Exhibit 10.2

 

THE COURIER CORPORATION EXECUTIVE COMPENSATION PROGRAM

 

As amended and restated on December 5, 2005

 

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THE COURIER CORPORATION EXECUTIVE COMPENSATION PROGRAM

 

Introduction

 

The Executive Compensation Program of Courier Corporation (“Courier” or the
“Company”) is one of its most important means of motivating and rewarding
performance of our senior management team.  The Program is designed to support
our business strategy by linking your compensation to the achievement of key,
measurable performance objectives.  It seeks to align your financial interests
with those of shareholders by focusing management efforts on enhancing the value
of each shareholder’s investment.  The Program also encourages executive stock
ownership and offers you the opportunity for wealth accumulation.

 

Objectives

 

The focus of Company-wide performance goals and stock ownership emphasizes the
need and importance of teamwork.  The Program has been developed to complement
the strategic focus and organization.  The Program is designed to:

 

•                  attract and retain high quality management talent and to
motivate them to build and sustain value for shareholders;

•                  provide aggregate compensation opportunities that, when
performance goals are achieved, will be comparable to those provided by other
companies with revenues and operating characteristics similar to Courier; and

•                  establish for employees in management positions a significant
risk/reward compensation structure through incentive pay plans.

 

Additionally, the Program places more importance on the performance-based
variable pay components that, when combined with base salary, provide a
competitive total compensation package with an up-side potential that may exceed
average total compensation paid to executives of similar responsibility in
similar-sized companies, when performance is superior.

 

Overview of the Program

 

The total compensation you are eligible to earn may be derived from four
sources:

 

•                  Base Salary

 

•                  Annual Cash Incentive

 

•                  Long-Term Performance Incentive

 

•                  Long-Term Stock Incentive

 

Base Salary

 

The first element of your total compensation is the base salary you receive from
Courier.  Your base salary is reviewed periodically.  In evaluating your base
salary the following factors are considered:  individual performance, the level
and scope of responsibilities, experience, internal equity, and salaries
relating to executives of similar responsibility in similar-sized companies. 
The primary considerations for determining any increase in your base pay,
however, are your individual performance and growth in responsibilities.

 

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Annual Cash Incentive

 

The second element of your total compensation is an annual cash incentive, which
is based upon the achievement of specified Company and business unit performance
targets.  The Company and business unit performance targets are quantifiable
targets which are established at the beginning of a fiscal year.

 

Minimum performance targets are set below which no annual cash incentive will be
paid.  Exceeding the minimum performance targets allows you to receive a
percentage of your overall annual cash incentive target.  If you exceed your
performance targets, you may earn as much as 200% of your annual cash incentive
target.

 

If performance targets are achieved for the fiscal year, the annual cash
incentive is paid as soon as practical following the close of the fiscal year
but normally no later than the January 31 of the new fiscal year.

 

The annual cash incentive is normally based upon the following performance
targets, although other quantifiable earnings targets may be used in individual
cases:

 

Company Performance

 

Business Unit Performance

 

 

 

Earnings Per Share

 

Pre-Tax Profits; Total Sales

 

Your specific fiscal year Company and business unit performance targets as well
as your fiscal year cash incentive target are contained in your Personalized
Illustration.

 

In the event a Change in Control of the Company occurs, you will receive a
pro-rated cash incentive in an amount equal to your cash incentive target
multiplied by a fraction, the numerator of which is the number of elapsed days
in the fiscal year through and including the date on which the Change in Control
occurs and the denominator of which is 365.

 

Long Term Performance Incentive

 

Another element of your total compensation may be a long-term performance
incentive (“LTPI”) award, which is a performance-related incentive based upon
achievement of multi-year objectives.  The target amount of the LTPI is
established at the beginning of the performance cycle, which is a three-year
period.  This award is earned by achieving specific targets over the performance
cycle.

 

Currently, the LTPI targets are specific Return on Assets (ROA) goals.  The
long-term performance incentive that is earned for the performance cycle is paid
as soon as practical in the fiscal year following the end of the three-year
performance cycle.  It is the intention of the Company to begin a new three-year
performance cycle every fiscal year.  New performance measures and/or targets
will be established at the beginning of each performance cycle by Courier’s
Compensation Committee of the Board of Directors.

 

Your specific three-year performance targets and your target LTPI award, if any,
are contained in your Personalized Illustration.

 

In the event a Change in Control of the Company occurs, for each of your
outstanding LTPI awards, you will receive a pro-rated amount in cash equal to
the target LTPI award multiplied by a fraction, the numerator of which is the
number of elapsed days in the performance period through and including the date
on which the Change in Control occurs and the denominator of which is 1096.

 

Long Term Stock Incentive

 

Another element of your total compensation may be a long-term stock incentive
(“LTSI”). The long-term stock incentive for participants may consist of a
(1) stock option award, (2) a restricted stock grant or

 

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restricted stock unit (“RSU”), (3)  a cash award, or (4) a combination of any of
these elements.  Your Personalized Illustration will indicate what your LTSI, if
any, for the fiscal year will be.

 

Stock option awards, restricted stock grants, or RSUs are granted near the
beginning of a fiscal year based on the fair market value of Courier Common
Stock as of the date of the award. The LTSI awards normally vest over a period
of years and are exercisable within a stated period.

 

The LTSI cash award is an amount that may be earned over a period of time up to
5 years based upon the Company meeting or exceeding the Total Shareholder Return
(“TSR”) of our Peer Group.  (The Peer Group is comprised of the companies
selected as the Courier Peer Group as set forth in the Company’s annual proxy
statement for the purposes of comparing TSR over a 5-year period.)  The LTSI
cash award may be earned as follows:

 

25% of the LTSI cash award would vest and be paid out after Year 1 if the
one-year average TSR of Courier meets or exceeds the one-year average TSR of the
Peer Group.

 

25% of the LTSI cash award would vest and be paid out after Year 2 if the
one-year average TSR of Courier meets or exceeds the one-year average TSR of the
Peer Group for that year.   Note:  In year 2, if the first year TSR is missed
but the two-year cumulative TSR is achieved, 50% of the LTSI cash award would
vest and be paid out after Year 2.

 

25% of the LTSI cash award would vest and be paid out after Year 3 if the
one-year average TSR of Courier meets or exceeds the one-year average TSR of the
Peer Group for that year. The remaining unearned amount of the LTSI cash award
would be earned in Year 3 if the 3-year cumulative TSR of Courier meets or
exceeds the 3-year cumulative TSR of the Peer Group and would be paid out after
Year 3.

 

If the full amount of the LTSI cash award has not yet been earned by Year 4, the
remaining amount of the LTSI cash award may be earned in Year 4 if the 4-year
cumulative TSR of Courier meets or exceeds the 4-year cumulative TSR of the Peer
Group and would be paid out after Year 4.

 

If the full amount of the LTSI cash award has not yet been earned by Year 5, the
remaining amount of the LTSI cash award may be earned in Year 5 if the 5-year
cumulative TSR of Courier meets or exceeds the 5-year cumulative TSR of the Peer
Group and would be paid out after Year 5.

 

Earned amounts of the LTSI cash award are paid as soon as practical following
the close of the fiscal year but normally no later than the January 31 of the
new fiscal year.

 

In the event a Change in Control of the Company occurs, all your outstanding
stock option awards will vest and become fully exercisable and all restricted
stock grants and RSUs will become fully vested.  With respect to any outstanding
LTSI cash award, you will receive a pro-rated amount in cash equal to the
unearned target LTSI cash award multiplied by a fraction, the numerator of which
is the number of elapsed days in the three-year performance period through and
including the date on which the Change in Control of the Company occurs and the
denominator of which is 1096.

 

Important Information

 

1.  Participation - Employees recommended for participation in the Executive
Compensation Program are approved by the Compensation Committee of the Board of
Directors.

 

During the course of a fiscal year or within a given three-year performance
period, the Compensation Committee of the Board of Directors may approve the
addition or removal of participants from the various participating groups.  In
such cases, the Compensation Committee will establish new performance targets
and incentive award targets, as appropriate.

 

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2.  Definitions

 

a.  Pretax Profit (Loss) means the revenues of the Company (on a consolidated
basis) or business unit less all expenses (except income taxes) determined in
accordance with generally accepted accounting principles (GAAP) consistently
applied for the fiscal year or performance period, except for Adjustments for
Unusual Transactions (as defined below).  Expenses include cost of sales,
selling, administrative and interest expenses.  Each business unit will be
charged an allocation of expenses including, but not limited to, corporate
overhead, real estate and interest so that pretax profit for each business unit
is “fully allocated” consistent with the business plan financial statements and
annual budgets.

 

b.  Net Income means Pretax Profit of the Company (on a consolidated basis)
 less a provision for income taxes in accordance with GAAP except for
Adjustments for Unusual Transactions (as defined below).

 

c.  Earnings Per Diluted Share (EPS) means Net Income of the Company (on a
consolidated basis) divided by the weighted average number of shares of
Courier’s Common Stock outstanding, as well as the dilutive effect of stock
options.

 

d.  Assets include cash, accounts receivables (net of reserve for uncollectible
accounts), inventories (net of related reserves), other current assets, fixed
assets such as land, building, machinery and equipment (net of accumulated
depreciation), and other assets including, but not limited to, long-term
investments and goodwill, all accounted for in accordance with GAAP on a
consistent basis.

 

e.  Adjustments for Unusual Transactions - The impact of certain transactions or
events which may occur during the fiscal year or the performance period and
which are deemed by the Company to be unusual and non-recurring will be excluded
from Pretax Profit (Loss) and Net Income.  For example, a gain or loss on the
sale of real estate, the impact of a change in the method of accounting for
inventories, or earnings or losses from discontinued operations would be deemed
to be unusual transactions and therefore excluded from income.  Adjustments for
Unusual Transactions will be made by the Compensation Committee of the Company’s
Board of Directors in its sole discretion.

 

f.  Return on Assets (ROA) is Net Income (after Adjustments for Unusual
Transactions) divided by Assets (average of beginning and end of the fiscal
year) after Adjustments for Unusual Transactions deemed appropriate by the
Compensation Committee.

 

g.  Total Shareholder Return (TSR) is the return earned by a shareholder on his
or her investment in the Company’s Common Stock, assuming the reinvestment of
quarterly dividends at the monthly closing stock price.  Thus, TSR is based on
both the change in the price of the Company’s Common Stock and the value of
dividends paid, assuming that such dividends were used to purchase more of the
Company’s Common Stock.

 

h.  Peer Group is the peer group of companies selected by the Company for
purposes of comparison in the Company’s annual proxy statement.  The Peer Group
of companies as of November 2005 is Banta Corporation; Bowne & Co.; Cadmus
Communications Corporation; Ennis Business Forms, Inc.; Thomas Nelson, Inc.; The
Standard Register Company; and John Wiley & Sons, Inc.  The Compensation
Committee of the Company’s Board of Directors may change the Peer Group at any
time in its sole discretion.

 

i.  Peer Group TSR is the return earned by a shareholder assuming such
shareholder simultaneously invests in the common stock of all the Peer Group
companies, assuming the reinvestment of quarterly dividends at the monthly
closing stock price.  In computing Peer Group TSR, the returns of the Peer Group
companies are weighted annually by their respective stock market
capitalizations.

 

j.  Change in Control of the Company shall be deemed to have occurred if there
is (i) any consolidation or merger of the Company in which the Company is not
the continuing or surviving corporation or pursuant to which shares of the
Company’s Common Stock would be converted into cash, securities or other
property, other than a consolidation or merger of the Company in which the
holders of the Company’s Common Stock immediately prior to the consolidation or
merger have the same

 

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proportionate ownership of the common stock of the surviving corporation
immediately after the consolidation or merger, or (ii) 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.

 

k.   Affiliate means any person or entity which is controlled by or under common
control with the Company.

 

3.  Additional Information - The Compensation Committee of the Board of
Directors reserves the right to amend or terminate the Executive Compensation
Program, and participants would be provided with timely written notice of any
amendments or of the termination of the Program.   The Compensation Committee
sets the rules and interprets the Executive Compensation Program, and its
rulings and decisions are final.

 

An individual must be an employee of the Company or one of its participating
Affiliates and a participant in the Executive Compensation Program as of the
date payment is made in order to be eligible to receive the annual cash
incentive award and any of the LTPI and LTSI cash awards.  The Compensation
Committee of the Board of Directors of the Company may, at its sole discretion,
determine a participant’s eligibility to receive the LTPI and LTSI awards if a
participant dies, becomes disabled, or retires during the performance period.

 

Details of the Annual Cash Incentive, LTPI, and LTSI Incentive are contained in
the Personalized Illustration to each participant.  This summary, the
Personalized Illustration, and/or any other documents contained within or about
the Executive Compensation Program do not constitute a contract between any
employee and the Company.  Neither the Program nor any action taken thereunder
shall be construed as giving any employee or other person any right to be
retained as an employee of the Company or any Affiliate.

 

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