thousands
Condensed Consolidating Statement of Cash Flows Twelve months ended December 31, 2007 In thousands
Condensed Consolidating Statement of Cash Flows Twelve months ended December 31, 2006 In thousands
Condensed Consolidating Statement of Cash Flows Twelve months ended December 31, 2005 In thousands
VERTIS, INC. AND SUBSIDIARIES SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS In thousands

EX-10.23

Exhibit 10.23

INDEPENDENT CONTRACTOR AGREEMENT

1.     Parties.  Barry Kohn (“Contractor”) provides THIS AGREEMENT for the benefit of Vertis, Inc. dba Vertis Communications  its subsidiaries, affiliates, successors and assigns (collectively, “Company”) and serves as a legally binding acknowledgment and assignment of the ownership of all “Work Product” (as defined below) and agreement on other terms herein.

2.     Services.  In consideration of the Company’s engagement of Contractor as an independent contractor, and for other good and valuable consideration as set forth on Exhibit A the receipt and sufficiency of which Contractor hereby acknowledges, Contractor hereby agrees to the following.  For purposes of this Agreement, the term “Work Product” shall mean all tangible items created or developed by Contractor during or as the result of Contractor’s engagement by the Company and within the scope of Contractor’s engagement, as well as all non-copyrightable ideas and inventions conceived or created by Contractor during the course of such activities, whether or not reduced to tangible form, and all Intellectual Property Rights (as defined below) in and to any of the foregoing.  The term “Work Product” shall include all such items and materials even though created or developed by Contractor after working hours, away from the Company’s premises or on an unsupervised basis, and whether created by Contractor or with others as long as such items and materials are within the scope of Contractor’s engagement.

3.     Ownership Rights.  Contractor acknowledges and agrees that all rights in and to the Work Product, including all the tangible copies thereof, shall belong exclusively to the Company.  By way of example and not limitation, the Company will be the exclusive owner of all intellectual property rights which may be applicable to the Work Product, including without limitation all copyrights, patents, trade secrets, trademarks, servicemarks, trade dress and other similar rights (collectively, “Intellectual Property Rights”).  In this regard, all copyrightable Work Product is to be considered a work made for hire on behalf of the Company whose ownership will vest exclusively with the Company on its creation.  Contractor hereby assigns all patentable inventions to the Company.  To the extent any Work Product may not, by operation of law or this Agreement, be considered a work made for hire, Contractor upon the creation of all items of such Work Product automatically assigns, without further consideration, the exclusive ownership thereof to the Company.  Contractor also irrevocably relinquishes to or licenses to Company, whichever is most expansive but enforceable at law, for the benefit of the Company and its assigns any moral rights in the Work Product which may be recognized by applicable law.

4.     Further Acts.  Upon the request of the Company, during or after Contractor’s engagement as an independent contractor, Contractor agrees to perform such further acts as may be necessary or desirable to transfer, perfect, and defend the Company’s rights, including without limitation by (1) executing, acknowledging, and delivering any requested affidavits and documents of assignment or conveyance, (2) obtaining and/or aiding in the enforcement of any Intellectual Property Rights with respect to the Work Product in any country, and (3) providing testimony in connection with any proceeding affecting the rights of the Company in any Work Product. This document shall function as a limited power of attorney in favor of Company to accomplish the acts set forth in this paragraph.

5.     Confidential Information.  During the course of Contractor’s engagement and thereafter, Contractor agrees not to use or disclose any trade secrets of the Company at any time except as necessary to perform Contractor’s duties for the Company. A trade secret generally consists of valuable, secret information or ideas that the Company collects or uses and which give it a business advantage, including confidential information supplied to the Company by its customers, clients, vendors, or agents. By way of example and not limitation, the Company’s trade secrets are such technical information as manufacturing or operating processes, equipment design, product specifications, computer software in source, object, script or other code form, and other proprietary technology, as well as such business information as selling and pricing information and procedures, customer lists, business and marketing plans, and internal financial statements. These restrictions do not apply to any information generally available to the public or any information properly obtained from a completely independent source. Because the Company would not have an adequate remedy at law in the event of any breach or threatened breach of this Agreement, Contractor hereby consents to the granting of equitable relief against Contractor restraining such breach without the requirement that the Company post any bond or other security therefor.  Nothing in this Agreement shall be

1

construed as conveying to Contractor any right, title or interests or copyright in or to any Confidential Information of Company; or to convey any license as to use, sell, exploit, copy or further develop any such Confidential Information.

6.     Warranty.  Contractor warrants that its services to create the Work Product and any other services for the Company do not and will not in any way conflict with any remaining obligations Contractor may have to any prior employer or other party. Contractor also agrees to perform its services as described in Exhibit A for the Company in a manner that avoids even the appearance of infringement of any third party’s Intellectual Property Rights and in a workmanlike manner.  Contractor hereby disclaims any and all express and implied warranties other than those set forth in this paragraph, including without limitation any warranty of fitness for a particular purpose or merchantability. Excepting those matters set forth in the indemnification paragraph below, both parties liability to each other are limited to the amount paid to contractor in total under this Agreement and both parties expressly disclaim any consequential, punitive or other special damages.

7.     Return of Work Product.  Upon the request of the Company and, in any event, upon the termination of Contractor’s engagement as an independent contractor, Contractor will leave with the Company all copies of the Work Product and all other materials relating to the Company’s business.

8.     Indemnification.

a.  From Contractor.  Contractor agrees to indemnify, defend and hold Company, its affiliates, subsidiaries, employees, directors, officers, shareholders, and clients harmless from any and all claims and threatened claims by any third party, including employees of either party, arising out of, under or in connection with: (i) the death or bodily injury of any third party, the damage loss or destruction of any personal or real property; or (ii) an act or omission of Contractor arising out of or relating to: (a) federal, state or other laws or regulations for the protection of persons who are members of a protected class or category or persons or (b) sexual discrimination or harassment.

b.  To Contractor:  Company agrees to indemnify, defend and hold Contractor harmless from any and all claims and threatened claims by any third party, including without limitation officers, investors, debt holders, directors and employees of Company, arising out of, or under or in connection with his services to Company, excepting  only those matters  set forth above where Contractor indemnifies Company.

Independent Contractor Status.  Contractor acknowledges and agrees that nothing herein shall constitute an offer to hire or an employment contract, that the Company’s engagement of Contractor as an independent contractor shall not constitute a partnership, agency relationship or joint venture and that Contractor is responsible for its own worker’s compensation, social security and other obligations imposed by law on independent contractors.

9.     Compliance with Rules and Regulations.  To the extent Contractor has access to or use of the facilities or computer resources of the Company or the Company’s client, Contractor agrees to comply at all times with the applicable rules and regulations regarding safety, security, use, and conduct and agrees that such use provides Contractor no rights therein, other than the limited right to use such for purposes expressly set forth herein and no other.

10.   Termination.  Contractor agrees that the Company may terminate this agreement without cause upon fourteen (14) days written notice.

11.   Governing Law.  This Agreement shall be governed by New York law without regard to New York’s conflict of law provisions. Any dispute regarding this agreement and the matters related to it shall be resolved in the federal and state courts of New York within the city of New York, specifically the borough of Manhattan.

12.   Non-solicitation.  During the term this Agreement is in effect and for a period of two (2) years thereafter, Contractor agrees not to solicit or to offer employment to any employees of Company or an affiliate of Company without the prior written consent of Company.

13.   Entire Agreement, Assignment, Waiver and Amendment.  This Agreement and its Exhibits constitute the sole and exclusive statement of the terms and conditions hereof and supersede any prior discussions, writings, and negotiations with respect thereto.  Contractor shall not assign or transfer this

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Agreement or subcontract any work hereunder without the prior written consent of Company.  Any attempt to assign or transfer this Agreement shall be void.  The parties agree that this Agreement cannot be altered, amended or modified, except by a writing signed by an authorized representative of each party.  No failure or delay in enforcing any right or exercising any remedy will be deemed a waiver of any right or remedy.

14.   Survival.  The provisions of this Agreement that are by their nature meant to survive any termination or expiration of this Agreement, including without limitation,  ownership of Work Product and Intellectual Property, trade secrets, and independent contractor status will survive any termination or expiration of this Agreement.

15.   Severability.  If any portion of this Agreement is determined to be or becomes unenforceable or illegal, such portion shall be reformed to the minimum extent necessary in order for this Agreement to remain in effect in accordance with its terms as modified by such reformation.

16.   Notices.  Any notice required under this Agreement shall be given in writing and shall be deemed effective upon delivery to the party to whom addressed.  All notices shall be sent to the applicable address specified herein or to such other address as the parties may designate in writing.  Unless otherwise specified, all notices to Company shall be sent to the Office of the General Counsel, Vertis, Inc. 250 W. Pratt St. 18th Floor, Baltimore, MD 21201.  All notices to Contractor shall be sent to 10935 Hastings Lane, Powell, OH 43065.

Dated this 12th day of February, 2007.

Acknowledged and Accepted:

Vertis, Inc. dba Vertis Communications	Barry Kohn
/s/ John V. Howard
Signature
John V. Howard	/s/ Barry Kohn
Name
Secretary
Title

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Exhibit A

Consulting services as directed by Mike DuBose at a weekly rate of $10,000 per week plus reasonable expenses as incurred, to be billed periodically.

Barry C. Kohn

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Contractor Code of Conduct

This Contractor Code of Conduct has been adopted by the management of Vertis, Inc. as well as all other subsidiaries and affiliates of Vertis, Inc. (collectively, “Vertis”).

The Contractor Code of Conduct won’t answer every question or situation. If you are unsure about how to handle a situation, please use common sense in making your decision and contact Vertis’ Office of the General Counsel (“OGC”) or Vertis’ Human Resources Department for further guidance. You should comply not only with the letter of the Contractor Code of Conduct, but also the spirit of these policies at all times.

General Conduct

·Vertis conducts its business operations in a manner to encourage individual integrity, promote ethical practices and adhere to the highest standards of personal and professional integrity. Vertis observes the applicable local, state, U.S. and foreign laws, including those pertaining to copyright infringement, intellectual property protection, and controlled substances. When individuals contracted by Vertis (“Contractors”) are required to work at Vertis customer sites, they must act professionally at all times and follow the rules and procedures of Vertis’ customers. A customer rule might include testing the Contractor for controlled substances. If any Contractor has any concerns regarding a customer rule, the Contractor should notify their Vertis contact to discuss their options.

·While on Vertis’ premises or while performing services for Vertis, Contractors should conduct themselves in a professional manner, including complying with property management rules and requests in addition to Vertis’ rules and procedures.  If Contractor has any concerns regarding these rules, procedures, requests, or otherwise, Contractor should notify his/her Vertis contact.

·Contractor must never use Vertis funds or Contractor funds directly or indirectly for bribery, payoffs, kickbacks, illegal or improper lobbying or political contributions, personal gain or for any other illegal or improper purpose.

·Contractors should use common sense in not accepting or soliciting any gifts or gratuities from anyone doing business with Vertis, with the exception of the occasional token promotional items of nominal value. At no time should such acceptance or solicitation violate any legal or ethical standards and such items should be reported for tax purposes. Regardless of value no such item should be accepted or sought if its receipt would cause public embarrassment upon disclosure.

·To further the safety of Vertis’ working environment, Contractors are prohibited from carrying weapons (including firearms) on Vertis premises and at any other time and place while performing services for Vertis.

Equal Employment Opportunity and Harassment

·Vertis is committed to the principle of equal employment opportunity for all qualified employees and job applicants, and it administers all employment matters without regard to race, color, religion, gender, sexual orientation, national origin, age, disability, Veteran status or any other status, or any condition or status protected by federal, state or local law. Vertis’ equal employment opportunity policy strictly prohibits harassment of any kind whether based on race, gender, or otherwise, including any conduct or comment that could be viewed by the person harassed as sexual harassment. Contractors must be fully committed to these principles and abide by them at all times.

Compliance with the Antitrust Laws

·Vertis employees and Contractors of Vertis must never discuss with Vertis’ competitors any competitive matters about Vertis, such as prices, discounts, credit, costs, customers, suppliers, competitive conditions, or any other competitive or confidential aspect of Vertis’ business.  If any confidential or competitive Vertis matters arise during discussions at industry functions, trade association meetings or any other legitimate contacts with competitors, you must end the discussion immediately and report the incident to Vertis’ OGC.

Confidentiality

·Customers and business partners entrust Vertis with confidential information regarding their products, processes and business operations which Vertis and its employees are obligated to protect from unauthorized disclosure. Vertis and its Contractors must not use this information in any manner that may compromise its confidentiality.

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Contractors are expected to use the same care and protection with Vertis’ and others’ confidential information as with the Contractor’s own confidential information.

·Contractors should never knowingly take or use confidential information of a competitor, customer or other party.

Vertis’ Internet, Email, Instant Messaging and Voice Mail Policies

·Vertis believes that lawful and appropriate use of the Internet and email (both internal and external) can enhance productivity. However, conducting illegal or unprofessional activities, such as requesting, sending, or obtaining unauthorized confidential information or any bootlegged materials (such as music or movies) is strictly forbidden.

·User IDs may not be shared with other people.

·All information in any format (including voicemail, email, and instant messages) that is transmitted and/or stored by any means on Vertis’ equipment (computer network drives, local hard drives, diskettes, etc.) is the property of Vertis. Contractors should have no expectation of privacy in their email messages, email attachments, instant messages, Internet use or voicemail messages. The email and voicemail systems are for “business use” and Vertis reserves the right to monitor these systems for “business use.” Vertis reserves the right to monitor use of its equipment and storage facilities at any time, and passwords or other security devices may be overridden by Vertis for any reason, including but not limited to, (i) ensuring that only rightful information resides on Vertis’ electronic storage facilities; (ii) preventing facility misuse; (iii) investigating and resolving network or communication problems; and (iv) ensuring compliance with this policy. Because these storage facilities are subject to such inspection and monitoring, do not assume that email messages, email attachments, Internet use or voicemail messages are private.

·Contractors must comply with any other policies or instructions of Vertis’ IT Department as they are communicated to Contractors.

Software Licensing

·Vertis licenses the use of computer software from a variety of outside companies. Vertis does not own this licensed software, and use of the software must be in accordance with the licenses of the respective vendors. Such software must not be reproduced unless authorized. In addition, Contractors shall not utilize unlicensed (bootleg) software on Vertis’ computers.

Vertis-Sponsored Functions

·Vertis sponsors certain functions where alcohol is made available for consumption. Contractors who attend those functions are expected to behave in a sensible and professional manner, including the avoidance of excessive consumption of alcohol. Contractors should never drive after excessive consumption of alcohol.

·Vertis may at times sponsor certain recreational activities, including athletic events or leagues. Participation in recreational activities is completely voluntary and at the Contractor’s own risk. All participants in recreational activities will be required to sign a release of liability with Vertis prior to participation.

Legal Notices

·For obvious reasons, it is very important that all subpoenas, summons and other legal notices (or if you’re not sure, anything that might be one of those) involving Vertis which are received by or served upon any Contractor of Vertis immediately be forwarded to Vertis’ Office of the General Counsel.  Speed is crucial with these matters because response times are often quite short. Delivery should be by hand delivery to a lawyer in the Vertis Office of the General Counsel in the Baltimore Headquarters @ 250 W. Pratt St., 18^th Floor, Baltimore Maryland 21201 if feasible, or if not, then by fax to 410-529-9287 with confirmation copy sent by overnight mail.

Violations

·If a Contractor of Vertis learns of a violation of this Contractor Code of Conduct, he/she is obligated to notify his/her Vertis contact. Failure to do so will be a violation of this Contractor Code of Conduct. Any violations of this Contractor Code of Conduct will be noted with violators subject to action by Vertis, up to and including immediate termination.

Interpretations/Clarifications

·You are encouraged to directly contact your Vertis contact, Vertis’ Office of the General Counsel, Human Resources, or an Officer of Vertis with any questions about this Contractor Code of Conduct or any other Vertis policies.

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EX-10.25

Exhibit 10.25

		Mike DuBose                                        www.vertisinc.com
TURN TO US		Chairman & Chief Executive Officer
		250 West Pratt Street Suite 1800 Baltimore, MD 21201
		D: 410.361.8367 F: 410.528.9287
		mdubose@vertisinc.com

September 17, 2007

VIA HAND DELIVERY

John V. Howard

Dear John:

This letter (“Letter Agreement”) confirms our agreement concerning relocation of your principal employment location to Vertis, Inc.’s Boulder, Colorado office and the terms and conditions of your continued at-will employment hereafter pursuant to that certain employment agreement by and among Vertis Inc. (the “Company”), Vertis Holdings, Inc. (“Holdings”) and you, dated and effective as of August 31, 2003 (the “Employment Agreement”).

1.                Relocation of Principal Employment Location

Effective immediately, your principal employment location with the Company shall be the Company’s Boulder, Colorado office.  You agree to use all reasonable efforts to carry out your responsibilities faithfully and efficiently, which efforts are anticipated to include increased travel to support the needs of the Company and the expenditure of substantial time in the Baltimore, Maryland office or other location from time to time of the headquarters of the Company.

2.                Relocation of Principal Residence

You agree to begin immediately to relocate your principal residence to the metropolitan area of Boulder, Colorado which relocation is expected to be completed as soon as practicable.  You will be eligible to receive the assistance and benefits provided under the Company’s Employee Relocation (Executives) policy (Policy Number 407, Effective Date: January 1, 2007) (the “Relocation Policy”) subject to the terms and conditions set forth therein and the following revisions.  Notwithstanding the provisions of Section 18 of the Relocation Policy, if prior to November 1, 2009, you resign, take a leave of absence from which you do not return, or you are involuntarily terminated for cause (as defined in the Employment Agreement), all relocation payments will cease and you will be required to repay to the Company a percentage of all the expenses, including relocation allowances, relocation reimbursements, related taxes, payments and gross ups, (collectively, the “Relocation Expenses”) incurred by the Company for your relocation (the “Reimbursement Amount”) according to the following schedule:

Effective date of termination of employment	Percentage of Relocation Expenses to be repaid to the Company
On or before November 1, 2008	100%
After November 1, 2008 and before November 1, 2009	50%

You understand that a listing of all Relocation Expenses incurred by the Company on your behalf will be made available to you.  You agree to reimburse the Company for the Reimbursement Amount under the circumstances described in this Section 2 within one month of the effective date of your termination of employment and your receipt from the Company of an itemization of Relocation Expenses incurred.  In addition, to the extent that it becomes due under this Section 2, you authorize the Company to deduct the Reimbursement Amount, to the full extent permitted by law, from any salary, bonuses, vacation, severance pay and/or other forms of compensation otherwise due and payable to you by the Company upon your termination.  If you fail to make such timely reimbursement, you agree to reimburse the Company for all attorneys’ fees and costs incurred by the Company in enforcing your payment under this Letter Agreement.

3.                Offset of Relocation Expenses against Bonus Arrangements

In the event that you earn an incentive award under the Company’s Management Incentive Compensation Plan (“MICP”) for fiscal year 2007 or receive any retention or discretionary bonus in 2007 or 2008 related to your employment with the Company (other than an MICP incentive award earned for fiscal year 2008 performance or subsequent years) (the amount of any 2007 MICP incentive award, retention bonus and discretionary bonus, each, a “Bonus” and collectively, the “Bonuses”), the Bonuses will be offset by the amount of Relocation Expenses paid or payable by the Company (the “Bonus Offset”).  In calculating the amount of any Bonus Offset, the amount shall include, to the extent not previously included in a Bonus Offset, the aggregate Relocation Expenses incurred as of the date of the Bonus payment and reasonable estimates made in the Company’s discretion for anticipated future Relocation Expenses.  The Bonus Offset shall be disregarded for purposes of calculating the Applicable Bonus Amount under the Employment Agreement.  In contrast, in each instance under the Employment Agreement that provides for the payment of earned but unpaid annual bonuses, such provision shall not be construed to cause the payment of an amount that was included in the Bonus Offset.

4.                Waiver of Claims

In consideration of the Company’s agreement to relocate your employment to the Boulder, Colorado office at your request, you hereby forever waive all rights that you might otherwise have to assert the existence of Good Reason to terminate employment under the Employment Agreement with respect to (a) any of the provisions set forth above, including increased travel requirements and the Bonus Offset, (b) the change in reporting responsibility of Jim Foley directly to the Chief Executive Officer, and (c) the past reduction of your annual cash bonus opportunity from 75% to 50% of base salary.

5.                Miscellaneous

This Letter Agreement shall be governed by, and construed in accordance with, the laws of the State of Maryland, without reference to principles of conflict of laws.  This Letter Agreement and the Relocation Policy are the full and final understanding between you and the Company regarding the relocation of your principal employment location and principal residence.  Except as modified by the terms of this Letter Agreement, the Employment Agreement remains in full force and effect.  You acknowledge that nothing in this Letter Agreement gives you any contractual or other rights to continued employment for any period of time and your employment with the Company remains at will at all times.  This Letter Agreement shall not be modified, waived or amended except by a written agreement executed by the parties hereto or their respective successors and legal representatives.  This Letter Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.  The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company expressly to assume and agree to perform this Letter Agreement in the same manner and to the same extent that the Company would have been required to perform it if no such succession had taken place.

If the foregoing terms are acceptable to you, please confirm your agreement by signing your name below. Your signature below will indicate that you are entering into this Letter Agreement freely and with a full understanding of its terms and effect.

Very truly yours,

/s/ Mike DuBose

Mike DuBose,

On behalf of Vertis, Inc. and

Vertis Holdings, Inc.

AGREED AND ACCEPTED:
/s/ John V. Howard Jr.
John V. Howard Jr.
Date:	September 17, 2007

EX-10.26

Exhibit 10.26

TURN TO US		John V. Howard Chief Legal Officer and Secretary	www.vertisinc.com
		250 West Pratt Street Suite 1800 Baltimore, MD 21201
		D: 410.361.8347 F: 410.454.8460
		jhoward@vertisinc.com

November 18, 2007

VIA HAND DELIVERY

Michael T. DuBose

Dear Mike:

This letter (“Letter Agreement”) confirms the agreement reached between the Board of Directors and you concerning relocation of your principal employment location pursuant to the terms and conditions of that certain employment agreement by and among Vertis, Inc. (the “Company”), Vertis Holdings, Inc. (“Holdings”) and you, dated and effective as of November 28, 2006 (the “Employment Agreement”).  This Letter Agreement serves to amend the Employment Agreement as set forth below as of this date.

Section 3(f) of the Employment Agreement provides that until September 30, 2007, your principal employment location is Williams, Oregon, and after such date your principal employment location would be at such Company office as is mutually agreed upon between the Company and you by September 30, 2007 (the “Relocation Date”).  It further provides that you would relocate your principal place of residence to the metropolitan area encompassing such agreed-upon office by the first anniversary of your commencement of employment with the Company.

Section 3(f) of the Employment Agreement is hereby amended to change the Relocation Date from September 30, 2007 to December 31, 2007.  Section 3(f) of the Employment Agreement is hereby further amended to provide that you will relocate your principal place of residence to the metropolitan area encompassing the agreed-upon Company office by or as soon as practicable after December 31, 2007.

Section 3(f) of the Employment Agreement provides that you will be reimbursed for reasonable commuting, moving and other cost-of-relocation expenses incurred by you in relocating to your principal employment location and for reasonable costs incurred in traveling between your principal employment location and other employment locations in accordance with the Company’s existing reimbursement policies (including amounts expended for meals and lodging at other employment locations).  Section 3(f) of the Employment Agreement further provides that the above-described reimbursement will also include any incremental tax liability incurred by you with respect to the reimbursements for relocation costs and traveling costs, so

that you are in the same tax position you would have been in if such reimbursement were not subject to income tax, provided, however, that, after September 30, 2007, you will not be reimbursed for incremental tax liability attributable to reimbursement for amounts expended for meals and lodging.

Section 3(f) of the Employment Agreement is hereby amended to provide that the reimbursements described therein for moving and other cost-of-relocation expenses, reasonable commuting expenses, and reasonable costs incurred in traveling between your principal employment location and other employment locations in accordance with the Company’s existing reimbursement policies (including amounts expended for meals and lodging at other employment locations) will continue indefinitely into the future.

You further acknowledge and understand that the reimbursements for commuting expenses and for amounts expended for meals and lodging in the vicinity of your principal employment location after the first anniversary of your commencement of employment with the Company will be reported by the Company as W-2 wages, but such amounts will not be taken into consideration as compensation for purposes of the Company’s employee benefit plans in which you participate, now or in the future, or for purposes of calculating any severance benefit to which you may become entitled under the Employment Agreement.

This Letter Agreement shall be governed by, and construed in accordance with, the laws of the State of Maryland, without reference to principles of conflict of laws.  Except as modified by the terms of this Letter Agreement, the Employment Agreement remains in full force and effect.  You acknowledge that nothing in this Letter Agreement gives you any contractual or other rights to continued employment for any period of time and your employment with the Company remains at will at all times.  This Letter Agreement shall not be modified, waived or amended except by a written agreement executed by the parties hereto or their respective successors and legal representatives.  This Letter Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

If the foregoing terms are acceptable to you, please confirm your agreement by signing your name below.  Your signature below will indicate that you are entering into this Letter Agreement freely and with a full understanding of its terms and effect.

		Very truly yours,
		/s/ John V. Howard, Jr.
		John V. Howard, Jr.
		On behalf of Vertis, Inc. and
		Vertis Holdings, Inc.
AGREED AND ACCEPTED:
/s/ Mike DuBose
Mike DuBose
Date:	September 18, 2007

EX-10.27

Exhibit 10.27

EMPLOYMENT AGREEMENT

THIS AGREEMENT (the “Agreement”) by and among Vertis, Inc. (the “Company”), Vertis Holdings, Inc. (“Holdings”), and Barry C. Kohn (the “Executive”), dated and effective as of December 18, 2007 (the “Effective Date”).

WHEREAS, the Company wishes to provide for the continued employment by the Company of the Executive, and the Executive wishes to continue to serve the Company, in the capacities and on the terms and conditions set forth in this Agreement;

NOW, THEREFORE, it is hereby agreed as follows:

1.EMPLOYMENT AT WILL.  The employment of the Executive by the Company shall be at will and shall be terminable by either party upon 30 days prior written notice or as otherwise set forth in Section 4.  The provisions of Sections 4 and 5 shall govern the consequences of any termination of the Executive’s employment.

2.POSITION AND DUTIES.

(a)During his employment with the Company, the Executive shall serve as the Senior Vice President and Chief Financial Officer of the Company and shall perform such duties and have such responsibilities as are customarily assigned to such position, and shall also perform or hold such other duties and responsibilities with respect to the Company or its subsidiaries not inconsistent therewith as may from time to time be assigned to him by the Board of Directors of the Company (the “Board”).

(b)During his employment with the Company, and excluding any periods of vacation and sick leave to which the Executive is entitled, the Executive shall devote his full business attention and time to the business and affairs of the Company and shall use all reasonable efforts to carry out his responsibilities faithfully and efficiently.  However, the Executive may serve on corporate, industry, civic or charitable boards or committees, so long as these activities do not materially interfere with the performance of the Executive’s responsibilities to the Company.  It is further agreed that Executive may, through June 2009, continue to provide those services, if any, requested by the Board of Directors of Aftermarket Technology Corp. pursuant to the Amended and Restated Employment Agreement between Executive and Aftermarket Technology Corp. dated July 1, 2002.  The Executive represents that such services will not interfere with the Executive’s ability to perform his duties to the Company.

3.COMPENSATION.

(a)BASE SALARY.  During his employment with the Company, the Executive shall receive an annual base salary of $470,000, as adjusted by the Board from time to time as set forth below (the “Annual Base Salary”).  The Annual Base Salary shall be paid in accordance with the Company’s regular payroll practice for its senior executives, as in effect from time to time.  The Annual Base Salary shall be reviewed for adjustment by the Board at least annually during the

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Executive’s employment with the Company, with such review to occur as soon as practicable each year after the Company’s release of audited financial statements for the prior year.

(b)ANNUAL CASH BONUS.  For fiscal years during the Executive’s employment with the Company, the Executive shall participate in an annual cash incentive compensation plan (currently the Company’s Management Incentive Compensation Plan), as adopted and approved by the Board from time to time, with applicable corporate and individual performance targets and maximum award amounts determined by the Board.  The target bonus of the Executive pursuant to the annual cash incentive compensation plan shall be determined in accordance with the Management Incentive Compensation Plan (or the applicable replacement or successor plan) with respect to each such fiscal year, but said target bonus shall be set at a level at least equal to fifty percent (50%) of the Annual Base Salary.  Any cash bonuses payable to the Executive will be paid at the time the Company normally pays such bonuses to its senior executives and will be subject to the terms and conditions of the applicable annual cash incentive compensation plan.  For the purposes of the 2007 Management Incentive Compensation Plan, the executive’s employment will be deemed to have started on January 1, 2007.

(c)LONG-TERM INCENTIVE COMPENSATION.  During the Executive’s employment with the Company, the Executive shall be eligible to receive long-term equity incentive compensation awards (which may consist of stock options or other types of awards, as determined by the Board in its discretion) pursuant to the Company’s equity incentive compensation plans and programs in effect from time to time.These awards shall be granted in the discretion of the Board, shall include such terms and conditions (including performance objectives) as the Board deems appropriate, and shall be subject to such other agreements affecting the capital securities of the Company as the Board may determine to be appropriate.However, said other agreements shall specify that Executive is entitled to receive, as soon as practicable after execution of this Agreement, an initial grant of 250,000 shares of restricted stock.  Further, the Company and Executive agree that any such other agreements relating to the award to the Executive of restricted stock shall provide (i) that the Executive may make an election pursuant to Section 83(b) of the Internal Revenue Code to recognize as ordinary income an amount equal to the fair market value of the restricted stock as of the date of transfer and (ii) that the Company shall be responsible for the reasonable cost of obtaining a valuation of the fair market value of the restricted stock as of the date of transfer.

(d)OTHER BENEFITS.  During the Executive’s employment with the Company, the Executive shall be eligible to participate in the retirement, welfare benefit, and fringe benefit plans, practices, policies and programs of the Company (including any medical, prescription, dental, disability, life insurance, accidental death and travel accident insurance plans and programs maintained by the Company) to the same extent, and subject to substantially the same terms and conditions, as these arrangements are made available generally to the senior officers of the Company.

(e)VACATION; EXPENSES.  The Executive shall be entitled to 4 weeks annual paid executive leave in accordance with the provisions of the Company’s executive leave policy as in effect from time to time, which shall be taken at times selected by the Executive with due regard for the business needs of the Company.  The Company shall pay or reimburse the

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Executive for ordinary and necessary business expenses incurred by him in the performance of his duties in accordance with the Company’s usual policies.

(f)RELOCATION; TEMPORARY HOUSING.  The Executive shall be reimbursed (upon presentation of appropriate documentation) for reasonable commuting, moving and other cost-of-relocation expenses incurred by the Executive in relocating to Executive’s principal employment location.  The Executive will be reimbursed for reasonable costs incurred in traveling between his principal employment location and other employment locations in accordance with the Company’s existing reimbursement policies (including amounts expended for meals and lodging at other employment locations).  It is understood that on or before May 21, 2008 (the “Relocation Date”), the Executive’s principal employment location shall be Columbus, Ohio.  After the Relocation Date, the Executive’s principal employment location shall be that Company office as to which agreement is reached by the Company and the Executive by May 21, 2008 (the “Post-May 21, 2008 Principal Employment Location”) and, as soon as is reasonably practicable after the Relocation Date or such other date, not later than the first anniversary of the Executive’s commencement of employment with the Company, as may be agreed upon by the Company, the Executive shall change his principal place of residence to the metropolitan area encompassing the Post-May 21, 2008 Principal Employment Location.  The above-described reimbursement shall also include any incremental tax liability incurred by the Executive with respect to the reimbursements for relocation costs and traveling costs, so that the Executive is in the same tax position he would have been in if such reimbursement were not subject to income tax, provided, however, that, after the Relocation Date, the Executive shall not be reimbursed for incremental tax liability attributable to reimbursement for amounts expended for meals and lodging.  Upon termination other than a Termination for Cause or by the Executive without Good Reason, the Executive will be reimbursed for the reasonable cost-of-relocation expenses by the Executive in relocating back to Columbus, Ohio.

4.TERMINATION OF EMPLOYMENT.

(a)DEATH OR DISABILITY.  The Executive’s employment shall terminate automatically upon the Executive’s death during his employment with the Company.  The Company shall be entitled to terminate the Executive’s employment because of the Executive’s Disability.  “Disability” means that (1) the Executive is permanently disabled within the meaning of the long-term disability plan of the Company in which the Executive participates or (2) if there is no such plan in effect, that (i) the Executive has been absent from the full-time performance of the Executive’s duties with the Company for a period of 120 days, (ii) the Company shall have given the Executive a notice of termination for Disability, and (iii) within 30 days after such notice of termination is given, the Executive shall not have returned to the full-time performance of the Executive’s duties.  The effective date of any such termination for Disability shall be in the case of a termination pursuant to clause (l), the date on which the Executive is determined to be disabled for purposes of such plan or, in the case of a termination pursuant to clause (2), the date which is 30 days following the notice of termination for Disability (either such date, the “Disability Effective Time”).

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(b)TERMINATION BY THE COMPANY.

(i)The Company may terminate the Executive’s employment with the Company for Cause or without Cause.  Except as set forth in Section 4(b)(ii), “Cause” shall mean (i) gross negligence or willful misconduct by the Executive in connection with the performance of his duties hereunder that is materially injurious to the Company, monetarily or otherwise, (ii) the conviction of the Executive by a court of competent jurisdiction for felony criminal conduct or (iii) material violation by the Executive of the provisions of Section 6 of this Agreement, unless, in the case of clauses (i) or (iii), the event constituting Cause is curable and has been cured by the Executive within ten business days of his receipt of written notice from the Company that an event constituting Cause has occurred and specifying in reasonable detail the actions required to effect a cure.

(ii)Notwithstanding the provisions of Section 4(b)(i), following a Change in Control (as defined herein), “Cause” shall only mean (A) the conviction of the Executive by a court of competent jurisdiction for felony criminal conduct; or (B) the willful engaging by the Executive in fraud or dishonesty which is demonstrably and materially injurious to the Company or its reputation, monetarily or otherwise.  For purposes of this Section 4(b), no act, or failure to act, on the Executive’s part shall be deemed “willful” unless committed, or omitted by the Executive in bad faith.

(iii)A termination of the Executive’s employment for Cause shall require a vote of a majority of the Board.  Following a Change in Control a termination of the Executive’s employment for Cause shall not be effective unless it is accomplished in accordance with the following procedures.  The Board shall give the Executive written notice (“Notice of Termination for Cause”) of its intention to terminate the Executive’s employment for Cause, setting forth in reasonable detail the specific conduct of the Executive that it considers to constitute Cause and the specific provision(s) of this Agreement on which it relies, and stating the date, time and place of the Special Board Meeting for Cause.  The “Special Board Meeting for Cause” means a meeting of the Board called and held specifically and exclusively for the purpose of considering the Executive’s termination for Cause.  The Special Board Meeting for Cause must take place not less than thirty business days after the Executive receives the Notice of Termination for Cause.  The Executive shall be given an opportunity, together with counsel, to be heard at the Special Board Meeting for Cause.  The Executive’s termination for Cause shall be effective when a resolution is duly adopted at the Special Board Meeting for Cause stating that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in the Notice of Termination for Cause and that such conduct constitutes Cause under the applicable provision of this Agreement.

(c)TERMINATION BY THE EXECUTIVE.

(i)The Executive may terminate employment with the Company for Good Reason or without Good Reason.  “Good Reason” shall mean the occurrence of any of the following events, without the Executive’s consent (other than in connection with an

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event constituting Cause): (a) any action by the Company which results in a significant diminution in the Executive’s position, authority, duties or responsibilities as contemplated by this Agreement; (b) a reduction in the Executive’s Annual Base Salary or the Executive’s annual cash bonus opportunity under the Executive Incentive Plan (or a successor plan) or a failure by the Company to timely pay any portion of the Executive’s current or deferred compensation; (c) the Company requiring the Executive to be based at an office that is greater than 50 miles from where the Executive’s office is located at such time except for required travel on the Company’s business to an extent substantially consistent with the business travel obligations which the Executive undertook on behalf of the Company prior to a Change in Control; or (d) the failure by the Company to obtain from any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company an express written assumption and agreement to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place unless, in each case, such action is remedied by the Company within ten business days after receipt of a Notice of Termination for Good Reason (as defined below) given by the Executive.

(ii)The Executive shall automatically be deemed to have Good Reason (“Deemed Good Reason”) despite the absence of any of the events or circumstances described in the second sentence of Section 4(c)(i) for the thirty day period commencing on the first anniversary of a Change in Control; provided, however, that if the Executive terminates his employment pursuant to the provisions of this subparagraph (ii), the Executive’s entitlement to the benefits provided in Section 5(d) (and the benefits provided in connection with a termination described in such Section) may be conditioned by the Company on the Executive continuing to serve the Company for up to six months following the Notice of Termination for Good Reason (the “Transition Period”).  A failure by the Executive to comply with such a request absent an event or circumstance described in the second sentence of Section 4(c)(i) will result in the termination being treated as a termination described in Section 5(a).  In the event that the Company invokes its right to require the Executive to continue to serve the Company during the Transition Period, the Executive’s Annual Base Salary shall not be reduced during such period, nor shall the Executive’s annual bonus opportunity (which bonus, if any, (i) shall be paid out on a pro-rata basis for the applicable period during which the Executive was employed, (ii) shall be paid at the time such bonuses are paid to the Company’s executives generally and (iii) shall be based upon the Company’s (and, if applicable, the Executive’s) scheduled performance against target applicable to the portion of the performance period during which the Executive was employed - in each case consistent with (and not in duplication of) the provisions of Section 5(e).

(iii)A termination of employment by the Executive for Good Reason or Deemed Good Reason shall be effected by giving the Company written notice (“Notice of Termination for Good Reason”) of the termination, setting forth in the case of a termination for Good Reason in reasonable detail the specific conduct of the Company that constitutes Good Reason and the specific provision(s) of this Agreement on which the Executive relies.  A termination of employment by the Executive for Good Reason

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shall be effective ten business days following the date when the Notice of Termination for Good Reason is given, unless, if applicable, the event constituting Good Reason is remedied by the Company prior to that date.  Actions by the Company which constitute Good Reason shall be disregarded in the calculation of termination benefits described in Section 5.

(iv)A termination of the Executive’s employment by the Executive without Good Reason shall be effected by giving the Company 30 days’ written notice of the termination.

(d)DATE OF TERMINATION; RESIGNATION. The “Date of Termination” means the date of the Executive’s death, the Disability Effective Time or the date on which the termination of the Executive’s employment by the Company for Cause or without Cause or by the Executive for Good Reason or without Good Reason is effective.  Following termination of the Executive’s employment for any reason, the Executive shall immediately resign from the Board and from all other offices and positions he holds with the Company and its subsidiaries if requested by the Board.

5.OBLIGATIONS OF THE COMPANY UPON TERMINATION.

(a)TERMINATION BY THE COMPANY (OTHER THAN TERMINATIONS FOR CAUSE, DEATH OR DISABILITY), OR TERMINATION BY THE EXECUTIVE FOR GOOD REASON.  If the Company terminates the Executive’s employment for any reason other than for Cause (other than a termination for Disability or death), or the Executive terminates his employment for Good Reason, then, except for any termination to which Section 5(d) applies, the Company shall pay to the Executive (i) a cash payment equal to 1.5 times the sum of (A) the Executive’s Annual Base Salary immediately prior to the Date of Termination and (B) the greater of (1) the annual bonus earned by the Executive for the last completed fiscal year prior to the fiscal year in which the Date of Termination occurs, (2) the annual bonus the Executive would have earned for the fiscal year in which the Date of Termination occurs absent such termination (which amount shall be based upon the Company’s (and, if applicable, the Executive’s) actual performance against target (expressed as a percentage of achievement of targeted performance) applicable to the portion of the performance period during which the Executive was employed, with such percentage level of achievement annualized for the full fiscal year) and (3) the annual target bonus the Executive would have been eligible to earn for the fiscal year in which the Date of Termination occurs (the greatest of such amounts being referred to hereafter as the “Applicable Bonus Amount”); and (ii) any unpaid amounts of the Executive’s Annual Base Salary for periods prior to the Date of Termination and earned annual bonuses for completed fiscal years prior to the Date of Termination.  The payment described in clauses (i) and in clause (ii) of the preceding sentence shall be made within 30 days of the Date of Termination.  The Company shall also provide to the Executive (and, as applicable, his eligible dependents), in the event of such a termination continued participation at the Company’s expense in the Company’s medical, dental, prescription and vision care insurance plans (or substantially equivalent coverage under an alternative arrangement) for 18 months following the Date of Termination (or, if earlier, until the date the Executive obtains alternative coverage from a subsequent employer) following which, if no such alternative coverage has been obtained, the

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Executive will be entitled to elect continuation coverage (“COBRA”) in accordance with the provisions of Section 4980B of the Internal Revenue Code of 1986, as amended (the “Code”), which COBRA coverage period shall begin at the close of the period of such continued participation.  For purposes of this Agreement, the Executive’s employment shall be deemed to have been terminated within the thirteen month period following a Change in Control and during the Term by the Company without Cause (and shall be governed by Section 5(d), if the Executive’s employment is terminated by the Company without Cause either (i) during the 120 day period prior to the execution of an agreement, the consummation of which would result in a Change in Control or (ii) following the execution of an agreement, the consummation of which would result in a Change in Control and such termination is effective at the time, or during the pendency, of such Change in Control (in either case whether or not such Change in Control actually occurs).

(b)DEATH AND DISABILITY.  If the Executive’s employment is terminated by the Company due to Disability or terminated automatically upon the Executive’s death then, (i) the Company shall pay to the Executive (or the Executive’s estate, as applicable) in a lump sum in cash within 30 days after the Date of Termination, any portion of the Executive’s Annual Base Salary earned through the Date of Termination that has not been paid and earned annual bonuses for completed fiscal years prior to the Date of Termination and (ii) all outstanding equity awards shall be treated according to the provisions of the plan and agreements under which such awards were granted.  The Company shall also provide to the Executive (and, as applicable, his eligible dependents), in the event of such a termination continued participation at the Company’s expense in the Company’s medical, dental, prescription and vision care insurance plans (or substantially equivalent coverage under an alternative arrangement) for 18 months following the Date of Termination (or, if earlier, until the date the Executive obtains alternative coverage from a subsequent employer) following which, if no such alternative coverage has been obtained, the Executive (or his eligible dependents, if applicable) will be entitled to elect COBRA continuation coverage in accordance with the provisions of Section 4980B of the Code, which COBRA coverage period shall begin at the close of the period of such continued participation.

(c)BY THE COMPANY FOR CAUSE; BY THE EXECUTIVE OTHER THAN FOR GOOD REASON.  If the Executive’s employment is terminated by the Company for Cause or the Executive voluntarily terminates employment other than for Good Reason then, (i) the Company shall pay to the Executive in a lump sum in cash within thirty days after the Date of Termination, any portion of the Executive’s Annual Base Salary earned through the Date of Termination that has not been paid and earned annual bonuses for completed fiscal years prior to the Date of Termination and (ii) all outstanding equity awards shall be treated according to the provisions of the plan and agreements under which such awards were granted.

(d)CHANGE IN CONTROL TERMINATION.

(i)If, within the 13-month period immediately following the occurrence of a Change in Control, the Executive’s employment by the Company is terminated by the Company other than for Cause (other than a termination for Disability or death) or by the Executive for Good Reason (subject, if applicable, to the proviso set forth in the first sentence of Section 4(c)(ii)), then the Company shall pay to the Executive (i) a cash

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payment equal to three times the sum of (A) the Executive’s Annual Base Salary immediately prior to the Date of Termination and (B) the Applicable Bonus Amount; and (ii) any unpaid amounts of the Executive’s Annual Base Salary for periods prior to the Date of Termination and earned annual bonuses for completed fiscal years prior to the Date of Termination.  The cash payments described in clause (i) and (ii) of the preceding sentence shall be made in a lump sum within 30 days following the Date of Termination.  Notwithstanding the foregoing, if the amounts of such payments cannot be finally determined on or before a date when a payment is due, the Company shall pay to the Executive on such day an estimate, as reasonably determined by the Company, of the minimum amount of such payments to which the Executive is clearly entitled and shall pay the remainder of such payments, if any, as soon as the amount thereof can be determined.  The Company shall also provide to the Executive (and, as applicable, his eligible dependents), in the event of such a termination continued participation at the Company’s expense in the Company’s medical, dental, prescription and vision care insurance plans (or substantially equivalent coverage under an alternative arrangement) for 36 months following the Date of Termination (or, if earlier, until the date the Executive obtains alternative coverage from a subsequent employer) following which, if no such alternative coverage has been obtained, the Executive will be entitled to elect COBRA continuation coverage in accordance with the provisions of Section 4980B of the Code, which COBRA coverage period shall begin at the close of the period of such continued participation.

(ii)For purposes of this Agreement, a “Change in Control” shall be deemed to have occurred on the first date after the Effective Date on which (1) any Person (as defined below) shall acquire, whether by purchase, exchange, tender offer, merger, consolidation or otherwise, beneficial ownership of securities of the Company constituting fifty percent (50%) or more of the combined voting power of the securities of the Company, (2) any Person shall acquire all or substantially all of the assets of the Company pursuant to a sale, dissolution or liquidations or (3) any Person shall acquire the ability to appoint or elect a majority of the members of the Board.  For purposes of the preceding sentence, “Person” shall have the meaning given in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended from time to time, as such term is modified and used in Sections 13(d) and 14(d) thereof, except that such term shall not include (i) Holdings, Thomas H. Lee Partners or Thomas H. Lee Equity Fund IV, L.P., Evercore Capital Partners L.P. and each of their respective affiliates (the “Designated Investors”), (ii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its affiliates, (iii) an underwriter temporarily holding securities pursuant to an offering of such securities and (iv) a corporation owned, directly or indirectly, by the Designated Investors, such that the aggregate ownership of securities or assets of the Company or the ability to appoint or elect directors of the Company that is attributable to such Designated Investors would not decrease to a level that would result in a Change in Control, if such ownership or ability was deemed to be held directly in the Company.  The completion of an initial public offering in which no Person acquires beneficial ownership of fifty percent (50%) or more of the combined voting power of the securities of such Person shall not constitute a Change in Control, nor shall the acquisition of beneficial ownership of securities of the Company by a Person which has a

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class of securities registered under Section 12 of the Securities Exchange Act of 1934, as amended, if such acquisition does not result in the Designated Investors owning thirty percent (30%) or less of the combined voting power of the securities of the Company.  Notwithstanding the foregoing, a Change in Control shall be deemed to have occurred on the date when the Designated Investors together with the senior management of the Company (as determined by the Designated Investors) cease to beneficially own at least thirty percent (30%) or more of the combined voting power of the securities of the Company.

(iii)For purposes of this Agreement, the Executive’s employment shall be deemed to have been terminated within the thirteen month period following a Change in Control and during the Term by the Company without Cause (and shall be governed by this Section 5(d)), if the Executive’s employment is terminated by the Company without Cause either (i) during the 120 day period prior to the execution of an agreement, the consummation of which would result in a Change in Control or (ii) following the execution of an agreement, the consummation of which would result in a Change in Control and such termination is effective at the time, or during the pendency, of such Change in Control (in either case whether or not such Change in Control actually occurs).

(e)PRO-RATA BONUS PAYMENTS.  Except as set forth in the following sentence, for purposes of this Section 5, bonus amounts shall only be considered to be earned if the Executive was employed by the Company through the last day of the performance period to which the bonus relates.  In case of a termination described in Section 5(a), 5(b) or 5(d), in addition to the payments provided in such Section, the Executive shall be considered to have earned an annual bonus (the “Pro-rata Bonus”) equal to the bonus (if any) the Executive would have received (as determined consistent with the provisions set forth below) had the Executive remained employed by the Company through the last day of the fiscal year during which the Date of Termination occurs, multiplied by a fraction, the numerator of which is the number of days in such fiscal year during which the Executive was employed by the Company and the denominator of which is 365.  The Pro-rata Bonus for purposes of a termination described in Section 5(d), shall be determined, as near as practicable, based on actual performance achieved for the fiscal year through the Date of Termination, expressed as a percentage of targeted performance for that period. For purposes of a termination described in Section 5(a) or 5(b), such Pro-rata Bonus payment shall be based on the actual results for the completed fiscal year during which the Date of Termination occurs.  In the event of a termination described in Section 5(a), 5(b) or 5(d), the payment of any amount of Pro-rata Bonus which becomes due in accordance with this Section 5(e) shall be made at the time the Company normally pays such bonuses to its senior executives, irrespective of whether any such bonuses are paid to other senior executives for such fiscal year, and will be subject to the terms and conditions of the applicable annual cash incentive compensation plan but without giving effect to any requirement therein that the Executive remain employed with the Company through the payment date or the last day of the applicable fiscal year in order to receive payment thereunder.  Exhibit A hereto sets forth examples of the calculation of the Pro-rata Bonus.

(f)OUTPLACEMENT SERVICES. If the Executive’s employment is terminated under the circumstances described in Section 5(a) or 5(d), the Company shall pay the cost of

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providing the Executive with outplacement services, up to a maximum of five percent (5%) of the sum of the Base Salary and the Applicable Bonus Amount, provided that such services are (a) utilized by the Executive within six months following the Date of Termination and (b) provided by a recognized outplacement provider.  Such payment shall be made by the Company directly to the service provider promptly following the provision of such services and the presentation to the Company of documentation of the provision of such services, and in all events by no later than the first anniversary of the Date of Termination.  Such services shall include office facilities and telephone answering services during such six month period.

(g)           ACCRUED BENEFITS. Upon the Executive’s termination of employment for any reason, in addition to any other amounts and benefits provided for in Section 5, the Executive (and his beneficiaries and dependents, as applicable) shall be entitled to receive all vested benefits under the Company’s benefit plans policies and programs in which the Executive participated, in accordance with the terms of such plans (except to the extent that such benefits are duplicative of benefits provided for in Section 5).

(h)           RELEASE.  The Executive shall not be entitled to any payment or benefit provided under Sections 5(a), 5(d), 5(e), and 5(f), other than COBRA continuation coverage at the Executive’s expense, unless (a) the Executive executes and delivers to the Company a release, in form and substance acceptable to the Company, by which the Executive release the Company from all claims arising from the Executive’s employment by the Company, in consideration for such payment or benefit, and (b) the Executive shall not be in breach of any of the provisions of Section 6 of this Agreement at any time during the effectiveness thereof.  In no event will such payment or benefit be provided prior to such release becoming effective upon expiration of the applicable withdrawal period.

(i)            409A SAFE HARBOR.

(i)            If Executive becomes eligible for payments under this Agreement on account of his “separation from service,” as defined below, and Executive is a “specified employee” within the meaning of Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder (collectively, the “Code”) when the separation from service occurs, as determined by the Company, any portion of the payments that either do not qualify under the “short-term deferral rule” or exceed two times the lesser of (A) the Executive’s “annualized compensation” (within the meaning of Section 409A of the Code) for the calendar year preceding the Executive’s separation from service, or (B) the maximum amount that may be taken into account under Section 401(a)(17) of the Code for the year in which the Executive’s separation from service occurs and which are not otherwise exempt from Section 409A of the Code, shall be accrued, without interest, and its payment delayed until the first day of the seventh month following the Executive’s separation from service, or if earlier, the Executive’s death, at which point the accrued amount will be paid in a single, lump sum cash payment.  Furthermore, the Company shall not be required to make, and the Executive shall not be required to receive, any severance or other payment or benefit under this Agreement at such time as the making of such payment or the provision of such benefit or the receipt thereof shall result in a tax to Executive arising under Section 409A of the Code.  The

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preceding provisions, however, shall not be construed as a guarantee by the Company of any particular tax effect to Executive under this Agreement.

(ii)           “Termination of Executive’s employment,” or words of similar import, as used in this Agreement, means for purposes of Section 409A of the Code the date as of which the Company and the Executive reasonably anticipate that no further services will be performed by the Executive and shall be construed as the date that the Executive first incurs a “separation from service” for purposes of Section 409A of the Code.

(iii)          For purposes of Section 409A of the Code, the right to a series of installment payments under this Agreement shall be treated as a right to a series of separate payments.

(iv)          This Agreement is intended to comply with, or otherwise be exempt from, Section 409A of the Code.  This Agreement shall be administered, interpreted and construed in a manner that does not result in the imposition to the Executive of additional taxes or interest under Section 409A of the Code.

(v)           The Company and the Executive agree that they will execute any and all amendments to this Agreement as they mutually agree in good faith may be necessary to ensure compliance with the provisions of Section 409A of the Code.

(vi)          With respect to any reimbursement of expenses of, or any provision of in-kind benefits to, the Executive, as specified under this Agreement, such reimbursement of expenses or provision of in-kind benefits shall be subject to the following conditions: (A) the expenses eligible for reimbursement or the amount of in-kind benefits provided in one taxable year shall not affect the expenses eligible for reimbursement or the amount of in-kind benefits provided in any other taxable year, except for any medical reimbursement arrangement providing for the reimbursement of expenses referred to in Section 105(b) of the Code; (B) the reimbursement of an eligible expense shall be made no later than the end of the year after the year in which such expense was incurred; and (C) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.

(j)            CERTAIN ADDITIONAL PAYMENTS.

(i)            Gross-Up Payment Amount.  Notwithstanding anything in this Agreement to the contrary other than the second sentence of this Section 5(j)(i), in the event it shall be determined that any payment or distribution by the Company to or for the benefit of the Executive, whether paid, payable, distributed or distributable pursuant to this Agreement or otherwise (a “Payment”) would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986 (the “Code”) (or any successor provision) or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are collectively referred to in this Agreement as the “Excise Tax”), then the Executive shall be entitled to receive an additional payment (a “Gross-Up Payment”) in an amount such that after the payment by

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the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax, imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment.  Notwithstanding the foregoing provisions of this Section 5(j)(i), if it shall be determined that a reduction in the Payments by an amount that does not exceed two percent (2%) of the present value of the aggregate Payments (determined consistent with Code Section 280G(d)(4)) would result in no portion of the Payments being subject to the Excise Tax, then (x) no Gross-Up Payment shall be made pursuant to this Section 5(j)(i) to the Executive and (y) the Payments to the Executive shall be reduced to the minimum extent necessary so that no portion thereof shall be subject to the Excise Tax.

(ii)           Determinations.  Subject to the provisions of Section 5(j)(iii), all determinations required to be made under this Section 5(j), including whether and when a Gross Up Payment is required and the amount of such Gross Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by an accounting firm of national standing reasonably selected by the Company (the “Accounting Firm”), which shall provide detailed supporting calculations to both the Company and the Executive within fifteen (15) business days of the receipt of written notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company.  Any Gross Up Payment, as determined pursuant to this section, shall be paid by the Company to the Executive within five (5) days of the receipt of the Accounting Firm’s determination.  All fees and expenses of the Accounting Firm shall be borne solely by the Company.  Any determination by the Accounting Firm shall be binding upon the Company and the Executive.  As a result of the possible uncertainty in application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross Up Payments will not have been made by the Company that should have been made (“Underpayment”), consistent with the calculations required to be made hereunder.  In the event that the Company exhausts its remedies pursuant to this section or related sections and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Executive.

(iii)          IRS Claims.  The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Gross Up Payment.  Such notification shall be given as soon as practicable but no later than ten (10) business days after the Executive is informed in writing of such claim and shall apprise the Company of the nature of such claim and the date on which such claim is to be paid.  The Executive shall not pay such claim prior to the expiration of the thirty (30)  day period following the date on which the Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due).  If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall: (a) give the Company any information reasonably requested by the Company relating to such claim; (b) take such action in connection with contesting

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such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney selected by the Company and reasonably acceptable to the Executive; (c) cooperate with the Company in good faith in order effectively to contest such claim; and (d) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses.  Without limitation on the foregoing provisions of this Section, the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest free basis and shall indemnify and hold the Executive harmless, on an after tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount.  Furthermore, the Company’s control of the contest shall be limited to issues with respect to which a Gross Up Payment would be payable hereunder and the Executive shall be entitled in his sole discretion to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

(iv)          Refunds.  If, after receipt by the Executive of an amount advanced by the Company pursuant to this section or related sections, the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Company’s complying with the requirements of such section) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto).  If, after receipt by the Executive of an amount advanced by the Company pursuant to this section or related sections, a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross Up Payment required to be paid.

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(v)           In all events, the Gross-Up Payment, if any, shall not be made later than the December 31 following Executive’s taxable year in which Executive remits the Excise Tax.

6.CONFIDENTIALITY; COMPETITION; SOLICITATION; INTELLECTUAL PROPERTY; RETURN OF PROPERTY.

(a)           The Executive shall hold in a fiduciary capacity for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company or any of its predecessors or affiliated companies and their respective businesses that the Executive obtains or has obtained during the Executive’s employment by the Company or any of its predecessors or affiliated companies and that is not public knowledge (other than as a result of the Executive’s violation of his obligations to the Company, including those set forth herein) (“Confidential Information”).  The Executive shall not communicate, divulge or disseminate Confidential Information at any time during or after the Executive’s employment with the Company, except with the prior written consent of the Company or as otherwise required by law or legal process (of which the Executive has delivered to the Company prompt prior notice).

(b)           During the Executive’s employment with the Company and for a period of two years after the termination of the Executive’s employment with the Company, the Executive shall not, without the prior written consent of the Board, directly or indirectly engage in or be interested in (as owner, partner, stockholder, employee, director, officer, agent, consultant or otherwise), with or without compensation, any business which is in competition with any line of business actively being conducted or to the Executive’s knowledge, contemplated on the Date of Termination by the Company or any of its subsidiaries or affiliates. Nothing herein will prohibit the Executive from acquiring or holding not more than one percent of any class of publicly traded securities of any business.

(c)           Except as set forth below, during the Executive’s employment with the Company and for a period of two years after the termination of the Executive’s employment with the Company, the Executive shall not, without the prior written consent of the Board, directly or indirectly, hire any person who was employed by the Company or any of its subsidiaries or affiliates within the six-month period preceding the date of such hiring or solicit, entice, persuade or induce any person or entity doing business with the Company and its subsidiaries or affiliates, to terminate such relationship or to refrain from extending or renewing the same.

(d)           The Executive agrees that the restrictions set forth in this Section 6 are reasonable and necessary to protect the legal interests of the Company.  The Executive further agrees that the Company shall be entitled to injunctive relief in the event of any actual or threatened breach of the restrictions and shall not be required to post bond or prove actual damages.  If the scope or content of any restriction contained in this Agreement is too broad to permit enforcement of such restriction to its full extent, then the restriction shall be enforced to the maximum extent permitted by law, and the parties hereby consent that the scope or restriction shall be judicially modified accordingly in any proceeding brought with respect to the enforcement of the restriction.

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(e)           The Executive agrees that any and all intellectual property developed within the scope of employment or relating to the Company’s business, existing or which in the future may exist, including all patents, copyrights, trademarks or trade names, all ideas, concepts, themes, inventions, designs, improvements and discoveries conceived or developed, whether by the Executive or others, shall remain the sole and exclusive property of the Company.

(f)            Immediately upon any termination of employment with the Company, the Executive shall promptly deliver to the Company all equipment, notebooks, documents, memoranda, reports, files, samples, books, correspondence, mailing lists, calendars, card files, rolodexes and all other records or materials relating to the Company’s business which are or have been in the possession or control of the Executive unless such documents are public.  The Executive shall not maintain any copy or other reproduction whatsoever of any of the items described in this Section 6(f) after the termination of such employment.

7.             INDEMNIFICATION.  Except to the extent inconsistent with the Company’s certificate of incorporation or bylaws, the Company will indemnify the Executive and hold him harmless to the fullest extent permitted by law with respect to his service as an officer and director of the Company and its subsidiaries, which indemnification shall be provided following termination of employment for so long as the Executive may have liability with respect to his service as an officer and director of the Company and its subsidiaries.  The Executive will be covered by a directors’ and officers’ insurance policy with respect to his acts as an officer and director to the same extent as all other Company officers and directors under such policies.

8.             DISPUTE RESOLUTION; ATTORNEYS’ FEES.  Other than with respect to the Company’s right to obtain injunctive relief under Section 6 (which shall not be subject to the provisions of this Section 8), all disputes arising under or related to the employment of the Executive or the provisions of this Agreement shall be settled by arbitration under the rules of the American Arbitration Association then in effect, such arbitration to be held in Baltimore Maryland, as the sole and exclusive remedy of either party.  The arbitration shall be heard by one arbitrator mutually agreed upon by the parties, who must be a former judge. In the event that the parties cannot agree upon the selection of the arbitrator within 10 days, each party shall select one arbitrator and those arbitrators shall select a third arbitrator who will serve as the sole arbitrator.  The arbitrator shall have the authority to order expedited discovery, hearing and decision, including the ability to set outside time limits for such discovery, hearing and decision.  The parties shall direct the arbitrator to render a decision not later than 90 days following the arbitration hearing.  Judgment on any arbitration award may be entered in any court of competent jurisdiction.  The Company shall pay all reasonable legal fees and expenses incurred by the Executive in connection with any such arbitration or other legal proceeding which occurs on or following a Change in Control.

9.             SUCCESSORS.

(a)           This Agreement is personal to the Executive and without the prior written consent of the Company the Executive’s rights under the Agreement shall not be assignable (except by will or the laws of descent and distribution).  This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives.

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(b)           This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

(c)           The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would have been required to perform it if no such succession had taken place. As used in this Agreement, the term “Company” shall mean both the Company as defined above and any such successor.

10.           MISCELLANEOUS.

(a)           This Agreement shall be governed by, and construed in accordance with, the laws of the State of Maryland, without reference to principles of conflict of laws.  The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.  This Agreement may not be amended or modified except by a written agreement executed by the parties hereto or their respective successors and legal representatives.

(b)           All notices and other communications under this Agreement shall be in writing and shall be given by hand delivery to the other party, by overnight courier or by certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Executive:
If to the Company:
Vertis, Inc.
250 W. Pratt Street, 18th Floor
Baltimore, Maryland 21201
Attention: Chief Legal Officer
with a copy to:
Thomas H. Lee Partners
75 State Street
Suite 2600
Boston, Massachusetts 02109
Attention:	Anthony J. DiNovi
	Scott M. Sperling
	Soren Oberg
Fax: (617) 227-3514

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or to such other address as either party furnishes to the other in writing in accordance with this Section 10(b).

(c)           Notwithstanding any other provision of this Agreement, the Company may withhold from amounts payable under this Agreement all federal, state, local and foreign taxes that are required to be withheld by applicable laws or regulations.

(d)           The Executive’s or the Company’s failure to insist upon strict compliance with any provisions of, or to assert any right under, this Agreement shall not be deemed to be a waiver of such provision or right or of any other provision of or right under this Agreement.

(e)           Except as set forth in this Section l0(e), as of the Effective Date, this Agreement shall constitute the entire understanding of the parties with respect to subject matter herein and supercedes any other agreement or other understanding, whether oral or written, express or implied, between them to the extent that such agreements or understandings contain provisions addressed herein.

(f)            This Agreement shall terminate upon the termination of the Executive’s employment, except that terms of this Agreement which must survive the termination of this Agreement in order to be effectuated (including the provisions of Sections 5, 6, 7 and 8) shall survive.  Upon the termination of the Executive’s employment, Executive consents to the notification by the Company to the Executive’s new employer of Executive’s obligations under this Agreement.

(g)           The Executive is not required to seek other employment or to attempt in any way to mitigate or reduce any amounts payable to the Executive by the Company pursuant to Section 5 hereof.  Except with respect to alternative medical, dental, prescription and vision care insurance obtained from a subsequent employer, the amount of any payment or benefit provided for in this Agreement shall not be reduced by any compensation earned by the Executive as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise.

(h)           This Agreement may be executed in several counterparts, each of which shall be deemed an original and which together shall constitute but one and the same instrument.

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IN WITNESS WHEREOF, the Executive and the Company have executed this Agreement under seal, as of the day and year first above written.

VERTIS, INC.
By:	/s/ John V. Howard, Jr.
Name:	John V. Howard, Jr.
Title:	Secretary
VERTIS HOLDINGS, INC.
By:	/s/ John V. Howard, Jr.
Name:	John V. Howard, Jr.
Title:	Secretary
/s/ Barry Kohn
Barry Kohn

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EXHIBIT A

Solely for purposes of illustration and clarification of the provisions of Section 5(e), and not in limitation thereof, the following examples are provided. The bonus formula under the annual cash incentive compensation plan in effect for the fiscal year in the examples below is 75% of Base Salary payable upon 100% achievement of targeted performance for the fiscal year; the Company’s bonus plan for the year sets forth that reduced amounts are payable for achievement between 90% and 99% of targeted performance (for each 1 % above 90%, the Executive would earn 10% of targeted bonus, until 100% achievement yields 100% payout of targeted bonus) but no bonus is payable for achievement at or below 90%.

Example 1: Assume that (A) actual performance against interim quarterly targeted performance through June 30th is 100%; (B) actual performance against targeted performance through December 31^st is 85%; (C) Executive’s employment is terminated under circumstances described in Section 5(d) on July 1^st; and (D) Executive’s Base Salary on the Date of Termination is $100,000. The Pro-rata Bonus payable to Executive is $37,500 determined as follows:

Pro-rata Bonus = (182 days employed through Date of Termination/ 365)
x 100% achievement x (75% x $100,000 Base Salary)

Example 2: Assume the same facts as Example 1, except that Executive’s employment is terminated under circumstances described in Section 5(a) or 5(b). The Pro-rata Bonus payable to Executive is zero because actual performance for the completed fiscal year in which the Date of Termination occurs is below the 91 % minimum threshold required for a payout under the plan.

Example 3: Assume the same facts as Example 2, except that the actual performance against targeted performance through December 31^st 95%. The Pro-rata Bonus payable to Executive is $18,750 determined as follows:

Pro-rata Bonus = (182 days employed through Date of Termination/ 365)
x 50% x (75% x $100,000 Base Salary)

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EX-10.28

Exhibit 10.28

		John V. Howard	www.vertisinc.com
TURN TO US		Chief Legal Officer and Secretary
		250 West Pratt Street Suite 1800 Baltimore, MD 21201
		D: 410.361.8347 F: 410.454.8460
		jhoward@vertisinc.com

                                                                                                                                January 31, 2008

VIA HAND DELIVERY

Michael T. DuBose

Dear Mike:

This letter (“Letter Agreement”) confirms the agreement reached between the Board of Directors and you concerning relocation of your principal employment location pursuant to the terms and conditions of that certain employment agreement by and among Vertis, Inc. (the “Company”), Vertis Holdings, Inc. (“Holdings”) and you, dated and effective as of November 28, 2006 (the “Employment Agreement”), as amended by the letter agreement dated as of November 18, 2007.  This Letter Agreement serves to further amend the Employment Agreement as set forth below as of this date.

Section 3(f) of the Employment Agreement, as previously amended, provides that your principal employment location initially would be Williams, Oregon, that after December 31, 2007, your principal employment location would be at such Company office as is mutually agreed upon between the Company and you, and that you will relocate your principal place of residence to the metropolitan area encompassing such agreed-upon Company office by or as soon as practicable after December 31, 2007.  Section 3(f) of the Employment Agreement is hereby amended to provide that your principal employment location on and after January 1, 2008, shall remain Williams, Oregon unless and until the Company and you mutually agree to move your principal employment location elsewhere.

This Letter Agreement shall be governed by, and construed in accordance with, the laws of the State of Maryland, without reference to principles of conflict of laws.  Except as modified by the terms of this Letter Agreement, the Employment Agreement remains in full force and effect.  You acknowledge that nothing in this Letter Agreement gives you any contractual or other rights to continued employment for any period of time and your employment with the Company remains at will at all times.  This Letter Agreement shall not be modified, waived or amended except by a written agreement executed by the parties hereto or their respective successors and legal representatives.  This Letter Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

If the foregoing terms are acceptable to you, please confirm your agreement by signing your name below.  Your signature below will indicate that you are entering into this Letter Agreement freely and with a full understanding of its terms and effect.

		Very truly yours,
		/s/ John V. Howard, Jr.
		John V. Howard, Jr.
		On behalf of Vertis, Inc. and
		Vertis Holdings, Inc.
AGREED AND ACCEPTED:
/s/ Mike DuBose
Mike DuBose
Date:	January 31, 2008

EX-10.29

Exhibit 10.29

TURN TO US		John V. Howard                               www.vertisinc.com Chief Legal Officer and Secretary 250 West Pratt Street Suite 1800 Baltimore, MD 21201
		D: 410.361.8347 F: 410.454.8460 jhoward@vertisinc.com

February 18, 2008

VIA HAND DELIVERY

Barry C. Kohn

Dear Barry:

This letter (“Letter Agreement”) confirms the agreement reached between the Board of Directors and you concerning relocation of your principal employment location pursuant to the terms and conditions of that certain employment agreement by and among Vertis, Inc. (the “Company”), Vertis Holdings, Inc. (“Holdings”) and you, dated and effective as of December 18, 2007 (the “Employment Agreement”).  This Letter Agreement serves to amend the Employment Agreement as set forth below as of this date.

Section 3(f) of the Employment Agreement provides that until May 21, 2008, your principal employment location is Columbus, Ohio, that after May 21, 2008, your principal employment location would be at such Company office as is mutually agreed upon between the Company and you, and that you will relocate your principal place of residence to the metropolitan area encompassing such agreed-upon Company office by or as soon as practicable after May 21, 2008.  Section 3(f) of the Employment Agreement is hereby amended to provide that your principal employment location on and after January 1, 2008, shall remain Columbus, Ohio unless and until the Company and you mutually agree to move your principal employment location elsewhere.

Section 3(f) of the Employment Agreement provides that you will be reimbursed for reasonable commuting, moving and other cost-of-relocation expenses incurred by you in relocating to your principal employment location and for reasonable costs incurred in traveling between your principal employment location and other employment locations in accordance with the Company’s existing reimbursement policies (including amounts expended for meals and lodging at other employment locations).  Section 3(f) of the Employment Agreement further provides that the above-described reimbursement will also include any incremental tax liability incurred by you with respect to the reimbursements for relocation costs and traveling costs, so that you are in the same tax position you would have been in if such reimbursement were not subject to income tax, provided, however, that, after May 21, 2008, you will not be reimbursed for incremental tax liability attributable to reimbursement for amounts expended for meals and lodging.

Section 3(f) of the Employment Agreement is hereby amended to provide that the reimbursements described therein for moving and other cost-of-relocation expenses, reasonable commuting expenses, and reasonable costs incurred in traveling between your principal employment location and other employment locations in accordance with the Company’s existing reimbursement policies (including amounts expended for meals and lodging at other employment locations) will continue indefinitely into the future.

You further acknowledge and understand that the reimbursements for commuting expenses and for amounts expended for meals and lodging in the vicinity of your principal employment location after the first anniversary of your commencement of employment with the Company will be reported by the Company as W-2 wages, but such amounts will not be taken into consideration as compensation for purposes of the Company’s employee benefit plans in which you participate, now or in the future, or for purposes of calculating any severance benefit to which you may become entitled under the Employment Agreement.

This Letter Agreement shall be governed by, and construed in accordance with, the laws of the State of Maryland, without reference to principles of conflict of laws.  Except as modified by the terms of this Letter Agreement, the Employment Agreement remains in full force and effect.  You acknowledge that nothing in this Letter Agreement gives you any contractual or other rights to continued employment for any period of time and your employment with the Company remains at will at all times.  This Letter Agreement shall not be modified, waived or amended except by a written agreement executed by the parties hereto or their respective successors and legal representatives.  This Letter Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

If the foregoing terms are acceptable to you, please confirm your agreement by signing your name below.  Your signature below will indicate that you are entering into this Letter Agreement freely and with a full understanding of its terms and effect.

Very truly yours,

/s/ John V. Howard Jr.

John V. Howard, Jr.

On behalf of Vertis, Inc. and

Vertis Holdings, Inc.

AGREED AND ACCEPTED:
/s/ Barry Kohn
Barry Kohn
Date:	February 18, 2008

EX-10.36

Exhibit 10.36

RESTRICTED STOCK AGREEMENT

VERTIS HOLDINGS, INC.
1999 EQUITY AWARD PLAN

GRANTEE:  JOHN  R. COLAROSSI

NO. OF SHARES:  7,500

This Agreement (the “Agreement”), approved by Thomas H. Lee Equity Fund IV, L.P. (the “Sponsor”), evidences the award of 7,500 restricted shares (each, an “Award Share,” and collectively, the “Award Shares”) of the Common Stock of Vertis Holdings, Inc., a Delaware corporation (the “Company”), granted to you, John R. Colarossi, effective as of  February 23, 2007 (the “Grant Date”), pursuant to the Vertis Holdings, Inc. 1999 Equity Award Plan (the “Plan”) and conditioned upon your agreement to the terms described below.  All of the provisions of the Plan are expressly incorporated into this Agreement.

1.Terminology.  The Glossary at the end of this Agreement contains definitions of all words that appear in this Agreement with an initial capital letter that are not defined elsewhere in this Agreement.

2.Vesting.  All of the Award Shares are nonvested and forfeitable as of the Grant Date.  So long as your Service with the Company is continuous from the Grant Date through the applicable date upon which vesting occurs, the Award Shares will vest and become nonforfeitable immediately prior to the first to occur of the following:

(a)a Liquidity Event;

(b)your death; or

(c)the date upon which you suffer a Disability.

Except as provided above, unless otherwise determined by the Administrator, none of the Award Shares will become vested and nonforfeitable after your Service with the Company ceases.

3.Termination of Employment or Service.

3.1Unvested Award Shares.  If your Service with the Company ceases for any reason other than your death or Disability, all Award Shares that are not then vested and nonforfeitable will be immediately forfeited to the Company upon such cessation for no consideration.

3.2Vested Award Shares.  If your Service with the Company ceases for any reason, all Award Shares that are then vested and nonforfeitable will not be affected by such cessation but will remain subject to the provisions of this Agreement, including the restrictions on transfer set forth under Section 4 of this Agreement.

4.Restrictions on Transfer.

4.1Except as otherwise provided under Sections 4.3 or 7 of this Agreement or in accordance with your will or the laws of descent and distribution upon your death, until an Award Share becomes vested and nonforfeitable and a Liquidity Event has occurred, the Award Share may not be assigned, transferred, pledged, hypothecated or disposed of in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process.

4.2You hereby represent and warrant to the Company as follows:

(a)You will hold the Award Shares for your own account for investment only and not with a view to, or for resale in connection with, any “distribution” of the Award Shares within the meaning of the Securities Act.

(b)You understand that the Award Shares have not been registered under the Securities Act by reason of a specific exemption and that the Award Shares must be held indefinitely, unless they are subsequently registered under the Securities Act or you obtain an opinion of counsel, in form and substance satisfactory to the Company and its counsel, that such registration is not required.  You further acknowledge and understand that the Company is under no obligation to register the Award Shares.

(c)You understand that the Company may, in its discretion, impose restrictions on the sale, pledge or other transfer of the Award Shares (including the placement of appropriate legends on stock certificates) if, in the judgment of the Company, such restrictions are necessary or desirable to comply with the Securities Act, the securities laws of any State or any other law.

(d)You are aware that your investment in the Company is a speculative investment that has limited liquidity and is subject to the risk of complete loss.

4.3The provisions of Sections 4.1 and 4.2(b) shall not apply to the following transfers; provided, however, that no transfer of Award Shares pursuant to this Section 4.3 (other than a transfer to the Company) shall be given effect on the books of the Company unless and until the Permitted Transferee (as defined below) executes an agreement in writing with the parties hereto pursuant to which he, she, or it agrees to be bound by all of the terms and conditions of this Agreement to the same extent as the parties hereto; provided, further, that no transfer will be permitted if the Company determines that, in its sole discretion, such transfer is, or is reasonably likely to be, in violation of applicable federal or state securities laws:

(a)a transfer of vested Award Shares made to an Affiliate of the Company or an Affiliate of any subsidiary of the Company;

(b)a transfer of vested Award Shares upon your death to your executors, administrators, testamentary trustees, legatees or beneficiaries;

(c)a transfer of vested Award Shares to a trust, the beneficiaries of which include only you and your spouse, siblings, or direct lineal ancestors or descendants;

(d)a transfer of vested Award Shares made as a gift to your spouse or lineal descendants; or

(e)a transfer of vested Award Shares made pursuant to a court order in connection with a divorce proceeding.

The transferee in each of the subclauses (a) through (e) above is referred to herein as a “Permitted Transferee.”  Notwithstanding anything to the contrary in this Agreement, no transfer made to the Company, any

2

subsidiary of the Company, or the Sponsor shall be subject to any restriction on transfer contained herein, so long as any such transfer is made in accordance with all applicable federal and state securities laws and does not violate any contractual agreement in effect at the time of such transfer.

4.4The Company shall not be required to (a) transfer on its books any Award Shares that have been sold or transferred in contravention of this Agreement or (b) treat as the owner of Award Shares, or otherwise accord voting, dividend or liquidation rights to, any transferee to whom Award Shares have been transferred in contravention of this Agreement.

5.Stock Certificates.  You will be reflected as the owner of record of the Award Shares as of the Grant Date on the Company’s books.  The Company will hold the share certificates for safekeeping, or otherwise retain the Award Shares in uncertificated book entry form, until the Award Shares become vested and nonforfeitable and until they may be transferred freely without restriction under this Agreement.  Until the Award Shares become vested and nonforfeitable, any share certificates representing such shares will include a legend in substantially the following form, in addition to any other legends that may be required under federal or state securities laws.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE APPLICABLE SECURITIES ACT OF ANY STATE BUT HAVE BEEN ISSUED IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION CONTAINED IN SAID ACTS.  NO SALE, OFFER TO SELL OR OTHER TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE UNLESS A REGISTRATION STATEMENT UNDER SAID ACTS IS IN EFFECT WITH RESPECT TO THE SECURITIES, OR AN EXEMPTION FROM THE REGISTRATION PROVISIONS OF SUCH ACTS IS THEN APPLICABLE.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND THE OTHER TERMS AND CONDITIONS SET FORTH IN A CERTAIN RESTRICTED STOCK AGREEMENT DATED FEBRUARY 23, 2007 AS AMENDED FROM TIME TO TIME, BETWEEN THE COMPANY AND THE REGISTERED OWNER OF THIS CERTIFICATE (OR HIS PREDECESSOR IN INTEREST), AND SUCH AGREEMENT IS AVAILABLE FOR INSPECTION WITHOUT CHARGE AT THE OFFICE OF THE SECRETARY OF THE COMPANY.

All regular cash dividends and other distributions on the Award Shares held by the Company will be paid directly to you, but any stock dividends will be treated in the manner set forth in Section 9 of this Agreement.

6.Market Stand-Off Agreement.  You agree that following the effective date of a registration statement of the Company filed under the Securities Act, to the extent requested by the Company and an underwriter of Common Stock or other securities of the Company, you will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any equity securities of the Company, or any securities convertible into or exchangeable or exercisable for such securities, enter into a transaction which would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction is to be settled by delivery of such securities or other securities, in cash or otherwise, or publicly disclose the intention to make any such offer, sale, pledge or disposition, or to enter into any such transaction, swap, hedge or other arrangement, in each case during the seven days prior to and the one hundred and eighty (180) days after the effectiveness of any underwritten offering of the Company’s equity securities (or such longer or shorter period as may be requested in writing by the managing underwriter and agreed to in writing by the Company) (the “Market Stand-Off Period”), except as part of such underwritten registration if otherwise permitted.  In addition, you agree to execute any further letters, agreements and/or other documents requested by the Company or its underwriters which are consistent with the terms of this Section 6.  The Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such Market Stand-Off Period.

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7.Tag-Along and Drag-Along Rights.

7.1.Tag-Along Rights.  (a)  If the Sponsor proposes to transfer all or a portion of the shares of Common Stock beneficially owned by it to a Third Party which would not be an Affiliate of the Sponsor immediately upon consummation of such transfer, and the Sponsor does not exercise its Drag-Along Rights in accordance with Section 7.4 (a “Tag-Along Sale”), the Sponsor shall cause you and your Permitted Transferees to have the option to exercise your rights under this Section 7.1, provided, however, that you and your Permitted Transferees, if any, shall have no rights under this Section 7.1 if the shares of Common Stock to be transferred in such transaction and any shares of Common Stock which have been transferred to any Third Party within a 90-day period preceding the date of such transfer have, in the aggregate, a Fair Market Value less than ten million dollars ($10,000,000) (a “Small Transfer”), and provided, further, that when the cumulative Fair Market Value of all such Small Transfers, the value to be calculated at the time of each such transfer, exceeds fifty million dollars ($50,000,000), the restrictions provided for in the first proviso of this Section 7.1(a) shall no longer be in effect.  Moreover, you and your Permitted Transferees, if any, shall have no rights under this Section 7.1 with respect to any transfer by the Sponsor of any shares of Common Stock beneficially owned by it to any limited partner of the Sponsor.

(b)In the event of a proposed Tag-Along Sale:

(i)the Sponsor shall provide you written notice of the terms and conditions of such proposed Tag-Along Sale, as described in Section 7.1(c) (“Tag-Along Notice”), at least 10 Business Days prior to the consummation of such proposed Tag-Along Sale and offer you and your Permitted Transferees the opportunity to participate in such Tag-Along Sale on the terms and conditions set forth in this Section 7.1; and

(ii)subject to Section 7.1(c), you and your Permitted Transferees shall be entitled to sell up to a Pro Rata Portion (as defined below) of your Award Shares (the “Tag Shares”) at the same price and on the same terms as the shares of Common Stock proposed to be sold by the Sponsor in such Tag-Along Sale in accordance with the terms set forth in this Section 7.1.

The “Pro-Rata Portion” of your Tag Shares shall mean an amount of such Tag Shares equal to the product of:

(A)(x) a fraction, the numerator of which is the number of shares of Common Stock proposed to be transferred by the Sponsor and its Affiliates in such Tag-Along Sale and the denominator of which is the total number of shares of Common Stock beneficially owned by the Sponsor and its Affiliates collectively, immediately prior to transferring such shares of Common Stock; or, (y) for the first transfer after the restrictions set forth in the first proviso of Section 7.1(a) are no longer in effect, a fraction, the numerator of which is the number of shares of Common Stock proposed to be transferred by the Sponsor and its Affiliates in such Tag-Along Sale plus the cumulative number of shares of Common Stock transferred by the Sponsor and its Affiliates in all Small Transfers, and the denominator of which is the total number of shares of Common Stock beneficially owned by the Sponsor and its Affiliates collectively, immediately prior to transferring such shares of Common Stock plus the cumulative number of shares of Common Stock transferred by the Sponsor and its Affiliates in all Small Transfers; and

(B)the total amount of Tag Shares beneficially owned by such Executive at the time of the Tag-Along Sale.

(c)The Tag-Along Notice shall identify the proposed transferee, the number of shares of Common Stock to be sold by the Sponsor in the Tag-Along Sale, the Pro Rata Portion of your Tag Shares which you shall be entitled to transfer in such Tag-Along Sale, the price at which the transfer of shares of Common Stock is proposed to be made, and all other material terms and conditions of the proposed Tag-Along Sale.  From the date of

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the Tag-Along Notice, you and your Permitted Transferees shall have the right (a “Tag-Along Right”), exercisable by written notice (“Tag-Along Response Notice”) given by you to the Sponsor within seven Business Days from the date of the Tag-Along Notice (the “Tag-Along Response Notice Period”), to request that the Sponsor includes in the proposed transfer the number of Tag Shares held by you and your Permitted Transferees (up to their Pro Rata Portion) as is specified in such Tag-Along Response Notice at the same price and on the same terms and conditions set forth in the Tag Along Notice; provided, however, that if the aggregate number of shares of Common Stock proposed to be sold by (i) the Sponsor, (ii) you and your Permitted Transferees, (iii) Other Award Share Grantees and their permitted transferees giving tag-along notices similar to the Tag-Along Notice during such period prescribed in Other Award Share Grantees’ Agreements and (iv) any other persons entitled to give (and giving on a timely basis) tag-along notices similar to the Tag-Along Notice pursuant to agreements substantially similar to this Agreement, including those certain Option Transfer Agreements, those certain Amended and Restated Management Subscription Agreements, and those certain Retained Share Agreements, each between the Company, the Sponsor and you or Other Key People, as amended, (the persons identified in subclauses (i), (ii), (iii) and (iv) of this subsection, collectively, the “Participants”), in such Tag-Along Sale exceeds the number of shares of Common Stock which can be sold on the terms and conditions set forth in the Tag-Along Notice, then only the Tag-Along Portion of shares of Common Stock beneficially owned by you shall be sold pursuant to the Tag-Along Sale.  “Tag-Along Portion” means, with respect to you and your Permitted Transferees, the number of shares of Common Stock beneficially owned by you and your Permitted Transferees on the date of the Tag-Along Notice multiplied by a fraction, the numerator of which is the maximum number of shares of Common Stock which can be sold in the Tag-Along Sale and the denominator of which is the aggregate number of shares of Common Stock beneficially owned by the Participants, collectively.

(d)Delivery of a Tag-Along Response Notice by you to the Sponsor pursuant to Section 7.1(c) shall constitute an irrevocable election by you and your Permitted Transferees, if any, to sell the number of Tag Shares beneficially owned by it or them as is specified in such Tag-Along Response Notice in such Tag-Along Sale.  If, at the end of a 90-day period after such delivery, the Tag-Along Sale has not been consummated on substantially the same terms and conditions set forth in the Tag-Along Notice, all restrictions on transfers of Tag Shares contained in this Agreement or otherwise applicable at such time with respect to Tag Shares owned by you and your Permitted Transferees shall again be in effect.

(e)If at the termination of the Tag-Along Response Notice Period you and your Permitted Transferees, if any, shall not have exercised its or their Tag-Along Right by providing the Sponsor with a Tag-Along Response Notice, such Executive and such Executive’s Permitted Transferees shall be deemed to have waived its or their Tag-Along Right with respect to transferring its or their Tag Shares pursuant to such Tag-Along Sale.

(f)The Sponsor may sell, on behalf of you and your Permitted Transferees, if you and your Permitted Transferees, if any, exercise your or their Tag-Along Right pursuant to this Section 7.1, the shares of Common Stock entitled to be transferred in the Tag-Along Sale on the terms and conditions set forth in the Tag-Along Notice within 90 days of the date on which Tag-Along Rights shall have been waived or exercised.

7.2.Limitation of Rights Following Termination of Employment.  Notwithstanding any other provision of this Agreement, upon the termination of your employment with the Company or any of its subsidiaries for Cause, or if you terminate your employment with the Company or any of its subsidiaries without Good Reason (as such term is defined in your employment agreement with the Company, if any), you and your Permitted Transferees shall have no rights under Section 7.1.  In the case of any other termination of your employment you and your Permitted Transferees shall continue to have the rights specified in Section 7.1.

7.3.Termination of Tag-Along Rights.  Notwithstanding anything to the contrary, the provisions of Section 7.1 shall not be applicable if the Common Stock is publicly traded on an Exchange and there exists a Minimum Public Float.

7.4.Drag-Along Rights.  (a)  If the Sponsor and its Affiliates propose to transfer all or any portion of the shares of Common Stock beneficially owned by them to a Third Party (a “Drag-Along Sale”), you and your Permitted Transferees shall, at the Sponsor’s option and in the Sponsor’s sole discretion, upon your receipt

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of written notice from the Sponsor, sell the Drag-Along Portion of your Award Shares to such Third Party for the same consideration and otherwise on the same terms and conditions on which the Sponsor and its Affiliates sell their shares of Common Stock in such Drag-Along Sale (the “Drag-Along Rights”).

The “Drag-Along Portion” of your Award Shares means, at any time, the number of Award Shares beneficially owned by you and your Permitted Transferees, multiplied by a fraction, the numerator of which is the number of shares of Common Stock proposed to be sold on behalf of the Sponsor in such Drag-Along Sale and the denominator of which is the total number of shares of Common Stock then beneficially owned by the Sponsor.

(b)The Sponsor shall provide written notice of such Drag-Along Sale to you (a “Drag-Along Notice”) not less than 20 days prior to the consummation of such proposed Drag-Along Sale which notice shall state that the Sponsor proposes to effect a transfer of a certain number of shares of Common Stock, the number of shares of Common Stock proposed to be transferred, the purchase price, the proposed transferee, the number of Award Shares which you are required to transfer in such Drag-Along Sale (based on the methodology set forth in Section 7.4(a)), and all other material terms and conditions of the Drag-Along Sale.  Subject to Section 7.4(c), you shall be required to participate in the Drag-Along Sale on the terms and conditions set forth in the Drag-Along Notice.  Not later than the tenth day following the date of the Drag-Along Notice (the “Drag-Along Notice Period”), you shall deliver to a representative of the Sponsor designated in the Drag-Along Notice certificates representing all the Award Shares beneficially owned and held by you, duly endorsed, together with all other documents required to be executed in connection with such Drag-Along Sale, or, if such delivery is not permitted by applicable law, an unconditional agreement to deliver such Award Shares pursuant to this Section 7.4 at the closing for such Drag-Along Sale against delivery to you of the consideration therefor.  If you should fail to deliver such certificates to the Sponsor in a Drag-Along Sale pursuant to this Section 7.4, the Company shall cause the books and records of the Company to show that such shares of Common Stock are bound by the provisions of this Section 7.4 and that such shares of Common Stock shall be transferred to the purchaser of the shares of the Common Stock immediately upon surrender for transfer by the holder thereof.

(c)The Sponsor shall have a period of 90 days from the date of the Drag-Along Notice to consummate the Drag-Along Sale on the terms and conditions set forth in such Drag-Along Sale Notice.  If the Drag-Along Sale shall not have been consummated during such period, the Sponsor shall return to you all certificates representing Award Shares that you delivered for transfer pursuant hereto, together with any documents in the possession of the Sponsor executed by you in connection with such proposed transfer, and the Drag-Along Notice shall be deemed to be cancelled and this Agreement will remain in full force and effect in accordance with its terms.

7.5.Other Responsibilities.  The delivery of any notices to, and the obtaining of any consents from, any Permitted Transferee with respect to any provision of this Agreement, including, but not limited to, Sections 7.1 and 7.4, shall be your sole responsibility, unless otherwise agreed to in writing between such Permitted Transferee and the Sponsor.  Neither the Company nor the Sponsor shall be liable to any Permitted Transferee for your failure to deliver a notice to, or obtain a consent from, any Permitted Transferee with respect to any provision of this Agreement, including, but not limited to, Sections 7.1 and 7.4.

7.6.Sales to Principal Beneficial Owners.  The Sponsor and its Affiliates shall not transfer all or any portion of the shares of Common Stock beneficially owned by them to a Principal Beneficial Owner, other than an Affiliate of the Sponsor, unless such Principal Beneficial Owner agrees to be bound by this Section 7 as if it were the Sponsor.  To the extent that the Sponsor and its Affiliates transfer any shares of Common Stock to a Principal Beneficial Owner other than an Affiliate of the Sponsor, you and your Permitted Transferees agree that such Principal Beneficial Owner shall receive the benefits set forth in Sections 7.4 and 7.5 hereof as if such Principal Beneficial Owner were the Sponsor.

8.Tax Withholding and Tax Election.

8.1 Tax Withholding. The Company shall have the right to deduct from any compensation or any other payment of any kind (including upon approval of the Board of Directors of the Company, withholding the

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delivery of shares of Commons Stock) due you the amount of any federal, state, local or foreign taxes required by law to be withheld which arise in connection with the Award Shares; provided, however, that the value of the shares of Common Stock withheld may not exceed the statutory minimum withholding amount required by law. In lieu of such deduction, the Company may require you to make a cash payment to the Company equal to the amount required to be withheld. If you do not make such payment when requested, the Company may refuse to issue any Common Stock certificate under this Agreement until arrangements satisfactory to the Administrator for such payment have been made.

8.2Tax Election.  You hereby acknowledge that you have been advised by the Company to seek independent tax advice from your own advisors regarding the availability and advisability of making an election under Section 83(b) of the Code, and that any such election, if made, must be made within 30 days of the Grant Date.  You expressly acknowledge that you are solely responsible for filing any such Section 83(b) election with the appropriate governmental authorities, irrespective of the fact that such election is also delivered to the Company.  You may not rely on the Company or any of its officers, directors or employees for tax or legal advice regarding this award.  You acknowledge that you have sought tax and legal advice from your own advisors regarding this award or have voluntarily and knowingly foregone such consultation.  You must pay over to the Company by check the amount of any and all applicable withholding taxes at the time that you make a Section 83(b) election.

9.Adjustments for Corporate Transactions and Other Events.

9.1Stock Dividend, Stock Split and Reverse Stock Split.  Upon a stock dividend of, or stock split, reverse stock split, or similar event affecting, the Common Stock, the number of Award Shares and the number of such Award Shares that are nonvested and forfeitable shall, without further action of the Administrator, be adjusted to reflect such event.  The Administrator may make adjustments, in its discretion, to address the treatment of fractional shares with respect to the Award Shares as a result of the stock dividend, stock split, reverse stock split, or similar event.  Adjustments under this Section 9 will be made by the Administrator, whose determination as to what adjustments, if any, will be made and the extent thereof will be final, binding and conclusive.  No fractional Award Shares will result from any such adjustments.

9.2Binding Nature of Agreement.  The terms and conditions of this Agreement shall apply with equal force to any additional and/or substitute securities received by you in exchange for, or by virtue of your ownership of, the Award Shares, whether as a result of any spin-off, stock split-up, stock dividend, stock distribution, other reclassification of the Common Stock of the Company, or similar event, except as otherwise determined by the Administrator.  If the Award Shares are converted into or exchanged for, or stockholders of the Company receive by reason of any distribution in total or partial liquidation or pursuant to any merger of the Company or acquisition of its assets, securities of another entity, or other property (including cash), then the rights of the Company under this Agreement shall inure to the benefit of the Company’s successor, and this Agreement shall apply to the securities or other property received upon such conversion, exchange or distribution in the same manner and to the same extent as the Award Shares.

10.Non-Guarantee of Employment or Service Relationship.  Nothing in the Plan or this Agreement shall alter your at-will or other employment status or other service relationship with the Company, nor be construed as a contract of employment or service relationship between the Company and you, or as a contractual right of you to continue in the employ of, or in a service relationship with, the Company for any period of time, or as a limitation of the right of the Company to discharge you at any time with or without cause or notice and whether or not such discharge results in the forfeiture of any Award Shares or any other adverse effect on your interests under the Plan.

11.Rights as Stockholder.  Except as otherwise provided in this Agreement with respect to the nonvested and forfeitable Award Shares, you are entitled to all rights of a stockholder of the Company, including the right to vote the Award Shares and receive dividends and/or other distributions declared on the Award Shares.

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12.The Company’s Rights.  Except as provided under Section 7.6 of this Agreement, the existence of the Award Shares shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company’s capital structure or its business, or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or other stocks with preference ahead of or convertible into, or otherwise affecting the Common Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of the Company’s assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.

13.Notices.  All notices and other communications made or given pursuant to this Agreement shall be in writing and shall be sufficiently made or given if hand delivered or mailed by certified mail, addressed to you at the address contained in the records of the Company, or addressed to the Administrator, care of the Company for the attention of its Corporate Secretary at its principal executive office or, if the receiving party consents in advance, transmitted and received via telecopy or via such other electronic transmission mechanism as may be available to the parties.

14.Entire Agreement.  This Agreement contains the entire agreement between the parties with respect to the Award Shares granted hereunder.  Any oral or written agreements, representations, warranties, written inducements, or other communications made prior to the execution of this Agreement with respect to the Award Shares granted hereunder shall be void and ineffective for all purposes.

15.Amendment.  This Agreement may be amended from time to time only be a written instrument duly executed by the Company, the Sponsor, and you.

16.Conformity with Plan.  This Agreement is intended to conform in all respects with, and is subject to all applicable provisions of, the Plan.  Inconsistencies between this Agreement and the Plan shall be resolved in accordance with the terms of the Plan.  In the event of any ambiguity in this Agreement or any matters as to which this Agreement is silent, the Plan shall govern.  A copy of the Plan is available upon request.  Please contact the Company by email at dselby@vertisinc.com or at 250 W. Pratt Street, 18^th Floor, Baltimore, Maryland 21201, Attention: Dolores D. Selby, (telephone: 410-361-8394), to receive a copy of the Plan.

17.Governing Law. The validity, construction and effect of this Agreement, and of any determinations or decisions made by the Administrator relating to this Agreement, and the rights of any and all persons having or claiming to have any interest under this Agreement, shall be determined exclusively in accordance with the laws of the State of Delaware, without regard to its provisions concerning the applicability of laws of other jurisdictions.  Any suit with respect hereto will be brought in the federal or state courts in the districts which include New York, New York, and you hereby agree and submit to the personal jurisdiction and venue thereof.

18.Headings.  The headings in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

19.Notices.  All notices and other communications provided for herein shall be dated and in writing and shall be deemed to have been duly given when delivered, if delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid and when received if delivered otherwise, to the party to whom it is directed:

(a)If to the Company, to it at the following address:

250 W. Pratt Street, 18^th Floor

Baltimore, Maryland 21201

Attention:  General Counsel

Fax No.:  (410) 528-9287

with a copy to the Sponsor, at the address set forth below:

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(b)If to you, at the address set forth in the Company’s records;

(c)If to the Sponsor, to it at the following address:

Thomas H. Lee Equity Fund IV, L.P.

c/o Thomas H. Lee Company

75 State Street, Suite 2600

Boston, MA 02109

Attention: Anthony J. DiNovi

Fax No.: (617) 227-3514

or at such other address as the parties hereto shall have specified by notice in writing to the other parties (provided, that such notice of change of address shall be deemed to have been duly given only when actually received).

20.Limitation of Liability.  None of the Affiliates of the Sponsor shall have any liability to the you or any of your Permitted Transferees or the Company or any of its subsidiaries under any provision of this Agreement.  In the event of an alleged breach of this Agreement by the Sponsor, the parties hereto acknowledge and agree that the sole remedy which may be sought against the Sponsor shall be specific performance, provided, however, that if the remedy of specific performance is not available, you, your Permitted Transferees, if any, and the Company will only seek to recover direct damages for any breach of this Agreement.  You, your Permitted Transferees, if any, and the Company agree to waive any other remedy against the Sponsor to which they might be entitled at law, including, but not limited to, compensatory damages, consequential damages, continuing damages, future damages, incidental damages, punitive damages and nominal damages.  The Company shall indemnify, defend, save and hold harmless Sponsor from and against any and all liabilities arising under, pursuant to or in connection with this Agreement.

21.Severability.  The invalidity, illegality or unenforceability of one or more of the provisions of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of this Agreement, including any such provision, in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.

22.Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart.

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GLOSSARY

(a)   “Administrator” means the Committee as determined under Section 2.7 of the Plan.

(b)   “Affiliate” has the meaning given to such term in the Plan.

(c)   “Business Day” means any day other than a Saturday, Sunday, or other day during which the Company’s principal executive office is not open for business.

(d)   “Cause” generally means your insubordination, dishonesty, incompetence, moral turpitude, other misconduct of any kind or the refusal to perform your duties or responsibilities for any reason other than illness or incapacity, in each case as determined by the Board in good faith.  However, if you have an employment agreement, consulting agreement, change of control agreement or similar agreement in effect with the Company at the time in question that defines “cause” (or words of like import), then “cause” has the meaning ascribed to it under such agreement, as such agreement shall provide at the time in question; provided that with respect to any agreement that conditions “cause” on the occurrence of a change of control, such definition of “cause” shall not apply until a change of control actually takes place and then only with regard to a termination thereafter.

(e)   “Common Stock” means the common stock, $.01 par value, of Vertis Holdings, Inc..

(f)    “Company” means Vertis Holdings, Inc. and its Affiliates, except where the context otherwise requires.  For purposes of determining whether a Liquidity Event has occurred, Company shall mean only Vertis Holdings, Inc.

(g)   “Disability” means your inability to perform substantially your duties and responsibilities to the Company by reason of a physical or mental disability or infirmity for a continuous period of three months.  The date of such disability shall be the earlier of (1) the last day of such three-month period or (2) the day on which you submit, or cause to be submitted, to the Board any medical evidence of such disability reasonably satisfactory to the Board.

(h)   “Exchange” means the principal stock exchange, including The Nasdaq Stock Market, on which the Common Stock is listed or approved for listing, if any.

(i)    “Liquidity Event” means (1) a public offering of the Common Stock registered pursuant to the Securities Act where there is a Minimum Public Float immediately following such offering, (2) a merger or other business combination or recapitalization whereby the Common Stock is exchanged for cash and/or publicly traded equity or debt securities in another entity or a combination of cash and other non-publicly traded equity or debt securities where cash constitutes at least a majority of the consideration to be received in such merger, business combination or recapitalization or (3) a sale or other disposition of all or substantially all of the Company’s assets to another entity, for cash and/or publicly traded equity or debt securities of another entity or a combination of cash and other non-publicly traded equity or debt securities where cash constitutes at least a majority of the proceeds of such sale or disposition, in each case, other than to the Company, any subsidiary of the Company, or any entity controlled by the ultimate control persons of the Company.

(j)    “Minimum Public Float” means the circumstances existing when (i) the consummation of one or more public offerings registered pursuant to the Securities Act of shares of Common Stock if, upon such consummation, the aggregate number of shares of Common Stock held by the public, not including Affiliates of the Company, represents at least 20% of the total number of outstanding shares of Common Stock at the time of such public offering and (ii) the Common Stock is listed on an Exchange.

(k)   “Other Award Share Grantees” means other persons receiving Award Shares pursuant to a restricted stock agreement having terms substantially identical to those contained in this Agreement.

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(l)    “Other Key People” means the officers, members of management, key employees of the Company and its Affiliates.

(m)  “Principal Beneficial Owner” means any of the Sponsor, CLI/THLEF IV Vertis LLC, Evercore Capital Partners L.P., CLI Associates LLC, J.P. Morgan Partners (BHCA), L.P., Wachovia Capital Partners, LLC (formerly First Union Capital Partners, LLC), and Cadogan Capital, LLC and their respective Affiliates and successors.

(n)   “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

(o)   “Service” means your employment or other service relationship with the Company and its Affiliates.  Service will be considered to have ceased with the Company if, after a sale, merger or other corporate transaction, the trade, business or entity with which you are employed is no longer an Affiliate of Vertis Holdings, Inc.

(p)   “Third Party” means any person or entity excluding each of the following:  (a) the Company and its employees, officers, directors and (b) the Principal Beneficial Owners.

(q)   “You”; “Your”.  You means the recipient of the Award Shares as reflected in the first paragraph of this Agreement.  Whenever the word “you” or “your” is used in any provision of this Agreement under circumstances where the provision should logically be construed, as determined by the Administrator, to apply to the estate, personal representative, or beneficiary to whom the Award Shares may be transferred by will or by the laws of descent and distribution, the words “you” and “your” shall be deemed to include such person.

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IN WITNESS WHEREOF, the Company and the Sponsor have caused this Agreement to be executed by their duly authorized officers.

VERTIS HOLDINGS, INC.
By:	/s/ John V. Howard Jr.
Date:		February 28, 2007
THOMAS H. LEE EQUITY FUND IV, L.P.
By:	Anthony DiNovi
Date:		March 9, 2007

                The undersigned hereby acknowledges that he/she has carefully read this Agreement and agrees to be bound by all of the provisions set forth herein.

WITNESS:	GRANTEE:		JOHN COLAROSSI
/s/ Dolores Selby	/s/ John Colarossi
	Date:	April 17, 2007

Enclosure:  Vertis Holdings, Inc. 1999 Equity Award Plan

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STOCK POWER

                FOR VALUE RECEIVED, the undersigned, John R. Colarossi, hereby sells, assigns and transfers unto Vertis Holdings, Inc., a Delaware corporation (the “Company”), or its successor, 7,500 shares of common stock, par value $0.01 per share, of the Company standing in my name on the books of the Company, represented by Certificate No. ____________, which is attached hereto, and hereby irrevocably constitutes and appoints ______________________________________________________ as my attorney-in-fact to transfer the said stock on the books of the Company with full power of substitution in the premises.

WITNESS:	JOHN R. COLAROSSI:
		Dated:

IMPORTANT TAX INFORMATION

INSTRUCTIONS REGARDING SECTION 83(b) ELECTIONS

1.An 83(b) Election is irrevocable.

2.If you want to make an 83(b) Election, an 83(b) Election Form must be filed with the Internal Revenue Service within 30 days of the date the Restricted Stock is granted to you; no exceptions to this rule are made.

3.You must provide a copy of the 83(b) Election Form to the Corporate Secretary or other designated officer of the Company.  This copy should be provided to the Company at the same time that you file your 83(b) Election Form with the Internal Revenue Service. In addition, you must pay over to the Company the amount of the withholding taxes by check at the time or your 83(b) Election.

4.In addition to making the filing under Item 2 above, you must attach a copy of your 83(b) Election Form to your tax return for the taxable year in which you received the Restricted Stock.

5.If you make an 83(b) Election and later forfeit the Restricted Stock, you will not be entitled to a refund of any tax you paid as a result of having made the 83(b) Election.  You may, however, recognize a capital loss upon forfeiture.

6.You must consult your personal tax advisor before making an 83(b) Election.  The attached election forms are intended as samples only, they must be tailored to your circumstances and may not be relied upon without consultation with a personal tax advisor.

SECTION 83(b) ELECTION FORM

Election Pursuant to Section 83(b) of the Internal Revenue Code

to Include Property in Gross Income in Year of Transfer

The undersigned hereby makes an election pursuant to Section 83(b) of the Internal Revenue Code with respect to the property described below and supplies the following information in accordance with the regulations promulgated thereunder:

1.             The name, address, and taxpayer identification number of the undersigned are:

                ______________________________

                ______________________________

                ______________________________

                ___-__-____

2.             The property with respect to which the election is made is _____________ shares of Common Stock, par value $.01 per share, of Vertis Holdings, Inc., a Delaware corporation (the “Company”).

3.             The date on which the property was transferred was ________________, the date on which the taxpayer received the property pursuant to a grant of restricted stock.

4.             The taxable year to which this election relates is calendar year 2007.

5.             The property is subject to restrictions in that the property is not transferable and is subject to a substantial risk of forfeiture until the taxpayer vests in the property.  The taxpayer will vest in _____ shares of Common Stock (the “Shares”) immediately prior to the first to occur of (i) a “liquidity event,” (ii) the taxpayer’s death, or (iii) the taxpayer suffering a “disability” (as each is defined in the restricted stock agreement evidencing the Shares), provided the taxpayer is in the employ of the Company when the event triggering vesting occurs.

6.             The fair market value at the time of transfer (determined without regard to any restrictions other than restrictions which by their terms will never lapse) of the property with respect to which this election is being made is $________ per share; with a cumulative fair market value of $______________.  The taxpayer did not pay any amount for the property transferred.

7.             A copy of this statement was furnished to the Company, for whom taxpayer rendered the services underlying the transfer of such property.

8.             This election is made to the same effect, and with the same limitations, for purposes of any applicable state statute corresponding to Section 83(b) of the Internal Revenue Code.

The undersigned understands that the foregoing election may not be revoked except with the consent of the Commissioner of Internal Revenue.

Signed: _________________________________________________

Date:       __________________________

Letter for filing §83(b) Election Form

[Date]

CERTIFIED MAIL

RETURN RECEIPT REQUESTED

Internal Revenue Service Center

(the Service Center to which individual income tax return is filed)

                                Re:          83(b) Election of ________________________________

                                                Social Security Number:   _______________________

Dear Sir/Madam:

Enclosed is an election under section 83(b) of the Internal Revenue Code of 1986 with respect to certain shares of stock of Vertis Holdings, Inc. that were transferred to me on ___________________, 20__.

Please file this election.

Sincerely,

_________________________________

cc: Secretary of Vertis Holdings, Inc.

EX-10.37

Exhibit 10.37

RESTRICTED STOCK AGREEMENT

VERTIS HOLDINGS, INC.
1999 EQUITY AWARD PLAN

GRANTEE:  DOUG MANN

NO. OF SHARES:  7,500

This Agreement (the “Agreement”), approved by Thomas H. Lee Equity Fund IV, L.P. (the “Sponsor”), evidences the award of  7,500 restricted shares (each, an “Award Share,” and collectively, the “Award Shares”) of the Common Stock of Vertis Holdings, Inc., a Delaware corporation (the “Company”), granted to you, Doug Mann, effective as of   February 23, 2007 (the “Grant Date”), pursuant to the Vertis Holdings, Inc. 1999 Equity Award Plan (the “Plan”) and conditioned upon your agreement to the terms described below.  All of the provisions of the Plan are expressly incorporated into this Agreement.

1.             Terminology.  The Glossary at the end of this Agreement contains definitions of all words that appear in this Agreement with an initial capital letter that are not defined elsewhere in this Agreement.

2.             Vesting.  All of the Award Shares are nonvested and forfeitable as of the Grant Date.  So long as your Service with the Company is continuous from the Grant Date through the applicable date upon which vesting occurs, the Award Shares will vest and become nonforfeitable immediately prior to the first to occur of the following:

(a)           a Liquidity Event;

(b)           your death; or

(c)           the date upon which you suffer a Disability.

Except as provided above, unless otherwise determined by the Administrator, none of the Award Shares will become vested and nonforfeitable after your Service with the Company ceases.

3.             Termination of Employment or Service.

3.1           Unvested Award Shares.  If your Service with the Company ceases for any reason other than your death or Disability, all Award Shares that are not then vested and nonforfeitable will be immediately forfeited to the Company upon such cessation for no consideration.

3.2           Vested Award Shares.  If your Service with the Company ceases for any reason, all Award Shares that are then vested and nonforfeitable will not be affected by such cessation but will remain subject to the provisions of this Agreement, including the restrictions on transfer set forth under Section 4 of this Agreement.

4.             Restrictions on Transfer.

4.1           Except as otherwise provided under Sections 4.3 or 7 of this Agreement or in accordance with your will or the laws of descent and distribution upon your death, until an Award Share becomes vested and nonforfeitable and a Liquidity Event has occurred, the Award Share may not be assigned, transferred, pledged, hypothecated or disposed of in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process.

4.2           You hereby represent and warrant to the Company as follows:

(a)           You will hold the Award Shares for your own account for investment only and not with a view to, or for resale in connection with, any “distribution” of the Award Shares within the meaning of the Securities Act.

(b)           You understand that the Award Shares have not been registered under the Securities Act by reason of a specific exemption and that the Award Shares must be held indefinitely, unless they are subsequently registered under the Securities Act or you obtain an opinion of counsel, in form and substance satisfactory to the Company and its counsel, that such registration is not required.  You further acknowledge and understand that the Company is under no obligation to register the Award Shares.

(c)           You understand that the Company may, in its discretion, impose restrictions on the sale, pledge or other transfer of the Award Shares (including the placement of appropriate legends on stock certificates) if, in the judgment of the Company, such restrictions are necessary or desirable to comply with the Securities Act, the securities laws of any State or any other law.

(d)           You are aware that your investment in the Company is a speculative investment that has limited liquidity and is subject to the risk of complete loss.

4.3           The provisions of Sections 4.1 and 4.2(b) shall not apply to the following transfers; provided, however, that no transfer of Award Shares pursuant to this Section 4.3 (other than a transfer to the Company) shall be given effect on the books of the Company unless and until the Permitted Transferee (as defined below) executes an agreement in writing with the parties hereto pursuant to which he, she, or it agrees to be bound by all of the terms and conditions of this Agreement to the same extent as the parties hereto; provided, further, that no transfer will be permitted if the Company determines that, in its sole discretion, such transfer is, or is reasonably likely to be, in violation of applicable federal or state securities laws:

(a)           a transfer of vested Award Shares made to an Affiliate of the Company or an Affiliate of any subsidiary of the Company;

(b)           a transfer of vested Award Shares upon your death to your executors, administrators, testamentary trustees, legatees or beneficiaries;

(c)           a transfer of vested Award Shares to a trust, the beneficiaries of which include only you and your spouse, siblings, or direct lineal ancestors or descendants;

(d)           a transfer of vested Award Shares made as a gift to your spouse or lineal descendants; or

(e)           a transfer of vested Award Shares made pursuant to a court order in connection with a divorce proceeding.

The transferee in each of the subclauses (a) through (e) above is referred to herein as a “Permitted Transferee.”  Notwithstanding anything to the contrary in this Agreement, no transfer made to the Company, any

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subsidiary of the Company, or the Sponsor shall be subject to any restriction on transfer contained herein, so long as any such transfer is made in accordance with all applicable federal and state securities laws and does not violate any contractual agreement in effect at the time of such transfer.

4.4           The Company shall not be required to (a) transfer on its books any Award Shares that have been sold or transferred in contravention of this Agreement or (b) treat as the owner of Award Shares, or otherwise accord voting, dividend or liquidation rights to, any transferee to whom Award Shares have been transferred in contravention of this Agreement.

5.             Stock Certificates.  You will be reflected as the owner of record of the Award Shares as of the Grant Date on the Company’s books.  The Company will hold the share certificates for safekeeping, or otherwise retain the Award Shares in uncertificated book entry form, until the Award Shares become vested and nonforfeitable and until they may be transferred freely without restriction under this Agreement.  Until the Award Shares become vested and nonforfeitable, any share certificates representing such shares will include a legend in substantially the following form, in addition to any other legends that may be required under federal or state securities laws.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE APPLICABLE SECURITIES ACT OF ANY STATE BUT HAVE BEEN ISSUED IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION CONTAINED IN SAID ACTS.  NO SALE, OFFER TO SELL OR OTHER TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE UNLESS A REGISTRATION STATEMENT UNDER SAID ACTS IS IN EFFECT WITH RESPECT TO THE SECURITIES, OR AN EXEMPTION FROM THE REGISTRATION PROVISIONS OF SUCH ACTS IS THEN APPLICABLE.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND THE OTHER TERMS AND CONDITIONS SET FORTH IN A CERTAIN RESTRICTED STOCK AGREEMENT DATED FEBRUARY 23, 2007 AS AMENDED FROM TIME TO TIME, BETWEEN THE COMPANY AND THE REGISTERED OWNER OF THIS CERTIFICATE (OR HIS PREDECESSOR IN INTEREST), AND SUCH AGREEMENT IS AVAILABLE FOR INSPECTION WITHOUT CHARGE AT THE OFFICE OF THE SECRETARY OF THE COMPANY.

All regular cash dividends and other distributions on the Award Shares held by the Company will be paid directly to you, but any stock dividends will be treated in the manner set forth in Section 9 of this Agreement.

6.             Market Stand-Off Agreement.  You agree that following the effective date of a registration statement of the Company filed under the Securities Act, to the extent requested by the Company and an underwriter of Common Stock or other securities of the Company, you will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any equity securities of the Company, or any securities convertible into or exchangeable or exercisable for such securities, enter into a transaction which would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction is to be settled by delivery of such securities or other securities, in cash or otherwise, or publicly disclose the intention to make any such offer, sale, pledge or disposition, or to enter into any such transaction, swap, hedge or other arrangement, in each case during the seven days prior to and the one hundred and eighty (180) days after the effectiveness of any underwritten offering of the Company’s equity securities (or such longer or shorter period as may be requested in writing by the managing underwriter and agreed to in writing by the Company) (the “Market Stand-Off Period”), except as part of such underwritten registration if otherwise permitted.  In addition, you agree to execute any further letters, agreements and/or other documents requested by the Company or its underwriters which are consistent with the terms of this Section 6.  The Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such Market Stand-Off Period.

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7.             Tag-Along and Drag-Along Rights.

7.1.          Tag-Along Rights.  (a)  If the Sponsor proposes to transfer all or a portion of the shares of Common Stock beneficially owned by it to a Third Party which would not be an Affiliate of the Sponsor immediately upon consummation of such transfer, and the Sponsor does not exercise its Drag-Along Rights in accordance with Section 7.4 (a “Tag-Along Sale”), the Sponsor shall cause you and your Permitted Transferees to have the option to exercise your rights under this Section 7.1, provided, however, that you and your Permitted Transferees, if any, shall have no rights under this Section 7.1 if the shares of Common Stock to be transferred in such transaction and any shares of Common Stock which have been transferred to any Third Party within a 90-day period preceding the date of such transfer have, in the aggregate, a Fair Market Value less than ten million dollars ($10,000,000) (a “Small Transfer”), and provided, further, that when the cumulative Fair Market Value of all such Small Transfers, the value to be calculated at the time of each such transfer, exceeds fifty million dollars ($50,000,000), the restrictions provided for in the first proviso of this Section 7.1(a) shall no longer be in effect.  Moreover, you and your Permitted Transferees, if any, shall have no rights under this Section 7.1 with respect to any transfer by the Sponsor of any shares of Common Stock beneficially owned by it to any limited partner of the Sponsor.

(b)           In the event of a proposed Tag-Along Sale:

(i)            the Sponsor shall provide you written notice of the terms and conditions of such proposed Tag-Along Sale, as described in Section 7.1(c) (“Tag-Along Notice”), at least 10 Business Days prior to the consummation of such proposed Tag-Along Sale and offer you and your Permitted Transferees the opportunity to participate in such Tag-Along Sale on the terms and conditions set forth in this Section 7.1; and

(ii)           subject to Section 7.1(c), you and your Permitted Transferees shall be entitled to sell up to a Pro Rata Portion (as defined below) of your Award Shares (the “Tag Shares”) at the same price and on the same terms as the shares of Common Stock proposed to be sold by the Sponsor in such Tag-Along Sale in accordance with the terms set forth in this Section 7.1.

The “Pro-Rata Portion” of your Tag Shares shall mean an amount of such Tag Shares equal to the product of:

(A)(x) a fraction, the numerator of which is the number of shares of Common Stock proposed to be transferred by the Sponsor and its Affiliates in such Tag-Along Sale and the denominator of which is the total number of shares of Common Stock beneficially owned by the Sponsor and its Affiliates collectively, immediately prior to transferring such shares of Common Stock; or, (y) for the first transfer after the restrictions set forth in the first proviso of Section 7.1(a) are no longer in effect, a fraction, the numerator of which is the number of shares of Common Stock proposed to be transferred by the Sponsor and its Affiliates in such Tag-Along Sale plus the cumulative number of shares of Common Stock transferred by the Sponsor and its Affiliates in all Small Transfers, and the denominator of which is the total number of shares of Common Stock beneficially owned by the Sponsor and its Affiliates collectively, immediately prior to transferring such shares of Common Stock plus the cumulative number of shares of Common Stock transferred by the Sponsor and its Affiliates in all Small Transfers; and

(B)the total amount of Tag Shares beneficially owned by such Executive at the time of the Tag-Along Sale.

(c)           The Tag-Along Notice shall identify the proposed transferee, the number of shares of Common Stock to be sold by the Sponsor in the Tag-Along Sale, the Pro Rata Portion of your Tag Shares which you shall be entitled to transfer in such Tag-Along Sale, the price at which the transfer of shares of Common Stock is proposed to be made, and all other material terms and conditions of the proposed Tag-Along Sale.  From the date of

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the Tag-Along Notice, you and your Permitted Transferees shall have the right (a “Tag-Along Right”), exercisable by written notice (“Tag-Along Response Notice”) given by you to the Sponsor within seven Business Days from the date of the Tag-Along Notice (the “Tag-Along Response Notice Period”), to request that the Sponsor includes in the proposed transfer the number of Tag Shares held by you and your Permitted Transferees (up to their Pro Rata Portion) as is specified in such Tag-Along Response Notice at the same price and on the same terms and conditions set forth in the Tag Along Notice; provided, however, that if the aggregate number of shares of Common Stock proposed to be sold by (i) the Sponsor, (ii) you and your Permitted Transferees, (iii) Other Award Share Grantees and their permitted transferees giving tag-along notices similar to the Tag-Along Notice during such period prescribed in Other Award Share Grantees’ Agreements and (iv) any other persons entitled to give (and giving on a timely basis) tag-along notices similar to the Tag-Along Notice pursuant to agreements substantially similar to this Agreement, including those certain Option Transfer Agreements, those certain Amended and Restated Management Subscription Agreements, and those certain Retained Share Agreements, each between the Company, the Sponsor and you or Other Key People, as amended, (the persons identified in subclauses (i), (ii), (iii) and (iv) of this subsection, collectively, the “Participants”), in such Tag-Along Sale exceeds the number of shares of Common Stock which can be sold on the terms and conditions set forth in the Tag-Along Notice, then only the Tag-Along Portion of shares of Common Stock beneficially owned by you shall be sold pursuant to the Tag-Along Sale.  “Tag-Along Portion” means, with respect to you and your Permitted Transferees, the number of shares of Common Stock beneficially owned by you and your Permitted Transferees on the date of the Tag-Along Notice multiplied by a fraction, the numerator of which is the maximum number of shares of Common Stock which can be sold in the Tag-Along Sale and the denominator of which is the aggregate number of shares of Common Stock beneficially owned by the Participants, collectively.

(d)           Delivery of a Tag-Along Response Notice by you to the Sponsor pursuant to Section 7.1(c) shall constitute an irrevocable election by you and your Permitted Transferees, if any, to sell the number of Tag Shares beneficially owned by it or them as is specified in such Tag-Along Response Notice in such Tag-Along Sale.  If, at the end of a 90-day period after such delivery, the Tag-Along Sale has not been consummated on substantially the same terms and conditions set forth in the Tag-Along Notice, all restrictions on transfers of Tag Shares contained in this Agreement or otherwise applicable at such time with respect to Tag Shares owned by you and your Permitted Transferees shall again be in effect.

(e)           If at the termination of the Tag-Along Response Notice Period you and your Permitted Transferees, if any, shall not have exercised its or their Tag-Along Right by providing the Sponsor with a Tag-Along Response Notice, such Executive and such Executive’s Permitted Transferees shall be deemed to have waived its or their Tag-Along Right with respect to transferring its or their Tag Shares pursuant to such Tag-Along Sale.

(f)            The Sponsor may sell, on behalf of you and your Permitted Transferees, if you and your Permitted Transferees, if any, exercise your or their Tag-Along Right pursuant to this Section 7.1, the shares of Common Stock entitled to be transferred in the Tag-Along Sale on the terms and conditions set forth in the Tag-Along Notice within 90 days of the date on which Tag-Along Rights shall have been waived or exercised.

7.2.          Limitation of Rights Following Termination of Employment.  Notwithstanding any other provision of this Agreement, upon the termination of your employment with the Company or any of its subsidiaries for Cause, or if you terminate your employment with the Company or any of its subsidiaries without Good Reason (as such term is defined in your employment agreement with the Company, if any), you and your Permitted Transferees shall have no rights under Section 7.1.  In the case of any other termination of your employment you and your Permitted Transferees shall continue to have the rights specified in Section 7.1.

7.3.          Termination of Tag-Along Rights.  Notwithstanding anything to the contrary, the provisions of Section 7.1 shall not be applicable if the Common Stock is publicly traded on an Exchange and there exists a Minimum Public Float.

7.4.          Drag-Along Rights.  (a)  If the Sponsor and its Affiliates propose to transfer all or any portion of the shares of Common Stock beneficially owned by them to a Third Party (a “Drag-Along Sale”), you and your Permitted Transferees shall, at the Sponsor’s option and in the Sponsor’s sole discretion, upon your receipt

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of written notice from the Sponsor, sell the Drag-Along Portion of your Award Shares to such Third Party for the same consideration and otherwise on the same terms and conditions on which the Sponsor and its Affiliates sell their shares of Common Stock in such Drag-Along Sale (the “Drag-Along Rights”).

The “Drag-Along Portion” of your Award Shares means, at any time, the number of Award Shares beneficially owned by you and your Permitted Transferees, multiplied by a fraction, the numerator of which is the number of shares of Common Stock proposed to be sold on behalf of the Sponsor in such Drag-Along Sale and the denominator of which is the total number of shares of Common Stock then beneficially owned by the Sponsor.

(b)           The Sponsor shall provide written notice of such Drag-Along Sale to you (a “Drag-Along Notice”) not less than 20 days prior to the consummation of such proposed Drag-Along Sale which notice shall state that the Sponsor proposes to effect a transfer of a certain number of shares of Common Stock, the number of shares of Common Stock proposed to be transferred, the purchase price, the proposed transferee, the number of Award Shares which you are required to transfer in such Drag-Along Sale (based on the methodology set forth in Section 7.4(a)), and all other material terms and conditions of the Drag-Along Sale.  Subject to Section 7.4(c), you shall be required to participate in the Drag-Along Sale on the terms and conditions set forth in the Drag-Along Notice.  Not later than the tenth day following the date of the Drag-Along Notice (the “Drag-Along Notice Period”), you shall deliver to a representative of the Sponsor designated in the Drag-Along Notice certificates representing all the Award Shares beneficially owned and held by you, duly endorsed, together with all other documents required to be executed in connection with such Drag-Along Sale, or, if such delivery is not permitted by applicable law, an unconditional agreement to deliver such Award Shares pursuant to this Section 7.4 at the closing for such Drag-Along Sale against delivery to you of the consideration therefor.  If you should fail to deliver such certificates to the Sponsor in a Drag-Along Sale pursuant to this Section 7.4, the Company shall cause the books and records of the Company to show that such shares of Common Stock are bound by the provisions of this Section 7.4 and that such shares of Common Stock shall be transferred to the purchaser of the shares of the Common Stock immediately upon surrender for transfer by the holder thereof.

(c)           The Sponsor shall have a period of 90 days from the date of the Drag-Along Notice to consummate the Drag-Along Sale on the terms and conditions set forth in such Drag-Along Sale Notice.  If the Drag-Along Sale shall not have been consummated during such period, the Sponsor shall return to you all certificates representing Award Shares that you delivered for transfer pursuant hereto, together with any documents in the possession of the Sponsor executed by you in connection with such proposed transfer, and the Drag-Along Notice shall be deemed to be cancelled and this Agreement will remain in full force and effect in accordance with its terms.

7.5.          Other Responsibilities.  The delivery of any notices to, and the obtaining of any consents from, any Permitted Transferee with respect to any provision of this Agreement, including, but not limited to, Sections 7.1 and 7.4, shall be your sole responsibility, unless otherwise agreed to in writing between such Permitted Transferee and the Sponsor.  Neither the Company nor the Sponsor shall be liable to any Permitted Transferee for your failure to deliver a notice to, or obtain a consent from, any Permitted Transferee with respect to any provision of this Agreement, including, but not limited to, Sections 7.1 and 7.4.

7.6.          Sales to Principal Beneficial Owners.  The Sponsor and its Affiliates shall not transfer all or any portion of the shares of Common Stock beneficially owned by them to a Principal Beneficial Owner, other than an Affiliate of the Sponsor, unless such Principal Beneficial Owner agrees to be bound by this Section 7 as if it were the Sponsor.  To the extent that the Sponsor and its Affiliates transfer any shares of Common Stock to a Principal Beneficial Owner other than an Affiliate of the Sponsor, you and your Permitted Transferees agree that such Principal Beneficial Owner shall receive the benefits set forth in Sections 7.4 and 7.5 hereof as if such Principal Beneficial Owner were the Sponsor.

8.             Tax Withholding and Tax Election.

8.1 Tax Withholding. The Company shall have the right to deduct from any compensation or any other payment of any kind (including upon approval of the Board of Directors of the Company, withholding the

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delivery of shares of Commons Stock) due you the amount of any federal, state, local or foreign taxes required by law to be withheld which arise in connection with the Award Shares; provided, however, that the value of the shares of Common Stock withheld may not exceed the statutory minimum withholding amount required by law. In lieu of such deduction, the Company may require you to make a cash payment to the Company equal to the amount required to be withheld. If you do not make such payment when requested, the Company may refuse to issue any Common Stock certificate under this Agreement until arrangements satisfactory to the Administrator for such payment have been made.

8.2           Tax Election.  You hereby acknowledge that you have been advised by the Company to seek independent tax advice from your own advisors regarding the availability and advisability of making an election under Section 83(b) of the Code, and that any such election, if made, must be made within 30 days of the Grant Date.  You expressly acknowledge that you are solely responsible for filing any such Section 83(b) election with the appropriate governmental authorities, irrespective of the fact that such election is also delivered to the Company.  You may not rely on the Company or any of its officers, directors or employees for tax or legal advice regarding this award.  You acknowledge that you have sought tax and legal advice from your own advisors regarding this award or have voluntarily and knowingly foregone such consultation.  You must pay over to the Company by check the amount of any and all applicable withholding taxes at the time that you make a Section 83(b) election.

9.             Adjustments for Corporate Transactions and Other Events.

9.1           Stock Dividend, Stock Split and Reverse Stock Split.  Upon a stock dividend of, or stock split, reverse stock split, or similar event affecting, the Common Stock, the number of Award Shares and the number of such Award Shares that are nonvested and forfeitable shall, without further action of the Administrator, be adjusted to reflect such event.  The Administrator may make adjustments, in its discretion, to address the treatment of fractional shares with respect to the Award Shares as a result of the stock dividend, stock split, reverse stock split, or similar event.  Adjustments under this Section 9 will be made by the Administrator, whose determination as to what adjustments, if any, will be made and the extent thereof will be final, binding and conclusive.  No fractional Award Shares will result from any such adjustments.

9.2           Binding Nature of Agreement.  The terms and conditions of this Agreement shall apply with equal force to any additional and/or substitute securities received by you in exchange for, or by virtue of your ownership of, the Award Shares, whether as a result of any spin-off, stock split-up, stock dividend, stock distribution, other reclassification of the Common Stock of the Company, or similar event, except as otherwise determined by the Administrator.  If the Award Shares are converted into or exchanged for, or stockholders of the Company receive by reason of any distribution in total or partial liquidation or pursuant to any merger of the Company or acquisition of its assets, securities of another entity, or other property (including cash), then the rights of the Company under this Agreement shall inure to the benefit of the Company’s successor, and this Agreement shall apply to the securities or other property received upon such conversion, exchange or distribution in the same manner and to the same extent as the Award Shares.

10.           Non-Guarantee of Employment or Service Relationship.  Nothing in the Plan or this Agreement shall alter your at-will or other employment status or other service relationship with the Company, nor be construed as a contract of employment or service relationship between the Company and you, or as a contractual right of you to continue in the employ of, or in a service relationship with, the Company for any period of time, or as a limitation of the right of the Company to discharge you at any time with or without cause or notice and whether or not such discharge results in the forfeiture of any Award Shares or any other adverse effect on your interests under the Plan.

11.           Rights as Stockholder.  Except as otherwise provided in this Agreement with respect to the nonvested and forfeitable Award Shares, you are entitled to all rights of a stockholder of the Company, including the right to vote the Award Shares and receive dividends and/or other distributions declared on the Award Shares.

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12.           The Company’s Rights.  Except as provided under Section 7.6 of this Agreement, the existence of the Award Shares shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company’s capital structure or its business, or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or other stocks with preference ahead of or convertible into, or otherwise affecting the Common Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of the Company’s assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.

13.           Notices.  All notices and other communications made or given pursuant to this Agreement shall be in writing and shall be sufficiently made or given if hand delivered or mailed by certified mail, addressed to you at the address contained in the records of the Company, or addressed to the Administrator, care of the Company for the attention of its Corporate Secretary at its principal executive office or, if the receiving party consents in advance, transmitted and received via telecopy or via such other electronic transmission mechanism as may be available to the parties.

14.           Entire Agreement.  This Agreement contains the entire agreement between the parties with respect to the Award Shares granted hereunder.  Any oral or written agreements, representations, warranties, written inducements, or other communications made prior to the execution of this Agreement with respect to the Award Shares granted hereunder shall be void and ineffective for all purposes.

15.           Amendment.  This Agreement may be amended from time to time only be a written instrument duly executed by the Company, the Sponsor, and you.

16.           Conformity with Plan.  This Agreement is intended to conform in all respects with, and is subject to all applicable provisions of, the Plan.  Inconsistencies between this Agreement and the Plan shall be resolved in accordance with the terms of the Plan.  In the event of any ambiguity in this Agreement or any matters as to which this Agreement is silent, the Plan shall govern.  A copy of the Plan is available upon request.  Please contact the Company by email at dselby@vertisinc.com or at 250 W. Pratt Street, 18^th Floor, Baltimore, Maryland 21201, Attention: Dolores D. Selby, (telephone: 410-361-8394), to receive a copy of the Plan.

17.           Governing Law. The validity, construction and effect of this Agreement, and of any determinations or decisions made by the Administrator relating to this Agreement, and the rights of any and all persons having or claiming to have any interest under this Agreement, shall be determined exclusively in accordance with the laws of the State of Delaware, without regard to its provisions concerning the applicability of laws of other jurisdictions.  Any suit with respect hereto will be brought in the federal or state courts in the districts which include New York, New York, and you hereby agree and submit to the personal jurisdiction and venue thereof.

18.           Headings.  The headings in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

19.           Notices.  All notices and other communications provided for herein shall be dated and in writing and shall be deemed to have been duly given when delivered, if delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid and when received if delivered otherwise, to the party to whom it is directed:

(a)       If to the Company, to it at the following address:

250 W. Pratt Street, 18^th Floor

Baltimore, Maryland 21201

Attention:  General Counsel

Fax No.:  (410) 528-9287

with a copy to the Sponsor, at the address set forth below:

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(b)       If to you, at the address set forth in the Company’s records;

(c)       If to the Sponsor, to it at the following address:

Thomas H. Lee Equity Fund IV, L.P.

c/o Thomas H. Lee Company

75 State Street, Suite 2600

Boston, MA 02109

Attention: Anthony J. DiNovi

Fax No.: (617) 227-3514

or at such other address as the parties hereto shall have specified by notice in writing to the other parties (provided, that such notice of change of address shall be deemed to have been duly given only when actually received).

20.           Limitation of Liability.  None of the Affiliates of the Sponsor shall have any liability to the you or any of your Permitted Transferees or the Company or any of its subsidiaries under any provision of this Agreement.  In the event of an alleged breach of this Agreement by the Sponsor, the parties hereto acknowledge and agree that the sole remedy which may be sought against the Sponsor shall be specific performance, provided, however, that if the remedy of specific performance is not available, you, your Permitted Transferees, if any, and the Company will only seek to recover direct damages for any breach of this Agreement.  You, your Permitted Transferees, if any, and the Company agree to waive any other remedy against the Sponsor to which they might be entitled at law, including, but not limited to, compensatory damages, consequential damages, continuing damages, future damages, incidental damages, punitive damages and nominal damages.  The Company shall indemnify, defend, save and hold harmless Sponsor from and against any and all liabilities arising under, pursuant to or in connection with this Agreement.

21.           Severability.  The invalidity, illegality or unenforceability of one or more of the provisions of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of this Agreement, including any such provision, in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.

22.           Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart.

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GLOSSARY

(a)   “Administrator” means the Committee as determined under Section 2.7 of the Plan.

(b)   “Affiliate” has the meaning given to such term in the Plan.

(c)   “Business Day” means any day other than a Saturday, Sunday, or other day during which the Company’s principal executive office is not open for business.

(d)   “Cause” generally means your insubordination, dishonesty, incompetence, moral turpitude, other misconduct of any kind or the refusal to perform your duties or responsibilities for any reason other than illness or incapacity, in each case as determined by the Board in good faith.  However, if you have an employment agreement, consulting agreement, change of control agreement or similar agreement in effect with the Company at the time in question that defines “cause” (or words of like import), then “cause” has the meaning ascribed to it under such agreement, as such agreement shall provide at the time in question; provided that with respect to any agreement that conditions “cause” on the occurrence of a change of control, such definition of “cause” shall not apply until a change of control actually takes place and then only with regard to a termination thereafter.

(e)   “Common Stock” means the common stock, $.01 par value, of Vertis Holdings, Inc..

(f)    “Company” means Vertis Holdings, Inc. and its Affiliates, except where the context otherwise requires.  For purposes of determining whether a Liquidity Event has occurred, Company shall mean only Vertis Holdings, Inc.

(g)   “Disability” means your inability to perform substantially your duties and responsibilities to the Company by reason of a physical or mental disability or infirmity for a continuous period of three months.  The date of such disability shall be the earlier of (1) the last day of such three-month period or (2) the day on which you submit, or cause to be submitted, to the Board any medical evidence of such disability reasonably satisfactory to the Board.

(h)   “Exchange” means the principal stock exchange, including The Nasdaq Stock Market, on which the Common Stock is listed or approved for listing, if any.

(i)    “Liquidity Event” means (1) a public offering of the Common Stock registered pursuant to the Securities Act where there is a Minimum Public Float immediately following such offering, (2) a merger or other business combination or recapitalization whereby the Common Stock is exchanged for cash and/or publicly traded equity or debt securities in another entity or a combination of cash and other non-publicly traded equity or debt securities where cash constitutes at least a majority of the consideration to be received in such merger, business combination or recapitalization or (3) a sale or other disposition of all or substantially all of the Company’s assets to another entity, for cash and/or publicly traded equity or debt securities of another entity or a combination of cash and other non-publicly traded equity or debt securities where cash constitutes at least a majority of the proceeds of such sale or disposition, in each case, other than to the Company, any subsidiary of the Company, or any entity controlled by the ultimate control persons of the Company.

(j)    “Minimum Public Float” means the circumstances existing when (i) the consummation of one or more public offerings registered pursuant to the Securities Act of shares of Common Stock if, upon such consummation, the aggregate number of shares of Common Stock held by the public, not including Affiliates of the Company, represents at least 20% of the total number of outstanding shares of Common Stock at the time of such public offering and (ii) the Common Stock is listed on an Exchange.

(k)   “Other Award Share Grantees” means other persons receiving Award Shares pursuant to a restricted stock agreement having terms substantially identical to those contained in this Agreement.

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(l)    “Other Key People” means the officers, members of management, key employees of the Company and its Affiliates.

(m)  “Principal Beneficial Owner” means any of the Sponsor, CLI/THLEF IV Vertis LLC, Evercore Capital Partners L.P., CLI Associates LLC, J.P. Morgan Partners (BHCA), L.P., Wachovia Capital Partners, LLC (formerly First Union Capital Partners, LLC), and Cadogan Capital, LLC and their respective Affiliates and successors.

(n)   “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

(o)   “Service” means your employment or other service relationship with the Company and its Affiliates.  Service will be considered to have ceased with the Company if, after a sale, merger or other corporate transaction, the trade, business or entity with which you are employed is no longer an Affiliate of Vertis Holdings, Inc.

(p)   “Third Party” means any person or entity excluding each of the following:  (a) the Company and its employees, officers, directors and (b) the Principal Beneficial Owners.

(q)   “You”; “Your”.  You means the recipient of the Award Shares as reflected in the first paragraph of this Agreement.  Whenever the word “you” or “your” is used in any provision of this Agreement under circumstances where the provision should logically be construed, as determined by the Administrator, to apply to the estate, personal representative, or beneficiary to whom the Award Shares may be transferred by will or by the laws of descent and distribution, the words “you” and “your” shall be deemed to include such person.

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IN WITNESS WHEREOF, the Company and the Sponsor have caused this Agreement to be executed by their duly authorized officers.

VERTIS HOLDINGS, INC.
By:	/s/ John V. Howard Jr.
Date:	February 28, 2007

THOMAS H. LEE EQUITY FUND IV, L.P.
By:	/s/ Anthony DiNovi
Date:	March 7, 2007

The undersigned hereby acknowledges that he/she has carefully read this Agreement and agrees to be bound by all of the provisions set forth herein.

WITNESS:	GRANTEE:   Doug Mann
/s/ Dolores Selby	/s/ Doug Mann
	Date:	February 23, 2007

Enclosure:  Vertis Holdings, Inc. 1999 Equity Award Plan

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STOCK POWER

                FOR VALUE RECEIVED, the undersigned, Doug Mann, hereby sells, assigns and transfers unto Vertis Holdings, Inc., a Delaware corporation (the “Company”), or its successor, 7,500 shares of common stock, par value $0.01 per share, of the Company standing in my name on the books of the Company, represented by Certificate No. ____________, which is attached hereto, and hereby irrevocably constitutes and appoints ______________________________________________________ as my attorney-in-fact to transfer the said stock on the books of the Company with full power of substitution in the premises.

WITNESS:

___________________________                                 ____________________________________

                                                                                                                Dated: ______________________________

IMPORTANT TAX INFORMATION

INSTRUCTIONS REGARDING SECTION 83(b) ELECTIONS

1.An 83(b) Election is irrevocable.

2.If you want to make an 83(b) Election, an 83(b) Election Form must be filed with the Internal Revenue Service within 30 days of the date the Restricted Stock is granted to you; no exceptions to this rule are made.

3.You must provide a copy of the 83(b) Election Form to the Corporate Secretary or other designated officer of the Company.  This copy should be provided to the Company at the same time that you file your 83(b) Election Form with the Internal Revenue Service. In addition, you must pay over to the Company the amount of the withholding taxes by check at the time or your 83(b) Election.

4.In addition to making the filing under Item 2 above, you must attach a copy of your 83(b) Election Form to your tax return for the taxable year in which you received the Restricted Stock.

5.If you make an 83(b) Election and later forfeit the Restricted Stock, you will not be entitled to a refund of any tax you paid as a result of having made the 83(b) Election.  You may, however, recognize a capital loss upon forfeiture.

6.You must consult your personal tax advisor before making an 83(b) Election.  The attached election forms are intended as samples only, they must be tailored to your circumstances and may not be relied upon without consultation with a personal tax advisor.

SECTION 83(b) ELECTION FORM

Election Pursuant to Section 83(b) of the Internal Revenue Code

to Include Property in Gross Income in Year of Transfer

The undersigned hereby makes an election pursuant to Section 83(b) of the Internal Revenue Code with respect to the property described below and supplies the following information in accordance with the regulations promulgated thereunder:

1.             The name, address, and taxpayer identification number of the undersigned are:

                ______________________________

                ______________________________

                ______________________________

                ___-__-____

2.             The property with respect to which the election is made is _____________ shares of Common Stock, par value $.01 per share, of Vertis Holdings, Inc., a Delaware corporation (the “Company”).

3.             The date on which the property was transferred was ________________, the date on which the taxpayer received the property pursuant to a grant of restricted stock.

4.             The taxable year to which this election relates is calendar year 2007.

5.             The property is subject to restrictions in that the property is not transferable and is subject to a substantial risk of forfeiture until the taxpayer vests in the property.  The taxpayer will vest in _____ shares of Common Stock (the “Shares”) immediately prior to the first to occur of (i) a “liquidity event,” (ii) the taxpayer’s death, or (iii) the taxpayer suffering a “disability” (as each is defined in the restricted stock agreement evidencing the Shares), provided the taxpayer is in the employ of the Company when the event triggering vesting occurs.

6.             The fair market value at the time of transfer (determined without regard to any restrictions other than restrictions which by their terms will never lapse) of the property with respect to which this election is being made is $________ per share; with a cumulative fair market value of $______________.  The taxpayer did not pay any amount for the property transferred.

7.             A copy of this statement was furnished to the Company, for whom taxpayer rendered the services underlying the transfer of such property.

8.             This election is made to the same effect, and with the same limitations, for purposes of any applicable state statute corresponding to Section 83(b) of the Internal Revenue Code.

The undersigned understands that the foregoing election may not be revoked except with the consent of the Commissioner of Internal Revenue.

Signed:  _________________________________________________

Date:       __________________________

Letter for filing §83(b) Election Form

[Date]

CERTIFIED MAIL

RETURN RECEIPT REQUESTED

Internal Revenue Service Center

(the Service Center to which individual income tax return is filed)

                                Re:          83(b) Election of ________________________________

                                                Social Security Number:   _______________________

Dear Sir/Madam:

Enclosed is an election under section 83(b) of the Internal Revenue Code of 1986 with respect to certain shares of stock of Vertis Holdings, Inc. that were transferred to me on ___________________, 20__.

Please file this election.

Sincerely,

_________________________________

cc: Secretary of Vertis Holdings, Inc.

EX-10.38

Exhibit 10.38

RESTRICTED STOCK AGREEMENT

VERTIS HOLDINGS, INC.
1999 EQUITY AWARD PLAN

GRANTEE: MICHAEL T. DUBOSE

NO. OF SHARES:  600,000

This Agreement (the “Agreement”), approved by Thomas H. Lee Equity Fund IV, L.P. (the “Sponsor”), evidences the award of  600,000 restricted shares (each, an “Award Share,” and collectively, the “Award Shares”) of the Common Stock of Vertis Holdings, Inc., a Delaware corporation (the “Company”), granted to you, Michael T. DuBose, effective as of  January 7, 2008 (the “Grant Date”), pursuant to the Vertis Holdings, Inc. 1999 Equity Award Plan (the “Plan”) and conditioned upon your agreement to the terms described below.  All of the provisions of the Plan are expressly incorporated into this Agreement.

1.Terminology.  The Glossary at the end of this Agreement contains definitions of all words that appear in this Agreement with an initial capital letter that are not defined elsewhere in this Agreement.

2.Vesting.  All of the Award Shares are nonvested and forfeitable as of the Grant Date.  So long as your Service with the Company is continuous from the Grant Date through the applicable date upon which vesting occurs, the Award Shares will vest and become nonforfeitable immediately prior to the first to occur of the following:

(a)           a Liquidity Event;

(b)           your death; or

(c)           the date upon which you suffer a Disability.

Except as provided above, unless otherwise determined by the Administrator, none of the Award Shares will become vested and nonforfeitable after your Service with the Company ceases.

3.Termination of Employment or Service.

3.1           Unvested Award Shares.  If your Service with the Company ceases for any reason other than your death or Disability, all Award Shares that are not then vested and nonforfeitable will be immediately forfeited to the Company upon such cessation for no consideration.

3.2           Vested Award Shares.  If your Service with the Company ceases for any reason, all Award Shares that are then vested and nonforfeitable will not be affected by such cessation but will remain subject to the provisions of this Agreement, including the restrictions on transfer set forth under Section 4 of this Agreement.

4.Restrictions on Transfer.

4.1           Except as otherwise provided under Sections 4.3 or 7 of this Agreement or in accordance with your will or the laws of descent and distribution upon your death, until an Award Share becomes vested and nonforfeitable and a Liquidity Event has occurred, the Award Share may not be assigned, transferred, pledged, hypothecated or disposed of in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process.

4.2           You hereby represent and warrant to the Company as follows:

(a)           You will hold the Award Shares for your own account for investment only and not with a view to, or for resale in connection with, any “distribution” of the Award Shares within the meaning of the Securities Act.

(b)           You understand that the Award Shares have not been registered under the Securities Act by reason of a specific exemption and that the Award Shares must be held indefinitely, unless they are subsequently registered under the Securities Act or you obtain an opinion of counsel, in form and substance satisfactory to the Company and its counsel, that such registration is not required.  You further acknowledge and understand that the Company is under no obligation to register the Award Shares.

(c)           You understand that the Company may, in its discretion, impose restrictions on the sale, pledge or other transfer of the Award Shares (including the placement of appropriate legends on stock certificates) if, in the judgment of the Company, such restrictions are necessary or desirable to comply with the Securities Act, the securities laws of any State or any other law.

(d)           You are aware that your investment in the Company is a speculative investment that has limited liquidity and is subject to the risk of complete loss.

4.3           The provisions of Sections 4.1 and 4.2(b) shall not apply to the following transfers; provided, however, that no transfer of Award Shares pursuant to this Section 4.3 (other than a transfer to the Company) shall be given effect on the books of the Company unless and until the Permitted Transferee (as defined below) executes an agreement in writing with the parties hereto pursuant to which he, she, or it agrees to be bound by all of the terms and conditions of this Agreement to the same extent as the parties hereto; provided, further, that no transfer will be permitted if the Company determines that, in its sole discretion, such transfer is, or is reasonably likely to be, in violation of applicable federal or state securities laws:

(a)           a transfer of vested Award Shares made to an Affiliate of the Company or an Affiliate of any subsidiary of the Company;

(b)           a transfer of vested Award Shares upon your death to your executors, administrators, testamentary trustees, legatees or beneficiaries;

(c)           a transfer of vested Award Shares to a trust, the beneficiaries of which include only you and your spouse, siblings, or direct lineal ancestors or descendants;

(d)           a transfer of vested Award Shares made as a gift to your spouse or lineal descendants; or

(e)           a transfer of vested Award Shares made pursuant to a court order in connection with a divorce proceeding.

The transferee in each of the subclauses (a) through (e) above is referred to herein as a “Permitted Transferee.”  Notwithstanding anything to the contrary in this Agreement, no transfer made to the Company, any

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subsidiary of the Company, or the Sponsor shall be subject to any restriction on transfer contained herein, so long as any such transfer is made in accordance with all applicable federal and state securities laws and does not violate any contractual agreement in effect at the time of such transfer.

4.4           The Company shall not be required to (a) transfer on its books any Award Shares that have been sold or transferred in contravention of this Agreement or (b) treat as the owner of Award Shares, or otherwise accord voting, dividend or liquidation rights to, any transferee to whom Award Shares have been transferred in contravention of this Agreement.

5.Stock Certificates.  You will be reflected as the owner of record of the Award Shares as of the Grant Date on the Company’s books.  The Company will hold the share certificates for safekeeping, or otherwise retain the Award Shares in uncertificated book entry form, until the Award Shares become vested and nonforfeitable and until they may be transferred freely without restriction under this Agreement.  Until the Award Shares become vested and nonforfeitable, any share certificates representing such shares will include a legend in substantially the following form, in addition to any other legends that may be required under federal or state securities laws.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE APPLICABLE SECURITIES ACT OF ANY STATE BUT HAVE BEEN ISSUED IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION CONTAINED IN SAID ACTS.  NO SALE, OFFER TO SELL OR OTHER TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE UNLESS A REGISTRATION STATEMENT UNDER SAID ACTS IS IN EFFECT WITH RESPECT TO THE SECURITIES, OR AN EXEMPTION FROM THE REGISTRATION PROVISIONS OF SUCH ACTS IS THEN APPLICABLE.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND THE OTHER TERMS AND CONDITIONS SET FORTH IN A CERTAIN RESTRICTED STOCK AGREEMENT DATED JANUARY 7, 2008 AS AMENDED FROM TIME TO TIME, BETWEEN THE COMPANY AND THE REGISTERED OWNER OF THIS CERTIFICATE (OR HIS PREDECESSOR IN INTEREST), AND SUCH AGREEMENT IS AVAILABLE FOR INSPECTION WITHOUT CHARGE AT THE OFFICE OF THE SECRETARY OF THE COMPANY.

All regular cash dividends and other distributions on the Award Shares held by the Company will be paid directly to you, but any stock dividends will be treated in the manner set forth in Section 9 of this Agreement.

6.Market Stand-Off Agreement.  You agree that following the effective date of a registration statement of the Company filed under the Securities Act, to the extent requested by the Company and an underwriter of Common Stock or other securities of the Company, you will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any equity securities of the Company, or any securities convertible into or exchangeable or exercisable for such securities, enter into a transaction which would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction is to be settled by delivery of such securities or other securities, in cash or otherwise, or publicly disclose the intention to make any such offer, sale, pledge or disposition, or to enter into any such transaction, swap, hedge or other arrangement, in each case during the seven days prior to and the one hundred and eighty (180) days after the effectiveness of any underwritten offering of the Company’s equity securities (or such longer or shorter period as may be requested in writing by the managing underwriter and agreed to in writing by the Company) (the “Market Stand-Off Period”), except as part of such underwritten registration if otherwise permitted.  In addition, you agree to execute any further letters, agreements and/or other documents requested by the Company or its underwriters which are consistent with the terms of this Section 6.  The Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such Market Stand-Off Period.

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7.Tag-Along and Drag-Along Rights.

7.1.          Tag-Along Rights.  (a)  If the Sponsor proposes to transfer all or a portion of the shares of Common Stock beneficially owned by it to a Third Party which would not be an Affiliate of the Sponsor immediately upon consummation of such transfer, and the Sponsor does not exercise its Drag-Along Rights in accordance with Section 7.4 (a “Tag-Along Sale”), the Sponsor shall cause you and your Permitted Transferees to have the option to exercise your rights under this Section 7.1, provided, however, that you and your Permitted Transferees, if any, shall have no rights under this Section 7.1 if the shares of Common Stock to be transferred in such transaction and any shares of Common Stock which have been transferred to any Third Party within a 90-day period preceding the date of such transfer have, in the aggregate, a Fair Market Value less than ten million dollars ($10,000,000) (a “Small Transfer”), and provided, further, that when the cumulative Fair Market Value of all such Small Transfers, the value to be calculated at the time of each such transfer, exceeds fifty million dollars ($50,000,000), the restrictions provided for in the first proviso of this Section 7.1(a) shall no longer be in effect.  Moreover, you and your Permitted Transferees, if any, shall have no rights under this Section 7.1 with respect to any transfer by the Sponsor of any shares of Common Stock beneficially owned by it to any limited partner of the Sponsor.

(b)           In the event of a proposed Tag-Along Sale:

(i)            the Sponsor shall provide you written notice of the terms and conditions of such proposed Tag-Along Sale, as described in Section 7.1(c) (“Tag-Along Notice”), at least 10 Business Days prior to the consummation of such proposed Tag-Along Sale and offer you and your Permitted Transferees the opportunity to participate in such Tag-Along Sale on the terms and conditions set forth in this Section 7.1; and

(ii)           subject to Section 7.1(c), you and your Permitted Transferees shall be entitled to sell up to a Pro Rata Portion (as defined below) of your Award Shares (the “Tag Shares”) at the same price and on the same terms as the shares of Common Stock proposed to be sold by the Sponsor in such Tag-Along Sale in accordance with the terms set forth in this Section 7.1.

The “Pro-Rata Portion” of your Tag Shares shall mean an amount of such Tag Shares equal to the product of:

(A)(x) a fraction, the numerator of which is the number of shares of Common Stock proposed to be transferred by the Sponsor and its Affiliates in such Tag-Along Sale and the denominator of which is the total number of shares of Common Stock beneficially owned by the Sponsor and its Affiliates collectively, immediately prior to transferring such shares of Common Stock; or, (y) for the first transfer after the restrictions set forth in the first proviso of Section 7.1(a) are no longer in effect, a fraction, the numerator of which is the number of shares of Common Stock proposed to be transferred by the Sponsor and its Affiliates in such Tag-Along Sale plus the cumulative number of shares of Common Stock transferred by the Sponsor and its Affiliates in all Small Transfers, and the denominator of which is the total number of shares of Common Stock beneficially owned by the Sponsor and its Affiliates collectively, immediately prior to transferring such shares of Common Stock plus the cumulative number of shares of Common Stock transferred by the Sponsor and its Affiliates in all Small Transfers; and

(B)the total amount of Tag Shares beneficially owned by such Executive at the time of the Tag-Along Sale.

(c)           The Tag-Along Notice shall identify the proposed transferee, the number of shares of Common Stock to be sold by the Sponsor in the Tag-Along Sale, the Pro Rata Portion of your Tag Shares which you shall be entitled to transfer in such Tag-Along Sale, the price at which the transfer of shares of Common Stock is proposed to be made, and all other material terms and conditions of the proposed Tag-Along Sale.  From the date of

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the Tag-Along Notice, you and your Permitted Transferees shall have the right (a “Tag-Along Right”), exercisable by written notice (“Tag-Along Response Notice”) given by you to the Sponsor within seven Business Days from the date of the Tag-Along Notice (the “Tag-Along Response Notice Period”), to request that the Sponsor includes in the proposed transfer the number of Tag Shares held by you and your Permitted Transferees (up to their Pro Rata Portion) as is specified in such Tag-Along Response Notice at the same price and on the same terms and conditions set forth in the Tag Along Notice; provided, however, that if the aggregate number of shares of Common Stock proposed to be sold by (i) the Sponsor, (ii) you and your Permitted Transferees, (iii) Other Award Share Grantees and their permitted transferees giving tag-along notices similar to the Tag-Along Notice during such period prescribed in Other Award Share Grantees’ Agreements and (iv) any other persons entitled to give (and giving on a timely basis) tag-along notices similar to the Tag-Along Notice pursuant to agreements substantially similar to this Agreement, including those certain Option Transfer Agreements, those certain Amended and Restated Management Subscription Agreements, and those certain Retained Share Agreements, each between the Company, the Sponsor and you or Other Key People, as amended, (the persons identified in subclauses (i), (ii), (iii) and (iv) of this subsection, collectively, the “Participants”), in such Tag-Along Sale exceeds the number of shares of Common Stock which can be sold on the terms and conditions set forth in the Tag-Along Notice, then only the Tag-Along Portion of shares of Common Stock beneficially owned by you shall be sold pursuant to the Tag-Along Sale.  “Tag-Along Portion” means, with respect to you and your Permitted Transferees, the number of shares of Common Stock beneficially owned by you and your Permitted Transferees on the date of the Tag-Along Notice multiplied by a fraction, the numerator of which is the maximum number of shares of Common Stock which can be sold in the Tag-Along Sale and the denominator of which is the aggregate number of shares of Common Stock beneficially owned by the Participants, collectively.

(d)           Delivery of a Tag-Along Response Notice by you to the Sponsor pursuant to Section 7.1(c) shall constitute an irrevocable election by you and your Permitted Transferees, if any, to sell the number of Tag Shares beneficially owned by it or them as is specified in such Tag-Along Response Notice in such Tag-Along Sale.  If, at the end of a 90-day period after such delivery, the Tag-Along Sale has not been consummated on substantially the same terms and conditions set forth in the Tag-Along Notice, all restrictions on transfers of Tag Shares contained in this Agreement or otherwise applicable at such time with respect to Tag Shares owned by you and your Permitted Transferees shall again be in effect.

(e)           If at the termination of the Tag-Along Response Notice Period you and your Permitted Transferees, if any, shall not have exercised its or their Tag-Along Right by providing the Sponsor with a Tag-Along Response Notice, such Executive and such Executive’s Permitted Transferees shall be deemed to have waived its or their Tag-Along Right with respect to transferring its or their Tag Shares pursuant to such Tag-Along Sale.

(f)            The Sponsor may sell, on behalf of you and your Permitted Transferees, if you and your Permitted Transferees, if any, exercise your or their Tag-Along Right pursuant to this Section 7.1, the shares of Common Stock entitled to be transferred in the Tag-Along Sale on the terms and conditions set forth in the Tag-Along Notice within 90 days of the date on which Tag-Along Rights shall have been waived or exercised.

7.2.          Limitation of Rights Following Termination of Employment.  Notwithstanding any other provision of this Agreement, upon the termination of your employment with the Company or any of its subsidiaries for Cause, or if you terminate your employment with the Company or any of its subsidiaries without Good Reason (as such term is defined in your employment agreement with the Company, if any), you and your Permitted Transferees shall have no rights under Section 7.1.  In the case of any other termination of your employment you and your Permitted Transferees shall continue to have the rights specified in Section 7.1.

7.3.          Termination of Tag-Along Rights.  Notwithstanding anything to the contrary, the provisions of Section 7.1 shall not be applicable if the Common Stock is publicly traded on an Exchange and there exists a Minimum Public Float.

7.4.          Drag-Along Rights.  (a)  If the Sponsor and its Affiliates propose to transfer all or any portion of the shares of Common Stock beneficially owned by them to a Third Party (a “Drag-Along Sale”), you and your Permitted Transferees shall, at the Sponsor’s option and in the Sponsor’s sole discretion, upon your receipt

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of written notice from the Sponsor, sell the Drag-Along Portion of your Award Shares to such Third Party for the same consideration and otherwise on the same terms and conditions on which the Sponsor and its Affiliates sell their shares of Common Stock in such Drag-Along Sale (the “Drag-Along Rights”).

The “Drag-Along Portion” of your Award Shares means, at any time, the number of Award Shares beneficially owned by you and your Permitted Transferees, multiplied by a fraction, the numerator of which is the number of shares of Common Stock proposed to be sold on behalf of the Sponsor in such Drag-Along Sale and the denominator of which is the total number of shares of Common Stock then beneficially owned by the Sponsor.

(b)           The Sponsor shall provide written notice of such Drag-Along Sale to you (a “Drag-Along Notice”) not less than 20 days prior to the consummation of such proposed Drag-Along Sale which notice shall state that the Sponsor proposes to effect a transfer of a certain number of shares of Common Stock, the number of shares of Common Stock proposed to be transferred, the purchase price, the proposed transferee, the number of Award Shares which you are required to transfer in such Drag-Along Sale (based on the methodology set forth in Section 7.4(a)), and all other material terms and conditions of the Drag-Along Sale.  Subject to Section 7.4(c), you shall be required to participate in the Drag-Along Sale on the terms and conditions set forth in the Drag-Along Notice.  Not later than the tenth day following the date of the Drag-Along Notice (the “Drag-Along Notice Period”), you shall deliver to a representative of the Sponsor designated in the Drag-Along Notice certificates representing all the Award Shares beneficially owned and held by you, duly endorsed, together with all other documents required to be executed in connection with such Drag-Along Sale, or, if such delivery is not permitted by applicable law, an unconditional agreement to deliver such Award Shares pursuant to this Section 7.4 at the closing for such Drag-Along Sale against delivery to you of the consideration therefor.  If you should fail to deliver such certificates to the Sponsor in a Drag-Along Sale pursuant to this Section 7.4, the Company shall cause the books and records of the Company to show that such shares of Common Stock are bound by the provisions of this Section 7.4 and that such shares of Common Stock shall be transferred to the purchaser of the shares of the Common Stock immediately upon surrender for transfer by the holder thereof.

(c)           The Sponsor shall have a period of 90 days from the date of the Drag-Along Notice to consummate the Drag-Along Sale on the terms and conditions set forth in such Drag-Along Sale Notice.  If the Drag-Along Sale shall not have been consummated during such period, the Sponsor shall return to you all certificates representing Award Shares that you delivered for transfer pursuant hereto, together with any documents in the possession of the Sponsor executed by you in connection with such proposed transfer, and the Drag-Along Notice shall be deemed to be cancelled and this Agreement will remain in full force and effect in accordance with its terms.

7.5.          Other Responsibilities.  The delivery of any notices to, and the obtaining of any consents from, any Permitted Transferee with respect to any provision of this Agreement, including, but not limited to, Sections 7.1 and 7.4, shall be your sole responsibility, unless otherwise agreed to in writing between such Permitted Transferee and the Sponsor.  Neither the Company nor the Sponsor shall be liable to any Permitted Transferee for your failure to deliver a notice to, or obtain a consent from, any Permitted Transferee with respect to any provision of this Agreement, including, but not limited to, Sections 7.1 and 7.4.

7.6.          Sales to Principal Beneficial Owners.  The Sponsor and its Affiliates shall not transfer all or any portion of the shares of Common Stock beneficially owned by them to a Principal Beneficial Owner, other than an Affiliate of the Sponsor, unless such Principal Beneficial Owner agrees to be bound by this Section 7 as if it were the Sponsor.  To the extent that the Sponsor and its Affiliates transfer any shares of Common Stock to a Principal Beneficial Owner other than an Affiliate of the Sponsor, you and your Permitted Transferees agree that such Principal Beneficial Owner shall receive the benefits set forth in Sections 7.4 and 7.5 hereof as if such Principal Beneficial Owner were the Sponsor.

8.Tax Withholding and Tax Election.

8.1 Tax Withholding. The Company shall have the right to deduct from any compensation or any other payment of any kind (including upon approval of the Board of Directors of the Company, withholding the

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delivery of shares of Commons Stock) due you the amount of any federal, state, local or foreign taxes required by law to be withheld which arise in connection with the Award Shares; provided, however, that the value of the shares of Common Stock withheld may not exceed the statutory minimum withholding amount required by law. In lieu of such deduction, the Company may require you to make a cash payment to the Company equal to the amount required to be withheld. If you do not make such payment when requested, the Company may refuse to issue any Common Stock certificate under this Agreement until arrangements satisfactory to the Administrator for such payment have been made.

8.2           Tax Election.  You hereby acknowledge that you have been advised by the Company to seek independent tax advice from your own advisors regarding the availability and advisability of making an election under Section 83(b) of the Code, and that any such election, if made, must be made within 30 days of the Grant Date.  The Company shall be responsible for the reasonable cost of obtaining a valuation of the fair market value of the Award Shares as of the date of transfer.  You expressly acknowledge that you are solely responsible for filing any such Section 83(b) election with the appropriate governmental authorities, irrespective of the fact that such election is also delivered to the Company.  You may not rely on the Company or any of its officers, directors or employees for tax or legal advice regarding this award.  You acknowledge that you have sought tax and legal advice from your own advisors regarding this award or have voluntarily and knowingly foregone such consultation.  You must pay over to the Company by check the amount of any and all applicable withholding taxes at the time that you make a Section 83(b) election.

9.Adjustments for Corporate Transactions and Other Events.

9.1           Stock Dividend, Stock Split and Reverse Stock Split.  Upon a stock dividend of, or stock split, reverse stock split, or similar event affecting, the Common Stock, the number of Award Shares and the number of such Award Shares that are nonvested and forfeitable shall, without further action of the Administrator, be adjusted to reflect such event.  The Administrator may make adjustments, in its discretion, to address the treatment of fractional shares with respect to the Award Shares as a result of the stock dividend, stock split, reverse stock split, or similar event.  Adjustments under this Section 9 will be made by the Administrator, whose determination as to what adjustments, if any, will be made and the extent thereof will be final, binding and conclusive.  No fractional Award Shares will result from any such adjustments.

9.2           Binding Nature of Agreement.  The terms and conditions of this Agreement shall apply with equal force to any additional and/or substitute securities received by you in exchange for, or by virtue of your ownership of, the Award Shares, whether as a result of any spin-off, stock split-up, stock dividend, stock distribution, other reclassification of the Common Stock of the Company, or similar event, except as otherwise determined by the Administrator.  If the Award Shares are converted into or exchanged for, or stockholders of the Company receive by reason of any distribution in total or partial liquidation or pursuant to any merger of the Company or acquisition of its assets, securities of another entity, or other property (including cash), then the rights of the Company under this Agreement shall inure to the benefit of the Company’s successor, and this Agreement shall apply to the securities or other property received upon such conversion, exchange or distribution in the same manner and to the same extent as the Award Shares.

10.Non-Guarantee of Employment or Service Relationship.  Nothing in the Plan or this Agreement shall alter your at-will or other employment status or other service relationship with the Company, nor be construed as a contract of employment or service relationship between the Company and you, or as a contractual right of you to continue in the employ of, or in a service relationship with, the Company for any period of time, or as a limitation of the right of the Company to discharge you at any time with or without cause or notice and whether or not such discharge results in the forfeiture of any Award Shares or any other adverse effect on your interests under the Plan.

11.Rights as Stockholder.  Except as otherwise provided in this Agreement with respect to the nonvested and forfeitable Award Shares, you are entitled to all rights of a stockholder of the Company, including the right to vote the Award Shares and receive dividends and/or other distributions declared on the Award Shares.

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12.The Company’s Rights and Obligations.   Except as provided under Section 7.6 of this Agreement, the existence of the Award Shares shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company’s capital structure or its business, or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or other stocks with preference ahead of or convertible into, or otherwise affecting the Common Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of the Company’s assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.

13.Notices.  All notices and other communications made or given pursuant to this Agreement shall be in writing and shall be sufficiently made or given if hand delivered or mailed by certified mail, addressed to you at the address contained in the records of the Company, or addressed to the Administrator, care of the Company for the attention of its Corporate Secretary at its principal executive office or, if the receiving party consents in advance, transmitted and received via telecopy or via such other electronic transmission mechanism as may be available to the parties.

14.Entire Agreement.  This Agreement contains the entire agreement between the parties with respect to the Award Shares granted hereunder.  Any oral or written agreements, representations, warranties, written inducements, or other communications made prior to the execution of this Agreement with respect to the Award Shares granted hereunder shall be void and ineffective for all purposes.

15.Amendment.  This Agreement may be amended from time to time only be a written instrument duly executed by the Company, the Sponsor, and you.

16.Conformity with Plan.  This Agreement is intended to conform in all respects with, and is subject to all applicable provisions of, the Plan.  Inconsistencies between this Agreement and the Plan shall be resolved in accordance with the terms of the Plan.  In the event of any ambiguity in this Agreement or any matters as to which this Agreement is silent, the Plan shall govern.  A copy of the Plan is available upon request.  Please contact the Company by email at dselby@vertisinc.com or at 250 W. Pratt Street, 18^th Floor, Baltimore, Maryland 21201, Attention: Dolores D. Selby, (telephone: 410-361-8394), to receive a copy of the Plan.

17.Governing Law. The validity, construction and effect of this Agreement, and of any determinations or decisions made by the Administrator relating to this Agreement, and the rights of any and all persons having or claiming to have any interest under this Agreement, shall be determined exclusively in accordance with the laws of the State of Delaware, without regard to its provisions concerning the applicability of laws of other jurisdictions.  Any suit with respect hereto will be brought in the federal or state courts in the districts which include New York, New York, and you hereby agree and submit to the personal jurisdiction and venue thereof.

18.Headings.  The headings in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

19.Notices.  All notices and other communications provided for herein shall be dated and in writing and shall be deemed to have been duly given when delivered, if delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid and when received if delivered otherwise, to the party to whom it is directed:

(a)       If to the Company, to it at the following address:

250 W. Pratt Street, 18^th Floor

Baltimore, Maryland 21201

Attention:  General Counsel

Fax No.:  (410) 528-9287

with a copy to the Sponsor, at the address set forth below:

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(b)       If to you, at the address set forth in the Company’s records;

(c)       If to the Sponsor, to it at the following address:

Thomas H. Lee Equity Fund IV, L.P.

c/o Thomas H. Lee Company

75 State Street, Suite 2600

Boston, MA 02109

Attention: Anthony J. DiNovi

Fax No.: (617) 227-3514

or at such other address as the parties hereto shall have specified by notice in writing to the other parties (provided, that such notice of change of address shall be deemed to have been duly given only when actually received).

20.Limitation of Liability.  None of the Affiliates of the Sponsor shall have any liability to you or any of your Permitted Transferees or the Company or any of its subsidiaries under any provision of this Agreement.  In the event of an alleged breach of this Agreement by the Sponsor, the parties hereto acknowledge and agree that the sole remedy which may be sought against the Sponsor shall be specific performance, provided, however, that if the remedy of specific performance is not available, you, your Permitted Transferees, if any, and the Company will only seek to recover direct damages for any breach of this Agreement.  You, your Permitted Transferees, if any, and the Company agree to waive any other remedy against the Sponsor to which they might be entitled at law, including, but not limited to, compensatory damages, consequential damages, continuing damages, future damages, incidental damages, punitive damages and nominal damages.  The Company shall indemnify, defend, save and hold harmless Sponsor from and against any and all liabilities arising under, pursuant to or in connection with this Agreement.

21.Severability.  The invalidity, illegality or unenforceability of one or more of the provisions of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of this Agreement, including any such provision, in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.

22.Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart.

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GLOSSARY

(a)   “Administrator” means the Committee as determined under Section 2.7 of the Plan.

(b)   “Affiliate” has the meaning given to such term in the Plan.

(c)   “Business Day” means any day other than a Saturday, Sunday, or other day during which the Company’s principal executive office is not open for business.

(d)   “Cause” generally means your insubordination, dishonesty, incompetence, moral turpitude, other misconduct of any kind or the refusal to perform your duties or responsibilities for any reason other than illness or incapacity, in each case as determined by the Board in good faith.  However, if you have an employment agreement, consulting agreement, change of control agreement or similar agreement in effect with the Company at the time in question that defines “cause” (or words of like import), then “cause” has the meaning ascribed to it under such agreement, as such agreement shall provide at the time in question; provided that with respect to any agreement that conditions “cause” on the occurrence of a change of control, such definition of “cause” shall not apply until a change of control actually takes place and then only with regard to a termination thereafter.

(e)   “Common Stock” means the common stock, $.01 par value, of Vertis Holdings, Inc..

(f)    “Company” means Vertis Holdings, Inc. and its Affiliates, except where the context otherwise requires.  For purposes of determining whether a Liquidity Event has occurred, Company shall mean only Vertis Holdings, Inc.

(g)   “Disability” means your inability to perform substantially your duties and responsibilities to the Company by reason of a physical or mental disability or infirmity for a continuous period of three months.  The date of such disability shall be the earlier of (1) the last day of such three-month period or (2) the day on which you submit, or cause to be submitted, to the Board any medical evidence of such disability reasonably satisfactory to the Board.

(h)   “Exchange” means the principal stock exchange, including The Nasdaq Stock Market, on which the Common Stock is listed or approved for listing, if any.

(i)    “Liquidity Event” means (1) a public offering of the Common Stock registered pursuant to the Securities Act where there is a Minimum Public Float immediately following such offering, (2) a merger or other business combination or recapitalization whereby the Common Stock is exchanged for cash and/or publicly traded equity or debt securities in another entity or a combination of cash and other non-publicly traded equity or debt securities where cash constitutes at least a majority of the consideration to be received in such merger, business combination or recapitalization or (3) a sale or other disposition of all or substantially all of the Company’s assets to another entity, for cash and/or publicly traded equity or debt securities of another entity or a combination of cash and other non-publicly traded equity or debt securities where cash constitutes at least a majority of the proceeds of such sale or disposition, in each case, other than to the Company, any subsidiary of the Company, or any entity controlled by the ultimate control persons of the Company.

(j)    “Minimum Public Float” means the circumstances existing when (i) the consummation of one or more public offerings registered pursuant to the Securities Act of shares of Common Stock if, upon such consummation, the aggregate number of shares of Common Stock held by the public, not including Affiliates of the Company, represents at least 20% of the total number of outstanding shares of Common Stock at the time of such public offering and (ii) the Common Stock is listed on an Exchange.

(k)   “Other Award Share Grantees” means other persons receiving Award Shares pursuant to a restricted stock agreement having terms substantially identical to those contained in this Agreement.

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(l)    “Other Key People” means the officers, members of management, key employees of the Company and its Affiliates.

(m)  “Principal Beneficial Owner” means any of the Sponsor, CLI/THLEF IV Vertis LLC, Evercore Capital Partners L.P., CLI Associates LLC, J.P. Morgan Partners (BHCA), L.P., Wachovia Capital Partners, LLC (formerly First Union Capital Partners, LLC), and Cadogan Capital, LLC and their respective Affiliates and successors.

(n)   “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

(o)   “Service” means your employment or other service relationship with the Company and its Affiliates.  Service will be considered to have ceased with the Company if, after a sale, merger or other corporate transaction, the trade, business or entity with which you are employed is no longer an Affiliate of Vertis Holdings, Inc.

(p)   “Third Party” means any person or entity excluding each of the following:  (a) the Company and its employees, officers, directors and (b) the Principal Beneficial Owners.

(q)   “You”; “Your”.  You means the recipient of the Award Shares as reflected in the first paragraph of this Agreement.  Whenever the word “you” or “your” is used in any provision of this Agreement under circumstances where the provision should logically be construed, as determined by the Administrator, to apply to the estate, personal representative, or beneficiary to whom the Award Shares may be transferred by will or by the laws of descent and distribution, the words “you” and “your” shall be deemed to include such person.

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IN WITNESS WHEREOF, the Company and the Sponsor have caused this Agreement to be executed by their duly authorized officers.

VERTIS HOLDINGS, INC.
By:	/s/ John V. Howard, Jr.
Date:		01/07/2008
THOMAS H. LEE EQUITY FUND IV, L.P.
By:	/s/ Anthony DiNovi
Date:		01/07/2008

                The undersigned hereby acknowledges that he/she has carefully read this Agreement and agrees to be bound by all of the provisions set forth herein.

WITNESS:	GRANTEE:    Michael T. DuBose
[Witness]	/s/ Michael T. Dubose
	Date:	01/07/2008

Enclosure:  Vertis Holdings, Inc. 1999 Equity Award Plan

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STOCK POWER

                FOR VALUE RECEIVED, the undersigned, Michael T. DuBose, hereby sells, assigns and transfers unto Vertis Holdings, Inc., a Delaware corporation (the “Company”), or its successor, 600,000 shares of common stock, par value $0.01 per share, of the Company standing in my name on the books of the Company, represented by Certificate No._________________, which is attached hereto, and hereby irrevocably constitutes and appoints _____________________________________________ as my attorney-in-fact to transfer the said stock on the books of the Company with full power of substitution in the premises.

WITNESS:

Dated:

IMPORTANT TAX INFORMATION

INSTRUCTIONS REGARDING SECTION 83(b) ELECTIONS

1.An 83(b) Election is irrevocable.

2.If you want to make an 83(b) Election, an 83(b) Election Form must be filed with the Internal Revenue Service within 30 days of the date the Restricted Stock is granted to you; no exceptions to this rule are made.

3.You must provide a copy of the 83(b) Election Form to the Corporate Secretary or other designated officer of the Company.  This copy should be provided to the Company at the same time that you file your 83(b) Election Form with the Internal Revenue Service. In addition, you must pay over to the Company the amount of the withholding taxes by check at the time or your 83(b) Election.

4.In addition to making the filing under Item 2 above, you must attach a copy of your 83(b) Election Form to your tax return for the taxable year in which you received the Restricted Stock.

5.If you make an 83(b) Election and later forfeit the Restricted Stock, you will not be entitled to a refund of any tax you paid as a result of having made the 83(b) Election.  You may, however, recognize a capital loss upon forfeiture.

6.You must consult your personal tax advisor before making an 83(b) Election.  The attached election forms are intended as samples only, they must be tailored to your circumstances and may not be relied upon without consultation with a personal tax advisor.

SECTION 83(b) ELECTION FORM

Election Pursuant to Section 83(b) of the Internal Revenue Code

to Include Property in Gross Income in Year of Transfer

The undersigned hereby makes an election pursuant to Section 83(b) of the Internal Revenue Code with respect to the property described below and supplies the following information in accordance with the regulations promulgated thereunder:

1.             The name, address, and taxpayer identification number of the undersigned are:

- -

2.             The property with respect to which the election is made is ____________________ shares of Common Stock, par value $.01 per share, of Vertis Holdings, Inc., a Delaware corporation (the “Company”).

3.             The date on which the property was transferred was _______________________, the date on which the taxpayer received the property pursuant to a grant of restricted stock.

4.             The taxable year to which this election relates is calendar year 2007.

5.             The property is subject to restrictions in that the property is not transferable and is subject to a substantial risk of forfeiture until the taxpayer vests in the property.  The taxpayer will vest in _____ shares of Common Stock (the “Shares”) immediately prior to the first to occur of (i) a “liquidity event,” (ii) the taxpayer’s death, or (iii) the taxpayer suffering a “disability” (as each is defined in the restricted stock agreement evidencing the Shares), provided the taxpayer is in the employ of the Company when the event triggering vesting occurs.

6.             The fair market value at the time of transfer (determined without regard to any restrictions other than restrictions which by their terms will never lapse) of the property with respect to which this election is being made is $________ per share; with a cumulative fair market value of $______________.  The taxpayer did not pay any amount for the property transferred.

7.             A copy of this statement was furnished to the Company, for whom taxpayer rendered the services underlying the transfer of such property.

8.             This election is made to the same effect, and with the same limitations, for purposes of any applicable state statute corresponding to Section 83(b) of the Internal Revenue Code.

The undersigned understands that the foregoing election may not be revoked except with the consent of the Commissioner of Internal Revenue.

Signed:

Date:

Letter for filing §83(b) Election Form

[Date]

CERTIFIED MAIL

RETURN RECEIPT REQUESTED

Internal Revenue Service Center

(the Service Center to which individual income tax return is filed)

Re:	83(b) Election of
	Social Security Number:

Dear Sir/Madam:

Enclosed is an election under section 83(b) of the Internal Revenue Code of 1986 with respect to certain shares of stock of Vertis Holdings, Inc. that were transferred to me on ___________________, 20__.

Please file this election.

Sincerely,

cc: Secretary of Vertis Holdings, Inc.

EX-10.39

Exhibit 10.39

RESTRICTED STOCK AGREEMENT

VERTIS HOLDINGS, INC.
1999 EQUITY AWARD PLAN

GRANTEE: BARRY C. KOHN

NO. OF SHARES:  250,000

This Agreement (the “Agreement”), approved by Thomas H. Lee Equity Fund IV, L.P. (the “Sponsor”), evidences the award of 250,000 restricted shares (each, an “Award Share,” and collectively, the “Award Shares”) of the Common Stock of Vertis Holdings, Inc., a Delaware corporation (the “Company”), granted to you, Barry C. Kohn, effective as of   February 5, 2008 (the “Grant Date”), pursuant to the Vertis Holdings, Inc. 1999 Equity Award Plan (the “Plan”) and conditioned upon your agreement to the terms described below.  All of the provisions of the Plan are expressly incorporated into this Agreement.

1.Terminology.  The Glossary at the end of this Agreement contains definitions of all words that appear in this Agreement with an initial capital letter that are not defined elsewhere in this Agreement.

2.Vesting.  All of the Award Shares are nonvested and forfeitable as of the Grant Date.  So long as your Service with the Company is continuous from the Grant Date through the applicable date upon which vesting occurs, the Award Shares will vest and become nonforfeitable immediately prior to the first to occur of the following:

(a)a Liquidity Event;

(b)your death; or

(c)the date upon which you suffer a Disability.

Except as provided above, unless otherwise determined by the Administrator, none of the Award Shares will become vested and nonforfeitable after your Service with the Company ceases.

3.Termination of Employment or Service.

3.1Unvested Award Shares.  If your Service with the Company ceases for any reason other than your death or Disability, all Award Shares that are not then vested and nonforfeitable will be immediately forfeited to the Company upon such cessation for no consideration.

3.2Vested Award Shares.  If your Service with the Company ceases for any reason, all Award Shares that are then vested and nonforfeitable will not be affected by such cessation but will remain subject to the provisions of this Agreement, including the restrictions on transfer set forth under Section 4 of this Agreement.

4.Restrictions on Transfer.

4.1Except as otherwise provided under Sections 4.3 or 7 of this Agreement or in accordance with your will or the laws of descent and distribution upon your death, until an Award Share becomes vested and nonforfeitable and a Liquidity Event has occurred, the Award Share may not be assigned, transferred, pledged,

hypothecated or disposed of in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process.

4.2You hereby represent and warrant to the Company as follows:

(a)You will hold the Award Shares for your own account for investment only and not with a view to, or for resale in connection with, any “distribution” of the Award Shares within the meaning of the Securities Act.

(b)You understand that the Award Shares have not been registered under the Securities Act by reason of a specific exemption and that the Award Shares must be held indefinitely, unless they are subsequently registered under the Securities Act or you obtain an opinion of counsel, in form and substance satisfactory to the Company and its counsel, that such registration is not required.  You further acknowledge and understand that the Company is under no obligation to register the Award Shares.

(c)You understand that the Company may, in its discretion, impose restrictions on the sale, pledge or other transfer of the Award Shares (including the placement of appropriate legends on stock certificates) if, in the judgment of the Company, such restrictions are necessary or desirable to comply with the Securities Act, the securities laws of any State or any other law.

(d)You are aware that your investment in the Company is a speculative investment that has limited liquidity and is subject to the risk of complete loss.

4.3The provisions of Sections 4.1 and 4.2(b) shall not apply to the following transfers; provided, however, that no transfer of Award Shares pursuant to this Section 4.3 (other than a transfer to the Company) shall be given effect on the books of the Company unless and until the Permitted Transferee (as defined below) executes an agreement in writing with the parties hereto pursuant to which he, she, or it agrees to be bound by all of the terms and conditions of this Agreement to the same extent as the parties hereto; provided, further, that no transfer will be permitted if the Company determines that, in its sole discretion, such transfer is, or is reasonably likely to be, in violation of applicable federal or state securities laws:

(a)a transfer of vested Award Shares made to an Affiliate of the Company or an Affiliate of any subsidiary of the Company;

(b)a transfer of vested Award Shares upon your death to your executors, administrators, testamentary trustees, legatees or beneficiaries;

(c)a transfer of vested Award Shares to a trust, the beneficiaries of which include only you and your spouse, siblings, or direct lineal ancestors or descendants;

(d)a transfer of vested Award Shares made as a gift to your spouse or lineal descendants; or

(e)a transfer of vested Award Shares made pursuant to a court order in connection with a divorce proceeding.

The transferee in each of the subclauses (a) through (e) above is referred to herein as a “Permitted Transferee.”  Notwithstanding anything to the contrary in this Agreement, no transfer made to the Company, any subsidiary of the Company, or the Sponsor shall be subject to any restriction on transfer contained herein, so long as any such transfer is made in accordance with all applicable federal and state securities laws and does not violate any contractual agreement in effect at the time of such transfer.

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4.4The Company shall not be required to (a) transfer on its books any Award Shares that have been sold or transferred in contravention of this Agreement or (b) treat as the owner of Award Shares, or otherwise accord voting, dividend or liquidation rights to, any transferee to whom Award Shares have been transferred in contravention of this Agreement.

5.Stock Certificates.  You will be reflected as the owner of record of the Award Shares as of the Grant Date on the Company’s books.  The Company will hold the share certificates for safekeeping, or otherwise retain the Award Shares in uncertificated book entry form, until the Award Shares become vested and nonforfeitable and until they may be transferred freely without restriction under this Agreement.  Until the Award Shares become vested and nonforfeitable, any share certificates representing such shares will include a legend in substantially the following form, in addition to any other legends that may be required under federal or state securities laws.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE APPLICABLE SECURITIES ACT OF ANY STATE BUT HAVE BEEN ISSUED IN RELIANCE UPON EXEMPTIONS FROM REGISTRATION CONTAINED IN SAID ACTS.  NO SALE, OFFER TO SELL OR OTHER TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE MAY BE MADE UNLESS A REGISTRATION STATEMENT UNDER SAID ACTS IS IN EFFECT WITH RESPECT TO THE SECURITIES, OR AN EXEMPTION FROM THE REGISTRATION PROVISIONS OF SUCH ACTS IS THEN APPLICABLE.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND THE OTHER TERMS AND CONDITIONS SET FORTH IN A CERTAIN RESTRICTED STOCK AGREEMENT DATED FEBRUARY 5, 2008 AS AMENDED FROM TIME TO TIME, BETWEEN THE COMPANY AND THE REGISTERED OWNER OF THIS CERTIFICATE (OR HIS PREDECESSOR IN INTEREST), AND SUCH AGREEMENT IS AVAILABLE FOR INSPECTION WITHOUT CHARGE AT THE OFFICE OF THE SECRETARY OF THE COMPANY.

All regular cash dividends and other distributions on the Award Shares held by the Company will be paid directly to you, but any stock dividends will be treated in the manner set forth in Section 9 of this Agreement.

6.Market Stand-Off Agreement.  You agree that following the effective date of a registration statement of the Company filed under the Securities Act, to the extent requested by the Company and an underwriter of Common Stock or other securities of the Company, you will not offer, sell, contract to sell, pledge or otherwise dispose of, directly or indirectly, any equity securities of the Company, or any securities convertible into or exchangeable or exercisable for such securities, enter into a transaction which would have the same effect, or enter into any swap, hedge or other arrangement that transfers, in whole or in part, any of the economic consequences of ownership of such securities, whether any such transaction is to be settled by delivery of such securities or other securities, in cash or otherwise, or publicly disclose the intention to make any such offer, sale, pledge or disposition, or to enter into any such transaction, swap, hedge or other arrangement, in each case during the seven days prior to and the one hundred and eighty (180) days after the effectiveness of any underwritten offering of the Company’s equity securities (or such longer or shorter period as may be requested in writing by the managing underwriter and agreed to in writing by the Company) (the “Market Stand-Off Period”), except as part of such underwritten registration if otherwise permitted.  In addition, you agree to execute any further letters, agreements and/or other documents requested by the Company or its underwriters which are consistent with the terms of this Section 6.  The Company may impose stop-transfer instructions with respect to securities subject to the foregoing restrictions until the end of such Market Stand-Off Period.

7.Tag-Along and Drag-Along Rights.

7.1.Tag-Along Rights.  (a)  If the Sponsor proposes to transfer all or a portion of the shares of Common Stock beneficially owned by it to a Third Party which would not be an Affiliate of the Sponsor immediately upon consummation of such transfer, and the Sponsor does not exercise its Drag-Along Rights in

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accordance with Section 7.4 (a “Tag-Along Sale”), the Sponsor shall cause you and your Permitted Transferees to have the option to exercise your rights under this Section 7.1, provided, however, that you and your Permitted Transferees, if any, shall have no rights under this Section 7.1 if the shares of Common Stock to be transferred in such transaction and any shares of Common Stock which have been transferred to any Third Party within a 90-day period preceding the date of such transfer have, in the aggregate, a Fair Market Value less than ten million dollars ($10,000,000) (a “Small Transfer”), and provided, further, that when the cumulative Fair Market Value of all such Small Transfers, the value to be calculated at the time of each such transfer, exceeds fifty million dollars ($50,000,000), the restrictions provided for in the first proviso of this Section 7.1(a) shall no longer be in effect.  Moreover, you and your Permitted Transferees, if any, shall have no rights under this Section 7.1 with respect to any transfer by the Sponsor of any shares of Common Stock beneficially owned by it to any limited partner of the Sponsor.

(b)In the event of a proposed Tag-Along Sale:

(i)the Sponsor shall provide you written notice of the terms and conditions of such proposed Tag-Along Sale, as described in Section 7.1(c) (“Tag-Along Notice”), at least 10 Business Days prior to the consummation of such proposed Tag-Along Sale and offer you and your Permitted Transferees the opportunity to participate in such Tag-Along Sale on the terms and conditions set forth in this Section 7.1; and

(ii)subject to Section 7.1(c), you and your Permitted Transferees shall be entitled to sell up to a Pro Rata Portion (as defined below) of your Award Shares (the “Tag Shares”) at the same price and on the same terms as the shares of Common Stock proposed to be sold by the Sponsor in such Tag-Along Sale in accordance with the terms set forth in this Section 7.1.

The “Pro-Rata Portion” of your Tag Shares shall mean an amount of such Tag Shares equal to the product of:

(A)(x) a fraction, the numerator of which is the number of shares of Common Stock proposed to be transferred by the Sponsor and its Affiliates in such Tag-Along Sale and the denominator of which is the total number of shares of Common Stock beneficially owned by the Sponsor and its Affiliates collectively, immediately prior to transferring such shares of Common Stock; or, (y) for the first transfer after the restrictions set forth in the first proviso of Section 7.1(a) are no longer in effect, a fraction, the numerator of which is the number of shares of Common Stock proposed to be transferred by the Sponsor and its Affiliates in such Tag-Along Sale plus the cumulative number of shares of Common Stock transferred by the Sponsor and its Affiliates in all Small Transfers, and the denominator of which is the total number of shares of Common Stock beneficially owned by the Sponsor and its Affiliates collectively, immediately prior to transferring such shares of Common Stock plus the cumulative number of shares of Common Stock transferred by the Sponsor and its Affiliates in all Small Transfers; and

(B)the total amount of Tag Shares beneficially owned by such Executive at the time of the Tag-Along Sale.

(c)The Tag-Along Notice shall identify the proposed transferee, the number of shares of Common Stock to be sold by the Sponsor in the Tag-Along Sale, the Pro Rata Portion of your Tag Shares which you shall be entitled to transfer in such Tag-Along Sale, the price at which the transfer of shares of Common Stock is proposed to be made, and all other material terms and conditions of the proposed Tag-Along Sale.  From the date of the Tag-Along Notice, you and your Permitted Transferees shall have the right (a “Tag-Along Right”), exercisable by written notice (“Tag-Along Response Notice”) given by you to the Sponsor within seven Business Days from the date of the Tag-Along Notice (the “Tag-Along Response Notice Period”), to request that the Sponsor includes in the proposed transfer the number of Tag Shares held by you and your Permitted Transferees (up to their Pro Rata Portion) as is specified in such Tag-Along Response Notice at the same price and on the same terms and conditions

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set forth in the Tag Along Notice; provided, however, that if the aggregate number of shares of Common Stock proposed to be sold by (i) the Sponsor, (ii) you and your Permitted Transferees, (iii) Other Award Share Grantees and their permitted transferees giving tag-along notices similar to the Tag-Along Notice during such period prescribed in Other Award Share Grantees’ Agreements and (iv) any other persons entitled to give (and giving on a timely basis) tag-along notices similar to the Tag-Along Notice pursuant to agreements substantially similar to this Agreement, including those certain Option Transfer Agreements, those certain Amended and Restated Management Subscription Agreements, and those certain Retained Share Agreements, each between the Company, the Sponsor and you or Other Key People, as amended, (the persons identified in subclauses (i), (ii), (iii) and (iv) of this subsection, collectively, the “Participants”), in such Tag-Along Sale exceeds the number of shares of Common Stock which can be sold on the terms and conditions set forth in the Tag-Along Notice, then only the Tag-Along Portion of shares of Common Stock beneficially owned by you shall be sold pursuant to the Tag-Along Sale.  “Tag-Along Portion” means, with respect to you and your Permitted Transferees, the number of shares of Common Stock beneficially owned by you and your Permitted Transferees on the date of the Tag-Along Notice multiplied by a fraction, the numerator of which is the maximum number of shares of Common Stock which can be sold in the Tag-Along Sale and the denominator of which is the aggregate number of shares of Common Stock beneficially owned by the Participants, collectively.

(d)Delivery of a Tag-Along Response Notice by you to the Sponsor pursuant to Section 7.1(c) shall constitute an irrevocable election by you and your Permitted Transferees, if any, to sell the number of Tag Shares beneficially owned by it or them as is specified in such Tag-Along Response Notice in such Tag-Along Sale.  If, at the end of a 90-day period after such delivery, the Tag-Along Sale has not been consummated on substantially the same terms and conditions set forth in the Tag-Along Notice, all restrictions on transfers of Tag Shares contained in this Agreement or otherwise applicable at such time with respect to Tag Shares owned by you and your Permitted Transferees shall again be in effect.

(e)If at the termination of the Tag-Along Response Notice Period you and your Permitted Transferees, if any, shall not have exercised its or their Tag-Along Right by providing the Sponsor with a Tag-Along Response Notice, such Executive and such Executive’s Permitted Transferees shall be deemed to have waived its or their Tag-Along Right with respect to transferring its or their Tag Shares pursuant to such Tag-Along Sale.

(f)The Sponsor may sell, on behalf of you and your Permitted Transferees, if you and your Permitted Transferees, if any, exercise your or their Tag-Along Right pursuant to this Section 7.1, the shares of Common Stock entitled to be transferred in the Tag-Along Sale on the terms and conditions set forth in the Tag-Along Notice within 90 days of the date on which Tag-Along Rights shall have been waived or exercised.

7.2.Limitation of Rights Following Termination of Employment.  Notwithstanding any other provision of this Agreement, upon the termination of your employment with the Company or any of its subsidiaries for Cause, or if you terminate your employment with the Company or any of its subsidiaries without Good Reason (as such term is defined in your employment agreement with the Company, if any), you and your Permitted Transferees shall have no rights under Section 7.1.  In the case of any other termination of your employment you and your Permitted Transferees shall continue to have the rights specified in Section 7.1.

7.3.Termination of Tag-Along Rights.  Notwithstanding anything to the contrary, the provisions of Section 7.1 shall not be applicable if the Common Stock is publicly traded on an Exchange and there exists a Minimum Public Float.

7.4.Drag-Along Rights.  (a)  If the Sponsor and its Affiliates propose to transfer all or any portion of the shares of Common Stock beneficially owned by them to a Third Party (a “Drag-Along Sale”), you and your Permitted Transferees shall, at the Sponsor’s option and in the Sponsor’s sole discretion, upon your receipt of written notice from the Sponsor, sell the Drag-Along Portion of your Award Shares to such Third Party for the same consideration and otherwise on the same terms and conditions on which the Sponsor and its Affiliates sell their shares of Common Stock in such Drag-Along Sale (the “Drag-Along Rights”).

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The “Drag-Along Portion” of your Award Shares means, at any time, the number of Award Shares beneficially owned by you and your Permitted Transferees, multiplied by a fraction, the numerator of which is the number of shares of Common Stock proposed to be sold on behalf of the Sponsor in such Drag-Along Sale and the denominator of which is the total number of shares of Common Stock then beneficially owned by the Sponsor.

(b)The Sponsor shall provide written notice of such Drag-Along Sale to you (a “Drag-Along Notice”) not less than 20 days prior to the consummation of such proposed Drag-Along Sale which notice shall state that the Sponsor proposes to effect a transfer of a certain number of shares of Common Stock, the number of shares of Common Stock proposed to be transferred, the purchase price, the proposed transferee, the number of Award Shares which you are required to transfer in such Drag-Along Sale (based on the methodology set forth in Section 7.4(a)), and all other material terms and conditions of the Drag-Along Sale.  Subject to Section 7.4(c), you shall be required to participate in the Drag-Along Sale on the terms and conditions set forth in the Drag-Along Notice.  Not later than the tenth day following the date of the Drag-Along Notice (the “Drag-Along Notice Period”), you shall deliver to a representative of the Sponsor designated in the Drag-Along Notice certificates representing all the Award Shares beneficially owned and held by you, duly endorsed, together with all other documents required to be executed in connection with such Drag-Along Sale, or, if such delivery is not permitted by applicable law, an unconditional agreement to deliver such Award Shares pursuant to this Section 7.4 at the closing for such Drag-Along Sale against delivery to you of the consideration therefor.  If you should fail to deliver such certificates to the Sponsor in a Drag-Along Sale pursuant to this Section 7.4, the Company shall cause the books and records of the Company to show that such shares of Common Stock are bound by the provisions of this Section 7.4 and that such shares of Common Stock shall be transferred to the purchaser of the shares of the Common Stock immediately upon surrender for transfer by the holder thereof.

(c)The Sponsor shall have a period of 90 days from the date of the Drag-Along Notice to consummate the Drag-Along Sale on the terms and conditions set forth in such Drag-Along Sale Notice.  If the Drag-Along Sale shall not have been consummated during such period, the Sponsor shall return to you all certificates representing Award Shares that you delivered for transfer pursuant hereto, together with any documents in the possession of the Sponsor executed by you in connection with such proposed transfer, and the Drag-Along Notice shall be deemed to be cancelled and this Agreement will remain in full force and effect in accordance with its terms.

7.5.Other Responsibilities.  The delivery of any notices to, and the obtaining of any consents from, any Permitted Transferee with respect to any provision of this Agreement, including, but not limited to, Sections 7.1 and 7.4, shall be your sole responsibility, unless otherwise agreed to in writing between such Permitted Transferee and the Sponsor.  Neither the Company nor the Sponsor shall be liable to any Permitted Transferee for your failure to deliver a notice to, or obtain a consent from, any Permitted Transferee with respect to any provision of this Agreement, including, but not limited to, Sections 7.1 and 7.4.

7.6.Sales to Principal Beneficial Owners.  The Sponsor and its Affiliates shall not transfer all or any portion of the shares of Common Stock beneficially owned by them to a Principal Beneficial Owner, other than an Affiliate of the Sponsor, unless such Principal Beneficial Owner agrees to be bound by this Section 7 as if it were the Sponsor.  To the extent that the Sponsor and its Affiliates transfer any shares of Common Stock to a Principal Beneficial Owner other than an Affiliate of the Sponsor, you and your Permitted Transferees agree that such Principal Beneficial Owner shall receive the benefits set forth in Sections 7.4 and 7.5 hereof as if such Principal Beneficial Owner were the Sponsor.

8.Tax Withholding and Tax Election.

8.1 Tax Withholding. The Company shall have the right to deduct from any compensation or any other payment of any kind (including upon approval of the Board of Directors of the Company, withholding the delivery of shares of Commons Stock) due you the amount of any federal, state, local or foreign taxes required by law to be withheld which arise in connection with the Award Shares; provided, however, that the value of the shares of Common Stock withheld may not exceed the statutory minimum withholding amount required by law. In lieu of such deduction, the Company may require you to make a cash payment to the Company equal to the amount

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required to be withheld. If you do not make such payment when requested, the Company may refuse to issue any Common Stock certificate under this Agreement until arrangements satisfactory to the Administrator for such payment have been made.

8.2Tax Election.  You hereby acknowledge that you have been advised by the Company to seek independent tax advice from your own advisors regarding the availability and advisability of making an election under Section 83(b) of the Code, and that any such election, if made, must be made within 30 days of the Grant Date.  The Company shall be responsible for the reasonable cost of obtaining a valuation of the fair market value of the Award Shares as of the date of transfer.  You expressly acknowledge that you are solely responsible for filing any such Section 83(b) election with the appropriate governmental authorities, irrespective of the fact that such election is also delivered to the Company.  You may not rely on the Company or any of its officers, directors or employees for tax or legal advice regarding this award.  You acknowledge that you have sought tax and legal advice from your own advisors regarding this award or have voluntarily and knowingly foregone such consultation.  You must pay over to the Company by check the amount of any and all applicable withholding taxes at the time that you make a Section 83(b) election.

9.Adjustments for Corporate Transactions and Other Events.

9.1Stock Dividend, Stock Split and Reverse Stock Split.  Upon a stock dividend of, or stock split, reverse stock split, or similar event affecting, the Common Stock, the number of Award Shares and the number of such Award Shares that are nonvested and forfeitable shall, without further action of the Administrator, be adjusted to reflect such event.  The Administrator may make adjustments, in its discretion, to address the treatment of fractional shares with respect to the Award Shares as a result of the stock dividend, stock split, reverse stock split, or similar event.  Adjustments under this Section 9 will be made by the Administrator, whose determination as to what adjustments, if any, will be made and the extent thereof will be final, binding and conclusive.  No fractional Award Shares will result from any such adjustments.

9.2Binding Nature of Agreement.  The terms and conditions of this Agreement shall apply with equal force to any additional and/or substitute securities received by you in exchange for, or by virtue of your ownership of, the Award Shares, whether as a result of any spin-off, stock split-up, stock dividend, stock distribution, other reclassification of the Common Stock of the Company, or similar event, except as otherwise determined by the Administrator.  If the Award Shares are converted into or exchanged for, or stockholders of the Company receive by reason of any distribution in total or partial liquidation or pursuant to any merger of the Company or acquisition of its assets, securities of another entity, or other property (including cash), then the rights of the Company under this Agreement shall inure to the benefit of the Company’s successor, and this Agreement shall apply to the securities or other property received upon such conversion, exchange or distribution in the same manner and to the same extent as the Award Shares.

10.Non-Guarantee of Employment or Service Relationship.  Nothing in the Plan or this Agreement shall alter your at-will or other employment status or other service relationship with the Company, nor be construed as a contract of employment or service relationship between the Company and you, or as a contractual right of you to continue in the employ of, or in a service relationship with, the Company for any period of time, or as a limitation of the right of the Company to discharge you at any time with or without cause or notice and whether or not such discharge results in the forfeiture of any Award Shares or any other adverse effect on your interests under the Plan.

11.Rights as Stockholder.  Except as otherwise provided in this Agreement with respect to the nonvested and forfeitable Award Shares, you are entitled to all rights of a stockholder of the Company, including the right to vote the Award Shares and receive dividends and/or other distributions declared on the Award Shares.

12.The Company’s Rights and Obligations.   Except as provided under Section 7.6 of this Agreement, the existence of the Award Shares shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company’s capital structure or its business, or any merger or consolidation of the Company, or any issue of bonds, debentures,

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preferred or other stocks with preference ahead of or convertible into, or otherwise affecting the Common Stock or the rights thereof, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of the Company’s assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise.

13.Notices.  All notices and other communications made or given pursuant to this Agreement shall be in writing and shall be sufficiently made or given if hand delivered or mailed by certified mail, addressed to you at the address contained in the records of the Company, or addressed to the Administrator, care of the Company for the attention of its Corporate Secretary at its principal executive office or, if the receiving party consents in advance, transmitted and received via telecopy or via such other electronic transmission mechanism as may be available to the parties.

14.Entire Agreement.  This Agreement contains the entire agreement between the parties with respect to the Award Shares granted hereunder.  Any oral or written agreements, representations, warranties, written inducements, or other communications made prior to the execution of this Agreement with respect to the Award Shares granted hereunder shall be void and ineffective for all purposes.

15.Amendment.  This Agreement may be amended from time to time only be a written instrument duly executed by the Company, the Sponsor, and you.

16.Conformity with Plan.  This Agreement is intended to conform in all respects with, and is subject to all applicable provisions of, the Plan.  Inconsistencies between this Agreement and the Plan shall be resolved in accordance with the terms of the Plan.  In the event of any ambiguity in this Agreement or any matters as to which this Agreement is silent, the Plan shall govern.  A copy of the Plan is available upon request.  Please contact the Company by email at iwarren@vertisinc.com or at 250 W. Pratt Street, 18^th Floor, Baltimore, Maryland 21201, Attention: Isaac Warren, (telephone: 303.305.2023), to receive a copy of the Plan.

17.Governing Law. The validity, construction and effect of this Agreement, and of any determinations or decisions made by the Administrator relating to this Agreement, and the rights of any and all persons having or claiming to have any interest under this Agreement, shall be determined exclusively in accordance with the laws of the State of Delaware, without regard to its provisions concerning the applicability of laws of other jurisdictions.  Any suit with respect hereto will be brought in the federal or state courts in the districts which include New York, New York, and you hereby agree and submit to the personal jurisdiction and venue thereof.

18.Headings.  The headings in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

19.Notices.  All notices and other communications provided for herein shall be dated and in writing and shall be deemed to have been duly given when delivered, if delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid and when received if delivered otherwise, to the party to whom it is directed:

(a)If to the Company, to it at the following address:

250 W. Pratt Street, 18^th Floor

Baltimore, Maryland 21201

Attention:  General Counsel

Fax No.:  (410) 528-9287

with a copy to the Sponsor, at the address set forth below:

(b)If to you, at the address set forth in the Company’s records;

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(c)If to the Sponsor, to it at the following address:

Thomas H. Lee Equity Fund IV, L.P.

c/o Thomas H. Lee Company

75 State Street, Suite 2600

Boston, MA 02109

Attention: Anthony J. DiNovi

Fax No.: (617) 227-3514

or at such other address as the parties hereto shall have specified by notice in writing to the other parties (provided, that such notice of change of address shall be deemed to have been duly given only when actually received).

20.Limitation of Liability.  None of the Affiliates of the Sponsor shall have any liability to you or any of your Permitted Transferees or the Company or any of its subsidiaries under any provision of this Agreement.  In the event of an alleged breach of this Agreement by the Sponsor, the parties hereto acknowledge and agree that the sole remedy which may be sought against the Sponsor shall be specific performance, provided, however, that if the remedy of specific performance is not available, you, your Permitted Transferees, if any, and the Company will only seek to recover direct damages for any breach of this Agreement.  You, your Permitted Transferees, if any, and the Company agree to waive any other remedy against the Sponsor to which they might be entitled at law, including, but not limited to, compensatory damages, consequential damages, continuing damages, future damages, incidental damages, punitive damages and nominal damages.  The Company shall indemnify, defend, save and hold harmless Sponsor from and against any and all liabilities arising under, pursuant to or in connection with this Agreement.

21.Severability.  The invalidity, illegality or unenforceability of one or more of the provisions of this Agreement in any jurisdiction shall not affect the validity, legality or enforceability of the remainder of this Agreement in such jurisdiction or the validity, legality or enforceability of this Agreement, including any such provision, in any other jurisdiction, it being intended that all rights and obligations of the parties hereunder shall be enforceable to the fullest extent permitted by law.

22.Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which shall constitute one and the same instrument, and it shall not be necessary in making proof of this Agreement to produce or account for more than one such counterpart.

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GLOSSARY

(a)   “Administrator” means the Committee as determined under Section 2.7 of the Plan.

(b)   “Affiliate” has the meaning given to such term in the Plan.

(c)   “Business Day” means any day other than a Saturday, Sunday, or other day during which the Company’s principal executive office is not open for business.

(d)   “Cause” generally means your insubordination, dishonesty, incompetence, moral turpitude, other misconduct of any kind or the refusal to perform your duties or responsibilities for any reason other than illness or incapacity, in each case as determined by the Board in good faith.  However, if you have an employment agreement, consulting agreement, change of control agreement or similar agreement in effect with the Company at the time in question that defines “cause” (or words of like import), then “cause” has the meaning ascribed to it under such agreement, as such agreement shall provide at the time in question; provided that with respect to any agreement that conditions “cause” on the occurrence of a change of control, such definition of “cause” shall not apply until a change of control actually takes place and then only with regard to a termination thereafter.

(e)   “Common Stock” means the common stock, $.01 par value, of Vertis Holdings, Inc.

(f)    “Company” means Vertis Holdings, Inc. and its Affiliates, except where the context otherwise requires.  For purposes of determining whether a Liquidity Event has occurred, Company shall mean only Vertis Holdings, Inc.

(g)   “Disability” means your inability to perform substantially your duties and responsibilities to the Company by reason of a physical or mental disability or infirmity for a continuous period of three months.  The date of such disability shall be the earlier of (1) the last day of such three-month period or (2) the day on which you submit, or cause to be submitted, to the Board any medical evidence of such disability reasonably satisfactory to the Board.

(h)   “Exchange” means the principal stock exchange, including The Nasdaq Stock Market, on which the Common Stock is listed or approved for listing, if any.

(i)    “Liquidity Event” means (1) a public offering of the Common Stock registered pursuant to the Securities Act where there is a Minimum Public Float immediately following such offering, (2) a merger or other business combination or recapitalization whereby the Common Stock is exchanged for cash and/or publicly traded equity or debt securities in another entity or a combination of cash and other non-publicly traded equity or debt securities where cash constitutes at least a majority of the consideration to be received in such merger, business combination or recapitalization or (3) a sale or other disposition of all or substantially all of the Company’s assets to another entity, for cash and/or publicly traded equity or debt securities of another entity or a combination of cash and other non-publicly traded equity or debt securities where cash constitutes at least a majority of the proceeds of such sale or disposition, in each case, other than to the Company, any subsidiary of the Company, or any entity controlled by the ultimate control persons of the Company.

(j)    “Minimum Public Float” means the circumstances existing when (i) the consummation of one or more public offerings registered pursuant to the Securities Act of shares of Common Stock if, upon such consummation, the aggregate number of shares of Common Stock held by the public, not including Affiliates of the Company, represents at least 20% of the total number of outstanding shares of Common Stock at the time of such public offering and (ii) the Common Stock is listed on an Exchange.

(k)   “Other Award Share Grantees” means other persons receiving Award Shares pursuant to a restricted stock agreement having terms substantially identical to those contained in this Agreement.

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(l)    “Other Key People” means the officers, members of management, key employees of the Company and its Affiliates.

(m)  “Principal Beneficial Owner” means any of the Sponsor, CLI/THLEF IV Vertis LLC, Evercore Capital Partners L.P., CLI Associates LLC, J.P. Morgan Partners (BHCA), L.P., Wachovia Capital Partners, LLC (formerly First Union Capital Partners, LLC), and Cadogan Capital, LLC and their respective Affiliates and successors.

(n)   “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

(o)   “Service” means your employment or other service relationship with the Company and its Affiliates.  Service will be considered to have ceased with the Company if, after a sale, merger or other corporate transaction, the trade, business or entity with which you are employed is no longer an Affiliate of Vertis Holdings, Inc.

(p)   “Third Party” means any person or entity excluding each of the following:  (a) the Company and its employees, officers, directors and (b) the Principal Beneficial Owners.

(q)   “You”; “Your”.  You means the recipient of the Award Shares as reflected in the first paragraph of this Agreement.  Whenever the word “you” or “your” is used in any provision of this Agreement under circumstances where the provision should logically be construed, as determined by the Administrator, to apply to the estate, personal representative, or beneficiary to whom the Award Shares may be transferred by will or by the laws of descent and distribution, the words “you” and “your” shall be deemed to include such person.

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IN WITNESS WHEREOF, the Company and the Sponsor have caused this Agreement to be executed by their duly authorized officers.

VERTIS HOLDINGS, INC.
By:	/s/ John V. Howard Jr.
	Name:	John V. Howard, Jr.
	Title:	Secretary
Date:	February 5, 2008
THOMAS H. LEE EQUITY FUND IV, L.P.
By:	/s/ Anthony DiNovi
	Name:	Anthony DiNovi
	Title:
Date:	February 5, 2008

                The undersigned hereby acknowledges that he/she has carefully read this Agreement and agrees to be bound by all of the provisions set forth herein.

WITNESS:	GRANTEE: Barry C. Kohn
[Witness]	/s/ Barry Kohn
	Date:	February 5, 2008

Enclosure:  Vertis Holdings, Inc. 1999 Equity Award Plan

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STOCK POWER

                FOR VALUE RECEIVED, the undersigned, Barry C. Kohn, hereby sells, assigns and transfers unto Vertis Holdings, Inc., a Delaware corporation (the “Company”), or its successor, 250,000 shares of common stock, par value $0.01 per share, of the Company standing in my name on the books of the Company, represented by Certificate No. ____________, which is attached hereto, and hereby irrevocably constitutes and appoints ______________________________________________________ as my attorney-in-fact to transfer the said stock on the books of the Company with full power of substitution in the premises.

WITNESS:
	Dated:

IMPORTANT TAX INFORMATION

INSTRUCTIONS REGARDING SECTION 83(b) ELECTIONS

1.An 83(b) Election is irrevocable.

2.If you want to make an 83(b) Election, an 83(b) Election Form must be filed with the Internal Revenue Service within 30 days of the date the Restricted Stock is granted to you; no exceptions to this rule are made.

3.You must provide a copy of the 83(b) Election Form to the Corporate Secretary or other designated officer of the Company.  This copy should be provided to the Company at the same time that you file your 83(b) Election Form with the Internal Revenue Service. In addition, you must pay over to the Company the amount of the withholding taxes by check at the time or your 83(b) Election.

4.In addition to making the filing under Item 2 above, you must attach a copy of your 83(b) Election Form to your tax return for the taxable year in which you received the Restricted Stock.

5.If you make an 83(b) Election and later forfeit the Restricted Stock, you will not be entitled to a refund of any tax you paid as a result of having made the 83(b) Election.  You may, however, recognize a capital loss upon forfeiture.

6.You must consult your personal tax advisor before making an 83(b) Election.  The attached election forms are intended as samples only, they must be tailored to your circumstances and may not be relied upon without consultation with a personal tax advisor.

SECTION 83(b) ELECTION FORM

Election Pursuant to Section 83(b) of the Internal Revenue Codeto Include Property in Gross Income in Year of Transfer

The undersigned hereby makes an election pursuant to Section 83(b) of the Internal Revenue Code with respect to the property described below and supplies the following information in accordance with the regulations promulgated thereunder:

1.             The name, address, and taxpayer identification number of the undersigned are:

                ______________________________

                ______________________________

                ______________________________

                ___-__-____

2.             The property with respect to which the election is made is _____________ shares of Common Stock, par value $.01 per share, of Vertis Holdings, Inc., a Delaware corporation (the “Company”).

3.             The date on which the property was transferred was ________________, the date on which the taxpayer received the property pursuant to a grant of restricted stock.

4.             The taxable year to which this election relates is calendar year 2007.

5.             The property is subject to restrictions in that the property is not transferable and is subject to a substantial risk of forfeiture until the taxpayer vests in the property.  The taxpayer will vest in _____ shares of Common Stock (the “Shares”) immediately prior to the first to occur of (i) a “liquidity event,” (ii) the taxpayer’s death, or (iii) the taxpayer suffering a “disability” (as each is defined in the restricted stock agreement evidencing the Shares), provided the taxpayer is in the employ of the Company when the event triggering vesting occurs.

6.             The fair market value at the time of transfer (determined without regard to any restrictions other than restrictions which by their terms will never lapse) of the property with respect to which this election is being made is $________ per share; with a cumulative fair market value of $______________.  The taxpayer did not pay any amount for the property transferred.

7.             A copy of this statement was furnished to the Company, for whom taxpayer rendered the services underlying the transfer of such property.

8.             This election is made to the same effect, and with the same limitations, for purposes of any applicable state statute corresponding to Section 83(b) of the Internal Revenue Code.

The undersigned understands that the foregoing election may not be revoked except with the consent of the Commissioner of Internal Revenue.

Signed:

Date:

Letter for filing §83(b) Election Form

___________, 20__

CERTIFIED MAIL

RETURN RECEIPT REQUESTED

Internal Revenue Service Center

______________________________

______________________________

______________________________

(the Service Center to which individual income tax return is filed)

                                Re:          83(b) Election of ________________________________

                                                Social Security Number:   _________________________

Dear Sir/Madam:

Enclosed is an election under section 83(b) of the Internal Revenue Code of 1986 with respect to certain shares of stock of Vertis Holdings, Inc. that were transferred to me on ___________________, 20__.

Please file this election.

Sincerely,

cc: Secretary of Vertis Holdings, Inc.

EX-10.40

Exhibit 10.40

RELOCATION REAL ESTATE PURCHASE AND SALE AGREEMENT

THIS AGREEMENT is entered into this 26th day of December,  2007 between American International Relocation Solutions, LLC (“BUYER”), a Pennsylvania limited liability company having its principal office at Park West Two, 6th Floor, 2000 Cliff Mine Road, Pittsburgh, PA 15275, and John V. Howard and Val M. Howard (“SELLER”), an individual or individuals having a mailing address of 714 Avila Drive, Davidsonville, MD 21035.

I. PREMISES

A. SELLER is the owner of certain real estate located at 714 Avila Drive, Davidsonville, MD 21035, having erected thereon a personal residence, as more specifically described in paragraph 1 and Appendix A hereto.

B. SELLER is an employee of Vertis Inc. (“EMPLOYER”), and EMPLOYER has entered into an agreement for BUYER to provide certain services in connection with the relocation of SELLER, including the purchase of SELLER’s residence as provided herein.

C. SELLER has agreed to sell the property to BUYER and BUYER has agreed to purchase the property from SELLER upon the terms and conditions set forth herein.

II. TERMS AND CONDITIONS

In consideration of the mutual covenants and promises herein contained, the parties, intending to be legally bound, agree, represent and warrant as follows:

1. Covenant to Sell. BUYER agrees to purchase and SELLER agrees to sell good and marketable title (and such as will be insurable by any responsible title insurance company at regular rates) to the real estate located at the address indicated in paragraph I.A. above, as more fully described in Appendix A (which may be modified to correct any non-material inaccuracies in the legal description that are determined by an accurate survey), together with the following (all of which hereinafter are referred to collectively as “the property”):

1.1 SELLER’s personal residence and all buildings and other improvements situated upon the real estate;

1.2 All of the rights and appurtenances pertaining to the real estate, including any right, title and interest of SELLER in and to adjacent easements, streets, roads, alleys and rights-of-way; and

1.3 All included terms referred to in paragraph 3 below.

2. Purchase Price. BUYER will pay to SELLER for the property the total sum of Eight Hundred Fifty One Thousand Five Hundred ($ 851500.00) Dollars (“Purchase Price”). This Purchase Price is based on the relocation policy of EMPLOYER. The Purchase Price shall be adjusted as provided in paragraph 5 below and the adjusted amount shall be paid to SELLER at the time and in the manner provided below.

3. Fixtures and Personal Property Included or Excluded From Sale. The sale shall include all personal property and fixtures permanently installed in the property, and all such property which was considered to be part of the property, including, but not limited to (strike if not applicable): plumbing, heating and lighting fixtures (including chandeliers, ceiling fans and shades); ranges, refrigerators and built-in microwave ovens; wall-to-wall carpeting; water treatment systems; pool and spa equipment; air conditioning units; garage door openers and transmitters; window treatments and rods; television antennas and satellite dishes; awnings, storm doors and windows, and window screens; shrubbery, plantings and unpotted trees; any remaining heating fuels stored in built-in appliances; central vacuum systems and equipment; as well as the following items specifically included: ___________N/A___________________________________________

The following items are not included in the sale and shall be removed from the Premises by the SELLER prior to delivering possession to the BUYER: _____________________N/A_________________________________

4. Possession. SELLER will vacate and deliver possession of the property to BUYER provided that BUYER, its authorized agents, brokers, employees, appraisers, surveyors, engineers, architects and other designated individuals may enter upon the property at reasonable times and with notice to SELLER prior to delivery of possession for purposes of inspecting the property and conducting environmental or other testing and examinations, and for purposes of showing the property to prospective purchasers. The date on which possession of the property is delivered to BUYER, (or, if later, the date of this Agreement), shall be the “Possession Date” for purposes of the Agreement. The Possession Date shall be determined by mutual agreement of BUYER and SELLER.

4.1 Until the Possession Date, SELLER will be responsible for all maintenance, repairs and replacements, mortgage payments (principal, interest and escrow), taxes, insurance, utilities and all other costs associated with the ownership and operation of the property.

4.2 On the Possession Date, SELLER will deliver possession of the property in the same physical condition as existed on the date SELLER signed this contract, that is broom clean, with all included items referred to in paragraph 3 above in good working order, together with all keys, garage door openers, security and entry codes and all other means of entering and securing the property.

4.3 SELLER will arrange for the transfer of all utilities into the name of BUYER or its nominee and may cancel its insurance coverage on the property as of the Possession Date.

4.4 SELLER will assign to BUYER all of its right, title and interest in and to any leases and security deposits affecting the property if such leases are approved and assumed by BUYER in writing and can be terminated by BUYER on not more than thirty (30) days notice to the tenant. In the event of assignment and assumption by BUYER, BUYER shall be responsible for all obligations under such leases accruing and arising on or after the Possession Date or, if later; the effective date of the written assignment. SELLER shall not enter into any new leases, written extensions of existing leases, if any, or additional leases for the property without the expressed written consent of BUYER.

4.5 BUYER will assume all benefits and burdens of ownership of the property from and after the Possession Date until sale and transfer of title.

5. Adjustments to Purchase Price. The amount to be paid by BUYER to SELLER hereunder (“SELLER’s Equity”) shall be the Purchase Price provided for in paragraph 2 above, subject to reductions and adjustments as of the Possession Date, in the manner which is customary in the jurisdiction which the property is located, as follows:

5.1. Loans. The unpaid balance of principal and interest due on all loans applicable to the property, including, but not limited to, all mortgages, home equity loans, home improvement loans and equity “bridge” loans.

5.2. Real Estate Taxes. All county, local and school, real estate, and any other taxes applicable to the property, together with any special assessments which have been levied or approved for levy.

5.3. Liens and Fees. All monetary liens, judgments, unpaid dues or assessments owing to any homeowners’ association or similar body, fees, maintenance, capital improvement or similar charges applicable to the property.

5.4. Pest Control Costs. The estimated cost of termite or pest control treatment.

5.5. Repairs.   Seller will complete repairs as agreed upon with buyer

5.6 Fuel. Utility and fuel charges.

5.7. Rent. Rent, rent deposits, security deposits or pre-paid rent under any leases assigned to and assumed by BUYER.

5.8. Other Proration Items.

If any amount to be prorated is not ascertainable as of the Possession Date, the adjustment thereof shall be based on the most recent ascertainable amount or reasonable estimates thereof, and shall be subject to subsequent adjustment. BUYER and SELLER each agree to promptly pay any amounts determined to be due as a result of such subsequent adjustments including over-payments. The provisions of this paragraph shall

apply regardless of the reason for the adjustment whether or not, the original calculation contained errors caused by SELLER, BUYER or others.

6. Payment of SELLER’s Equity Amount. The SELLER’s Equity shall be paid within ten (10) business days after SELLER has complied with all requirements of this Agreement, including the following:

6.1 BUYER has received from SELLER and dated a fully executed original, facsimile transmission and/or scanned email copy of this Agreement.

6.2 BUYER has received a title report and commitment satisfactory to BUYER and its attorneys.

6.3 BUYER has received all other documents and information which SELLER is required to provide.

6.4 All of the conditions precedent set forth in paragraph 10 below have been satisfied and upon satisfaction of all contingencies in this Agreement.

7. Mortgages. BUYER agrees to purchase the property subject to any existing mortgages disclosed on Appendix A and deducted in determining SELLER’s Equity (“Disclosed Mortgages”). Upon sale of the property by BUYER to a third party buyer, BUYER must either satisfy any Disclosed Mortgages on or prior to the closing date of such sale or obtain the unconditional release of any and all liability of SELLER and EMPLOYER with respect to such Disclosed Mortgages. BUYER may pay off and satisfy the Disclosed Mortgage(s) on the property on or after the Possession Date, or it may continue to maintain the Disclosed Mortgage(s) and make all payments due until the Disclosed Mortgages are paid off and satisfied, provided that if SELLER so requests in writing, BUYER, with EMPLOYER’s agreement will pay off any Veterans Administration mortgage in order to enable SELLER to retain its Veterans Administration mortgage eligibility, provided that SELLER refunds any portion of BUYER’s offer attributable to the assumability of the Veterans Administration mortgage. When BUYER pays off any Disclosed Mortgage, SELLER shall be responsible for obtaining from the mortgage lender any deposit or escrow fund held by the lender for real estate taxes, insurance or other items, but if the BUYER continues to maintain the mortgage after the Possession Date, SELLER will receive credit for any escrow funds, will assign its right to receive such amounts to BUYER and will otherwise cooperate in having any such amounts paid to BUYER when the Disclosed Mortgage is paid off including, if necessary, SELLER’S authorization of the BUYER to endorse any checks in your name for money properly due the BUYER.   In the event that the said loans are not paid off prior to June 1, 2008, BUYER agrees to pay said loans at that time.

8. Warranties and Representations of SELLER. As an inducement to BUYER to enter into this agreement, SELLER represents, warrants and guarantees to BUYER that the statements contained in this paragraph are true, correct and complete:

8.1. Authority. SELLER is an individual who holds lawful title to the property, the property is not subject to any options to purchase, rights of first refusal, written or oral agreements of sale or other commitments or obligations of purchase and SELLER has the full power and authority to transfer the property to BUYER. This agreement and the sale of the property hereunder are not subject to the approval of any party (other than any lender of a Disclosed Mortgage).

8.2. Good and Marketable Title to Property. SELLER warrants that the warranty deed to be issued by SELLER will vest good and marketable title to the property, in fee simple, (and such as will be insurable by any responsible title company at regular rates) free and clear of all liens, encumbrances, bankruptcies, judgments, mortgages, security interests, title retention agreements, restrictions, conditions, charges, equities and claims and any other encumbrances affecting the property whether or not they are of record, including common walls, fences, driveways and other common areas or facilities shared with a neighbor, encroachments, easements and rights of way, except for any Disclosed Mortgages.

8.3. Outstanding Claims and Disputes. There have been no repairs, additions or improvements made, ordered or contracted to be made to the premises, nor are there any appliances or fixtures attached to said premises which have not been paid for in full, and there are no outstanding or disputed claims for any such work or items.

8.4. Possession. No person or entity other than SELLER is in possession or entitled to possession of the property other than pursuant to any leases assumed by BUYER pursuant to subparagraph 4.4 above.

8.5. No Restrictions on Use. There are no liabilities, causes of action, unpaid taxes, zoning restrictions, encumbrances, or other claims or conditions, either pending or threatened, which would affect BUYER or its ability to use the property as a residence and for any related purposes, nor is the present use of the property subject to the approval of any party.

8.6. Purchase Money Obligations. There are no purchase money obligations being created in this transfer.

8.7. Accessibility of Utilities, Etc. All water, public sewage or septic systems for sanitary sewage, storm sewers, electricity, gas service and any and all public utilities are available on the property. The property is served by a community sewage system, or if no community sewage system is available, all necessary permits, approvals, etc. for the operation of the septic system or other private sewage system on the property have been obtained. If there is a well, the water supply to the property is both potable and ample under local standards. There has been no work done, or notice received that work is to be done, by any governmental body or authority or at its direction, in connection with the installation of sewer lines or water lines, or for improvements such as paving or repairing of streets, curbs or sidewalks or similar improvements.

8.8. Condemnation. SELLER has received no written or official notice and has no knowledge of any condemnation, eminent domain, abatement or any other legal or equitable proceeding against the whole or any part of the property.

8.9. Improvements. There are no known material defects in the physical condition or structure of the property, all operational components and systems are in good working order, and the property is not infested with termites or other pests to the best of Seller’s knowledge. The basement, crawl space and any similar lower level of the property is not subject to water penetration. All improvements on the property conform to and comply with all applicable codes, laws and ordinances. SELLER has received no notice from any governmental agencies or authorities and has no knowledge of any violations concerning the condition and/or use of the property which have not been corrected by SELLER.

8.10. Zoning and Other Ordinances. The property is zoned “RESIDENTIAL” in accordance with the applicable effective zoning ordinance which permits the use of the property as a single-family residence and related activities. SELLER has not received any notice and has no knowledge of any violations of any zoning, housing, building, safety or fire ordinances or regulations and all zoning permits or variances, building permits, setback agreements, and all other similar documents required for the property and the improvements thereon have been obtained.

8.11. Certificate of Occupancy. A certificate permitting occupancy of the property may be required by the municipality and/or governmental authority. If a certificate is required, SELLER shall, at SELLER’s expense and within ten (10) days of the execution of this agreement, order the certificate for delivery to BUYER on the Possession Date.

8.12. Litigation; Compliance with Law. There is no litigation, proceeding, investigation or claim pending or threatened, including, but not limited to, any bankruptcy or foreclosure proceedings, which would affect: (a) the property; (b) SELLER’s title to the property; (c) the financial condition of SELLER; or (d) SELLER’s ability to perform this agreement, and SELLER has no reasonable grounds to know of any basis for any such litigation, proceeding, investigation or claim.

8.13. Marital Status. SELLER(s), if husband and wife, have never been divorced from each other; are not separated from each other and no divorce proceedings are pending. If the SELLER acquired title alone, he/she has not been married since the date of acquiring title. If SELLER (or either or them) were previously divorced, no support payments are due and owing under the terms of any existing marital settlement agreement and the divorce proceedings filed of No __NA____ in the ___NA__________________ and the decree dated ____NA______________ disposed of all marital property, equitable distribution, alimony, child support and any other matters of a marital nature involving the SELLER(s). Any details will be kept confidential and used only as necessary to complete the sale of the property.

8.14. No Default. SELLER is not in default under any mortgage, land contract, deed or any other financing instrument encumbering the property, and from the date hereof

through the Possession Date SELLER shall make all payments required to be made under such obligations in the manner and at the times provided thereunder and shall perform all of his other obligations thereunder as mortgagor, vendee or otherwise as the case may be.

8.15. Boundaries. The structures and improvements are within the boundaries of the property, and there is no dispute with adjoining property owners as to the location of boundary lot lines.

8.16. Hazardous Substances. The property does not contain asbestos, lead paint, radon gas or urea formaldehyde foam insulation, any mold , any allergen nor any other hazardous or toxic materials or gas. If it is discovered that the property does contain any such substances, SELLER will indemnify, defend and hold harmless BUYER (and its officers, directors, members, employees and affiliates) from any and all costs which any of them may incur and any and all liabilities, obligations, debts, causes of action, lawsuits or other claims, whether asserted directly against BUYER or as a successor to SELLER or any present or prior owner in the chain of title to the property (including reasonable attorney’s fees and expenses incurred in the defense thereof) arising out of or resulting from the presence of such substances and the cost of removal or remediation thereof.

8.17. Flood Plain of Flood Zone. The property is not located within a so-called “flood plain area” or flood zone, and surface storm waters drain from the property in such manner as is permissible by government agencies having jurisdiction.

8.18. Insurability. The property is insurable at standard rates for normal hazards of fire, extended coverage and liability.

8.19. Disclosures. All material information regarding the property, including, but not limited to, its physical condition and legal title, any known pest infestation or presence of radon gas, lead-based paint or other hazardous substances, has been disclosed by SELLER or its agents to BUYER in this agreement or in an addendum attached hereto. SELLER will pay any costs, damages or expenses incurred by BUYER as the result of any failure of SELLER or its agents to disclose such material information, and BUYER reserves the right to terminate this agreement without further liability to SELLER in the event of any failure to fully disclose any material information regarding the property.

8.20 The warranties and representations of SELLER contained in this document shall be correct and complete in all material respects on and as of the Possession Date with the same force and effect as though such warranties and representations were made on and as of the Possession Date, and SELLER shall deliver to BUYER a certificate dated as of the Possession Date to that effect. Any fact or information which modifies or contradicts any of these representations and warranties must be in writing and attached to this Agreement. If any such statement or disclosure is unacceptable to BUYER, BUYER reserves the right to not countersign this Agreement and not pay the equity until such matter is resolved to the BUYER’S satisfaction.

8.21. Encumbrances. SELLER has not taken any action which would create an additional encumbrance of any kind against the property.

8.22. Mechanics’ Lien. All labors and materials supplied in connection with any repairs, alterations, additions or other work affecting the property have been paid in full and no mechanics’ or similar liens have been or can be filed against SELLER or the property.

9. Title to the Property.

9.1. Conveyance of Title. Within ten (10) days of receipt of Deed Document Package SELLER will execute and deliver to BUYER or its nominee a Power of Attorney, a warranty deed or its equivalent conveying good, clear and marketable title to the property to the BUYER or its nominee. The obligation to execute and deliver the deed will be binding upon SELLER and SELLER’s guardians, heirs, executors, personal representatives or assigns.

9.2. Defects in Title. BUYER will notify SELLER if it discovers any liens, encumbrances, encroachments or other defects in title which arise prior to the Possession Date, would prevent BUYER from re-selling and conveying good and marketable title to the property. SELLER will have thirty (30) days after notice to remove any such defects to the satisfaction of BUYER, any potential third party purchaser or lender, and their respective attorneys, provided that if the title defect can be removed or resolved at an expense of Two Thousand ($2,000) Dollars or less, BUYER may, at its option, remove the title defects and recover the cost of removal from SELLER. If such title defects cannot be removed within  one hundred-twenty (120) days, BUYER may terminate this agreement and SELLER will repay to BUYER any SELLER’s Equity or other amounts received from BUYER hereunder and SELLER will indemnify, defend and hold harmless BUYER (and its officers, directors, members, employees and affiliates) from any and all costs which any of them may incur and any and all liabilities, obligations, debts, causes of action, lawsuits or other claims, whether asserted directly against BUYER (and its officers, directors, members, employees and affiliates), including reasonable attorney’s fees and expenses incurred in the defense thereof) arising out of or resulting from this agreement or any agreement entered into by BUYER for the resale of the property.  In the event that the equity is repaid to the BUYER, Buyer will reconvey the property back to the SELLER.

10. Conditions Precedent to BUYER’s Obligations. The obligations of BUYER to consummate this transaction are subject to the satisfactory fulfillment and completion of the following conditions precedent prior to the closing date:

10.1. Good Title to Property. On the Possession Date, SELLER will own and have good and marketable title to the property, in fee simple, (and such as will be insurable by any responsible title company at regular rates) free and clear of all liens, encumbrances, bankruptcies, judgments, mortgages, security interests, title retention agreements, restrictions, conditions, charges, equities and claims, except for Disclosed Mortgages and those encumbrances, rights of way, etc. that do not adversely affect the property. Any and

all defects in the title to the property shall have been cured by SELLER. The description of the property set forth in Appendix A is consistent in all respects with the survey and contains all of the property.

10.2. Right to Sell. The property is not subject to any options to purchase, rights of first refusal, written or oral agreements of sale, or other commitments or obligations of purchase and SELLER has the full power and right to execute, deliver and implement this agreement.

10.3. Inspections and Reports. BUYER has had an opportunity to inspect the property and is satisfied with the results and/or reports received from all such inspections, surveys, tests and studies and any remediation or repair required as a result of such inspections, surveys, tests and studies has been completed to the satisfaction of BUYER.

10.4. Warranties and Representations. The warranties and representations of SELLER hereunder shall be true and correct in all material respects on and as of the Possession Date and SELLER shall deliver to BUYER a signed certificate confirming that fact.

10.5. Compliance. SELLER shall have complied with all of its warranties and representations and duly performed in all material respects all of the terms and conditions set forth in this agreement, including the delivery of documents, properties and other materials and instruments required or contemplated by this agreement.

10.6. Default. SELLER shall not be in default under any provisions of this agreement or any related agreements.

10.7. Satisfactory Actions. All actions to be taken by SELLER in connection with the consummation of the transactions contemplated hereby and all agreements, instruments and other documents necessary or appropriate to consummate the transactions contemplated by this agreement and any related agreements have or will be taken or delivered and such actions and documents and all other related legal matters have been approved by counsel for BUYER.

10.8. Insolvency. SELLER has not, on or prior to the Possession Date, become insolvent or filed a voluntary petition in bankruptcy, or a voluntary petition seeking reorganization, had an involuntary petition in bankruptcy filed against it, made an assignment for the benefit of creditors or applied for the appointment of a receiver or trustee of all or a substantial portion of its assets.

10.9. Material Change. There shall not be any facts or circumstances discovered which substantially or adversely affect the property or BUYER’s obligations under this agreement.

10.10 In the event that any of the foregoing conditions precedent are not satisfied, BUYER shall have the option to either (1) waive the same by an appropriate writing delivered to SELLER on or prior to the Possession Date and proceed to consummate the

transaction contemplated herein; or (2) declare this agreement null and void, in which case the BUYER shall have no further rights or obligations hereunder and any amounts paid by BUYER to SELLER shall be promptly repaid by SELLER to BUYER.

11. Default. In the event of default by SELLER or BUYER, the following shall determine their respective rights and obligations:

11.1. By SELLER. BUYER, at BUYER’s sole option, may elect to:

11.1.1. Waive any claim for loss of bargain, in which event SELLER agrees to reimburse BUYER for all direct, out-of-pocket costs and expenses incurred by BUYER in connection with the proposed transaction including, but not limited to, the costs of any environmental investigations or remediation, title examination fees and reasonable attorney’s fees and expenses, in which event this agreement shall terminate and be of no further force and effect.

11.1.2. In lieu thereof, BUYER may elect either or both of the following remedies: (a) an action for specific performance; and/or (b) an action at law for damages, including loss of bargain, all consequential damages and all direct out-of-pocket costs and expenses incurred by BUYER, provided, however, that no such election shall be final or exclusive until full satisfaction shall have been received by BUYER.

11.2. By BUYER. SELLER, at SELLER’s sole option, may elect to terminate the agreement and refund to BUYER any SELLER’s Equity or other amounts previously paid to SELLER by BUYER, in which event the agreement shall be of no further force and effect.

12. Residential Lead-Based Paint Hazard Reduction Act Notice Required For Properties Built Before 1978.

_X_ NOT APPLICABLE
___ APPLICABLE — PROPERTY BUILT BEFORE 1978

12.1 SELLER represents that: (check 1 or 2)
___ 1. SELLER has no knowledge concerning the presence of lead-based paint and/or lead-based paint hazards in or about the property.

___ 2. SELLER has knowledge of the presence of lead-based paint and/or lead-based paint hazards in or about the property. (Provide the basis for determining that lead-based paint and/or hazards exist, the location(s), the condition of the painted surfaces, and other available information concerning SELLER’s knowledge of the presence of lead-based paint and/or lead based paint hazards.)

12.2. Records/Reports (check 1 or 2)
___1. SELLER has no reports or records pertaining to lead-based paint and/or lead-based paint hazards in or about the property.

___2. SELLER has provided BUYER with all available records and reports pertaining to lead-based paint hazards in or about the property. (List documents)

12.3 BUYER’s Acknowledgment
___ 1. BUYER has received the pamphlet Protect Your Family From Lead in Your Home and has read the Lead Warning Statement contained in this Agreement (See Environmental Notices).
BUYER’s Initials ______________________ Date _____________________

___ 2. BUYER has reviewed SELLER’s disclosure of known lead-based paint and/or lead-based paint hazards, as identified in paragraph 12.1 and has received the records and reports pertaining to lead-based paint and/or lead-based paint hazards identified in paragraph 12.2.
BUYER’s Initials ______________________ Date _____________________

13. No Brokerage Commission. SELLER represents and warrants that any listing agreement covering the property has an exclusion clause that provides that no commission is payable to any broker as a result of the sale of the property by SELLER to BUYER. SELLER shall indemnify, defend and hold harmless BUYER from any claim for a brokerage commission.

14. SELLER’s Acceptance. This agreement shall not be binding upon BUYER unless BUYER shall have received (1) one original or copy hereof executed and acknowledged by SELLER on or before the expiration date specified in BUYER’s offer letter to SELLER and BUYER shall have executed and dated the originals. If the agreement has been modified or is otherwise not acceptable to BUYER, BUYER may terminate this agreement and shall have no further obligations to SELLER hereunder.

15. Survival of Warranties and Representations. The warranties, representations, terms and conditions of this agreement shall not merge into the deed and all of the warranties and representations contained herein shall survive the closing of this transaction.

16. Governing Law. This agreement and the transactions contemplated herein shall be governed and construed in accordance with the laws of the state in which the property is located.

17. Rights of Successors and Assigns. This agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, successors, assigns and legal

representatives. This agreement may not be assigned by either party without the prior written consent of the other party.

18. Tender and Notices. Formal tender of deed and purchase price are hereby waived by the parties. All notices, tenders, demands or other communications delivered or tendered under this agreement shall be in writing and shall be sufficient if sent by registered or certified mail with return receipt requested or by a recognized courier service to the parties at the addresses shown in the first paragraph hereof. Such notice shall be sufficient, whether accepted at the address referred to or not, if tendered at such address during the normal business hours. The addresses may from time to time be changed by either party giving written notice pursuant to the terms of this paragraph.

19. Entire Agreement of Parties/Miscellaneous. This agreement cannot be changed orally and constitutes the entire contract between the parties hereto. Any prior written or oral agreements, letters or other documents shall be considered to have been merged in this agreement and shall be of no further force and effect. This agreement shall not be modified nor changed by any expressed or implied promises, warranties, guaranties, representations or other information unless expressly and specifically set forth in this agreement or an addendum or amendment thereto properly executed by the parties. Failure of any party to insist upon strict performance of this Agreement at any given time will not act as a waiver of default. If there are two or more persons signing this Agreement as SELLER, each signer designates and authorizes the other as his/her agent to receive notices and payments and also give receipts for such payments under this Agreement. This Agreement can not be assigned by the SELLER. This is not a Third Party Agreement meaning the SELLER, BUYER and EMPLOYER are the only parties having any enforceable rights in this Agreement.

20. Paragraph Headings. The headings referring to the contents of paragraphs of this agreement are inserted for convenience and are not to be considered as part of this agreement nor a limitation on the scope of the particular paragraphs to which they refer.

21. FIRPTA Certification. SELLER, and each of them, hereby certify under penalties of perjury that:
a. SELLER, and each of them, are not nonresident alien(s) for purposes of U.S. income taxation. If any SELLER IS a nonresident alien for purposes of U.S. income taxation, please initial the following blank ________________.
b. SELLER’s taxpayer identification (social security) number(s) is (are) ###-##-#### and ###-##-####.
c. SELLER’s home address is 714 Avila Dr., Davidsonville, MD  21035.

SELLER understands that this certification may be disclosed to the Internal Revenue Service by the BUYER and that any false statement you have made here could be punished by fine, imprisonment or both (Section 1445 of the Internal Revenue Code provides that the buyer of U.S. real property interests must withohold tax if the seller is a foreign person. SELLER, and each of them make the foregoing certification to inform the buyer that no withholding is required.)

22. Facsimile Execution. This Agreement may be executed by the facsimile transmission and/or scanned email copy, and/or exchange, of a document or documents signed by the parties to be obligated, which shall be binding upon the transmission thereof. The parties agree to promptly provide one another with originals of any documents thus transmitted, as applicable.

III. EXECUTION

IN WITNESS WHEREOF, the parties hereto, intending to be legally bound, have read and duly executed this agreement the day and year first above written.

	SELLER
/s/ John V. Howard	John V. Howard
/s/ Val M. Howard	Val M. Howard
	BUYER
	AMERICAN INTERNATIONAL
	RELOCATION SOLUTIONS, LLC
	BY:	[unreadable signature]
		Duly authorized

LEAD NOTICES: (For Properties built before 1978)

Lead Warning Statement: Every purchaser of any interest in residential real property on which a residential dwelling was built prior to 1978 is notified that such property may present exposure to lead from lead-based paint that may place young children at risk of developing lead poisoning. Lead poisoning in young children may produce permanent neurological damage, including learning disabilities, reduced intelligence quotient, behavioral problems, and impaired memory. Lead poisoning also poses a particular risk to pregnant women. The seller of any interest in residential real property is required to provide the buyer with any information on lead-based paint hazards from risk assessments or inspections in the seller’s possession and notify the buyer of any known lead-based paint hazards. A risk assessment or inspection for possible lead-based paint hazards is recommended prior to purchase.

Lead Hazard Disclosure Requirements: In accordance with the Residential Lead-Based Paint Hazard Reduction Act, any seller of property built before 1978 must provide the buyer with an EPA-approved lead hazards information pamphlet titled Protect Your Family From Lead in Your Home and must disclose to the buyer and the seller’s agent the known presence of lead-based paint and/or lead-based paint hazards in or on the property being sold, including the basis used for determining that lead-based paint and/or lead-based paint hazards exist, the location of lead-based paint and/or lead-based paint hazards, and the condition of painted surfaces. Any seller of a pre-1978 structure must also provide the buyer with any records or reports available to the seller pertaining to lead-based paint and/or lead-based paint hazards in or about the property being sold, the common areas, or other residential dwellings in multi-family housing. The Act further requires that before a buyer is obligated to purchase any housing constructed prior to

1978, the seller shall give the buyer 10 days (unless buyer and seller agree in writing to another time period) to conduct a risk assessment or inspection for the presence of lead-based paint and/or lead-based paint hazards. The opportunity to conduct a risk assessment or inspection may be waived by the buyer, in writing. Neither testing nor abatement is required of the seller. Housing built in 1978 or later is not subject to the Act.

APPENDIX A

Description of Property

Street Address:	714 Avila Drive
	Davidsonville, MD 21035

Recording Reference: ______________________________ Tax Parcel Numbers: _______________

Legal Description:
See Schedule A

Liens, Encumbrances, Mortgages, Security Interests, Title Retention Agreements Restrictions, Conditions, Charges, Equities and Other Claims on Property:

Citimortgage - - #2001708320-3 — first lien with approximate balance as of 12/10/07 at $455,457.78

Sandy Spring Bank — second lien with balance at zero.

EX-12.1

Exhibit 12.1

Vertis, Inc.

Computation of Ratio of Earnings to Fixed Charges and

Deficiency of Earnings Available to Cover Fixed Charges

(Dollars in thousands)

	Years Ended December 31,
	2007			2006			2005			2004			2003
Net Earnings	$	(326,745	)	$	(26,195	)	$	(173,230	)	$	(11,133	)	$	(95,925	)
Add:
Income tax provision (benefit)	388			(1		)	(8,070		)	(66,053		)	48,436
Loss (gain) from discontinued operations, net	251			(21,600		)	143,389			6,210			(3,577		)
Cumulative effect of accounting change							1,600
Amortization of previously capitalized interest	941			780			717			764			571
Fixed charges per (B) below	144,018			140,677			138,449			139,985			135,232
Deduct:
Interest capitalized during period	1,667			1,250			929			798			832
Earnings, as adjusted (A)	$	(182,814	)	$	92,411		$	101,926		$	68,975		$	83,905
Fixed charges:
Portion of rents representative of an interest factor	$	8,729		$	8,542		$	8,792		$	8,641		$	9,356
Interest expense on all indebtedness, including amortization of debt expense	135,289			132,135			129,657			131,344			125,876
Fixed charges for computation purposes (B)	$	144,018		$	140,677		$	138,449		$	139,985		$	135,232
Ratio of earnings to fixed charges (A) / (B)
Deficiency of earnings available to cover fixed charges	$	(326,832	)	$	(48,266	)	$	(36,523	)	$	(71,010	)	$	(51,327	)

EX-21.1

Exhibit 21.1

List of Subsidiaries of Vertis, Inc.

As of December 31, 2007

Enteron Group, LLC

Laser Tech Color Mexico, S.A. de C.V.

USA Direct, LLC

Vertis Digital Services Limited (EU)

Vertis Fragrance SARL (France)

Vertis Mailing, LLC

Vertis Receivables II, LLC

Webcraft, LLC

Webcraft Chemicals, LLC

EX-31.1

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Exhibit 31.1

CERTIFICATION

I, Michael T. DuBose, certify that:

1.        I have reviewed this annual report on Form 10-K of Vertis, Inc.;

2.        Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.        Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.        The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)        Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)        Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accounting principles;

(c)        Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)        Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.        The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a)        All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)        Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/  MICHAEL T. DUBOSEName: Michael T. DuBose
Title: Chairman and Chief Executive Officer

Date: March 31, 2008

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Exhibit 31.1

CERTIFICATION

EX-31.2

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Exhibit 31.2

CERTIFICATIONS

I, Barry C. Kohn, certify that:

1.        I have reviewed this annual report on Form 10-K of Vertis, Inc.;

2.        Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.        Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.        The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)        Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)        Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accounting principles;

(c)        Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)        Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.        The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a)        All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

(b)        Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

/s/  BARRY C. KOHNName: Barry C. Kohn
Title: Chief Financial Officer

Date: March 31, 2008

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Exhibit 31.2

CERTIFICATIONS