10-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

xANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXHANGE ACT OF 1934

For the year ended December 31, 2006

OR

oTRANSITION 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	13-3768322
(State or other jurisdiction of	(I.R.S. Employer Identification)
incorporation or organization)
250 West Pratt Street, Baltimore, MD	21201
(Address of principal executive offices)	(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 oNo x

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 xNo 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 oNo x

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.x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act:

Large accelerated filer   o Accelerated filer   o Non-accelerated filer   x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act)Yes oNo x

The number of shares outstanding of Registrant’s common stock as of April 2, 2007 was 1,000 shares.

Documents Incorporated By Reference:None

VERTIS, INC.

ANNUAL REPORT ON FORM 10-K
FOR THE YEAR ENDED DECEMBER 31, 2006

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	11
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	39
Part III
Item 10	Directors, Executive Officers and Corporate Governance	40
Item 11	Executive Compensation	42
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	55
Item 13	Certain Relationships and Related Transactions and Director Independence	58
Item 14	Principal Accountant Fees and Services	59
Part IV
Item 15	Exhibits and Financial Statement Schedules	60
Signatures		65
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:

·general economic and business conditions;

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

·the financial condition of our customers;

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

·our ability to execute key strategies;

·actions by our competitors;

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

·downgrades in our credit ratings;

·changes in interest rates; and

·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 1BUSINESS

Overview

Vertis, Inc. is a marketing partner to a wide array of clients, including many of today’s Fortune 500 companies. We offer world-class consulting, creative, research, direct mail, media, technology and printing services. For over three decades, we have worked with clients to turn complex marketing ideas into realities. Our marketing and printing heritage affords us the greatest experience in managing large, complicated, time-sensitive assignments. Our clients include approximately 2,000 grocery stores, drug stores and other retail chains, general merchandise producers and manufacturers, financial and insurance service providers, newspapers, and advertising agencies.

We offer an extensive list of solutions across a broad spectrum of media designed to 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. We believe that the breadth of our client base limits our reliance on any individual customer. Our top ten customers in 2006 accounted for 33.0% of our revenue, and no customer accounted for more than 8.3% 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 17 years.

Vertis, Inc. is a Delaware corporation incorporated in 1993. In 2006, Vertis had approximately $1.5 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 specified 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 products and various targeted direct marketing services. In addition, we also provide premedia and related services (“Premedia”) as well as media planning and placement services (“Media Services”). These services are included in “Corporate and Other” for discussion within this Annual Report, together with corporate costs incurred by the Company.

Financial and other information relating to our business segments for each of 2006, 2005 and 2004 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:

·Targetable advertising insert programs for retailers and manufacturers

·Newspaper products (TV magazines, Sunday magazines, color comics and special supplements)

·Consumer research

·Creative services including page layout and design

We are a leading provider of advertising inserts and the largest single producer of newspaper TV listing guides and Sunday comics in the United States. In 2006, we produced more than 33 billion advertising inserts. Advertising inserts are typically produced in color on better quality paper than the reproductions that appear in run-of-press newspaper advertise­ments. In addition, advertising inserts allow marketers to vary layout, artwork, design, trim size, paper type, color and format. Versions may be targeted by newspaper zones and by specific customer demographics. We provide 72 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 2006, we produced approximately 1.4 billion Sunday comics, and approximately 524 million TV listing guides.

Revenue and Customers.   Total Advertising Insert revenue for 2006 accounted for 70.2% of Vertis’ total 2006 revenue. Advertising Inserts employs approximately 37 sales representatives devoted to this segment’s specific products and services.  Our customers include grocery stores, drug stores, other retailers, newspapers, and consumer goods manufacturers. Our advertising insert products are distributed in national newspapers and, depending on their target audience, through various forms of mail distribution and in-store circulation. Advertising Insert’s ten largest customers accounted for approximately 45.5% of the segment’s 2006 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:

·Highly customized one-to-one marketing programs

·Automated digital fulfillment services

·Direct mail production with varying levels of personalization

·Data design, collection and management to identify target audiences

·Mailing management services

·Effectiveness measurement

·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, broadbase 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 highly individualized marketing campaigns are designed to enhance customer response levels and improve client marketing efficiencies

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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 2006 accounted for 22.5% of Vertis’ total 2006 revenue. Direct Mail employs approximately 60 sales representatives devoted to 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 38.5% of the segment’s 2006 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:

·Digital content management

·Graphic design and animation

·Digital photography, compositing and retouching

·In-store displays, billboards and building wraps

·Consulting services

·Newspaper advertising development

·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. More importantly, these services and technologies also enable clients to benefit from the influences of newer digital advertising media such as CD-ROM and the Internet. Our integrated offering enables advertisers to maintain consistency of appearance of their products and brand names throughout various media forms. Additionally, included in the Corporate and Other is our Media Services division designed to support our targeted capabilities and marketing efforts. Corporate and Other has approximately 43 sales representatives devoted to this segment’s 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 2006, we spent approximately $587 million on raw materials. The primary raw materials required in our operations are paper and ink. We also use other raw materials, such as film, 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.

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Our results of operations are impacted by the cost of paper and our ability to pass along to our customers any increases in these costs and remain competitive when there are decreases. 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.

In 2006, we renegotiated all contracts that had previously subjected us to target minimum quantities, which were mainly contracts covering the purchase of ink and press supplies (i.e. plates, blankets, solutions). Under the new contracts, there are no minimum purchase amounts required. As of December 31, 2006, we do not have any contracts requiring us to purchase any specified minimum quantities.

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, 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., Applied Graphics Technologies, Inc. and Schawk, Inc. We also compete for advertising dollars with 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. 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 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

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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.

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, 2006, we had approximately 5,800 employees. Most of the hourly employees at our North Brunswick and Newark, New Jersey facilities (approximately 147 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 1ARISK FACTORS

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

As of December 31, 2006, our total consolidated debt was $1.1 billion. Our substantial debt could have important consequences for our financial condition, including:

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

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

·increasing our vulnerability to general adverse economic and industry conditions;

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

·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;

·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

·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, 2006, our senior credit facility would permit us to borrow up to an additional $90.8 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. In March 2007, we amended the senior credit facility to provide that the maximum availability under the credit facility would increase to $250 million from $220 million at December 31, 2006. Under the amended credit facility, up to $200 million consists of a revolving credit facility and the remaining $50 million represents a term loan. 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” for further information.

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. Based on the current and anticipated level of operations, we believe that our cash flows from operations, together with amounts available under our senior credit facility and our accounts receivable securitization facility, are adequate to meet our anticipated requirements for working capital, capital expenditures, interest payments and scheduled principal payments for the next twelve months. 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, however, 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 may have to refinance all or a portion of our existing debt or obtain additional financing. We cannot assure you that any refinancing of this kind would be possible or that any additional financing could be obtained. Most of our existing long-term debt matures during 2009 and we cannot assure you that any required replacement debt will be obtained. 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:

·borrow money;

·pay dividends or make distributions;

·purchase or redeem stock;

·make investments and extend credit;

·engage in transactions with affiliates;

·engage in sale-leaseback transactions;

·consummate certain asset sales;

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

·create liens on our assets.

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In addition, our senior credit facility requires us to maintain a minimum Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) amount, 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 $169.4 million at December 31, 2006. There were no reserves established by the Agent against our availability in 2006. 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. 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. 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.

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

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not deteriorate. If there is a period of economic downturn or stagnation, our results of operations may be adversely affected.

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 (i) we are not able to pass paper cost increases to our customers, or (ii) 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.

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 23% of our consolidated revenues for the twelve months ended December 31, 2006, 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. Mr. DuBose was appointed chairman and chief executive officer of the Company in November 2006. Mr. DuBose has a significant number of years experience as a chief executive officer as well as other executive positions. We believe Mr. DuBose provides us with the leadership skills and prior experience that will greatly benefit Vertis, 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.

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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 1BUNRESOLVED STAFF COMMENTS

None.

ITEM 2PROPERTIES

Executive Offices

Our principal executive offices are located at 250 West Pratt Street, Baltimore, Maryland, and comprise approximately 52,004 square feet of leased space, pursuant to a lease agreement expiring on August 31, 2014.

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Production Facilities

As of December 31, 2006, we owned 12 and leased 26 production facilities, with an aggregate area of approximately 3,700,000 square feet. The leased production facilities have lease terms expiring at various times from 2007 to 2016. 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	103,000	September 30, 2011
Columbus, OH	141,185	December 31, 2014
Irving, TX	91,649	October 31, 2012
East Longmeadow, MA	159,241	February 2, 2016
Elk Grove Village, IL	80,665	August 31, 2007
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, 2007
Riverside, CA	83,520	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	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	320,000	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, 2007
Newark, NJ	23,000	Fee Ownership
North Brunswick, NJ	281,232	Fee Ownership
York, PA	203,133	December 31, 2012

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Other Locations
Chicago, IL(3)	52,024	May 31, 2011
Earth City, MO	23,023	June 30, 2012
Greenville, SC	1,400	February 28, 2008
Greensboro, NC(4)	85,830	April 30, 2007
Harrison, NJ	21,957	May 31, 2010
Irving, TX	91,649	October 31, 2012
North Haven, CT	31,600	December 27, 2007
Richmond, VA	4,600	March 31, 2009
San Antonio, TX	26,227	April 30, 2011

(1)Comprised of two adjacent facilities.

(2)Idle.

(3)27,552 square feet are subleased to another party with the remaining square footage idle.

(4)Subleased to another party.

Sales Offices and Other Facilities

We maintain a large number of facilities for use as sales offices and other administrative purposes. All but one of the sales offices and other facilities are leased, with lease terms expiring at various times from 2007 to 2016.

ITEM 3LEGAL 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 4SUBMISSION 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, 2006.

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PART II

ITEM 5MARKET 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. During 2005, we paid dividends to Vertis Holdings of approximately $4,000 for normal operating expenses. We did not make any dividend payments in 2006. 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 certain customary covenants imposing limitations on the payment of dividends or other distributions.

ITEM 6SELECTED 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, 2006, 2005, 2004, 2003 and 2002. The historical data for the three-year period ended December 31, 2006 has been derived from our audited consolidated financial statements included elsewhere in this Annual Report. The historical data for the two-year period ended December 31, 2003 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,
	2006			2005			2004			2003			2002
	(in thousands)
Operating data:
Revenue	$	1,468,661		$	1,470,088		$	1,474,359		$	1,410,306		$	1,497,397
Operating income	90,564		(1)	100,163		(2)	109,518		(3)	79,730		(4)	115,791		(5)
Interest expense, net(6)	131,023			128,821			132,809			136,557			134,374
Loss from continuing operations before income tax expense (benefit) and cumulative effect of accounting change	(47,796		)	(36,311		)	(70,976		)	(51,068		)	(23,446		)
Loss from continuing operations before cumulative effect of accounting change	(47,795		)	(28,241		)	(4,923		)	(99,502		)	(21,410		)
Gain (loss) from discontinued operations, net(7)	21,600		(8)	(143,389		)(9)	(6,210		)	3,577			(12,136		)(10)
Cumulative effect of accounting change, net				(1,600		)(11)	—			—			(86,600		)(10)
Net loss	(26,195		)	(173,230		)	(11,133		)	(95,925		)	(120,146		)
Balance sheet data (at year end):
Working capital(12)	$	(40,527	)	$	(74,064	)	$	(72,738	)	$	(60,857	)	$	(19,911	)
Net property, plant and equipment	330,039			336,248			358,872			380,503			422,371
Total assets(12)	844,686			872,639			1,049,795			1,147,498			1,134,998
Long-term debt (including current portion)	1,096,041			1,049,059			1,024,035			1,051,917			1,092,972
Accumulated deficit	(953,090		)	(926,895		)	(753,661		)	(742,512		)	(646,579		)
Other stockholder’s equity	403,007			401,017			405,101			400,314			396,587
Total stockholder’s deficit	(550,083		)	(525,878		)	(348,560		)	(342,198		)	(249,992		)
Other data:
Capital expenditures	$	48,985		$	42,197		$	45,636		$	40,195		$	39,638
Cash flows provided by operating activities	11,690			5,693			47,545			89,046			96,719
Cash flows used in investing activities	(28,146		)	(43,765		)	(18,992		)	(40,903		)	(41,412		)
Cash flows provided by (used in) financing activities	20,307			39,332			(29,608		)	(53,176		)	(68,736		)
EBITDA(13)	142,015			155,339			127,263			158,222			190,334
Dividends to parent	—			4			15			—			—
Ratio of earnings to fixed charges	—		(14)	—		(14)	—		(14)	—		(14)	—		(14)

(1) Includes $16.0 million of restructuring expenses.

(2) Includes $17.1 million of restructuring expenses.

(3) Includes $4.5 million of restructuring expenses.

(4) Includes $14.6 million of restructuring expenses.

(5) Includes $16.6 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.

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(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 January 1, 2002, we adopted Statement of Financial Accounting Standards (“SFAS”) No. 142 (“SFAS 142”). Under this statement, goodwill and intangible assets with indefinite lives are no longer amortized. Under the transitional provisions of SFAS 142, our goodwill was tested for impairment as of January 1, 2002. Each of our reporting units fair value was determined based on a valuation study using the discounted cash flow method and the guideline company method. As a result of our impairment test completed in the third quarter of 2002, we recorded an impairment loss of $86.6 million to reduce the carrying value of goodwill to its implied fair value. This amount was reflected as a cumulative effect of accounting change. Additionally, a $21.8 million impairment loss was recorded by our European Subsidiaries and is included in the loss from discontinued operations. Impairment in both cases was due to a combination of factors including operating performance and acquisition price.

(11) 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.

(12) 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. The amount sold under these facilities, net of retained interest, was $130.0 million at December 31, 2006, 2005 and 2004, $122.5 million at December 31, 2003, and $125.9 million at December 31, 2002. These amounts are reflected as reductions of Accounts receivable, net on our consolidated balance sheet included elsewhere in this Annual Report.

(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,
	2006			2005			2004			2003			2002
	(in thousands)
Loss from continuing operations before cumulative effect of accounting change	$	(47,795	)	$	(28,241	)	$	(4,923	)	$	(99,502	)	$	(21,410	)
Interest expense, net	131,023			128,821			132,809			136,557			134,374
Income tax (benefit) expense	(1		)	(8,070		)	(66,053		)	48,436			(2,036		)
Depreciation and amortization of intangibles	58,788			62,829			65,430			72,731			79,406
EBITDA	$	142,015		$	155,339		$	127,263		$	158,222		$	190,334

(14) Earnings were inadequate to cover fixed charges by $48.3 million, $36.5 million, $71.0 million, $51.3 million and $23.5 million for the years ended December 31, 2006, 2005, 2004, 2003, and 2002, respectively. See Exhibit 12.1 to this Annual Report for this computation. Net loss for the years ended December 31, 2006, 2005, 2004, 2003, and 2002, includes $58.8 million, $62.8 million, $65.4 million, $72.7 million and $79.4 million, respectively, of non-cash depreciation and amortization expense.

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ITEM 7MANAGEMENT’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, 2006. The analysis is based on the consolidated financial statements and related notes that are included elsewhere in this Annual Report, prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).

Introductory Overview

Executive Summary

Vertis, Inc. is a marketing partner to a wide array of clients, including many of today’s Fortune 500 companies. We offer world-class consulting, creative, research, direct mail, media, technology and production services. Our marketing and printing heritage affords us the greatest experience in managing large, complicated, time-sensitive assignments.

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 products and various targeted direct marketing services. 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.

On May 31, 2006, we acquired USA Direct for $21.0 million in cash. USA Direct, Inc. (“USA Direct”) is a full-service provider of direct marketing services based in York, Pennsylvania. The acquisition of USA Direct provides us with a strategic complement to our existing direct marketing product offerings by expanding the flexibility and range of products, especially in small to mid-sized quantities, and adding capacity to our core manufacturing capabilities including digital, conventional and in-line printing.

On September 8, 2006, we entered into an agreement to sell our fragrance business, which included two presses and the Company’s 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 marketing product lines.

We use independent third-party source materials to track statistics pertaining to advertising growth. Based on these publications, projections for 2006 domestic advertising spending indicated growth ranging from 4.7% to 5.6%. U.S. advertising growth estimates for 2007 range from 2.6% to 4.8%. Advertising growth percentages include all forms of advertising, not exclusively print advertising, as those statistics are not tracked separately.

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. These factors contributed to the volume and pricing declines at our Advertising Inserts segment in 2006 and were the primary drivers of the year-over-year decline in Advertising Inserts revenue of 1.7% and the year-over-year decline in Advertising Inserts EBITDA of 5.9%. The challenging conditions in Advertising Inserts, specifically the industry-wide dynamics around pricing as well as the intense competitive pressure to maintain and grow sales volume, are expected to continue. We posted 12.6% revenue growth in Direct Mail of which 6.8% was due to the acquisition of USA Direct discussed below. Direct Mail EBITDA was essentially flat versus 2005, with a decline in pricing and higher costs offsetting the increase in revenue. We expect volume growth in Direct

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Mail to continue. Although Premedia revenue and EBITDA both declined in 2006, we expect this business to stabilize in the near-term.

Our 2006 performance fell short of expectations and potential, primarily resulting from the unique circumstances resulting from certain cost reductions, reorganizations, and order management changes which were initiated during 2006.

Our focus in 2007 is to begin to transform Vertis into a customer focused well-managed world class business. We are investing in people, processes and our customers while launching several key initiatives aimed at dramatically improving Vertis’ performance over the long term. We will accomplish this by further strengthening our foundation of quality printing and value added services capabilities and focusing our efforts on understanding and exceeding our customers’ expectations. These important initiatives are aimed at reversing the negative trends we have experienced over the past several years and allow us to dramatically improve performance in the future.  The amendment to our revolving senior credit facility (the “Credit Facility”) will facilitate these investments as well as increases in maintenance and other infrastructure costs, if needed, by increasing liquidity and lowering the financial covenant.

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 2006 restructuring activities yielded year-over-year savings of approximately $18.9 million.

Liquidity continues to be a primary focus. At December 31, 2006, we had approximately $90.8 million available to borrow under our Credit Facility, our primary source of funds. In May 2006, we amended our Credit Facility allowing for an increase in the maximum availability from $200 million to $220 million. Under this amendment, the availability under the Credit Facility would have decreased in stages based on a schedule set forth by the Credit Facility agreement, ultimately reaching $200 million by December 31, 2007. In March 2007, we amended the Credit Facility to provide that the maximum availability under the Credit Facility will increase to $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 term loan. Under the Credit Facility, we are subject to a minimum EBITDA covenant requiring us to maintain EBITDA, as defined by the Credit Facility, of $160 million on a trailing twelve-month basis as of December 31, 2006. As of December 31, 2006, we were in compliance with all of our covenants, financial or otherwise. Under the March 2007 amendment to the Credit Facility, the EBITDA required under the covenant is $125 million on a trailing twelve-month basis. 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 2007, including results from January and February, we believe we will be in compliance in the upcoming year.

The Company continues to be highly leveraged. However, as a result of the refinancing of our revolving credit facility and other refinancings over the last few years, no significant debt repayments are due until 2008 and beyond.

Capital expenditures amounted to approximately $49.0 million, $42.2 million and $45.6 million in 2006, 2005 and 2004, 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 2007 to be essentially the same as in 2006.

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 2006 revenue, 23.8% of revenue was generated in the first quarter, 23.9% in the second, 24.0% in the third and 28.3% in the fourth. Profitability continues to follow a more seasonal pattern due to the higher margins and efficiencies

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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. 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.

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 its other direct marketing product lines.

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.

As of December 31, 2006, we had received proceeds of $41.1 million related to the sale of our fragrance business, and estimate the total proceeds from the sale to be $42.1 million, including $1.0 million of proceeds that were held in escrow at year end. A portion of the proceeds held in escrow, $0.5 million, were released to us in January 2007. The remaining $0.5 million will be held in escrow until April 10, 2007, at which time it will be released to us if there have not been any claims filed by the Purchaser. The sale of our fragrance business resulted in a gain on sale of $21.4 million, which is included in Income (loss) from discontinued operations on our consolidated statements of operations included elsewhere in this Annual Report. We estimate the total gain on the sale to be $21.9 million, including the $0.5 million of proceeds held in escrow to be released in April 2007, which are included in Other current liabilities on our consolidated balance sheet at December 31, 2006 included elsewhere in this Annual Report.

Revenue from the fragrance business, which was reported under our Direct Mail segment, was $26.7 million, $40.2 million and $32.3 million for the twelve months ended December 31, 2006, 2005, and 2004 respectively. The net income from the fragrance business was $1.1 million, $5.4 million and $4.0 million for twelve months ended December 31, 2006, 2005, and 2004 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.

In 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. 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 European segment. These amounts are included

19

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, $147.2 million and $10.2 million for the years ended December 31, 2006, 2005 and 2004, respectively, and is included in discontinued operations on our consolidated financial statements. 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 years ended December 31, 2005 and December 31, 2004, was $100.0 million and $138.6 million, respectively. 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

In 2006, we began a restructuring program (the “2006 Program”) to address the continuing issue of industry-wide overcapacity and streamline operations to capitalize on operating efficiencies and improve productivity and consistency, thus reducing our overall cost base. Under the 2006 program, restructuring actions 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. Cost savings achieved in 2006 as a result of the 2006 Program were approximately $18.9 million, $17.8 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 2006 Program are estimated to be approximately $32.1 million, $29.8 million of which relate to expected staffing cost savings and $2.3 million related to facility costs savings.

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 estimate 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 aggregate severance costs allocated to the segments based on percentages established by management. The severance costs are related to the elimination of 31 shared services positions and the facilities costs represent accretion expense.

Liabilities for severance costs related to future restructurings are not accrued as the amounts cannot be reasonably estimated. We are continuously evaluating the need to implement restructuring programs to rationalize our costs and improve operating efficiency. It is likely that we will incur additional restructuring costs in 2007 in an on-going effort to achieve these objectives.

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Our 2005 restructuring program (the “2005 Program”) aimed at regionalizing and streamlining operations to capitalize on operating efficiencies and improve productivity and consistency, and reducing our overall cost base. The 2005 Program included reductions in work force of approximately 490 employees; the closure of six premedia facilities, one advertising inserts warehouse, and two advertising inserts regional offices, some of which are associated with the consolidation of operations; and the transfer of certain positions. The total cost associated with actions taken under the 2005 Program was $19.9 million (net of estimated sublease income of $1.3 million), approximately all of which were recorded in 2005. The execution of the 2005 Program was complete as of December 31, 2005. Included in the 2005 Program, were restructuring costs of $3.5 million related to reductions in workforce of approximately 130 employees in our Vertis Europe segment. These costs are included in the loss from discontinued operations on our consolidated statement of operations included elsewhere in this Annual Report.

In the year ended December 31, 2005, under the 2005 Program, 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 aggregate severance costs allocated to the segments based on percentages established by management. These severance costs are related to the elimination of approximately 50 shared services positions for which the costs are allocated to the segments on a monthly basis.

In 2004, the Advertising Inserts segment recorded $0.2 million in severance costs. Corporate and Other recorded $0.3 million in severance costs due to headcount reductions of approximately 50 employees, and $3.5 million in facility closure costs. These costs were associated with our 2003 restructuring program, which included the closure of facilities, some of which were associated with the consolidation of operations; transfer of certain positions to the corporate office; reductions in work force of approximately 260 employees; and the abandonment of assets associated with vacating these premises. Additionally, in 2004 we announced an amendment of an executive level employment agreement resulting in an estimated cost of $1.2 million. Corporate and Other recorded $0.5 million in restructuring costs in 2004 related to this amendment. Europe recorded $2.4 million in restructuring costs in 2004, which are included in the loss from discontinued operations on our consolidated statement of operations.

In connection with our restructuring actions discussed above, we recorded $16.0 million, $17.1 million, and $4.5 million of restructuring charges in the years ended December 31, 2006, 2005 and 2004, respectively. We expect to pay $4.2 million of the accrued restructuring costs in 2007 and the remainder, approximately $4.0 million, by 2011. 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.

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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. Changes in the cost of paper do not materially impact our net earnings since we are generally able to pass on increases in the cost of paper to our customers, 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.

Also affecting year-over-year comparability is the acquisition of USA Direct in May 2006. See Note 6 to our consolidated financial statements included elsewhere in this Annual Report for further discussion. The USA Direct results of operations are included in our Direct Mail segment in 2006 from the date of acquisition.

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

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
	2006			2005			2004			2006		2005		2004
	(in thousands)
Revenue	$	1,468,661		$	1,470,088		$	1,474,359		100.0	%	100.0	%	100.0	%
Costs of production	1,160,392			1,140,582			1,137,216			79.0	%	77.6	%	77.2	%
Selling, general and administrative	142,916			149,395			157,694			9.7	%	10.2	%	10.7	%
Restructuring charges	16,001			17,119			4,501			1.1	%	1.1	%	0.3	%
Depreciation and amortization of intangibles	58,788			62,829			65,430			4.0	%	4.3	%	4.4	%
Total operating costs	1,378,097			1,369,925			1,364,841			93.8	%	93.2	%	92.6	%
Operating income	$	90,564		$	100,163		$	109,518		6.2	%	6.8	%	7.4	%
Other data:
Cash flows provided by operating activities	$	11,690		$	5,693		$	47,545
Cash flows used in investing activities	(28,146		)	(43,765		)	(18,992		)
Cash flows provided by (used in) financing activities	20,307			39,332			(29,608		)
EBITDA	142,015			155,339			127,263			9.7	%	10.6	%	8.6	%

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

·interest expense (net of interest income)

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·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,
	2006			2005			2004
	(in thousands)
Loss from continuing operations before cumulative effect of accounting change	$	(47,795	)	$	(28,241	)	$	(4,923	)
Interest expense, net	131,023			128,821			132,809
Income tax benefit	(1		)	(8,070		)	(66,053		)
Depreciation and amortization of intangibles	58,788			62,829			65,430
EBITDA	$	142,015		$	155,339		$	127,263

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.

At our Advertising Inserts segment, 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. The primary changes in Advertising Inserts revenue are as follows:

	Revenue
	(in thousands)
2005	$	1,048,417
Increase (decrease):
Volume	(12,738		)
Pricing(1)	(9,066		)
Paper(2)	3,858
Total revenue change	(17,946		)
2006	$	1,030,471

(1)Includes product, customer and equipment mix.

(2)See “Factors Affecting Comparability” section.

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

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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 continue to represent approximately 85% and 13%, respectively, of total Advertising Inserts revenue.

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

At our Direct Mail segment, 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. The primary changes in Direct Mail revenue are as follows:

	Revenue
	(in thousands)
2005	$	293,814
Increase (decrease):
Volume	11,526
Pricing(1)	10,187
Paper(2)	1,678
Other	13,589
Total revenue change	36,980
2006	$	330,794

(1)   Includes product, customer and equipment mix.

(2)   See “Factors Affecting Comparability” section.

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, approximately $16.9 million, reflects increased volume and Pricing. More than 100% of the increase in Pricing was the result of a change in product mix which necessitated an increase in contract services.  As such, the increase in revenue from Pricing did not result in an increase in EBITDA as contract services are largely a pass-through. We expect revenue growth in Direct Mail to continue in the near-term.

Our Direct Mail business serves a diverse group of clients across a broad array of production capabilities. The major end-user groups posting year-over-year revenue growth were financial, healthcare, and consumer goods, partially offset by declines in automotive and entertainment.

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.

See also “Segment Performance” for a discussion of EBITDA by segment.

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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.

Segment Performance

Set forth below is a discussion of the performance of our business segments based on 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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At the Advertising Inserts segment, EBITDA amounted to $117.9 million for the year ended December 31, 2006, a decrease of $7.4 million, or 5.9%, compared to $125.3 million in the comparable 2005 period. The primary changes in EBITDA are as follows:

	EBITDA
	(in thousands)
2005		$	125,294
Increase (decrease) in EBITDA:
Volume		(6,280		)
Pricing(1)		(9,008		)
Variable Costs, rate adjusted(2)		(2,123		)
Fixed Costs(3)		1,341
Selling, general and administrative(4)		6,593
Restructuring charges		2,067
Total EBITDA change		(7,410		)
2006		$	117,884

(1)Includes product, customer and equipment mix.

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

(3)Primarily related to decreased staffing costs offset by increased maintenance costs.

(4)Primarily related to decreased staffing costs.

At the Direct Mail segment, EBITDA amounted to $36.6 million for the year ended December 31, 2006, a decrease of $0.1 million, or 0.2%, compared to $36.7 million in the comparable 2005 period. The primary changes in EBITDA are as follows:

	EBITDA
	(in thousands)
2005		$	36,652
Increase (decrease) in EBITDA:
Volume		8,427
Pricing(1)		(3,818		)
Variable Costs, rate adjusted(2)		(2,461		)
Fixed Costs(3)		(4,016		)
Selling, general and administrative(4)		1,930
Restructuring charges		386
Other(5)		(535		)
Total EBITDA change		(87		)
2006		$	36,565

(1)Includes product, customer and equipment mix.

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

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

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

(5)Principally, the decline in EBITDA for our fulfillment and other businesses.

Corporate and Other recorded an EBITDA loss of $12.4 million for the year ended December 31, 2006, an increase of $5.8 million, or 87.9%, compared to a $6.6 million EBITDA loss for the year ended December 31, 2005. This change is primarily the result of the decline in Premedia revenue discussed above.

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Results of Operations—2005 compared to 2004

Revenue

For the year ended December 31, 2005, our consolidated revenue decreased $4.3 million, or 0.3%, from $1,474.4 million in 2004 to $1,470.1 million in 2005.

At our Advertising Inserts segment, revenue decreased $12.7 million, or 1.2%, from $1,061.1 million for the year ended December 31, 2004 to $1,048.4 million for the year ended December 31, 2005. The primary changes in Advertising Inserts revenue are as follows:

	Revenue
	(in thousands)
2004		$	1,061,141
Increase (decrease):
Volume		(49,676		)
Pricing(1)		11,171
Paper(2)		27,026
Other(3)		(1,245		)
Total revenue change		(12,724		)
2005		$	1,048,417

(1)Includes product, customer and equipment mix.

(2)See “Factors Affecting Comparability” section.

(3)Includes a decrease in revenue resulting from the impact of the revision to our print revenue recognition policy (see “Revenue Recognition’’ section).

At our Direct Mail segment, revenue increased $12.9 million, or 4.6%, from $280.9 million for the year ended December 31, 2004 to $293.8 million for the year ended December 31, 2005. The primary changes in Direct Mail revenue are as follows:

	Revenue
	(in thousands)
2004		$	280,909
Increase (decrease):
Volume		696
Pricing(1)		11,276
Paper(2)		727
Other(3)		206
Total revenue change		12,905
2005		$	293,814

(1)Includes product, customer and equipment mix.

(2)See “Factors Affecting Comparability” section.

(3)Includes the change in revenue in our fulfillment and other businesses.

Corporate and Other revenue decreased $3.2 million, or 2.3%, from $141.9 million for the year ended December 31, 2004 to $138.7 million for the year ended December 31, 2005. The primary changes in Corporate and Other revenue are due to lower Premedia revenue partially offset by increased Media Services revenue and revenue from our integrated data solutions group which helps customers analyze data to more effectively target their advertising products.

See also “Segment Performance” for a discussion of EBITDA by segment.

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Operating Expenses

For the year ended December 31, 2005, our consolidated costs of production increased $3.4 million, or 0.3%, from $1,137.2 million in 2004 to $1,140.6 million in 2005. The increase in costs of production is attributable to increases in paper, labor costs, freight expense, utilities and rent expense.  Offsetting these increased costs were decreases in ink and other materials consumed, contract services, repairs and maintenance, property taxes and other supplies used in the production process. Additionally, in relation to the revision to our print revenue recognition policy and our maintenance parts capitalization policy, decreases in costs of production of $9.8 million and $6.2 million, respectively, were recognized in 2005 (see Note 3 to the consolidated financial statements included in this Annual Report). The remainder of the change is due to fluctuations in various miscellaneous costs of production.

Selling, general and administrative expenses decreased $8.3 million, or 5.3%, for the year ended  December 31, 2005, from $157.7 million in 2004 to $149.4 million in 2005. The decrease is due to decreases in staffing costs, and rent expense offset by increases in telecommunications expense, contract services, supplies utilized and bad debt expense due to a $2.0 million write-off of amounts owed to us by a bankrupt customer. 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, 2005 totaled $17.1 million as compared to $4.5 million in 2004. See the “Restructuring” section for a detailed discussion of restructuring charges.

Other Expenses (Income)

Other, net decreased $40.0 million for the year ended December 31, 2005 from $47.7 million in 2004 to $7.7 million in 2005. This decrease is primarily due to a $44.0 million non-cash loss recorded in 2004 related to the termination of our leasehold interest in five real estate properties in two lease-leaseback transactions entered into in 1998 (see “Sources of Funds” 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 $28.2 million for the year ended December 31, 2005, an increase in loss of $23.3 million compared to a loss of $4.9 million for the year ended December 31, 2004. 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). Included in the 2004 loss is the $44.0 million loss from the termination of leasehold interests offset by a $66.7 million tax benefit related to the loss. Excluding these items, loss from continuing operations before cumulative effect of accounting change increased $7.7 million, or 38.7% in 2005 as compared to 2004. Included in this increase is a $12.6 million increase in restructuring charges, the components of which are discussed above. The balance of the increase in loss from continuing operations reflects the aforementioned changes in revenue and costs, as discussed above. See also “Segment Performance” below.

Segment Performance

Set forth below is a discussion of the performance of our business segments based on EBITDA, which is the measure reported to our chief operating decision makers 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 FASB Statement No. 131, “Disclosure about Segments of an Enterprise and

28

Related Information”, is contained in the notes to our consolidated financial statements included elsewhere herein.

At the Advertising Inserts segment, EBITDA amounted to $125.3 million for the year ended December 31, 2005, a decrease of $18.1 million, or 12.6%, compared to $143.4 million in the comparable 2004 period. The primary changes in EBITDA are as follows:

	EBITDA
	(in thousands)
2004		$	143,403
Increase (decrease) in EBITDA:
Volume		(24,875		)
Pricing(1)		18,899
Variable Costs, rate adjusted(2)		(16,214		)
Fixed Costs(3)		10,129
Selling, general and administrative(4)		1,511
Restructuring charges		(7,559		)
Total EBITDA change		(18,109		)
2005		$	125,294

(1)Includes product, customer and equipment mix.

(2)Primarily related to an increase in utilities, labor and packaging materials as well as the impact of the change in our print revenue recognition and our maintenance parts capitalization policies (see Note 3 to the consolidated financial statements included elsewhere in this Annual Report.

(3)Primarily related to decreased repair and maintenance costs and a decrease in property taxes offset by a increase in labor costs.

(4)Primarily related to decreased staffing costs.

At the Direct Mail segment, EBITDA amounted to $36.7 million for the year ended December 31, 2005, an increase of $1.6 million, or 4.6%, compared to $35.1 million in the comparable 2004 period. The primary changes in EBITDA are as follows:

	EBITDA
	(in thousands)
2004	$	35,106
Increase (decrease) in EBITDA:
Volume	848
Pricing(1)	10,685
Variable Costs, rate adjusted(2)	(1,818		)
Fixed Costs(3)	(2,580		)
Selling, general and administrative(4)	(1,318		)
Restructuring charges	(2,043		)
Other(5)	(2,228		)
Total EBITDA change	1,546
2005	$	36,652

(1)Includes product, customer and equipment mix.

(2)Primarily related to increased cost of materials used in production and increased utilities expense.

(3)Primarily related to increased staffing and rent expense offset by a decline in repairs and maintenance.

(4)Primarily related to increases in supplies consumed and contract services.

(5)Includes changes in EBITDA for our fulfillment and other businesses.

29

Corporate and Other recorded an EBITDA loss of $6.6 million for the year ended December 31, 2005, a decrease in loss of $44.6 million, or 87.1%, compared to a $51.2 million EBITDA loss for the year ended December 31, 2004. The change is primarily the result of a loss of $44.0 million was incurred in 2004 from the termination of our leasehold interest in real estate properties. The remainder of the change was primarily driven by the Premedia revenue decline partially offset by increased Media Services revenue and revenue from our integrated data solutions group discussed above.

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.

We believe that the debt facilities in place, including the March 2007 amendment to our Credit Facility discussed below, as well as our cash flows, will be sufficient to meet operational needs (including capital expenditures, restructuring costs and interest payments) for the next twelve months and beyond. At December 31, 2006, we had approximately $90.8 million available to borrow under the Credit Facility.

In May 2006, we amended our Credit Facility to allow for an increase in the maximum availability from $200 million to $220 million. Under this amendment, the availability under the Credit Facility would have decreased in stages based on a schedule set forth by the Credit Facility agreement, ultimately reaching $200 million by December 31, 2007. In March 2007, we amended the Credit Facility to provide that the maximum availability under the Credit Facility will increase to $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 term loan.

At December 31, 2006, the maximum availability under the Credit Facility was $220 million, 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 to the consolidated financial statements included elsewhere in this Annual Report); and 55% of eligible machinery, equipment and owned real estate. The eligibility of such assets included in the calculation is set forth in the credit agreement.  At December 31, 2006, the Company’s borrowing base was calculated to be $248.4 million.

Per the March 2007 amendment, the maximum availability under the Credit Facility will be limited to a borrowing based 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 to the consolidated financial statements included elsewhere in this Annual Report); 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. 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 in Note 11 to the consolidated financial statements, is in excess of $180 million on a quarterly trailing twelve-month basis. The Agent is not required to obtain written consent when Compliance EBITDA on a quarterly trailing twelve-month basis is less than $180 million. However, the Credit Facility requires the Company to maintain Compliance EBITDA as set forth under the credit agreement. The Compliance EBITDA covenant at December 31, 2006 was $160 million on a trailing twelve-month basis. At December 31, 2006, the Company’s trailing twelve-month Compliance EBITDA as calculated under the credit agreement was $169.4 million. The Compliance EBITDA covenant set forth in the March 2007 amendment to the Credit Facility is

30

$125 million on a trailing twelve-month basis through December 2008. 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. At December 31, 2006, the Company was in compliance with its debt covenants.

The Company has debt instruments that mature in 2008 and 2009 in the amounts of $112.9 million and $993.5 million, respectively. There can be no assurance that our operations will generate sufficient cash flows or that we will always be able to refinance our current debt. In the event we are unable to obtain sufficient financing, we would pursue other sources of funding such as debt offerings by Vertis Holdings, equity offerings by us and/or Vertis Holdings or asset sales.

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, 2006 and the periods in which payments are due:

			Less than						After
Contractual Obligations	Total		1 year		1-3 years		3-5 years		5 years
	(In thousands)
Long-term debt	$	1,106,380	$	5	$	1,106,375
Interest payments(1)	287,016		111,809		175,207
Operating leases	97,451		25,591		34,092		$	21,785	$	15,983
Restructuring payments(2)	3,194		2,429		765
Pension payments(3)	25,783		2,690		5,604		5,438		12,051
Total contractual cash obligations	$	1,519,824	$	142,524	$	1,322,043	$	27,223	$	28,034

(1)Interest payments relate only to the interest on the Company’s debt for which the interest rate is fixed. The amount excludes interest owed under the Company’s revolving credit facility, for which the interest rate fluctuates. For further discussion, see Note 11 to the consolidated financial statements included in this Annual Report. The balance of the revolving credit facility at December 31, 2006 was $112.9 million and the weighted-average interest rate was 8.30%.

(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.

In 2006, we renegotiated all contracts that had previously subjected us to target minimum quantities, which were mainly contracts covering the purchase of ink and press supplies (i.e. plates, blankets, solutions). Under the new contracts, there are no minimum purchase amounts required. No such contracts were entered into in 2006. As of December 31, 2006, 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, 2006, the Company’s defined benefit plans are underfunded. Under the new 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 $1.5 million per year for our qualified defined benefit plans.

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Debt Financing

Our Credit Facility, which matures on December 22, 2008, the outstanding 9 3/4% notes due April 1, 2009, the outstanding 10 7/8% notes due June 15, 2009, and the outstanding 13 1/2% 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, 2006 was $160 million on a trailing twelve-month basis. At December 31, 2006, our trailing twelve-month Compliance EBITDA as calculated under the credit agreement was $169.4 million. The Compliance EBITDA covenant set forth in the March 2007 amendment to the Credit Facility 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, 2006, 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 2007, including actual results for January and February, we believe we will be in compliance in the upcoming year. 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

In December 2002, we entered into a three-year agreement, which was due to expire on November 30, 2005, to sell substantially all trade accounts receivable generated by subsidiaries in the U.S. (the “2002 Facility”) through the issuance of $130.0 million variable rate trade receivable backed notes. In November 2005, we entered into a new $130 million three-year revolving trade receivables facility (the “A/R Facility”) terminating in December 2008. Funds advanced pursuant to the A/R Facility were used by us to pay off the remaining obligations under and terminate the 2002 Facility.

Under the A/R Facility, as well as the 2002 Facility previously in place, 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 $3.0 million in 2006 and 2005, 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 sold 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 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, 2006, we are in compliance with all targets and covenants under the A/R Facility.

At December 31, 2006 and 2005, accounts receivable of $130.0 million had been sold under the A/R Facility and as such are reflected as reductions of accounts receivable. At December 31, 2006 and 2005, we retained an interest in the pool of receivables in the form of overcollateralization and cash reserve accounts of $92.3 million and $71.8 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

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proceeds from collections reinvested in securitizations amounted to $1,680.3 million and $1,595.7 million in 2006 and 2005, 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 under the A/R Facility and 90 basis points under the 2002 Facility. 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 $6.5 million in 2006, $5.2 million in 2005 and $3.1 million in 2004, and is included in Other, net.

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 $40.5 million at December 31, 2006 and by $74.1 million at December 31, 2005. This represents an increase in working capital of $33.6 million for the year ended December 31, 2006. The excess of current liabilities over current assets reflects the impact of accounts receivable sold under the A/R Facility. We use the proceeds from those accounts receivable sales to reduce long-term borrowings under our revolving credit facility. After the sale of all trade accounts receivable, however, we still retain an interest in the receivables in the form of over-collateralization and cash reserve accounts, and we have been contracted to service the receivables. Therefore, if we add back $130.0 million of accounts receivable sold under the A/R Facility as of both December 31, 2006 and 2005, and reflect the offsetting increase in long-term debt as if the A/R Facility were not in place, our working capital at December 31, 2006 and 2005 would have been $89.5 million and $55.9 million, respectively. The ratio of current assets to current liabilities as of December 31, 2006 was 0.85 to 1 (1.34 to 1, excluding the impact of the A/R Facility) compared to 0.76 to 1 as of December 31, 2005 (1.18 to 1, excluding the impact of the A/R Facility).

In the year ended December 31, 2006, cash used for working capital, adjusted for acquisitions and divestitures, was $37.0 million. This was $24.1 million higher than the cash used in the year ended December 31, 2005. The 2006 increase was primarily driven by increases in accounts receivable in our Advertising Inserts and Direct Mail segments related to the timing of cash receipts and increases in working capital in our Media Services business to more normal levels in 2006 compared to 2005.

Summary of Cash Flows

Cash Flows from Operating Activities

Net cash provided by continuing operating activities in 2006 increased by $6.0 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.

Net cash provided by continuing operating activities in 2005 decreased by $41.9 million from the 2004 level. This decrease 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 for 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

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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.

Net cash used for investing activities in 2005 increased by $24.8 million from the 2004 level, primarily due to the $31.1 million in proceeds received in 2004 from the termination of our leasehold interest in real estate properties (see “Sources of Funds” section), and $3.4 million in expenditures in 2005 related to our acquisition of Elite (see Note 6 to our financial statements included elsewhere within this Annual Report).  Offsetting these amounts is $2.4 million in net proceeds received from the sale of our Vertis Europe segment. Additionally, included in the change in cash used in investing activities is a $3.7 million decrease associated with investing activities of our discontinued operations.

Cash Flows from Financing Activities

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 revolving credit facility which reflects the relative levels of cash provided by operating activities and capital expenditures in each respective year. Additionally, financing activities of our discontinued operations contributed $1.6 million of this fluctuation.

In 2005, net cash provided by financing activities was $39.3 million as compared to a $29.6 million net usage of cash in 2004. Financing activities of our discontinued operations contributed $16.2 million of this fluctuation. The majority of the remainder relates to funding fluctuations under our revolving credit facility which reflect the relative levels of cash provided by operating activities and capital expenditures in each respective year.

Other Factors

During 2006, we used $32.2 million of our U.S. capital loss carryovers as a result of the sale of our fragrance business (See “Discontinued Operations”). The transaction reduced our capital loss carryforward to $104.8 million as of December 31, 2006.

At the end of 2006 our federal net operating loss carryforwards were $261.1 million. The carryforwards expire beginning in 2007 through 2027.

Our valuation allowance related to our deferred tax asset, which was $132.5 million at the beginning of 2006, was decreased by $3.9 million to $128.6 million at the end of 2006. 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.

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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.

During 2004, the Company recorded a tax benefit of $66.7 million from the termination of the Company’s leasehold interest in the same real estate properties that were the subject of the Company’s 2005 IRS settlement (see Note 10 for further discussion).

New Accounting Pronouncements

In February 2006, the FASB issued 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 is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. The adoption of this statement is not expected to have a material impact on our 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 are effective for us in the reporting period beginning January 1, 2007. The adoption of this statement is not expected to have a material impact on our results of operations or financial position.

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109” (“ FIN 48”), which clarifies the accounting and disclosure for uncertainty in tax positions, as defined. FIN 48 is intended to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for income taxes. This interpretation is effective for us for fiscal years beginning after December 15, 2006. The cumulative effect of applying this interpretation must be reported as an adjustment to the opening balance of our stockholder’s deficit in 2007. We are currently evaluating the impact of FIN 48 on our consolidated financial statements and anticipate the adjustment to our stockholder’s deficit will not be material.

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

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beginning after November 15, 2007.   We are not able to assess at this time the future impact of this Statement on our consolidated financial position or results of operations.

In September 2006, the FASB issued SFAS No. 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”). SFAS 158 requires an employer that sponsors one or more single-employer defined benefit plans to recognize the overfunded or underfunded status of a benefit plan in its statement of financial position and to recognize as a component of other comprehensive income, net of tax, the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit cost. SFAS 158 also requires an entity to measure defined benefit plan assets and obligations as of the date of its fiscal year-end. Additional footnote disclosures are also required under SFAS 158.  The provisions of this Statement are effective for us as of December 31, 2007. We adopted this statement on December 31, 2006. See Note 14 to our consolidated financial statements included elsewhere in this Annual Report for the impact of the adoption of SFAS 158.

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (“SAB 108”). SAB 108 provides guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. The SEC staff believes that registrants should quantify errors using both a balance sheet and an income statement approach and evaluate whether either approach results in quantifying a misstatement that is material. We were required to apply the guidance in SAB 108 beginning with the financial statements for the year ended December 31, 2006. We adopted this Statement without material impact to our consolidated financial position or results of operations.

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 are not able to assess at this time the future impact of this Statement on our consolidated financial position or results of operations.

Application of Critical Accounting Policies

Our significant accounting policies are described in Note 2 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 which 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

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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 and a $2.9 million decrease in net income for the year ended December 31, 2005. Additionally, unbilled accounts receivable increased by $12.7 million and finished goods inventory balances increased by $9.8 million as a result of the change.

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.

Allowance for Doubtful Accounts

We maintain allowances for doubtful accounts for estimated losses resulting from the failure of our customers to make payments. 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. 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, 2006.

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. 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 estimated market values of the reporting units.

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 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.

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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, 2006. The weighted average discount rate assumed in 2006 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.

Stock Based Compensation

Vertis employees 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. We have options, restricted shares, retained shares and rights outstanding under the Stock Plan at December 31, 2006. We account 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 our financial statements based on their grant date fair values. We 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 effect on our consolidated financial position or results of operations. There have been no changes to our mix of employee compensation or terms of our stock based awards subsequent to our adoption of SFAS 123R in 2006. See Note 16 to our consolidated financial statements for further discussion.

In 2005, we 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 our net income for 2005. No stock-based employee compensation cost was reflected in our net loss for the year ended December 31, 2004. See our consolidated financial statements included elsewhere in this Annual Report.

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 US Prime 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, 2006, 10.2% of our long-term debt held a variable interest rate (19.7% if we include off-balance sheet debt related to the accounts receivable securitization facility, the fees on which are also variable).

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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 $1.8 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, 2006 and does not provide for changes in borrowings that may occur in the future.

ITEM 8FINANCIAL 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 9CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

None.

ITEM 9A 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, 2006. 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. No significant changes were made in our internal controls over financial reporting during the year ended December 31, 2006 that materially affected or are reasonably likely to materially affect our internal controls over financial reporting.

ITEM 9BOTHER INFORMATION

In March 2007, the Company amended the Credit Facility (the “2007 Amendment”). The information regarding the 2007 Amendment contained in “Management's Discussion and Analysis of Financial Condition and results of Operations—Liquidity and Capital Resources—Sources of Funds” is incorporated by reference herein.

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PART III

ITEM 10DIRECTORS, 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	53	Chairman and Chief Executive Officer
Stephen E. Tremblay	48	Chief Financial Officer
Douglas L. Mann	43	Senior Vice President and General Manager—Advertising Inserts
David P. Colatriano	44	Senior Vice President and General Manager—Direct Mail
John V. Howard, Jr.	45	Chief Legal Officer and Secretary
Ann M. Raider	59	Chief Strategy Officer
Gary L. Sutula	62	Chief Information Officer
Donald E. Roland	64	Director
Ciara A. Burnham	40	Director
John T. Dillon	68	Director
Anthony J. DiNovi	44	Director
Soren L. Oberg	36	Director
Scott M. Sperling	49	Director

Michael T. DuBosewas 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.

Stephen E. Tremblay was named Chief Financial Officer of Vertis in February 2005. From May 2003 to February 2005, he served as Senior Vice President Finance and Treasurer of Vertis and from May 1998 to May 2003 he served as Vice President Finance of Vertis. Prior to joining Vertis as Group Controller in 1997, Mr. Tremblay held senior financial management positions with Wellman, Inc. and served as a senior manager at Ernst & Young.

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.

David P. Colatriano was named Senior Vice President and General Manager of Direct Mail in April 2005. Prior to that, he served as Group President of Vertis North America East since August 2003. From June 2000 to August 2003, Mr. Colatriano served as the Group President of the former Direct Marketing Services segment of Vertis. Prior to June 2000 he held numerous positions at Webcraft Inc., beginning in January 1987, including Senior Vice President and General Manager, Vice President of Operations and Division Director. Prior to joining Webcraft, Mr. Colatriano worked as an Industrial Engineer with the Boeing Company.

John V. Howard, Jr. was named Chief Legal Officer and Secretary in February 2005. In July 2000, Mr. Howard was named Senior Vice President¾General 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

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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. Mr. Howard is also a Trustee on the Board of Trustees of the Hammond-Harwood House.

Ann M. Raider joined Vertis in April 2005 as Chief Strategy Officer. Prior to joining Vertis, Ms. Raider served from August 1999 to April 2005 as Senior Vice President of Sales and Marketing at SmartSource Direct, a division of News America Marketing. In addition, Ms. Raider co-founded Consumer Card Marketing, Inc., a loyalty marketing company, and held senior management positions at Shawmut National Corporation, H.P. Hood, and other corporations. Ms. Raider has also served as a marketing consultant to such organizations as Staples and Bank One.

Gary L. Sutula has been Chief Information Officer 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).

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, 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.

Ciara A. Burnham has been a director of Vertis and Vertis Holdings since April 2004. Ms. Burnham is a Senior Managing Director of Evercore Group Holdings, an affiliate of Evercore Partners, an advisory and investment firm. Ms. Burnham originally joined the firm in 1997 and rejoined in 2003. From 2001 through 2003, she was a founding partner of Five Mile Capital Partners, a hedge fund management company. Prior to joining Evercore, she was an equity research analyst with Sanford C. Bernstein & Co., Inc. and previously spent six years in consulting, most recently as an engagement manager at McKinsey & Co., Inc. Ms. Burnham also serves on the Board of Specialty Products & Insulation Co.

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., US LEC Corporation and West Corporation as well as various other private companies.

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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. Mr. Oberg also serves on the audit committee of West Corporation.

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 Houghton Mifflin Company, 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 the organizational meeting of our board of directors following the next annual meeting of our stockholders and until a successor is elected and qualified, or until that officer’s death, resignation, retirement, disqualification 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, comprised of three of its members: Ciara A. Burnham, Soren L. Oberg and Scott M. Sperling. 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 11EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

The following discussion relates to the compensation of Michael T. DuBose, Vertis’ Chairman and Chief Executive Officer; Stephen E. Tremblay, Vertis’ Chief Financial Officer; and the three other most highly compensated executive officers of Vertis (collectively, the “Named Executive Officers”) that were employed by the Company at December 31, 2006.

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Compensation Philosophy

The general philosophy of the Company’s executive compensation program is to attract and retain talented management while ensuring that 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 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 Officer is comprised of the following primary elements:

·base salary,

·annual cash incentive awards,

·discretionary cash bonuses,

·equity based compensation,

·retirement and other benefits and

·perquisites and other personal benefits.

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); 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. The Company utilizes various independent survey sources when performing their review. The predominant survey utilized in 2006 was the Salary Assessor Series published electronically by the Economic Research Institute. The Salary Assessor Series includes the Executive Compensation Assessor, which allows data segmentation by industry classification and annual revenues.

Annual Cash Incentive Compensation

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

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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 EBITDA levels, no cash incentive is typically awarded. However, the Board of Directors (the “Board”) may make exceptions in the case of extraordinary individual achievement. If the Company’s or 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 executive incentive plan (the “EIP”) as of December 31, 2006, the potential bonus payouts for Mr. Tremblay, Mr. Colatriano and Mr. Howard were 50% of base salary, assuming bonus targets under the EIP were met, which can rise to 200% of the target incentive if the Company exceeds its goals. Mr. Sutula’s potential bonus payout as of December 31, 2006, was 40% of his base salary, assuming bonus targets under the EIP were met, which can rise to 200% of the target incentive if the Company exceeds its goals. No payments were made in 2006, 2005 and 2004 under the EIP. The Company may also, at its discretion, compensate the Named Executive Officers with cash bonuses outside of the Company’s EIP for personal achievement. The Company paid discretionary cash bonuses in the first quarter of 2006 of $100,000 each to Mr. Tremblay and Mr. Howard in recognition of performance efforts prior to 2006. In 2005, the Company paid a $200,000 discretionary cash bonus to Mr. Durbin based upon his past performance. The Company did not pay any discretionary cash bonuses to the 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. 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 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 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.

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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 is consistent with those offered to all other employees who meet the eligibility rules of each plan.

·Executive Compensation Deferral Program—The Named Executive Officers, in addition to certain other eligible employees, are entitled to participate in the Company’s deferred compensation plan. Pursuant to the deferred compensation plan, eligible employees can defer up to 100% of earnings from their base annual salary, annual bonus and commissions. The Company may 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 elects to defer compensation, the Named Executive Officer will elect 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 may 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.

·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 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 made available to certain Named Executive Officers: automobile allowance, relocation benefits and temporary housing expenses.

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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.

The following table sets forth the compensation earned by the Named Executive Officers in the year ended December 31, 2006.

Summary Compensation Table

Name and Principal Position	Salary		Stock Awards(1)		Change in Pension Value and Non-Qualified Deferred Compensation Earnings				All Other Compensation Earnings				Total
Michael T. DuBose Chairman and Chief Executive Officer(2)	$	69,231								$	1,980	(3)	$	71,211
Stephen E. Tremblay Chief Financial Officer	322,308		$	865,812		$	4,037	(4)		18,415		(5)	1,210,572
David P. Colatriano Senior Vice President and General Manager—Direct Mail	312,692		614,400			8,149		(6)		16,789		(5)	952,030
Dean D. Durbin Former President and Chief Executive Officer(7)	563,091		2,031,759			27,101		(4)		1,157,449		(8)	3,779,400
John V. Howard, Jr. Chief Legal Officer and Secretary	295,932		614,400			810		(4)		16,588		(5)	927,730
Gary L. Sutula Chief Information Officer	246,092		423,281							11,880		(3)	681,253

(1)Represents grants of restricted shares with a grant date fair value of $20.48 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.

(2)Mr. DuBose was appointed chairman and chief executive officer of Vertis in November 2006. See “DuBose Employment Agreement” section for Mr. DuBose’s annual base salary.

(3)Represents an auto allowance.

(4)Represents the increase in the actuarial present value of the respective Named Executive Officer’s benefit under the SERP. See Note 14 to the consolidated financial statements included elsewhere in this Annual Report for further discussion of the Company’s retirement plans.

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

(6)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.

(7)Mr. Durbin resigned his positions as President and Chief Executive Officer in November 2006.

(8)Represents $1,140,000 in severance accrued for Mr. Durbin under his termination agreement dated January 2, 2007, $10,890 for an auto allowance paid to Mr. Durbin and $6,559 contributed to the Company’s 401(k) plan for Mr. Durbin.

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The following table summarizes the grants in the year ended December 31, 2006 under our equity based compensation plan (see “Equity-Based Compensation” section).

Grants of Plan-Based Awards

		Estimated Future Payouts Under Non-Equity Incentive Plan Awards(1)								All Other Stock Awards: Number of Shares of Stock or		Grant Date Fair
Name	Grant Date	Threshold ($)			Target ($)		Maximum ($)			Units (#)(2)		Value ($)(3)
Michael T. DuBose
Stephen E. Tremblay	March 6, 2006										42,276		$	865,812
			$	165,000	$	165,000		$	330,000
David P. Colatriano	March 6, 2006										30,000		614,400
			157,500		157,500			315,000
Dean D. Durbin(4)	March 6, 2006										99,207		2,031,759
John V. Howard, Jr.	March 6, 2006										30,000		614,400
			149,058		149,058			298,116
Gary L. Sutula	March 6, 2006										20,668		423,281
			98,880		98,880			197,760

(1)These amounts represent the potential bonus payments set forth in the Company’s EIP assuming bonus targets under the EIP, which are based upon the percentages of the achievement of an internally calculated pro forma EBITDA measure, are met. The bonus targets under the EIP were not met for the year ended December 31, 2006 and therefore the Named Executive Officers were not paid these bonuses in 2007.

(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 2006 was $20.48 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. Durbin resigned from the Company in November 2006, therefore there is no estimated future payout for him under the Company’s EIP.

Employment Arrangements with Executive Officers

DuBose Employment Agreement.   The Company is in the process of finalizing an employment agreement with Michael T. DuBose that will contain mutually agreed upon terms and conditions that reflect Mr. DuBose’s employment as Chief Executive Officer and Chairman of the Board. Mr. DuBose is currently receiving an annual base salary of $750,000. All other terms and conditions of his employment are being negotiated.

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 currently serves as Chief Financial Officer. The Tremblay Agreement may be terminated by either Mr. Tremblay or the Company at any time and for any reason. Under the Tremblay Agreement, Mr. Tremblay receives an annual base salary, as adjusted by the Board, and various

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employment benefits. In 2006, Mr. Tremblay received a base salary of $322,308. In addition, Mr. Tremblay received a special, discretionary cash bonus of $100,000, which was paid on March 6, 2006 (“Tremblay Special Bonus”) in recognition of performance efforts prior to 2006. The Tremblay Special Bonus was not considered as salary or bonus for purposes of the Company’s other benefit and compensation plans or for purposes of Mr. Tremblay’s employment agreement. In addition, it did not count in any severance calculations and was distinct from his annual bonus opportunity under the EIP. The Tremblay Agreement also provides that Mr. Tremblay receive an annual bonus targeted at not less than 50% of base salary (assuming bonus targets under the EIP, 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 Tremblay Agreement provides that Mr. Tremblay receive certain fringe benefits, including participation in the SERP. 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.

Colatriano Employment Agreement.   The Company entered into an employment agreement with Dave Colatriano, effective August 15, 2003 (the “Colatriano Agreement”), pursuant to which Mr. Colatriano currently serves as Senior Vice President and General Manager for Direct Mail. The Colatriano Agreement may be terminated by either Mr. Colatriano or the Company at any time for any reason. Under the Colatriano Agreement, Mr. Colatriano receives an annual base salary, as adjusted by the Board, and various employment benefits. In 2006, Mr. Colatriano received a base salary of $312,692. Under the Colatriano Agreement, Mr. Colatriano received a signing bonus of $50,000. The Colatriano Agreement also provides an annual bonus targeted at 50% of his base salary (assuming bonus targets under the EIP, 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.

Durbin Employment Agreement.   The Company entered into an employment agreement with Dean D. Durbin, effective August 30, 2003, which was amended by the parties on March 9, 2006 (the “Durbin Amendment”) (collectively, the “Durbin Agreement”). The Durbin Amendment changed Mr. Durbin’s position to President and Chief Executive Officer of Vertis and adjusted his annual base salary to $570,000. Under the Durbin Agreement, Mr. Durbin received an annual base salary, as adjusted by the Board, and various employment benefits. In 2006, Mr. Durbin received a base salary of $563,091. The Durbin Agreement also provided that Mr. Durbin received an annual bonus targeted at not less than 75% of base salary (assuming bonus targets under the EIP, which are based upon the percentages of the achievements of an internally calculated pro forma EBITDA measure, are met) and which could rise to 200% of the target incentive if the Company exceeds its goals. Additionally, the Durbin Agreement provided that Mr. Durbin receive certain fringe benefits, including participation in the SERP. The Company entered into a Restricted Stock Agreement with Mr. Durbin effective May 20, 2004 pursuant to which Mr. Durbin exchanged certain options to purchase shares of the common stock of the Company for 14,406 restricted shares of common stock of Vertis Holdings.  Mr. Durbin also received a grant of 99,207 restricted shares of common stock of Vertis Holdings pursuant to a Restricted Stock Agreement effective March 6, 2006.

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In connection with Mr. Durbin’s resignation in November 2006, the Company entered into a separation agreement with Mr. Durbin on January 7, 2007. See the “Durbin Severance Arrangement” section for a detailed discussion of this separation agreement.

Howard Employment Agreement.   The Company entered into an employment agreement with John Howard, 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 2006, Mr. Howard received a base salary of $295,932. In addition, Mr. Howard received a special, discretionary cash bonus of $100,000, which was paid on March 6, 2006 (“Howard Special Bonus”) in recognition of performance efforts prior to 2006. The Howard Special Bonus was not considered as salary or bonus for purposes of the Company’s other benefit and compensation plans or for purposes of Mr. Howard’s employment agreement. In addition, it did not count in any severance calculations and was distinct from his annual bonus opportunity under the Company’s EIP. The Howard Agreement also provides that Mr. Howard receive an annual bonus targeted at not less than 50% of base salary (assuming bonus targets under the EIP, 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

Sutula Employment Agreement.   The Company has entered into an employment agreement with Gary L. Sutula dated January 11, 2005 (the “Sutula Agreement”), pursuant to which Mr. Sutula currently serves as Chief Information Officer. The Sutula Agreement may be terminated by either Mr. Sutula or the Company at any time and for any reason. Under the Sutula Agreement, Mr. Sutula receives an annual base salary, as adjusted by the board of directors, and various employment benefits. In 2006, Mr. Sutula received a base salary of $246,092. The Sutula Agreement also provides that Mr. Sutula receive an annual bonus targeted at not less than 40% of base salary (assuming bonus targets under the EIP, 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 Sutula Agreement provides that Mr. Sutula receive certain fringe benefits, including an automobile allowance and relocation assistance. As part of the Sutula Agreement, Mr. Sutula also received a grant of 5,000 restricted shares of common stock of Vertis Holdings, which were granted pursuant to a Restricted Stock Agreement effective February 18, 2005. Mr. Sutula has also received a grant of 20,668 restricted shares of common stock of Vertis Holdings pursuant to a Restricted Stock Agreement effective March 6, 2006.

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The following table sets forth the number of unvested stock awards outstanding at December 31, 2006 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 ($)(3)
Michael T. DuBose
Stephen E. Tremblay	Restricted shares		43,443		$	889,713
David P. Colatriano	Restricted shares		36,683		751,268
	Rights		2,335		73,553
Dean D. Durbin	Restricted shares(2)		113,613		2,326,794
	Rights		6,002		189,063
John V. Howard, Jr.	Restricted shares.		36,610		749,773
Gary L. Sutula	Restricted shares		25,668		525,681

(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)Under Mr. Durbin’s separation agreement, discussed in the “Durbin Severance Arrangement” section, he begins forfeiting any unvested restricted shares on the date of termination, as defined in the separation agreement, and based upon the terms specified in this agreement.

(3)In calculating the market value of restricted shares and rights that have not vested as of December 31, 2006, the Company used a value of $20.48 per share and $31.50 per share, respectively, 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).

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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 ($)
Michael T. DuBose
Stephen E. Tremblay	SERP		9.7		$	4,608
David P. Colatriano	Webcraft Retirement Income Plan(2)		18.2		40,847
	SERP		20.0		72,106
Dean D. Durbin	SERP		9.4		63,606
John V. Howard, Jr.	SERP		8.8		1,659
Gary L. Sutula

(1)The Board has the ability to grant extra years of service under these defined benefit plans at its discretion. As of December 31, 2006, the Board had not granted any extra years of service to the participating Named Executive Officers.

(2)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.

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 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

DuBose Severance Arrangement.   The Company is in the process of finalizing an employment agreement with Michael T. DuBose, which will contain provisions regarding Mr. DuBose’s severance. The terms and conditions of his employment, other than his annual base salary, are still being negotiated.

Tremblay Severance Arrangement.   The Company entered into a severance arrangement with Mr. Tremblay, effective July 1, 2005, under which if Mr. Tremblay’s employment is terminated by the Company without cause, 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.

Colatriano Severance Arrangement.   The employment agreement of David P. Colatriano, described in the “Colatriano Employment Agreement” section, 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.

Durbin Severance Arrangement.   In connection with Mr. Durbin’s resignation in November 2006, the Company entered into a separation agreement with Mr. Durbin on January 7, 2007 (the “Durbin Separation Agreement”). Pursuant to the Durbin Separation Agreement, the Company agreed to provide Mr. Durbin with the severance benefits set forth in this agreement. Mr. Durbin continued his employment with the Company as a non-officer employee through February 28, 2007 (the “Date of Termination”), at which time Mr. Durbin’s employment terminated. Mr. Durbin continued to receive his current base salary and was eligible to participate in all Vertis retirement, health and welfare benefit plans through the Date of Termination. Furthermore, under the Durbin Agreement, Mr. Durbin forfeited on the Date of Termination 40% of his unvested shares of Vertis restricted common stock issued under the Restricted Stock Agreement dated May 20, 2004 and the Restricted Stock Agreement dated March 6, 2006. With respect to the remaining 60% of Mr. Durbin’s unvested shares of restricted common stock, 33% percent shall be forfeited on February 28, 2011, if they have not by such date become vested, and the remainder shall be forfeited equally on a monthly basis over a twenty-four month period commencing on the Date of Termination if they have not earlier become vested.

Additionally, pursuant to the Durbin Agreement, the Company waived its call rights, as provided for in the Amended and Restated Management Subscription Agreement dated August 31, 2003 (the “Subscription Agreement”), exclusive of any drag-along rights (as described and defined in the Subscription Agreement), against 6,002 shares of common stock held or that may be held by Mr. Durbin which the Company otherwise could have exercised upon the termination of Mr. Durbin’s employment with the Company. The Company also agreed to preserve the tag-along rights (as described and defined in the Subscription Agreement) granted to Mr. Durbin in the Subscription Agreement beyond the termination of his employment with the Company.

Howard Severance Arrangement.   The employment agreement of John V. Howard, Jr., described in the “Howard Employment Agreement” section, contain 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 EIP 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

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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 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 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 EIP 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.

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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, 2006.

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 Upon Death or Disability			Termination by the Company for Cause or Termination by the Executive for Other Than Good Reason
Michael T. DuBose
Stephen E. Tremblay		$	330,000
David P. Colatriano		315,000		(1)		$	315,000	(1)
Dean D. Durbin						1,140,000		(2)
John V. Howard, Jr.		897,904				450,730				$	3,556		$	3,556
Gary L. Sutula

(1)Under the Colatriano Severance Arrangement, if Mr. Colatriano remains unemployed at the end of the time period under which he would receive the severance payments above, 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. In the event the maximum amount of severance continuation is provided by the Company, the total severance paid to Mr. Colatriano under both triggering events would be $472,500.

(2)Represents severance set forth in the Durbin Separation Agreement effective January 7, 2007, which was entered into in connection with Mr. Durbin’s resignation from the Company in November 2006.

Compensation of Directors

Michael T. DuBose and Donald E. Roland were the directors of Vertis at December 31, 2006, who were also executive officers of the Company. Neither Mr. DuBose nor Mr. Roland received any additional compensation for service as members of the Board.

All non-employee directors of Vertis, except Michael S. Rawlings, are directly affiliated with either Thomas H. Lee Partners (“THL”) or Evercore Capital Partners (“ECP”), two significant shareholders of Vertis Holdings. Mr. Rawlings was appointed to the Board upon the nomination of THL and ECP pursuant to the Amended and Restated Investors’ Agreement among Vertis Holdings, THL, ECP and others, dated March 23, 2001. With the exception of Mr. Rawlings, as discussed below, 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. See “Certain Relationships and Related Transactions.”

Mr. Rawlings was a Vertis Director at December 31, 2006, however he resigned from this position in February 2007. Prior to his resignation, Mr. Rawlings’ compensation for his service as a director was as follows:

·$50,000 per year for service on the Board,

·$50,000 per year for business consulting services, and

·up to 7,500 shares of restricted stock over a three-year period, subject to the plan’s provisions.

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The following table presents the compensation of the Company’s directors for the year ended December 31, 2006.

Director Compensation

Name	Fees Earned or Paid in Cash			All Other Compensation				Total Compensation
Michael S. Rawlings		$	50,000		$	50,000	(1)		$	100,000

(1)Represents business consulting services

Mr. Rawlings had 5,000 shares of restricted stock outstanding at December 31, 2006. These shares were cancelled in February 2007 when Mr. Rawlings resigned his position as a director of the Company.

Compensation Committee Interlocks and Insider Participation

The Company does not have a compensation committee. Dean Durbin, during the time he was Chief Executive Officer of the Company, served on the Board and participated in deliberations with the Board regarding compensation of executive officers, other than his own compensation. Michael DuBose, current Chief Executive Officer of the Company and Chairman of the Board, began participating in deliberations with the Board regarding compensation of executive officers when he joined the Company, other than his own compensation.

ITEM 12SECURITY 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 28, 2007 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.

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	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		65.1	%
Evercore Capital Partners L.P. and Affiliates(3) 65 East 55th Street, 33rd Floor, New York, NY 10022		2,114,415		15.6	%
Stephen E. Tremblay c/o Vertis, Inc., 250 West Pratt Street, Baltimore, MD 21201		43,443		*
David P. Colatriano(4) c/o Vertis, Inc., 250 West Pratt Street, Baltimore, MD 21201		39,018		*
Dean D. Durbin(5) c/o Vertis, Inc., 250 West Pratt Street, Baltimore, MD 21201		74,170		*
John V. Howard, Jr. c/o Vertis, Inc., 250 West Pratt Street, Baltimore, MD 21201		36,610		*
Gary L. Sutula c/o Vertis, Inc., 250 West Pratt Street, Baltimore, MD 21201		25,668		*
Douglas L. Mann c/o Vertis, Inc., 250 West Pratt Street, Baltimore, MD 21201		7,500		*
Ann M. Raider c/o Vertis, Inc., 250 West Pratt Street, Baltimore, MD 21201		13,267		*
Donald E. Roland(6) c/o Vertis, Inc., 250 West Pratt Street, Baltimore, MD 21201		72,469		*
Anthony J. DiNovi(7) c/o THL Partners, 75 State Street, Boston, MA 02109		7,166,451		52.7	%
Scott M. Sperling(8) c/o THL Partners, 75 State Street, Boston, MA 02109		7,166,451		52.7	%
Soren L. Oberg(9) c/o THL Partners, 75 State Street, Boston, MA 02109		7,146,253		52.6	%
Ciara A. Burnham(10) c/o Evercore Capital Partners, 55 East 52 nd Street, 43 rd Floor, New York, NY 10055		2,114,415		15.6	%
John T. Dillon(11) c/o Evercore Capital Partners, 55 East 52 nd Street, 43 rd Floor, New York, NY 10055		2,114,415		15.6	%
All Directors and Executive Officers of Vertis and Vertis Holdings as a group (14 persons)(12)		356,615		2.6	%

* 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 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.

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(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 rights entitling Mr. Colatriano to 2,335 shares of common stock upon the occurrence of certain sales or liquidation of Vertis Holdings and 36,683 shares of restricted stock that vest immediately prior to a Liquidity Event.

(5) Includes rights entitling Mr. Durbin to 6,002 shares of common stock upon the occurrence of certain sales or liquidation of Vertis Holdings and 68,168 shares of restricted stock that vest immediately prior to a Liquidity Event. Per the Durbin Separation Agreement discussed in the “Durbin Severance Arrangement” section, 45,445 shares of restricted stock were forfeited on February 28, 2007.

(6) 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.

(7) 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.

(8) 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.

(9) 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;

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

(10) 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. Ms. Burnham disclaims beneficial ownership of the shares held by Evercore Capital, Evercore Capital NQ and EBF except to the extent of her pecuniary interest therein.

(11) 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 his pecuniary interest therein.

(12) Includes 95,204 shares of common stock; rights to 28,803 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 231,339 shares of restricted stock that vest immediately prior to a Liquidity Event.

ITEM 13CERTAIN 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. 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. Di Novi, Oberg and Sperling are affiliated with THL and Ms. Burnham and Mr. Dillon are 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 with the closing of the Credit Facility in 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.

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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.

ITEM 14PRINCIPAL 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, 2006 and 2005, and fees billed for other services rendered by Deloitte Entities.

	Year ended December 31,
	2006		2005
	(in thousands)
Audit fees(1)	$	1,295	$	1,214
Audit-related fees(2)	175		550
Tax fees(3)	143		631
Total fees billed	$	1,613	$	2,395

(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 consist mainly of services related to Sarbanes-Oxley Section 404 readiness and agreed-upon procedures engagements.

(3)Tax fees consist of compliance fees for the preparation of the corporate tax returns and assistance on some 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 2006 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-40 hereof.

3.Exhibits

3	.1	Restated Certificate of Incorporation of Vertis, Inc.##
3	.2	Amended and Restated By-Laws of Vertis, Inc.**
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**
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.***
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	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.##
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.^
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.****
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.****
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.****
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.##

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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.##
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.##
10	.8	Termination Agreement, dated November 25, 2005, by and among Manufacturers and Traders Trust Company, not individually but solely as trustee under the Amended and Restated Indenture and Servicing Agreement dated as of December 9, 2002, Vertis Receivables LLC and Vertis, Inc.****
10	.9	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.****
10	.10	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.****
10	.11	Annex X to Receivables Sale and Servicing Agreement and Receivables Funding Administration Agreement dated as of November 25, 2005.****
10	.12	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.##
10	.13	Stock Purchase Agreement dated September 18, 2002 by and between Vertis Holdings and Dean D. Durbin.*†
10	.14	Stock Purchase Agreement dated September 20, 2002 by and between Vertis Holdings and John V. Howard, Jr.*†
10	.15	Employment Agreement dated August 31, 2003 by and between Vertis, Vertis Holdings and Donald Roland.#†
10	.16	Employment Agreement dated August 31, 2003 by and between Vertis, Vertis Holdings and Dean D. Durbin.#†
10	.17	Employment Agreement dated August 31, 2003 by and between Vertis, Vertis Holdings and Herbert W. Moloney III.#†
10	.18	Service Agreement dated August 31, 2003 by and between Vertis Digital Services Limited and Adriaan Roosen.#†
10	.19	Employment Agreement dated August 31, 2003 by and between Vertis, Vertis Holdings and John Howard.#†
10	.20	Employment Agreement dated August 31,2003 by and between Vertis, Vertis Holdings and Catherine Leggett†^
10	.21	Memo of Understanding dated August 15, 2003 by and between Vertis and Thomas Zimmer.#†

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10	.22	Memo of understanding dated August 15, 2003 by and between Vertis and David Colatriano†^
10	.23	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.†^
10	.24	Restricted Stock Incentive Memo dated April 5, 2004 on behalf of Vertis Holdings, Inc to Dean D. Durbin.†^
10	.25	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†^
10	.26	Restricted Stock Incentive Memo dated April 5, 2004 on behalf of Vertis Holdings, Inc to John V. Howard, Jr.†^
10	.27	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.†^
10	.28	Restricted Stock Incentive Memo dated April 5, 2004 on behalf of Vertis Holdings, Inc to Donald E. Roland.†^
10	.29	Restricted Stock Agreement dated May 20, 2004 by and among Vertis Holdings, Inc., Thomas H. Lee Equity Fund IV, L.P. and David P. Colatriano.† ^
10	.30	Restricted Stock Incentive Memo dated April 5, 2004 on behalf of Vertis Holdings, Inc to David P. Colatriano.† ^
10	.31	Restricted Stock Agreement dated May 20, 2004 by and among Vertis Holdings, Inc., Thomas H. Lee Equity Fund IV, L.P. and Thomas R. Zimmer.†^
10	.32	Restricted Stock Incentive Memo dated April 5, 2004 on behalf of Vertis Holdings, Inc to Thomas R. Zimmer.†^
10	.33	Employment Agreement dated October 13, 2004 by and between Vertis and Joe. M Scott.†^
10	.34	Memo of Understanding dated November 6, 2004 by and between Vertis and Herbert W. Moloney III amending Mr. Moloney’s Employment Agreement dated August 31, 2003, and filed as Exhibit 10.44 to Vertis’ 2003 Annual Report on Form 10-K.†^
10	.35	Memo of Understanding dated November 6, 2004 by and between Vertis and Herbert W. Moloney III amending Mr. Moloney’s Employment Agreement dated August 31, 2003 and filed as Exhibit 10.44 to Vertis’ 2003 Annual Report on Form 10-K.†^
10	.36	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 and filed as Exhibit 10.43 to Vertis’ 2003 Annual Report on Form 10-K.†^
10	.37	Employment Agreement dated January 11, 2005 by and between Vertis and Gary L. Sutula.†^
10	.38	Employment Agreement dated March 3, 2005 by and between Vertis and Ann M. Raider.†****
10	.39	Termination Agreement dated November 9,2005 by and between Vertis Digital Services Limited and Adriaan Roosen.†****
10	.40	Letter Agreement dated March 9, 2006 amending Employment Agreement dated August 31, 2003 by and among Vertis, Vertis Holdings and Dean D. Durbin†****

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10	.41	Letter Agreement dated January 2, 2007 by and between Vertis and Dean D. Durbin regarding separation from employment.†##
10	.42	Offer Letter and Business Responsibility Agreement dated January 10, 2007 by and between Vertis and Doug L. Mann.†##
10	.43	Executive Incentive Plan for Vertis Executives dated March 1, 2005.†****
10	.44	Employee Incentive Plan for Vertis Executives dated February 1, 2006.†****
10	.45	Employee Incentive Plan for Vertis Executives dated January 1, 2007.†##
10	.46	Vertis Holdings, Inc. 1999 Equity Award Plan.†****
10	.47	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.†****
10	.48	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.##
10	.49	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.##
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.##
10	.51	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.##
10	.52	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.##
12	.1	Statement re computation of ratios of earnings to fixed charges.##
21	.1	List of subsidiaries of Vertis, Inc.##
31	.1	Certification of Michael T. DuBose, Chairman and Chief Executive Officer, dated April 2, 2007, pursuant to Section 302 of the Sarbanes-Oxley Act 0f 2002.##
31	.2	Certification of Stephen E. Tremblay, Chief Financial Officer, dated April 2, 2007, pursuant to Section 302 of the Sarbanes-Oxley Act 0f 2002.##

*	Incorporated by reference to the corresponding exhibit to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002.
**	Incorporated by reference to the corresponding exhibit to the Registrant’s registration statement on Form S-4 (No. 333-97721).

63

***	Incorporated by reference to the corresponding exhibit to the Registrant’s registration statement on Form S-4 (No. 333-106435).
****	Incorporated by reference to the corresponding exhibit to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005.
##	Filed herewith.
#	Incorporated by reference to the corresponding exhibit to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003.
^	Incorporated by reference to the corresponding exhibit to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2004.
†	This exhibit is a management contract or a compensatory plan or arrangement.

64

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: April 2, 2007

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		Chairman and Chief Executive Officer		April 2, 2007
Michael T. Dubose		(Principal Executive Officer)
/s/ CIARA A. BURNHAM		Director		April 2, 2007
Ciara A. Burnham
/s/ JOHN T. DILLON		Director		April 2, 2007
John T. Dillon
/s/ ANTHONY J. DI NOVI		Director		April 2, 2007
Anthony J. Dinovi
/s/ SOREN L. OBERG		Director		April 2, 2007
Soren L. Oberg
/s/ DONALD E. ROLAND		Director		April 2, 2007
Donald E. Roland
/s/ SCOTT M. SPERLING		Director		April 2, 2007
Scott M. Sperling
/s/ STEPHEN E. TREMBLAY		Chief Financial Officer		April 2, 2007
Stephen E. Tremblay		(Principal Financial and Accounting Officer)

65

VERTIS, INC. AND SUBSIDIARIES

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets at December 31, 2006 and 2005	F-3
Consolidated Statements of Operations for the Years Ended December 31, 2006, 2005 and 2004	F-4
Consolidated Statements of Stockholder’s Deficit for the Years Ended December 31, 2006, 2005 and 2004	F-5
Consolidated Statements of Cash Flows for the Years Ended December 31, 2006, 2005 and 2004	F-6
Notes to Consolidated Financial Statements	F-7
Schedule of Valuation and Qualifying Accounts for the Years Ended December 31, 2006, 2005 and 2004	F-43

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, 2006 and 2005 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, 2006. 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 the 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, 2006 and 2005, and the results of their operations and their 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.

/s/ Deloitte & Touche LLP

Baltimore, Maryland
April 2, 2007

F-2

Vertis, Inc. and Subsidiaries
Consolidated Balance Sheets
In thousands, except per share amounts

As of December 31,	2006			2005
ASSETS
Current Assets:
Cash and cash equivalents	$	5,710		$	1,828
Accounts receivable, net	139,426			145,049
Inventories	48,227			51,735
Maintenance parts, net	22,292			20,500
Prepaid expenses and other current assets	8,578			9,027
Current assets of operations held for sale	—			7,056
Total current assets	224,233			235,195
Property, plant and equipment, net	330,039			336,248
Goodwill	246,260			238,566
Deferred financing costs, net	14,838			20,755
Other assets, net	29,316			30,341
Long-term assets of operations held for sale	—			11,534
Total assets	$	844,686		$	872,639
LIABILITIES AND STOCKHOLDER’S DEFICIT
Current Liabilities:
Accounts payable	$	186,638		$	229,812
Compensation and benefits payable	34,755			37,645
Accrued interest	14,300			14,110
Accrued income taxes	897			2,347
Current portion of long-term debt	5
Other current liabilities	28,165			23,385
Current liabilities of operations held for sale	—			1,960
Total current liabilities	264,760			309,259
Due to parent	3,491			7,898
Long-term debt	1,096,036			1,049,059
Other long-term liabilities	30,482			32,301
Total liabilities	1,394,769			1,398,517
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	(953,090		)	(926,895		)
Accumulated other comprehensive loss	(6,682		)	(8,672		)
Total stockholder’s deficit	(550,083		)	(525,878		)
Total liabilities and stockholder’s deficit	$	844,686		$	872,639

See Notes to Consolidated Financial Statements.

F-3

Vertis, Inc. and Subsidiaries
Consolidated Statements of Operations
In thousands

Year Ended December 31,	2006			2005			2004
Revenue	$	1,468,661		$	1,470,088		$	1,474,359
Operating expenses:
Costs of production	1,160,392			1,140,582			1,137,216
Selling, general and administrative	142,916			149,395			157,694
Restructuring charges	16,001			17,119			4,501
Depreciation and amortization of intangibles	58,788			62,829			65,430
	1,378,097			1,369,925			1,364,841
Operating income	90,564			100,163			109,518
Other expenses, net:
Interest expense, net	131,023			128,821			132,809
Other, net	7,337			7,653			47,685
	138,360			136,474			180,494
Loss from continuing operations before income tax benefit and cumulative effect of accounting change	(47,796		)	(36,311		)	(70,976		)
Income tax benefit	(1		)	(8,070		)	(66,053		)
Loss from continuing operations before cumulative effect of accounting change	(47,795		)	(28,241		)	(4,923		)
Discontinued operations:
Income (loss) from discontinued operations	21,600			(143,389		)	(6,210		)
Loss before cumulative effect of accounting change	(26,195		)	(171,630		)	(11,133		)
Cumulative effect of accounting change	—			(1,600		)	—
Net loss	$	(26,195	)	$	(173,230	)	$	(11,133	)

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, 2004		1		$	—		$	408,964			$	(742,512	)		$	(8,650	)	$	(342,198	)
Net loss											(11,133		)					(11,133		)
Currency translation adjustment															5,962			5,962
Minimum pension liability adjustment															(1,270		)	(1,270		)
Comprehensive loss																		(6,441		)
Dividends to parent											(15		)					(15		)
Capital contributions by parent							95											95
Other											(1		)					(1		)
Balance at December 31, 2004		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(2)															(1,249		)	(1,249		)
Balance at December 31, 2006		1		$	—		$	409,689			$	(953,090	)		$	(6,682	)	$	(550,083	)

(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.)

(2)See Note 15 for further discussion.

See Notes to Consolidated Financial Statements.

F-5

Vertis, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
In thousands

Year Ended December 31,	2006			2005			2004
Cash Flows from Operating Activities:
Net loss	$	(26,195	)	$	(173,230	)	$	(11,133	)
Adjustments for discontinued operations	(21,600		)	143,389			6,210
Net loss from continuing operations	(47,795		)	(29,841		)	(4,923		)
Adjustments to reconcile net loss from continuing operations to net cash provided by continuing operating activities:
Depreciation and amortization	58,788			62,829			65,430
Amortization of deferred financing costs	6,306			7,265			7,831
Write-off of deferred financing fees							1,788
Accretion of long-term debt discounts	3,961			3,961			3,962
Cumulative effect of accounting change				1,600
Loss on termination of leasehold interest							44,012
Deferred income taxes							(66,733		)
Provision for doubtful accounts	942			1,544			670
Other, net	2,544			1,532			(512		)
Changes in operating assets and liabilities (excluding effect of acquisitions and dispositions):
Decrease (increase) in accounts receivable	9,078			(7,537		)	9,323
Decrease (increase) in inventories	5,211			(10,664		)	(4,403		)
Decrease (increase) in prepaid expenses and other assets	2,234			(5,574		)	3,644
Decrease in accounts payable and other liabilities	(28,033		)	(19,263		)	(10,327		)
Net cash provided by continuing operating activities	13,236			5,852			49,762
Net income (loss) from discontinued operations	21,600			(143,389		)	(6,210		)
Change in net assets of discontinued operations held for sale	(23,146		)	143,230			3,993
Net cash used in discontinued operations	(1,546		)	(159		)	(2,217		)
Net cash provided by operating activities	11,690			5,693			47,545
Cash Flows from Investing Activities:
Capital expenditures	(46,936		)	(40,165		)	(43,731		)
Software development costs capitalized	(2,049		)	(2,032		)	(1,905		)
Proceeds from sale of property, plant and equipment	785			1,021			808
Proceeds from sale of businesses, net	41,071			2,361
Proceeds from termination of leasehold interest							31,068
Acquisition of business, net of cash acquired	(21,017		)	(3,430		)
Investing activities of discontinued operations				(1,520		)	(5,232		)
Net cash used in investing activities	(28,146		)	(43,765		)	(18,992		)
Cash Flows from Financing Activities:
Issuance of long-term debt under new revolving credit facility							103,294
Repayment of debt under prior revolving credit facility							(102,932		)
Net borrowings (repayments) under revolving credit facilities	41,470			21,197			(57,705		)
Repayments of long-term debt	(34		)	(6		)	(74		)
Deferred financing costs	(388		)	(1,204		)	(5,605		)
(Decrease) increase in outstanding checks drawn on controlled disbursement accounts	(21,807		)	15,030			13,976
Dividends to parent				(4		)	(15		)
Capital contributions by parent							95
(Advances to) distributions from parent	(480		)	1,150			(47		)
Financing activities of discontinued operations	1,546			3,169			19,405
Net cash provided by (used in) financing activities	20,307			39,332			(29,608		)
Effect of exchange rate changes on cash	31			(2,070		)	1,610
Net increase (decrease) in cash and cash equivalents	3,882			(810		)	555
Cash and cash equivalents at beginning of year	1,828			2,638			2,083
Cash and cash equivalents at end of year	$	5,710		$	1,828		$	2,638

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 a leading provider of targeted advertising, media and marketing services. 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.

Reclassifications—Certain amounts for prior periods have been reclassified to conform to the current period presentation.

2.   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 (see Note 3). 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.

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.

F-7

Long-lived Assets—Property, plant and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method over the assets’ estimated useful lives, or when applicable, the terms of the leases, if shorter.

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 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.

Software development costs incurred for software intended to be licensed to others are expensed until technological feasibility is determined, after which costs are capitalized until the product is ready for general release and sale. These costs are amortized over one to five-year lives beginning at the respective release dates.

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 software development 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. Accumulated amortization was $2.8 million and $1.7 million at December 31, 2006 and 2005, respectively. 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. 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 estimated market values of the reporting units. See Note 4 for discussion of the Europe impairment loss recorded in 2005. No impairment of goodwill was noted in 2006 and 2004.

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 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.

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

F-8

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 $361 million and $363 million at December 31, 2006 and 2005, respectively. The fair value of the senior unsecured notes, with a principal amount of $350.0 million, approximated $351 million and $346 million at December 31, 2006 and 2005, respectively. The aggregate fair value of the remaining debt outstanding at December 31, 2006 and 2005 approximated $264 million and $240 million, respectively.

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.

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, 2006. 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.

New Accounting Pronouncements—In February 2006, the FASB issued 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 is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. The adoption of this statement is not expected to 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 are effective for the Company in the reporting

F-9

period beginning January 1, 2007. The adoption of this statement is not expected to have a material impact on the Company’s results of operations or financial position.

In July 2006, the FASB issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes—an interpretation of FASB Statement No. 109” (“ FIN 48”), which clarifies the accounting and disclosure for uncertainty in tax positions, as defined. FIN 48 is intended to reduce the diversity in practice associated with certain aspects of the recognition and measurement related to accounting for income taxes. This interpretation is effective for the Company for fiscal years beginning after December 15, 2006. The cumulative effect of applying this interpretation must be reported as an adjustment to the opening balance of the Company’s stockholder’s deficit in 2007. The Company is currently evaluating the impact of FIN 48 on its consolidated financial statements and anticipates the adjustment to stockholder’s deficit will not be material.

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 is not able to assess at this time the future impact of this Statement on its consolidated financial position or results of operations.

In September 2006, the FASB issued SFAS No. 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”). SFAS 158 requires an employer that sponsors one or more single-employer defined benefit plans to recognize the overfunded or underfunded status of a benefit plan in its statement of financial position and to recognize as a component of other comprehensive income, net of tax, the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit cost. SFAS 158 also requires an entity to measure defined benefit plan assets and obligations as of the date of its fiscal year-end. Additional footnote disclosures are also required under SFAS 158.  The provisions of this Statement are effective for the Company as of December 31, 2007. The Company adopted this statement on December 31, 2006. See Note 14 for further discussion.

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (“SAB 108”). SAB 108 provides guidance on how the effects of the carryover or reversal of prior year misstatements should be considered in quantifying a current year misstatement. The SEC staff believes that registrants should quantify errors using both a balance sheet and an income statement approach and evaluate whether either approach results in quantifying a misstatement that is material. The guidance in SAB 108 should be applied by the Company beginning with the financial statements for the year ended December 31, 2006. The Company adopted this Statement without material impact on its consolidated financial position or results of operations.

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 en 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 is not able to assess at this time the future impact of this Statement on its consolidated financial position or results of operations.

F-10

3.   SUMMARY OF ACCOUNTING REVISIONS

In 2005, the Company revised its revenue recognition policy for printed materials to recognize revenue when product is shipped. Prior to the change, revenue was recorded when these materials were completed and off-press. This revision resulted in a $12.7 million decrease in revenue and a $2.9 million increase in loss from continuing operations for the year ended December 31, 2005.

Based on a complete physical inventory of maintenance parts in 2005, the Company determined that it should have capitalized all maintenance parts, rather than just those assets that exceeded the Company’s previous $100 minimum threshold for capitalization. As a result, the Company recorded $6.2 million of maintenance part assets in 2005 that had not been capitalized previously. The recording of these assets decreased cost of production expenses and net loss for the year ended December 31, 2005 by $6.2 million.

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 marketing product lines.

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.

As of December 31, 2006, the Company had received proceeds of $41.1 million related to the sale of its fragrance business, and estimates the total proceeds from the sale to be $42.1 million, including $1.0 million of proceeds that are held in escrow at year end. A portion of the proceeds held in escrow, $0.5 million, were released to the Company in January 2007. The remaining $0.5 million will be held in escrow until April 10, 2007, at which time it will be released to the Company if there have not been any claims filed by the Purchaser. The sale of the Company’s fragrance business resulted in a gain on sale of $21.4 million, which is included in income (loss) from discontinued operations on the consolidated statements of operations. The Company estimates the total gain on the sale to be $21.9 million, including the $0.5 million of proceeds held in escrow to be released in April 2007, which are included in other current liabilities on the Company’s consolidated balance sheet at December 31, 2006.

F-11

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 income (loss) 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 divestiture of the fragrance business was on a debt-free basis. Prior year financial statements have been restated to reflect the fragrance business as discontinued operations. Select results of this business, are presented in the following table.

	2006				2005		2004
	(in thousands)
Revenue		$	26,683		$	40,200	$	32,309
Income from operations		1,146			5,401		4,007
Gain on sale of discontinued operations		21,443		(1)
Income from discontinued operations		$	22,589		$	5,401	$	4,007

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

The assets and liabilities of the Company’s fragrance business are presented separately under the captions “Assets of operations held for sale” and “Liabilities of operations held for sale,” respectively, in the accompanying consolidated balance sheet at December 31, 2005. The components of these balance sheet line items are specified in the discontinued operations’ balance sheet as follows:

	December 31,
	2005
	(in thousands)
Assets of operations held for sale—Current:
Accounts receivable, net		$	6,357
Inventory		699
Total current assets of operations held for sale		$	7,056
Assets of operations held for sale—Long-term:
Property, plant and equipment		$	417
Goodwill allocated to Fragrance business		11,117		(1)
Total long-term assets of operations held for sale		$	11,534
Liabilities of operations held for sale—Current:
Accounts payable		$	1,615
Accrued expenses and other current liabilities		345
Total liabilities of operations held for sale		$	1,960

(1)In conjunction with the disposition of the Company’s fragrance business, a goodwill valuation of the direct mail reporting unit was performed by an independent third party. As a result of this valuation, $11.1 million of goodwill was allocated to the fragrance business. See Note 2 for discussion of the Company’s goodwill accounting policy.

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 income (loss) from discontinued operations on the consolidated statements of operations, are presented in the following table.

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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			2004
	(in thousands)
Revenue				$	99,982		$	138,583
Loss from operations	$	(422	)(1)	(147,238		)(3)	(10,217		)
Loss on sale of discontinued operations	(567		)(2)	(1,552		)(4)
Loss from discontinued operations	$	(989	)	$	(148,790	)	$	(10,217	)

(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 2 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.

5.RESTRUCTURING

In 2006, the Company began a restructuring program (the “2006 Program”) to address the continuing issue of industry-wide overcapacity and streamline operations to capitalize on operating efficiencies and improve productivity and consistency, thus reducing the Company’s overall cost base. Under the 2006 program, restructuring actions 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.

F-13

Included in the 2006 segment restructuring expense amounts above are $0.9 million of aggregate severance costs allocated to the segments based on percentages established by management. The severance costs are related to the elimination of 31 shared services positions and the facilities costs represent accretion expense.

Liabilities for severance costs related to future restructurings are not accrued as the amounts cannot be reasonably estimated. 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 2007 in an on-going effort to achieve these objectives.

The Company’s 2005 restructuring program (the “2005 Program”) aimed at regionalizing and streamlining operations to capitalize on operating efficiencies and improve productivity and consistency, and reducing the Company’s overall cost base. The 2005 Program included reductions in work force of approximately 490 employees; the closure of six premedia facilities, one advertising inserts warehouse, and two advertising inserts regional offices, some of which are associated with the consolidation of operations; and the transfer of certain positions. The total cost associated with actions taken under the 2005 Program was $19.9 million (net of estimated sublease income of $1.3 million), approximately all of which were recorded in 2005. The execution of the 2005 Program was complete as of December 31, 2005. Included in the 2005 Program, were restructuring costs of $3.5 million related to reductions in workforce of approximately 130 employees in the Company’s Vertis Europe segment. These costs are included in the loss from discontinued operations on the Company’s consolidated statement of operations (see Note 4).

In the year ended December 31, 2005, under the 2005 Program, 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 aggregate severance costs allocated to the segments based on percentages established by management. These severance costs are related to the elimination of approximately 50 shared services positions for which the costs are allocated to the segments on a monthly basis.

In 2004, the Advertising Inserts segment recorded $0.2 million in severance costs. Corporate and Other recorded $0.3 million in severance costs due to headcount reductions of approximately 50 employees, and $3.5 million in facility closure costs. These costs were associated with the Company’s 2003 restructuring program, which included the closure of facilities, some of which were associated with the consolidation of operations; transfer of certain positions to the corporate office; reductions in work force of approximately 260 employees; and the abandonment of assets associated with vacating these premises. Additionally, in 2004 the Company announced an amendment of an executive level employment agreement resulting in an estimated cost of $1.2 million. Corporate and Other recorded $0.5 million in restructuring costs in 2004 related to this amendment. Europe recorded $2.4 million in restructuring costs in 2004, which are included in the loss from discontinued operations on the Company’s consolidated statement of operations.

F-14

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, 2004		$	1,800			$	—		$	9,305		$	525		$	11,630
Restructuring charges in 2004		960				35			3,506						4,501
Restructuring payments and usage in 2004		(2,016		)		(35		)	(5,939		)	50			(7,940		)
Balance at December 31, 2004		744				—			6,872			575			8,191
Restructuring charges in 2005		14,748				(109		)	2,480		(1)				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		(2)				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

(1)Includes accretion expense of $0.3 million.

(2)Includes accretion expense of $0.6 million.

Accrued restructuring reserves total approximately $8.2 million at December 31, 2006. The Company expects to pay approximately $4.2 million of the accrued restructuring costs during the next year, and the remainder, approximately $4.0 million, by 2011. 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:

	2006		2005			2004
	(in thousands)
Charges requiring cash payments	$	14,647	$	17,228		$	4,466
(Gain) loss on asset disposals in closed locations	1,354		(109		)	35
	$	16,001	$	17,119		$	4,501

6.ACQUISITIONS

On May 31, 2006, the Company acquired USA Direct, Inc. (“USA Direct”) for $21.0 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. The acquisition of USA Direct provides the Company with a strategic complement to its existing direct marketing product offerings by expanding the flexibility and range of products, especially in small to mid-sized quantities, and adding capacity to core manufacturing capabilities including digital, conventional and in-line printing.

Goodwill arising in connection with the USA Direct acquisition was approximately $7.7 million, calculated as the excess of the purchase price over the fair value of the net assets acquired. 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).

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of the USA Direct acquisition. The Company determined the fair value of certain USA Direct assets and intangibles including the use of a third party valuation, which was finalized in the fourth quarter

F-15

of 2006. Adjustments to goodwill in the amount of $1.7 million have been made in the fourth quarter of 2006 related to a $1.5 million revision to the valuation of the customer base and trademark being acquired, a $0.3 million write-off of obsolete inventory on USA Direct’s books, offset by a $0.1 million adjustment to property, plant and equipment based on the valuation. The Company is in the process of finalizing the working capital calculation under the USA Direct purchase agreement, thus, the allocation of the purchase price is subject to refinement. The Company expects the purchase price to be finalized in the second quarter of 2007.

As of May 31,	2006
	(in thousands)
ASSETS
Current assets		$	6,252
Property, plant and equipment		7,973
Goodwill		7,693
Customer base(1)		3,600
Trademark		40
Other long-term assets(2)		122
Total assets acquired		$	25,680
LIABILITIES
Current Liabilities		$	4,611
Total liabilities assumed		4,611
Net assets acquired—Purchase price		$	21,069

(1)The Customer base will be amortized over a period of four years, which represents the asset’s remaining useful life.

(2)Includes a $90,000 non-compete agreement that will be amortized over its three-year useful term.

On January 20, 2005, the Company acquired Elite Mailing and Fulfillment Services, Inc. (“Elite”) for $3.4 million. Elite is a full-service lettershop and mail presorting facility based in Bellmawr, New Jersey. Elite has been a strategic partner of Vertis since 1996, providing lettershop and fulfillment services.

Goodwill arising in connection with the Elite acquisition was approximately $2.8 million.  Goodwill is calculated as the excess of the liabilities assumed over the fair value of the net assets acquired. The financial results of Elite are included in the Company’s consolidated financial statements from the date of acquisition.

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 and Elite as though the acquisition had occurred at the beginning of 2004.

	Twelve months ended
	December 31,
	2006			2005			2004
	(In thousands)
Revenue	$	1,482,806		$	1,499,744		$	1,475,121
Loss from continuing operations before cumulative effect of accounting change	(48,111		)	(25,352		)	(5,093		)
Net loss	(26,511		)	(170,341		)	(11,303		)

F-16

7.ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following:

	2006			2005
	(in thousands)
Trade—billed	$	114,263		$	119,742
Trade—unbilled	20,522			17,076
Other receivables	7,500			9,725
	142,285			146,543
Allowance for doubtful accounts(1)	(2,859		)	(1,494		)
	$	139,426		$	145,049

(1)The Company recorded a provision for doubtful accounts of $0.9 million, $1.5 million and $0.7 million in the twelve months ended December 31, 2006, 2005 and 2004, respectively.

In December 2002, the Company entered into a three-year agreement, which was due to expire on November 30, 2005, to sell substantially all trade accounts receivable generated by subsidiaries in the U.S. (the “2002 Facility”) through the issuance of $130.0 million variable rate trade receivable backed notes. In November 2005, the Company entered into a new $130 million three-year revolving trade receivables facility (the “A/R Facility”) terminating in December 2008. Funds advanced pursuant to the A/R Facility were used by the Company to pay off the remaining obligations under and terminate the 2002 Facility.

Under the A/R Facility, as well as the 2002 Facility previously in place, 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 and $3.0 million in 2006 and 2005, 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 sold 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 four fiscal quarter period. In addition, the A/R Facility includes certain targets related to its receivables collections and credit experience including a minimum EBITDA of $160 million, amended to $125 million effective March 2007 (see Note 11). 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, 2006, the Company is in compliance with all targets and covenants under the A/R Facility.

At December 31, 2006 and 2005, accounts receivable of $130.0 million had been sold under the A/R Facility and as such are reflected as reductions of accounts receivable. At December 31, 2006 and 2005, the Company retained an interest in the pool of receivables in the form of overcollateralization and cash reserve accounts of $92.3 million and $71.8 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 $1,680.3 million and $1,595.7 million in 2006 and 2005, respectively.

F-17

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 under the A/R Facility and 90 basis points under the 2002 Facility. The Company also pays 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 $6.5 million in 2006, $5.2 million in 2005 and $3.1 million in 2004, and is included in Other, net.

8.INVENTORIES

Inventories consisted of the following:

	2006		2005
	(in thousands)
Paper	$	29,858	$	30,567
Ink and chemicals	3,160		3,743
Work in process	4,439		3,611
Finished goods	5,576		9,757
Other	5,194		4,057
	$	48,227	$	51,735

9.PROPERTY, PLANT AND EQUIPMENT

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

	Estimated
	Useful Life
	(Years)		2006			2005
	(in thousands)
Land			$	8,361		$	8,491
Machinery and equipment		3 to 15	646,960			646,357
Buildings and leasehold improvements		1 to 40	91,388			89,587
Furniture and fixtures		3 to 10	113,837			112,013
Internally developed computer software		3 to 5	21,002			18,953
Vehicles		3	968			1,159
Construction in progress and deposits on equipment purchases			23,988			21,187
			906,504			897,747
Accumulated depreciation and amortization			(576,465		)	(561,499		)
			$	330,039		$	336,248

The Company recorded depreciation of $57.4 million, $62.0 million and $64.2 million in the twelve months ended December 31, 2006, 2005 and 2004, respectively.

10.INVESTMENTS

The Company had two subsidiaries which were special purpose limited liability companies (“LLCs”) that were the head lessees and sub-lessors in two lease-leaseback transactions entered into in 1998. Under these transactions, buildings with estimated useful lives of 65 years were leased by the LLCs for terms of 57 years (the “Headleases”) and subleased by the LLCs to the lessors for terms of 52 years (the “Subleases”). Under the guidelines of SFAS No. 13, “Accounting for Leases,” the Headleases qualified as capital leases and the Subleases qualified as leveraged leases. The Company’s investments represented approximately 24% of the buildings’ combined leasehold values, while the balance was furnished by third-party financing

F-18

in the form of long-term debt that provided no recourse against the LLCs or the Company, but was secured by first liens on the properties.

On September 14, 2004, the Company entered into a termination and release agreement with the headlessor/sublessee whereby the Company terminated its leasehold interest in the properties. The Company received net proceeds of approximately $31 million, after transaction expenses, from one of the third parties that was financing the original arrangement. As a result of the transaction, the Company recorded a non-cash loss related to the termination and release of $44.0 million, which is included in Other, net in 2004, and a tax benefit of $66.7 million (see Note 13).

Other, net includes $1.0 million of income earned on the leveraged lease investments in 2004, prior to the termination of the leasehold interest.

11.LONG-TERM DEBT

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

	2006			2005
	(in thousands)
Revolving credit facility (due December 2008)	$	112,880		$	69,864
$350 million 93¤4% senior secured second lien notes, net of discount (due April 2009)	346,418			344,827
$350 million 107¤8% senior notes, net of discount (due June 2009)	349,113			348,756
131¤2% senior subordinated notes (due December 2009)	293,495			293,495
Discount—131¤2% senior subordinated credit facility	(5,870		)	(7,883		)
Other notes	5
	1,096,041			1,049,059
Current portion	(5)
	$	1,096,036		$	1,049,059

The Company entered into a four-year revolving credit agreement (the “Credit Facility”) in December 2004. In May 2006, the Company amended its Credit Facility to allow for an increase in the maximum availability from $200 million to $220 million. Under this amendment, the availability under the Credit Facility would have decreased in stages based on a schedule set forth by the Credit Facility agreement, ultimately reaching $200 million by December 31, 2007. In March 2007, we amended the Credit Facility to provide that the maximum availability under the Credit Facility will increase to $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 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.

At December 31, 2006, the maximum availability under the Credit Facility was 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); and 55% of eligible machinery, equipment and owned real estate. The eligibility of such assets included in the calculation was set forth in the credit agreement. At December 31, 2006, the Company’s borrowing base calculation was $248.4 million.

Per the March 2007 amendment to the Credit Facility, the maximum availability under the Credit Facility will be limited to a borrowing base calculated as follows:  85% of the Company’s eligible

F-19

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.

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 quarterly trailing twelve-month basis. The agent is not required to obtain written consent when Compliance EBITDA on a quarterly trailing twelve-month basis is less than $180 million. At December 31, 2006, the Company’s trailing twelve-month Compliance EBITDA as calculated under the Credit Facility was $169.4 million.

“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.

The interest rate on the revolving 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 US 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 Facility. At December 31, 2006, the margin was 275 basis points above LIBOR. The Company also pays an unused commitment fee of 50 basis points on the difference between $220 million and the amount of loans and letters of credit outstanding. The term loan under the amended Credit Facility has been structured on a last out basis and will bear interest at the greater of (a) the LIBOR rate plus 4.75% or (b) 1.75% greater than the interest rate in effect under the revolving portion of the Credit Facility.

At December 31, 2006, the weighted-average interest rate on the Credit Facility was 8.30% as compared to 7.33% at December 31, 2005.

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. In addition, the Credit Facility requires the Company to maintain Compliance EBITDA as set forth under the credit agreement. The Compliance EBITDA covenant at December 31, 2006 was $160 million on a trailing twelve-month basis. At December 31, 2006, the Company’s trailing twelve-month Compliance EBITDA as calculated under the credit agreement was $169.4 million. The Compliance EBITDA covenant set forth in the March 2007 amendment to the Credit Facility is $125 million on a trailing twelve-month basis. 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. At December 31, 2006, the Company was in compliance with its debt covenants.

F-20

At December 31, 2006, the aggregate maturities of long-term debt were:

	(in thousands)
2007		$	5
2008		112,880
2009		993,495
2010
2011
Thereafter
		$	1,106,380

12.LEASES

Facilities and certain equipment are leased under agreements that expire at various dates through 2016. Rental expense for continuing operations under operating leases for the years ended December 31, 2006, 2005 and 2004, was $25.6 million, $25.9 million, and $26.4 million, respectively.

At December 31, 2006, minimum annual rentals under non-cancelable operating leases (net of subleases) were:

	(in thousands)
2007		$	25,591
2008		19,136
2009		14,956
2010		12,466
2011		9,319
Thereafter		15,983
		$	97,451

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

13.INCOME TAXES

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

	2006				2005			2004
	(in thousands)
Current:
Federal					$	(8,324	)	$	1,000
State and foreign		$	(1	)	254			(320		)
		(1		)	(8,070		)	680
Deferred:
Federal								(66,733		)
State and foreign
								(66,733		)
Total income tax benefit		$	(1	)	$	(8,070	)	$	(66,053	)

F-21

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 2006, 2005, and 2004. There are no tax related intercompany balances due to or due from the Company.

The Company’s foreign pre-tax income was not a significant component of total pre-tax income or loss. During 2006, the Company increased its unremitted foreign earnings from its French subsidiary by $0.4 million to approximately $1.4 million for which it has recorded a deferred tax liability.

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

	2006		2005		2004
	(percent of pre-tax loss)
Statutory income tax rate	(35.0	)%	(35.0	)%	(35.0	)%
State income taxes, net of federal income tax benefits					(0.5	)
Change in valuation allowance	30.4		29.4		(60.2	)
Foreign income taxed at other rates	(2.1	)	(0.1	)	1.5
Adjustment to contingency reserve			(23.0	)	1.4
Officer’s life insurance	(0.7	)	(0.4	)
Other	7.4		6.8		(0.4	)
Effective tax rate	0.0	%	(22.3	)%	(93.2	)%

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

	2006			2005
	(in thousands)
Employee benefits	$	14,564		$	15,054
Net tax benefit carry forwards	160,843			162,285
Accrued expenses and reserves	7,101			6,679
Deferred tax assets	182,508			184,018
Property, plant and equipment	(44,542		)	(49,049		)
Other taxable differences	(9,382		)	(2,438		)
Deferred tax liabilities	(53,924		)	(51,487		)
Valuation allowance	(128,584		)	(132,531		)
Net deferred income tax liability	$	0		$	0

During 2006, the Company used $32.2 million of its U.S. capital loss carryovers as a result of the sale of the Company’s fragrance business (See Note 4 for further discussion). The transaction reduced the Company’s capital loss carryforward to $104.8 million as of December 3, 2006.

At the end of 2006 the Company’s federal net operating loss carryforwards were $261.1 million. This amount is included in the consolidated Vertis Holdings net operating loss carryforward. The carryforwards expire beginning in 2007 through 2027.

The Company’s valuation allowance related to its deferred tax asset, which was $132.5 million at the beginning of 2006, was decreased by $3.9 million to $128.6 million at the end of 2006. 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

F-22

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 August 30, 2005, the Company reached a tentative settlement agreement with the IRS resolving disputes over the tax deductibility of net losses relating to five leasehold interests in real estate properties that the company entered into in 1998. On January 23, 2006, the Company 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, the Company reduced its 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 related to the settlement.

In the fourth quarter of 2005 the Company sold the stock of its Europe direct mail subsidiary which generated a capital loss carryforward in the U.S. of $137.0 million. Also in the fourth quarter, the Europe premedia subsidiary of the Company 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 UK capital loss can be carried forward indefinitely.

During 2004, the Company recorded a tax benefit of $66.7 million from the termination of the Company’s leasehold interest in the same real estate properties that were the subject of the Company’s 2005 IRS settlement (see Note 10 for further discussion.)

The Company is currently under examination by various states in the United States. The Company believes it has adequate provisions for all open years.

The Company made income tax payments of $0.7 million, $0.2 million and $0.4 million for the years ended December 31, 2006, 2005, and 2004, 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 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.

The following table summarizes the impact of the adoption of SFAS 158 in 2006 on individual line items in the Company’s consolidated balance sheet.

	As of December 31, 2006
	Before Application of SFAS 158				Adjustments				After Application of SFAS 158
	(in thousands)
Other current liabilities		$	28,733			$	1,086			$	29,819
Other long-term liabilities		30,319				163				30,482
Total liabilities		1,395,174				1,249				1,396,423
Accumulated other comprehensive loss		$	(5,433	)		$	(1,249	)		$	(6,682	)
Total stockholder’s deficit		(550,488		)		(1,249		)		(551,737		)

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Additional information regarding the defined benefit plans, collectively, is as follows. Due to the adoption of SFAS 158 on December 31, 2006, the applicable disclosures required by SFAS 158 are presented only for 2006 in the table below:

	2006			2005			2004
	(in thousands)
Components of net periodic pension cost:
Service cost	$	481		$	673		$	686
Interest cost	2,218			2,271			2,159
Expected return on assets	(1,309		)	(1,358		)	(1,023		)
Net amortization and deferral	963			1,155			944
Settlements and curtailments	873			443
	$	3,226		$	3,184		$	2,766
Changes in benefit obligations:
Benefit obligation at beginning of year	$	40,788		$	40,022
Service cost	481			673
Interest cost	2,218			2,271
Actuarial loss (gain)	(757		)	1,907
Benefits paid	(3,403		)	(2,512		)
Settlements and curtailments	(573		)	(1,573		)
Benefit obligation at end of year	$	38,754		$	40,788
Accumulated benefit obligation at end of year	$	38,276		$	40,029
Changes in plan assets:
Fair value of plan assets at beginning of year	$	16,602		$	15,076
Actual return on assets	1,765			903
Employer contributions	3,136			3,135
Benefits paid	(3,403		)	(2,512		)
Fair value of plan assets at end of year	$	18,100		$	16,602
Funded status of the plan:
Benefit obligation at end of year	$	38,754		$	40,788
Fair value of plan assets at end of year	18,100			16,602
Unfunded status of the plan at end of year	$	20,654		$	24,186
Current liabilities	$	1,086
Long-term liabilities	19,568
Net amount recognized	$	20,654
Amounts recognized in other comprehensive loss:
Net actuarial loss	$	(10,726	)
Prior service cost	(770		)
Net amount recognized	$	(11,496	)
Amounts expected to be recognized in net periodic pension cost in 2007:
Prior service cost	$	99
Actuarial loss	554
Total	$	653

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

	2006		2005		2004
Weighted-average assumptions used to calculate net periodic pension cost:
Discount rate	5.50	%	5.75	%	6.25	%
Expected return on plan assets	7.50	%	8.75	%	8.75	%
Annual compensation increase	3.00	%	3.00	%	3.00	%
Weighted-average assumptions used to determine benefit obligation:
Discount rate	5.75	%	5.50	%
Annual compensation increase	3.00	%	3.00	%

The Company expects to make approximately $2.7 million of cash contributions to its pension plans in 2007.

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

	(in thousands)
2007		$	3,594
2008		1,996
2009		2,762
2010		2,399
2011		1,885
2012-2016		12,941
		$	25,577

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:

	2006			2005
Asset category:
Equity securities		56	%		56	%
Fixed Income		38	%		39	%
Cash and cash equivalents		6	%		5	%
		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 2006 are shown in the table below.

F-25

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 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:

				Expected
	Percent of			Long-term
Asset category:	Total			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. Long-term liabilities include balances related to this plan of $4.0 million as of December 31, 2006 and $6.6 million as of December 31, 2005.

Defined Contribution Plans—The Company maintains 401(k) and other investment plans for eligible employees. The Company recorded $3.7 million in expenses for the year ended December 31, 2006 and $5.0 million in 2005. The Company did not make matching contributions to its 401(k) plan in 2004 and thus did not record any expense for the year ended December 31, 2004.

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 waived by Vertis, Inc.

Vertis Holdings has 700,000 warrants outstanding at December 31, 2006, with an aggregate value of $15.8 million. 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 and $15,000 of cash dividends to Vertis Holdings in 2005 and 2004, respectively. No dividends were paid in 2006. The Company’s debt instruments contain customary covenants imposing certain limitations on the payment of dividends or other distributions.

F-26

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

	2006									2005									2004
	Gross			Tax			Net			Gross			Tax			Net			Gross			Tax			Net
	(in thousands)
Cumulative translation adjustments	$	108					$	108		$	76					$	76		$	4,370					$	4,370
Minimum pension liability adjustment										(13,454		)	$	(4,706	)	(8,748		)	(13,034		)	$	(4,706	)	(8,328		)
Defined benefit plans	(11,496		)	$	(4,706	)	(6,790		)
	$	(11,388	)	$	(4,706	)	$	(6,682	)	$	(13,378	)	$	(4,706	)	$	(8,672	)	$	(8,664	)	$	(4,706	)	$	(3,958	)

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, 2006. 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 December 2006, the Company reversed a $1.7 million cumulative effect of accounting change recorded in the first quarter of 2006 to classify the Retained Shares and Rights as equity awards under SFAS 123R.

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

F-27

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 297,620 shares of restricted stock and cancelled 106,717 shares of restricted stock in the year ended December 31, 2006, due to forfeiture and employees departure from the Company. The fair value of the restricted stock was determined to be $20.48 per share, which included our consideration of the range of values calculated by an independent third party valuation conducted for the Company in 2004. At December 31, 2006 there were 346,296 shares of restricted stock outstanding under the Stock Plan.

The Company also has the ability to issue options to certain members of management under the Stock Plan. At December 31, 2006, there are 7,618 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, 2006 is as follows:

	Retained Shares			Rights			Restricted Stock(1)			Options(2)
	(thousands of shares)
Outstanding at December 31, 2005		20			32			155			8
Granted								298
Forfeited/ Cancelled		(2	)		(1	)		(107	)
Outstanding at December 31, 2006		18			31			346			8
Nonvested at December 31, 2006								346
Exercisable at December 31, 2006											8

(1)The weighted-average grant-date fair value of the restricted shares is $20.48 per share. As of December 31, 2006 there was $7.1 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, 2006 is $31.50 per share. The outstanding options have ten-year terms, with 5,832 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. No stock-based employee compensation cost was reflected in the Company’s net loss for the year ended December 31, 2004. 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			2004
	(In thousands)
Net loss:
As reported	$	(173,230	)	$	(11,133	)
Deduct: total stock-based compensation determined under the fair value based method for all awards, net of tax	(7		)	(11		)
Pro forma	$	(173,237	)	$	(11,144	)

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17.   INTEREST EXPENSE, NET

Interest expense, net consists of the following:

	2006			2005			2004
	(In thousands)
Interest cost	$	127,079		$	123,320		$	124,311
Amortization of deferred financing fees	6,306			7,265			7,831
Write-off of deferred financing fees							1,788
Capitalized interest	(1,250		)	(929		)	(798		)
Interest income	(1,112		)	(835		)	(323		)
	$	131,023		$	128,821		$	132,809

The Company wrote off deferred financing fees of $1.8 million in December 2004 in connection with the termination of the prior revolving credit facility. See Note 11 for further discussion of debt transactions.

The Company made interest payments of $122.9 million, $118.8 million and $123.2 million in the years ended December 31, 2006, 2005 and 2004, respectively.

18.   OTHER, NET

Other, net consists of the following:

	2006		2005		2004
	(In thousands)
A/R Facility fees (see Note 7)	$	6,529	$	5,163	$	3,087
Bank commitment fees	804		927		1,182
Loss on termination of leasehold interest (see Note 10)					44,012
Income earned on leasehold interest (see Note 10)					(1,021		)
Other expense	4		1,563		425
	$	7,337	$	7,653	$	47,685

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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 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, 2005 and 2004.

20.   QUARTERLY FINANCIAL INFORMATION—UNAUDITED

The results of operations for the years ended December 31, 2006 and 2005 are presented below.

	First			Second			Third			Fourth
	Quarter			Quarter			Quarter			Quarter
	(in thousands)
Year Ended December 31, 2006(1)
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
Year Ended December 31, 2005(1)
Revenue	$	342,245		$	355,299		$	366,683		$	405,861
Gross profit	52,268			64,653			67,431			90,058
(Loss) income from continuing operations before income taxes and cumulative effect of accounting change	(29,679		)	(9,765		)	(6,793		)	9,926
(Loss) income from continuing operations before cumulative effect of accounting change	(29,937		)	(10,030		)	1,394			10,332
(Loss) income from discontinued operations	(99,991		)	(18,993		)	(25,951		)	1,546
Cumulative effect of accounting change(3)										(1,600		)
Net (loss) income	(129,928		)	(29,023		)	(24,557		)	10,278

(1)As a result of the sale of the Company’s fragrance business in the third quarter of 2006, which was accounted for as a discontinued operation (see Note 4), results have been restated for the first and second quarters of 2006 and for all 2005 periods presented.

(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 (see Note 16).

(3)Fourth quarter results include the effect of adopting FIN 47 on December 31, 2005 (see Note 3).

F-30

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 2 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. In 2005, the results of our Advertising Inserts segment included an entity whose sole function is to buy and sell paper. The results of this entity were reclassified as Corporate and Other in 2006 which the Company believes is the more appropriate treatment. The operating results of the Advertising Inserts segment have been restated for all periods presented within these financial statements.

·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 all periods presented within these financial statements. See Note 4 for further discussion. Additionally, in 2006, the results on one of the Company’s facilities and several support services previously included in Corporate and Other (see discussion below) were reclassified under the Direct Mail segment as the Company’s management determined that the majority of the services performed by the facility were direct marketing services. The operating results of the Direct Mail segment have been restated for all periods presented within these financial statements.

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.

The Company had operations in Europe, principally in the United Kingdom, that were sold in the fourth quarter of 2005. The operational results of the Company’s European segment are included in discontinued operations for all periods presented within these financial statements. See Note 4 for further discussion.

F-31

Following is information regarding the Company’s segments:

		2006			2005			2004
		(in thousands)
Revenue	Advertising Inserts	$	1,030,471		$	1,048,417		$	1,061,141
	Direct Mail	330,794			293,814			280,909
	Corporate and Other	115,859			138,671			141,945
	Elimination of intersegment sales	(8,463		)	(10,814		)	(9,636		)
	Consolidated	$	1,468,661		$	1,470,088		$	1,474,359
EBITDA	Advertising Inserts	$	117,884		$	125,294		$	143,403
	Direct Mail	36,565			36,652			35,106
	Corporate and Other	(12,434		)	(6,607		)	(51,246		)
	Consolidated EBITDA	142,015			155,339			127,263
	Depreciation and amortization
	of intangibles	58,788			62,829			65,430
	Interest expense, net	131,023			128,821			132,809
	Income tax benefit	(1		)	(8,070		)	(66,053		)
	Consolidated loss from continuing operations before cumulative effect of accounting change	$	(47,795	)	$	(28,241	)	$	(4,923	)
Restructuring charges	Advertising Inserts	$	5,737		$	7,804		$	245
	Direct Mail	1,828			2,056			13
	Corporate and Other	8,436			7,259			4,243
	Consolidated	$	16,001		$	17,119		$	4,501
Depreciation and	Advertising Inserts	$	39,749		$	38,555		$	37,530
amortization of	Direct Mail	13,550			14,302			16,735
intangibles	Corporate and Other	5,489			9,972			11,165
	Consolidated	$	58,788		$	62,829		$	65,430
Additions to long-lived	Advertising Inserts	$	20,970		$	23,900		$	23,645
assets (excluding	Direct Mail	12,614			7,298			8,670
acquisitions)	Corporate and Other	15,401			10,999			13,321
	Consolidated	$	48,985		$	42,197		$	45,636
Identifiable Assets	Advertising Inserts	$	535,510		$	542,958		$	552,274
	Direct Mail	203,341			183,636		(1)	183,384		(2)
	Europe							174,653		(3)
	Corporate and Other	105,835			146,045			139,484
	Consolidated	$	844,686		$	872,639		$	1,049,795
Goodwill	Advertising Inserts	$	187,867		$	187,867		$	187,867
	Direct Mail	54,320			46,626			43,798
	Corporate and Other	4,073			4,073			4,073
	Consolidated	$	246,260		$	238,566		$	235,738

(1)Includes assets held for sale of $18.6 million.

(2)Includes assets held for sale of $18.2 million.

(3)Includes cash of $1.2 million and assets held for sale of $173.4 million.

F-32

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, 2006 and 2005, and for the years ended December 31, 2006, 2005 and 2004 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, 2006, the guarantor subsidiaries include Enteron Group LLC, Vertis Mailing LLC, Webcraft 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 is comprised of Vertis, Inc. and Vertis Receivables II, LLC, and includes the operations of Advertising Inserts as well as some Direct Mail operations and operations reported under Corporate and Other.

In 2005 and 2004, Printco, Inc., a former subsidiary of Vertis, Inc., was included in the guarantor subsidiaries. This entity was rolled into Vertis, Inc. beginning in 2006 and is included in the Parent in 2006. Also, in 2005 and 2004, 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, 2006
In thousands

				Guarantor		Non-Guarantor
	Parent			Companies		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
Accrued income taxes	802						95								897
Current portion of long-term debt				5											5
Other current liabilities	22,198			5,898			69								28,165
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-34

Condensed Consolidating Balance Sheet Information at December 31, 2005
In thousands

				Guarantor			Non-Guarantor
	Parent			Companies			Companies				Eliminations				Consolidated
ASSETS
Current Assets:
Cash and cash equivalents	$	304			$	101		$	1,423							$	1,828
Accounts receivable, net	140,876				3,444			729								145,049
Inventories	37,852				13,880			3								51,735
Maintenance parts	16,234				4,266											20,500
Prepaid expenses and other
current assets	8,340				670			17								9,027
Current assets of operations held for sale					7,056											7,056
Total current assets	203,606				29,417			2,172								235,195
Intercompany receivable	143,722											$	(143,722	)
(Losses in excess of investments) investments in subsidiaries	(12,982		)		859							12,123
Property, plant and equipment, net	257,547				78,615			86								336,248
Goodwill	198,229				40,337											238,566
Deferred financing costs, net	20,755															20,755
Other assets, net	29,672				649			20								30,341
Long-term assets of operations held for sale					11,531			3								11,534
Total Assets	$	840,549			$	161,408		$	2,281			$	(131,599	)		$	872,639
LIABILITIES AND STOCKHOLDER’S (DEFICIT) EQUITY
Current Liabilities:
Accounts payable	$	207,437			$	22,133		$	242							$	229,812
Compensation and benefits payable	33,056				4,551			38								37,645
Accrued interest	14,110															14,110
Accrued income taxes	2,135							212								2,347
Other current liabilities	20,748				2,616			21								23,385
Current (liabilities) of operations held for sale					1,960											1,960
Total current liabilities	277,486				31,260			513								309,259
Due to parent	7,898				124,528			19,194				$	(143,722	)		7,898		(1)
Long-term debt, net of current portion	1,049,059															1,049,059
Other long-term liabilities	31,984				317											32,301
Total liabilities	1,366,427				156,105			19,707				(143,722		)		1,398,517
Stockholder’s (deficit) equity	(525,878		)		5,303			(17,426		)		12,123				(525,878		)
Total Liabilities and Stockholder’s (Deficit) Equity	$	840,549			$	161,408		$	2,281			$	(131,599	)		$	872,639

(1)Represents the amount due to Vertis Holdings

F-35

Condensed Consolidating Statement of Operations
Year ended December 31, 2006
In thousands

				Guarantor				Non-Guarantor
	Parent			Companies				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 before income taxes	(26,370		)		25,336				621				(47,383		)		(47,796		)
Income tax (benefit) expense	(175		)						174								(1		)
(Loss) income from continuing operations before cumulative effect of accounting change	(26,195		)		25,336				447				(47,383		)		(47,795		)
Income from discontinued operations					22,464				(864		)						21,600
Net (loss) income	$	(26,195	)		$	47,800			$	(417	)		$	(47,383	)		$	(26,195	)

F-36

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-37

Condensed Consolidating Statement of Operations
Year ended December 31, 2004
In thousands

	Parent			Guarantor Companies				Non-Guarantor Companies				Eliminations				Consolidated
Revenue	$	1,160,433			$	316,139			$	1,118			$	(3,331	)		$	1,474,359
Operating expenses:
Costs of production	905,535				234,643				369				(3,331		)		1,137,216
Selling, general and administrative	123,120				34,502				72								157,694
Restructuring charges	3,903				598												4,501
Depreciation and amortization of intangibles	49,278				16,002				150								65,430
	1,081,836				285,745				591				(3,331		)		1,364,841
Operating income	78,597				30,394				527								109,518
Other expenses (income):
Interest expense, net	132,799				10												132,809
Other, net	4,672				24				42,989								47,685
	137,471				34				42,989								180,494
Equity in net income (loss) of subsidiaries	(18,492		)		(7,063		)						25,555
(Loss) income before income taxes	(77,366		)		23,297				(42,462		)		25,555				(70,976		)
Income tax (benefit) expense	(66,233		)		(11		)		191								(66,053		)
(Loss) income from continuing operations	(11,133		)		23,308				(42,653		)		25,555				(4,923		)
Income (loss) from discontinued operations					3,766				(9,976		)						(6,210		)
Net (loss) income	$	(11,133	)		$	27,074			$	(52,629	)		$	25,555			$	(11,133	)

F-38

Condensed Consolidating Statement of Cash Flows
Twelve months ended December 31, 2006
In thousands

								Non-
				Guarantor				Guarantor
	Parent			Companies				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-39

Condensed Consolidating Statement of Cash Flows
Twelve months ended December 31, 2005
In thousands

								Non-
				Guarantor				Guarantor
	Parent			Companies				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-40

Condensed Consolidating Statement of Cash Flows
Year ended December 31, 2004
In thousands

	Parent			Guarantor Companies				Non-Guarantor Companies				Consolidated
Cash Flows from Operating Activities	$	36,657			$	25,008			$	(14,120	)		$	47,545
Cash Flows from Investing Activities:
Capital expenditures	(36,739		)		(6,992		)						(43,731		)
Software development costs capitalized	(1,905		)										(1,905		)
Proceeds from sale of property, plant and equipment and divested assets	763				45								808
Proceeds from termination of leasehold interest									31,068				31,068
Other investing activities									(5,232		)		(5,232		)
Net cash (used in) provided by investing activities	(37,881		)		(6,947		)		25,836				(18,992		)
Cash Flows from Financing Activities:
Net repayments under revolving credit facilities	(57,343		)										(57,343		)
Repayments of long-term debt	(72		)		(2		)						(74		)
Deferred financing costs	(5,605		)										(5,605		)
Increase in outstanding checks drawn on controlled disbursement accounts	12,187				1,789								13,976
Other financing activities	51,965				(19,923		)		(12,604		)		19,438
Net cash provided by (used in) financing activities	1,132				(18,136		)		(12,604		)		(29,608		)
Effect of exchange rate changes on cash									1,610				1,610
Net (decrease) increase in cash and cash equivalents	(92		)		(75		)		722				555
Cash and cash equivalents at beginning of year	389				108				1,586				2,083
Cash and cash equivalents at end of year	$	297			$	33			$	2,308			$	2,638

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		Charges (Credits)				Write offs				Balance
	Beginning		to Costs and				Net of				at End
	of Year		Expenses				Recoveries				of Year
Allowance for Doubtful Accounts
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
Year ended December 31, 2004	3,862			670				(1,212		)	3,320
Deferred Tax Valuation Allowance
Year ended December 31, 2006	$	132,531		$	(3,294	)					$	129,237
Year ended December 31, 2005	40,490			92,041							132,531
Year ended December 31, 2004	74,393			(33,903		)					40,490

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

F-43

EX-3.1

Exhibit 3.1

RESTATED CERTIFICATE OF INCORPORATION

OF

VERTIS, INC.

*  *  *  *  *  *

Vertis, Inc., a corporation organized and existing under the laws of the State of Delaware (the “Corporation”), hereby certifies as follows:

1.             The name of the corporation is Vertis, Inc. and the name under which the corporation was originally incorporated is BFP Holdings Corp.  The date of filing of its original Certificate of Incorporation with the Secretary of State was July 14, 1993.

2.             This Restated Certificate of Incorporation only restates and integrates and does not further amend the provisions of the Certificate of Incorporation of this corporation as theretofore amended or supplemented and there is no discrepancy between those provisions and the provisions of this Restated Certificate of Incorporation.

3.             The text of the Certificate of Incorporation as amended or supplemented heretofore is hereby restated without further amendments or changes to read as herein set forth in full:

FIRST:                   The name of the Corporation is Vertis, Inc. (hereinafter the “Corporation”).  The Corporation was originally incorporated under the name BFP Holdings Corp. and the original Certificate of Incorporation of the Corporation was filed with the Secretary of State of the State of Delaware on July 14, 1993.

SECOND:              The address of the registered office of the Corporation in the State of Delaware is 2711 Centerville Road, Suite 400, in the City of Wilmington, County of New Castle. The name of its registered agent at that address is Corporation Service Company.

THIRD:The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the General Corporation Law of the State of Delaware as set forth in Title 8 of the Delaware Code (the “GCL”).

FOURTH:The aggregate number of shares which the Corporation shall have authority to issue shall be three thousand (3,000), consisting of three thousand (3,000) shares of Common Stock, par value $0.01 per share. No shares of the previously designated Series A Junior Preferred Stock having been issued, such series is hereby terminated and all matters set forth in this certificate of incorporation with respect to such series are hereby eliminated from this certificate of incorporation. No shares of the Class B Common Stock remaining outstanding,

been terminated and all matters set forth in this certificate of incorporation with respect to such series have been eliminated from this certificate of incorporation.

FIFTH:                    The following provisions are inserted for the management of the business and the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation, and of its directors and stockholders:

(1)           The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors. The Board of Directors shall consist of not less than three nor more than 12 members, the exact number of which shall be fixed from time to time by the Board of Directors.

(2)           In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, adopt, alter, amend, change or repeal the Bylaws of the Corporation. Stockholders may make, adopt, alter, amend, change or repeal the Bylaws of the Corporation upon the affirmative vote of the holders of a majority of the outstanding shares of Common Stock.

(3)           No director shall be personally liable to the Corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director’s duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the GCL or (iv) for any transaction from which the director derived an improper personal benefit. Any repeal or modification of the Article FIFTH by the stockholders of the Corporation shall not adversely affect any right or protection of a director of the Corporation existing at the time of such repeal or modification with respect to acts or omissions occurring prior to such repeal or modification.

(4)           In addition to the powers and authority hereinbefore or by statute expressly conferred upon them, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the GCL, this Certificate of Incorporation, and any Bylaws adopted by the stockholders; provided, however, that no Bylaws hereafter adopted by the stockholders shall invalidate any prior act of the directors which would have been valid if such Bylaws had not been adopted.

SIXTH:               Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of the Corporation may be kept (subject to any provision contained in the GCL) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation.

SEVENTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statue, and all rights conferred upon stockholders herein are granted subject to this reservation.

EIGHTH:                Any act or transaction by or involving the Corporation that requires for its adoption under the General Corporation Law of the State of Delaware or this certificate of incorporation the approval of the stockholders of the Corporation shall, by virtue of this reference to Section 251(g) of the General Corporation Law of the State of Delaware, require, in addition, the approval of the stockholders of Big Flower Holdings, Inc., a Delaware corporation, or any successor thereto by merger, so long as such corporation or its successor is the ultimate parent, directly or indirectly, of this Corporation, by the same vote that is required by the General Corporation Law of the State of Delaware and/or the certificate of incorporation of this Corporation. For the purposes of this Article Eighth, the term “parent” shall mean a corporation that owns, directly or indirectly, at lease a majority of the outstanding capital stock of this Corporation entitled to vote in the election of directors of this Corporation without regard to the occurrence of any contingency.

4.                              This Restated Certificate of Incorporation was duly adopted by the Board of Directors in accordance with Section 245 of the General Corporation Law of the State of Delaware.

IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by Michael T. DuBose, its Chairman and Chief Executive Officer, this 9th day of March, 2007.

	/S/ Michael T. DuBose
By: Michael T. DuBose
Chairman and Chief Executive Officer

EX-4.4

Exhibit 4.4

VERTIS, INC.,

as Issuer,

the Guarantors
named herein

and

THE BANK OF NEW YORK,

as Trustee

INDENTURE

Dated as of February 28, 2003

up to $293,500,000

131¤2% Senior Subordinated Notes due 2009

[CROSS-REFERENCE TABLE]

TIA Section		Indenture Section
§ 310 (a)	(l)	7.10
(a)	(2)	7.10
(a)	(3)	N.A.
(a)	(4)	N.A.
(a)	(5)	7.10
(b)		7.8; 7.10; 13.2
(c)		N.A.
§ 311 (a)		7.11
(b)		7.11
(c)		N.A.
§ 312 (a)		2.5
(b)		13.3
(c)		13.3
§ 313 (a)		7.6
(b)	(l)	7.6
(b)	(2)	7.6
(c)		7.6; 13.2(b)
(d)		7.6
§ 314 (a)		4.6; 4.7; 13.2
(b)		N.A.
(c)	(1)	13.4
(c)	(2)	13.4
(c)	(3)	13.4
(d)		N.A.
(e)		13.5
(f)		N.A.
§ 315 (a)		7.1(b)
(b)		7.5; 13.2
(c)		7.1(a)
(d)		7.1(c)
(e)		6.11
§ 316 (a)	(last sentence)	2.9
(a)	(1)(A)	6.5
(a)	(1)(B)	6.4
(a)	(2)	N.A.
(b)		6.7
(c)		9.4
§ 317 (a)	(1)	6.8
(a)	(2)	6.9
(b)		2.4
§ 318 (a)		13.1
(c)		13.1

N.A. means Not Applicable.

i

NOTE:           This Cross-Reference Table shall not, for any purpose, be deemed to be a part of this Indenture.

ii

TABLE OF CONTENTS

		Page
ARTICLE I
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.1	Definitions	1
SECTION 1.2	Incorporation by Reference of Trust Indenture Act	35
SECTION 1.3	Rules of Construction	36
ARTICLE II
THE SECURITIES
SECTION 2.1	Form and Dating	36
SECTION 2.2	Execution and Authentication	36
SECTION 2.3	Registrar and Paying Agent	37
SECTION 2.4	Paying Agent To Hold Money in Trust	38
SECTION 2.5	Securityholder Lists	38
SECTION 2.6	Transfer and Exchange	39
SECTION 2.7	Replacement Notes	39
SECTION 2.8	Outstanding Notes	40
SECTION 2.9	Treasury Notes	40
SECTION 2.10	Temporary Notes	40
SECTION 2.11	Cancellation	41
SECTION 2.12	Defaulted Interest	41
SECTION 2.13	CUSIP Number	41
SECTION 2.14	Book-Entry Provisions for Global Securities	42
SECTION 2.15	Special Transfer Provisions	43
ARTICLE III
REDEMPTION
SECTION 3.1	Notices to Trustee	45
SECTION 3.2	Selection of Notes To Be Redeemed	45
SECTION 3.3	Notice of Redemption	45
SECTION 3.4	Effect of Notice of Redemption	46
SECTION 3.5	Deposit of Redemption Price	46
SECTION 3.6	Notes Redeemed in Part	47

iii

ARTICLE IV
COVENANTS
SECTION 4.1	Payment of Notes	47
SECTION 4.2	Maintenance of Office or Agency	47
SECTION 4.3	Corporate Existence	48
SECTION 4.4	Payment of Taxes and Other Claims	48
SECTION 4.5	Maintenance of Properties	49
SECTION 4.6	Compliance Certificates; Notice of Default	49
SECTION 4.7	Reports	50
SECTION 4.8	Limitation on Restricted Payments	50
SECTION 4.9	Limitation on Incurrence of Additional Indebtedness	54
SECTION 4.10	Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries	54
SECTION 4.11	Limitation on Liens	56
SECTION 4.12	Limitation on Asset Sales	56
SECTION 4.13	Limitations on Transactions with Affiliates	61
SECTION 4.14	Prohibition on Incurrence of Senior Subordinated Debt	63
SECTION 4.15	Change of Control	63
SECTION 4.16	Waiver of Stay; Extension of Usury Laws	65
SECTION 4.17	Limitation on Guarantees by Restricted Subsidiaries	65
SECTION 4.18	Limitation on Preferred Stock of Subsidiaries	67
SECTION 4.19	Conduct of Business	67
ARTICLE V
SUCCESSOR CORPORATION
SECTION 5.1	Limitation on Mergers, Consolidations or Sales of Assets	67
SECTION 5.2	Successor Entity Substituted	69
ARTICLE VI
DEFAULT AND REMEDIES
SECTION 6.1	Events of Default	70
SECTION 6.2	Acceleration	72
SECTION 6.3	Other Remedies	73
SECTION 6.4	Waiver of Past Default	73
SECTION 6.5	Control by Majority	73
SECTION 6.6	Limitation on Suits	74
SECTION 6.7	Rights of Holders To Receive Payment	74
SECTION 6.8	Collection Suit by Trustee	74
SECTION 6.9	Trustee May File Proofs of Claim	75

iv

SECTION 6.10	Priorities	75
SECTION 6.11	Undertaking for Costs	75
SECTION 6.12	Rights and Remedies Cumulative	76
SECTION 6.13	Delay or Omission Not Waiver	76
ARTICLE VII
TRUSTEE
SECTION 7.1	Duties of Trustee	76
SECTION 7.2	Rights of Trustee	77
SECTION 7.3	Individual Rights of Trustee	79
SECTION 7.4	Trustee’s Disclaimer	79
SECTION 7.5	Notice of Defaults	79
SECTION 7.6	Reports by Trustee to Holders	79
SECTION 7.7	Compensation and Indemnity	80
SECTION 7.8	Replacement of Trustee	81
SECTION 7.9	Successor Trustee by Merger, Etc.	82
SECTION 7.10	Eligibility; Disqualification	82
SECTION 7.11	Preferential Collection of Claims Against Company	82
ARTICLE VIII
DISCHARGE OF INDENTURE; DEFEASANCE
SECTION 8.1	Termination of the Company’s Obligations	82
SECTION 8.2	Legal Defeasance and Covenant Defeasance	84
SECTION 8.3	Conditions to Legal Defeasance or Covenant Defeasance	85
SECTION 8.4	Application of Trust Money	87
SECTION 8.5	Repayment to the Company	87
SECTION 8.6	Reinstatement	88
ARTICLE IX
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 9.1	Without Consent of Holders	88
SECTION 9.2	With Consent of Holders	89
SECTION 9.3	Compliance with Trust Indenture Act	90
SECTION 9.4	Revocation and Effect of Consents	91
SECTION 9.5	Notation on or Exchange of Notes	91
SECTION 9.6	Trustee To Sign Amendments, Etc.	91

v

ARTICLE X
SUBORDINATION
SECTION 10.1	Notes Subordinated to Senior Debt	92
SECTION 10.2	Suspension of Payment When Senior Debt Is in Default	92
SECTION 10.3	Obligations Subordinated to Prior Payment of All Senior Debt on Dissolution, Liquidation or Reorganization of Company	94
SECTION 10.4	Payments May Be Paid Prior to Dissolution	95
SECTION 10.5	Holders To Be Subrogated to Rights of Holders of Senior Debt	96
SECTION 10.6	Obligations of the Company Unconditional	96
SECTION 10.7	Reliance on Judicial Order or Certificate of Liquidating Agent	97
SECTION 10.8	Subordination Rights Not Impaired by Acts or Omissions of the Company or Holders of Senior Debt	97
SECTION 10.9	Holders Authorize Trustee To Effectuate Subordination of Obligations	98
SECTION 10.10	Amendments or Modifications to Article X	98
SECTION 10.11	Article X Not to Prevent Events of Default	98
SECTION 10.12	No Fiduciary Duty of Trustee to Holders of Senior Debt	99
ARTICLE XI
GUARANTEE
SECTION 11.1	Unconditional Guarantee	99
SECTION 11.2	Subordination of Guarantee	100
SECTION 11.3	Severability	100
SECTION 11.4	Release of a Guarantor	100
SECTION 11.5	Limitation of Guarantor”s Liability	101
SECTION 11.6	Consolidation, Merger and Sale of Assets	101
SECTION 11.7	Contribution	102
SECTION 11.8	Waiver of Subrogation	102
SECTION 11.9	Evidence of Guarantee	103
SECTION 11.10	Waiver of Stay, Extension or Usury Laws	103
ARTICLE XII
SUBORDINATION OF GUARANTEE OBLIGATIONS
SECTION 12.1	Guarantee Obligations Subordinated to Guarantor Senior Debt	103

vi

SECTION 12.2	Suspension of Guarantee Obligations When Guarantor Senior Debt Is in Default	104
SECTION 12.3	Guarantee Obligations Subordinated to Prior Payment of All Guarantor Senior Debt on Dissolution, Liquidation or Reorganization of Such Guarantor	105
SECTION 12.4	Payments May Be Paid Prior to Dissolution	106
SECTION 12.5	Holders To Be Subrogated to Rights of Lenders of Guarantor Senior Debt	107
SECTION 12.6	Guarantee Obligations of the Guarantors Unconditional	107
SECTION 12.7	Reliance on Judicial Order or Certificate of Liquidating Agent	107
SECTION 12.8	Subordination Rights Not Impaired by Acts or Omissions of the Guarantors or Lenders of Guarantor Senior Debt	108
SECTION 12.9	Holders Authorize Trustee To Effectuate Subordination of Guarantee Obligations	108
SECTION 12.10	This Article XII Not To Prevent Events of Default	109
SECTION 12.11	Amendments or Modifications to Article XII	109
SECTION 12.12	No Fiduciary Duty of Trustee to Holders of Senior Debt	109
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1	Trust Indenture Act Controls	110
SECTION 13.2	Notices	110
SECTION 13.3	Communications by Holders with Other Holders	111
SECTION 13.4	Certificate and Opinion of Counsel as to Conditions Precedent	111
SECTION 13.5	Statements Required in Certificate and Opinion of Counsel	112
SECTION 13.6	Rules by Trustee, Paying Agent, Registrar	112
SECTION 13.7	Legal Holidays	112
SECTION 13.8	Governing Law	112
SECTION 13.9	No Recourse Against Others	113
SECTION 13.10	Successors	113
SECTION 13.11	Counterparts	113
SECTION 13.12	Severability	113
SECTION 13.13	Table of Contents, Headings, Etc.	113
SECTION 13.14	No Adverse Interpretation of Other Agreements	113
SECTION 13.15	Benefits of Indenture	114
SECTION 13.16	Independence of Covenants	114

vii

Exhibit A-1	—	Form of Series A Note
Exhibit A-2	—	Form of Series B Note
Exhibit B	—	Form of Legend for Global Securities
Exhibit C	—	Transferee Certificate for Non-QIB Accredited Investors
Exhibit D	—	Transferee Certificate for Transfers Pursuant to Regulation S
Exhibit E	—	Form of Guarantee

Note:      This Table of Contents shall not, for any purpose, be deemed to be part of the Indenture.

viii

INDENTURE dated as of February 28, 2003, among VERTIS, INC., a corporation duly organized and existing under the laws of the State of Delaware, as issuer (the “Company”), the Guarantors (as defined herein) and THE BANK OF NEW YORK, a New York banking corporation, as Trustee (the “Trustee”).

The parties hereto agree as follows for the benefit of each other and for the equal and ratable benefit of the Holders:

ARTICLE I

DEFINITIONS AND INCORPORATION BY REFERENCE

SECTION 1.1 Definitions.

“Acceleration Notice” shall have the meaning ascribed to such term in Section 6.2.

“Accrued Bankruptcy Interest” means all interest accruing subsequent to the occurrence of any events specified in Section 6.l(f) or (g) or which would have accrued but for any such event.

“Acquired Indebtedness” means Indebtedness (1) of a Person or any of its Subsidiaries existing at the time such Person becomes a Restricted Subsidiary of the Company or (2) assumed in connection with the acquisition of assets from such Person, in each case not incurred by such Person in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary of the Company or such acquisition. Acquired Indebtedness shall be deemed to have been incurred, with respect to clause (1) of the preceding sentence, on the date such Person becomes a Restricted Subsidiary of the Company and, with respect to clause (2) of the preceding sentence, on the date of consummation of such acquisition of assets.

“Adjusted Net Assets” shall have the meaning provided in Section 11.7.

“Affiliate” means, with respect to any specified Person, any other Person who directly or indirectly through one or more intermediaries controls, or is controlled by, or is under common control with, such specified Person. The term “control” means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative of the foregoing. Notwithstanding the foregoing, no Person (other than the Company or any

Subsidiary of the Company) in whom a Receivables Entity makes an Investment in connection with a Qualified Receivables Transaction shall be deemed to be an Affiliate of the Company or any of its Subsidiaries solely by reason of such Investment.

“Affiliate Transaction” has the meaning ascribed to such term in Section 4.13.

“Agent” means any Registrar, Paying Agent or co-registrar.

“Agent Members” has the meaning provided in Section 2.14.

“A/R Facility” means the Receivables Purchase Agreement dated as of March 19, 1996, as amended, among the Company, certain subsidiaries of the Company and BFP Receivables Corporation in each case as such agreement may be amended (including any amendment and restatement thereof), supplemented or otherwise modified from time to time, including any agreement extending the term thereof, and any successor or replacement agreement, including, without limitation, any agreement or agreements governing a Qualified Receivables Transaction.

“Asset Acquisition” means (1) an Investment by the Company or any Restricted Subsidiary of the Company in any other Person pursuant to which such Person shall become a Restricted Subsidiary of the Company or of any Restricted Subsidiary of the Company, or shall be merged with or into the Company or any Restricted Subsidiary of the Company, or (2) the acquisition by the Company or any Restricted Subsidiary of the Company of the assets of any Person (other than a Restricted Subsidiary of the Company) which constitute all or substantially all of the assets of such Person or comprise any division or line of business of such Person or any other properties or assets of such Person other than in the ordinary course of business.

“Asset Sale” means any direct or indirect sale, issuance, conveyance, transfer, lease (other than operating leases entered into in the ordinary course of business), assignment or other disposition for value by the Company or any of its Restricted Subsidiaries (including any Sale and Leaseback Transaction) to any Person other than the Company or a Restricted Subsidiary of the Company of: (1) any Capital Stock of any Restricted Subsidiary of the Company; or (2) any other property or assets of the Company or any Restricted Subsidiary of the Company other than in the ordinary course of business; provided, however, that Asset Sales shall not include:

(a)any transaction or series of related transactions for which the Company or its Restricted Subsidiaries receive aggregate consideration of less than $2.5 million;

(b)the sale, lease, conveyance, disposition or other transfer of all or substantially all of the assets of the Company as permitted under Article V;

2

(c)the sale or discount, in each case without recourse, of accounts receivable arising in the ordinary course of business;

(d)the factoring of accounts receivable arising in the ordinary course of business pursuant to arrangements customary in the industry;

(e)the licensing of intellectual property;

(f)disposals or replacements of obsolete equipment in the ordinary course of business;

(g)the sale, lease, conveyance, disposition or other transfer by the Company or any Restricted Subsidiary of assets or property in transactions constituting Permitted Investments or Restricted Payments that are not prohibited under Section 4.8;

(h)sales of accounts receivable and related assets of the type specified in the definition of “Qualified Receivables Transaction” to a Receivables Entity (for the purposes of this clause (h), Purchase Money Notes shall be deemed to be cash);

(i)transfers of accounts receivable and related assets of the type specified in the definition of “Qualified Receivables Transaction” (or a fractional undivided interest therein) by a Receivables Entity in a Qualified Receivables Transaction;

(j)leases or subleases to third persons not interfering in any material respect with the business of the Company or any of its Restricted Subsidiaries; and

(k)the surrender or waiver of contract rights or the settlement, release or surrender of contract, tort or other claims of any kind.

“Banc of America” means Banc of America Bridge LLC (f/k/a NationsBridge, L.L.C.).

“Bankruptcy Law” means Title 11 of the United States Code entitled “Bankruptcy,” as now and hereafter in effect, or any successor statute or any other United States federal, state or local law or the law of any other jurisdiction relating to bankruptcy, insolvency, winding up, liquidation, reorganization or relief of debtors, whether in effect on the date hereof or hereafter.

“Bankruptcy Order” means any court order made in a proceeding pursuant to or within the meaning of any Bankruptcy Law, containing an adjudication of bankruptcy or insolvency, or providing for liquidation, winding up, dissolution or reorganization, or appointing a custodian of a debtor or of all or any substantial part of a debtor’s property, or

3

providing for the staying, arrangement, adjustment or composition of indebtedness or other relief of a debtor.

“Board of Directors” means, as to any Person, the board of directors of such Person or any duly authorized committee thereof.

“Board Resolution” means, with respect to any Person, a copy of a resolution certified by the Secretary or an Assistant Secretary of such Person to have been duly adopted by the Board of Directors of such Person and to be in full force and effect on the date of such certification, and delivered to the Trustee.

“Business Day” means any day excluding Saturday, Sunday and any day which is a legal holiday under the laws of New York, New York or is a day on which banking institutions therein located are authorized or required by law or other governmental action to close.

“Capital Stock” means:

(1)with respect to any Person that is a corporation, any and all shares, interests, participations or other equivalents (however designated and whether or not voting) of corporate stock, including each class of Common Stock and Preferred Stock of such Person; and

(2)with respect to any Person that is not a corporation, any and all partnership, membership or other equity interests of such Person.

“Capitalized Lease Obligation” means, as to any Person, the obligations of such Person under a lease that are required to be classified and accounted for as capital lease obligations under GAAP and, for purposes of this definition, the amount of such obligations at any date shall be the capitalized amount of such obligations at such date, determined in accordance with GAAP.

“Cash Equivalents” means:

(1)marketable direct obligations issued by, or unconditionally guaranteed by, the United States Government or any member state of the European Union or issued by any agency thereof and backed by the full faith and credit of the United States or any member state of the European Union, in each case maturing within one year from the date of acquisition thereof;

(2)marketable direct obligations issued by any state of the United States of America or any member state of the European Union or any political subdivision of

4

any such state or any public instrumentality thereof maturing within one year from the date of acquisition thereof and, at the time of acquisition, having one of the two highest ratings obtainable from either Standard & Poor’s Ratings Group (“S&P”) or Moody’s Investors Service, Inc. (“Moody’s”);

(3)commercial paper maturing no more than one year from the date of creation thereof and, at the time of acquisition, having a rating of at least A-1 from S&P or at least P-1 from Moody’s;

(4)time deposits, certificates of deposit or bankers’ acceptances (or with respect to foreign banks, similar instruments) maturing within one year from the date of acquisition thereof issued by any bank organized under the laws of the United States of America or any state thereof or the District of Columbia or any member state of the European Union or any U.S. branch of a foreign bank having at the date of acquisition thereof combined capital and surplus of not less than $200.0 million;

(5)certificates of deposit or bankers’ acceptances or similar instruments maturing within one year from the date of acquisition thereof issued by any foreign bank that is a lender under the Senior Credit Facility having at the date of acquisition thereof combined capital and surplus of not less than $500.0 million;

(6)repurchase obligations with a term of not more than seven days for underlying securities of the types described in clause (1) or (2) above entered into with any bank meeting the qualifications specified in clause (4) above;

(7)demand deposit accounts maintained in the ordinary course of business; and

(8)investments in money market funds which invest substantially all their assets in securities of the types described in clauses (1) through (7) above;

provided, that for purposes of Articles X and XII, the term “Cash Equivalents” shall not include the Cash Equivalents referred to in clause (6) above.

“Change of Control” means the occurrence of one or more of the following events:

(1)any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all of the assets of the Company to any Person or group of related Persons for purposes of Section 13(d) of the Exchange Act (a “Group”), together with any Affiliates thereof (other than one or more Permitted Holders);

5

(2)the approval by the holders of Capital Stock of the Company of any plan or proposal for the liquidation or dissolution of the Company;

(3)any Person or Group (other than one or more Permitted Holders) shall become the beneficial owner (as defined in Rules 13d-3 and 13d-5 or any successor rule or regulation promulgated under the Exchange Act), directly or indirectly, of shares representing more than 25% of the aggregate ordinary voting power represented by the issued and outstanding Capital Stock of Vertis Holdings or the Company, unless at such time the Equity Investors beneficially own, directly or indirectly, in the aggregate, shares representing not less than a majority of the voting power represented by the issued and outstanding Capital Stock of the Company; or

(4)the first day on which a majority of the Board of Directors of the Company are not Continuing Directors.

“Change of Control Offer” has the meaning ascribed to such term in Section 4.15.

“Change of Control Payment Date” has the meaning ascribed to such term in Section 4.15.

“Common Stock” of any Person means any and all shares, interests or other participations in, and other equivalents (however designated and whether voting or non-voting) of such Person’s common stock, whether outstanding on the Issue Date or issued after the Issue Date, and includes, without limitation, all series and classes of such common stock.

“Company” means the party named as such in this Indenture until a successor replaces it in accordance with the provisions of this Indenture and, thereafter, means the successor.

“Consolidated EBITDA” means, with respect to any Person, for any period, the sum (without duplication) of:

(1)Consolidated Net Income; and

(2)to the extent Consolidated Net Income has been reduced thereby:

(a) all income taxes of such Person and its Restricted Subsidiaries paid or accrued in accordance with GAAP for such period (other than income taxes attributable to extraordinary, unusual or nonrecurring gains or losses or taxes attributable to sales or dispositions outside the ordinary course of business);

6

(b) Consolidated Interest Expense;

(c) Consolidated Non-cash Charges;

(d) the amount of any restructuring reserve or charge recorded during such period in accordance with GAAP;

(e) any fees permitted pursuant to clause (b)(10) of Section 4.13;

(f) amounts paid as a spread payment in connection with a cashless exercise of options by a director or employee of Vertis Holdings or any of its Restricted Subsidiaries (i.e.,a payment equal to the spread of the then fair market value of Vertis Holdings’ Common Stock which may be purchased with such options over the aggregate exercise price of such options); and

(g) less, without duplication, non-cash items increasing Consolidated Net Income of such Person and its Restricted Subsidiaries for such period in each case determined in accordance with GAAP.

“Consolidated Fixed Charge Coverage Ratio” means, with respect to any Person, the ratio of Consolidated EBITDA of such Person during the four full fiscal quarters (the “Four Quarter Period”) ending on or prior to the date of the transaction giving rise to the need to calculate the Consolidated Fixed Charge Coverage Ratio for which financial statements are available (the “Transaction Date”) to Consolidated Fixed Charges of such Person for the Four Quarter Period. In addition to and without limitation of the foregoing, for purposes of this definition, “Consolidated EBITDA” and “Consolidated Fixed Charges” shall be calculated after giving effect on a pro forma basis for the period of such calculation to:

(1)the incurrence or repayment of any Indebtedness of such Person or any of its Restricted Subsidiaries (and the application of the proceeds thereof) giving rise to the need to make such calculation and any incurrence or repayment of other Indebtedness (and the application of the proceeds thereof), other than the incurrence or repayment of Indebtedness in the ordinary course of business for working capital purposes pursuant to working capital facilities, occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such incurrence or repayment, as the case may be (and the application of the proceeds thereof), occurred on the first day of the Four Quarter Period;

(2)any asset sales or other dispositions or Asset Acquisitions (including, without limitation, any Asset Acquisition giving rise to the need to make such calculation as a result of such Person or one of its Restricted Subsidiaries (including

7

any Person who becomes a Restricted Subsidiary as a result of the Asset Acquisition) incurring, assuming or otherwise being liable for Acquired Indebtedness and also including any Consolidated EBITDA (including pro forma expense and cost reductions calculated on a basis consistent with Regulation S-X under the Exchange Act) attributable to the assets which are the subject of the Asset Acquisition or Asset Sale during the Four Quarter Period) occurring during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date, as if such asset sale or Asset Acquisition (including the incurrence, assumption or liability for any such Indebtedness or Acquired Indebtedness) occurred on the first day of the Four Quarter Period; and

(3)any asset sales or asset acquisitions (including any Consolidated EBITDA (including pro forma expense and cost reductions calculated on a basis consistent with Regulation S-X under the Exchange Act) attributable to the assets which are the subject of the Asset Acquisition or asset sale during the Four Quarter Period) that have been made by any Person that has become a Restricted Subsidiary of the Company or has been merged with or into the Company or any Restricted Subsidiary of the Company during the Four Quarter Period or at any time subsequent to the last day of the Four Quarter Period and on or prior to the Transaction Date that would have constituted asset sales or Asset Acquisitions had such transactions occurred when such Person was a Restricted Subsidiary of the Company or subsequent to such Person’s merger into the Company, as if such asset sale or Asset Acquisition (including the incurrence, assumption or liability for any Indebtedness or Acquired Indebtedness in connection therewith) occurred on the first day of the Four Quarter Period;

provided that to the extent that clause (2) or (3) of this sentence requires that pro forma effect be given to an asset sale or Asset Acquisition, such pro forma calculation shall be based upon the four full fiscal quarters immediately preceding the Transaction Date of the Person, or division or line of business of the Person, that is acquired or disposed of for which financial information is available. If such Person or any of its Restricted Subsidiaries directly or indirectly guarantees Indebtedness of a third Person, the preceding sentence shall give effect to the incurrence of such guaranteed Indebtedness as if such Person or any Restricted Subsidiary of such Person had directly incurred or otherwise assumed such guaranteed Indebtedness.

Furthermore, in calculating “Consolidated Fixed Charges” for purposes of this “Consolidated Fixed Charge Coverage Ratio” interest on Indebtedness determined on a fluctuating basis, to the extent such interest is covered by agreements relating to Interest Swap Obligations, shall be deemed to accrue at the rate per annum resulting after giving effect to the operation of such agreements.

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“Consolidated Fixed Charges” means, with respect to any Person for any period, the sum, without duplication, of:

(1)Consolidated Interest Expense; plus

(2)the product of (x) the amount of all dividend payments on any series of Preferred Stock of such Person and its Restricted Subsidiaries (other than dividends paid in Qualified Capital Stock and dividends paid on Preferred Stock of Unrestricted Subsidiaries) paid, accrued or scheduled to be paid or accrued during such period times (y) a fraction, the numerator of which is one and the denominator of which is one minus the then current effective consolidated federal, state and local tax rate of such Person, expressed as a decimal; provided that to the extent that such dividend payments are tax deductible, then this clause (2) shall equal the amount set forth in clause (x) hereof without giving effect to clause (y) hereof.

“Consolidated Interest Expense” means, with respect to any Person for any period, the sum of, without duplication:

(1)the aggregate of all cash and non-cash interest expense with respect to all outstanding Indebtedness of such Person and its Restricted Subsidiaries, including the net costs associated with Interest Swap Obligations for such period determined on a consolidated basis in conformity with GAAP but excluding amortization or original issued discount and amortization of any deferred financing costs; and

(2)the interest component of Capitalized Lease Obligations paid, accrued and/or scheduled to be paid or accrued by such Person and its Restricted Subsidiaries during such period as determined on a consolidated basis in accordance with GAAP.

“Consolidated Net Income” of the Company means, for any period, the aggregate net income (or loss) of the Company and its Restricted Subsidiaries for such period on a consolidated basis, determined in accordance with GAAP; provided that there shall be excluded therefrom:

(1)gains and losses from Asset Sales (without regard to the $2.5 million limitation set forth in the definition thereof) or abandonments or reserves relating thereto and the related tax effects according to GAAP;

(2)gains and losses due solely to fluctuations in currency values and the related tax effects according to GAAP;

(3)extraordinary, unusual or nonrecurring gains, losses, income or expense, and the related tax effects;

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(4)the net income (or loss) of any Person acquired in a “pooling of interests” transaction accrued prior to the date it becomes a Restricted Subsidiary of the Company or is merged or consolidated with the Company or any Restricted Subsidiary of the Company;

(5)the net income of any Restricted Subsidiary of the Company to the extent that the declaration of dividends or similar distributions by that Restricted Subsidiary of that income is restricted by a contract, operation of law or otherwise;

(6)the net loss of any Person other than a Restricted Subsidiary of the Company;

(7)the net income of any Person, other than a Restricted Subsidiary of the Company, except to the extent of cash dividends or distributions paid to the Company or to a Restricted Subsidiary of the Company by such Person unless, in the case of a Restricted Subsidiary of the Company that receives such dividends or distributions, such Restricted Subsidiary is subject to clause (5) above;

(8)(A) all non-cash charges (provided that any cash payments actually made with respect to the liabilities for which such cash charges were created shall be deducted from Consolidated Net Income in the period when made) and (B) all deferred financing costs written off in connection with the early extinguishment of any Indebtedness, in each case incurred by the Company or any of its Restricted Subsidiaries in connection with the recapitalization of Vertis Holdings in December 1999 and the related financing transactions;

(9)non-cash compensation charges, including any arising from existing stock options resulting from any merger or recapitalization transition; and

(10)the cumulative effect of a change in accounting principle.

“Consolidated Non-cash Charges” means, with respect to any Person, for any period, the aggregate depreciation, amortization and other non-cash expenses of such Person and its Restricted Subsidiaries reducing Consolidated Net Income of such Person and its Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP (excluding any such charges constituting an extraordinary item or loss or any such charge which requires an accrual of or a reserve for cash charges for any future period).

“Continuing Directors” means, as of any date of determination, any member of the Board of Directors of the Company who:

(1)was a member of such Board of Directors on the Issue Date;

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(2)was nominated for election or elected to such Board of Directors with, or whose election to such Board of Directors was approved by, the affirmative vote of a majority of the Continuing Directors who were members of such Board of Directors at the time of such nomination or election; or

(3)is any designee of a Permitted Holder or was nominated by a Permitted Holder or any designees of a Permitted Holder on the Board of Directors.

“Corporate Trust Office” means the principal office of the Trustee at which at any time its corporate trust business shall be administered, which office at the date hereof is located at 101 Barclay Street, New York, New York 10286, Attention: Corporate Trust Administration, or such other address as the Trustee may designate from time to time by notice to the Holders and the Company, or the principal corporate trust office of any successor Trustee (or such other address as such successor Trustee may designate from time to time by notice to the Holders and the Company).

“Covenant Defeasance” has the meaning provided in Section 8.2.

“Currency Agreement” means any foreign exchange contract, currency swap agreement or other similar agreement or arrangement designed to protect the Company or any Restricted Subsidiary of the Company against fluctuations in currency values.

“Custodian” means any receiver, interim receiver, receiver and manager, trustee, assignee, liquidator, sequestrator or similar official charged with maintaining possession or control over property for one or more creditors, whether under any Bankruptcy Law or otherwise.

“Default” means an event or condition the occurrence of which is, or with the lapse of time or the giving of notice or both would be, an Event of Default.

“Depository” means The Depository Trust Company, its nominees and successors.

“Designated Senior Debt” means (1) Indebtedness under or in respect of the Senior Credit Facility and (2) any other Indebtedness constituting Senior Debt which, at the time of determination, has an aggregate principal amount outstanding of, or under which, at the date of determination, the holders thereof are committed to lend up to, at least $25.0 million and is specifically designated in the instrument evidencing such Senior Debt as “Designated Senior Debt” by the Company.

“Deutsche Bank” means Deutsche Bank Trust Company Americas (f/k/a Bankers Trust Company).

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“Disqualified Capital Stock” means that portion of any Capital Stock which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable at the option of the holder thereof), or upon the happening of any event (other than an event which would constitute a Change of Control), matures (excluding any maturity as the result of an optional redemption by the issuer thereof) or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the sole option of the holder thereof (except, in each case, upon the occurrence of a Change of Control) on or prior to the final maturity date of the Notes.

“Dollars” or the sign “$” means the lawful money of the United States of America.

“Domestic Restricted Subsidiary” means a Restricted Subsidiary incorporated or otherwise organized or existing under the laws of the United States, any state thereof or any territory or possession of the United States.

“ ECP” shall mean Evercore Capital Partners L.P., a Delaware limited partnership.

“ECP Affiliates” shall mean any Affiliate of ECP.

“ECP Investors” shall mean ECP, Evercore Capital Partners (NQ) L.P. and EBF Group L.L.C., or any limited or general partner, stockholder, officer or employee of such ECP Investor.

“Equity Investors” shall mean THL, THL Investors, ECP, ECP Investors and their respective Affiliates, taken as a whole.

“Event of Default” means each of the events set forth in Section 6.1.

“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any successor statute or statutes thereto.

“fair market value” means, with respect to any asset or property, the price which could be negotiated in an arm’s-length, free market transaction, for cash, between a willing seller and a willing and able buyer, neither of whom is under undue pressure or compulsion to complete the transaction. Fair market value shall be determined by the Board of Directors of the Company acting reasonably and in good faith and shall be evidenced by a Board Resolution of the Board of Directors of the Company delivered to the Trustee.

“Funding Guarantor” has the meaning ascribed to it in Section 11.7.

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“GAAP” means generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as may be approved by a significant segment of the accounting profession of the United States, which are in effect as of the Issue Date.

“Global Security” has the meaning provided in Section 2.2.

“Guarantee Obligations” shall mean, as to any Guarantor, all obligations of every nature of such Guarantor from time to time owing to the Holders and the Trustee under this Indenture and the Notes (including its Guarantee), whether for principal, reimbursements, interest, premium, fees, penalties, expenses, indemnities, damages or otherwise.

“Guarantees” means, collectively, the guarantees of the Notes by the Guarantors pursuant to Article XI which are evidenced by notations of guarantee substantially in the form of Exhibit E.

“Guarantor” means (1) each of the Company’s Domestic Restricted Subsidiaries that is a guarantor under the Senior Credit Facility on the Issue Date and (2) each of the Company’s Domestic Restricted Subsidiaries that in the future executes a supplemental indenture in which such Domestic Restricted Subsidiary agrees to be bound by the terms of this Indenture as a Guarantor; provided that any Person constituting a Guarantor as described above shall cease to constitute a Guarantor when its respective Guarantee is released in accordance with the terms of this Indenture.

“Guarantor Senior Debt” means, with respect to any Guarantor: the principal of, premium, if any, and interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on any Indebtedness of a Guarantor, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Guarantee of such Guarantor. Without limiting the generality of the foregoing, “Guarantor Senior Debt” shall also include the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on, and all other amounts owing in respect of:

(x) all monetary obligations of every nature of such Guarantor under, or with respect to, the Senior Credit Facility and the A/R Facility, including, without

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limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, fees, expenses and indemnities (and guarantees thereof);

(y)all Interest Swap Obligations of such Guarantor (and guarantees thereof by such Guarantor); and

(z)all obligations of such Guarantor (and guarantees thereof by such Guarantor) under Currency Agreements;

in each case whether outstanding on the Issue Date or thereafter incurred.

Notwithstanding the foregoing, “Guarantor Senior Debt” shall not include:

(1)any Indebtedness of such Guarantor to a Subsidiary of the Company;

(2)Indebtedness to, or guaranteed on behalf of, any shareholder, director, officer or employee of such Guarantor or any Subsidiary of such Guarantor (including, without limitation, amounts owed for compensation) other than a shareholder who is also a lender (or an Affiliate of a lender) under the Senior Credit Facility;

(3)Indebtedness to trade creditors and other amounts incurred in connection with obtaining goods, materials or services;

(4)Indebtedness represented by Disqualified Capital Stock;

(5)any liability for federal, state, local or other taxes owed or owing by such Guarantor;

(6)that portion of any Indebtedness incurred in violation of Section 4.9 (but, as to any such obligation, no such violation shall be deemed to exist for purposes of this clause (6) if the holder(s) of such obligation or their representative shall have received an officers’ certificate of the Company to the effect that the incurrence of such Indebtedness does not (or, in the case of revolving credit indebtedness, that the incurrence of the entire committed amount thereof at the date on which the initial borrowing thereunder is made would not) violate Section 4.9); provided that the foregoing shall not apply to any incurrence under the Senior Credit Facility pursuant to clause (2) of the definition of “Permitted Indebtedness” which incurrence was in violation of such clause (2) solely as a result of the increase in Attributed Receivables Facility Indebtedness (as defined in the Senior Credit Facility as in effect on June 24, 2002) and the lenders under the Senior Credit Facility extended such additional amounts in good faith without knowledge of such increase;

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(7)Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to such Guarantor; and

(8)any Indebtedness which is, by its express terms, subordinated or junior in right of payment to any other Indebtedness of such Guarantor.

“Guarantor Senior Debt Obligations” means all obligations of any Guarantor for principal, premium, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Guarantor Senior Debt, and all guarantees by such Guarantor of any of the foregoing.

“Holder” or “Securityholder” means a Person in whose name a Note is registered. The Holder of a Note will be treated as the owner of such Note for all purposes.

“Incur” means, with respect to any Indebtedness or other obligation of any Person, to create, issue, incur (by conversion, exchange or otherwise), assume, guarantee or otherwise become liable in respect of such Indebtedness or other obligation or the recording, as required pursuant to GAAP or otherwise, of any such Indebtedness or other obligation on the balance sheet of such Person (and “Incurrence,” “Incurred,” “Incurrable” and “Incurring” shall have meanings correlative to the foregoing); provided that any amendment, modification or waiver of any document pursuant to which Indebtedness was previously Incurred shall only be deemed to be an Incurrence of Indebtedness if and to the extent such amendment, modification or waiver (i) increases the principal thereof or interest rate or premium payable thereon or (ii) changes to an earlier date the stated maturity thereof or the date of any scheduled or required principal payment thereon or the time or circumstances under which such Indebtedness shall be redeemed; provided, further, that any Indebtedness of a Person existing at the time such Person becomes a Restricted Subsidiary of the Company (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Restricted Subsidiary at the time it becomes a Restricted Subsidiary of the Company.

“Indebtedness” means with respect to any Person, without duplication:

(1)all Obligations of such Person for borrowed money;

(2)all Obligations of such Person evidenced by bonds, debentures, notes or other similar instruments;

(3)all Capitalized Lease Obligations of such Person;

(4)all Obligations of such Person issued or assumed as the deferred purchase price of property, all conditional sale obligations and all Obligations under

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any title retention agreement (but excluding trade accounts payable and other accrued liabilities arising in the ordinary course of business);

(5)all Obligations for the reimbursement of any obligor on any letter of credit, banker’s acceptance or similar credit transaction;

(6)guarantees and other contingent obligations in respect of Indebtedness referred to in clauses (1) through (5) above and clause (8) below;

(7)all Obligations of any other Person of the type referred to in clauses (1) through (6) which are secured by any lien on any property or asset of such Person, but which Obligations are not assumed by such Person, the amount of such Obligation being deemed to be the lesser of the fair market value of such property or asset or the amount of the Obligation so secured;

(8)all Obligations under currency agreements and interest swap agreements of such Person; and

(9)all Disqualified Capital Stock issued by such Person with the amount of Indebtedness represented by such Disqualified Capital Stock being equal to the greater of its voluntary or involuntary liquidation preference and its maximum fixed repurchase price, but excluding accrued dividends, if any.

For purposes hereof, (x) the “maximum fixed repurchase price” of any Disqualified Capital Stock which does not have a fixed repurchase price shall be calculated in accordance with the terms of such Disqualified Capital Stock as if such Disqualified Capital Stock were purchased on any date on which Indebtedness shall be required to be determined pursuant to this Indenture, and if such price is based upon, or measured by, the fair market value of such Disqualified Capital Stock, such fair market value shall be determined reasonably and in good faith by the Board of Directors of the issuer of such Disqualified Capital Stock and (y) any transfer of accounts receivable or other assets which constitutes a sale for purposes of GAAP shall not constitute Indebtedness hereunder. Accrual of interest, accretion or amortization of original issue discount and the payment of any interest on any Indebtedness in the form of additional Indebtedness with the same terms will not be deemed to be an incurrence of Indebtedness for the purposes of Section 4.9.

“Indenture” means this Indenture as amended or supplemented from time to time pursuant to the terms hereof.

“Institutional Accredited Investor” means an institution that is an “accredited investor” as that term is defined in Rule 501(a)(l), (2), (3) or (7) under the Securities Act.

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“Intercompany Indebtedness” means any Indebtedness of the Company or any Guarantor or Wholly Owned Restricted Subsidiary of the Company that is not a Guarantor which, in the case of the Company, is owing to any Guarantor or Wholly Owned Restricted Subsidiary of the Company that is not a Guarantor and which, in the case of any such Subsidiary, is owing to the Company or any Guarantor or Wholly Owned Restricted Subsidiary of the Company that is not a Guarantor; provided that if as of any date any Person other than the Company or a Guarantor or a Wholly Owned Restricted Subsidiary of the Company that is not a Guarantor, a lender under the Senior Credit Facility or a creditor under any interest rate protection or other hedging agreement (or any collateral agent acting on behalf of such lenders and/or creditors) owns or holds such Indebtedness, or holds any Lien in respect thereof (other than a Lien in favor of the Holders, the lenders under the Senior Credit Facility, the creditors under any interest rate protection or other hedging agreement or any collateral agent for such lenders and/or creditors), such Indebtedness shall no longer be Intercompany Indebtedness.

“interest,” when used with respect to any Note, means the amount of all interest accruing on such Note, including all interest accruing subsequent to the occurrence of any events specified in Sections 6.l(f) and 6.1(g) or which would have accrued but for any such event.

“Interest Payment Date,” when used with respect to any Note, means the stated maturity of an installment of interest specified in such Note.

“Interest Swap Obligations” means the obligations of any Person, pursuant to any arrangement with any other Person, whereby, directly or indirectly, such Person is entitled to receive from time to time periodic payments calculated by applying either a floating or a fixed rate of interest on a stated notional amount in exchange for periodic payments made by such other Person calculated by applying a fixed or a floating rate of interest on the same notional amount.

“Investment” by any Person in any other Person means, with respect to any Person, any direct or indirect loan or other extension of credit (including, without limitation, a guarantee) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition by such Person of any Capital Stock, bonds, notes, debentures or other securities or evidences of Indebtedness issued by, such other Person. “Investment” shall exclude extensions of trade credit by the Company and its Restricted Subsidiaries on commercially reasonable terms in accordance with normal trade practices of the Company or such Restricted Subsidiary, as the case may be. For the purposes of Section 4.8:

(1)the Company shall be deemed to have made an “Investment” equal to the fair market value of the net assets of any Restricted Subsidiary at the time that such

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Restricted Subsidiary is designated an Unrestricted Subsidiary and the aggregate amount of Investments made subsequent to the Issue Date shall exclude (to the extent the designation as an Unrestricted Subsidiary was included as a Restricted Payment) the fair market value of the net assets of any Unrestricted Subsidiary at the time that such Unrestricted Subsidiary is designated a Restricted Subsidiary, not to exceed the amount of the Investment deemed made at the date of designation thereof as an Unrestricted Subsidiary; and

(2)the amount of any Investment shall be the original cost of such Investment plus the cost of all additional Investments by the Company or any of its Restricted Subsidiaries, without any adjustments for increases or decreases in value, or write-ups, write-downs or write-offs with respect to such Investment, reduced by the payment of dividends or distributions (including tax sharing payments) in connection with such Investment or any other amounts received in respect of such Investment; provided that no such payment of dividends or distributions or receipt of any such other amounts shall reduce the amount of any Investment if such payment of dividends or distributions or receipt of any such amounts would be included in Consolidated Net Income. If the Company or any Restricted Subsidiary of the Company sells or otherwise disposes of any Common Stock of any direct or indirect Restricted Subsidiary of the Company such that, after giving effect to any such sale or disposition, the Company no longer owns, directly or indirectly, more than 50% of the outstanding Common Stock of such Restricted Subsidiary, the Company shall be deemed to have made an Investment on the date of any such sale or disposition equal to the fair market value of the Common Stock of such Restricted Subsidiary not sold or disposed of.

“Issue Date” means February 28, 2003.

“JP Morgan” means JP Morgan Chase Bank (f/k/a The Chase Manhattan Bank).

“Laws” means all applicable statutes, laws, ordinances, regulations, rules, orders, judgments, writs, injunctions or decrees of any state, commonwealth, nation, territory, possession or province, or Tribunal, and “Law” means each of the foregoing.

“Legal Defeasance” has the meaning provided in Section 8.2.

“Legal Holiday” means any day other than a Business Day.

“Lien” means any lien, mortgage, deed of trust, pledge, security interest, charge or encumbrance of any kind (including any conditional sale or other title retention agreement, any lease in the nature thereof and any agreement to give any security interest).

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“Maturity Date” means, when used with respect to any Note, the date specified in such Note as the fixed date on which the final installment of principal of such Note is due and payable (in the absence of any acceleration thereof pursuant to Section 6.2 or any Net Proceeds Offer or Change of Control Offer).

“Net Cash Proceeds” means, with respect to any Asset Sale, the proceeds in the form of cash or Cash Equivalents including payments in respect of deferred payment obligations when received in the form of cash or Cash Equivalents (other than the portion of any such deferred payment constituting interest) received by the Company or any of its Restricted Subsidiaries from such Asset Sale net of:

(1)out-of-pocket expenses and fees relating to such Asset Sale (including, without limitation, legal, accounting and investment banking fees and sales commissions);

(2)taxes paid or payable after taking into account any reduction in consolidated tax liability due to available tax credits or deductions and any tax sharing arrangements;

(3)any repayment of debt under the Senior Subordinated Credit Agreement to the extent such repayment is required thereunder;

(4)any relocation expenses and severance, pension and shutdown costs incurred as a result thereof;

(5)the repayment of Indebtedness that is secured by a Lien on the Property or assets that are subject of such Asset Sale and such Lien is permitted by this Indenture; and

(6)any portion of cash proceeds which the Company determines in good faith should be reserved for post-closing adjustments, it being understood and agreed that on the day that all such post-closing adjustments have been determined, the amount (if any) by which the reserved amount in respect of such Asset Sale exceeds the actual post-closing adjustments payable by the Company or any of its Subsidiaries shall constitute Net Cash Proceeds on such date; provided that, in the case of the sale by the Company of an asset constituting an Investment made after the Issue Date (other than a Permitted Investment), the “Net Cash Proceeds” in respect of such Asset Sale shall not include the lesser of (x) the cash received with respect to such Asset Sale and (y) the initial amount of such Investment, less, in the case of clause (y), all amounts (up to an amount not to exceed the initial amount of such Investment) received by the Company with respect to such Investment, whether by dividend, sale, liquidation or repayment, in each case prior to the date of such Asset Sale.

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“Net Proceeds Offer” shall have the meaning ascribed to such term in Section 4.12(a).

“Net Proceeds Offer Amount” shall have the meaning ascribed to such term in Section 4.12(a).

“Net Proceeds Offer Payment Date” shall have the meaning ascribed to such term in Section 4.12(a).

“Net Proceeds Offer Trigger Date” shall have the meaning ascribed to such term in Section 4.12(a).

“Non-payment Default” shall have the meaning ascribed to such term in Section 10.2(b).

“Non-U.S. Person” means a Person who is not a U.S. Person, as defined in Regulation S.

“Notes” means the Series A Notes and Series B Notes as amended or supplemented from time to time in accordance with the terms hereof that are issued pursuant to this Indenture.

“Obligations” means all obligations for (a) principal, premium, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law), penalties, fees, and (b) to the extent liquidated and quantifiable at the time of determination, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Indebtedness.

“Officer” means the Chairman of the Board, the President, any Vice President, the Chief Financial Officer, the Controller, the Treasurer, the Secretary or Assistant Secretary.

“Officers’ Certificate” means, as applied to any corporation, a certificate executed on behalf of such corporation by an Officer.

“Offshore Physical Securities” has the meaning provided in Section 2.2.

“Opinion of Counsel” means a written opinion from legal counsel who is reasonably acceptable to the Trustee, which may include outside or in-house counsel to the Company.

“Paying Agent” has the meaning provided in Section 2.3.

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“Payment Blockage Notice” has the meaning ascribed to such term in Section 10.2(b).

“Payment Blockage Period” has the meaning provided in Section 10.2(b).

“Payment Default” shall have the meaning ascribed to such term in Section 10.2(a).

“Payment Restriction” has the meaning ascribed to such term in Section 4.10.

“Permitted Holders” shall mean and include (i) THL, THL Affiliates and THL Investors and (ii) ECP, ECP Affiliates and ECP Investors.

“Permitted Indebtedness” means, without duplication, each of the following:

(1)Indebtedness under the Notes and this Indenture and under the Senior Subordinated Credit Agreement (including the guarantees made thereunder) in an aggregate principal amount not to exceed $293.5 million;

(2)Indebtedness incurred pursuant to the Senior Credit Facility (including but not limited to Indebtedness in respect of letters of credit or bankers’ acceptances issued or created thereunder) (including the guarantees made thereunder) in a maximum principal amount not to exceed in the aggregate the amount equal to $670 million less (x) the amount of any proceeds from any incurrence by the Company or any of its Restricted Subsidiaries of Attributed Receivables Facility Indebtedness (as defined in the Senior Credit Facility as in effect on June 24, 2002) pursuant to the A/R Facility in excess of $150.0 million and (y) the amount of all mandatory repayments of term loans actually made under, and permanent commitment reductions actually made in the revolving credit portion of, the Senior Credit Facility with Net Cash Proceeds of Asset Sales applied thereto as required by Section 4.12;

(3)other Indebtedness of the Company and its Restricted Subsidiaries outstanding on the Issue Date reduced by the amount of any scheduled amortization payments or mandatory prepayments when actually paid or permanent reductions thereon;

(4)Interest Swap Obligations of the Company or any Restricted Subsidiary of the Company covering Indebtedness of the Company or any of its Restricted Subsidiaries; provided that any Indebtedness to which any such Interest Swap Obligations correspond is otherwise permitted to be incurred under this Indenture;

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(5)Indebtedness of the Company or any of its Restricted Subsidiaries under (i) Currency Agreements entered into, in the judgment of the Company, to protect the Company or such Restricted Subsidiary from foreign currency exchange rates and (ii) Raw Material Hedge Agreements;

(6)Intercompany Indebtedness of the Company or any of its Restricted Subsidiaries;

(7)Acquired Indebtedness of any Restricted Subsidiary of the Company that is not a Guarantor to the extent the Company could have incurred such Indebtedness in accordance with the Consolidated Fixed Charge Coverage Ratio of Section 4.9 on the date such Indebtedness became Acquired Indebtedness; provided that such Acquired Indebtedness was not incurred in connection with, or in anticipation or contemplation of, such Person becoming a Restricted Subsidiary of the Company; provided, further, that the aggregate amount of Indebtedness (including refinancings thereof) pursuant to this clause (7) and clause (10) shall not exceed $40.0 million in the aggregate;

(8)Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently drawn against insufficient funds in the ordinary course of business;

(9)any refinancing, modification, replacement, renewal, restatement, refunding, deferral, extension, substitution, supplement, reissuance or resale of existing or future Indebtedness (other than pursuant to clauses (2), (4), (5), (6), (7), (8), (l0), (11), (12), (13), (14) and (15) of this definition), including any additional Indebtedness incurred to pay interest or premiums required by the instruments governing such existing or future Indebtedness as in effect at the time of issuance thereof or other premiums to the extent the Company reasonably determines that such premiums are necessary to effect the refinancing (“Required Premiums”) and fees in connection therewith; provided that any such event shall not (1) result in an increase in the aggregate principal amount of Permitted Indebtedness (except to the extent such increase is a result of a simultaneous incurrence of additional Indebtedness (A) to pay Required Premiums and related fees or (B) otherwise permitted to be incurred under this Indenture) of the Company and its Restricted Subsidiaries and (2) create Indebtedness with a Weighted Average Life to Maturity at the time such Indebtedness is incurred that is less than the Weighted Average Life to Maturity at such time of the Indebtedness being refinanced, modified, replaced, renewed, restated, refunded, deferred, extended, substituted, supplemented, reissued or resold; provided that no Restricted Subsidiary of the Company may refinance any Indebtedness pursuant to this clause (9) other than its own Indebtedness;

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(10)(x) Indebtedness incurred by the Company and its Restricted Subsidiaries to finance the purchase, lease or improvement of property (real or personal) or equipment (whether through the direct purchase of assets or the Capital Stock of any Person owning such assets) and (y) Capitalized Lease Obligations in an aggregate principal amount outstanding for both clauses (x) and (y) (including refinancings thereof), together with any Indebtedness pursuant to clause (7), not to exceed $40.0 million at the time of any incurrence thereof;

(11)Indebtedness incurred by the Company or any of its Restricted Subsidiaries constituting reimbursement obligations with respect to letters of credit issued in the ordinary course of business, including, without limitation, letters of credit in respect of workers’ compensation claims or self-insurance, or other Indebtedness with respect to reimbursement-type obligations regarding workers’ compensation claims;

(12)Indebtedness arising from agreements of the Company or a Restricted Subsidiary of the Company providing for indemnification, adjustment of purchase price, earn out or other similar obligations, in each case, incurred or assumed in connection with the disposition or acquisition of any business, assets or a Restricted Subsidiary of the Company;

(13)obligations in respect of performance and surety bonds and completion guarantees provided by the Company or any Restricted Subsidiary of the Company in the ordinary course of business;

(14)Indebtedness consisting of guarantees (i) by the Company of Indebtedness and any other obligation or liability permitted to be incurred under this Indenture by Restricted Subsidiaries of the Company, and (ii) subject to the provisions of Section 4.17, by Restricted Subsidiaries of the Company of Indebtedness and any other obligation or liability permitted to be incurred by the Company or other Restricted Subsidiaries of the Company; and

(15)additional Indebtedness of the Company or any Restricted Subsidiary in an aggregate principal amount not to exceed $35.0 million at any one time outstanding (which amount may, but need not, be incurred in whole or in part under the Senior Credit Facility; and

(16)Indebtedness of the Company represented by the Senior Notes in an aggregate principal amount not to exceed $350.0 million and the related guarantees by the Guarantors.

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Notwithstanding anything in this Indenture to the contrary, transactions contemplated pursuant to the A/R Facility shall not be deemed to be the incurrence of Indebtedness by the Company or by any Restricted Subsidiary.

“Permitted Investments” means:

(1)Investments by the Company or any Restricted Subsidiary of the Company in any Restricted Subsidiary of the Company that is a Guarantor or any Wholly Owned Subsidiary of the Company that is not a Guarantor (whether existing on the Issue Date or created thereafter) and Investments in the Company by any Restricted Subsidiary of the Company;

(2)cash and Cash Equivalents;

(3)Investments existing on the Issue Date;

(4)loans and advances to employees, officers and directors of the Company and its Restricted Subsidiaries not in excess of $10.0 million at any one time outstanding;

(5)accounts receivable owing to the Company or any Restricted Subsidiary created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include concessionary trade terms as the customary trade terms;

(6)Currency Agreements, Interest Swap Obligations and Raw Material Hedge Agreements entered into by the Company or any of its Restricted Subsidiaries for bona fide business reasons and not for speculative purposes, and otherwise in compliance with this Indenture;

(7)Investments in securities of trade creditors or customers received pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such trade creditors or customers;

(8)guarantees by the Company or any of its Restricted Subsidiaries of Indebtedness otherwise permitted to be incurred by the Company or any of its Restricted Subsidiaries under this Indenture and the creation of Liens on the assets of the Company or any of its Restricted Subsidiaries in compliance with Section 4.11;

(9)Investments by the Company or any Restricted Subsidiary of the Company in a Person, if as a result of such Investment (a) such Person becomes a Restricted Subsidiary of the Company and a Guarantor or a Wholly Owned Subsidiary

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of the Company that is not a Guarantor or (b) such Person is merged, consolidated or amalgamated with or into, or transfers or conveys all or substantially all of its assets to, or is liquidated into, the Company or a Restricted Subsidiary of the Company that is a Guarantor or any Wholly Owned Subsidiary of the Company that is not a Guarantor;

(10)additional Investments having an aggregate fair market value, taken together with all other Investments made pursuant to this clause (10) that are at the time outstanding, not exceeding $20.0 million at the time of such Investment (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value);

(11)any Investment by the Company or a Restricted Subsidiary of the Company in a Receivables Entity or any Investment by a Receivables Entity in any other Person in connection with a Qualified Receivables Transaction; provided that any Investment in a Receivables Entity is in the form of a Purchase Money Note or an equity interest;

(12)Investments received by the Company or its Restricted Subsidiaries as consideration for asset sales, including Asset Sales; provided that such Asset Sale is otherwise effected in compliance with Section 4.12; and

(13)that portion of any Investment where the consideration provided by the Company is Capital Stock of the Company (other than Disqualified Capital Stock).

“Permitted Liens” means the following types of Liens:

(1)Liens securing the Notes and the Guarantees;

(2)Liens securing Acquired Indebtedness incurred in reliance on clause (7) of the definition of “Permitted Indebtedness”; provided that such Liens do not extend to or cover any property or assets of the Company or of any of its Restricted Subsidiaries other than the property or assets that secured the Acquired Indebtedness prior to the time such Indebtedness became Acquired Indebtedness of the Company or a Restricted Subsidiary of the Company;

(3)Liens existing on the Issue Date, together with any Liens securing Indebtedness incurred in reliance on clause (9) of the definition of “Permitted Indebtedness” in order to refinance the Indebtedness secured by Liens existing on the Issue Date; provided that the Liens securing the refinancing Indebtedness shall not extend to property other than that pledged under the Liens securing the Indebtedness being refinanced; and

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(4)Liens in favor of the Company on the property or assets, or any proceeds, income or profit therefrom, of any Restricted Subsidiary.

“Person” means an individual, partnership, corporation, unincorporated organization, trust or joint venture, or a governmental agency or political subdivision thereof or any other entity.

“Physical Security” means, collectively, the Offshore Physical Securities and the U.S. Physical Securities.

“Preferred Stock” of any Person means any Capital Stock of such Person that has preferential rights to any other Capital Stock of such Person with respect to dividends or redemptions or upon liquidation.

“principal” of a debt security means the principal amount of the security plus, when appropriate, the premium, if any, on the security.

“Private Placement Legend” means the legend initially set forth on the Series A Notes in the form set forth on Exhibit A-1.

“Productive Assets” means assets (including Capital Stock) of a kind used or usable in the businesses of the Company and its Restricted Subsidiaries as, or related to such business, conducted on the Issue Date or in businesses reasonably related thereto.

“pro forma” means, with respect to any calculation made or required to be made pursuant to the terms of this Indenture, a calculation in accordance with Article 11 of Regulation S-X under the Securities Act as interpreted by the Company’s chief financial officer or Board of Directors in consultation with its independent certified public accountants.

“Purchase Money Note” means a promissory note of a Receivables Entity evidencing a line of credit, which may be irrevocable, from the Company or any Subsidiary of the Company in connection with a Qualified Receivables Transaction to a Receivables Entity, which note shall be repaid from cash available to the Receivables Entity, other than amounts required to be established as reserves pursuant to agreements, amounts paid to investors in respect of interest, principal and other amounts owing to such investors and amounts paid in connection with the purchase of newly generated receivables.

“Qualified Capital Stock” means any Capital Stock that is not Disqualified Capital Stock.

“Qualified Institutional Buyer” or “QIB” shall have the meaning specified in Rule 144A under the Securities Act.

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“Qualified Receivables Transaction” means any transaction or series of transactions that may be entered into by the Company or any of its Subsidiaries pursuant to which the Company or any or its Subsidiaries may sell, convey or otherwise transfer to (a) a Receivables Entity (in the case of a transfer by the Company or any of its Subsidiaries) and (b) any other Person (in the case of a transfer by a Receivables Entity), or may grant a security interest in, any accounts receivable (whether now existing or arising in the future) of the Company or any of its Subsidiaries, and any assets related thereto including, without limitation, all collateral securing such accounts receivable, all contracts and all guarantees or other obligations in respect of such accounts receivable, proceeds of such accounts receivable and other assets which are customarily transferred or in respect of which security interests are customarily granted in connection with asset securitization transactions involving accounts receivable.

“Raw Material Hedge Agreements” means agreements designed to hedge against fluctuations in the cost of raw materials entered into in the ordinary course of business in connection with the operation of the Company’s and its Restricted Subsidiaries’ business.

“Receivable” means a right to receive payment arising from a sale or lease of goods or services by a Person pursuant to an arrangement with another Person pursuant to which such other Person is obligated to pay for goods or services under terms that permit the purchase of such goods and services on credit, as determined in accordance with GAAP.

“Receivables Entity” means a Wholly Owned Subsidiary of the Company (or another Person in which the Company or any Subsidiary of the Company makes an Investment and to which the Company or any Subsidiary of the Company transfers accounts receivable and related assets) which engages in no activities other than in connection with the financing of accounts receivable, all proceeds thereof and all rights (contractual or other), collateral and other assets relating thereto, and any business or activities incidental or related to such business, and which is designated by the Board of Directors of the Company (as provided below) as a Receivables Entity:

(1)no portion of the Indebtedness or any other Obligations (contingent or otherwise) of which:

(i)is guaranteed by the Company or any Subsidiary of the Company (excluding guarantees of Obligations (other than the principal of, and interest on, Indebtedness) pursuant to Standard Securitization Undertakings);

(ii)is recourse to or obligates the Company or any Subsidiary of the Company in any way other than pursuant to Standard Securitization Undertakings; or

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(iii)subjects any property or asset of the Company or any Subsidiary of the Company, directly or indirectly, contingently or otherwise, to the satisfaction thereof, other than pursuant to Standard Securitization Undertakings;

(2)with which neither the Company nor any Subsidiary of the Company has any material contract, agreement, arrangement or understanding other than on terms no less favorable to the Company or such Subsidiary than those that might be obtained at the time from Persons that are not Affiliates of the Company, other than (i) pursuant to documents which evidence a Qualified Receivables Transaction and (ii) fees payable in the ordinary course of business in connection with servicing accounts receivable; and

(3)to which neither the Company nor any Subsidiary of the Company has any obligation to maintain or preserve such entity’s financial condition or cause such entity to achieve certain levels of operating results other than through the contribution of additional Receivables, related security and collections thereto and proceeds of the foregoing.

Any such designation by the Board of Directors of the Company shall be evidenced to the Trustee by filing with the Trustee a certified copy of the resolution of the Board of Directors of the Company giving effect to such designation and an Officers’ Certificate certifying that such designation complied with the foregoing conditions.

“Redemption Date” means, with respect to any Note, the Maturity Date of such Note or the date on which such Note is to be redeemed by the Company pursuant to the terms of the Notes.

“Reference Date” shall have the meaning ascribed to such term in Section 4.8(c).

“Registrar” has the meaning provided in Section 2.3.

“Registration Rights Agreement” means the Registration Rights Agreement by and among the Company, Deutsche Bank, JP Morgan and Banc of America, as agents, and the lenders named therein, relating to $293.5 million of the Notes and dated as of the Issue Date, as the same may be amended, supplemented or otherwise modified from time to time in accordance with the terms thereof.

“Regulation S” means Regulation S under the Securities Act.

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“Representative” means a trustee or other trustee, agent or representative in respect of any Designated Senior Debt; provided that if, and for so long as, any Designated Senior Debt lacks such a representative, then the Representative for such Designated Senior Debt shall at all times constitute the holders of a majority in outstanding principal amount of such Designated Senior Debt in respect of any Designated Senior Debt.

“Responsible Officer” shall mean, when used with respect to the Trustee, any officer within the corporate trust department of the Trustee, including any vice president, assistant vice president, assistant secretary, assistant treasurer, trust officer or any other officer of the Trustee who customarily performs functions similar to those performed by the persons who at the time shall be such officers, respectively, or to whom any corporate trust matter is referred because of such person’s knowledge of and familiarity with the particular subject and who shall have direct responsibility for the administration of this Indenture.

“Restricted Security” has the meaning set forth in Rule 144(a)(3) under the Securities Act; provided that the Trustee shall be entitled to request and conclusively rely upon an Opinion of Counsel with respect to whether any Note is a Restricted Security.

“Restricted Subsidiary” of any Person means any Subsidiary of such Person which at the time of determination is not an Unrestricted Subsidiary.

“Rule 144A” means Rule 144A under the Securities Act.

“Sale and Leaseback Transaction” means any direct or indirect arrangement with any Person or to which any such Person is a party, providing for the leasing to the Company or a Restricted Subsidiary of any property, whether owned by the Company or any Restricted Subsidiary at the Issue Date or later acquired, which has been or is to be sold or transferred by the Company or such Restricted Subsidiary to such Person or to any other Person from whom funds have been or are to be advanced by such Person on the security of such property.

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended.

“Securityholder” means Holder.

“Senior Credit Facility” means the Credit Agreement dated as of December 7, 1999, among the Company, certain of its subsidiaries, the lenders party thereto in their capacities as lenders thereunder and J.P. Morgan Securities Inc. (f/k/a Chase Securities Inc.) and Deutsche Bank Securities Inc., as Joint Lead Arrangers and Joint Book Managers, JP Morgan Chase Bank, (f/k/a The Chase Manhattan Bank), as Administrative Agent, Deutsche

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Bank Trust Company Americas (f/k/a Bankers Trust Company), as Syndication Agent, Bank of America, N.A., as Documentation Agent, and various co-agents, together with the related documents thereto (including, without limitation, any guarantee agreements and security documents), in each case as such agreements may be amended (including any amendment and restatement thereof), supplemented or otherwise modified from time to time, including any agreement extending the maturity of, refinancing, replacing or otherwise restructuring (including increasing the amount of available borrowings thereunder or adding Restricted Subsidiaries of the Company as additional borrowers or guarantors thereunder) all or any portion of the Indebtedness under such agreement or any successor or replacement agreement and whether by the same or any other agent, lender or group of lenders.

“Senior Debt” means the principal of, premium, if any, and interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on any Indebtedness of the Company, whether outstanding on the Issue Date or thereafter created, incurred or assumed, unless, in the case of any particular Indebtedness, the instrument creating or evidencing the same or pursuant to which the same is outstanding expressly provides that such Indebtedness shall not be senior in right of payment to the Notes. Without limiting the generality of the foregoing, “Senior Debt” shall also include the principal of, premium, if any, interest (including any interest accruing subsequent to the filing of a petition of bankruptcy at the rate provided for in the documentation with respect thereto, whether or not such interest is an allowed claim under applicable law) on, and all other amounts owing in respect of:

(1)all monetary obligations of every nature of the Company under, or with respect to, the Senior Credit Facility and the A/R Facility, including, without limitation, obligations to pay principal and interest, reimbursement obligations under letters of credit, fees, expenses and indemnities (and guarantees thereof);

(2)all Interest Swap Obligations of the Company (and guarantees thereof by the Company); and

(3)all obligations of the Company (and guarantees thereof by the Company) under Currency Agreements;

in each case whether outstanding on the Issue Date or thereafter incurred.

Notwithstanding the foregoing, “Senior Debt” shall not include:

(1)any Indebtedness of the Company to a Subsidiary of the Company;

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(2)Indebtedness to, or guaranteed on behalf of, any shareholder, director, officer or employee of the Company or any Subsidiary of the Company (including, without limitation, amounts owed for compensation) other than a shareholder who is also a lender (or an Affiliate of a lender) under the Senior Credit Facility;

(3)Indebtedness to trade creditors and other amounts incurred in connection with obtaining goods, materials or services;

(4)Indebtedness represented by Disqualified Capital Stock;

(5)any liability for federal, state, local or other taxes owed or owing by the Company;

(6)that portion of any Indebtedness incurred in violation of Section 4.9 (but, as to any such obligation, no such violation shall be deemed to exist for purposes of this clause (6) if the holder(s) of such obligation or their representative shall have received an officers’ certificate of the Company to the effect that the incurrence of such Indebtedness does not (or, in the case of revolving credit indebtedness, that the incurrence of the entire committed amount thereof at the date on which the initial borrowing thereunder is made would not) violate such provisions of this Indenture); provided that the foregoing shall not apply to any incurrence under the Senior Credit Facility pursuant to clause (2) of the definition of “Permitted Indebtedness” which incurrence was in violation of such clause (2) solely as a result of the increase in Attributed Receivables Facility Indebtedness (as defined in the Senior Credit Facility as in effect on June 24, 2002) and the lenders under the Senior Credit Facility extended such additional amounts in good faith without knowledge of such increase;

(7)Indebtedness which, when incurred and without respect to any election under Section 1111(b) of Title 11, United States Code, is without recourse to the Company; and

(8)any Indebtedness which is, by its express terms, subordinated or junior in right of payment to any other Indebtedness of the Company.

“Senior Debt Obligations” means all obligations of the Company for principal, premium, interest, penalties, fees, indemnifications, reimbursements, damages and other liabilities payable under the documentation governing any Senior Debt, and all guarantees by the Company of any of the foregoing.

“Senior Notes” means the Company’s $350,000,000 aggregate principal amount of 10-7/8% Senior Notes due 2009.

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“Senior Subordinated Credit Agreement” shall mean the Senior Subordinated Credit Agreement dated as of December 7, 1999, by and among Vertis Holdings, the Company, the subsidiary guarantors named therein, the lenders party thereto, and the agent banks named therein, as the same may be amended from time to time.

“Senior Subordinated Indebtedness” means (x) with respect to the Notes, any Indebtedness of the Company that specifically provides that such Indebtedness is to rank pari passu with the Notes and is not by its express terms subordinate in right of payment to any Indebtedness of the Company which is not Senior Debt and (y) with respect to a Guarantee, any Indebtedness of a Guarantor that specifically provides that such Indebtedness is to rank pari passu with such Guarantor’s Guarantee and is not by its express terms subordinate in right of payment to any Indebtedness of such Guarantor which is not Guarantor Senior Debt.

“Series A Notes” means the 13½% Senior Subordinated Notes due 2009, Series A, issued, authenticated and delivered under this Indenture, as amended or supplemented from time to time pursuant to the terms of this Indenture substantially in the form set forth in Exhibit A-1.

“Series B Notes” means the 13½% Senior Subordinated Notes due 2009, Series B (the terms of which are identical to the Series A Notes except that the Series B Notes shall be registered under the Securities Act, and shall not contain the restrictive legend on the face of the form of the Series A Notes) to the extent issued in exchange for the Series A Notes pursuant to the terms of the Registration Rights Agreement and this Indenture substantially in the form set forth in Exhibit A-2.

“Significant Subsidiary” with respect to any Person, means any Restricted Subsidiary of such Person that satisfies the criteria for a “significant subsidiary” set forth in Rule 1.02(w) of Regulation S-X under the Exchange Act.

“Standard Securitization Undertakings” means representations, warranties, covenants and indemnities entered into by the Company or any Subsidiary of the Company which, taken as a whole, are reasonably customary in an accounts receivable transaction (including, without limitation, all such representations, warrants, covenants and indemnities included in the documents evidencing the A/R Facility as in effect on the Issue Date).

“Subordinated Obligation” means(x) with respect to the Company, any Indebtedness of the Company (whether outstanding on the Issue Date or thereafter incurred) which is expressly subordinate in right of payment to the Notes, pursuant to a written agreement and (y) with respect to a Guarantor, any Indebtedness of such Guarantor (whether outstanding on the Issue Date or thereafter incurred) which is expressly subordinate in right of payment to the Guarantee of such Guarantor, pursuant to a written agreement.

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“Subsidiary” with respect to any Person, means:

(1)any corporation of which the outstanding Capital Stock having at least a majority of the votes entitled to be cast in the election of directors under ordinary circumstances shall at the time be owned, directly or indirectly, by such Person; or

(2)any other Person of which at least a majority of the voting interest under ordinary circumstances is at the time, directly or indirectly, owned by such Person.

“THL” shall mean Thomas H. Lee Partners, L.P., a Delaware limited partnership.

“THL Affiliates” shall mean any Affiliate of THL, provided that for purposes of the definition of “Change of Control,” the term THL Affiliate shall not include any portfolio company of either THL or any Affiliate of THL.

“THL Investor” shall mean and include Thomas H. Lee Equity Fund, IV, L.P., Thomas H. Lee Foreign Fund, IV, L.P., Thomas H. Lee Equity Fund IV, L.P., 1997 Thomas H. Lee Nominee Trust and Thomas H. Lee Charitable Investment, L.P., or any limited or general partner, stockholder, officer, employee or consultant of such THL Investor, or any officer, employee or consultant of THL; provided that for the purposes of making calculations under the definition of “Change of Control,” the aggregate amount of equity of Vertis Holdings attributable to consultants of THL and consultants of THL Investors may not exceed $3 million.

“TIA” means the Trust Indenture Act of 1939 (15 U.S. Code §§ 77aaa-77bbbb) as in effect on the date of this Indenture.

 “Transaction Date” has the meaning ascribed to such term in the definition of “Consolidated Fixed Charge Coverage Ratio.”

“Tribunal” means any government, any arbitration panel, any court or any governmental department, commission, board, bureau, agency, authority or instrumentality of the United States or any state, province, commonwealth, nation, territory or possession, whether now or hereafter constituted and/or existing.

“Trustee” means the party named as such in this Indenture until a successor replaces it in accordance with the provisions of this Indenture and thereafter means such successor.

“Unrestricted Subsidiary” of any Person means:

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(1)any Subsidiary of such Person that at the time of determination shall be or continue to be designated an Unrestricted Subsidiary by the Board of Directors of such Person in the manner provided below; and

(2)any Subsidiary of an Unrestricted Subsidiary.

The Board of Directors may designate any Subsidiary (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided that:

(1)the Company certifies to the Trustee that such designation complies with Section 4.8; and

(2)each Subsidiary to be so designated and each of its Subsidiaries has not at the time of designation, and does not thereafter, create, incur, issue, assume, guarantee or otherwise become directly or indirectly liable with respect to any Indebtedness pursuant to which the lender has recourse to any of the assets of the Company or any of its Restricted Subsidiaries.

The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary only if:

(1)immediately after giving effect to such designation, the Company is able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.9; and

(2)immediately before and immediately after giving effect to such designation, no Default or Event of Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the Board Resolution giving effect to such designation and an officers’ certificate certifying that such designation complied with the foregoing provisions.

“U.S. Government Obligations” means direct non-callable obligations of, or non-callable obligations guaranteed by, the United States of America for the payment of which guarantee or obligation the full faith and credit of the United States is pledged.

“U.S. Legal Tender” means such coin or currency of the United States of America as at the time of payment shall be legal tender for the payment of public and private debts.

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“U.S. Physical Securities” means Notes, together with their related Guarantees, issued in the form of certificated Notes, together with their related Guarantees, in registered form in substantially the form set forth in Exhibit A-1 or Exhibit A-2.

“Vertis Holdings” means Vertis Holdings, Inc., a Delaware corporation and the parent of the Company.

“Weighted Average Life to Maturity” means, when applied to any Indebtedness at any date, the number of years obtained by dividing (a) the then outstanding aggregate principal amount of such Indebtedness into (b) the sum of the total of the products obtained by multiplying (i) the amount of each then remaining installment, sinking fund, serial maturity or other required payment of principal, including payment at final maturity, in respect thereof, by (ii) the number of years (calculated to the nearest one-twelfth) which will elapse between such date and the making of such payment.

“Wholly Owned Subsidiary” means any Restricted Subsidiary of the Company all the outstanding voting interests or voting Capital Stock of which (other than directors’ qualifying shares or an immaterial amount of shares required to be owned by other Persons pursuant to applicable law) are owned, directly or indirectly, by the Company.

SECTION 1.2Incorporation by Reference of Trust Indenture Act.

Whenever this Indenture refers to a provision of the TIA, the provision shall be deemed incorporated by reference in and made a part of this Indenture. The following TIA terms used in this Indenture have the following meanings:

(a)  “Commission” means the SEC;

(b)  “indenture securities” means the Notes, together with their related Guarantees;

(c)  “indenture security holder” means a Securityholder;

(d)  “indenture to be qualified” means this Indenture;

(e)  “indenture trustee” or “institutional trustee” means the Trustee; and

(f)  “obligor” on the indenture securities means the Company or any other obligor on the Notes and the Guarantees.

All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule and not otherwise defined herein have the meanings so assigned to them therein.

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SECTION 1.3Rules of Construction.

Unless the context otherwise requires:

(a)  a term has the meaning assigned to it;

(b)  “or” is exclusive;

(c)  words in the singular include the plural, and words in the plural include the singular;

(d)  provisions apply to successive events and transactions;

(e)  “herein,” “hereof’ and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other Subdivision; and

(f)  unless otherwise specified herein, all accounting terms used herein shall be interpreted, all accounting determinations hereunder shall be made, and all financial statements required to be delivered hereunder shall be prepared in accordance with GAAP as in effect from time to time, applied on a basis consistent with the most recent audited consolidated financial statements of the Company.

ARTICLE II

THE SECURITIES

SECTION 2.1Form and Dating.

The Series A Notes and the Series B Notes and the Trustee’s certificate of authentication with respect thereto shall be substantially in the form set forth in Exhibits A-1 and A-2 annexed hereto, which is hereby incorporated in and expressly made a part of this Indenture. The Notes may have notations, legends or endorsements required by law, rule, usage or agreement to which the Company is subject. Each Note shall be dated the date of its issuance and shall show the date of its authentication. The terms and provisions contained in the Notes and the Guarantees shall constitute, and are expressly made, a part of this Indenture.

SECTION 2.2Execution and Authentication.

Two Officers shall execute the Notes on behalf of the Company by either manual or facsimile signature. The Guarantors shall execute the Guarantees in the manner set forth in Article XI.

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If a Person whose signature is on a Note as an Officer no longer holds that office at the time the Trustee authenticates the Note, the Note shall be valid nevertheless.

A Note shall not be valid until the Trustee manually signs the certificate of authentication on the Note. The signature shall be conclusive evidence that the Note has been authenticated under this Indenture. Each Note shall be dated the date of its authentication.

The Trustee shall authenticate Series A Notes for original issue from time to time in the aggregate principal amount not to exceed $293,500,000, upon receipt of an Officers’ Certificate. In addition, the Trustee or an authenticating agent shall authenticate Series B Notes to the extent issued pursuant to the terms of the Registration Rights Agreement upon receipt of an Officers’ Certificate. The aggregate principal amount of Notes outstanding at any time may not exceed $293,500,000 except as provided in Section 2.7.

The Trustee may appoint an authenticating agent acceptable to the Company to authenticate Notes. Unless limited by the terms of such appointment, an authenticating agent may authenticate Notes whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. Such authenticating agent shall have the same authenticating rights and duties as the Trustee in any dealings hereunder with the Company or with any Affiliate of the Company.

The Notes shall be issuable only in registered form without coupons and only in denominations of $1,000 and any integral multiple thereof.

Notes offered and sold in reliance on Rule 144A shall be issued initially in the form of one or more permanent global notes in registered form, substantially in the form set forth in Exhibit A-1 (“Global Securities”), deposited with the Trustee, as custodian for the Depository, and shall bear the legend set forth on Exhibit B. The aggregate principal amount of any Global Security may from time to time be increased or decreased by adjustments made on the records of the Trustee, as custodian for the Depository, as hereinafter provided.

Notes offered and sold in offshore transactions in reliance on Regulation S shall be issued in the form of certificated notes in registered form set forth in Exhibit A- 1 (“Offshore Physical Securities”).

SECTION 2.3Registrar and Paying Agent.

The Company shall maintain an office or agency (which shall be located in the Borough of Manhattan in the City of New York, State of New York) where Notes may be presented for registration of transfer or for exchange (the “Registrar”), an office or agency (which shall be located in the Borough of Manhattan, City of New York, State of New York) where Notes may be presented for payment (the “Paying Agent”) and an office or agency

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where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Registrar shall keep a register of the Notes and of their transfer and exchange. The Company may have one or more co-registrars and one or more additional paying agents. The term “Paying Agent” includes any additional paying agent. The Company may act as its own Paying Agent, except that for the purposes of payments on account of principal on the Notes pursuant to Sections 4.12 and 4.15, neither the Company nor any Affiliate of the Company may act as Paying Agent.

The Company shall enter into an appropriate agency agreement with any Agent not a party to this Indenture, which shall incorporate the provisions of the TIA. The agreement shall implement the provisions of this Indenture that relate to such Agent. The Company shall notify the Trustee of the name and address of any such Agent. If the Company fails to maintain a Registrar or Paying Agent, or fails to give the foregoing notice, the Trustee shall act as such and shall be entitled to appropriate compensation in accordance with Section 7.7.

The Company initially appoints the Trustee as Registrar and Paying Agent and agent for service of notices and demands in connection with the Notes.

SECTION 2.4Paying Agent To Hold Money in Trust.

Each Paying Agent shall hold in trust for the benefit of the Securityholders or the Trustee all money held by the Paying Agent for the payment of principal of or interest on the Notes, and shall notify the Trustee of any default by the Company in making any such payment. Money held in trust by the Paying Agent need not be segregated except as required by law and in no event shall the Paying Agent be liable for any interest on any money received by it hereunder. The Company at any time may require the Paying Agent to pay all money held by it to the Trustee and account for any funds disbursed and the Trustee may at any time during the continuance of any Event of Default specified in Section 6.l(a) or (b) upon written request to the Paying Agent, require such Paying Agent to pay forthwith all money so held by it to the Trustee and to account for any funds disbursed. Upon making such payment, the Paying Agent shall have no further liability for the money delivered to the Trustee.

SECTION 2.5Securityholder Lists.

The Trustee shall preserve in as current a form as is reasonably practicable the most recent list available to it of the names and addresses of the Securityholders and otherwise comply with TIA §312(a). If the Trustee is not the Registrar, the Company shall furnish or cause the Registrar to furnish to the Trustee before each Interest Payment Date, and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of the Securityholders.

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SECTION 2.6Transfer and Exchange.

Subject to the provisions of Sections 2.14 and 2.15, when Notes are presented to the Registrar or a co-Registrar with a request from the Holder of such Notes to register the transfer or to exchange them for an equal principal amount of Notes of other authorized denominations, the Registrar shall register the transfer or make the exchange as requested; provided that every Note presented or surrendered for registration of transfer or exchange shall be duly endorsed or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Registrar, duly executed by the Holder thereof or his attorneys duly authorized in writing. To permit registrations of transfers and exchanges, the Company shall issue and execute and the Trustee shall authenticate new Notes (together with related Guarantees executed by the Guarantors) evidencing such transfer or exchange. No service charge shall be made to the Securityholder for any registration of transfer or exchange. The Company may require from the Securityholder payment of a sum sufficient to cover any transfer taxes or other governmental charge that may be imposed in relation to a transfer or exchange, but this provision shall not apply to any exchange pursuant to Section 2.10,4.12, 4.15 or 9.5 (in which events the Company will be responsible for the payment of such taxes). The Registrar or co-Registrar shall not be required to register the transfer of or exchange of any Note (i) during a period beginning at the opening of business 15 days before the mailing of a notice of redemption of Notes and ending at the close of business on the day of such mailing and (ii) selected for redemption in whole or in part pursuant to Article III, except the unredeemed portion of any Note being redeemed in part.

SECTION 2.7Replacement Notes.

If a mutilated Note is surrendered to the Registrar or the Trustee or if the Holder of a Note of any series claims that the Note has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Note (together with related Guarantees executed by the Guarantors) if the Holder of such Note furnishes to the Company and to the Trustee evidence reasonably acceptable to them of the ownership and the destruction, loss or theft of such Note. If required by the Trustee or the Company, an indemnity bond shall be posted, sufficient in the judgment of the Company or the Trustee, as the case may be, to protect the Company, the Trustee or any Agent from any loss that any of them may suffer if such Note is replaced. The Company may charge such Holder for the Company’s expenses in replacing such Note and the Trustee may charge the Company for the Trustee’s expenses in replacing such Note. Every replacement Note shall constitute an additional obligation of the Company and shall be entitled to the benefits of this Indenture.

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SECTION 2.8Outstanding Notes.

The Notes outstanding at any time are all Notes that have been authenticated by the Trustee except for (a) those canceled by it, (b) those delivered to it for cancellation or (c) those described in this Section 2.8 as not outstanding. A Note does not cease to be outstanding because the Company or one of its Affiliates holds the Note.

If a Note is replaced pursuant to Section 2.7, it ceases to be outstanding unless the Trustee receives proof satisfactory to it that the replaced Note is held by a bona fide purchaser in whose hands such Note is a legal, valid and binding obligation of the Company.

If the Paying Agent holds, in its capacity as such, on any Maturity Date or on any optional redemption date money sufficient to pay all accrued interest and principal with respect to such Notes payable on that date and is not prohibited from paying such money to the Holders thereof pursuant to the terms of this Indenture, then on and after that date such Notes cease to be outstanding and interest on them ceases to accrue.

SECTION 2.9Treasury Notes.

In determining whether the Holders of the required principal amount of Notes have concurred in any declaration of acceleration or notice of default or direction, waiver or consent or any amendment, modification or other change to this Indenture, Notes owned by the Company or any Subsidiary or an Affiliate of the Company shall be deemed not to be outstanding, except that for the purposes of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent or any amendment, modification or other change to this Indenture, only Notes that the Trustee knows are so owned shall be so disregarded. The Company shall notify the Trustee, in writing, when it or any of its Affiliates repurchases or otherwise acquires Notes, of the aggregate principal amount of such Notes so repurchased or otherwise acquired.

SECTION 2.10Temporary Notes.

Until definitive Notes are prepared and ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Notes (together with related Guarantees executed by the Guarantors). Temporary Notes shall be substantially in the form of definitive Notes but may have variations that the Company reasonably considers appropriate for temporary Notes. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Notes (together with related Guarantees executed by the Guarantors) in exchange for temporary Notes. Until such exchange, such temporary Notes shall be entitled to the same rights, benefits and privileges as the definitive Notes.

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SECTION 2.11Cancellation.

The Company at any time may deliver Notes to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Notes surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel all Notes surrendered for registration of transfer, exchange, payment, replacement or cancellation and shall (subject to the record-retention requirements of the Exchange Act) dispose of canceled Notes unless the Company directs the Trustee to return such Notes to the Company. The Company may not reissue or resell, or issue new Notes to replace, Notes that the Company has redeemed or paid, or that have been delivered to the Trustee for cancellation.

SECTION 2.12Defaulted Interest.

If the Company defaults in a payment of interest on the Notes, it shall pay the defaulted interest, plus, to the extent permitted by law, any interest payable on the defaulted interest, to the Persons who are Securityholders on a subsequent special record date. Such record date shall be the fifteenth day next preceding the date fixed by the Company for the payment of defaulted interest, whether or not such day is a Business Day. At least 15 days before the subsequent special record date, the Company shall mail (or cause to be mailed) to each Securityholder a notice that states the record date, the payment date and the amount of defaulted interest to be paid. Notwithstanding the foregoing, any interest which is paid prior to the expiration of the 30-day period set forth in Section 6.l(a) or (b) shall be paid to Holders of Notes as of the regular record date for the interest payment date for which interest has not been paid. Notwithstanding the foregoing, the Company may make payment of any defaulted interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Notes may be listed, and upon such notice as may be required by such exchange.

SECTION 2.13CUSIP Number.

The Company in issuing the Notes may use a “CUSIP” number, and if so, such CUSIP number shall be included in notices of redemption or exchange as a convenience to Holders; provided that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP number printed in the notice or on the Notes, and that reliance may be placed only on the other identification numbers printed on the Notes. The Company will promptly notify the Trustee of any change in the CUSP number.

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SECTION 2.14Book-Entry Provisions for Global Securities.

(a)The Global Securities initially shall (i) be registered in the name of the Depository or the nominee of such Depository, (ii) be delivered to the Trustee as custodian for such Depository and (iii) bear legends as set forth in Exhibit B.

Members of, or participants in, the Depository (“Agent Members”) shall have no rights under this Indenture with respect to any Global Security held on their behalf by the Depository, or the Trustee as its custodian, or under the Global Security, and the Depository may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of the Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Note.

(b)Transfers of Global Securities shall be limited to transfers in whole, but not in part, to the Depository, its successors or their respective nominees. U.S. Physical Securities shall be transferred to all beneficial owners in exchange for their beneficial interests in Global Securities, in accordance with the rules and procedures of the Depository, only if (i) the Depository notifies the Company that it is unwilling or unable to continue as Depository for any Global Security and a successor depositary is not appointed by the Company within 90 days of such notice or (ii) an Event of Default has occurred and is continuing and the Registrar has received a request from the Depository to issue U.S. Physical Securities.

(c)In connection with the transfer of Global Securities as an entirety to beneficial owners pursuant to paragraph (b), the Global Securities shall be deemed to be surrendered to the Trustee for cancellation, and the Company shall execute, and the Trustee shall authenticate and deliver to each beneficial owner identified by the Depository in exchange for its beneficial interest in the Global Securities, an equal aggregate principal amount of U.S. Physical Securities (together with related Guarantees executed by the Guarantors) of authorized denominations.

(d)Any U.S. Physical Security constituting a Restricted Security delivered in exchange for an interest in a Global Security pursuant to paragraph (b) shall, except as otherwise provided by paragraphs (a)(i)(x) and (c) of Section 2.15, bear the legend regarding transfer restrictions applicable to the U.S. Physical Securities set forth in Exhibit A-1.

(e)The Holder of any Global Security may grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through

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Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Notes.

SECTION 2.15Special Transfer Provisions.

(a)Transfers to Non-QIB Institutional Accredited Investors and Non-U.S. Persons. The following provisions shall apply with respect to the registration of any proposed transfer of a Note constituting a Restricted Security to any Institutional Accredited Investor which is not a QIB or to any Non-U.S. Person:

(i)the Registrar shall register the transfer of any Note constituting a Restricted Security, whether or not such Note bears the Private Placement Legend, if (x) the requested transfer is after the second anniversary of the Issue Date or (y) (1) in the case of a transfer to an Institutional Accredited Investor which is not a QIB (excluding Non-U.S. Persons), the proposed transferee has delivered to the Registrar a certificate substantially in the form of Exhibit C hereto or (2) in the case of a transfer to a Non-U.S. Person, the proposed transferee has delivered to the Registrar a certificate substantially in the form of Exhibit D hereto, together, in the case of clause (i)(x) with such other certifications, legal opinions or other information as the Company or the Trustee may reasonably require to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act; and

(ii)if the proposed transferor is an Agent Member holding a beneficial interest in a Global Security, upon receipt by the Registrar of (x) the certificate, if any, required by paragraph (i) above and (y) instructions given in accordance with the Depository’s and the Registrar’s procedures,

whereupon (a) the Registrar shall reflect on its books and records the date and (if the transfer does not involve a transfer of outstanding Physical Securities) a decrease in the principal amount of a Global Security in an amount equal to the principal amount of the beneficial interest in a Global Security to be transferred, and (b) the Company shall execute and the Trustee shall authenticate and deliver one or more Physical Securities (together with related Guarantees executed by the Guarantors) of like tenor and amount.

(b)Transfers to QIBs. The following provisions shall apply with respect to the registration of any proposed transfer of a Note constituting a Restricted Security to a QIB (excluding transfers to Non-U.S. Persons):

(i)the Registrar shall register the transfer if such transfer is being made by a proposed transferor who has checked the box provided for on the form of Note stating, or has otherwise advised the Company and the Registrar in writing, that the

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sale has been made in compliance with the provisions of Rule 144A to a transferee who has signed the certification provided for on the form of Note stating, or has otherwise advised the Company and the Registrar in writing, that it is purchasing the Note for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a QIB within the meaning of Rule 144A, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as it has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon its foregoing representations in order to claim the exemption from registration provided by Rule 144A; and

(ii)if the proposed transferee is an Agent Member, and the Notes to be transferred consist of Physical Securities which after transfer are to be evidenced by an interest in the Global Security, upon receipt by the Registrar of instructions given in accordance with the Depository’s and the Registrar’s procedures, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Global Security in an amount equal to the principal amount of the Physical Securities to be transferred, and the Trustee shall cancel the Physical Securities so transferred.

(c)Private Placement Legend. Upon the transfer, exchange or replacement of Notes not bearing the Private Placement Legend, the Registrar shall deliver Notes that do not bear the Private Placement Legend. Upon the transfer, exchange or replacement of Notes bearing the Private Placement Legend, the Registrar shall deliver only Notes that bear the Private Placement Legend unless (i) the circumstances contemplated by paragraph (a)(i)(x) of this Section 2.15 exist, (ii) there is delivered to the Registrar an Opinion of Counsel reasonably satisfactory to the Company and the Trustee to the effect that neither such legend nor the related restrictions on transfer are required in order to maintain compliance with the provisions of the Securities Act or (iii) such Note has been sold pursuant to an effective registration statement under the Securities Act.

(d)General. By its acceptance of any Note bearing the Private Placement Legend, each Holder of such a Note acknowledges the restrictions on transfer of such Note set forth in this Indenture and in the Private Placement Legend and agrees that it will transfer such Note only as provided in this Indenture.

The Registrar shall retain copies of all letters, notices and other written communications received pursuant to Section 2.14 or this Section 2.15. The Company shall have the right to inspect and make copies of all such letters, notices or other written communications at any reasonable time upon the giving of reasonable written notice to the Registrar.

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ARTICLE III

REDEMPTION

SECTION 3.1Notices to Trustee.

If the Company elects to redeem Notes pursuant to Section 5 of the Notes, it shall notify the Trustee and the Paying Agent in writing of the Redemption Date and the principal amount of Notes to be redeemed.

The Company shall give each notice provided for in this Section 3.1 at least 30 but not more than 60 days before the Redemption Date (unless a shorter notice shall be satisfactory to the Trustee), together with an Officers’ Certificate stating that such redemption will comply with the conditions contained herein and in the Notes.

SECTION 3.2Selection of Notes To Be Redeemed.

If less than all of the Notes are to be redeemed, the Trustee shall select Notes to be so redeemed in compliance with applicable legal requirements and the requirements of the principal national securities exchange, if any, on which the Notes are listed or, if the Notes are not listed on a national securities exchange, by lot, pro rata or in such other fair and appropriate manner chosen at the discretion of the Trustee.

The Trustee shall make the selection from the Notes outstanding and not previously called for redemption. Notes in denominations of $1,000 or less may only be redeemed in whole. The Trustee may select for redemption portions (equal to $1,000 or any integral multiple thereof) of the principal of Notes that have denominations larger than $1,000. Provisions of this Indenture that apply to Notes called for redemption also apply to portions of Notes called for redemption. The Trustee shall promptly notify the Company in writing of the Notes selected for redemption and, in the case of any Note selected for partial redemption, the principal amount of each certificate selected for redemption.

SECTION 3.3Notice of Redemption.

At least 30 days but not more than 60 days before a Redemption Date, the Company shall mail or cause the mailing of a notice of redemption by first-class mail, postage prepaid, to each Holder of Notes to be redeemed at such Holder’s address as it appears on the Notes register maintained by the Registrar with a copy to the Trustee and any Paying Agent.

The notice shall identify the Notes to be redeemed and shall state:

(a)  the Redemption Date;

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(b)  the redemption price to be paid;

(c)  the name and address of the Paying Agent;

(d)  that Notes called for redemption must be surrendered to the Paying Agent to collect the redemption price and accrued interest, if any;

(e)  that, unless the Company defaults in making the redemption payment, interest on Notes called for redemption ceases to accrue on and after the Redemption Date and the only remaining right of the Holders of such Notes is to receive payment of the redemption price upon surrender to the Paying Agent of the Notes to be redeemed;

(f)  if any Note is to be redeemed in part, the portion of the principal amount (equal to $1,000 or any integral multiple thereof) of such Note to be redeemed and that, on or after the Redemption Date, upon surrender of such Note, a new Note or Notes in aggregate principal amount equal to the unredeemed portion thereof will be issued without charge to the Securityholder;

(g)  if less than all of the Notes are to be redeemed, the identification of the particular Notes (or portion thereof) to be redeemed, as well as the aggregate principal amount of Notes to be redeemed; and

(h)  the CUSIP number, if any.

At the Company’s request, made to the Trustee at least 35 days prior to the Redemption Date, the Trustee shall give the notice of redemption in the Company’s name and at the Company’s expense in accordance with this Section 3.3.

SECTION 3.4Effect of Notice of Redemption.

Once notice of redemption is mailed, Notes called for redemption become due and payable on the Redemption Date and at the redemption price. Upon surrender to the Paying Agent, such Notes shall be paid at the redemption price plus accrued interest to the Redemption Date, but interest installments whose Interest Payment Date is on or prior to such Redemption Date will be payable on the relevant Interest Payment Dates to the Holders of record at the close of business on the relevant record dates referred to in the Notes.

SECTION 3.5Deposit of Redemption Price.

Prior to 10:00 a.m. New York City time on the Redemption Date, the Company shall deposit with the Paying Agent in immediately available funds U.S. Legal Tender

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sufficient to pay the redemption price of and accrued interest on all Notes or portions thereof to be redeemed on that date.

If any Note surrendered for redemption in the manner provided in the Notes shall not be so paid on the Redemption Date due to the failure of the Company to deposit sufficient funds with the Paying Agent, interest will continue to accrue from and including the Redemption Date until such payment is made on the unpaid principal and, to the extent lawful, on any interest not paid on such unpaid principal, in each case at the date and in the manner provided in the Notes.

SECTION 3.6Notes Redeemed in Part.

Upon surrender to the Paying Agent of a Note that is redeemed in part, the Company shall execute and the Trustee shall authenticate for the Holder a new Note (together with related Guarantees executed by the Guarantors) equal in principal amount to the unredeemed portion of the Note surrendered.

ARTICLE IV

COVENANTS

SECTION 4.1Payment of Notes.

The Company shall pay the principal of and interest on the Notes on the dates and in the manner provided in the Notes and this Indenture.

An installment of principal or interest shall be considered paid on the date due if the Trustee or Paying Agent (other than the Company or any Subsidiary of the Company or any Affiliate of any thereof) holds on such date immediately available funds designated for and sufficient to pay such installment.

The Company shall pay interest (including Accrued Bankruptcy Interest) on overdue principal and on overdue installments of interest, in each case at the rate per annum specified in the Notes, to the extent lawful.

SECTION 4.2Maintenance of Office or Agency.

The Company shall maintain in the Borough of Manhattan, the City of New York, an office or agency, where Notes may be surrendered for registration of transfer or exchange or for presentation for payment and where notices and demands to or upon the Company in respect of the Notes and this Indenture may be served. The Company will give

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prompt written notice to the Trustee of the location, and any change in the location, of such office or agency. If at any time the Company shall fail to maintain any such required office or agency or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the address of the Trustee set forth in Section 13.2.

The Company may also from time to time designate one or more other offices or agencies where the Notes may be presented or surrendered for any or all such purposes and may from time to time rescind such designations; provided that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, the City of New York, for such purposes. The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.

The Company hereby initially designates the Corporate Trust Office of the Trustee set forth in Section 13.2 as an agency of the Company in accordance with Section 2.3.

SECTION 4.3Corporate Existence.

Subject to Article V hereof, the Company shall do or cause to be done, at its own cost and expense, all things necessary to, and will cause each of its Restricted Subsidiaries to, preserve and keep in full force and effect the corporate existence and rights (charter and statutory), licenses and/or franchises of the Company and each of its Restricted Subsidiaries; provided that the Company shall not be required to preserve any such right, license or franchise, or the corporate existence of any of its Restricted Subsidiaries, if in the judgment of the Board of Directors or management of the Company (i) such preservation or existence is not desirable in the conduct of business of the Company or such Restricted Subsidiary and (ii) the loss of such right, license or franchise or the dissolution of such Restricted Subsidiary is not adverse in any material respect to the Holders.

SECTION 4.4Payment of Taxes and Other Claims.

The Company shall and shall cause each of its Subsidiaries to pay or discharge or cause to be paid or discharged, before the same shall become delinquent, (a) all material taxes, assessments and governmental charges levied or imposed upon its or its Subsidiaries’ income, profits or property and (b) all material lawful claims for labor, materials and supplies which, if unpaid, would be reasonably likely to by law become a Lien upon its property or the property of any of its Subsidiaries; provided that the Company shall not be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith by appropriate negotiations or proceedings and for which disputed amounts adequate reserves (in the good faith judgment of

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the Board of Directors or management of the Company) have been made in accordance with GAAP.

SECTION 4.5Maintenance of Properties.

The Company shall and shall cause each of its Restricted Subsidiaries to at all times cause all properties used or useful in the conduct of its business to be maintained and kept in good condition, repair and working order (reasonable wear and tear excepted) and supplied with all necessary equipment, and shall cause to be made all necessary repairs, renewals, replacements, betterments and improvements thereto; provided that nothing in this Section 4.5 shall prevent the Company or any Restricted Subsidiary from discontinuing the operation or maintenance of any of such properties, or disposing of any of them, if such discontinuance or disposal is either (i) in the ordinary course of business, (ii) in the reasonable and good faith judgment of the Board of Directors or management of the Company or the Restricted Subsidiary concerned, as the case may be, desirable in the conduct of the business of the Company or such Restricted Subsidiary, as the case may be, or (iii) otherwise permitted by this Indenture.

SECTION 4.6Compliance Certificates; Notice of Default.

(a)The Company shall deliver to the Trustee, within 120 days after the end of its fiscal year, an Officers’ Certificate signed by the principal executive officer, the principal financial officer or the principal accounting officer complying with TIA § 314(a)(4) stating (i) that a review of the activities of the Company and the activities of its Subsidiaries during the preceding fiscal year has been made under the supervision of the signing Officers with a view to determining whether the Company and the Guarantors have kept, observed, performed and fulfilled each of their respective obligations under this Indenture, the Notes and the Guarantees and (ii) that, to the best knowledge of such Officer after due inquiry, each of the Company and the Guarantors has kept, observed, performed and fulfilled, in each case in all material respects, each and every covenant and other obligation contained in this Indenture, the Notes and the Guarantees and is not in default in the performance or observance of any of the terms, provisions and conditions hereof and has not failed to comply with any other obligation hereunder (or, if a Default, Event of Default or failure to comply with any other obligation hereunder shall have occurred, describing with particularity all such Defaults, Events of Default or failures to comply with any other obligation hereunder of which such Officer may have knowledge, including, but not limited to, their status and what action the Company is taking or proposes to take with respect thereto).

(b)The Company shall, so long as any of the Notes are outstanding, deliver to the Trustee, forthwith upon becoming aware of any Default or Event of Default, an Officers’ Certificate specifying such Default or Event of Default and what action the Company is taking or proposes to take with respect thereto.

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SECTION 4.7Reports.

(a)The Company shall deliver to the Trustee and mail to each Holder, within 15 days after the filing of the same with the SEC, copies of its annual report and of the information, documents and other reports, if any, which the Company is required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act. The Company shall also comply with the other provisions of TIA § 3 14(a).

(b)If the Company is not subject to the requirements of such Section 13 or 15(d) of the Exchange Act, the Company shall file with the SEC, to the extent permitted, and distribute to the Trustee and to each Holder copies of the quarterly and annual financial information and current reports on Form 8-K that would have been required to be filed with the SEC pursuant to the Exchange Act had the Company been subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act. All such financial information shall include consolidated financial statements (including footnotes) prepared in accordance with GAAP. Such annual financial information shall also include an opinion thereon expressed by an independent accounting firm of established national reputation. All such consolidated financial statements shall be accompanied by a “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The financial information and current reports to be distributed to Holders pursuant to this Section 4.7 shall be filed with the Trustee and mailed to the Holders at their respective addresses appearing in the register of the Notes maintained by the Registrar, within the time periods specified in the SEC’s rules and regulations.

(c)The Company shall deliver to the Trustee and mail to each Holder, within the applicable time periods provided in the Senior Subordinated Credit Agreement, all information and reports which the lenders under the Senior Subordinated Credit Agreement are entitled to receive from Vertis Holdings, the Company and the Company’s Subsidiaries, as the case may be, in each case to the extent not already provided under clauses (a) and (b) of this Section 4.7.

(d)Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee’s receipt of such shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company’s compliance with any of its covenants (as to which the Trustee is entitled to conclusively rely exclusively on an Officers’ Certificates).

SECTION 4.8Limitation on Restricted Payments.

(a)The Company shall not, and shall not cause or permit any of its Restricted Subsidiaries to, directly or indirectly:

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(1)declare or pay any dividend or make any distribution (other than dividends or distributions payable in Qualified Capital Stock or options, warrants and other rights to purchase the same) on or in respect of shares of Capital Stock of the Company to holders of such Capital Stock;

(2)purchase, redeem or otherwise acquire or retire for value any Capital Stock of the Company or any warrants, rights or options to purchase or acquire shares of any class of such Capital Stock;

(3)make any principal payment on, purchase, defease, redeem, prepay or otherwise acquire or retire for value, prior to any scheduled final maturity, scheduled repayment or scheduled sinking fund payment, any Subordinated Obligation; or

(4)make any Investment (other than Permitted Investments) in any other Person (each of the foregoing actions set forth in clauses (1), (2), (3) and (4) being referred to as a “Restricted Payment”); if at the time of such Restricted Payment or immediately after giving effect thereto:

(i)a Default or an Event of Default shall have occurred and be continuing; or

(ii)the Company is not able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.9; or

(iii)the aggregate amount of Restricted Payments made subsequent to June 24, 2002 (the amount expended for such purposes, if other than cash, being the fair market value of such property as determined in good faith by the Board of Directors of the Company), shall exceed the sum of (the “Restricted Payment Basket”):

(v)50% of the cumulative Consolidated Net Income (or if cumulative Consolidated Net Income shall be a loss, minus 100% of such loss) of the Company earned subsequent to June 30, 2002 and on or prior to the date the Restricted Payment occurs (the “Reference Date”) (treating such period as a single accounting period); plus

(w)100% of the aggregate Net Cash Proceeds received by the Company from any Person (other than a Subsidiary of the Company) from the issuance and sale subsequent to June 24, 2002 and on or prior to the Reference Date of Qualified Capital Stock of the Company (including Capital Stock issued upon the conversion of

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convertible Indebtedness or in exchange for outstanding Indebtedness but excluding aggregate net cash proceeds from the sale of Capital Stock to the extent used to repurchase or acquire shares of Capital Stock of the Company or a Subordinated Obligation of the Company or a Guarantor pursuant to clause (2) of paragraph (b) below); plus

(x)without duplication of any amounts included in clause (iii) (w) above, 100% of the aggregate net cash proceeds of any equity contribution received by the Company from a holder of the Company’s Capital Stock subsequent to June 24, 2002; plus

(y)to the extent that any Investment (other than a Permitted Investment) that was made after June 24,2002 is sold for cash or otherwise liquidated or repaid for cash, the Net Cash Proceeds received with respect to such sale, liquidation or repayment of such Investment, but only to the extent not included in the calculation of Consolidated Net Income.

(b)Notwithstanding the foregoing, the provisions set forth in paragraph (a) do not prohibit:

(1)the payment of any dividend within 60 days after the date of declaration of such dividend if the dividend would have been permitted on the date of declaration;

(2)the acquisition of any shares of Capital Stock of the Company or the repurchase, redemption or other repayment of any Subordinated Obligation of the Company or any Guarantor in exchange for or solely out of the proceeds of the substantially concurrent sale (other than to a Subsidiary of the Company) of shares of Qualified Capital Stock of the Company;

(3)the repurchase, redemption or other repayment of any Subordinated Obligation of the Company or any Guarantor in exchange for or solely out of the proceeds of the substantially concurrent issuance (other than to a Subsidiary of the Company) of a Subordinated Obligation of the Company or such Guarantor with no payments of principal required until at least six months following the maturity date of the Notes;

(4)the making of distributions, loans or advances in an amount not to exceed (x) $5.0 million to pay the ordinary operating costs of Vertis Holdings (including, without limitation, directors fees, indemnification obligations, professional fees and expenses) related to Vertis Holdings’ ownership of Capital Stock of the Company (other than to the Equity Investors or their Affiliates) in any fiscal year plus

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(y) any other amounts of corporate overhead expenses payable by Vertis Holdings which were deducted in calculating the Consolidated Net Income of the Company in accordance with GAAP;

(5)the payment by the Company of cash dividends to Vertis Holdings in the amounts and at the times of any payment by Vertis Holdings in respect of taxes, provided that (x) the amount of cash dividends paid pursuant to this clause (5) to enable Vertis Holdings to pay federal and state income taxes at any time shall not exceed the lesser of (A) the amount of such federal and state income taxes owing by Vertis Holdings at such time for the respective period and (B) the amount of such federal and state income taxes that would be owing by the Company and its Subsidiaries on a consolidated basis for such period if determined without regard to Vertis Holdings’ ownership of the Company and (y) any refunds shall promptly be returned by Vertis Holdings to the Company;

(6)payments for the purpose of and in an amount equal to the amount required to permit Vertis Holdings to redeem or repurchase Vertis Holdings’ common equity or options in respect thereof, in each case in connection with the repurchase, put or call provisions under employee stock option, management subscription, retained share or stock purchase agreements or other agreements to compensate management employees; provided that such redemptions or repurchases pursuant to this clause (6) shall not exceed $10.0 million per annum; provided that amounts not used pursuant to this clause (6) in prior years shall not be carried forward for use in future years;

(7)so long as no Default or Event of Default shall have occurred and be continuing, payments not to exceed $500,000 in the aggregate to enable Vertis Holdings to make payments to holders of its Capital Stock in lieu of issuance of fractional shares of its Capital Stock;

(8)payments made to the Equity Investors allowed pursuant to Section 4.13: and

(9)repurchases of Capital Stock deemed to occur upon the exercise of stock options if such Capital Stock represents a portion of the exercise price thereof; and

(10)additional Restricted Payments in an aggregate amount not to exceed $13.0 million.

In determining the aggregate amount of the Restricted Payments Basket in accordance with clause (iii) of paragraph (a) above, amounts expended pursuant to clauses (1), (6) and (10) of paragraph (b) shall be included in such calculation.

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SECTION 4.9Limitation on Incurrence of Additional Indebtedness.

(a)The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create, incur, assume, guarantee, acquire, become liable, contingently or otherwise, with respect to, or otherwise become responsible for payment of (collectively, “incur”) any Indebtedness (other than Permitted Indebtedness); provided, however, that if no Default or Event of Default shall have occurred and be continuing at the time or as a consequence of the Incurrence of any such Indebtedness, the Company or any Guarantor may Incur Indebtedness if on the date of the Incurrence of such Indebtedness, after giving effect to the Incurrence thereof, the Consolidated Fixed Charge Coverage Ratio of the Company would have been greater than 2.25 to 1.0 if such Indebtedness is incurred before January 1, 2005, or greater than 2.5 to 1.0 if such Indebtedness is incurred on or after January 1, 2005.

No Indebtedness incurred pursuant to the Consolidated Fixed Charge Coverage Ratio test of the preceding sentence (including, without limitation, Indebtedness under the Senior Credit Facility) shall reduce the amount of Indebtedness which may be incurred pursuant to any clause of the definition of Permitted Indebtedness (including, without limitation, Indebtedness under the Senior Credit Facility pursuant to clause (2) of the definition of Permitted Indebtedness)

(b)       For purposes of determining compliance with this covenant, (I) in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described in the definition of “Permitted Indebtedness,” the Company, in its sole discretion, will classify such item of Indebtedness at the time of incurrence and will be entitled to divide and classify an item of Indebtedness in more than one of the types of Indebtedness described in the definition of “Permitted Indebtedness” and (2) the Company will be entitled from time to time to reclassify any Indebtedness incurred pursuant to any clause in the definition of “Permitted Indebtedness.”

SECTION 4.10Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries.

The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, create or otherwise cause or permit to exist or become effective any consensual encumbrance or restriction on the ability of any Restricted Subsidiary to:

(1)pay dividends or make any other distributions on or in respect of its Capital Stock;

(2)make loans or advances or to pay any Indebtedness or other obligation owed to the Company or any other Restricted Subsidiary of the Company; or

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(3)transfer any of its property or assets to the Company or any other Restricted Subsidiary of the Company,

except for such encumbrances or restrictions existing under or by reason of:

(a)applicable law;

(b)the Loan Documents (as defined in the Senior Subordinated Credit Agreement), this Indenture or encumbrances or restrictions substantially similar to the encumbrances and restrictions contained in the Loan Documents (as defined in the Senior Subordinated Credit Agreement) and this Indenture, as the case may be, taken as a whole;

(c)non-assignment provisions of any contract or any lease entered into in the ordinary course of business;

(d)any instrument governing Acquired Indebtedness, which encumbrance or restriction is not applicable to the Company or any Restricted Subsidiary of the Company, or the properties or assets of any such Person, other than the Person or the properties or assets of the Person so acquired; provided, however, that such Acquired Indebtedness was not incurred in connection with, or in anticipation or contemplation, of an acquisition by the Company or the Restricted Subsidiary;

(e)agreements existing on the Issue Date;

(f)the Senior Credit Facility and the A/R Facility;

(g)restrictions on the transfer of assets subject to any Lien permitted under this Indenture imposed by the holder of such Lien;

(h)restrictions imposed by any agreement to sell assets permitted under this Indenture to any Person pending the closing of such sale;

(i)Indebtedness or other contractual requirements of a Receivables Entity in connection with a Qualified Receivables Transaction; provided that such restrictions apply only to such Receivables Entity;

(j)agreements governing Indebtedness permitted to be Incurred pursuant to Section 4.9, provided that the provisions relating to such encumbrances or restrictions contained in such Indebtedness are no less favorable to the Company in any material respect as determined by the Board of Directors of the Company in their reasonable and good faith judgment than the provisions contained in the Senior Credit Facility as in effect on the Issue Date; or

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(k)an agreement effecting a refinancing, replacement or substitution of Indebtedness issued, assumed or Incurred pursuant to an agreement referred to in clause (b), (d), (e) or (f) above; provided, however, that the provisions relating to such encumbrance or restriction contained in any such refinancing, replacement or substitution agreement are no less favorable to the Company or the Holders in any material respect as determined by the Board of Directors of the Company than the provisions relating to such encumbrance or restriction contained in agreements referred to in such clause (b), (d), (e) or (f).

SECTION 4.11Limitation on Liens.

The Company shall not, and shall not permit any of its Restricted Subsidiaries to, create, incur, assume or suffer to exist any Liens (other than Permitted Liens) of any kind against or upon any of their respective property or assets, or any proceeds, income or profit therefrom which secure Senior Subordinated Indebtedness or Subordinated Obligations, unless:

(1)in the case of Liens securing Subordinated Obligations of the Company, the Notes are secured by a Lien on such property, assets, proceeds, income or profit that is senior in priority to such Liens;

(2)in the case of Liens securing Subordinated Obligations of a Guarantor, such Guarantor’s Guarantee is secured by a Lien on such property, assets, proceeds, income or profit that is senior in priority to such Liens;

(3)in the case of Liens securing Senior Subordinated Indebtedness of the Company, the Notes are equally and ratably secured by a Lien on such property, assets, proceeds, income or profit; and

(4)in the case of Liens securing Senior Subordinated Indebtedness of a Guarantor, such Guarantor’s Guarantee is equally and ratably secured by a Lien on such property, assets, proceeds, income or profit.

SECTION 4.12Limitation on Asset Sales.

(a)The Company shall not, and shall not permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless:

(1)the Company or the applicable Restricted Subsidiary, as the case may be, receives consideration at the time of such Asset Sale at least equal to the fair market value of the assets sold or otherwise disposed of (as determined in good faith by the Company’s Board of Directors);

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(2)at least 75% of the consideration received by the Company or such Restricted Subsidiary, as the case may be, from such Asset Sale shall be cash or Cash Equivalents and is received at the time of such disposition; provided that the amount of (x) any liabilities (as shown on the Company’s or such Restricted Subsidiary’s most recent balance sheet or in the notes thereto) of the Company or such Restricted Subsidiary (other than liabilities that are by their terms subordinated to the Notes and other than liabilities consisting of Disqualified Capital Stock) (i) that are assumed by the transferee of any such assets and from which the Company and its Restricted Subsidiaries are unconditionally released or (ii) in respect of which neither the Company nor any Restricted Subsidiary following such sale has any obligation and (y) any notes or other obligations received by the Company or such Restricted Subsidiary from such transferee that are promptly, but in no event more than 60 days after receipt, converted by the Company or such Restricted Subsidiary into cash or Cash Equivalents (to the extent of the cash or Cash Equivalents received), shall be deemed to be cash for purposes of this provision; and

(3)upon the consummation of an Asset Sale, the Company shall apply, or cause such Restricted Subsidiary to apply, the Net Cash Proceeds relating to such Asset Sale within 360 days of receipt thereof either:

(a)to prepay any Senior Debt or Guarantor Senior Debt and, in the case of any Senior Debt or Guarantor Senior Debt under any revolving credit facility, effect a permanent reduction in the availability under such revolving credit facility;

(b)to reinvest in Productive Assets (and to the extent such reinvestment constitutes an Investment, such reinvestment complies with Section 4.8); or

(c)a combination of prepayment and investment permitted by the foregoing clauses (3)(a) and (3)(b).

On the 361st day after an Asset Sale or such earlier date, if any, as the Board of Directors of the Company or of such Restricted Subsidiary determines not to apply the Net Cash Proceeds relating to such Asset Sale as set forth in clauses (3)(a), (3)(b) and (3)(c) of the immediately preceding sentence (each, a “Net Proceeds Offer Trigger Date”), such aggregate amount of Net Cash Proceeds which have not been applied on or before such Net Proceeds Offer Trigger Date as permitted in clauses (3)(a), (3)(b) and (3)(c) of the immediately preceding sentence (each a “Net Proceeds Offer Amount”) shall be applied by the Company or such Restricted Subsidiary to make an offer to purchase for cash (the “Net Proceeds Offer”) on a date (the “Net Proceeds Offer Payment Date”) not less than 30 nor more than 60 days following the applicable Net Proceeds Offer Trigger Date, from all Holders on a pro rata

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basis, that amount of Notes equal to the Net Proceeds Offer Amount at a price in cash equal to 100% of the principal amount of the Notes to be purchased, plus accrued and unpaid interest thereon, if any, to the date of purchase; provided, however, that if at any time any non-cash consideration received by the Company or any Restricted Subsidiary of the Company, as the case may be, in connection with any Asset Sale is converted into or sold or otherwise disposed of for cash (other than interest, dividends or other earnings received with respect to any such non-cash consideration), then such conversion or disposition shall be deemed to constitute an Asset Sale hereunder as of the date of such conversion or disposition and the Net Cash Proceeds thereof shall be applied in accordance with this covenant.

(b)Notwithstanding the foregoing, if a Net Proceeds Offer Amount is less than $20 million, the application of the Net Cash Proceeds constituting such Net Proceeds Offer Amount to a Net Proceeds Offer may be deferred until such time as such Net Proceeds Offer Amount plus the aggregate amount of all Net Proceeds Offer Amounts arising subsequent to the Net Proceeds Offer Trigger Date relating to such initial Net Proceeds Offer Amount from all Asset Sales by the Company and its Restricted Subsidiaries aggregates at least $10 million, at which time the Company or such Restricted Subsidiary shall apply all Net Cash Proceeds constituting all Net Proceeds Offer Amounts that have been so deferred to make a Net Proceeds Offer (the first date the aggregate of all such deferred Net Proceeds Offer Amounts is equal to $20 million or more shall be deemed to be a Net Proceeds Offer Trigger Date).

(c)Notwithstanding paragraphs (a) and (b) of this Section 4.12, the Company and its Restricted Subsidiaries will be permitted to consummate an Asset Sale without complying with such paragraphs to the extent that:

(1)at least 75% of the consideration for such Asset Sale constitutes Productive Assets (and to the extent any of such Productive Assets constitutes an Investment, such Investment complies with Section 4.8); and

(2)such Asset Sale is for at least fair market value (as determined in good faith by the Company’s Board of Directors); provided that any consideration not constituting Productive Assets received by the Company or any of its Restricted Subsidiaries in connection with any Asset Sale permitted to be consummated under this paragraph shall constitute Net Cash Proceeds and shall be subject to the provisions of this covenant with respect to the application of Net Cash Proceeds; provided that at the time of entering into such transaction or immediately after giving effect thereto, no Default or Event of Default shall have occurred or be continuing or would occur as a consequence thereof.

(d)Within 25 days following the Net Proceeds Offer Trigger Date, the Company shall mail or cause the Trustee to mail (in the Company’s name and at its expense)

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notice of a Net Proceeds Offer to the Holders of the Notes at their last registered addresses with a copy to the Trustee and the Paying Agent. The Net Proceeds Offer shall remain open from the time of mailing for at least 20 Business Days and until the close of business on the third Business Day prior to the Net Proceeds Offer Payment Date. The notice shall contain all instructions and materials necessary to enable such Holders to tender Notes pursuant to the Net Proceeds Offer. The notice, which shall govern the terms of the Net Proceeds Offer, shall state:

(i)that the Net Proceeds Offer is being made pursuant to this Section 4.12;

(ii)the purchase price (including the amount of accrued and unpaid interest, if any) for each Note and the Net Proceeds Offer Payment Date;

(iii)that any Note not tendered or accepted for payment will continue to accrue interest in accordance with the terms thereof;

(iv)that any Note accepted for payment pursuant to the Net Proceeds Offer shall cease to accrue interest after the Net Proceeds Offer Payment Date unless the Company shall fail to make payment therefor;

(v)that Holders electing to have Notes purchased pursuant to a Net Proceeds Offer will be required to surrender their Notes to the Paying Agent at the address specified in the notice prior to 5:00 p.m., New York City time, on the third Business Day immediately preceding the Net Proceeds Offer Payment Date and must complete any form letter of transmittal proposed by the Company and acceptable to the Trustee and the Paying Agent;

(vi)that Holders will be entitled to withdraw their election if the Paying Agent receives, not later than 5:00 p.m., New York City time, on the third Business Day immediately preceding the Net Proceeds Offer Payment Date, a telex or facsimile transmission (confirmed by overnight delivery of the original thereof) or letter setting forth the name of the Holder, the principal amount of Notes the Holder delivered for purchase, the Note certificate number (if any) and a statement that such Holder is withdrawing his election to have such Notes purchased;

(vii)that if Notes in a principal amount in excess of the Holders’ prorata share of the Net Proceeds are tendered pursuant to a Net Proceeds Offer, the Company shall purchase Notes on a pro rata basis among the Notes tendered (with such adjustments as may be deemed appropriate by the Company so that only Notes in denominations of $1,000 or integral multiples of $1,000 shall be acquired);

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(viii)that Holders whose Notes are purchased only in part will be issued new Notes equal in principal amount to the unpurchased portion of the Notes surrendered; and

(ix)the instructions that Holders must follow in order to tender their Notes.

On or before the Net Proceeds Offer Payment Date, the Company shall (i) accept for payment, on a prorata basis among the Notes, Notes or portions thereof tendered pursuant to the Net Proceeds Offer, (ii) deposit with the Paying Agent money, in immediately available funds, in an amount sufficient to pay the purchase price of all Notes or portions thereof so tendered and accepted and (iii) deliver to the Paying Agent the Notes so accepted together with an Officers’ Certificate setting forth the Notes or portions thereof tendered to and accepted for payment by the Company. The Paying Agent shall promptly mail or deliver to Holders of Notes so accepted payment in an amount equal to the purchase price, and the Trustee shall promptly authenticate and mail or deliver to such Holders a new Note equal in principal amount to any unpurchased portion of the Note surrendered. Any Notes not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company will publicly announce the results of the Net Proceeds Offer on the first Business Day following the Net Proceeds Offer Payment Date. The Paying Agent shall promptly deliver to the Company the balance of any moneys held by the Paying Agent after payment to the Holders of Notes as aforesaid.

(e)To the extent that the aggregate amount of Notes tendered pursuant to a Net Proceeds Offer is less than the Net Proceeds Offer Amount, the Company may use any remaining Net Proceeds Offer Amount for general corporate purposes. Upon completion of any such Net Proceeds Offer, the Net Proceeds Offer Amount shall be reset at zero.

(f)In the event of the transfer of substantially all of the property and assets of the Company and its Restricted Subsidiaries as an entirety to a Person in a transaction permitted under Article V, which transaction does not constitute a Change of Control, the successor Person shall be deemed to have sold the properties and assets of the Company and its Subsidiaries not so transferred for purposes of this Section 4.12, and shall comply with the provisions of clause (a)(3) of this Section 4.12 respect to such deemed sale as if it were an Asset Sale.

(g)The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations (including Rule 14e-1 under the Exchange Act) in connection with the repurchase of Notes pursuant to a Net Proceeds Offer. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section 4.12, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 4.12 by virtue thereof.

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SECTION 4.13Limitations on Transactions with Affiliates.

(a)The Company shall not, and shall not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into or permit to exist any transaction or series of related transactions (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with, or for the benefit of, any of its Affiliates (an “Affiliate Transaction”), other than (x) Affiliate Transactions permitted under paragraph (b) below and (y) Affiliate Transactions entered into on terms that are fair and reasonable to, and in the best interests of, the Company or such Restricted Subsidiary, as the case may be, as determined in good faith by the Company’s Board of Directors; provided, however, that for a transaction or series of related transactions with an aggregate value of $5.0 million or more, at the Company’s option (i) such determination shall be made in good faith by a majority of the disinterested members of the Board of the Directors of the Company or (ii) the Board of Directors of the Company or any such Restricted Subsidiary party to such Affiliate Transaction shall have received a favorable opinion from a nationally recognized investment banking firm that such Affiliate Transaction is fair from a financial point of view to the Company or such Restricted Subsidiary; provided, further, that for a transaction or series of related transactions with an aggregate value of $20.0 million or more, the Board of Directors of the Company shall have received a favorable opinion from a nationally recognized investment banking firm that such Affiliate Transaction is fair from a financial point of view to the Company or such Restricted Subsidiary.

(b)The foregoing restrictions shall not apply to:

(1)transactions exclusively between or among the Company and any of its Restricted Subsidiaries or exclusively between or among such Restricted Subsidiaries, provided such transactions are not otherwise prohibited by this Indenture;

(2)transactions effected as part of a Qualified Receivables Transaction;

(3)any agreement as in effect as of the Issue Date or any amendment thereto or any transaction contemplated thereby (including pursuant to any amendment thereto) or in any replacement agreement thereto so long as any such amendment or replacement agreement is not more disadvantageous to the Holders in any material respect than the original agreement as in effect on the Issue Date;

(4)Restricted Payments permitted by this Indenture;

(5)loans or advances to officers, directors or employees of the Company or its Restricted Subsidiaries not in excess of $10.0 million at any one time outstanding;

(6)Permitted Investments or Permitted Liens;

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(7)transactions with Persons solely in their capacity as holders of Indebtedness or Capital Stock of the Company or any of its Restricted Subsidiaries, where such Persons are treated no more favorably than holders of Indebtedness or Capital Stock of the Company or such Restricted Subsidiary generally;

(8)reasonable and customary fees and compensation paid to, and indemnity provided on behalf of, officers, directors, consultants or employees of Vertis Holdings or any of its Restricted Subsidiaries (other than the THL Affiliates and the ECP Affiliates, which are set forth in clauses 9, 10 and 11 below), as determined by the Board of Directors of the Company or any such Restricted Subsidiary or the senior management thereof in good faith, including, without limitation, issuances of stock, payment of bonuses and other transactions pursuant to employment or compensation agreements, stock option agreements, indemnification agreements and other arrangements in effect on the Issue Date or substantially similar thereto;

(9)the payment, on a quarterly basis, of management fees to (A) THL and/or the THL Affiliates not to exceed $250,000 in any fiscal quarter and (B) ECP and/or the ECP Affiliates not to exceed $62,500 in any fiscal quarter, in each case in accordance with the management agreement between THL, the THL Affiliates, ECP and/or the ECP Affiliates and Vertis Holdings;

(10)the reimbursement of THL, the THL Affiliates, ECP and/or the ECP Affiliates for the reasonable out-of-pocket expenses incurred by them in connection with performing management services to Vertis Holdings and its Restricted Subsidiaries;

(11)the payment of one-time fees to THL, the THL Affiliates, ECP and/or the ECP Affiliates in connection with acquisition transactions not prohibited by this Indenture, such fees to be payable at the time of each such acquisition and not to exceed (for all fees paid pursuant to this clause (11)) 2.5% of the aggregate consideration paid by Vertis Holdings and its Restricted Subsidiaries for any such acquisition or such lesser amount as is then permitted pursuant to the Senior Credit Facility; and

(12)reasonable and customary fees paid to members of the Board of Directors of the Company, other than THL, the THL Affiliates, ECP and the ECP Affiliates.

Notwithstanding the foregoing, the Company shall only pay one-half of any management or other fees or expenses permitted under clauses (9), (10) and (11) to the Equity Investors or their Affiliates at a time when a Default or an Event of Default exists; provided

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that such unpaid fees and/or expenses shall be paid at such time as such Default or Event of Default shall have been cured or waived.

SECTION 4.14Prohibition on Incurrence of Senior Subordinated Debt.

Neither the Company nor any Guarantor shall incur Indebtedness that is senior in right of payment to the Notes or such Guarantor’s Guarantee and subordinate in right of payment to any other Indebtedness of the Company or such Guarantor, as the case may be.

SECTION 4.15Change of Control.

(a)Upon the occurrence of a Change of Control (the date of such occurrence, the “Change of Control Date”), each Holder shall have the right to require that the Company purchase all or a portion of such Holder’s Notes pursuant to an offer to purchase (the “Change of Control Offer”) at a purchase price equal to 101% of the aggregate principal amount thereof plus accrued interest thereon to the date of repurchase.

Prior to the mailing of the notice to the Holders provided for in paragraph (b) below but in any event within 30 days following the date upon which the Company obtains actual knowledge of any Change of Control, the Company hereby covenants to (i) repay in full and terminate all commitments under Indebtedness under the Senior Credit Facility and all other Senior Debt the terms of which require repayment upon a Change of Control or offer to repay in full and terminate all commitments under all Indebtedness under the Senior Credit Facility and all other such Senior Debt and to repay the Indebtedness of each lender which has accepted such offer or (ii) obtain the requisite consents under the Senior Credit Facility and all other Senior Debt to permit the repurchase of the Notes as provided for in paragraph (c) below.

The Company shall first comply with the covenant in the immediately preceding sentence before it shall be required to repurchase the Notes pursuant to this Section 4.15. The Company’s failure to comply with the covenant described in the immediately preceding paragraph (and any failure to send the notice referred to in clause (b) below as a result of the prohibition in the second preceding sentence) may (with notice and lapse of time) constitute an Event of Default described in Section 6.l(c) but shall not constitute an Event of Default described in Section 6.1(a) or (b).

(b)Notice of a Change of Control Offer shall be sent, by first class mail, by the Company within 30 days following the date upon which the Company obtains actual knowledge that a Change of Control occurred to the Holders of Notes at their last registered addresses with a copy to the Trustee and the Paying Agent. The date on which Notes are purchased pursuant to the Change of Control Offer shall be a business day that is no earlier than 30 days nor later than 60 days from the date such notice is mailed (the “Change of

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Control Payment Date”). The Change of Control Offer shall remain open from the time of mailing for at least 20 Business Days and until 3:00 p.m., New York City time, on the third Business Day prior to the Change of Control Payment Date. The notice, which shall govern the terms of the Change of Control Offer, shall include such disclosures as are required by law and shall state:

(i)that the Change of Control Offer is being made pursuant to this Section 4.15 and that all Notes will be accepted for payment;

(ii)the purchase price (including the amount of accrued and unpaid interest, if any) for each Note and the Change of Control Payment Date;

(iii)that any Note not tendered for payment will continue to accrue interest in accordance with the terms thereof;

(iv)that any Note accepted for payment pursuant to the Change of Control Offer shall cease to accrue interest after the Change of Control Payment Date unless the Company shall fail to make payment therefor;

(v)that Holders electing to have Notes purchased pursuant to a Change of Control Offer will be required to surrender their Notes to the Paying Agent at the address specified in the notice prior to 3:00 p.m., New York City time, on the Change of Control Payment Date and must complete any form of transmittal proposed by the Company and acceptable to the Trustee and the Paying Agent;

(vi)that Holders of Notes will be entitled to withdraw their election if the Paying Agent receives, not later than 3:00 p.m., New York City time, on the third Business Day prior to the Change of Control Payment Date, a telex or facsimile transmission (confirmed by overnight delivery of the original thereof) or letter seating forth the name of the Holder, the principal amount of Notes the Holder delivered for purchase, the Note certificate number (if any) and a statement that such Holder is withdrawing his election to have such Notes purchased;

(vii)that Holders whose Notes are purchased only in part will be issued Notes equal in principal amount to the unpurchased portion of the Notes surrendered; and

(viii)the instructions that Holders must follow in order to tender their Notes.

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(c)On the Change of Control Payment Date, the Company shall (i) accept for payment Notes or portions thereof tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying Agent money sufficient to pay the purchase price of all Notes or portions thereof so tendered and accepted and (iii) deliver to the Trustee the Notes so accepted together with an Officers’ Certificate setting forth the Notes or portions thereof tendered to and accepted for payment by the Company. The Paying Agent shall promptly mail or deliver to the Holders of Notes so accepted payment in an amount equal to the purchase price, and the Trustee shall promptly authenticate and mail or deliver to such Holders a new Note equal in principal amount to any unpurchased portion of the Note surrendered. Any Notes not so accepted shall be promptly mailed or delivered by the Company to the Holder thereof. The Company will publicly announce the results of the Change of Control Offer not later than the first Business Day following the Change of Control Payment Date.

(d)The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act, and any other securities laws or regulations (including Rule 14e-1 under the Exchange Act) in connection with the purchase of Notes pursuant to a Change of Control Offer. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section 4.15, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section 4.15 by virtue thereof.

SECTION 4.16Waiver of Stay; Extension of Usury Laws.

The Company covenants (to the extent that it may lawfully do so) that it shall not, nor shall it cause or permit any of the Guarantors to, at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive the Company or any Guarantor from paying all or any portion of the principal of or interest on the Notes or the Guarantees, as applicable, as contemplated herein or in the Notes and the Guarantees, wherever enacted, now or at any time hereafter in force, or that may affect the covenants or the performance of this Indenture; and (to the extent that it may lawfully do so) each of the Company and the Guarantors hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

SECTION 4.17Limitation on Guarantees by Restricted Subsidiaries.

The Company shall not permit any of its Domestic Restricted Subsidiaries that is not a Guarantor (whether formed or acquired before or after the Issue Date), directly or indirectly, by way of the pledge of any intercompany note or otherwise, to assume, guarantee or in any other manner become liable with respect to any Indebtedness of the Company (other

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than: (1) Indebtedness under Currency Agreements in reliance on clause (5)of the definition of Permitted Indebtedness; or (2) Interest Swap Obligations incurred in reliance on clause (4) of the definition of Permitted Indebtedness), unless, in any such case:

(1)such Restricted Subsidiary executes and delivers a supplemental indenture to this Indenture providing a guarantee of payment of the Notes by such Restricted Subsidiary, and

(2)(a) if any such assumption, guarantee or other liability of such Restricted Subsidiary is provided in respect of Senior Debt, the guarantee or other instrument provided by such Restricted Subsidiary in respect of such Senior Debt may be superior to such guarantee of the Notes pursuant to subordination provisions no less favorable to the Holders of the Notes than those contained in this Indenture and (b) if such assumption, guarantee or other liability of such Restricted Subsidiary is provided in respect of Indebtedness that is expressly subordinated to the Notes, the guarantee or other instrument provided by such Restricted Subsidiary in respect of such Subordinated Obligation shall be subordinated to such guarantee at least to the same extent that the Notes are subordinated to Senior Debt.

Notwithstanding the foregoing, any such Guarantee by a Restricted Subsidiary of the Notes shall provide by its terms that it shall be automatically and unconditionally released and discharged, without any further action required on the part of the Trustee or any Holder, upon:

(1)the unconditional release of such Restricted Subsidiary from its liability in respect of the Indebtedness in connection with which such Guarantee was executed and delivered pursuant to the preceding paragraph and all other Indebtedness which would require that a Guarantee be executed and delivered pursuant to the preceding paragraph;

(2)any sale or other disposition (by merger or otherwise) to any Person which is not a Restricted Subsidiary of the Company of all of the Company’s Capital Stock in, or all or substantially all of the assets of, such Restricted Subsidiary; provided that (a) such sale or disposition of such Capital Stock or assets is otherwise in compliance with the terms of this Indenture and (b) such assumption, guarantee or other liability of such Restricted Subsidiary has been released by the holders of the other Indebtedness of the Company so guaranteed;

(3)the Legal Defeasance of the Notes as described under Section 8.2; or

(4)such Restricted Subsidiary being designated as an Unrestricted Subsidiary in compliance with this Indenture.

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SECTION 4.18Limitation on Preferred Stock of Subsidiaries.

The Company shall not permit any of its Restricted Subsidiaries that is not a Guarantor to issue any Preferred Stock (other than to the Company or to a Restricted Subsidiary of the Company) or permit any Person (other than the Company or a Restricted Subsidiary of the Company) to own any Preferred Stock of any Restricted Subsidiary of the Company that is not a Guarantor.

SECTION 4.19Conduct of Business.

The Company and its Restricted Subsidiaries shall not engage in any businesses which are not the same, similar, related or ancillary to the businesses in which the Company and its Restricted Subsidiaries are engaged on the Issue Date.

ARTICLE V

SUCCESSOR CORPORATION

SECTION 5.1Limitation on Mergers, Consolidations or Sales of Assets.

The Company shall not, in a single transaction or a series of related transactions, consolidate with or merge with or into, or sell, assign, transfer, lease, convey or otherwise dispose of (or cause or permit any Restricted Subsidiary of the Company to sell, assign, transfer, lease, convey or otherwise dispose of) all or substantially all of the Company’s assets to, another Person or Persons unless:

(1)either:

(a)the Company shall be the surviving or continuing corporation of such merger or consolidation; or

(b)the surviving Person is a corporation existing under the laws of the United States, any state thereof or the District of Columbia and such surviving Person shall expressly assume all the obligations of the Company under the Notes and this Indenture;

(2)immediately after giving effect to such transaction (on a pro forma basis, including any Indebtedness incurred or anticipated to be incurred in connection with such transaction and the other adjustments that are referred to in the definition of “Consolidated Fixed Charge Coverage Ratio”), the Company or the surviving Person

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is able to incur at least $1.00 of additional Indebtedness (other than Permitted Indebtedness) in compliance with Section 4.9;

(3)immediately before and immediately after giving effect to such transaction (including any Indebtedness incurred or anticipated to be incurred in connection with the transaction), no Default or Event of Default shall have occurred and be continuing; and

(4)the Company or the surviving entity, as the case may be, has delivered to the Trustee an officers’ certificate and opinion of counsel, each stating that such consolidation, merger or transfer complies with this Indenture, that the surviving Person agrees to be bound thereby and by the Notes and the Registration Rights Agreement, and that all conditions precedent in this Indenture relating to such transaction have been satisfied.

For purposes of the foregoing, the transfer (by lease, assignment, sale or otherwise, in a single transaction or series of transactions) of all or substantially all of the properties and assets of one or more Subsidiaries of the Company, the Capital Stock of which constitutes all or substantially all of the properties and assets of the Company, shall be deemed to be the transfer of all or substantially all of the properties and assets of the Company.

Notwithstanding the foregoing clauses (1), (2) and (3):

(a)any Restricted Subsidiary of the Company may consolidate with, merge into or transfer all or part of its properties and assets to the Company; and

(b)the Company may merge with an Affiliate that is (x) a corporation that has no material assets or liabilities and which was incorporated solely for the purpose of reincorporating the Company in another jurisdiction or (y) a Restricted Subsidiary of the Company that is a Guarantor so long as all assets of the Company and the Restricted Subsidiaries immediately prior to such transaction are owned by such Restricted Subsidiary and its Restricted Subsidiaries immediately after the consummation thereof.

Each Guarantor (other than any Guarantor whose Guarantee is to be released in accordance with the terms of this Indenture) shall not, and the Company shall not cause or permit any Guarantor to, consolidate with or merge with or into any Person other than the Company or any other Guarantor unless:

(1)the entity formed by or surviving any such consolidation or merger (if other than the Guarantor) or to which such sale, lease, conveyance or other disposition

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shall have been made is a corporation organized and existing under the laws of the United States or any State thereof or the District of Columbia;

(2)such entity assumes by supplemental indenture all of the obligations of the Guarantor on the Guarantee;

(3)immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing; and

(4)immediately after giving effect to such transaction and the use of any net proceeds therefrom on a pro forma basis, the Company could satisfy the provisions of clause (2) of the first paragraph of this Section 5.1.

Any merger or consolidation of a Restricted Subsidiary with and into the Company (with the Company being the surviving entity) or another Guarantor that is a Wholly Owned Subsidiary of the Company need only comply with clause (4) of the first paragraph of this Section 5.1.

SECTION 5.2Successor Entity Substituted.

Upon any consolidation or merger, or any sale, lease, conveyance or other disposition of all or substantially all of the assets of the Company or any assignment of its obligations under this Indenture in accordance with Section 5.1 hereof, upon assumption by the successor corporation, by supplemental indenture, executed and delivered to the Trustee and satisfactory in form to the Trustee, of the due and punctual payment of the principal of, premium, if any, and interest on all of the Notes and the due and punctual performance and observance of all the covenants and conditions of this Indenture to be performed or observed by the Company, the surviving entity formed by such consolidation or into or with which the Company is merged or to which such sale, lease, conveyance or other disposition or assignment is made will succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture with the same effect as if such surviving entity has been named as the Company herein and such surviving entity may cause to be signed and may issue in its own name or in the name of the Company, any or all Notes issuable hereunder and the predecessor Company in the case of a sale, lease, conveyance or other disposition or assignment, will be released from all obligations under the Notes.

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ARTICLE VI

DEFAULT AND REMEDIES

SECTION 6.1Events of Default.

“Event of Default”, whenever used herein, means any one of the following events (whatever the reason for such Event of Default and whether or not it shall be occasioned or prohibited by the provisions of Article X or Article XII and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

(a)the failure to pay interest on any Notes when the same becomes due and payable and the default continues for a period of 30 days (whether or not such payments shall be prohibited by the subordination provisions of this Indenture);

(b)the failure to pay the principal on any Notes, when such principal becomes due and payable, at maturity, upon redemption or otherwise (including the failure to make a payment to purchase Notes tendered pursuant to a Change of Control Offer or a Net Proceeds Offer) (whether or not such payments shall be prohibited by the subordination provisions of this Indenture);

(c)a default in the observance or performance of any other covenant or agreement contained in this Indenture which default continues for a period of 30 days after the Company receives written notice specifying the default (and demanding that such default be remedied) from the Trustee or the Holders of at least 25% of the outstanding principal amount of the Notes;

(d)the failure to pay at final stated maturity (giving effect to any applicable grace periods and any extensions thereof) the principal amount of any Indebtedness of the Company or any Restricted Subsidiary (other than a Receivables Entity) of the Company, or the acceleration of the final stated maturity of any such Indebtedness (which acceleration is not rescinded, annulled or otherwise cured within 30 days of receipt by the Company or such Restricted Subsidiary of notice of any such acceleration) if the aggregate principal amount of such Indebtedness, together with the principal amount of any other such Indebtedness in default for failure to pay principal at final stated maturity or which has been accelerated (in each case with respect to which the 30-day period described above has elapsed), aggregates $20.0 million or more at any time;

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(e)one or more judgments in an aggregate amount in excess of $20.0 million shall have been rendered against the Company or any of its Significant Subsidiaries and such judgments remain undischarged, unpaid or unstayed for a period of 60 days after such judgment or judgments become final and non-appealable;

(f)A court of competent jurisdiction enters a Bankruptcy Order under any Bankruptcy Law that:

(1)is for relief against the Company or any of its Significant Subsidiaries in an involuntary case or proceeding, or

(2)appoints a Custodian of the Company or any of its Significant Subsidiaries for all or substantially all of its respective properties, or

(3)orders the liquidation of the Company or any of its Significant Subsidiaries.

and in each case the order or decree remains unstayed and in effect for 60 consecutive days;

(g)The Company or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law:

(1)commences a voluntary case or proceeding, or

(2)consents to the entry of a Bankruptcy Order for relief against it in an involuntary case or proceeding, or

(3)consents to the appointment of a Custodian of it or for all or substantially all of its property, or

(4)makes a general assignment for the benefit of its creditors or files a proposal or scheme of arrangement involving the rescheduling or composition of its indebtedness, or

(5)consents to the filing of a petition in bankruptcy against it; or

(h)any Guarantee of a Significant Subsidiary ceases to be in full force and effect or any Guarantee of a Significant Subsidiary is declared to be null and void and unenforceable or any Guarantee of a Significant Subsidiary is found to be invalid or any Guarantor that is a Significant Subsidiary denies its liability under its Guarantee (other than by reason of release of a Guarantor in accordance with the terms of this Indenture).

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SECTION 6.2Acceleration.

(a)If an Event of Default (other than an Event of Default specified in Section 6.1(f) or 6.1(g) above with respect to the Company) shall occur and be continuing, then, and in every such case, unless the principal of all the Notes shall have already become due and payable, either the Trustee or the Holders of not less than 25% in aggregate principal amount of the then outstanding Notes, by notice in writing to the Company and the Representative under the Senior Credit Facility (and to the Trustee if given by Holders) (the “Acceleration Notice”), may declare all of the unpaid principal of and accrued interest thereon to be, and the same (x) shall become immediately due and payable, or (y) if there are any amounts outstanding under the Senior Credit Facility, shall become immediately due and payable upon the first to occur of an acceleration under the Senior Credit Facility or five business days after receipt by the Company and the Representative under the Senior Credit Facility of such Acceleration Notice but only if such Event of Default is then continuing. If an Event of Default specified in Section 6.1(f) or 6.1(g) with respect to the Company occurs and is continuing, all unpaid principal of and accrued interest due and payable on all the outstanding Notes shall ipso facto become and be immediately due and payable without any declaration, notice or other act on the part of the Trustee or any Holder.

(b)At any time after a declaration of acceleration with respect to the Notes as described in the preceding paragraph, the Holders of a majority in aggregate principal amount of the Notes, by written notice to the Company and the Trustee, may rescind and cancel, on behalf of all Holders, such declaration and its consequences:

(1)if the rescission would not conflict with any judgment or decree;

(2)if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of the acceleration;

(3)to the extent the payment of such interest is lawful, interest on overdue installments of interest and overdue principal, which has become due otherwise than by such declaration of acceleration, has been paid;

(4)if the Company has paid the Trustee its reasonable compensation and reimbursed the Trustee for its expenses, disbursements and advances; and

(5)in the event of the cure or waiver of an Event of Default of the type described in Section 6.1(f) or (g), the Trustee shall have received an Officers’ Certificate to the effect that such Event of Default has been cured or waived.

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No such rescission shall affect any subsequent Default or impair any right consequent thereto.

In the event that the maturity of the Notes is accelerated pursuant to this Section 6.2, 100% of the principal amount thereof plus accrued interest to the date of payment shall become due and payable.

SECTION 6.3Other Remedies.

If an Event of Default occurs and is continuing, the Trustee may pursue any available remedy by proceeding at law or in equity to collect the payment of principal of or interest on the Notes or to enforce the performance of any provision of the Notes or this Indenture.

The Trustee may maintain a proceeding even if it does not possess any of the Notes or does not produce any of them in the proceeding, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Notes in respect of which such judgment has been recovered.

SECTION 6.4Waiver of Past Default.

Subject to Sections 6.7 and 9.2, prior to the declaration of acceleration of the maturity of the Notes, the Holder or Holders of not less than a majority in aggregate principal amount of the Notes at the time outstanding by written notice to the Company and the Trustee may waive on behalf of all the Holders any past default under this Indenture and its consequence, except a default in the payment of principal of or interest on any Note or a default with respect to any covenant or provision which cannot be modified or amended without the consent of the Holder of each outstanding Note affected pursuant to Section 9.2.

SECTION 6.5Control by Majority.

The Holders of a majority in aggregate principal amount of the then outstanding Notes may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on it, including, without limitation, any remedies provided for in Section 6.3. However, the Trustee may refuse to follow any direction that conflicts with law, the Notes or this Indenture, or that the Trustee determines may be unduly prejudicial to the rights of another Securityholder or that may involve the Trustee in personal liability.

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SECTION 6.6Limitation on Suits.

A Securityholder may not pursue any remedy with respect to this Indenture or the Notes unless:

(a)the Holder gives to the Trustee written notice of a continuing Event of Default;

(b)the Holders of at least 25% in principal amount of the then outstanding Notes make a written request to the Trustee to pursue a remedy;

(c)such Holder or Holders offer and, if requested, provide to the Trustee indemnity satisfactory to the Trustee against any loss, liability or expense;

(d)the Trustee does not comply with the request within 30 days after receipt of the request and the offer of indemnity; and

(e)during such 30-day period the Holders of at least a majority in principal amount of the then outstanding Notes do not give the Trustee a direction which is inconsistent with the request.

A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over such other Securityholder.

SECTION 6.7Rights of Holders To Receive Payment.

Notwithstanding any other provision of this Indenture, the right of any Holder to receive payment of principal of and interest on a Note, on or after the respective due dates expressed in the Note, or to bring suit for the enforcement of any such payment on or after such respective dates, is absolute and unconditional and shall not be impaired or affected without the consent of such Holder.

SECTION 6.8Collection Suit by Trustee.

If an Event of Default specified in Section 6.l(a) or (b) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company or any other obligor on the Notes for the whole amount of principal and accrued interest remaining unpaid, together with interest overdue on principal and, to the extent that payment of such interest is lawful, interest on overdue installments of interest, in each case at the interest rate and such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.

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SECTION 6.9Trustee May File Proofs of Claim.

The Trustee shall be entitled and empowered to file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee (including any claim for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel) and the Securityholders allowed in any judicial proceedings relative to the Company or any of its Subsidiaries (or any other obligor upon the Notes), its creditors or its property and shall be entitled and empowered to collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same, and any Custodian in any such judicial proceedings is hereby authorized by each Securityholder to make such payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Securityholders, to pay to the Trustee any amount due to it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agent and counsel, and any other amounts due the Trustee under Section 7.7. Nothing herein contained shall be deemed to authorize the Trustee to authorize or consent to or accept or adopt on behalf of any Securityholder any plan of reorganization, arrangement, adjustment or composition affecting the Notes or the rights of any Holder thereof, or to authorize the Trustee to vote in respect of the claim of any Securityholder in any such proceeding.

SECTION 6.10Priorities.

If the Trustee collects any money pursuant to this Article VI, it shall pay out such money in the following order:

First: to the Trustee for amounts due under Section 7.7;

Second: to Holders for amounts due and unpaid on the Notes for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Notes for principal and interest, respectively; and

Third: to the Company.

The Trustee, upon prior written notice to the Company, may fix a record date and payment date for any payment to Securityholders pursuant to this Article VI.

SECTION 6.11Undertaking for Costs.

In any suit for the enforcement of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the

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costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys’ fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.7, or a suit by any Holder, or group of Holders, holding in the aggregate more than 10% in principal amount of the outstanding Notes.

SECTION 6.12Rights and Remedies Cumulative.

No right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

SECTION 6.13Delay or Omission Not Waiver.

No delay or omission of the Trustee or of any Holder of any Note to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein. Every right and remedy given by this Article VI or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be.

ARTICLE VII

TRUSTEE

SECTION 7.1Duties of Trustee.

(a)If an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent Person would exercise or use under the circumstances in the conduct of his own affairs.

(b)Except during the continuance of an Event of Default:

(i)The Trustee need perform only those duties as are specifically set forth in this Indenture or the TIA and no others and no implied covenants or obligations shall be read into this Indenture against the Trustee.

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(ii)In the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, in the case of any such certificate or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall examine such certificates and opinions to determine whether or not they conform to the requirements of this Indenture.

(c)Notwithstanding anything to the contrary herein contained, the Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act, or its own willful misconduct, except that:

(i)This paragraph does not limit the effect of paragraph (b) of this Section 7.1.

(ii)The Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it is proved that the Trustee was negligent in ascertaining the pertinent facts.

(iii)The Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Sections 6.4 and 6.5.

(d)No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.

(e)Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (d) of this Section 7.1.

(f)The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law.

SECTION 7.2Rights of Trustee.

Subject to Section 7.1 :

(a)The Trustee may rely and shall be protected in acting or refraining from acting upon any document reasonably believed by it to be genuine and to have been

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signed or presented by the proper Person. The Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit.

(b)Before the Trustee acts or refrains from acting with respect to any matter contemplated by this Indenture, it may require an Officers’ Certificate or an Opinion of Counsel, which shall conform to the provisions of Section 13.5. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such certificate or opinion.

(c)The Trustee may act through its attorneys and agents and shall not be responsible for the misconduct or negligence of any agent (other than the negligence or willful misconduct of an agent who is an employee of the Trustee) appointed with due care.

(d)The Trustee shall not be liable for any action it takes or omits to take in good faith and without negligence which it reasonably believes to be authorized or within its rights or powers conferred upon it by this Indenture or the TIA.

(e)The Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request, order or direction of any of the Holders, pursuant to the provisions of this Indenture, unless such Holders shall have offered to the Trustee security or indemnity against the costs, expenses and liabilities which may be incurred therein or thereby.

(f)The Trustee may consult with counsel of its selection and the advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon.

(g)The rights, privileges, protections, immunities and benefits given to the Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder; and

(h)The Trustee may request that the Company deliver an Officers’ Certificate setting forth the names of individuals and or titles of officers authorized at such time to take specified actions pursuant to this Indenture, which Officers’ Certificate may be signed by any person authorized to sign an Officers’ Certificate,

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including any person specified as so authorized in any such certificate previously delivered and not superseded.

SECTION 7.3Individual Rights of Trustee.

The Trustee in its individual capacity or any other capacity may become the owner or pledgee of Notes and may otherwise deal with the Company, or its Subsidiaries and Affiliates with the same rights it would have if it were not Trustee. Any Agent may do the same with like rights. However, the Trustee is subject to Sections 7.10 and 7.11.

SECTION 7.4Trustee’s Disclaimer.

The Trustee makes no representation as to the validity or adequacy of this Indenture, the Notes or the Guarantees, and it shall not be accountable for the Company’s use of the proceeds from the Notes, and it shall not be responsible for any statement of the Company in this Indenture, or any statement in the Notes other than the Trustee’s certificate of authentication.

SECTION 7.5Notice of Defaults.

If a Default or an Event of Default with respect to the Notes occurs and is continuing and is actually known to a Responsible Officer, the Trustee shall mail to each Holder a notice of the Default or Event of Default within 60 days after it occurs or, if later, within 10 days after such Default or Event of Default becomes known to the Trustee, unless such Default or Event of Default has been cured. Except in the case of a Default or Event of Default in the payment of principal of or interest on any Note, including an acceleration, and the failure to make payment when required by Sections 4.12 and 4.15, the Trustee may withhold the notice to the Holders if and so long as a committee of its Responsible Officers determines in good faith that withholding the notice is in the interest of the Holders.

SECTION 7.6Reports by Trustee to Holders.

Within 60 days after each November 15 beginning with November 15, 2003, the Trustee shall transmit to each Securityholder a report dated as of May 15 of the relevant year that complies with the requirements of TIA § 313(a). The Trustee also shall comply with TIA § 313(b) and TIA § 313(c) and (d). A copy of such report at the time of its transmission to Securityholders shall be filed with the SEC, if required, with each stock exchange, if any, on which the Notes are listed and with the Company.

The Company shall promptly notify the Trustee if the Notes become listed on any stock exchange and the Trustee shall comply with TIA § 313(d).

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SECTION 7.7Compensation and Indemnity.

The Company shall pay to the Trustee, the Paying Agent and the Registrar from time to time such compensation for their respective services rendered hereunder as agreed in writing. The Trustee’s compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee upon request for all reasonable out-of-pocket disbursements, expenses and advances (including reasonable fees and expenses of counsel) incurred or made by each of them in connection with the performance of its duties under this Indenture. Such expenses shall include the reasonable compensation, reasonable out-of-pocket disbursements and reasonable expenses of the Trustee’s agents and counsel.

The Company shall indemnify and hold harmless the Trustee and their agents, employees, officers, directors and shareholders against any and all claims, expenses, loss or liability incurred by it arising out of or in connection with the administration of its duties under this Indenture. The Trustee shall notify the Company promptly of any claim asserted against it for which it may seek indemnity. The Company shall defend the claim with counsel designated by the Company, who may be outside counsel to the Company, but shall in all events be reasonably satisfactory to the Trustee, and the Trustee shall cooperate in the defense. The Trustee may have separate counsel and the Company shall pay the reasonable fees and expenses of such counsel; provided that the Company will not be required to pay such fees and expenses if it assumes the Trustee’s defense and there is no conflict of interest between the Company and the Trustee in connection with such defense. The Company need not pay for any settlement made without its written consent, which consent may not be unreasonably withheld. The Company need not reimburse any expense or indemnify against any loss or liability incurred by the Trustee through the Trustee’s own willful misconduct, negligence or bad faith.

To secure the Company’s payment obligations in this Section 7.7, the Trustee shall have a lien prior to the Notes and the Guarantees on all money or property held or collected by it in its capacity as Trustee, except money or property held in trust to pay principal of or interest on particular Notes.

When the Trustee incurs expenses or renders services after an Event of Default specified in Section 6.l(f) or 6.1(g) occurs, the expenses and the compensation for the services are intended to constitute expenses of administration under any Bankruptcy Law.

This section shall survive the resignation or removal of the Trustee.

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SECTION 7.8Replacement of Trustee.

The Trustee may resign at any time by so notifying the Company in writing, such resignation to be effective upon the appointment of a successor Trustee. The Holders of a majority in principal amount of the outstanding Notes may remove the Trustee by so notifying the Trustee in writing and may appoint a successor Trustee with the Company’s consent which consent shall not be unreasonably withheld. The Company may remove the Trustee if:

(a)the Trustee fails to comply with Section 7.10;

(b)the Trustee is adjudged a bankrupt or an insolvent;

(c)a receiver or other public officer takes charge of the Trustee or its property;

or

(d)the Trustee becomes incapable of acting.

If the Trustee resigns or is removed or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee. Within one year after the successor Trustee takes office, the Holders of a majority in principal amount of the Notes may appoint a successor Trustee to replace the successor Trustee appointed by the Company.

A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Immediately after that, the retiring Trustee shall transfer all property held by it as Trustee to the successor Trustee (subject to the lien provided in Section 7.7), the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. A successor Trustee shall mail notice of its succession to each Securityholder.

If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee, the Company or the Holders of at least 25% in principal amount of then outstanding Notes may petition any court of competent jurisdiction at the expense of the Company for the appointment of a successor Trustee.

If the Trustee fails to comply with Section 7.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.

Notwithstanding replacement of the Trustee pursuant to this Section 7.8, the Company’s obligations under Section 7.7 shall continue for the benefit of the retiring Trustee.

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SECTION 7.9Successor Trustee by Merger, Etc.

If the Trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business to, another corporation or national banking association, the resulting, surviving or transferee corporation or national banking association without any further act shall be the successor Trustee; provided such corporation shall be otherwise qualified and eligible under this Article VII.

SECTION 7.10Eligibility; Disqualification.

This Indenture shall always have a Trustee who satisfies the requirements of TIA § 310(a)(l) and (2). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA § 310(b); provided that there shall be excluded from the operation of TIA § 310(b)(l) any indenture or indentures under which other securities, or certificates of interest or participation in other securities, of the Company are outstanding if the requirements for such exclusion set forth in TIA § 310(b)(l) are met. The provisions of TIA § 310 shall apply to the Company, as obligor of the Notes.

SECTION 7.11Preferential Collection of Claims Against Company.

The Trustee shall comply with TIA § 311(a), excluding any creditor relationship listed in TIA § 31l(b). A Trustee who has resigned or been removed shall be subject to TIA § 311(a) to the extent indicated therein.

ARTICLE VIII

DISCHARGE OF INDENTURE; DEFEASANCE

SECTION 8.1Termination of the Company’s Obligations.

The Company may terminate its obligations under the Notes and the obligations of the Guarantors under the Guarantees, as the case may be, and this Indenture, except those obligations referred to in the penultimate paragraph of this Section 8.1, if all Notes previously authenticated and delivered (other than destroyed, lost or stolen Notes which have been replaced or paid or Notes for whose payment U.S. Legal Tender has theretofore been deposited with the Trustee or the Paying Agent in trust or segregated and held in trust by the Company and thereafter repaid to the Company, as provided in Section 8.5) have been delivered to the Trustee for cancellation and the Company has paid all sums payable by it hereunder, or if:

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(a)  either (i) pursuant to Article III, the Company shall have given notice to the Trustee and mailed a notice of redemption to each Holder of the redemption of all of the Notes under arrangements satisfactory to the Trustee for the giving of such notice or (ii) all Notes have otherwise become due and payable hereunder;

(b)  the Company shall have irrevocably deposited or caused to be deposited with the Trustee, as trust funds in trust solely for the benefit of the Holders for that purpose, U.S. Legal Tender in such amount as is sufficient without consideration of reinvestment of interest, to pay principal of, premium, if any, and interest on the outstanding Notes to maturity or redemption; provided that the Trustee shall have been irrevocably instructed to apply such U.S. Legal Tender to the payment of said principal, premium, if any, and interest with respect to the Notes; and provided, further, that from and after the time of deposit, the money deposited shall not be subject to the rights of holders of Senior Debt pursuant to the provisions of Article X and Article XII;

(c)  no Default or Event of Default with respect to this Indenture, the Notes or the Guarantees shall have occurred and be continuing on the date of such deposit or shall occur immediately after giving effect to such deposit and such deposit will not result in a breach or violation of, or constitute a default under, any other instrument to which the Company is a party or by which it is bound;

(d)  the Company shall have paid all other sums payable by it hereunder; and

(e)  the Company shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions precedent providing for or relating to the termination of the Company’s and the Guarantors’ obligations under the Notes and the Guarantees, as the case may be, and this Indenture have been complied with. Such Opinion of Counsel shall also state that such satisfaction and discharge does not result in a default under the Senior Credit Facility (if then in effect) or any other material agreement or material instrument then known to such counsel that binds or affects the Company.

Notwithstanding the foregoing paragraph, the Company’s obligations in Sections 2.5, 2.6, 2.7, 2.10, 4.1, 4.2, 7.7, 8.5 and 8.6 shall survive until the Notes are no longer outstanding pursuant to the last paragraph of Section 2.8. After the Notes are no longer outstanding, the Company’s obligations in Sections 7.7, 8.5 and 8.6 shall survive.

After such delivery or irrevocable deposit, the Trustee upon request shall acknowledge in writing the discharge of the Company’s and the Guarantors’ obligations under the Notes and the Guarantees, as the case may be, and this Indenture except for those surviving obligations specified above.

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SECTION 8.2Legal Defeasance and Covenant Defeasance.

(a)The Company may, at its option by Board Resolution of the Board of Directors, at any time, elect to have either paragraph (b) or (c) below be applied to all outstanding Notes upon compliance with the conditions set forth in Section 8.3.

(b)Upon the Company’s exercise under paragraph (a) hereof of the option applicable to this paragraph (b), each of the Company and the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.3, be deemed to have been discharged from its obligations with respect to all outstanding Notes on the date the conditions set forth below are satisfied (hereinafter, “Legal Defeasance”). For this purpose, Legal Defeasance means that the Company shall be deemed to have paid and discharged the entire Indebtedness represented by the outstanding Notes, which shall thereafter be deemed to be “outstanding” only for the purposes of Section 8.4 hereof and the other Sections of this Indenture referred to in (i) and (ii) below, and to have satisfied all its other obligations under such Notes and this Indenture (and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging the same), and Holders of the Notes and any amounts deposited under Section 8.3 hereof shall cease to be subject to any obligations to, or the rights of, any holder of Senior Debt under Article X or otherwise, except for the following provisions, which shall survive until otherwise terminated or discharged hereunder: (i) the rights of Holders of outstanding Notes to receive solely from the trust fund described in Section 8.4 hereof, and as more fully set forth in such Section, payments in respect of the principal of and interest on such Notes when and to the extent such payments are due, (ii) the Company’s obligations with respect to such Notes under Article II and Section 4.2 hereof, (iii) the rights, powers, trusts, duties and immunities of the Trustee hereunder and the Company’s obligations in connection therewith, including Section 7.7 hereof and (iv) this Article VIII. Subject to compliance with this Article VIII, the Company may exercise its option under this paragraph (b) notwithstanding the prior exercise of its option under paragraph (c) hereof.

(c)Upon the Company’s exercise under paragraph (a) hereof of the option applicable to this paragraph (c), each of Vertis Holdings, the Company and the Guarantors shall, subject to the satisfaction of the conditions set forth in Section 8.3 hereof, be released from its obligations under the covenants contained in Sections 4.8 through 4.15, Sections 4.18 and 4.19 and Article V hereof with respect to the outstanding Notes on and after the date the conditions set forth below are satisfied (hereinafter, “Covenant Defeasance”), and the Notes shall thereafter be deemed not “outstanding” for the purposes of any direction, waiver, consent or declaration or act of Holders (and the consequences of any thereof) in connection with such covenants, but shall continue to be deemed “outstanding” for all other purposes hereunder (it being understood that such Notes shall not be deemed outstanding for accounting purposes) and Holders of the Notes and any amounts deposited under Section 8.3 hereof shall cease to be subject to any obligations to, or the rights of, any holder of Senior Debt under Article X,

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Article XII or otherwise. For this purpose, such Covenant Defeasance means that, with respect to the outstanding Notes, the Company and its Subsidiaries may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such covenant, whether directly or indirectly, by reason of any reference elsewhere herein to any such covenant or by reason of any reference in any such covenant to any other provision herein or in any other document and such omission to comply shall not constitute a Default or an Event or Default under Section 6.1(c) hereof, but, except as specified above, the remainder of this Indenture and such Notes shall be unaffected thereby. In addition, upon the Company’s exercise under paragraph (a) hereof of the option applicable to this paragraph (c), subject to the satisfaction of the conditions set forth in Section 8.3 hereof, Sections 6.1(c) and 6.1(e) shall not constitute Events of Default.

SECTION 8.3Conditions to Legal Defeasance or Covenant Defeasance.

The following shall be the conditions to the application of either Section 8.2(b) or 8.2(c) hereof to the outstanding Notes:

In order to exercise either Legal Defeasance or Covenant Defeasance:

(a)  the Company must irrevocably deposit with the Trustee, in trust, for the benefit of the Holders, U.S. Legal Tender or U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms, will provide, not later than one day before the due date of any payment on the Notes, U.S. Legal Tender, or a combination thereof, in such amounts as will be sufficient, in the opinion of a nationally recognized firm of independent public accountants, to pay the principal of, premium, if any, and interest on the Notes on the stated date for payment thereof or on the applicable redemption date, as the case may be, of such principal or installment of principal of or interest on the Notes; provided that the Trustee shall have received an irrevocable written order from the Company instructing the Trustee to apply such U.S. Legal Tender or the proceeds of such U.S. Government Obligations to said payments with respect to the Notes;

(b)  in the case of an election under Section 8.2(b) hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that (A) the Company has received from, or there has been published by, the Internal Revenue Service a ruling or (B) since the date of this Indenture, there has been a change in the applicable federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Legal Defeasance and will be subject to federal

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income tax on the same amounts, in the same manner and at the same times as would have been the case if such Legal Defeasance had not occurred;

(c)  in the case of an election under Section 8.2(c) hereof, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States reasonably acceptable to the Trustee confirming that the Holders of the Notes will not recognize income, gain or loss for federal income tax purposes as a result of such Covenant Defeasance and will be subject to federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such Covenant Defeasance had not occurred;

(d)  no Default or Event of Default or event which with notice or lapse of time or both would become a Default or an Event of Default with respect to the Notes shall have occurred and be continuing on the date of such deposit (other than a Default or Event of Default resulting from the incurrence of Indebtedness all or a portion of the proceeds of which will be used to defease the Notes pursuant to this Article VII concurrently with such incurrence) or insofar as Sections 6.1(f) and 6.1(g) hereof are concerned, at any time in the period ending on the 91st day after the date of such deposit;

(e)  such Legal Defeasance or Covenant Defeasance shall not result in a breach or violation of or constitute a default under this Indenture or any other material agreement or instrument to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound;

(f)  the Company shall have delivered to the Trustee an Officers’ Certificate stating that the deposit was not made by the Company with the intent of preferring the Holders over any other creditors of the Company or with the intent of defeating, hindering, delaying or defrauding any other creditors of the Company or others;

(g)  the Company shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for or relating to the Legal Defeasance or the Covenant Defeasance have been complied with; and

(h)  the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that (i) the trust funds will not be subject to any rights of any holders of Senior Debt, including, without limitation, those arising under this Indenture, and (ii) assuming no intervening bankruptcy or insolvency of the Company between the date of deposit and the 91st day following the deposit and that no Holder is an insider of the Company, after the 91st day following the deposit, the trust funds will not be subject to the effect of any applicable Bankruptcy Law.

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Notwithstanding the foregoing, the Opinion of Counsel required by clause (b) above of this Section 8.3 need not be delivered if all Notes not theretofore delivered to the Trustee for cancellation (i) have become due and payable, (ii) will become due and payable on the Maturity Date within one year or (iii) are to be called for redemption within one year under arrangements satisfactory to the Trustee for the giving of notice of redemption by the Trustee in the name, and at the expense, of the Company.

SECTION 8.4Application of Trust Money.

The Trustee or Paying Agent shall hold in trust U.S. Legal Tender or U.S. Government Obligations deposited with it pursuant to this Article VIII, and shall apply the deposited U.S. Legal Tender and the money from U.S. Government Obligations in accordance with this Indenture to the payment of principal of and interest on the Notes. The Trustee shall be under no obligation to invest said U.S. Legal Tender or U.S. Government Obligations except as it may agree with the Company.

The Company shall pay and indemnify the Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Legal Tender or U.S. Government Obligations deposited pursuant to Section 8.3 hereof or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the outstanding Notes.

Anything in this Article VIII to the contrary notwithstanding, the Trustee shall deliver or pay to the Company from time to time upon the Company’s request any U.S. Legal Tender or U.S. Government Obligations held by it as provided in Section 8.3 hereof which, in the opinion of a nationally recognized firm of independent public accountants expressed in a written certification thereof delivered to the Trustee, are in excess of the amount thereof that would then be required to be deposited to effect an equivalent Legal Defeasance or Covenant Defeasance.

SECTION 8.5Repayment to the Company.

Subject to this Article VIII, the Trustee and the Paying Agent shall promptly pay to the Company upon request any excess U.S. Legal Tender or U.S. Government Obligations held by them at any time and thereupon shall be relieved from all liability with respect to such money. The Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal or interest that remains unclaimed for two years; provided that the Trustee or such Paying Agent, before being required to make any payment, may at the expense of the Company cause to be published once in a newspaper of general circulation in the City of New York or mail to each Holder entitled to such money notice that such money remains unclaimed and that after a date specified therein which shall be at least 30 days from the date of such publication or mailing any

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unclaimed balance of such money then remaining will be repaid to the Company. After payment to the Company, Holders entitled to such money must look to the Company for payment as general creditors unless an applicable law designates another Person.

SECTION 8.6Reinstatement.

If the Trustee or Paying Agent is unable to apply any U.S. Legal Tender or U.S. Government Obligations in accordance with this Article VIII by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company’s obligations under this Indenture and the Notes shall be revived and reinstated as though no deposit had occurred pursuant to this Article VIII until such time as the Trustee or Paying Agent is permitted to apply all such U.S. Legal Tender or U.S. Government Obligations in accordance with this Article VIII; provided that if the Company has made any payment of interest on or principal of any Notes because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Notes to receive such payment from the U.S. Legal Tender or U.S. Government Obligations held by the Trustee or Paying Agent.

ARTICLE IX

AMENDMENTS, SUPPLEMENTS AND WAIVERS

SECTION 9.1Without Consent of Holders.

Without the consent of any Holders, the Company and the Guarantors, when authorized by resolutions of their respective Boards of Directors (copies of which shall be delivered to the Trustee), and the Trustee may amend or supplement this Indenture, the Notes or the Guarantees without notice to any Holder for any of the following purposes:

(a)  to cure any ambiguity, defect or inconsistency herein;

(b)  to add to the covenants of the Company for the benefit of the Holders, or surrender any right or power herein conferred upon the Company;

(c)  to provide for collateral for the Notes;

(d)  to provide for uncertificated Notes in addition to or in place of certificated Notes;

(e)  to effect or maintain the qualification of this Indenture under the TIA;

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(f)  to evidence the succession in accordance with Article V hereof of another Person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Notes; or

(g)  to make any other change that does not adversely affect the rights of any Holder in any material respect; provided that in making such change, the Trustee may rely upon an Opinion of Counsel stating that such change does not adversely affect the rights of any Holder in any material respect.

SECTION 9.2With Consent of Holders.

Subject to Section 6.7 and the provisions of this Section 9.2, the Company and the Guarantors, when authorized by resolutions of their respective Boards of Directors (copies of which shall be delivered to the Trustee), and the Trustee may amend or supplement this Indenture with the written consent of the Holders of at least a majority in aggregate principal amount of the Notes then outstanding. Subject to Section 6.7 and the provisions of this Section 9.2, the Holders of, in the aggregate, at least a majority in principal amount of the then outstanding Notes affected may waive compliance by the Company with any provision of this Indenture without notice to any other Securityholder. However, without the consent of each Securityholder affected, an amendment, supplement or waiver, including a waiver pursuant to Section 6.4 may not:

(a)reduce the percentage of principal amount of Notes whose Holders must consent to an amendment, supplement or waiver of any provision of this Indenture or the Notes;

(b)reduce the rate of or change or have the effect of changing the time for payment of interest, including defaulted interest, on any Note;

(c)reduce the principal of or change or have the effect of changing the fixed maturity of any Notes, or change the date on which any Notes may be subject to redemption or reduce the redemption price therefor;

(d)make the principal of, or any interest on, any Note payable in money other than that stated in the Note;

(e)make any change in provisions of this Indenture protecting the right of each Holder to receive payment of principal of and interest on such Note on or after the due date thereof or to bring suit to enforce such payment, or permitting Holders of a majority in principal amount of Notes to waive Defaults or Events of Default;

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(f)amend, change or modify any provisions of this Indenture or the related definitions affecting the Company’s obligation to make a Change of Control Offer in a manner which adversely affects the Holders;

(g)after the Company’s obligation to purchase Notes arises thereunder, amend, change or modify in any material respect the obligation of the Company to make and consummate a Net Proceeds Offer with respect to any Asset Sale that has been consummated or, after such Asset Sale has been consummated, modify any of the provisions or definitions with respect thereto;

(h)modify or change any provision of this Indenture or the related definitions affecting the subordination or ranking of the Notes or any Guarantee in a manner which adversely affects the Holders; or

(i)release any Guarantor that is a Significant Subsidiary from any of its obligations under its Guarantee or this Indenture otherwise than in accordance with the terms of this Indenture.

It shall not be necessary for the consent of the Holders under this Section 9.2 to approve the particular form of any proposed amendment, supplement or waiver, but it shall be sufficient if such consent approves the substance thereof.

Notwithstanding the foregoing, no amendment shall modify any provision of Article X or Article XII of this Indenture without the consent of each holder of any then outstanding Designated Senior Debt.

After an amendment, supplement or waiver under this Section 9.2 becomes effective, the Company shall mail to the Holders affected thereby a notice briefly describing the amendment, supplement or waiver. Any failure of the Company to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.

In connection with any amendment, supplement or waiver under this Article IX, the Company may, but shall not be obligated to, offer to any Holder who consents to such amendment, supplement or waiver, or to all Holders, consideration for such Holder’s consent to such amendment, supplement or waiver.

SECTION 9.3Compliance with Trust Indenture Act.

Every amendment to or supplement of this Indenture, the Notes or the Guarantees shall be set forth in a supplemental indenture that complies with the TIA as then in effect.

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SECTION 9.4Revocation and Effect of Consents.

Until an amendment, supplement or waiver becomes effective, a consent to it by a Holder is a continuing consent by the Holder and every subsequent Holder of that Note or portion of that Note that evidences the same debt as the consenting Holder’s Note, even if notation of the consent is not made on any Note. However, any such Holder or subsequent Holder may revoke the consent as to his Note or portion of a Note. Such revocation shall be effective only if the Trustee receives the notice of revocation before the date the amendment, supplement or waiver becomes effective. Notwithstanding the above, nothing in this paragraph shall impair the right of any Securityholder under § 316(b) of the TIA.

The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Holders entitled to consent to any amendment, supplement or waiver which record date shall be at least 10 days prior to the first solicitation of such consent. If a record date is fixed, then notwithstanding the second and third sentences of the immediately preceding paragraph, those Persons who were Holders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to consent to such amendment, supplement or waiver or to revoke any consent previously given, whether or not such Persons continue to be Holders after such record date. Such consent shall be effective only for actions taken within 90 days after such record date.

After an amendment, supplement or waiver becomes effective, it shall bind every Securityholder unless it makes a change described in any of clauses (a) through (l) of Section 9.2. In that case the amendment, supplement or waiver shall bind each Holder of a Note who has consented to it.

SECTION 9.5Notation on or Exchange of Notes.

If an amendment, supplement or waiver changes the terms of a Note, the Trustee may (in accordance with the specific direction of the Company) request the Holder of the Note to deliver it to the Trustee. The Trustee may (in accordance with the specific direction of the Company) place an appropriate notation on the Note about the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Note shall issue and the Trustee shall authenticate a new Note (together with related Guarantees of the Guarantors) that reflects the changed terms. Failure to make the appropriate notation or issue a new Note shall not affect the validity and effect of such amendment, supplement or waiver.

SECTION 9.6Trustee To Sign Amendments, Etc.

The Trustee shall sign any amendment, supplement or waiver authorized pursuant to this Article IX if the amendment, supplement or waiver does not adversely affect

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the rights, duties or immunities of the Trustee. If it does, the Trustee may, but need not, sign it. In signing any amendment, supplement or waiver, the Trustee shall be entitled to receive, if requested, an indemnity reasonably satisfactory to it and to receive, and shall be fully protected in relying upon, an Officers’ Certificate and an Opinion of Counsel stating that the execution of any amendment, supplement or waiver authorized pursuant to this Article IX is authorized or permitted by this Indenture. Neither the Company nor any Guarantor may sign an amendment until its Board of Directors approves it.

ARTICLE X

SUBORDINATION

SECTION 10.1Notes Subordinated to Senior Debt.

Anything herein to the contrary notwithstanding, the Company, for itself and its successors, and each Holder, by his acceptance of Notes, agrees that the payment of the principal of and interest on the Notes is subordinated, to the extent and in the manner provided in this Article X, to the prior payment in full in cash or Cash Equivalents, or such payment duly provided for to the satisfaction of the holders of Senior Debt, of all Senior Debt Obligations (including the Senior Debt Obligations with respect to the Senior Credit Facility, whether outstanding on the Issue Date or thereafter incurred).

This Article X shall constitute a continuing offer to all Persons who become holders of, or continue to hold, Senior Debt, and such provisions are made for the benefit of the holders of Senior Debt and such holders are made obligees hereunder and any one or more of them may enforce such provisions.

SECTION 10.2Suspension of Payment When Senior Debt Is in Default.

(a)If any default occurs and is continuing in the payment when due, whether at maturity, upon any redemption, by declaration or otherwise, of any principal of, interest on, unpaid drawings for letters of credit issued in respect of, or regularly accruing fees with respect to, any Senior Debt (including, without limitation, guarantees of the foregoing items which constitute Senior Debt) (a “Payment Default”), then no payment or distribution of any kind or character shall be made by or on behalf of the Company or any other Person on its or their behalf with respect to any Obligations or to acquire any of the Notes for cash or property or otherwise until such Payment Default (and all other Payment Defaults) shall have been cured or waived in accordance with the terms of the documentation governing the respective Senior Debt or ceased to exist or all Senior Debt with respect to which any

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Payment Default has occurred and is continuing shall have been discharged or paid in full in cash or Cash Equivalents.

(b)If any event of default (other than a Payment Default) occurs and is continuing with respect to any Designated Senior Debt (as such event of default is defined in the instrument creating or evidencing such Designated Senior Debt) permitting the holders of such Designated Senior Debt then outstanding to accelerate the maturity thereof (a “Non-payment Default”), and if the Representative for the respective issue of Designated Senior Debt gives notice of the event of default to the Trustee stating that such notice is a payment blockage notice (a “Payment Blockage Notice”), then during the period (the “Payment Blockage Period”) beginning upon the delivery of such Payment Blockage Notice and ending on the earlier of the 180th day after such delivery and the date on which (x) all events of default with respect to all Designated Senior Debt have been cured or waived or cease to exist, (y) all Designated Senior Debt with respect to which any such event of default has occurred and is continuing is discharged or paid in full in cash or Cash Equivalents, or (z) the Trustee receives notice thereof from the Representative for the respective issue of Designated Senior Debt terminating the Payment Blockage Period, neither the Company nor any other Person on its behalf shall (i) make any payment of any kind or character with respect to any Obligations or (ii) acquire any of the Notes for cash or property or otherwise. Notwithstanding anything herein to the contrary, (x) in no event will a Payment Blockage Period extend beyond 180 days from the date the applicable Payment Blockage Notice is received by the Trustee and (y) only one such Payment Blockage Period may be commenced within any 360 consecutive days. For all purposes of this Section 10.2(b), no event of default which existed or was continuing on the date of the commencement of any Payment Blockage Period with respect to the Designated Senior Debt shall be, or be made, the basis for the commencement of a second Payment Blockage Period by the Representative of such Designated Senior Debt whether or not within a period of 360 consecutive days, unless such event of default shall have been cured or waived for a period of not less than 90 consecutive days (it being acknowledged that any subsequent action, or any breach of any financial covenants for a period ending after the date of commencement of such Payment Blockage Period that, in either case, would give rise to an event of default pursuant to any provisions under which an event of default previously existed or was continuing shall constitute a new event of default for this purpose).

(c)In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee, any Holder or any Paying Agent when such payment is prohibited by the foregoing provisions of this Section 10.2, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Debt (pro rata to such holders on the basis of the respective amount of Senior Debt held by such holders) or their respective Representatives, as their respective interests may appear. The Trustee and any Paying Agent shall be entitled to rely on information regarding amounts then due and owing on the Senior Debt, if any, received from the holders of Senior Debt (or their Representatives)

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or, if such information is not received from such holders or their Representatives, from the Company and only amounts included in the information provided to the Trustee and any Paying Agent shall be paid to the holders of Senior Debt.

Nothing contained in this Article X shall limit the right of the Trustee or the Holders to take any action to accelerate the maturity of the Notes and all other Obligations pursuant to Article VI or to pursue any rights or remedies hereunder; provided that all Senior Debt thereafter due or declared to be due shall first be paid in full in cash or Cash Equivalents before the Holders are entitled to receive any payment of any kind or character with respect to Obligations.

SECTION 10.3Obligations Subordinated to Prior Payment of All Senior Debt on Dissolution, Liquidation or Reorganization of Company.

(a)Upon any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to creditors upon any total or partial liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors or marshaling of assets and liabilities of the Company or in a bankruptcy, reorganization, insolvency, receivership or other similar proceeding relating to the Company or its assets, whether voluntary or involuntary, all Senior Debt Obligations due or to become due shall first be paid in full in cash or Cash Equivalents, or such payment duly provided for to the satisfaction of the holders of Senior Debt, before any payment or distribution of any kind or character is made on account of any Obligations or for the acquisition of any of the Notes for cash or property or otherwise. Upon any such dissolution, winding-up, liquidation, reorganization, receivership or similar proceeding, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, to which the Holders or the Trustee would be entitled, except for the provisions hereof, shall be paid by the Company or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders, the Trustee or any Paying Agent if received by them, directly to the holders of Senior Debt (pro rata to such holders on the basis of the respective amounts of Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Senior Debt remaining unpaid until all such Senior Debt has been paid in full in cash or Cash Equivalents after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of Senior Debt.

(b)To the extent any payment of Senior Debt (whether by or on behalf of the Company, as proceeds of security or enforcement of any right of setoff or otherwise) is declared to be fraudulent or preferential, set aside or required to be paid to any receiver,

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trustee in bankruptcy, liquidating trustee, agent or other similar Person under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then, if such payment is recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person, the Senior Debt or part thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding as if such payment had not occurred.

It is further agreed that any diminution (whether pursuant to court decree or otherwise, including without limitation for any of the reasons described in the preceding sentence) of the Company’s obligation to make any distribution or payment pursuant to any Senior Debt, except to the extent such diminution occurs by reason of the repayment (which has not been disgorged or returned) of such Senior Debt in cash or Cash Equivalents, shall have no force or effect for purposes of the subordination provisions contained in this Article X, with any turnover of payments as otherwise calculated pursuant to this Article X to be made as if no such diminution had occurred.

(c)In the event that, notwithstanding the foregoing, any payment or distribution of assets of the Company of any kind or character, whether in cash, property or securities, shall be received by any Holder when such payment or distribution is prohibited by this Section 10.3, such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Senior Debt (pro rata to such holders on the basis of the respective amount of Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Senior Debt remaining unpaid until all such Senior Debt has been paid in full in cash or Cash Equivalents, after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of such Senior Debt.

(d)The consolidation of the Company with, or the merger of the Company with or into, another corporation, partnership, trust or limited liability company or the liquidation or dissolution of the Company following the conveyance or transfer of all or substantially all of its assets, to another corporation, partnership, trust or limited liability company upon the terms and conditions provided in Article V hereof and as long as permitted under the terms of the Senior Debt shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, assume the Company’s obligations hereunder in accordance with Article V hereof.

SECTION 10.4Payments May Be Paid Prior to Dissolution.

Nothing contained in this Article X or elsewhere in this Indenture shall prevent (i) the Company, except under the conditions described in Sections 10.2 and 10.3, from making payments at any time for the purpose of making payments of principal of and interest

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on the Obligations, or from depositing with the Trustee or any Paying Agent, any monies for such payments, or (ii) in the absence of actual knowledge by the Trustee or any Paying Agent that a given payment would be prohibited by Section 10.2 or 10.3, the application by the Trustee and any Paying Agent of any monies deposited with them for the purpose of making such payments of principal of, and interest on, the Obligations to the Holders entitled thereto unless at least one Business Day prior to the date upon which such payment would otherwise become due and payable Trustee and any Paying Agent shall have actually received the written notice provided for in the first sentence of Section 10.2(b) (provided that, notwithstanding the foregoing, the Holders receiving any payments made in contravention of Section 10.2 and/or 10.3 (and the respective such payments) shall otherwise be subject to the provisions of Section 10.2 and Section 10.3). The Company shall give prompt written notice to the Trustee and any Paying Agent of any dissolution, winding-up, liquidation or reorganization of the Company, although any delay or failure to give any such notice shall have no effect on the subordination provisions contained herein.

SECTION 10.5Holders To Be Subrogated to Rights of Holders of Senior Debt.

Subject to the payment in full in cash or Cash Equivalents of all Senior Debt, the Holders shall be subrogated to the rights of the holders of Senior Debt to receive payments or distributions of cash, property or securities of the Company applicable to the Senior Debt until the Obligations shall be paid in full; and, for the purposes of such subrogation, no such payments or distributions to the holders of the Senior Debt by or on behalf of the Company, or by or on behalf of the Holders by virtue of this Article X, which otherwise would have been made to the Holders shall, as between the Company and the Holders, be deemed to be a payment by the Company to or on account of the Senior Debt, it being understood that the provisions of this Article X are and are intended solely for the purpose of defining the relative rights of the Holders, on the one hand, and the holders of Senior Debt, on the other hand.

SECTION 10.6Obligations of the Company Unconditional.

Nothing contained in this Article X or elsewhere in this Indenture is intended to or shall impair, as among the Company, its creditors other than the holders of Senior Debt, and the Holders, the obligation of the Company, which is absolute and unconditional, to pay to the Holders the principal of and any interest on the Obligations as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders and creditors of the Company other than the holders of the Senior Debt, nor shall anything herein or therein prevent any Holder or the Trustee on its behalf from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article X, of the holders of Senior Debt

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in respect of cash, property or securities of the Company received upon the exercise of any such remedy.

SECTION 10.7Reliance on Judicial Order or Certificate of Liquidating Agent.

Upon any payment or distribution of assets of the Company referred to in this Article X, the Trustee, subject to the provisions of Article VII hereof, and the Holders shall be entitled to rely upon any order or decree made by any court of competent jurisdiction in which any insolvency, bankruptcy, receivership, dissolution, winding-up, liquidation, reorganization or similar case or proceeding is pending, or upon a certificate of the receiver, trustee in bankruptcy, liquidating trustee, assignee for the benefit of creditors, agent or other person making such payment or distribution, delivered to the Trustee or the Holders, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Senior Debt and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article X.

SECTION 10.8Subordination Rights Not Impaired by Acts or Omissions of the Company or Holders of Senior Debt.

No right of any present or future holders of any Senior Debt to enforce subordination as provided herein shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of the Company or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by the Company with the terms of this Indenture, regardless of any knowledge thereof which any such holder may have or otherwise be charged with.

Without in any way limiting the generality of the foregoing paragraph, the holders of Senior Debt may, at any time and from time to time, without the consent of or notice to the Trustee, without incurring responsibility to the Trustee or the Holders and without impairing or releasing the subordination provided in this Article X or the obligations hereunder of the Holders to the holders of the Senior Debt, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Senior Debt, or otherwise amend or supplement in any manner Senior Debt, or any instrument evidencing the same or any agreement under which Senior Debt is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Senior Debt; (iii) release any Person liable in any manner for the payment or collection of Senior Debt; and (iv) exercise or refrain from exercising any rights against the Company and any other Person.

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SECTION 10.9Holders Authorize Trustee To Effectuate Subordination of Obligations.

Each Holder authorizes and expressly directs the Trustee on its behalf to take such action as may be necessary or appropriate to effectuate, as between the holders of Senior Debt and the Holders, the subordination provided in this Article X, and appoints the Trustee its attorney-in-fact for such purposes, including, in the event of any dissolution, winding-up, liquidation or reorganization of the Company (whether in bankruptcy, insolvency, receivership, reorganization or similar proceedings or upon an assignment for the benefit of credits or otherwise) tending towards liquidation of the business and assets of the Company, the filing of a claim for the unpaid balance of its Obligations and accrued interest in the form required in those proceedings.

If the Trustee does not file a proper claim or proof of debt in the form required in such proceeding prior to 30 days before the expiration of the time to file such claim or claims, then the holders of the Senior Debt or their Representative are or is hereby authorized to have the right to file and are or is hereby authorized to file an appropriate claim for and on behalf of the Holders. Nothing herein contained shall be deemed to authorize the Trustee or the holders of Senior Debt or their Representative to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Holder thereof, or to authorize the Trustee or the holders of Senior Debt or their Representative to vote in respect of the claim of any Holder in any such proceeding.

SECTION 10.10Amendments or Modifications to Article X.

Notwithstanding anything to the contrary contained in this Indenture, no amendment or modification to any provision of this Article X or the related definitions used herein (other than to cure any ambiguity, defect, mistake or inconsistency herein, so long as such amendment or modification does not adversely affect the rights of the holders of any Senior Debt then outstanding) shall be permitted without the consent of the “Required Lenders,” as such term is used in the Senior Credit Facility.

SECTION 10.11Article X Not to Prevent Events of Default.

The failure to make a payment on account of principal of or interest on the securities by reason of any provision of this Article X shall not be construed as preventing the occurrence of a Default or an Event of Default under Section 6.1.

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SECTION 10.12No Fiduciary Duty of Trustee to Holders of Senior Debt.

The Trustee shall not be deemed to owe any fiduciary duty to the holders of Senior Debt, and shall not be liable to any such holders if it shall in good faith mistakenly pay over or distribute to the Holders of Notes or the Company or any other Person, cash, property or securities to which any holders of Senior Debt shall be entitled by virtue of this Article X or otherwise. Nothing in this Section 10.12 shall affect the obligation of any other such Person to hold such payment for the benefit of, and to pay such payment over to, the holders of Senior Debt or their Representative.

ARTICLE XI

GUARANTEE

SECTION 11.1Unconditional Guarantee.

Each Guarantor hereby unconditionally, jointly and severally, guarantees (each such guarantee to be referred to herein as a “Guarantee”), subject to Article XII, to each of the Holders and to the Trustee and their respective successors and assigns that (i) the principal of and interest on the Notes will be promptly paid in full when due, subject to any applicable grace period, whether at maturity, by acceleration or otherwise, and interest on the overdue principal, if any, and interest on any interest, if any, to the extent lawful, of the Notes and all other obligations of the Company to the Holders or the Trustee hereunder or thereunder will be promptly paid in full or performed, all in accordance with the terms hereof and thereof; and (ii) in case of any extension of time of payment or renewal of any of the Notes or of any such other obligations, the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, subject to any applicable grace period, whether at stated maturity, by acceleration or otherwise, subject, however, in the case of clauses (i) and (ii) above, to the limitations set forth in Section 11.5. Each Guarantor hereby agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of the Notes or this Indenture, the absence of any action to enforce the same, any waiver or consent by any of the Holders with respect to any provisions hereof or thereof, the recovery of any judgment against the Company, any action to enforce the same or any other circumstance which might otherwise constitute a legal or equitable discharge or defense of a Guarantor. Each Guarantor hereby waives diligence, presentment, demand of payment, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest, notice and all demands whatsoever and covenants that this Guarantee will not be discharged except by complete performance of the obligations contained in the Notes, this Indenture and in this Guarantee. If any Holder or the Trustee is required by any court or otherwise to return to the Company, any

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Guarantor, or any custodian, trustee, liquidator or other similar official acting in relation to the Company or any Guarantor, any amount paid by the Company or any Guarantor to the Trustee or such Holder, this Guarantee, to the extent theretofore discharged, shall be reinstated in full force and effect. Each Guarantor further agrees that, as between each Guarantor, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be accelerated as provided in Article VI for the purposes of this Guarantee, and (y) in the event of any acceleration of such obligations as provided in Article VI, such obligations (whether or not due and payable) shall forthwith become due and payable by each Guarantor for the purpose of this Guarantee.

SECTION 11.2Subordination of Guarantee.

The obligations of each Guarantor to the Holders and to the Trustee pursuant to the Guarantee of such Guarantor and this Indenture are expressly subordinate and subject in right of payment to the prior payment in full of all Guarantor Senior Debt of such Guarantor, to the extent and in the manner provided in Article XII.

SECTION 11.3Severability.

In case any provision of this Guarantee shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

SECTION 11.4Release of a Guarantor.

Upon (i) the release by the lenders under the Senior Credit Facility and related documents of all guarantees of a Guarantor and all Liens on the property and assets of such Guarantor relating to such Indebtedness, (ii) the unconditional release of a Guarantor from its liability in respect of the Indebtedness in connection with which such Guarantee was executed and delivered in accordance with the first paragraph of Section 4.17, (iii) any sale or other disposition (by merger or otherwise) to any Person which is not a Restricted Subsidiary of the Company of all of the Company’s Capital Stock in, or all or substantially all of the assets of, a Guarantor; provided that (a) such sale or disposition of such Capital Stock or assets is otherwise in compliance with the terms of this Indenture and (b) such assumption, guarantee or other liability of such Guarantor has been released by the holders of the other Indebtedness of the Company so guaranteed, (iv) the Legal Defeasance of the Notes as described under Section 8.2, or (v) a Guarantor being designated as an Unrestricted Subsidiary as described under the definition of “Unrestricted Subsidiary,” such Guarantor shall be deemed released from all obligations under this Article XI without any further action required on the part of the Trustee or any Holder; provided that any such termination shall occur only to the extent that all obligations of such Guarantor under all of its guarantees of, and under all of its pledges of

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assets or other security interests which secure, such Indebtedness of the Company shall also terminate upon such release, sale or transfer.

The Trustee shall promptly deliver an appropriate instrument evidencing such release upon receipt of a request by the Company accompanied by an Officers’ Certificate certifying as to the compliance with this Section 11.4. Any Guarantor not so released remains liable for the full amount of principal of and interest on the Notes as provided in this Article XI.

SECTION 11.5Limitation of Guarantor’s Liability.

Each Guarantor and by its acceptance hereof each of the Holders hereby confirm that it is the intention of all such parties that the guarantee by such Guarantor pursuant to its Guarantee not constitute a fraudulent transfer or conveyance for purposes of any Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the Uniform Fraudulent Transfer Act or any similar Federal or state law. To effectuate the foregoing intention, the Holders and such Guarantor hereby irrevocably agree that the obligations of such Guarantor under the Guarantee shall be limited to the maximum amount as will, after giving effect to all other contingent and fixed liabilities of such Guarantor (including, but not limited to, the Guarantor Senior Debt of such Guarantor) and after giving effect to any collections from or payments made by or on behalf of any other Guarantor in respect of the obligations of such other Guarantor under its Guarantee or pursuant to Section 11.7, result in the obligations of such Guarantor under the Guarantee not constituting such fraudulent transfer or conveyance.

SECTION 11.6Consolidation, Merger and Sale of Assets.

Upon any consolidation, merger, sale or conveyance of a Guarantor as permitted by Article V, the Guarantee of such Guarantor set forth in this Article XI, and the due and punctual performance and observance of all of the covenants and conditions of this Indenture to be performed by such Guarantor, shall be expressly assumed (in the event that the Company, the Guarantor or another Guarantor is not the surviving corporation in the merger), by an agreement or supplemental indenture reasonably satisfactory in form to the Trustee, executed and delivered to the Trustee, by the corporation formed by such consolidation, or into which the Guarantor shall have merged, or by the corporation that shall have acquired such property. In the case of any such consolidation, merger, sale or conveyance and upon the assumption by the successor corporation, by an agreement or supplemental indenture executed and delivered to the Trustee and satisfactory in form and substance to the Trustee of the due and punctual performance of all of the covenants and conditions of this Indenture to be performed by the Guarantor, such successor corporation shall succeed to and be substituted for the Guarantor with the same effect as if it had been named herein as a Guarantor.

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SECTION 11.7Contribution.

In order to provide for just and equitable contribution among the Guarantors, the Guarantors agree, inter se, that in the event any payment or distribution is made by any Guarantor (a “Funding Guarantor”) under its Guarantee, such Funding Guarantor shall be entitled to a contribution from all other Guarantors in a pro rata amount based on the Adjusted Net Assets of each Guarantor (including the Funding Guarantor) for all payments, damages and expenses incurred by that Funding Guarantor in discharging the Company’s obligations with respect to the Obligations. “Adjusted Net Assets” of such Guarantor at any date shall mean the lesser of (x) the amount by which the fair value of the property of such Guarantor exceeds the total amount of liabilities, including, without limitation, contingent liabilities (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date (other than liabilities of such Guarantor under Subordinated Obligation)), but excluding liabilities under the Guarantee, of such Guarantor at such date and (y) the amount by which the present fair salable value of the assets of such Guarantor at such date exceeds the amount that will be required to pay the probable liabilities of such Guarantor on its debts including, without limitation, Guarantor Senior Debt (after giving effect to all other fixed and contingent liabilities incurred or assumed on such date and after giving effect to any collection from any Subsidiary of such Guarantor in respect of the obligations of such Subsidiary under the Guarantee), excluding debt in respect of the Guarantee of such Guarantor, as they become absolute and matured.

SECTION 11.8Waiver of Subrogation.

Each Guarantor hereby irrevocably waives any claim or other rights which it may now or hereafter acquire against the Company that arise from the existence, payment, performance or enforcement of such Guarantor’s obligations under its Guarantee and this Indenture, including, without limitation, any right of subrogation, reimbursement, exoneration, indemnification, and any right to participate in any claim or remedy of any Holder against the Company, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law, including, without limitation, the right to take or receive from the Company, directly or indirectly, in cash or other property or by set-off or in any other manner, payment or security on account of such claim or other rights. If any amount shall be paid to any Guarantor in violation of the preceding sentence and the Notes shall not have been paid in full, such amount shall be deemed to have been paid to such Guarantor for the benefit of, and held in trust for the benefit of, the Holders, and shall, subject to the provisions of Article X, Section 1 1.2 and Article XII, forthwith be paid to the Trustee for the benefit of such Holders to be credited and applied upon the Notes, whether matured or unmatured, in accordance with the terms of this Indenture. Each Guarantor acknowledges that it will receive direct and indirect benefits from the financing arrangements contemplated by

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this Indenture and that the waiver set forth in this Section 11.8 is knowingly made in contemplation of such benefits.

SECTION 11.9Evidence of Guarantee.

To evidence their guarantees to the Holders set forth in this Article XI, each of the Guarantors hereby agrees to execute the notation of Guarantee in substantially the form included in Exhibit E. Each such notation of Guarantee shall be signed on behalf of each Guarantor by an Officer or an assistant Secretary.

SECTION 11.10Waiver of Stay, Extension or Usury Laws.

Each Guarantor covenants that it will not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law or any usury law or other law that would prohibit or forgive such Guarantor from performing its Guarantee as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this Indenture; and each Guarantor hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

ARTICLE XII

SUBORDINATION OF GUARANTEE OBLIGATIONS

SECTION 12.1Guarantee Obligations Subordinated to Guarantor Senior Debt.

Anything herein to the contrary notwithstanding, each of the Guarantors, for itself and its successors, and each Holder by his acceptance of Notes agrees that the payment of all Guarantee Obligations of such Guarantor are subordinated, to the extent and in the manner provided in this Article XII, to the prior payment in full in cash or Cash Equivalents, or such payment duly provided for to the satisfaction of the holders of Guarantor Senior Debt, of all Guarantor Senior Debt Obligations of such Guarantor (including Guarantor Senior Debt Obligations with respect to the Senior Credit Facility, whether outstanding on the Issue Date or thereafter incurred).

This Article XII shall constitute a continuing offer to all Persons who become holders of, or continue to hold, Guarantor Senior Debt, and such provisions are made for the

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benefit of the holders of Guarantor Senior Debt and such holders are made obligees hereunder and any one or more of them may enforce such provisions.

SECTION 12.2Suspension of Guarantee Obligations When Guarantor Senior Debt Is in Default.

(a)If any default occurs and is continuing in the payment when due, whether at maturity, upon any redemption, by declaration or otherwise, of any principal of, interest on, unpaid drawings for letters of credit issued in respect of, or regularly accruing fees with respect to, any Guarantor Senior Debt (including, without limitation, guarantees of the foregoing items which constitute Guarantor Senior Debt), then no payment or distribution of any kind or character shall be made by or on behalf of such Guarantor or any other Person on its or their behalf with respect to any Guarantee Obligations or to acquire any of the Notes for cash or property or otherwise until such Payment Default (and all other Payment Defaults) shall have been cured or waived in accordance with the terms of the documentation governing the respective Guarantor Senior Debt or ceased to exist or all Guarantor Senior Debt with respect to which any Payment Default has occurred and is continuing shall have been discharged or paid in full in cash or Cash Equivalents.

(b)During any Payment Blockage Period (as determined in accordance with Section 10.2(b), including the limitations set forth therein), neither any Guarantor nor any other Person on any Guarantor’s behalf shall (i) make any payment of any kind or character with respect to any Guarantee Obligations or (ii) acquire any of the Notes for cash or property or otherwise.

(c)In the event that, notwithstanding the foregoing, any payment shall be received by the Trustee, any Paying Agent or any Holder when such payment is prohibited by the foregoing provisions of this Section 12.2, such payment shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Guarantor Senior Debt (pro rata to such holders on the basis of the respective amount of Guarantor Senior Debt held by such holders) or their respective Representatives, as their respective interests may appear. The Trustee and any Paying Agent shall be entitled to rely on information regarding amounts then due and owing on the Guarantor Senior Debt, if any, received from the holders of Guarantor Senior Debt (or their Representatives) or, if such information is not received from such holders or their Representatives, from a Guarantor and only amounts included in the information provided to the Trustee and any Paying Agent shall be paid to the holders of Guarantor Senior Debt.

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SECTION 12.3Guarantee Obligations Subordinated to Prior Payment of All Guarantor Senior Debt on Dissolution, Liquidation or Reorganization of Such Guarantor.

(a)Upon any payment or distribution of assets of any Guarantor of any kind or character, whether in cash, property or securities, to creditors upon any total or partial liquidation, dissolution, winding-up, reorganization, assignment for the benefit of creditors or marshaling of assets of such Guarantor or in a bankruptcy, reorganization, insolvency, receivership or other similar proceeding relating to such Guarantor or its property, whether voluntary or involuntary, all Guarantor Senior Debt Obligations due or to become due shall first be paid in full in cash or Cash Equivalents, or such payment duly provided for to the satisfaction of the holders of Guarantor Senior Debt, before the Holders shall be entitled to receive any payment or distribution of any kind or character on account of any Guarantee Obligations or for the acquisition of any of the Notes for cash or property or otherwise. Upon any such dissolution, winding-up, liquidation, reorganization, receivership or similar proceeding, any payment or distribution of assets of such Guarantor of any kind or character, whether in cash, property or securities, to which the Holders or the Trustee would be entitled, except for the provisions hereof, shall be paid by such Guarantor or by any receiver, trustee in bankruptcy, liquidating trustee, agent or other Person making such payment or distribution, or by the Holders or by the Trustee if received by them, directly to the holders of Guarantor Senior Debt (pro rata to such holders on the basis of the respective amounts of Guarantor Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Guarantor Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Guarantor Senior Debt remaining unpaid until all such Guarantor Senior Debt has been paid in full in cash or Cash Equivalents after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of Guarantor Senior Debt.

(b)To the extent any payment of Guarantor Senior Debt (whether by or on behalf of a Guarantor, as proceeds of security or enforcement of any right of setoff or otherwise) is declared to be fraudulent or preferential, set aside or required to be paid to any receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person under any bankruptcy, insolvency, receivership, fraudulent conveyance or similar law, then, if such payment is recovered by, or paid over to, such receiver, trustee in bankruptcy, liquidating trustee, agent or other similar Person, the Guarantor Senior Debt or part thereof originally intended to be satisfied shall be deemed to be reinstated and outstanding as if such payment had not occurred.

It is further agreed that any diminution (whether pursuant to court decree or otherwise, including without limitation for any of the reasons described in the preceding sentence) of any Guarantor’s obligation to make any distribution or payment pursuant to any

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Guarantor Senior Debt, except to the extent such diminution occurs by reason of the repayment (which has not been disgorged or returned) of such Guarantor Senior Debt in cash or Cash Equivalents, shall have no force or effect for purposes of the subordination provisions contained in this Article XII, with any turnover of payments as otherwise calculated pursuant to this Article XII to be made as if no such diminution had occurred.

(c)In the event that, notwithstanding the foregoing, any payment or distribution of assets of any Guarantor of any kind or character, whether in cash, property or securities, shall be received by any Holder when such payment or distribution is prohibited by this Section 12.3, such payment or distribution shall be held in trust for the benefit of, and shall be paid over or delivered to, the holders of Guarantor Senior Debt (pro rata to such holders on the basis of the respective amount of Guarantor Senior Debt held by such holders) or their respective Representatives, or to the trustee or trustees under any indenture pursuant to which any of such Guarantor Senior Debt may have been issued, as their respective interests may appear, for application to the payment of Guarantor Senior Debt remaining unpaid until all such Guarantor Senior Debt has been paid in full in cash or Cash Equivalents, after giving effect to any concurrent payment, distribution or provision therefor to or for the holders of such Guarantor Senior Debt.

(d)The consolidation of any Guarantor with, or the merger of any Guarantor with or into, another corporation or the liquidation or dissolution of a Guarantor following the conveyance or transfer of all or substantially all of its assets, to another corporation upon the terms and conditions provided in Article V and as long as permitted under the terms of the Guarantor Senior Debt shall not be deemed a dissolution, winding-up, liquidation or reorganization for the purposes of this Section if such other corporation shall, as a part of such consolidation, merger, conveyance or transfer, assume the Guarantee of such Guarantor hereunder in accordance with Article V.

SECTION 12.4Payments May Be Paid Prior to Dissolution.

Nothing contained in this Article XI1 or elsewhere in this Indenture shall prevent (i) any Guarantor, except under the conditions described in Sections 12.2 and 12.3, from making payments at any time for the purpose of making payments on Guarantee Obligations, or from depositing with the Trustee or any Paying Agent, any monies for such payments, or (ii) in the absence of actual knowledge by the Trustee or any Paying Agent that a given payment would be prohibited by Section 12.2 or 12.3, the application by the Trustee and any Paying Agent of any monies deposited with them for the purpose of making such payments on Guarantee Obligations to the Holders entitled thereto unless at least one Business Day prior to the date upon which such payment would otherwise become due and payable the Trustee and any Paying Agent shall have actually received the written notice provided for in the first sentence of Section 10.2(b) (provided that, notwithstanding the foregoing, the Holders

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receiving any payments made in contravention of Sections 12.2 and/or 12.3 (and the respective such payments) shall otherwise be subject to the provisions of Section 12.2 and Section 12.3). Each Guarantor shall give prompt written notice to the Trustee and any Paying Agent of any dissolution, winding-up, liquidation or reorganization of such Guarantor, although any delay or failure to give any such notice shall have no effect on the subordination provisions contained herein.

SECTION 12.5Holders To Be Subrogated to Rights of Lenders of Guarantor Senior Debt.

Subject to the payment in full in cash or Cash Equivalents of all Guarantor Senior Debt, the Holders shall be subrogated to the rights of the holders of Guarantor Senior Debt of such Guarantor to receive payments or distributions of cash, property or securities of such Guarantor applicable to such Guarantor Senior Debt until all amounts owing on or in respect of the Guarantee Obligations shall be paid in full; and, for the purposes of such subrogation, no such payments or distributions to the holders of such Guarantor Senior Debt by or on behalf of such Guarantor, or by or on behalf of the Holders by virtue of this Article XII, which otherwise would have been made to the Holders shall, as between such Guarantor and the Holders, be deemed to be a payment by such Guarantor to or on account of such Guarantor Senior Debt, it being understood that the provisions of this Article XII are and are intended solely for the purpose of defining the relative rights of the Holders, on the one hand, and the holders of Guarantor Senior Debt, on the other hand.

SECTION 12.6Guarantee Obligations of the Guarantors Unconditional.

Nothing contained in this Article XII or elsewhere in this Indenture or in the Guarantees is intended to or shall impair, as among the Guarantors, their creditors other than the holders of Guarantor Senior Debt, and the Holders, the obligation of the Guarantors, which is absolute and unconditional, to pay to the Holders all amounts due and payable under the Guarantees as and when the same shall become due and payable in accordance with their terms, or is intended to or shall affect the relative rights of the Holders and creditors of the Guarantors other than the holders of the Guarantor Senior Debt, nor shall anything herein or therein prevent any Holder or the Trustee on its behalf from exercising all remedies otherwise permitted by applicable law upon default under this Indenture, subject to the rights, if any, under this Article XII of the holders of Guarantor Senior Debt in respect of cash, property or securities of the Guarantors received upon the exercise of any such remedy.

SECTION 12.7Reliance on Judicial Order or Certificate of Liquidating Agent.

Upon any payment or distribution of assets of a Guarantor referred to in this Article XII, the Trustee, subject to the provisions of Article VII hereof, and the Holders shall

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be entitled to rely upon any order or decree made by any court of competent jurisdiction in which any insolvency, bankruptcy, receivership, dissolution, winding-up, liquidation, reorganization or similar case or proceeding is pending, or upon a certificate of the trustee in bankruptcy, liquidating trustee, receiver, assignee for the benefit of creditors, agent or other person making such payment or distribution, delivered to the Trustee or the Holders, for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of the Guarantor Senior Debt and other Indebtedness of such Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article XII.

SECTION 12.8Subordination Rights Not Impaired by Acts or Omissions of the Guarantors or Lenders of Guarantor Senior Debt.

No right of any present or future holders of any Guarantor Senior Debt to enforce subordination as provided herein shall at any time in any way be prejudiced or impaired by any act or failure to act on the part of any Guarantor or by any act or failure to act, in good faith, by any such holder, or by any noncompliance by any Guarantor with the terms of this Indenture, regardless of any knowledge thereof which any such holder may have or otherwise be charged with.

Without in any way limiting the generality of the foregoing paragraph, the holders of Guarantor Senior Debt may, at any time and from time to time, without the consent of or notice to the Trustee, without incurring responsibility to the Trustee or the Holders and without impairing or releasing the subordination provided in this Article XII or the obligations hereunder of the Holders to the holders of Guarantor Senior Debt, do any one or more of the following: (i) change the manner, place or terms of payment or extend the time of payment of, or renew or alter, Guarantor Senior Debt, or otherwise amend or supplement in any manner Guarantor Senior Debt, or any instrument evidencing the same or any agreement under which Guarantor Senior Debt is outstanding; (ii) sell, exchange, release or otherwise deal with any property pledged, mortgaged or otherwise securing Guarantor Senior Debt; (iii) release any Person liable in any manner for the payment or collection of Guarantor Senior Debt; and (iv) exercise or refrain from exercising any rights against the Guarantors and any other Person.

SECTION 12.9Holders Authorize Trustee To Effectuate Subordination of Guarantee Obligations.

Each Holder, by its acceptance of the Guarantee Obligations, authorizes and expressly directs the Trustee on its behalf to take such action as may be necessary or appropriate to effectuate, as between the holders of Guarantor Senior Debt and the Holders, the subordination provided in this Article XII, and appoints the Trustee its attorney-in-fact for such purposes, including, in the event of any dissolution, winding-up, liquidation or reorganization of any Guarantor (whether in bankruptcy, insolvency, receivership,

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reorganization or similar proceedings or upon an assignment for the benefit of credits or otherwise) tending towards liquidation of the business and assets of any Guarantor, the filing of a claim for the unpaid balance under its Guarantee Obligations and accrued interest in the form required in those proceedings.

If the Trustee does not file a proper claim or proof of debt in the form required in such proceeding prior to 30 days before the expiration of the time to file such claim or claims, then the holders of the Guarantor Senior Debt or their Representative are or is hereby authorized to have the right to file and are or is hereby authorized to file an appropriate claim for and on behalf of the Holders. Nothing herein contained shall be deemed to authorize the Trustee or the holders of Guarantor Senior Debt or their Representative to authorize or consent to or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Guarantee Obligations or the rights of any Holder, or to authorize the Trustee or the holders of Guarantor Senior Debt or their Representative to vote in respect of the claim of any Holder in any such proceeding.

SECTION 12.10This Article XII Not To Prevent Events of Default.

The failure to make a payment on account of principal of or interest on the Guarantee Obligations by reason of any provision of this Article XII will not be construed as preventing the occurrence of an Event of Default.

SECTION 12.11Amendments or Modifications to Article XII.

Notwithstanding anything to the contrary contained in this Indenture, no amendment or modification to any provision of this Article XII or the related definitions used herein (other than to cure any ambiguity, defect, mistake or inconsistency herein, so long as such amendment or modification does not adversely affect the rights of the holders of any Guarantor Senior Debt then outstanding) shall be permitted without the consent of the “Required Lenders,” as such term is used in the Senior Credit Facility.

SECTION 12.12No Fiduciary Duty of Trustee to Holders of Senior Debt.

The Trustee shall not be deemed to owe any fiduciary duty to the holders of Guarantor Senior Debt, and shall not be liable to any such holders if it shall in good faith mistakenly pay over or distribute to the Holders of Notes or the Company or any other Person, cash, property or securities to which any holders of Guarantor Senior Debt shall be entitled by virtue of this Article XII or otherwise. Nothing in this Section 12.12 shall affect the obligation of any other such Person to hold such payment for the benefit of, and to pay such payment over to, the holders of Guarantor Senior Debt or their Representative.

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ARTICLE XIII

MISCELLANEOUS

SECTION 13.1Trust Indenture Act Controls.

The provisions of TIA §§310 through 317 that impose duties on any Person (including the provisions automatically deemed included unless expressly excluded by this Indenture) are a part of and govern this Indenture, whether or not physically contained herein.

If any provision of this Indenture limits, qualifies or conflicts with the duties imposed by the above paragraph, the imposed duties shall control.

SECTION 13.2Notices.

Any notice or communication shall be sufficiently given if in writing and delivered in Person or mailed by first-class mail or by telecopier, followed by first-class mail, or by overnight service guaranteeing next-day delivery, addressed as follows:

(a)if to the Company or any Guarantor:

c/o Vertis, Inc.
250 W. Pratt Street
18th Floor
Baltimore, MD 21201
Attention: Chief Financial Officer
Telecopier Number: (410) 528-9287

with a copy to:

Sullivan & Cromwell LLP
125 Broad Street
New York, New York 10004
Attention: Robert E. Buckholz, Jr., Esq.
Telecopier Number: (212) 558-3588

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(b)if to the Trustee:

The Bank of New York
101 Barclay Street
New York, New York 10286
Attention: Corporate Trust Administration
Telecopier Number: (212) 815-5704

The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications.

Any notice or communication mailed to a Securityholder, including any notice delivered in connection with TIA § 310(b), TIA § 313(c), TIA § 314(a) and TIA § 315(b), shall be mailed to such Holder, first-class postage prepaid, at his address as it appears on the registration books of the Registrar and shall be sufficiently given to such Holder if so mailed within the time prescribed.

Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. Except for a notice to the Trustee, which is deemed given only when received, if a notice or communication is mailed in the manner provided above, it is duly given, whether or not the addressee receives it.

SECTION 13.3Communications by Holders with Other Holders.

Securityholders may communicate pursuant to TIA § 312(b) with other Securityholders with respect to their rights under this Indenture, the Notes or the Guarantees. The Company, the Guarantors, the Trustee, the Registrar and any other Person shall have the protection of TIA § 312(c).

SECTION 13.4Certificate and Opinion of Counsel as to Conditions Precedent.

Upon any request or application by the Company to the Trustee to take any action under this Indenture, the Company shall furnish to the Trustee at the request of the Trustee (a) an Officers’ Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with (which officer signing such certificate may rely, as to matters of law, on an Opinion of Counsel), (b) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of counsel, all such conditions have been complied with (which counsel, as to factual matters, may rely on an Officers’ Certificate and certificates of public officials) and

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(c) where applicable, a certificate or opinion by an independent certified public accountant satisfactory to the Trustee that complies with TIA § 314(c).

SECTION 13.5Statements Required in Certificate and Opinion of Counsel.

Each certificate and Opinion of Counsel with respect to compliance with a condition or covenant provided for in this Indenture shall include:

(a)  a statement that the Person making such certificate or rendering such Opinion of Counsel has read such covenant or condition;

(b)  a brief statement as to the nature and scope of the examination or investigation upon which the statements contained in such certificate or Opinion of Counsel are based;

(c)  a statement that, in the opinion of such Person, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and

(d)  a statement as to whether or not, in the opinion of such Person, such condition or covenant has been complied with.

SECTION 13.6Rules by Trustee, Paying Agent, Registrar.

The Trustee may make reasonable rules in accordance with the Trustee’s customary practices for action by or at a meeting of Securityholders. The Paying Agent or Registrar may make reasonable rules for its functions.

SECTION 13.7Legal Holidays.

If a payment date is a Legal Holiday at a place of payment, payment may be made at that place on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period.

SECTION 13.8Governing Law.

THE LAWS OF THE STATE OF NEW YORK SHALL GOVERN THIS INDENTURE AND THE SECURITIES WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. THE COMPANY AGREES TO SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK IN ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS INDENTURE OR THE SECURITIES.

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SECTION 13.9No Recourse Against Others.

No past, present or future director, officer, employee, incorporator or stockholder of the Company or any Guarantor, as such, shall have any liability for any obligations of the Company or any Guarantor under the Notes, the Guarantees or this Indenture or for any claim based on, in respect of, or by reason of, such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes and the Guarantees.

SECTION 13.10Successors.

All agreements of the Company and the Guarantors in this Indenture, the Notes and the Guarantees shall bind their respective successors. All agreements of the Trustee in this Indenture shall bind its successor.

SECTION 13.1 1Counterparts.

The parties may sign any number of counterparts of this Indenture. Each such counterpart shall be an original, but all of them together represent the same agreement.

SECTION 13.12Severability.

In case any provision in this Indenture, the Notes or the Guarantees shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby, and a Holder shall have no claim therefor against any party hereto.

SECTION 13.13Table of Contents, Headings, Etc.

The table of contents, cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, and are not to be considered a part hereof, and shall in no way modify or restrict any of the terms or provisions hereof.

SECTION 13.14No Adverse Interpretation of Other Agreements.

This Indenture may not be used to interpret another indenture, loan or debt agreement of the Company or any of its Subsidiaries. Any such indenture, loan or debt agreement may not be used to interpret this Indenture.

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SECTION 13.15Benefits of Indenture.

Nothing in this Indenture, the Notes or the Guarantees, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder and the Holders, any benefit or any legal or equitable right, remedy or claim under this Indenture, the Notes or the Guarantees.

SECTION 13.16Independence of Covenants.

All covenants and agreements in this Indenture shall be given independent effect so that if any particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or otherwise be within the limitations of, another covenant shall not avoid the occurrence of a Default or an Event of Default if such action is taken or condition exists.

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IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the date first written above.

VERTIS, INC.,
as Issuer
By:	/s/ John V. Howard, Jr.
	Name:	John V. Howard, Jr.
	Title:	Sr. V.P.
THE BANK OF NEW YORK,
as Trustee
By:
	Name:
	Title:
SUBSIDIARY GUARANTORS:
PRINTCO., INC.
By:	/s/ John V. Howard, Jr.
	Name:	John V. Howard, Jr.
	Title:	Sr. V.P.
WEBCRAFT, LLC
By:	/s/ John V. Howard, Jr.
	Name:	John V. Howard, Jr.
	Title:	Sr. V.P.
WEBCRAFT CHEMICALS, LLC
By:	/s/ John V. Howard, Jr.
	Name:	John V. Howard, Jr.
	Title:	Sr. V.P.

ENTERON GROUP, LLC
By:	/s/ John V. Howard, Jr.
	Name:	John V. Howard, Jr.
	Title:	Sr. V.P.
BIG FLOWER DIGITAL SERVICES
(DELAWARE), INC.
By:	/s/ John V. Howard, Jr.
	Name:	John V. Howard, Jr.
	Title:	Sr. V.P.
BIG FLOWER DIGITAL LLC
By:	BIG FLOWER DIGITAL SERVICES
(DELAWARE), INC.
By:	/s/ John V. Howard Jr.
	Name:	John V. Howard, Jr.
	Title:	Sr. V.P.
Notice Address for all Guarantors:
	Vertis, Inc.
	250 W. Pratt Street
	18th Floor
	Baltimore, MD 21201
	Attention:		Chief Financial
			Officer
	Telephone:		(410) 528-9800
	Telecopy:		(410) 528-9287

IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed as of the date first written above.

VERTIS, INC.,
as Issuer
By:
	Name:
	Title:
THE BANK OF NEW YORK,
as Trustee
By:	/s/ Geovanni Barris
	Name:	GEOVANNI BARRIS
	Title:	VICE PRESIDENT
SUBSIDIARY GUARANTORS:
PRINTCO., INC.
By:
	Name:
	Title:
WEBCRAFT, LLC
By:
	Name:
	Title:
WEBCRAFT CHEMICALS, LLC
By:
	Name:
	Title:

EXHIBIT A-1

[FORM OF SERIES A SECURITY]

THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES OR TO OR FOR THE ACCOUNT OR BENEFIT OF U.S. PERSONS EXCEPT AS SET FORTH BELOW. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A “QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT), (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT OR (C) IT IS AN ACCREDITED INVESTOR (AS DEFINED IN RULE 501(a)(l), (2),(3) OR (7) UNDER THE SECURITIES ACT) (AN “ACCREDITED INVESTOR”), (2) AGREES THAT IT WILL NOT WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY RESELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES (OR HAS FURNISHED ON ITS BEHALF BY A U.S. BROKER-DEALER) TO THE TRUSTEE A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON TRANSFER OF THIS SECURITY (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE FOR THIS SECURITY), (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT (IF AVAILABLE), (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), OR (G) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THIS SECURITY WITHIN TWO YEARS AFTER THE ORIGINAL ISSUANCE OF THIS SECURITY, IF THE PROPOSED TRANSFEREE IS AN ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE TRUSTEE AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY

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REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS “OFFSHORE TRANSACTION,” “UNITED STATES” AND “U.S. PERSON” HAVE THE MEANING GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT.

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No. $[     ]

VERTIS, INC.

13½% SENIOR SUBORDINATED NOTE DUE 2009

VERTIS, INC. promises to pay to        or registered assigns the principal sum of [        ] Dollars on December 7, 2009.

Interest Payment Dates: June 1 and December 1

Record Dates: May 15 and November 15

By:
	Authorized Signature
By:
	Authorized Signature

Dated: [            ], 2003

CERTIFICATE OF AUTHENTICATION

This is one of the 13½% Senior Subordinated Notes due 2009 referred to in the within-mentioned Indenture.

THE BANK OF NEW YORK,
as Trustee
By:
	Authorized Signatory

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(REVERSE O F SECURITY)

13½% SENIOR SUBORDINATED NOTE DUE 2009

1.Interest. VERTIS, INC., a Delaware corporation (the “Company”, which term shall include any successor thereto in accordance with the Indenture), promises to pay, until the principal hereof is paid or made available for payment, interest (including any Accrued Bankruptcy Interest) on the principal amount set forth on the reverse side hereof at a rate of 13½% per annum. Interest on the Notes will accrue from and including the most recent date to which interest has been paid or, if no interest has been paid, from and including the date of issuance of such Notes through but excluding the date on which interest is paid. Interest shall be payable in arrears on June 1 and December 1 (each an “Interest Payment Date”). Interest will be computed on the basis of a 360-day year of twelve full 30-day months.

To the extent a Note is issued for original issue after February 28, 2003, the Holder of such Note is hereby obligated upon original issuance of such Note to pay the Company in U.S. Legal Tender the amount of accrued and unpaid interest on such Note from the later of February 28, 2003 or the most recently completed Interest Payment Date to the date of original issuance of such Note.

2.Method of Payment. The Company will pay interest on the Notes (except defaulted interest) to the Persons who are registered Holders of Notes at the close of business on the May 15 or November 15 immediately preceding the Interest Payment Date. Holders must surrender Notes to a Paying Agent to collect principal payments. The Company will pay principal, premium, if any, and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. At the Company’s option, interest may be paid by check mailed to the registered address of the Holder of this Note.

3.Paying Agent and Registrar. Initially, The Bank of New York (the “Trustee”) will act as Paying Agent and Registrar. The Company may change any Paying Agent, Registrar or co-Registrar without notice.

4.Indenture. The Company issued the Notes under an Indenture dated as of February 28, 2003 (the “Indenture”) among the Company, the Guarantors and the Trustee. This Note is one of an issue of Notes of the Company issued under the Indenture. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code §§ 77aaa-77bbbb) as amended from time to time. The Notes are subject to all such terms, and Securityholders are referred to the Indenture and such Act for a statement of them. Capitalized terms used herein and not otherwise defined have the meanings set forth in the Indenture. The Notes are general unsecured obligations of the Company limited in aggregate principal amount to $293,500,000.

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Under Article XI of the Indenture, the payment on each Note is guaranteed on a senior subordinated basis by the Guarantors.

5.Optional Redemption. The Notes are not redeemable before January 1, 2005. Thereafter, the Company may redeem the Notes at its option, in whole or in part, upon not less than 30 nor more than 60 days’ notice, at the following redemption prices (expressed as percentages of the principal amount thereof) if redeemed during the twelve-month period commencing on January 1 of the year set forth below:

Year	Percentage
2005	106.75	%
2006	104.50	%
2007	102.25	%
2008 and thereafter	100.00	%

In addition, the Company must pay accrued and unpaid interest on the Notes redeemed.

6.Notice of Redemption. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each holder of Notes to be redeemed at his registered address. On and after the Redemption Date, unless the Company defaults in making the redemption payment, interest ceases to accrue on Notes or portions thereof called for redemption.

7.Offers to Purchase. Sections 4.12 and 4.15 of the Indenture provide that after an Asset Sale, or upon the occurrence of a Change of Control, and subject to further limitations contained therein, the Company shall make an offer to purchase certain amounts of Notes in accordance with the procedures set forth in the Indenture.

8.Denominations, Transfer, Exchange. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay to it any taxes and fees required by law or permitted by the Indenture. The Registrar need not transfer or exchange any Note or portion of a Note selected for redemption, or transfer or exchange any Notes for a period of 15 days before a selection of Notes to be redeemed.

9.Persons Deemed Owners. The registered holder of a Note may be treated as the owner of it for all purposes.

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10.Unclaimed Money. If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent will pay the money back to the Company at its request. After that, Holders entitled to the money must look to the Company for payment as general creditors unless an “abandoned property” law designates another Person.

11.Amendment, Supplement, Waiver. The Company and the Trustee may, without the consent of the holders of any outstanding Notes, amend, waive or supplement the Indenture or the Notes for certain specified purposes, including, among other things, curing ambiguities, defects or inconsistencies, maintaining the qualification of the Indenture under the Trust Indenture Act of 1939 or making any other change that does not adversely affect the rights of any Holder. Other amendments and modifications of the Indenture or the Notes may be made by the Company, the Guarantors and the Trustee with the consent of the Holders of not less than a majority in aggregate principal amount of the outstanding Notes, subject to certain exceptions requiring the consent of the Holders of the particular Notes (and, in certain cases, holders of Designated Senior Debt) to be affected.

12.Successor Corporation. When a successor corporation assumes all the obligations of its predecessor under the Notes and the Indenture and the transaction complies with the terms of Article V of the Indenture, the predecessor corporation will, subject to certain exceptions, be released from those obligations.

13.Defaults and Remedies. Events of Default include: default in payment of principal of or premium on the Notes at maturity, or upon acceleration, redemption or otherwise; default in payment of interest on any Note for 30 days; certain defaults under other Indebtedness; failure by the Company for 30 days after written notice to it from the Trustee or Holders of at least 25% in principal amount of the then outstanding Notes, to comply with any of the other agreements or covenants in or provisions of the Indenture or the Notes; certain events of bankruptcy or insolvency with respect to the Company and its Significant Subsidiaries; certain final judgments that remain undischarged for 60 days after being entered; any Guarantee of a Significant Subsidiary ceases to be in full force and effect; and any Guarantor that is a Significant Subsidiary shall deny its obligations under its Guarantee. If an Event of Default occurs and is continuing (and has not been waived in accordance with the provisions of the Indenture), the Trustee or the Holders of at least 25% in aggregate principal amount of the then outstanding Notes may declare all the Notes to be immediately due and payable for an amount equal to 100% of the principal amount of the Notes plus accrued interest to the date of payment, except that in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes become due and payable immediately without further action or notice, subject to the rights of holders of Senior Debt. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Notes. Subject to certain limitations, Holders of a majority in principal amount of the then

A-1-6

outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing Default or Event of Default (except a Default or an Event of Default in payment of principal, premium, if any, or interest) if and so long as a committee of its Responsible Officers determines in good faith that withholding notice is in their interests. The Company must furnish an annual compliance certificate to the Trustee.

14.Restrictive Covenants. The Indenture imposes certain limitations on the ability of the Company and its Subsidiaries to, among other things, pay dividends and make distributions with respect to or repurchase or otherwise acquire or retire for value any of their equity interests, make certain Investments, incur additional Indebtedness, enter into transactions with Affiliates, incur Liens, sell assets, merge or consolidate with any other Person and sell, lease, transfer or otherwise dispose of substantially all of their properties or assets. The limitations are subject to a number of important qualifications and exceptions. The Company must annually report to the Trustee on compliance with such limitations.

15.Trustee Dealings with Company. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not Trustee.

16.No Recourse Against Others. No past, present or future director, officer, employee, incorporator or stockholder of the Company, as such, shall have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes.

17.Discharge of Indenture; Defeasance. The Indenture contains provisions for defeasance at any time, upon compliance with certain conditions set forth therein, of (i) the entire indebtedness of this Note or (ii) certain restrictive covenants and Events of Default with respect to this Note.

18.Authentication. This Note shall not be valid until the Trustee signs the certificate of authentication on the other side of this Note.

19.Abbreviations. Customary abbreviations may be used in the name of a Security holder or an assignee, such as: TEN COM (= tenants in common), TENANT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).

20.Subordination. The Notes are subordinated to all Senior Debt, which includes any Indebtedness permitted to be incurred pursuant to the terms of the “Limitation on

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Additional Indebtedness” covenant in the Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is on a parity with or subordinated in right of payment to the Notes. The Guarantees in respect of the Notes are subordinated to all Guarantor Senior Debt of each Guarantor, whether outstanding on the date of the Indenture or thereafter created, incurred, assumed or guaranteed. Each Holder, by its acceptance hereof, agrees to be bound by such provisions and authorizes and expressly directs the Trustee, on its behalf, to take such action as may be necessary or appropriate to effectuate the subordination provided for in the Indenture and appoints the Trustee its attorney-in-fact for such purposes.

21.Registration Rights. Pursuant to the Registration Rights Agreement, the Company will be obligated to consummate an exchange offer pursuant to which the Holder of this Note shall have the right to exchange this Note for Notes of a separate series issued under the Indenture (or a trust indenture substantially identical to the Indenture in accordance with the terms of the Registration Rights Agreement) which have been registered under the Securities Act, in like principal amount and having identical terms as this Note. The Holders of the Notes shall be entitled to receive certain additional interest payments in the event such exchange offer is not consummated and upon certain other conditions, all pursuant to and in accordance with the terms of the Registration Rights Agreement.

22.GOVERNING LAW. THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

The provisions of this Note are expressly made subject to the more detailed provisions set forth in the Indenture and the Registration Rights Agreement, which shall for all purposes be controlling. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to:

VERTIS, INC.
250 W. Pratt Street
18th Floor
Baltimore, MD 21201
Attention: Chief Financial Officer

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ASSIGNMENT FORM

If you the holder want to assign this Note, fill in the form below and have your signature guaranteed:

I or we assign and transfer this Note to

(Insert assignee’s social security or tax ID number)

(Print or type assignee’s name, address and zip code) and irrevocably appoint agent to transfer this Note on the books of the Company. The agent may substitute another to act for him.

Date:	Your signature:
		(Sign exactly as your name appears on
		the other side of this Note)
Signature Guarantee:

OPTION OF HOLDER TO ELECT PURCHASE

If you wish to have this Note purchased by the Company pursuant to Section 4.12 or 4.15 of the Indenture, check the Box: o

If you wish to have a portion of this Note purchased by the Company pursuant to Section 4.12 or 4.15 of the Indenture, state the amount:

$                                

Date:	Your signature:
		(Sign exactly as your name appears on
		the other side of this Note)
Signature Guarantee:

EXHIBIT A-2

[FORM OF SERIES B SECURITIES]

No. $

VERTIS, INC.

13½% SENIOR SUBORDINATED NOTE DUE 2009

VERTIS, INC. promises to pay to                           or registered assigns the principal sum of                                  Dollars on December 7, 2009.

Interest Payment Dates: June 1 and December 1

Record Dates: May 15 and November 15

	By:
		Authorized Signature
	By:
		Authorized Signature
Dated: [                              ], 2003

CERTIFICATE OF AUTHENTICATION

This is one of the 13½% Senior Subordinated Notes due 2009 referred to in the within-mentioned Indenture.

THE BANK OF NEW YORK, as Trustee
By:
	Authorized Signatory

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(REVERSE OF SECURITY)

13½% SENIOR SUBORDINATED NOTE DUE 2009

1.        Interest. VERTIS, INC., a Delaware corporation (the “Company”, which term shall include any successor thereto in accordance with the Indenture), promises to pay, until the principal hereof is paid or made available for payment, interest (including any Accrued Bankruptcy Interest) on the principal amount set forth on the reverse side hereof at a rate of 13½% per annum. Interest on the Notes will accrue from and including the most recent date to which interest has been paid or, if no interest has been paid, from and including the date of issuance of such Notes through but excluding the date on which interest is paid. Interest shall be payable in arrears on June 1 and December 1 (each an “Interest Payment Date”). Interest will be computed on the basis of a 360-day year of twelve full 30-day months.

To the extent a Note is issued for original issue after February 28, 2003, the Holder of such Note is hereby obligated upon original issuance of such Note to pay the Company in U.S. Legal Tender the amount of accrued and unpaid interest on such Note from the later of February 28, 2003 or the most recently completed Interest Payment Date to the date of original issuance of such Note.

2.        Method of Payment. The Company will pay interest on the Notes (except defaulted interest) to the Persons who are registered Holders of Notes at the close of business on the May 15 or November 15 immediately preceding the Interest Payment Date. Holders must surrender Notes to a Paying Agent to collect principal payments. The Company will pay principal, premium, if any, and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. At the Company’s option, interest may be paid by check mailed to the registered address of the Holder of this Note.

3.        Paying Agent and Registrar. Initially, The Bank of New York (the “Trustee”) will act as Paying Agent and Registrar. The Company may change any Paying Agent, Registrar or co-Registrar without notice.

4.        Indenture. The Company issued the Notes under an Indenture dated as of February 28, 2003 (the “Indenture”) among the Company, the Guarantors and the Trustee. This Note is one of an issue of Notes of the Company issued under the Indenture. The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S. Code §§ 77aaa-77bbbb) as amended from time to time. The Notes are subject to all such terms, and Securityholders are referred to the Indenture and such Act for a statement of them. Capitalized terms used herein and not otherwise defined have the meanings set forth in the Indenture. The Notes are general unsecured obligations of the Company limited in aggregate principal amount to $293,500,000.

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Under Article XI of the Indenture, the payment of each Note is guaranteed on a senior subordinated basis by the Guarantors.

5.        Optional Redemption. The Notes are not redeemable before January 1, 2005. Thereafter, the Company may redeem the Notes at its option, in whole or in part, upon not less than 30 nor more than 60 days’ notice, at the following redemption prices (expressed as percentages of the principal amount thereof) if redeemed during the twelve-month period commencing on January 1 of the year set forth below:

Year	Percentage
2005	106.75	%
2006	104.50	%
2007	102.25	%
2008 and thereafter	100.00	%

In addition, the Company must pay accrued and unpaid interest on the Notes redeemed.

6.        Notice of Redemption. Notice of redemption will be mailed at least 30 days but not more than 60 days before the redemption date to each holder of Notes to be redeemed at his registered address. On and after the Redemption Date, unless the Company defaults in making the redemption payment, interest ceases to accrue on Notes or portions thereof called for redemption.

7.        Offers to Purchase. Sections 4.12 and 4.15 of the Indenture provide that after an Asset Sale, or upon the occurrence of a Change of Control, and subject to further limitations contained therein, the Company shall make an offer to purchase certain amounts of Notes in accordance with the procedures set forth in the Indenture.

8.        Denominations, Transfer, Exchange. The Notes are in registered form without coupons in denominations of $1,000 and integral multiples of $1,000. A Holder may transfer or exchange Notes in accordance with the Indenture. The Registrar may require a Holder, among other things, to furnish appropriate endorsements and transfer documents and to pay to it any taxes and fees required by law or permitted by the Indenture. The Registrar need not transfer or exchange any Note or portion of a Note selected for redemption, or transfer or exchange any Notes for a period of 15 days before a selection of Notes to be redeemed.

9.        Persons Deemed Owners. The registered holder of a Note may be treated as the owner of it for all purposes.

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10.      Unclaimed Money. If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent will pay the money back to the Company at its request. After that, Holders entitled to the money must look to the Company for payment as general creditors unless an “abandoned property” law designates another Person.

11.      Amendment, Supplement, Waiver. The Company, the Guarantors and the Trustee may, without the consent of the holders of any outstanding Notes, amend, waive or supplement the Indenture or the Notes for certain specified purposes, including, among other things, curing ambiguities, defects or inconsistencies, maintaining the qualification of the Indenture under the Trust Indenture Act of 1939 or making any other change that does not adversely affect the rights of any Holder. Other amendments and modifications of the Indenture or the Notes may be made by the Company, the Guarantors and the Trustee with the consent of the Holders of not less than a majority in aggregate principal amount of the outstanding Notes, subject to certain exceptions requiring the consent of the Holders of the particular Notes (and, in certain cases, holders of Designated Senior Debt) to be affected.

12.      Successor Corporation. When a successor corporation assumes all the obligations of its predecessor under the Notes and the Indenture and the transaction complies with the terms of Article V of the Indenture, the predecessor corporation will, subject to certain exceptions, be released from those obligations.

13.      Defaults and Remedies. Events of Default include: default in payment of principal of or premium on the Notes at maturity, or upon acceleration, redemption or otherwise; default in payment of interest on any Note for 30 days; certain defaults under other Indebtedness; failure by the Company or its Subsidiaries for 30 days after written notice to it from the Trustee or Holders of at least 25% in principal amount of the then outstanding Notes, to comply with any of the other agreements or covenants in or provisions of the Indenture or the Notes; certain events of bankruptcy or insolvency with respect to the Company and its Significant Subsidiaries; certain final judgments that remain undischarged for 60 days after being entered; any Guarantee of a Significant Subsidiary ceases to be in full force and effect; and any Guarantor that is a Significant Subsidiary shall deny its obligations under its Guarantee. If an Event of Default occurs and is continuing (and has not been waived in accordance with the provisions of the Indenture), the Trustee or the Holders of at least 25% in aggregate principal amount of the then outstanding Notes may declare all the Notes to be immediately due and payable for an amount equal to 100% of the principal amount of the Notes plus accrued interest to the date of payment, except that in the case of an Event of Default arising from certain events of bankruptcy or insolvency, all outstanding Notes become due and payable immediately without further action or notice, subject to the rights of holders of Senior Debt. Holders may not enforce the Indenture or the Notes except as provided in the Indenture. The Trustee may require indemnity satisfactory to it before it enforces the Indenture or the Notes. Subject to certain limitations, Holders of a majority in principal

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amount of the then outstanding Notes may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Holders notice of any continuing Default or Event of Default (except a Default or an Event of Default in payment of principal, premium, if any, or interest) if and so long as a committee of its Responsible Officers determines in good faith that withholding notice is in their interests. The Company must furnish an annual compliance certificate to the Trustee.

14.      Restrictive Covenants. The Indenture imposes certain limitations on the ability of the Company and its Subsidiaries to, among other things, pay dividends and make distributions with respect to or repurchase or otherwise acquire or retire for value any of their Equity Interests, make certain Investments, incur additional Indebtedness, enter into transactions with Affiliates, incur Liens, sell assets, merge or consolidate with any other Person and sell, lease, transfer or otherwise dispose of substantially all of their properties or assets. The limitations are subject to a number of important qualifications and exceptions. The Company must annually report to the Trustee on compliance with such limitations.

15.      Trustee Dealings with Company. The Trustee, in its individual or any other capacity, may make loans to, accept deposits from, and perform services for the Company or its Affiliates, and may otherwise deal with the Company or its Affiliates, as if it were not Trustee.

16.      No Recourse Against Others. No past, present or future director, officer, employee, incorporator or stockholder of the Company, as such, shall have any liability for any obligations of the Company under the Notes or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. Each Holder by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Notes.

17.      Discharge of Indenture; Defeasance. The Indenture contains provisions for defeasance at any time, upon compliance with certain conditions set forth therein, of (i) the entire indebtedness of this Note or (ii) certain restrictive covenants and Events of Default with respect to this Note.

18.      Authentication. This Note shall not be valid until the Trustee signs the certificate of authentication on the other side of this Note.

19.      Abbreviations. Customary abbreviations may be used in the name of a Securityholder or an assignee, such as: TEN COM (= tenants in common), TENANT (= tenants by the entireties), JT TEN (= joint tenants with right of survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts to Minors Act).

20.      Subordination. The Notes are subordinated to all Senior Debt, which includes any Indebtedness permitted to be incurred pursuant to the terms of the “Limitation on

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Additional Indebtedness” covenant in the Indenture, unless the instrument under which such Indebtedness is incurred expressly provides that it is on a parity with or subordinated in right of payment to the Notes. The Guarantees in respect of the Notes are subordinated to all Guarantor Senior Debt of each Guarantor, whether outstanding on the date of the Indenture or thereafter created, incurred, assumed or guaranteed. Each Holder, by its acceptance hereof, agrees to be bound by such provisions and authorizes and expressly directs the Trustee, on its behalf, to take such action as may be necessary or appropriate to effectuate the subordination provided for in the Indenture and appoints the Trustee its attorney-in-fact for such purposes.

21.      GOVERNING LAW. THE INDENTURE AND THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.

The provisions of this Note are expressly made subject to the more detailed provisions set forth in the Indenture, which shall for all purposes be controlling. The Company will furnish to any Holder upon written request and without charge a copy of the Indenture. Requests may be made to:

VERTIS, INC.
250 W. Pratt Street
18th Floor
Baltimore, MD 21201
Attention: Chief Financial Officer

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ASSIGNMENT FORM

If you the holder want to assign this Note, fill in the form below and have your signature guaranteed:

I or we assign and transfer this Note to

(Insert assignee’s social security or tax ID number)

(Print or type assignee’s name, address and zip code) and irrevocably appoint

agent to transfer this Note on the books of the Company. The agent may substitute another to act for him.

Date:	Your signature:
		(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:

OPTION OF HOLDER TO ELECT PURCHASE

If you wish to have this Note purchased by the Company pursuant to Section 4.12 or 4.15 of the Indenture, check the Box: o

If you wish to have a portion of this Note purchased by the Company pursuant to Section 4.12 or 4.15 of the Indenture, state the amount:

$                                

Date:	Your signature:
		(Sign exactly as your name appears on the other side of this Note)
Signature Guarantee:

EXHIBIT B

FORM OF LEGEND FOR BOOK-ENTRY SECURITIES

Any Global Security authenticated and delivered hereunder shall bear a legend (which would be in addition to any other legends required in the case of a Restricted Security) in substantially the following form:

THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE.

UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (“DTC”), TO ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR I N SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

B-1

EXHIBIT C

Form of Certificate To Be
Delivered in Connection with
Transfers to Non-QTB Accredited Investors

                           ,        

The Bank of New York
101 Barclay Street
New York, NY 10286

Attention: Corporate Trust Administration

Re:Vertis, Inc. (the “Company”) 13½%
Senior Subordinated Notes due 2009 (the “Securities”)

Ladies and Gentlemen:

In connection with our proposed purchase of $                  aggregate principal amount of the Securities, we confirm that:

1.        We have received such information as we deem necessary in order to make our investment decision.

2.        We understand that any subsequent transfer of the Securities is subject to certain restrictions and conditions set forth in the Indenture and the undersigned agrees to be bound by, and not to resell, pledge or otherwise transfer the Securities except in compliance with, such restrictions and conditions and the Securities Act of 1933, as amended (the “Securities Act”).

3.        We understand that the offer and sale of the Securities have not been registered under the Securities Act, and that the Securities may not be offered or sold except as permitted in the following sentence. We agree, on our own behalf and on behalf of any accounts for which we are acting as hereinafter stated, that if we should sell or otherwise transfer any Securities prior to the date which is two years after the original issuance of the Securities, we will do so only (i) to the Company or any subsidiary thereof, (ii) inside the United States in accordance with Rule 144A under the Securities Act to a person whom we reasonably believe is a “qualified institutional buyer” (as defined in Rule 144A under the Securities Act), (iii) inside the United States to an accredited investor (as defined below) that,

C-1

prior to such transfer, furnishes (or has furnished on its behalf by a U.S. broker-dealer) to you a signed letter containing certain representations and agreements relating to the restrictions on transfer of the Securities, (iv) outside the United States in an offshore transaction in accordance with Rule 904 of Regulation S under the Securities Act, (v) pursuant to the exemption from registration provided by Rule 144 under the Securities Act (if available), or (vi) pursuant to an effective registration statement under the Securities Act, and we further agree to provide to any Person purchasing any of the Securities from us a notice advising such purchaser that resales of the Securities are restricted as stated herein.

4.        We understand that, on any proposed resale of any Securities, we will be required to furnish to you and the Company such certification, legal opinions and other information as you and the Company may reasonably require to confirm that the proposed sale complies with the foregoing restrictions. We further understand that the Securities purchased by us will bear a legend to the foregoing effect.

5.        We are an institutional “accredited investor” (as defined in Rule 501(a)(l), (2), (3) or (7) of Regulation D under the Securities Act)(an “accredited investor”) and have such knowledge and experience in financial and business matters as to be capable of evaluating the merits and risks of our investment in the Securities, and we and any accounts for which we are acting are each able to bear the economic risk of our or their investment, as the case may be.

6.        We are acquiring the Securities purchased by us for our account or for one or more accounts (each of which is an accredited investor) as to each of which we exercise sole investment discretion.

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You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby.

Very truly yours,
[Name of Transferee]
By:
	Authorized Signature

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EXHIBIT D

Form of Certificate To Be Delivered
in Connection with Transfers
Pursuant to Regulation S

                           ,         

The Bank of New York
101 Barclay Street
New York, NY 10286

Attention: Corporate Trust Administration

Re:Vertis, Inc. (the “Company”) 13½% Senior
Subordinated Notes due 2009 (the “Securities”)

Dear Sirs:

In connection with our proposed sale of $                     aggregate principal amount of the Securities, we confirm that such sale has been effected pursuant to and in accordance with Regulation S under the U.S. Securities Act of 1933, as amended (the “Securities Act”), and, accordingly, we represent that:

(1)       the offer of the Securities was not made to a Person in the United States;

(2)       either (a) at the time the buy offer was originated, the transferee was outside the United States or we and any Person acting on our behalf reasonably believed that the transferee was outside the United States, or (b) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any Person acting on our behalf knows that the transaction has been pre-arranged with a buyer in the United States;

(3)       no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903(b) or Rule 904(b) of Regulation S, as applicable;

(4)       the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act; and

(5)       we have advised the transferee of the transfer restrictions applicable to the Securities.

D-1

You and the Company are entitled to rely upon this letter and are irrevocably authorized to produce this letter or a copy hereof to any interested party in any administrative or legal proceedings or official inquiry with respect to the matters covered hereby. Terms used in this certificate have the meanings set forth in Regulation S.

Very truly yours,
[Name of Transferor]
By:
	Authorized Signature

D-2

EXHIBIT E

[FORM OF NOTATION ON NOTE
RELATING TO GUARANTEES]

GUARANTEES

The Guarantors (as defined in the Indenture (the “Indenture”) referred to in the Note upon which this notation is endorsed and each hereinafter referred to as a “Guarantor”) have unconditionally guaranteed on a senior subordinated basis (such guarantee by each Guarantor being referred to herein as the “Guarantee”) (i) the due and punctual payment of the principal of and interest on the Notes in full when due, subject to any applicable grace period, whether at maturity, by acceleration or otherwise and interest on the overdue principal, if any, and interest on any interest, if any, to the extent lawful, of the Notes and all other obligations of the Company to the Holders all in accordance with the terms set forth in of the Indenture and (ii) in case of any extension of time of payment or renewal of any Notes or of any of such other obligations, that the same will be promptly paid in full when due or performed in accordance with the terms of the extension or renewal, subject to any applicable grace period, whether at stated maturity, by acceleration or otherwise.

The obligations of each Guarantor to the Holders and the Trustee of the Notes pursuant to the Guarantee and the Indenture are expressly set forth and are expressly subordinated and subject in right of payment to the prior payment in full of all Guarantor Senior Debt of such Guarantor, to the extent and in the manner provided, in Article XII of the Indenture, and reference is hereby made to such Indenture for the precise terms of the Guarantee therein made.

No past, present or future stockholder, director, officer, employee or incorporator, as such, of any of the Guarantors shall have any liability for any obligation of the Guarantors under the Guarantee or the Indenture or for any claim based on, in respect of or by reason of, such obligations or their creation. Each Holder of a Note by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for the issuance of the Guarantees.

SUBSIDIARY GUARANTORS:
PrintCo., Inc.
By:
	Name:
	Title:

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Webcraft, LLC
By:
	Name:
	Title:

Webcraft Chemicals, LLC
By:
	Name:
	Title:

Enteron Group, LLC
By:
	Name:
	Title:

E-2

Big Flower Digital Services (Delaware), Inc.
By:
	Name:
	Title:

Big Flower Digital LLC
By:
	Name:
	Title:

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EX-10.5

Exhibit 10.5

AMENDMENT NO. 4 TO CREDIT AGREEMENT

This Amendment No. 4 to Credit Agreement, dated as of May 30, 2006 (this “Amendment”), is entered into by and among Vertis, Inc., as a Borrower (“Borrower”), the other Credit Parties signatory hereto, General Electric Capital Corporation, as a Lender and as Agent for Lenders (“Agent”), and the other Lenders.

RECITALS

A.            Borrower, the other Credit Parties, Agent and Lenders are parties to that certain Credit Agreement, dated as of December 22, 2004, including all annexes, exhibits and schedule thereto (as amended by that certain Limited Consent and Amendment No. 1 to Credit Agreement, dated as of October 3, 2005, that certain Amendment No. 2 to Credit Agreement, dated as of November 22, 2005, and that certain Limited Consent and Amendment No. 3 to Credit Agreement, dated as of December 12, 2005, and as from time to time further amended, restated, supplemented or otherwise modified, the “Credit Agreement”).

B.            Borrower and the other Credit Parties have requested that Agent and Lenders consent to certain amendments to the Credit Agreement as set forth herein in Section 2 in order to increase: (i) the advance rate on Fixed Assets with respect to the calculation of the Borrowing Base; and (ii) the amount of each Lender’s Revolving Loan Commitment.

C.            Borrower, the other Credit Parties, Agent and Lenders are willing to consent to the amendments set forth herein pursuant to, and subject to, the terms and conditions set forth in this Amendment.

D.            This Amendment shall constitute a Loan Document and these Recitals shall be construed as part of this Amendment.

NOW THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, and of the Loans and other extensions of credit heretofore, now or hereafter made to, or for the benefit of, Borrower by Lenders, Borrower, the other Credit Parties, Agent and Lenders hereby agree as follows:

1.             Definitions.  Except to the extent otherwise specified herein, capitalized terms used in this Amendment shall have the same meanings ascribed to them in the Credit Agreement and Annex A thereto.

2.             Amendments.

2.1.          Section 6.2(g) of the Credit Agreement is hereby deleted in its entirety and replaced with the following paragraph:

 “(g)        Non-Real Estate Fixed Asset Appraisal and Real Estate Appraisal.  Upon the election of Agent, which may be made at any time while and so long as a

Default or Event of Default shall be continuing and not more than once per year so long as no Default or Event of Default has occurred and is continuing, Agent may conduct appraisals and audits and obtain appraisal reports in form and substance and from appraisers reasonably satisfactory to Agent (which may be, or be affiliated with, a Lender) with respect to the fixed assets (excluding real estate) of the Borrower and the other Credit Parties (the “Non-Real Estate Fixed Asset Appraisal”) which reports shall indicate whether or not the relevant information set forth in the Borrowing Base Certificate most recently delivered is accurate and complete in all material respects based upon a review by such appraiser;  provided, that so long as no Default or Event of Default has occurred and is continuing, Borrower’s obligation to reimburse out-of-pocket expenses in respect of any such Non-Real Estate Fixed Asset Appraisal shall not exceed $125,000.  At the request of the Borrower made at any time in the reasonable discretion of Borrower, Agent may conduct appraisals and obtain appraisal reports in form and substance and from appraisers reasonably satisfactory to Agent (which may be, or be affiliated with, a Lender) with respect to the owned real estate of the Borrower and the other Credit Parties (the “Real Estate Appraisal”) which reports shall indicate whether or not the relevant information set forth in the Borrowing Base Certificate most recently delivered is accurate and complete in all material respects based upon a review by such appraiser.  In addition, for periods beginning on or after January 1, 2007, upon the election of Agent, which may be made at any time while and so long as a Default or Event of Default shall be continuing and not more than once per year so long as no Default or Event of Default is continuing, Agent may conduct a Real Estate Appraisal which report shall satisfy the requirements set forth in the immediately preceding sentence.”

2.2.          Annex A to the Credit Agreement is hereby amended by inserting the following definition in appropriate alphabetical order:

“Fixed Asset Appraisal shall mean a Non-Real Estate Fixed Asset Appraisal or a Real Estate Appraisal as the case may be and as each of such terms is defined in Section 6.2(g).”

2.3.          Section 1.3(e) of the Credit Agreement is hereby amended by deleting clause (ii) of the proviso at the end of the first sentence of such Section 1.3(e) and replacing it with the following:

“(ii) any Non-Real Estate Fixed Asset Appraisal (as defined in Section 6.2(g) hereof) shall not exceed $125,000.”

2.4.          Section 4.3 of the Credit Agreement is hereby amended by deleting the third sentence of such Section 4.3 and replacing it with the following:

“In addition to the foregoing, each Credit Party shall permit any authorized representatives of Agent to conduct a Fixed Asset Appraisal subject to and upon the terms and conditions set forth in Section 6.2(g) hereof; provided, however, that, so long as no Default or Event of Default has occurred and is continuing, (i)

2

Agent shall be limited to one (1) Non-Real Estate Fixed Asset Appraisal during each calendar year and, for periods beginning on or after January 1, 2007, one (1) Real Estate Appraisal during each calendar year, and (ii) Borrower’s obligation to reimburse out-of-pocket expenses in respect of any such Non-Real Estate Fixed Asset Appraisal shall not exceed $125,000.”

2.5.          Schedule 1 to Exhibit 6.2(e) to the Credit Agreement is hereby amended by deleting the figure “45%” in the “Advance Rate” line with respect to Fixed Assets appearing on the second page of such Schedule 1 and replacing such figure with “55%”.  Schedule 1 to Exhibit 6.2(e) to the Credit Agreement is hereby further amended by applying the following adjustments to the figure “55%” (as herein amended) in the “Advance Rate” line with respect to Fixed Assets appearing on the second page of such Schedule 1.  Each adjustment will be referred to as a “Step Down” and will occur on the dates detailed in the following table.  The Advance Rate associated with each Step Down will remain in place until the next Step Down.

Step Down	Date		Advance Rate on Fixed Assets
1		March 31, 2007	53%
2		June 30, 2007	50%
3		September 30, 2007	48%
4		December 31, 2007	45%

provided, however, that, if, prior to December 31, 2007, Agent receives a Real Estate Appraisal evidencing an amount of at least $45,000,000 in excess of the Net Book Value (as reported in the most recently delivered Borrowing Base Certificate) of owned real estate of the Borrower and the other Credit Parties, then the Advance Rate on Fixed Assets will immediately revert to 45%; and, provided, further, that, if at any time prior to December 31, 2007 the Maximum Amount is permanently reduced pursuant to the terms of the Credit Agreement (whether in connection with a voluntary reduction, a mandatory reduction or otherwise) to $200,000,000 or less, then the Advance Rate on Fixed Assets will immediately revert to 45%.

2.6.          Schedule 1 to Exhibit 6.2(e) to the Credit Agreement is hereby further amended by:

(a)           deleting the line “Real Estate (Net Book Value)” with respect to Fixed Assets appearing on the second page of such Schedule 1 and replacing such line with the line “Real Estate (the greater of Net Book Value and Fair Market Value)”; and

(b)           inserting the following at the end of such Schedule 1:

“The term “Fair Market Value” for purposes of this Schedule 1 shall mean the value shown with respect to owned real estate of the Borrower and the other Credit Parties in the most recently completed Real Estate Appraisal, if any.”

2.7.          Annex B to the Credit Agreement is hereby amended by:

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(a)           deleting the figure “$150,000,000” appearing opposite the name of General Electric Capital Corporation on such Annex B and replacing such figure with “$165,000,000”.  Annex B to the Credit Agreement is hereby further amended by applying the following adjustments to the figure “$165,000,000” (as herein amended) appearing opposite the name of General Electric Capital Corporation on such Annex B.  Each adjustment will be referred to as a “Step Down” and will occur on the dates detailed in the following table.  The Revolving Loan Commitment of General Electric Capital Corporation associated with each Step Down will remain in place until the next Step Down.

Step Down	Date		Revolving Loan Commitment
1		March 31, 2007	$161,250,000
2		June 30, 2007	$157,500,000
3		September 30, 2007	$153,750,000
4		December 31, 2007	$150,000,000

provided, further, that, if, prior to December 31, 2007, Agent receives a Real Estate Appraisal then the Revolving Loan Commitment of General Electric Capital Corporation shall become equal to the lesser of (I) $165,000,000 and (II) the higher of (x) the then otherwise applicable Revolving Loan Commitment determined in accordance with the foregoing Step Down table and (y) an amount equal to (A) $150,000,000 plus (B) 45% of (the Fair Market Value of owned real estate of the Borrower and the other Credit Parties (as reported in the Real Estate Appraisal) minus the Net Book Value of owned real estate of the Borrower and the other Credit Parties (as reported in the most recently delivered Borrowing Base Certificate)), which calculation shall be made each subsequent time that (x) Agent receives a Real Estate Appraisal, (y) a Step Down occurs or (z) the Net Book Value of owned real estate of the Borrower and the other Credit Parties (as reported in the most recently delivered Borrowing Base Certificate) changes and following each such subsequent calculation the Revolving Loan Commitment of General Electric Capital Corporation shall be accordingly adjusted (it being understood and agreed that in no event whatsoever shall the Revolving Loan Commitment of General Electric Capital Corporation exceed $165,000,000); and

(b)           deleting the figure “$50,000,000” appearing opposite the name of Bank of America, N.A. on such Annex B and replacing such figure with “$55,000,000”.  Annex B to the Credit Agreement is hereby further amended by applying the following adjustments to the figure “$55,000,000” (as herein amended) appearing opposite the name of Bank of America, N.A. on such Annex B.  Each adjustment will be referred to as a “Step Down” and will occur on the dates detailed in the following table.  The Revolving Loan Commitment of Bank of America, N.A. associated with each Step Down will remain in place until the next Step Down.

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Step Down	Date		Revolving Loan Commitment
1		March 31, 2007	$53,750,000
2		June 30, 2007	$52,500,000
3		September 30, 2007	$51,250,000
4		December 31, 2007	$50,000,000

provided, further, that, if, prior to December 31, 2007, Agent receives a Real Estate Appraisal then the Revolving Loan Commitment of Bank of America, N.A. shall become equal to the lesser of (I) $55,000,000 and (II) the higher of (x) the then otherwise applicable Revolving Loan Commitment determined in accordance with the foregoing Step Down table and (y) an amount equal to (A) $50,000,000 plus (B) 45% of (the Fair Market Value of owned real estate of the Borrower and the other Credit Parties (as reported in the Real Estate Appraisal) minus the Net Book Value of owned real estate of the Borrower and the other Credit Parties (as reported in the most recently delivered Borrowing Base Certificate)), which calculation shall be made each subsequent time that (x) Agent receives a Real Estate Appraisal, (y) a Step Down occurs or (z) the Net Book Value of owned real estate of the Borrower and the other Credit Parties (as reported in the most recently delivered Borrowing Base Certificate) changes and following each such subsequent calculation the Revolving Loan Commitment of Bank of America, N.A. shall be accordingly adjusted (it being understood and agreed that in no event whatsoever shall the Revolving Loan Commitment of Bank of America, N.A. exceed $55,000,000).

3.             Representations and Warranties.  Each of Borrower and each other Credit Party, jointly and severally, hereby represents and warrants to Agent and Lenders that:

3.1.          The execution, delivery and performance by the Borrower and each of the other Credit Parties of this Amendment have been duly authorized by all necessary corporate action, and this Amendment constitutes the legal, valid and binding obligation of the Borrower and each of the other Credit Parties enforceable against each of them in accordance with its terms, except as the enforcement hereof may be subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors’ rights generally or to general principles of equity.

3.2.          Each of the execution, delivery and performance of this Amendment by Borrower and each Credit Party and the consummation of the transactions contemplated hereby does not, and will not, contravene or conflict with any provision of (i) law, (ii) any judgment, decree or order, or (iii) the certificate or articles of incorporation or by-laws or other constituent documents of Borrower or any Credit Party, and does not, and will not, contravene or conflict with, or cause any Lien to arise under, any provision of any indenture, agreement, mortgage, lease, instrument or other document, including, without limitation, the February 2003 Senior Subordinated Debt Documents, the 2002 Senior Debt Documents, the 2003 Senior Secured Debt Documents or the Mezzanine Debt Documents, binding upon or otherwise affecting Borrower or any Credit Party or any property of Borrower or any Credit Party.

3.3.          No Default or Event of Default exists under the Credit Agreement or any other Loan Document or will exist after or be triggered by the execution, delivery and

5

performance of this Amendment or the consummation of the transactions contemplated hereby.  In addition, each of Borrower and each other Credit Party hereby represents, warrants and reaffirms that the Credit Agreement and each of the other Loan Documents remains in full force and effect.

4.             Conditions Precedent to Effectiveness.  The effectiveness of the amendments set forth in Section 2 hereof are in each instance subject to the satisfaction of each of the following conditions precedent:

4.1.          Amendment.  This Amendment shall have been duly executed and delivered by the Borrower, the Credit Parties, Agent and Lenders.

4.2.          No Default.  No Default or Event of Default shall have occurred and be continuing or would result from the effectiveness of this Amendment or the consummation of any of the transactions contemplated hereby.

4.3.          Opinion.  Agent and Lenders shall have received an opinion of counsel to Borrower, Sullivan & Cromwell LLP, with respect to this Amendment, including, without limitation, as to this Amendment and the transactions contemplated hereby not conflicting with any provision of the February 2003 Senior Subordinated Debt Documents, the 2002 Senior Debt Documents, the 2003 Senior Secured Debt Documents or the Mezzanine Debt Documents, all in form and substance acceptable to Agent.

4.4.          Notes.  Each Lender shall have received a new Revolving Note in form and substance acceptable to Agent, duly executed by Borrower and reflecting such Lender’s increased Revolving Loan Commitment pursuant to the terms of this Amendment.

4.5.          Amendment Fee.  Borrower shall have paid to the Agent, a nonrefundable amendment fee for the ratable account of the Lenders, in an amount equal to $200,000.

4.6.          Miscellaneous.  Agent and Lenders shall have received such other agreements, instruments and documents as Agent or Lenders may reasonably request.

5.             Reference to and Effect Upon the Credit Agreement and other Loan Documents. 

5.1.          Full Force and Effect.  Except as specifically provided herein, the Credit Agreement and each other Loan Document shall remain in full force and effect and each is hereby ratified and confirmed by all Credit Parties.

5.2.          No Waiver.  The execution, delivery and effect of this Amendment shall be limited precisely as written and shall not be deemed to (i) be a consent to any waiver of any term or condition, or to any amendment or modification of any term or condition (except as specifically provided herein) of the Credit Agreement or any other Loan Document or (ii) prejudice any right, power or remedy which the Agent or any Lender now has or may have in the future under or in connection with the Credit Agreement or any other Loan Document.

5.3.          Certain Terms.  Each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or any other word or words of similar import shall

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mean and be a reference to the Credit Agreement as amended hereby, and each reference in any other Loan Document to the Credit Agreement or any word or words of similar import shall be and mean a reference to the Credit Agreement as amended hereby.

6.             Counterparts.  This Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed an original but all such counterparts shall constitute one and the same instrument.  Delivery of an executed counterpart of a signature page to this Amendment by telecopier or “pdf” shall be as effective as delivery of a manually executed counterpart signature page to this Amendment.

7.             Costs and Expenses.  As provided in the Credit Agreement, Borrower shall pay the fees, costs and expenses incurred by Agent in connection with the preparation, execution and delivery of this Amendment (including, without limitation, attorneys’ fees).

8.             GOVERNING LAW.  THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPALS.

9.             Headings.  Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.

[Signature Pages Follow]

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IN WITNESS WHEREOF, this Amendment has been duly executed as of the date first written above.

BORROWER:
VERTIS, INC.
By:	/S/ JOHN V. HOWARD, JR.
Name:		John V. Howard, Jr.
Title:		Secretary

GENERAL ELECTRIC CAPITAL CORPORATION
as Agent, an L/C Issuer and a Lender
By:	/S/ SANDRA CLAGHORN
	Duly Authorized Signatory

BANK OF AMERICA, N.A.
as a Lender
By:	/S/ ROBERT ANCHUNDIA
Name:		Robert Anchundia
Title:		Vice President

The following Persons are signatory to this Amendment in their capacity as Credit Parties and not as Borrowers:

VERTIS HOLDINGS, INC.
By:	/S/ JOHN V. HOWARD, JR.
Name:			John V. Howard, Jr.
Title:			Secretary
VERTIS DIGITAL SERVICES LIMITED
By:	/S/ JOHN V. HOWARD, JR.
Name:		John V. Howard, Jr.
Title:		Secretary
ENTERON GROUP LLC
By:	/S/ JOHN V. HOWARD, JR.
Name:		John V. Howard, Jr.
Title:		Secretary
WEBCRAFT, LLC
By:	/S/ JOHN V. HOWARD, JR.
Name:		John V. Howard, Jr.
Title:		Secretary
VERTIS MAILING, LLC
By:	/S/ JOHN V. HOWARD, JR.
Name:		John V. Howard, Jr.
Title:		Secretary

WEBCRAFT CHEMICALS, LLC
By:	/S/ JOHN V. HOWARD, JR.
Name:		John V. Howard, Jr.
Title:		Secretary

EX-10.6

Exhibit 10.6

LIMITED CONSENT AND AMENDMENT NO. 5 TO CREDIT AGREEMENT

This Limited Consent and Amendment No. 5 to Credit Agreement, dated as of September 5, 2006 (this “Consent and Amendment”), is entered into by and among Vertis, Inc. (“Borrower”), as Borrower, the other Credit Parties signatory hereto, General Electric Capital Corporation, as a Lender and as Agent for Lenders (“Agent”), and the other Lenders.

RECITALS

A. Borrower, the other Credit Parties, Agent and Lenders are parties to that certain Credit Agreement, dated as of December 22, 2004, including all annexes, exhibits and schedules thereto (as amended by: (i) that certain Limited Consent and Amendment No. 1 to Credit Agreement, dated as of October 3,2005; (ii) that certain Amendment No. 2 to Credit Agreement, dated as of November 22, 2005; (iii) that certain Limited Consent and Amendment No. 3 to Credit Agreement, dated as of December 12, 2005; and (iv) that certain Amendment No. 4 to Credit Agreement, dated as of May 30,2006; and as from time to time further amended, restated, supplemented or otherwise modified, the “Credit Agreement”).

B. Borrower and the other Credit Parties have requested that Agent and Lenders consent to the sale by Borrower and Webcraft, LLC (“Webcraft”) of certain assets related to Borrower’s and Webcraft’s fragrance and cosmetic businesses as set forth in (i) that certain Asset Purchase Agreement to be entered into by Borrower and Webcraft, together as Seller, and Spice Acquisition Corp. (“Spice”), as Purchaser, and (ii) that certain Asset Sale Agreement to be entered into by Vertis Fragrance SARL (“SARL”), as Seller, and Arcade Europe SARL, as Purchaser, substantially in the form of Exhibit A-1 and Exhibit A-2, respectively, to this Consent and Amendment (together, the “Asset Purchase Agreements”), and (iii) certain related actions as further described in Section 2 herein.

C. This Consent and Amendment shall constitute a Loan Document and these Recitals shall be construed as part of this Consent and Amendment.

NOW THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, and of the Loans and other extensions of credit heretofore, now or hereafter made to, or for the benefit of, Borrower by Lenders, Borrower, the other Credit Parties, Agent and Lenders hereby agree as follows:

1. Definitions. Except to the extent otherwise specified herein, capitalized terms used in this Consent and Amendment shall have the same meanings ascribed to them in the Credit Agreement and Annex A thereto.

2. Consents.

2.1. Notwithstanding Section 5.7 of the Credit Agreement or any other provision of the Credit Agreement or any other Loan Document to the contrary, Agent and Lenders hereby consent to the sale by Borrower and Webcraft to Spice of certain assets related to Borrower’s and Webcraft’s fragrance and cosmetic businesses as set forth in the Asset Purchase Agreements; provided, that, any changes to the Asset Purchase Agreements from the versions thereof attached to this Consent and Amendment as Exhibit A-1 and Exhibit A-2, shall be reasonably satisfactory to Agent.

2.2. Notwithstanding any provision of the Credit Agreement or any other Loan Document to the contrary, Agent and Lenders hereby consent to the release of Agent’s Liens on the assets of Borrower and Webcraft which are being sold by Borrower and Webcraft to Spice pursuant to the Asset Purchase Agreements upon the closing of the transactions contemplated by the Asset Purchase Agreements to the

extent such properties and assets have been pledged to Agent pursuant to the Credit Agreement or any other Loan Document.

3. Further Assurances.

3.1. Each Credit Party shall, from time to time, execute and deliver such agreements, instruments, certificates, reports and other documents and take all such actions as Agent or Lenders at any time may reasonably request to evidence, further document, effectuate or otherwise implement the actions described above in Section 2, under the Credit Agreement and/or the other Loan Documents.

3.2. At the time of the closing of the transactions contemplated by the Asset Purchase Agreements and from time to time thereafter, at Borrower’s expense, Agent and Lenders shall execute and deliver such lien release instruments and documents and take such related actions as Borrower may reasonably request to evidence, further document, effectuate or otherwise implement the release of Agent’s Liens as described above in Section 2, under the Credit Agreement and the other Loan Documents.

4. Representations and Warranties. Borrower and Credit Parties, jointly and severally, hereby represent and warrant to Agent and Lenders that:

4.1. Aside from: (a) (i) the agreements to provide indemnification, (ii) the guaranty by Borrower, and (iii) other obligations, all as set forth in the Asset Purchase Agreements, under which the maximum aggregate exposure with respect to the preceding clause (i) is $4,000,000, subject to the exceptions set forth in the Asset Purchase Agreements; and (b) the obligations set forth in the Transition Services Agreement, substantially in the form of Exhibit B to this Consent and Amendment (the “Transition Services Agreement”), to be entered into by and among Borrower, Webcraft, SARL and Spice, (A) there are no post-closing obligations and liabilities, including, without limitation, contingent obligations and liabilities, under the Asset Purchase Agreements or the Transition Services Agreement of Borrower and the other Credit Parties to Spice or any other Person, and (B) there is no existing guaranty, credit support, indemnity or other similar arrangement by Borrower or any other Credit Party or by any of their direct or indirect Subsidiaries in favor of Spice or any employee, customer or creditor relating to Spice.

4.2. The execution, delivery and performance by Borrower and each of the other Credit Parties of this Consent and Amendment have been duly authorized by all necessary corporate action, and this Consent and Amendment constitutes the legal, valid and binding obligation of Borrower and each of the other Credit Parties enforceable against each of them in accordance with its terms, except as the enforcement hereof may be subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors’ rights generally or to general principles of equity.

4.3. The execution, delivery and performance of this Consent and Amendment and the consummation of the transactions contemplated hereby by Borrower and each other Credit Party do not, and will not:

(a) contravene or conflict with any provision of (i) law, (ii) any judgment, decree or order, or (iii) the certificate or articles of incorporation or by-laws or other constituent documents of Borrower or any other Credit Party; or

(b) contravene or conflict with, or cause any Lien to arise under, any provision of any indenture, agreement, mortgage, lease, instrument or other document, including, without limitation, the Security Agreement, the February 2003 Senior Subordinated Debt Documents, the 2002 Senior Debt Documents, the 2003 Senior Secured Debt Documents or the Mezzanine Debt Documents, binding upon or otherwise affecting Borrower or any Credit Party or any property of Borrower or any Credit Party.

4.4.          No Default or Event of Default exists under the Credit Agreement or any other Loan Document or will exist after or be triggered by the execution, delivery and performance of this Consent and Amendment or the consummation of the transactions contemplated hereby and by the Asset Purchase Agreements. In addition, each of Borrower and each other Credit Party hereby represents, warrants and reaffirms that the Credit Agreement and each of the other Loan Documents remains in full force and effect.

5. Covenants. Aside from (a) (i) the agreements to provide indemnification, (ii) the guaranty by Borrower, and (iii) other obligations, all as set forth in the Asset Purchase Agreements, under which the maximum aggregate exposure with respect to the preceding clause (i) is $4,000,000, subject to the exceptions set forth in the Asset Purchase Agreements, and (b) the obligations set forth in the Transition Services Agreement, each of Borrower and each other Credit Party executing this Consent and Amendment jointly and severally agrees as to all Credit Parties that from and after the date hereof, the Credit Parties shall not and shall not cause or permit their Subsidiaries directly or indirectly to create, incur, assume or otherwise become or remain directly or indirectly liable with respect to any guaranty, credit support, indemnity or other similar arrangement, by Borrower or by any of its direct or indirect Subsidiaries in favor of Spice or any employee, customer or creditor relating to Spice.

6. Conditions Precedent to Effectiveness. The effectiveness of the consents set forth in Section 2 hereof are in each instance subject to the satisfaction of each of the following conditions precedent:

6.1. Consent and Amendment. This Consent and Amendment shall have been duly executed and delivered by Borrower, the other Credit Parties, Agent and Lenders.

6.2. No Default. No Default or Event of Default shall have occurred and be continuing or would result from the effectiveness of this Consent and Amendment or the consummation of any of the transactions contemplated hereby or by the Asset Purchase Agreements.

6.3. Opinion. Agent and Lenders shall have received an opinion of counsel to Borrower, Sullivan & Cromwell LLP, with respect to this Consent and Amendment, including, without limitation, as to this Consent and Amendment, the Asset Purchase Agreements and the transactions contemplated hereby and thereby not conflicting with any provision of the Security Agreement, the February 2003 Senior Subordinated Debt Documents, the 2002 Senior Debt Documents, the 2003 Senior Secured Debt Documents or the Mezzanine Debt Documents, in form and substance acceptable to Agent.

6.4. Miscellaneous. Agent and Lenders shall have received such other agreements, instruments and documents as Agent or Lenders may reasonably request.

7. Reference to and Effect Upon the Credit Agreement and other Loan Documents.

7.1. Full Force and Effect. Except as specifically provided herein, the Credit Agreement, the Notes and each other Loan Document shall remain in full force and effect and each is hereby ratified and confirmed by all Credit Parties.

7.2. No Waiver. The execution, delivery and effect of this Consent and Amendment shall be limited precisely as written and shall not be deemed to (i) be a consent to any waiver of any term or condition, or to any amendment or modification of any term or condition (except as specifically provided herein) of the Credit Agreement or any other Loan Document or (ii) prejudice any right, power or remedy which the Agent or any Lender now has or may have in the future under or in connection with the Credit Agreement, the Notes or any other Loan Document.

7.3 Certain Terms. Each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof ‘, “herein” or any other word or words of similar import shall mean and be a reference to the Credit Agreement as amended hereby, and each reference in any other Loan Document to the Credit Agreement or any word or words of similar import shall be and mean a reference to the Credit Agreement as amended hereby.

8. Counterparts. This Consent and Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed an original but all such counterparts shall constitute one and the same instrument. Delivery of an executed counterpart of a signature page to this Consent and Amendment by telecopier or “pdf” shall be as effective as delivery of a manually executed counterpart signature page to this Consent and Amendment.

9. Costs and Expenses. As provided in the Credit Agreement, Borrower shall pay the fees, costs and expenses incurred by Agent in connection with the preparation, execution and delivery of this Consent and Amendment (including, without limitation, attorneys’ fees).

10. GOVERNING LAW. THIS CONSENT AND AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPALS.

11. Headings. Section headings in this Consent and Amendment are included herein for convenience of reference only and shall not constitute a part of this Consent and Amendment for any other purpose.

[Signature Pages Follow]

IN WITNESS WHEREOF, this Consent and Amendment has been duly executed as of the date first written above.

BORROWER:
VERTIS, INC.
By:	/s/ Dean D. Durbin
Name:			Dean D. Durbin
Title:		President and Chief Executive Officer

GENERAL ELECTRIC CAPITAL CORPORATION
as Agent, an L/C Issuer and a Lender
By:	/s/ Sandra Claghorn
	Duly Authorized Signatory

BANK OF AMERICA, N.A.
as a Lender
By:	/s/ Robert Anchundia
Name:			Robert Anchundia
Title:		Vice President

The following Persons are signatory to this Amendment in their capacity as Credit Parties and not as Borrowers:

VERTIS HOLDINGS, INC.
By:	/s/ Dean D. Durbin
Name:			Dean D. Durbin
Title:		President and Chief Executive Officer
VERTIS DIGITAL SERVICES LIMITED
By:	/s/ Dean D. Durbin
Name:			Dean D. Durbin
Title:		President and Chief Executive Officer
ENTERON GROUP LLC
By:	/s/ Dean D. Durbin
Name:			Dean D. Durbin
Title:		President and Chief Executive Officer
WEBCRAFT, LLC
By:	/s/ Dean D. Durbin
Name:			Dean D. Durbin
Title:		President and Chief Executive Officer
USA DIRECT, LLC
By:	/s/ Dean D. Durbin
Name:			Dean D. Durbin
Title:		President and Chief Executive Officer

VERTIS MAILING, LLC
By:	/s/ Dean D. Durbin
Name:			Dean D. Durbin
Title:		President and Chief Executive Officer
WEBCRAFT CHEMICALS, LLC
By:	/s/ Dean D. Durbin
Name:			Dean D. Durbin
Title:		President and Chief Executive Officer

EX-10.7

Exhibit 10.7

LIMITED CONSENT AND AMENDMENT NO. 6 TO CREDIT AGREEMENT

This Limited Consent and Amendment No. 6 to Credit Agreement, dated as of November    , 2006 (this “Consent and Amendment”), is entered into by and among Vertis, Inc. (“Borrower”), as Borrower, the other Credit Parties signatory hereto, General Electric Capital Corporation, as a Lender and as Agent for Lenders (“Agent”), and the other Lenders.

RECITALS

A.    Borrower, the other Credit Parties, Agent and Lenders are parties to that certain Credit Agreement, dated as of December 22, 2004, including all annexes, exhibits and schedules thereto (as amended by: (i) that certain Limited Consent and Amendment No. 1 to Credit Agreement, dated as of October 3, 2005; (ii) that certain Amendment No. 2 to Credit Agreement, dated as of November 22, 2005; (iii) that certain Limited Consent and Amendment No. 3 to Credit Agreement, dated as of December 12, 2005; (iv) that certain Amendment No. 4 to Credit Agreement, dated as of May 30, 2006; and (v) that certain Limited Consent and Amendment No. 5 to Credit Agreement, dated as of September 5, 2006; and as from time to time further amended, restated, supplemented or otherwise modified, the “Credit Agreement”).

B.    Borrower and the other Credit Parties have requested that Agent and Lenders consent to the condemnation of approximately twelve (12) acres of land (the “Chalfont Property”) comprising a portion of the property owned by Webcraft, LLC (“Webcraft”) in Chalfont, Pennsylvania to New Britain Township (the “Town”), and the transfer of the Chalfont Property to the Town in accordance with the terms of an agreement to be in form and substance satisfactory to Agent (the “Chalfont Property Transfer Agreement”) in connection with the construction by Webcraft of a warehouse in the Town.

C.    This Consent and Amendment shall constitute a Loan Document and these Recitals shall be construed as part of this Consent and Amendment.

NOW THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, and of the Loans and other extensions of credit heretofore, now or hereafter made to, or for the benefit of, Borrower by Lenders, Borrower, the other Credit Parties, Agent and Lenders hereby agree as follows:

1.             Definitions.  Except to the extent otherwise specified herein, capitalized terms used in this Consent and Amendment shall have the same meanings ascribed to them in the Credit Agreement and Annex A thereto.

2.             Consents.

2.1.          Notwithstanding Section 5.7 of the Credit Agreement or any other provision of the Credit Agreement or any other Loan Document to the contrary, Agent and Lenders hereby consent to the condemnation of the Chalfont Property by the Town and the

transfer by Webcraft of the Chalfont Property to the Town in accordance with the terms of the Chalfont Property Transfer Agreement.

2.2.          Notwithstanding any provision of the Credit Agreement or any other Loan Document to the contrary, Agent and Lenders hereby consent to the release of Agent’s Liens on the assets of Webcraft which are being transferred by Webcraft to the Town pursuant to the Chalfont Property Transfer Agreement upon the closing of the transactions contemplated by the Chalfont Property Transfer Agreement to the extent such properties and assets have been pledged to Agent pursuant to the Credit Agreement or any other Loan Document.

3.             Further Assurances.

3.1.          Each Credit Party shall, from time to time, execute and deliver such agreements, instruments, certificates, reports and other documents and take all such actions as Agent or Lenders at any time may reasonably request to evidence, further document, effectuate or otherwise implement the actions described above in Section 2, under the Credit Agreement and/or the other Loan Documents.

3.2.          At the time of the closing of the transactions contemplated by the Chalfont Property Transfer Agreement and from time to time thereafter, at Borrower’s expense, Agent and Lenders shall execute and deliver such lien release instruments and documents and take such related actions as Borrower may reasonably request to evidence, further document, effectuate or otherwise implement the release of Agent’s Liens as described above in Section 2, under the Credit Agreement and the other Loan Documents.

4.             Representations and Warranties.  Borrower and Credit Parties, jointly and severally, hereby represent and warrant to Agent and Lenders that:

4.1.          Aside from the obligations set forth in the Chalfont Property Transfer Agreement, there are no post-closing obligations and liabilities, including, without limitation, contingent obligations and liabilities, under the Chalfont Property Transfer Agreement of Borrower and the other Credit Parties to the Town or any other Person, and (b) there is no existing guaranty, credit support, indemnity or other similar arrangement by Borrower or any other Credit Party or by any of their direct or indirect Subsidiaries in favor of the Town or any employee, customer or creditor relating to the Town.

4.2.          The execution, delivery and performance by Borrower and each of the other Credit Parties of this Consent and Amendment have been duly authorized by all necessary corporate action, and this Consent and Amendment constitutes the legal, valid and binding obligation of Borrower and each of the other Credit Parties enforceable against each of them in accordance with its terms, except as the enforcement hereof may be subject to the effect of any applicable bankruptcy, insolvency, reorganization, moratorium or similar law affecting creditors’ rights generally or to general principles of equity.

4.3.          The execution, delivery and performance of this Consent and Amendment and the consummation of the transactions contemplated hereby by Borrower and each other Credit Party do not, and will not:

2

(a)           contravene or conflict with any provision of (i) law, (ii) any judgment, decree or order, or (iii) the certificate or articles of incorporation or by-laws or other constituent documents of Borrower or any other Credit Party; or

(b)           contravene or conflict with, or cause any Lien to arise under, any provision of any indenture, agreement, mortgage, lease, instrument or other document, including, without limitation, the Security Agreement, the February 2003 Senior Subordinated Debt Documents, the 2002 Senior Debt Documents, the 2003 Senior Secured Debt Documents or the Mezzanine Debt Documents, binding upon or otherwise affecting Borrower or any Credit Party or any property of Borrower or any Credit Party.

4.4.          No Default or Event of Default exists under the Credit Agreement or any other Loan Document or will exist after or be triggered by the execution, delivery and performance of this Consent and Amendment or the consummation of the transactions contemplated hereby and by the Chalfont Property Transfer Agreement.  In addition, each of Borrower and each other Credit Party hereby represents, warrants and reaffirms that the Credit Agreement and each of the other Loan Documents remains in full force and effect.

5.             Covenants.  Each of Borrower and each other Credit Party executing this Consent and Amendment jointly and severally agrees as to all Credit Parties that from and after the date hereof, the Credit Parties shall not and shall not cause or permit their Subsidiaries directly or indirectly to create, incur, assume or otherwise become or remain directly or indirectly liable with respect to any guaranty, credit support, indemnity or other similar arrangement, by Borrower or by any of its direct or indirect Subsidiaries in favor of the Town or any employee, customer or creditor relating to the Town.

6.             Conditions Precedent to Effectiveness.  The effectiveness of the consents set forth in Section 2 hereof are in each instance subject to the satisfaction of each of the following conditions precedent:

6.1.          Consent and Amendment.  This Consent and Amendment shall have been duly executed and delivered by Borrower, the other Credit Parties, Agent and Lenders.

6.2.          No Default.  No Default or Event of Default shall have occurred and be continuing or would result from the effectiveness of this Consent and Amendment or the consummation of any of the transactions contemplated hereby or by the Chalfont Property Transfer Agreement.

6.3.          Opinion.  Agent and Lenders shall have received an opinion of counsel to Borrower, Sullivan & Cromwell LLP, with respect to this Consent and Amendment, including, without limitation, as to this Consent and Amendment, the Chalfont Property Transfer Agreement and the transactions contemplated hereby and thereby not conflicting with any provision of the Security Agreement, the February 2003 Senior Subordinated Debt Documents, the 2002 Senior Debt Documents, the 2003 Senior Secured Debt Documents or the Mezzanine Debt Documents, in form and substance acceptable to Agent.

6.4.          Miscellaneous.  Agent and Lenders shall have received such other agreements, instruments and documents as Agent or Lenders may reasonably request.

3

7.             Reference to and Effect Upon the Credit Agreement and other Loan Documents. 

7.1.          Full Force and Effect.  Except as specifically provided herein, the Credit Agreement, the Notes and each other Loan Document shall remain in full force and effect and each is hereby ratified and confirmed by all Credit Parties.

7.2.          No Waiver.  The execution, delivery and effect of this Consent and Amendment shall be limited precisely as written and shall not be deemed to (i) be a consent to any waiver of any term or condition, or to any amendment or modification of any term or condition (except as specifically provided herein) of the Credit Agreement or any other Loan Document or (ii) prejudice any right, power or remedy which the Agent or any Lender now has or may have in the future under or in connection with the Credit Agreement, the Notes or any other Loan Document.

7.3.          Certain Terms.  Each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or any other word or words of similar import shall mean and be a reference to the Credit Agreement as amended hereby, and each reference in any other Loan Document to the Credit Agreement or any word or words of similar import shall be and mean a reference to the Credit Agreement as amended hereby.

8.             Counterparts.  This Consent and Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed an original but all such counterparts shall constitute one and the same instrument.  Delivery of an executed counterpart of a signature page to this Consent and Amendment by telecopier or “pdf” shall be as effective as delivery of a manually executed counterpart signature page to this Consent and Amendment.

9.             Costs and Expenses.  As provided in the Credit Agreement, Borrower shall pay the fees, costs and expenses incurred by Agent in connection with the preparation, execution and delivery of this Consent and Amendment (including, without limitation, attorneys’ fees).

10.           GOVERNING LAW.  THIS CONSENT AND AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPALS.

11.           Headings.  Section headings in this Consent and Amendment are included herein for convenience of reference only and shall not constitute a part of this Consent and Amendment for any other purpose.

[Signature Pages Follow]

4

IN WITNESS WHEREOF, this Consent and Amendment has been duly executed as of the date first written above.

BORROWER:
VERTIS, INC.
By:	/S/ Stephen E. Tremblay
Name: Stephen E. Tremblay
Title: Chief Financial Officer

GENERAL ELECTRIC CAPITAL CORPORATION
as Agent, an L/C Issuer and a Lender
By:	/S/ Daniel D. McCready
Duly Authorized Signatory

BANK OF AMERICA, N.A.
as a Lender
By:	/S/ Richard Levenson
Name: Richard Levenson
Title: Senior Vice President

                The following Persons are signatory to this Amendment in their capacity as Credit Parties and not as Borrowers:

VERTIS HOLDINGS, INC.
By:				/S/ Stephen E. Tremblay
Name: Stephen E. Tremblay
Title: Chief Financial Officer
ENTERON GROUP LLC
By:			/S/ Stephen E. Tremblay
Name: Stephen E. Tremblay
Title: Chief Financial Officer
WEBCRAFT, LLC
By:		/S/ Stephen E. Tremblay
Name: Stephen E. Tremblay
Title: Chief Financial Officer
USA DIRECT, LLC
By:	/S/ Stephen E. Tremblay
Name: Stephen E. Tremblay
Title: Chief Financial Officer
VERTIS MAILING, LLC
By:				/S/ Stephen E. Tremblay
Name: Stephen E. Tremblay
Title: Chief Financial Officer

WEBCRAFT CHEMICALS, LLC
By:	/S/ Stephen E. Tremblay
Name: Stephen E. Tremblay
Title: Chief Financial Officer

EX-10.12

Exhibit 10.12

FIRST AMENDMENT

THIS FIRST AMENDMENT (this “Amendment”), is dated September 5, 2006, and relates to that certain Receivables Funding and Administration Agreement, dated as of November 25, 2005 (as amended, restated, supplemented or otherwise modified from time to time, the “Funding Agreement”), among Vertis Receivables II, LLC, a Delaware limited liability company (“Borrower”), the financial institutions from time to time party thereto (each a “Lender” and collectively, the “Lenders”), General Electric Capital Corporation, a Delaware corporation, as administrative agent for the Lenders (the “Administrative Agent”), and is hereby made by Borrower, the Administrative Agent, and the Lenders. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Funding Agreement.

W I T N E S S E T H:

WHEREAS, Borrower has advised the Lenders and the Administrative Agent that Webcraft, LLC, a Delaware limited liability company (“Webcraft”) has agreed to sell certain assets used in the development, marketing, sale and production of multi-sensory sampling devices and renditions, including, without limitation, fragrance, cosmetics and toiletries-related sampling, labels, scent strips and single use packaging for fragrances, cosmetics and toiletries (which business is hereinafter referred to as the “Fragrance Business”) pursuant to that certain Asset Purchase Agreement (the “FB Purchase Agreement”) among Vertis, Inc., a Delaware corporation (“Vertis”) and Webcraft as “Seller” thereunder and Spice Acquisition Corp., a Delaware corporation (the “FB Purchaser”), dated September 5, 2006 (the transactions relating thereto, the “Sale Transaction”);

WHEREAS, prior to the date hereof, and continuing until the “Closing Date” (as defined in the FB Purchase Agreement), Webcraft has sold and will continue to sell Receivables arising out of the Fragrance Business to Borrower (the “FB Receivables”) and after the Closing Date will continue to sell Receivables (other than those arising out of the Fragrance Business) as provided in the Related Documents;

WHEREAS, the parties hereto have agreed as follows:

(a)           contemporaneously with the effectiveness of the Sale Transaction, all Transferred Receivables constituting FB Receivables shall no longer constitute “Eligible Receivables”;

(b)           as a result of the foregoing, a Funding Excess shall exist and Borrower shall be required to pay the amount of such Funding Excess in cash to Administrative Agent pursuant to Section 2.08(b) and 2.08(d);

(c)           if such Funding Excess is not paid as and when required pursuant to Section 2.08(b) and 2.08(d), then Administrative Agent has the authority pursuant to Section 9.01(b) to direct the sale of the FB Receivables; and

(d)           in order to effectuate the provisions of the Funding Agreement and Related Documents and the orderly disposition of Transferred Receivables as required to repay the Loans, notwithstanding any timing differentials between the occurrence of the

foregoing pursuant to the Funding Agreement, the Administrative Agent and the Lenders shall on the Effective Date (as defined in Section 3 below), direct the sale of the FB Receivables to the FB Purchaser by the Borrower, and the Borrower will effectuate such sale by the execution and delivery of a quit-claim assignment agreement with the FB Purchaser in form and substance satisfactory to Administrative Agent (a copy of which is attached hereto as Exhibit A, the “FB Quitclaim”, such quit-claim transaction, the “Quitclaim Transaction”);

WHEREAS, subject to the terms and conditions set forth herein, in connection with the consummation of the Sale Transaction and the Quitclaim Transaction, the Administrative Agent  and Lenders have agreed to consent to the Quitclaim Transaction;

WHEREAS, the Administrative Agent, the Lenders, and Borrower are willing to amend the Funding Agreement to reflect the foregoing and grant the requested consent on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the foregoing premises, the parties hereto agree as follows:

1.             Consent and Amendments as of Effective Date.  As of the “Effective Date” (as defined in Section 3 below):

(a)           All Transferred Receivables constituting FB Receivables shall no longer be deemed “Eligible Receivables”.

(b)           The Administrative Agent and the Lenders hereby direct, and consent to, the Quitclaim Transaction, and Borrower shall enter into the Quitclaim Transaction and use the proceeds thereof to pay on the Effective Date any Funding Excess resulting from the amendment described in clause (a) above.

(c)           Any collections received in a Lockbox, Collection Account or Concentration Account with respect to FB Receivables on and after the Effective Date shall be deemed “Unrelated Amounts”. Borrower shall identify to Administrative Agent such Unrelated Amounts within one Business Day of deposit therein, and Administrative Agent agrees that upon such notice Administrative Agent shall (i) until the 90th day after the Effective Date, remit such amounts to the FB Purchaser as directed by Servicer and (ii) after the 90th day after the Effective Date, address such Unrelated Amounts as otherwise provided in the Related Documents.

(d)           No later than 5:00 p.m. (New York time) on each Tuesday, Borrower shall deliver a report identifying any collections received by Borrower, Webcraft, any other Originator or Servicer from FB Receivables during the previous calendar week (including a total of such amounts identified pursuant to clause (c) above), prepared as of the last day of such week.

(e)           On each Settlement Date until the 90th day after the Closing Date, Borrower shall provide (or cause Servicer to so provide) a written report to

Administrative Agent certifying that no collections from FB Receivables have been remitted to the Agent Account about which Administrative Agent has not been advised.

(f)            Borrower agrees that it will, on or before the close of business on the fifth Business Day after the “Closing Date” (as defined in the FB Purchase Agreement), cause Servicer to send written notice to each Obligor of FB Receivables to remit payment to a deposit account other than a Collection Account or Concentration Account (and a lockbox other than a Lockbox) and a Person other than Borrower, Servicer and Webcraft. Should notwithstanding such instructions any collections from FB Receivables be remitted to Servicer, Webcraft, Borrower, any Originator, any Collection Account, Concentration Account or Lockbox, Borrower shall exercise commercially reasonable efforts to cause FB Purchaser to renotify such Obligors regarding the proper direction of payments. The parties hereto agree that a failure to send such notices by the date set forth in the first sentence of this clause (f) shall not be subject to any grace period set forth in Section 8.01 of the Funding Agreement.

(g)           The Administrative Agent, on behalf of the Lenders, hereby releases all security interests with respect to all of the Administrative Agent’s right, title and interest in and to the FB Receivables.

2.             Representations and Warranties. As of the Effective Date, Borrower hereby represents and warrants to Administrative Agent and the Lenders that (i) all of the representations and warranties of such Person in the Related Documents are true and correct in all material respects on and as of such date as though made to each such Person on and as of such date (other than representations and warranties which expressly speak as of a different date, which representations shall be made only on such date), (ii) each of the recitals accurately describes the transactions described therein in all respects, and (iii) as of such date, no Incipient Termination Event, Termination Event, Incipient Servicer Termination Event or Event of Servicer Termination Event has occurred and is continuing (it being agreed and understood by all parties that the Sale Transaction, Quitclaim Transaction and any Funding Excess created thereby but remedied in accordance with Section 3(c) below do not constitute any of the foregoing types of events).

3.             Effective Date.  The “Effective Date” shall occur upon the satisfaction of the following conditions precedent:

(a)           The Administrative Agent shall have received counterparts hereof executed by each Person for which a signature block is attached hereto.

(b)           Each of the representations and warranties contained in this Amendment which speaks as of the Effective Date shall be true and correct in all respects on and as of the Effective Date.

(c)           Borrower shall have delivered to the Administrative Agent on or prior to the Effective Date a Daily Report giving pro forma effect to the foregoing amendment and consent, and from the amount received from the proceeds of the Quitclaim Transaction, Borrower shall have paid to the Administrative Agent, in

immediately available funds, an amount equal to the amount, if any, of Funding Excess created by the foregoing amendment and consent.

(d)           The Administrative Agent shall have received an execution copy of the FB Purchase Agreement and the FB Quitclaim executed and delivered by all parties thereto in form and substance reasonably satisfactory to Administrative Agent.

(e)           The “Closing Date” pursuant to the FB Purchase Agreement shall have occurred, and the Sale Transaction and the Quitclaim Transaction shall have been consummated.

4.             Reference to and Effect on the Related Documents.

(a)           As applicable, on and after the Effective Date, each reference in the Funding Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import, and each reference in the other Related Documents to the Funding Agreement, shall mean and be a reference to the Funding Agreement as modified hereby.

(b)           Except as specifically amended or consented to above, all of the terms of the Funding Agreement and all other Related Documents remain unchanged and in full force and effect.

(c)           The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of any Lender or of Administrative Agent under any of the Related Documents, nor constitute an amendment, other than as set forth herein, or waiver of any provision of any of the Related Documents, nor obligate any Lender or Administrative Agent to agree to similar consents in the future.

(d)           This Amendment shall constitute a Related Document.

5.             Costs and Expenses.  Borrower agrees to pay upon demand in accordance with the terms of Section 12.04 of the Funding Agreement all reasonable costs and expenses of the Administrative Agent in connection with the preparation, negotiation, execution and delivery of this Amendment, including, without limitation, the reasonable fees, expenses and disbursements of Sidley Austin LLP, counsel for the Administrative Agent with respect to any of the foregoing.

6.             Miscellaneous.  The headings herein are for convenience of reference only and shall not alter or otherwise affect the meaning hereof.

7.             Counterparts.  This Amendment may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed and delivered by facsimile shall be an original, but all of which shall together constitute one and the same instrument.

8.             GOVERNING LAW.  THIS AMENDMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, BE

GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (INCLUDING SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAWS BUT OTHERWISE WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES) EXCEPT TO THE EXTENT THAT THE PERFECTION, EFFECT OF PERFECTION OR PRIORITY OF THE INTERESTS OF THE ADMINISTRATIVE AGENT IN THE RECEIVABLES OR REMEDIES HEREUNDER OR THEREUNDER, IN RESPECT THEREOF, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF NEW YORK, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.

*              *              *

IN WITNESS WHEREOF, Borrower, the Administrative Agent, and the Lenders, have caused this Amendment to be executed by their respective officers thereunto duly authorized as of the date first above written.

VERTIS RECEIVABLES II, LLC
as the Borrower
By:	/S/ JOHN V. HOWARD, JR.
	Name:	John V. Howard, Jr
	Title:	Secretary

	GENERAL ELECTRIC CAPITAL
	CORPORATION
	as Administrative Agent
	By:	/S/ SUSAN TIMMERMAN
		Name: Susan Timmerman
		Duly Authorized Signatory
Commitment: $130,000,000	GENERAL ELECTRIC CAPITAL
	CORPORATION
	as the Lender and Swing Line Lender
	By:	/S/ Susan Timmerman
		Name: Susan Timmerman
		Duly Authorized Signatory

ACKNOWLEDGED & AGREED:
	VERTIS, INC.
	as Servicer
	By:	/S/ John V. Howard, Jr.
		Name: John V. Howard, Jr.
		Title:   Secretary

Exhibit A

Quitclaim Agreement

SEE ATTACHED

ACCOUNTS RECEIVABLE ASSIGNMENT

THIS ACCOUNTS RECEIVABLE ASSIGNMENT (the “Accounts Receivable Assignment”) is entered into as of September 8, 2006 by and between VERTIS RECEIVABLES II, LLC (“Assignor”) and SPICE ACQUISITION CORP (“Assignee”).

WHEREAS, Vertis, Inc. and Webcraft, LLC and certain of their Affiliates other than Assigor (collectively “Business Seller”), are engaged in the business of the development, marketing, sale and production of multi-sensory sampling devices and renditions, including, without limitation, fragrance, cosmetics and toiletries-related sampling, labels, scent strips and single use packaging for fragrances, cosmetics and toiletries (the “Business”);

WHEREAS, Business Seller and Assignee, have entered into that certain Asset Purchase Agreement as of September 5, 2006 (the “Asset Purchase Agreement”) pursuant to which Business Seller has agreed to sell to Assignee, as Purchaser thereunder, the Business and certain assets used in or comprising the Business; and

WHEREAS, Assignor is the owner of accounts receivable arising out of the Business, and collateral and supporting obligations securing such accounts receivable (collectively, the “A/R Assets”),

NOW, THEREFORE

1.             In consideration of the payment made by Assignee in the amount of $8,022,279 in immediately available funds remitted to Bank of America, N.A., Account No. 3751970318, ABA No. 026009593, upon receipt of such amount, the Assignor hereby sells, assigns, transfers and conveys, absolutely and without recourse, all of its right, title and interest in, to and under all of the A/R Assets.

2.             Assignor covenants and agrees to execute and deliver, or cause to be executed and delivered, any and all agreements, instruments, papers, or deeds, as may be reasonably required by Assignee for the purpose of evidencing the vesting in Assignee of the property, rights, title and interests of the Assignor sold hereunder and the release of any liens created by Assignor, other than Permitted Liens (as defined in the Asset Purchase Agreement).

3.             Assignor hereby authorizes Assignee to file a financing statement in the form attached as Exhibit A hereto.  If Assignee causes a financing statement to be filed, Assignee hereby agrees to cause such financing statement to be terminated promptly following its receipt of payment from the obligors on the A/R Assets transferred hereunder.

4.             Except as expressly stated herein, Assignor makes no other representations, warranties or covenants.  We refer you to the representations, warranties and covenants made by Business Seller in the Asset Purchase Agreement with respect to the Assignor and the A/R Assets.

5.             Wherever possible, each provision of this Accounts Receivable Assignment shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Accounts Receivable Assignment shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or the remaining provisions of this Accounts Receivable Assignment.

6.             THIS ACCOUNTS RECEIVABLE ASSIGNMENT SHALL BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING SECTION 5-1401 AND SECTION 5-1402 OF THE GENERAL OBLIGATIONS LAWS BUT OTHERWISE WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES), AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.

7.             Assignee hereby agrees that from and after the date hereof, until the date that is one year and one day after all obligations of the Assignor under the Receivables Funding and Administration Agreement (and all amendments and replacements thereof) have terminated, it will not, directly or indirectly, institute or cause to be instituted against the Assignor any bankruptcy case, insolvency or dissolution proceedings.

IN WITNESS WHEREOF, the parties have caused this Accounts Receivable Assignment to be executed by their respective officers thereunto duly authorized, as of the day and year first above written.

VERTIS RECEIVABLES II, LLC, as
Assignor
By:	/S/ John V. Howard, Jr.
Name:			John V. Howard, Jr.
Title:			Secretary
Agreed and accepted:
SPICE ACQUISITION CORP., as Assignee
By:	/S/ Paul Carousso
Name:		Paul Carousso
Title:		SVP Finance

The undersigned, as Administrative Agent on behalf of the lenders under that certain Receivables Funding and Administration Agreement, dated as of November 25, 2005, among the Assignor, the financial institutions identified as lenders therein, and General Electric Capital Corporation, as Administrative Agent, consents and agrees to the sale, assignment and conveyance provided for herein and hereby releases any an all liens, security interests or other interests in the A/R Assets (and proceeds thereof, other than the purchase price paid as provided herein) conveyed hereunder, any and all such liens or security interest to attach to the purchase price provided herein.

GENERAL ELECTRIC CAPITAL
CORPORATION, as Administrative Agent
By:	/S/ Susan Timmerman
Name:		Susan Timmerman
Title:		Duly Authorized Signatory

EX-10.41

Exhibit 10.41

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

December 5, 2006

VIA OVERNIGHT DELIVERY

Dean D. Durbin

Dear Dean:

This letter (“Letter Agreement”) confirms our agreement concerning your resignation as President, Chief Executive Officer, and Director of Vertis Holdings, Inc., Vertis, Inc. and their subsidiaries and affiliates (collectively “Vertis”) effective November 28, 2006, and the special benefits that are being offered to you in order to ensure a smooth transition. Although you are resigning your employment with Vertis, Vertis agrees to honor the terms of your August 31, 2003 Employment Agreement, as amended (“Employment Agreement”), as though your termination of employment is occurring under the provisions of Section 5(a) of the Employment Agreement and will provide to you the severance benefits set forth in the Employment Agreement for such terminations, as well as other valuable consideration set forth below. Other than as specifically modified below, your rights and obligations and all other provisions under your Employment Agreement shall remain as set forth therein, including without limitation the provisions of Section 5(d)(iii) thereof; provided, however, that solely for purposes of the last sentence of Section 5(a) and Section 5(d)(iii), your employment will be considered to have terminated effective November 28, 2006.

1.Resignation and Termination of Employment.  Effective November 28, 2006, you resign your position as President and Chief Executive Officer of Vertis, as well as your position on any Board of Directors of Vertis. Your employment with Vertis will continue, in the capacity of a non-officer employee, until February 28, 2007 (the “Date of Termination”), at which time your employment will terminate. Through the Date of Termination, you will continue to receive your current base salary, less applicable withholding taxes and lawful deductions, and except as provided below, you shall continue to be eligible to participate in all Vertis retirement, health and welfare benefit plans, including any medical, prescription, dental, disability, life insurance, accidental death and travel accident insurance plans and programs maintained by Vertis.

2.Transition Period.  Until February 28, 2007, you agree to make yourself available to respond to business-related inquiries from Vertis’s officers, directors and/or shareholders.

3.Equity Interests.  You are a party to those certain agreements with Vertis known as the Amended and Restated Management Subscription Agreement, dated as of August 31, 2003 (the “Management Subscription Agreement”) and certain Restricted Stock Agreements

(INITIALS)

CONFIDENTIAL

dated as of May 20, 2004 and March 6, 2006 respectively (collectively the “Restricted Stock Agreements”), under which you are the beneficial owner of an equity stake in Vertis.

(a)Vertis hereby forever waives its call rights (exclusive of any drag-along rights) against the shares of common stock and other equity interests that are subject to the Management Subscription Agreement and agrees to take all actions necessary to amend the Management Subscription Agreement to provide for the continuation of the tag-along rights that you (or, as applicable, your estate) enjoy with respect to the interests subject to the Management Subscription Agreement beyond your termination of employment with Vertis for any reason.

(b)Vertis agrees to take all actions necessary to amend the Restricted Stock Agreements to provide as follows:

(i)On February 28, 2007, forty percent (40%) of the then-unvested shares of common stock subject to the Restricted Stock Agreements shall be forfeited immediately for no consideration,

(ii)with respect to the remaining sixty percent (60%) of the shares of common stock subject to the Restricted Stock Agreements that are unvested as of February 28, 2007 (the “Remaining Shares”),

(1) thirty-three percent (33%) of the Remaining Shares shall be forfeited for no consideration on February 28, 2011, if they have not earlier become vested and nonforfeitable pursuant to the terms of the Restricted Stock Agreements, and

(2) sixty-seven percent (67%) of the Remaining Shares shall be forfeited over the twenty-four (24) month period that commences on February 28, 2007, with one-twenty-fourth (1/24th) of such shares being forfeited on the last day of March 2007, and an additional one-twenty-fourth (1/24th) of such shares being forfeited on the last day of each month thereafter, until all such Remaining Shares shall have been forfeited if they have not earlier become vested and nonforfeitable pursuant to the terms of the Restricted Stock Agreements.

4.Indemnification.  Except to the extent inconsistent with Vertis’s certificate of incorporation or bylaws, Vertis will indemnify you against any claim arising out of your employment to the fullest extent permitted by law with respect to your service as an employee, officer and director of Vertis and its subsidiaries, which indemnification shall be provided following your termination of employment for so long as you may have liability with respect to your service as an employee, officer or director of Vertis. You will be covered by a directors’ and officers’ insurance policy with respect to your acts as an officer and director while employed by Vertis to the same extent as all other Vertis officers and directors under such policies.

5.Releases and Covenants Not to Sue.

(a)In keeping with our intent to provide for an amicable separation, for yourself and your heirs and personal representatives, you hereby release and forever discharge Vertis, and its subsidiaries, affiliates, successors, benefit plans, directors, officers and employees (the “Vertis Released Parties”), from and against all liability, damages, actions and claims of any kind

(INITIALS)

2

whatsoever, known and unknown, that you now have or may have had, or thereafter claim to have, on behalf of yourself or any other person or entity, at any time, arising out of, or relating in any way to, any acts or omissions done or occurring in whole or in part prior to and including the date of this Letter Agreement, including, but not limited to, all such matters arising out of, or related in any way to, your employment or termination of employment with Vertis. You expressly acknowledge and agree that, to the maximum extent permitted by law, this Release includes, but is not limited to, your release of any tort and contract claims and any claims under Title VII of the Civil Rights Act of 1964, as amended, the Americans With Disabilities Act, the Employee Retirement Income Security Act, the Age Discrimination in Employment Act, and all other federal, state and local laws pertaining to employment and/or employment discrimination. By signing this Letter Agreement, you also expressly acknowledge and represent that you have suffered no injuries or occupational diseases arising out of or in connection with your employment with Vertis and have received all wages to which you were entitled as an employee of Vertis.

(b)You agree not to file, join in or prosecute any lawsuits or arbitrations against Vertis or any of the other Vertis Released Parties, concerning any matter, act, occurrence, or transaction which arose on or before the date of this Letter Agreement. Although you are not precluded from filing a charge with the EEOC or from participating in an EEOC investigation or proceeding, you expressly waive your right to any monetary recovery or any other individual relief in connection with any EEOC charge or other administrative action, to the maximum extent permitted by law.

(c)Prior to you receiving any payments under this Letter Agreement which are payable after your termination of employment with Vertis, Vertis may require you to execute an additional general release covering the period of time through your last day of employment. The additional general release will be in a form substantially similar to the form attached as Appendix A.

(d)Except as provided in Section 5(e) below, Vertis hereby releases you, your heirs personal representatives and estate, from and against all liability, damages, actions and claims of any kind whatsoever, known and unknown, that Vertis now has or may have had or hereafter claims to have had on behalf of Vertis or any other Person claiming through Vertis at any time, arising out of or relating in any way to any acts or omissions done or occurring in whole or in part prior to and including the date of this Letter Agreement, including, but not limited to all such matters of, or related in any way to Vertis’s employment of you (the “Vertis Release”).

(e)Notwithstanding anything in this Letter Agreement to the contrary, nothing in this Letter Agreement, including, without limitation, the foregoing releases will relinquish, diminish, or in any way affect (i) any rights or claims arising out of this Letter Agreement, including any breach by Vertis or you, as applicable, of this Letter Agreement; (ii) any right or claim you may have, if any, to indemnification under Vertis’s (or as to any other entities for which you serve as a director or officer, such entity’s) certificate of incorporation or bylaws; (iii) any rights you may have as a holder of any equity interest in Vertis or any rights or claims you may have, if any, under a Vertis benefit plan, program or policy, except to the extent modified by this Letter Agreement; (iv) any right to reimbursement for business expenses incurred during the course of

(INITIALS)

3

your employment with Vertis and in accordance with Vertis’s policies with respect to the reimbursement of business expenses; (v) any right or claim you, Vertis or any other Vertis Released Party may have to obtain contribution as permitted by applicable law in an instance in which both you, on the one hand, and any of the Vertis or any other Vertis Released Party, on the other hand, are held to be jointly liable; (vi) any rights or claims that Vertis or any other Vertis Released Party may have against you based on, or arising out of, any criminal conduct or intentional misconduct that you may have engaged in of which Vertis is not currently aware or any act or omission with respect to which Vertis would not have the power to indemnify you under the provisions of Section 145 of the Delaware General Corporation Law regarding indemnification of corporate officers and directors; or (vii) any rights or claims that, as a matter of law, cannot be released or waived.

6.Additional Disclosures and Notice of Rights.  You acknowledge, agree and understand that:

(a)under this Letter Agreement you are waiving and releasing, among other claims, any rights and claims that may exist under the Age Discrimination in Employment Act (ADEA);

(b)the waiver and release of claims set forth in Section 5 above does not apply to any rights or claims that may arise under the ADEA after the date of execution of this Letter Agreement;

(c)the payments and other consideration that are being provided to you under this Letter Agreement are of significant value and in addition to what you otherwise would be entitled;

(d)you are being advised in writing to consult with an attorney before signing this Letter Agreement;

(e)you are being given a period of at least twenty-one (21) days within which to review and consider this Letter Agreement before signing it; and

(f)you may revoke this Letter Agreement by providing written notice to Vertis within seven (7) days following its execution. This Letter Agreement will not become effective and enforceable until such seven (7) day period has expired, and you therefore will not receive any consideration under this Letter Agreement until after the revocation period has expired. Accordingly, the Effective Date of this Letter Agreement will be the eighth (8th) day following your signing of this Letter Agreement. Any notice of revocation of this Letter Agreement will not be effective unless given in writing and received by Vertis via personal delivery, overnight courier or certified U.S. Mail, return receipt requested, at the following address: John V. Howard, Jr., General Counsel, 250 W. Pratt Street, 18th Floor Baltimore, Maryland 21201.

7.Dispute Resolution.  The dispute resolution provisions set forth in the Employment Agreement shall govern disputes arising under or in connection with this Letter Agreement.

(INITIALS)

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8.Successors.

(a)This Letter Agreement is personal to you and without the prior written consent of Vertis, your rights under this Letter Agreement shall not be assignable (except by will or the laws of descent and distribution).

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

(c)Vertis 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 Vertis expressly to assume and agree to perform this Letter Agreement in the same manner and to the same extent that Vertis would have been required to perform it if no such succession had taken place. As used in this Letter Agreement, the term “Vertis” shall mean both Vertis as defined above and any such successor.

9.Miscellaneous.

(a)This Letter Agreement incorporates by specific reference the Management Subscription Agreement, Restricted Stock Agreements, and the provisions of your Employment Agreement, except where specifically modified herein. Unless otherwise noted, this Letter Agreement supersedes any and all other agreements or proposals, written or oral, made by Vertis or any Released Party, or on their behalf to you, including but not limited to, your Employment Agreement. This Letter Agreement is the full and final understanding between you and Vertis. You agree that there are no additional promises or terms among you and Vertis other than those contained or referred to herein, and that 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.

(b)Notwithstanding any other provision of this Letter Agreement, Vertis may withhold from amounts payable under this Letter Agreement all federal, state, local and foreign taxes that are required to be withheld by applicable laws or regulations.

(c)Your or Vertis’s failure to insist upon strict compliance with any provisions of, or to assert any right under, this Letter Agreement shall not be deemed to be a waiver of such provision or right or of any other provision of or right under this Letter Agreement.

(INITIALS)

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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/ Dean D. Durbin
Dean D. Durbin
Date:	12/17/06

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EX-10.42

Exhibit 10.42

January 10, 2007

Douglas L. Mann

Dear Doug,

We are excited about the possibility of your joining Vertis Communications. Clearly you bring to us an enormous amount of experience, expertise, energy, drive and proven results. Therefore, we are pleased to extend to you an offer to join what we believe is one of the most successful and dynamic organizations in targeted advertising, media, and marketing solutions. You have a unique opportunity to participate in the positioning, growth and challenges offered by our company.

Following are the summarized terms of our offer:

1.Specifically, you will join Vertis Communications in the position of Senior Vice President/General Manager - Advertising Inserts and will be responsible for providing the leadership, vision and strategy needed to grow top line revenue for the Advertising Inserts portion of the Company’s business.

2.It is our understanding that you will resign from your current position and begin work with Vertis Communications on Monday, February 5, 2007.

3.Your starting base salary will be $350,000 annualized, distributed in an amount of $13,461.54 bi-weekly on Fridays.

4.In addition, should you begin your employment on or before February 5th, 2007, you will receive a signing bonus of $75,000, paid within the first 30 days. Should you choose to end your association with Vertis or should Vertis terminate you for Cause as defined below prior to you completing one full year of employment, you agree to repay this amount in full and agree Vertis may offset such an amount against amounts owing to you at the end of your employment.

5.You will receive an automobile allowance of $990 per month or $11,880 annually.

6.You will participate in the Employee Incentive Plan, with bonus eligibility of 50% of your base salary. The details of this Plan, including your plan objectives, will be discussed and refined after you have accepted this offer.

7.As an element of your compensation, the Company intends to grant to you 5,000 shares of the Company’s restricted common stock under the Vertis Holdings, Inc. equity plan, subject to approval by the Company’s Board of Directors at its next meeting. These shares of restricted stock would be subject to the Company’s standard vesting provisions and restrictions on transfer. These provisions would be more fully set forth in a Restricted Stock Agreement, to be entered into upon the award of the shares.

8.You will be eligible to participate in the company’s Deferred Compensation Plan. Upon acceptance of this offer, the details of this Plan will be provided to you.

9.Your job performance will be reviewed annually. Merit increases are based on performance and in accordance with the company’s current policy and procedures.

10.You will be eligible for coverage under our group health, life insurance and disability plans in accordance with the terms of those plans. Our health insurance plans provide coverage for most medical, dental and vision expenses. Several coverage options are available allowing you to select the program that best meets your needs. Again, upon acceptance of this offer our benefit brochures and more detailed and specific information will be provided to you under separate cover.

11.You will be eligible to participate in our 401K Plan within 15 days of your hire date.

12.You will be immediately eligible for all Vertis holidays, which are:

·Thanksgiving Day

·Day After Thanksgiving

·Christmas Eve Day

·Christmas Day

·New Year’s Day

·Memorial Day

·Independence Day

·Labor Day

13.As a senior member of management, your personal time off will be covered under our Executive Leave policy, which provides you up to 4 weeks of compensated leave each year. (Leave cannot be accumulated from year to year).

14.Vertis Communications requires that all employees take and pass a pre-employment controlled substance screening prior to the beginning of employment. Therefore, this offer is contingent upon the laboratory results of that test. Details containing our testing procedures are included with this letter.

15.As appropriate for your position in senior management, this offer is contingent upon the successful completion and results of comprehensive reference and background checks.

Due to the highly sensitive nature of our business, we require all professional and or management personnel to sign a Business Responsibility Agreement. This Agreement is enclosed for your review. Please sign one copy of the Agreement and return the other copy to me.

Federal requirements state that, at the time of your employment, you must provide documentation establishing your identity and legal right to work in the United States. Therefore, this offer is contingent on this validation.

We understand that you are not a party to any employment contract or agreement which restricts your ability to devote the full range of your skills and knowledge to Vertis Communications, or your right to engage in competition with your present employer after the termination of your employment. If this understanding is incorrect, please notify us immediately. Accordingly, our offer is contingent upon our receipt and review of any such agreement.

Furthermore, should you accept this offer; there is no express or implied contract of employment between you and Vertis Communications. You will be employed for no particular period of time; you have the right to terminate your employment at any time for any reason, and the company has a similar right. If the Company terminates your employment for any reason other than for Cause, then upon execution of a Separation and Release Agreement, you will receive severance pay, in the form of payroll continuation of your annual base salary as of your date of separation, for a period of twelve (12) months, less all legally required deductions. “Cause” shall mean (i) gross negligence or willful misconduct by you in connection with the performance of your duties that is materially injurious to the Company, monetarily or otherwise, (ii) the conviction of you by a court of competent jurisdiction for felony criminal conduct or (iii) material violation by you of the non-disclosure of confidential information or non-solicitation provisions of your Business Responsibility Agreement.

The terms of this offer of employment extended to you are outlined in this letter and any additions or other changes must also be in writing.

Please acknowledge your receipt of this offer, acceptance of it and agreement with the terms outlined above by signing the attached copy of this letter and returning it to me.

I am sure you realize that this position provides you the opportunity to enhance your already considerable skills. I am certain you will find your new role challenging, rewarding and satisfying. We look forward to having you on the Vertis Communications team.

Sincerely,

/s/ James G. Foley

James G. Foley

Vice President, Human Resources

Acknowledged: /s/ Douglas L. Mann

Date:

Consent to Drug Testing and Release of Claims

Forensic Drug Testing Custody and Control

U.S. Immigration & Naturalization Service I-9

Business Responsibility Agreement

BUSINESS RESPONSIBILITY AGREEMENT

Dear Doug:

As you know, your position involves exposure and access to very sensitive areas of Vertis Communications’ (“Vertis”) business, including confidential and proprietary information. This letter confirms the terms and conditions of your access to that information, and it reflects the agreement between you and Vertis that compliance with these terms is essential to your employment with Vertis. You also understand that the obligations of this letter are in addition to the obligations set forth in Vertis’ current Employee Handbook.

In consideration of your employment or continued employment and your eligibility for positions that give you access to Vertis’ confidential and proprietary information, and for other consideration, you and Vertis agree as follows:

1.Business Conduct.  In addition to the terms and conditions in this Agreement, you will be subject to the Vertis Employee Handbook, including any updates or changes, as well as all other policies and procedures of Vertis.  You agree at all times to perform faithfully the duties assigned to you to the best of your ability, experience and talents and you will not do any other work that interferes with your responsibilities for Vertis.  Further, you represent and warrant that you are not subject to any restrictions, limitations or obligations that would prevent you from being able to fully perform the duties assigned to you by Vertis.

2.Confidentiality.   You acknowledge that the successful marketing and development of Vertis products and services requires substantial time and expense.  Such efforts generate valuable proprietary and confidential information for Vertis that gives Vertis a business advantage over others who do not have such information.  You acknowledge that during your employment with Vertis you have developed and/or acquired and will develop and/or acquire Confidential Information (as defined in this Agreement).  You will use your best efforts and the utmost diligence to guard and protect all Confidential Information of Vertis.  Vertis “Confidential Information” includes all information about Vertis’ business which has not been made available generally to the public by Vertis, whether or not it is reduced to writing.  It includes, without limitation, any information about any Vertis customers; Vertis’ marketing methods, business plans and related data; the costs of any materials, the prices, discounts or terms at which it sells its products or services; manufacturing and sales costs; financial information; compensation paid to employees, and other proprietary information and trade secrets. You will not, at any time during or after your employment by Vertis, disclose or use for the benefit of any other person or entity any Vertis Confidential Information.  If your employment by Vertis is terminated for any reason, you will leave with Vertis any and all Company and personal records, papers, electronic media and materials, which contain or otherwise disclose Vertis Confidential Information.

3.Discoveries and Inventions. You will promptly report to Vertis any and all discoveries, inventions or improvements of any nature, whether or not patentable, which you discover, conceive or make during the period of your employment, which relate to the business of Vertis. All such discoveries, inventions and improvements will be the sole and exclusive property of Vertis. During or after your employment with Vertis, you will execute any documents Vertis deems necessary for the protection of its interest in discoveries, inventions and improvements.

4.Conflicts of Interest. You will avoid actual, perceived or potential conflicts of interest with Vertis’ business. In this regard, you agree not to accept any cash or cash equivalents, no matter what the value or accept any gifts, entertainment or gratuities with a value over $100.00 from actual or prospective customers, suppliers, competitors or others with whom Vertis has business relationships.  In addition, you agree not to have directly or indirectly, financial interests in competing or supplying companies which could affect your duties to Vertis.  If any actual or potential conflict of interest arises, you agree to report them immediately in writing to an officer of Vertis.

5.Company Property. All equipment, notebooks, documents, memoranda, reports, files, samples, books, correspondence, mailing lists, calendars, card files, rolodexes, and all other written and graphic records affecting or relating to the business of Vertis, regardless of the medium in which such information is stored (“Company Property”) shall be and remain the sole and exclusive property of Vertis You agree not to remove any things or documents from Vertis’ premises at any time unless those things or documents are necessary to those duties, which you must perform outside of Vertis’ premises. In the event of termination of employment with Vertis for any reason, you shall promptly deliver to Vertis all Company Property, which are or have been in your possession. You shall not maintain any copy or other reproduction whatsoever of any of the items described in this section after the termination of employment.

6.Employee Solicitation. You agree that Vertis invests substantial time and effort in assembling its personnel.  You agree that during your employment and for a period of one (1) year after its termination for any reason, you will not directly or indirectly solicit any employee of Vertis for employment in any capacity by yourself or another company.

7. Customer Solicitation. You agree that Vertis’ relationships with its customers are solely the assets and property of Vertis. You agree that during and for a period of one (1) year following termination of your employment with Vertis for any reason, you will not directly or indirectly solicit, contact, serve or have any dealing with or attempt to solicit, contact serve or have any dealing with any of Vertis’ customers with whom you had material contact on behalf of Vertis during the twelve (12) month period before your termination. “Material contact” means: (i) direct personal contact with customer for the purpose of selling Vertis’ products or services to the customer or (ii) any direct supervision of the direct personal contacts other employees of Vertis may have with customers.

8.Non-Competition.  You agree that during and for a period of one (1) year following termination of your employment with Vertis for any reason, you will not, for yourself or as a stockholder, director, officer, partner, agent or employee of any other person, firm or corporation, directly or indirectly, render any services in connection with the manufacture, development, sale or servicing of any product or service competitive with, or usable for substantially the same purposes as, any product or service manufactured or sold or in the process of development by Vertis or, for a period of one (1) year following said termination date, solicit from or service the accounts of any customer of Vertis.  This section shall not preclude any investment in a security listed in a national securities exchange, if such investment is limited to not more than one percent (1%) of the outstanding value of such security.

9.Interpretation of Obligations. If any provision of this Agreement is held to be invalid, void or unenforceable, the remaining provisions will remain in effect and will not be affected, impaired or invalidated. If a court should determine that any restrictive provision in this Agreement is unenforceable because of over-breadth, then the court will modify the provision to make it reasonable and enforceable under the circumstances.

10.Injunctive Relief. You acknowledge that should you violate any of the provisions in this Agreement, it will be difficult to determine the resulting damages to Vertis and that monetary damages would not be adequate in any event. In addition to any other remedies it may have, Vertis shall be entitled to temporary and permanent injunctive relief without the necessity of proving actual damage.

11.Term of Employment. Your employment with Vertis is not for a specified term, but is an employment-at-will.  You are free to terminate your employment at any time, with or without cause, and with or without advance notice and Vertis retains the same rights.

12.Other Employment After Termination. You acknowledge the restrictions in this Agreement are reasonably designed to protect Vertis’ Confidential Information and other legitimate business interests.  You acknowledge and represent that you have substantial experience and knowledge such that you can readily obtain subsequent employment, which does not violate this Agreement.  You also agree that Vertis may notify any of your future or prospective employers as to the existence and provision of this Agreement and as to its intention to enforce its rights.

13.Miscellaneous. This Agreement is governed by and construed in accordance with the laws of the State of Maryland.  If any legal action is necessary to enforce the terms or conditions of this Agreement, the parties agree that the Courts of the State of Maryland shall have proper venue and jurisdiction for the bringing of such action. The provisions of this Agreement are the entire Agreement between the parties and supersede all prior or contemporaneous agreements related to the subject matter and may be modified only in writing executed by the parties.  Waiver of any default or breach of this Agreement shall not constitute a waiver of any other default or breach.  You acknowledge that your obligations under this Agreement are unique and personal.  Therefore, you may not assign any of your rights or delegate any of your duties or obligations under this Agreement.  Vertis may assign its rights, duties or obligations under this Agreement to any person or entity with whom it has merged or consolidated, or to whom it has transferred all, or substantially all, of its assets or as a consequence of a corporate reorganization or merger.

You certify that you have read this Agreement, studied it, and have had sufficient opportunity to ask questions, and understand all rights and obligations under the Agreement.  You also certify that you had the option of seeking legal counsel regarding this Agreement prior to execution.  If this Agreement is acceptable to you, please sign the enclosed copy and return it to Jim Foley.

Sincerely,

/s/ James G. Foley

James G. Foley

Vice President, Human Resources

Accepted and agreed to on                          ,               

By:	/s/ Douglas L. Mann
Douglas L. Mann

EX-10.45

Exhibit 10.45

Plan Document

Management Incentive Compensation Plan — FY 2007

Purpose

The Management Incentive Compensation Plan (“MICP” or the “Plan”) is designed to reward select key employees of Vertis, Inc. and any subsidiary corporation (the “Company”) for achieving and exceeding performance objectives. The Plan is intended to provide an incentive for superior work and to motivate participating employees to achieve high levels of performance that drive business results.  The Plan is also intended to align participant goals with those of the Company and its shareholders and enables the Company to continue to attract and retain highly qualified employees.  This Plan Document, as it is written, is intended to serve as a reference guide and planning tool with which the Company can further administer the Plan.

Eligibility and Participation

1.1	Members of management designated as managers (or equivalent) and above are eligible to be considered for participation in the Plan, subject to selection and approval as set forth in paragraph 1.2.
1.2	The Administrative Committee, as defined below, for the Plan shall have the authority to identify those eligible employees (“Participants”) who will participate in the Plan for each Performance Period. Participants are generally defined as manager level and above who directly impact the top or bottom line financials of the Company. However, job title alone will not guarantee participation in the Plan.
1.3	The Administrative Committee, in its sole discretion, may also select certain non-manager-level employees to participate in the MICP when those non manager-level employees are able to significantly impact business results.
1.4	Participants who are hired between January 1 and October 1 of the Plan Year are eligible to participate for that Plan Year. Participants hired after October1st are not eligible to participate for that Plan Year. Any payout for a Participant hired after January 1st will be prorated based on the number of months worked, including any months on a Company approved leave of absence, during the Plan Year. Participants hired between the 1st and the 15th of any month will be deemed to have been hired on the 1st of that month. Participants hired between the 16th and the 31st of any month will be deemed to have been hired on the 1st of the following month.

Plan Year, Performance Period and Performance Goals

2.1	The fiscal year of the Plan shall be the calendar year (the “Plan Year”). The performance period in which incentives may be payable under the Plan shall normally be the Plan Year; provided however, that the Administrative Committee shall have the authority to designate alternative performance periods under the Plan (“Performance Period”).
2.2	The Administrative Committee shall establish in writing, with respect to each Performance Period, Vertis-wide performance goals and specific target objectives (“Vertis Performance Goals”). To the extent that Vertis Performance Goals are attained, a method or formula for computing the amount of incentive compensation payable to each participant under the Plan shall be communicated at the beginning of each Performance Period or as soon as administratively possible after the beginning of the Performance Period.
2.3	Other performance goals may be established and may be based upon a particular business unit or participant’s attainment of specific objectives set for the Performance Period (“Individual Objectives”) (the Vertis Performance Goals and the Individual Objectives are collectively referred to as “Performance Goals”).
2.4	Individual Objectives shall be developed for each Participant by the Participant’s supervisor. Individual Objectives will be documented on the appropriate Plan form at the beginning of the Performance Period, or as soon as possible thereafter, copies of which will be given to the Participant and the Administrative Committee. Individual Objectives will be subject to approval by the Administrative Committee or its designee. Individual Objectives may be changed during a performance period to reflect changes in the business or in Company initiatives. To the extent Individual Objectives are changed during a year, the changes will be reviewed with the Participant, and a new form will be completed and sent to the Administrative Committee for approval.

Determination of Incentive Awards

3.1 As soon as practicable following the end of the applicable Performance Period, each Participant will review their performance against their stated Individual Objectives with their supervisor. The Supervisor will provide a report to their appropriate Group Human Resources Director and Business Unit General Manager indicating the Participant’s level of achievement with respect to their Individual Objectives. Following the approval of the Group Human Resources Director and General Manager, each Participant’s Individual Objectives attainment level will be reported to the Corporate Human Resources Department.

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3.2

The Chief Financial Officer shall certify in writing to what extent the Company, its subsidiaries, operating divisions or other operating units and the Participants have achieved any established Vertis Performance Goal(s) for the Performance Period(s), including the satisfaction of material terms of the Performance Goals. The Chief Financial Officer shall then provide this information to the Corporate Human Resources Department.

3.3

The Corporate Human Resources Department shall then calculate the amount of incentive for each Participant based upon the formula or method as set out for the applicable Performance Period. Calculated awards shall be presented to the Administrative Committee for final review and approval.

Payment of Incentive Awards

4.1	Approved incentive awards shall be payable by the Company by direct deposit, unless other arrangements are agreed to, to each Participant, or to his/her estate in the event of his/her death. Payments shall be made as soon as possible after the Administrative Committee has approved the awards pursuant to Section 3.3, but no later than two and one-half months following the end of the calendar year in which the applicable Performance Period ended.
4.2	Except as otherwise provided (a) by the Administrative Committee or (b) in any written employment agreement, scheduled retirement, written severance agreement or other written agreement between the Company and a Participant, there shall be no payment of any incentive award to any Participant who is not actively employed or on a Company approved leave of absence as of the end of the Plan Year.
4.3	To be eligible to receive a payout under this policy, the participant must be an employee in good standing with the company. “Good standing” for purposes of this document shall mean that they shall have received a performance rating of at least Proficient as of the date of their most recent performance review or if the review is more than 3 months old, must be currently performing at least in a Proficient manner as of the end of the Plan Year.
4.4	Calculation of payouts, if any, will be based on the Participant’s base salary as of the end of the Plan Year (December 31).
4.5	The Company will deduct from any incentive award any applicable withholding taxes or any amounts owed by the Participant to the Company or any of its subsidiaries.

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Other Terms and Conditions

5.1

Except as may be otherwise required by law, incentive awards under the Plan shall not be subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, charge, garnishment, execution, or levy of any kind, either voluntary or involuntary. Incentives awarded under the Plan shall be payable from the general assets of the Company, and no participant shall have any claim with respect to any specific assets of the Company.

5.2

Neither the Plan nor any action taken under the Plan shall be construed as giving any employee the right to be retained in the employment of the Company or any parent, subsidiary or affiliate of the Company or to maintain any Participant’s compensation at any level. Nothing in this Plan shall in any way diminish or limit either party’s right to terminate the employment relationship at any time and for any lawful reason, in its sole discretion.

Administration

6.1	The Administrative Committee is comprised of the Chairman & Chief Executive Officer, Chief Financial Officer, VP Human Resources, Chief Legal Officer, and the Director, Corporate Compensation & Benefits. The Chief Financial Officer is the chair of the Committee.
6.2	The Administrative Committee shall have full power, authority and discretion to administer and interpret the provisions of the Plan and to adopt such rules, regulations, agreements, guidelines and instruments for the administration of the Plan and for the conduct of its business as the Committee deems necessary or advisable.
6.3	The Administrative Committee shall have full power to delegate to any officer or employee of the Company the authority to administer and interpret procedural and administrative issues, and unless the Committee otherwise delegates this authority, the Director, Corporate Compensation & Benefits fulfills this role.
6.4	The Administrative Committee may rely on opinions, reports or statements of officers or employees of the Company or any subsidiary thereof and of Company counsel (inside or retained counsel), public accountants and other professional or expert persons.
6.5	The Administrative Committee reserves the right to amend or terminate the Plan in whole or in part at any time without advance notice to the Participants.
6.6	To the extent permitted by applicable law, (a) no member of the Administrative Committee shall be liable for any action taken or omitted to be taken or for any determination made in good faith with respect to the Plan, and (b) the Company shall indemnify and hold harmless each member of the Administrative Committee against any reasonable cost or expense (including reasonable counsel fees) or liability (including any sum paid in settlement of a claim with the

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	approval of the Administrator) arising out of any act or omission in connection with the administration or interpretation of the Plan, unless arising out of fraud or bad faith.
6.7	The place of administration of the Plan shall be in the State of Maryland, and the validity, construction, interpretation, administration and effect of the Plan and of its rules and regulations, and rights relating to the Plan, shall be determined solely in accordance with the laws of the State of Maryland.

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EX-10.48

Exhibit 10.48

MANAGEMENT SERVICES AGREEMENT

WITH

THOMAS H. LEE CAPITAL, LLC

AGREEMENT entered into as of December 7,1999, between Thomas H. Lee Capital, LLC, a Delaware limited liability company (the “Consultant”), and Big Flower Holdings, Inc., a Delaware corporation (“Big Flower”).

WHEREAS, the Consultant has and its affiliates have staff specially skilled in corporate finance, strategic corporate planning and other management skills and services;

WHEREAS, as of the date hereof, Big Flower has completed its merger pursuant to the Amended and Restated Agreement and Plan of Merger (as amended, the “Merger Agreement”) dated as of October 11, 1999 between Big Flower and BFH Merger Corp., a Delaware corporation and an affiliate of the Consultant;

WHEREAS, Big Flower will require the Consultant’s special skills and management advisory services in connection with its general business operations; and

WHEREAS, the Consultant is willing to provide such skills and services to Big Flower.

NOW, THEREFORE, in consideration of the mutual promises contained herein, the parties hereto, intending to be legally bound, do hereby agree as follows:

1.Engagement. Big Flower hereby engages the Consultant for the Term (as defined in Section 2) and upon the terms and conditions herein set forth to provide consulting and enagement advisory services to Big Flower, as requested by Big Flower. These services will be in connection with financial and strategic corporate planning and such other management services as the Consultant and Big Flower shall mutually agree. In consideration of the remuneration herein specified, the Consultant accepts such engagement and agrees to perform the services specified herein.

2.Term. The engagement hereunder shall be for a term commencing on January 1, 2000 and expiring on the date that the THL Entities (as defined in the Investors’ Agreement) cease to own, collectively, at least one-third of the number of shares of Big Flower common stock they hold collectively immediately after the Effective Time (as defined in the Merger Agreement), unless the Consultant and Big Flower agree to extend the term beyond such date, in which case the term shall expire on the date agreed to by the Consultant and Big Flower (the “Term”). “Investors’ Agreement” means

the Investors’ Agreement dated as of the date hereof among Big Flower, R. Theodore Ammon, Thomas H. Lee Equity Fund IV, L.P., Evercore Capital Partners L.P. and the other parties named therein.

3.Services to be Performed. The Consultant shall devote reasonable time and efforts to the performance of the consulting and management advisory services contemplated by this Agreement. However, no precise number of hours is to be devoted by the Consultant on a weekly or monthly basis. The Consultant may perform services under this Agreement directly, through its employees or agents, or with such outside consultants as the Consultant may engage for such purpose. The Consultant agrees that the consulting and management advisory services provided hereunder will be performed by individuals qualified in accordance with the Consultant’s normal business practices and in a manner providing quality of standards no lower than the quality provided by the Consultant to its other customers.

4.Compensation; Expense Reimbursement.

(a)In consideration of the management advisory services hereunder, Big Flower agrees to pay to the Consultant an annual fee equal to $414,150 (to be adjusted as set forth in the Addendum to this Agreement). The annual fee shall be payable in equal quarterly installments each year, to be paid in advance on the first day of each calendar quarter with the first such payment to be made on January 1, 2000, except to the extent that any such payment is prohibited by Section 9.06 of the Credit Agreement, dated as of the date hereof, among Big Flower, as a Guarantor, Big Flower Press Holdings, Inc. and various Subsidiaries of Big Flower Press Holdings, Inc., as Borrowers, various Lenders, Chase Securities, Inc. and Deutsche Bank Securities Inc. as Joint Lead Arrangers and Joint Book Managers, The Chase Manhattan Bank, as Administrative Agent, Bankers Trust Company, as Syndication Agent, Bank of America, N.A., (as such terms are defined in such Credit Agreement), in which case payments of the annual fee shall be made in such a manner as to comply with such Section 9.06 of such Credit Agreement.

(b)Big Flower shall reimburse the Consultant for all reasonable out-of-pocket expenses incurred by the Consultant, and its affiliates, in connection with management advisory services provided by the Consultant hereunder, including, without limitation, reasonable travel, lodging, accounting, legal, administrative and similar out-of-pocket costs reasonably incurred by it in connection with its performance of services for Big Flower hereunder. Reimbursement shall be made only upon presentation to Big Flower by the Consultant of reasonably itemized documentation therefor.

5.Indemnification. (a) In addition to its agreements and obligations under this Agreement, Big Flower agrees to indemnify and hold harmless the Consultant, and its affiliates (including their respective officers, directors, stockholders, partners, members, employees and agents) from and against any and all actions, claims, liabilities,

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losses and damages (or actions in respect thereof), in any way related to or arising out of the execution, delivery and existence of this Agreement, or the performance by the Consultant of services under Sections 1 and 3 of this Agreement (other than for expenses described in Section 4(b) hereof which are reimbursed under Section 4 hereof), and to reimburse the Consultant and any other such indemnified person for reasonable out-of-pocket legal and other expenses incurred by it in connection with or relating to investigating, preparing to defend, or defending any actions, claims or other proceedings (including any investigation or inquiry) arising in any manner out of or in connection with the Consultant’s performance under this Agreement (whether or not such indemni­fied person is a named party in such proceeding); provided, however, that Big Flower shall not be responsible under this Section 5 for any claims, liabilities, losses, damages or expenses to the extent that they are finally judicially determined to result from actions taken by the Consultant (or such other indemnified person) due to the Consultant’s (or such other indemnified person’s) gross negligence or willful misconduct.

(b)Big Flower also agrees that the Consultant (or such other indemnified person) shall not have any liability (whether direct or indirect, in contract or tort or otherwise) to Big Flower or any of its affiliates for or in connection with the retention of the Consultant pursuant to this Agreement or the performance of the Consultant of its obligations under this Agreement, except to the extent that any such liability is finally judicially determined to have resulted from the Consultant’ (or such other indemnified person’s) gross negligence or willful misconduct.

(c)The indemnification provided for in this Section 5 shall be in addition to any liability which Big Flower may otherwise have to the Consultant or the other indemnified persons. Further, if and to the extent that the indemnification provided for in this Section 5 is not enforceable for any reason, Big Flower agrees to make the maximum contribution possible pursuant to applicable law to the payment and satisfaction of any actions, claims, liabilities, losses and damages incurred by the Consultant or the other indemnified persons for which they would have otherwise been entitled to be indemnified hereunder.

(d)If any action, claim, proceeding or investigation is commenced as to which the Consultant (or such other indemnified person) proposes to demand indemnification, the Consultant shall notify Big Flower with reasonable promptness; provided, however, that any failure by the Consultant (or such other indemnified person) to notify Big Flower shall not relieve Big Flower from its obligations hereunder. The Consultant (or such other indemnified person) shall have the right to retain counsel of its own choice to represent it, and Big Flower shall pay the reasonable fees, expenses and disbursements of such counsel as incurred; and such counsel shall, to the extent consistent with its professional responsibilities, cooperate with Big Flower and any counsel designated by Big Flower. Big Flower shall be liable for any settlement of any claim against the Consultant (or such other indemnified person) made with Big Flower’s written consent, which consent shall not be unreasonably withheld. Big Flower shall not, without the

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prior written consent of the Consultant (or such other indemnified person), settle or compromise any claim, or permit a default or consent to the entry of any judgment in respect thereof, unless such settlement, compromise or consent includes, as an unconditional term thereof, the giving by the claimant to the Consultant (or such other indemni­fied person) of an unconditional release from all liability in respect of such claim.

6.Notices. All notices hereunder, to be effective, shall be in writing and shall be sent by reputable nationwide courier, or sent by facsimile, as follows:

(i)If to the Consultant:

Thomas H. Lee Capital, LLC
570 Madison Avenue
New York, New York 10022
Attention: Thomas H. Lee
Facsimile: 212-888-6388

(ii)If to Big Flower:

Big Flower Holdings, Inc.
3 East 54th Street
New York, New York 10022
Attention: Irene B. Fisher
Facsimile: 212-715-4902

7.Modifications. This Agreement constitutes the entire agreement between the parties hereto with regard to the subject matter hereof, superseding all prior understandings and agreements whether written or oral. This Agreement may not be amended or revised except by a writing signed by the parties.

8.Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the patties and their respective successors and assigns but may not be assigned by either party without the prior written consent of the other. Notwithstanding the foregoing (but subject to the final sentence of Section 3), the Consultant may elect to have its obligations hereunder performed in whole or in part by a partnership or other entity affiliated with the Consultant, and the Consultant may direct that any compensation (including all or a portion of the fees under Section 4(a), and reimbursement of expenses be paid to the affiliate performing the services hereunder with respect thereto.

9.Captions. Captions have been inserted solely for the conveniencs of reference and in no way define, limit or describe the scope or substance of any provision and shall not affect the validity of any other provision.

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10.Governing Law. This Agreement shall be construed under and governed by and construed in accordance with the laws of the State of New York, without reference to principles of conflicts or choice of laws, or any other law that would make the laws of any jurisdiction other than the State of New York applicable hereto.

11.Counterpart. This Agreement may be signed in two counter-parts, each of which shall be deemed an original but which together shall constitute one and the same instrument.

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IN WITNESS WHEREOF, the parties have duly executed this Management Services Agreement as of the date first above written.

THOMAS H. LEE CAPITAL, LLC
By:	/s/ Thomas H. Lee
Name:
Title:
BIG FLOWER HOLDINGS, INC.
By:	/s/ Irene B. Fisher
Name:
Title:

Addendum to Management Services Agreement
with Thomas H. Lee Capital, LLC

The parties understand and agree that in accordance with the Limited Partnership Agreement of Thomas H. Lee Equity Fund IV, L.P. (“Fund IV”), THL Equity Advisors IV, LLC (“Advisors IV”) is obligated to advise Big Flower when certain limitations have been reached on management, consulting and transaction fee income received from Big Flower, pursuant to this Agreement by “GP Affiliates” (which term includes the Consultant) as defined in the Limited Partnership Agreement of Fund IV (the “Special Fee Limitation”), and to direct that certain of such fees after such Special Fee Limitation is reached be paid instead directly to Advisors IV pursuant to that certain Management Services Agreement (the “Advisors IV Agreement”) dated as of the date hereof between Big Flower and Advisors IV. Big Flower hereby agrees that it will act as directed in any such written notice with respect to such fees, which shall be additional consideration to Advisors IV for the services rendered pursuant to the Advisors IV Agreement.

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EX-10.49

Exhibit 10.49

MANAGEMENT SERVICES AGREEMENT

WITH

THL EQUITY ADVISORS IV, LLC

AGREEMENT entered into as of December 7,1999, between THL Equity Advisors IV, LLC, a Massachusetts limited liability company (the “Consultant”), and Big Flower Holdings, Inc., a Delaware corporation (“Big Flower”).

WHEREAS, the Consultant has and its affiliates have staff specially skilled in corporate finance, strategic corporate planning and other management skills and services;

WHEREAS, as of the date hereof, Big Flower has completed its merger pursuant to the Amended and Restated Agreement and Plan of Merger (as amended, the “Merger Agreement”) dated as of October 11, 1999 between Big Flower and BFH Merger Corp., a Delaware corporation and an affiliate of the Consultant;

WHEREAS, Big Flower will require the Consultant’s special skills and management advisory services in connection with its general business operations; and

WHEREAS, the Consultant is willing to provide such skills and services to Big Flower.

NOW, THEREFORE, in consideration of the mutual promises contained herein, the parties hereto, intending to be legally bound, do hereby agree as follows:

1.         Engagement. Big Flower hereby engages the Consultant for the Term (as defined in Section 2) and upon the terms and conditions herein set forth to provide consulting and management advisory services to Big Flower, as requested by Big Flower. These services will be in connection with financial and strategic corporate planning and such other management services as the Consultant and Big Flower shall mutually agree. In consideration of the remuneration herein specified, the Consultant accepts such engagement and agrees to perform the services specified herein.

2.         Term. The engagement hereunder shall be for a term commencing on January 1, 2000 and expiring on the date that the THL Entities (as defined in the Investors’ Agreement) cease to own, collectively, at least one-third of the number of shares of Big Flower common stock they hold collectively immediately after the Effective Time (as defined in the Merger Agreement), unless the Consultant and Big Flower agree to extend the term beyond such date, in which case the term shall expire on the date agreed to by the Consultant and Big Flower (the “Term”). “Investors’ Agreement”

means the Investors’ Agreement dated as of the date hereof among Big Flower, R. Theodore Ammon, Thomas H. Lee Equity Fund IV, L.P., Evercore Capital Partners L.P. and the other parties named therein.

3.         Services to be Performed. The Consultant shall devote reasonable time and efforts to the performance of the consulting and management advisory services contemplated by this Agreement. However, no precise number of hours is to be devoted by the Consultant on a weekly or monthly basis. The Consultant may perform services under this Agreement directly, through its employees or agents, or with such outside consultants as the Consultant may engage for such purpose. The Consultant agrees that the consulting and management advisory services provided hereunder will be performed by individuals qualified in accordance with the Consultant’s normal business practices and in a manner providing quality of standards no lower than the quality provided by the Consultant to its other customers.

4.         Compensation; Expense Reimbursement.

(a)       In consideration of the management advisory services hereunder, Big Flower agrees to pay to the Consultant an annual fee equal to $385,850 (to be adjusted as set forth in the Addendum to this Agreement). The annual fee shall be payable in equal quarterly installments each year, to be paid in advance on the first day of each calendar quarter with the first such payment to be made on January 1, 2000, except to the extent that any such payment is prohibited by Section 9.06 of the Credit Agree­ment, dated as of the date hereof, among Big Flower, as a Guarantor, Big Flower Press Holdings, Inc. and various Subsidiaries of Big Flower Press Holdings, Inc., as Borrowers, various Lenders, Chase Securities, Inc. and Deutsche Bank Securities Inc. as Joint Lead Arrangers and Joint Book Managers, The Chase Manhattan Bank, as Administrative Agent, Bankers Trust Company, as Syndication Agent, Bank of America, N.A., (as such terms are defined in such Credit Agreement), in which case payments of the annual fee shall be made in such a manner as to comply with such Section 9.06 of such Credit Agreement.

(b)       Big Flower shall reimburse the Consultant for all reasonable out-of-pocket expenses incurred by the Consultant, and its affiliates, in connection with management advisory services provided by the Consultant hereunder, including, without limitation, reasonable travel, lodging, accounting, legal, administrative and similar out-of-pocket costs reasonably incurred by it in connection with its performance of services for Big Flower hereunder. Reimbursement shall be made only upon presentation to Big Flower by the Consultant of reasonably itemized documentation therefor.

5.         Indemnification. (a) In addition to its agreements and obligations under this Agreement, Big Flower agrees to indemnify and hold harmless the Consultant, and its affiliates (including their respective officers, directors, stockholders, partners, members, employees and agents) from and against any and all actions, claims, liabilities,

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losses and damages (or actions in respect thereof), in any way related to or arising out of the execution, delivery and existence of this Agreement, or the performance by the Consultant of services under Sections 1 and 3 of this Agreement (other than for expenses described in Section 4(b) hereof which are reimbursed under Section 4 hereof), and to reimburse the Consultant and any other such indemnified person for reasonable out-of-pocket legal and other expenses incurred by it in connection with or relating to investi­gating, preparing to defend, or defending any actions, claims or other proceedings (including any investigation or inquiry) arising in any manner out of or in connection with the Consultant’s performance under this Agreement (whether or not such indemni­fied person is a named party in such proceeding); provided, however, that Big Flower shall not be responsible under this Section 5 for any claims, liabilities, losses, damages or expenses to the extent that they are finally judicially determined to result from actions taken by the Consultant (or such other indemnified person) due to the Consultant’s (or such other indemnified person’s) gross negligence or willful misconduct.

(b)       Big Flower also agrees that the Consultant (or such other indemnified person) shall not have any liability (whether direct or indirect, in contract or tort or otherwise) to Big Flower or any of its affiliates for or in connection with the retention of the Consultant pursuant to this Agreement or the performance of the Consultant of its obligations under this Agreement, except to the extent that any such liability is finally judicially determined to have resulted from the Consultant’s (or such other indemnified person’s) gross negligence or willful misconduct.

(c)       The indemnification provided for in this Section 5 shall be in addition to any liability which Big Flower may otherwise have to the Consultant or the other indemnified persons. Further, if and to the extent that the indemnification provided for in this Section 5 is not enforceable for any reason, Big Flower agrees to make the maximum contribution possible pursuant to applicable law to the payment and satisfaction of any actions, claims, liabilities, losses and damages incurred by the Consultant or the other indemnified persons for which they would have otherwise been entitled to be indemnified hereunder.

(d)       If any action, claim, proceeding or investigation is commenced as to which the Consultant (or such other indemnified person) proposes to demand indemnification, the Consultant shall notify Big Flower with reasonable promptness; provided, however, that any failure by the Consultant (or such other indemnified person) to notify Big Flower shall not relieve Big Flower from its obligations hereunder. The Consultant (or such other indemnified person) shall have the right to retain counsel of its own choice to represent it, and Big Flower shall pay the reasonable fees, expenses and disbursements of such counsel as incurred; and such counsel shall, to the extent consistent with its professional responsibilities, cooperate with Big Flower and any counsel designated by Big Flower. Big Flower shall be liable for any settlement of any claim against the Consultant (or such other indemnified person) made with Big Flower’s written consent, which consent shall not be unreasonably withheld. Big Flower shall not, without the

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prior written consent of the Consultant (or such other indemnified person), settle or compromise any claim, or permit a default or consent to the entry of any judgment in respect thereof, unless such settlement, compromise or consent includes, as an unconditional term thereof, the giving by the claimant to the Consultant (or such other indemnified person) of an unconditional release from all liability in respect of such claim.

6.         Notices. All notices hereunder, to be effective, shall be in writing and shall be sent by reputable nationwide courier, or sent by facsimile, as follows:

(i)	If to the Consultant:
	THL Equity Advisors IV, LLC
	c/o Thomas H. Lee Company
	75 State Street
	Boston, Massachusetts 02109
	Attention: Anthony J. DiNovi
	Facsimile: 617-227-3514
(ii)	If to Big Flower;
	Big Flower Holdings, Inc.
	3 East 54th Street
	New York, New York 10022
	Attention: Irene B. Fisher
	Facsimile: 212-715-4902

7.         Modifications. This Agreement constitutes the entire agreement between the parties hereto with regard to the subject matter hereof, superseding all prior understandings and agreements whether written or oral. This Agreement may not be amended or revised except by a writing signed by the parties.

8.         Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns but may not be assigned by either party without the prior written consent of the other. Notwithstanding the foregoing (but subject to the final sentence of Section 3), the Consultant may elect to have its obligations hereunder performed in whole or in part by a partnership or other entity affiliated with the Consultant, and the Consultant may direct that any compensation (including all or a portion of the fees under Section 4(a), and reimbursement of expenses be paid to the affiliate performing the services hereunder with respect thereto.

9.         Captions. Captions have been inserted solely for the convenience of reference and in no way define, limit or describe the scope or substance of any provision and shall not affect the validity of any other provision.

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10.      Governing Law. This Agreement shall be construed under and governed by and construed in accordance with the laws of the State of New York, without reference to principles of conflicts or choice of laws, or any other law that would make the laws of any jurisdiction other than the State of New York applicable hereto.

11.      Counterparts . This Agreement may be signed in two counterparts, each of which shall be deemed an original but which together shall constitute one and the same instrument.

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IN WITNESS WHEREOF, the parties have duly executed this Management Services Agreement as of the date first above written.

THL EQUITY ADVISORS IV, LLC
By:	/s/ Anthony J. DiNovi
	Name:	Anthony J. DiNovi
	Title:	Managing Director

BIG FLOWER HOLDINGS, INC.
By:	/s/ Irene B. Fisher
	Name:
	Title:

Addendum

The parties understand and agree that in accordance with the Limited Partnership Agreement of Thomas H. Lee Equity Fund IV, L.P. (“Fund IV”), the Consultant is obligated to advise Big Flower when certain limitations have been reached on management, consulting and transaction fee income received from Big Flower, pursuant to that certain Management Services Agreement dated as of the date hereof between Big Flower and Thomas H. Lee Capital, LLC, by “GP Affiliates” (which term includes Thomas H. Lee Capital, LLC) as defined in the Limited Partnership Agreement of Fund IV (the “Special Fee Limitation”), and to direct that certain of such fees after such Special Fee Limitation is reached be paid instead directly to the Consultant, pursuant to this Agreement. Big Flower hereby agrees that it will act as directed in any such written notice with respect to such fees, which shall be additional consideration to the Consultant for the services rendered hereunder.

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EX-10.50

Exhibit 10.50

MANAGEMENT SERVICES AGREEMENT

WITH

EVERCORE ADVISORS INC.

AGREEMENT entered into as of December 7, 1999, between Evercore Advisors Inc., a Delaware corporation (the “Consultant”), and Big Flower Holdings, Inc., a Delaware corporation (“Big Flower”).

WHEREAS, the Consultant has and its affiliates have staff specially skilled in corporate finance, strategic corporate planning and other management skills and services;

WHEREAS, as of the date hereof, Big Flower has completed its merger pursuant to the Amended and Restated Agreement and Plan of Merger (as amended, the “Merger Agreement”) dated as of October 11, 1999 between Big Flower and BFH Merger Corp., a Delaware corporation;

WHEREAS, Big Flower will require the Consultant’s special skills and management advisory services in connection with its general business operations; and

WHEREAS, the Consultant is willing to provide such skills and services to Big Flower.

NOW, THEREFORE, in consideration of the mutual promises contained herein, the parties hereto, intending to be legally bound, do hereby agree as follows:

1.Engagement. Big Flower hereby engages the Consultant for the Term (as defined in Section 2) and upon the terms and conditions herein set forth to provide consulting and management advisory services to Big Flower, as requested by Big Flower. These services will be in connection with financial and strategic corporate planning and such other management services as the Consultant and Big Flower shall mutually agree. In consideration of the remuneration herein specified, the Consultant accepts such engagement and agrees to perform the services specified herein.

2.Term. The engagement hereunder shall be for a term commencing on January 1, 2000 and expiring on the date that Evercore (as defined in the Investors’Agreement) ceases to own, at least one-third of the number of shares of Big Flower common stock that Evercore holds immediately after the Effective Time (at defined in the Merger Agreement), unless the Consultant and Big Flower agree to extend the term beyond such date, in which case the term shall expire on the date agreed to by the Consultant and Big Flower (the “Term”). “Investors’ Agreement” means the Investors’

Agreement dated as of the date hereof among Big Flower, R. Theodore Ammon, Thomas H. Lee Equity Fund IV, L.P., Evercore Capital Partners L.P. and the other parties named therein.

3.Services to be Performed. The Consultant shall devote reasonable time and efforts to the performance of the consulting and management advisory services contemplated by this Agreement. However, no precise number of hours is to be devoted by the Consultant on a weekly or monthly basis. The Consultant may perform services under this Agreement directly, through its employees or agents, or with such outside consultants as the Consultant may engage for such purpose. The Consultant agrees that the consulting and management advisory services provided hereunder will be performed by individuals qualified in accordance with the Consultant’s normal business practices and in a manner providing quality of standards no lower than the quality provided by the Consultant to its other customers.

4.Compensation; Expense Reimbursement.

(a)In consideration of the management advisory services hereunder, Big Flower agrees to pay to the Consultant an annual fee equal to $250,000. The annual fee shall be payable in equal quarterly installments each year, to be paid in advance on the first day of each calendar quarter with the first such payment to be made on January 1, 2000, except to the extent that any such payment is prohibited by Section 9.06 of the Credit Agreement, dated as of the date hereof, among Big Flower, as a Guarantor, Big Flower Press Holdings, Inc. and various Subsidiaries of Big Flower Press Holdings, Inc., as Borrowers, various Lenders, Chase Securities, Inc. and Deutsche Bank Securities Inc. as Joint Lead Arrangers and Joint Book Managers, The Chase Manhattan Bank, as Administrative Agent, Bankers Trust Company, as Syndication Agent, Bank of America, N.A., (as such terms are defined in such Credit Agreement), in which case payments of the annual fee shall be made in such a manner as to comply with such Section 9.06 of such Credit Agreement.

(b)Big Flower shall reimburse the Consultant for all reasonable out-of-pocket expenses incurred by the Consultant, and its affiliates, in connection with management advisory services provided by the Consultant hereunder, including, without limitation, reasonable travel, lodging, accounting, legal, administrative and similar out-of-pocket costs reasonably incurred by it in connection with its performance of services for Big Flower hereunder. Reimbursement shall be made only upon presentation to Big Flower by the Consultant of reasonably itemized documentation therefor.

5.Indemnification. (a) In addition to its agreements and obligations under this Agreement, Big Flower agrees to indemnify and hold harmless the Consultant, and its affiliates (including their respective officers, directors, stockholders, partners, members, employees and agents) from and against any and all actions, claims, liabilities, losses and damages (or actions in respect thereof), in any way related to or arising out of

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the execution, delivery and existence of this Agreement, or the performance by the Consultant of services under Sections 1 and 3 of this Agreement (other than for expenses described in Section 4(b) hereof which are reimbursed under Section 4 hereof), and to reimburse the Consultant and any other such indemnified person for reasonable out-of-pocket legal and other expenses incurred by it in connection with or relating to investigating, preparing to defend, or defending any actions, claims or other proceedings (including any investigation or inquiry) arising in any manner out of or in connection with the Consultant’s performance under this Agreement (whether or not such indemni­fied person is a named party in such proceeding); provided, however, that Big Flower shall not be responsible under this Section 5 for any claims, liabilities, losses, damages or expenses to the extent that they are finally judicially determined to result from actions taken by the Consultant (or such other indemnified person) due to the Consultant’s (or such other indemnified person’s) gross negligence or willful misconduct.

(b)Big Flower also agrees that the Consultant (or such other indemnified person) shall not have any liability (whether direct or indirect, in contract or tort or otherwise) to Big Flower or any of its affiliates for or in connection with the retention of the Consultant pursuant to this Agreement or the performance of the Consultant of its obligations under this Agreement, except to the extent that any such liability is finally judicially determined to have resulted from the Consultant’s (or such other indemnified person’s) gross negligence or willful misconduct.

(c)The indemnification provided for in this Section 5 shall be in addition to any liability which Big Flower may otherwise have to the Consultant or the other indemnified persons. Further, if and to the extent that the indemnification provided for in this Section 5 is not enforceable for any reason, Big Flower agrees to make the maximum contribution possible pursuant to applicable law to the payment and satisfaction of any actions, claims, liabilities, losses and damages incurred by the Consultant or the other indemnified persons for which they would have otherwise been entitled to be indemnified hereunder.

(d)If any action, claim, proceeding or investigation is commenced as to which the Consultant (or such other indemnified person) proposes to demand indemnification, the Consultant shall notify Big Flower with reasonable promptness; provided, however, that any failure by the Consultant (or such other indemnified person) to notify Big Flower shall not relieve Big Flower from its obligations hereunder. The Consultant (or such other indemnified person) shall have the right to retain counsel of its own choice to represent it, and Big Flower shall pay the reasonable fees, expenses and disbursements of such counsel as incurred; and such counsel shall, to the extent consistent with its professional responsibilities, cooperate with Big Flower and any counsel designated by Big Flower. Big Flower shall be liable for any settlement of any claim against the Consultant (or such other indemnified person) made with Big Flower’s written consent, which consent shall not be unreasonably withheld. Big Flower shall not, without the prior written consent of the Consultant (or such other indemnified person), settle or

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compromise any claim, or permit a default or consent to the entry of any judgment in respect thereof, unless such settlement, compromise or consent includes, as an unconditional term thereof, the giving by the claimant to the Consultant (or such other indemnified person) of an unconditional release from all liability in respect of such claim.

6.Notices. All notices hereunder, to be effective, shall be in writing and shall be sent by reputable nationwide courier, or sent by facsimile, as follows:

(i)If to the Consultant:

Evercore Advisors Inc.
65 East 55th Street
33rd Floor
New York, New York 10022
Attention: Austin M. Beutner
Facsimile: 212-857-3122

(ii)If to Big Flower:

Big Flower Holdings, Inc.
3 East 54th Street
New York, New York 10022
Attention: Irene B. Fisher
Facsimile: 212-715-4902

7.Modifications. This Agreement constitutes the entire agreement between the parties hereto with regard to the subject matter hereof, superseding all prior understandings and agreements whether written or oral. This Agreement may not be amended or revised except by a writing signed by the parties.

8.Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their respective successors and assigns but may not be assigned by either party without the prior written consent of the other. Notwithstanding the foregoing (but subject to the final sentence of Section 3), the Consultant may elect to have its obligations hereunder performed in whole or in part by a partnership or other entity affiliated with the Consultant, and the Consultant may direct that any compensation (including all or a portion of the fees under Section 4(a), and reimbursement of expenses be paid to the affiliate performing the services hereunder with respect thereto.

9.Captions. Captions have been inserted solely for the convenience of reference and in no way define, limit or describe the scope or substance of any provision and shall not affect the validity of any other provision.

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10.Governing Law. This Agreement shall be construed under and governed by and construed in accordance with the laws of the State of Delaware, without reference to principles of conflicts or choice of laws, or any other law that would make the laws of any jurisdiction other than the State of Delaware applicable hereto.

11.Counterparts. This Agreement may be signed in two counter­parts, each of which shall be deemed an original but which together shall constitute one and the same instrument.

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IN WITNESS WHEREOF, the parties have duly executed this Management Services Agreement as of the date first above written.

EVERCORE ADVISORS INC.
By:	/s/ Neeraj Mital
Name:		Neeraj Mital
Title:		Authorized Person
BIG FLOWER HOLDINGS, INC.
By:	/s/ Irene B. Fisher
Name:
Title:

EX-10.51

Exhibit 10.51

LIMITED CONSENT AND AMENDMENT NO. 7 TO CREDIT AGREEMENT

This Limited Consent and Amendment No. 7 to Credit Agreement, dated as of March 30, 2007 (this “Amendment”), is entered into by and among Vertis, Inc. (“Borrower”), as Borrower, the other Credit Parties signatory hereto, General Electric Capital Corporation, as a Lender and as Agent for Lenders (“Agent”), the other Lenders, and Crystal Capital Fund, L.P, as a Joint-Lead Arranger.

RECITALS

A.    Borrower, the other Credit Parties, Agent and Lenders are parties to that certain Credit Agreement, dated as of December 22, 2004, including all annexes, exhibits and schedules thereto (as amended by: (i) that certain Limited Consent and Amendment No. 1 to Credit Agreement, dated as of October 3, 2005; (ii) that certain Amendment No. 2 to Credit Agreement, dated as of November 22, 2005; (iii) that certain Limited Consent and Amendment No. 3 to Credit Agreement, dated as of December 12, 2005; (iv) that certain Amendment No. 4 to Credit Agreement, dated as of May 30, 2006; (v) that certain Limited Consent and Amendment No. 5 to Credit Agreement, dated as of September 5, 2006; and (vi) that certain Limited Consent and Amendment No. 6 to Credit Agreement, dated as of November 27, 2006; and as from time to time further amended, restated, supplemented or otherwise modified, the “Credit Agreement”).

B.    Borrower and the other Credit Parties have requested that Agent and Lenders consent to certain transactions as described below in this Amendment and Agent and Lenders are willing to do so as and to the extent, and solely as and to the extent, and subject to the terms and conditions set forth in this Amendment.

C.    Borrower and the other Credit Parties have requested that Agent and Lenders agree to amend the Credit Agreement as and to the extent set forth in this Amendment and Agent and Lenders are willing to do so as and to the extent, and solely as and to the extent, and subject to the terms and conditions set forth in this Amendment.

D.    This Amendment shall constitute a Loan Document and these Recitals shall be construed as part of this Amendment.

NOW THEREFORE, in consideration of the premises and the mutual covenants hereinafter contained, and of the Loans and other extensions of credit heretofore, now or hereafter made to, or for the benefit of, Borrower by Lenders, Borrower, the other Credit Parties, Agent and Lenders hereby agree as follows:

1.Definitions.  Except to the extent otherwise specified herein, capitalized terms used in this Amendment shall have the same meanings ascribed to them in the Credit Agreement and Annex A thereto.

2.Amendments.

2.1.Section 1 (AMOUNTS AND TERMS OF LOANS) of the Credit Agreement is hereby amended by deleting such Section in its entirety and replacing it with the following new Section 1:

“

SECTION 1.

AMOUNTS AND TERMS OF LOANS

1.1Loans.  Subject to the terms and conditions of this Agreement and in reliance upon the representations and warranties of Borrower and the other Credit Parties contained herein:

(a)Domestic Revolving Loans.

(i)            Each Revolving Lender agrees, severally and not jointly, to make available to Borrower from time to time until the Commitment Termination Date its Pro Rata Share of advances (each a “Revolving Credit Advance”) requested by the Borrower hereunder.  The Pro Rata Share of the Revolving Loan of any Revolving Lender (including, without duplication, Swing Line Loan) shall not at any time exceed its separate Revolving Loan Commitment.  Revolving Credit Advances may be repaid and reborrowed; provided, that the amount of any Revolving Credit Advance to be made at any time shall not exceed Borrowing Availability.  Borrowing Availability may be further reduced by Reserves imposed by Agent in its reasonable credit judgment based on a change in circumstances; provided, that, as long as Holdings, Borrower and their Subsidiaries on a consolidated basis shall have, as of the end of the immediately preceding calendar quarter, EBITDA, adjusted to reflect restructuring charges, non-recurring charges and including other adjustments, if any, all as set forth in Section 6.1(a) of Schedule 1 to Annex F, for the twelve (12) month period then ended of greater than $180,000,000, Agent’s right to impose any Reserves not previously imposed or to alter the manner in which previously imposed Reserves are determined shall require prior written consent of the Borrower.  The Revolving Loan, including, without limitation, the Alternative Currency Revolving Credit Subfacility, shall be repaid in full on the Commitment Termination Date.  Borrower shall execute and deliver to each Revolving Lender a note to evidence the total Revolving Loan Commitment of that Revolving Lender.  Each note shall be in the maximum principal amount of the Revolving Loan Commitment of the applicable Revolving Lender, dated the Closing Date and substantially in the form of Exhibit 1.1(a)(i) (as amended, modified, extended, substituted or replaced from time to time, each a “Revolving Note” and, collectively, the “Revolving Notes”).  Other than pursuant to Section 1.1(a)(ii), if the aggregate outstanding Revolving Loan (including, without limitation, the amount outstanding under the Alternative Currency Revolving Credit Subfacility) exceeds the Borrowing Base as set forth in the most recently delivered Borrowing

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Base Certificate or the total aggregate Revolving Loan Commitment of all Lenders (any such excess amount of Revolving Loan is herein referred to as an “Overadvance”), Lenders shall not be obligated to make Revolving Credit Advances, no additional Letters of Credit shall be issued and, except as provided in Section 1.1(a)(ii) below, the Revolving Loan must be repaid immediately and/or Letters of Credit cash collateralized in an amount sufficient to eliminate any Overadvance.  For the avoidance of doubt, at no time shall the Revolving Loan balance exceed the Maximum Amount and, if at any time the Revolving Loan balance shall exceed the Maximum Amount, Borrower shall immediately repay the Revolving Loan in an amount sufficient to eliminate any such excess.  All Overadvances shall constitute Index Rate Loans and shall bear interest payable upon demand at the Default Rate.  For funding requests for Revolving Credit Advances to be funded as Index Rate Loans of less than $5,000,000, written notice must be provided by 1:00 p.m. (New York time) on the Business Day on which the Revolving Credit Advance is to be made.  For funding requests of Revolving Credit Advances to be funded as Index Rate Loans of $5,000,000 or greater, written notice must be provided by 1:00 p.m. (New York time) on the Business Day immediately preceding the day on which the Revolving Credit Advance is to be made.  All Revolving Credit Advances to be funded as LIBOR Loans require three (3) Business Days prior written notice. Written notices for funding requests shall be in the form attached as Exhibit 1.1(a)(ii) (“Notice of Revolving Credit Advance”).  Any Loan or group of Loans having the same proposed LIBOR Period to be made or continued as, or converted into, a LIBOR Loan must be in a minimum amount of $5,000,000 and integral multiples of $500,000 in excess of such amount.

(ii)           If Borrower requests that Revolving Lenders make, or permit to remain outstanding an Overadvance, Agent may, in its sole discretion, elect to make, or permit to remain outstanding such Overadvance; provided, however, that Agent may not cause Revolving Lenders to make, or permit to remain outstanding, (a) a Revolving Loan balance in excess of the Maximum Amount or (b) an Overadvance in an aggregate amount in excess of $10,000,000.  If an Overadvance is made, or permitted to remain outstanding, pursuant to the preceding sentence, then all Revolving Lenders shall be bound to make, or permit to remain outstanding, such Overadvance based upon their Pro Rata Shares of the Revolving Loan Commitment in accordance with the terms of this Agreement.

(b)Domestic Swing Line Facility.

(i)            Subject to the terms and conditions hereof, the Swing Line Lender hereby agrees to make available at any time and from time to time until the Commitment Termination Date advances (each, a “Swing Line Advance”).  The provisions of this Section 1.1(b) shall not relieve Revolving Lenders of their obligations to make Revolving Credit Advances under Section 1.1(a).  Except as provided in Section 1.1(a)(ii) above, the aggregate amount of

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Swing Line Advances outstanding shall not exceed at any time the lesser of (A) the Swing Line Commitment and (B) Borrowing Availability (“Swing Line Availability”).  Until the Commitment Termination Date, Borrower may from time to time borrow, repay and reborrow under this Section 1.1(b).  Whenever Borrower desires that the Swing Line Lender make a Swing Line Advance hereunder, Borrower shall give the Swing Line Lender, not later than 3:30 P.M. (New York time), on the date that a Swing Line Advance is to be made, written notice or telephonic notice promptly confirmed in writing of each Swing Line Advance to be made hereunder.  Each such notice shall be irrevocable and specify (A) the date of borrowing (which shall be a Business Day), and  (B) the aggregate principal amount of the Swing Line Advance to be made pursuant to such borrowing.  Unless the Swing Line Lender has received at least one (1) Business Day’s prior written notice from Requisite Lenders instructing it not to make a Swing Line Advance, the Swing Line Lender shall, notwithstanding the failure of any condition precedent set forth in Section 2.2, be entitled to fund that Swing Line Advance, and to have each Revolving Lender make Revolving Credit Advances in accordance with Section 1.1(b)(iii) or purchase participating interests in accordance with Section 1.1(b)(iv).  Notwithstanding any other provision of this Agreement or the other Loan Documents, the Swing Line Loan shall constitute an Index Rate Loan.  Borrower shall repay the aggregate outstanding principal amount of the Swing Line Loan upon demand therefor by Agent. The entire unpaid balance of the Swing Line Loan and all other noncontingent Obligations (other than as set forth in Section 1.5) shall be immediately due and payable in full in immediately available funds on the Commitment Termination Date if not sooner paid in full.

(ii)           Borrower shall execute and deliver to the Swing Line Lender a promissory note to evidence the Swing Line Commitment. Such note shall be in the principal amount of the Swing Line Commitment of the Swing Line Lender, dated the Closing Date and substantially in the form of Exhibit 1.1(b) (as amended, modified, extended, substituted or replaced from time to time, the “Swing Line Note”). The Swing Line Note shall represent the obligation of Borrower to pay the amount of the Swing Line Commitment or, if less, the aggregate unpaid principal amount of all Swing Line Advances made to Borrower together with interest thereon as prescribed in Section 1.2.

(iii)          The Swing Line Lender, at any time and from time to time in its sole and absolute discretion but no less frequently than once weekly, may on behalf of Borrower (and Borrower hereby irrevocably authorizes the Swing Line Lender to so act on its behalf) request each Revolving Lender to make a Revolving Credit Advance to Borrower (which shall be an Index Rate Loan) in an amount equal to that Revolving Lender’s Pro Rata Share of the principal amount of the Swing Line Loan (the “Refunded Swing Line Loan”) outstanding on the date such notice is given.  Unless any of the events described in Sections 7.1(f) and 7.1(g) has occurred (in which event the procedures of Section 1.1(b)(iv) shall apply) and regardless of whether the conditions precedent set forth in this

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Agreement to the making of a Revolving Credit Advance are then satisfied, each Revolving Lender shall disburse directly to Agent, its Pro Rata Share of a Revolving Credit Advance on behalf of the Swing Line Lender, prior to 3:00 p.m. (New York time), in immediately available funds on the Business Day next succeeding the date that notice is given.  The proceeds of those Revolving Credit Advances shall be immediately paid to the Swing Line Lender and applied to repay the Refunded Swing Line Loan.

(iv)          If, prior to refunding a Swing Line Loan with a Revolving Credit Advance pursuant to Section 1.1(b)(iii), one of the events described in Sections 7.1(f) or 7.1(g) has occurred, then, subject to the provisions of Section 1.1(b)(v) below, each Revolving Lender shall, on the date such Revolving Credit Advance was to have been made for the benefit of Borrower, purchase from the Swing Line Lender an undivided participation interest in the Swing Line Loan in an amount equal to its Pro Rata Share (determined with respect to the Revolving Loan) of such Swing Line Loan.  Upon request, each Revolving Lender shall promptly transfer to the Swing Line Lender, in immediately available funds, the amount of its participation interest.

(v)           Each Revolving Lender’s obligation to make Revolving Credit Advances in accordance with Section 1.1(b)(iii) and to purchase participation interests in accordance with Section 1.1(b)(iv) shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right that such Revolving Lender may have against the Swing Line Lender, Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of any Default or Event of Default; (C) any inability of Borrower to satisfy the conditions precedent to borrowing set forth in this Agreement at any time or (D) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing.  Swing Line Lender shall be entitled to recover, on demand, from each Revolving Lender the amounts required pursuant to Sections 1.1.(b)(iii) or 1.1(b)(iv), as the case may be.  If any Revolving Lender does not make available such amounts to Agent or the Swing Line Lender, as applicable, the Swing Line Lender shall be entitled to recover, on demand, such amount on demand from such Revolving Lender, together with interest thereon for each day from the date of non-payment until such amount is paid in full at the Federal Funds Rate for the first two Business Days and at the Index Rate thereafter.

(c)           Letters of Credit.  The Revolving Loan Commitment may, in addition to advances under the Revolving Loan and the Alternative Currency Revolving Credit Subfacility, be utilized (subject to the limitations imposed by Section 1.1(a)), upon the request of the Borrower to Agent, for the issuance of Letters of Credit, which shall be issued in Dollars or, to the extent available, Pounds Sterling, on behalf of Borrower.  Immediately upon the issuance by an L/C Issuer of a Letter of Credit, and without further action on the part of Agent or any of the Lenders, each Revolving Lender shall be deemed to have purchased

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from such L/C Issuer a participation in such Letter of Credit (or in its obligation under a risk participation agreement with respect thereto) equal to such Revolving Lender’s Pro Rata Share of the aggregate amount available to be drawn under such Letter of Credit.

(i)            Maximum Amount.  The aggregate amount of Letter of Credit Obligations with respect to all Letters of Credit outstanding or unreimbursed at any time shall not exceed $45,000,000, or the Dollar Equivalent thereof (“L/C Sublimit”).

(ii)           Reimbursement.  Borrower shall be irrevocably and unconditionally obligated forthwith without presentment, demand, protest or other formalities of any kind (including for purposes of Section 10), to reimburse any L/C Issuer on demand in immediately available funds for any amounts paid by such L/C Issuer with respect to a Letter of Credit, including all reimbursement payments, Fees, Charges, costs and expenses paid by such L/C Issuer.  Borrower hereby authorizes and directs Agent, at Agent’s option, to debit Borrower’s accounts (by increasing the outstanding principal balance of the Revolving Credit Advances, Alternative Currency Revolving Credit Advances, Swing Line Advances or Alternative Currency Swing Line Advances made to Borrower, as applicable) in the amount of any payment made by an L/C Issuer with respect to any Letter of Credit.  All amounts paid by an L/C Issuer with respect to any Letter of Credit that are not immediately repaid by Borrower with the proceeds of a Revolving Credit Advance, Alternative Currency Revolving Credit Advance, Swing Line Advance, Alternative Currency Swing Line Advance or otherwise shall bear interest payable on demand at the interest rate applicable to Revolving Credit Advances that are Index Rate Loans plus, at the election of Agent or Requisite Lenders, an additional two percent (2.00%) per annum.  Each Revolving Lender agrees to fund its Pro Rata Share of any Revolving Loan made pursuant to this Section 1.1(c)(ii).  In the event Agent elects not to debit Borrower’s account and Borrower fails to reimburse the L/C Issuer in full on the date of any payment in respect of a Letter of Credit, Agent shall promptly notify each Revolving Lender of the amount of such unreimbursed payment and the accrued interest thereon and each Revolving Lender, on the next Business Day prior to 3:00 p.m. (New York time), shall deliver to Agent an amount equal to its Pro Rata Share thereof in same day funds.  Each Revolving Lender hereby absolutely and unconditionally agrees to pay to the L/C Issuer upon demand by the L/C Issuer such Revolving Lender’s Pro Rata Share of each payment made by the L/C Issuer in respect of a Letter of Credit and not immediately reimbursed by Borrower or satisfied through a debit of Borrower’s account.  Each Revolving Lender acknowledges and agrees that its obligations pursuant to this subsection in respect of Letters of Credit are absolute and unconditional and shall not be affected by any circumstance whatsoever, including setoff, counterclaim, the occurrence and continuance of a Default or an Event of Default or any failure by Borrower to satisfy any of the conditions set forth in Section 2.2.  If any Revolving Lender fails to make available to the L/C Issuer the amount of such

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Revolving Lender’s Pro Rata Share of any payments made by the L/C Issuer in respect of a Letter of Credit as provided in this Section 1.1(c)(ii), the L/C Issuer shall be entitled to recover such amount on demand from such Revolving Lender together with interest at the Index Rate or at the Alternative Currency Index Rate, as applicable.

(iii)          Request for Letters of Credit.  Borrower shall give Agent at least three (3) Business Days prior written notice specifying the date a Letter of Credit is requested to be issued, the amount and the name and address of the beneficiary and a description of the transactions proposed to be supported thereby, the Applicable Currency, and the expiry date (or extended expiry date) of the Letter of Credit.  Each request by Borrower for the issuance of a Letter of Credit shall be in the form of Exhibit 1.1(c).  If Agent informs Borrower that the L/C Issuer cannot issue the requested Letter of Credit directly, Borrower may request that L/C Issuer arrange for the issuance of the requested Letter of Credit under a risk participation agreement with another financial institution reasonably acceptable to Agent, L/C Issuer and Borrower.  The issuance of any Letter of Credit under this Agreement shall be subject to satisfaction of the conditions set forth in Section 2.2 and the conditions that the Letter of Credit (i) supports a transaction benefiting the Credit Parties (other than Holdings) or their wholly-owned Subsidiaries and (ii) is in a form, is for an amount and contains such terms and conditions as are reasonably satisfactory to the L/C Issuer and, in the case of standby letters of credit, Agent.  The initial notice requesting the issuance of a Letter of Credit shall be accompanied by the form of the Letter of Credit and the Master Standby Agreement or Master Documentary Agreement, as applicable, and an application for a letter of credit, if any, then required by the L/C Issuer completed in a manner reasonably satisfactory to such L/C Issuer.  If any provision of any application or reimbursement agreement is inconsistent with the terms of this Agreement, then the provisions of this Agreement, to the extent of such inconsistency, shall control.

(iv)          Expiration Dates of Letters of Credit.  The expiration date of each Letter of Credit shall be on a date that is not later than the earlier of (a) twelve months from its date of issuance or (b) the thirtieth (30th) day prior to the date set forth in clause (a) of the definition of the term Commitment Termination Date. Notwithstanding the foregoing, a Letter of Credit may provide for automatic extensions of its expiration date for one (1) or more successive periods of up to twelve (12) months for each period; provided that the L/C Issuer has the right to terminate such Letter of Credit on each such expiration date and no renewal term may extend the term of the Letter of Credit to a date that is later than the thirtieth (30th) day prior to the date set forth in clause (a) of the definition of the term Commitment Termination Date.  Upon direction by Agent or Requisite Lenders, the L/C Issuer shall not renew any such Letter of Credit at any time during the continuance of an Event of Default; provided that, in the case of a direction by Agent or Requisite Lenders, the L/C Issuer receives such directions

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prior to the date notice of non-renewal is required to be given by the L/C Issuer and the L/C Issuer has had a reasonable period of time to act on such notice.

(v)           Obligations Absolute.  The obligation of Borrower to reimburse the L/C Issuer, Agent and Lenders for payments made in respect of Letters of Credit issued by the L/C Issuer shall be unconditional and irrevocable and shall be paid under all circumstances strictly in accordance with the terms of this Agreement, including the following circumstances: (a) any lack of validity or enforceability of any Letter of Credit; (b) any amendment or waiver of or any consent or departure from all or any of the provisions of any Letter of Credit or any Loan Document; (c) the existence of any claim, set-off, defense or other right which Borrower, any of its Subsidiaries or Affiliates or any other Person may at any time have against any beneficiary of any Letter of Credit, Agent, any L/C Issuer, any Lender or any other Person, whether in connection with this Agreement, any other Loan Document or any other related or unrelated agreements or transactions; (d) any draft or other document presented under any  Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (e) payment under any Letter of Credit against presentation of a draft or other document that does not substantially comply with the terms of such Letter of Credit; or (f) any other act or omission to act or delay of any kind of any L/C Issuer, Agent, any Lender or any other Person or any other event or circumstance whatsoever that might, but for the provisions of this Section 1.1(c)(v), constitute a legal or equitable discharge of Borrower’s obligations hereunder.  Without limiting the generality of the foregoing, it is expressly understood and agreed by Borrower that the absolute and unconditional obligation of Borrower to Agent and Lenders hereunder to reimburse payments made under a Letter of Credit will not be excused by the gross negligence or willful misconduct of the L/C Issuer.  However, the foregoing shall not be construed to excuse an L/C Issuer from claims which Borrower may assert against the L/C Issuer subject to the terms of the Master Standby Agreement or the Master Documentary Agreement.

(vi)          Obligations of L/C Issuers.  Each L/C Issuer (other than GE Capital) hereby agrees that it will not issue a Letter of Credit hereunder until it has provided Agent with written notice specifying the amount and intended issuance date of such Letter of Credit.  Each L/C Issuer (other than GE Capital) further agrees to provide to Agent:  (a) a copy of each Letter of Credit issued by such L/C Issuer promptly after its issuance; (b) a weekly report summarizing available amounts under Letters of Credit issued by such L/C Issuer, the dates and amounts of any draws under such Letters of Credit, the effective date of any increase or decrease in the face amount of any Letters of Credit during such week and the amount of any unreimbursed draws under such Letters of Credit; and (c) such additional information reasonably requested by Agent from time to time with respect to the Letters of Credit issued by such L/C Issuer.

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(d)Alternative Currency Revolving Credit Subfacility.

(i)            The Revolving Loan Commitment may, in addition to advances under the Revolving Loan and the issuance of any Letters of Credit, be utilized (subject to the limitations imposed by Section 1.1(a) and this Section 1.1(d)), upon the request of Borrower, for advances under the Alternative Currency Revolving Credit Subfacility as set forth herein.  Each Revolving Lender agrees, severally and not jointly, to make available to the Borrower from time to time until the Commitment Termination Date its Pro Rata Share of advances denominated in an Alternative Currency (each an “Alternative Currency Revolving Credit Advance”) requested by Borrower hereunder, which request shall specify the Alternative Currency.  The Pro Rata Share of the Alternative Currency Revolving Credit Advances of any Revolving Lender shall not at any time exceed the Assigned Dollar Value of such Lender’s Unused Alternative Currency Revolving Credit Sub-Commitment at such time; provided, however, that the aggregate amount of all Alternative Currency Revolving Credit Advances at any time outstanding shall not at any time exceed the Assigned Dollar Value of $150,000,000 (the “Alternative Currency Revolving Credit Subfacility”), and, provided, further, that the aggregate amount of all Alternative Currency Revolving Credit Borrowings shall in no event exceed the aggregate of the Unused Alternative Currency Revolving Credit Sub-Commitments of the Revolving Lenders at such time.  Each Alternative Currency Revolving Credit Borrowing  shall be in the Assigned Dollar Value of approximately Two Million Dollars ($2,000,000) or an integral multiple of approximately One Million Dollars ($1,000,000) in excess thereof on the date of the applicable Notice of Alternative Currency Borrowing or, if less, the then Dollar Equivalent amount of the aggregate Unused Alternative Currency Revolving Credit Sub-Commitments other than, in the case of continuations or conversions of any Alternative Currency Revolving Credit Borrowing, to the extent a failure to comply with the foregoing is solely a result of currency fluctuations.  Each Alternative Currency Revolving Credit Borrowing shall consist of Alternative Currency Revolving Credit Advances made simultaneously by the Revolving Lenders ratably according to their Alternative Currency Revolving Credit Sub-Commitments.

(ii)           Each Alternative Currency Revolving Credit Borrowing shall be made on notice, given not later than 1:00 P.M. (New York, New York time) on the 3rd Business Day prior to the date of the proposed Borrowing by the Borrower to the Agent.  Each such notice of an Alternative Currency Revolving Credit Borrowing (a “Notice of Alternative Currency Borrowing”) shall be in substantially the form of Exhibit 1.1(d)(ii) hereto, specifying therein the requested (i) date of such Alternative Currency Revolving Credit Borrowing, (ii) Applicable Currency, and (iii) aggregate amount of such Alternative Currency Revolving Credit Borrowing.

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(e)Alternative Currency Swing Line Facility.

(i)            Subject to the terms and conditions hereof, the Alternative Currency Swing Line Lender hereby agrees to make available at any time and from time to time until the Commitment Termination Date advances (each, an “Alternative Currency Swing Line Advance”).  The provisions of this Section 1.1(e) shall not relieve Revolving Lenders of their obligations to make Revolving Credit Advances under Section 1.1(b) or Alternative Revolving Credit Advances under Section 1.1(d).  Except as provided in Section 1.1(a)(ii) above, the aggregate amount of Alternative Currency Swing Line Advances outstanding shall not exceed at any time the lesser of (A) the Alternative Currency Swing Line Commitment and (B) Borrowing Availability (“Alternative Currency Swing Line Availability”).  Until the Commitment Termination Date, Borrower may from time to time borrow, repay and reborrow under this Section 1.1(e).  Whenever Borrower desires that the Alternative Currency Swing Line Lender make an Alternative Currency Swing Line Advance hereunder, Borrower shall give the Alternative Currency Swing Line Lender not later than 10:00 A.M. (New York time) on the Business Day prior to the date that an Alternative Currency Swing Line Advance is to be made, written notice or telephonic notice promptly confirmed in writing of each Alternative Currency Swing Line Advance to be made hereunder.  Each such notice shall be irrevocable and specify (A) the date of Borrowing (which shall be a Business Day), and (B) the aggregate principal amount of the Alternative Currency Swing Line Advance to be made pursuant to such Borrowing.  Unless the Alternative Currency Swing Line Lender has received at least one (1) Business Day’s prior written notice from Requisite Lenders instructing it not to make an Alternative Currency Swing Line Advance, the Alternative Currency Swing Line Lender shall, notwithstanding the failure of any condition precedent set forth in Section 2.2, be entitled to fund that Alternative Currency Swing Line Advance, and to have each Revolving Lender make Alternative Currency Revolving Credit Advances in accordance with Section 1.1(e)(iii) or purchase participating interests in accordance with Section 1.1(e)(iv).  Notwithstanding any other provision of this Agreement or the other Loan Documents, the Alternative Currency Swing Line Loan shall constitute an Index Rate Loan.  Borrower shall repay the aggregate outstanding principal amount of the Alternative Currency Swing Line Loan upon demand therefor by Agent.  The entire unpaid balance of the Alternative Currency Swing Line Loan and all other noncontingent Obligations shall be immediately due and payable in full in immediately available funds on the Commitment Termination Date if not sooner paid in full.

(ii)           Borrower shall execute and deliver to the Alternative Currency Swing Line Lender a promissory note to evidence the Alternative Currency Swing Line Commitment.  Such note shall be in the principal amount of the Alternative Currency Swing Line Commitment of the Alternative Currency Swing Line Lender, dated the Closing Date and substantially in the form of Exhibit 1.1(e) (as amended, modified, extended, substituted or replaced from time to time, the “Alternative Currency Swing Line Note”).  The Alternative Currency Swing Line Note shall represent the obligation

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of Borrower to pay the amount of the Alternative Currency Swing Line Commitment or, if less, the aggregate unpaid principal amount of all Alternative Currency Swing Line Advances made to Borrower together with interest thereon as prescribed in Section 1.2.

(iii)          The Alternative Currency Swing Line Lender, at any time and from time to time in its sole and absolute discretion but no less frequently than once every two weeks, may on behalf of Borrower (and Borrower hereby irrevocably authorizes the Alternative Currency Swing Line Lender to so act on its behalf) request each Revolving Lender to make an Alternative Currency Revolving Credit Advance to Borrower (which shall be a LIBOR Loan at the Alternative Currency LIBOR Rate) in an amount equal to that Revolving Lender’s Pro Rata Share of the difference between (A) the principal amount of the Alternative Currency Swing Line Loan (such amount, the “Refunded Alternative Currency Swing Line Loan”) outstanding on the date such notice is given and (B) the then Pounds Sterling equivalent of $2,500,000.  Prior to sending such notice the Alternative Currency Swing Line Lender shall contact the Borrower which shall specify the LIBOR Period for the Alternative Currency Revolving Credit Advance to be made by each Lender in order to repay the Refunded Alternative Currency Swing Line Loan and, accordingly, such notice sent by the Alternative Currency Swing Line Lender to each Lender shall specify both such Lender’s Pro Rata Share of the Refunded Alternative Currency Advance and the LIBOR Period selected by the Borrower for the Alternative Currency Revolving Credit Advances to be made by the Lenders in the amount of the Refunded Alternative Currency Swing Line Loan.  Unless any of the events described in Sections 7.1(f) and 7.1(g) has occurred (in which event the procedures of Section 1.1(e)(iv) shall apply) and regardless of whether the conditions precedent set forth in this Agreement to the making of an Alternative Currency Revolving Credit Advance are then satisfied, each Revolving Lender shall disburse directly to Agent, its Pro Rata Share of an Alternative Currency Revolving Credit Advance on behalf of the Alternative Currency Swing Line Lender, prior to 3:00 p.m. (New York time), in immediately available funds on the third (3rd) Business Day next following the date that such notice is given by the Alternative Currency Swing Line Lender.  The proceeds of those Alternative Currency Revolving Credit Advances shall be immediately paid to the Alternative Currency Swing Line Lender and applied to repay the Refunded Alternative Currency Swing Line Loan.

(iv)          If, prior to refunding an Alternative Currency Swing Line Loan with an Alternative Currency Revolving Credit Advance pursuant to Section 1.1(e)(iii), one of the events described in Sections 7.1(f) or 7.1(g) has occurred, then, subject to the provisions of Section 1.1(e)(v) below, each Revolving Lender shall, on the date such Alternative Currency Revolving Credit Advance was to have been made for the benefit of Borrower, purchase from the Alternative Currency Swing Line Lender an undivided participation interest in the Alternative Currency Swing Line Loan in an amount equal to its Pro Rata Share (determined with respect to Alternative Currency Revolving Credit Borrowings)

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of such Alternative Currency Swing Line Loan.  Upon request, each Revolving Lender shall promptly transfer to the Alternative Currency Swing Line Lender, in immediately available funds, the amount of its participation interest.

(v)           Each Revolving Lender’s obligation to make Alternative Currency Revolving Credit Advances in accordance with Section 1.1(e)(iii) and to purchase participation interests in accordance with Section 1.1(e)(iv) shall be absolute and unconditional and shall not be affected by any circumstance, including (A) any setoff, counterclaim, recoupment, defense or other right that such Revolving Lender may have against the Alternative Currency Swing Line Lender, Borrower or any other Person for any reason whatsoever; (B) the occurrence or continuance of any Default or Event of Default; (C) any inability of Borrower to satisfy the conditions precedent to borrowing set forth in this Agreement at any time or (D) any other circumstance, happening or event whatsoever, whether or not similar to any of the foregoing.  Alternative Currency Swing Line Lender shall be entitled to recover, on demand, from each Revolving Lender the amounts required pursuant to Sections 1.1.(e)(iii) or 1.1(e)(iv), as the case may be.  If any Revolving Lender does not make available such amounts to Agent or the Alternative Currency Swing Line Lender, as applicable, the Alternative Currency Swing Line Lender shall be entitled to recover, on demand, such amount on demand from such Revolving Lender, together with interest thereon for each day from the date of non-payment until such amount is paid in full at the Federal Funds Rate for the first two Business Days and at the Alternative Currency Index Rate thereafter.

(f)            Funding Authorization.

(i)            The proceeds of all Loans made to the Borrower pursuant to this Agreement (other than Loans made to the Borrower pursuant to the Alternative Currency Revolving Credit Subfacility) subsequent to the Closing Date are to be funded by Agent by wire transfer to the account designated by Borrower below (the “US Disbursement Account”):

Bank:  Deutsche  Trust Company Americas

ABA No.:  021-001-033

Bank Address:  New York, New York

Account No.:  00360911

Reference:  Vertis, Inc.

(ii)           The proceeds of all Loans made to the Borrower pursuant to the Alternative Currency Revolving Credit Subfacility under this Agreement subsequent to the Seventh Amendment Effective Date are to be funded by Agent by wire transfer to the applicable account designated in writing by Borrower to Agent at least ten (10) Business Days prior to the funding of any such Loan under the Alternative Currency Revolving Credit Subfacility (each, a “European Disbursement Account”, and collectively the “European Disbursement

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Accounts” and collectively with the US Disbursement Account, the “Disbursement Accounts”).

Borrower shall provide Agent with written notice of any change in the foregoing instructions at least three (3) Business Days before the desired effective date of such change.

(g)           Term Loan.  Each Term Lender agrees, severally and not jointly, to lend to Borrower in one draw, on the Seventh Amendment Effective Date, its Pro Rata Share of the aggregate amount of $50,000,000 (the “Term Loan”).  The principal amount of the Term Loan shall be due and payable in full, in cash in one installment, on the Commitment Termination Date; subject, however, to acceleration upon (or following) the occurrence of an Event of Default and during its continuation, or upon earlier termination of this Agreement, as provided for herein.  Amounts borrowed under this Section 1.1(g) and repaid may not be reborrowed.  The Term Loan shall be evidenced by promissory notes substantially in the form of Exhibit 1.1(g) (as amended, modified, extended, substituted or replaced from time to time, each a “Term Note” and, collectively, the “Term Notes”), and, except as provided in Section 1.7, the Borrower shall execute and deliver each Term Note to the applicable Term Lender.  Each Term Note shall represent the obligation of Borrower to pay the amount of the applicable Term Lender’s Term Loan Commitment, together with interest thereon.

1.2           Interest and Applicable Margins.

(a)           Borrower shall pay interest to Agent, for the ratable benefit of Lenders, with respect to the various Loans (other than Letter of Credit Obligations) made by each Lender (or in the case of the Swing Line Loan, for the benefit of the Swing Line Lender or, in the case of the Alternative Currency Swing Line Loan, for the benefit of the Alternative Currency Swing Line Lender), in arrears on each applicable Interest Payment Date, at the following rates with respect to (i) Revolving Credit Advances that are Index Rate Loans, the Index Rate plus the Applicable Revolver Index Margin per annum, (ii) Revolving Credit Advances that are LIBOR Loans, at the election of Borrower, the applicable LIBOR Rate plus the Applicable Revolver LIBOR Margin per annum, (iii) the Swing Line Loan, the Index Rate plus the Applicable Revolver Index Margin per annum, (iv) Alternative Currency Revolving Credit Advances that are LIBOR Loans, at the election of Borrower, the applicable Alternative Currency LIBOR Rate plus the Applicable Revolver LIBOR Margin per annum, (v) Alternative Currency Swing Line Loan, the Alternative Currency Index Rate plus the Applicable Alternative Currency Revolver Index Margin per annum, and (vi) the Term Loan, the applicable LIBOR Rate plus the Applicable Term Loan Margin per annum.

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As of the Seventh Amendment Effective Date, the Applicable Margins with respect to Revolving Credit Advances, Alternative Currency Revolving Credit Advances and Letter of Credit Obligations are as follows:

Applicable Revolver Index Margin	1.75	%
Applicable Alternative Currency Revolver Index Margin	3.00	%
Applicable Revolver LIBOR Margin	3.00	%
Applicable L/C Margin	3.00	%

The Applicable Term Loan Margin shall in all events equal the greater of (I) 4.75% and (II) 1.75% in excess of the then Applicable Revolver LIBOR Margin.

The Applicable Margins shall be adjusted (up or down) prospectively on a quarterly basis as determined by Holdings’ and its Subsidiaries’ consolidated financial performance, commencing with the first day of the first calendar month that occurs more than one (1) day after delivery of Holdings’ quarterly Financial Statements to Lenders for the Fiscal Quarter ending June 30, 2005.  Adjustments in Applicable Margins with respect to Revolving Credit Advances, Alternative Currency Revolving Credit Advances and Letter of Credit Obligations will be determined by reference to the following grid:

If Leverage Ratio is:	Level of Applicable Margins:
<0.7	Level I
<1.0, but > 0.7	Level II
<1.6, but > 1.0	Level III
>1.6	Level IV

	Applicable Margins
	Level I			Level II			Level III			Level IV
Applicable Revolver Index Margin		1.00	%		1.25	%		1.50	%		1.75	%
Applicable Alternative Currency Revolver Index Margin		2.25	%		2.50	%		2.75	%		3.00	%
Applicable Revolver LIBOR Margin		2.25	%		2.50	%		2.75	%		3.00	%
Applicable L/C Margin		2.25	%		2.50	%		2.75	%		3.00	%

All adjustments in the Applicable Margins  after June 30, 2005 shall be implemented quarterly on a prospective basis, for each calendar month commencing at least one (1) day after the date of delivery to Lenders of the

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quarterly unaudited Financial Statements evidencing the need for an adjustment.  Concurrently with the delivery of quarterly unaudited Financial Statements, Borrower shall deliver to Agent and Lenders a certificate, signed by its chief financial officer, setting forth in reasonable detail the basis for the continuance of, or any change in, the Applicable Margins.  Failure to timely deliver such Financial Statements shall, in addition to any other remedy provided for in this Agreement, result in an increase in the Applicable Margins to the highest level set forth in the foregoing grid, until the first day of the first calendar month following the delivery of those Financial Statements demonstrating that such an increase is not required.  If any Default or an Event of Default has occurred and is continuing at the time any reduction in the Applicable Margins is to be implemented, that reduction shall be deferred until the first day of the first calendar month following the date on which all Defaults or Events of Default are waived or cured.

(b)           If any payment on any Loan becomes due and payable on a day other than a Business Day, the maturity thereof will be extended to the next succeeding Business Day (except as set forth in the definition of LIBOR Period) and, with respect to payments of principal, interest thereon shall be payable at the then applicable rate during such extension.

(c)           All computations of Fees calculated on a per annum basis and interest shall be made by Agent on the basis of a 360-day year, in each case for the actual number of days occurring in the period for which such Fees and interest are payable.  The Index Rate and the Alternative Currency Index Rate are each floating rates determined for each day.  Each determination by Agent of an interest rate and Fees hereunder shall be final, binding and conclusive on Borrower, absent manifest error.

(d)           So long as an Event of Default has occurred and is continuing under Section 7.1(a), (f) or (g) and without notice of any kind, or so long as any other Event of Default has occurred and is continuing and at the election of Agent (or upon the written request of Requisite Lenders) confirmed by written notice from Agent to Borrower, the interest rates applicable to the Loans and the Letter of Credit and Unused Line Fees shall be increased by two percentage points (2%) per annum above the rates of interest or the rate of such Fee otherwise applicable hereunder (“Default Rate”), and all other outstanding Obligations which are past due shall bear interest at the then applicable Index Rate applicable to such other Obligations plus the Default Rate.  Interest, Unused Line Fees and Letter of Credit Fees at the Default Rate shall accrue from the initial date of such Event of Default until that Event of Default is cured or waived and shall be payable upon demand, but in any event, shall be payable on the next regularly scheduled payment date set forth herein for such Obligation.

(e)           Borrower shall have the option to (i) request that any Revolving Credit Advance or Alternative Currency Revolving Credit Advance be made as a LIBOR Loan, (ii) convert at any time all or any part of outstanding

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Loans (other than the Swing Line Loan) from Index Rate Loans to LIBOR Loans, (iii) convert any LIBOR Loan (other than an Alternative Currency Revolving Credit Advance or the Term Loan) to an Index Rate Loan, subject to payment of the LIBOR Breakage Costs in accordance with Section 1.3(e) if such conversion is made prior to the expiration of the LIBOR Period applicable thereto, or (iv) continue all or any portion of any Loan (other than the Swing Line Loan) as a LIBOR Loan upon the expiration of the applicable LIBOR Period and the succeeding LIBOR Period of that continued Loan shall commence on the first day after the last day of the LIBOR Period of the Loan to be continued, provided, however, Loans that bear interest by reference to the Alternative Currency LIBOR Rate and the Alternative Currency Index Rate may not be converted or continued as Loans that bear interest by reference to the LIBOR Rate or the Index Rate.  Any such election must be made by 1:00 p.m. (New York time) on the 3rd Business Day prior to (1) the date of any proposed Revolving Credit Advance or Alternative Currency Revolving Credit Advance that is to bear interest at the LIBOR Rate or the Alternative Currency LIBOR Rate, as applicable, (2) the end of each LIBOR Period with respect to any LIBOR Loans to be continued as such, or (3) the date on which Borrower wishes to convert any Index Rate Loan to a LIBOR Loan for a LIBOR Period designated by Borrower in such election.  If no election is received with respect to a LIBOR Loan by 1:00 p.m. (New York time) on the 3rd Business Day prior to the end of the LIBOR Period with respect thereto, that LIBOR Loan (other than an Alternative Currency Revolving Credit Advance) shall be converted to an Index Rate Loan at the end of its LIBOR Period.  With respect to any Loan consisting of an Alternative Currency Revolving Credit Advance, if no election is received with respect to a LIBOR Loan by 1:00 p.m. (New York time) on the 3rd Business Day prior to the end of the LIBOR Period with respect thereto, that LIBOR Loan shall be continued as a LIBOR Loan for the same LIBOR Period.  Borrower must make such election by notice to Agent in writing, by fax or overnight courier.  In the case of any conversion or continuation, such election must be made pursuant to a written notice (a “Notice of Conversion/Continuation”) in the form of Exhibit 1.2(e).  No Loan shall be made, converted into or continued as a LIBOR Loan, if an Event of Default has occurred and is continuing and Agent or Requisite Lenders have determined not to make or continue any Loan as a LIBOR Loan as a result thereof.

(f)            Notwithstanding anything to the contrary set forth in this Section 1.2, if a court of competent jurisdiction determines in a final order that the rate of interest payable hereunder exceeds the highest rate of interest permissible under law (the “Maximum Lawful Rate”), then so long as the Maximum Lawful Rate would be so exceeded, the rate of interest payable hereunder shall be equal to the Maximum Lawful Rate; provided, however, that if at any time thereafter the rate of interest payable hereunder is less than the Maximum Lawful Rate, Borrower shall continue to pay interest hereunder at the Maximum Lawful Rate until such time as the total interest received by Agent, on behalf of Lenders, is equal to the total interest that would have been received had the interest rate

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payable hereunder been (but for the operation of this paragraph) the interest rate payable since the Closing Date as otherwise provided in this Agreement.  Thereafter, interest hereunder shall be paid at the rate(s) of interest and in the manner provided in Sections 1.2(a) through (e), unless and until the rate of interest again exceeds the Maximum Lawful Rate, and at that time this paragraph shall again apply.  In no event shall the total interest received by any Lender pursuant to the terms hereof exceed the amount that such Lender could lawfully have received had the interest due hereunder been calculated for the full term hereof at the Maximum Lawful Rate.  If the Maximum Lawful Rate is calculated pursuant to this paragraph, such interest shall be calculated at a daily rate equal to the Maximum Lawful Rate divided by the number of days in the year in which such calculation is made.  If, notwithstanding the provisions of this Section 1.2(f), a court of competent jurisdiction shall determine by a final, non-appealable order that a Lender has received interest hereunder in excess of the Maximum Lawful Rate, Agent shall, to the extent permitted by applicable law, promptly apply such excess as specified in Section 1.5(d) and thereafter shall refund any excess to Borrower or as such court of competent jurisdiction may otherwise order.

1.3           Fees.

(a)           Fee Letters.  Borrower shall pay: (i) to GE Capital, individually, the Fees specified in that certain fee letter, dated as of November 5, 2004 among Borrower and GE Capital (the “GE Capital Fee Letter”), at the times specified for payment therein; and (ii) for so long as Crystal Capital is a “Lender”, to Crystal Capital, individually, the Fees specified in that certain fee letter, dated as of March 13, 2007 among Borrower and Crystal Capital (the “Crystal Capital Fee Letter”), at the times specified for payment therein.

(b)           Unused Line Fee.  As additional compensation for the Revolving Lenders, Borrower shall pay to Agent, for the ratable benefit of such Lenders, in arrears, on the first Business Day of each calendar quarter prior to the Commitment Termination Date, commencing with January, 2005 and on the Commitment Termination Date, a fee for Borrower’s non-use of available funds in an amount equal to one-half of one percent (0.50%) per annum multiplied by the difference between (x) the Maximum Amount (as it may be reduced from time to time) and (y) the average for the period of the daily closing balances of the Revolving Loan (including, without duplication, Swing Line Loans and Alternative Currency Revolving Loans) outstanding during the period for which such Fee is due.

(c)           Letter of Credit Fee.  Borrower agrees to pay to Agent for the benefit of Revolving Lenders, as compensation to such Revolving Lenders for Letter of Credit Obligations incurred hereunder, (i) without duplication of reasonable, documented, out-of-pocket costs and expenses otherwise payable to Agent or Lenders hereunder, all costs and expenses incurred by Agent or any Lender on account of such Letter of Credit Obligations, and (ii) for each calendar

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quarter during which any Letter of Credit Obligation shall remain outstanding, commencing with the first calendar quarter following the Closing Date, a fee (the “Letter of Credit Fee”) in an amount equal to the Applicable L/C Margin from time to time in effect multiplied by the maximum amount available from time to time to be drawn under the applicable Letter of Credit.  Such fee shall be paid to Agent for the benefit of the Revolving Lenders in arrears, on the first Business Day of each calendar quarter and on the Commitment Termination Date.  In addition, Borrower shall pay to any L/C Issuer, on demand, such fees (including all per annum fees), charges and expenses of such L/C Issuer in respect of the issuance, negotiation, acceptance, amendment, transfer and payment of such Letter of Credit or otherwise payable pursuant to the application and related documentation under which such Letter of Credit is issued.

(d)           LIBOR Breakage Costs.  Upon (i) any default by Borrower in making any borrowing of, conversion into or continuation of any LIBOR Loan following Borrower’s delivery to Agent of any LIBOR Loan request in respect thereof or (ii) any payment of a LIBOR Loan on any day that is not the last day of the LIBOR Period applicable thereto (regardless of the source of such prepayment and whether voluntary, by acceleration or otherwise), Borrower shall pay Agent, for the benefit of all Lenders that funded or were prepared to fund any such LIBOR Loan, LIBOR Breakage Costs, if applicable.

(e)           Expenses and Attorneys’ Fees.  Borrower agrees to pay all reasonable, documented, out-of-pocket fees, charges, costs and expenses (including, without duplication, reasonable attorneys’ fees and expenses) incurred by Agent, and, on and after the Seventh Amendment Effective Date, by Crystal Capital (regardless of whether incurred prior to the Seventh Amendment Effective Date in connection with the Seventh Amendment to Credit Agreement or after the Seventh Amendment Effective Date in connection with any of the Loan Documents), in connection with any matters contemplated by or arising out of the Loan Documents, in connection with the examination, review, due diligence investigation, documentation, negotiation, closing and syndication of the transactions contemplated herein and in connection with the continued administration of the Loan Documents including any amendments, modifications, consents and waivers, and Agent will use its best efforts to give Borrower reasonable notice of all such out-of-pocket fees, charges, costs and expenses; provided, however, that so long as no Default or Event of Default has occurred and is continuing, Borrower’s obligation to reimburse out-of-pocket expenses in respect of (i) any Field Examination (as defined in Section 4.3 hereof) shall not exceed $40,000 and (ii) any Non-Real Estate Fixed Asset Appraisal (as defined in Section 6.2(g) hereof) shall not exceed $125,000.  Borrower agrees to promptly pay reasonable documentation charges assessed by Agent for amendments, waivers, consents and any of the documentation prepared by Agent’s internal legal staff.  Borrower agrees to promptly pay, without duplication, all reasonable, documented, out-of-pocket fees, charges, costs and expenses (including fees, charges, costs and expenses of attorneys, auditors, appraisers, consultants and

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advisors) incurred by Agent, and, after the Seventh Amendment Effective Date, by Crystal Capital, in connection with any (i) amendment, waiver or consent requested by a Credit Party with respect to the Loan Documents, (ii) Event of Default, (iii) work-out or (iv) action to enforce any Loan Document or to collect any payments due from Borrower or any other Credit Party.  In addition, in connection with any work-out or action to enforce any Loan Document or to collect any payments due from Borrower or any other Credit Party, Borrower agrees to promptly pay all reasonable fees, charges, costs and expenses, including, without limitation, reasonable attorneys’ fees, incurred by Lenders.  All fees, charges, costs and expenses for which Borrower is responsible under this Section 1.3(e) shall be deemed part of the Obligations when incurred, payable in accordance with the final sentence of Section 1.4 and secured by the Collateral.

1.4           Receipt of Payments.

(a)           All payments by Borrower of the Obligations shall be without deduction, defense, setoff or counterclaim and shall be made in same day funds and delivered to Agent, for the benefit of Agent and Lenders, as applicable, by wire transfer to (i) with respect to payments in U.S. Dollars, the account identified below under the heading “US Collection Account” and (ii) with respect to payments in Pounds Sterling, the account identified below under the heading “UK Collection Account” or such other place as Agent may from time to time designate in writing (collectively, the US Collection Account and the UK Collection Account are herein referred to as the “Collection Account”).

US Collection Account

ABA No. 021-001-033

Account Number 502-328-54

Deutsche Trust Company Americas

New York, New York

ACCOUNT NAME: GECC/CAF DEPOSITORY

Reference:  GE Capital re Vertis, Inc. CFN5830

UK Collection Account

Swift Code BARCGB22

Sort Code 200000

Barclays Bank PLC (London)

ACCOUNT NAME: GE CAPITAL COMMERCIAL FINANCE

Account Number: 60802697

Account ID: 5130

Reference: Vertis, Inc. CFN5830

(b)           Borrower shall make each payment under this Agreement not later than (i) with respect to payments in Dollars, 4:00 p.m. (New York time) on the day when due in immediately available funds in Dollars to the US Collection Account and (ii) with respect to payments in Pounds Sterling, 11:00

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a.m. (New York time) on the day when due in immediately available funds in Pounds Sterling to the UK Collection Account.  All payments by Borrower of the Obligations denominated in Dollars shall be made in Dollars; all payments by Borrower of the Obligations denominated in Pounds Sterling shall be made in Pounds Sterling.  For purposes of computing interest and Fees and determining Borrowing Availability as of any date, all payments shall be deemed received on the day of receipt of immediately available funds therefor in (i) the U.S. Collection Account prior to 4:00 p.m. New York time and (ii) the UK Collection Account prior to 11:00 a.m. (New York time).  Payments received (i) into the U.S. Collection Account after 4:00 p.m. (New York time) and (ii) after 11:00 a.m. (New York time) in the UK Collection Account on any Business Day shall be deemed to have been received on the following Business Day.

Whenever any payment to be made hereunder shall be stated to be due on a day that is not a Business Day, the payment may be made on the next succeeding Business Day and such extension of time shall be included in the computation of the amount of interest and Fees due hereunder.

(c)           Borrower hereby authorizes Lenders to make Revolving Credit Advances, Alternative Currency Revolving Credit Advances or Swing Line Advances for the payment of interest, Fees and expenses, Letter of Credit reimbursement obligations and any amounts required to be deposited with respect to outstanding Letter of Credit Obligations pursuant to Sections 1.5(e) or 7.3; provided, that so long as no Event of Default has occurred and is continuing, expense reimbursements pursuant to Section 1.3(e) shall be payable 10 days after notice thereof to Borrower (and otherwise such expense reimbursements shall be payable upon demand).

1.5           Prepayments.

(a)           Voluntary Prepayments of Loans.  At any time, Borrower may prepay the Loans, in whole or in part, without premium or penalty subject to the payment of LIBOR Breakage Costs, if applicable.  Prepayments of the Term Loan shall be applied in accordance with Section 1.5(d).

(b)           Prepayments from Asset Dispositions.

(i)            Except as provided in Section 1.5(b)(ii) below and other than any asset dispositions in connection with the Permitted Receivables Financing as otherwise permitted hereunder, immediately upon receipt of any Net Proceeds in excess of $2,500,000 in the aggregate during any Fiscal Year, Borrower shall prepay the Loans in an amount equal to such Net Proceeds, except that Borrower or its Subsidiaries may reinvest all or a portion of the Net Proceeds of any such Asset Disposition, within three hundred and sixty (360) days, in fixed assets.  If Borrower does not intend to so reinvest such Net Proceeds or if the period set forth in the immediately preceding sentence expires without Borrower

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having reinvested the Net Proceeds of any such Asset Disposition, Borrower shall prepay the Loans in an amount equal to such remaining Net Proceeds in accordance with Section 1.5(d).  Notwithstanding anything to the contrary in this Agreement, in the event that, and for so long as, Borrower has Borrowing Availability, both before and after giving effect to any such prepayment, in excess of $20,000,000, the provisions of this Section 1.5(b) shall not be applicable (i.e. no mandatory prepayment pursuant to this Section 1.5(b) shall be required).

(ii)           Notwithstanding anything to the contrary in this Agreement, payments from (a) insurance proceeds or (b) condemnation proceeds, in each case, from casualties or losses to Collateral shall be applied to the Loan in accordance with this Section1.5(b)(ii).  If (i) Borrower notifies Agent in writing within thirty (30) days after the occurrence of such event that it intends to replace or restore the affected Collateral, (ii) the cost required to replace the Collateral with the same or substantially similar assets or restore the Collateral to the same value as it had prior to the casualty or condemnation does not exceed $2,500,000 and (iii) such proceeds, together with any amounts contributed to or otherwise available to Borrower to replace or restore the Collateral, are sufficient to cover all or substantially all of the replacement or restoration of the affected Collateral, Agent shall permit Borrower to replace or restore the Collateral in a diligent and expeditious manner with materials and workmanship of substantially the same quality as existed before the casualty or condemnation; provided, that if Borrower has not completed such replacement or restoration within 360 days of such event, such insurance proceeds or condemnation proceeds shall be applied to the Obligations in accordance with Section 1.5(b)(i).  To the extent not used to replace or restore the affected Collateral within 360 days of the casualty or condemnation, such proceeds shall be applied in accordance with Section 1.5(b)(i).  To the extent such prepayments exceed the then outstanding principal balance of the Loans, they shall be returned to Borrower.

(c)           Prepayments from Issuance of Securities.  Immediately upon the receipt by Holdings, Borrower or any of their Subsidiaries of the proceeds of the issuance of Stock, Borrower shall prepay the Loans in an amount equal to such proceeds, net of underwriting discounts and commissions and other reasonable, documented, out-of-pocket costs associated therewith.  The payments shall be applied in accordance with Section 1.5(d).  Notwithstanding the foregoing, the following proceeds of stock issuances shall be excluded from any mandatory prepayment: (i) proceeds of issuances of Stock by any Credit Party on or prior to the Closing Date, (ii) proceeds of issuances of Stock of Holdings to management employees of any Credit Party, (iii) proceeds of issuances of Stock by any Subsidiary of Borrower to Borrower that constitute an Investment permitted hereunder and (iv) proceeds of issuances of Stock by Holding to (I) THL and Evercore (Holdings’ two principal shareholders), THL Affiliates, Evercore Affiliates and any other existing shareholders of Holdings as of the Closing Date or (II) additional Person(s) that become shareholder(s) of Holdings following the Closing Date and are reasonably acceptable to Agent, provided,

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however, that any such issuance(s) pursuant to this clause (II) do not result in a Change of Control .

(d)Application of Proceeds.

(i)            With respect to any prepayments made by Borrower pursuant to Sections 1.5(b) and 5.17, such prepayments shall be applied as follows: first, to reduce the outstanding principal balance of the Swing Line Loan or Alternative Currency Swing Line Loan, as applicable, outstanding to Borrower until the same have been repaid in full; second, to the Revolving Credit Advances or Alternative Currency Revolving Credit Advances, as applicable, outstanding to Borrower until the same have been repaid in full and, in the event that at the time of such prepayment Borrowing Availability both before and after giving effect to any such prepayment, is less than $20,000,000, as a permanent reduction of the Revolving Loan Commitment; and third, to reduce the outstanding principal balance of the Term Loan outstanding to Borrower until the same has been repaid in full.

(ii)           With respect to any prepayments made by Borrower pursuant to Section 1.5(c), such prepayments shall be applied as follows: first, to reduce the outstanding principal balance of the Swing Line Loan outstanding to Borrower until the same has been repaid in full; second, to the Revolving Credit Advances or Alternative Currency Revolving Credit Advances, as applicable, outstanding to Borrower until the same have been repaid in full; and third, to reduce the outstanding principal balance of the Term Loan outstanding to Borrower until the same has been repaid in full.  Considering each type of Loan being prepaid separately, any such prepayment shall be applied first to Index Rate Loans of the type required to be prepaid before application to LIBOR Loans of the type required to be prepaid, in each case in a manner that minimizes any resulting LIBOR Breakage Costs.

(e)Letter of Credit Obligations.  In the event any Letters of Credit are outstanding at the time that the Revolving Loan Commitment is terminated, Borrower shall deposit with Agent for the benefit of all Revolving Lenders cash in an amount equal to 102% of the aggregate outstanding Letter of Credit Obligations to be available to Agent to reimburse payments of drafts drawn under such Letters of Credit and pay any Fees and expenses related thereto.

1.6           Maturity.  All of the Obligations shall become due and payable as otherwise set forth herein, but in any event all of the remaining Obligations (other than contingent indemnification obligations as to which no unsatisfied claim has been asserted) shall become due and payable upon the Commitment Termination Date.  Until the Termination Date, Agent shall be entitled to retain the Liens on the Collateral granted under the Collateral Documents and the ability to exercise all rights and remedies available to them under the Loan Documents and applicable laws.  Notwithstanding anything contained in this Agreement to the

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contrary, upon any termination of the Revolving Loan Commitment, all of the Obligations (other than contingent indemnification obligations as to which no unsatisfied claim has been asserted) shall be due and payable.

1.7           Loan Accounts.  Agent shall maintain a loan account (the “Loan Account”) on its books to record:  the name and federal employer identification number of each Lender, all Advances and the Term Loan, all payments made by Borrower, and  all other debits and credits as provided in this Agreement with respect to the Loans or any other Obligations.  All entries in the Loan Account shall be made in accordance with Agent’s customary accounting practices as in effect from time to time.  The balance in the Loan Account, as recorded on Agent’s most recent printout or other written statement, shall, absent manifest error, be presumptive evidence of the amounts due and owing to Agent and Lenders by Borrower; provided that any failure to so record or any error in so recording shall not limit or otherwise affect Borrower’s duty to pay the Obligations.  Agent shall render to Borrower a monthly accounting of transactions with respect to the Loans setting forth the balance of the Loan Account as to Borrower for the immediately preceding month.  Unless Borrower notifies Agent in writing of any objection to any such accounting (specifically describing the basis for such objection), within forty-five (45) days after the date thereof, each and every such accounting shall, absent manifest error, be deemed final, binding and conclusive on Borrower in all respects as to all matters reflected therein.  Only those items expressly objected to in such notice shall be deemed to be disputed by Borrower.  Notwithstanding any provision herein contained to the contrary, any Lender may elect (which election may be revoked) to dispense with the issuance of Notes to that Lender and may rely on the Loan Account as evidence of the amount of Obligations from time to time owing to it.

1.8 Yield Protection.

(a)           Capital Adequacy and Other Adjustments.  In the event that any Lender shall have determined that the adoption or implementation after the date hereof of any law, treaty, directive, governmental (or quasi-governmental) rule, regulation, guideline or order, or any change in (or the interpretation, administration or application of) any of the same regarding capital adequacy, reserve requirements or similar requirements or compliance by any Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy, reserve requirements or similar requirements (whether or not having the force of law and whether or not failure to comply therewith would be unlawful), in each case adopted or implemented after the Closing Date, from any central bank or governmental agency or body having jurisdiction does or shall have the effect of increasing the amount of capital, reserves or other funds required to be maintained by such Lender or any corporation controlling such Lender against commitments made by it under this Agreement in connection with the making or financing of the Revolving Loan and thereby reducing the rate of return on such Lender’s or such corporation’s capital as a consequence of its

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obligations hereunder, then Borrower shall from time to time within fifteen (15) days after notice and demand from such Lender (together with the certificate referred to in the next sentence and with a copy to Agent) pay to Agent, for the account of such Lender, additional amounts sufficient to compensate such Lender for such reduction.  A certificate as to the amount of such cost and showing the basis of the computation of such cost submitted by such Lender to Borrower and Agent shall, absent manifest error, be final, conclusive and binding for all purposes.

(b)           Increased LIBOR Funding Costs; Illegality.  Notwithstanding anything to the contrary contained herein, if the introduction of or any change in any law, rule, regulation, treaty or directive (or any change in the interpretation, administration or application thereof) shall make it unlawful, or any central bank or other Governmental Authority shall assert that it is unlawful, for any Lender to agree to make or to make or to continue to fund or maintain any LIBOR Loan or Alternative Currency LIBOR Loan, as applicable, then, unless that Lender is able to make or to continue to fund or to maintain such LIBOR Loan or Alternative Currency LIBOR Loan, as applicable, at another branch or office of that Lender without, in that Lender’s opinion, adversely affecting it or its LIBOR Loans or the income obtained therefrom, on notice thereof and demand therefor by such Lender to Borrower through Agent, (i) the obligation of such Lender to agree to make or to make or to continue to fund or maintain LIBOR Loans or Alternative Currency LIBOR Loans, as applicable, shall terminate and (ii) each such LIBOR Loan or Alternative Currency LIBOR Loan, as applicable, shall automatically be converted into an Index Rate Loan or Alternative Currency Index Rate Loan, respectively.  If, after the date hereof, the introduction of, change in or interpretation of any law, rule, regulation, treaty or directive would impose or increase reserve requirements (other than as taken into account in the definition of LIBOR Rate or Alternative Currency LIBOR Rate, as applicable) and the result of any of the foregoing is to increase the cost to Agent or any such Lender of issuing any Letter of Credit or making or continuing any LIBOR Loan hereunder, as the case may be, or to reduce any amount receivable hereunder, then Borrower shall from time to time within thirty (30) days after notice and demand from Agent to Borrower (together with the certificate referred to in the next sentence) pay to Agent itself or, for the account of (and Agent shall promptly pay over to) all such affected Lenders, as applicable, additional amounts sufficient to compensate the Agent and such Lenders for such increased cost or reduced amount; provided, that such Lender shall not be entitled to any such amounts to the extent that the event giving rise to such assessment occurred more than ninety (90) days prior to the date such notice and demand is given to Borrower; provided, however, that if the event giving rise to such assessment has a retroactive effect, then such ninety (90) day period shall be extended to include the period of such retroactive effect.  A certificate as to the amount of such cost and showing the basis of the computation of such cost submitted by Agent on behalf of all such affected Lenders to Borrower shall, absent manifest error, be final, conclusive and binding for all purposes.

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1.9Taxes.

(a)           No Deductions.  Any and all payments or reimbursements made hereunder (including any payments made pursuant to Section 10) or under any other Loan Document shall be made free and clear of and without deduction for any and all Charges, present or future, taxes, levies, imposts, deductions or withholdings, and all liabilities with respect thereto (including any interest, additions to tax or penalties applicable thereto) of any nature whatsoever imposed by any Governmental Authority or by any political subdivision or taxing authority thereof or therein with respect to such payments (but excluding any tax imposed on or measured by the net income or profits or any franchise or other tax in lieu thereof (including branch profits or similar taxes) of Agent or Lender by (i) the jurisdiction under the laws of which such Agent or Lender is organized or any political subdivision thereof, or (ii) the jurisdiction of such Agent’s or Lender’s applicable lending office or any political subdivision thereof) and all interest, penalties or similar liabilities with respect thereto (all such non-excluded taxes, levies, imposts, duties, fees, assessments or other charges being referred to collectively as “Taxes”).  If Borrower shall be required by law to deduct any Taxes from or in respect of any sum payable hereunder or under any other Loan Document to any Lender or Agent, (i) the sum payable hereunder shall be increased as may be necessary so that, after making all required deductions (including deductions applicable to additional sums payable pursuant to this Section 1.9), such Lender or Agent (as the case may be) receives an amount equal to the sum it would have received had no such deductions been made, (ii) Borrower shall make such deductions, (iii) Borrower shall timely pay the full amount deducted to the relevant Governmental Authority in accordance with applicable law, and (iv) Borrower shall furnish to the Agent the original copy of a receipt evidencing payment thereof within thirty (30) days after such payment is made.

(b)           Other Taxes.  In addition, Borrower hereby agrees to pay any present or future stamp or documentary taxes or any other excise or property taxes, charges or similar levies and irrevocable value added taxes which arise from any payment made hereunder or under any other Loan Document or from the execution, delivery, enforcement or registration of, transfer or assignment or otherwise with respect to, this Agreement or any other Loan Document (“Other Taxes”).

(c)Foreign Lenders.

(i)            Prior to becoming a Lender under this Agreement and within fifteen (15) days after a reasonable written request of Borrower or Agent from time to time thereafter, each such Person or Lender that is not in each case a “United States person” (as such term is defined in IRC Section 7701(a)(30)) for U.S. federal income tax purposes (a “Foreign Lender”) shall

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deliver to each of the Borrower and Agent two duly completed copies of United States IRS Form W-8BEN, Form W-8ECI or Form W-8IMY or other applicable or successor form, certificate or document prescribed by the IRS or substitute therefor as applicable, certifying such Foreign Lender’s entitlement to receive payments under this Agreement and under the Notes free of any United States withholding tax (a ”Certificate of Exemption”).  Each Foreign Lender claiming exemption from U.S. federal withholding tax under Section 871(h) or Section 881(c) of the IRC with respect to payments of “portfolio interest” hereby represents and warrants to Borrower and Agent that, as of the date that it became a Lender, such Foreign Lender (i) is not a “bank” within the meaning of Section 881(c)(3)(A) of the IRC, (ii) is not a “10 percent shareholder” of Borrower within the meaning of Section 871(h)(3)(B) of the IRC, and (iii) is not a controlled foreign corporation receiving interest from a related person within the meaning of Section 864(d)(4) of the IRC.  Each Foreign Lender further undertakes to deliver to each of Borrower and Agent renewals or additional copies of such Certificates of Exemption on or before the date that such Certificate of Exemption expires or becomes obsolete as may be reasonably requested by Borrower or Agent, and after the occurrence of any event requiring a change in the Certificate of Exemption so delivered by it, such additional forms or amendments thereto reflecting such change.  All Certificates of Exemption, additional forms or amendments thereto described in the preceding sentence shall certify that such Lender is entitled to receive payments under this Agreement without deduction or withholding of any United States federal income taxes, unless an event (including without limitation any change in treaty, law or regulation, or any change in the interpretation or administration thereof by any Governmental Authority) has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Lender from duly completing and delivering any such form or amendment with respect to it and such Lender advises the Borrower and the Agent that it is not capable of receiving payments without any deduction or withholding of United States federal income tax.

(ii)           For any period during which Foreign Lender has failed to provide  Borrower with an appropriate Certificate of Exemption pursuant to clause (c)(i), above (unless such failure is due to a change in treaty, law or regulation, or any change in the interpretation or administration thereof by any Governmental Authority, occurring subsequent to the date on which a form originally was required to be provided), such Foreign Lender shall not be entitled to indemnification under this Section 1.9 with respect to Taxes imposed by the United States; provided that, should Foreign Lender that is otherwise exempt from or subject to a reduced rate of withholding tax become subject to Taxes because of its failure to deliver a Certificate of Exemption required under clause (i), above, Borrower shall take such steps as such Foreign Lender shall reasonably request to assist such Foreign Lender to recover such Taxes.

(d)           [Intentionally Omitted].

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(e)           United States Lenders.  Each Lender that is a “United States person” (as such term is defined in IRC Section 7701(a)(30)) shall deliver to each of the Borrower and Agent two duly completed copies of United States IRS Form W-9.

(f)            Borrower Indemnification.  Borrower agrees to indemnify and hold harmless each Lender and Agent, and reimburse each such Lender or Agent (as the case may be) upon its written request, for the full amount of Taxes (including any Taxes and Other Taxes imposed by any jurisdiction on amounts payable under this Section 1.9) levied or imposed and paid by such Lender or Agent (as the case may be) and any liability (including penalties, interest and expenses, including reasonable attorney’s fees and expenses) arising therefrom or with respect thereto whether or not such Taxes or Other Taxes were correctly or legally asserted by the relevant Governmental Authority.  Additionally, Borrower agrees to pay additional amounts and to indemnify each Lender (without regard to the identity of the jurisdiction requiring the deduction or withholding) in respect of any amounts deducted or withheld by it as described under this Section 1.9 as a result of any changes after the Closing Date in any applicable law, treaty, governmental rule, regulation, guideline or order, or in the interpretation thereof, relating to the deducting or withholding of Taxes.

(g)           [Intentionally Omitted].

(h)           Lender Indemnification of Agent.  If the U.S. IRS or any other Governmental Authority of the United States or any other country or any political subdivision thereof asserts a claim that Agent did not properly withhold tax from amounts paid to or for the account of any Lender (because the appropriate Certificate of Exemption was not delivered or properly completed, because such Lender failed to notify the Agent of a change in circumstances which rendered its exemption from withholding ineffective, or for any other reason), such Lender shall indemnify the Agent fully for all amounts paid, directly or indirectly, by Agent as tax, withholding therefor, or otherwise, including penalties and interest, and including taxes imposed by any jurisdiction on amounts payable to Agent under this subsection, together with all costs and expenses related thereto (including attorneys fees and time charges of attorneys for Agent).

(i)            Evidence of Payments.  As soon as practicable after any payment of Taxes and Other Taxes by the Borrower to a Governmental Authority, the Borrower shall deliver to the Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment or other evidence of such payment reasonably satisfactory to the Agent.  Any Non-U.S. Lender or Treaty Lender that is entitled to an exemption from or reduction of withholding tax with respect to payments under this Agreement or any Note pursuant to the law of any relevant jurisdiction or any treaty shall deliver to Borrower (with a copy to Agent), at the time or times

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prescribed by applicable law, such properly completed and executed documentation prescribed by applicable law as will permit such payments to be made without withholding or at a reduced rate.

(j)            Survival.  The agreements in this Section 1.9 shall survive the termination of this Agreement and the payment of the Obligations.

1.10         Borrower Representative.  Borrower hereby designates Vertis as its representative and agent on its behalf for the purposes of issuing Notice of Revolving Credit Advances, Notice of Alternative Currency Revolving Credit Advances and Notice of Conversion/Continuation, giving instructions with respect to the disbursement of the proceeds of the Loans, selecting interest rate options, requesting Letters of Credit, giving and receiving all other notices and consents hereunder or under any of the other Loan Documents and taking all other actions (including in respect of compliance with covenants) on behalf of Borrower under the Loan Documents.  Borrower Representative hereby accepts such appointment.  Agent and each Lender may regard any notice or other communication pursuant to any Loan Document from Borrower Representative as a notice or communication from Borrower.  Each warranty, covenant, agreement and undertaking made on its behalf by Borrower Representative shall be deemed for all purposes to have been made by Borrower and shall be binding upon and enforceable against Borrower to the same extent as it if the same had been made directly by Borrower.”

2.2.          Section 4.6 (Landlords’ Agreements and Mortgagee Agreements) of the Credit Agreement is hereby amended by inserting the following sentence immediately after the last sentence of such Section 4.6 of the Credit Agreement:

“If Agent receives a landlord or mortgagee agreement or bailee letter, as applicable, each to be in form and substance reasonably satisfactory to Agent, after the Seventh Amendment Effective Date, Agent shall (x) review any Reserves that have been established by Agent based on Agent not having received such landlord or mortgagee agreement or bailee letter, as applicable, prior to the Seventh Amendment Effective Date and (y) reduce such Reserves if and to the extent appropriate based on Agent’s reasonable credit judgment.”

2.3.          Section 4.9 (Cash Management Systems) of the Credit Agreement is hereby amended by inserting the following new language immediately after the last sentence of such Section 4.9 of the Credit Agreement:

“Notwithstanding the foregoing requirements, Borrower and each other Credit Party shall cause each deposit account of USA Direct, LLC to become subject to a Control Agreement in form and substance reasonably satisfactory to Agent within sixty (60) days following the Seventh Amendment Effective Date.”

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2.4.          Section 6.1(a) (Minimum EBITDA) of the Credit Agreement is hereby amended by deleting the first sentence of such Section and replacing it with the following new sentence:

“Holdings and its Subsidiaries on a consolidated basis shall have: (i) at the end of each Fiscal Month ending during Fiscal Year 2007, EBITDA for the twelve trailing Fiscal Months, adjusted to reflect restructuring charges, non-cash non-recurring charges and other adjustments, if any, all as set forth in Section 6.1(a) of Schedule 1 to Annex F, of not less than $125,000,000; and (ii) at the end of each Fiscal Quarter ending during Fiscal Year 2008, EBITDA for the twelve trailing Fiscal Months, adjusted to reflect restructuring charges, non-cash non-recurring charges and other adjustments, if any, all as set forth in Section 6.1(a) of Schedule 1 to Annex F, of not less than $125,000,000.”

2.5.          Section 6.2 (Financial Statements and Other Reports) of the Credit Agreement is hereby amended by inserting the following new clause immediately after clause (p) of such Section 6.2 of the Credit Agreement:

“(q)         Bank Account Balances.  To Agent, within fifteen (15) Business Days after the end of each Fiscal Month, a report in form and substance reasonably satisfactory to Agent with respect to the bank account balances of Borrower and each other Credit Party.”

2.6.          Clause (l) (Damage; Casualty) of Section 7.1 (Event of Default) of the Credit Agreement is hereby amended by deleting such clause (l) and replacing it with the following new clause (l):

“(l)          Damage; Casualty.  Any event occurs, whether or not insured or insurable, as a result of which EBITDA for the immediately preceding 12 Fiscal Month period then ended, giving pro forma effect to any such event would be less than $125,000,000 and any such event cannot reasonably be expected to be corrected or reversed within 45 days; or”

2.7.          Section 7.5 (Application of Proceeds) of the Credit Agreement is hereby amended by deleting such Section in its entirety and replacing it with the following new Section 7.5:

“7.5         Application of Proceeds.  Notwithstanding anything to the contrary contained in this Agreement, upon the occurrence and during the continuance of an Event of Default, Borrower irrevocably waives the right to direct the application of any and all payments at any time or times thereafter received by Agent from or on behalf of Borrower, and Agent shall have the continuing and exclusive right to apply and to reapply any and all payments received at any time

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or times after the occurrence and during the continuance of an Event of Default.  Notwithstanding anything to the contrary contained in this Agreement (including, without limitation, Section 1.1 and Section 1.5 hereof), all payments (including the proceeds of any Asset Disposition or other sale of, or other realization upon, all or any part of the Collateral) received after acceleration of the Obligations shall be applied as follows: first, to all costs and expenses incurred by or owing to Agent and any Lender with respect to this Agreement, the other Loan Documents or the Collateral; second, to accrued and unpaid interest and Fees with respect to Revolving Credit Advances (including any interest which but for the provisions of the Bankruptcy Code, would have accrued on such amounts); third, to the principal amount of Revolving Credit Advances outstanding and to cash collateralize outstanding Letters of Credit (pro rata among all such Revolving Credit Advances or Letters of Credit, as applicable, based upon the principal amount of such Revolving Credit Advances or the outstanding face amount of such Letters of Credit, as applicable); fourth, to accrued and unpaid interest and Fees with respect to the Term Loan (including any interest which but for the provisions of the Bankruptcy Code, would have accrued on such amounts); fifth, to the principal amount of the Term Loan outstanding; and sixth to any other Obligations owing to Agent or any Lender under the Loan Documents or any Interest Rate Agreement.  Any balance remaining shall be delivered to Borrower or to whomever may be lawfully entitled to receive such balance or as a court of competent jurisdiction may direct.”

2.8.          Section 7 (DEFAULTS, RIGHTS AND REMEDIES) of the Credit Agreement is hereby amended by inserting the following new Section 7.6 immediately following Section 7.5 of such Section 7:

“7.6         Requisite Term Lender Remedies.  Upon the occurrence and during the continuance of either an Each Lender Event of Default or a Requisite Term Lender Event of Default, Requisite Term Lenders may send a notice to Agent of their intent to direct Agent to exercise enforcement rights and remedies against Borrower, the other Credit Parties and/or the Collateral (a “Requisite Term Lender Notice”).  On the 91st day after receipt of a Requisite Term Lender Notice by Agent, unless (i) Agent shall have previously begun and be diligently pursuing the exercise of enforcement rights and remedies against Borrower, the other Credit Parties and/or the Collateral, as applicable, (ii) Requisite Term Lenders shall have withdrawn such Requisite Term Lender Notice, or (iii) the Each Lender Event of Default or Requisite Term Lender Event of Default for which the Requisite Term Lenders have sent the Requisite Term Lender Notice no longer exists or has been waived, Agent shall begin and thereafter continue to take such action as Requisite Term Lenders may require to exercise such enforcement rights and remedies against Borrower, the other Credit Parties and/or the Collateral as are available to Agent under this Agreement and the other Loan Documents and are specified in the Requisite Term Lender Notice.”

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2.9.          Section 9.2 (Amendments and Waivers) of the Credit Agreement is hereby amended by inserting the following new clause (c) immediately following clause (b) of such Section 9.2:

“              (c)           (I)  Notwithstanding the foregoing provisions of this Section 9.2, no amendment, waiver or other modification shall, without the consent of the Requisite Term Lenders and any other consent required under this Section 9.2:  (i) amend, waive or otherwise modify the Applicable Term Loan Margin; (ii) amend, waive or otherwise modify (including, solely for purposes of the following, any such amendment, waiver or other modification effected through an amendment or other modification of any defined term used therein), or grant any consent under the provisions of, Section 1.1(a)(ii), Section 1.1(g), Section 1.5, Section 5.1, Section 5.2, Section 5.3, Section 5.4, Section 5.5, Section 5.7, Section 5.10, Section 5.18, Section 6.1, Section 7.1, Section 7.2, Section 7.3, Section 7.5, Section 7.6, Section 8.2(h)(i) or this Section 9.2(c); (iii) increase the aggregate amount of the Revolving Loan Commitment of all Revolving Lenders; (iv) amend, waive or otherwise modify (including, solely for purposes of the following, any such amendment, waiver or other modification effected through an amendment or other modification of any defined term used therein), or grant any consent to depart from the provisions of, any Event of Default resulting from noncompliance with Section 9.2(b) or with any of the Sections of this Agreement set forth in clause (ii) above or with clause (iii) above; or (v) amend, waive or otherwise modify (including, solely for purposes of the following, any such amendment, waiver or other modification effected through an amendment or other modification of any defined term used therein), or grant any consent to depart from, the provisions of the Existing Security Agreement.  Any such amendment, waiver or other modification shall apply equally to each Lender and shall be binding upon Credit Parties, Agent, Lenders, and all future holders of the Obligations.

                (II)  Notwithstanding any other provision of this Agreement to the contrary, prior to the making of any Alternative Currency Revolving Credit Advance or Alternative Currency Swing Line Advance Borrower shall first obtain the written approval of Requisite Term Lenders (which approval may be provided by the Requisite Term Lenders (i) for a specific Alternative Currency Revolving Credit Advance or Alternative Currency Swing Line Advance or (ii) for Alternative Currency Revolving Credit Advances and Alternative Currency Swing Line Advances in an aggregate amount not to exceed a specified maximum Assigned Dollar Value amount).

                (III)  In the event, if any, that Borrower or any other Credit Party shall become debtors in any case under the Bankruptcy Code and, in connection with such case or cases, Agent and/or Revolving Lenders desire to permit the use of “Cash Collateral” (as such term is defined in Section 363 (a) of the Bankruptcy Code) or to permit Borrower or any other Credit Party to obtain debtor-in-possession financing from Agent or Lenders or any other Person secured by the Collateral or otherwise, Term Lenders shall retain whatever legal rights Term

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Lenders would have to object to such usage of cash collateral or provision of debtor-in-possession financing and Agent and/or Revolving Lenders shall retain whatever legal rights Agent and/or Revolving Lenders would have to oppose any such objection, permit use of “Cash Collateral” or provide debtor-in possession financing.”

2.10.        Section 9.13 (Confidentiality) of the Credit Agreement is hereby amended by inserting the following new sentence at the end of such Section 9.13:

“Notwithstanding anything to the contrary herein or in any other Loan Document, the Borrower and the other Credit Parties agree that Crystal Capital shall have the right to issue press releases, advertisements or tombstones regarding the making of the Term Loan to the Borrower pursuant to the terms of this Agreement; provided, that such press releases, advertisements and tombstones shall be subject to the prior approval of the Borrower and, to the extent that Agent’s name is contained in any such press release, advertisement or tombstone or that any reference to Agent is made therein, the Agent (with each such approval not to be unreasonably withheld or delayed).”

2.11.        Clause (c) of Section 9.19 (Replacement of Lenders) of the Credit Agreement is hereby amended by deleting such clause (c) in its entirety and replacing it with the following new clause (c):

“(c)         If, in connection with any proposed amendment, modification, waiver or termination pursuant to Section 9.2 (a “Proposed Change”) requiring (i) the consent of all affected Lenders, the consent of Requisite Lenders is obtained, but the consent of other Lenders whose consent is required is not obtained (any such Lender whose consent is not obtained being referred to as a “Non-Consenting Lender”), (ii) the consent of Supermajority Lenders, the consent of Requisite Lenders is obtained but the consent of Supermajority Lenders is not obtained, or (iii) the consent of both Requisite Lenders and Requisite Term Lenders, the consent of Requisite Lenders is obtained but the consent of Requisite Term Lenders is not obtained, then, so long as Agent is not a Non-Consenting Lender, at Borrower’s request Agent, or a Person reasonably acceptable to Agent, shall have the right with Agent’s consent and in Agent’s sole discretion (but shall have no obligation) to purchase from such Non-Consenting Lenders, and such Non-Consenting Lenders agree that they shall, upon Agent’s request, sell and assign to Agent or such Person, all of the Loans and Commitments of such Non-Consenting Lenders for an amount equal to the principal balance of all Loans held by the Non-Consenting Lenders and all accrued interest and Fees and other Obligations owing with respect thereto through the date of sale, such purchase and sale to be consummated pursuant to an executed Assignment Agreement.”

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2.12.        The definition of the term “Alternative Currency LIBOR Rate” contained in Annex A (Definitions) to the Credit Agreement is hereby amended by deleting the words “Telerate Page 3750” from clause (a) of such definition and replacing them with the words “Reuters Screen LIBOR01 Page”.

2.13.        The definition of the term “Commitments” contained in Annex A (Definitions) to the Credit Agreement is hereby amended by deleting such definition in its entirety and replacing it with the following new definition:

“Commitments means (a) as to any Lender, the aggregate of such Lender’s  Revolving Loan Commitment and Term Loan Commitment each as set forth on Annex B to the Agreement or in the most recent Assignment Agreement executed by such Lender and (b) as to all Lenders, the aggregate of all Lenders’ (i) Revolving Loan Commitments, which aggregate commitment shall be Two Hundred Million Dollars ($200,000,000) as of the Seventh Amendment Effective Date, and (ii) Term Loan Commitments, which aggregate commitment shall be Fifty Million Dollars ($50,000,000) as of the Seventh Amendment Effective Date, as such Commitments may be reduced, amortized or adjusted from time to time in accordance with this Agreement.  For the avoidance of doubt, the aggregate amount of the Revolving Loan Commitments shall not be subject to any of the adjustments or reductions contemplated by the Fourth Amendment to Credit Agreement.”

2.14.        The definition of the term “Lenders” contained in Annex A (Definitions) to the Credit Agreement is hereby amended by deleting such definition in its entirety and replacing it with the following new definition:

“Lenders means GE Capital, the Revolving Lenders, the Term Lenders, and, if any such Lender shall decide to assign all or any portion of the Obligations pursuant to and in accordance with the terms of this Agreement, the term “Lenders” shall include any assignee of such Lender.”

2.15.        The definition of the term “LIBOR Loans” contained in Annex A (Definitions) to the Credit Agreement is hereby amended by deleting such definition in its entirety and replacing it with the following new definition:

“LIBOR Loans means an Advance or Term Loan or any portion thereof bearing interest by reference to the LIBOR Rate or Alternative Currency LIBOR Rate, as applicable.”

2.16.        The definition of the term “LIBOR Rate” contained in Annex A (Definitions) to the Credit Agreement is hereby amended by deleting the words “Telerate Page

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3750” from clause (a) of such definition and replacing them with the words “Reuters Screen LIBOR01 Page”.

2.17.        The definition of the term “Loans” contained in Annex A (Definitions) to the Credit Agreement is hereby amended by deleting such definition in its entirety and replacing it with the following new definition:

“Loans means the Revolving Loan, including, without limitation, any loans pursuant to Alternative Currency Revolving Credit Advances, the Term Loan, and the Swing Line Loan.”

2.18.        The definition of the term “Notes” contained in Annex A (Definitions) to the Credit Agreement is hereby amended by deleting such definition in its entirety and replacing it with the following new definition:

“Notes means, collectively, the Revolving Notes, the Term Notes, and the Swing Line Note.”

2.19.        The definition of the term “Pro Rata Share” contained in Annex A (Definitions) to the Credit Agreement is hereby amended by deleting such definition in its entirety and replacing it with the following new definition:

“Pro Rata Share means with respect to all matters relating to any Lender (a) with respect to the Revolving Loan, the percentage obtained by dividing (i) the Revolving Loan Commitment of that Lender by (ii) the aggregate Revolving Loan Commitments of all Lenders, (b) with respect to the Term Loan, the percentage obtained by dividing (i) the Term Loan Commitment of that Lender by (ii) the aggregate Term Loan Commitments of all Lenders, (c) with respect to all Loans, the percentage obtained by dividing (i) the aggregate Commitments of that Lender by (ii) the aggregate Commitments of all Lenders, and (d) with respect to all Loans on and after the Commitment Termination Date, the percentage obtained by dividing (i) the aggregate outstanding principal balance of the Loans held by that Lender, by (ii) the outstanding principal balance of the Loans held by all Lenders, as any such percentages may be adjusted by assignments pursuant to Section 8.1.”

2.20.        The definition of the term “Revolving Loan Commitment” contained in Annex A (Definitions) to the Credit Agreement is hereby amended by deleting such definition in its entirety and replacing it with the following new definition:

“Revolving Loan Commitment means (a) as to any Lender, the commitment of such Lender to make its Pro Rata Share of Revolving Credit Advances and Alternative Currency Revolving Credit Advances or incur its Pro Rata Share of

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Letter of Credit Obligations (including, in the case of the Swing Line Lender, its commitment to make Swing Line Advances as a portion of its Revolving Loan Commitment and in the case of the Alternative Currency Swing Line Lender, its commitment to make Alternative Currency Swing Line Advances as a portion of its Revolving Loan Commitment) as set forth on Annex B or in the most recent Assignment Agreement, if any, executed by such Lender and (b) as to all Lenders, the aggregate commitment of all Lenders to make the Revolving Credit Advances (including, in the case of the Swing Line Lender, Swing Line Advances and in the case of the Alternative Currency Swing Line Lender, Alternative Currency Swing Line Advances) and Alternative Currency Revolving Credit Advances or incur Letter of Credit Obligations, which aggregate commitment shall be Two Hundred Million Dollars ($200,000,000) as of the Seventh Amendment Effective Date, as such amount may be adjusted, if at all, from time to time in accordance with the Agreement.”

2.21.        Annex A (Definitions) to the Credit Agreement is hereby further amended by inserting the following new defined terms into such Annex in appropriate alphabetical order:

“Applicable Term Loan Margin means the per annum interest rate from time to time in effect and payable in addition to the LIBOR Rate, applicable to the Term Loan, as determined by reference to Section 1.2(a).”

“Crystal Capital means Crystal Capital Fund, L.P., a limited partnership organized under the laws of Delaware, in its capacity as a Term Lender.”

“Crystal Capital Fee Letter has the meaning set forth in Section 1.3(a).”

“Each Lender Event of Default means an Event of Default which has resulted from noncompliance with any covenant or agreement contained in this Agreement the amendment, waiver or other modification of which would require the consent of each Lender directly affected thereby pursuant to Section 9.2(b).”

“Fourth Amendment to Credit Agreement means that certain Amendment No. 4 to Credit Agreement, dated as of May 30, 2006, by and among the Borrower, the other Credit Parties, the Agent and Lenders.”

“Requisite Term Lenders means Term Lenders having (a) more than 50% of the Term Loan Commitments of all Term Lenders, or (b) if the Term Loan Commitments have been terminated, more than 50% of the aggregate outstanding amount of the Term Loans; provided that if there is more than one Term Lender, Requisite Term Lenders shall in any event be at least two (2) Term Lenders.”

“Requisite Term Lender Notice has the meaning set forth in Section 7.6.”

“Requisite Term Lender Event of Default means an Event of Default which has resulted from noncompliance with any covenant or agreement contained in this

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Agreement the amendment, waiver or other modification of which would require the consent of the Requisite Term Lenders pursuant to Section 9.2(c).”

“Seventh Amendment to Credit Agreement or Seventh Amendment means that certain Limited Consent and Amendment No. 7 to Credit Agreement, dated as of March    , 2007, by and among the Borrower, the other Credit Parties, the Agent and Lenders.”

“Seventh Amendment Effective Date means the date on which the conditions precedent to the effectiveness of the Seventh Amendment to Credit Agreement are satisfied and the Seventh Amendment to Credit Agreement becomes effective.”

“Term Lenders means those Lenders having a Term Loan Commitment.”

“Term Loan has the meaning ascribed to it in Section 1.1(g).”

“Term Loan Commitment means: (x) (a) as to any Term Lender, the commitment of such Lender to make its Pro Rata Share of the Term Loan as set forth on Annex B or in the most recent Assignment Agreement, if any, executed by such Lender and (b) as to all Term Lenders, the aggregate commitment of all Lenders to make the Term Loan, which aggregate commitment shall be Fifty Million Dollars ($50,000,000) on the Seventh Amendment Effective Date; and (y) after the $50,000,000 Term Loan has been funded by the Term Lenders, (a) as to any Term Lender, the Pro Rata Share of the outstanding principal amount of the Term Loan owing to such Lender and (b) as to all Term Lenders, the aggregate outstanding principal amount of the Term Loan, which shall be Fifty Million Dollars ($50,000,000), as such amount may be reduced, if at all, from time to time in accordance with the Agreement.”

“Term Notes has the meaning ascribed to it in Section 1.1(g).”

2.22.        Annex B (Pro Rata Shares and Commitment Amounts) to the Credit Agreement is hereby amended by deleting such Annex B in its entirety and replacing it with the new Annex B set forth in Exhibit A to this Amendment.

2.23.        Section 6.1(a) (Minimum EBITDA) of Schedule 1 to Annex F (Compliance and Pricing Certificate) of the Credit Agreement is hereby amended by:

(a)           replacing the figure “$160,000,000” appearing opposite the term “Required EBITDA” in such Section 6.1(a) of Schedule 1 to Annex F and replacing it with the figure “$125,000,000”; and

(b)           inserting the following new footnote at the end of such Section 6.1(a) of Schedule 1 to Annex F:

36

“To the extent the management fees permitted to be paid to (A) THL and/or any THL Affiliates or (B) Evercore and/or any Evercore Affiliates, in accordance with Section 5.8 of the Agreement are accrued rather than paid, such accrued management fees may be considered and included on the line item above for “any other non-cash gains/(losses) (other than non-cash losses relating to write-offs, write-downs or reserves with respect to Accounts and Inventory” for purposes of calculating Minimum EBITDA.”

2.24.        Schedule 1 to Exhibit 6.2(e) to the Credit Agreement is hereby amended by deleting such Schedule 1 in its entirety and replacing it with the new Schedule 1 to Exhibit 6.2(e) set forth in Exhibit B to this Amendment.

2.25.        For the purpose of clarification and notwithstanding anything to the contrary in the Fourth Amendment to Credit Agreement, the terms and provisions set forth in Section 2.5 and Section 2.7 of the Fourth Amendment to Credit Agreement, including the “Step Downs” (as defined in and set forth in the Fourth Amendment to Credit Agreement) and any other adjustments or reductions to the Advance Rate and the Commitments set forth in the Fourth Amendment to Credit Agreement, shall no longer be applicable and shall be of no further force and effect.

2.26.        Additional Joint-Lead Arranger.  Crystal Capital Fund, L.P. is hereby appointed as a Joint-Lead Arranger in respect of the Agreement.

2.27.        Certain Mortgage Matters.  With respect to those mortgaged properties set forth on Exhibit C to this Amendment, within thirty (30) days following the Seventh Amendment Effective Date, which 30-day period may be extended to sixty (60) days by Agent in its discretion, Agent shall have received duly executed and effective date down endorsements to the title policies with respect to each of the Mortgages relating to such mortgaged properties and such other instruments, amendments, agreements and documents as Agent may reasonably request relating to such Mortgages in connection with this Amendment, all in form and substance reasonably satisfactory to Agent.

2.28.        Certain Good Standing Certificates.  Within thirty (30) days following the Seventh Amendment Effective Date Agent shall have received good standing certificates and certificates of qualification to conduct business, each dated a recent date relative to the date of this Amendment and certified by the applicable Secretary of State or other authorized Governmental Authority (1) from the State of New York with respect to USA Direct, LLC, (2) from the District of Columbia and the State of Indiana with respect to Vertis, Inc., and (3) from the State of Connecticut with respect to Webcraft, LLC.

37

3.             Consents.

3.1.          Notwithstanding any term or provision of the Credit Agreement or any other Loan Document to the contrary, Agent and Lenders hereby consent to the incurrence by the Borrower of the Term Loan in the aggregate principal amount of $50,000,000, as further described in and subject to the terms and provisions set forth in Section 2 above.

3.2.          Notwithstanding any term or provision of the Credit Agreement or any other Loan Document to the contrary, Agent and Lenders hereby consent to a sale-leaseback transaction with respect to the Real Estate currently owned by Webcraft, LLC and located in Chalfont, Pennsylvania (the “Chalfont Sale-Leaseback”) and, in connection therewith, the release of Agent’s Liens on those specific assets of Webcraft, LLC which relate to such Real Estate and are being transferred by Webcraft, LLC to the Chalfont Purchaser (as defined below) upon the closing of and in connection with the Chalfont Sale-Leaseback; provided, that: (i) the Chalfont Sale-Leaseback shall be entered into with a third party purchaser (the “Chalfont Purchaser”) and shall be an arms-length transaction; (ii) on or prior to the date of consummation of the Chalfont Sale-Leaseback, Agent shall have received an opinion, in form and substance satisfactory to Agent, and from outside legal counsel to the Borrower acceptable to Agent, stating that the consummation of the Chalfont Sale-Leaseback does not conflict with any provision of the Existing Security Agreement, the February 2003 Senior Subordinated Debt Documents, the 2002 Senior Debt Documents, the 2003 Senior Secured Debt Documents, the Mezzanine Debt Documents, the Receivables Indenture or the Receivables Purchase Agreement; (iii) as a condition to the consummation of the Chalfont Sale-Leaseback, Borrower and the other Credit Parties shall obtain a landlord waiver agreement with the Chalfont Purchaser which agreement shall contain a waiver or subordination of all Liens or claims that the Chalfont Purchaser may assert against the Collateral at that location, and shall otherwise be reasonably satisfactory in form and substance to Agent; and (iv) the Net Proceeds of the Chalfont Sale-Leaseback shall be applied in accordance with the provisions of Section 1.5 of the Credit Agreement.  At Borrower’s expense, Agent shall execute and deliver such lien release instruments and documents and take such related actions as Borrower may reasonably request to evidence and otherwise effectuate the release of Agent’s Liens on such Real Estate and specific assets of Webcraft, LLC which relate to such Real Estate upon the closing of the Chalfont Sale-Leaseback in accordance with the provisions of this Section 3.2.

4.             Further Assurances.  Each Credit Party shall, from time to time, execute and deliver such agreements, instruments, certificates, reports and other documents and take all such actions as Agent or Lenders at any time may reasonably request to evidence, further document, effectuate or otherwise implement the actions described above in Sections 2 and 3 under the Credit Agreement and/or the other Loan Documents.

5.             Representations and Warranties.  Borrower and Credit Parties, jointly and severally, hereby represent and warrant to Agent and Lenders that:

5.1.          The execution, delivery and performance by Borrower and each of the other Credit Parties of this Amendment have been duly authorized by all necessary corporate action, and this Amendment constitutes the legal, valid and binding obligation of Borrower and each of the other Credit Parties enforceable against each of them in accordance with its terms, except as the enforcement hereof may be subject to the effect of any applicable bankruptcy,

38

insolvency, reorganization, moratorium or similar law affecting creditors’ rights generally or to general principles of equity.

5.2.          The execution, delivery and performance of this Amendment and the consummation of the transactions contemplated hereby by Borrower and each other Credit Party do not, and will not:

(a)           contravene or conflict with any provision of (i) law, (ii) any judgment, decree or order, or (iii) the certificate or articles of incorporation or by-laws or other constituent documents of Borrower or any other Credit Party; or

(b)           contravene or conflict with, or cause any Lien to arise under, (i) except if such contraventions, conflicts, or Liens do not have and would not reasonably be expected to have, either individually or in the aggregate, a Material Adverse Effect, any provision of any indenture, agreement, mortgage, lease, instrument or other document binding upon or otherwise affecting Borrower or any Credit Party or any property of Borrower or any Credit Party or (ii) the Security Agreement, the February 2003 Senior Subordinated Debt Documents, the 2002 Senior Debt Documents, the 2003 Senior Secured Debt Documents or the Mezzanine Debt Documents.

5.3.          Each of the representations and warranties set forth in Section 3 of the Credit Agreement is true, complete and correct as of the date of this Amendment other than in the case of representations and warranties that speak as of a specific date in which case such representations and warranties shall have been true, complete and correct as of such date.  Each Schedule to the Credit Agreement remains true, complete and correct except to the extent set forth in the attached Exhibit D to this Amendment.

5.4.          No Default or Event of Default exists under the Credit Agreement or any other Loan Document or will exist after or be triggered by the execution, delivery and performance of this Amendment or the consummation of the transactions contemplated hereby.  In addition, each of Borrower and each other Credit Party hereby represents, warrants and reaffirms that the Credit Agreement and each of the other Loan Documents remains in full force and effect.

6.             Conditions Precedent to Effectiveness.  The effectiveness of the amendments set forth in Section 2 hereof and the consents set forth in Section 3 hereof are in each instance subject to the satisfaction of each of the following conditions precedent, each in a manner satisfactory to Agent:

6.1.          Amendment.  This Amendment shall have been duly executed and delivered by Borrower, the other Credit Parties, Agent and Lenders.

6.2.          Revolving Lender Fees.  Agent shall have received in cash an amendment fee from Borrower in an amount equal to 0.20% of the aggregate amount of all of the Revolving Loan Commitments, to be distributed by Agent pro rata to the Revolving Lenders.

39

6.3.          Term Lender Fees.  Crystal Capital shall have received any fees due and payable to Crystal Capital pursuant to and in accordance with the terms of the Crystal Capital Fee Letter.

6.4.          No Default.  No Default or Event of Default shall have occurred and be continuing or would result from the effectiveness of this Amendment or the consummation of any of the transactions contemplated hereby.

6.5.          Consents and Approvals.  Agent shall have received evidence satisfactory to Agent that any necessary consents and approvals to any and all transactions contemplated by this Amendment have been obtained by the Borrower and each other Credit Party.

6.6.          Term Notes.  Each Term Lender shall have received a Term Note dated the date of this Amendment in the amount of such Term Lender’s Term Loan Commitment duly executed by the Borrower.

6.7.          Revolving Notes.  Each Revolving Lender shall have received a new Revolving Note in form and substance satisfactory to Agent dated the date of this Amendment and reflecting such Revolving Lender’s reduced Revolving Loan Commitment pursuant to the terms of this Amendment.

6.8.          Mortgage Matters.  Agent shall have received duly executed and effective date down endorsements to the title policies with respect to each of the Mortgages other than those addressed by Section 2.27 of this Amendment and such other instruments, amendments, agreements and documents as Agent may reasonably request relating to such Mortgages in connection with this Amendment, all in form and substance satisfactory to Agent.

6.9.          Security Interests.  Agent and Lenders shall have received evidence satisfactory to them that Agent (for the benefit of itself and Lenders) has a valid and perfected first priority security interest in the Collateral.

6.10.        Lien Search Results.  Agent shall have received lien search results with respect to the Borrower and each other Credit Party (other than Vertis Digital Services Limited) satisfactory in form and substance to Agent.

6.11.        Charters and Bylaws.  Agent shall have received each of Borrower’s and each other Credit Party’s (a) charter (or foreign equivalent) and all amendments thereto, if any, and (b) bylaws or operating agreement, as applicable, together with all amendments thereto, if any.

6.12.        Good Standing Certificates.  Agent shall have received, other than as addressed by Section 2.28 of this Amendment, with respect to each of Borrower and each other Credit Party (other than Vertis Digital Services Limited): (a) good standing certificates in such entity’s state of formation (or foreign equivalent); and (b) good standing certificates and certificates of qualification to conduct business (or foreign equivalent) in each jurisdiction where such entity’s ownership or lease of property or the conduct of its business requires such qualification, each dated a recent date prior to the date of this Amendment and certified by the applicable Secretary of State or other authorized Governmental Authority.

40

6.13.        Resolutions.  Agent shall have received resolutions of Borrower’s and each other Credit Party’s Board of Directors or other applicable body, approving and authorizing the execution, delivery and performance of this Amendment and the transactions to be consummated in connection with this Amendment, each certified by such entity’s corporate secretary or assistant secretary as being in full force and effect without any modification or amendment as of the date of this Amendment.

6.14.        Opinions.  Agent and Lenders shall have received: (a) an opinion of counsel to Borrower, DLA Piper US LLP, with respect to this Amendment, covering such matters as Agent shall reasonably request, in form and substance acceptable to Agent; provided, however, that no opinions relating to Vertis Digital Services Limited shall be required; and (b) an opinion of special counsel to Borrower, Sullivan & Cromwell LLP, with respect to this Amendment, including, without limitation, as to this Amendment and the transactions contemplated hereby not conflicting with any provision of the Security Agreement, the February 2003 Senior Subordinated Debt Documents, the 2002 Senior Debt Documents, the 2003 Senior Secured Debt Documents or the Mezzanine Debt Documents, in form and substance acceptable to Agent.

6.15.        Minimum Borrowing Availability.  After giving effect to the funding of the $50,000,000 Term Loan on the Seventh Amendment Effective Date, Borrower shall have Borrowing Availability of at least $80,000,000 (with accounts payable and taxes being paid in the ordinary course, other than those accounts payable and taxes which are subject to disputes and challenges being pursued in good faith). 

6.16.        Miscellaneous.  Agent and Lenders shall have received such other agreements, instruments and documents as Agent or Lenders may reasonably request.

7.             Reference to and Effect Upon the Credit Agreement and other Loan Documents. 

7.1.          Full Force and Effect.  Except as specifically provided herein, the Credit Agreement, the Notes and each other Loan Document shall remain in full force and effect and each is hereby ratified and confirmed by all Credit Parties.

7.2.          No Waiver.  The execution, delivery and effect of this Amendment shall be limited precisely as written and shall not be deemed to (i) be a consent to any waiver of any term or condition, or to any amendment or modification of any term or condition (except as specifically provided herein) of the Credit Agreement or any other Loan Document or (ii) prejudice any right, power or remedy which the Agent or any Lender now has or may have in the future under or in connection with the Credit Agreement, the Notes or any other Loan Document.

7.3.          Certain Terms.  Each reference in the Credit Agreement to “this Agreement”, “the Agreement”, “hereunder”, “hereof”, “herein” or any other word or words of similar import shall mean and be a reference to the Credit Agreement as amended hereby, and each reference in any other Loan Document to the Credit Agreement or any word or words of similar import shall be and mean a reference to the Credit Agreement as amended hereby.

8.             Counterparts.  This Amendment may be executed in any number of counterparts, each of which when so executed shall be deemed an original but all such counterparts shall

41

constitute one and the same instrument.  Delivery of an executed counterpart of a signature page to this Amendment by telecopier or “pdf” shall be as effective as delivery of a manually executed counterpart signature page to this Amendment.

9.             Costs and Expenses.  As provided in the Credit Agreement, Borrower shall pay the fees, costs and expenses incurred by Agent in connection with the preparation, execution and delivery of this Amendment (including, without limitation, attorneys’ fees).

10.           GOVERNING LAW.  THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPALS.

11.           Headings.  Section headings in this Amendment are included herein for convenience of reference only and shall not constitute a part of this Amendment for any other purpose.

[Signature Pages Follow]

42

IN WITNESS WHEREOF, this Amendment has been duly executed as of the date first written above.

BORROWER:
VERTIS, INC.
By:	/S/ Stephen E. Tremblay
Name: Stephen E. Tremblay
Title:		Chief Financial Officer

GENERAL ELECTRIC CAPITAL
CORPORATION
as Agent, an L/C Issuer and a Lender
By:	/S/ Sandra Claghorn
Duly Authorized Signatory

BANK OF AMERICA, N.A.
as a Lender
By:		/S/ Robert Scalzitt
Name:		Robert Scalzitt
Title:		Vice President
CRYSTAL CAPITAL FUND, L.P.
as a Lender
By: Crystal Capital GP, LLC,			its
General Partner
By:	/S/ Steven Migliero, Jr.
Name:	Steven Migliero, Jr.
Title:	Director

The following Persons are signatory to this Amendment in their capacity as Credit Parties and not as Borrowers:

VERTIS HOLDINGS, INC.
By:	/S/ Stephen E. Tremblay
Name:	Stephen E. Tremblay
Title:	Chief Financial Officer
VERTIS DIGITAL SERVICES LIMITED
By:	/S/ Stephen E. Tremblay
Name:	Stephen E. Tremblay
Title:	Chief Financial Officer
ENTERON GROUP LLC
By:	/S/ Stephen E. Tremblay
Name:	Stephen E. Tremblay
Title:	Chief Financial Officer
WEBCRAFT, LLC
By:	/S/ Stephen E. Tremblay
Name:	Stephen E. Tremblay
Title:	Chief Financial Officer
USA DIRECT, LLC
By:	/S/ Stephen E. Tremblay
Name:	Stephen E. Tremblay
Title:	Chief Financial Officer

VERTIS MAILING, LLC
By:	/S/ Stephen E. Tremblay
Name:	Stephen E. Tremblay
Title:	Chief Financial Officer
WEBCRAFT CHEMICALS, LLC
By:	/S/ Stephen E. Tremblay
Name:	Stephen E. Tremblay
Title:	Chief Financial Officer

EXHIBIT A

to

LIMITED CONSENT AND AMENDMENT NO. 7 TO CREDIT AGREEMENT

Annex B

to

Credit Agreement

PRO RATA SHARES AND COMMITMENT AMOUNTS

	Lender(s)
Revolving Loan Commitment (including a Swing Line Commitment and Alternative Currency Swing Line Commitment collectively of $30,000,000, and an Alternative Currency Revolving Credit Sub-Commitment of $112,500,000) of $145,000,000	General Electric Capital Corporation
Revolving Loan Commitment (including an Alternative Currency Revolving Credit Sub-Commitment of $37,500,000) of $55,000,000	Bank of America, N.A.
Term Loan Commitment of $50,000,000	Crystal Capital Fund, L.P.

EXHIBIT B

to

LIMITED CONSENT AND AMENDMENT NO. 7 TO CREDIT AGREEMENT

Schedule 1

to

Exhibit 6.2(e) — Form of Borrowing Base Certificate

Vertis, Inc. (Consolidated)

Borrowing Base Certificate

      /        /       

(000’s)	MMS			VPS			UK			Total
Accounts Receivable per         /         /         aging
Ineligibles
Past Due (>90 Days Past Invoice Date)
Credits in Past Due (>90 Days Past Invoice Date)
Cross Age (>50% Past Due)
Contra Accounts
Foreign Customers
Government Accounts
Intra-Company Accounts
Bankrupt Accounts
Volume Rebate Reserve
Credit Memo Reserve
Payment Error
Total Ineligibles	$			$			$			$
Eligible Accounts Receivable	$			$			$			$
Advance Rate	85		%	85		%	85		%		85		%
Available Accounts Receivable	$	0		$	0		$	0			$	0
Reserves: none	$	0		$	0		$	0			$	0
Net Available Accounts Receivable	$	0		$	0		$	0			$	0
(000’s)										Total
Residual Interest as of          /         /         (as reported in the     /      /         Daily Report)
Accounts Receivable Sold to Securitization

Net Advances Under Securitization
Residual Interest	$
Ineligibles
Ineligible obligors
Ineligibles receivables
Carry cost reserve
Total Ineligible	$
Eligible Residual Interest	$
Advance Rate		65	%
Net Residual Interest Available	$

(000’s)	Paper			Ink			Finished Goods			Maint. Parts			Unbilled A/R			Total
Inventory as of         /         /																$
Ineligibles
Excess Obsolete
Locations < $100M
Cost Test Reserve
Consigned Inventory Reserve
GECFS Reserve (30% of Unbilled A/R)
Total Ineligibles
Eligible Inventory	$			$			$			$			$			$
Advance Rate	65.0		%	65.0		%	65.0		%	65.0		%	65.0		%	65.0		%
Available Inventory	$			$			$			$			$			$
Reserves: none	$	0		$	0		$	0		$	0		$	0		$	0
Net Inventory Availability	$			$			$			$			$			$
Total Current Asset Availability	$			$			$			$			$			$

(000s)			Total
Fixed Assets as of
Machinery & Equipment — Leased Locations
Net Book Value
Net Orderly Liquidation Value
Lesser of (i) 55% of Net Book Value and (ii) 100% of Net Orderly
Liquidation Value
Machinery & Equipment — Owned Locations
Net Book Value
Orderly Liquidation Value In-Place
Lesser of (i) 55% of Net Book Value and (ii) 100% of Orderly
Liquidation Value In-Place
Total Machinery & Equipment Availability
Real Estate (Fair Market Value)
Advance Rate for Real Estate	80			%
Total Real Estate Availability
Total Fixed Assets Availability
Reserves:
Assets Purchased under Capital Leases	—
Rent Reserve	$	1,700,000
Control Agreements	—
Total Availability
Revolver Commitment	$	200,000,000
Lesser of Commitment and Availability
Less: Outstanding Revolving Loan Balance
Less: Letters of Credit
Excess (Deficit) Availability

For the avoidance of doubt, Advance Rates with respect to Fixed Assets shall not be subject to any of the reductions contemplated by the Fourth Amendment to Credit Agreement.

The term “Fair Market Value” for purposes of this Schedule 1 shall mean the value shown with respect to owned real estate of the Borrower and the other Credit Parties in the most recently completed Real Estate Appraisal, if any.

The term “Net Orderly Liquidation Value” for purposes of this Schedule 1 shall mean with respect to eligible machinery and equipment, the aggregate net orderly liquidation value as determined by the most recent Fixed Asset Appraisal (or update thereof), provided by AccuVal Associates, Inc. or other appraisal firm approved by Agent, of the eligible machinery and equipment of the Borrower and the other Credit Parties delivered to Agent pursuant to the Credit Agreement.

The term “Orderly Liquidation Value In-Place” for purposes of this Schedule 1 shall mean with respect to eligible machinery and equipment, the aggregate orderly liquidation value in place thereof as determined by the most recent Fixed Asset Appraisal (or update thereof), provided by AccuVal Associates, Inc. or other appraisal firm approved by Agent, of eligible machinery and equipment of the Borrower and the other Credit Parties delivered to Agent pursuant to the Credit Agreement.

EXHIBIT C

to

LIMITED CONSENT AND AMENDMENT NO. 7 TO CREDIT AGREEMENT

Certain Mortgaged Properties

6111 Woodlake Center Dr., San Antonio, TX

Bexar County

Route 1 & Adams Station

North Brunswick, NJ

County: Middlesex

1202 Shore Street

West Sacramento, CA

County: Yolo

EXHIBIT D

to

LIMITED CONSENT AND AMENDMENT NO. 7 TO CREDIT AGREEMENT

Schedules

to

Credit Agreement

[See attached]

EX-10.52

Exhibit 10.52

SECOND AMENDMENT

THIS SECOND AMENDMENT (this “Amendment”), is dated March 30, 2007, and relates 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 and as further amended, restated, supplemented or otherwise modified from time to time, the “Funding Agreement”), among Vertis Receivables II, LLC, a Delaware limited liability company (“Borrower”), the financial institutions from time to time party thereto (each a “Lender” and collectively, the “Lenders”), General Electric Capital Corporation, a Delaware corporation, as administrative agent for the Lenders (the “Administrative Agent”) and (ii) that certain Receivables Sale and Servicing Agreement, dated as of November 25, 2005 (as amended, restated, supplemented or otherwise modified from time to time, the “Sale Agreement” and together with the Funding Agreement, the “Agreements” and each an “Agreement”) among Borrower, Vertis, Inc., a Delaware corporation, as servicer (in such capacity, the “Servicer”) and in its individual capacity (in such capacity, “Parent”) and each of the Originators listed on the signature pages hereto (collectively, the “Originators”), and is hereby made by Borrower, the Administrative Agent, the Servicer, the Parent, the Originators and the Lenders. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Funding Agreement or the Sale Agreement, as applicable.

W I T N E S S E T H:

WHEREAS, the Administrative Agent, the Lenders and Borrower desire to amend the Funding Agreement on the terms and conditions set forth herein; and

WHEREAS, Borrower, Servicer, Parent and the Originators desire to amend the Sale Agreement on the terms and conditions set forth herein;

NOW, THEREFORE, in consideration of the foregoing premises, the parties hereto agree as follows:

1.             Amendment to Sale Agreement.  As of the “Effective Date” (as defined in Section 4 below), Annex Z to the Sale Agreement is hereby amended and restated in its entirety as Attachment I attached hereto and made part hereof.

2.             Amendment to Funding Agreement.  As of the “Effective Date” (as defined in Section 4 below), Section 2.03(a) of the Funding Agreement is hereby amended to delete the sixth sentence of such section and to replace such sentence with the following sentences:

The Administrative Agent shall review (x) the Borrowing Base Certificate delivered in connection with each Borrowing Request and (y) such other information deemed reasonably necessary or desirable by the Administrative Agent (including, without limitation, the amount of any Collections received by the Borrower, the Servicer or the Administrative Agent up to and including the date of such requested Borrowing that are

not reflected on the Borrowing Base Certificate delivered in connection with such Borrowing Request (“Additional Collections”) and the application of such Additional Collections in accordance with Section 2.08 hereof) to confirm whether a Funding Excess exists or would arise after giving effect to the Borrowing requested in the related Borrowing Request (including, without limitation, any Funding Excess arising because Additional Collections have been applied to reduce calculation of the Borrowing Base as of the date of such requested Borrowing but such Additional Collections have not yet been applied to reduce the Outstanding Principal Amount pursuant to Section 2.08 hereof as of the date of such requested Borrowing). For the avoidance of doubt and without limiting the terms of the definition of “Funding Excess” set forth herein, the Administrative Agent’s determination as to the existence of a Funding Excess before or after giving effect to any Requested Borrowing  shall be final, binding and conclusive on all parties to the Funding Agreement (absent manifest error).

3.             Representations and Warranties.

(a)           As of the Effective Date, Borrower hereby represents and warrants to Administrative Agent and the Lenders that (i) all of the representations and warranties of Borrower in the Related Documents are true and correct in all material respects on and as of such date as though made to each such Person on and as of such date (other than representations and warranties which expressly speak as of a different date, which representations shall be made only on such date), (ii) each of the recitals accurately describes the transactions described therein in all respects, and (iii) as of such date, no Incipient Termination Event, Termination Event, Incipient Servicer Termination Event or Event of Servicer Termination Event has occurred and is continuing.

(b)           As of the Effective Date, each of the Transaction Parties hereby represents and warrants to Borrower that (i) all of the representations and warranties of such Person in the Related Documents are true and correct in all material respects on and as of such date as though made to each such Person on and as of such date (other than representations and warranties which expressly speak as of a different date, which representations shall be made only on such date), (ii) each of the recitals accurately describes the transactions described therein in all respects, and (iii) as of such date, no Incipient Termination Event, Termination Event, Incipient Servicer Termination Event or Event of Servicer Termination Event has occurred and is continuing.

4.             Effective Date.  The “Effective Date” shall occur upon the Administrative Agent’s receipt of each of the following:

(a)           counterparts of this Amendment executed by each of the Persons identified on the signature pages hereto; and

(b)           an amendment fee from Borrower in an amount equal to 0.20% of the aggregate amount of all of the Commitments, to be distributed by Administrative

2

Agent pro rata to the Lenders (which such amendment fee shall be fully earned and non-refundable on the date paid).

5.             Reference to and Effect on the Related Documents.

(a)           As applicable, on and after the Effective Date, each reference in any Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import, and each reference in the other Related Documents to such Agreement, shall mean and be a reference to such Agreement as modified hereby.

(b)           Except as specifically amended or consented to above, all of the terms of each Agreement and all other Related Documents remain unchanged and in full force and effect.

(c)           The execution, delivery and effectiveness of this Amendment shall not operate as a waiver of any right, power or remedy of any party under any of the Related Documents, nor constitute an amendment, other than as set forth herein, or waiver of any provision of any of the Related Documents, nor obligate any such party to agree to similar consents in the future.

(d)           This Amendment shall constitute a Related Document.

6.             Costs and Expenses.  Borrower agrees to pay upon demand in accordance with the terms of Section 12.04 of the Funding Agreement all reasonable costs and expenses of the Administrative Agent in connection with the preparation, negotiation, execution and delivery of this Amendment, including, without limitation, the reasonable fees, expenses and disbursements of Sidley Austin LLP, counsel for the Administrative Agent with respect to any of the foregoing.

7.             Miscellaneous.  The headings herein are for convenience of reference only and shall not alter or otherwise affect the meaning hereof.

8.             Counterparts.  This Amendment may be executed in any number of counterparts and by the different parties hereto in separate counterparts, each of which when so executed and delivered by facsimile shall be an original, but all of which shall together constitute one and the same instrument.

9.             GOVERNING LAW.  THIS AMENDMENT AND THE OBLIGATIONS ARISING HEREUNDER SHALL IN ALL RESPECTS, INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, BE GOVERNED BY, AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK (INCLUDING SECTIONS 5-1401 AND 5-1402 OF THE GENERAL OBLIGATIONS LAWS BUT OTHERWISE WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES) EXCEPT TO THE EXTENT THAT THE PERFECTION, EFFECT OF PERFECTION OR PRIORITY OF THE INTERESTS OF BORROWER OR THE ADMINISTRATIVE AGENT IN THE RECEIVABLES OR REMEDIES HEREUNDER OR THEREUNDER, IN RESPECT THEREOF, ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER THAN THE STATE OF

3

NEW YORK, AND ANY APPLICABLE LAWS OF THE UNITED STATES OF AMERICA.

*              *              *

4

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized as of the date first above written.

VERTIS RECEIVABLES II, LLC, as Borrower
By:	/S/ Stephen E. Tremblay
Name:	Stephen E. Tremblay
Title:	Chief Financial Officer
VERTIS, INC., as Servicer, Parent and as an Originator
By:	/S/ Stephen E. Tremblay
Name:	Stephen E. Tremblay
Title:	Chief Financial Officer
WEBCRAFT, LLC, as an Originator
By:	/S/ Stephen E. Tremblay
Name:	Stephen E. Tremblay
Title:	Chief Financial Officer
WEBCRAFT CHEMICALS, LLC, as an Originator
By:	/S/ Stephen E. Tremblay
Name:	Stephen E. Tremblay
Title:	Chief Financial Officer
ENTERON GROUP, LLC, as an Originator
By:	/S/ Stephen E. Tremblay
Name:	Stephen E. Tremblay
Title:	Chief Financial Officer
VERTIS MAILING, LLC, as an Originator
By:	/S/ Stephen E. Tremblay
Name:	Stephen E. Tremblay
Title:	Chief Financial Officer

GENERAL ELECTRIC CAPITAL CORPORATION, as Administrative Agent
By:	/S/ Susan Bassett
Name:	Susan Bassett
Title:	Duly Authorized Signatory
GENERAL ELECTRIC CAPITAL CORPORATION, as the Lender and Swing Line Lender
By:	/S/ Susan Bassett
Name:	Susan Bassett
Title:	Duly Authorized Signatory

ATTACHMENT I TO SECOND AMENDMENT

AMENDED AND RESTATED ANNEX Z TO SALE AGREEMENT

[ATTACHED]

ANNEX Z

FINANCIAL TEST

Minimum EBITDA.  Holdings and its Subsidiaries on a consolidated basis shall have, (i) at the end of each Fiscal Month ending during Fiscal Year 2007, EBITDA (as calculated in accordance with the table set forth below) for the twelve trailing Fiscal Months, of not less than $125,000,000, (ii) at the end of each Fiscal Quarter ending during Fiscal Year 2008, EBITDA (as calculated in accordance with the table set forth below) for the four Fiscal Quarter period then ended of not less than $125,000,000 and (iii) at all other times, at the end of each Fiscal Quarter, EBITDA (as calculated in accordance with the table set forth below) for the four Fiscal Quarter period then ended of not less than $160,000,000.  In the event that Holdings and its Subsidiaries are not in compliance with the preceding sentence, THL and Evercore shall have the option to make a common equity or, on terms and conditions acceptable to Administrative Agent, preferred equity, contribution to Holdings and the net proceeds of such equity contribution shall be treated on a dollar for dollar basis as EBITDA for purposes of determining compliance with the preceding sentence; provided, that, such an equity contribution shall, for purposes of its treatment as EBITDA, (i) not be made more than once in any fiscal year and (ii) not exceed $15,000,000 in amount (i.e., not more than $15,000,000 of such an equity contribution shall be treated as a replacement for EBITDA in any year and such an equity contribution may only be made once per year).

“EBITDA” shall be calculated in accordance with the following table:

Consolidated Net Income is defined as follows:
Net income during the measuring period on a consolidated basis excluding:		$
	the income (or deficit) accrued prior to the date a Subsidiary was merged or consolidated into Holdings or any of Holdings’ Subsidiaries
	the income (or deficit) from operations of any entity that is not a Subsidiary of Holdings but in which Holdings has an ownership interest, except to the extent any such income has actually been received by Holdings or any of its Subsidiaries in the form of cash dividends or distributions
	any restoration to income of any contingency reserve greater than $1,000,000, except to the extent that provision for such reserve was made out of income accrued during such period
	any net gain (or loss) attributable to the write-up (or write-down) of any asset (other than accounts and inventory)

	any net gain from the collection of the proceeds of life insurance policies
	any net gain (or loss) arising from the sale of any securities, or the extinguishment of any Indebtedness, of Holdings or any of their Subsidiaries
Consolidated Net Income		$
EBITDA is defined as follows:
Consolidated Net Income (from above)		$
Plus:	(in each case to the extent included in the calculation of Consolidated Net Income, but without duplication):
	Interest Expense, net of interest income
	Non-cash interest expense and amortization of original issue discount
	any fees payable with respect to the Related Documents
	gain/ (losses) from extraordinary items
	any gain (or loss) arising from the sale, exchange or other disposition of assets out of the ordinary course of business, other than accounts and inventory
	(i) any other non-cash gains/(losses) (other than non-cash losses relating to write-offs, write-downs or reserves with respect to accounts and inventory) and (ii) any management fees permitted to be paid to (A) THL and/or any THL Affiliates or (B) Evercore and/or any Evercore Affiliates, in accordance with Section 5.8 of the Credit Agreement (as in effect as of March 30, 2007 without giving effect to any subsequent amendments or modifications thereto) to the extent such management fees are accrued rather than paid
	non-recurring gains/ (losses)
	any provision for income taxes/ (net of income tax credits)
	amortization of deferred financing fees
	restructuring charges (GAAP)

	restructuring charges (non-GAAP)
	depreciation and amortization
	any deduction as the result of any grant to any members of the management of Holdings or any of its Subsidiaries of any Stock
EBITDA		$
Required EBITDA		$[160,000,000] $[125,000,000]

Capitalized terms used in this Annex Z and not otherwise defined herein shall have the respective meanings ascribed to them in Annex X.  In addition, when used herein, the following defined terms shall have the definitions set forth below:

“Fiscal Month” means any of the monthly accounting periods of Parent of each Fiscal Year.

“Fiscal Quarter” means any of the quarterly accounting periods of Parent, ending on March 31, June 30, September 30 and December 31 of each year.

“Fiscal Year” means any of the annual accounting periods of Parent ending on December 31 of each year.

Rules of Construction Concerning Financial Tests.  Unless otherwise specifically provided therein, any accounting term used in any Related Document shall have the meaning customarily given such term in accordance with GAAP, and all financial computations thereunder shall be computed in accordance with GAAP consistently applied.  That certain items or computations are explicitly modified by the phrase “in accordance with GAAP” shall in no way be construed to limit the foregoing.  If any Accounting Changes occur and such changes result in a change in the calculation of the financial tests, standards or terms used in any Related Document, then the parties thereto agree to enter into negotiations in order to amend such provisions so as to equitably reflect such Accounting Changes with the desired result that the criteria for evaluating the financial condition of such Persons and their Subsidiaries shall be the same after such Accounting Changes as if such Accounting Changes had not been made.  If the parties thereto agree upon the required amendments thereto, then after appropriate amendments have been executed and the underlying Accounting Change with respect thereto has been implemented, any reference to GAAP contained therein shall, only to the extent of such Accounting Change, refer to GAAP consistently applied after giving effect to the implementation of such Accounting Change.  If such parties cannot agree upon the required amendments within 30 days following the date of implementation of any Accounting Change, then all financial statements delivered and all calculations of financial tests and other standards and terms in accordance with the Related Documents shall be prepared, delivered and made without regard to the underlying Accounting Change.

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,
	2006			2005			2004			2003			2002
Net Earnings	$	(26,195	)	$	(173,230	)	$	(11,133	)	$	(95,925	)	$	(120,146	)
Add:
Income tax (benefit) provision	(1		)	(8,070		)	(66,053		)	48,436			(2,036		)
Loss (gain) from discontinued operations, net	(21,600		)	143,389			6,210			(3,577		)	12,136
Cumulative effect of accounting change				1,600									86,600
Amortization of previously capitalized interest	780			717			764			571			545
Fixed charges per (B) below	140,776			138,449			139,886			135,232			133,062
Deduct:
Interest capitalized during period	1,250			929			798			832			555
Earnings, as adjusted (A)	$	92,510		$	101,926		$	68,876		$	83,905		$	109,606
Fixed charges:
Portion of rents representative of an interest factor	$	8,641		$	8,792		$	8,542		$	9,356		$	9,913
Interest expense on all indebtedness, including amortization of debt expense	132,135			129,657			131,344			125,876			123,149
Fixed charges for computation purposes (B)	$	140,776		$	138,449		$	139,886		$	135,232		$	133,062
Ratio of earnings to fixed charges (A) / (B)
Deficiency of earnings available to cover fixed charges	$	(48,266	)	$	(36,523	)	$	(71,010	)	$	(51,327	)	$	(23,456	)

EX-21.1

Exhibit 21.1

List of Subsidiaries of Vertis, Inc.

As of December 31, 2006

Enteron Group, LLC

Laser Tech Color Mexico, S.A. de C.V.

USA Direct, LLC

Vertis Digital Services Limited

Vertis Fragrance SARL (France)

Vertis Mailing, LLC

Vertis Receivables II, LLC

Webcraft, LLC

Webcraft Chemicals, LLC

EX-31.1

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)) 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;

(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. DUBOSE

Name: Michael T. DuBose

Title: Chairman and Chief Executive Officer

Date: April 2, 2007

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Stephen E. Tremblay, 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)) 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;

(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/ STEPHEN E. TREMBLAY

Name: Stephen E. Tremblay

Title: Chief Financial Officer

Date: April 2, 2007