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 Companys success and to align employee interests with those of the Companys 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 participants 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 Participants annual base salary rate in effect on May 1^st 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.

     (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 Companys 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.