UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





Form 10-K







|x | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ------------------------------------------------------------------------------------

For the fiscal year ended December 31, 2008

OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------

For the transition period from             to

Commission file number: 001-14003





OMEGA PROTEIN CORPORATION

(Exact name of Registrant as specified in its charter)







|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|State of Nevada                                                |  | 76-0562134                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
|                                                               | 
|2105 City West Blvd, Suite 500 Houston, Texas                  |  | 77042                               
|(Address of principal executive offices)                       |  | (Zip Code)                          

Registrants telephone number, including area code: (713) 623-0060





Securities registered pursuant to Section 12(b) of the Act:



|                              |  |                                          
|----------------------------- |  | -----------------------------------------
|Title of each class           |  | Name of each exchange on which registered
|Common Stock, $0.01 par value |  | New York Stock Exchange                  

Securities registered pursuant to Section 12(g) of the Act:    None.





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.    Yes   ̈    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act.    Yes   ̈    No  x

Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.    Yes  x    No   ̈

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.   ̈

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.
See definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer   ̈            Accelerated filer  x            Non-accelerated filer   ̈            Small
reporting company   ̈

Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act).    Yes   ̈    No  x

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately $205,779,843 as of
June 30, 2008 (computed by reference to the quoted closing price of the registrants common stock on the New York Stock Exchange on June 30, 2008). Shares of common stock held by each officer and director and by each person who owns
10% or more of the outstanding stock have been excluded from this computation in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

On March 6, 2009, there were outstanding 18,712,096 shares of the Companys common stock, $0.01 par value.

Documents incorporated by reference: Portions of the registrants definitive proxy statement for its 2009 annual meeting of stockholders, which will
be filed with the Securities and Exchange Commission within 120 days after December 31, 2008, are incorporated by reference to the extent set forth in Part III of this Form 10-K.









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Forward-looking statements in this Annual Report on Form 10-K, future filings by the Company with the Securities and
Exchange Commission (the Commission), the Companys press releases and oral statements by authorized officers of the Company are intended to be subject to the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. Investors are cautioned that all forward-looking statements involve risks and uncertainty, including without limitation, the risks set forth under Item 1A Risk Factors. The Company believes that forward-looking statements made
by it are based on reasonable expectations; however, no assurances can be given that actual results will not differ materially from those contained in such forward-looking statements. Forward-looking statements involve statements that are predictive
in nature, which depend upon or refer to future events or conditions, or which include the words estimate, project, anticipate, expect, predict, believe, could,
hope, would, may and similar expressions.

PART I

Item 1. and 2.Business and Properties.

General

Omega Protein Corporation is the largest processor, marketer and distributor of fish meal
and fish oil products in the United States. As used herein, the term Omega or the Company refers to Omega Protein Corporation or to Omega Protein Corporation and its consolidated subsidiaries, as applicable. The
Companys principal executive offices are located at 2105 City West Boulevard, Suite 500, Houston, Texas 77042-2838 (Telephone: (713) 623-0060).

The Company produces and sells a variety of protein and oil products derived from menhaden, a species of wild herring-like fish found along the Gulf of Mexico and Atlantic coasts. The fish are not genetically modified
or genetically enhanced. The Company processes several grades of fish meal, as well as fish oil and fish solubles. The Companys fish meal products are primarily used as a protein ingredient in animal feed for swine, cattle, aquaculture and
household pets. Fish oil is utilized for animal and aquaculture feeds, industrial applications, additives to human food products and as dietary supplements. The Companys fish solubles are sold primarily to livestock feed manufacturers,
aquaculture feed manufacturers and for use as an organic fertilizer. See Company OverviewProductsFish Meal and Fish Oil.

The Company operates four menhaden processing plants: two in Louisiana, one in Mississippi and one in Virginia. The Company also operates a Health and Science Center in Reedville, Virginia, which provides 100-metric
tons per day fish oil processing capacity for the Companys food, industrial and feed grade oils. The Companys technical center in Houston, TexasThe OmegaPure Technology and Innovation Center has food science application labs as
well as analytical, sensory, lipids research and pilot plant capabilities. See Company OverviewMeal and Oil Processing Plants and OmegaPure Technology and Innovation Center.

In September 2008, the Company sustained damage to property, plant and equipment at its Abbeville and Cameron, Louisiana facilities due to Hurricane Ike.
The Abbeville facility was operational two weeks after Hurricane Ike and the Cameron facility is expected to be fully operational at the beginning of the 2009 fishing season. Total processing capacity, post-hurricane, was reduced from 850,000 tons
to 625,000 tons for the remainder of the 2008 fishing season. The temporary decrease in processing capacity had no effect on the Companys processing ability.

In 2005, the Company sustained damage to property, plant and equipment at each of its Gulf of Mexico facilities due to Hurricanes Katrina and Rita. The Moss Point and Abbeville facilities were fully operational at the
start of the 2006 season and the Cameron facility became fully operational towards the end of the 2006 season. Total processing capacity, post-hurricanes, was reduced from 950,000 tons to 850,000 tons. The decrease in annual processing capacity had
no effect on the Companys future processing ability because the Company has historically operated at levels substantially below maximum capacity.



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All of the Companys products contain healthy long-chain Omega-3 fatty acids. Omega-3 fatty acids
are commonly referred to as essential fatty acids because the human and animal bodies do not produce them. Instead, essential fatty acids must be obtained from outside sources, such as food or special supplements. Long-chain Omega-3s are
also commonly referred to as a good fat for their health benefits, as opposed to the bad fats that create or aggravate health conditions through long-term consumption. Scientific research suggests that long-chain Omega-3s as
part of a balanced diet may provide significant benefits for health issues such as cardiovascular disease, inflammatory conditions and other ailments.

Under its production process, the Company produces OmegaPure®, a taste-free, odorless refined fish oil which is the only marine source of long-chain Omega-3s directly affirmed by the U.S. Food and Drug Administration (FDA) as a food ingredient that is
Generally Recognized as Safe (GRAS). See Company OverviewProductsFood Grade Oils.

The Company operates
through two primary subsidiaries: Omega Protein, Inc. and Omega Shipyard, Inc. Omega Protein, Inc. is the Companys principal operating subsidiary for its menhaden processing business and is the successor to a business conducted since 1913.
Omega Shipyard, Inc. owns a drydock facility in Moss Point, Mississippi, which is used to provide shoreside maintenance for the Companys fishing fleet and, subject to outside demand and excess capacity, occasionally for third-party vessels.
Revenues from shipyard work for third-party vessels in 2008 were not material. The Company also has a number of other immaterial direct and indirect subsidiaries.

Until April 1998, the Company, including its predecessors, was a wholly-owned subsidiary of Zapata Corporation (Zapata). In April 1998, the Company completed an initial public offering of its common stock.
Immediately following the initial public offering, Zapata owned approximately 60% of the Companys outstanding common stock. On December 8, 2005, Zapata announced that its Board of Directors had authorized Zapatas management to seek
a buyer for its then 58% equity ownership interest in the Company.

On November 28, 2006, the Company purchased 9,268,292 shares of
the Companys common stock from Zapata at a purchase price of $5.125 per share, or an aggregate purchase price of $47.5 million. The Company financed the purchase of the shares from Zapata with a senior secured financing facility from Ableco
Finance LLC, an affiliate of Cerberus Capital Management, L.P. Concurrent with the purchase, Zapatas two representatives, Avram A. Glazer and Leonard DiSalvo, resigned from Omegas Board of Directors. Immediately following the purchase by
the Company, Zapata owned approximately 33% of the Companys outstanding common stock. For a more detailed description of the terms of the purchase by the Company, see the Companys Current Reports on Form 8-K filed with the SEC on
September 12, 2006 and December 1, 2006.

On December 4, 2006, Zapata sold the remaining 5,232,708 shares of the
Companys common stock held by Zapata to certain purchasers in a private transaction. As a result of the sale by Zapata, Zapata no longer owns any shares of the Companys common stock. For a more detailed description of the terms of the
sale by Zapata, see the Companys Current Report on Form 8-K filed with the SEC on December 5, 2006.

Available Information

The Company files annual, quarterly and current reports and other information with the SEC. The Companys annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K and amendments to these reports filed under the Securities and Exchange Act of 1934 (Exchange Act), as well as Section 16 filings by officers and directors, are available free of
charge at the Companys website at www.omegaproteininc.com or at the SECs website at www.sec.gov and are posted as soon as reasonably practicable after they are filed with the SEC. The Company will provide a copy of these
documents to stockholders upon request. Information on the Companys website or any other website is not incorporated by reference into this report and does not constitute part of this report.



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In addition, the public may read and copy any materials filed by the Company with the SEC at the
SECs Public Reference Room at 100 F. Street, NE., Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a website that contains reports,
proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.

The
Companys Corporate Governance Guidelines, Code of Business Conduct and Ethics, Code of Ethics for Financial Professionals, as well as the Charters for the Boards Audit Committee, Compensation Committee, Corporate Governance Committee and
Scientific Committee, are available at the Companys website. These Guidelines, Codes and Charters are not incorporated by reference into this report and do not constitute part of this report. The Company will provide a copy of these documents
to stockholders upon request.

Geographic Information

The Company operates within one industry segment, menhaden fishing, for the production and sale of fish meal, fish solubles and fish oil. Export sales of fish oil and fish meal were approximately $81 million, $66
million, and $56 million in 2008, 2007, and 2006, respectively. Such sales were made primarily to Asian, European and Canadian markets. In 2008, 2007 and 2006, sales to the Companys top customer were approximately $20.4 million, $12.6 million
and $12.3 million, respectively. This customer was the same in 2006 and 2007 but differed in 2008.

The following table shows the
geographical distribution of revenues (in thousands) based on location of customers:



|                        |  |                          |         |         |       |   |          |      |         |  |       |          |  |         |         |  |       |  
|----------------------- |  | ------------------------ | ------- | ------- | ----- | - | -------- | ---- | ------- |  | ----- | -------- |  | ------- | ------- |  | ----- | -
|                        |  | Years Ended December 31, |        
|                        |  | 2008                     |         |         | 2007  |   |          | 2006 |        
|                        |  | Revenues                 |         | Percent |       |   | Revenues |      | Percent |  |       | Revenues |  | Percent |        
|U.S.                    |  | $                        | 96,335  |         | 54.3  | % |          | $    | 91,461  |  | 58.2  | %        |  | $       | 83,341  |  | 59.6  | %
|Mexico                  |  |                          | 4,790   |         | 2.7   |   |          |      | 8,643   |  | 5.5   |          |  |         | 8,530   |  | 6.1   |  
|Europe                  |  |                          | 26,257  |         | 14.8  |   |          |      | 12,258  |  | 7.8   |          |  |         | 14,403  |  | 10.3  |  
|Canada                  |  |                          | 12,951  |         | 7.3   |   |          |      | 11,315  |  | 7.2   |          |  |         | 9,928   |  | 7.1   |  
|Asia                    |  |                          | 26,789  |         | 15.1  |   |          |      | 24,358  |  | 15.5  |          |  |         | 16,500  |  | 11.8  |  
|South & Central America |  |                          | 10,290  |         | 5.8   |   |          |      | 9,114   |  | 5.8   |          |  |         | 7,132   |  | 5.1   |  
|                        |  |                          |         |         |       |   |          |      |         |  |       |          |  |         |         |  |       |  
|Total                   |  | $                        | 177,412 |         | 100.0 | % |          | $    | 157,149 |  | 100.0 | %        |  | $       | 139,834 |  | 100.0 | %
|                        |  |                          |         |         |       |   |          |      |         |  |       |          |  |         |         |  |       |  

Company Overview

Business. Omega is the largest U.S. producer of protein-rich meal and oil derived from marine sources. The Companys products are produced from menhaden (a herring-like fish found in commercial
quantities), and includes regular grade and value-added specialty fish meals, crude and refined fish oils and fish solubles.

Fishing. During 2008, the Company owned a fleet of 58 fishing vessels and 32 spotter aircraft for use in its fishing operations and also leased additional aircraft where necessary to facilitate operations. During the 2008
fishing season in the Gulf of Mexico, which runs from mid-April through October, the Company operated 31 fishing and carry vessels and 30 spotter aircraft. The fishing area in the Gulf is generally located along the Gulf Coast, with a concentration
off the Louisiana and Mississippi coasts. The fishing season along the Atlantic coast begins in early May and usually extends into December. During the 2008 season, the Company operated 10 fishing vessels and 8 spotter aircraft along the
Mid-Atlantic coast, concentrated primarily in and around Virginia and North Carolina. The remaining fleet of fishing vessels and spotter aircraft are not routinely operated during the fishing season and are back-up to the active fleet, used for
other transportation purposes, inactive or in the process of refurbishment in the Companys shipyard.



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On September 13, 2008, the Companys Abbeville and Cameron, Louisiana fish processing
facilities were damaged by Hurricane Ike. Both of these facilities were non-operational immediately after the hurricane. Operations at the Abbeville fish processing facility were restored to full capacity on September 22, 2008. The Company
anticipates the Cameron fish processing facility to be fully functional prior to the beginning of the 2009 fishing season.

Menhaden
usually school in large, tight clusters and are commonly found in warm, shallow waters. Spotter aircraft locate the schools and direct the fishing vessels to them. The principal fishing vessels transport two 40-foot purse boats, each carrying
several fishermen and one end of a 1,500-foot net. The purse boats encircle the school and capture the fish in the net. The fish are then pumped from the net into refrigerated holds of the fishing vessel or onto a carry vessel, and then are unloaded
at the Companys processing plants. Carry vessels do not engage in active fishing but instead carry fish from the Companys offshore fishing vessels to its plants. Utilization of carry vessels increases the amount of time that
certain of the Companys fishing vessels remain offshore fishing productive waters and therefore increases the Companys fish catch per vessel employed. The carry vessels have reduced crews and crew expenses and incur less maintenance cost
than the actual fishing vessels.

The Companys principal raw material is menhaden, a species of fish that inhabits coastal and inland
tidal waters in the United States. Certain state agencies, as well as interstate compacts, impose resource depletion restrictions on menhaden pursuant to fisheries management legislation or regulations and may impose additional legislation or
regulations in the future. For example, in February 2007, the Commonwealth of Virginia established an annual cap for a five year period beginning in 2006 on the Companys menhaden landings from the Chesapeake Bay in an amount equal to the
Companys average annual landings over a five year period from 2001 to 2005 (approximately 109,020 metric tons). The Virginia restrictions also allow the Company a credit whereby any under-harvest in a particular year below the 109,020 metric
ton cap would be added to increase the cap for the following year, up to a maximum of 122,740 metric tons per year. In April 2008, the State of Texas enacted regulations which limited the annual menhaden catch to the Companys five year average
of 31.5 million pounds. The regulation also allows a 10% underage or overage in each year which is credited or deducted, as applicable, to the total allowable catch in the following year. This regulation is expected to be effective commencing
with the 2009 fishing season. In addition, two bills were introduced in the U.S. House of Representatives in 2008 which failed to pass. Had the bills passed, menhaden fishing in Atlantic waters would have been banned. See Item 1 and 2.
Business and PropertiesCompany OverviewRegulation. To date, the Company has not experienced any material adverse impact on its fish catch or results of operations as a result of these restrictions.

During 2008, the Company experienced higher costs of production and below average fish catch. The higher costs of production were primarily attributed to
increased energy, labor and repair costs. The reduced fish catch was primarily attributable to adverse weather conditions mainly associated with hurricane activity (the amount of hurricane losses were substantial and are more fully described in
Notes 2, 3, 5 and 13 of the Notes to Consolidated Financial Statements). As a result of the higher costs of production and below average fish catch, the Company experienced significantly higher per unit product costs which have adversely affected
the Companys earnings for 2008 (approximately 27.3% increase as compared to the 2007 fishing season). The impacts of higher cost inventories will be carried forward and are expected to adversely affect the Companys earnings through the
second quarter of 2009. In addition, the lost fishing days resulted in lower 2008 product volumes available for sale.

Meal and Oil
Processing Plants. The Company operates four meal and oil processing plants, two in Louisiana, one in Mississippi and one in Virginia, where the menhaden are processed into three general products types: fish meal, fish oil and fish
solubles. The Companys processing plants are located in coastal areas near the Companys fishing fleet. Annual volume processed varies depending upon menhaden catch. Each plant maintains a dedicated dock to unload fish, fish processing
equipment and storage facility. The fish are unloaded from the fishing vessels into storage boxes and then conveyed into steam cookers. The fish are then passed through



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presses to remove most of the oil and water. The solid portions of the fish are dried and ground into fish meal. The liquid that is produced in the cooking
and pressing operations contains oil, water, dissolved protein and some fish solids. This liquid is decanted to remove the solids and is put through a centrifugal oil and water separation process. The separated fish oil is a finished product called
crude oil. The separated water and protein mixture is further processed through evaporators to recover the soluble protein, which can be sold as a finished product or added to the solid portions of the fish for processing into fish meal.

Shipyard. The Company owns a 49.4 acre shipyard facility in Moss Point, Mississippi which includes two dry docks, each with a capacity of 1,300
tons. The shipyard is used for routine maintenance and vessel refurbishment on the Companys fishing vessels and occasionally for shoreside maintenance services to third-party vessels if excess capacity exists.

Health and Science Center. The Companys Health and Science Center provides 100-metric tons per day fish oil processing capacity and is
located adjacent to the Companys Reedville, Virginia processing plant. The food-grade facility includes state-of-the-art processing equipment and controls that allows the Company to refine, bleach, fractionate and deodorize its menhaden fish
oil and has more than tripled the Companys previous refined fish oil production capacity for food, industrial and feed grade oils. The facility also provides the Company with automated packaging and on-site frozen storage capacity and has a
lipids analytical laboratory to enhance the development of Omega-3 oils.

OmegaPure Technology and Innovation Center.In January 2007, the Company opened its new OmegaPure Technology and Innovation Center located in Houston, Texas to further develop its OmegaPure® food grade Omega-3 product line. The new facility has food science application labs, as well as analytical, sensory and pilot plant capabilities. The new facility also has a lipids research lab where the Company
plans to continue to develop new Omega-3 products that have improved functionality and technical characteristics.

Hurricane Damages.

2008 Hurricane Activity

On
September 13, 2008, the Companys Abbeville and Cameron, Louisiana fish processing facilities were damaged by Hurricane Ike. Both of these facilities were non-operational immediately after these weather events. Operations at the Abbeville
fish processing facility were restored to full capacity on September 22, 2008. The Company anticipates the Cameron fish processing facility to be fully functional prior to the beginning of the 2009 fishing season.

The direct impact of Hurricane Ike upon the Company was a loss of physical inventories and physical damage to the plants. The interruption of processing
capabilities caused the Company to address the impact of abnormal downtime of its processing facilities, which resulted in the immediate recognition of costs which would ordinarily have been captured as inventory costs. The amounts of these losses
are more fully described in Notes 2, 3, 5 and 13 of the Notes to Consolidated Financial Statements.

Because of the damages to the
Companys Cameron, Louisiana facility caused by Hurricane Ike, the Company redeployed all of its ten Cameron vessels to its Abbeville, Louisiana and Moss Point, Mississippi facilities. Although these two facilities had adequate processing
capacity, the Companys fishing efforts were diminished because increased unloading time due to additional vessels reduced the number of vessels on the fishing grounds during the most optimal fishing times. The Company expects that the 10
Cameron fishing vessels will be redeployed to the Cameron facility for the beginning of the 2009 fishing season.

The Company maintains
insurance coverage for a variety of these damages, most notably property, inventory, vessel and business interruption insurance. The nature and extent of the insurance coverage varies by line of policy and the Company has recorded insurance
recoveries as accounts receivable based on preliminary



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estimates and discussions with its insurers and adjusters. On October 17, 2008, the Company received an advance of $2.5 million from its primary
insurance carrier and on January 29, 2009, a final settlement payment of $7.5 million was received which represented the limits of the insurance policy.

2005 Hurricane Activity

On August 29, 2005, the Companys Moss Point, Mississippi fish processing facility and adjacent
shipyard were severely damaged by Hurricane Katrina. On September 25, 2005, the Companys Cameron and Abbeville, Louisiana fish processing facilities were also severely damaged by Hurricane Rita.

In order to facilitate the insurance recovery process, on July 28, 2006, the Company filed a lawsuit against its property insurance carriers,
Lexington Insurance Company and RSUI Indemnity Company, in the U.S. District Court for the Western District of Louisiana, alleging breach of contract and bad faith based on the insurance carriers failure to pay amounts due to the Company under
its property insurance policies for damages sustained from Hurricanes Katrina and Rita in the third quarter of 2005. The Company settled its lawsuit with its primary property insurance carrier, Lexington Insurance Company, for a total of $19.8
million during the third quarter of 2007. Of the $19.8 million, $12.0 million was previously recorded as a receivable and was fully received as of September 30, 2007, $3.3 million was paid to outside legal counsel in connection with the
settlement and $4.5 million was recognized during 2007 as insurance recoveries relating to natural disaster in the statement of operations and comprehensive income and was received as of December 31, 2007. In addition, the Company settled
its lawsuit with its secondary property insurance carrier, RSUI Indemnity Company, for a total of $9.2 million during the fourth quarter of 2007. Of the $9.2 million, $0.7 million was advanced during the third quarter of 2007 and recognized as
insurance recoveries relating to natural disaster in the statement of operations and comprehensive income, $3.0 million was paid to outside legal counsel in connection with the settlement during the fourth quarter of 2007 and $5.5 million was
recognized and received during the fourth quarter of 2007 as insurance recoveries relating to natural disaster in the statement of operations and comprehensive income. The Company still has a pending lawsuit against its insurance broker
alleging negligent procurement, negligent misrepresentation, breach of contract and violations of Texas Insurance and Consumer laws. See Part I, Item 3. Legal Proceedings for additional information.

During 2008, the Company received a grant of $1.3 million, net of fees and expenses, from the Louisiana Department of Wildlife and Fisheries which was
recognized as Insurance recoveries and other proceeds related to natural disaster, net2005 in the Consolidated Statement of Operations for the year ended December 31, 2008. The grant provides assistance for commercial fishing
owners impacted by Hurricanes Katrina and Rita in 2005. Subsequent to December 31, 2008, the Company received a similar grant related to the impact of Hurricane Katrina of $2.6 million, net of fees and expenses, from the State of Mississippi.
The Mississippi grant will be recognized in the Consolidated Statement of Operations during 2009.

Products. The Company sells
three general types of products: fish meal, fish oil and fish solubles.

Fish Meal. Fish meal, the principal product made from
menhaden, is sold primarily as a high-protein feed ingredient. It is used as a feed ingredient in feed formulated for pigs and other livestock, aquaculture and household pets. Each use requires certain standards to be met regarding quality and
protein content, which are determined by the freshness of the fish and by processing conditions such as speed and temperatures. The Company produces fish meal of several different types:

Special Select. Special Select is a premium grade low temperature processed fish meal. The quality control
guidelines are very stringent, producing a higher protein level and higher digestibility and a lower total volatile nitrogen (TVN) and histamine content. These guidelines require that only the freshest fish and the most gentle drying
process be used. Special Select is targeted for monogastrics, including baby pigs, turkey poults, pets, shrimp and fish.

SeaLac. SeaLac is similar to Special Select in its freshness (low TVN) and gentle drying (high digestibility). During the processing however, the Company removes some of the soluble protein. This step



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allows the amount of rumen undegradable protein to be maximized while still maintaining excellent digestibility. This product is made specifically for dairy
and beef cattle, sheep, goats and other ruminants requiring bypass protein.

FAQ Meal. FAQ (Fair Average
Quality) Meal, the Companys commodity grade fish meal, guarantees a protein content of at least 60%. This product typically is used in protein blends for poultry, catfish, pets and other animals.

Fish Oil. The Company produces crude unrefined fish oil, refined fish oil and food grade oils.

Unrefined Fish Oil. Unrefined fish oil (also referred to as crude fish oil) is the Companys basic fish oil product. This grade of fish
oil has not undergone any portion of the refining process. The Companys markets for crude fish oil have changed over the past decade. In the 1990s, the Companys main crude fish oil market, which accounted for greater than 90% of
the Companys production, was the manufacturers of hydrogenated oils for human consumption such as margarine and shortening. In 2006, 2007 and 2008, the Company estimates that approximately 73%, 67% and 60% of its crude fish oil was sold as a
feed ingredient to the aquaculture industry, respectively. The development of the worldwide aquaculture industry has resulted in steady demand for fish oils in order to improve feed efficiency, nutritional value, survivability and health of
farm-raised fish species.

Refined Fish Oil. The Companys refined fish oils come in three basic grades. Refined oils also
include industrial grade oils which are used in a variety of industrial applications.

Feed Grade Oils. Feed grade menhaden oil is processed and refined to offer a high Omega-3 oil for use in premium pet, aquaculture and livestock feeds, as well as agricultural and attractant applications. The processing reduces
free fatty acids, color and oxidative precursors while enhancing Omega-3 fatty acids for incorporation in the final feed to enhance skin and coat conditioning, reproductive performance, and immunity. Kosher products are available. The Companys
refined feed grade fish oils are sold in two basic grades under the name Virginia Prime. Virginia Prime GoldTMfish oil is alkali refined,
bleached and then fractionated,. Virginia Prime Platinum fish oil is alkali refined, bleached, fractionated and then deodorized.

SeaCideTM. SeaCideTMis a unique blend of refined menhaden oil, cottonseed oil and an organic emulsifier developed for
use against target pests and fungal diseases that occur in a variety of field crops, orchards, vineyards and greenhouse operations. SeaCideTMis an
all natural organic alternative to chemical insecticides and fungicides, is less phytotoxic than petroleum based oils, is compatible with most fertilizers, and is versatile enough for use on virtually any crop. SeaCideTMis listed for organic uses by the Organic Materials Review Institute (OMRI).

OmegaEquis.OmegaEquis is a specialty feed additive product for the equine market that supplies omega-3 fatty acids to horses. OmegaEquis is
Virginia Prime Gold that has been alkali refined, bleached, fractionated and then flavored in order to enhance palatability.

Industrial Grade Oils.The Companys industrial grade menhaden oils are refined and processed to enhance the unique fatty acid range, making them desirable for a number of drying and lubricating applications including coolant
transfer, chemical raw material, drying and rustproofing paints, drilling fluids and leather treatment chemicals.

Food Grade Oils. The Company has developed a process to highly refine menhaden oil to remove flavor, odor, color and pro-oxidants and offer a naturally high, long-chain Omega-3 content. The Companys
product in this grade is OmegaPure®. Food applications for OmegaPure® are designed to deliver a stable, odorless, flavorless
source of Omega-3 fatty acids to enhance human nutrition. These applications include mainstream consumer foods, medical care foods and dietary supplements. OmegaPure® is also
kosher-certified by Orthodox Union.



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Omega-3 fatty acids exist in two forms: long-chain and short-chain. Short-chain Omega-3s (or
alpha-linolenic acid (ALA), are generally found in canola oil, soy beans and flaxseed, and generally require ten to twenty times as much concentration in the diet to approach the same benefit levels as long-chain Omega-3s.
Long-chain Omega-3 fatty acids are found in marine sources and consist of two main types: eicosapentaenoic acid (EPA) and docosahexaenoic acid (DHA). EPA is a fatty acid that generally reduces inflammatory responses and has
been linked to the alleviation of symptoms from asthma, arthritis, psoriasis and other inflammatory conditions. DHA is a major structural fatty acid in the brain and the eyes retina. DHA is important for proper brain and eye development in
infants and both EPA and DHA have been shown to support cardiovascular health in adults.

As a result of the completion of its Health and
Science Center in Reedville, Virginia, in October 2004, the Company is the only fully-integrated fish oil processing operation in the United States that both directly conducts fishing operations and also manufactures highly refined EPA and DHA from
these marine resources. With the completion of this new facility, the Company can control the purity and quality of its product from harvesting all the way through manufacturing and shipment.

Various scientific studies have linked consumption of Omega-3 fatty acids to a number of nutritional and health benefits, such as heart health,
alleviation of arthritis and other inflammatory diseases, improving brain and eye function and minimization of depression. For example, in September 2004, the FDA announced that scientific evidence indicates that long-chain Omega-3 fatty acids may
be beneficial in reducing coronary heart disease.

In addition, the American Heart Association (AHA) issued a Scientific
Statement in November 2002, entitled Fish Consumption, Fish Oil, Omega-3 Fatty Acids, and Cardiovascular Disease. The Scientific Statement outlines the findings of a comprehensive report that examined the cardiovascular health benefit of
Omega-3 fatty acids from fish sources, specifically DHA and EPA. The report concluded that consumption of such Omega-3 fatty acids, either through diet or supplements, may reduce the incidence of cardiovascular disease. The statement referred to
studies that have indicated the following to be associated with the intake of Omega-3 fatty acids: decreased risk of sudden death and arrhythmia, decreased thrombosis (blood clot), decreased triglyceride levels, decreased growth of atherosclerotic
plaque, improved arterial health and lower blood pressure. The Scientific Statement concludes that Omega-3 fatty acids have been shown in epidemiological and clinical trials to reduce the incidence of heart disease.

Menhaden oil currently is the only marine source of long-chain Omega-3s directly affirmed by the FDA as a Generally Recognized As Safe (or
GRAS) food ingredient for direct human consumption. The FDA has approved menhaden oil use in 29 different food categories such as margarine, salad dressings, condiments, yogurt, ice cream, cheese, prepared meats, sauces, soups, crackers,
cookies, cereals and bakery products.

In 2005, the U.S. Department of Agriculture and the Department of Health and Human Services released
the 2005 Dietary Guidelines for Americans. The Guidelines, which are issued every five years, represent the federal governments most current science-based advice to promote human health and reduce the risk of chronic diseases through nutrition
and physical activity. The previous Dietary Guidelines issued in 2000 recognized that certain fish contain Omega-3 fatty acids that are being studied to determine if they offer protection against heart disease, but did not specifically identify
these Omega-3 fatty acids as EPA and DHA. The 2005 Dietary Guidelines specifically mentioned EPA and DHA and stated the limited evidence suggests an association between consumption of fatty acids in fish and reduced risks of mortality from
cardiovascular disease for the general population.

In 2007, the Company opened its new technical center in Houston, TexasThe
OmegaPure Technology and Innovation Center. The technical center has food science application labs, as well as analytical, sensory and pilot plant capabilities. The technical center also has a lipids research lab where the Company plans to continue
to develop new Omega-3 products that have improved functionality and technical characteristics.



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Fish Solubles. Fish solubles are a liquid protein product used as an additive in fish meal
and are also marketed as an independent product to animal feed formulators and the fertilizer industry. The Companys soluble-based products are:

Neptune Fish Concentrate. This aqua grade liquid protein is composed of low molecular weight, water-soluble compounds such as free amino acids, peptides and nucleotides that are attractants for a
variety of aquaculture feeds. The product is utilized in both shrimp and finfish diets to improve attractability and thus consumption and conversion. Neptune Fish Concentrate also can be added directly to grow-out ponds as a fertilizer to help
feed plankton and other natural food sources.

OmegaGrow. OmegaGrow is a liquid soil or
foliar-applied fertilizer for plant nutrition. OmegaGrow is listed for organic uses by the Organic Materials Review Institute (OMRI). OmegaGrow is a free-flowing product that has been filtered through an 80-mesh screen and
can be applied by sprayers or through irrigation systems.

OmegaGrow Plus. OmegaGrow Plus is a
liquid foliar-applied fertilizer for plant nutrition that also helps to control insect and fungus problems. This product has additional oil content of 25% to 30% which is greater than the 7% to 10% oil content typically found in OmegaGrow.
These higher levels are detrimental to soft-bodied insects, as well as fungal diseases in citrus and vegetable crops. OmegaGrow Plus can be used as a replacement for petroleum-based oil sprays.

Distribution System. The Companys distribution system of warehouses, tank storage facilities and vessel loading facilities allow for
transportation via trucks, barges, containers and railcars allows the Company to service customers throughout the United States and also foreign locations. The Company owns and leases warehouses and tank storage space for storage of its products,
generally at terminals along the Mississippi River. The Company generally contracts with third-party trucking, vessel, barge, container and railcar companies to transport its products to and from warehouses and tank storage facilities and directly
to its customers.

Historically, approximately 35% to 40% of Omegas FAQ grade fish meal was sold on a two-to-twelve-month forward
contract basis. The balance of FAQ grade fish meal and other products was substantially sold on a spot basis through purchase orders. In 2002, the Company began a similar forward sales program for its specialty grade meals and crude fish oil due to
increasing demand for these products. During 2006, 2007, and 2008 approximately 70%, 50%, and 65%, respectively, of the Companys fish meals and crude fish oil had been sold on a forward contract basis prior to those years respective
fishing season. The percentage of fish meal and crude fish oil sold on a forward contract basis will fluctuate from year to year based upon perceived market availability.

The Companys annual revenues are highly dependent on pricing, annual fish catch, production yields and inventories and, in addition, inventory is generally carried over from one year to the next year. The
Company determines the level of inventory to be carried over based on existing contracts, prevailing market prices of the products and anticipated customer usage and demand during the off-season. Thus, production volume does not necessarily
correlate with sales volume in the same year and sales volumes will fluctuate from quarter to quarter. The Companys fish meal products have a useable life of approximately one year from date of production. Practically, however, the Company
attempts to empty its warehouses of the previous seasons products by the second or third month of the new fishing season. The Companys crude fish oil products do not lose efficacy unless exposed to oxygen and, therefore, their storage
life typically is longer than that of fish meal.

Customers and Marketing.Most of the Companys marine protein products
are sold directly to approximately 600 customers by the Companys agriproducts sales department, while a smaller amount is sold through independent sales agents. Product inventory was $62.1 million as of December 31, 2008 versus $58.0
million as of December 31, 2007.

The Companys fish meal is sold primarily to domestic feed producers for utilization as a
high-protein ingredient for the swine, aquaculture, dairy and pet food industries. Crude fish oil sales primarily involve export



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markets where the fish oil is used for aquaculture feeds. Over the past decade, increasing percentages of the Companys fish meal and oil products have
been sold into the aquaculture industry. The growth of the worldwide aquaculture industry has resulted in increasing demand for fish oils and meals to improve feed efficiency, nutritional value and health of farm-raised fish species.

The Companys products are sold both in the U.S. and internationally. International sales consist of both fish meal and fish oil and are primarily
to Norway, Canada, Chile, China and Japan. The Companys sales in these foreign markets are denominated in U.S. dollars and are not directly affected by currency fluctuations. Such sales could be adversely affected by changes in demand
resulting from fluctuations in currency exchange rates.

A number of countries in which the Company currently sells products impose various
tariffs and duties, none of which have a significant impact on the Companys foreign sales. Certain of these duties have been reduced in recent years for certain countries under the North American Free Trade Agreement and the Uruguay Round
Agreement of the General Agreement on Tariffs and Trade. In all cases, the Companys products are shipped to its customers either by FOB shipping point or CIF terms, and therefore, the customer is responsible for any tariffs, duties or other
levies imposed on the Companys products sold into these markets.

During the off season, the Company fills purchase orders from the
inventory it has accumulated during the fishing season or in some cases, by re-selling meal purchased from other suppliers. Prices for the Companys products tend to be lower during the fishing season when product is more abundant than in the
off season. Throughout the entire year, prices are often significantly influenced by supply and demand in world markets for competing products, primarily other global sources of fish meal and oil, and also soybean meal for its fish meal products,
and vegetable oils for its fish oil products when used as an alternative.

Quality Control. The Company believes that
maintaining high standards of quality in all aspects of its manufacturing operations play an important part in its ability to attract and retain customers and maintain its competitive position. To that end, the Company has adopted strict quality
control systems and procedures designed to test the quality aspects of its products, such as protein content and digestibility. The Company regularly reviews, updates and modifies these systems and procedures as appropriate.

Purchases and Sales of Third-Party Meal and Oils. Omega has from time to time purchased fish meal and fish oil from other domestic and
international manufacturers. These purchase and resale transactions have to date been ancillary to the Companys base manufacturing and sales business.

During 2005, 2006 and 2008, the Companys fish catch and resultant product inventories were reduced, primarily due to adverse weather conditions, and the Company further expanded its purchase and resale of other
fish meals and oils (primarily Panamanian, Peruvian and Mexican fish meal and U.S. menhaden oil). Although operating margins from these activities are less than the margins typically generated from the Companys base domestic production, these
operations provide the Company with a source of fish meal and oil to sell into other markets, some of which, the Company has not historically had a presence. During 2006, the Company purchased products totaling approximately 14,600 tons, or
approximately 7% of total volume 2006 sales. During 2007, the Company purchased fish oil totaling approximately 5,500 tons, or approximately 9.1% of fish oil sales volumes for 2007. The Company did not purchase any fish meal or fish oil in 2008.

Insurance.The Company maintains insurance against physical loss and damage to its assets, coverage against liabilities to
third parties it may incur in the course of its operations, as well as workers compensation, United States Longshoremens and Harbor Workers Compensation Act and Jones Act coverage. Assets are insured at replacement cost, market
value or assessed earning power. The Companys limits for liability coverage are statutory or $50 million. The $50 million limit is comprised of several excess liability policies, which are subject to deductibles, underlying limits, annual
aggregates and exclusions. The Company believes its insurance coverage to be in such form, against such risks, for such amounts and subject to such deductibles and self-retentions as are prudent and normal for its operations. Over recent years, the
Company has elected to increase its



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deductibles and self-retentions in order to achieve lower insurance premium costs. These higher deductibles and self-retentions have resulted in greater
costs to the Company in the cases of Hurricanes Katrina, Rita and Ike and will expose the Company to greater risk of loss if additional future claims occur. In addition, the Companys cost of insurance for property damage has increased
materially and may further increase materially in future years, (particularly property insurance renewals in 2009), as insurers recoup losses paid and to be paid out in connection with Hurricanes Katrina, Rita and Ike by charging higher premiums.

Competition. The Company competes with a smaller domestic privately-owned menhaden fishing company and with international
marine protein and oil producers, including Mexican sardine processors and South American anchovy and mackerel processors. In addition, but to a lesser extent, the Companys marine protein and oil business is also subject to significant
competition from producers of vegetable and other animal protein products and oil products such as Archer Daniels Midland and Cargill. Many of these competitors have significantly greater financial resources and more extensive and diversified
operations than those of the Company.

Omega competes on price, quality and performance characteristics of its products, such as protein
level and amino acid profile in the case of fish meal. The principal competition for the Companys fish meal and fish solubles is from other global production of marine proteins as well as other protein sources such as soybean meal and other
vegetable or animal protein products. The Company believes, however, that these other non-marine sources are not complete substitutes because fish meal offers nutritional values not contained in such other sources. Other globally produced fish oils
provide the primary market competition for the Companys fish oil, as well as soybean and rapeseed oil.

Fish meal prices have
historically borne a relationship to prevailing soybean meal prices (more weakly correlated in recent years), while prices for fish oil are generally influenced by prices for vegetable oils, such as rapeseed, soybean and palm oils. Thus, the prices
for the Companys products are established by worldwide supply and demand relationships over which the Company has no control and tend to fluctuate significantly over the course of a year and from year to year. For example, during 2008, the
Company experienced fish oil price increases of approximately 73.4% when compared to 2007, whereas palm oil and soy oil prices rose 35% and 43%, respectively. Beginning in the third quarter of 2008, pricing in the agricultural commodity markets
began to decrease. Spot fish oil and fish meal prices have followed these general trends during the second half of 2008 and into the beginning of 2009.

Price List. The Company posts its latest internally generated price list for its various products on its Company website, omegaproteininc.com. The Company expects to post updates to the price list as they
become available, which may occur as frequently as weekly. The Company may elect to discontinue this disclosure at any time without prior notice. Pricing and product availability information disclosed in the price list are subject to change without
prior notice, and the Company undertakes no obligation to update such information. Information on the Companys website is not incorporated by reference into this report and does not constitute part of this report.

Regulation.The Companys operations are subject to federal, state and local laws and regulations relating to the locations and periods
in which fishing may be conducted as well as environmental and safety matters. At the state and local level, certain state and local government agencies have enacted legislation or regulations which prohibit, restrict or regulate menhaden fishing
within their jurisdictional waters.

The Companys menhaden fishing operations are also subject to regulation by two interstate
compact commissions created by federal law: the Atlantic States Marine Fisheries Commission (ASMFC) which consists of 15 states along the Atlantic Coast, and the Gulf States Marine Fisheries Commission which consists of 5 states along
the Gulf of Mexico. In 2005, the ASMFC recommended precautionary restrictions on the Chesapeake Bay menhaden harvest, despite its finding that menhaden are not overfished and that overfishing is not occurring on a coast wide basis, in order to
determine whether localized depletion was occurring in Chesapeake Bay.



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In February 2007 the Commonwealth of Virginia declined to adopt an ASMFC recommended plan but instead
adopted its own restrictions whereby the Companys Chesapeake Bay menhaden harvest was capped for a five year period at a recent five-year average (2001 to 2005) of 109,020 metric tons per year. The Virginia restrictions also allow for a credit
whereby any under-harvest in a particular year below the 109,020 metric ton cap would be added to increase the cap for the following year, up to a maximum of 122,740 metric tons per year. The Company supported Virginias proposal and
voluntarily complied with its limitations in 2006. This compliance had no effect on the Companys Chesapeake Bay harvest in 2008 and is not expected to have any material adverse effect on its Chesapeake Bay harvest in 2009. As a result of the
underharvest in 2008, the 2009 Chesapeake Bay catch limit will be 122,740 metric tons.

On March 27, 2008, the Texas Parks and
Wildlife Commission adopted regulations related to the menhaden reduction fishery in Texas waters which limits the Total Allowable Catch (TAC) to 31.5 million pounds annually (the five year average menhaden catch for reduction
purposes in Texas waters from 2002 through 2006). The regulations also allow for a 10% underage or overage in each year which is credited or deducted, as applicable, to the TAC in the following year.

The Companys menhaden fish catch in Texas in 2008 is preliminarily estimated by the National Marine Fisheries Service to be 30.8 million
pounds (approximately 15,000 metric tons), or approximately 3.5% of the Companys total 2008 fish catch, although these figures have not yet been finalized. The limitation is not expected to have a material adverse effect on the Companys
business, results of operation or financial conditions. The Texas regulations become effective at the beginning of the 2009 fishing season.

In October 2007, two bills were introduced in the U.S. House of Representatives (H.R. 3840 and H.R. 3841) by two congressmen representing portions of New Jersey and Maryland, areas where the Company has no operations. These two congressmen
were not re-elected to Congress in November 2008 and the bills never moved out of committee, nor was any vote ever taken on them. The bills, if enacted, would have effectively prohibited commercial fishing for Atlantic menhaden for reduction
purposes in inland, state and federal waters along the Atlantic coast. The Company believed that the bills were premised on inaccurate assumptions and depictions of facts about the menhaden resource which the National Marine Fisheries Service
continues to classify as healthy and not overfished. The bills would have also supplanted decades of fisheries management previously undertaken by the Atlantic States Marine Fisheries Commission and the National Marine Fisheries Service. The
enactment of either of the bills, or any restrictions similar to those described in the bills, would have a material adverse effect on the Companys business, results of operations and financial condition.

The Company, through its operation of fishing vessels, is subject to the jurisdiction of the U.S. Coast Guard, the National Transportation Safety Board
and the U.S. Customs Service. The U.S. Coast Guard and the National Transportation Safety Board set safety standards and are authorized to investigate vessel accidents and recommend improved safety standards. The U.S. Customs Service is authorized
to inspect vessels at will.

The Companys operations are subject to federal, state and local laws and regulations relating to the
protection of the environment, including the federal Clean Water Act, which imposes strict controls against the discharge of pollutants in reportable quantities, and along with the Oil Pollution Act, imposes substantial liability for the costs of
oil removal, remediation and damages. The Companys operations also are subject to the federal Clean Air Act, as amended; the federal Comprehensive Environmental Response, Compensation, and Liability Act, which imposes liability, without regard
to fault, on certain classes of persons that contributed to the release of any hazardous substances into the environment; and the federal Occupational Safety and Health Act (OSHA). The implementation of continuing safety and
environmental regulations from these authorities could result in additional requirements and procedures for the Company, and it is possible that the costs of these requirements and procedures could be material.

The OSHA hazard communications standard, the Environmental Protection Agency community right-to-know regulations under Title III of the federal Superfund
Amendment and Reauthorization Act and similar state statutes require the Company to organize information about hazardous materials used or produced in



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its operations. Certain of this information must be provided to employees, state and local governmental authorities and local citizens. Numerous other
environmental laws and regulations, along with similar state laws, also apply to the operations of the Company, and all such laws and regulations are subject to change.

The Company has made, and anticipates that it will make in the future, expenditures in the ordinary course of its business in connection with environmental matters. Such expenditures have not been material in the
past, and while they are expected to increase in the future, such increases are not expected to be material to the Companys overall business. However, there is no assurance that environmental laws and regulations enacted in the future will not
require material expenditures or otherwise adversely affect the Companys operations.

The Company continually monitors regulations
which affect fish meal and fish oil in the United States and in those foreign jurisdictions where it sells its products. To date, such regulations have not had a material adverse effect on the Companys business, but it is possible they may do
so in the future.

The Companys harvesting operations are subject to the Shipping Act of 1916 and the regulations promulgated
thereunder by the Department of Transportation, Maritime Administration which require, among other things, that the Company be incorporated under the laws of the U.S. or a state, the Companys chief executive officer be a U.S. citizen, no more
of the Companys directors be non-citizens than a minority of the number necessary to constitute a quorum and at least 75% of the Companys outstanding capital stock (including a majority of the Companys voting capital stock) be
owned by U.S. citizens. If the Company fails to observe any of these requirements, it will not be eligible to conduct its harvesting activities in U.S. jurisdictional waters. Such a loss of eligibility would have a material adverse effect on the
Companys business, results of operations and financial condition.

To protect against such loss of eligibility, the Companys
Articles of Incorporation (i) contain provisions limiting the aggregate percentage ownership by non-citizens of each class of the Companys capital stock to no more than 25% of the outstanding shares of each such class (the Permitted
Percentage) so that any purported transfer to non-citizens of shares in excess of the Permitted Percentage will be ineffective as against the Company for all purposes (including for purposes of voting, dividends and any other distribution,
upon liquidation or otherwise), (ii) provide for a dual stock certificate system to determine such ownership pursuant to which certificates representing shares of Company Common Stock bear legends that designate such certificates as either
citizen or non-citizen depending on the citizenship of the owner, and (iii) permit the Companys Board of Directors to make such determinations as may reasonably be necessary to ascertain such ownership and
implement restrictive limitations on those shares that exceed the Permitted Percentage (the Excess Shares). For example, the Companys Board is authorized, among other things, to redeem for cash (upon written notice) any Excess
Shares in order to reduce the aggregate ownership by non-citizens to the Permitted Percentage.

Employees

At December 31, 2008, during the Companys off-season, the Company employed approximately 653 persons. At August 31, 2008, during the peak
of the Companys 2008 fishing season, the Company employed approximately 1,157 persons. Approximately 142 employees at the Companys Reedville, Virginia plant are represented by an affiliate of the United Food and Commercial Workers Union.
The union agreement for the Reedville employees has a three-year term which expires in April 2011. During the past five years Omega has not experienced any strike or work stoppage which has had a material impact on its operations. The Company
considers its employee relations to be generally satisfactory.

The Company has historically utilized workers in the United States H2B Visa
Program whereby foreign nationals are permitted to enter the United States temporarily and engage in seasonal, non-agricultural employment. The U.S. Congress has failed to re-authorize the Save Our Small and Seasonal Business Act amendment to the
H2B visa program which would allow returning H2B workers from certain prior years from being counted against the H2B visa programs annual 66,000 visa cap. Because of the relatively low visa cap



14



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number, the Company did not receive its historical allotment of H2B workers for the 2008 fishing season, nor will it receive its historical allotment of H2B
workers for the 2009 fishing season commencing in April. The Company has instituted changes to its recruiting programs to increase the number of domestic workers to replace H2B workers, including raising of certain wage scales, implementation of
sign-on bonuses for certain positions, offering of referral fees for qualified workers, and other benefits. However, the Companys inability to secure sufficient domestic workers for its vessels or plants could have an adverse effect on the
Companys business, results of operation and financial condition. In addition, the Company will bear the increased costs of these additional benefits.

Executive Officers of the Company

The names, ages and current offices of the executive officers of the Company as of
December 31, 2008 are set forth below. Also indicated is the date when each such person commenced serving as an executive officer of the Company.



|                                 |  |                                                                        |  |                               
|-------------------------------- |  | ---------------------------------------------------------------------- |  | ------------------------------
|Name and Age                     |  | Office                                                                 |  | Date Became  Executive Officer
|                                 |  |                                                                       
|Joseph L. von Rosenberg III (50) |  | Chief Executive Officer, President and Director                        |  | July 1997                     
|                                 |  |                                                                       
|Robert W. Stockton (58)          |  | Executive Vice President, Chief Financial Officer                      |  | July 1997                     
|                                 |  |                                                                       
|John D. Held (46)                |  | Executive Vice President, General Counsel and Secretary                |  | January 2002                  
|                                 |  |                                                                       
|J. Scott Herbert (43)            |  | Senior Vice PresidentSales and Marketing                              |  | September 2002                
|                                 |  |                                                                       
|Joseph E. Kadi (48)              |  | Senior Vice PresidentOperations                                       |  | December 2008                 
|                                 |  |                                                                       
|Thomas R. Wittmann (59)          |  | Vice PresidentOperations                                              |  | October 2002                  
|                                 |  |                                                                       
|Gregory P. Toups (33)            |  | Vice PresidentCorporate Controller                                    |  | May 2008                      
|                                 |  |                                                                       
|Michael E. Wilson (58)           |  | Vice PresidentMarine Operations and President of Omega Shipyard, Inc. |  | July 1998                     

A description of the business experience during the past five years for each of the executive
officers of Omega is set forth below.

Joseph L. von Rosenberg III has served as President, Chief Executive Officer and a Director
of the Company since July 1997.

Robert W. Stocktonhas served as Executive Vice President and Chief Financial Officer of the
Company since July 1997. He has also served as Secretary from January 2000 to September 2002.

John D. Held has served as the
Companys General Counsel since March 2000, as Vice President of the Company from April 2002 to September 2002, as Senior Vice President and Secretary since September 2002 and as Executive Vice President since June 2005. Prior thereto,
Mr. Held was Senior Vice President, General Counsel and Secretary of American Residential Services, Inc., a then public company engaged in the consolidation of the air-conditioning, plumbing and electrical service industries. Prior thereto,
Mr. Held practiced law for several years with a large law firm in Houston, Texas.

J. Scott Herbert has served as Senior Vice
PresidentSales and Marketing of the Company since May 2007. Prior thereto, Mr. Herbert served as Vice PresidentAgriproducts since September 2002, Vice PresidentFeed Ingredient Marketing of the Companys principal
subsidiary, Omega Protein, Inc., since March 1998, and as Director of Fish Meal Sales and in various other sales capacities with the Company since 1992.



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Joseph E. Kadihas served as Senior Vice PresidentOperations since December 2008. Prior
thereto, Mr. Kadi served as Director of Strategic Development since November 2008. From 2003 to October 2008, Mr. Kadi was the Vice President of Operations for Milk Specialties Company, a manufacturer of nutritional and health products for
the food and feed industries. From 1999 to 2003, Mr. Kadi was Director of Manufacturing, Worldwide for Applied Food Biotechnology, a manufacturer of liquid and dry pet food flavors.

Thomas R. Wittmannhas served as Director of Manufacturing Services since January 2009 and Vice PresidentOperations from October 2002 to
January 2009. Prior thereto, Mr. Wittmann served as the General Manager of the Companys Abbeville, Louisiana facility since 1997 and served in various other Company positions since 1985.

Gregory P. Toupshas served as Vice PresidentCorporate Controller since May 2008. Prior thereto, Mr. Toups served as the Companys
Controller since May 2005 and Assistant Controller from March 2005 to May 2005. Prior thereto, Mr. Toups was employed by the accounting firms Kushner LaGraize LLC, from November 2001 to March 2005, and by PricewaterhouseCoopers, LLP, from
January 1998 to November 2001.

Michael E. Wilson has served as President of the Companys wholly-owned subsidiary, Omega
Shipyard, Inc., since June 1997. Since July 1998, he has also served as the Companys Vice PresidentMarine Operations and prior thereto, served as the Companys Coordinator of Marine Engineering & Maintenance.
Mr. Wilson joined the Company in 1985 and served in various operating capacities until 1996.

Properties

The Companys material properties are described below. The Company believes its facilities are adequate and suitable for its current level of
operations.

Plants.The Company owns its plants in Reedville, Virginia, Moss Point, Mississippi and Abbeville, Louisiana
(except for certain portions of the Abbeville facility which are leased from unaffiliated third parties). The Company also owns its Health and Science Center in Reedville, Virginia, as well as its Morgan City, Louisiana property which was formerly
operated as a plant. The Company leases from unaffiliated third parties the real estate on which its Cameron, Louisiana plant is located.

The Companys Abbeville and Cameron plants were severely damaged in the third quarter 2008 by Hurricane Ike. See Company OverviewHurricane Damages.

The Companys Moss Point, Abbeville and Cameron plants were severely damaged in the third quarter 2005 by Hurricanes Katrina and Rita. See
Company OverviewHurricane Damages.

Warehouse and Storage.The Company owns, as well as leases from
unaffiliated third parties, warehouses and tank space for storage of its products, generally at terminals located along the Mississippi River and Tennessee River. Information regarding the Companys material storage facilities is set forth
below:



|                        |  |                                                    |  |            
|----------------------- |  | -------------------------------------------------- |  | -----------
|Location                |  | Approximate Fish Mealand Fish Oil Storage Capacity |  | Owned/Lease
|Reedville, Virginia     |  | 42,000 tons                                        |  | Owned      
|Abbeville, Louisiana    |  | 14,700 tons                                        |  | Owned      
|Moss Point, Mississippi |  | 13,000 tons                                        |  | Owned      
|Morgan City, Louisiana  |  | 15,000 tons                                        |  | Owned      
|St. Louis, Missouri     |  | 10,000 tons                                        |  | Owned      
|Avondale, Louisiana     |  | 23,000 tons                                        |  | Leased     
|Cameron, Louisiana      |  | 15,300 tons                                        |  | Leased     
|East Dubuque, Illinois  |  | 11,000 tons                                        |  | Leased     
|Port Arthur, Texas      |  | 10,000 tons                                        |  | Leased     



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Shipyard.The Company owns a 49.4 acre shipyard facility in Moss Point, Mississippi which
includes two dry docks, each with a capacity of 1,300 tons. The shipyard is used for routine maintenance and vessel refurbishment on the Companys fishing vessels and occasionally for shoreside maintenance services to third-party vessels if
excess capacity exists.

Administrative and Executive Offices.The Company leases administrative and executive office space
from an unaffiliated third party in Houston, Texas. The Company also leases the property for its Omega Pure Technology and Innovation Center from an unaffiliated third party in Houston, Texas.



|Item 1A. | Risk Factors
|-------- | ------------

The Company
cautions investors that the following risk factors, and those factors described elsewhere in this report, other filings made by the Company with the SEC from time to time and press releases issued by the Company, could affect the Companys
actual results which could differ materially from those expressed in any forward-looking statements made by or on behalf of the Company.

The risks described below are not the only ones facing the Company. The Companys business is also subject to other risks and uncertainties that affect many other companies, such as competition, technological obsolescence, labor
relations (including risks of strikes), general economic conditions and geopolitical events. Additional risks not currently known to the Company or risks that the Company currently believes are immaterial may also impair the Companys business,
results of operations and financial results.

Risks Relating to the Companys Business and Industry:

The Company is dependent on a single natural resource and may not be able to catch the amount of menhaden that it requires to operate
profitably.The Companys primary raw material is menhaden. The Companys business is totally dependent on its annual menhaden harvest in ocean waters along the U.S. Atlantic and Gulf coasts. The Companys ability to meet its raw
material requirements through its annual menhaden harvest fluctuates from year to year and month to month, due to natural conditions over which the Company has no control. These natural conditions, which include varying fish population, adverse
weather conditions and fish disease, may prevent the Company from catching the amount of menhaden required to operate profitably. In the third quarter of 2008, the Company experienced below average fish catch primarily due to adverse weather
conditions relating to hurricane activity, which, in conjunction with increased cost of production, has increased per unit costs that have adversely impacted earnings in 2008, and are expected to adversely impact earnings in the first two quarters
of 2009.

The Companys operations are geographically concentrated in the Gulf of Mexico where they are susceptible
to regional adverse weather patterns such as hurricanes.Three of the Companys four operating plants are located in the Gulf of Mexico (two in Louisiana and one in Mississippi), a region which has historically been subject to a late
summer/early fall hurricane season. The Companys Virginia facility has in the past also at times been adversely affected by hurricanes. In September 2008, the Companys Abbeville and Cameron, Louisiana fish processing facilities were
damaged by Hurricane Ike and were non-operational immediately after these weather events. Operations at the Abbeville fish processing facility have been restored to full capacity, and the Company anticipates the Cameron fish processing facility to
be fully functional prior to the beginning of the 2009 fishing season. In addition, all three of the Companys Gulf of Mexico plants were severely damaged within a one-month span by Hurricanes Katrina and Rita in August and September 2005.
Immediately after the second hurricane, approximately 70% of the Companys 2004 production capacity was impaired and the Companys business, results of operations and financial condition were materially adversely affected. Additional
future weather related disruptions could, if they occur, also have a material adverse effect on the Companys business, results of operations and financial condition. In addition, the Companys costs of insurance for property damage have
increased as insurers recoup losses paid and to be paid out in connection with the Katrina, Rita and Ike hurricanes by charging higher premiums.



17



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The costs of energy may materially impact the Companys business. The Company
has experienced substantially higher costs for energy in recent years. The Companys business is materially dependent on diesel fuel for its vessels and natural gas for its operating facilities. The costs of these commodities, which are beyond
the Companys control, may have an adverse material impact on the Companys business, results of operations and financial condition.

Fluctuation in oil yields derived from the Companys fish catch could impact the Companys ability to operate profitably. The oil yield, or the percentage of oil derived from
the menhaden fish, while it is relatively high compared to many species of fish, has fluctuated over the years and from month to month due to natural conditions relating to fish biology over which the Company has no control. For example, the
Companys oil yields for the 2006 fishing season were lower by 28% compared to those in the 2005 fishing season and were lower by 24% compared to the Companys 10 year oil yield average. The Company believes that the causes of lower fish
oil yields relate to fish diet, weather and water temperature but such causes are not generally well understood. Poor oil yields result in significantly higher per unit inventory costs and fewer volumes available for future sale and, as a result,
have at times materially impacted the amount of fish oil that the Company has been able to produce from its available fish catch. It is possible that oil yields in the future could also adversely impact the Companys ability to operate
profitably.

Laws or regulations that restrict or prohibit menhaden or purse seine fishing operations could adversely
affect the Companys ability to operate. The adoption of new laws or regulations at federal, regional, state or local levels that restrict or prohibit menhaden or purse seine fishing operations, or stricter interpretations of existing laws
or regulations, could materially adversely affect the Companys business, results of operations and financial condition. In addition, the impact of a violation by the Company of federal, regional, state or local law or regulation relating to
its fishing operations, the protection of the environment or the health and safety of its employees could have a material adverse affect on the Companys business, results of operations and financial condition.

One example of potentially restrictive regulation is an addendum to a fisheries management plan recommended by a regional regulatory
commission in August 2005. The Commonwealth of Virginia has declined to adopt the regulatory commissions recommended plan but has instead adopted its own restrictions whereby the Companys Chesapeake Bay menhaden harvest would be capped
for a five year period at a recent five-year average (2001 to 2005) of 109,020 metric tons per year. The Virginia restrictions also allow for a credit whereby any under-harvest in a particular year below the 109,020 metric ton cap would be added to
increase the cap for the following year, up to a maximum of 122,740 metric tons per year. The Company supported Virginias proposal and voluntarily complied with its limitations in 2006. This restriction had no effect on the Companys
Chesapeake Bay harvest in 2008 and is not expected to have a material adverse effect on the Chesapeake Bay harvest in 2009. As a result of the 2008 Chesapeake Bays underharvest, the 2009 Chesapeake Bay catch limit will be 122,740 metric tons.

On March 27, 2008, the Texas Parks and Wildlife Commission adopted regulations related to the menhaden reduction
fishery in Texas waters which limits the Total Allowable Catch (TAC) to 31.5 million pounds annually (the five year average menhaden catch for reduction purposes in Texas waters from 2002 through 2006). The regulations also allow
for a 10% underage or overage in each year which is credited or deducted, as applicable, to the TAC in the following year.

The Companys menhaden fish catch in Texas in 2008 is preliminarily estimated by the National Marine Fisheries Service to be 30.8 million pounds (approximately 15,000 metric tons), or approximately 3.5% of the Companys total
2008 fish catch, although these figures have not yet been finalized. The limitation is not expected to have a material adverse effect on the Companys business, results of operation or financial conditions. The Texas regulations become
effective at the beginning of the 2009 fishing season.

In October 2007, two bills were introduced in the U.S. House of
Representatives (H.R. 3840 and H.R. 3841) by two congressmen representing portions of New Jersey and Maryland, areas where the Company has no operations. These two congressmen were not re-elected to Congress in November 2008 and the bills never
moved out of committee, nor was any vote ever taken on the bills. The bills, if enacted, would have



18



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effectively prohibited commercial fishing for Atlantic menhaden for reduction purposes in inland, state and federal waters along the Atlantic coast. The
Company believed that the bills were premised on inaccurate assumptions and depictions of facts about the menhaden resource which the National Marine Fisheries Service continues to classify as healthy and not overfished. The bills would have also
supplanted decades of fisheries management previously undertaken by the Atlantic States Marine Fisheries Commission and the National Marine Fisheries Service. The enactment of either of the bills, or any restrictions similar to those described in
the bills, would have a material adverse effect on the Companys business, results of operations and financial condition.

The Companys fish catch may be impacted by restrictions on its spotter aircraft. If the Companys spotter aircraft are prohibited or restricted from operating in their normal manner during the Companys fishing
season, the Companys business, results of operations and financial condition could be adversely affected. For example, as a direct result of the September 11, 2001 terrorist attacks, the Secretary of Transportation issued a federal ground
stop order that grounded certain aircraft (including the Companys fish-spotting aircraft) for approximately nine days. This loss of spotter aircraft coverage severely hampered the Companys ability to locate menhaden fish during this
nine-day period and thereby reduced its amount of saleable product.

Worldwide supply and demand relationships, which are
beyond the Companys control, influence the prices that the Company receives for many of its products and may from time to time result in low prices for many of the Companys products.Prices for many of the Companys products are
subject to, or influenced by, worldwide supply and demand relationships over which the Company has no control and which tend to fluctuate to a significant extent over the course of a year and from year to year. For example, during 2008, the Company
experienced fish oil price increases of approximately 73.4% when compared to 2007. Beginning in the third quarter of 2008, pricing in the agricultural commodity markets began to decrease. Spot fish oil and fish meal prices have followed these
general trends during the second half of 2008 and into the beginning of 2009. The factors that influence these supply and demand relationships are world supplies of fish meal made from other fish species, animal proteins and fats, palm oil, rapeseed
oil, soy meal and oil, and other edible oils.

New laws or regulation regarding contaminants in fish oil or fish meal may
increase the Companys cost of production or cause the Company to lose business. It is possible that future enactment of increasingly stringent regulations regarding contaminants in fish meal or fish oil by foreign countries or the United
States may adversely affect the Companys business, results of operations and financial condition. More stringent regulations could result in: (i) the Companys incurrence of additional capital expenditures on contaminant reduction
technology in order to meet the requirements of those jurisdictions, and possibly higher production costs for Companys products, or (ii) the Companys withdrawal from marketing its products in those jurisdictions.

Risks Relating to the Companys Ongoing Operations:

The Company has a substantial amount of indebtedness, which may adversely affect its ability to operate its business, remain in compliance with debt covenants and make payments on its debt. As of
December 31, 2008, the aggregate amount of the Companys outstanding indebtedness under its Senior Credit Facility and its loan agreements under the Title XI Fisheries Finance Program was approximately $59.0 million. The Companys
outstanding indebtedness could have important consequences for you, including the following:



| |  |  | it may be more difficult for the Company to satisfy its obligations with respect to its Senior Credit Facility and its loan agreements under the Title XI Fisheries
Finance Program, and any failure to comply with the obligations of any of the agreements governing such indebtedness, including financial and other restrictive covenants, could result in an event of default under such agreements;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



19



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| |  |  | the covenants contained in the Companys debt agreements limit its ability to borrow money in the future for acquisitions, capital expenditures or to meet its
operating expenses or other general corporate obligations;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the amount of the Companys interest expense may increase because certain of its borrowings are at variable rates of interest, which, if interest rates
increase, could result in higher interest expense;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Company will need to use a portion of its cash flows to pay principal and interest on its debt, which will reduce the amount of money the Company has for
operations, working capital, capital expenditures, expansion, acquisitions or general corporate or other business activities;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Company may have a higher level of debt than some of its competitors, which could put it at a competitive disadvantage;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | the Company may be more vulnerable to economic downturns and adverse developments in its industry or the economy in general; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------



| |  |  | the Companys debt level could limit its flexibility in planning for, or reacting to, changes in its business and the industry in which it operates.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------

The Companys ability to meet its expenses and debt obligations will depend on its future
performance, which will be affected by financial, business, economic, regulatory and other factors. The Company will not be able to control many of these factors, such as economic conditions and governmental regulation. The Company cannot be certain
that its earnings will be sufficient to allow it to pay the principal and interest on its existing or future debt and meet its other obligations. If the Company does not have enough money to service its existing or future debt, it may be required to
refinance all or part of its existing or future debt, sell assets, borrow more money or raise equity. The Company may not be able to refinance its existing or future debt, sell assets, borrow more money or raise equity on terms acceptable to it, if
at all.

The Companys strategy to expand into the functional food grade oils market may be unsuccessful.The
Companys attempts to expand its fish oil sales into the market for refined, functional food grade fish oils for human consumption may not be successful. The Companys expectations regarding future demand for Omega-3 fatty acids may prove
to be incorrect or, if future demand does meet the Companys expectations, it is possible that purchasers could utilize Omega-3 sources other than the Companys products.

The Companys quarterly operating results will fluctuate as its business is seasonal in nature.The Companys menhaden
harvesting and processing business is seasonal in nature. The Company generally has higher sales during the menhaden harvesting season (which includes the second and third quarter of each fiscal year) due to increased product availability, but
prices during the fishing season tend to be lower than during the off-season. As a result, the Companys quarterly operating results have fluctuated in the past and may fluctuate in the future. In addition, from time to time the Company defers
sales of inventory based on worldwide prices for competing products that affect prices for its products, which may affect comparable period comparisons.

The Companys business is subject to significant competition, and some competitors have significantly greater financial resources and more extensive and diversified operations than the Company.The marine
protein and oil business is subject to significant competition from producers of vegetable and other animal protein products and oil products such as Archer Daniels Midland and Cargill. In addition the Company competes with a smaller domestic
privately-owned menhaden fishing company and international marine protein and oil producers, including Scandinavian herring processors and South American anchovy and sardine processors. Many of these competitors have significantly greater financial
resources and more extensive and diversified operations than the Company.

The Companys foreign customers are
subject to disruption typical to foreign countries.The Companys sales of its products in foreign countries are subject to risks associated with foreign countries such as changes in social, political and economic conditions inherent in
foreign operations, including:



| |  |  | Changes in the law and policies that govern foreign investment and international trade in foreign countries;
| | - |  | ------------------------------------------------------------------------------------------------------------



20



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| |  |  | Changes in U.S. laws and regulations relating to foreign investment and trade;
| | - |  | ------------------------------------------------------------------------------



| |  |  | Changes in tax or other laws;
| | - |  | -----------------------------



| |  |  | Partial or total expropriation;
| | - |  | -------------------------------



| |  |  | Current exchange rate fluctuations;
| | - |  | -----------------------------------



| |  |  | Restrictions on current repatriation; or
| | - |  | ----------------------------------------



| |  |  | Political disturbances, insurrection or war.
| | - |  | --------------------------------------------

In addition, it is possible that the Company, at any one time, could have a significant amount of its revenues generated by sales in a particular country which would concentrate the Companys susceptibility to
adverse events in that country.

The Company may undertake acquisitions that are unsuccessful and the Companys
inability to control the inherent risks of acquiring businesses could adversely affect its business, results of operations and financial condition operations. In the future the Company may undertake acquisitions of other businesses, located
either in the United States or in other countries, although there can be no assurances that this will occur. There can be no assurance that the Company will be able (i) to identify and acquire acceptable acquisition candidates on favorable
terms, (ii) to profitably manage future businesses it may acquire, or (iii) to successfully integrate future businesses it may acquire without substantial costs, delays or other problems. Any of these outcomes could have a material adverse
effect on the Companys business, results of operations and financial condition.

The Companys failure to
comply with federal U.S. citizenship ownership requirements may prevent it from harvesting menhaden in the U.S. jurisdictional waters. The Companys harvesting operations are subject to the Shipping Act of 1916 and the regulations
promulgated thereunder by the Department of Transportation, Maritime Administration which require, among other things, that the Company be incorporated under the laws of the U.S. or a state, the Companys chief executive officer be a U.S.
citizen, no more of the Companys directors be non-citizens than a minority of a number necessary to constitute a quorum and at least 75% of the Companys outstanding capital stock (including a majority of its voting capital stock) be
owned by U.S. citizens. If the Company fails to observe any of these requirements, the Company will not be eligible to conduct its harvesting activities in U.S. jurisdictional waters which would have a material adverse effect on the Companys
business, results of operations and financial condition.

The Company may not be able to recruit, train and retain
qualified marine personnel in sufficient numbers. The Companys business is dependent on its ability to recruit, train and retain qualified marine personnel in sufficient numbers such as vessel captains, vessel engineers and other
crewmembers. The Company has experienced difficulty in recent years in recruiting its optimal number of employees. To the extent that the Company is not successful in recruiting, training and retaining employees in sufficient numbers, its
productivity may suffer. If the Company were unable to secure a sufficient number of workers during periods of peak employment, the lack of personnel could have an adverse effect on the Companys business, results of operations and financial
condition.The impact of Hurricanes Katrina, Rita and Ike has exacerbated the difficulties of recruiting and retaining qualified marine personnel in the Gulf Coast area.

The Company has historically participated in the United States H2B Visa Program whereby foreign nationals are permitted to enter the
United States temporarily and engage in seasonal, non-agricultural employment. The Company utilizes its H2B Visa workers for a portion of its fishing vessel crews and plant personnel. Changes in the H2B Visa Program, the termination of that program,
or caps on the number of workers available under that program, could have a material adverse effect upon the Companys ability to secure a sufficient number of workers during periods of peak employment or cause the Company to bear additional
costs to secure domestic workers in a tight job market.

The U.S. Congress has failed to re-authorize the Save Our Small and
Seasonal Business Act amendment to the H2B visa program which would allow returning H2B workers from certain prior years



21



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from being counted against the H2B visa programs annual 66,000 visa cap. Because of the relatively low visa cap number, the Company did not receive its
historical allotment of H2B workers for the 2008 fishing season and will not receive any allotment for the 2009 fishing season. Accordingly, the Company utilized all domestic workers for its 2008 fishing season and expects to do so again for its
2009 fishing season. The Company has changed its recruiting programs to completely replace H2B workers, including raising certain wage scales, implementing sign-on bonuses for certain positions, offering referral fees for qualified workers, and
other benefits, all of which have resulted in additional costs for the Company. In addition, some of the newly hired domestic workers have not worked in the menhaden fishing business prior to working for the Company, unlike many H2B workers who
typically return year after year with the benefits of their training and experience. These newer inexperienced workers have resulted in increased training costs and likely lower productivity for the Companys operations.

The Companys Senior Credit Facility and other Fisheries Finance Program loan agreements contain covenants and restrictions that
may limit the Companys financial flexibility.The Companys Senior Credit Facility and the Companys loan agreements under the Title XI Fisheries Finance Program contain various covenants and restrictions such as prohibitions on
dividends and stock repurchases without the lenders consent. The Senior Credit Facility also contains various financial covenants that the Company must comply with.

Investment Risks.Investment risks specifically related to the Companys common stock include:

Capital and Credit Market CrisisIt is possible that the recent unprecedented volatility in capital and credit markets may create additional risks in the upcoming months and possibly years.



| |  |  | Liquidity in the capital and credit marketsWhile not significant to the Company to date, the disruptions in capital and credit markets may result in increased
borrowing costs associated with short-term and long-term debt.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Counterparty creditworthinessThe Company is subject to credit risk, which relates to the ability of its customers to meet their contractual payment
obligations or the potential non-performance of counterparties to deliver contracted energy.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Value of InvestmentsThe Company sponsors a defined benefit pension plans for its employees. The market value of the investments within the employee pension
plan declined by approximately 24.9% during the year ended December 31, 2008. The benefit plan assets and obligations of the Company are remeasured annually using a December 31 measurement date. Reductions in plan assets from investment
losses may result in an increase to the plans unfunded status and a decrease in shareholders equity upon actuarial revaluation of the plan on January 1, 2009. Changes in the value of plan assets will not have an impact on the income
statement for 2008; however, reduced benefit plan assets will result in increased benefit costs in future years and may increase the amount and accelerate the timing of required future funding contributions. Depending upon market conditions, such
increases could be material.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Macroeconomic conditionsThe recent capital and credit market crisis is adversely affecting the U.S. and global economies. This could have several adverse
effects on the Companys markets should the effects of the downturn be experienced for an extended period of time. Potential long-term decline of global economies could lead to lower demand for fishmeal and oil which could result in a
decline of the Companys sales prices and related revenue. Lower demand for fishmeal and oil could also lead to lower margins for the Company. In addition, customers may not be able to pay, or may delay payment of, accounts receivable
that are owed to the Company.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The limited liquidity for the Companys common stock could affect
your ability to sell your shares at a satisfactory price.The Companys common stock is relatively illiquid. As of December 31, 2008, the Company had approximately 18.7 million shares of common stock outstanding. The average daily



22



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trading volume in the common stock during the prior 60 calendar days ending on that date was approximately 147,400 shares. A more active public market for
the Companys common stock, however, may not develop, which would continue to adversely affect the trading price and liquidity of the common stock. Moreover, a thin trading market for the common stock causes the market price for the common
stock to fluctuate significantly more than the stock market as a whole. Without a large float, the Companys common stock is less liquid than the stock of companies with broader public ownership and, as a result, the trading prices of the
common stock may be more volatile. In addition, in the absence of an active public trading market, you may be unable to liquidate your investment in the Company at a satisfactory price.

Issuance of shares in connection with financing transactions or under stock incentive plans will dilute current stockholders.Pursuant to the Companys stock incentive plans, the Companys management is authorized to grant stock awards to its employees, directors and consultants. You will incur dilution upon exercise of any outstanding stock awards. In
addition, if the Company raises additional funds by issuing additional common stock, or securities convertible into or exchangeable or exercisable for common stock, further dilution to its existing stockholders will result, and new investors could
have rights superior to existing stockholders.

The number of shares of the Companys common stock eligible for
future sale could adversely affect the market price of its stock.The Company had outstanding options to purchase approximately 0.6 million shares of its common stock with a weighted average exercise price of $7.26 per share as of
December 31, 2008. These shares of common stock are registered for resale on currently effective registration statements. In addition, the Company has registered the resale of 5,232,708 shares of common stock that were sold by Zapata to certain
purchasers in a private transaction on a currently effective registration statement. Certain of the Companys officers and directors have also entered into Rule 10b5-1 sales plans with brokers unaffiliated with the Company whereby they have
committed to sell automatically and without discretion a predetermined number of shares of the Companys common stock over a period of time according to their own individual criteria. The Company may issue additional restricted securities or
register additional shares of common stock under the Securities Act in the future. The issuance of a significant number of shares of common stock upon the exercise of stock options, or the availability for sale, or sale, of a substantial number of
the shares of common stock eligible for future sale under effective registration statements, under Rule 144 or otherwise, could adversely affect the market price of the common stock.

The Companys Articles of Incorporation and Bylaws have provisions that discourage corporate takeovers and could prevent
stockholders from realizing a premium on their investment.Certain provisions of the Companys Articles of Incorporation and Bylaws, as well as the Nevada Corporation Law, to which the Company is subject, could delay or frustrate the
removal of incumbent directors and could make difficult a merger, tender offer or proxy contest involvement the Company, even if such events could be viewed as beneficial by its stockholders. The Companys Board of Directors is empowered to
issue preferred stock in one or more series without stockholder action. Any issuance of this blank-check preferred stock could materially limit the rights of holders of the Companys common stock and render more difficult or discourage an
attempt to obtain control of the Company by means of a tender offer, merger, proxy contest or otherwise. In additional, the Articles of Incorporation and Bylaws contain a number of provisions which could impede a takeover or change in control of the
Company, including, among other things, staggered terms for members of its Board of Directors, the requiring of two-thirds vote of stockholders to amend certain provisions of the Articles of Incorporation or the inability to take action by written
consent or to call special stockholder meetings. Certain provisions of the Nevada Corporation Law could also discourage takeover attempts that have not been approved by the Companys Board of Directors. In addition, federal law requires that at
least 75% of the Companys outstanding capital stock be owned by U.S. citizens which will discourage takeover attempts by potential foreign purchasers.

The Company has not paid dividends and does not expect to pay dividends in the near future.The Company has never declared or paid
any cash dividends on its common stock since it became a public company in April 1998 and has no intention to do so in the near future. Any determination as to payment of



23



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dividends will be made at the discretion of the Companys Board of Directors and will depend upon the Companys operating results, financial
condition, capital requirements, general business conditions and such other factors that the Board of Directors deems relevant. In addition, the payment of cash dividends is not permitted by the terms of the Companys Senior Credit Facility.



|Item 1B. | Unresolved Staff Comments.
|-------- | --------------------------

None.



|Item 3. | Legal Proceedings.
|------- | ------------------

The
Company is defending various claims and litigation arising from operations which arise in the ordinary course of the Companys business. In the opinion of management, any losses resulting from these matters will not have a material adverse
affect on the Companys results of operations, cash flows or financial position.

On August 31, 2007, the Company filed a lawsuit in the District Court of Harris, Texas 295thJudicial District, against its prior
insurance broker, Aon Risk Services of Texas, who procured the Companys property insurance policies for the 2005/2006 policy year, which were the subject of prior litigation as a result of claims relating to Hurricanes Rita and Katrina. The
Companys lawsuit against Aon alleges negligent procurement, negligent misrepresentation, breach of contract and violations of Texas insurance and consumer protection laws. Trial has currently been set for this matter for October 2009.



|Item 4. | Submission of Matters to a Vote of Security Holders.
|------- | ----------------------------------------------------

No matter was submitted to a vote of Omegas stockholders during the fourth quarter of 2008.



24



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PART II



|Item 5. | Market for the Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
|------- | -----------------------------------------------------------------------------------------------------------------

The following performance graph compares the Companys cumulative total stockholder return on its Common Stock with the cumulative total return on
(i) the Russell 2000 Index, and (ii) a peer group stock index (the Peer Group Index) which consists of three publicly traded companies in the agriproducts industry. The companies that comprise the Peer Group Index are Archer
Daniels Midland Company, ConAgra, Inc. and Tyson Foods, Inc.

The cumulative total return computations set forth in the Performance Graph
assume the investment of $100 in Common Stock, the Russell 2000 Index, and the Peer Group Index on December 31, 2003. Any dividends are assumed to be reinvested.

LOGO



|                          |  |          |        |   |          |   |          |  |          |        |          |   |          |  |   |        |  |   |       
|------------------------- |  | -------- | ------ | - | -------- | - | -------- |  | -------- | ------ | -------- | - | -------- |  | - | ------ |  | - | ------
|                          |  | 12/31/03 |        |   | 12/31/04 |   | 12/31/05 |  | 12/31/06 |        | 12/31/07 |   | 12/31/08
|Omega Protein Corporation |  | $        | 100.00 | * |          | $ | 217.72   |  | $        | 169.87 |          | $ | 195.70   |  | $ | 235.19 |  | $ | 51.94 
|Peer Group Index          |  | $        | 100.00 | * |          | $ | 152.65   |  | $        | 139.22 |          | $ | 177.58   |  | $ | 210.79 |  | $ | 118.45
|Russell 2000              |  | $        | 100.00 | * |          | $ | 170.81   |  | $        | 176.48 |          | $ | 206.61   |  | $ | 196.40 |  | $ | 88.09 



|* | $100 invested on December 31, 2003 including reinvestment of dividends
|- | ----------------------------------------------------------------------

The Performance Graph and related description shall not be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended (the Securities Act), or under the Exchange Act,
except to the extent that the Company specifically incorporates this information by reference. In addition the Performance Graph and the related description shall not be deemed soliciting material or to be filed with the SEC
or subject to Regulation 14A or 14C.



25



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Omegas common stock is listed on the New York Stock Exchange (NYSE) under the symbol
OME. The daily high and low sales prices for the common stock, as reported in the consolidated transactions reporting system for each quarterly period ending on the date indicated, are shown in the following table. No dividends were paid
during the periods set forth in the table.



|                 |  |              |       |              |   |              |  |              |       |              |   |              |  |              |       |              |   |       |  |   |      |  |   |     
|---------------- |  | ------------ | ----- | ------------ | - | ------------ |  | ------------ | ----- | ------------ | - | ------------ |  | ------------ | ----- | ------------ | - | ----- |  | - | ---- |  | - | ----
|                 |  | Dec. 31,2008 |       | Sep. 30,2008 |   | Jun. 30,2008 |  | Mar. 31,2008 |       | Dec. 31,2007 |   | Sep. 30,2007 |  | Jun. 30,2007 |       | Mar. 31,2007
|High sales price |  | $            | 11.59 |              | $ | 18.25        |  | $            | 15.71 |              | $ | 14.57        |  | $            | 10.54 |              | $ | 10.49 |  | $ | 9.38 |  | $ | 8.05
|Low sales price  |  |              | 3.10  |              |   | 10.20        |  |              | 10.91 |              |   | 7.49         |  |              | 6.68  |              |   | 8.15  |  |   | 6.75 |  |   | 6.00

On March 6, 2009, the closing price of Omegas common stock, as reported by the NYSE,
was $1.95 per share. As of March 6, 2009, there were approximately 25 holders of record of Omegas common stock. This number does not include any beneficial owners for whom shares may be held in a nominee or street
name.

Omega has never declared any dividends since it became a public company in April 1998. Omega intends to retain earnings, if any, and
does not anticipate declaring or paying dividends on its common stock in the foreseeable future. Any future determination as to payment of dividends will be made at the discretion of the Board of Directors of Omega and will depend upon the
Companys operating results, financial condition, capital requirements, general business conditions and such other factors that the Board of Directors deems relevant. In addition, the payment of cash dividends is not permitted by the terms of
the Companys Senior Credit Facility. See Item 7Managements Discussion and Analysis of Financial Conditional and Results of OperationsLiquidity and Capital Resources.

Information relating to compensation plans under which the Companys equity securities are authorized for issuance are set forth in Part III,
Item 12 of this Annual Report on Form 10-K.



|Item 6. | Selected Financial Data.
|------- | ------------------------

The
following table sets forth certain selected historical consolidated financial information for the periods presented and should be read in conjunction with the Consolidated Financial Statements of the Company included in Item 8 of this Report
and the related notes thereto and with Managements Discussion and Analysis of Financial Condition and Results of Operations included in Item 7 of this Report.



|                                                                  |  |                                          |         |      |   |         |  |      |         |  |      |         |   |  |   |        
|----------------------------------------------------------------- |  | ---------------------------------------- | ------- | ---- | - | ------- |  | ---- | ------- |  | ---- | ------- | - |  | - | -------
|                                                                  |  | Years Ended December 31,                
|                                                                  |  | 2008                                     |         | 2007 |   | 2006    |  | 2005 |         |  | 2004
|                                                                  |  | (in thousands, except per share amounts)
|INCOME STATEMENT DATA:                                            |  |                                          |         |      |   |         |  |      |         |  |      |         |   |  |   |        
|Revenues                                                          |  | $                                        | 177,412 |      | $ | 157,149 |  | $    | 139,834 |  | $    | 109,896 |   |  | $ | 119,645
|Operating income (loss)                                           |  |                                          | 23,543  |      |   | 27,440  |  |      | 7,956   |  |      | (10,887 | ) |  |   | 5,288  
|Net income (loss)                                                 |  |                                          | 12,576  |      |   | 12,139  |  |      | 4,572   |  |      | (7,186  | ) |  |   | 3,202  
|Per share income (loss) basic                                     |  |                                          | 0.69    |      |   | 0.72    |  |      | 0.19    |  |      | (0.29   | ) |  |   | 0.13   
|Per share income (loss) diluted                                   |  |                                          | 0.68    |      |   | 0.70    |  |      | 0.18    |  |      | (0.29   | ) |  |   | 0.12   
|CASH FLOW DATA:                                                   |  |                                          |         |      |   |         |  |      |         |  |      |         |   |  |   |        
|Capital expenditures                                              |  |                                          | 22,943  |      |   | 8,331   |  |      | 20,318  |  |      | 17,590  |   |  |   | 22,907 
|BALANCE SHEET DATA (end of period):                               |  |                                          |         |      |   |         |  |      |         |  |      |         |   |  |   |        
|Working capital                                                   |  | $                                        | 96,812  |      | $ | 83,461  |  | $    | 71,076  |  | $    | 79,120  |   |  | $ | 73,137 
|Property and equipment, net                                       |  |                                          | 106,181 |      |   | 96,659  |  |      | 100,776 |  |      | 93,965  |   |  |   | 97,766 
|Total assets                                                      |  |                                          | 232,581 |      |   | 207,829 |  |      | 200,718 |  |      | 200,227 |   |  |   | 190,162
|Current maturities of long-term debt and capital lease obligation |  |                                          | 7,999   |      |   | 6,283   |  |      | 2,467   |  |      | 2,443   |   |  |   | 1,661  
|Long-term debt and capital lease obligation                       |  |                                          | 52,946  |      |   | 58,976  |  |      | 72,693  |  |      | 27,658  |   |  |   | 15,943 
|Stockholders equity                                              |  |                                          | 139,557 |      |   | 118,455 |  |      | 101,090 |  |      | 142,367 |   |  |   | 149,667



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|Item 7. | Managements Discussion and Analysis of Financial Condition and Results of Operations.
|------- | --------------------------------------------------------------------------------------

The following is a discussion of the Companys financial condition and results of operations. This discussion should be read in conjunction with the
Consolidated Financial Statements of the Company appearing under Item 8 of this Report. Certain amounts applicable to the prior periods have been reclassified to conform to the classifications currently followed. Such reclassifications do not
affect earnings or stockholders equity.

Company Overview

Business.Omega is the largest U.S. producer of protein-rich meal and oil derived from marine sources. The Companys products are produced from menhaden (a herring-like fish found in commercial
quantities), and include regular grade and value-added specialty fish meals, crude and refined fish oils and fish solubles. The Companys fish meal products are used as nutritional feed additives by animal feed manufacturers and by commercial
livestock producers. The Companys crude fish oil is sold to food producers and feed manufacturers, and its refined fish oil products are used in food production and certain industrial applications. Fish solubles are sold as protein additives
for animal feed and as fertilizers.

Fishing.The Companys harvesting season generally extends from May through December on
the mid-Atlantic coast and from April through October on the Gulf coast. During the off-season and the first few months of each fishing season, the Company fills purchase orders from the inventory it has accumulated during the previous fishing
season or in some cases, by re-selling meal and oil purchased from other suppliers.

On September 13, 2008, the Companys
Abbeville and Cameron, Louisiana fish processing facilities were damaged by Hurricane Ike. Both of these facilities were non-operational immediately after the hurricane. Operations at the Abbeville fish processing facility were restored to full
capacity on September 22, 2008. The Company anticipates the Cameron fish processing facility to be fully functional prior to the beginning of the 2009 fishing season. These hurricane damages adversely affected the Companys business,
results of operations and financial condition.

The direct impact of the hurricane upon the Company was a loss of physical inventories and
physical damage to the plants. The interruption of processing capabilities caused the Company to address the impact of abnormal downtime of its processing facilities, which resulted in the immediate recognition of costs which would ordinarily have
been captured as inventory costs. The amounts of these losses are more fully described in Notes 2, 3, 5 and 13 to the Consolidated Financial Statements.

During 2008, the Company experienced higher costs of production and below average fish catch. The higher costs of production were primarily attributed to increased energy, labor and repair costs. The reduced fish
catch was primarily attributable to adverse weather conditions mainly associated with hurricane activity. As a result of the higher costs of production and below average fish catch, the Company experienced significantly higher per unit product costs
(approximately 27.3% increase as compared to the 2007 fishing season) which have adversely affected the Companys earnings for 2008. The impacts of higher cost inventories will be carried forward and are expected to adversely affect the
Companys earnings through the second quarter of 2009. In addition, the lost fishing days resulted in lower 2008 product volumes available for sale in the first half of 2009.

The fish catch is processed into three general types of products; fish meal, fish oil and fish solubles at the Companys four meal and oil
processing plants, two in Louisiana, one in Mississippi and one in Virginia.



27



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Harvesting and Production.The following table summarizes the Companys harvesting and
production for the indicated periods:



|                      |  |                          |  |         |  |        
|--------------------- |  | ------------------------ |  | ------- |  | -------
|                      |  | Years Ended December 31,
|                      |  | 2008                     |  | 2007    |  | 2006   
|Fish catch (tons) (1) |  | 458,079                  |  | 542,102 |  | 541,059
|                      |  |                          | 
|Production (tons):    |  |                          |  |         |  |        
|Fish meal             |  |                          |  |         |  |        
|Regular grade         |  | 33,083                   |  | 23,605  |  | 19,250 
|Special Select        |  | 68,839                   |  | 108,700 |  | 116,831
|Sea-Lac               |  | 13,570                   |  | 10,821  |  | 10,864 
|Oil                   |  |                          |  |         |  |        
|Crude                 |  | 43,119                   |  | 42,152  |  | 39,963 
|Refined               |  | 13,258                   |  | 13,997  |  | 9,907  
|Solubles              |  | 6,797                    |  | 6,617   |  | 5,962  
|                      |  |                          |  |         |  |        
|Total Production      |  | 178,666                  |  | 205,892 |  | 202,777
|                      |  |                          |  |         |  |        



|(1) | Fish catch has been converted to tons using the National Marine Fisheries Service (NMFS) fish catch conversion ratio of 670 pounds per 1,000 fish.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------

The Companys harvesting and processing business is seasonal and fluctuates from year to year and month to month due to
natural conditions over which the Company has no control. For illustrative purposes, the Companys oil yields for the 2006 fishing season were the poorest in recent history and lower by 28% compared to those in the 2005 fishing season and were
lower by 24% compared to the Companys 10 year oil yield average. The causes of lower fish oil yields are believed to relate to fish diet, weather and water temperature but are not generally well understood.

Markets.Pricing for the Companys products has been volatile in the past several
years and is attributable mainly to the international availability, or the perceived international availability, of fish meal and fish oil inventories. In an effort to reduce price volatility and to generate higher, more consistent profit margins,
the Company has implemented a quality control program designed to increase its capability of producing higher quality fish meal products and, in conjunction therewith, enhanced it sales efforts to penetrate premium product markets. During 2000, the
Companys production percentage of specialty meal products was approximately 46% of total meal production. During 2008, the Companys specialty meal production percentage accounted for 71% of total meal production. Future volumetric growth
in specialty meal sales will be dependant upon increased harvesting efforts and market demand. Additionally, the Company is attempting to introduce its refined fish oil into the food market. The Company has made sales, which to date have not been
material, of its refined fish oil, trademarked OmegaPure®, to food manufacturers in the United States and Canada at prices that provide substantially improved margins over the margins that
can be obtained from selling non-refined crude fish oil. The Company cannot estimate, however, the size of the actual domestic or international markets for Omega Pure or how long it may take to develop these markets.

During 2002, the Company developed a business plan to expand its purchase and resale of other manufacturers fish meal and fish oil products which
focused initially on the purchase and resale of Mexican fish meal and fish oil. In 2002, revenues generated from these types of transactions represented less than 2% of total Company revenues. During 2003 and 2004 the Companys fish catch and
resultant product inventories were reduced, primarily due to adverse weather conditions. During 2005, 2006 and 2008, the Companys fish catch and resultant product inventories were reduced, primarily due to adverse weather conditions, and the
Company further expanded its purchase and resale of other fish meals and oils (primarily Panamanian, Peruvian and Mexican fish meal and U.S. menhaden oil). Although operating margins from these activities are less than the margins typically
generated from the Companys base domestic production, these operations provide the



28



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Company with a source of fish meal and oil to sell into other markets, some of which, the Company has not historically had a presence. The Company purchased
products totaling approximately 5,500 and 14,600 tons, or approximately 9.1%, and 7% of total volume sales for the fiscal year ended December 31, 2007 and 2006, respectively. The Company has not purchased any fish meal or fish oil during 2008.

Historically, approximately 35% to 40% of Omegas FAQ grade fish meal was sold on a two-to-twelve-month forward contract basis. The
balance of FAQ grade fish meal and other products was substantially sold on a spot basis through purchase orders. In 2002, the Company began a similar forward sales program for its specialty grade meals and crude fish oil due to increasing demand
for these products. During 2006, 2007, and 2008 approximately 70%, 50%, and 65%, respectively, of the Companys fish meals and crude fish oil had been sold on a forward contract basis prior to those years respective fishing season. The
percentage of fish meal and crude fish oil sold on a forward contract basis will fluctuate from year to year based upon perceived market availability.

The Companys annual revenues are highly dependent on annual fish catch, production yields and inventories and, in addition, inventory is generally carried over from one year to the next year. The Company
determines the level of inventory to be carried over based on prevailing market prices of the products and anticipated customer usage and demand during the off-season. Thus, production volume does not necessarily correlate with sales volume in the
same year and sales volumes will fluctuate from quarter to quarter. The Companys fish meal products have a useable life of approximately one year from date of production. Practically, however, the Company attempts to empty its warehouses of
the previous seasons products by the second or third month of the new fishing season. The Companys crude fish oil products do not lose efficacy unless exposed to oxygen and, therefore, their storage life typically is longer than that of
fish meal.

The following table sets forth the Companys revenues by product (in millions) and the approximate percentage of total
revenues represented thereby, for the indicated periods:



|               |  |                          |       |         |       |   |          |      |         |  |       |          |  |         |       |  |       |  
|-------------- |  | ------------------------ | ----- | ------- | ----- | - | -------- | ---- | ------- |  | ----- | -------- |  | ------- | ----- |  | ----- | -
|               |  | Years Ended December 31, |      
|               |  | 2008                     |       |         | 2007  |   |          | 2006 |        
|               |  | Revenues                 |       | Percent |       |   | Revenues |      | Percent |  |       | Revenues |  | Percent |      
|Regular Grade  |  | $                        | 22.8  |         | 13.0  | % |          | $    | 21.1    |  | 13.5  | %        |  | $       | 17.0  |  | 12.1  | %
|Special Select |  |                          | 68.7  |         | 38.7  |   |          |      | 73.9    |  | 47.0  |          |  |         | 63.4  |  | 45.3  |  
|SeaLac         |  |                          | 13.3  |         | 7.5   |   |          |      | 11.7    |  | 7.4   |          |  |         | 9.2   |  | 6.6   |  
|Crude Oil      |  |                          | 48.5  |         | 27.3  |   |          |      | 33.9    |  | 21.6  |          |  |         | 38.3  |  | 27.4  |  
|Refined Oil    |  |                          | 20.3  |         | 11.4  |   |          |      | 13.7    |  | 8.7   |          |  |         | 9.3   |  | 6.7   |  
|Fish Solubles  |  |                          | 3.8   |         | 2.1   |   |          |      | 2.6     |  | 1.7   |          |  |         | 2.2   |  | 1.6   |  
|Other          |  |                          |      |         |      |   |          |      | 0.2     |  | 0.1   |          |  |         | 0.4   |  | 0.3   |  
|               |  |                          |       |         |       |   |          |      |         |  |       |          |  |         |       |  |       |  
|Total          |  | $                        | 177.4 |         | 100.0 | % |          | $    | 157.1   |  | 100.0 | %        |  | $       | 139.8 |  | 100.0 | %
|               |  |                          |       |         |       |   |          |      |         |  |       |          |  |         |       |  |       |  

Critical Accounting Policies and Estimates

For information on critical accounting policies and estimates, see Note 1 to the consolidated financial statements included in Item 8Financial
Statements and Supplementary Data.



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Results of Operations

The following table sets forth as a percentage of revenues, certain items of the Companys operations for each of the indicated periods.



|                                                                                        |  |                          |   |  |       |   |  |       |  
|--------------------------------------------------------------------------------------- |  | ------------------------ | - |  | ----- | - |  | ----- | -
|                                                                                        |  | Years Ended December 31, |  
|                                                                                        |  | 2008                     |   |  | 2007  |   |  | 2006  |  
|Revenues                                                                                |  | 100.0                    | % |  | 100.0 | % |  | 100.0 | %
|Cost of sales                                                                           |  | 75.7                     |   |  | 77.9  |   |  | 83.4  |  
|                                                                                        |  |                          |   |  |       |   |  |       |  
|Gross profit                                                                            |  | 24.3                     |   |  | 22.1  |   |  | 16.6  |  
|Selling, general and administrative expenses                                            |  | 9.3                      |   |  | 10.4  |   |  | 9.8   |  
|Research and development expenses                                                       |  | 1.0                      |   |  | 0.8   |   |  |      |  
|Loss resulting from natural disaster, net2008                                          |  | 1.1                      |   |  |      |   |  |      |  
|(Insurance recoveries and other proceeds) losses relating to natural disaster, net2005 |  | (0.8                     | ) |  | (6.8  | ) |  | 1.1   |  
|Loss on disposal of assets                                                              |  | 0.4                      |   |  | 0.2   |   |  |      |  
|                                                                                        |  |                          |   |  |       |   |  |       |  
|Operating income                                                                        |  | 13.3                     |   |  | 17.5  |   |  | 5.7   |  
|Interest income                                                                         |  | 0.3                      |   |  | 0.2   |   |  | 0.4   |  
|Interest expense                                                                        |  | (2.4                     | ) |  | (3.5  | ) |  | (1.8  | )
|Loss resulting from debt refinancing                                                    |  |                         |   |  | (1.9  | ) |  |      |  
|Other expense, net                                                                      |  | (0.1                     | ) |  | (0.2  | ) |  | (0.2  | )
|                                                                                        |  |                          |   |  |       |   |  |       |  
|Income before income taxes                                                              |  | 11.1                     |   |  | 12.1  |   |  | 4.1   |  
|Provision for income taxes                                                              |  | 4.0                      |   |  | 4.4   |   |  | 0.8   |  
|                                                                                        |  |                          |   |  |       |   |  |       |  
|Net income                                                                              |  | 7.1                      |   |  | 7.7   |   |  | 3.3   |  
|                                                                                        |  |                          |   |  |       |   |  |       |  

2008  2007

Revenues. Revenues increased $20.3 million, or 12.9%, from $157.1 million in 2007 to $177.4 million in 2008. The increase in revenues was due to higher sales prices of 2.0% and
73.4% for the Companys fish meal and fish oil, respectively, which was partially offset by lower sales volumes of 3.8% and 16.7% for the Companys fish meal and fish oil, respectively. Considering fish meal, fish oil and fish solubles
sales activities in total, the Company experienced a $34.8 million increase in revenues due to increased sales prices and a $14.5 million decrease in revenue caused by decreased sales volumes, when comparing 2008 to 2007.

Cost of Sales. Cost of sales, including depreciation and amortization, for 2008 was $134.4 million, an $11.9
million increase, or 9.7%, as compared to 2007. Cost of sales as a percentage of revenues was 75.7% for 2008 as compared to 77.9% for 2007. The decrease in cost of sales as a percentage of revenue was primarily due to increased fish oil sales
prices, partially offset by increased per unit production costs due to increased energy, labor and repair costs and below average fish catch attributable to adverse weather conditions mainly associated with hurricane activity.

Gross Profit. Gross profit increased $8.3 million, or 24.0%, from $34.7 million in 2007 to $43.0 million in 2008.
Gross profit as a percentage of revenues was 24.3% for 2008 as compared to 22.1% for 2007. The increase in gross profit as a percentage of revenues was primarily due to increased fish oil sales prices partially offset by increased per unit
production costs as discussed above.

Selling, general and administrative expenses.Selling, general and administrative
expenses decreased $0.1 million, or 0.5%, from $16.4 million in 2007 to $16.3 million in 2008. The decrease was primarily due to decreased employee bonuses incurred in 2008 as compared to 2007, partially offset by increased public affairs costs in
2008 as compared to 2007. Additionally, during 2008, the Company recorded approximately $0.4 million related to the estimated cost of an environmental remediation for one of the Companys properties. The Company anticipates that the
remediation will be completed in 2009.



30



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Research and development expenses.Research and development expenses increased $0.6 million
from approximately $1.2 million in 2007 to approximately $1.8 million in 2008. The increase is due in part to the increase in equipment and employees for the OmegaPure Technology and Innovation Center, which commenced operations in January 2007 but
was not fully staffed until the latter part of 2007. Additionally, the increase is due to an additional research project that commenced during 2008.

Loss resulting from natural disaster, net2008.During 2008, the Company incurred losses, net of insurance receivable, of $2.0 million relating to damages incurred at its Abbeville and Cameron,
Louisiana, fish processing facilities related to Hurricane Ike.

(Insurance recoveries and other proceeds) losses relating to natural
disaster, net 2005.During 2008, the Company received a federal hurricane assistance grant of $1.3 million, net of fees, related to the impact of Hurricane Rita on the Company. During 2007, the Company settled the lawsuit with its
primary and secondary insurance carriers which resulted in the recognition of $10.7 million in net proceeds in excess of amounts previously recorded.

Loss on disposal of assets. Loss on disposal of assets increased $0.4 million from a loss of $0.3 million in 2007 to a loss of $0.7 million in 2008. The increase was the result
of disposal of miscellaneous assets in the ordinary course of business during 2008.

Operating
income. As a result of the factors discussed above, the Companys operating income decreased $3.9 million from $27.4 million in 2007 to $23.5 million in 2008. As a percentage of revenues, operating income
decreased from 17.5% in 2007 to 13.3% in 2008.

Interest income. Interest income increased by $0.1
million from $0.4 million in 2007 to $0.5 million in 2008. The increase was primarily due to increased average cash balances on which interest income is generated partially offset by a decrease in interest rates.

Interest expense.Interest expense decreased $1.2 million from $5.5 million in 2007 to $4.3 million in 2008. The decrease in interest
expense is primarily due to decreased debt balances and interest rates during 2008 as compared to 2007.

Loss resulting from debt
refinancing.Loss resulting from debt refinancing was $3.0 million in 2007. The expenses related to previously deferred debt issuance costs and other costs that became immediately recognized when the Company refinanced its prior credit
facility on March 26, 2007. No such loss was incurred during 2008.

Other income (expense),
net. Other income (expense), net decreased by $0.2 million from a net expense of $0.3 million in 2007 to a net expense of $0.1 million in 2008. The decrease was primarily due to an enterprise zone grant awarded to
the Company by the Commonwealth of Virginia in the amount of $159,000 during 2008 and a decrease in fees paid to the Companys bank and related lenders.

Provision for income taxes.The Company recorded a $7.1 million provision for income taxes in 2008 representing an effective tax rate of 36.0% for income taxes compared to 36.0% in 2007. The Company
believes that it is more probable than not that the recorded estimated deferred tax asset benefits and state operating loss carry-forwards will be realized except for the amount for which a valuation allowance has been provided. The statutory tax
rate of 34% for U.S. federal taxes was in effect for the respective periods.

2007  2006

Revenues. Revenues increased $17.3 million, or 12.4%, from $139.8 million in 2006 to $157.1 million in 2007. The
increase in revenues was due to higher sales prices of 21.2% and 18.4% for the Companys fish meal and fish oil, respectively, which was partially offset by lower sales volumes of 1.6% and 15.6% for the



31



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Companys fish meal and fish oil, respectively. Considering fish meal, fish oil and fish solubles sales activities in total, the Company experienced a
$26.1 million increase in revenues due to increased sales prices and an $8.7 million decrease in revenue caused by decreased sales volumes, when comparing 2007 to 2006.

Cost of Sales. Cost of sales, including depreciation and amortization, for 2007 was $122.5 million, a $5.8 million increase, or 5.0%, as compared to 2006. Cost of sales as a
percentage of revenues was 77.9% for 2007 as compared to 83.4% for 2006. The 5.5% decrease in cost of sales as percentage of revenue was primarily due to increased sales prices, partially offset by increased per unit production costs due to
increased labor and repair costs.

Gross Profit. Gross profit increased $11.5 million, or 49.6%,
from $23.2 million in 2006 to $34.7 million in 2007. As a percentage of revenues, the Companys gross profit margin increased 5.5% in 2007 as compared to 2006. The increase in gross profit was primarily due to increased sales prices partially
offset by increased per unit production costs as discussed above.

Selling, general and administrative
expenses. Selling, general and administrative expenses increased $2.7 million, or 19.8%, from $13.7 million in 2006 to $16.4 million in 2007. The increase was primarily due to increased employee bonuses incurred in
2007 that were not incurred in 2006. This increase was partially offset by costs incurred in 2006 related to the relocation of the administrative offices from Louisiana to Texas that were not incurred in 2007. As a percentage of revenue, selling,
general and administrative expense increased 0.6% from 9.8% in 2006 to 10.4% in 2007.

Research and development expenses.Research and development expenses were approximately $1.2 million in 2007. This balance represents costs incurred at the Companys OmegaPure Technology and Innovation Center which commenced operations in January 2007. No such expenses
were recognized in 2006.

Insurance recoveries and other proceeds2005.During 2007, the Company settled the lawsuits
with its primary and secondary insurance carriers which resulted in the recognition of $10.7 million in net proceeds in excess of insurance recoveries previously recorded. The losses of approximately $1.5 million incurred in 2006 represent costs in
excess of the original estimated involuntary conversion loss recorded at December 31, 2005.

Loss on disposal of
assets. Loss on disposal of assets increased $334,000 from a loss of $9,000 in 2006 to a loss of $343,000 in 2007. The increase was the result of disposal of miscellaneous assets in the ordinary course of business
during 2007.

Operating income. As a result of the factors discussed above, the Companys
operating income (loss) increased $19.4 million from $8.0 million in 2006 to $27.4 million in 2007. As a percentage of revenues, operating income (loss) increased 11.8% from 5.7% in 2006 to 17.5% in 2007.

Interest income. Interest income decreased by $272,000 from $622,000 in 2006 to $350,000 in 2007. The decrease
was primarily due to decreased average cash balances.

Interest expense.Interest expense increased $2.9 million from
$2.6 million in 2006 to $5.5 million in 2007. The increase in interest expense is primarily due to additional debt the Company had outstanding during 2007 that was incurred in October 2006 and refinanced in March 2007.

Loss resulting from debt refinancing.Refinancing expenses were $3.0 million in 2007. The expenses relate to previously deferred debt
issuance costs and other costs that became immediately recognized when the Company refinanced its prior credit facility on March 26, 2007. No such expenses were recognized in 2006.

Other income (expense), net. Other income (expense), net increased by $89,000 from $244,000 in 2006 to $333,000
in 2007. The increase was primarily due to increased fees paid to the Companys bank and miscellaneous charges incurred during 2007 that were not incurred in 2006.



32



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Provision for income taxes.The Company recorded a $6.8 million provision for income
taxes in 2007 representing an effective tax rate of 36.0% for income taxes compared to 20.8% in 2006. This increase in the effective tax rate is primarily a result of factors experienced in 2006 that had less of an impact in 2007. These factors
include the partial exclusion of income on foreign sales, income tax credits attributable to post-hurricane wages and a state income tax benefit. The Company believes that it is more probable than not that the recorded estimated deferred tax asset
benefits and state operating loss carry-forwards will be realized except for the amount for which a valuation allowance has been provided. The statutory tax rate of 34% for U.S. federal taxes was in effect for the respective periods.

Liquidity and Capital Resources

Historically, the
Companys primary sources of liquidity and capital resources have been cash flows from operations, bank credit facilities and term loans from various lenders provided pursuant to the U.S. Maritime Administrations Fisheries Finance Program
(FFP), which is offered through National Marine Fisheries Services (NMFS) under Title XI of the Marine Act of 1936 (Title XI). These sources of cash flows have been used for operations, capital expenditures,
payment of long-term debt and the purchase and retirement of shares of the Companys common stock in 2006.

At December 31, 2008,
the Company had an unrestricted cash balance of $14.0 million, down $5.3 million from December 31, 2007. This decrease was primarily due to capital expenditures, changes in receivables and debt payments, offset by increased revenue, proceeds
received from stock options exercised and insurance recoveries and other proceeds received during 2008. The Companys annual revenues and its resulting liquidity are highly dependent on annual fish catch, production yields, selling prices for
its products and inventories available for sale. While the Companys selling prices for its products increased in 2008 over 2007 and 2006, those increases were offset by higher energy, labor and repair costs and below average fish catch
attributable to adverse weather conditions mainly associated with hurricane activity experienced during the 2008 fishing season, which resulted in significantly higher per unit inventory costs. It is expected that the significantly higher per unit
inventory costs related to the 2008 fishing season will also negatively impact the first and second quarters of 2009.

The aggregate amount
of the Companys outstanding indebtedness at December 31, 2008 was approximately $59.0 million compared to approximately $65.3 million at December 31, 2007. The Company has a highly leveraged financial structure, limiting its
financial flexibility. In particular, the Company will be required to use a portion of its cash flows to pay principal and interest on its debt, which will reduce the amount of money the Company has for operations, capital expenditures, expansion,
acquisitions or general corporate or other business activities. In addition, the covenants contained in the Companys debt agreements limit its ability to borrow money in the future for acquisitions, capital expenditures or to meet the
Companys operating expenses or other general corporate obligations. See Risk FactorsThe Company has a substantial amount of indebtedness, which may adversely affect its ability to operate its business, remain in compliance with
debt covenants and make payments on its debt.

Capital and Credit Market Crisis

It is possible that the recent unprecedented volatility in capital and credit markets may create additional risks in the upcoming months and possibly
years.



| |  |  | Liquidity in the capital and credit marketsThe Company believes that it has sufficient liquidity despite the disruption of the capital and credit markets.
While not significant to the Company to date, the disruptions in capital and credit markets may result in increased borrowing costs associated with short-term and long-term debt.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Counterparty creditworthinessThe Company is subject to credit risk, which relates to the ability of its customers to meet their contractual payment
obligations or the potential non-performance of counterparties to deliver contracted energy.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



33



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| |  |  | Value of InvestmentsThe Company sponsors a defined benefit pension plans for its employees. The market value of the investments within the employee pension
plan declined by approximately 24.9% during the year ended December 31, 2008. The benefit plan assets and obligations of the Company are remeasured annually using a December 31 measurement date. Reductions in plan assets from investment
losses may result in an increase to the plans unfunded status and a decrease in shareholders equity upon actuarial revaluation of the plan on January 1, 2009. Changes in the value of plan assets will not have an impact on the income
statement for 2008; however, reduced benefit plan assets will result in increased benefit costs in future years and may increase the amount and accelerate the timing of required future funding contributions. Depending upon market conditions, such
increases could be material.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Macroeconomic conditionsThe recent capital and credit market crisis is adversely affecting the U.S. and global economies. This could have several adverse
effects on the Companys markets should the effects of the downturn be experienced for an extended period of time. Potential long-term decline of global economies could lead to lower demand for fishmeal and oil which could result in a
decline of the Companys sales prices and related revenue. Lower demand for fishmeal and oil could also lead to lower margins for the Company. In addition, customers may not be able to pay, or may delay payment of, accounts receivable
that are owed to the Company.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Source of Capital: Operations

Net cash flow provided by operating activities increased from approximately $6.0 million for the year ended December 31, 2007 to $8.2 million for the
year ended December 31, 2008. The increase in operating cash flow is primarily attributable to net income and changes in accounts receivable, inventory and accrued liabilities. Additionally, the Company incurred an early payment penalty of $0.9
million during 2007 related to the Company refinancing its prior credit facility.

Source of Capital: Debt

Net financing activities provided (used) cash of $5.4 million and ($5.1) million during the years ended December 31, 2008 and 2007, respectively. The
year 2008 included $6.4 million in debt and capital lease principal payments and $11.8 million in proceeds and tax effects received from stock options exercised. The year 2007 included approximately $47.3 million in total borrowings, $57.3
million in principal payments with respect to the Companys prior credit facility and other debt obligations, $0.7 million in debt issuance costs associated with the new Senior Credit Facility and $5.6 million in proceeds and tax effects
received from stock options exercised.

Under Title XI, as administered under the FFP, the Company has secured loans through lenders with
terms generally ranging between 12 and 20 years at interest rates between 6% and 8% per annum which are enhanced with a government guaranty to the lender for up to 80% of the financing. The Companys current Title XI borrowings are secured
by liens on 18 fishing vessels and mortgages on the Companys Reedville, Virginia and Abbeville, Louisiana plants. In 1996, Title XI borrowing was modified to permit use of proceeds from borrowings obtained through this program for shore-side
construction.

In September 2004, the FFP approved the Companys financing application in an amount not to exceed $14.0 million (the
Approval Letter). Borrowings under the Approval Letter are required to be used to finance and/or refinance approximately 73% of the actual depreciable cost of the Companys future fishing vessel refurbishments and capital
expenditures relating to shore-side fishing assets for a term not to exceed 15 years from inception at interest rates determined by the U.S. Treasury. Final approval for all such future projects requires individual approval through the Secretary of
Commerce, National Oceanic and Atmospheric Administration, and NMFS. Borrowings under the FFP are required to be evidenced by security agreements, undertakings, and other documents deemed in the sole discretion of the NMFS as necessary to accomplish
the intent and purpose of the Approval Letter. The Company is required to comply with customary NMFS covenants as well as certain special covenants. The Company closed on a $14.0 million FFP loan on October 17, 2005.



34



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On December 1, 2005, pursuant to the Title XI program, the FFP approved a second financing
application made by the Company in the amount of $16.4 million (the Second Approval Letter). In May 2006, the Company submitted a $6.3 million financing request under the Second Approval Letter. The Company closed on the $6.3 million FFP
loan in the first quarter of 2007. As of December 31, 2008, the Company had approximately $28.4 million of borrowings outstanding under Title XI and was in compliance with all of the covenants contained therein.

On March 26, 2007 (the Closing Date), the Company entered into a Credit Agreement (the Credit Agreement) with Bank of
America, N.A., as administrative agent, lender, swing line lender and letter of credit issuer, Regions Bank, Compass Bank and Farm Credit Bank of Texas (collectively, the Lenders). The Credit Agreement provides the Company with a $55
million senior credit facility (the Senior Credit Facility) consisting of (i) a 5-year revolving credit facility (the Revolving Credit Facility) of up to $20 million, including a $7.5 million sub-limit for the issuance
of standby letters of credit and a $2.5 million sub-limit for swing line loans and (ii) a 5-year term loan (the Term Loan) of $35 million. The Senior Credit Facility replaced the Companys Financing Facility, under which, as of
the Closing Date, $28.7 million in principal was outstanding under a term loan and $6.5 million in principal was outstanding under revolving loans, and approximately $3.3 million in letters of credit were issued, primarily in support of
workers compensation insurance programs. On the Closing Date, the Company drew down $35 million under the Term Loan and approximately $2.0 million under the Revolving Credit Facility, and had approximately $3.1 million issued in
standby letters of credit, primarily in support of workers compensation insurance programs. The Senior Credit Facility is secured by a first priority lien on all of the Companys assets, other than vessels, real estate and other assets
pledged to secure loans made to the Company under the FFP. On September 29, 2008, the Credit Agreement was amended to increase the limit in the financial covenant in the Consolidated Capital Expenditures Covenant from $15 million to $21 million
for the fiscal year ended 2008 with the limit returning to $15 million for any year thereafter.

Aggregate amounts outstanding under the
Revolving Credit Facility (including standby letters of credit and swing line loans) are limited to an amount not to exceed the lesser of (i) $20 million and (ii) an amount equal to the sum of (a) 80% of Eligible Accounts Receivable
(as defined in the Credit Agreement) plus (b) 50% of net book value of Eligible Inventory (as defined in the Credit Agreement), provided that Eligible Inventory shall not comprise more than 50% of the total of (a) and (b). Standby letters
of credit will be issued by, and swing line loans will be made available by, Bank of America, N.A. and each Lender will purchase an irrevocable and unconditional participation in each standby letters of credit and swing line loan, subject to certain
conditions. Swing line loans will be made available on a same day basis in minimum amounts of $100,000, subject to certain conditions.

Any
loan (other than swing line loans) under the Senior Credit Facility bears interest at a rate equal to the Applicable Margin, as determined in accordance with the pricing grid set forth below, plus one of the following indexes: (i) Eurodollar
and (ii) the Base Rate (defined as the higher of (a) the Federal Funds Rate plus 0.50% and (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America as its prime rate). Each
swing line loan bears interest at the Base Rate plus the Applicable Margin for Base Rate loans.



|                                                                |  |                         |   |  |                      |   |  |                                     |   |  |                                    |  
|--------------------------------------------------------------- |  | ----------------------- | - |  | -------------------- | - |  | ----------------------------------- | - |  | ---------------------------------- | -
|Consolidated Leverage Ratio of the Company and its Subsidiaries |  | ApplicableCommitmentFee |   |  | Letters of CreditFee |   |  | ApplicableMargin forEurodollarLoans |   |  | ApplicableMargin forBase RateLoans |  
|Less than 2.0x                                                  |  | 0.40                    | % |  | 2.00                 | % |  | 2.00                                | % |  | 0.50                               | %
|Less than 2.50x but greater than or equal to 2.0x               |  | 0.40                    | % |  | 2.25                 | % |  | 2.25                                | % |  | 0.75                               | %
|Less than 3.0x but greater than or equal to 2.5x                |  | 0.40                    | % |  | 2.38                 | % |  | 2.38                                | % |  | 1.00                               | %
|Less than 3.5x but greater than or equal to 3.0x                |  | 0.40                    | % |  | 2.50                 | % |  | 2.50                                | % |  | 1.25                               | %
|Greater than or equal to 3.5x                                   |  | 0.50                    | % |  | 2.75                 | % |  | 2.75                                | % |  | 1.50                               | %



35



---

All borrowings made on the Closing Date were made as Base Rate loans. These Base Rate loans were
converted to Eurodollar loans three days after the Closing Date.

The Company has entered into interest rate swap agreements with notional
amounts as indicated below that are scheduled to mature in March 2012. The swaps effectively convert all of the Companys variable rate debt under the Term Loan to a fixed rate, without exchanging the notional value amounts.



|                 |  |                        |            |                        |      |   |                                              |   |            |                                                           |  |                                      |         |  |   |           
|---------------- |  | ---------------------- | ---------- | ---------------------- | ---- | - | -------------------------------------------- | - | ---------- | --------------------------------------------------------- |  | ------------------------------------ | ------- |  | - | ----------
|Date of Contract |  | OriginalNotionalAmount |            | ContractedInterestRate |      |   | Total Asset(Liability) as ofDecember 31,2008 |   |            | Total Deferred TaxAsset (Liability) as ofDecember 31,2008 |  | NotionalAmount as ofDecember 31,2008
|April 4, 2007    |  | $                      | 19,950,000 |                        | 5.16 | % |                                              | $ | (1,385,100 | )                                                         |  | $                                    | 470,900 |  | $ | 17,456,000
|February 7, 2008 |  |                        | 10,237,500 |                        | 3.36 | % |                                              |   | (355,300   | )                                                         |  |                                      | 120,800 |  |   | 9,188,000 
|March 19, 2008   |  |                        | 4,436,250  |                        | 2.96 | % |                                              |   | (118,000   | )                                                         |  |                                      | 40,100  |  |   | 3,981,000 
|                 |  |                        |            |                        |      |   |                                              |   |            |                                                           |  |                                      |         |  |   |           
|                 |  |                        |            |                        |      |   |                                              | $ | (1,858,400 | )                                                         |  | $                                    | 631,800 |  | $ | 30,625,000

The Credit Agreement requires the Company comply with various affirmative and negative covenants
affecting its business and operations. In addition, the Company is required to comply with the following financial covenants:



| |  |  | The Company is required to maintain Consolidated Net Worth (as defined in the Credit Agreement) of at least $85 million, which is increased on a cumulative basis as
of the end of each fiscal quarter (commencing June 30, 2007) by an amount equal to 75% of Consolidated Net Income (as defined in the Credit Agreement) (to the extent positive) for the fiscal quarter then ended plus 100% of the amount of certain
equity issuances after the Closing Date that increase consolidated shareholders equity.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company is required to maintain, as of the end of each fiscal quarter (commenced March 31, 2007), a Consolidated Leverage Ratio (as defined in the Credit
Agreement) of 4.0 to 1.0, which will be reduced to (i) 3.75 to 1.0 on September 30, 2007, (ii) 3.25 to 1.0 on December 31, 2007, (iii) 3.0 to 1.0 on December 31, 2008, (iv) 2.75 to 1.0 on December 31, 2009 and
(iv) 2.5 to 1.0 on December 31, 2010 for thereafter.
| | - |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company is required to maintain, as of the end of each fiscal quarter (commenced March 31, 2007), a Consolidated Fixed Charge Coverage Ratio (as defined in
the Credit Agreement) of at least 1.1 to 1.0.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company is required to maintain, at the end of each fiscal quarter (commenced March 31, 2007), a Consolidated Asset Coverage Ratio (as defined in the
Credit Agreement) of 1.5 to 1.0, which will be increased to 2.0 to 1.0 on December 31, 2008 for thereafter.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | The Company is not permitted to have Consolidated Capital Expenditures (as defined in the Credit Agreement) in excess of $21 million for fiscal year 2008 (as
amended on September 29, 2008) and $15 million for all subsequent fiscal years.
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

In addition to the above listed
financial covenants, the Credit Agreement contains specific definitions of events which could constitute default. One such definition relates to a cross-default provision wherein if the Company was to default on any other credit
agreement, such as Title XI debt, the Senior Credit Facility could also be considered in default.

As of December 31, 2008, the
Company was in compliance with all applicable financial covenants.

The Senior Credit Facility will terminate on March 26, 2012 (the
Maturity Date). All loans and all other obligations outstanding under the Senior Credit Facility shall be payable in full on the Maturity Date. For a more detailed description of the terms and conditions of the Credit Agreement, see the
Companys Current Report on Form 8-K filed with the SEC on March 30, 2007.



36



---

As of December 31, 2008, the Company had $30.6 million outstanding under the Term Loan and
approximately $2.8 million in letters of credit issued primarily in support of workers compensation insurance programs. As of December 31, 2008, the Company had $17.2 million available under the Revolving Credit Facility and the Company
was in compliance with all of the covenants under the Senior Credit Facility. The Company has no off-balance sheet arrangements other than normal operating leases and standby letters of credit.

Use of Capital: Operations

Net investing activities
(used) provided cash of ($18.9) million and $10.3 million for the years ended December 31, 2008 and 2007, respectively. The Companys investing activities consist mainly of capital expenditures for equipment purchases, replacements, vessel
refurbishments, and fish oil refining processes. The Company made capital expenditures of approximately $22.9 million and $8.3 million, for the years ended December 31, 2008 and 2007, respectively. The Company anticipates making an additional
$15.0 million in capital expenditures during 2009 primarily for the refurbishment of vessels and plant assets and for the repair of certain equipment damaged by Hurricane Ike. Investing activities also includes the receipt of $0.2 million related to
proceeds from disposition of assets and $3.8 million in proceeds from insurance companies and a federal hurricane recovery grant for the year ended December 31, 2008. For the year ended December 31, 2007, investing activities included
$18.7 million from insurance companies relating to Hurricanes Katrina and Rita.

The Company believes that the existing cash, cash
equivalents, short-term investments and funds available through the Senior Credit Facility and/or Title XI indebtedness described above will be sufficient to meet its working capital and capital expenditure requirements through at least the next
twelve months.

Use of Capital: Acquisitions

The Company from time to time considers potential transactions including, but not limited to, enhancement of physical facilities to improve production capabilities and the acquisition of other businesses. Certain of the potential
transactions reviewed by the Company would, if completed, result in its entering new lines of business (generally including certain businesses to which the Company sells its products such as pet food manufacturers, aquaculture feed manufacturers,
fertilizer companies and organic foods manufacturers and distributors), although historically, reviewed opportunities have been generally related in some manner to the Companys existing operations or which would have added new protein products
to the Companys product lines. Although the Company does not explicitly budget for acquisitions and, as of the date hereof, does not have any commitment with respect to a material acquisition, it could enter into such agreement in the future.
Depending on the size of the acquisition, the Company would expect to finance the transaction using internally generated cash flows and its Senior Credit Facility, or, if necessary, equity or debt financings. The Company cannot assure you that such
financings will be available on acceptable terms, if at all.

Use of Capital: Contractual Obligations

The following tables aggregate information about the Companys contractual cash obligations and other commercial commitments (in thousands) as of
December 31, 2008:



|                                                        |  |                        |         |                 |   |             |  |             |        |              |   |        |  |   |       
|------------------------------------------------------- |  | ---------------------- | ------- | --------------- | - | ----------- |  | ----------- | ------ | ------------ | - | ------ |  | - | ------
|                                                        |  | Payments Due by Period
|Contractual Cash Obligations                            |  | Total                  |         | Less than1 year |   | 1 to 3years |  | 4 to 5years |        | After 5years
|Long term debt                                          |  | $                      | 59,009  |                 | $ | 7,697       |  | $           | 18,949 |              | $ | 16,463 |  | $ | 15,900
|Capital lease obligation                                |  |                        | 1,936   |                 |   | 302         |  |             | 817    |              |   | 817    |  |   |      
|Interest on long term debt and capital lease obligation |  |                        | 17,381  |                 |   | 3,984       |  |             | 6,264  |              |   | 3,290  |  |   | 3,843 
|Operating lease obligations                             |  |                        | 6,515   |                 |   | 1,642       |  |             | 2,147  |              |   | 1,471  |  |   | 1,255 
|Pension Funding                                         |  |                        | 11,786  |                 |   | 606         |  |             | 6,750  |              |   | 3,520  |  |   | 910   
|Energy Commitments (1)                                  |  |                        | 16,466  |                 |   | 16,466      |  |             |       |              |   |       |  |   |      
|                                                        |  |                        |         |                 |   |             |  |             |        |              |   |        |  |   |       
|Total Contractual Cash Obligations                      |  | $                      | 113,093 |                 | $ | 30,697      |  | $           | 34,927 |              | $ | 25,561 |  | $ | 21,908
|                                                        |  |                        |         |                 |   |             |  |             |        |              |   |        |  |   |       



37



---



|(1) | As of December 31, 2008, the Company had normal purchase commitments for energy usage of approximately $16.5 million that will be delivered in quantities expected to be used in
the normal course of business during the 2009 fishing seasons.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Recently Issued Accounting Standards

For additional information on changes in accounting principles and new accounting principles, see Note 1 to the consolidated financial statements included
in Item 8Financial Statements and Supplementary Data.

Seasonal and Quarterly Results

The Companys menhaden harvesting and processing business is seasonal in nature. The Company generally has higher sales during the menhaden
harvesting season (which includes the second and third quarter of each year) due to increased product availability, but prices during the fishing season tend to be lower than during the off-season. As a result, the Companys quarterly operating
results have fluctuated in the past and may fluctuate in the future. In addition, from time to time the Company defers sales of inventory based on worldwide prices for competing products that affect prices for the Companys products which may
affect comparable period comparisons. Quarterly financial data contained in Note 17 to the Companys Consolidated Financial Statements included in Item 8 of this report are incorporated herein by reference.



|Item 7A. | Quantitative and Qualitative Disclosure About Market Risk.
|-------- | ----------------------------------------------------------

In the normal course of business, the financial condition of the Company is exposed to minimal market risk associated with interest rate movements on the Companys borrowings. To further mitigate this minimal
risk, the Company has entered into interest rate swap agreements to effectively lock-in the LIBOR component of certain debt instruments. A one percent increase or decrease in the levels of interest rates on variable rate debt would not result in a
material change to the Companys results of operations.

The Company is also exposed to market risk associated with natural gas and
diesel prices. To partially mitigating this risk, the Company forward purchased a portion of its expected natural gas and diesel usage for 2009. Additionally, subsequent to December 31, 2008, the Company purchased natural gas and heating
oil swaps related to a portion of its expected natural gas and diesel usage for 2010. The Company is currently exposed to market risk associated with increases in natural gas and diesel prices related to the portion not forward-purchased for
2009 and not covered by swaps for 2010.

Although the Company sells products in foreign countries, all of the Companys revenues are
billed and paid for in US dollars. As a result, management does not believe that the Company is exposed to any significant foreign country currency exchange risk, and the Company does not utilize market risk sensitive instruments to manage its
exposure to this risk.



|Item 8. | Financial Statements and Supplementary Data.
|------- | --------------------------------------------



38



---

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Omega Protein Corporation:

In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of Omega Protein Corporation and its
subsidiaries at December 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2008 in conformity with accounting principles generally accepted in the
United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with
the related consolidated financial statements. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2008, based on criteria established in Internal
ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The Companys management is responsible for these financial statements and financial statement schedule, for
maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in Managements Report on Internal Control over Financial Reporting under
Item 9A. Our responsibility is to express opinions on these financial statements, on the financial statement schedule, and on the Companys internal control over financial reporting based on our integrated audits. We conducted our audits
in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material
misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also
included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As discussed in Notes 1 and 16 to the consolidated financial statements, the Company changed the manner in which it measures fair value of its financial assets and financial liabilities in 2008. As discussed in Note 9
to the consolidated financial statements, the Company changed the manner in which it accounts for its uncertain tax positions in 2007.

A
companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with
generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect
the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

PricewaterhouseCoopers LLP

Houston, Texas

March 10, 2009



39



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OMEGA PROTEIN CORPORATION

CONSOLIDATED BALANCE SHEETS



|                                                                                                                                                                 |  |                  |         |   |                  |   |         |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ------- | - | ---------------- | - | ------- | -
|                                                                                                                                                                 |  | December 31,2008 |         |   | December 31,2007 |  
|                                                                                                                                                                 |  | (in thousands)   |        
|ASSETS                                                                                                                                                           |  |                  |         |   |                  |   |         |  
|Current assets:                                                                                                                                                  |  |                  |         |   |                  |   |         |  
|Cash and cash equivalents                                                                                                                                        |  | $                | 13,995  |   |                  | $ | 19,292  |  
|Receivables, net                                                                                                                                                 |  |                  | 33,455  |   |                  |   | 16,051  |  
|Inventories                                                                                                                                                      |  |                  | 74,676  |   |                  |   | 70,852  |  
|Deferred tax asset, net                                                                                                                                          |  |                  | 101     |   |                  |   |        |  
|Prepaid expenses and other current assets                                                                                                                        |  |                  | 1,438   |   |                  |   | 1,456   |  
|                                                                                                                                                                 |  |                  |         |   |                  |   |         |  
|Total current assets                                                                                                                                             |  |                  | 123,665 |   |                  |   | 107,651 |  
|Other assets, net                                                                                                                                                |  |                  | 2,735   |   |                  |   | 3,344   |  
|Deferred tax assets, net                                                                                                                                         |  |                  |        |   |                  |   | 175     |  
|Property, plant and equipment, net                                                                                                                               |  |                  | 106,181 |   |                  |   | 96,659  |  
|                                                                                                                                                                 |  |                  |         |   |                  |   |         |  
|Total assets                                                                                                                                                     |  | $                | 232,581 |   |                  | $ | 207,829 |  
|                                                                                                                                                                 |  |                  |         |   |                  |   |         |  
|LIABILITIES AND STOCKHOLDERS EQUITY                                                                                                                             |  |                  |         |   |                  |   |         |  
|Current liabilities:                                                                                                                                             |  |                  |         |   |                  |   |         |  
|Current maturities of long-term debt                                                                                                                             |  | $                | 7,697   |   |                  | $ | 6,283   |  
|Current portion of capital lease obligation                                                                                                                      |  |                  | 302     |   |                  |   |        |  
|Accounts payable                                                                                                                                                 |  |                  | 2,507   |   |                  |   | 2,459   |  
|Accrued liabilities                                                                                                                                              |  |                  | 16,347  |   |                  |   | 15,067  |  
|Deferred tax liabilities, net                                                                                                                                    |  |                  |        |   |                  |   | 381     |  
|                                                                                                                                                                 |  |                  |         |   |                  |   |         |  
|Total current liabilities                                                                                                                                        |  |                  | 26,853  |   |                  |   | 24,190  |  
|Long-term debt, net of current maturities                                                                                                                        |  |                  | 51,312  |   |                  |   | 58,976  |  
|Capital lease obligation, net of current portion                                                                                                                 |  |                  | 1,634   |   |                  |   |        |  
|Interest rate swap liability, net of current portion                                                                                                             |  |                  | 959     |   |                  |   | 459     |  
|Deferred tax liability, net of current portion                                                                                                                   |  |                  | 3,005   |   |                  |   |        |  
|Pension liabilities, net                                                                                                                                         |  |                  | 9,261   |   |                  |   | 5,749   |  
|                                                                                                                                                                 |  |                  |         |   |                  |   |         |  
|Total liabilities                                                                                                                                                |  |                  | 93,024  |   |                  |   | 89,374  |  
|                                                                                                                                                                 |  |                  |         |   |                  |   |         |  
|Commitments and contingencies                                                                                                                                    |  |                  |         |   |                  |   |         |  
|                                                                                                                                                                 |  |                 
|Stockholders equity:                                                                                                                                            |  |                  |         |   |                  |   |         |  
|Preferred stock, $0.01 par value; 10,000,000 authorized shares; none issued                                                                                      |  |                  |        |   |                  |   |        |  
|Common Stock, $0.01 par value; 80,000,000 authorized shares; 18,712,096 and 17,453,702 shares issued and outstanding at December 31, 2008
and 2007, respectively |  |                  | 187     |   |                  |   | 175     |  
|Capital in excess of par value                                                                                                                                   |  |                  | 114,008 |   |                  |   | 101,865 |  
|Retained earnings                                                                                                                                                |  |                  | 36,011  |   |                  |   | 23,435  |  
|Accumulated other comprehensive loss                                                                                                                             |  |                  | (10,649 | ) |                  |   | (7,020  | )
|                                                                                                                                                                 |  |                  |         |   |                  |   |         |  
|Total stockholders equity                                                                                                                                       |  |                  | 139,557 |   |                  |   | 118,455 |  
|                                                                                                                                                                 |  |                  |         |   |                  |   |         |  
|Total liabilities and stockholders equity                                                                                                                       |  | $                | 232,581 |   |                  | $ | 207,829 |  
|                                                                                                                                                                 |  |                  |         |   |                  |   |         |  

The accompanying notes are an integral part of the consolidated financial statements.



40



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OMEGA PROTEIN CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS



|                                                                                        |  |                                          |         |   |      |   |         |      |  |   |         |  
|--------------------------------------------------------------------------------------- |  | ---------------------------------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                        |  | Years Ended December 31,                 |        
|                                                                                        |  | 2008                                     |         |   | 2007 |   |         | 2006 | 
|                                                                                        |  | (in thousands, except per share amounts) |        
|Revenues                                                                                |  | $                                        | 177,412 |   |      | $ | 157,149 |      |  | $ | 139,834 |  
|Cost of sales                                                                           |  |                                          | 134,387 |   |      |   | 122,455 |      |  |   | 116,638 |  
|                                                                                        |  |                                          |         |   |      |   |         |      |  |   |         |  
|Gross profit                                                                            |  |                                          | 43,025  |   |      |   | 34,694  |      |  |   | 23,196  |  
|Selling, general and administrative expenses                                            |  |                                          | 16,310  |   |      |   | 16,386  |      |  |   | 13,683  |  
|Research and development expenses                                                       |  |                                          | 1,757   |   |      |   | 1,194   |      |  |   |        |  
|Loss resulting from natural disaster, net2008                                          |  |                                          | 2,033   |   |      |   |        |      |  |   |        |  
|(Insurance recoveries and other proceeds) losses relating to natural disaster, net2005 |  |                                          | (1,336  | ) |      |   | (10,669 | )    |  |   | 1,548   |  
|Loss on disposal of assets                                                              |  |                                          | 718     |   |      |   | 343     |      |  |   | 9       |  
|                                                                                        |  |                                          |         |   |      |   |         |      |  |   |         |  
|Operating income                                                                        |  |                                          | 23,543  |   |      |   | 27,440  |      |  |   | 7,956   |  
|Interest income                                                                         |  |                                          | 527     |   |      |   | 350     |      |  |   | 622     |  
|Interest expense                                                                        |  |                                          | (4,306  | ) |      |   | (5,471  | )    |  |   | (2,560  | )
|Loss resulting from debt refinancing                                                    |  |                                          |        |   |      |   | (3,024  | )    |  |   |        |  
|Other expense, net                                                                      |  |                                          | (111    | ) |      |   | (333    | )    |  |   | (244    | )
|                                                                                        |  |                                          |         |   |      |   |         |      |  |   |         |  
|Income before income taxes                                                              |  |                                          | 19,653  |   |      |   | 18,962  |      |  |   | 5,774   |  
|Provision for income taxes                                                              |  |                                          | 7,077   |   |      |   | 6,823   |      |  |   | 1,202   |  
|                                                                                        |  |                                          |         |   |      |   |         |      |  |   |         |  
|Net income                                                                              |  | $                                        | 12,576  |   |      | $ | 12,139  |      |  | $ | 4,572   |  
|                                                                                        |  |                                          |         |   |      |   |         |      |  |   |         |  
|Basic earnings per share                                                                |  | $                                        | 0.69    |   |      | $ | 0.72    |      |  | $ | 0.19    |  
|                                                                                        |  |                                          |         |   |      |   |         |      |  |   |         |  
|Weighted average common shares outstanding                                              |  |                                          | 18,298  |   |      |   | 16,830  |      |  |   | 24,322  |  
|                                                                                        |  |                                          |         |   |      |   |         |      |  |   |         |  
|Diluted earnings per share                                                              |  | $                                        | 0.68    |   |      | $ | 0.70    |      |  | $ | 0.18    |  
|                                                                                        |  |                                          |         |   |      |   |         |      |  |   |         |  
|Weighted average common shares and potential common shares outstanding                  |  |                                          | 18,581  |   |      |   | 17,432  |      |  |   | 25,200  |  
|                                                                                        |  |                                          |         |   |      |   |         |      |  |   |         |  

The accompanying notes are an integral part of the consolidated financial statements.



41



---

OMEGA PROTEIN CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS



|                                                                                                   |  |                          |         |   |      |   |         |      |  |   |         |  
|-------------------------------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                                   |  | Years Ended December 31, |        
|                                                                                                   |  | 2008                     |         |   | 2007 |   |         | 2006 | 
|                                                                                                   |  | (in thousands)           |        
|Cash flow provided by (used in) operating activities:                                              |  |                          |         |   |      |   |         |      |  |   |         |  
|Net income                                                                                         |  | $                        | 12,576  |   |      | $ | 12,139  |      |  | $ | 4,572   |  
|Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |  |                          |         |   |      |   |         |      |  |   |         |  
|Depreciation and amortization                                                                      |  |                          | 12,883  |   |      |   | 13,279  |      |  |   | 13,069  |  
|Loss resulting from natural disaster, net2008                                                     |  |                          | 3,065   |   |      |   |        |      |  |   |        |  
|(Insurance recoveries and other proceeds) losses relating to natural disaster, net2005            |  |                          | (1,337  | ) |      |   | (10,669 | )    |  |   | 1,094   |  
|Loss resulting from debt refinancing                                                               |  |                          |        |   |      |   | 2,151   |      |  |   |        |  
|Loss on disposal of assets, net                                                                    |  |                          | 718     |   |      |   | 343     |      |  |   | 9       |  
|Provisions for losses on receivables                                                               |  |                          | 45      |   |      |   | 117     |      |  |   | 10      |  
|Share based compensation                                                                           |  |                          | 375     |   |      |   | 316     |      |  |   | 166     |  
|Deferred income taxes                                                                              |  |                          | 3,102   |   |      |   | 4,340   |      |  |   | 655     |  
|Changes in assets and liabilities:                                                                 |  |                          |         |   |      |   |         |      |  |   |         |  
|Receivables                                                                                        |  |                          | (20,001 | ) |      |   | (2,886  | )    |  |   | 2,299   |  
|Amounts due from former majority owner                                                             |  |                          |        |   |      |   |        |      |  |   | 105     |  
|Inventories                                                                                        |  |                          | (3,824  | ) |      |   | (10,807 | )    |  |   | (13,185 | )
|Prepaid expenses and other current assets                                                          |  |                          | 18      |   |      |   | 231     |      |  |   | (565    | )
|Other assets                                                                                       |  |                          | (689    | ) |      |   | (1,514  | )    |  |   | (2,990  | )
|Accounts payable                                                                                   |  |                          | 48      |   |      |   | 3       |      |  |   | (1,393  | )
|Accrued liabilities                                                                                |  |                          | 592     |   |      |   | 1,096   |      |  |   | 1,558   |  
|Pension liability, net                                                                             |  |                          | 667     |   |      |   | (2,161  | )    |  |   | (1,630  | )
|Other, net                                                                                         |  |                          |        |   |      |   | 41      |      |  |   | (2      | )
|                                                                                                   |  |                          |         |   |      |   |         |      |  |   |         |  
|Total adjustments                                                                                  |  |                          | (4,338  | ) |      |   | (6,120  | )    |  |   | (800    | )
|                                                                                                   |  |                          |         |   |      |   |         |      |  |   |         |  
|Net cash provided by operating activities                                                          |  |                          | 8,238   |   |      |   | 6,019   |      |  |   | 3,772   |  
|                                                                                                   |  |                          |         |   |      |   |         |      |  |   |         |  
|Cash flow (used in) provided by investing activities:                                              |  |                          |         |   |      |   |         |      |  |   |         |  
|Proceeds from disposition of assets                                                                |  |                          | 181     |   |      |   |        |      |  |   | 166     |  
|Proceeds from insurance companies, hurricanes                                                      |  |                          | 3,837   |   |      |   | 18,667  |      |  |   | 2,000   |  
|Capital expenditures                                                                               |  |                          | (22,943 | ) |      |   | (8,331  | )    |  |   | (20,318 | )
|                                                                                                   |  |                          |         |   |      |   |         |      |  |   |         |  
|Net cash (used in) provided by investing activities                                                |  |                          | (18,925 | ) |      |   | 10,336  |      |  |   | (18,152 | )
|                                                                                                   |  |                          |         |   |      |   |         |      |  |   |         |  
|Cash flow provided by (used in) financing activities:                                              |  |                          |         |   |      |   |         |      |  |   |         |  
|Principal payments of long-term debt                                                               |  |                          | (6,250  | ) |      |   | (57,250 | )    |  |   | (3,553  | )
|Principal payments of capital lease obligation                                                     |  |                          | (140    | ) |      |   |        |      |  |   |        |  
|Debt issuance costs                                                                                |  |                          |        |   |      |   | (723    | )    |  |   | (2,342  | )
|Proceeds from borrowings                                                                           |  |                          |        |   |      |   | 47,349  |      |  |   | 48,612  |  
|Purchase and retirement of common stock                                                            |  |                          |        |   |      |   |        |      |  |   | (47,500 | )
|Treasury stock acquisition costs                                                                   |  |                          |        |   |      |   |        |      |  |   | (996    | )
|Proceeds from stock options exercised                                                              |  |                          | 9,364   |   |      |   | 2,897   |      |  |   | 1,247   |  
|Tax effect of stock options exercised                                                              |  |                          | 2,416   |   |      |   | 2,663   |      |  |   | 546     |  
|                                                                                                   |  |                          |         |   |      |   |         |      |  |   |         |  
|Net cash provided by (used in) financing activities                                                |  |                          | 5,390   |   |      |   | (5,064  | )    |  |   | (3,986  | )
|                                                                                                   |  |                          |         |   |      |   |         |      |  |   |         |  
|Effect of exchange rate changes on cash and cash equivalents                                       |  |                          |        |   |      |   | 8       |      |  |   | (3      | )
|                                                                                                   |  |                          |         |   |      |   |         |      |  |   |         |  
|Net (decrease) increase in cash and cash equivalents                                               |  |                          | (5,297  | ) |      |   | 11,299  |      |  |   | (18,369 | )
|Cash and cash equivalents at beginning of year                                                     |  |                          | 19,292  |   |      |   | 7,993   |      |  |   | 26,362  |  
|                                                                                                   |  |                          |         |   |      |   |         |      |  |   |         |  
|Cash and cash equivalents at end of year                                                           |  | $                        | 13,995  |   |      | $ | 19,292  |      |  | $ | 7,993   |  
|                                                                                                   |  |                          |         |   |      |   |         |      |  |   |         |  
|Supplemental cash flow information:                                                                |  |                          |         |   |      |   |         |      |  |   |         |  
|Cash paid (received) during the year for:                                                          |  |                          |         |   |      |   |         |      |  |   |         |  
|Interest                                                                                           |  | $                        | 5,019   |   |      | $ | 4,854   |      |  | $ | 2,126   |  
|Income taxes                                                                                       |  | $                        | 1,519   |   |      | $ | 160     |      |  | $ |        |  

In 2008, 2007 and 2006, approximately 0, 5,200 and 8,400 shares, respectively, of the
Companys common stock were issued to directors in non cash transactions as payment in lieu of Board retainer and per diem fees. Expenses were recognized on these non cash transactions of $0, $41,700, and $51,000 for 2008, 2007, and 2006,
respectively.

The accompanying notes are an integral part of the consolidated financial statements.



42



---

OMEGA PROTEIN CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY



|                                                                  |  |                |   |  |        |     |   |                              |   |         |                  |  |   |                                            |   |  |                     |         |   |                          |   |        |   |  |   |         |  
|----------------------------------------------------------------- |  | -------------- | - |  | ------ | --- | - | ---------------------------- | - | ------- | ---------------- |  | - | ------------------------------------------ | - |  | ------------------- | ------- | - | ------------------------ | - | ------ | - |  | - | ------- | -
|                                                                  |  |                |   |  |        |     |   | Capital inExcess ofPar Value |   |         | RetainedEarnings |  |   | AccumulatedOtherComprehensiveIncome (Loss) |   |  | TreasuryStockAmount |         |   | TotalStockholdersEquity |  
|                                                                  |  | Common Stock   |   |  |        |     |   |                             
|                                                                  |  | Shares         |   |  | Amount |     |   |                              |   |         |                 
|                                                                  |  | (in thousands) |  
|Balance at December 31, 2005                                      |  | 25,447         |   |  | $      | 255 |   |                              | $ | 116,512 |                  |  | $ | 35,253                                     |   |  | $                   | (7,618  | ) |                          | $ | (2,035 | ) |  | $ | 142,367 |  
|Issuance of common stock                                          |  | 444            |   |  |        | 4   |   |                              |   | 1,407   |                  |  |   |                                           |   |  |                     |        |   |                          |   |       |   |  |   | 1,411   |  
|Purchase and retirement of common stock                           |  | (9,681         | ) |  |        | (97 | ) |                              |   | (22,504 | )                |  |   | (27,930                                    | ) |  |                     |        |   |                          |   | 2,035  |   |  |   | (48,496 | )
|Tax benefit from exercise of stock options                        |  |               |   |  |        |    |   |                              |   | 546     |                  |  |   |                                           |   |  |                     |        |   |                          |   |       |   |  |   | 546     |  
|Comprehensive income (loss):                                      |  |                |   |  |        |     |   |                              |   |         |                  |  |   |                                            |   |  |                     |         |   |                          |   |        |   |  |   |         |  
|Net income                                                        |  |               |   |  |        |    |   |                              |   |        |                  |  |   | 4,572                                      |   |  |                     |        |   |                          |   |       |   |  |   | 4,572   |  
|Other comprehensive income (loss):                                |  |                |   |  |        |     |   |                              |   |         |                  |  |   |                                            |   |  |                     |         |   |                          |   |        |   |  |   |         |  
|Minimum pension liability, net of tax benefit of $357             |  |               |   |  |        |    |   |                              |   |        |                  |  |   |                                           |   |  |                     | 693     |   |                          |   |       |   |  |   | 693     |  
|Foreign translation adjustment, net of tax expense                |  |               |   |  |        |    |   |                              |   |        |                  |  |   |                                           |   |  |                     | (3      | ) |                          |   |       |   |  |   | (3      | )
|                                                                  |  |                |   |  |        |     |   |                              |   |         |                  |  |   |                                            |   |  |                     |         |   |                          |   |        |   |  |   |         |  
|Total comprehensive loss                                          |  |                |   |  |        |     |   |                              |   |         |                  |  |   | 4,572                                      |   |  |                     | 690     |   |                          |   |       |   |  |   | 5,262   |  
|                                                                  |  |                |   |  |        |     |   |                              |   |         |                  |  |   |                                            |   |  |                     |         |   |                          |   |        |   |  |   |         |  
|Balance at December 31, 2006                                      |  | 16,210         |   |  | $      | 162 |   |                              | $ | 95,961  |                  |  | $ | 11,895                                     |   |  | $                   | (6,928  | ) |                          | $ |       |   |  | $ | 101,090 |  
|Issuance of common stock                                          |  | 1,244          |   |  |        | 13  |   |                              |   | 3,241   |                  |  |   |                                           |   |  |                     |        |   |                          |   |       |   |  |   | 3,254   |  
|Tax benefit from exercise of stock options                        |  |               |   |  |        |    |   |                              |   | 2,663   |                  |  |   |                                           |   |  |                     |        |   |                          |   |       |   |  |   | 2,663   |  
|FIN 48 adoption, net of tax                                       |  |               |   |  |        |    |   |                              |   |        |                  |  |   | (599                                       | ) |  |                     |        |   |                          |   |       |   |  |   | (599    | )
|Comprehensive income (loss):                                      |  |                |   |  |        |     |   |                              |   |         |                  |  |   |                                            |   |  |                     |         |   |                          |   |        |   |  |   |         |  
|Net income                                                        |  |               |   |  |        |    |   |                              |   |        |                  |  |   | 12,139                                     |   |  |                     |        |   |                          |   |       |   |  |   | 12,139  |  
|Other comprehensive income (loss):                                |  |                |   |  |        |     |   |                              |   |         |                  |  |   |                                            |   |  |                     |         |   |                          |   |        |   |  |   |         |  
|Interest rate swap adjustment, net of tax benefit of $228         |  |               |   |  |        |    |   |                              |   |        |                  |  |   |                                           |   |  |                     | (442    | ) |                          |   |       |   |  |   | (442    | )
|Pension benefits adjustment, net of tax expense of $176           |  |               |   |  |        |    |   |                              |   |        |                  |  |   |                                           |   |  |                     | 342     |   |                          |   |       |   |  |   | 342     |  
|Foreign currency translation adjustment, net of tax expense of $4 |  |               |   |  |        |    |   |                              |   |        |                  |  |   |                                           |   |  |                     | 8       |   |                          |   |       |   |  |   | 8       |  
|                                                                  |  |                |   |  |        |     |   |                              |   |         |                  |  |   |                                            |   |  |                     |         |   |                          |   |        |   |  |   |         |  
|Total comprehensive income (loss)                                 |  |                |   |  |        |     |   |                              |   |         |                  |  |   | 12,139                                     |   |  |                     | (92     | ) |                          |   |       |   |  |   | 12,047  |  
|                                                                  |  |                |   |  |        |     |   |                              |   |         |                  |  |   |                                            |   |  |                     |         |   |                          |   |        |   |  |   |         |  
|Balance at December 31, 2007                                      |  | 17,454         |   |  | $      | 175 |   |                              | $ | 101,865 |                  |  | $ | 23,435                                     |   |  | $                   | (7,020  | ) |                          | $ |       |   |  | $ | 118,455 |  
|Issuance of common stock                                          |  | 1,258          |   |  |        | 12  |   |                              |   | 9,727   |                  |  |   |                                           |   |  |                     |        |   |                          |   |       |   |  |   | 9,739   |  
|Tax benefit from exercise of stock options                        |  |               |   |  |        |    |   |                              |   | 2,416   |                  |  |   |                                           |   |  |                     |        |   |                          |   |       |   |  |   | 2,416   |  
|Comprehensive income (loss):                                      |  |                |   |  |        |     |   |                              |   |         |                  |  |   |                                            |   |  |                     |         |   |                          |   |        |   |  |   |         |  
|Net income                                                        |  |               |   |  |        |    |   |                              |   |        |                  |  |   | 12,576                                     |   |  |                     |        |   |                          |   |       |   |  |   | 12,576  |  
|Other comprehensive income (loss):                                |  |                |   |  |        |     |   |                              |   |         |                  |  |   |                                            |   |  |                     |         |   |                          |   |        |   |  |   |         |  
|Interest rate swap adjustment net of tax benefit of $404          |  |               |   |  |        |    |   |                              |   |        |                  |  |   |                                           |   |  |                     | (784    | ) |                          |   |       |   |  |   | (784    | )
|Pension benefits adjustment, net of tax benefit of $1,465         |  |               |   |  |        |    |   |                              |   |        |                  |  |   |                                           |   |  |                     | (2,845  | ) |                          |   |       |   |  |   | (2,845  | )
|                                                                  |  |                |   |  |        |     |   |                              |   |         |                  |  |   |                                            |   |  |                     |         |   |                          |   |        |   |  |   |         |  
|Total comprehensive income (loss)                                 |  |                |   |  |        |     |   |                              |   |         |                  |  |   | 12,576                                     |   |  |                     | (3,629  | ) |                          |   |       |   |  |   | 8,947   |  
|                                                                  |  |                |   |  |        |     |   |                              |   |         |                  |  |   |                                            |   |  |                     |         |   |                          |   |        |   |  |   |         |  
|Balance at December 31, 2008                                      |  | 18,712         |   |  | $      | 187 |   |                              | $ | 114,008 |                  |  | $ | 36,011                                     |   |  | $                   | (10,649 | ) |                          |   |       |   |  | $ | 139,557 |  
|                                                                  |  |                |   |  |        |     |   |                              |   |         |                  |  |   |                                            |   |  |                     |         |   |                          |   |        |   |  |   |         |  

The accompanying notes are in integral part of the consolidated financial statements.



43



---

OMEGA PROTEIN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



|NOTE 1. | SIGNIFICANT ACCOUNTING POLICIES SUMMARY OF OPERATIONS AND BASIS OF PRESENTATION
|------- | -------------------------------------------------------------------------------

Business Description

Omega Protein Corporation (Omega or the Company)
produces and markets a variety of products produced from menhaden (a herring-like species of fish found in commercial quantities in the U.S. coastal waters of the Atlantic Ocean and Gulf of Mexico), including regular grade and value-added specialty
fish meals, crude and refined fish oils and fish solubles. The Companys fish meal products are primarily used as a protein ingredient in animal feed for swine, cattle, aquaculture and household pets. Fish oil is utilized for animal and
aquaculture feeds, industrial applications, as well as for additives to human food products and dietary supplements. The Companys fish solubles are sold primarily to livestock feed manufacturers, aquaculture feed manufacturers and for use as
an organic fertilizer.

Consolidation

The consolidated financial statements include the accounts of Omega and its wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Financial Statement Preparation

The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the Companys financial statements and the accompanying notes and the reported amounts of revenues and expenses during the reporting period. Actual amounts, when available, could
differ from those estimates and those differences could have a material affect on the financial statements.

Hurricane Losses, Insurance Recoveries
and Other Proceeds

2008 Hurricane Activity

On September 13, 2008, the Companys Abbeville and Cameron, Louisiana fish processing facilities were damaged by Hurricane Ike. Both of these facilities were non-operational immediately after the hurricane.
Operations at the Abbeville fish processing facility were restored to full capacity on September 22, 2008. The Company anticipates the Cameron fish processing facility to be fully functional prior to the beginning of the 2009 fishing season.

The direct impact of Hurricane Ike on the Company was a loss of physical inventories and physical damage to the plants. The interruption
of processing capabilities caused the Company to address the impact of abnormal downtime of its processing facilities, which resulted in the immediate recognition of costs which would ordinarily have been captured as inventory costs. The amounts of
these losses are more fully described in Notes 2, 3, 5 and 13.

The Company maintains insurance coverage for a variety of these damages,
most notably property, inventory, vessel and business interruption insurance. The nature and extent of the insurance coverage varies by line of policy and the Company has recorded insurance recoveries as accounts receivable based on estimates and
discussions with its insurers and adjusters. On October 17, 2008, the Company received an advance of $2.5 million from its primary insurance carrier. Subsequent to December 31, 2008, the Company received the final cash settlement of $7.5
million.



44



---

OMEGA PROTEIN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



2005 Hurricane Activity

On August 29, 2005, the Companys Moss Point, Mississippi fish processing facility and adjacent shipyard were severely damaged by Hurricane
Katrina. On September 25, 2005, the Companys Cameron and Abbeville, Louisiana fish processing facilities were also severely damaged by Hurricane Rita.

In order to facilitate the insurance recovery process, on July 28, 2006, the Company filed a lawsuit against its property insurance carriers, Lexington Insurance Company and RSUI Indemnity Company, in the U.S.
District Court for the Western District of Louisiana, alleging breach of contract and bad faith based on the insurance carriers failure to pay amounts due to the Company under its property insurance policies for damages sustained from
Hurricanes Katrina and Rita in the third quarter of 2005. The Company settled its lawsuit with its primary property insurance carrier, Lexington Insurance Company, for a total of $19.8 million during the third quarter of 2007. Of the $19.8
million, $12.0 million was previously recorded as a receivable and was received as of September 30, 2007, $3.3 million was paid to outside legal counsel in connection with the settlement and $4.5 million was recognized during the third quarter
of 2007 as insurance recoveries and other proceeds relating to natural disaster, net 2005 in the statement of operations and comprehensive income and was received as of December 31, 2007. In addition, the Company settled its lawsuit
with its secondary property insurance carrier, RSUI Indemnity Company, for a total of $9.2 million during the fourth quarter of 2007. Of the $9.2 million, $0.7 million was advanced during the third quarter of 2007 and recognized as insurance
recoveries and other proceeds relating to natural disaster, net2005 in the statement of operations and comprehensive income, $3.0 million was paid to outside legal counsel in connection with the settlement during the fourth quarter of 2007 and
$5.5 million was recognized and received during the fourth quarter of 2007 as insurance recoveries and other proceeds relating to natural disaster, net2005 in the statement of operations and comprehensive income. The Company still has a
pending lawsuit against its insurance broker alleging negligent procurement, negligent misrepresentation, breach of contract and violations of Texas Insurance and Consumer laws.

During 2008, the Company received a grant of $1.3 million, net of fees and expenses, from the Louisiana Department of Wildlife and Fisheries which was
recognized as Insurance recoveries and other proceeds related to natural disaster, net2005 in the Consolidated Statement of Operations for the year ended December 31, 2008. The grant provides assistance for commercial fishing
owners impacted by Hurricanes Katrina and Rita in 2005. Subsequent to December 31, 2008, the Company received a similar grant related to the impact of Hurricane Katrina of $2.6 million, net of fees and expenses, from the State of Mississippi.
The Mississippi grant will be recognized in the Consolidated Statement of Operations during 2009.

Revenue Recognition

The Company derives revenue principally from the sales of a variety of protein and oil products derived from menhaden. The Company recognizes revenue for
the sale of its products when title and rewards of ownership to its products are transferred to the customer.

Cash and Cash Equivalents

The Company considers cash in banks and short-term investments with original maturities of three months or less as cash and cash
equivalents.

Allowances for Doubtful Accounts

The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability of the Companys customers to make required payments. The Company considers the following factors when



45



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OMEGA PROTEIN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



determining if collection is reasonably assured: customer credit worthiness, past transaction history with the customer, and changes in customer payment
terms. If the Company has no previous experience with the customer, the Company typically obtains reports from credit organizations to ensure that the customer has a history of paying its creditors. The Company may also request financial
information, including financial statements or other documents (e.g., bank statements), or may obtain a letter of credit from the customer to ensure that the customer has the means of making payment. If the financial condition of the Companys
customers were to deteriorate, adversely affecting their ability to make payments, additional allowances would be required.

Inventories

Inventory is stated at the lower of cost or market. The Companys fishing season runs from mid-April to the first of November in the
Gulf of Mexico and from the beginning of May into December in the Atlantic. Government regulations generally preclude the Company from fishing during the off-seasons.

The Companys inventory cost system considers all costs associated with an annual fish catch and its processing, both variable and fixed, including both costs incurred during the off-season and during the fishing
season. The Companys costing system allocates cost to inventory quantities on a per unit basis as calculated by a formula that considers total estimated inventoriable costs for a fishing season (including off-season costs) to total estimated
fish catch and the relative fair market value of the individual products produced. The Company adjusts the cost of sales, off-season costs and inventory balances at the end of each quarter based on revised estimates of total inventoriable costs and
fish catch. The Companys lower-of-cost-or-market-value analyses at year-end and at interim periods compare the total estimated per unit production cost of the Companys expected production to the projected per unit market prices of the
products. The impairment analyses involve estimates of, among other things, future fish catches and related costs, and expected commodity prices for the fish products as well as projected purchase commitments from customers. These estimates, which
management believes are reasonable and supportable, involve estimates of future activities and events which are inherently imprecise and from which actual results may differ materially.

Any costs incurred during abnormal downtime related to activity at the Companys plants are charged to expense as incurred.

During the off-seasons, in connection with the upcoming fishing seasons, the Company incurs costs (i.e., plant and vessel related labor, utilities, rent,
repairs, and depreciation) that are directly related to the Companys infrastructure. These costs accumulate in inventory and are applied as elements of the cost of production of the Companys products throughout the fishing season ratably
based on the Companys monthly fish catch and the expected total fish catch for the season.

Insurance

The Company carries insurance for certain losses relating to its vessels and Jones Act liabilities for employees aboard its vessels. The Company provides
reserves for those portions of the annual aggregate deductible for which the Company remains responsible by using an estimation process that considers Company-specific and industry data as well as managements experience, assumptions and
consultation with counsel, as these reserves include estimated settlement costs. Managements current estimated range of liabilities related to such cases is based on claims for which management can estimate the amount and range of loss. For
those claims where there may be a range of loss, the Company has recorded an estimated liability inside that range, based on managements experience, assumptions and consultation with counsel. The process of estimating and



46



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OMEGA PROTEIN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



establishing reserves for these claims is inherently uncertain and the actual ultimate net cost of a claim may vary materially from the estimated amount
reserved. There is some degree of inherent variability in assessing the ultimate amount of losses associated with these claims due to the extended period of time that transpires between when the claim might occur and the full settlement of such
claims. This variability is generally greater for Jones Act claims by vessel employees. The Company continually evaluates loss estimates associated with claims and losses as additional information becomes available and revises its estimates.
Although management believes estimated reserves related to these claims are adequately recorded, it is possible that actual results could significantly differ from the recorded reserves, which could materially impact the Companys results of
operations, financial position and cash flow.

The Company is primarily self-insured for health insurance. The Company purchases individual
stop loss coverage with a large deductible. As a result, the Company is primarily self-insured for claims and associated costs up to the amount of the deductible, with claims in excess of the deductible amount being covered by insurance. Expected
claims estimates are based on health care trend rates and historical claims data; actual claims may differ from those estimates. The Company evaluates its claims experience related to this coverage with information obtained from its risk management
consultants.

Assumptions used in preparing these insurance estimates are based on factors such as claims settlement patterns, claim
development trends, claim frequency and severity patterns, inflationary trends and data reasonableness. Together these factors will generally affect the analysis and determination of the best estimate of the projected ultimate claim
losses. The results of these evaluations are used to both analyze and adjust the Companys insurance loss reserves.

In addition to
the above insurance policies, the Company maintains insurance coverage for property, inventory and business interruption insurance. The nature and extent of the insurance coverage varies by line of policy. The Company has recorded insurance
recoveries related to Hurricane Ike up to the policy maximum of $10 million, of which the Company has recognized $7.5 million as an account receivable as of December 31, 2008 due to the prior receipt in October 2008 of an advance of $2.5
million from the insurance carrier. Subsequent to December 31, 2008, the Company received the remaining $7.5 million in settlement of the claim.

Advertising Costs

The costs of advertising are expensed as incurred in accordance with Statement of Position 93-7
Reporting on Advertising Costs.

Research and Development

Costs incurred in research and development activities are expensed as incurred.

Call Options

The Company does not enter into financial instruments for trading or speculative
purposes. The Company purchased natural gas call options in March 2008 for $67,000 to manage its exposure to rising natural gas prices. The call options gave the Company the right to purchase natural gas at a price of $10.50 per MMBTU between
April 1, 2008 and June 30, 2008.

For the year ended December 31, 2008, the Company recorded gains in product inventory of
$29,000 related to the settlement of natural gas call options above the $10.50 option price.



47



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OMEGA PROTEIN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Interest Rate Swap Agreements

The Company does not enter into financial instruments for trading or speculative purposes. The Company has entered into interest rate swap agreements to
manage its cash flow exposure to interest rate changes with notional amounts as indicated below that are scheduled to mature in March 2012. The swaps effectively convert all the Companys variable rate debt under the Term Loan (as defined
below) to a fixed rate, without exchanging the notional principal amounts.



|                 |  |                        |            |                        |      |   |                                              |   |            |                                                          |  |                                      |         |  |   |           
|---------------- |  | ---------------------- | ---------- | ---------------------- | ---- | - | -------------------------------------------- | - | ---------- | -------------------------------------------------------- |  | ------------------------------------ | ------- |  | - | ----------
|Date of Contract |  | OriginalNotionalAmount |            | ContractedInterestRate |      |   | Total Asset(Liability) as ofDecember 31,2008 |   |            | Total DeferredTax Asset(Liability) as ofDecember 31,2008 |  | NotionalAmount as ofDecember 31,2008
|April 4, 2007    |  | $                      | 19,950,000 |                        | 5.16 | % |                                              | $ | (1,385,100 | )                                                        |  | $                                    | 470,900 |  | $ | 17,456,000
|February 7, 2008 |  |                        | 10,237,500 |                        | 3.36 | % |                                              |   | (355,300   | )                                                        |  |                                      | 120,800 |  |   | 9,188,000 
|March 19, 2008   |  |                        | 4,436,250  |                        | 2.96 | % |                                              |   | (118,000   | )                                                        |  |                                      | 40,100  |  |   | 3,981,000 
|                 |  |                        |            |                        |      |   |                                              |   |            |                                                          |  |                                      |         |  |   |           
|                 |  |                        |            |                        |      |   |                                              | $ | (1,858,400 | )                                                        |  | $                                    | 631,800 |  | $ | 30,625,000

As of December 31, 2008, the Company has recorded a long-term liability of $958,700, net of
the current portion of $899,700, to recognize the fair value of interest rate derivatives, and has also recorded a deferred tax asset of $631,800 associated therewith. The change in fair value from inception to December 31, 2008 is recorded in
other comprehensive income in the Companys consolidated financial statements. The following table illustrates the changes recorded, net of tax, in accumulated other comprehensive loss resulting from the interest rate swap
agreements.



|                                                                        |  |                |        
|----------------------------------------------------------------------- |  | -------------- | -------
|                                                                        |  | (in thousands)
|Balance at January 1, 2008                                              |  | $              | (442)  
|Net gain/(loss), net of tax, reclassified into earnings                 |  |                | (199)  
|Net change associated with current period swap transactions, net of tax |  |                | (585)  
|                                                                        |  |                |        
|Balance at December 31, 2008                                            |  | $              | (1,226)
|                                                                        |  |                |        

The $1,226,000 reported in accumulated other comprehensive loss as of December 31, 2008 will
be reclassified to earnings, through interest expense, on a quarterly basis until 2012, when the interest rate swaps expire. The amount to be reclassified to earnings, net of taxes, during the next 12 months is expected to be
approximately $593,800.

If, at any time, the swaps are determined to be ineffective, in whole or in part, due to changes in the interest
rate swaps or underlying debt agreements, the fair value of the portion of the interest rate swaps determined to be ineffective will be recognized as gain or loss in interest expense in the statement of operations for the applicable
period.

Accounting for the Impairment of Long-Lived Assets

The Company evaluates at each balance sheet date for continued appropriateness of the carrying value of its long-lived assets including its long-term receivables and property, plant and equipment in accordance with
Statement of Financial Accounting Standards (SFAS) No. 144, Accounting for the Impairment or Disposals of Long-Lived Assets. The Company reviews long-lived assets for impairment when events or changes in circumstances
indicate that the carrying amount of any such assets or grouping of assets may not be recoverable. The Company has grouped certain assets together (primarily marine vessels) for impairment testing on a fleet



48



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OMEGA PROTEIN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



basis. If indicators of impairment are present, management evaluates the undiscounted cash flows estimated to be generated by those assets or grouping of
assets compared to the carrying amount of those items. The net carrying value of assets or grouping of assets not recoverable is reduced to fair value. The Company considers continued operating losses, or significant and long-term changes in
business conditions, to be its primary indicators of potential impairment.

Income Taxes

The Company utilizes the liability method to account for income taxes. This method requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of existing temporary differences between the financial reporting and tax reporting basis of assets and liabilities, and operating loss and tax credits carryforwards for tax purposes. The Company records a valuation
allowance to reduce the deferred tax assets to the amount that is more likely than not to be realized. The Company believes that the deferred tax assets recorded as of December 31, 2008 are realizable through future reversals of existing
taxable temporary differences and future taxable income. If the Company were to subsequently determine that it would be able to realize deferred tax assets in the future in excess of the net recorded amount, an adjustment to deferred tax assets
would increase earnings for the period in which such determination was made. The Company will continue to assess the adequacy of the valuation allowance on a quarterly basis. Any changes to the estimated valuation allowance could be material to the
consolidated financial condition and results of operations.

Property, Equipment and Depreciation

Property and equipment additions are recorded at cost. Depreciation of property and equipment is computed by the straight-line method at rates expected to amortize the
cost of property and equipment, net of salvage value, over their estimated useful lives. Estimated useful lives, determined at the date of acquisition, of new assets acquired are based primarily on the review of existing property and equipment.
Estimated useful lives are as follows:



|                                                       |  |                    
|------------------------------------------------------ |  | -------------------
|                                                       |  | Useful Lives(years)
|Fishing vessels and fish processing plants             |  | 15  20            
|Machinery, equipment, furniture and fixtures and other |  | 3  10             

Replacements and major improvements are capitalized and amortized over a period of 5 to 15 years.
Maintenance and repairs are charged to expense as incurred. Upon sale or retirement, the costs and related accumulated depreciation are eliminated from the accounts. Any resulting gains or losses are included in the statement of operations. The
Company capitalizes interest as part of the acquisition cost of a qualifying asset.

Interest is capitalized only during the period of time
required to complete and prepare the asset for its intended use. For the years ended December 31, 2008, 2007 and 2006, the Company capitalized approximately $292,600, $82,900 and $0, respectively, of interest.

Pension Plans

As of December 31, 2006,
the Company adopted SFAS No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans. This statement requires the recognition of the overfunded or underfunded status of defined benefit pension and
postretirement plans as an asset or liability in its statement of financial position and to recognize changes in that funded status in the year in which the changes occur through other comprehensive income. The statement also changes financial
reporting by requiring an employer to



49



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OMEGA PROTEIN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



measure the funded status of a plan as of the date of its year-end statement of financial position. The Companys policy is to fund U.S. pension plans
at amounts not less than the minimum requirements of the Employee Retirement Income Security Act of 1974 and generally for obligations under its foreign plans to deposit funds with trustees under insurance policies.

In 2002, the Board of Directors authorized a plan to freeze the Companys pension plan in accordance with ERISA rules and regulations so that new
employees, hired after July 31, 2002, will not be eligible to participate in the pension plan and further benefits will no longer accrue for existing participants. The freezing of the pension plan had the effect of vesting all existing
participants in their pension benefits in the plan.

Comprehensive Income ( Loss)

Comprehensive income (loss) is defined as change in equity of a business enterprise during a period from transactions and other events and circumstances
from non-owner sources, including foreign currency translation adjustments and pension benefits adjustments, including recognition of actuarial losses. The Company presents comprehensive income (loss) in its consolidated statements of
stockholders equity.

Accumulated Comprehensive Loss

The components of accumulated other comprehensive loss included in shareholders equity are as follows:



|                                                                                                                       |  |                  |         |   |                  |   |        |  
|---------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ------- | - | ---------------- | - | ------ | -
|                                                                                                                       |  | December 31,2008 |         |   | December 31,2007 |  
|                                                                                                                       |  | (in thousands)   |        
|Cumulative Translation Adjustments, net of tax benefit of $13 as of December 31, 2008 and December 31, 2007            |  | $                | (25     | ) |                  | $ | (25    | )
|Pension Benefits Adjustments, net of tax benefit of $4,842 as of December 31, 2008 and $3,377 as of December 31,
2007  |  |                  | (9,398  | ) |                  |   | (6,553 | )
|Fair Value of Interest Rate Swap, net of tax benefit of $632 as of December 31, 2008 and $228 as of December 31,
2007. |  |                  | (1,226  | ) |                  |   | (442   | )
|                                                                                                                       |  |                  |         |   |                  |   |        |  
|Accumulated Other Comprehensive Loss                                                                                   |  | $                | (10,649 | ) |                  | $ | (7,020 | )
|                                                                                                                       |  |                  |         |   |                  |   |        |  

Foreign Currency Translation

The Companys Mexican operations use the local currency as the functional currency. Assets and liabilities of those operations are translated into
U.S. dollars using period-end exchange rates; income and expenses are translated using the average exchange rates for the reporting period. Translation adjustments are deferred in accumulated other comprehensive income (loss), a separate component
of stockholders equity.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and trade accounts receivable. The Companys customer base generally remains consistent from
year to year. The Company performs ongoing credit evaluations of its customers and generally does not require material collateral. The Company maintains reserves for potential credit losses and such losses have historically been within
managements expectations.

At December 31, 2008 and December 31, 2007, the Company had cash deposits concentrated primarily
in one major bank. In addition, the Company had commercial quality grade investments A2P2 rated or better with companies and financial institutions. The Company believes that credit risk in such investments is minimal.



50



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OMEGA PROTEIN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Earnings per Share

Basic earnings per common share (EPS) were computed by dividing net earnings by the weighted average number of common shares outstanding during the reporting period. Diluted EPS reflects the dilution that could occur
if securities or contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company. Diluted earnings per common share was computed by dividing
net earnings by the sum of the weighted average number of common shares outstanding plus the number of additional common shares that would have been outstanding if the dilutive potential common shares (in this case, exercise of the Companys
employee stock options) had been issued during each period as discussed in Note 8.

Purchase and Retirement of Common Stock

The Company accounts for the retirement of treasury shares under the par value method. Under this method, the excess of the cost of treasury stock over
its par value is charged to retained earnings.

Recently Issued Accounting Standards

In September 2006, the FASB issued Statement of Financial Accounting Standards (SFAS) No. 157, Fair Value Measurements (SFAS
No. 157). SFAS No. 157 establishes a common definition for fair value, establishes a framework for measuring fair value, and expands disclosure about such fair value measurements. SFAS No. 157 is effective for financial assets and
financial liabilities for fiscal years beginning after November 15, 2007. Issued in February 2008, FSP 157-1 Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair
Value Measurements for Purposes of Lease Classification or Measurement under Statement 13 removed leasing transactions accounted for under Statement 13 and related guidance from the scope of SFAS No. 157. FSP 157-2 Partial Deferral
of the Effective Date of Statement 157 (FSP 157-2), deferred the effective date of SFAS No. 157 for all nonfinancial assets and nonfinancial liabilities that are not recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually) to fiscal years beginning after November 15, 2008.

The implementation of SFAS No. 157 for
financial assets and financial liabilities, effective January 1, 2008, did not have a material impact on the Companys consolidated financial position and results of operations. The implementation of SFAS No. 157 for nonfinancial
assets and nonfinancial liabilities will not require any new fair value measurements and therefore the Company does not expect it will have a material impact on its consolidated financial position and results of operations.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an
Amendment of FASB Statement No. 115 (SFAS No. 159). This statement permits entities to choose to measure many financial assets and liabilities and certain other items at fair value. The objective is to improve financial
reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. Management decided not to
apply the fair value option to any of the Companys existing financial assets and/or liabilities effective January 1, 2008. As such, the statement had no impact on the Companys consolidated financial position and results of
operations.

In December 2007, the FASB issued SFAS No. 141 (revised 2007), Business Combinations (SFAS 141(R)). SFAS
141(R) states that all business combinations, whether full, partial, or step acquisitions, will result in all assets and liabilities of an acquired business being recorded at their fair values at the acquisition date. In subsequent periods,
contingent liabilities will be measured at the higher of their acquisition date fair value or the



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OMEGA PROTEIN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



estimated amounts to be realized. SFAS 141(R) applies to all transactions or other events in which an entity obtains control of one or more businesses. This
statement is effective as of the beginning of an entitys first fiscal year beginning after December 15, 2008. The Company does not expect the adoption of SFAS No. 141(R) will have a material impact on its consolidated results of
operations, financial position and related disclosures.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling
Interests in Consolidated Financial Statementamendments of ARB No. 51 (SFAS 160). SFAS 160 states that accounting and reporting for minority interests will be recharacterized as noncontrolling interests and classified as a component
of equity. SFAS 160 applies to all entities that prepare consolidated financial statements, except not-for-profit organizations, but will affect only those entities that have an outstanding noncontrolling interest in one or more subsidiaries or that
deconsolidate a subsidiary. This statement is effective as of the beginning of an entitys first fiscal year beginning after December 15, 2008. The Company does not expect the adoption of SFAS No. 160 will have a material impact on
its consolidated results of operations, financial position and related disclosures.

In March 2008, the FASB issued SFAS No. 161,
Disclosures about Derivative Instruments and Hedging Activities (SFAS 161). SFAS 161 is a clarification of SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities which did not provide adequate
information about how derivative and hedging activities affect an entitys financial position, financial performance and cash flows. Accordingly, SFAS 161 requires enhanced disclosures about an entitys derivative and hedging activities
and thereby improves the transparency of financial reporting. This Statement is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. The Company does not expect the adoption of SFAS
No. 161 will have a material impact on its consolidated results of operations, financial position and related disclosures.

Stock-Based
Compensation

The Company has a stock-based compensation plan, which is described in more detail in Note 12.

NOTE 2. ACCOUNTS RECEIVABLE

Accounts receivable
as of December 31, 2008 and 2007 are summarized as follows:



|                                     |  |                |        |   |      |   |        |  
|------------------------------------ |  | -------------- | ------ | - | ---- | - | ------ | -
|                                     |  | 2008           |        |   | 2007 |  
|                                     |  | (in thousands) |       
|Trade                                |  | $              | 22,802 |   |      | $ | 14,767 |  
|Insurance                            |  |                | 8,139  |   |      |   | 727    |  
|Employee                             |  |                | 11     |   |      |   | 21     |  
|Income tax                           |  |                | 2,653  |   |      |   | 583    |  
|Other                                |  |                | 15     |   |      |   | 73     |  
|                                     |  |                |        |   |      |   |        |  
|Total accounts receivable            |  |                | 33,620 |   |      |   | 16,171 |  
|Less allowance for doubtful accounts |  |                | (165   | ) |      |   | (120   | )
|                                     |  |                |        |   |      |   |        |  
|Receivables, net                     |  | $              | 33,455 |   |      | $ | 16,051 |  
|                                     |  |                |        |   |      |   |        |  

As a result of Hurricane Ike (see Note 13  Hurricane Losses, Insurance Recoveries and Other
Proceeds), the Company sustained damage to its Abbeville and Cameron, Louisiana fish processing facilities. The Company initially recorded a hurricane related insurance receivable of $10.0 million, of which $7.5 million was receivable as of
December 31, 2008. Subsequent to December 31, 2008, the Company received the remaining $7.5 million in settlement of the claim.



52



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OMEGA PROTEIN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



NOTE 3. INVENTORY

Inventory as of December 31, 2008 and 2007 is summarized as follows:



|                                                             |  |                |        |      |   |       
|------------------------------------------------------------ |  | -------------- | ------ | ---- | - | ------
|                                                             |  | 2008           |        | 2007
|                                                             |  | (in thousands)
|Fish meal                                                    |  | $              | 38,115 |      | $ | 42,937
|Fish oil                                                     |  |                | 22,927 |      |   | 13,590
|Fish solubles                                                |  |                | 1,073  |      |   | 1,461 
|Unallocated inventory cost pool (including off-season costs) |  |                | 6,407  |      |   | 6,848 
|Other materials & supplies                                   |  |                | 6,154  |      |   | 6,016 
|                                                             |  |                |        |      |   |       
|Total inventory                                              |  | $              | 74,676 |      | $ | 70,852
|                                                             |  |                |        |      |   |       

Inventory at December 31, 2008 and 2007 is stated at the lower of cost or market. The
elements of unallocated inventory cost pool include plant and vessel related labor, utilities, rent, repairs and depreciation, to be allocated to inventories produced through the 2008 fishing season.

As a result of Hurricane Ike, the Company sustained damage to its Cameron, Louisiana and Port Arthur, Texas fish meal inventory and Abbeville and
Cameron, Louisiana materials and supplies inventory. The Company recognized a $1.4 million fish meal inventory write-off and $0.3 million materials and supplies write-off for the year ended December 31, 2008. See Note 13Hurricane Losses,
Insurance Recoveries and Other Proceeds.

The hurricanes also affected the Companys 2008 Gulf of Mexico fishing season due to the
closure of two fish processing facilities in the Gulf of Mexico region. As a result of these closures and their impact on fishing, the Company has recognized a $5.4 million unallocated inventory cost pool write-off and a $0.9 million write-off
related to idle plant cost for the year ended December 31, 2008. See Note 13Hurricane Losses, Insurance Recoveries and Other Proceeds.

NOTE 4. OTHER ASSETS

Other assets as of December 31, 2008 and 2007 are summarized as follows:



|                                                                |  |                |       |      |   |      
|--------------------------------------------------------------- |  | -------------- | ----- | ---- | - | -----
|                                                                |  | 2008           |       | 2007
|                                                                |  | (in thousands)
|Fish nets, net of accumulated amortization of $2,213 and $2,008 |  | $              | 1,192 |      | $ | 1,093
|Insurance receivable, net of allowance for doubtful accounts    |  |                | 640   |      |   | 1,082
|Title XI debt issuance costs                                    |  |                | 316   |      |   | 374  
|Other debt issuance costs                                       |  |                | 510   |      |   | 736  
|Deposits and other                                              |  |                | 77    |      |   | 59   
|                                                                |  |                |       |      |   |      
|Total other assets, net                                         |  | $              | 2,735 |      | $ | 3,344
|                                                                |  |                |       |      |   |      

Amortization expense for fishing nets amounted to $1,048,000, $845,000 and $699,000 for the years
ended December 31, 2008, 2007 and 2006, respectively.

The Company carries insurance for certain losses relating to its vessels and
Jones Act liability for employees aboard its vessels (collectively, Vessel Claims Insurance). The typical Vessel Claims Insurance policy contains an annual aggregate deductible (AAD) for which the Company remains responsible,
while the insurance carrier



53



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OMEGA PROTEIN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



is responsible for all applicable amounts which exceed the AAD. It is the Companys policy to accrue current amounts due and record amounts paid out on
each claim. Once payments exceed the AAD, the Company records an insurance receivable for a given policy year, net of allowance for doubtful accounts. As of December 31, 2008 and 2007 the allowance for doubtful insurance receivable accounts was
$2.0 million.

NOTE 5. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment as of December 31, 2008 and 2007 are summarized as follows:



|                                             |  |                |          |   |      |   |          |  
|-------------------------------------------- |  | -------------- | -------- | - | ---- | - | -------- | -
|                                             |  | 2008           |          |   | 2007 |  
|                                             |  | (in thousands) |         
|Land                                         |  | $              | 7,690    |   |      | $ | 7,690    |  
|Plant assets                                 |  |                | 105,150  |   |      |   | 101,171  |  
|Fishing vessels                              |  |                | 99,655   |   |      |   | 95,193   |  
|Furniture and fixtures                       |  |                | 5,643    |   |      |   | 5,049    |  
|Construction in progress                     |  |                | 12,662   |   |      |   | 4,166    |  
|                                             |  |                |          |   |      |   |          |  
|Total property and equipment                 |  |                | 230,800  |   |      |   | 213,269  |  
|Less accumulated depreciation and impairment |  |                | (124,619 | ) |      |   | (116,610 | )
|                                             |  |                |          |   |      |   |          |  
|Property, plant and equipment, net           |  | $              | 106,181  |   |      | $ | 96,659   |  
|                                             |  |                |          |   |      |   |          |  

Depreciation expense for the years ended December 31, 2008, 2007 and 2006 was approximately
$11.6 million, $12.1 million and $12.2 million, respectively.

As a result of Hurricane Ike, the Company sustained damage to its property
and equipment at its Abbeville and Cameron, Louisiana fish processing facilities. The Company recognized a $0.3 million and $0.2 million write-off of its property and equipment and related accumulated depreciation, respectively, for the year ended
December 31, 2008, which resulted in an involuntary conversion loss. The Company also recognized a $2.9 million loss on the involuntary conversion of damaged property and equipment related to plant assets. See Note 13Hurricane
Losses, Insurance Recoveries and Other Proceeds.

NOTE 6. NOTES PAYABLE AND LONG-TERM DEBT

At December 31, 2008 and 2007, the Companys long-term debt consisted of the following:



|                                                                                                                                                                                                                                         |  |                  |        |   |                  |   |        |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---------------- | ------ | - | ---------------- | - | ------ | -
|                                                                                                                                                                                                                                         |  | December 31,2008 |        |   | December 31,2007 |  
|                                                                                                                                                                                                                                         |  | (in thousands)   |       
|U.S. government guaranteed obligations (Title XI loans) collateralized by a first lien on certain vessels and certain plant
assets:                                                                                                      |  |                  |        |   |                  |   |        |  
|Amounts due in installments through 2022, interest from 6.49% to 7.6%                                                                                                                                                                    |  | $                | 28,148 |   |                  | $ | 30,858 |  
|Amounts due in installments through 2014, interest at Eurodollar rates plus 0.45% (4.21% and 5.68% at December 31, 2008 and
December 31, 2007, respectively)                                                                             |  |                  | 236    |   |                  |   | 276    |  
|Bank of America term loan, quarterly principal payments, as defined, interest payable quarterly based on LIBOR plus an applicable rate (3.46%
and 7.45% as of December 31, 2008 and December 31, 2007, respectively) maturing March 2012 |  |                  | 30,625 |   |                  |   | 34,125 |  
|                                                                                                                                                                                                                                         |  |                  |        |   |                  |   |        |  
|Total debt                                                                                                                                                                                                                               |  |                  | 59,009 |   |                  |   | 65,259 |  
|Less current maturities                                                                                                                                                                                                                  |  |                  | (7,697 | ) |                  |   | (6,283 | )
|                                                                                                                                                                                                                                         |  |                  |        |   |                  |   |        |  
|Long-term debt                                                                                                                                                                                                                           |  | $                | 51,312 |   |                  | $ | 58,976 |  
|                                                                                                                                                                                                                                         |  |                  |        |   |                  |   |        |  



54



---

OMEGA PROTEIN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The Title XI loans are secured by liens on certain of the Companys fishing vessels and
mortgages on the Companys Reedville, Virginia and Abbeville, Louisiana plants. Loans are now available under similar terms pursuant to the Title XI program without intervening lenders.

In September 2004, pursuant to the Title XI program, the United States Department of Commerce Fisheries Finance Program (the FFP) approved
the Companys financing application in an amount not to exceed $14 million (the Approval Letter). Borrowings under the Approval Letter are to be used to finance and/or refinance approximately 73% of the actual depreciable cost of
the Companys future fishing vessel refurbishments and capital expenditures relating to shore-side fishing assets for a term not to exceed 15 years from inception at interest rates determined by the U.S. Treasury. Final approval for all such
future projects requires individual approval through the Secretary of Commerce, National Oceanic and Atmospheric Administration, and National Marine Fisheries Service (National Marine Fisheries Service). Borrowings under the FFP are
required to be evidenced by security agreements, undertakings, and other documents deemed in the sole discretion of the National Marine Fisheries Service as necessary to accomplish the intent and purpose of the Approval Letter. The Company is
required to comply with customary National Marine Fisheries Service covenants as well as certain special covenants. In December 2004, the Company submitted a $4.9 million financing request against the $14 million approval, and subsequently amended
that request to include the entire $14 million. The Company closed on the $14 million FFP loan on October 17, 2005.

On
December 1, 2005, pursuant to the Title XI program, the FFP approved a second financing application made by the Company in the amount of $16.4 million (the Second Approval Letter). In May 2006, the Company submitted a $6.3 million
financing request under the Second Approval Letter. The Company closed on the $6.3 million FFP loan in the first quarter of 2007. As of December 31, 2008, the Company was in compliance with all of the covenants contained therein.

On March 26, 2007 (the Closing Date), the Company entered into a Credit Agreement (the Credit Agreement) with Bank of
America, N.A., as administrative agent, lender, swing line lender and letter of credit issuer, Regions Bank, Compass Bank and Farm Credit Bank of Texas (collectively, the Lenders). The Credit Agreement provides the Company with a $55
million senior credit facility (the Senior Credit Facility) consisting of (i) a 5-year revolving credit facility (the Revolving Credit Facility) of up to $20 million, including a $7.5 million sub-limit for the issuance
of standby letters of credit and a $2.5 million sub-limit for swing line loans and (ii) a 5-year term loan (the Term Loan) of $35 million. The Senior Credit Facility replaced the Companys Financing Facility, under which, as of
the Closing Date, $28.7 million in principal was outstanding under a term loan and $6.5 million in principal was outstanding under revolving loans, and approximately $3.3 million in letters of credit were issued, primarily in support of
workers compensation insurance programs. On the Closing Date, the Company drew down $35 million under the Term Loan and approximately $2.0 million under the Revolving Credit Facility, and had approximately $3.1 million issued in
standby letters of credit, primarily in support of workers compensation insurance programs. The Senior Credit Facility is secured by a first priority lien on all of the Companys assets, other than vessels, real estate and other assets
pledged to secure loans made to the Company under the FFP. On September 29, 2008, the Credit Agreement was amended to increase the limit in the financial covenant in the Consolidated Capital Expenditures Covenant from $15 million to $21 million
for the fiscal year ended 2008 with the limit returning to $15 million for any year thereafter.

For the year ended December 31, 2007,
as a result of the above mentioned refinancing, the Company expensed approximately $2.2 million in deferred debt issuance costs and $0.8 million as a prepayment penalty related to the Financing Facility.



55



---

OMEGA PROTEIN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



As of December 31, 2008, the Company had $30.6 million outstanding under the Term Loan and $2.8
million in letters of credit issued primarily in support of workers compensation insurance programs. As of December 31, 2008, the Company had $17.2 million available under the Revolving Credit Facility and the Company was in compliance
with all of the covenants under the Senior Credit Facility. The Company has no off-balance sheet arrangements other than normal operating leases and standby letters of credit.

Annual Maturities

The annual maturities of long-term debt for the five years ending
December 31, 2013 and thereafter are as follows (in thousands):



|       |  |        |  |        |  |         |  |        |  |           
|------ |  | ------ |  | ------ |  | ------- |  | ------ |  | ----------
|2009   |  | 2010   |  | 2011   |  | 2012    |  | 2013   |  | Thereafter
|$7,697 |  | $9,393 |  | $9,556 |  | $13,903 |  | $2,560 |  | $15,900   

NOTE 7. CAPITAL LEASE OBLIGATION

On May 29, 2008 and July 10, 2008, the Company entered into capital lease agreements to lease barges for a period of 5 years. Following is a
summary of future minimum payments under the capitalized lease agreements (in thousands):



|                                                 |  |   |       |  
|------------------------------------------------ |  | - | ----- | -
|2009                                             |  | $ | 524   |  
|2010                                             |  |   | 551   |  
|2011                                             |  |   | 578   |  
|2012                                             |  |   | 609   |  
|2013                                             |  |   | 290   |  
|                                                 |  |   |       |  
|Total minimum lease payments                     |  |   | 2,552 |  
|Less amount representing interest                |  |   | (616  | )
|                                                 |  |   |       |  
|Present value of minimum payments                |  |   | 1,936 |  
|Less current portion of capital lease obligation |  |   | (302  | )
|                                                 |  |   |       |  
|Long-term capital lease obligation               |  | $ | 1,634 |  
|                                                 |  |   |       |  

As of December 31, 2008, assets recorded under capital lease obligations are included in
Property, Plant and Equipment, net as follows (in thousands):



|                                              |  |   |       |  
|--------------------------------------------- |  | - | ----- | -
|Fishing vessels and marine equipment, at cost |  | $ | 2,076 |  
|Less accumulated depreciation                 |  |   | (225  | )
|                                              |  |   |       |  
|Property, plant and equipment, net            |  | $ | 1,851 |  
|                                              |  |   |       |  



56



---

OMEGA PROTEIN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



NOTE 8. EARNINGS PER SHARE INFORMATION

The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations (in thousands except share
and per share data) for the years ended December 31, 2008, 2007 and 2006.



|                                         |  |                         |        |                         |        |                         |   |                   |  |                     |        |        |        |                   |   |                     |  |        |       |  |        |  |   |     
|---------------------------------------- |  | ----------------------- | ------ | ----------------------- | ------ | ----------------------- | - | ----------------- |  | ------------------- | ------ | ------ | ------ | ----------------- | - | ------------------- |  | ------ | ----- |  | ------ |  | - | ----
|                                         |  | Years EndedDecember 31, |        | Years EndedDecember 31, |        | Years EndedDecember 31,
|                                         |  | 2008                    |        | 2007                    |        | 2006                   
|                                         |  | Income(Numerator)       |        | Shares(Denominator)     |        | Amount                  |   | Income(Numerator) |  | Shares(Denominator) |        | Amount |        | Income(Numerator) |   | Shares(Denominator) |  | Amount
|Net income                               |  | $                       | 12,576 |                         |       |                         |   |                   |  | $                   | 12,139 |        |       |                   |   |                     |  | $      | 4,572 |  |       |  |   |     
|                                         |  |                         |        |                         |        |                         |   |                   |  |                     |        |        |        |                   |   |                     |  |        |       |  |        |  |   |     
|Basic EPS                                |  |                         |        |                         |        |                         |   |                   |  |                     |        |        |        |                   |   |                     |  |        |       |  |        |  |   |     
|Income available to common stockholders |  |                         | 12,576 |                         | 18,298 |                         | $ | 0.69              |  |                     | 12,139 |        | 16,830 |                   | $ | 0.72                |  |        | 4,572 |  | 24,322 |  | $ | 0.19
|                                         |  |                         |        |                         |        |                         |   |                   |  |                     |        |        |        |                   |   |                     |  |        |       |  |        |  |   |     
|Effect of Dilutive stock option grants   |  |                         |       |                         | 283    |                         |   |                   |  |                     |       |        | 602    |                   |   |                     |  |        |      |  | 878    |  |   |     
|                                         |  |                         |        |                         |        |                         |   |                   |  |                     |        |        |        |                   |   |                     |  |        |       |  |        |  |   |     
|Diluted EPS                              |  |                         |        |                         |        |                         |   |                   |  |                     |        |        |        |                   |   |                     |  |        |       |  |        |  |   |     
|Income available to common stockholders |  | $                       | 12,576 |                         | 18,581 |                         | $ | 0.68              |  | $                   | 12,139 |        | 17,432 |                   | $ | 0.70                |  | $      | 4,572 |  | 25,200 |  | $ | 0.18
|                                         |  |                         |        |                         |        |                         |   |                   |  |                     |        |        |        |                   |   |                     |  |        |       |  |        |  |   |     

Options to purchase 1,206,000 shares of common stock at exercise prices ranging from $12.375 to
$15.88 per share were outstanding during the year ended December 31, 2008, but were not included in the computation of diluted earnings per share because the exercise prices of the options were greater than the average market price of the
shares during that year.

Options to purchase 2,482,000 shares of common stock at exercise prices ranging from $7.25 to $17.25 per share
were outstanding during the year ended December 31, 2007, but were not included in the computation of diluted earnings per share because the exercise prices of the options were greater than the average market price of the shares during that
year.

Options to purchase 2,510,000 shares of common stock at exercise prices ranging from $6.44 to $17.25 per share were outstanding
during the year ended December 31, 2006, but were not included in the computation of diluted earnings per share because inclusion of these shares would have been antidilutive.

NOTE 9. INCOME TAXES

The Companys provision (benefit) for income taxes consisted of the
following:



|                           |  |                          |       |      |   |       |      |  |   |       |  
|-------------------------- |  | ------------------------ | ----- | ---- | - | ----- | ---- |  | - | ----- | -
|                           |  | Years Ended December 31, |      
|                           |  | 2008                     |       | 2007 |   |       | 2006 | 
|                           |  | (in thousands)           |      
|Current:                   |  |                          |       |      |   |       |      |  |   |       |  
|State                      |  | $                        | 40    |      | $ | (70   | )    |  | $ |      |  
|U.S.                       |  |                          |      |      |   |      |      |  |   |      |  
|Deferred:                  |  |                          |       |      |   |       |      |  |   |       |  
|State                      |  |                          | 335   |      |   | 346   |      |  |   | (140  | )
|U.S.                       |  |                          | 6,702 |      |   | 6,547 |      |  |   | 1,342 |  
|                           |  |                          |       |      |   |       |      |  |   |       |  
|Provision for income taxes |  | $                        | 7,077 |      | $ | 6,823 |      |  | $ | 1,202 |  
|                           |  |                          |       |      |   |       |      |  |   |       |  



57



---

OMEGA PROTEIN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



As of December 31, 2008, for federal income tax purposes, the Company had $22.9 million in net
operating losses expiring in 2009 through 2025, and approximately $1.3 million in alternative minimum tax credit carryforward.

The
following table reconciles the income tax provisions (benefits) computed using the U.S. statutory rate of 34% to the provisions reflected in the financial statements.



|                                    |  |                          |       |      |   |       |      |  |   |       |  
|----------------------------------- |  | ------------------------ | ----- | ---- | - | ----- | ---- |  | - | ----- | -
|                                    |  | Years Ended December 31, |      
|                                    |  | 2008                     |       | 2007 |   |       | 2006 | 
|                                    |  | (in thousands)           |      
|Taxes at statutory rate             |  | $                        | 6,682 |      | $ | 6,442 |      |  | $ | 1,969 |  
|Foreign sales exempt income         |  |                          |      |      |   |      |      |  |   | (271  | )
|State taxes, net of federal benefit |  |                          | 252   |      |   | 244   |      |  |   | (97   | )
|Excess executive compensation       |  |                          | 22    |      |   | 255   |      |  |   |      |  
|Employment tax credits              |  |                          |      |      |   |      |      |  |   | (379  | )
|Other                               |  |                          | 121   |      |   | (118  | )    |  |   | (20   | )
|                                    |  |                          |       |      |   |       |      |  |   |       |  
|Provision for income taxes          |  | $                        | 7,077 |      | $ | 6,823 |      |  | $ | 1,202 |  
|                                    |  |                          |       |      |   |       |      |  |   |       |  

A tax benefit of $2,416,000 and $2,663,000 for the exercise of stock options was not included in
income for financial reporting purposes and was credited directly to additional paid in capital as of December 31, 2008, and 2007, respectively.

The American Jobs Creation Act of 2004 (the Act) provides a deduction for income from qualified domestic production activities, which will be phased in from 2005 through 2010. In return, the Act also
provides for a two-year phase-out of the existing extra-territorial income exclusion (ETI) for foreign sales that was viewed to be inconsistent with international trade protocols by the European Union.

Under the guidance in FASB Staff Position No. FAS 109-1, Application of FASB Statement No. 109, Accounting for Income Taxes, to the Tax
Deduction on Qualified Production Activities Provided by the American Jobs Creation Act of 2004, the deduction will be treated as a special deduction as described in FASB Statement No. 109. As such, the special deduction has no
effect on deferred tax assets and liabilities existing at the enactment date. Rather, the impact of this deduction will be reported in the period in which the deduction is claimed on our tax return.

The Company has sufficient net operating loss carryforwards (NOLs) that will fully offset near term future taxable income. Because of the NOL
carryforward the Company will not be entitled to the special deduction because the deduction is based on taxable income after taking into account NOLs. Therefore, the Companys near term effective tax rate will not reflect any benefit for the
special deduction.



58



---

OMEGA PROTEIN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Temporary differences and tax credit carryforwards that gave rise to significant portions of deferred
tax assets and liabilities as of December 31, 2008 and 2007 are as follows:



|                                                     |  |                |         |   |      |   |         |  
|---------------------------------------------------- |  | -------------- | ------- | - | ---- | - | ------- | -
|                                                     |  | 2008           |         |   | 2007 |  
|                                                     |  | (in thousands) |        
|Deferred tax assets:                                 |  |                |         |   |      |   |         |  
|Assets and accruals not yet deductible               |  | $              | 3,998   |   |      | $ | 2,922   |  
|                                                     |  |               
|Alternative minimum tax credit carryforwards         |  |                | 1,250   |   |      |   | 1,205   |  
|Equity in loss of unconsolidated affiliates          |  |                | 122     |   |      |   | 122     |  
|Net operating loss carryforward                      |  |                | 6,119   |   |      |   | 11,157  |  
|Tax credit carryforward                              |  |                | 859     |   |      |   | 574     |  
|Pension liability                                    |  |                | 5,118   |   |      |   | 3,377   |  
|State income tax                                     |  |                | 654     |   |      |   | 951     |  
|Other                                                |  |                | 175     |   |      |   | 175     |  
|Valuation allowance                                  |  |                | (1,081  | ) |      |   | (856    | )
|                                                     |  |                |         |   |      |   |         |  
|Total deferred tax assets                            |  |                | 17,214  |   |      |   | 19,627  |  
|                                                     |  |                |         |   |      |   |         |  
|Deferred tax liabilities:                            |  |                |         |   |      |   |         |  
|Property and equipment                               |  |                | (15,970 | ) |      |   | (16,083 | )
|Pension and other retirement benefits                |  |                | (1,970  | ) |      |   | (1,422  | )
|Assets currently deductible                          |  |                | (2,178  | ) |      |   | (2,328  | )
|                                                     |  |                |         |   |      |   |         |  
|Total deferred tax liabilities                       |  |                | (20,118 | ) |      |   | (19,833 | )
|                                                     |  |                |         |   |      |   |         |  
|Net deferred tax liability                           |  | $              | (2,904  | ) |      | $ | (206    | )
|                                                     |  |                |         |   |      |   |         |  
|Deferred income tax (liabilities) assets non-current |  | $              | (3,005  | ) |      | $ | 175     |  
|Deferred income tax asset (liabilities) current      |  |                | 101     |   |      |   | (381    | )
|                                                     |  |                |         |   |      |   |         |  
|Net deferred tax liability                           |  | $              | (2,904  | ) |      | $ | (206    | )
|                                                     |  |                |         |   |      |   |         |  

The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction
and various states. With a few exceptions, the Company is no longer subject to U.S. federal, state and local or non-U.S. income tax examinations by tax authorities for years before 2001. The Company is not currently under examination by the Internal
Revenue Service, the various states or foreign jurisdictions.

The Company adopted the provisions of FASB Interpretation No. 48 (FIN
48), Accounting for Uncertainty in Income Taxes, on January 1, 2007. As a result of the implementation of FIN 48, the Company recognized approximately a $599,000 decrease in its deferred tax asset, which was accounted for as a
reduction of $599,000 and $ -0- to the January 1, 2007, balance of retained earnings and accumulated other comprehensive income, respectively.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:



|                                                             |  |                |     |      |   |      |  
|------------------------------------------------------------ |  | -------------- | --- | ---- | - | ---- | -
|                                                             |  | 2008           |     | 2007 |  
|                                                             |  | (in thousands) |    
|Balance at January 1,                                        |  | $              | 821 |      | $ | 991  |  
|Reductions for tax positions of prior years                  |  |                |    |      |   | (135 | )
|Additions based on tax positions related to the current year |  |                | 43  |      |   |     |  
|Settlements                                                  |  |                |    |      |   | (18  | )
|Lapse of Statute of Limitations                              |  |                |    |      |   | (17  | )
|                                                             |  |                |     |      |   |      |  
|Balance at December 31,                                      |  | $              | 864 |      | $ | 821  |  
|                                                             |  |                |     |      |   |      |  



59



---

OMEGA PROTEIN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Included in the balance at December 31, 2008, are $864,000 of tax positions for which the
ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest and penalties, the disallowance of the shorter deductibility
period would not materially affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

The Company recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. The Company did not have an accrual for payment of interest and penalties at
December 31, 2008 and December 31, 2007.



|NOTE 10. | ACCRUED LIABILITIES
|-------- | -------------------

Accrued liabilities as of
December 31, 2008 and December 31, 2007 are summarized as follows:



|                                                         |  |                  |        |                  |   |       
|-------------------------------------------------------- |  | ---------------- | ------ | ---------------- | - | ------
|                                                         |  | December 31,2008 |        | December 31,2007
|                                                         |  | (in thousands)  
|Salary and benefits                                      |  | $                | 3,628  |                  | $ | 3,959 
|Insurance                                                |  |                  | 4,831  |                  |   | 4,611 
|Taxes, other than income tax                             |  |                  | 177    |                  |   | 33    
|Trade creditors                                          |  |                  | 5,942  |                  |   | 5,106 
|Fair market value of interest rate swap, current portion |  |                  | 899    |                  |   | 211   
|Other                                                    |  |                  | 870    |                  |   | 1,147 
|                                                         |  |                  |        |                  |   |       
|Total accrued liabilities                                |  | $                | 16,347 |                  | $ | 15,067
|                                                         |  |                  |        |                  |   |       



|NOTE 11. | CERTAIN TRANSACTIONS AND ARRANGEMENTS BETWEEN THE COMPANY AND ZAPATA
|-------- | --------------------------------------------------------------------

Upon completion of the Companys initial public offering in 1998, the Company and Zapata entered into certain agreements that included the Sublease, Registration Rights, Tax Indemnity and Administrative Services
Agreements. The Sublease Agreement provided for the Company to lease its principal corporate offices in Houston, Texas from Zapata and provided the Company with the ability to utilize telephone equipment worth approximately $21,000 for no additional
charge. In May 2003, the Company directly assumed Zapatas obligations under the Sublease Agreement with the third party landlord and terminated the Sublease Agreement with Zapata. The lease obligations assumed by the Company were identical to
its sublease obligations to Zapata, and the transaction had no material effect on the Company. The Registration Rights Agreement sets forth the rights and responsibilities of each party concerning certain registration filings and provides for the
sharing of fees and expenses related to such filings. The Tax Indemnity Agreement requires the Company to be responsible for federal, state and local income taxes from its operations. The Administrative Services Agreement allows the Company to
provide certain administrative services to Zapata at the Companys estimated cost. In connection with its repurchase of 9,268,292 shares of common stock from Zapata in November 2006, any remaining obligations under the above agreements were
terminated.

On November 28, 2006, the Company repurchased and retired 9,268,292 shares of the Companys common stock at a
purchase price of $5.125 per share from Zapata. The result of this transaction reduced Zapatas ownership in the Company from approximately 58% to approximately 33%. In December 2006, Zapata subsequently reduced its equity ownership in the
Company to 0% through sales of its remaining shares to third parties.



60



---

OMEGA PROTEIN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The following represents intercompany activity for the periods presented (in thousands):



|                                                          |  |                          |   |      |   |      |  |   |      |  
|--------------------------------------------------------- |  | ------------------------ | - | ---- | - | ---- |  | - | ---- | -
|                                                          |  | Years Ended December 31, |  
|                                                          |  | 2008                     |   | 2007 |   | 2006 | 
|Beginning balance due from Zapata                         |  | $                        |  |      | $ |     |  | $ | 105  |  
|Administrative services provided by the Company to Zapata |  |                          |  |      |   |     |  |   |     |  
|Payments to the Company by Zapata                         |  |                          |  |      |   |     |  |   | (105 | )
|                                                          |  |                          |   |      |   |      |  |   |      |  
|Ending balance due from Zapata                            |  | $                        |  |      | $ |     |  | $ |     |  
|                                                          |  |                          |   |      |   |      |  |   |      |  



|NOTE 12. | BENEFIT PLANS
|-------- | -------------

Defined Contribution Plan

All qualified employees of the Company are covered under the Omega Protein 401(k) Savings and Retirement Plan (the Plan). The
Companys matching contributions to the Plan were approximately $840,000, $818,000 and $772,000 during 2008, 2007 and 2006, respectively.

Pension Plan

The Company has a pension plan covering substantially all employees. Plan benefits are generally based
on an employees years of service and compensation level. The plan has adopted an excess benefit formula integrated with covered compensation. Participants are 100% vested in the accrued benefit after five years of service.

In 2002, the Board of Directors authorized a plan to freeze the Companys pension plan in accordance with ERISA rules and regulations so that new
employees, after July 31, 2002, will not be eligible to participate in the pension plan and further benefits will no longer accrue for existing participants. The freezing of the pension plan had the affect of vesting all existing participants
in their pension benefits in the plan.

On September 29, 2006, SFAS No. 158, Employers Accounting for Defined Benefit
Pension and Other Postretirement Plans was issued. SFAS 158 requires, among other things, the recognition of the funded status of the defined benefit pension plan. Each overfunded plan is recognized as an asset and each underfunded plan is
recognized as a liability. The initial impact of the standard due to unrecognized prior service costs or credits and net actuarial gains or losses as well as subsequent changes in the funded status is recognized as a component of accumulated
comprehensive loss in shareholders equity. Additional minimum pension liabilities (AML) and related intangible assets are also derecognized upon adoption of the new standard. SFAS 158 requires initial application for fiscal years ending
after December 15, 2006. The Companys adoption of SFAS 158, as of December 31, 2006, is described in the following table:



|                                     |  |                                                      |       |               |   |        |                    |  |                                                  |   |  |   |        |    
|------------------------------------ |  | ---------------------------------------------------- | ----- | ------------- | - | ------ | ------------------ |  | ------------------------------------------------ | - |  | - | ------ | ---
|($000s)                              |  | December 31, 2006Prior to AML andSFAS 158Adjustments |       | AMLAdjustment |   |        | SFAS 158Adjustment |  | December 31, 2006Post AML andSFAS 158Adjustments |  
|Prepaid pension costs                |  | $                                                    | 2,197 |               | $ | (2,197 | )                  |  | $                                                | 0 |  | $ | 0      |    
|Pension liabilities                  |  | $                                                    | 0     |               | $ | (8,252 | )                  |  | $                                                | 0 |  | $ | (8,252 | )  
|Accumulated other comprehensive loss |  | $                                                    | 0     |               | $ | 10,448 |                    |  | $                                                | 0 |  | $ | 10,448 | (1)



|(1) | The above amount represents unrecognized actuarial losses yet to be recognized in the statement of financial position.
|--- | ----------------------------------------------------------------------------------------------------------------------



61



---

OMEGA PROTEIN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Amounts listed as recognized actuarial loss for 2008 and 2007 and minimum pension liability
adjustments for 2006 under the caption Comprehensive (Loss) Income on the Consolidated Statements of Stockholders Equity of ($2.8) million, $0.3 million and $0.7 million for 2008, 2007 and 2006, respectively, represent the change,
net of tax, in the portion of the additional pension liability recorded under Accumulated Other Comprehensive Loss on the Consolidated Balance Sheet. During 2009, the Company expects total net periodic benefit cost to be approximately
$1.7 million. The amounts in accumulated other comprehensive loss that are expected to be recognized as a component of net periodic benefit cost during the 2009 year are as follows (in thousands):



|                          |  |   |      
|------------------------- |  | - | -----
|Net Actuarial Loss (Gain) |  | $ | 1,225
|Prior Service Cost        |  | $ | 0    

The Companys funding policy is to make contributions as required by applicable regulations.
The Company uses a December 31 measurement date for its pension plan. The accumulated benefit obligation for the pension plan was $24.1 million and $26.0 million at December 31, 2008 and 2007, respectively.

The following tables set forth the benefit obligations, fair value of plan assets, and the funded status of the Companys pension plan, amounts
recognized in the Companys financial statements, and the principal weighted average assumptions used:



|                                                                                               |  |                          |        |   |      |   |        |  
|---------------------------------------------------------------------------------------------- |  | ------------------------ | ------ | - | ---- | - | ------ | -
|                                                                                               |  | Years Ended December 31, |       
|                                                                                               |  | 2008                     |        |   | 2007 |  
|                                                                                               |  | (in thousands)           |       
|Accumulated Benefit Obligations                                                                |  | $                        | 24,062 |   |      | $ | 25,960 |  
|                                                                                               |  |                         
|Change in Benefit Obligation                                                                   |  |                          |        |   |      |   |        |  
|Benefit Obligation at beginning of year                                                        |  | $                        | 25,960 |   |      | $ | 26,735 |  
|Service Cost                                                                                   |  |                          |       |   |      |   |       |  
|Interest Cost                                                                                  |  |                          | 1,506  |   |      |   | 1,503  |  
|Plan Amendments                                                                                |  |                          |       |   |      |   |       |  
|Actuarial (Gain) / Loss                                                                        |  |                          | (1,546 | ) |      |   | (551   | )
|Benefits Paid                                                                                  |  |                          | (1,858 | ) |      |   | (1,727 | )
|                                                                                               |  |                          |        |   |      |   |        |  
|Benefit Obligation at end of year                                                              |  | $                        | 24,062 |   |      | $ | 25,960 |  
|                                                                                               |  |                          |        |   |      |   |        |  
|Change in Plan Assets                                                                          |  |                          |        |   |      |   |        |  
|Plan Assets at Fair Value at beginning of year                                                 |  | $                        | 20,212 |   |      | $ | 18,483 |  
|Actual Return (loss) on Plan Assets                                                            |  |                          | (5,025 | ) |      |   | 769    |  
|Contributions                                                                                  |  |                          | 1,472  |   |      |   | 2,686  |  
|Benefits Paid                                                                                  |  |                          | (1,858 | ) |      |   | (1,727 | )
|                                                                                               |  |                          |        |   |      |   |        |  
|Plan Assets at Fair Value at end of year                                                       |  | $                        | 14,801 |   |      | $ | 20,211 |  
|                                                                                               |  |                          |        |   |      |   |        |  
|Funded Status of the Plan                                                                      |  | $                        | (9,261 | ) |      | $ | (5,749 | )
|                                                                                               |  |                         
|Additional Amounts Recognized in the Statement of Financial Position:                          |  |                          |        |   |      |   |        |  
|Noncurrent Liabilities                                                                         |  | $                        | (9,261 | ) |      | $ | (5,749 | )
|                                                                                               |  |                         
|Amounts Recognized in Accumulated Other Comprehensive Income:                                  |  |                          |        |   |      |   |        |  
|Net Actuarial Loss                                                                             |  | $                        | 14,240 |   |      | $ | 9,930  |  
|                                                                                               |  |                         
|Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income: |  |                          |        |   |      |   |        |  
|Net Actuarial Loss                                                                             |  | $                        | 5,085  |   |      | $ | 296    |  
|Reversal of Amortization Item:                                                                 |  |                          |        |   |      |   |        |  
|Net Actuarial Gain                                                                             |  |                          | (775   | ) |      |   | (814   | )
|                                                                                               |  |                          |        |   |      |   |        |  
|Total Recognized in Other Comprehensive Income                                                 |  | $                        | 4,310  |   |      | $ | (518   | )
|                                                                                               |  |                          |        |   |      |   |        |  



62



---

OMEGA PROTEIN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The Company, in consultations with its actuarial firm, employs a building block approach in
determining the assumed long-term rate of return for plan assets. The Company reviews historical market data and long-term historical relationships between equities and fixed income in accordance with the widely-accepted capital market principle
that assets with higher volatility generally generate greater returns over the long run. The Company also evaluates current market factors such as inflation and interest rates before it determines long-term capital market assumptions. After taking
into account diversification of asset classes and the need to periodically re-balance asset classes, the Company establishes the assumed long-term portfolio rate of return by a building block approach. The Company also reviews peer data and
historical returns to check its long-term rate of return for reasonability and appropriateness.

A change in the assumed discount rate
creates a deferred actuarial gain or loss. Generally, when the assumed discount rate decreases compared to the prior measurement date, a deferred actuarial loss is created. When the assumed discount rate increases compared to the prior measurement
date, a deferred actuarial gain is created. Actuarial gains and losses also are created when actual results differ from assumptions. The net of the deferred gains and losses are amortized to pension expense over the average service life of the
remaining plan participants, when it exceeds certain thresholds defined in SFAS No. 87. This approach to amortization of gains and losses has the effect of reducing the volatility of pension expense attributable to investment returns and
liability experience. Over time, it is not expected to reduce or increase the pension expense relative to an approach that immediately recognizes losses and gains.

As a result of the annual review of assumptions, the Companys 2009 expected return on plan assets decreased to 7.1% and the discount rate increased from 6.00% to 6.25%. The discount rate selected by the Company
is consistent with general movements in interest rates. Additionally, the Company performed a yield curve analysis which concluded that when the Hewitt Above Median Yield Curve is applied to the Plan, it produces a discount rate of 6.29%. Given that
Moodys Aa Corporate Bond rate was 5.62% as of December 31, 2008, the selected discount rate falls between Moodys Aa and the yield curve analysis.



|                                                                         |  |                          |   |  |                          |   |  |      |  
|------------------------------------------------------------------------ |  | ------------------------ | - |  | ------------------------ | - |  | ---- | -
|                                                                         |  |                          |   |  | Years Ended December 31, |  
|                                                                         |  |                          |   |  | 2008                     |   |  | 2007 |  
|Assumptions                                                              |  |                          |   |  |                          |   |  |      |  
|                                                                         |  |                          |  
|Weighted average assumptions used to determine benefit obligations       |  |                          |   |  |                          |   |  |      |  
|Discount Rate                                                            |  |                          |   |  | 6.25                     | % |  | 6.00 | %
|Long-Term Rate of Return                                                 |  |                          |   |  | 7.90                     | % |  | 8.50 | %
|Salary Scale up to age 50                                                |  |                          |   |  | N/A                      |   |  | N/A  |  
|Salary Scale over age 50                                                 |  |                          |   |  | N/A                      |   |  | N/A  |  
|                                                                         | 
|                                                                         |  | Years Ended December 31, |  
|                                                                         |  | 2008                     |   |  | 2007                     |   |  | 2006 |  
|Weighted average assumptions used to determine net periodic benefit cost |  |                          |   |  |                          |   |  |      |  
|Discount Rate                                                            |  | 6.00                     | % |  | 5.80                     | % |  | 5.50 | %
|Long-Term Rate of Return                                                 |  | 7.90                     | % |  | 8.50                     | % |  | 8.50 | %
|Salary Scale up to age 50                                                |  | N/A                      |   |  | N/A                      |   |  | N/A  |  
|Salary Scale over age 50                                                 |  | N/A                      |   |  | N/A                      |   |  | N/A  |  



63



---

OMEGA PROTEIN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Components of net periodic benefit cost:



|                                                     |  |                          |        |   |      |   |        |      |  |   |        |  
|---------------------------------------------------- |  | ------------------------ | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                                     |  | Years Ended December 31, |       
|                                                     |  | 2008                     |        |   | 2007 |   |        | 2006 | 
|                                                     |  | (in thousands)           |       
|Service cost                                         |  | $                        |       |   |      | $ |       |      |  | $ |       |  
|Interest cost                                        |  |                          | 1,506  |   |      |   | 1,503  |      |  |   | 1,434  |  
|Expected return on plan assets                       |  |                          | (1,607 | ) |      |   | (1,616 | )    |  |   | (1,371 | )
|Amortization of transition asset and other deferrals |  |                          | 775    |   |      |   | 814    |      |  |   | 906    |  
|                                                     |  |                          |        |   |      |   |        |      |  |   |        |  
|Net periodic pension cost                            |  | $                        | 674    |   |      | $ | 701    |      |  | $ | 969    |  
|                                                     |  |                          |        |   |      |   |        |      |  |   |        |  

Plan Assets

The Companys pension plan weighted-average asset allocations at December 31, 2008 and 2007, by asset category are as follows:



|                |  |                             |   |  |        |   |  |        |   |  |        |  
|--------------- |  | --------------------------- | - |  | ------ | - |  | ------ | - |  | ------ | -
|                |  | Plan Assets at December 31, |  
|Asset Category  |  | 2008                        |   |  | 2007   |  
|                |  | Actual                      |   |  | Target |   |  | Actual |   |  | Target |  
|Equity          |  | 51.7                        | % |  | 60.0   | % |  | 61.3   | % |  | 60.0   | %
|Debt securities |  | 48.6                        |   |  | 40.0   |   |  | 37.9   |   |  | 40.0   |  
|Real estate     |  | 0.0                         |   |  |       |   |  | 0.0    |   |  |       |  
|Other           |  | (0.3                        | ) |  |       |   |  | 0.8    |   |  |       |  
|                |  |                             |   |  |        |   |  |        |   |  |        |  
|Total           |  | 100.0                       | % |  | 100.0  | % |  | 100.0  | % |  | 100.0  | %
|                |  |                             |   |  |        |   |  |        |   |  |        |  

Plan assets are well diversified and managed by independent investment advisors, who are in turn
overseen and monitored by an investment advisor engaged by the Investment Committee. The Plans investment objective is long-term capital appreciation with a prudent level of risk. The Plans Investment Committee periodically completes
asset performance studies with the goal of maintaining an optimal asset allocation in order to meet future Plan benefit obligations. The investment objectives of the Plan assets have a long-term focus and the Plan is invested in accordance with
prudent investment practices that emphasize long-term investment fundamentals.

Equity securities do not include any of the Companys
common stock at December 31, 2008 and 2007, respectively.

Projected Benefit Payments for the years ending December 31, 2009  2018



|               |  |        |  |        |  |        |  |        |  |            
|-------------- |  | ------ |  | ------ |  | ------ |  | ------ |  | -----------
|(in thousands)
|2009           |  | 2010   |  | 2011   |  | 2012   |  | 2013   |  | 2014  2018
|$1,726         |  | $1,738 |  | $1,741 |  | $1,741 |  | $1,755 |  | $8,854     

Expected Contributions during 2009

The Company expects to make contributions of $0.6 million to the pension plan in 2009.



64



---

OMEGA PROTEIN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Stock Option Plans

On January 26, 1998, the 1998 Long-Term Incentive Plan of the Company (the 1998 Incentive Plan) was approved by the Companys Board. The 1998 Incentive Plan provided for the grant of any or all
of the following types of awards: stock options, stock appreciation rights, stock awards and cash awards. These options generally vest ratably over three years from the date of grant and expire ten years from the date of grant.

On January 26, 1998, the Non-Management Director Stock Option Plan (the Directors Plan) was approved by the Board. The Directors Plan
provided that the initial Chairman of the Board be granted options to purchase 568,200 shares of the Common Stock and each other initial non-employee director of the Company will be granted options to purchase 14,200 shares of Common Stock at a
price determined by the Board.

On June 27, 2000, the 1998 Incentive Plan and the Director Plan were amended and restated in their
entirety and renamed the 2000 Long-Term Incentive Plan (2000 Incentive Plan), and the 2000 Incentive Plan was approved by the Companys stockholders. Under the 2000 Incentive Plan, the Company is authorized to issue shares of Common
Stock pursuant to Awards granted in various forms, including incentive stock options (intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended), non-qualified stock options, and other similar
stock-based Awards. The substantive changes from the 1998 Incentive Plan and the Directors Plan in the amendment and restatement of the 2000 Incentive Plan were (a) the 2000 Incentive Plan allows annual option grant awards of 10,000 shares to
each non-employee Director and (b) the 2000 Incentive Plan allows for the aggregate number of option shares available for issuance under the plan to equal 25% of the number of shares of common stock outstanding at any time with an absolute
maximum of no more than 15 million shares available for awards at any time. Reference is made to the Companys 2000 proxy statement for a complete summary of all the differences among the three plans.

On April 13, 2006, the Board of Directors approved the establishment of the Omega Protein Corporation 2006 Incentive Plan (2006 Incentive
Plan) which was subsequently approved by the Companys stockholders and became effective on June 7, 2006. Reference is made to the Companys 2006 proxy statement for a complete summary of the Plans.

The Company granted stock options in 2006, 2007 and 2008 under the 2000 Incentive Plan and 2006 Incentive Plan in the form of non-qualified stock
options. See Stock-Based Compensation regarding the method the Company utilizes to record compensation expense for employee stock options. The Company establishes the exercise price based on the fair market value of the Companys
stock (as defined in the relevant plan) at the date of grant. Each quarter, the Company reports the potential dilutive impact of stock option in its diluted earnings per common share using the treasury-stock method. Out-of-the-money stock options
(i.e., the average stock price during the period is below the strike price of the stock option) are not included in diluted earnings per common share.

Stock-Based Compensation

Effective January 1, 2006, the Company adopted SFAS No. 123R, Share-Based
Payment, using the modified prospective application transition method. Under this transition method, compensation cost in 2006 includes the portion vesting in the period for (1) all share-based payments granted prior to, but not vested as
of January 1, 2006, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123 and (2) all share-based payments granted subsequent to January 1, 2006, based on the grant date fair
value estimated in accordance with the provisions of SFAS No. 123R. Under the modified prospective application transition method, no cumulative effect of change in accounting principle charge is required for the Company, and results for prior
periods have not been restated. SFAS No. 123R also requires excess tax benefits be reported as a financing cash inflow rather than an operating cash inflow.



65



---

OMEGA PROTEIN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Net earnings for the years ended December 31, 2008, 2007 and 2006 includes approximately
$569,000, $480,000 and $166,000 ($375,000, $316,000 and $109,000 after tax) of share-based compensation cost, which are included in selling, general and administrative expenses in the statement of operations for the years ended December 31,
2008, 2007 and 2006, respectively. As of December 31, 2008, there was approximately $533,000 of unrecognized compensation cost related to non-vested share-based compensation that is expected to be recognized over a weighted-average period of
2.1 years. Based on grants as of December 31, 2008, total before tax share-based compensation cost for fiscal year 2009 is expected to be approximately $300,000.

The following table shows options granted and outstanding under the 2006 Long-Term Incentive Plan to the Companys independent directors and employees for the year ended December 31, 2008:



|                     |  |                             |       |                                                       |        |                 |                             
|-------------------- |  | --------------------------- | ----- | ----------------------------------------------------- | ------ | --------------- | ----------------------------
|Date of Option Grant |  | Exercise Priceon Grant Date |       | Options Granted andOutstandingas of December 31, 2008 |        | Date of
Vesting
|January 2, 2008      |  | $                           | 9.30  |                                                       | 4,000  |                 | January 2, 2009  2011 (1)  
|January 29, 2008     |  | $                           | 8.13  |                                                       | 5,000  |                 | January 29, 2009  2011 (1) 
|May 27, 2008         |  | $                           | 13.41 |                                                       | 50,000 |                 | November 27, 2008           
|June 12, 2008        |  | $                           | 14.18 |                                                       | 30,000 |                 | June 12, 2009  2011 (1)    
|June 20, 2008        |  | $                           | 14.69 |                                                       | 5,000  |                 | June 20, 2009  2011 (1)    
|July 29, 2008        |  | $                           | 15.88 |                                                       | 3,000  |                 | July 29, 2009  2011 (1)    
|August 22, 2008      |  | $                           | 13.74 |                                                       | 5,000  |                 | August 22, 2009  2011 (1)  
|September 8, 2008    |  | $                           | 13.27 |                                                       | 5,000  |                 | September 8, 2009  2011 (1)
|October 10, 2008     |  | $                           | 6.00  |                                                       | 10,000 |                 | October 10, 2009  2011 (1) 
|October 23, 2008     |  | $                           | 6.89  |                                                       | 6,000  |                 | October 23, 2009  2011 (1) 
|November 19, 2008    |  | $                           | 4.15  |                                                       | 20,000 |                 | November 19, 2009  2011 (1)



|(1) | Options to employees vest in equal one-third portions in 2009, 2010, and 2011.
|--- | ------------------------------------------------------------------------------

There were 1,258,394 stock option exercises during the year ended December 31, 2008. A summary of option activity under the plans for years 2008, 2007 and 2006 is as follows (options in thousands):



|                                               |  |                                  |   |      |                               |       |                                  |        |   |                               |   |                                  |  |       |                               |  |   |     
|---------------------------------------------- |  | -------------------------------- | - | ---- | ----------------------------- | ----- | -------------------------------- | ------ | - | ----------------------------- | - | -------------------------------- |  | ----- | ----------------------------- |  | - | ----
|                                               |  | 2008                             |   | 2007 |                               | 2006 
|                                               |  | Number ofSharesUnderlyingOptions |   |      | WeightedAverageExercisePrices |       | Number ofSharesUnderlyingOptions |        |   | WeightedAverageExercisePrices |   | Number ofSharesUnderlyingOptions |  |       | WeightedAverageExercisePrices
|Outstanding at beginning of year               |  | 2,753                            |   |      | $                             | 9.22  |                                  | 4,502  |   |                               | $ | 7.78                             |  | 4,750 |                               |  | $ | 7.36
|Granted                                        |  | 143                              |   |      | $                             | 11.29 |                                  | 75     |   |                               | $ | 8.85                             |  | 212   |                               |  | $ | 6.90
|Exercised                                      |  | (1,258                           | ) |      | $                             | 7.44  |                                  | (1,239 | ) |                               | $ | 2.34                             |  | (436  | )                             |  | $ | 2.88
|Expired                                        |  | (1,023                           | ) |      | $                             | 12.89 |                                  | (568   | ) |                               | $ | 12.75                            |  |      |                               |  | $ |    
|Forfeited                                      |  | (10                              | ) |      | $                             | 6.29  |                                  | (17    | ) |                               | $ | 10.03                            |  | (24   | )                             |  | $ | 5.67
|                                               |  |                                  |   |      |                               |       |                                  |        |   |                               |   |                                  |  |       |                               |  |   |     
|Outstanding at end of year                     |  | 605                              |   |      | $                             | 7.26  |                                  | 2,753  |   |                               | $ | 9.22                             |  | 4,502 |                               |  | $ | 7.78
|                                               |  |                                  |   |      |                               |       |                                  |        |   |                               |   |                                  |  |       |                               |  |   |     
|Exercisable at end of year                     |  | 451                              |   |      | $                             | 6.58  |                                  | 2,629  |   |                               | $ | 9.29                             |  | 4,337 |                               |  | $ | 7.80
|                                               |  |                                  |   |      |                               |       |                                  |        |   |                               |   |                                  |  |       |                               |  |   |     
|Weighted-average fair value of options granted |  |                                  |   |      | $                             | 5.04  |                                  |        |   |                               | $ | 4.92                             |  |       |                               |  | $ | 3.11



66



---

OMEGA PROTEIN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|                                            |  |                                            |      
|------------------------------------------- |  | ------------------------------------------ | -----
|                                            |  | December 31, 2008Aggregate Intrinsic Value
|                                            |  | (in thousands)                            
|Options outstanding as of December 31, 2008 |  | $                                          | 141  
|Options exercisable as of December 31, 2008 |  | $                                          | 141  
|Options exercised during 2008               |  | $                                          | 8,515

The following table further describes the Companys stock options outstanding as of
December 31, 2008.



|                         |  |                                |  |                                           |  |                                 |       |                                |         |                                |   |      
|------------------------ |  | ------------------------------ |  | ----------------------------------------- |  | ------------------------------- | ----- | ------------------------------ | ------- | ------------------------------ | - | -----
|                         |  | Options Outstanding            |  | Options Exercisable                      
|Range of Exercise Prices |  | NumberOutstandingat 12/31/2008 |  | Weighted AverageRemainingContractual Life |  | Weighted AverageExercise Prices |       | NumberExercisableat 12/31/2008 |         | WeightedAverageExercise Prices
|$1.65 to $3.50           |  | 131,382                        |  | 1.6 years                                 |  | $                               | 2.93  |                                | 131,382 |                                | $ | 2.93 
|$3.51 to $4.70           |  | 48,000                         |  | 6.2 years                                 |  | $                               | 4.39  |                                | 28,000  |                                | $ | 4.56 
|$4.71 to $7.55           |  | 188,002                        |  | 7.4 years                                 |  | $                               | 6.62  |                                | 127,836 |                                | $ | 6.40 
|$7.56 to $10.58          |  | 139,884                        |  | 6.7 years                                 |  | $                               | 8.60  |                                | 114,217 |                                | $ | 8.49 
|$10.59 to $15.88         |  | 98,000                         |  | 9.5 years                                 |  | $                               | 13.80 |                                | 50,000  |                                | $ | 13.41
|                         |  |                                |  |                                           |  |                                 |       |                                |         |                                |   |      
|                         |  | 605,268                        |  |                                           |  |                                 |       |                                | 451,435 |                                |   |      
|                         |  |                                |  |                                           |  |                                 |       |                                |         |                                |   |      



|                                          |  |                             |   |  |                                      |     
|----------------------------------------- |  | --------------------------- | - |  | ------------------------------------ | ----
|                                          |  | Year EndedDecember 31, 2008 |   |  | Weighted AverageGrant-DateFair
Value
|Nonvested options as of January 1, 2008   |  | 124,334                     |   |  | $                                    | 3.48
|Granted                                   |  | 143,000                     |   |  | $                                    | 5.04
|Vested                                    |  | (110,166                    | ) |  | $                                    | 4.58
|Forfeited                                 |  | (3,335                      | ) |  | $                                    | 3.34
|                                          |  |                             |   |  |                                      |     
|Nonvested options as of December 31, 2008 |  | 153,833                     |   |  | $                                    | 4.15
|                                          |  |                             |   |  |                                      |     

The fair value of the Companys stock options is the estimated present value at grant date
using the Black-Scholes option pricing model with the following weighted average assumptions for the year ended December 31, 2008, 2007 and 2006: expected dividend yield of 0%, 0% and 0%; expected volatility of 47.24%, 61.16% and 44.83%;
risk-free interest rate of 3.10%, 4.83% and 4.76%; and an expected term of 5 years. The expected dividend yield is based on the Companys annual dividend payout at grant date. Expected volatility is based on the historical volatility of
the Companys stock for a period approximating the expected life. The risk-free interest rate is based on the U.S. treasury yield in effect at the time of grant and has a term equal to the expected life. The expected term of the options
represents the period of time the options are expected to be outstanding.



67



---

OMEGA PROTEIN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



NOTE 13. HURRICANE LOSSES AND INSURANCE RECOVERIES

2008 Hurricane

On September 13, 2008, the
Companys Abbeville and Cameron, Louisiana fish processing facilities were damaged by Hurricane Ike. For the year ended December 31, 2008, the following amounts have been recognized in the Companys statement of operations (in
thousands):



|                                                   |  |   |         |  
|-------------------------------------------------- |  | - | ------- | -
|Damaged fish meal inventory                        |  | $ | 1,360   |  
|Write-off of other materials and supplies          |  |   | 292     |  
|Write-off of unallocated inventory cost pool       |  |   | 5,436   |  
|Involuntary conversion of property and equipment   |  |   | 3,065   |  
|Idle plant costs recognized as period expense      |  |   | 886     |  
|Clean-up costs incurred                            |  |   | 1,012   |  
|Estimated insurance recoveries                     |  |   | (10,018 | )
|                                                   |  |   |         |  
|Estimated losses in excess of insurance recoveries |  | $ | 2,033   |  
|                                                   |  |   |         |  

A substantial portion of the amounts listed above are based upon estimates and assumptions. Actual
amounts, when available, could differ materially from those estimates and changes to those estimates could have a material affect on the Companys future financial statements.

Not included in the amounts listed in the above table are the replacement capital costs of property and equipment, which did not have any book basis and
were destroyed in the hurricane, and the costs of clean up incurred subsequent to December 31, 2008.

2005 Hurricanes

On August 29, 2005, the Companys Moss Point, Mississippi fish processing facility and adjacent shipyard were severely damaged by Hurricane
Katrina. On September 24, 2005, the Companys Cameron, Louisiana and the Abbeville, Louisiana fish processing facilities were also severely damaged by Hurricane Rita. For the years ended December 31, 2008, 2007 and 2006, the following
amounts have been recognized in the Companys statement of operations (in thousands):



|                                                  |  |                          |        |   |      |   |         |      |  |   |      
|------------------------------------------------- |  | ------------------------ | ------ | - | ---- | - | ------- | ---- |  | - | -----
|                                                  |  | Years Ended December 31,
|                                                  |  | 2008                     |        |   | 2007 |   |         | 2006
|Involuntary conversion of property and equipment  |  | $                        |       |   |      | $ |        |      |  | $ | 1,094
|Clean-up costs incurred                           |  |                          |       |   |      |   |        |      |  |   | 454  
|Federal hurricane recovery grant, net             |  |                          | (1,336 | ) |      |   |        |      |  |   |     
|Insurance recoveries, net                         |  |                          |       |   |      |   | (10,669 | )    |  |   |     
|                                                  |  |                          |        |   |      |   |         |      |  |   |      
|(Recoveries) losses relating to natural disasters |  | $                        | (1,336 | ) |      | $ | (10,669 | )    |  | $ | 1,548
|                                                  |  |                          |        |   |      |   |         |      |  |   |      

Not included in the amounts listed in the above table are the replacement capital costs of
property and equipment, which did not have any book basis and were destroyed in the hurricanes.

NOTE 14. COMMITMENTS AND CONTINGENCIES

Operating Lease Payable

The Company has
noncancellable operating leases, primarily for land and building, that expire over 1 to 8 years.



68



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OMEGA PROTEIN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Future minimum payments under non-cancelable operating lease obligations for the five years ending
December 31, 2013 and thereafter are as follows (in thousands):



|       |  |        |  |      |  |      |  |      |  |           
|------ |  | ------ |  | ---- |  | ---- |  | ---- |  | ----------
|2009   |  | 2010   |  | 2011 |  | 2012 |  | 2013 |  | Thereafter
|$1,642 |  | $1,241 |  | $906 |  | $726 |  | $745 |  | $ 1,255   

Rental expense for operating leases was $2.0 million, $2.0 million, and $1.9 million in 2008,
2007, and 2006, respectively.

Contract Commitments

As of December 31, 2008, the Company has entered into purchase commitments of approximately $16.5 million to purchase energy for a portion of the 2009 fishing season.



|                        |  |           |  |                |       |                  |   |           
|----------------------- |  | --------- |  | -------------- | ----- | ---------------- | - | ----------
|                        |  | Volume    |  | Contract Price |       | Total Commitment
|Natural gas (per MMBTU) |  | 504,630   |  | $              | 8.44  |                  | $ | 4,257,000 
|Bunker C (per bbl)      |  | 40,000    |  |                | 71.61 |                  |   | 2,864,000 
|Diesel (per gallon)     |  | 3,121,577 |  |                | 2.99  |                  |   | 9,345,000 
|                        |  |           |  |                |       |                  |   |           
|Total                   |  |           |  |                |       |                  | $ | 16,466,000
|                        |  |           |  |                |       |                  |   |           

Litigation

The Company is defending various claims and litigation arising from its operations which arise in the ordinary course of the Companys business. In the opinion of management, and based on advice of legal counsel,
it is believed that any existing litigation involving the Company will not materially affect its financial condition, cash flows or future results of operations.

Insurance

The Company carries insurance with coverages and coverage limits that it believes to be appropriate for
the business. Although there can be no assurance that such insurance is sufficient to protect the Company against all contingencies, management believes that its insurance protection is reasonable in view of the nature and scope of the
Companys operations. Should the Companys insurers become insolvent, the Company is responsible for payment of all outstanding claims associated with the insurers policies.

Environmental Matters

The Company is subject
to various possible claims and lawsuits regarding environmental matters. Management believes that costs, if any, related to these matters will not have a material adverse effect on the results of operations, cash flows or financial position of the
Company.

Indemnification

The
Companys Articles of Incorporation and By-Laws limit the liability of the Companys officers and directors to the fullest extent permitted by Nevada law. Nevada provides that directors of Nevada corporations may be relieved of monetary
liabilities for breach of their fiduciary duties as directors, except under certain circumstances, including (i) acts or omissions which involve intentional misconduct, fraud or a knowing violation of law or (ii) the willful or grossly
negligent payment of unlawful distributions.



69



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OMEGA PROTEIN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The Companys Articles of Incorporation and By-Laws generally require the Company to indemnify
its directors and officers to the fullest extent permitted by Nevada law. The Companys Articles of Incorporation and By-Laws also require the Company to advance expenses to its directors and its officers to the fullest extent permitted by
Nevada law upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it should be ultimately determined that they are not entitled to indemnification by the Company. The Company also has entered into
indemnification agreements with all of its directors and certain of its officers which provides for the indemnification and advancement of expenses by the Company. The Company also maintains director and officer liability insurance with respect to
liabilities arising out of certain matters, including matters arising under the securities laws. This insurance is subject to limitations, conditions and deductibles set forth in the respective insurance policy.

NOTE 15. INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION

The Company operates within one industry segment, menhaden fishing, for the production and sale of fish meal, fish solubles and fish oil. Export sales of fish oil and fish meal were approximately $81 million, $66 million, and $56 million in
2008, 2007, and 2006, respectively. Such sales were made primarily to Asian, European and Canadian markets. In 2008, 2007 and 2006, sales to the largest customer was approximately $20.4 million, $12.6 million and $12.3 million, respectively. This
customer was the same in 2006 and 2007 but differed in 2008.

The following table shows the geographical distribution of revenues (in
thousands) based on location of customers:



|                        |  |                          |         |         |       |   |          |      |         |  |       |          |  |         |         |  |       |  
|----------------------- |  | ------------------------ | ------- | ------- | ----- | - | -------- | ---- | ------- |  | ----- | -------- |  | ------- | ------- |  | ----- | -
|                        |  | Years Ended December 31, |        
|                        |  | 2008                     |         |         | 2007  |   |          | 2006 |        
|                        |  | Revenues                 |         | Percent |       |   | Revenues |      | Percent |  |       | Revenues |  | Percent |        
|U.S.                    |  | $                        | 96,335  |         | 54.3  | % |          | $    | 91,461  |  | 58.2  | %        |  | $       | 83,341  |  | 59.6  | %
|Mexico                  |  |                          | 4,790   |         | 2.7   |   |          |      | 8,643   |  | 5.5   |          |  |         | 8,530   |  | 6.1   |  
|Europe                  |  |                          | 26,257  |         | 14.8  |   |          |      | 12,258  |  | 7.8   |          |  |         | 14,403  |  | 10.3  |  
|Canada                  |  |                          | 12,951  |         | 7.3   |   |          |      | 11,315  |  | 7.2   |          |  |         | 9,928   |  | 7.1   |  
|Asia                    |  |                          | 26,789  |         | 15.1  |   |          |      | 24,358  |  | 15.5  |          |  |         | 16,500  |  | 11.8  |  
|South & Central America |  |                          | 10,290  |         | 5.8   |   |          |      | 9,114   |  | 5.8   |          |  |         | 7,132   |  | 5.1   |  
|                        |  |                          |         |         |       |   |          |      |         |  |       |          |  |         |         |  |       |  
|Total                   |  | $                        | 177,412 |         | 100.0 | % |          | $    | 157,149 |  | 100.0 | %        |  | $       | 139,834 |  | 100.0 | %
|                        |  |                          |         |         |       |   |          |      |         |  |       |          |  |         |         |  |       |  

NOTE 16. DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS

The following disclosures of the estimated fair value of financial instruments are made in accordance with the requirements of SFAS No. 107,
Disclosure About Fair Value of Financial Instruments. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies and are described in the following paragraphs.

Fair value estimates are subject to certain inherent limitations. Estimates of fair value are made at a specific point in time, based on
relevant market information and information about the financial instrument. The estimated fair values of financial instruments presented below are not necessarily indicative of amounts the Company might realize in actual market transactions.
Estimates of fair value are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.



70



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OMEGA PROTEIN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The carrying amounts of cash and cash equivalents, accounts receivables, accounts payable, and
accrued expenses approximate fair value because of the short maturity of these items. The carrying amounts of notes payable outstanding under the Companys Term Loan approximate fair value because the interest rates on these instruments change
with market interest rates. At December 31, 2008, the Company had no borrowings under its Revolving Credit Facility except for $2.8 million in letters of credit support obligations.

The carrying values and respective fair market values of the Companys long-term debt are presented below (in thousands). The fair value of the
Companys long-term debt is estimated based on the quoted market prices available to the Company for issuance of similar debt with similar terms at year end 2008.



|                            |  |                         |        |      |   |       
|--------------------------- |  | ----------------------- | ------ | ---- | - | ------
|                            |  | Years EndedDecember 31,
|                            |  | 2008                    |        | 2007
|Long-term Debt:             |  |                         |        |      |   |       
|Carrying Value              |  | $                       | 59,009 |      | $ | 65,259
|Estimated Fair Market Value |  | $                       | 58,930 |      | $ | 66,732

Effective January 1, 2008, the Company adopted SFAS 157 as discussed in Note 1, which, among
other things, requires enhanced disclosures about assets and liabilities carried at fair value.

The standard defines fair value, provides
a consistent framework for measuring fair value under accounting principles generally accepted in the United States and expands fair value financial statement disclosure requirements. SFAS 157 does not require any new fair value measurements. It
only applies to accounting pronouncements that already require or permit fair value measures, except for standards that relate to share-based payments (SFAS 123R Share Based Payment) and to lease accounting (SFAS 13).

SFAS 157s valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent
sources, while unobservable inputs reflect our market assumptions. The standard classifies these inputs into the following hierarchy:

Level
1 InputsQuoted prices for identical instruments in active markets.

Level 2 InputsQuoted prices for similar instruments in
active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 InputsInstruments with primarily unobservable value drivers.

The following table sets forth by level within the fair value hierarchy the Companys financial liabilities that were accounted for at fair value on a recurring basis as of December 31, 2008. As required by
SFAS 157, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Companys assessment of the significance of a particular input to the fair
value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels.



|                             |  |                               |   |                         |   |         |  |   |         |  |   |        
|---------------------------- |  | ----------------------------- | - | ----------------------- | - | ------- |  | - | ------- |  | - | -------
|                             |  | December 31, 2008            
|                             |  | Fair Value Measurements Using |   | LiabilitiesatFair Value
|                             |  | Level 1                       |   | Level 2                 |   | Level 3 | 
|Liabilities (in thousands)   |  |                               |   |                         |   |         |  |   |         |  |   |        
|Interest rate swap liability |  | $                             |  |                         | $ |        |  | $ | (1,858) |  | $ | (1,858)



71



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OMEGA PROTEIN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The determination of the fair values above incorporates various factors required under SFAS 157.
These factors include not only the credit standing of the counterparties involved and the impact of credit enhancements (such as cash deposits, letters of credit and priority interests), but also the impact of the Companys nonperformance risk
on its liabilities.

The fair value of the interest rate swap liability is determined using an income valuation model based on the present
value of expected future cash flows as determined by comparing the Companys rate to the Euro-dollar futures curve. This model includes inputs or significant value drivers which might not be observable in or corroborated by the market. When
such inputs have a significant impact on the measurement of fair value, the instrument is categorized in Level 3.

The following table
provides a reconciliation of all assets and (liabilities) measured at fair value on a recurring basis which use Level 3 or significant unobservable inputs or significant value drivers for the year ended December 31, 2008 (in thousands):



|                                                                            |  |                                                                              |        |  
|--------------------------------------------------------------------------- |  | ---------------------------------------------------------------------------- | ------ | -
|                                                                            |  | Fair Value MeasurementsUsing SignificantUnobservable Inputs (Level 3 Inputs) |       
|                                                                            |  | Year EndedDecember 31, 2008                                                  |       
|Beginning Balance                                                           |  | $                                                                            | (670   | )
|Net gain reclassified into earnings related to natural gas call options     |  |                                                                              | 29     |  
|Net change associated with current period natural gas call options activity |  |                                                                              | (29    | )
|Net loss reclassified into earnings related to swap transactions            |  |                                                                              | (302   | )
|Net change associated with current period swap transactions                 |  |                                                                              | (886   | )
|                                                                            |  |                                                                              |        |  
|Ending Balance                                                              |  | $                                                                            | (1,858 | )
|                                                                            |  |                                                                              |        |  

NOTE 17. QUARTERLY FINANCIAL DATA (UNAUDITED)

Seasonal and Quarterly Results

The following table presents certain unaudited operating
results for each of the Companys preceding eight quarters. The Company believes that the following information includes all adjustments (consisting only of normal recurring adjustments) that the Company considers necessary for a fair
presentation, in accordance with generally accepted accounting principles. The operating results for any interim period are not necessarily indicative of results for any other period.



|                        |  |                                          |        |              |   |                   |  |                  |        |  |   |       
|----------------------- |  | ---------------------------------------- | ------ | ------------ | - | ----------------- |  | ---------------- | ------ |  | - | ------
|                        |  | Quarters Ended 2008                     
|                        |  | March 31,2008                            |        | June 30,2008 |   | September 30,2008 |  | December 31,2008
|                        |  | (in thousands, except per share amounts)
|Revenues (1)            |  | $                                        | 36,109 |              | $ | 47,128            |  | $                | 54,507 |  | $ | 39,668
|Gross profit (1)        |  |                                          | 8,258  |              |   | 15,926            |  |                  | 10,584 |  |   | 8,257 
|Operating income (1)    |  |                                          | 4,048  |              |   | 11,638            |  |                  | 5,320  |  |   | 2,537 
|Net income (1)          |  |                                          | 1,912  |              |   | 6,710             |  |                  | 3,114  |  |   | 840   
|Earnings per share (2): |  |                                          |        |              |   |                   |  |                  |        |  |   |       
|Basic                   |  |                                          | 0.11   |              |   | 0.37              |  |                  | 0.17   |  |   | 0.04  
|Diluted                 |  |                                          | 0.11   |              |   | 0.36              |  |                  | 0.16   |  |   | 0.04  



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OMEGA PROTEIN CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|                               |  |                                          |        |   |              |   |                   |  |                  |        |  |   |       
|------------------------------ |  | ---------------------------------------- | ------ | - | ------------ | - | ----------------- |  | ---------------- | ------ |  | - | ------
|                               |  | Quarters Ended 2007                     
|                               |  | March 31,2007                            |        |   | June 30,2007 |   | September 30,2007 |  | December 31,2007
|                               |  | (in thousands, except per share amounts)
|Revenues (1)                   |  | $                                        | 31,129 |   |              | $ | 37,094            |  | $                | 44,590 |  | $ | 44,336
|Gross profit (1)               |  |                                          | 6,263  |   |              |   | 8,795             |  |                  | 10,950 |  |   | 8,686 
|Operating income (1)           |  |                                          | 1,218  |   |              |   | 5,090             |  |                  | 12,312 |  |   | 8,820 
|Net income (loss) (1)          |  |                                          | (2,312 | ) |              |   | 2,515             |  |                  | 7,153  |  |   | 4,783 
|Earnings (loss) per share (2): |  |                                          |        |   |              |   |                   |  |                  |        |  |   |       
|Basic                          |  |                                          | (0.14  | ) |              |   | 0.15              |  |                  | 0.42   |  |   | 0.27  
|Diluted                        |  |                                          | (0.14  | ) |              |   | 0.14              |  |                  | 0.41   |  |   | 0.27  



|(1) | Revenues, gross profit, operating income, and net income (loss) are rounded to thousands each quarter. Therefore, the sum of the quarterly amounts may not equal the annual amounts
reported.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Earnings per share are computed independently for each quarter and the full year based upon respective average shares outstanding. Therefore, the sum of the quarterly earnings per
share amounts may not equal the annual amounts reported.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

The Companys menhaden harvesting and processing business is
seasonal in nature. The Company generally has higher sales during the menhaden harvesting season (which includes the second and third quarter of each year) due to increased product availability, but prices during the fishing season tend to be lower
than during the off-season. As a result, the Companys quarterly operating results have fluctuated in the past and may fluctuate in the future. In addition, from time to time the Companys defers sales of inventory based on worldwide
prices for competing products that affect prices for the Companys products which may affect comparable period comparisons.



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OMEGA PROTEIN CORPORATION



|Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
|------- | -------------------------------------------------------------------------------------

None.



|Item 9A. | Controls and Procedures
|-------- | -----------------------

(a)
Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, the Company conducted an evaluation of
the effectiveness of its disclosure controls and procedures, as that phrase is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934. The evaluation was carried out under the supervision and with the
participation of management, including the Companys Chief Executive Office (CEO) and Chief Financial Officer (CFO).

Based on and as of the date of that evaluation, the Companys CEO and CFO have concluded that (i) the Companys disclosure controls and procedures are designed to ensure that information required to be disclosed by the
Company in the reports that the Company files or submits under the Securities Exchange Act of 1934, is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms, and that such information is
accumulated and communicated to the Companys management, including the CEO and CFO, as appropriate to allow timely decisions regarding required disclosure, and (ii) that the Companys disclosure controls and procedures are effective.

Notwithstanding the foregoing, there can be no assurance that the Companys disclosure controls and procedures will detect or uncover
all failures of persons within the Company and its consolidated subsidiaries to disclose material information otherwise required to be set forth in the Companys periodic reports. There are inherent limitations to the effectiveness of any
system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable,
not absolute, assurance of achieving their control objectives.

(b) Managements Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting, and for performing an
assessment of the effectiveness of internal control over financial reporting as of December 31, 2008. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Companys system of internal control over financial reporting includes those policies and procedures
that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors
of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Companys assets that could have a material affect on the financial statements.

Management performed an assessment of the effectiveness of the Companys internal control over financial reporting as of
December 31, 2008 based upon criteria in a report entitled Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that assessment and
those criteria, management concluded that the Companys internal control over financial reporting was effective as of December 31, 2008.



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OMEGA PROTEIN CORPORATION



The effectiveness of the Companys internal control over financial reporting as of
December 31, 2008 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report which appears herein. (See Item 8. Financial Statements and Supplementary Data.)

(c) Changes in Internal Control Over Financial Reporting

There were no changes in the Companys internal control over financial reporting during the three-month period ended December 31, 2008 that have materially affected, or are reasonably likely to materially
affect, the Companys internal control over financial reporting.



|Item 9B. | Other Information.
|-------- | ------------------

In July
2008, the Company submitted its Section 303A Annual Written Affirmation to the New York Stock Exchange for the Companys fiscal year ended December 31, 2007 and had no qualifications to that Certification.

The Certifications of the Companys Chief Executive Officer and Chief Financial Officer for the fiscal year ended December 31, 2008 required
under Section 302 of the Sarbanes-Oxley Act of 2002 are attached as exhibits to this Annual Report on Form 10-K.

PART III



|Item 10. | Directors, Executive Officers and Corporate Governance.
|-------- | -------------------------------------------------------

Pursuant to General Instruction G of Form 10-K, the information called for by Item 10 of Part III of Form 10-K is incorporated by reference to the information set forth in the Companys definitive proxy
statement relating to its 2009 Annual Meeting of Stockholders (the 2009 Proxy Statement) to be filed pursuant to Regulation 14A under the Exchange Act, in response to Items 401, 405 and 407(c)(3), (d)(4) and (d)(5) of Regulation S-K
under the Securities Act of 1933 and the Exchange Act (Regulation S-K). Reference is also made to the information appearing in Item 1 of Part I of this Annual Report on Form 10-K under the caption Business and
PropertiesExecutive Officers of the Registrant.

The Company adopted a Code of Business Conduct and Ethics, which applies to
all employees, officers and directors of the Company. The Code meets the requirements of a code of ethics as defined by Item 406 of Regulation S-K, and applies to the Companys Chief Executive Officer, Chief Financial Officer
(who is both the Companys principal financial and principal accounting officer), Controller as well as all other employees, as indicated above. The Code of Business Conduct and Ethics also meets the requirements of a code of business conduct
and ethics under NYSE listing standards.

In addition to the above Code, the Company has adopted a Code of Ethics for Financial
Professionals which applies to the Chief Executive Officer, Chief Financial Officer, Controller and all other Company professionals worldwide serving in a finance, accounting, treasury, tax or investor relations role.

Both the Code of Business Conduct and Ethics and the Code of Ethics for Financial Professionals are posted on the Companys website at
www.omegaproteininc.com. The Company will provide a copy of the Code of Business Conduct and Ethics and Code of Ethics for Financial Professionals to any person without charge upon request. Inquires should be sent to Omega Protein Corporation, 2105
City West Blvd, Suite 500, Houston, Texas 77042, Attn: Corporate Secretary. The Company intends to disclose any amendments to the Codes, as well as any waivers to the Codes for executive officers or directors, on its website.

None of these codes, nor the Companys website, is incorporated by reference in this report or constitutes part of this report.



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OMEGA PROTEIN CORPORATION



|Item 11. | Executive Compensation.
|-------- | -----------------------

Pursuant to General Instruction G of Form 10-K, the information called for by Item 11 of Part III of Form 10-K is incorporated by reference to the information set forth in the 2009 Proxy Statement in response to Items 402 and 407(a)(4)
and (a)(5) of Regulation S-K.



|Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
|-------- | -----------------------------------------------------------------------------------------------

Pursuant to General Instruction G of Form 10-K, the information called for by Item 12 of Part III of Form 10-K is incorporated by reference to the
information set forth in the 2009 Proxy Statement in response to Items 201(d) and 403 of Regulation S-K.



|Item 13. | Certain Relationships and Related Transactions,and Director Independence.
|-------- | -------------------------------------------------------------------------

Pursuant to General Instruction G of Form 10-K, the information called for by Item 13 of Part III of Form 10-K is incorporated by reference to the
information set forth in the 2009 Proxy Statement in response to Items 404 and 407(a) of Regulation S-K.



|Item 14. | Principal Accountant Fees and Services.
|-------- | ---------------------------------------

Pursuant to General Instruction G of Form 10-K, the information called for by Item 14 of Part III of Form 10-K is incorporated by reference to the information set forth in the 2009 Proxy Statement.



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OMEGA PROTEIN CORPORATION



PART IV



|Item 15. | Exhibits and Financial Statement Schedules.
|-------- | -------------------------------------------



|       |  |                                                                                                       |  |    |  | 
|------ |  | ----------------------------------------------------------------------------------------------------- |  | -- |  | 
|(a)(1) |  | The Companys consolidated financial statements listed below have been filed as part of this report: 
|       |  | Report of Independent Registered Public Accounting Firm                                               |  | 39
|       |  | Consolidated balance sheets as of December 31, 2008 and 2007                                          |  | 40
|       |  | Consolidated statements of operations for the years ended December 31, 2008, 2007 and
2006            |  | 41
|       |  | Consolidated statements of cash flows for the years ended December 31, 2008, 2007 and
2006            |  | 42
|       |  | Consolidated statements of stockholders equity for the years ended December 
31, 2008, 2007 and 2006 |  | 43
|       |  | Notes to consolidated financial statements                                                            |  | 44
|       | 
|(a)(2) |  | Financial Statement Schedule                                                                         

SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS



|                                |  |                              |           |                             |   |               |  |                        |         |  |   |          
|------------------------------- |  | ---------------------------- | --------- | --------------------------- | - | ------------- |  | ---------------------- | ------- |  | - | ---------
|Description                     |  | Balance atBeginningof Period |           | Charged toCosts andExpenses |   | Deductions(A) |  | Balance atEnd ofPeriod
|December 31, 2006:              |  |                              |           |                             |   |               |  |                        |         |  |   |          
|Allowance for doubtful accounts |  | $                            | 2,553,555 |                             | $ | 30,000        |  | $                      | 20,416  |  | $ | 2,563,139
|December 31, 2007:              |  |                              |           |                             |   |               |  |                        |         |  |   |          
|Allowance for doubtful accounts |  | $                            | 2,563,139 |                             | $ | 117,024       |  | $                      | 593,403 |  | $ | 2,086,760
|December 31, 2008:              |  |                              |           |                             |   |               |  |                        |         |  |   |          
|Allowance for doubtful accounts |  | $                            | 2,086,760 |                             | $ | 56,233        |  | $                      | 2,755   |  | $ | 2,140,238



|(A) | Allowance for Doubtful Accountsuncollectible accounts written off.
|--- | -------------------------------------------------------------------



|       |  |          |  |                                                                                                                                                                                                           
|------ |  | -------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a)(3) |  | Exhibits
|       |  |         
|2.1*   |  |         |  | Agreement and Plan of Merger between Marine Genetics, Inc. and Omega Protein Corporation (Omega or the Company) (Exhibit 2.1 to Omega Registration Statement on Form
S-1 [Registration No. 333-44967])
|       |  |         
|3.1*   |  |         |  | Articles of Incorporation of Omega (Exhibit 3.1 to Omega Registration Statement on Form S-1 [Registration No. 333-44967])                                                                                 
|       |  |         
|3.2*   |  |         |  | By-Laws of Omega (Exhibit 3.2 to Omega Registration Statement on Form S-1 [Registration No. 333-44967])                                                                                                   
|       |  |         
|4.2*   |  |         |  | Form of Common Stock Certificate (Citizen) (Exhibit 4.1 to Omega Registration Statement on Form S-1 [Registration No. 333-44967])                                                                         
|       |  |         
|4.3*   |  |         |  | Form of Common Stock Certificate (Non-Citizen) (Exhibit 4.2 to Omega Registration Statement on Form S-1 [Registration No. 333-44967])                                                                     
|       |  |         
|4.4*   |  |         |  | Registration Rights Agreement dated as of December 1, 2006 between Omega Protein Corporation and certain purchasers (Exhibit 10.1 to Omega Current Report on Form 8-K filed December 5, 2006)             



77



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OMEGA PROTEIN CORPORATION



|       |  |   |  |                                                                                                                                                                                                                                                                                                      
|------ |  | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.1* |  |  |  | Form of Amended and Restated Indemnification Agreement for all Officers and Directors (Exhibit 10.1 to Omega Quarterly Report on Form 10-Q for quarter ended June 30, 2003)                                                                                                                          
|       |  |  
|10.2* |  |  |  | Omega Protein Corporation 2000 Long-Term Incentive Plan (Appendix A to Omega Proxy Statement on Schedule 14A dated May 3, 2000)                                                                                                                                                                      
|       |  |  
|10.3* |  |  |  | Omega Protein Corporation 2006 Incentive Plan (Appendix A to Omega Proxy Statement on Schedule 14A dated April 26, 2006)                                                                                                                                                                             
|       |  |  
|10.4* |  |  |  | Omega Protein Corporation Annual Incentive Compensation Plan dated April 8, 1998 (Exhibit 10.11 to Omega Annual Report on Form 10-K for the year ended December 31, 2001)                                                                                                                            
|       |  |  
|10.5* |  |  |  | Omega Protein, Inc. Executive Medical Plan dated August 1993 (Exhibit 10.16 to Omega Annual Report on Form 10-K for the year ended December 31, 2002)                                                                                                                                                
|       |  |  
|10.6* |  |  |  | Form of Insurance Policy Issuable under the Omega Protein Supplemental Executive Medical Reimbursement Plan (Exhibit 10.1 to Company Current Report on Form 8-K filed with the SEC on
May 29, 2007).                                                                                                 
|       |  |  
|10.7*  |  |  |  | Lease dated July 1, 1992 with Ardoin Limited Partnership (Exhibit 10.12 to Omega Registration Statement on Form S-1 [Registration No. 333-44967])                                                                                                                                                    
|       |  |  
|10.8*  |  |  |  | Amendment One Lease Extension dated February 22, 2006 to Lease Agreement dated July 1, 2002 between the Ardoin Limited Partnership and Omega Protein, Inc. (formerly known as Zapata Haynie
Corporation) (Exhibit 10.1 to Omega Current Report on Form 8-K filed February 28, 2006).                 
|       |  |  
|10.9*  |  |  |  | Lease Agreement dated November 25, 1997 with O. W. Burton, Jr., individually and as trustee of the Trust of Anna Burton (Exhibit 10.13 to Omega Registration Statement on Form S-1
[Registration No. 333-44967])                                                                                     
|       |  |  
|10.10* |  |  |  | Commercial Lease Agreement dated January 1, 1971 with Purvis Theall and Ethlyn Cessac (Exhibit 10.15 to Omega Registration Statement on Form S-1 [Registration No. 333-44967])                                                                                                                       
|       |  |  
|10.11* |  |  |  | Lease Agreement dated January 4, 1994 with the City of Abbeville, Louisiana (Exhibit 10.16 to Omega Registration Statement on Form S-1 [Registration No. 333-44967])                                                                                                                                 
|       |  |  
|10.12* |  |  |  | Lease Agreement between Beltway/290 Investors, L.P. and Omega Protein, Inc., dated as of March 22, 2006 (Exhibit 10.1 to Omega Current Report on Form 8-K filed March 28,
2006)                                                                                                                      
|       |  |  
|10.13* |  |  |  | Lease Guaranty Agreement dated as of March 22, 2006 of Omega Protein Corporation (Exhibit 10.2 to Omega Current Report on Form 8-K filed March 28, 2006)                                                                                                                                             
|       |  |  
|10.14* |  |  |  | Lease Amendment and Option to Purchase, effective as of August 1, 2006, between Ivy and Dola Richard and Omega Protein, Inc. (Exhibit 10.1 to Omega Quarterly Report on Form 10-Q for the
quarter ended June 30, 2006)                                                                               
|       |  |  
|10.15* |  |  |  | United States Guaranteed Promissory Note dated March 31, 1993 in favor of Bear, Stearns Securities Corporation (Exhibit 10.20 to Omega Registration Statement on Form S-1 [Registration No.
333-44967])                                                                                              
|       |  |  
|10.16* |  |  |  | Amendment to No. 1 to Promissory Note dated March 31, 1993 to the United States of America pursuant to the provisions of Title XI of the Marine Act of 1936 in favor of Bear, Stearns
Securities Corporation (Exhibit 10.21 to Omega Registration Statement on Form S-1 [Registration No. 333-44967])
|       |  |  
|10.17* |  |  |  | Amendment to No. 1 to First Preferred Ship Mortgage dated March 31, 1993 to the United States of America (Exhibit 10.22 to Omega Registration Statement on Form S-1 [Registration No.
333-44967])                                                                                                    



78



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OMEGA PROTEIN CORPORATION



|       |  |   |  |                                                                                                                                                                                                                                                                     
|------ |  | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.18* |  |  |  | Supplement No. 5 to First Preferred Fleet Mortgage dated March 31, 1993 in favor of Chemical Bank, as Trustee (Exhibit 10.23 to Omega Registration Statement on Form S-1 [Registration No.
333-44967])                                                              
|       |  |  
|10.19* |  |  |  | Amendment No. 1 to Guaranty Deed of Trust dated March 31, 1993 for the benefit of the United States of America (Exhibit 10.24 to Omega Registration Statement on Form S-1 [Registration
No. 333-44967])                                                             
|       |  |  
|10.20* |  |  |  | Supplement No. 2 to Security Agreement dated March 31, 1993 in favor of the United States of America (Exhibit 10.25 to Omega Registration Statement on Form S-1 [Registration
No. 333-44967])                                                                       
|       |  |  
|10.21* |  |  |  | Indemnity Agreement Regarding Hazardous Materials dated March 31, 1993 in favor of the United States of America (Exhibit 10.26 to Omega Registration Statement on Form S-1 [Registration No.
333-44967])                                                            
|       |  |  
|10.22* |  |  |  | United States Guaranteed Promissory Note dated September 27, 1994 in favor of Sun Bank of Tampa Bay (Exhibit 10.27 to Omega Registration Statement on Form S-1 [Registration
No. 333-44967])                                                                        
|       |  |  
|10.23* |  |  |  | Promissory Note to the United States of America dated September 27, 1994 pursuant to the provisions of Title XI of the Marine Act of 1936 in favor of Sun Bank of Tampa Bay (Exhibit 10.28
to Omega Registration Statement on Form S-1 [Registration No. 333-44967])
|       |  |  
|10.24* |  |  |  | First Preferred Ship Mortgage dated September 27, 1994 to the United States of America (Exhibit 10.29 to Omega Registration Statement on Form S-1 [Registration No.
333-44967])                                                                                     
|       |  |  
|10.25* |  |  |  | Collateral Mortgage and Collateral Assignment of Lease dated September 27, 1994 in favor of the United States of America (Exhibit 10.30 to Omega Registration Statement on Form S-1
[Registration No. 333-44967])                                                   
|       |  |  
|10.26* |  |  |  | Collateral Mortgage Note dated September 27, 1994 in favor of the United States of America (Exhibit 10.31 to Omega Registration Statement on Form S-1 [Registration No.
333-44967])                                                                                 
|       |  |  
|10.27* |  |  |  | Collateral Pledge Agreement dated September 27, 1994 in favor of the United States of America (Exhibit 10.32 to Omega Registration Statement on Form S-1 [Registration No. 333-44967])                                                                              
|       |  |  
|10.28* |  |  |  | Guaranty Agreement dated September 27, 1994 in favor of the United States of America (Exhibit 10.33 to Omega Registration Statement on Form S-1 [Registration No. 333-44967])                                                                                       
|       |  |  
|10.29* |  |  |  | Title XI Financial Agreement dated September 27, 1994 with the United States of America (Exhibit 10.34 to Omega Registration Statement on Form S-1 [Registration No.
333-44967])                                                                                    
|       |  |  
|10.30* |  |  |  | Security Agreement dated September 27, 1994 in favor of the United States of America (Exhibit 10.35 to Omega Registration Statement on Form S-1 [Registration No. 333-44967])                                                                                       
|       |  |  
|10.31* |  |  |  | United States Guaranteed Promissory Note dated October 30, 1996 in favor of Coastal Securities (Exhibit 10.36 to Omega Registration Statement on Form S-1 [Registration No. 333-44967])                                                                             
|       |  |  
|10.32* |  |  |  | Promissory Note to the United States of America dated October 30, 1996, pursuant to the provisions of Title XI of the Marine Act of 1936, in favor of Coastal Securities (Exhibit 10.37 to
Omega Registration Statement on Form S-1 [Registration No. 333-44967])   
|       |  |  
|10.33* |  |  |  | Guaranty Agreement dated October 30, 1996 in favor of the United States of America (Exhibit 10.38 to Omega Registration Statement on Form S-1 [Registration No.
333-44967])                                                                                         



79



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OMEGA PROTEIN CORPORATION



|        |  |   |  |                                                                                                                                                                                                                                                                                   
|------- |  | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.34*  |  |  |  | Title XI Financial Agreement dated October 30, 1996 with the United States of America (Exhibit 10.39 to Omega Registration Statement on Form S-1 [Registration No. 333-44967])                                                                                                    
|        |  |  
|10.35*  |  |  |  | Certification and Indemnification Agreement Regarding Environmental Matters dated October 30, 1996 in favor of the United States of America (Exhibit 10.40 to Omega Registration Statement
on Form S-1 [Registration No. 333-44967])                                              
|        |  |  
|10.36*  |  |  |  | Deed of Trust dated October 30, 1996 for the benefit of the United States of America (Exhibit 10.41 to Omega Registration Statement on Form S-1 [Registration No.
333-44967])                                                                                                     
|        |  |  
|10.37*  |  |  |  | Deed of Trust dated December 20, 1999 for the benefit of the United States of America (Exhibit 10.45 to Omega Annual Report on Form 10-K for the year ended December 31, 2001)                                                                                                    
|        |  |  
|10.38*  |  |  |  | Promissory Notes to the United States of America dated December 20, 1999, pursuant to the provisions of Title XI of the Marine Act of 1936, in favor of Hibernia National Bank
(Exhibit 10.46 to Omega Annual Report on Form 10-K for the year ended December 31, 2001)           
|        |  |  
|10.39*  |  |  |  | Security Agreement dated December 20, 1999 in favor of the United Stated of America (Exhibit 10.47 to Omega Annual Report on Form 10-K for the year ended December 31, 2001)                                                                                                      
|        |  |  
|10.40*  |  |  |  | Title XI Financial Agreement dated December 20, 1999 with the United States of America (Exhibit 10.48 to Omega Annual Report on Form 10-K for the year ended December 31,
2001)                                                                                                   
|        |  |  
|10.41*  |  |  |  | Guaranty Agreement dated December 20, 1999 in favor of the United States of America (Exhibit 10.49 to Omega Annual Report on Form 10-K for the year ended December 31, 2001)                                                                                                      
|        |  |  
|10.42*  |  |  |  | Certification and Indemnification Agreement Regarding Environmental Matters dated December 20, 1999 in favor of the United States of America (Exhibit 10.50 to Omega Annual Report on Form 10-K
for the year ended December 31, 2001)                                             
|        |  |  
|10.43*  |  |  |  | Preferred Ship Mortgages dated December 20, 1999 in favor of the United States of America (Exhibit 10.51 to Omega Annual Report on Form 10-K for the year ended December 31,
2001)                                                                                                
|        |  |  
|10.44*  |  |  |  | Deed of Trust dated October 19, 2001 for the benefit of the United States of America (Exhibit 10.52 to Omega Annual Report on Form 10-K for the year ended December 31,
2001)                                                                                                     
|        |  |  
|10.45*  |  |  |  | Promissory Note to the United States of America dated October 19, 2001, pursuant to the provisions of Title XI of the Marine Act of 1936, in favor of Hibernia National Bank
(Exhibit 10.53 to Omega Annual Report on Form 10-K for year ended December 31, 2001)                 
|        |  |  
|10.46*  |  |  |  | Security Agreement dated October 19, 2001 in favor of the United States of America (Exhibit 10.54 to Omega Annual Report on Form 10-K for the year ended December 31,
2001)                                                                                                       
|        |  |  
|10.47*  |  |  |  | Title XI Financial Agreement dated October 19, 2001 with the United States of America (Exhibit 10.55 to Omega Annual Report on Form 10-K for the year ended December 31, 2001)                                                                                                    
|        |  |  
|10.48*  |  |  |  | Guaranty Agreement dated October 19, 2001 in favor of the United States of America (Exhibit 10.56 to Omega Annual Report on Form 10-K for the year ended December 31,
2001)                                                                                                       
|        |  |  
|10.49*  |  |  |  | Certification and Indemnification Agreement Regarding Environmental Matters dated October 19, 2001 in favor of the United States of America (Exhibit 10.57 to Omega Annual Report on Form
10-K for the year ended December 31, 2001)                                              
|        |  |  
|10.50*  |  |  |  | Preferred Ship Mortgages dated October 19, 2001 in favor of the United States of America (Exhibit 10.58 to Omega Annual Report on Form 10-K for the year ended December 31,
2001)                                                                                                 
|        |  |  
|10.51* |  |  |  | Amended and Restated Executive Employment Agreement dated as of December 31, 2007 between Joseph L. von Rosenberg III and Omega Protein Corporation (incorporated by reference to Exhibit 10.1
to the Companys Current Report on Form 8-K filed with the SEC on January 3, 2008).



80



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|        |  |   |  |                                                                                                                                                                                                                                                                                                           
|------- |  | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.52* |  |  |  | Amended and Restated Executive Employment Agreement dated as of December 31, 2007 between Robert W. Stockton and Omega Protein Corporation (incorporated by reference to Exhibit 10.2 to the
Companys Current Report on Form 8-K filed with the SEC on January 3, 2008).                                 
|        |  |  
|10.53* |  |  |  | Amended and Restated Executive Employment Agreement dated as of December 31, 2007 between John D. Held and Omega Protein Corporation (incorporated by reference to Exhibit 10.3 to the
Companys Current Report on Form 8-K filed with the SEC on January 3, 2008).                                       
|        |  |  
|10.54* |  |  |  | First Amendment to the Amended and Restated Executive Employment Agreement dated as of December 3, 2008, between Joseph L. von Rosenberg III and Omega Protein Corporation (incorporated by
reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed with the SEC on December 8, 2008).
|        |  |  
|10.55* |  |  |  | First Amendment to the Amended and Restated Executive Employment Agreement dated as of December 3, 2008, between Robert W. Stockton and Omega Protein Corporation (incorporated by reference to
Exhibit 10.2 to the Companys Current Report on Form 8-K filed with the SEC on December 8, 2008).         
|        |  |  
|10.56* |  |  |  | First Amendment to the Amended and Restated Executive Employment Agreement dated as of December 3, 2008, between John D. Held and Omega Protein Corporation (incorporated by reference to
Exhibit 10.3 to the Companys Current Report on Form 8-K filed with the SEC on December 8, 2008).               
|        |  |  
|10.57* |  |  |  | Change of Control Agreement dated as of September 1, 2000 between Omega and Scott Herbert (Exhibit 10.1 to Omega Quarterly Report on Form 10-Q for the quarter ended September 30,
2002)                                                                                                                  
|        |  |  
|10.58* |  |  |  | Employment Agreement dated February 3, 2009 between the Company and Joseph E. Kadi (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed with the
SEC on February 5, 2009).                                                                                        
|        |  |  
|10.59* |  |  |  | Employment Agreement dated as of October 1, 2002 between Omega and Thomas R. Wittmann (Exhibit 10.2 to Omega Quarterly Report on Form 10-Q for the quarter ended September 30, 2002)                                                                                                                      
|        |  |  
|10.60* |  |  |  | Amendment to Employment Agreement between the Company and Thomas R. Wittman dated January 20, 2009 (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K
filed with the SEC on January 21, 2009).                                                                        
|        |  |  
|10.61* |  |  |  | Form of Stock Option Agreement under the 1998 Long-Term Incentive Plan (Exhibit 10.66 to Omega Annual Report on Form 10-K for the year ended December 31, 2005)                                                                                                                                           
|        |  |  
|10.62* |  |  |  | Form of Stock Option Agreement for Employees under the 2000 Long-Term Incentive Plan (Exhibit 10.67 to Omega Annual Report on Form 10-K for the year ended December 31, 2005)                                                                                                                             
|        |  |  
|10.63* |  |  |  | Form of Stock Option Agreement for Senior Management under the 2000 Long-Term Incentive Plan (Exhibit 10.68 to Omega Annual Report on Form 10-K for the year ended December 31,
2005)                                                                                                                     
|        |  |  
|10.64* |  |  |  | Form of Stock Option Agreement for Independent Directors under the 2000 Long-Term Incentive Plan (Exhibit 10.69 to Omega Annual Report on Form 10-K for the year ended December 31,
2005)                                                                                                                 
|        |  |  
|10.65* |  |  |  | Form of Stock Option Agreement dated June 7, 2006 for each Independent Director (Exhibit 10.1 to Omega Current Report on Form 8-K filed June 9, 2006)                                                                                                                                                     



81



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|       |  |   |  |                                                                                                                                                                                                                                                                                                                                   
|------ |  | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.66* |  |  |  | Deed of Trust dated December 29, 2003 for the benefit of the United States of America (Exhibit 10.65 to Omega Annual Report on Form 10-K for year ended December 31, 2003)                                                                                                                                                        
|       |  |  
|10.67* |  |  |  | Promissory Note to the United States of America dated December 29, 2003 (Exhibit 10.66 to Omega Annual Report on Form 10-K for year ended December 31, 2003)                                                                                                                                                                      
|       |  |  
|10.68* |  |  |  | Security Agreement dated December 29, 2003 in favor of the United States of America (Exhibit 10.67 to Omega Annual Report on Form 10-K for year ended December 31, 2003)                                                                                                                                                          
|       |  |  
|10.69* |  |  |  | Title XI Financial Agreement dated December 29, 2003 with the United States of America (Exhibit 10.68 to Omega Protein Annual Report on Form 10-K for year ended December 31,
2003)                                                                                                                                               
|       |  |  
|10.70* |  |  |  | Guaranty Agreement dated December 29, 2003 in favor of the United States of America (Exhibit 10.69 to Omega Protein Annual Report on Form 10-K for year ended December 31,
2003)                                                                                                                                                  
|       |  |  
|10.71* |  |  |  | Certification and Indemnification Agreement Regarding Environmental Matters dated December 29, 2003 in favor of the United States of America (Exhibit 10.70 to Omega Protein Annual Report on
Form 10-K for year ended December 31, 2003)                                                                                         
|       |  |  
|10.72* |  |  |  | Preferred Ship Mortgages dated December 29, 2003 in favor of the United States of America (Exhibit 10.71 to Omega Protein Annual Report on Form 10-K for year ended December 31,
2003)                                                                                                                                            
|       |  |  
|10.73* |  |  |  | Lease Agreement between BMC Software Texas, L.P. and Omega Protein Corporation dated as of August 18, 2005 (Exhibit 10.1 to Omega Protein Current Report on Form 8-K dated August 17,
2005)                                                                                                                                       
|       |  |  
|10.74* |  |  |  | First Amendment to Lease Agreement between BMC Software Texas, L.P. and Omega dated as of September 15, 2005 (Exhibit 10.1 to Omega Current Report on Form 8-K dated September 15,
2005)                                                                                                                                          
|       |  |  
|10.75* |  |  |  | Deed of Trust dated October 17, 2005 for the benefit of the United States of America (Exhibit 10.1 to Omega Current Report on Form 8-K dated October 17, 2005)                                                                                                                                                                    
|       |  |  
|10.76* |  |  |  | Promissory Note to the United States of America Dated October 17, 2005 (Exhibit 10.2 to Omega Current Report on Form 8-K dated October 17, 2005)                                                                                                                                                                                  
|       |  |  
|10.77* |  |  |  | Security Agreement dated October 17, 2005 in favor of the United States of America (Exhibit 10.3 to Omega Current Report on Form 8-K dated October 17, 2005)                                                                                                                                                                      
|       |  |  
|10.78* |  |  |  | Title XI Financial Agreement dated October 17, 2005 with the United States of America (Exhibit 10.4 to Omega Current Report on Form 8-K dated October 17, 2005)                                                                                                                                                                   
|       |  |  
|10.79* |  |  |  | Guaranty Agreement dated October 17, 2005 in favor of the United States of America (Exhibit 10.5 to Omega Current Report on Form 8-K dated October 17, 2005)                                                                                                                                                                      
|       |  |  
|10.80* |  |  |  | Certification and Indemnification Agreement Regarding Environmental Matters dated October 17, 2005 in favor of the United States of America (Exhibit 10.6 to Omega Current Report on Form
8-K dated October 17, 2005)                                                                                                             
|       |  |  
|10.81* |  |  |  | Preferred Ship Mortgages dated October 17, 2005 in favor of the United States of America (Exhibit 10.7 to Omega Current Report on Form 8-K dated October 17, 2005)                                                                                                                                                                
|       |  |  
|10.82* |  |  |  | Approval Letter dated as of December 1, 2005 and executed on December 6, 2005 by Omega Protein, Inc., the Company and United States Department of Commerce, Acting by National Oceanic and
Atmospheric Administration, National Marine Fisheries Service (Exhibit 10.1 to Omega Current Report on Form 8-K dated December 6, 2005)



82



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|       |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                             
|------ |  | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.83* |  |  |  | Deed of Trust dated March 6, 2007 for the benefit of the United States of America (incorporated by reference to Exhibit 10.2 to the Companys Current Report on Form 8-K filed with the
SEC on March 13, 2007).                                                                                                                                                                             
|       |  |  
|10.84* |  |  |  | Mortgage and Assignment of Leases dated March 7, 2007 in favor of the United States of America (incorporated by reference to Exhibit 10.3 to the Companys Current Report on Form 8-K
filed with the SEC on March 13, 2007).                                                                                                                                                                
|       |  |  
|10.85* |  |  |  | Promissory Note to the United States of America dated March 7, 2007 (incorporated by reference to Exhibit 10.4 to the Companys Current Report on Form 8-K filed with the SEC on March 13,
2007).                                                                                                                                                                                           
|       |  |  
|10.86* |  |  |  | Security Agreement dated March 7, 2007 in favor of the United States of America (incorporated by reference to Exhibit 10.5 to the Companys Current Report on Form 8-K filed with the
SEC on March 13, 2007).                                                                                                                                                                               
|       |  |  
|10.87* |  |  |  | Title XI Financial Agreement dated March 7, 2007 with the United States of America (incorporated by reference to Exhibit 10.6 to the Companys Current Report on Form 8-K filed with the
SEC on March 13, 2007).                                                                                                                                                                            
|       |  |  
|10.88* |  |  |  | Guaranty Agreement dated March 7, 2007 in favor of the United States of America (incorporated by reference to Exhibit 10.7 to the Companys Current Report on Form 8-K filed with the SEC
on March 13, 2007).                                                                                                                                                                               
|       |  |  
|10.89* |  |  |  | Certification and Indemnification Agreement Regarding Environmental Matters dated March 7, 2007 in favor of the United States of America (incorporated by reference to Exhibit 10.8
to the Companys Current Report on Form 8-K filed with the SEC on March 13, 2007).                                                                                                                      
|       |  |  
|10.90* |  |  |  | Preferred Ship Mortgage dated March 7, 2007 in favor of the United States of America (incorporated by reference to Exhibit 10.9 to the Companys Current Report on Form 8-K filed with the
SEC on March 13, 2007).                                                                                                                                                                          
|       |  |  
|10.91* |  |  |  | Stock Purchase Agreement dated as of September 8, 2006, between Zapata Corporation and Omega Protein Corporation (Exhibit 10.1 to Omega Quarterly Report on Form 10-Q for the quarter ended
September 30, 2006)                                                                                                                                                                             
|       |  |  
|10.92* |  |  |  | Escrow Agreement dated as of September 8, 2006, among Zapata Corporation, Omega Protein Corporation and Manufacturers and Traders Trust Company (Exhibit 10.2 to Omega Quarterly Report on Form
10-Q for the quarter ended September 30, 2006)                                                                                                                                              
|       |  |  
|10.93* |  |  |  | Letter Agreement dated October 18, 2006, between Omega Protein Corporation and Zapata Corporation (Exhibit 10.1 to Omega Current Report on Form 8-K filed October 24, 2006)                                                                                                                                                                                                                 
|       |  |  
|10.94* |  |  |  | Financing Agreement dated as of October 19, 2006, among Omega Protein Corporation, Omega Protein, Inc., Omega Shipyard, Inc., Omega International Distribution Company, Omega International
Marketing Company, Protein Finance Company, Ableco Finance LLC, Wachovia Bank, National Association, and A3 Funding SP (Exhibit 10.2 to Omega Current Report on Form 8-K filed October 24, 2006)
|       |  |  
|10.95* |  |  |  | Security Agreement dated as of October 19, 2006, made by Omega Protein Corporation, Protein Finance Company, Omega International Marketing Company, Omega International Distribution Company
and Omega Shipyard, Inc. in favor of Ableco Finance LLC (Exhibit 10.3 to Omega Current Report on Form 8-K filed October 24, 2006)                                                              
|       |  |  
|10.96* |  |  |  | Pledge and Security Agreement dated as of October 19, 2006, made by Omega Protein Corporation, Protein Finance Company, Omega International Marketing Company, Omega International Distribution
Company and Omega Shipyard, Inc. in favor of Ableco Finance LLC (Exhibit 10.4 to Omega Current Report on Form 8-K filed October 24, 2006)                                                   



83



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OMEGA PROTEIN CORPORATION



|        |  |   |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|------- |  | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.97*  |  |  |  | First Preferred Fleet Mortgage made October 19, 2006 by Omega Protein, Inc., a Virginia corporation to Omega Master Vessel Trust 2006 (Exhibit 10.5 to Omega Current Report on Form 8-K filed
October 24, 2006)                                                                                                                                                                                                                                                                                                                                                                             
|        |  |  
|10.98*  |  |  |  | Notice of Reduction of Commitments effective March 16, 2007 (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed with the SEC on
March 16, 2007).                                                                                                                                                                                                                                                                                                                                                                                                   
|        |  |  
|10.99*  |  |  |  | Credit Agreement dated as of March 26, 2007, among Omega Protein Corporation, Omega Protein, Inc., Protein Finance Company, Omega International Marketing Company, Omega International
Distribution Company, Omega Shipyard, Inc., Protein Industries, Inc., Bank of America, N.A., as administrative agent, lender, swing line lender and letter of credit issuer, Regions Bank, as lender, Compass Bank, as lender, and Farm Credit Bank of
Texas, as lender (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed with the SEC on March 30, 2007).
|        |  |  
|10.100* |  |  |  | Security Agreement dated as of March 26, 2007, made by Omega Protein Corporation, Omega Protein, Inc., Protein Finance Company, Omega International Marketing Company, Omega International
Distribution Company, Omega Shipyard, Inc., Protein Industries, Inc. and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.2 to the Companys Current Report on Form 8-K filed with the SEC on March 30, 2007.                                                                                                                                             
|        |  |  
|10.101* |  |  |  | First Preferred Fleet Mortgage made March 26, 2007 given by Omega Protein, Inc. to Omega Master Vessel Trust 2007 (incorporated by reference to Exhibit 10.3 to the Companys Current
Report on Form 8-K filed with the SEC on March 30, 2007).                                                                                                                                                                                                                                                                                                                                             
|        |  |  
|10.102* |  |  |  | First Amendment to Credit Agreement effective as of September 29, 2008, among Omega Protein Corporation, Omega Protein, Inc., the Guarantors party thereto, the Lenders from time to time party
thereto, and Bank of America, N.A., as Administrative Agent, Lender, Swing Line Lender and Letter of Credit Issuer (incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form 8-K filed with the SEC on October 9, 2008).                                                                                                                                           
|        |  |  
|21      |  |  |  | Schedule of Subsidiaries                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|        |  |  
|23.1    |  |  |  | Consent of PricewaterhouseCoopers LLP                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|        |  |  
|31.1    |  |  |  | Certification of Chief Executive Officer pursuant to Rule 13a-15(e)/Rule 15d-15(e)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        |  |  
|31.2    |  |  |  | Certification of Chief Financial Officer pursuant to Rule 13a-15(e)/Rule 15d-15(e)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        |  |  
|32.1    |  |  |  | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|        |  |  
|32.2    |  |  |  | Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          



|* | Incorporated by reference
|- | -------------------------

| | Management Contract or Compensatory Plan or arrangement required to be filed as an exhibit pursuant to the requirements of Item 15(b) of Form 10-K and Item 601 of
Regulation S-K.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

(b)Exhibits.See Item 15(a) (3) above.



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OMEGA PROTEIN CORPORATION



SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on
March 10, 2009.



OMEGA PROTEIN CORPORATION(Registrant)By:

/s/    ROBERT W.
STOCKTONRobert W. Stockton Executive Vice President and Chief Financial Officer


KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes
and appoints Joseph L. von Rosenberg III or Robert W. Stockton, or either of them, his or her true and lawful attorneys in-fact and agents, with full power of substitution and resubstitution, for him or her and in his or her name, place and
stead, any and all capacities, to sign his or her name to the Companys Form 10-K for the year ended December 31, 2008 and any or all amendments, and to file the same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their or his or her substitute or substitutes, may lawfully do or cause to
be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the dates indicated.



|                                                               |  |                                                                                                   |  |               
|-------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------- |  | --------------
|Signature                                                      |  | Title                                                                                             |  | Date          
|                                                               |  |                                                                                                  
|/s/    JOSEPH L. VON
ROSENBERG III Joseph L. von Rosenberg III |  | Chairman of the Board, President and Chief Executive Officer                                      |  | March 10, 2009
|                                                               | 
|                                                               |  |                                                                                                  
|/s/    ROBERT W.
STOCKTON Robert W. Stockton                   |  | Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) |  | March 10, 2009
|                                                               | 
|                                                               |  |                                                                                                  
|/s/    GARY L.
ALLEE Gary L. Allee                             |  | Director                                                                                          |  | March 10, 2009
|                                                               | 
|                                                               |  |                                                                                                  
|/s/    GARY R.
GOODWIN Gary R. Goodwin                         |  | Director                                                                                          |  | March 10, 2009
|                                                               | 
|                                                               |  |                                                                                                  
|/s/    PAUL M.
KEARNS Paul M. Kearns                           |  | Director                                                                                          |  | March 10, 2009
|                                                               | 
|                                                               |  |                                                                                                  
|/s/    WILLIAM E. M.
LANDS William E. M. Lands                 |  | Director                                                                                          |  | March 10, 2009
|                                                               | 
|                                                               |  |                                                                                                  
|/s/    HARRY O. NICODEMUS
IV Harry O. Nicodemus                |  | Director                                                                                          |  | March 10, 2009
|                                                               | 



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