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MARITRANS INC.



ANNUAL INCENTIVE PLAN



 




 




Adopted by Maritrans Inc.

Board of Directors on November 2, 2005.




Approved by Maritrans Inc.

Stockholders on                                         




 









 





MARITRANS INC.




ANNUAL INCENTIVE PLAN





	1.	 	Purpose





     The purpose of the Maritrans Inc. Annual Incentive Plan (the “Plan”) is to enhance the ability
of Maritrans Inc. (the “Company”) to attract, reward and retain employees, to strengthen employee
commitment to the Company’s success and to align employee interests with those of the Company’s
stockholders by providing variable compensation, based on the achievement of performance
objectives. To this end, the Plan provides a means of annually rewarding participants based on the
performance of the Company and its Business Units (as defined below) and, where appropriate, on a
participant’s personal performance.




	2.	 	Definitions





     (a) “Award” shall mean the incentive award earned by a Participant under the Plan for any
Performance Period.



     (b) “Base Salary” shall mean the Participant’s annual base salary rate in effect on May
1st of a Performance Period. Base Salary does not include Awards under this Plan or any
other short-term or long-term incentive plan; imputed income from such programs as group-term life
insurance; or non-recurring earnings, such as moving expenses, but is based on salary earnings
before reductions for such items as deferrals under Company-sponsored deferred compensation plans,
contributions under Code section 401(k) and contributions to flexible spending accounts under Code
section 125.



     (c) “Board” shall mean the Maritrans Inc. Board of Directors, as constituted from time to
time.



     (d) “Business Unit” shall mean a strategic business unit, central function, regional group or
other unit of classification of the Company, as specified by the Committee or the CEO, as
applicable.



     (e) “CEO” shall mean the Chief Executive Officer of the Company or the person to whom the CEO
delegates any function required of the CEO under the Plan.



     (f) “Code” shall mean the Internal Revenue Code of 1986, as amended or any successor statute
thereto.



     (g) “Committee” shall mean the Compensation Committee of the Board. The Committee shall
consist of two or more persons appointed by the Board, all of whom shall be “outside directors” as
defined under Code section 162(m) and related Treasury regulations. The Committee may delegate its
responsibilities for administering the Plan to the CEO as it deems appropriate, except that it may
not delegate its responsibilities under the Plan relating to Tier I Officers or its authority to
amend or terminate the Plan.



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     (h) “Company” shall mean Maritrans Inc., any successor corporation and each corporation which
is a member of a controlled group of corporations (within the meaning of Code section 414(b)) of
which Maritrans Inc. is a component member.



     (i) “Disabled” or “Disability” shall mean that a Participant is considered totally and
permanently disabled for purposes of the Company’s long-term disability plan.



     (j) “Effective Date” shall mean January 1, 2006.



     (k) “Employee” shall mean an employee of the Company (including an officer or director who is
also an employee), but excluding any individual (a) employed in a casual or temporary capacity
(i.e., those hired for a specific job of limited duration), (b) whose terms of employment
are governed by a collective bargaining agreement that does not provide for participation in this
Plan, (c) characterized as a “leased employee” within the meaning of Code section 414, or (d)
classified by the Company as a “contractor” or “consultant,” no matter how characterized by the
Internal Revenue Service, other governmental agency or a court. Any change of characterization of
an individual by any court or government agency shall have no effect upon the classification of an
individual as an Employee for purposes of this Plan, unless the Committee determines otherwise.



     (l) “Executive” shall mean an officer, business leader or other Employee of the Company, who
is designated as an Executive for purposes of the Plan by the Committee, upon the recommendation of
the CEO.



     (m) “Participant” for any Performance Period, shall mean an Employee designated by the
Committee to participate in the Plan.



     (n) “Performance Goals” for any Performance Period, shall mean:



          (i) For Target Awards designated as “qualified performance-based compensation” pursuant to
Section 5, the Performance Goals of the Company or a Business Unit, as specified by the Committee,
shall be based on one or more of the following objective criteria, either in absolute terms or in
comparison to publicly available industry standards or indices: earnings, revenue, operating
margins and statistics, operating or net cash flows, financial return and leverage ratios, total
stockholder returns, market share, and safety statistics.




          (ii) For Target Awards not designated as “qualified performance-based compensation” pursuant
to Section 5, the Performance Goals of the Company, a Business Unit and/or the Participant, as
specified by the Committee, based on one or more of the criteria listed in (i) above and/or such
other performance measures or goals, whether quantitative or qualitative, developed pursuant to the
Company’s operating plan for the Performance Period.




          (iii) The Committee may also establish Performance Goals that relate to a Participant’s
individual performance or a combination of a Participant’s individual performance and Company
performance as the Committee deems appropriate.




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          (iv) To the extent applicable, the Committee, in determining whether and to what extent a
Performance Goal has been achieved, shall use the information set forth in the Company’s audited
financial statements. The Performance Goals established by the Committee may be (but need not be)
different each Performance Period and different Performance Goals may be applicable to different
Participants.




          (v) The Performance Goals may be weighted in such manner as the Committee may allocate, as
determined at the beginning of the Performance Period.




          (vi) The Performance Goals for each Performance Period, as determined by the Committee, are
set forth in Attachment A.




     (o) “Performance Period” shall mean the fiscal year of the Company or any other period
designated by the Committee with respect to which an Award may be earned.



     (p) “Plan” shall mean this Maritrans Inc. Annual Incentive Plan, as from time to time amended
and in effect.



     (q) “Retirement” shall mean retirement from active employment or service with the Company at
or after age 62.



     (r) “Target Award Percentage” shall mean the percentage of the Participant’s Base Salary that
the Participant would earn as an Award for that Performance Period if the targeted level of
performance was achieved for each of the Performance Goals set by the Committee for that
Participant for the Performance Period. A Participant’s Target Award Percentage shall be
determined by the Committee in its sole discretion based on the Participant’s responsibility level
or the position or positions held during the Performance Period; provided, however, that if any
Participant other than a Tier I Officer held more than one position during the Performance Period,
then the Committee may designate different Target Award Percentages with respect to each position
and the Award will be pro-rated to reflect (to the nearest semi-monthly increment) the period
during which such Participant had each Target Award Percentage.



     (t) “Target Award” for any Participant with respect to any Performance Period, shall mean the
dollar amount based on the Participant’s Target Award Percentage and Base Salary that the
Participant would be eligible to earn as an Award for that Performance Period.



     (u) “Tier I Officer” shall mean the Chief Executive Officer of the Company and such other
executive officers (within the meaning of the Securities Exchange Act of 1934, as amended) who are
among the top six most highly compensated Employees of the Company as may be deemed Tier I Officers
by the Committee as of the beginning of a Performance Period.




	3.	 	Eligibility





     Subject to the limitations contained in this Section 3, all Executives of the Company are
eligible to participate in the Plan. The Committee shall determine, upon the recommendation of the
CEO of the Company, each Executive of the Company who shall be eligible to participate in



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the Plan for each Performance Period, each Participant’s Target Award Percentage for that
Performance Period and the Performance Goal or Goals (and how they are weighted, if applicable) for
that Performance Period. In making its determinations, the Committee shall take into account the
Company’s overall compensation policy, the Executive’s present and potential contribution to the
success of the Company and such other factors as the Committee may in its sole discretion deem
proper and relevant.



     To be eligible to receive an Award with respect to any Performance Period, an Employee must be
actively employed by the Company on the date payment of the Award is made (except as provided in
Section 8). Newly hired Employees shall be eligible to receive a prorated Award for a Performance
Period provided that their date of hire occurs on or before September 30 or such other date as the
Committee may specify.



     Employees shall participate in only one annual incentive plan for any specific period in time.
An Employee may participate in this Plan and another plan sequentially during any Performance
Period because of promotion or reassignment, provided that participation in each such plan is
prorated to reflect (to the nearest semi-monthly increment) the period during which he or she
participated in each plan.




	4.	 	Administration





     The administration of the Plan shall be consistent with the purpose and the terms of the Plan.
The Plan shall be administered by the Committee. The Committee shall have full authority to
establish the rules and regulations relating to the Plan, to interpret the Plan and those rules and
regulations, to select Participants in the Plan, to determine each Participant’s Target Award
Percentage, to approve all of the Awards, to decide the facts in any case arising under the Plan
and to make all other determinations, including factual determinations, and to take all other
actions necessary or appropriate for the proper administration of the Plan, including the
delegation of such authority or power, where appropriate; provided, however, that only the
Committee shall have authority to amend or terminate the Plan and the Committee shall not be
authorized to increase the amount of the Award payable to a Tier I Officer that would otherwise be
payable pursuant to the terms of the Plan. All powers of the Committee shall be executed in its
sole discretion, in the best interest of the Company, not as a fiduciary, and in keeping with the
objectives of the Plan and need not be uniform as to similarly situated individuals.



     All Awards shall be made conditional upon the Participant’s acknowledgement, in writing or by
acceptance of the Award, that all decisions and determinations of the Committee shall be final and
binding on the Participant, his or her beneficiaries and any other person having or claiming an
interest under such Award. Awards need not be uniform as among Participants. The Committee’s
administration of the Plan, including all such rules and regulations, interpretations, selections,
determinations, approvals, decisions, delegations, amendments, terminations and other actions,
shall be final and binding on the Company and all employees of the Company, including, the
Participants and their respective beneficiaries.



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	5.	 	Determination of Awards





     (a) Setting Target Awards. As soon as practicable, but no later than the earlier of (i) 90
days after the beginning of the Performance Period or (ii) the date on which 25% of the Performance
Period has been completed, or such other date as may be required or permitted under applicable
regulations under Code section 162(m), the Committee shall determine the Employees who shall be
Participants during that Performance Period and determine each Participant’s Target Award
Percentage, each of which shall be set forth in the Committee’s minutes. The Committee may also
specify, at the same time, Award percentages above or below the Target Award Percentage depending
upon the level of achievement of the Performance Goals. The minutes shall set forth (A) the
Participants during that Performance Period (which may be amended during the Performance Period for
new Participants), (B) each Participant’s Target Award Percentage for that Performance Period and
(C) the Performance Goal or Goals (and how they are weighted, if applicable,) for that Performance
Period. The Company shall notify each Participant of the Participant’s Target Award Percentage and
the applicable Performance Goals for the Performance Period.



     (b) Earning An Award. Generally, a Participant earns an Award for a Performance Period based
on the level of achievement of the Performance Goals established by the Committee for that period.
Except for Awards to Tier I Officers designated as “qualified performance-based compensation,” the
amount of the Award may be increased above the Target Annual Percentage or other levels set under
subsection (a), as specified by the Committee. An Award may also be reduced below the Target Award
Percentage to the extent the level of achievement of the Performance Goals is below target, but at
or above the minimum level for that Performance Period, as specified by the Committee at the time
the Performance Goals are established or for other reasons specified by the Committee. A
Participant will receive no Award if the level of achievement of all Performance Goals is below the
minimum required to earn an Award for the applicable Performance Period, as specified by the
Committee at the time the Performance Goals are established.



     (c) Eligibility Change During the Performance Period. The Committee shall have full power
and authority to decide, in its sole discretion, that a prorated Award shall be paid to a
Participant due to a change in the Participant’s job title or position during the Performance
Period. Any such decision shall be final, conclusive and binding on the Company, Participants and
any other persons having or claiming an interest hereunder.



     (d) Maximum Award Amount. The maximum Award payable to any Tier I Officer for any
Performance Period shall not exceed $1,000,000.



     (e) Special Rules for Tier I Officers. Unless the Committee determines otherwise, the Target
Awards of Tier I Officers shall be based on Performance Goals for each Performance Period that
shall satisfy the requirements for “qualified performance-based compensation” under Code section
162(m), including the requirement that the achievement of the Performance Goals be substantially
uncertain at the time they are established and that the Performance Goals be established in such a
way that a third party with knowledge of the relevant facts could determine whether and to what
extent the Performance Goals have been met. To the extent that an Award



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designated as “qualified performance-based compensation” under Code section 162(m) is made, no
award may be made as an alternative to any other award that is not designated as “qualified
performance-based compensation” but instead must be separate and apart from all other awards made.
To the extent an Award is designated as “qualified performance-based compensation,” the Committee
is authorized to reduce the Award payable to a Tier I Officer for any Performance Period based upon
its assessment of personal performance or other factors, but not to increase the Award beyond the
Target Award Percentage, or the percentage set under subsection (a) for that Tier I Officer. Any
reduction of a Tier I Officer’s Target Award shall not result in an increase in any other Tier I
Officer’s Target Award.




	6.	 	Changes to the Target





     Except with respect to Awards to Tier I Officers, the Committee may at any time prior to the
final determination of Awards change the Target Award Percentage of any Participant or assign a
different Target Award Percentage to a Participant to reflect any change in the Participant’s
responsibility level or position during the course of the Performance Period.



     In addition, the Committee may, but only to the extent consistent with the requirements of
Code section 162(m) permitting a federal income tax deduction for Awards if a Target Award is
designated as “qualified performance-based compensation,” at any time prior to the financial
determination of Awards, change the performance measures or Performance Goals to reflect a change
in corporate capitalization, such as a stock split or stock dividend, or a corporate transaction,
such as a merger, consolidation, separation, reorganization or partial or complete liquidation, or
to equitably reflect the occurrence of any extraordinary event, any change in applicable accounting
rules or principles, any change in the Company’s method of accounting, any change in applicable
law, any change due to any merger, consolidation, acquisition, reorganization, stock split, stock
dividend, combination of shares or other changes in the Company’s corporate structure or shares, or
any other change of a similar nature.




	7.	 	Payment of Awards





     The Committee shall certify and announce the Awards that will be paid by the Company to each
Participant as soon as practicable following the final determination of the Company’s financial
results for the relevant Performance Period. Subject to the provisions of Section 8, payment of
the Awards certified by the Committee shall normally be made, in a single lump sum cash payment on
or before March 15 following the end of the Performance Period in which such Award was earned.




	8.	 	Limitations on Rights to Payment of Awards





     (a) Employment. No Participant shall have any right to receive payment of an Award under the
Plan for a Performance Period unless the Participant is actively employed by the Company on the
date payment of the Award is made; provided, however, that if a Participant’s employment with the
Company terminates prior to the end of the Performance Period (including but not limited to
termination on account of Retirement, Disability or death), the Committee may provide that the
Participant shall remain eligible to receive a prorated portion of any earned



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Award, based on the number of days that the Participant was actively employed and performed
services during such Performance Period in such circumstances as are deemed appropriate.



     (b) Leaves of Absence. If a Participant is on an authorized leave of absence during the
Performance Period, the Committee shall have full power and authority to decide, in its sole
discretion, that such Participant shall be eligible to receive a prorated portion of any Award that
would have been earned, based on the number of days that the Participant was actively employed and
performed services during such Performance Period. If payments are to be made under the Plan after
a Participant’s death, such payments shall be made to the personal representative of the
Participant’s estate.



     (c) Accelerated Payment. In no event will payment be made to a Tier I Officer or, unless the
Committee determines otherwise, to any other Participant, with respect to an Award prior to the end
of the Performance Period to which it relates.




	9.	 	Amendments





     The Committee may at any time amend (in whole or in part) this Plan; provided, however, that
the Committee shall not amend the Plan without stockholder approval if such approval is required by
Code section 162(m). No such amendment which adversely affects any Participant’s rights to or
interest in an Award earned prior to the date of the amendment shall be effective unless the
Participant shall have agreed thereto.




	10.	 	Termination





     The Committee may terminate this Plan (in whole or in part) at any time. In the case of such
termination of the Plan, the following provisions of this Section 10 shall apply notwithstanding
any other provisions of the Plan to the contrary:



     (a) Amount of Award. The Committee shall promulgate administrative rules applicable to Plan
termination, pursuant to which each affected Participant (other than a Tier I Officer) shall
receive, with respect to each Performance Period which has commenced on or prior to the effective
date of the Plan termination (the “Termination Date”) and for which the Award has not yet been
paid, the amount described in such rules and each Tier I Officer shall receive an amount equal to
the amount the Award would have been had the Plan not been terminated (prorated for the Performance
Period in which the Termination Date occurred), subject to reduction in the discretion of the
Committee.



     (b) Time of Payment. Each Award payable under this Section 10 shall be paid as soon as
practicable, but in no event later than 90 days after the Termination Date.




	11.	 	Miscellaneous Provisions





     (a) No Employment Right. This Plan is not a contract between the Company and the Employees
or the Participants. Neither the establishment of this Plan, nor any action taken hereunder, shall
be construed as giving any Employee or any Participant any right to be retained



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in the employ of the Company. The Company is under no obligation to continue the Plan. Nothing
contained in the Plan shall limit or affect in any manner or degree the normal and usual powers of
management, exercised by the officers and the Board of Directors or committees thereof, to change
the duties or the character of employment of any employee of the Company or to remove the
individual from the employment of the Company at any time, all of which rights and powers are
expressly reserved.



     (b) No Assignment. A Participant’s right and interest under the Plan may not be assigned or
transferred, except as provided in Section 8 of the Plan, and any attempted assignment or transfer
shall be null and void and shall extinguish, in the Company’s sole discretion, the Company’s
obligation under the Plan to pay Awards with respect to the Participant.



     (c) Unfunded Plan. The Plan shall be unfunded. The Company shall not be required to
establish any special or separate fund, or to make any other segregation of assets, to assure
payment of Awards.



     (d) Withholding Taxes. The Company shall have the right to deduct from Awards paid any taxes
or other amounts required by law to be withheld.



     (e) Stockholder Approval. Notwithstanding any provision of the Plan to the contrary, Awards
to Tier 1 Officers, if made, will be made contingent upon, and subject to, stockholder approval of
the Plan at the April 2006 stockholders’ meeting.



     (f) Compliance with 162(m). It is the intent of the Company that the Plan and Awards under
the Plan for Tier I Officers comply with the applicable provisions of Code section 162(m). To the
extent that any legal requirement of Code section 162(m) as set forth in the Plan ceases to be
required under Code section 162(m), that Plan provision shall cease to apply.



     (g) Governing Law. The validity, construction, interpretation and effect of the Plan shall
exclusively be governed by and determined in accordance with the law of the State of Florida.




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