OMI CORP.

                  ANNUAL EXECUTIVE INCENTIVE COMPENSATION PLAN

PURPOSE
-------

To improve OMI Corp.'s financial results by creating compensation incentives
based on the performance of its executive personnel.

ELIGIBILITY
-----------

Prior to the beginning of each calendar year (a "Performance Year"), the
Chairman of the Board of Directors will recommend to the Compensation Committee
of the Board those positions eligible to participate in the plan for that year
(the "Participants"). Participation in the plan is restricted to positions that:

     1. Report directly to the Chairman.

     2. Perform managerial or other functions that have significant influence on
corporate performance.

PLAN FEATURES
-------------

Unit Determination - Each Participant shall have allocated a proposed number of
units for each Performance Year in which he or she is a Participant. The person
to whom the Participant reports shall evaluate the Participant's performance
prior to the end of the Performance Year and recommend to the President or
Senior Vice

                                      - 1 -


<PAGE>



President to whom the Participant's department reports the percentage of the
allocated units to which the Participant shall be entitled, which percentage
shall range from 0 to 125% with the norm expected to be 75 to 100% and the
President or Senior Vice President shall determine the appropriate percentage.
The Chairman shall evaluate the performance of the President and the President
shall evaluate the performance of each Senior Vice President, each making a
recommendation to the Compensation Committee, which shall (1) evaluate the
performance of the Chairman and (2) determine the appropriate percentages for
the Chairman, President and Senior Vice Presidents (such determination for each
Participant multiplied by the appropriate target incentive award units being the
"Multiplier Units" for the Participant for the Performance Year).

COMPANY PERFORMANCE MEASURES - The performance measures selected may be
different in a given year and may vary from one year to another, at the
discretion of the Compensation Committee. The chosen measures will reflect
important strategic and/or tactical objectives crucial to the Company's success.

The Compensation Committee of the Board has selected the following goals for
1995 and until otherwise determined:

     (a) Stock price: The stock price will be targeted at $7.50 for 1995, $8.50
for 1996, $9.50 for 1997 and $10.50 in 1998. The measurement price shall be the
average closing price the first ten

                                      - 2 -


<PAGE>



trading days in December. The differential between the applicable targeted stock
price and the average weighted closing price during the measurement period shall
be calculated (the "Price Differential").

     (b) Free cash flow: Cash flow after debt service which is Net Income Before
Taxes + Depreciation - Scheduled Principal Amortization +/- Drydock Accrual.
(The drydock accrual shall be computed as accrued drydock expense - actual cash
expense.) Free cash flow shall be determined based on the Company's audited
financial statements and shall be divided by the number of common stock shares
of the Company outstanding on December 31 of the Performance Year (the "Cash
Flow per share").

Calculation - The award (the "Incentive Bonus") for a Participant shall be the
Participant's Multiplier Units times the sum of (a) the Price Differential and
(b) Cash flow per share.

PAYMENT AWARDS
--------------

The Incentive Bonus shall be paid in full as soon as possible after the end of
the Performance Year, usually on or before March 1.

SPECIAL CONSIDERATIONS
----------------------

If a Participant's employment is terminated due to death, long-term disability,
or retirement prior to the end of the Performance Year, the Participant or the
Participant's beneficiary shall be entitled

                                      - 3 -


<PAGE>



to receive a pro rata portion of the award that would have been received had the
Participant been active for the full year.

If a Participant's employment is terminated for reasons other than those
described above, including resignation or discharge, prior to the end of the
Performance Year any rights to an award will normally be forfeited, except that
the Chairman may recommend an award amount for approval by the Compensation
Committee, subject to ratification by the Board.

Individuals who become Participants during a performance year receive incentive
award opportunities prorated accordingly. Participants who are promoted to a
position at a higher level of proposed units are eligible for prorated award for
the amount of time spent in each position and based upon the performance level
achieved in each position.

LIMITATIONS
-----------

Participation in the Plan neither implies nor guarantees continuance of
employment. No part of the Plan shall be construed as a compensation contract.

CHANGE OF CONTROL
-----------------

In the event that a Change in Control as defined in Section 3 of
the OMI Corp. Separation Allowance Program shall occur, the

                                      - 4 -


<PAGE>



Participants shall be entitled to receive bonuses annually, using the same
criteria as hereinabove set forth except:

     (1)  neither the Compensation committee nor any other person nor persons
          shall have the right to terminate nor the discretion to change the
          Plan without the written consent of each Participant affected.

     (2)  The multiplier Units for each Participant shall be 100% of the
          Participant's target incentive award units

     (3)  The Price Differential shall be the difference between (a) the higher
          of (i) stock price at the time of the calculation of the bonus most
          recently paid and (ii) the fair market value of shares of OMI Corp.
          common stock at the time of the Change in Control and (b) the target
          price for the applicable year, provided that for any year for which a
          target price has not been established, the target price shall be $1.00
          higher than the previous year.

     (4)  If a Participant's employment is terminated other than for cause (as
          defined in any employment agreement between the Participant and the
          Company, if the same is in effect, or otherwise in the OMI Corp.
          Separation Allowance Program) or due to death, long term disability

                                      - 5 -


<PAGE>


          or retirement prior to the end of a Performance Year, the Participant
          or the Participant's beneficiary shall be entitled to receive a pro
          rata portion of the award that would have been received had the
          Participant been active for the full year.


                                      - 6 -