COURIER CORP
10-K, 1998-12-08
BOOK PRINTING
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<PAGE>


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

                                    Form 10-K

(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

For the fiscal year ended September 26, 1998

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

For the transition period from _______________to_______________

                          Commission file number 0-7597

                               Courier Corporation

                           A Massachusetts corporation

                  I.R.S. Employer Identification No. 04-2502514

                                15 Wellman Avenue
                         Chelmsford, Massachusetts 01863
                           Telephone No. 978-251-6000


           Securities registered pursuant to Section 12(b) of the Act:
                                      None

           Securities registered pursuant to Section 12(g) of the Act:
                           Common Stock, $1 par value


     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 [X] No [ ]

     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. [ ]

     State the aggregate market value of the voting stock held by non-affiliates
of the registrant as of November 20, 1998

                    Common Stock, $1 par value - $54,648,144

     Indicate the number of shares outstanding of each of the registrant's
classes of common stock as of November 20, 1998

                     Common Stock, $1 par value - 1,900,805


                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the registrant's proxy statement for the annual meeting of
stockholders scheduled to be held on January 21, 1999 (Part III).



<PAGE>


                                     PART I

Item 1.  Business.

                                  INTRODUCTION

         Registrant, Courier Corporation ("Courier" or the "Company"), was
incorporated under the laws of Massachusetts on June 30, 1972. Courier owns all
of the capital stock of Courier-Citizen Company, a Massachusetts corporation
organized in 1894 as successor to a printing business which originated in 1824.

         Courier Corporation helps organizations manage the process of creating
and distributing intellectual properties. Courier is the largest book
manufacturer in the Northeast offering services from preparation, production,
media replication, kitting and packaging through storage, and distribution.
Products include Bibles, reference texts, books, software kits and technical
documentation. Courier also operates businesses which respond to the need for
greater choice in education. Copyright Management Services provides
Internet-based solutions that enable educators to use coursepacks combining
materials from multiple publishers. The Home School is a direct marketer of
educational materials to families engaged in educating children at home.

         In December 1994, the Company formed Courier New Media, Inc. ("Courier
New Media"), an information management services company which works with
publishers and other information developers to create new products from new and
existing intellectual properties. Simultaneously, Courier New Media launched a
new business, Copyright Management Services ("CMS"). CMS specializes in managing
the process of creating multiple-publisher college coursepacks for college
professors, enabling personalized course curriculum and 100% relevant materials
for students. CMS obtains copyright permissions and provides either
ready-to-print masters to a campus print shop, or high quality printed
coursepacks to college bookstores.

         On July 21, 1997, the Company acquired all of the outstanding stock of
Book-mart Press, Inc. ("Book-mart"), a North Bergen, New Jersey book
manufacturer specializing in short to medium runs of softcover and hardcover
books. Founded in 1977, Book-mart has built a strong reputation and loyal
customer following in New York and the surrounding areas. Book-mart offers high
quality offset printing and binding for order quantities as low as 300 copies.
The acquisition complements the Company's existing range of services so that the
Company can offer its customers, and Book-mart customers, one-stop full-service
shopping for book production at any run length.

         On September 30, 1997, the Company purchased the assets of The Home
School Books & Supplies ("The Home School"), based in Arlington, Washington. The
Home School markets curriculum and other learning materials direct to home
schoolers through retail and catalog businesses.



                                       1
<PAGE>


         In May 1998, the Company restructured the Courier EPIC division located
in North Chelmsford, Massachusetts. Kitting, assembly, disk replication and
related services were consolidated into Courier Stoughton where similar
operations were performed. Simultaneously, North Chelmsford's end-user
fulfillment operation was expanded to handle The Home School's national catalog
roll out and other end-user fulfillment business.


                                    PRODUCTS

         Courier's products include the manufacture of books, manuals and
replicated diskettes and CD-ROMs for publishers, software developers and other
information providers as well as related services involved in managing the
process of creating and distributing these products. Courier provides
manufacturing and related services from six facilities in Westford, Stoughton
and North Chelmsford, Massachusetts; Philadelphia, Pennsylvania; Kendallville,
Indiana; and North Bergen, New Jersey.

         Courier's book manufacturing operations consist of both electronic and
conventional film processing, platemaking, printing and binding of soft and hard
bound books and manuals. These book manufacturing operations are conducted
through five subsidiaries, Courier Westford, Inc. ("Westford"), Courier
Stoughton, Inc. ("Stoughton"), Courier Kendallville, Inc. ("Kendallville"),
National Publishing Company ("National"), and Book-mart. Each of these
subsidiaries has certain specialties adapted to the needs of the market niches
Courier serves, such as short-run book manufacturing capabilities, printing on
lightweight paper for medical and religious publishers and 4-color book
manufacturing for educational and trade publishers.

         In December 1994, the Company formed Courier New Media to work with
publishers and other information providers to develop new products from new and
existing intellectual properties. Courier New Media includes two operating
units, CMS and end user fulfillment. In May 1998, Courier EPIC's project
management, product assembly, packaging, and diskette replication were
consolidated into Stoughton. CMS specializes in managing the process of creating
multiple-publisher college coursepacks for college professors by obtaining
copyright permissions and providing either ready-to-print masters to campus
print shops or printed coursepacks to college bookstores.

         On September 30, 1997, the Company purchased the assets of The Home
School Books & Supplies, based in Arlington, Washington. The Home School markets
curriculum and other learning materials direct to home schoolers through retail
and catalog businesses. Retail operations are located in Arlington, Washington,
while catalog operations were transferred to North Chelmsford, Massachusetts.



                                       2
<PAGE>


                             MARKETING AND CUSTOMERS

         Courier's book manufacturing services are primarily sold to publishers
of educational, religious, consumer, professional and reference books and to
computer software and hardware manufacturers.

         Courier's book manufacturing sales force of 24 people is responsible
for all of the Company's sales to over 650 customers, excluding customers of The
Home School and CMS. Courier's salespeople operate out of sales offices located
in New York, Chicago, Philadelphia, Hayward, California, Orlando, Florida, North
Chelmsford, Massachusetts, and North Bergen, New Jersey.

         Sales to one customer, the Gideon Society, aggregated approximately 26%
of consolidated sales in fiscal 1998 and sales to another customer, Simon &
Schuster, aggregated approximately 12% of consolidated 1998 sales. In November
1998, Pearson PLC, another customer of the Company, announced its acquisition of
The Simon & Schuster education, reference, and business and professional
publishing businesses from Viacom Inc. At this time, the Company has no basis
for determining the impact that the acquisition may have on its business
relationship with the combined entity. The loss of these customers would have a
material adverse effect on the Company. No other customer accounted for more
than 10% of fiscal 1998 consolidated sales. The Company distributes products
around the world; export sales, as a percentage of consolidated sales, were
approximately 17% in fiscal 1998, 18% in fiscal 1997 and 17% in fiscal 1996.

         CMS markets its custom coursepack services to college bookstores,
campus print shops and direct to professors nationwide. It utilizes direct
marketing techniques including mailings and e-mail backed up by one sales person
and an internal direct response staff located in North Chelmsford,
Massachusetts. The Home School markets curriculum and other learning materials
direct to home schoolers through retail operations in Arlington, Washington, and
through catalog operations in North Chelmsford, Massachusetts.


                                   COMPETITION

         All phases of Courier's business are highly competitive. The printing
and publishing industries, exclusive of newspapers, include over 50,000
establishments. While most of these establishments are relatively small, several
of Courier's competitors are considerably larger or are affiliated with
companies which are considerably larger and have greater financial resources
than Courier. In recent years, consolidation of both customers and competitors
within the Company's markets has increased pricing pressures. The major
competitive factors in Courier's business in addition to price are product
quality, customer service, availability of appropriate printing capacity,
related services and technology support.



                                       3
<PAGE>


                             MATERIALS AND SUPPLIES

         Courier purchases its principal raw materials, primarily paper, but
also plate materials, ink, cover stock and casebinding materials, from numerous
suppliers, and is not dependent upon any one source for its requirements. Many
of Courier's book manufacturing customers purchase their own paper and furnish
it at no charge to these operations for book production purposes. The Home
School purchases books and other learning materials from over 100 educational
publishers and it is not dependent upon any one source.


                            ENVIRONMENTAL REGULATIONS

         The Company believes that its operations comply in all material
respects with applicable federal, state and local environmental laws and
regulations. Although the Company makes capital expenditures for environmental
protection, it does not anticipate any significant expenditures in order to
comply with such laws and regulations which would have a material impact on the
Company's capital expenditures, earnings or competitive position.


                                    EMPLOYEES

         The Company and its subsidiaries employed 1,254 persons at September
26, 1998 compared to 1,202 a year ago.

                                      OTHER

         Courier's overall business is not significantly seasonal in nature.
Although in prior years sales volume was generally lower in the Company's second
quarter, recent results have not reflected that seasonal trend due to changes in
the business, including acquisitions. In addition, market demand for CMS and The
Home School products and services is highest in the Company's fourth quarter.

         There is no portion of Courier's business subject to cancellation of
government contracts or renegotiation of profits. Courier holds no patents,
licenses other than third-party software, franchises or concessions which are
important to its operations. The Company considers Courier, Courier New Media,
The Home School, Copyright Management Services, E-Master, CoursepackCounselors,
SmartMail, CampusPrint, Coursepack.com and SmartChoice to be proprietary
trademarks. In addition, www.coursepack.com and www.coursepak.com are
proprietary Universal Resource Locators (URL) on the World Wide Web for
Courier's coursepack business and are important to its operations.



                                       4
<PAGE>


Item 2.  Properties.

                                 REAL PROPERTIES

         The following schedule lists the facilities occupied by Courier at
September 26, 1998. The list also includes real estate which is held for sale or
lease, as discussed in Note J to the Consolidated Financial Statements, which
appears on page F-14 of this Annual Report on Form 10-K. Courier considers its
plants and other facilities to be well maintained and suitable for the purpose
intended.
<TABLE>
<CAPTION>

                                                                Owned/            Size in
Principal Activity and Location (Year Constructed)              Leased            Sq. Ft.
- -------------------------------------------------               ------            -------
<S>                                                             <C>               <C>
Corporate headquarters and executive offices
   North Chelmsford, MA (1973, 1996)                            Owned              69,000 (1)
Book manufacturing and warehousing
  Westford plant, Westford, MA (1900, 1968, 1969, 1981, 1990)   Owned             593,000
  Kendallville plant, Kendallville, IN (1978)                   Owned             155,000
  National plant, Philadelphia, PA (1975, 1997)                 Owned             229,000 (2)
  Stoughton plant, Stoughton, MA (1980)                         Leased            169,000
  Book-mart plant, North Bergen, NJ (1917, 1935, 1997)          Leased             75,000
Real estate held for sale or lease
   Raymond, NH (1973)                                           Owned              59,000 (3)

</TABLE>


(1)     In September 1996, the Company relocated its corporate headquarters into
        approximately 17,000 square feet of an existing facility in North
        Chelmsford, MA which also houses CMS, The Home School and end user
        fulfillment operations..

(2)     In December 1996, the Company completed construction of a 100,000 square
        foot addition to its principle Philadelphia facility. The expansion
        enabled the Company to consolidate operations located in an older
        multistory facility to the newer, more efficient property. The older
        multistory facility, which had been vacant, was sold in June 1998.

(3)     This building, which had been leased through June 1996 to the purchaser
        of the Company's former forms printing business, is now vacant pending
        sale or lease.


                                    EQUIPMENT

        The Company's products are manufactured on equipment which in most cases
is owned by the Company, although it leases computers, image setters and
electronic printing systems which are subject to more rapid obsolescence. In
addition, it leases three printing presses where title is held by the lessor
including one new press installed in July 1998. Capital expenditures amounted to
approximately $4.1 in 1998, $6.7 million in 1997, and $7.3 million in 1996.
Capital expenditures in 1998 included $0.5 million for a computer-to-plate
system which eliminates the need to produce film prior to printing and $0.5
million to upgrade the Company's information systems and infrastructure. Capital
expenditures for fiscal 1999 are expected to be approximately $8-10 million,
including approximately $0.6 million related to Year 2000 issues. Courier
considers its equipment to be in good operating condition and adequate for its
present needs.



                                       5
<PAGE>


                       ENCUMBRANCES AND RENTAL OBLIGATIONS

        For a description of encumbrances on certain properties and equipment,
see Note D of Notes to Consolidated Financial Statements on page F-10 of this
Annual Report on Form 10-K. Information concerning leased properties and
equipment is disclosed in Note E of Notes to Consolidated Financial Statements,
which appears on page F-10 of this Annual Report on Form 10-K.

Item 3.  Legal Proceedings.

        In the ordinary course of business, the Company is subject to various
legal proceedings and claims. The Company believes that the ultimate outcome of
these matters will not have a material adverse effect on its financial
statements.

Item 4.  Submission of Matters to a Vote of Security Holders.

        There were no matters submitted to a vote of security holders during the
quarter ended September 26, 1998.


                                     PART II

Item 5.  Market for the Registrant's Common Equity and Related Stockholder 
         Matters.

        The information required by this Item is contained in the section
captioned "Selected Quarterly Financial Data (Unaudited)" which appears on page
F-15 of this Annual Report on Form 10-K.

Item 6.  Selected Financial Data.

        The information required by this Item is contained in the section
captioned "Five-Year Financial Summary" appearing on page F-16 of this Annual
Report on Form 10-K.

Item 7.  Management's Discussion and Analysis of Financial Condition and
         Results of Operations.

        The information required by this Item is contained in the section
captioned "Management's Discussion and Analysis" appearing on pages F-17 through
F-20 of this Annual Report on Form 10-K.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk

       The Company does not hold any derivative financial instruments, 
derivative commodity instruments or other financial instruments except as 
noted in Note A to the financial statements. The Company engages neither in 
speculative nor derivative trading activities. As of September 26, 1998, the 
Company had $5.3 million of debt outstanding with a variable interest rate 
(see Note D to the consolidated financial statements). A fluctuation in the 
underlying interest rate on this debt at its current balance would not have a 
material effect on the Company's financial results.

                                       6
<PAGE>


Item 8.  Financial Statements and Supplementary Data.

        The information required by this Item is contained on pages F-1 through
F-14 of this Annual Report on Form 10-K.

Item 9.  Changes in and Disagreements With Accountants on Accounting and
         Financial Disclosure.

        Not applicable.


                                    PART III

Item 10.  Directors and Executive Officers of the Registrant.

        Courier's executive officers, together with their ages and all positions
and offices with the Company presently held by each person named, are as
follows:

<TABLE>
<S>                              <C>        <C>
James F. Conway III               46        Chairman, President and Chief
                                            Executive Officer

George Q. Nichols                 69        Corporate Senior Vice President
                                            and President of National
                                            Publishing Company

Robert P. Story, Jr.              47        Senior Vice President and
                                            Chief Financial Officer

Thomas G. Osenton                 45        Senior Vice President and
                                            Chief Marketing Officer

Peter M. Folger                   45        Vice President and
                                            Controller

</TABLE>



        The terms of office of all of the above executive officers continue
until the first meeting of the Board of Directors following the next annual
meeting of stockholders and the election or appointment and qualification of
their successors, unless any officer sooner dies, resigns, is removed or becomes
disqualified.

        Mr. Conway III was elected Chairman of the Board in September 1994 after
serving as acting Chairman since December 1992. He has been Chief Executive
Officer since December 1992 and President since July 1988.



                                       7
<PAGE>


        Mr. Nichols became an executive officer of Courier in June 1989 while
retaining his position as President of National Publishing Company, a position
he has held since 1975. He was elected a Director of the Company in March 1995
and became Senior Vice President of the Company in November 1996.

        Mr. Story became Senior Vice President and Chief Financial Officer in
April 1989. He joined Courier in November 1986 as Vice President and Treasurer.
He was elected a Director of the Company in February 1995.

        Mr. Osenton joined Courier in October 1993 as Senior Vice President and
Chief Marketing Officer. He has been President of Courier New Media since
January 1996. He had previously served as President/Chief Executive Officer and
Publisher of The Sporting News Publishing Company, a subsidiary of the Times
Mirror Company.

        Mr. Folger has been Controller since 1982 and became Vice President in
November 1992.

        All other information called for by Item 10 is contained in the
definitive Proxy Statement to be delivered to stockholders in connection with
the Annual Meeting of Stockholders scheduled to be held on Thursday, January 21,
1999. Such information is incorporated herein by reference.

Item 11.  Executive Compensation.

                                       and

Item 12.  Security Ownership of Certain Beneficial Owners and Management.

                                       and

Item 13.  Certain Relationships and Related Transactions.

        Information called for by Items 11, 12 and 13 is contained in the
definitive Proxy Statement to be delivered to stockholders in connection with
the Annual Meeting of Stockholders scheduled to be held on Thursday, January 21,
1999. Such information is incorporated herein by reference.



                                       8
<PAGE>


                                     PART IV

Item 14.  Exhibits, Financial Statement Schedules and Reports on Form 8-K.

(a)     Documents filed as part of this report
<TABLE>
<CAPTION>

        1.      Financial statements                                                   Page(s)
        <S>                                                                           <C>
                -       Report of Independent Accountants                             F-1
                -       Consolidated Balance Sheets as of September 26, 1998
                        and September 27, 1997                                        F-2 to F-3
                -       Consolidated Statements of Income for each of the three
                        years in the period ended September 26, 1998                  F-4
                -       Consolidated Statements of Cash Flows for each of the
                        three years in the period ended September 26, 1998            F-5
                -       Consolidated Statements of Changes in Stockholders' Equity
                        for each of the three years in the period ended
                        September 26, 1998                                            F-6
                -       Notes to Consolidated Financial Statements                    F-7 to F-14


        2.      Financial statement schedule

                -       Schedule II - Valuation and Qualifying Accounts               S-1


        3.      Exhibits

</TABLE>


<TABLE>
<CAPTION>


Exhibit No.             Description of Exhibit
- ----------              ----------------------
<S>             <C>
3A-1            Articles of Organization of Courier Corporation, as of June 29,
                1972 (filed as Exhibit 3A-1 to the Company's Annual Report on
                Form 10-K for the fiscal year ended September 26, 1981, and
                incorporated herein by reference).

3A-2            Articles of Amendment of Courier Corporation (changing
                stockholder vote required for merger or consolidation), as of
                January 20, 1977 (filed as Exhibit 3A-2 to the Company's Annual
                Report on Form 10-K for the fiscal year ended September 26,
                1981, and incorporated herein by reference).

3A-3            Articles of Amendment of Courier Corporation (providing for
                staggered election of directors), as of January 20, 1977 (filed
                as Exhibit 3A-3 to the Company's Annual Report on Form 10-K for
                the fiscal year ended September 26, 1981, and incorporated
                herein by reference).

</TABLE>


                                       9
<PAGE>


<TABLE>

<S>             <C>
3A-4            Articles of Amendment of Courier Corporation (authorizing class
                of Preferred Stock), as of February 15, 1978 (filed as Exhibit
                3A-4 to the Company's Annual Report on Form 10-K for the fiscal
                year ended September 26, 1981, and incorporated herein by
                reference).

3A-5            Articles of Amendment of Courier Corporation (increasing number
                of shares of authorized Common Stock), as of January 16, 1986
                (described in item #2 of the Company's Proxy Statement for the
                Annual Meeting of Stockholders held on January 16, 1986, and
                incorporated herein by reference).

3A-6            Articles of Amendment of Courier Corporation (providing for fair
                pricing procedures for stock to be sold in certain business
                combinations), as of January 16, 1986 (filed as Exhibit A to the
                Company's Proxy Statement for the Annual Meeting of Stockholders
                held on January 16, 1986, and incorporated herein by reference).

3A-7            Articles of Amendment of Courier Corporation (limiting personal
                liability of directors to the Corporation or to any of its
                stockholders for monetary damages for breach of fiduciary duty),
                as of January 28, 1988 (filed as Exhibit 3A-7 to the Company's
                Annual Report on Form 10-K for the fiscal year ended September
                24, 1988, and incorporated herein by reference).

3A-8            Articles of Amendment of Courier Corporation (establishing
                Series A Preferred Stock), as of November 8, 1988 (filed as
                Exhibit 3A-8 to the Company's Annual Report on Form 10-K for the
                fiscal year ended September 24, 1988, and incorporated herein by
                reference).

3B              By-Laws of Courier Corporation, as amended through April 28,
                1988 (filed as Exhibit 3B to the Company's Annual Report on Form
                10-K for the fiscal year ended September 24, 1988, and
                incorporated herein by reference).

4               First Refusal Agreement, dated July 5, 1989, relating to stock
                owned by the Estate of Dorothy F. French (filed as Exhibit 3 to
                the Company's Current Report on Form 8-K, dated July 6, 1989,
                and incorporated herein by reference).

10A-1+          Courier Corporation Stock Grant Plan (filed as Exhibit C to the
                Company's Proxy Statement for the Annual Meeting of Stockholders
                held on January 20, 1977, and incorporated herein by reference).

10A-2+          Amendment, effective January 19, 1989, to the Courier
                Corporation Stock Grant Plan (described in Item 4 of the
                Company's Proxy Statement for the Annual Meeting of Stockholders
                held January 19, 1989, and incorporated herein by reference).


</TABLE>


                                       10
<PAGE>



<TABLE>

<S>             <C>
10B+            Letter Agreement, dated February 8, 1990, of Courier Corporation
                relating to supplemental retirement benefit and consulting
                agreement with James F. Conway, Jr. (filed as Exhibit 10B to the
                Company's Annual Report on Form 10-K for the fiscal year ended
                September 29, 1990, and incorporated herein by reference).

10C-1+          Courier Corporation 1989 Deferred Income Stock Option Plan for
                Non-employee Directors, effective September 28, 1989 (filed as
                Exhibit A to the Company's Proxy Statement for the Annual
                Meeting of Stockholders held January 18, 1990, and incorporated
                herein by reference).

10C-2+          Amendment, effective November 4, 1993, to the 1989 Deferred
                Income Stock Option Plan for Non-employee Directors (filed as
                Exhibit 10C-2 to the Company's Annual Report on Form 10-K for
                the fiscal year ended September 25, 1993, and incorporated
                herein by reference).

10C-3+*         Amendment, effective September 24, 1998, to the 1989 Deferred
                Income Stock Option Plan for Non-employee Directors.

10D-1+          Courier Corporation 1983 Stock Option Plan (filed as Exhibit A
                to the Company's Proxy Statement for the Annual Meeting of
                Stockholders held on January 20, 1983, and incorporated herein
                by reference).

10D-2+          Amendment, effective January 17, 1985, to the Courier
                Corporation 1983 Stock Option Plan (described in Item 2 of the
                Company's Proxy Statement for the Annual Meeting of Stockholders
                held on January 17, 1985, and incorporated herein by reference).

10D-3+          Amendment, effective January 19, 1989, to the Courier
                Corporation 1983 Stock Option Plan (described in Item 3 of the
                Company's Proxy Statement for the Annual Meeting of Stockholders
                held January 19, 1989, and incorporated herein by reference).

10E-1+          Executive Incentive Compensation Program as amended and restated
                effective December, 1987 (filed as Exhibit 10L-1 to the
                Company's Annual Report on Form 10-K for the fiscal year ended
                September 24, 1988, and incorporated herein by reference).

10E-2+          The Courier Executive Compensation Program, effective October 4,
                1993 (filed as Exhibit 10E-2 to the Company's Annual Report on
                Form 10-K for the fiscal year ended September 25, 1993, and
                incorporated herein by reference).

10E-3+          The Management Incentive Compensation Program, effective October
                4, 1993 (filed as Exhibit 10E-3 to the Company's Annual Report
                on Form 10-K for the fiscal year ended September 25, 1993, and
                incorporated herein by reference).


</TABLE>



                                       11
<PAGE>

<TABLE>
<S>             <C>
10F+            Courier Corporation Senior Executive Severance Program and
                Agreements, dated October 25, 1988 pursuant to the program with
                Messrs. Conway III, Nichols, Story and Osenton (filed as Exhibit
                10P to the Company's Annual Report on Form 10-K for the fiscal
                year ended September 24, 1988, and incorporated herein by
                reference).

10G             Rights Amendment between Courier Corporation and State Street
                Bank and Trust Company dated October 25, 1988 (filed as Exhibit
                1 to the Company's Current Report on Form 8-K, dated October 28,
                1988, and incorporated herein by reference).

10H+            1989 Incentive Program, as amended and restated on May 28, 1992
                for the purchase of Courier Common Stock by Executive Officers
                and Key Employees of the Corporation (filed as Exhibit 10H to
                the Company's Annual Report on Form 10-K for the fiscal year
                ended September 24, 1994, and incorporated herein by reference).

10I+            Courier Corporation 1988 Employee Stock Purchase Plan (filed as
                Exhibit A to the Company's Proxy Statement for the Annual
                Meeting of Stockholders held on January 21, 1988, and
                incorporated herein by reference).

10J-1+          Agreement, as of March 3, 1993, of Courier Corporation relating
                to employment contract and supplemental retirement benefit with
                George Q. Nichols (filed as Exhibit 10J to the Company's Annual
                Report on Form 10-K for the fiscal year ended September 25,
                1993, and incorporated herein by reference).

10J-2+          Amendment, as of April 16, 1997, to supplemental retirement
                benefit agreement with George Q. Nichols (filed as Exhibit 10J-2
                to the Company's Annual Report on Form 10-K for the fiscal year
                ended September 27, 1997, and incorporated herein by reference).
 .
10K             Agreement, dated as of October 16, 1995, of Courier Corporation
                relating to employment of John Pugsley (filed as Exhibit 10K to
                the Company's Annual Report on Form 10-K for the fiscal year
                ended September 30, 1995, and incorporated herein by reference).

10L-1           Revolving Credit Agreement, dated as of March 18, 1997, between
                Courier Corporation, State Street Bank and Trust Company and
                BankBoston, N.A., providing for a $20 million revolving credit
                facility (filed as Exhibit 10 to the Company's Quarterly Report
                on Form 10-Q for the period ended March 29, 1997, and
                incorporated herein by reference).

10L-2           Amendment, dated July 22, 1997, to Note Agreement between
                Courier Corporation, State Street Bank and Trust Company and
                BankBoston, N.A., providing for a $30 million revolving credit
                facility (filed as Exhibit 10L-2 to the Company's Annual Report
                on Form 10-K for the fiscal year ended September 27, 1997, and
                incorporated herein by reference).

</TABLE>




                                       12
<PAGE>


<TABLE>

<S>             <C>
10L-3           Amendment, dated February 27, 1998, to Note Agreement between
                Courier Corporation, State Street Bank and Trust Company and
                BankBoston, N.A., providing for a $30 million revolving credit
                facility (filed as Exhibit 10 to the Company's Quarterly Report
                on Form 10-Q for the period ended March 28, 1998, and
                incorporated herein by reference).

10M-1           Term Promissory Note, dated as of October 15, 1991, between
                Courier Corporation and MetLife Capital Credit Corporation for
                the principal sum of $2,000,000 at 9.5% due October 15, 2001
                (filed as Exhibit 4F-1 to the Company's Annual Report on Form
                10-K for the fiscal year ended September 28, 1991, and
                incorporated herein by reference).

10M-2           Loan and Security Agreement, dated as of October 15, 1991,
                between Courier Corporation and MetLife Capital Credit
                Corporation (filed as Exhibit 4F-2 to the Company's Annual
                Report on Form 10-K for the fiscal year ended September 28,
                1991, and incorporated herein by reference).

10N             Master Lease Finance Agreement, dated as of July 27, 1994,
                between Courier Corporation and BancBoston Leasing (filed as
                Exhibit 10P to the Company's Annual Report on Form 10-K for the
                fiscal year ended September 24, 1994, and incorporated herein by
                reference).

10O-1+          Courier Corporation 1993 Stock Incentive Plan, as amended and
                restated, effective May 6, 1996 (filed as Exhibit 10O to the
                Company's Annual Report on Form 10-K for the fiscal year ended
                September 28, 1996, and incorporated herein by reference).

10O-2+*         Amendment, effective September 24, 1998, to the Courier
                Corporation 1993 Stock Incentive Plan.

10P             Stock Purchase Agreement by and among Courier Corporation and
                the stockholders of Book-mart Press, Inc., dated as of July 21,
                1997 (filed as Exhibit 2.1 to the Company's Current Report on
                Form 8-K dated July 21, 1997, and incorporated herein by
                reference).

10Q+            Courier Corporation Deferred Compensation Program dated November
                6, 1997 with Messrs. Conway III, Nichols, Story and Osenton
                (filed as Exhibit 10 to the Company's Quarterly Report on Form
                10-Q for the period ended December 27, 1997, and incorporated
                herein by reference).

</TABLE>


                                       13
<PAGE>


<TABLE>

<S>             <C>

10R*            Master Lease Finance Agreement, dated as of September 23, 1998
                between Courier Corporation and General Electric Capital Corporation.

21*             Schedule of Subsidiaries.

23*             Consent of Deloitte & Touche LLP, independent accountants.

27*             Financial Data Schedule.


</TABLE>

* Exhibit is furnished herewith.
+ Designates a Company compensation plan or arrangement.




(c)     Reports on Form 8-K

        None.



                                       14
<PAGE>


                                   SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on December 3, 1998.

                   COURIER CORPORATION

                 By:      s/James F. Conway III
                       --------------------------
                       James F. Conway III
                          Chairman, President and
                          Chief Executive Officer

                 By:      s/Robert P. Story, Jr.
                       --------------------------
                       Robert P. Story, Jr.
                          Senior Vice President and
                          Chief Financial Officer

                 By:      s/Peter M. Folger
                       --------------------------
                       Peter M. Folger
                          Vice President and Chief
                          Accounting Officer

    Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities indicated, on December 3, 1998.

     s/James F. Conway III                             s/George Q. Nichols
- --------------------------                         ----------------------------
James F. Conway III                                George Q. Nichols
  Chairman, President and                          Director
  Chief Executive Officer

     s/Kathleen Foley Curley                           s/Charles E. Otto
- -------------------------                          ----------------------------
Kathleen Foley Curley                              Charles E. Otto
   Director                                        Director

     s/Richard K. Donahue                              s/Robert P. Story, Jr.
- -------------------------                          ----------------------------
Richard K. Donahue                                 Robert P. Story, Jr.
  Director                                            Director

    s/Edward J. Hoff                                   s/W. Nicholas Thorndike
- -------------------------                          ----------------------------
Edward J. Hoff                                     W. Nicholas Thorndike
   Director                                           Director

    s/Arnold S. Lerner
- -------------------------
Arnold S. Lerner
   Director



                                       15
<PAGE>


INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of Courier Corporation:

We have audited the accompanying consolidated balance sheets of Courier 
Corporation and subsidiaries ("the Company") as of September 26, 1998 and 
September 27, 1997, and the related consolidated statements of income, 
stockholders' equity, and cash flows for each of the three years in the 
period ended September 26, 1998. Our audits also included the financial 
statement schedule listed in the Index at Item 14. These financial statements 
and the 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 generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
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 the Company as of September 26,
1998 and September 27, 1997, and the results of their operations and their cash
flows for each of the three years in the period ended September 26, 1998 in
conformity with generally accepted accounting principles. 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.



DELOITTE & TOUCHE LLP
Boston, Massachusetts
November 5, 1998



                                       F-1



<PAGE>


                              COURIER CORPORATION
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                                    September 26, 1998  September 27, 1997
                                                                                    ------------------  ------------------
<S>                                                                                 <C>                  <C>
ASSETS
Current assets:
        Cash and cash equivalents (Note A)                                          $       722,000      $         27,000
        Accounts receivable, less allowance for uncollectible
                accounts of $1,078,000 in 1998 and $1,242,000 in 1997                    27,941,000            25,919,000
        Inventories (Note B)                                                             10,828,000             9,695,000
        Deferred income taxes (Note C)                                                    1,758,000             1,642,000
        Other current assets                                                                847,000               780,000
                                                                                       ------------          ------------
                        Total current assets                                             42,096,000            38,063,000
Property, plant and equipment (Notes A and D):
        Land                                                                              1,059,000             1,059,000
        Buildings and improvements                                                       18,803,000            18,521,000
        Favorable building lease                                                          2,816,000             2,816,000
        Machinery and equipment                                                          77,490,000            74,422,000
        Furniture and fixtures                                                            1,668,000             1,681,000
        Construction in progress                                                            523,000               841,000
                                                                                       ------------          ------------
                                                                                        102,359,000            99,340,000
        Less-Accumulated depreciation and amortization                                  (69,102,000)          (62,398,000)
                                                                                       ------------          ------------
                Net property, plant and equipment                                        33,257,000            36,942,000

Real estate held for sale or lease, net (Note J)                                            336,000             2,459,000
Goodwill and other intangibles, net (Notes A and I)                                      11,421,000            11,618,000
Other assets                                                                                520,000               561,000
                                                                                       ------------          ------------
                        Total assets                                                   $ 87,630,000          $ 89,643,000
                                                                                       ------------          ------------
                                                                                       ------------          ------------

</TABLE>


The accompanying notes are an integral part of the consolidated financial
statements. 


                                      F-2


<PAGE>

                             COURIER CORPORATION
                          CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>

                                                                                    September 26, 1998  September 27, 1997
                                                                                    --------------------------------------
<S>                                                                                 <C>                  <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
        Current liabilities:
        Current maturities of long-term debt (Note D)                                  $    312,000          $    387,000
        Accounts payable                                                                  9,294,000             9,557,000
        Accrued payroll                                                                   4,319,000             3,644,000
        Accrued taxes                                                                     4,935,000             4,961,000
        Other current liabilities                                                         6,709,000             5,426,000
                                                                                       ------------          ------------
                Total current liabilities                                                25,569,000            23,975,000
Long-term debt (Note D)                                                                   6,781,000            18,593,000
Deferred income taxes (Note C)                                                            2,992,000             3,375,000
Other liabilities                                                                         2,498,000             1,952,000
                                                                                       ------------          ------------
                Total liabilities                                                        37,840,000            47,895,000
                                                                                       ------------          ------------
                                                                                       ------------          ------------
Commitments and contingencies (Note E)
Stockholders' equity (Notes A and F):
        Preferred stock, $1 par value-authorized 1,000,000 shares; none issued
        Common stock, $1 par value:
                Shares                        1998           1997
                ------                     ---------       ---------
                Authorized                 6,000,000       6,000,000
                Issued                     3,750,000       4,500,000
                Outstanding                3,172,000       2,007,000
                                                                                          3,750,000             4,500,000
        Additional paid-in capital                                                          384,000             9,277,000
        Retained earnings                                                                49,464,000            52,060,000
        Treasury stock, at cost: 578,000 shares in 1998 and 2,493,000 shares in 1997     (3,808,000)          (24,089,000)
                                                                                       ------------          ------------
                        Total stockholders' equity                                       49,790,000            41,748,000
                                                                                       ------------          ------------
                        Total liabilities and stockholders' equity                     $ 87,630,000          $ 89,643,000
                                                                                       ------------          ------------

</TABLE>


The accompanying notes are an integral part of the consolidated financial
statements. 



                                      F-3

<PAGE>


                              COURIER CORPORATION
                        CONSOLIDATED STATEMENTS OF INCOME



<TABLE>
<CAPTION>

                                                              For the Years Ended
                                          ------------------------------------------------------------
                                          September 26, 1998  September 27, 1997    September 28, 1996
                                          ------------------  ------------------    ------------------
<S>                                       <C>                 <C>                   <C>
Net sales                                    $ 151,591,000       $ 131,433,000        $ 125,232,000
Cost of sales                                  113,937,000         103,342,000          102,594,000
                                             -------------       -------------        -------------
        Gross profit                            37,654,000          28,091,000           22,638,000
Selling and administrative expenses             26,653,000          20,945,000           18,647,000
Interest expense                                 1,303,000             867,000              840,000
Other income (expense) (Note J)                  2,057,000            (275,000)            (267,000)
                                             -------------       -------------        -------------
        Income before taxes                     11,755,000           6,004,000            2,884,000
Provision for income taxes (Note C)              4,030,000           1,688,000              334,000
                                             -------------       -------------        -------------
Net income                                   $   7,725,000       $   4,316,000        $   2,550,000
                                             -------------       -------------        -------------
                                             -------------       -------------        -------------
Net income per share (Notes A and H):
        Basic                                $        2.49       $        1.44        $         .84
        Diluted                              $        2.37       $        1.41        $         .82
Cash dividends declared per share            $        .385       $         .32        $         .32

</TABLE>


The accompanying notes are an integral part of the consolidated financial
statements.



                                      F-4
<PAGE>




                              COURIER CORPORATION

                     CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                                        For the Years Ended
                                                                ------------------------------------------------------------------
                                                                September 26, 1998      September 27, 1997      September 28, 1996
                                                                ------------------      ------------------      ------------------
<S>                                                             <C>                     <C>                      <C>
Operating Activities:
        Net income                                              $       7,725,000       $       4,316,000       $       2,550,000
        Adjustments to reconcile net income to
                cash provided from operating activities:
                        Depreciation and amortization                   8,541,000               7,237,000               6,534,000
                        Deferred income taxes                            (499,000)               (812,000)               (303,000)
                        Change in accounts receivable                  (2,022,000)              1,671,000              (4,916,000)
                        Change in inventory                            (1,010,000)               (705,000)              1,271,000
                        Change in accounts payable                       (263,000)               (472,000)                726,000
                        Change in accrued taxes                           (26,000)                364,000                (119,000)
                        Change in other elements of working capital     1,891,000               1,431,000                (561,000)
                        Other, net                                     (1,695,000)              1,051,000                  75,000
                                                                 ----------------       -----------------       -----------------
Cash provided from operating activities                                12,642,000              14,081,000               5,257,000
                                                                 ----------------       -----------------       -----------------
Investment Activities:
        Business acquisitions (Note I)                                   (563,000)            (12,701,000)                      -
        Capital expenditures                                           (4,147,000)             (6,732,000)             (7,335,000)
        Proceeds from sale of assets (Note J)                           4,600,000                       -               1,792,000
                                                                 ----------------       -----------------       -----------------
Cash used for investment activities                                      (110,000)            (19,433,000)             (5,543,000)
                                                                 ----------------       -----------------       -----------------
Financing Activities:
        Scheduled long-term debt repayments                              (387,000)               (466,000)               (409,000)
        Other long-term borrowings (repayments)                       (11,500,000)              7,404,000                 282,000
        Cash dividends                                                 (1,205,000)               (969,000)               (970,000)
        Stock repurchase program                                                -                (882,000)                      -
        Proceeds from stock plans                                       1,255,000                 259,000                 269,000
                                                                 ----------------       -----------------       -----------------
Cash provided from (used for) financing activities                    (11,837,000)              5,346,000                (828,000)
                                                                 ----------------       -----------------       -----------------
Increase (decrease) in cash and cash equivalents                          695,000                  (6,000)             (1,114,000)
Cash at the beginning of the period                                        27,000                  33,000               1,147,000
                                                                 ----------------       -----------------       -----------------
Cash at the end of the period                                     $       722,000      $           27,000     $            33,000
                                                                 ----------------       -----------------       -----------------
                                                                 ----------------       -----------------       -----------------
Supplemental cash flow information:
        Interest paid                                             $     1,243,000      $          774,000     $           724,000
        Income taxes paid (net of receipts)                       $     4,498,000      $        2,060,000     $           739,000

</TABLE>



The accompanying notes are an integral part of the consolidated financial
statements.


                                      F-5
<PAGE>



                                     COURIER CORPORATION

                    CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                        Common         Additional        Retained       Treasury    Stockholders'
                                                         Stock    Paid-in Capital        Earnings          Stock          Equity
                                                    ------------  ---------------   --------------  -------------   ------------
<S>                                                 <C>             <C>             <C>             <C>             <C>
Balance, September 30, 1995                         $  4,500,000    $  8,884,000    $ 47,133,000    $(23,691,000)   $ 36,826,000
        Net income                                          --              --         2,550,000            --         2,550,000
        Cash dividends                                      --              --          (970,000)           --          (970,000)
        Shares issued under stock plans                     --           171,000            --           187,000         358,000
                                                    ------------  ---------------   --------------  -------------   ------------
Balance, September 28, 1996                            4,500,000       9,055,000      48,713,000     (23,504,000)     38,764,000
        Net income                                          --              --         4,316,000            --         4,316,000
        Cash dividends                                      --              --          (969,000)           --          (969,000)
        Stock repurchase program                            --              --              --          (882,000)       (882,000)
        Shares issued under stock plans                     --           125,000            --           194,000         319,000
        Shares issued in connection with
                business acquisition (Note I)               --            97,000            --           103,000         200,000
                                                    ------------  ---------------   --------------  -------------   ------------
Balance, September 27, 1997                            4,500,000       9,277,000      52,060,000     (24,089,000)     41,748,000
        Net income                                          --              --         7,725,000            --         7,725,000
        Cash dividends                                      --              --        (1,205,000)           --        (1,205,000)
        Shares issued under stock plans                     --           734,000            --           788,000       1,522,000
        Convert treasury shares (Note A)              (2,000,000)     (9,627,000)     (7,866,000)     19,493,000            --
        Stock dividend (Note A)                        1,250,000            --        (1,250,000)           --              --
                                                    ------------  ---------------   --------------  -------------   ------------
Balance, September 26, 1998                        $   3,750,000   $     384,000   $  49,464,000    $ (3,808,000)   $ 49,790,000
                                                    ------------  ---------------   --------------  -------------   ------------
                                                    ------------  ---------------   --------------  -------------   ------------



</TABLE>


The accompanying notes are an integral part of the consolidated financial
statements





                                      F-6
<PAGE>



                              COURIER CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Business: Courier Corporation ("Courier" or the "Company") helps organizations
manage the process of creating and distributing intellectual properties.
Courier's book manufacturing business offers services from preparation,
production, media replication, kitting and packaging through storage, and
distribution. Products include Bibles, reference texts, books, software kits and
technical documentation. Courier also operates businesses which respond to the
need for greater choice in education, providing Internet-based solutions for
custom coursepacks, as well as direct marketing of educational materials to
families engaged in educating children at home.

Principles of Consolidation: The consolidated financial statements, prepared 
on a fiscal year basis, include the accounts of Courier Corporation and its 
subsidiaries after elimination of all significant intercompany transactions. 
Such financial statements have been prepared in conformity with generally 
accepted accounting principles which require the use of certain estimates and 
assumptions.

Financial Instruments: Financial instruments consist primarily of cash, 
accounts receivable, accounts payable and debt obligations. The Company 
classifies as cash and cash equivalents amounts on deposit in banks and cash 
invested temporarily in various instruments with maturities of three months 
or less at time of purchase. The Company estimates the fair value of 
financial instruments based on interest rates available to the Company and by 
comparison to quoted market prices. At September 26, 1998 and September 27, 
1997, the fair value of the Company's financial instruments approximated 
their carrying values.

Property, Plant and Equipment: Property, plant and equipment are recorded at 
cost, including interest on funds borrowed to finance the acquisition or 
construction of major capital additions. Capitalized interest was 
approximately $34,000 in fiscal 1997 and $15,000 in fiscal 1996. No interest 
was capitalized in fiscal 1998. The Company provides for depreciation of 
plant and equipment on a straight-line basis over periods ranging from 3 to 
11 years, except for depreciation on buildings and improvements which is 
based on estimated useful lives ranging from 10 to 40 years. 

Leasehold improvements are amortized on a straight-line basis over the shorter
of the useful life of the improvement or the term of the lease. A favorable
building lease is being amortized over the life of the lease, which expires in
2005. Expenditures for maintenance and repairs are charged against income as
incurred; betterments which increase the value or materially extend the life of
the related assets are capitalized. When assets are sold or retired, the cost
and accumulated depreciation are removed from the accounts and any gain or loss
is included in income. 

Goodwill: Goodwill arising from recent business acquisitions, which are 
discussed more fully in Note I, is being amortized using the straight-line 
method over periods ranging from 5 to 20 years. Amortization expense was 
$597,000 and $97,000 for fiscal 1998 and fiscal 1997, respectively. The 
Company continues to carry goodwill of approximately $1.2 million arising 
from the purchase of a company prior to October 31, 1970; such amount is not 
being amortized because management believes that the value has not 
diminished. 

Income Taxes: The provision for income taxes is determined as required by 
SFAS No. 109, "Accounting for Income Taxes", issued by the Financial 
Accounting Standards Board (FASB). Under SFAS No. 109, deferred income taxes 
are recorded based upon the differences between the financial statement and 
tax bases of assets and liabilities, and are measured by applying enacted tax 
rates and laws for the taxable years in which these differences are expected 
to reverse. 

Revenue Recognition: Revenue is recognized upon shipment of goods to 
customers or upon the transfer of ownership interest. 


                                      F-7
<PAGE>

                              COURIER CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Use of Estimates: The process of preparing financial statements in conformity 
with generally accepted accounting principles requires management to make 
estimates that affect the reported amounts of assets and liabilities at the 
date of the financial statements, as well as revenues and expenses during the 
reporting period. Actual results may differ from these estimates. 

Net Income per Share: Basic net income per share is based on the weighted 
average number of common shares outstanding each period. Diluted net income 
per share also includes potentially dilutive items such as options (see 
Note H). 

Stock Split: On April 16, 1998, the Company announced a three-for-two stock 
split effected in the form of a 50% stock dividend which was distributed on 
June 1, 1998 to stockholders of record on May 15, 1998. Per share amounts for 
each period presented in the accompanying financial statements have been 
restated to give effect to the stock split. In addition, related to this 
stock split, the Company converted 2,000,000 shares of treasury stock to 
authorized but unissued shares.

New Accounting Pronouncements: The FASB recently issued SFAS No. 130, 
"Reporting Comprehensive Income", SFAS No. 131, "Disclosure about Segments of 
an Enterprise and Related Information", SFAS No. 132, "Employer Disclosures 
about Pensions and Other Postretirement Benefits" and SFAS No. 133, 
"Accounting for Derivative Instruments and Hedging Activities". These new 
standards will be effective in the Company's fiscal year ending September 25, 
1999, with the exception of SFAS No. 133 which will be effective in the 
Company's fiscal year ending September 30, 2000. The Company does not expect 
that the implementation of these new standards will be material to the 
consolidated financial statements. 

B. INVENTORIES 

Inventories are valued at the lower of cost or market using the last-in,
first-out (LIFO) method for most inventories. Inventories as of September 26,
1998 and September 27, 1997 consisted of the following: 
<TABLE>
<CAPTION>

                            1998            1997 
                         -----------   ------------
<S>                      <C>           <C>         
Raw materials            $ 3,171,000   $ 3,912,000 
Work in process            4,903,000     4,108,000 
Finished goods             2,754,000     1,675,000 
                         -----------   ------------
Total                    $10,828,000   $ 9,695,000 
                         -----------   ------------
                         -----------   ------------


</TABLE>


On a first-in, first-out (FIFO) basis, reported year-end inventories would have
increased by $5.3 million in fiscal 1998 and $5.7 million in fiscal 1997. 

C. INCOME TAXES 

The statutory federal tax rate is 34%. The total provision differs from that
computed using the statutory federal income tax rate for the following reasons:

<TABLE>
<CAPTION>

                                                             1998            1997           1996 
                                                        -----------    -----------    -----------
<S>                                                     <C>            <C>            <C>        
Federal income taxes at statutory rate                  $ 3,997,000    $ 2,041,000    $   980,000
State income taxes, net of federal income tax benefit       428,000        189,000        143,000
Export related income                                      (310,000)      (288,000)      (279,000)
Donation of real estate                                        --         (300,000)      (500,000)
Other                                                       (85,000)        46,000        (10,000)
                                                        -----------    -----------    -----------
Total                                                   $ 4,030,000    $ 1,688,000    $   334,000
                                                        -----------    -----------    -----------
</TABLE>


                                      F-8
<PAGE>

                              COURIER CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The provision for income taxes consisted of the following:

<TABLE>
<CAPTION>

                          1998           1997           1996 
                     -----------    -----------    -----------
<S>                  <C>            <C>            <C>        
Currently payable:
Federal              $ 3,697,000    $ 2,040,000    $   343,000
State                    832,000        460,000        294,000
                     -----------    -----------    -----------
                       4,529,000      2,500,000        637,000
                     -----------    -----------    -----------
Deferred:
Federal                 (315,000)      (638,000)      (225,000)
State                   (184,000)      (174,000)       (78,000)
                     -----------    -----------    -----------
                        (499,000)      (812,000)      (303,000)
                     -----------    -----------    -----------
Total                $ 4,030,000    $ 1,688,000    $   334,000
                     -----------    -----------    -----------
                     -----------    -----------    -----------
</TABLE>


The deferred income tax net benefit arose from the following temporary
differences:

<TABLE>
<CAPTION>

                                           1998         1997         1996
                                        ---------    ----------   ---------
<S>                                     <C>          <C>          <C>      
Accelerated depreciation                $(549,000)   $(648,000)   $ 605,000
Non-deductible accruals and reserves     (144,000)    (238,000)    (363,000)
Retirement plan contributions             (77,000)      51,000      (69,000)
Charitable contributions carryforward     379,000       47,000     (500,000)
Other                                    (108,000)     (24,000)      24,000
                                        ---------    ----------   ---------
Total                                   $(499,000)   $(812,000)   $(303,000)
                                        ---------    ----------   ---------
                                        ---------    ----------   ---------
</TABLE>


The following is a summary of the significant components of the Company's
deferred tax assets and liabilities as of September 26, 1998 and September 27,
1997:

<TABLE>
<CAPTION>

                                                              1998         1997
                                                          ----------   ----------
<S>                                                       <C>          <C>       
Deferred tax assets:
        Vacation accrual not currently deductible         $  444,000   $  433,000
        Other accruals not currently deductible              375,000      436,000
        Non-deductible reserves                              881,000      686,000
        Other                                                 58,000       87,000
                                                          ----------   ----------
        Classified as current                              1,758,000    1,642,000
Deferred compensation arrangements                         1,058,000      915,000
Charitable contributions carryforward                         74,000      453,000
Other                                                         75,000        5,000
                                                          ----------   ----------
        Total deferred tax assets                         $2,965,000   $3,015,000
                                                          ----------   ----------
                                                          ----------   ----------
Deferred tax liabilities:
        Accelerated depreciation                          $4,199,000   $4,748,000
                                                          -----------------------
</TABLE>


Non-current deferred tax assets have been netted against non-current deferred
tax liabilities for balance sheet classification purposes.


                                      F-9
<PAGE>

                             COURIER CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

D. LONG-TERM DEBT

Long-term debt of the Company and its consolidated subsidiaries consisted of the
following:

<TABLE>
<CAPTION>

                                                                                       1998          1997
                                                                                  -----------   -----------
<S>                                                                               <C>           <C>        
Obligation under revolving bank credit facility at 6.2% as of
        September 26, 1998                                                        $ 5,250,000   $16,750,000
Obligation under industrial development bond arrangement
        at 3%, payable in monthly installments through May 2011                     1,041,000     1,108,000
9.5% secured promissory note, payable in monthly installments
        through October 2001                                                          802,000     1,022,000
Other                                                                                    --         100,000
                                                                                  -----------   -----------
                                                                                    7,093,000    18,980,000
Less: Current maturities                                                              312,000       387,000
                                                                                  -----------   -----------
Total                                                                             $ 6,781,000   $18,593,000
                                                                                  -----------   -----------
                                                                                  -----------   -----------
</TABLE>


Scheduled aggregate principal payments of long-term debt are $312,000 in fiscal
1999, $5,588,000 in fiscal 2000, $366,000 in fiscal 2001, $76,000 in fiscal
2002, $78,000 in fiscal 2003 and $673,000 thereafter.

In March 1997, the Company replaced its $11 million long-term revolving credit
facility with BankBoston, N.A. and $10 million informal bank credit line with
State Street Bank and Trust Company with a $20 million long-term revolving
credit facility involving both banks. In July 1997, this facility was extended
from $20 million to $30 million in contemplation of the acquisition of Book-mart
Press, Inc. (see Note I). Under this credit facility, the Company can borrow at
either LIBOR plus 3/4% or the bank's money market rates. The revolving credit
facility matures in February 2000 and borrowings of $5,250,000 at September 26,
1998 are included in scheduled aggregate principal payments due in 2000; the
maturity date is expected to be extended in 1999. The Company has not had any
short-term borrowings during the three fiscal years ended September 26, 1998.

The revolving credit facility contains restrictive covenants including
provisions relating to the maintenance of working capital, the incurring of
additional indebtedness and a quarterly test of cash flow to debt service. It
also provides for a commitment fee of 1/4% per annum on the unused portion. The
industrial bond arrangement and the 9.5% promissory note provide for a lien on
the assets acquired with the proceeds.

E. COMMITMENTS AND CONTINGENCIES 

The Company is committed under various operating leases to make annual rental
payments for certain buildings and equipment. Amounts charged against income
under such leases approximated $2,872,000 in fiscal 1998, $2,365,000 in fiscal
1997 and $2,370,000 in fiscal 1996. As of September 26, 1998, minimum annual
rental commitments under the Company's long-term operating leases are
approximately $3,064,000 in fiscal 1999, $2,680,000 in fiscal 2000, $2,390,000
in fiscal 2001, $1,964,000 in fiscal 2002, $1,664,000 in fiscal 2003 and
$4,580,000 in the aggregate thereafter.

In the ordinary course of business, the Company is subject to various legal 
proceedings and claims. The Company believes that the ultimate outcome of 
these matters will not have a material adverse effect on its financial 
statements.

F. STOCK ARRANGEMENTS 

Stock Option/Incentive Plans: In January 1993, stockholders approved the Courier
Corporation 1993 Stock Incentive Plan to replace the expiring 1983 Stock Option
Plan. The 1993 Stock Incentive Plan was amended and restated, with stockholder
approval, in January 1996. The amendment provided for, among other things, an
increase in the number of shares available for granting of stock options and
stock grants under the plan by 150,000 shares to a total of 345,000 shares.
Under the provisions of each plan, both non-qualified and incentive stock
options to purchase shares of the Company's common stock may be granted to key
employees. The option price per share may not be less than the fair market value
of stock at the time the option is granted and incentive stock options must
expire not later than ten years from the date of grant.


                                      F-10
<PAGE>

                              COURIER CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Directors' Option Plan: A 1989 plan, as amended in November
1993, allows members of the Company's Board of Directors to make an election to
apply either 50% or 100% of their annual retainer fee, including the committee
chair retainer, toward the annual grant of a stock option to be offered at a
price per share $5 below the fair market value of the Company's common stock at
the time the option is granted. Retainer fees for fiscal 1998 amounted to
$14,000 per director; in addition, the two committee chair fees amounted to a
total of $15,000 for fiscal 1998. The plan, as approved by stockholders,
provides that 150,000 shares be reserved for the granting of options. 

The following is a summary of all option activity for these plans:
<TABLE>
<CAPTION>

                               Stock Option/Incentive Plans    Directors' Option Plan
                               ------------------------------------------------------
                                                  Average                   Average
                                                 Exercise                  Exercise
                                     Shares         Price       Shares        Price
                                     -------     --------      --------   ---------
<S>                                  <C>         <C>            <C>       <C>      
Outstanding at September 30, 1995    350,520     $  9.65        18,600    $    7.26
        Issued during period          44,288       10.91        20,100        10.34
        Exercised during period      (19,673)       8.61        (3,600)        8.07
        Canceled during period       (12,357)      10.11            --           --
                                     -------     --------      --------   ---------
Outstanding at September 28, 1996    362,778     $  9.85        35,100    $    8.77
        Issued during period          31,538       14.50        21,000         7.46
        Exercised during period       (5,250)       6.38       (13,200)        7.40
        Canceled during period        (2,250)      12.89            --           --
        Expired during period        (15,450)      13.25            --           --
                                     -------     --------      --------   ---------
Outstanding at September 27, 1997    371,366     $ 10.13        42,900    $    8.69
        Issued during period          35,300       21.46        24,000        11.29
        Exercised during period     (137,510)       8.69       (22,500)        9.43
        Canceled during period        (3,599)      10.11            --           --
                                     -------     --------      --------   ---------
Outstanding at September 26, 1998    265,557     $ 12.39        44,400    $    9.72
                                     -------     --------      --------   ---------
                                     -------     --------      --------   ---------
Exercisable at September 26, 1998    187,584     $ 10.51        44,400    $    9.72
Available for future grants           64,537          --        28,500           --

</TABLE>


The following table presents information with regard to all stock options
outstanding at September 26, 1998:
<TABLE>
<CAPTION>

                                                                                                                Directors'
                                                                    Stock Option/Incentive Plans              Option Plan
                                                             --------------------------------------------------------------
<S>                                                          <C>        <C>          <C>         <C>         <C>
                                                                        $    8.83-   $  14.17-   $  22.83-   $        7.42-
Range of Exercise Prices                                     $   4.67   $   13.17    $  20.75    $  27.25    $       15.17
- ------------------------                                     --------   ---------    --------    --------    ---  ---------
Options outstanding                                            14,250     176,970      65,487       8,850           44,400
Weighted average exercise price of options outstanding       $   4.67   $   10.63    $  17.30    $  23.58    $        9.72
Weighted average remaining life                             2.6 years   2.7 years   6.0 years   5.3 years        3.0 years
Options exercisable                                            14,250     157,821      15,513          --           44,400
Weighted average exercise price of options exercisable       $   4.67   $   10.57    $  15.28          --    $        9.72

</TABLE>


Stock Grant Plan: The Company established a stock grant plan in 1977 entitling
key employees to receive shares of common stock of the Company. Shares granted
are either fully vested or vest over periods up to 5 years. The maximum number
of shares of common stock which may be awarded under the stock grant plan is
198,750 shares and no more than 33,750 shares may be awarded in any one fiscal
year. The number of shares granted under the plan were 2,000 in fiscal 1998,
3,000 in fiscal 1997 and 6,000 in fiscal 1996. The related compensation expense,
based on the amortization over the vesting period of the fair market value of
the shares on the date granted, was $52,000 in fiscal 1998, $22,000 in fiscal
1997 and $31,000 in fiscal 1996. As of September 26, 1998, there were 4,928
shares available for future grants under the plan. 


                                      F-11
<PAGE>

                             COURIER CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Employee Stock Purchase Plan: Under the Company's Employee Stock Purchase 
Plan ("ESPP") adopted in fiscal 1988, eligible employees may purchase shares 
of Company common stock at not less than 85% of fair market value at the 
beginning or end of the grant period. During fiscal 1998, 8,077 shares were 
issued under the plan. At September 26, 1998, 92,712 shares had been issued 
under the plan since inception at an average price of $8.40 per share, with 
an additional 42,288 shares reserved for future issuances. 

Stock Repurchase Program: In November 1996, the Company announced a program 
to repurchase up to $3 million of its common stock because the Company 
believed the stock was attractively priced. When the program ended in October 
1997, the Company had acquired 81,273 shares of common stock at an average 
cost of $10.85 per share. These shares were included in treasury stock which 
the Company has historically used for stock options and grants; the Company 
intends to continue to use treasury stock for such purposes. 

Stockholders' Rights Plan: In October 1988, the Board of Directors adopted a 
ten-year stockholders' rights plan. Under the plan, the Company's 
stockholders of record at November 4, 1988 received rights to purchase one 
one-hundredth of a share of preferred stock for each share of common stock 
held on that date. The rights are not exercisable, or transferable apart from 
the common stock, until certain events occur. 

Pro forma Disclosures: The Company accounts for its stock option plans under 
APB Opinion No. 25, "Accounting for Stock Issued to Employees" and related 
interpretations. Had compensation cost for stock options granted after 1995 
and for grants under the ESPP during fiscal 1998 been determined under the 
provisions of SFAS No. 123, "Accounting for Stock-Based Compensation", the 
Company's net income would have been $7,524,000, or $2.31 per diluted share, 
for fiscal 1998; $4,250,000, or $1.39 per diluted share, for fiscal 1997; and 
$2,519,000, or $.81 per diluted share, for fiscal 1996. The pro forma effect 
on net income and net income per share for fiscal 1998, fiscal 1997 and 
fiscal 1996 is not representative of the pro forma effect on net income in 
future years, because it does not take into consideration pro forma 
compensation expense related to options granted prior to fiscal 1996 or ESPP 
grants prior to fiscal 1998. 

For purposes of pro forma disclosures, the fair value of each grant was
estimated on the date of grant using the Black-Scholes option pricing model. The
following key assumptions were used to value grants issued:

<TABLE>
<CAPTION>

                                      1998       1997      1996
                                   ---------   --------   -------
<S>                                <C>          <C>       <C>
Risk-free interest rate                 4.9%       6.2%      6.3%
Expected volatility                      35%        34%       24%
Expected dividend yields                2.0%       2.3%      3.4%
Estimated life for grants under:
 1993 Stock Incentive Plan          7 years     7 years   7 years
 Directors' Option Plan             5 years     5 years   5 years
 Employee Stock Purchase Plan      6 months
                                   ---------   --------   -------
                                   ---------   --------   -------

</TABLE>


Following is a summary of the weighted average fair value per share of options
granted during 1998, 1997 and 1996:
<TABLE>
<CAPTION>

                                             1993 Stock Incentive Plan       Directors' Option Plan
                                             ------------------------------------------------------
On grant date:                                  1998    1997    1996          1998   1997     1996
                                             --------   -----   -----       -------  -----  -------
<S>                                             <C>     <C>     <C>          <C>      <C>     <C>
Exercise price was equal to stock price         $7.74   $5.29   $2.87            -       -       -
Exercise price was in excess of stock price     $5.98   $4.16   $1.84            -       -       -
Exercise price was less than stock price            -       -       -        $5.79   $3.73   $4.49
                                             --------   -----   -----       -------  -----  -------
</TABLE>


                                      F-12
<PAGE>

                             COURIER CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

G. RETIREMENT PLANS

The Company and its consolidated subsidiaries maintain various retirement plans
covering substantially all of its employees. Pension costs of multi-employer
union plans consist of defined contributions determined in accordance with the
respective collective bargaining agreements. Retirement benefits for non-union
employees are provided through the Courier Profit Sharing and Savings Plan,
which includes an Employee Stock Ownership Plan ("ESOP"). Retirement costs for
the Company's principal plans amounted to $1,934,000 in fiscal 1998, $1,466,000
in fiscal 1997 and $1,063,000 in fiscal 1996. 

The Profit Sharing and Savings Plan is qualified under Section 401(k) of the
Internal Revenue Code. The plan allows eligible employees to contribute up to
16% of their compensation, with the Company matching 25% of the first 6% of
employee contributions. The Company also makes contributions to the plan
annually based on profits each year for the benefit of all eligible non-union
employees. 

Shares of Company common stock may be allocated to participants' ESOP accounts
annually based on their compensation as defined in the plan. During fiscal 1998,
no such shares were allocated to eligible participants. At September 26, 1998,
the ESOP held 188,847 shares on behalf of the participants. 

H. NET INCOME PER SHARE 

During the first quarter of fiscal 1998, the Company adopted SFAS No. 128,
"Earnings per Share". Prior period net income per share has been restated to
reflect current presentation. Following is a reconciliation of the shares used
in the calculation of basic and diluted net income per share. Potentially
dilutive shares, calculated using the treasury stock method, consist of shares
issued under the Company's stock option and stock grant plans. Shares and per
share amounts have been adjusted to reflect a three-for-two stock split effected
in the form of a dividend distributed on June 1, 1998 (see Note A).

<TABLE>
<CAPTION>

                                           1998         1997         1996 
                                        ------------------------------------
<S>                                     <C>          <C>          <C>       
Average shares outstanding for basic    3,100,000    3,007,000    3,031,000 
Effect of potentially dilutive shares     154,000       60,000       75,000 
                                        ---------    ---------    ----------
Average shares outstanding for diluted  3,254,000    3,067,000    3,106,000 
                                        ---------    ---------    ----------
                                        ---------    ---------    ----------
</TABLE>


I. BUSINESS ACQUISITIONS 

On July 21, 1997, the Company acquired all of the outstanding capital stock of
Book-mart Press, Inc. ("Book-mart"), a North Bergen, New Jersey book
manufacturer specializing in short to medium runs of softcover and hardcover
books. The Company paid approximately $12.7 million in cash to the former
stockholders of Book-mart for their shares of capital stock. At the time of the
closing, Book-mart had approximately $2.3 million of outstanding bank
indebtedness which was subsequently paid in full. In connection with the
acquisition, 16,667 shares of Courier common stock (based upon a valuation of
$12 per share) were issued to two key executives of Book-mart for non-compete
agreements. 

In addition, one of such executives was issued 25,000 shares (subject to a
four-year vesting schedule) in connection with an employment agreement. The
acquisition was accounted for as a purchase and, accordingly, Book-mart's
results of operations have been included in the consolidated financial
statements from July 21, 1997 forward. The excess of the purchase price over the
fair value of net assets acquired amounted to approximately $10 million, which
has been accounted for as goodwill and is being amortized on a straight-line
basis over twenty years. Book-mart leases its office and plant facility from a
corporation owned by two of the former stockholders of Book-mart, one of whom
remains as a key executive of Book-mart. The lease agreement requires annual
payments of approximately $216,000 and expires five years from the date of
acquisition. 

On September 30, 1997, the Company purchased The Home School Books & Supplies
("The Home School"), based in Arlington, Washington. The Home School is a direct
marketer of educational materials to families engaged in educating children at
home. The purchase price was approximately $0.5 million.


                                      F-13
<PAGE>

                             COURIER CORPORATION

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

J. OTHER INCOME (EXPENSE)

Other income (expense) as reported in the accompanying income statements
consisted of the following:

<TABLE>
<CAPTION>

                                                      1998              1997           1996
                                                --------------    ---------------  ---------------
<S>                                             <C>               <C>              <C>
Net rental income                               $       14,000    $       31,000   $       99,000
Gain (loss) on sale/donation of real estate          2,043,000          (306,000)        (366,000)
                                                --------------    ---------------  ---------------
Total                                           $    2,057,000    $     (275,000)  $     (267,000)
                                                --------------    ---------------  ---------------
                                                --------------    ---------------  ---------------

</TABLE>

In June 1998, the Company completed the sale of a former industrial facility in
Philadelphia which had been vacant. During fiscal 1997, the Company had
consolidated its operations in Philadelphia from this older, multistory facility
to a recently expanded, more efficient manufacturing facility also in
Philadelphia. The selling price of the property was $4.6 million, resulting in a
pretax gain of approximately $2.0 million. The after-tax gain of approximately
$1.1 million, or $.34 per diluted share, generated approximately $3.2 million of
cash after taxes.

In September 1996, the Company relocated its corporate headquarters into an
existing facility in North Chelmsford, Massachusetts. In August 1997, the
Company finalized the donation of its former corporate headquarters in Lowell,
Massachusetts. The donation had no impact on 1997 earnings as a pretax loss of
approximately $300,000 was offset by a comparable tax benefit.

In March 1996, the Company completed the sale and donation of its former
telephone directory manufacturing facility which had been vacant. Sales proceeds
of $1.8 million for approximately half the facility resulted in a pretax loss of
$366,000. Tax benefits from the donation of the remainder of the facility
resulted in an after-tax gain on the overall transaction of approximately
$250,000, or $.08 per diluted share.

The Company's Raymond, New Hampshire facility, which had been leased through
June 1996, is now vacant pending sale or lease and is included in the September
26, 1998 balance sheet as "Real estate held for sale or lease, net." Management
does not believe that there is any material impairment of this or any other
asset of the Company as measured in accordance with SFAS No. 121, "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of". 

K. BUSINESS SEGMENTS AND FOREIGN OPERATIONS 

The Company is engaged principally in one industry, the manufacture and
distribution of printed products. Customers, which consist primarily of
publishers, are granted credit on an unsecured basis. 

Export sales as a percentage of consolidated sales were approximately 17% in
fiscal 1998, 18% in fiscal 1997 and 17% in fiscal 1996. Sales to the Company's
largest customer amounted to approximately 26% of consolidated sales in fiscal
1998, 28% in fiscal 1997 and 27% in fiscal 1996. In addition, sales to another
customer amounted to 12% of consolidated sales in fiscal 1998 and 11% in fiscal
1997. No other customer accounted for more than 10% of consolidated sales.


                                      F-14
<PAGE>


                               COURIER CORPORATION

                 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>


Fiscal 1998 (Dollars in thousands except per share amounts)       First       Second      Third     Fourth
                                                                -------      --------   --------   --------
<S>                                                             <C>          <C>        <C>        <C>
Operating Results:
Net sales                                                       $35,306      $39,136    $36,903    $40,246 
Gross profit                                                      8,789        9,227      9,308     10,330
Net income                                                        1,210        1,358      2,572      2,585 
Net income per diluted share                                        .38          .42        .79        .78
Dividends declared per share                                       .093         .093       .093       .105 
Stock Price: 
  Highest bid                                                    20 3/8       19 3/8         30         29 
  Lowest bid                                                     13 7/8       17 3/8     17 3/4     20 3/4
                                                                -------      --------   --------   --------
                                                                -------      --------   --------   --------

</TABLE>

<TABLE>
<CAPTION>


Fiscal 1997 (Dollars in thousands except per share amounts)       First       Second     Third      Fourth 
                                                                -------      --------   --------   --------
<S>                                                             <C>          <C>        <C>        <C>
Operating Results:
Net sales                                                       $30,539      $32,011    $32,721    $36,162
Gross profit                                                      6,321        6,769      6,509      8,492
Net income                                                          929          828        815      1,744
Net income per diluted share                                        .30          .27        .27        .57
Dividends declared per share                                        .08          .08        .08        .08
Stock Price:
  Highest bid                                                    10 1/2       11 5/8     12 1/4     14 1/2
  Lowest bid                                                      8 7/8        9 5/8     11 3/8     11 1/2
                                                                -------      --------   --------   --------
                                                                -------      --------   --------   --------

</TABLE>


Common shares of the Company are traded over-the-counter on the Nasdaq National
Market - symbol "CRRC".
There were approximately 680 stockholders of record as of September 26, 1998.


                                      F-15
<PAGE>


                              COURIER CORPORATION

                          FIVE-YEAR FINANCIAL SUMMARY

<TABLE>
<CAPTION>

(Dollar amounts in millions except per share data)         1998     1997       1996    1995*     1994**
                                                        -------   -------   -------   -------   -------
<S>                                                     <C>       <C>       <C>       <C>       <C>
Net sales                                               $ 151.6   $ 131.4   $ 125.2   $ 120.7   $ 122.7
Gross profit                                               37.7      28.1      22.6      26.3      24.8
Net income                                                  7.7       4.3       2.6       5.2       3.7
Net income per diluted share                               2.37      1.41       .82      1.73      1.28
Dividends per share                                        .385       .32       .32      .267      .133
Working capital                                            16.5      14.1      13.7      11.0      10.8
LIFO reserve                                                5.3       5.7       6.0       5.9       5.1
Current ratio (FIFO basis)                                  1.9       1.8       1.9       1.8       1.7
Total assets                                               87.6      89.6      74.8      73.0      64.4
Long-term debt                                              6.8      18.6       9.3       9.5       5.8
Long-term debt as a percentage of capitalization           12.0%     30.8%     19.3%     20.5%     15.6%
Depreciation and amortization                               8.5       7.2       6.5       6.0       5.8
Capital expenditures                                        4.1       6.7       7.3      15.0       2.2
Stockholders' equity                                       49.8      41.7      38.8      36.8      31.6
Return on stockholders' equity                             15.5%     10.3%      6.6%     14.2%     16.6%
Stockholders' equity per share                            15.70     13.87     12.74     12.23     10.75
Shares outstanding (000's omitted)                        3,172     3,011     3,044     3,011     2,936
Number of employees                                       1,254     1,202     1,050     1,103     1,093
                                                        -------   -------   -------   -------   -------
                                                        -------   -------   -------   -------   -------


</TABLE>


Net income per share is based on weighted average shares outstanding;
stockholders' equity per share is based on shares outstanding at year end.
Shares outstanding and per share amounts have been retroactively adjusted to
reflect a three-for-two stock split effected on June 1, 1998 (see Notes A and
H).

*Fiscal 1995 included 53 weeks.

**Fiscal 1994 net income and net income per diluted share above are before the
cumulative effect of an accounting change related to the adoption of SFAS No.
109, "Accounting for Income Taxes." After the cumulative effect of the
accounting change, net income was $5.2 million, or $1.81 per diluted share.


                                      F-16
<PAGE>

                              COURIER CORPORATION
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

RESULTS OF OPERATIONS 

Sales in fiscal 1998 increased 15% to $151.6 million compared to $131.4 million
in fiscal 1997. Strong sales to educational and religious publishers continued
to provide much of the growth, while sales to software customers continued to
drop, reflecting a reduction in the use of printed instruction manuals. The
acquisition in July 1997 of Book-mart Press, Inc. ("Book-mart"), a short-run
book manufacturer, accounted for approximately half of the 1998 sales increase.
Sales from the Company's two newer businesses, The Home School and Copyright
Management Services ("CMS"), which address the growing demand for choice in
education, added $2 million in incremental revenues in 1998. The Home School,
which was acquired on September 30, 1997, is a direct marketer of books and
other educational products for supplementing or replacing traditional education
with home-based learning. CMS provides customized coursepacks and copyright
clearance services primarily to colleges and universities. Sales in fiscal 1997
increased 5% to $131.4 million compared to $125.2 million in fiscal 1996,
despite a drop in paper prices and highly competitive market conditions. Growth
came primarily from educational and religious markets while sales to software
customers continued to fall sharply as printed manuals are replaced by CD-ROM
and on-line services. In July 1997, the Company acquired Book-mart which added
sales from the date of acquisition of approximately $2 million to 1997 sales.

Gross profits increased by $9.6 million or 34% and, as a percentage of sales,
increased to 24.8% from 21.4% in 1997. The improvement in gross profits resulted
from increased sales volume and an improved mix of sales combined with
productivity gains and cost savings. Gross profits in 1997 increased by $5.5
million or 24% and, as a percentage of sales, increased to 21.4% from 18.1% in
1996. The improvement reflects the benefits of increased sales volume, lower
costs primarily from consolidation of two facilities in 1997 and from the
streamlining of software documentation operations, and gains in productivity
resulting from investments in new equipment and processes. Inflation has not had
a significant impact on the Company's gross profits, nor on its overall
operations, during the past three years.

Selling and administrative expenses increased to $26.7 million in 1998 from
$20.9 million in 1997 and, as a percentage of sales, were 17.6% in 1998 compared
to 15.9% in 1997. The increase as a percentage of sales resulted from increased
expenses of approximately $1 million for improvements to the Company's
information systems and infrastructure, including expenses related to "Year
2000" remediation efforts, incremental selling and marketing expenses of
approximately $1 million associated with the Company's newer businesses, The
Home School and CMS, goodwill amortization of approximately $0.5 million related
to the acquisition of Book-mart, and other expenses that relate directly to the
increase in profitability. Selling and administrative expenses in 1997 increased
by approximately $2.3 million over 1996. As a percentage of sales, selling and
administrative expenses increased to 15.9% in 1997 from 14.9% in 1996. The
increase resulted from the acquisition of Book-mart, expansion of CMS and
expenses that relate directly to the increase in profitability.

Interest expense was $1.3 million in 1998 compared to $0.9 million in 1997,
reflecting increased average borrowings of approximately $6 million. Increased
borrowings of approximately $16 million to finance the acquisitions of Book-mart
and The Home School were offset by cash generated from operations which reduced
borrowings by approximately $12 million during 1998. Interest expense for fiscal
1997 was $27,000 higher than fiscal 1996. Interest on debt of approximately $15
million related to the July 21, 1997 acquisition of Book-mart was approximately
$175,000. Offsetting this was a drop in interest expense from a reduction in
average (non-acquisition) borrowings of approximately $2.2 million. 

Other income (expense) in 1998 includes a gain from the sale of a former
industrial facility in Philadelphia which had been vacant. During fiscal 1997,
the Company had completed the consolidation of its operations in Philadelphia
from this older facility to a recently expanded, more efficient manufacturing
facility also in Philadelphia. The selling price of the facility was $4.6
million, resulting in a pretax gain of approximately $2.0 million and an
after-tax gain of approximately $1.1 million, or $.34 per diluted share. In
1997, other income (expense) included a pretax loss of approximately $300,000
from the Company's donation of its former corporate headquarters. The donation
had no impact on 1997 net income as the pretax loss was offset by a comparable
tax benefit. In 1996, other income (expense) included a pretax loss from the
Company's sale and donation of its former telephone directory manufacturing
facility. 


                                      F-17
<PAGE>

                              COURIER CORPORATION
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

The sale of approximately half of the facility resulted in a pretax
loss of $366,000. Tax benefits of approximately $500,000 from the donation of
the remainder of the facility resulted in an after-tax gain on the overall
transaction of approximately $250,000.

The Company's effective tax rate for 1998 was 34% compared to 33% for 1997,
exclusive of the $300,000 tax benefit related to the donation of property in
1997. The 1998 tax rate was higher than 1997 primarily due to nondeductible
goodwill related to the acquisition of Book-mart. The Company's effective tax
rate for 1997 was 33% compared to 29% for 1996, exclusive of the tax benefits
derived from property donations in both 1997 and 1996. The 1996 tax rate was
lower than 1997 primarily due to benefits from export related income in 1996.

Net income was $7.7 million or $2.37 per diluted share in 1998, up 79% from $4.3
million or $1.41 per diluted share in 1997. The increase in net income in 1998
was from a $1.1 million gain on the sale of Philadelphia real estate and from a
significant increase in sales and gross profits. Net income was $4.3 million or
$1.41 per diluted share for fiscal 1997, up 69% from $2.6 million or $.82 per
diluted share in fiscal 1996. The improvement in gross profit margins was the
primary factor contributing to the increase in earnings.

Weighted average shares outstanding increased approximately 187,000 shares in
1998. The increase was due to shares exercised under the Company's stock option
plans, shares issued as compensation for noncompetition agreements pursuant to a
business acquisition, and the impact of potentially dilutive shares which
increased primarily due to the increase in the price per share of the Company's
stock. Weighted average shares outstanding decreased approximately 39,000 shares
from 1996 to 1997. The Company repurchased approximately 81,000 shares of its
common stock in 1997 and common stock equivalents decreased by approximately
14,000 shares.

On April 16, 1998, the Company announced a three-for-two stock split effected in
the form of a 50% stock dividend which was distributed on June 1, 1998 to
stockholders of record on May 15, 1998. Weighted average shares outstanding and
net income per share amounts have been restated to give effect to the stock
split. 

The Financial Accounting Standards Board recently issued SFAS No. 130,
"Reporting Comprehensive Income", SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information", SFAS No. 132, "Employer Disclosures about
Pensions and Other Postretirement Benefits" and SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities". These new standards will be
effective in the Company's fiscal year ending September 25, 1999, with the
exception of SFAS No. 133 which will be effective in the Company's fiscal year
ending September 30, 2000. The Company does not expect that the implementation
of these new standards will be material to the consolidated financial
statements. 

LIQUIDITY AND CAPITAL RESOURCES 

In fiscal 1998, operations provided approximately $12.6 million in cash. Net
income for the year was $7.7 million and depreciation and amortization were $8.5
million. Working capital utilized approximately $1.4 million of cash, primarily
from an increase in accounts receivable. 

Investment activities in 1998 used approximately $100,000 in cash. The
acquisition of The Home School on September 30, 1997 used $0.6 million of cash.
Proceeds from the sale of the Philadelphia real estate were $4.6 million,
resulting in an after-tax gain of approximately $1.1 million. The sale generated
$3.2 million of cash after taxes. Capital expenditures were $4.1 million,
including $0.5 million for a computer-to-plate system which eliminates the need
to produce film prior to printing and $0.5 million to upgrade the Company's
information systems and infrastructure. The balance of 1998 capital expenditures
were for improvements to increase productivity, lower costs and improve quality.
A web press installed late in fiscal 1998 was financed under a $4.5 million
operating lease. Fiscal 1999 capital expenditures are expected to be
approximately $8-10 million, including $0.6 million related to Year 2000 issues.
The Company's Raymond, New Hampshire facility, which had been leased through
June 1996, continues to be vacant pending sale or lease. 



                                      F-18
<PAGE>

                              COURIER CORPORATION
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

Financing activities used approximately $11.8 million of cash to reduce
long-term debt. Dividend payments were $1.2 million and proceeds from the
Company's stock plans were $1.3 million, primarily from the exercise of stock
options. At September 26, 1998, the Company utilized $5.3 million of its
borrowing capacity available under a $30 million long-term revolving credit
facility, which expires in February 2000. The Company intends to extend the
maturity of this revolving credit facility in 1999. 

The Company does not hold any derivative financial instruments, derivative
commodity instruments or other financial instruments except as noted in Note A
to the financial statements. The Company engages neither in speculative nor
derivative trading activities. 

The Company expects that its cash from operations and available credit
facilities will be sufficient to meet its cash requirements through 1999. 

YEAR 2000 ISSUE 

The statements in the following section include "Year 2000 readiness disclosure"
within the meaning of the Year 2000 Information and Readiness Disclosure Act.

Historically, many computer programs were written using two digits rather than
four to specify the year. Such software may recognize the year 2000 as "00"
which could result in computer system failures or miscalculations, commonly
referred to as the Year 2000 ("Y2K") issue. The Company recognizes the need to
ensure that its operations will not be adversely impacted by a Year 2000
software failure. Incomplete or untimely resolution of the Y2K issue by the
Company, key suppliers, customers and other parties could have a material
adverse effect on the Company's results of operations, financial condition and
cash flows. The Company established a Year 2000 Management Task Force to address
the Y2K issue. This Task Force is coordinating efforts to identify, assess and
implement changes to information technology ("IT") systems and operational
systems such as presses and binders, telecommunications equipment, building
security and environmental controls, and is evaluating the Y2K readiness of key
suppliers, customers and other parties. 

Operational systems have been inventoried and assessment of Y2K compliance is
approximately 60% complete. No instances of non-compliance have been found to
date, indicating a low overall risk of non-compliance. Assessment, remediation
and testing is expected to be completed for operational systems by March 31,
1999. 

The Company has substantially completed inventories and assessments of its IT
systems in use at each of its locations. Many of the IT systems are not
compliant. The Company is in the process of replacing or upgrading these systems
with enterprise-wide systems across all of the Company's operations, utilizing a
common IT infrastructure which collectively is designed to give the Company the
benefit of new technology with enhanced functionality and resultant improvements
in service and productivity. The replacement of non-compliant systems at the
Company's largest, most complex operation was completed on schedule in October
1998. Progress on upgrading all remaining operations is in process. The Company
anticipates the implementation and testing of these IT systems will be completed
at all of the Company's operations before the end of fiscal 1999. 

The Company is actively assessing the Y2K readiness of third parties (including
suppliers, financial institutions and customers) with which it has a material
relationship to identify potentially non-compliant parties. The Company has
performed site visits and is actively working with the key suppliers of raw
materials, such as paper mills and film and plate manufacturers. The Company
believes that its most reasonably likely, worst-case Y2K scenario may involve
non-compliant third parties, including suppliers of energy. The Company is
assessing the degree of exposure and risk of non-compliance by such third
parties which could include possible consequences such as temporary plant
disruptions, delays in the receipt of key materials, delays in receiving orders,
delivering finished products, or receiving payments. The Company will be
developing contingency plans specific to these risks during 1999 as it works
with its key suppliers, customers and other parties. The Year 2000 Task Force
will be continually monitoring the Y2K risks and related contingency plans
throughout 1999.


                                      F-19
<PAGE>

                              COURIER CORPORATION
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

The Company estimates the cost of achieving Y2K compliance to be approximately
$2 million of which approximately half will be capital expenditures, primarily
for new IT systems. Costs incurred through September 26, 1998 directly related
to Y2K remediation were approximately $0.8 million, of which approximately $0.4
million was expensed. The remainder of the Y2K costs are expected to be incurred
in fiscal 1999. The Y2K costs are expected to be funded through operating cash
flows and available credit facilities. 

FORWARD-LOOKING INFORMATION 

Statements that describe future expectations, plans or strategies are considered
forward-looking. Such statements are subject to risks and uncertainties which
could cause actual results to differ materially from those currently
anticipated. Factors that could affect actual results include, among others,
changes in customers' demand for the Company's products, changes in raw material
costs and availability, seasonal changes in customer orders, pricing actions by
competitors, consolidation among customers, success in the integration of
acquired businesses, Year 2000 glitches, and general changes in economic
conditions. Although the Company believes that the assumptions underlying the
forward-looking statements are reasonable, any of the assumptions could be
inaccurate, and therefore, there can be no assurance that the forward-looking
statements will prove to be accurate. The forward-looking statements included
herein are made as of the date hereof, and the Company undertakes no obligation
to update publicly such statements to reflect subsequent events or
circumstances.




                                      F-20








<PAGE>



                               COURIER CORPORATION

                                   SCHEDULE II

                 CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>

                                                                 ADDITIONS
                                                 BALANCE AT      CHARGED TO                                    BALANCE
                                                  BEGINNING      COSTS AND                      OTHER           AT END
                                                  OF PERIOD       EXPENSES     DEDUCTIONS     CHANGES (1)      OF PERIOD
<S>                                              <C>             <C>           <C>            <C>              <C>
Fiscal year ended September 26, 1998
       Allowance for uncollectible accounts      $1,242,000      $178,000      $342,000              -         $1,078,000

Fiscal year ended September 27, 1997
       Allowance for uncollectible accounts        $829,000      $242,000       $79,000       $250,000         $1,242,000

Fiscal year ended September 28, 1996
       Allowance for uncollectible accounts        $564,000      $313,000       $48,000              -           $829,000


</TABLE>


(1) Other changes reflects amount related to a business acquisition.



                                      S-1






<PAGE>


                                  AMENDMENT TO
                   1989 DEFERRED INCOME STOCK OPTION PLAN FOR
                             NON-EMPLOYEE DIRECTORS

         Effective as of September 24, 1998, the 1989 Deferred Income Stock
Option Plan for Non-Employee Directors (the "Directors' Plan") is amended as
follows in accordance with Section 14 of the Directors' Plan:

         1.       The following sentence is hereby added to Section 9:

Notwithstanding the foregoing, an Optionee may transfer, without consideration
for the transfer, his Options to members of his immediate family, to trusts for
the benefit of such family members, or to partnerships in which such family
members are the only partners, provided that the transferee agrees in writing
with the Company to be bound by all of the terms and conditions of this Plan and
the applicable Option.

         2. All remaining provisions of the Directors' Plan shall remain in full
force and effect.




Approved by the Board of Directors on September 24, 1998.








<PAGE>


                                  AMENDMENT TO
                 1993 AMENDED AND RESTATED STOCK INCENTIVE PLAN

         Effective as of September 24, 1998, the 1993 Amended and Restated Stock
Incentive Plan (the "Stock Incentive Plan") is amended as follows in accordance
with Section 12 of the Stock Incentive Plan:

         1. The first clause of the second paragraph of Section 5(c) is replaced
by the following text: "Alternatively, payment of the exercise price may be
made, in whole or in part, by the delivery (or attestation to the ownership) of
shares of Common Stock owned by the Optionee;"

         2. All remaining provisions of the Stock Incentive Plan shall remain in
full force and effect.




Approved by the Board of Directors on September 24, 1998.







<PAGE>


                             MASTER LEASE AGREEMENT


           THIS MASTER LEASE AGREEMENT, dated as of September 23, 1998 
("Agreement"), between General Electric Capital Corporation with an office at 
44 Old Ridgebury Road, Danbury, CT 06810 (hereinafter called, together with 
its successors and assigns, if any, "Lessor"), and Courier Kendallville, 
Inc., a corporation organized and existing under the laws of the State of 
Indiana with its mailing address and chief place of business at 2500 Marion 
Drive, Kendallville, Indiana 46755 (hereinafter called "Lessee").

                                   WITNESSETH:

           I.         LEASING:

           (a) Subject to the terms and conditions set forth below, Lessor
agrees to lease to Lessee, and Lessee agrees to lease from Lessor, the equipment
("Equipment") described in Annex A to any schedule hereto ("Schedule"). Terms
defined in a Schedule and not otherwise defined herein shall have the meanings
ascribed to them in such Schedule.

           (b) The obligation of Lessor to purchase Equipment from the
manufacturer or supplier thereof ("Supplier") and to lease the same to Lessee
under any Schedule shall be subject to receipt by Lessor, prior to the Lease
Commencement Date (with respect to such Equipment), of each of the following
documents in form and substance satisfactory to Lessor: (i) a Schedule relating
to the Equipment then to be leased hereunder, (ii) a Purchase Order Assignment
and Consent in the form of Annex B to the applicable Schedule, unless Lessor
shall have delivered its purchase order for such Equipment, (iii) evidence of
insurance which complies with the requirements of Section X, and (iv) such other
documents as Lessor may reasonably request. As a further condition to such
obligations of Lessor, Lessee shall, upon delivery of such Equipment (but not
later than the Last Delivery Date specified in the applicable Schedule) execute
and deliver to Lessor a Certificate of Acceptance (in the form of Annex C to the
applicable Schedule) covering such Equipment, and deliver to Lessor a bill of
sale therefor (in form and substance satisfactory to Lessor). Lessor hereby
appoints Lessee its agent for inspection and acceptance of the Equipment from
the Supplier. Upon execution by Lessee of any Certificate of Acceptance, the
Equipment described thereon shall be deemed to have been delivered to, and
irrevocably accepted by, Lessee for lease hereunder.

           II.        TERM, RENT AND PAYMENT:

           (a) The rent payable hereunder and Lessee's right to use the
Equipment shall commence on the date of execution by Lessee of the Certificate
of Acceptance for such Equipment ("Lease Commencement Date"). The term of this
Agreement shall be the period specified in the applicable Schedule. If any term
is extended, the word "term" shall be deemed to refer to all extended terms, and
all provisions of this Agreement shall apply during any extended terms, except
as may be otherwise specifically provided in writing.

           (b) Rent shall be paid to Lessor at its address stated above, except
as otherwise directed by Lessor. Payments of rent shall be in the amount set
forth in, and due in accordance with, the provisions of the applicable Schedule.
Rent shall consist of principal and interest components as provided in the
principal and interest amortization table attached to each schedule. If one or
more Advance Rentals are payable, such Advance Rental shall be (i) set forth on
the applicable Schedule, (ii) due upon acceptance by Lessor of such Schedule,
and (iii) when received by Lessor, applied to the first rent payment and the
balance, if any, to the final rental payment(s) under such Schedule. In no event
shall any Advance Rental or any other rent payments be refunded to Lessee. If
rent is not paid within ten days of its due date, Lessee agrees to pay a late
charge of three cents (3(cent)) per dollar on, and in addition to, the amount of
such rent but not exceeding the lawful maximum, if any.

           III.       Intentionally Deleted.

           IV. TAXES: , Except as provided in Section XIV, Lessee shall have no
liability for taxes imposed by the United States of America or any State or
political subdivision thereof which are on or measured by the net income of
Lessor. Lessee shall report (to the extent that it is legally permissible) and
pay promptly all other taxes, fees and assessments due, imposed, assessed or
levied against any Equipment (or the purchase, ownership, delivery, leasing,
possession, use or operation thereof), this Agreement (or any rentals or
receipts hereunder), or any Schedule, by any foreign, federal, state or local
government or taxing authority during or related to the term of this Agreement,
including, without limitation, all license and registration fees, and all sales,
use, personal property, excise, gross receipts, franchise, stamp or other taxes,
imposts, duties and charges, together with any penalties, fines or interest
thereon (all hereinafter called "Taxes"). Lessee shall (i) reimburse Lessor upon
receipt of written request for reimbursement for any Taxes charged to or
assessed against Lessor, (ii) on written request of Lessor, submit to Lessor
written evidence of Lessee's payment of Taxes, and (iii ) upon written request
of Lessor send a copy thereof to Lessor.

           V.         REPORTS:

           (a) Lessee will notify Lessor in writing, within ten days after any
tax or other lien shall attach to any Equipment, of the full particulars thereof
and of the location of such Equipment on the date of such notification.

           (b) Lessee will within 120 days of the close of each fiscal year of
Lessee, deliver to Lessor, Courier Corporation's consolidated balance sheet and
consolidated profit and loss statement, certified by a recognized firm of
certified public accountants. Upon request Lessee will deliver to Lessor
quarterly, within 


                                    1
<PAGE>


90 days of the close of each fiscal quarter of Lessee, in reasonable detail,
copies of Courier Corporation's quarterly financial report certified by the
chief financial officer of Lessee.

           (c) Lessee will permit Lessor to inspect any Equipment during normal
business hours.

           (d) Lessee will keep the Equipment at the Equipment Location
(specified in the applicable Schedule) and will promptly notify Lessor of any
relocation of Equipment. Upon the written request of Lessor, Lessee will notify
Lessor forthwith in writing of the location of any Equipment as of the date of
such notification.

           (e) Lessee will promptly and fully report to Lessor in writing if any
Equipment is lost or damaged (where the estimated repair costs would exceed 10%
of its then fair market value), or is otherwise involved in an accident causing
personal injury or property damage.

           (f) Within 60 days after any request by Lessor, Lessee will furnish a
certificate of an authorized officer of Lessee stating that he or she has
reviewed the activities of Lessee and that, to the best of his or her knowledge,
there exists no default (as described in Section XII) or event which with notice
or lapse of time (or both) would become such a default.

           VI.        DELIVERY, USE AND OPERATION:

           (a) All Equipment shall be shipped directly from the Supplier to 
Lessee.

           (b) Lessee agrees that the Equipment will be used by Lessee solely in
the conduct of its business and in a manner complying with all applicable
federal, state, and local laws and regulations.

           (c) LESSEE SHALL NOT ASSIGN, MORTGAGE, SUBLET OR HYPOTHECATE ANY
EQUIPMENT, OR THE INTEREST OF LESSEE HEREUNDER , NOR SHALL LESSEE REMOVE ANY
EQUIPMENT FROM THE CONTINENTAL UNITED STATES, WITHOUT THE PRIOR WRITTEN CONSENT
OF THE LESSOR.

           (d) Lessee will keep the Equipment free and clear of all liens and
encumbrances other than those which result from acts of Lessor.

           VII.  SERVICE:

           (a) Lessee will, at its sole expense, maintain each unit of Equipment
in good operating order, repair, condition and appearance in accordance with
manufacturer's recommendations, normal wear and tear excepted.

           (b) Lessee will not, without the prior consent of Lessor, affix or
install any accessory, equipment or device on any Equipment if such addition
will impair the originally intended function or use of such Equipment. All
additions, repairs, parts, supplies, accessories, equipment, and devices
furnished, attached or affixed to any Equipment which are not readily removable
shall be made only in compliance with applicable law, including Internal Revenue
Service guidelines, and shall become the property of Lessor. Lessee will not,
without the prior written consent of Lessor and subject to such conditions as
Lessor may impose for its protection, affix or install any Equipment to or in
any other personal or real property (such consent will be implied for on
equipment for which a Landlord Mortgagee waiver (in form acceptable to Lessor)
has been obtained.

           (c) Any alterations or modifications to the Equipment that may, at
any time during the term of this Agreement, be required to comply with any
applicable law, rule or regulation shall be made at the expense of Lessee.

           VIII. STIPULATED LOSS VALUE: Lessee shall promptly and fully notify
Lessor in writing if any unit of Equipment shall be or become worn out, lost,
stolen, destroyed, irreparably damaged in the reasonable determination of
Lessee, or permanently rendered unfit for use from any cause whatsoever (such
occurrences being hereinafter called "Casualty Occurrences"). On the rental
payment date next succeeding a Casualty Occurrence (the "Payment Date"), Lessee
shall pay Lessor the sum of (x) the Stipulated Loss Value of such unit
calculated as of the rental next preceding such Casualty Occurrence
("Calculation Date"); and (y) all rental and other amounts which are due
hereunder as of the Payment Date. Upon payment of all sums due hereunder, the
term of this lease as to such unit shall terminate and (except in the case of
the loss, theft or complete destruction of such unit) Lessor shall be entitled
to recover possession of such unit.

           IX. LOSS OR DAMAGE: Lessee hereby assumes and shall bear the entire
risk of any loss, theft, damage to, or destruction of, any unit of Equipment
from any cause whatsoever.

           X. INSURANCE: Lessee agrees, at its own expense, to keep all
Equipment insured for such amounts and against such hazards as Lessor may
require, including, but not limited to, insurance for damage to or loss of such
Equipment and liability coverage for personal injuries, death or property
damage, with Lessor named as additional insured and with a loss payable clause
in favor of Lessor, as its interest may appear, irrespective of any breach of
warranty or other act or omission of Lessee. All such policies shall be with
companies, and on term reasonably satisfactory to Lessor. Upon written request
by Lessor Lessee agrees to deliver to Lessor evidence of insurance satisfactory
to Lessor . No insurance shall be subject to any co-insurance clause. Lessee
hereby appoints Lessor as Lessee's attorney in



                                       2
<PAGE>


fact to make proof of loss and claim for insurance, and to make adjustments with
insurers and to receive payment of and execute or endorse all documents, checks
or drafts in connection with payments made as a result of such insurance
policies, provided however, that Lessor agrees not to exercise its powers
pursuant to such appointment unless and until Lessee is in default under this
Agreement. Any expense of Lessor in adjusting or collecting insurance shall be
borne by Lessee. Lessee will not make adjustments with insurers except (i) with
respect to claims for damage to any unit of Equipment where the repair costs do
not exceed 40% of such unit's fair market value, or (ii) with Lessor's written
consent. Said policies shall provide that the insurance may not be altered or
cancelled by the insurer until after thirty (30) days written notice to Lessor.
Lessor may, at its option, apply proceeds of insurance to which it is entitled,
in whole or in part, to (i) repair or replace Equipment or any portion thereof,
or (ii) satisfy any obligation of Lessee to Lessor hereunder.

           XI.        RETURN OF EQUIPMENT:

           (a) Upon any expiration or termination of this Agreement or any
Schedule, Lessee shall promptly, at its own cost and expense: (i) perform any
testing and repairs required to place the affected units of Equipment in the
same condition and appearance as when received by Lessee (reasonable wear and
tear excepted) and in good working order for their originally intended purpose;
(ii) if deinstallation, disassembly or crating is required, cause such units to
be deinstalled, disassembled and crated by an authorized manufacturer's
representative or such other service person as is satisfactory to Lessor; and
(iii) return such units to a location within a 750 mile radius of the Equipmejnt
location as Lessor shall direct.

           (b) Until Lessee has fully complied with the requirements of Section
XI(a) above, Lessee's rent payment obligation and all other obligations under
this Agreement shall continue from month to month notwithstanding any expiration
or termination of the lease term. Lessor may terminate such continued leasehold
interest upon ten (10) day's notice to Lessee.

           XII.       DEFAULT:

           (a) Lessor may in writing declare this Agreement in default if:
Lessee breaches its obligation to pay rent or any other sum when due and fails
to cure the breach within fifteen (15) days; Lessee breaches any of its
insurance obligations under Section X; Lessee breaches any of its other
obligations and fails to cure that breach within thirty (30) days after written
notice thereof; any representation or warranty made by Lessee in connection with
this Agreement shall be false or misleading in any material respect; Lessee
becomes insolvent or ceases to do business as a going concern; any Equipment is
illegally used; or a petition is filed by Lessee under any bankruptcy or
insolvency laws, or a petition is filed against Lessee or any guarantor of
Lessee's obligations to Lessor under any bankruptcy or insolvency laws and such
petition is not dismissed within 45 days thereafter. Such declaration shall
apply to all Schedules except as specifically excepted by Lessor.

           (b) After default, at the request of Lessor, Lessee shall comply with
the provisions of Section XI(a). Lessee hereby authorizes Lessor to enter, with
or without legal process, any premises where any Equipment is believed to be and
take possession thereof. Lessee shall, without further demand, forthwith pay to
Lessor (i) as liquidated damages for loss of a bargain and not as a penalty, the
Stipulated Loss Value of the Equipment (calculated as of the rental payment date
next preceding the declaration of default), and (ii) all rentals and other sums
then due and payable hereunder. Lessor may, but shall not be required to, sell
Equipment at private or public sale, in bulk or in parcels, with or without
notice, and without having the Equipment present at the place of sale; or Lessor
may, but shall not be required to, lease, otherwise dispose of or keep idle all
or part of the Equipment; and Lessor may use Lessee's premises for any or all of
the foregoing without liability for rent, costs, damages or otherwise for 360
days after the date of the written defualt notice. The proceeds of sale, lease
or other disposition, if any, shall be applied in the following order of
priorities: (1) to pay all of Lessor's costs, charges and expenses incurred in
taking, removing, holding, repairing and selling, leasing or otherwise disposing
of Equipment; then, (2) to the extent not previously paid by Lessee, to pay
Lessor all sums due and payable from Lessee hereunder; then (3) to reimburse to
Lessee any sums previously paid by Lessee as liquidated damages; and (4) any
surplus shall be retained by Lessor. Lessee shall pay any deficiency in (1) and
(2) forthwith.

           (c) The foregoing remedies are cumulative, and any or all thereof may
be exercised in lieu of or in addition to each other or any remedies at law, in
equity, or under statute. Lessee waives notice of sale or other disposition (and
the time and place thereof), and the manner and place of any advertising. Lessee
shall pay reasonable attorney's fees and the Stipulated Loss Value due upon
default, or if prohibited by law, such lesser sum as may be permitted. Waiver of
any default shall not be a waiver of any other or subsequent default.

           (d) Any default under the terms of this or any other agreement
between Lessor and Lessee may be declared by Lessor a default under this and any
such other agreement.

           XIII. ASSIGNMENT: Lessor may assign this Agreement or any Schedule.
Lessee hereby waives and agrees not to assert against any such assignee any
defense, set-off, recoupment claim or counterclaim which Lessee has or may at
any time have against Lessor for any reason whatsoever.

           XIV. NET LEASE; NO SET-OFF, ETC: This Agreement is a net lease.
Lessee's obligation to pay rent and other amounts due hereunder shall be
absolute and unconditional. Lessee shall not be entitled to any abatement or
reductions of, or set-offs against, said rent or other amounts, including,
without limitation, those arising or allegedly arising out of claims (present or
future, alleged or actual, and including claims arising out of strict tort or
negligence of Lessor) of Lessee against Lessor under this Agreement or
otherwise. Nor shall this Agreement terminate or the obligations of Lessee be
affected by reason of any defect in or damage to, or loss of possession, use or
destruction of, any Equipment from whatsoever cause. It is the intention of the
parties that rents and other amounts due hereunder shall continue to be payable
in all events in the manner and at the times set forth herein unless the
obligation to do so shall have been terminated pursuant to the express terms
hereof.



                                       3
<PAGE>


           XV.        INDEMNIFICATION:

           (a) Lessee hereby agrees to indemnify, save and keep harmless Lessor,
its agents, employees, successors and assigns from and against any and all
losses, damages, penalties, injuries, claims, actions and suits, including legal
expenses, of whatsoever kind and nature, in contract or tort, whether caused by
the active or passive negligence of Lessor or otherwise, (including, but not
limited to, Lessor's strict liability in tort),to the extent but only to the
extent arising out of (i) the selection, manufacture, purchase, acceptance or
rejection of Equipment, the ownership of Equipment during the term of this
Agreement, and the delivery, lease, possession, maintenance, uses, condition,
return or operation of Equipment (including, without limitation, latent and
other defects, whether or not discoverable by Lessor or Lessee and any claim for
patent, trademark or copyright infringement) or (ii) the condition of Equipment
sold or disposed of after use by Lessee, any sublessee or employees of Lessee.
Lessee shall, upon request, defend any actions based on, or arising out of, any
of the foregoing.

           (b) All of Lessor's rights, privileges and indemnities contained in
this Section XV shall survive the expiration or other termination of this
Agreement and the rights, privileges and indemnities contained herein are
expressly made for the benefit of, and shall be enforceable by Lessor, its
successors and assigns.

     XVI.  DISCLAIMER:  LESSEE ACKNOWLEDGES THAT IT HAS SELECTED THE EQUIPMENT 
WITHOUT ANY ASSISTANCE FROM LESSOR, ITS AGENTS OR EMPLOYEES. LESSOR DOES NOT
MAKE, HAS NOT MADE, NOR SHALL BE DEEMED TO MAKE OR HAVE MADE, ANY WARRANTY OR
REPRESENTATION, EITHER EXPRESS OR IMPLIED, WRITTEN OR ORAL, WITH RESPECT TO THE
EQUIPMENT LEASED HEREUNDER OR ANY COMPONENT THEREOF, INCLUDING, WITHOUT
LIMITATION, ANY WARRANTY AS TO DESIGN, COMPLIANCE WITH SPECIFICATIONS, QUALITY
OF MATERIALS OR WORKMANSHIP, MERCHANTABILITY, FITNESS FOR ANY PURPOSE, USE OR
OPERATION, SAFETY, PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT, OR TITLE. All
such risks, as between Lessor and Lessee, are to be borne by Lessee. Without
limiting the foregoing, Lessor shall have no responsibility or liability to
Lessee or any other person with respect to any of the following, regardless of
any negligence of Lessor (i) any liability, loss or damage caused or alleged to
be caused directly or indirectly by any Equipment, any inadequacy thereof, any
deficiency or defect (latent or otherwise) therein, or any other circumstance in
connection therewith; (ii) the use, operation or performance of any Equipment or
any risks relating thereto; (iii) any interruption of service, loss of business
or anticipated profits or consequential damages; or (iv) the delivery,
operation, servicing, maintenance, repair, improvement or replacement of any
Equipment. If, and so long as, no default exists under this Lease, Lessee shall
be, and hereby is, authorized during the term of this Lease to assert and
enforce, at Lessee's sole cost and expense, from time to time, in the name of
and for the account of Lessor and/or Lessee, as their interests may appear,
whatever claims and rights Lessor may have against any Supplier of the
Equipment.

           XVII. REPRESENTATIONS AND WARRANTIES OF LESSEE: Lessee hereby
represents and warrants to Lessor that on the date hereof and on the date of
execution of each Schedule:

           (a) Lessee has adequate power and capacity to enter into, and perform
under, this Agreement and all related documents (together, the "Documents") and
is duly qualified to do business wherever necessary to carry on its present
business and operations, including the jurisdiction(s) where the Equipment is or
is to be located.

           (b) The Documents have been duly authorized, executed and delivered
by Lessee and constitute valid, legal and binding agreements, enforceable in
accordance with their terms, except to the extent that the enforcement of
remedies therein provided may be limited under applicable bankruptcy and
insolvency laws.

           (c) No approval, consent or withholding of objections is required
from any governmental authority or instrumentality with respect to the entry
into or performance by Lessee of the Documents except such as have already been
obtained.

           (d) The entry into and performance by Lessee of the Documents will
not: (i) violate any judgment, order, law or regulation applicable to Lessee or
any provision of Lessee's Certificate of Incorporation or By-Laws; or (ii)
result in any breach of, constitute a default under or result in the creation of
any lien, charge, security interest or other encumbrance upon any Equipment
pursuant to any indenture, mortgage, deed of trust, bank loan or credit
agreement or other instrument (other than this Agreement) to which Lessee is a
party.

           (e) There are no suits or proceedings pending or threatened in court
or before any commission, board or other administrative agency against or
affecting Lessee, which will have a material adverse effect on the ability of
Lessee to fulfill its obligations under this Agreement.

           (f) The Equipment accepted under any Certificate of Acceptance is and
will remain tangible personal property.

           (g) Each consolidated Balance Sheet and consolidated Statement of
Income of Courier Corporation delivered to Lessor has been prepared in
accordance with generally accepted accounting principles, and since the date of
the most recent such consolidated Balance Sheet and consolidated Statement of
Income, there has been no material adverse change.

           (h) Lessee is and will be at all times validly existing and in good
standing under the laws of the State of its incorporation (specified in the
first sentence of this Agreement).



                                       4
<PAGE>


           (i) The Equipment will at all times be used for commercial or
business purposes.

           XVIII.      EARLY TERMINATION

           (a) On or after the First Termination Date (specified in the
applicable Schedule), Lessee may, so long as no default exists hereunder,
terminate this Agreement as to all (but not less than all) of the Equipment on
such Schedule as of a rent payment date ("Termination Date") upon at least 90
day's prior written notice to Lessor.

           (b) Lessee shall, and Lessor may, solicit cash bids for the Equipment
on an AS IS, WHERE IS BASIS without recourse to or warranty from Lessor, express
or implied ("AS IS BASIS"). Prior to the Termination Date, Lessee shall(i)
certify to Lessor any bids received by Lessee and (ii) pay to Lessor (A) the
Termination Value (calculated asof the Termination Date) for the Equipment, and
(B) all rent and other sums due and unpaid as of the TerminationDate.

           (c) Provided that all amounts due hereunder have been paid on the
Termination Date, Lessor shall (i) sell the Equipment on an AS IS BASIS for cash
to the highest bidder and (ii) refund the proceeds of such sale (net of any
related expenses) to Lessee up to the amount of the Termination Value. If such
sale is not consummated, no termination shall occur and Lessor shall refund the
Termination Value (less any expenses incurred by Lessor) to Lessee.

           (d) Notwithstanding the foregoing, Lessor may elect by written
notice, at any time prior to the Termination Date, not to sell the Equipment. In
that event, on the Termination Date Lessee shall (i) return the Equipment (in
accordance with Section XI) and (ii) pay to Lessor all amounts required under
Section XVIII(b) less the amount of the highest bid certified by Lessee to
Lessor.



           XIX.  OWNERSHIP FOR TAX PURPOSES, GRANT OF SECURITY INTEREST:

         (a) For income tax purposes, the parties hereto agree that it is their
mutual intention that Lessee shall be considered the owner of the Equipment.
Accordingly, Lessor agrees (i) to treat Lessee as the owner of the Equipment on
its federal income tax return, (ii) not to take actions or positions
inconsistent with such treatment on or with respect to its federal income tax
return, and (iii) not to claim any tax benefits available to an owner of the
Equipment on or with respect to its federal income tax return. The foregoing
undertakings by Lessor shall not be violated by Lessor's taking a tax position
inconsistent with the foregoing sentence to the extent such position is required
by law or is taken through inadvertence so long as such inadvertent tax position
is reversed by Lessor promptly upon its discovery. Lessor shall in no event be
liable to Lessee if Lessee fails to secure anyof the tax benefits available to
the owner of the Equipment.

           (b) Lessor and Lessee hereby agree that the transaction contemplated
herein is intended as a lease; PROVIDED HOWEVER that, if it is determined for
other reasons that the lease so intended creates a security interest, Lessee
shall have been deemed to grant, effective as of each Lease Commencement Date,
and hereby grants, to Lessor the following:

          (i)To secure the prompt payment and performance, as and when due, of
          all obligations and indebtedness of Lessee, now existing or hereafter
          created, to Lessor pursuant to this Agreement or otherwise, Lessee
          hereby grants to Lessor a first priority security interest in the
          Equipment and all accessions, substitutions and replacements thereto
          and therefor, and proceeds (cash and non-cash, including without
          limitation insurance proceeds) thereof. In furtherance of the
          foregoing, Lessee shall (A) execute and deliver to Lessor, to be
          recorded at Lessee's expense, Uniform Commercial Code financing
          statements, statements of amendment and statements of continuation as
          reasonably may be required by Lessor to perfect and maintain perfected
          the first priority security interest granted by Lessee herein and (B)
          execute and deliver, to be recorded at Lessee's expense, any such
          forms and documents as reasonably may be required by Lessor to
          evidence Lessor's title to and security interest in any item of
          Equipment which is covered by a certificate of title issued under a
          statute of any applicable jurisdiction.



                                       5
<PAGE>


          (iii)Lessee also grants to Lessor a security interest in all accounts,
          as such term is defined in the Uniform Commercial Code of any
          applicable jurisdiction, now owned by Lessee or hereafter acquired or
          owned by Lessee that might arise or result from any lease or other
          disposition of any of the Equipment, including, but not limited to,
          any right of Lessee to payment for Equipment sold or leased or for
          services rendered whether or not evidenced by an instrument or chattel
          paper, and whether or not such right has been earned by performance.

          (iv)To the extent that this Lease and/or any Equipment Schedule would
          constitute chattel paper, as such term is defined in the Uniform
          Commercial Code as in effect in any applicable jurisdiction, no
          security interest herein or therein may be created through the
          transfer or possession of this Lease in and of itself without the
          transfer or possession of the original of an Equipment Schedule
          executed pursuant to this Lease and incorporating this Lease by
          reference; and no security interest in this Lease and an Equipment
          Schedule may be created by the transfer or possession of any
          counterpart of the Equipment Schedule other than the original thereof,
          which shall be identified as the document marked "Original" and all
          other counterparts shall be marked "Duplicate" or "Copy".

          (v)It is the intention of the parties hereto to comply with any
          applicable usury laws to the extent that any Schedule is determined to
          be subject to such laws; accordingly, it is agreed that,
          notwithstanding any provision to the contrary in any Schedule or this
          Lease, in no event shall any Schedule require the payment or permit
          the collection of interest in excess of the maximum amount permitted
          by applicable law. If any such excess interest is contracted for,
          charged or received under any Schedule or this Lease, or in the event
          that all of the principal balance shall be prepaid, so that under any
          of such circumstances the amount of interest contracted for, charged
          or received under any Schedule or this Lease shall exceed the maximum
          amount of interest permitted by applicable law, then in such event (A)
          the provisions of this paragraph shall govern and control, (B) neither
          Lessee nor any other person or entity now or hereafter liable for the
          payment hereof shall be obligated to pay the amount of such interest
          to the extent that it is in excess of the maximum amount of interest
          permitted by applicable law, (C) any such excess which may have been
          collected shall be either applied as a credit against the then unpaid
          principal balance or refunded to Lessee, at the option of the Lessor,
          and (D) the effective rate of interest shall be automatically reduced
          to the maximum lawful contract rate allowed under applicable law as
          now or hereafter construed by the courts having jurisdiction thereof.
          It is further agreed that , without limitation of the foregoing, all
          calculations of the rate of interest contracted for, charged or
          received under any Schedule or this Lease which are made for the
          purpose of determining whether such rate exceed the maximum lawful
          contract rate, shall be made, to the extent permitted by applicable
          law, by amortizing, prorating, allocating and spreading in equal parts
          during the period of the full stated term of the Lease, all interest
          at any time contracted for, charged or received from Lessee or
          otherwise by Lessor during such term; provided, however, that if any
          applicable state law is amended or the law of the United States of
          America preempts any applicable state law, so that it becomes lawful
          for Lessor to receive a greater interest per annum rate than is
          presently allowed, the Lessee agrees that, on the effective date of
          such amendment or preemption, as the case may be, the lawful maximum
          hereunder shall be increased to the maximum interest per annum rate
          allowed by the amended state law or the law of the United States of
          America.

              XX. END OF LEASE OPTIONS. Lessee shall have the end of Lease term
options specifically set forth in each applicable Schedule.

           XXI.   MISCELLANEOUS:

           (a) Any cancellation or termination by Lessor, pursuant to the
provisions of this Agreement, any Schedule, supplement or amendment hereto, or
the lease of any Equipment hereunder, shall not release Lessee from any then
outstanding obligations to Lessor hereunder. Except as provided in Section XIX,
all Equipment shall at all times remain personal property of Lessor regardless
of the degree of its annexation to any real property and shall not by reason of
any installation in, or affixation to, real or personal property become a part
thereof.

           (b) Time is of the essence of this Agreement. Lessor's failure at any
time to require strict performance by Lessee of any of the provisions hereof
shall not waive or diminish Lessor's right thereafter to demand strict
compliance therewith. Lessee agrees, upon Lessor's request, to execute any
instrument necessary or expedient for filing, recording or perfecting the
interest of Lessor. All notices required to be given hereunder shall be deemed
adequately given if in writing and sent by overnight mail, registered or
certified mail, postage prepaid, to the addressee at its address stated herein,
or at such other place as such addressee may have designated in writing. This
Agreement and any Schedule and Annexes thereto constitute the entire agreement
of the parties with respect to the subject matter hereof. NO VARIATION OR
MODIFICATION OF THIS AGREEMENT OR ANY WAIVER OF ANY OF ITS PROVISIONS OR
CONDITIONS, SHALL BE VALID UNLESS IN WRITING AND SIGNED BY AN AUTHORIZED
REPRESENTATIVE OF EACH OF THE PARTIES HERETO.

           (c) In case of a failure of Lessee to comply with any provision of
this Agreement, Lessor shall have the right, but shall not be obligated to,
effect such compliance, in whole or in part; and all moneys spent and expenses
and obligations incurred or assumed by Lessor in effecting such compliance shall
constitute additional rent due to Lessor within five days after the date Lessor
sends written notice to Lessee requesting payment. Lessor's effecting such
compliance shall not be a waiver of Lessee's default.

         (d) Lessor agrees that Lessee shall quietly possess and use the
Equipment subject to and in accordance with the provisions of this Agreement. As
long as there has been no default hereunder, neither Lessor, nor any party
claiming under or through Lessor, shall interfere with Lessee's right of quiet
possession and use of the Equipment.



                                       6
<PAGE>


           (e) Any rent or other amount not paid to Lessor when due hereunder
shall bear interest, both before and after any judgment or termination hereof,
at the lesser of fifteen percent (15% ) per annum or the maximum rate allowed by
law. Any provisions in this Agreement and any Schedule which are in conflict
with any statute, law or applicable rule shall be deemed omitted, modified or
altered to conform thereto.

           (f) LESSEE HEREBY UNCONDITIONALLY WAIVES ITS RIGHTS TO A JURY TRIAL
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR
INDIRECTLY, THIS LEASE, ANY OF THE RELATED DOCUMENTS, ANY DEALINGS BETWEEN
LESSEE AND LESSOR RELATING TO THE SUBJECT MATTER OF THIS TRANSACTION OR ANY
RELATED TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN
LESSEE AND LESSOR. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING
OF ANY AND ALL DISPUTES THAT MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT
LIMITATION, CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER
COMMON LAW AND STATUTORY CLAIMS WITH RESPECT TO THE FOREGOING MATTERS). THIS
WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE MODIFIED EITHER ORALLY OR IN
WRITING, AND THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS, RENEWALS,
SUPPLEMENTS OR MODIFICATIONS TO THIS LEASE, ANY RELATED DOCUMENTS, OR TO ANY
OTHER DOCUMENTS OR AGREEMENTS RELATING TO THIS TRANSACTION OR ANY RELATED
TRANSACTION. IN THE EVENT OF LITIGATION, THIS LEASE MAY BE FILED AS A WRITTEN
CONSENT TO A TRIAL BY COURT.



           IN WITNESS WHEREOF, Lessee and Lessor have caused this Agreement to
be executed by their duly authorized representatives as of the date first above
written.






LESSOR: General Electric Capital          LESSEE: Courier Kendallville, Inc.
        Corporation

By:  /s/ Patrick J. Cooney                By:  /s/ Lee E. Cochrane
   -----------------------------             -----------------------------------

Title: Senior Risk Analyst                Title: Asst. Treasurer
      --------------------------                --------------------------------



                                       7
<PAGE>



                               EQUIPMENT SCHEDULE
                                 SCHEDULE NO. 1
                         DATED THIS September 23, 1998
                            TO MASTER LEASE AGREEMENT
                        DATED AS OF September 23, 1998


 Lessor & Mailing Address:                        Lessee & Mailing Address:

 General Electric Capital Corporation             Courier Kendallville, Inc.
 44 Old Ridgebury Road                            2500 Marion Drive
 Danbury, CT  06810                               Kendallville, IN 46755



 Capitalized terms not defined herein shall have the meanings assigned to them
in the Master Lease Agreement identified above ("Agreement"; said Agreement and
this Schedule being collectively referred to as "Lease").

 A.    Equipment

       Pursuant to the terms of the Lease, Lessor agrees to acquire and lease to
Lessee the Equipment listed on Annex A attached hereto and made a part hereof.

 B.    Financial Terms

        1.  Advance Rent (if any):  Not Applicable.
        2.  Capitalized Lessor's Cost:  $ 4,378,156.92.
        3.  Interest Rate: 6.21% during the Basic Term and any Renewal Term.
        4.  [Omitted].
        5.  Basic Term (No. of Months):  Eighty-Four (84) months.
        6.  Basic Term Commencement Date:  9-23-98.
        7.  Equipment Location:  2500 Marion Drive, Kendallville, Indiana 46755.
        8.  Lessee Federal Tax ID No.: 35-1804679.
        9.  Supplier:  See Annex A.
       10.  Last Delivery Date:  9-23-98.
       11   Lessee agrees and acknowledges that the Capitalized Lessor's Cost
            of the Equipment as stated on the Schedule is equal to the fair
            market value of the Equipment on the date hereof.
       12   Renewal Terms:   One (1) consecutive Thirty Six (36) month term.
       13   Maximum Lease Term:  ten (10) years.
       14   Stipulated Loss Values:  See Annex D.
       15   First Termination Date: Any time after the Basic Term Commencement
             Date

C.     [Omitted]


D.     Term and Rent

       1. Interim Rent. For the period from and including the Lease Commencement
Date to the Basic Term Commencement Date ("Interim Period"), interest shall
accrue at the Interest Rate set forth above on the Capitalized Lessor's Cost of
the Equipment, which amount shall be capitalized and added to the Capitalized
Lessor's Cost on the Basic Term Commencement Date.

       2. Basic Term Rent and Renewal Term Rent. Commencing on October 23, 
1998 and on the same day of each month thereafter (each, a "Rent Payment 
Date") (a) during the Basic Term, Lessee shall pay as rent ("Basic Term 
Rent"), and (b) during any Renewal Term, Lessee shall pay as rent ("Renewal 
Term Rent"), monthly installments in arrears, calculated to amortize the 
Capitalized Lessor's Cost of the Equipment over the Term, together with 
lessor's return on its investment, each installment in the principal amount 
specified on the attached Amortization Schedule together with Interest on the 
Unamortized Principal Balance specified on the attached Amortization Schedule 
as of the preceding Rent Payment Date at the Interest Rate for the Interest 
Period following such immediately preceding Rent Payment Date. Interest shall 
be calculated on the basis of a 360 day year for the actual 

                                       8
<PAGE>


number of days elapsed. As used herein "Interest period" shall mean the period
beginning on the Lease Commencement date and ending on the next Rent Payment
date , and each subsequent monthly period..

       3. Adjustment to Capitalized Lessor's Cost. Lessee hereby irrevocably
authorizes Lessor to adjust the Capitalized Lessor's Cost up or down by no more
than ten percent (10%) to account for equipment change orders, equipment
returns, invoicing errors, and similar matters. Lessee acknowledges and agrees
that the Rent shall be adjusted as a result of such change in the Capitalized
Lessor's Cost (pursuant to paragraphs 1 and 2 above). Lessor shall send Lessee a
written notice stating the final Capitalized Lessor's Cost, if different from
that disclosed on this Schedule.

 E.    Insurance

       1.    Public Liability:  $1,000,000 total liability per occurrence.

       2. Casualty and Property Damage: An amount equal to the higher of the
Stipulated Loss Value or the full replacement cost of the Equipment.

 Except as expressly modified hereby, all terms and provisions of the Agreement
shall remain in full force and effect. This Schedule is not binding or effective
with respect to the Agreement or Equipment until executed on behalf of Lessor
and Lessee by authorized representatives of Lessor and Lessee, respectively.

 F.    Fixed Purchase Price and Residual Risk Amount

<TABLE>
<CAPTION>

       End of Month    Fixed Purchase Price     Residual Risk Amount
       ------------    --------------------     --------------------
       <S>                  <C>                     <C>   
         84                 41.735%                 16.35%
</TABLE>


 The above amounts are expressed as a percent of the Capitalized Lessor's Cost
of the Equipment.


 For the purposes of this Schedule only, the following section is incorporated
by reference into the Lease.

XX.             END OF LEASE OPTIONS:

           (a) Return. So long as Lessee has not exercised its option to
terminate a Schedule pursuant to Section XVIII hereof, Lessee shall have the
option, upon the scheduled expiration of the Basic Term of the Schedule, to
return all (but not less than all) of the Equipment described on such Schedule,
in accordance with the terms hereof, to Lessor upon the following terms and
conditions. If Lessee desires to exercise this option it shall (i) pay to Lessor
on the last day of the Basic Term of the Schedule, in addition to the scheduled
rent due on such date and all other sums due hereunder, a terminal rental
adjustment amount equal to the Fixed Purchase Price percentage multiplied by the
Capitalized Lessor's Cost for such Equipment (as stated in such Schedule) for
such Equipment and (ii) return the Equipment to Lessor in accordance with
Section XI hereof. Thereafter, Lessor and Lessee will arrange for the
commercially reasonable sale, scrap or other disposition of such Equipment. Upon
the sale, scrap or other disposition of the Equipment, the net sales proceeds
with respect to the Equipment sold will be paid to Lessor. Lessor shall promptly
thereafter pay to Lessee the Residual Risk Amount multiplied by the Capitalized
Lessor's Cost for such Equipment, less all costs, expenses and fees, including
remarketing fees incurred in connection with the sale, scrap or disposition of
such Equipment plus all net proceeds, if any, of such sale in excess of the
Residual Risk Amount of such Equipment. All calculations under this Section XX
hereof shall be made on an aggregate basis with respect of all of the Equipment
described on the applicable Schedule.

           (b) Purchase. Provided that no default shall have occurred and be
continuing, unless Lessee has exercised its option to terminate this Agreement
pursuant to Section XVIII hereof or has exercised its option to return all the
Equipment in accordance with paragraph (a) above or renew the Lease as to such
Equipment in accordance with paragraph (c) below, upon the expiration of the
Basic Term of this Agreement with respect to any Schedule, upon at least 30
days' written notice to Lessor, Lessee may purchase all of the Equipment
described on such Equipment Schedule on an AS IS BASIS, upon the following terms
and conditions: At the expiration of the Basic Term of this Agreement with
respect to any such Schedule, Lessee shall pay to Lessor in cash the Fixed
Purchase Price for the Equipment so purchased, determined as hereinafter
provided. The Fixed Purchase Price of the Equipment shall be an amount specified
in the applicable Schedule, together with all rent and other sums due on such
date, plus all taxes and charges upon sale and all other reasonable expenses
incurred by Lessor in connection with such sale. Upon satisfaction of the
requirements specified in this Section, Lessor will sell the Equipment to Lessee
on an AS IS BASIS.



                                       9
<PAGE>


           (c) Renewal. Provided that no default shall have occurred and be
continuing, unless Lessee shall have exercised its option to terminate this
Agreement pursuant to Section XVIII hereof or has exercised its option to either
purchase or return the Equipment in accordance with paragraphs (a) or (b) above,
Lessee automatically renew this Agreement with respect to all (but not less than
all) Equipment on any Schedule an additional thirty six (36) month term (the
"Renewal Term"), at a monthly rental amount as set forth in the applicable
Schedule. At the end of the Renewal Term, provided that Lessee is not then in
default hereunder, Lessee shall purchase all, but not less than all, of the
Equipment on the Schedule for $1.00 cash, together with all rent and other sums
due on such date, plus all taxes and charges upon transfer, and all other
reasonable expenses incurred by Lessor in connection with such sale. Upon
satisfaction of the conditions specified in this Subsection (c), Lessor will
transfer, on an AS IS basis all of Lessor's interest in and to the Equipment.
Lessor shall not be required to make, and may specifically disclaim, any
representation and warranty as to the condition of the Equipment and any other
matters.

       IN WITNESS WHEREOF, Lessee and Lessor have caused this Schedule to be
executed by their duly authorized representatives as of the date first above
written.

 LESSOR:                                        LESSEE:

 General Electric Capital Corporation           Courier Kendallville, Inc.


 By: /s/ Patrick J. Cooney                      By: /s/ Lee E. Cochrane
    -----------------------------                  -------------------------

 Name: Patrick J. Cooney                      Name:  Lee E. Cochrane
      ---------------------------                    -----------------------

 Title: Senior Risk Analyst                   Title: Asst. Treasurer
       --------------------------                    -----------------------

                                                Attest

                                                By:  /s/ Mary Gail D. McCarthy
                                                    --------------------------

                                                Name:  Mary Gail D. McCarthy
                                                     -----------------------
                                                       Asst. Secretary

<PAGE>

                               CORPORATE GUARANTY


                                                        Date: September 23, 1998

General Electric Capital Corporation
44 Old Ridgebury Road
Danbury, CT 06810-5105

     To induce you to enter into, purchase or otherwise acquire, now or at 
any time hereafter, any promissory notes, security agreements, chattel 
mortgages, pledge agreements, conditional sale contracts, lease agreements, 
and/or any other documents or instruments evidencing, or relating to any 
lease, loan, extension of credit or other financial accommodation 
(collectively "Account Documents" and each an "Account Document") to Courier 
Kendallville, Inc., a corporation organized and existing under the laws of 
the State of Indiana ("Customer"), but without in my way binding you to do 
so, the undersigned or for good and valuable consideration, the receipt and 
sufficiency of which is hereby acknowledged, does hereby guarantee to you, 
your successors and assigns, the due regular and punctual payment of any sum 
or sums of money which the Customer may owe to you now or at any time 
hereafter, whether evidenced by an Account Document, on open account or 
otherwise, and whether it represents principal, interest, rent, late charges, 
indemnities, an original balance, an accelerated balance, liquidated damages, 
a balance reduced by partial payment, a deficiency after sale or other 
disposition of any leased equipment, collateral or security, or any other 
type of sum of any kind whatsoever that the Customer may owe to you now or at 
any time hereafter, and does hereby further guarantee to you, your successors 
and assigns, the due, regular and punctual performance of any other duty or 
obligation of any kind or character whatsoever that the Customer may owe to 
you now or at any time hereafter (all such payment and performance 
obligations being collectively referred to as "Obligations"). Undersigned 
does hereby further guarantee to pay upon demand all losses, costs, 
attorneys' fees and expenses which may be suffered by you by reason of 
Customer's default or default of the undersigned.

     This Guaranty is a guaranty of prompt payment and performance (and not 
merely a guaranty of collection). Nothing herein shall require you to first 
seek or exhaust any remedy against the Customer, its successors and assigns, 
or any other person obligated with respect to the Obligations, or to first 
foreclose, exhaust or otherwise proceed against any leased equipment, 
collateral or security which may be given in connection with the Obligations. 
It is agreed that you may, upon any breach or default of the Customer, or at 
any time thereafter, make demand upon the undersigned and receive payment and 
performance of the Obligations, with or without notice or demand for payment 
or performance by the Customer, its successors or assigns, or any other 
person. Suit may be brought and maintained against the undersigned, at your 
election, without joinder of the Customer or any other person as parties 
thereto. The obligations of each signatory to this Guaranty shall be joint 
and several.

     The undersigned agrees that its obligations under this Guaranty shall be 
primary, absolute, continuing and unconditional, irrespective of and 
unaffected by any of the following actions or circumstances (regardless of 
any notice to or consent of the undersigned): (a) the genuineness, validity, 
regularity and enforceability of the Account Documents or any other document; 
(b) any extension, renewal, amendment, change, waiver or other modification 
of the Account Documents or any other document; (c) the absence of, or delay 
in, any action to enforce the Account Documents, this Guaranty or any other 
document; (d) your failure or delay in obtaining any other guaranty of the 
Obligations (including, without limitation, your failure to obtain the 
signature or any other guarantor hereunder); (e) the release of, extension of 
time for payment or performance by, or any other indulgence granted to the 
Customer or any other person with respect to the Obligations by operation of 
law or otherwise; (f) the existence, value, condition, loss, subordination or 
release (with or without substitution) of, or failure to have title to or 
perfect and maintain a security interest in, or the time, place and manner of 
any sale or other disposition of any leased equipment, collateral or security 
given in connection with the Obligations, or any other impairment (whether 
intentional or negligent, by operation of law or otherwise) of the rights of 
the undersigned; (g) the Customer's voluntary or involuntary bankruptcy, 
assignment for the benefit of creditors, reorganization, or similar 
proceedings affecting the Customer or any of its assets; or (h) any other 
action or circumstances which might otherwise constitute a legal or equitable 
discharge or defense of a surety or guarantor.

     This Guaranty may be terminated upon deliver to you (at your address 
shown above) of a written termination notice from the undersigned. However, 
as to all Obligations (whether matured, unmatured, absolute, contingent or 
otherwise) incurred by the Customer prior to your receipt of such written 
termination notice (and regardless of any subsequent amendment, extension or 
other modification which may be made with respect to such Obligations), this 
Guaranty shall nevertheless continue and remain undischarged until all such 
Obligations are indefeasibly paid and performed in full.

     The undersigned agrees that this Guaranty shall remain in full force and 
effect or be reinstated (as the case may be) if at any time payment or 
performance of any of the Obligations (or any part thereof) is rescinded, 
reduced or must otherwise be restored or returned by you, all as though such 
payment or performance had not been made. If, by reason of any bankruptcy, 
insolvency or similar laws effecting the rights of creditors, you shall be 
prohibited from excising any of your rights or remedies against the Customer 
or any other person or against any property, then, as between you and the 
undersigned, such prohibition shall be of no force and effect, and you shall 
have the right to make demand upon, and receive payment from, the undersigned 
of all amounts and other sums that would be due to you upon a default with 
respect to the Obligations.

     Notice of acceptance of this Guaranty and of any default by the Customer 
or any other person is hereby waived. Presentment, protest demand, and notice 
of protest, demand and dishonor of any of the Obligations, and the exercise 
of possessory, collection or other remedies for the Obligations, are hereby 
waived. The undersigned warrants that it has adequate means to obtain from 
the Customer on a continuing basis financial data and other information 
regarding the Customer and is not relying upon you to provide any such data 
or other information. Without limiting the foregoing, notice of adverse 
change in the Customer's financial condition or of any other fact which might 
materially increase the risk of the undersigned is also waived. All 
settlements, compromises, accounts stated and agreed balances made in good 
faith between the Customer, its successors or assigns, and you shall be 
binding upon and

<PAGE>

shall not affect the liability of the undersigned.

     Payment of all amounts now or hereafter owed to the undersigned by the 
Customer or any other obligor for any of the Obligations is hereby 
subordinated in right of payment to the indefeasible payment in full to you 
of all Obligations and is hereby assigned to you as a security therefor. The 
undersigned hereby irrevocably and unconditionally waives and relinquishes 
all statutory, contractual, common law, equitable and all other claims 
against the Customer, any other obligor for any of the Obligations, any 
collateral therefor, or any other assets of the Customer or any such other 
obligor, for subrogation, reimbursement, exoneration, contribution, 
indemnification, setoff or other recourse in respect of sums paid or payable 
to you by the undersigned hereunder, and the undersigned hereby further 
irrevocably and unconditionally waives and relinquishes any and all other 
benefits which it might otherwise directly or indirectly receive or be 
entitled to receive by reason of any amounts paid by, or collected or due 
from it, the Customer or any other obligor for any of the Obligations, or 
realized from any of their respective assets.

     THE UNDERSIGNED HEREBY UNCONDITIONALLY WAIVES ITS RIGHT TO A JURY TRIAL 
OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR 
INDIRECTLY, THIS GUARANTY, THE OBLIGATIONS GUARANTEED HEREBY, ANY OF THE 
RELATED DOCUMENTS, ANY DEALINGS BETWEEN US RELATING TO THE SUBJECT MATTER 
HEREOF OR THEREOF, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED BETWEEN 
US. THE SCOPE OF THIS WAIVER IS INTENDED TO BE ALL ENCOMPASSING OF ANY AND 
ALL DISPUTES THAT MAY BE FILED IN ANY COURT (INCLUDING, WITHOUT LIMITATION, 
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW 
AND STATUTORY CLAIMS). THIS WAIVER IS IRREVOCABLE MEANING THAT IT MAY NOT BE 
MODIFIED EITHER ORALLY OR IN WRITING, AND SHALL APPLY TO ANY SUBSEQUENT 
AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS GUARANTY, THE 
OBLIGATIONS GUARANTEED HEREBY, OR ANY RELATED DOCUMENTS. IN THE EVENT OF 
LITIGATION, THIS GUARANTY MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE 
COURT.

     As used in this Guaranty, the word "person" shall include any individual, 
corporation, partnership, joint venture, association, joint-stock company, 
trust, unincorporated organization, or any government or any political 
subdivision thereof.

     This Guaranty is intended by the parties as a final expression of the 
guaranty of the undersigned and is also intended as a complete and exclusive 
statement of the terms thereof. No course of dealing, course of performance or 
trade usage, nor any paid evidence of any kind, shall be used to supplement 
or modify any of the terms hereof. Nor are there any conditions to the full 
effectiveness of this Guaranty. This Guaranty and each of its provisions may 
only be waived, modified, varied, released, terminated or surrendered, in 
whole or in part, by a duly authorized written instrument signed by you. No 
failure by you to exercise your rights hereunder shall give rise to any 
estoppel against you, or excuse the undersigned from performing hereunder. 
Your waiver of any right to demand performance hereunder shall not be a 
waiver of any subsequent or other right to demand performance hereunder.

     This Guaranty shall bind the undersigned's successors and assigns and 
the benefits thereof shall extend to and include your successors and assigns. 
In the event of default hereunder, you may at any time inspect undersigned's 
records, or at your option, undersigned shall furnish you with a current 
independent audit report.

     If any provisions of this Guaranty are in conflict with any applicable 
statute, rule or law, then such provisions shall be deemed null and void to 
the extent that they may conflict therewith, but without invalidating any 
other provisions hereof.

     Each signatory on behalf of a corporate guarantor warrants that he had 
authority to sign on behalf of such corporation and by so signing to bind 
said guarantor corporation hereunder.

     IN WITNESS WHEREOF, this Guaranty is executed the day and year above 
written.

                                            Courier Corporation

                                            By:     /s/ Lee E. Cochrane
                                                   -----------------------------
                                                     (Signature)


                                            Title:   Treasurer
                                                   -----------------------------
                                                     (Officer's Title)


ATTEST:   /s/ Mary Gail D. McCarthy
          -------------------------------
          Assistant Secretary



<PAGE>


                               COURIER CORPORATION
                           SUBSIDIARIES OF REGISTRANT

                                   EXHIBIT 21

Registrant has the following subsidiaries:
<TABLE>
<CAPTION>


                                                                                                                 % Owned
                                                                                        Jurisdiction of        by Immediate
               Name                                   Immediate Parent                   Incorporation            Parent
- ------------------------------------        --------------------------------------    ---------------------   ---------------
<S>                                         <C>                                       <C>                      <C>
Courier-Citizen Company                     Courier Corporation                       Massachusetts                100%

Courier Investment Corporation              Courier Corporation                       Massachusetts                100%

Book-mart Press, Inc.                       Courier Corporation                       New Jersey                   100%

The Home School, Inc.                       Courier Corporation                       Massachusetts                100%

Courier Westford, Inc.                      Courier Delaware Holding Corp.            Massachusetts                100%

National Publishing Company                 Courier Delaware Holding Corp.            Pennsylvania                 100%

Courier Stoughton, Inc.                     Courier Delaware Holding Corp.            Massachusetts                100%

Courier Companies, Inc.                     Courier Delaware Holding Corp.            Massachusetts                100%

Courier Kendallville, Inc.                  Courier Delaware Holding Corp.            Indiana                      100%

Courier New Media, Inc.                     Courier Delaware Holding Corp.            Massachusetts                100%

Courier Foreign Sales Corporation Ltd.      National Publishing Company               Jamaica                      99%

Courier Delaware Holding Corp.              Courier-Citizen Company                   Delaware                     100%

Courier Properties, Inc.                    Courier-Citizen Company                   Massachusetts                100%

</TABLE>





<PAGE>


INDEPENDENT AUDITORS' CONSENT


We consent to the incorporation by reference in Registration Statement No.
333-03201 of Courier Corporation on Form S-8 of our report dated November 5,
1998, appearing in this Annual Report on Form 10-K of Courier Corporation and
subsidiaries for the fiscal year ended September 26, 1998.


Deloitte & Touche LLP
Boston, Massachusetts
December 4, 1998

<TABLE> <S> <C>

<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
       
<S>                             <C>
<PERIOD-TYPE>                   YEAR
<FISCAL-YEAR-END>                          SEP-26-1998
<PERIOD-START>                             SEP-28-1997
<PERIOD-END>                               SEP-26-1998
<CASH>                                             722
<SECURITIES>                                         0
<RECEIVABLES>                                   27,941<F1>
<ALLOWANCES>                                     1,078
<INVENTORY>                                     10,828
<CURRENT-ASSETS>                                42,096
<PP&E>                                         102,359
<DEPRECIATION>                                  69,102
<TOTAL-ASSETS>                                  87,630
<CURRENT-LIABILITIES>                           25,569
<BONDS>                                              0
                                0
                                          0
<COMMON>                                         3,750
<OTHER-SE>                                      46,040<F2>
<TOTAL-LIABILITY-AND-EQUITY>                    87,630
<SALES>                                        151,591
<TOTAL-REVENUES>                               151,591
<CGS>                                          113,937
<TOTAL-COSTS>                                  113,937
<OTHER-EXPENSES>                                26,474
<LOSS-PROVISION>                                   179
<INTEREST-EXPENSE>                               1,303
<INCOME-PRETAX>                                 11,755
<INCOME-TAX>                                     4,030
<INCOME-CONTINUING>                              7,725
<DISCONTINUED>                                       0
<EXTRAORDINARY>                                      0
<CHANGES>                                            0
<NET-INCOME>                                     7,725
<EPS-PRIMARY>                                     2.49
<EPS-DILUTED>                                     2.37
<FN>
<F1>Accounts receivable are net of allowances for doubtful accounts.
<F2>Other SE includes treasury stock.
</FN>
        

</TABLE>


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