exv10w7






EXHIBIT 10.7









ANNUAL INCENTIVE PLAN



2010 Plan Year



Guidelines



KIRBY CORPORATION



January 2010



 









 





TABLE OF CONTENTS




	 	 	 	 	 
	Introduction
	 	 	2	 
	 
	 	 	 	 
	The Annual Incentive Plan
	 	 	3	 
	 
	 	 	 	 
	Performance Measurement Period
	 	 	3	 
	 
	 	 	 	 
	Eligibility
	 	 	3	 
	 
	 	 	 	 
	Plan Objectives
	 	 	4	 
	 
	 	 	 	 
	Performance Measures
	 	 	4	 
	 
	 	 	 	 
	Corporate and Business Group Weighting
	 	 	6	 
	 
	 	 	 	 
	Individual Bonus Targets
	 	 	7	 
	 
	 	 	 	 
	Annual Incentive Plan Concept
	 	 	7	 
	 
	 	 	 	 
	Performance Measures and Weighting
	 	 	8	 
	 
	 	 	 	 
	Performance Standards and Award Opportunities
	 	 	8	 
	 
	 	 	 	 
	Example Award Calculation
	 	 	9	 
	 
	 	 	 	 
	Administration
	 	 	10	 






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Introduction



Kirby Corporation established this 2010 Annual Incentive Plan (the “Plan”) to focus employees
on identifying and achieving business strategies that will grow the business and lead to
an increase in stockholder value. The Plan is also intended to reward superior performance by
employees, for their contributions toward 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 cases. Therefore, the Compensation Committee of the
Kirby Board of Directors shall have the discretionary authority to interpret these guidelines to
insure that 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 as such, shall be
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 performance, and for the
performance of our three Business Groups: Kirby Inland Marine, Kirby Engine Systems and Dixie
Offshore Transportation. Awards are formula-driven and are based on achieving Company, Business
Group and individual performance objectives. At the discretion of the Compensation Committee (or
to the extent provided in the Plan, the Chief Executive Officer of the Company), an award may be
decreased by up to 25% based on individual performance (“negative discretion”).




Performance Measurement Period



Performance is measured on a calendar year basis for the Plan. The Performance Period
begins on January 1, 2010 and ends on December 31, 2010.




Eligibility





	•	 	Generally, shore staff managerial employees in salary grades 15 and above, and
Wheelhouse employees classified as Captain, Relief Captain or Pilot, are eligible for
consideration to be participants. Selection for participation in the Plan is based upon each
position’s ability to impact long-term financial results of the Company. Consequently, some
employees in positions at salary grades 15 and above might not be included in the Plan, and
some employees in positions below salary grade 15 might be included.
	 
	•	 	In order to be eligible to receive an award, 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 retirement1 or
disability1. If a participant’s employment is terminated after the last day of the
Performance Period, but prior to the date of payment, for any reason other than death, normal
retirement1 or disability1, the participant’s bonus is distributed among
others eligible for the bonus. A “covered employee” as defined for







 




			
	1	 	Normal retirement or disability as defined
for shore based employees in the Company’s Profit Sharing Plan, and as defined
for wheelhouse employees in the Vessel Pension Plan




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	 	 	purposes of Section 162(m) (a “Covered Employee”) is not eligible for the reallocated
amounts.
	 
	•	 	Participation in the Plan in one year 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.





Plan Objectives



The Plan has five key objectives:





	 	•	 	Provide an annual incentive plan that drives performance toward objectives critical to
creating shareholder value.
	 
	 	•	 	Offer competitive cash compensation opportunities to key Kirby employees.
	 
	 	•	 	Award outstanding achievement among employees who can 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.





Performance Measures



The performance measures for 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 individual bonus payments will be based on a combination of Company performance and individual
performance.







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The maximum amount that may be paid under an award is based on Company performance in achieving the
three performance measures, although an award may be decreased by up to 25% based on an assessment
of individual performance for the year.



Each of the performance measures will have equal weight in calculating the bonus payout pool.






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Corporate and Business Group Weighting



The Plan bonus is calculated at the end of the year based on the performance of Kirby and the
performance of our three Business Groups, Kirby Inland Marine, Kirby Engine Systems and Dixie
Offshore Transportation, relative to objectives established at the beginning of the year.



The award for Business Group employees will be primarily tied to Business Group performance, with a
defined portion tied to Company performance.



The award for Corporate employees will be tied entirely to total Kirby performance.




Annual Incentive Plan Calculation




	 	 	 	 	 	 	 	 	 
	 	 	Incentive
	 	 	Bonus Calculation %
	 	 	Kirby	 	 
	 	 	(Company)	 	Business Group
	All Corporate Employees
	 	 	100	%	 	 	0	%
	 
	Business Group Employees (Inland,
Engine Systems and Offshore)
	 	 	30	%	 	 	70	%
	 
	Inland & Engine Systems Presidents
	 	 	50	%	 	 	50	%






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Individual Bonus Targets



Each participant will be assigned a bonus level which 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 repair industry, depending upon the individual position being considered.
The Company’s intent is that salary plus target annual bonus will be positioned to provide a
competitive market opportunity for target performance.




Annual Incentive Plan Concept













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Performance Measures and Weighting




	 	 	 	 	 	 	 	 	 
	Measure	 	Weight
	   	 	   
	 	n	 	 	EBITDA (Earnings Before Interest, Taxes,
Depreciation and Amortization)
	 	 	33-1/3	%
	 	 	 	 	 
	 	 	 	 
	 	n	 	 	Return on Total Capital (Earnings before interest and
taxes divided by average beginning and ending stockholders’
equity plus long-term debt)
	 	 	33-1/3	%
	 	 	 	 	 
	 	 	 	 
	 	n	 	 	Earnings per Share
	 	 	33-1/3	%
	 	 	 	 	 
	 	 	 	 
	 	 	 	 	 
	 	 	100	%






Performance Standards and Award Opportunities




	 	 	 	 	 	 	 	 	 	 	 
	Performance	 	 	 	Relationship to	 	% of Target
	Level	 	Definition	 	Budget	 	Earned
	Threshold	 	Minimal acceptable
performance for payout
	 	80% of Budget	 	 	50	%
	 
	Target	 	Expected performance
at a stretch level
	 	100% of Budget	 	 	100	%
	 
	Maximum	 	Outstanding performance
	 	120% of Budget	 	 	200	%





Performance must be at least to Threshold to earn a bonus payment.







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Example Award Calculation




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Performance Standards	 	 	Example Calculation
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Assumed	 	Percent	 	 	 	 	 	Weighted
	Performance	 	Below	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Actual	 	of	 	 	 	 	 	Percent
	Objectives	 	Threshold	 	Threshold	 	Target	 	Maximum	 	 	Results (%	 	Target	 	 	 	 	 	of Target
	Percent of Target	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Budget	 	Award	 	Objective	 	Award
	Award Earned:	 	0%	 	50%	 	100%	 	200%	 	 	Achieved)	 	Earned	 	Weight	 	Earned
	EBITDA (% Budget
Achieved)
	 	 	< 80	%	 	 	80	%	 	 	100	%	 	 	120	%	 	 	 	90	%	 	 	75	%	 	 	33-1/3	%	 	 	25	%
	 
	Return on Total
Capital (% Budget
Achieved)
	 	 	< 80	%	 	 	80	%	 	 	100	%	 	 	120	%	 	 	 	110	%	 	 	150	%	 	 	33-1/3	%	 	 	50	%
	 
	Earnings per Share (%
Budget Achieved)
	 	 	< 80	%	 	 	80	%	 	 	100	%	 	 	120	%	 	 	 	100	%	 	 	100	%	 	 	33-1/3	%	 	 	33.3	%
	 
	Total Percent of Target Awards Earned for Bonus Pool:	 	 	108.3	%







	n	 	 As shown in the exhibit, actual performance on each objective
results in a corresponding percent of target award earned.
	 
	n	 	The percents of target award earned for each objective are
then multiplied by the weight for the objective, producing a
weighted percent of target award earned for each objective.
	 
	n	 	The weighted percents of target award earned for all
objectives are summed to produce a total percent of target
awards earned. This factor, when multiplied by the sum of
target bonuses for plan participants, equals the bonus
funding pool.
	 
	n	 	The total pool is paid to participants pro-rata, based on
their individual bonus level and their applicable base salary
for the period, except that each individual award may be
decreased by up to 25% based on individual performance.




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Administration




Award Payout



A participant’s Final Award is paid out in cash within 90 days following the end of the Company’s
fiscal year, based on audited financials. No payment shall be made to a participant who is a
Covered Employee until the Compensation Committee certifies that the performance objectives that
result in such payment have been achieved.




Eligibility Limitation



Unless otherwise provided for in the Plan, participants must be employed by the Company on the last
day of the Performance Period, and on the date bonuses are actually paid for the Performance
Period, in order to be eligible to receive a bonus award.




Special Circumstances



Listed below are guidelines addressing payment of awards upon termination and other events. The
Committee will have the sole authority to resolve disputes related to Plan administration.
Decisions made by the Committee will be final and binding on all participants.



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



Termination of Employment. 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 retirement2, or disability2, the participant (or the participant’s
heirs) will be entitled to receive a prorated award at the end of the Performance Period, based
upon actual performance and base wages earned while employed during the Performance Period.



If employment terminates prior to the last day of the Performance Period, or prior to the date
bonuses are actually paid for the respective Performance Period, for any reason other then death,
normal retirement2, or disability2, the participant will be ineligible to
receive an award.






 




			
	2	 	Normal retirement or disability as defined for shore based employees in the Company’s
Profit Sharing Plan, and as defined for wheelhouse employees in the Vessel Pension Plan.




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Transfer. A participant who is transferred between business units of the Company will be entitled
to receive a weighted award based upon the time spent at each of the units. The weighted award is
calculated by adding (1) the participant’s prorated award for time spent at the first business
unit, to (2) the participant’s prorated award for time spent at the second business
unit3.



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 award.
The award is calculated by adding (1) the prorated award for service before the promotion or
reassignment, to (2) the prorated award for service after the promotion or
reassignment3.




Compensation Committee



The Compensation Committee has the responsibility for the overall governance and administration of
the Plan. In fulfilling its duties, the Committee will be responsible for interpreting the Plan
and will rely on these guidelines in making all determinations that are necessary or advisable for
administration of the Plan.



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





	 	•	 	Approve the designation of Business Groups within the Company
	 
	 	•	 	Approve the Performance Measures and the Threshold, Target and Maximum budget
performance levels for all participants
	 
	 	•	 	Approve linkage for participants to Company and Business Group performance
	 
	 	•	 	Approve the Bonus Levels for all participants whose salaries are at or above $100,000
	 
	 	•	 	Determine in its discretion whether a participant’s award will be decreased
	 
	 	•	 	Certify whether the performance objectives for a Covered Employee 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 may it
increase the amount payable to a Covered Employee upon attaining the performance objectives. The
performance objectives of Covered Employees may only be adjusted as permitted under Section 162(m)
or the regulations thereunder. In addition, the exercise of negative discretion with respect to
any participant is not permitted to result in an increase in the amount payable to another
participant who is a Covered Employee.






 




			
	3	 	Company and Business Group performance factors are calculated using performance for
the entire Performance Period.




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Chief Executive Officer (“CEO”)



The CEO will have primary responsibility for recommending Plan guidelines to the Committee, and for
carrying out the administrative duties associated with annual award calculations. In addition, the
Compensation Committee may delegate additional administrative duties to the CEO or any Company
officer. The CEO may determine, in his discretion, whether the award to any participant who is not
an executive officer of the Company will be decreased (up to a maximum of 25% of the award) based
on individual performance. The CEO may recommend, subject to Compensation Committee approval, that
the award to any executive officer of the Company be similarly decreased based on individual
performance.














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Chief Financial Officer (“CFO”)



The CFO will be responsible for calculating performance under the Plan and recommending adjustments
to the performance objectives. In this capacity, the CFO will:





	 	•	 	Provide annual reports to the Compensation Committee and the CEO on each Business
Group’s performance at the end of the Company’s 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 awards 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 Human Resources will have primary responsibility for the day-to-day administration of the
Plan. In this capacity, the VP of Human Resources will:





	 	•	 	Develop and recommend Target Award Guidelines and eligible participants for each
new Performance Period to the CEO for approval
	 
	 	•	 	Coordinate communications with participants, including materials to facilitate
understanding the Plan’s objectives and goals
	 
	 	•	 	Provide quarterly performance updates to Plan participants
	 
	 	•	 	Calculate participants’ awards, using the performance factors provided by the CFO
	 
	 	•	 	Process paperwork approving individual award payments





Business Group Presidents and Vice Presidents



Business Group Presidents and Vice Presidents will:





	 	•	 	Recommend participants for each Performance Period
	 
	 	•	 	Coordinate with the CFO to determine any significant changes in business conditions
for purposes of reviewing the Threshold, Target and Maximum performance objectives
	 
	 	•	 	Insure that participants are informed of the actual award earned for each
Performance Period






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