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Exhibit 10.5
 
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ANNUAL INCENTIVE PLAN (AIP)

2016 Plan Year

Guidelines

KIRBY CORPORATION
 
January 2016
 

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TABLE OF CONTENTS

Introduction
2
   
The Annual Incentive Plan
3
   
Plan Objectives
3
   
Performance Period
3
   
Eligibility
3
   
Individual Bonus Targets
4
   
Aggregate Payment Amount
4
   
Section 162(m) Performance Goal and Maximum Awards
5
   
Performance Measures
5
   
Business Group Designations and Weightings
5
   
Performance Standards for Interim Incentive Payment Calculations
6
   
Administration
8

 
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Introduction
Kirby Corporation (together with its subsidiaries, “Kirby” or the “Company”)
established the 2016 Annual Incentive Plan (the “Plan”) to focus employees on
identifying and achieving business strategies that lead to increased stockholder
value.  The Plan is also intended to reward superior performance by employees
and their contribution to achieving Kirby’s objectives.  This program may be
offered, in whole or in part, to wholly owned subsidiaries of the Company, at
the Company’s discretion.

Certain aspects of this Plan are complex.  Although these guidelines establish
rules for Plan operation, those rules may not work in all circumstances. 
Therefore, the Compensation Committee of the Kirby Board of Directors has
discretion to interpret these guidelines to assure the awards are consistent
with the Plan’s purposes and the Company’s interests.  All decisions by the
Compensation Committee shall be final and binding.

Unless resolutions of the Compensation Committee expressly provide otherwise,
awards granted under the Plan shall constitute performance awards granted under
Article IV of the Kirby Corporation 2005 Stock and Incentive Plan (as amended
from time to time, the “Stock Plan”) and are subject to the terms and provisions
of the Stock Plan that apply to such performance awards.

This Plan or any part thereof may be amended, modified, or terminated at any
time without prior notice, by written authorization of (i) the Compensation
Committee or (ii) the Chief Executive Officer of the Company; provided that the
Plan may not be amended or modified in a manner that would cause an award that
is intended to satisfy the performance-based compensation exception under
Section 162(m) of the Internal Revenue Code of 1986, as amended (“Section
162(m)”) to fail to satisfy the exception.
 
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The Annual Incentive Plan

Each award granted under the Plan is an award for total Company and designated
Business Group performance.  Awards are generally based on achieving the Company
Performance Goal as well as additional Company, Business Group and individual
performance measures and objectives.  Once the Performance Goal is reached
participants in the Plan become eligible for a bonus.

All amounts paid to participants pursuant to the Plan shall be subject to any
policy relating to the recovery of erroneously awarded incentive compensation
that may hereafter be adopted by the Company in order to comply with Securities
and Exchange Commission rules or New York Stock Exchange listing standards.

Plan Objectives

The Plan key objectives are:

· Provide an annual incentive plan that drives performance toward objectives
critical to creating stockholder value.

· Offer competitive cash compensation opportunities to key Kirby employees.

· Reward outstanding achievement by employees who directly affect Kirby’s
results.

· Assist Kirby in attracting and retaining high quality employees.

· Reflect both quantitative and qualitative performance factors in actual bonus
payouts.

· Ensure that incentive payments made by the Company are fully deductible by the
Company.

Performance Period

Performance is measured on a calendar year basis for the Plan.  The Performance
Period begins on January 1, 2016 and ends on December 31, 2016.

Eligibility

· Generally, managerial employees and Kirby Inland Marine Wheelhouse employees
classified as Captain, Relief Captain or Pilot, are eligible for participation. 
Selection for participation in the Plan is based upon each position’s ability to
impact long-term financial results of the Company and designation by
management.  Some employees in managerial positions might not be included in the
Plan.

 
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· In order to be eligible to receive an incentive payment under the Plan,
participants must be employed on the last day of the Performance Period and on
the date bonuses are actually paid for the Performance Period, unless their
earlier termination is due to death, normal retirement or disability. If a
participant’s employment is terminated prior to the last day of the Performance
Period, or prior to the date of payment, for any reason other than death, normal
retirement or disability, any bonus the participant may otherwise have received
will be forfeited and the participant will have no right to any incentive
payment under the Plan.

· Participation in the Plan in 2016 does not guarantee participation in similar
plans in future years.  Participants in the Plan or in similar plans in future
years will be notified annually of their selection for participation.

Individual Bonus Targets

On or before March 31, 2016, each participant will be assigned a target bonus
level defined as a percentage of base salary earned during the Performance
Period.  This bonus target is based on competitive market practices, as well as
the employee’s ability to impact long-term Company performance.  Market
practices will be determined using data from either general industry, the marine
transportation industry, or the diesel engine services industry, depending upon
the individual position being considered.

Aggregate Payment Amount

An interim incentive payment amount will be determined as of December 31, 2016
for each participant in the Plan based on the target incentive level for such
participant and the calculation formulas described in the Plan under the
headings Performance Measures, Business Group Designations and Weightings, and
Performance Standards for Interim Incentive Payment Calculations.  The Aggregate
Payment Amount shall equal the sum of all of such interim incentive payment
amounts.

The Company will be obligated to pay out the full Aggregate Payment Amount to
eligible participants, subject to the discretion of the Compensation Committee,
with respect to the allocation of the Aggregate Payment Amount among individual
participants.  Therefore, the Company’s obligation to pay out the Aggregate
Payment Amount becomes fixed on the last day of the Performance Period.

The Compensation Committee may determine the amount of the bonus paid to any
participant based on the performance measures described in the Plan or any other
criteria deemed appropriate in its discretion, provided that in no event will
the aggregate incentive payments made pursuant to the Plan exceed the Aggregate
Payment Amount.
 
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Section 162(m) Performance Goal and Maximum Awards

The performance goal (the “Performance Goal”) that must be attained in order for
any Plan participant to receive a bonus under the Plan is the achievement by the
Company of net earnings attributable to Kirby for 2016 (as shown in Kirby’s
audited Consolidated Statements of Earnings for 2016) greater than $1,000,000. 
If the Company achieves the Performance Goal, the maximum bonus that any
participant may receive under the Plan will be equal to 200% of the individual
bonus target established for such participant (for each participant, the
“Maximum Award”).  The Compensation Committee in its discretion may reduce the
bonus paid to any participant to an amount less than the Maximum Award.

Performance Measures

In addition to the Performance Goal, performance measures used under the Plan
are:
 

· EBITDA

· Return on Total Capital

· Earnings per share

Annual performance targets will be established for each measure based on Kirby’s
projected budget and each of the performance measures will have equal weight in
calculating the interim incentive payment amount for each participant.

Measure2
Weight
EBITDA
    (Earnings before Interest, Taxes, Depreciation and Amortization) 33.33%
 Return on Total Capital      
(Earnings before interest and taxes divided by average beginning and ending
stockholders' equity plus long-term debt)
33.33%
Earnings per Share
33.33%
 
100%

2 United Holdings measured on EBITDA only.
 
Business Group Designations and Weightings

The following business groups are designated for purposes of the Plan:

· Kirby Inland Marine

· Kirby Engine Systems

· United Holdings

· Kirby Offshore Marine

Note: Kirby Ocean Transport Company and Osprey Line, LLC are considered part of
the Kirby Inland Marine business group for purposes of the Plan.
 
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In calculating actual versus target performance against the performance
measures, the recommended award for Business Group employees will be primarily
based on Business Group performance with a defined portion based on Company
performance.  The award for Corporate employees will be based on total Kirby
performance.  Specific weightings are defined in the following table:
 

 
Calculation of Incentive Payments
                       
Incentive Bonus Calculation
          Kirby (Company)     Business Group(s)      
Eligible Corporate Employees
 
100%
 
 
0%
 
 
                   
Business Group Presidents
 
50%
 
 
50%
 
 
  (KMTG President 50% company, 35% KIM 15%KOM)                                  
Officers with primary responsibilities for KIM and partial KOM (5)
 
30%
 
 
70%
 
 
  (30% corporate, 50% KIM, 20% KOM)                                  
Officers with primary responsibilities for KOM and partial KIM (1)
 
30%
 
 
70%
 
 
  (30% corporate, 50% KOM, 20% KIM)                                   Other
Business Group Employees   30%     70%                      

Performance Standards for Incentive Payment Calculations

Performance
Level
Definition
Relationship to Budget*
% of Target
Used for
Calculation
Below Threshold
Performance did not meet minimum metric
less than 80% of Budget
0%
Threshold
Minimal acceptable performance for payout
80% of Budget
50%
Target
Expected performance at stretch level
100% of Budget
100%
Maximum
Outstanding performance
120% of Budget
200%

 
*budget and target are measured on an incremental basis (example: 90% of budget
results in 75% of target used for calculation)
 

· As shown in the tables, actual performance against each performance measure
results in a corresponding percentage of target amount.

· The target amount determined for each performance measure is then multiplied
by the weight for the performance measure (33.33%) and the results are added
together to produce a total corporate or business payout percentage of the
target incentive that is applied to each individual participant.

 
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· The Compensation Committee shall in its discretion allocate the Aggregate
Payment Amount among eligible participants.  In allocating the Aggregate Payment
Amount, the Compensation Committee may consider, but shall not be bound by, the
interim incentive payment calculation for each participant.

· The Compensation Committee has discretion to modify the performance measures
or adjust the calculation of the interim incentive amounts to adjust for
acquisitions, divestures, and other material business events.

· Notwithstanding the foregoing or any provision of the Plan to the contrary, no
participant who is a covered employee as defined in the Section 162(m) of the
Internal Revenue Code of 1986, as amended (a "Covered Employee”), may receive an
amount in excess of the participant’s Maximum Award and the aggregate amount of
incentive payments made to participants in the Plan must equal the Aggregate
Payment Amount.

 
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Administration

Award Payout
A participant’s final bonus payment is paid out in cash within 90 days following
the end of the Company’s fiscal year, based on audited financial statements of
the Company.  No payment shall be made to a participant who is a Covered
Employee until the Compensation Committee certifies that the Performance Goal
and other material terms of the Plan resulting in such payment have been
achieved.

Eligibility Limitation
Participants must be employed by the Company on the last day of the Performance
Period and on the date bonuses are actually paid in order to receive a bonus,
unless otherwise provided for in the Plan.

Special Circumstances
The Compensation Committee will have the sole authority to resolve disputes
related to Plan administration.  Decisions made by the Compensation Committee
will be final and binding on all participants.  The Compensation Committee has
the sole discretion to determine the bonuses for newly hired, terminated,
transferred and promoted employees, but will generally award bonuses based on
the following provisions.

New Employees
New employees hired after the beginning of a Performance Period who are selected
for participation in the Plan, will receive prorated bonuses for the current
Performance Period, subject to the Termination of Employment restrictions.

Termination of Employment
If employment terminates prior to the last day of the Performance Period or
prior to the date bonuses are actually paid for the Performance Period, for any
reason other than death, normal retirement, or disability, the participant will
be ineligible to receive a bonus.

If employment terminates before the end of the full Performance Period or before
the date bonuses are actually paid for the Performance Period as a result of
death, normal retirement, or disability, the participant (or the participant’s
heirs) will be entitled to receive a prorated bonus at the end of the
Performance Period based upon actual performance and base wages earned while
employed during the Performance Period.

Transfer
A participant who is transferred between business units of the Company will be
eligible to receive a weighted bonus based upon the time spent at each of the
units3.

Promotions
A participant who is promoted or reassigned during any Performance Period and
whose bonus target is subsequently increased or decreased will be eligible to
receive a weighted bonus, based on the service before and after the promotion or
reassignment.
 
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Compensation Committee
The Compensation Committee has the responsibility for governance and
administration of the Plan.  In fulfilling its duties the Compensation Committee
will be responsible for interpreting the Plan and will rely on these guidelines
in making all determinations necessary.

In administering the Plan the Compensation Committee will, on an annual basis:

·
Approve the designation of Business Groups within the Company

· Approve the Performance Goal

· Approve the performance measures and the Threshold, Target and Maximum budget
performance levels for all participants for purposes of calculating interim
incentive payments

· Approve linkage for participants to Company and Business Group performance

· Approve the individual bonus targets for all participants whose salaries are
at or above $100,000

· Determine at its discretion the final incentive payments for participants

· Approve the Aggregate Payment Amount to be paid to participants in the Plan

· Certify whether the Performance Goal and other material terms that result in
payments under the Plan have been satisfied prior to payment of an award to a
Covered Employee.

The Compensation Committee may deviate from the guidelines for the Plan, but in
no event will a bonus paid pursuant to the Plan exceed the Maximum Award for any
Covered Employee.  The Compensation Committee may decrease the bonus to be paid
to any participant below the Maximum Award based on such objective or subjective
criteria as the Compensation Committee deems appropriate.

The total amount of the bonuses paid to participants pursuant to the Plan may
not exceed the Aggregate Payment Amount.

The performance objectives of Covered Employees may only be adjusted as
permitted under Section 162(m) or the regulations thereunder.
 

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3Company and Business Group performance factors are calculated using performance
for the entire Performance Period.
 
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Chief Executive Officer (CEO)
The CEO has primary responsibility for recommending Plan guidelines to the
Committee and for delegating administrative duties associated with the plan. 
The Compensation Committee may delegate additional administrative duties to the
CEO or any Company officer.  The CEO may make recommendations subject to
Compensation Committee approval, with respect to the incentive payment to any
participant.

Chief Financial Officer (CFO)
The CFO is responsible for calculating performance under the Plan and
recommending adjustments to the performance objectives.  The CFO will:

· Provide annual reports to the Compensation Committee and the CEO on each
Business Group’s performance at the end of the fiscal year

 

· Maintain a financial information system that reports results on an estimated
quarterly and annual basis

 

· Coordinate with the Company’s auditors to properly recognize any accounting
expense associated with incentive payments under the Plan

 

· Provide the VP of Human Resources with the performance results of each
Business Group as well as overall Company performance

 

· Calculate new Threshold, Target and Maximum performance objectives as required
by the Plan

VP of Human Resources
The VP of HR has responsibility for administration of the Plan and will:

· Develop and recommend Target Award Guidelines and eligible participants for
each Performance Period to the CEO for approval

 

· Coordinate communications with participants, including materials to facilitate
understanding the Plan’s objectives and goals

 

· Calculate participants’ interim incentive amounts, using the performance
factors provided by the CFO

 

· Process paperwork approving individual incentive payments

Business Group Presidents and Vice Presidents will:

· Recommend participants in the Plan

 

· Coordinate with the CFO to determine any significant changes in business
conditions for purposes of reviewing the Threshold, Target and Maximum
performance objectives

 

· Assure that participants are informed of the actual incentive payment to be
made for the Performance Period

 
 
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