8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 8-K

Current Report

Pursuant to Section 13 or 15(d) of

the Securities Act of 1934

Date of Report (Date of earliest event reported): October 17, 2005

Omega Protein Corporation

(Exact name of registrant as specified in its charter)

Nevada	001-14003	76-0562134
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

1717 St. James Place, Suite 550 Houston, Texas	77056
(Address of principal executive offices)	(Zip Code)

(713) 623-0060

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CRF 240.133-4(c))

Item 1.01. Entry Into a Material Definitive Agreement

On October 17, 2005, the Company closed on a $14 million loan with the U.S. Department of Commerce Fisheries Finance Program (“FFP”). This loan was entered into pursuant to the Company’s financing application previously approved by the FFP in September 2004. The loan is secured by liens on four of the Company’s fishing vessels and a mortgage on the Company’s Reedville, Virginia facility. Borrowings will be used to reimburse the Company for prior expenditures for fishing vessel refurbishments and improvements to the Company’s shore-side marine assets. The loan has a term of 15 years, is amortized on a quarterly basis, and bears interest rate at the U.S. Treasury rate for agency borrowing.

Copies of the loan documents for the transaction are attached as Exhibits 10.1 through 10.7 to this Form 8-K.

Item 9.01 Financial Statements, Pro Forma Financial Information and Exhibits

(a) Financial Statements of business acquired.

None.

(b) Pro Forma Financial Information.

None.

(c) Exhibits.

10.1	Deed of Trust dated October 17, 2005 for the benefit of the United States of America.
10.2	Promissory Note to the United States of America dated October 17, 2005
10.3	Security Agreement dated October 17, 2005 in favor of the United States of America.
10.4	Title XI Financial Agreement dated October 17, 2005 with the United States of America.
10.5	Guaranty Agreement dated October 17, 2005 in favor of the United States of America.
10.6	Certification and Indemnification Agreement Regarding Environmental Matters dated October 17, 2005 in favor of the United States of America.
10.7	Preferred Ship Mortgages dated October 17, 2005 in favor of the United States of America.

SIGNATURE

Pursuant to the requirements 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.

	OMEGA PROTEIN CORPORATION
Dated: October 19, 2005	/s/    JOHN D. HELD
	John D. Held Executive Vice President, General Counsel and Secretary

EX-10.1

Exhibit 10.1

DEED OF TRUST

DATED AS OF OCTOBER 17, 2005

MADE BY

OMEGA PROTEIN, INC.

TO

MATSON C. TERRY, II, OF

NORTHUMBERLAND COUNTY, VIRGINIA

AND

B.H.B. HUBBARD, III, OF

LANCASTER COUNTY, VIRGINIA, TRUSTEES

FOR THE BENEFIT OF

THE UNITED STATES OF AMERICA

DEED OF TRUST AND SECURITY AGREEMENT

COMMONWEALTH OF VIRGINIA

COUNTY OF NORTHUMBERLAND

1. PARTIES: WHEREAS, OMEGA PROTEIN, INC., a Virginia corporation, hereinafter “Grantor”, whether one or more, is indebted to the UNITED STATES OF AMERICA acting by and through the Secretary of Commerce, Office of the Financial Services Division, National Marine Fisheries Service, National Oceanic and Atmospheric Administration, hereinafter”Beneficiary”, in the aggregate amount of Fourteen Million and No/100 Dollars ($14,000,000.00), together with interest thereon, as evidenced by a certain promissory note, payable to the order of the United States of America, acting by and through the Secretary of Commerce, Office of the Financial Services Division, National Marine Fisheries Service, National Oceanic and Atmospheric Administration, which bears interest and is payable according to the terms of said note and which has a final maturity date of October 17, 2020.

2. THE PROMISSORY NOTE TO THE UNITED STATES OF AMERICA: NOW, THEREFORE, in consideration of the premises and in order to secure the prompt and full payment of said indebtedness, and any future advance(s), additional advance(s), and/or readvance(s), and/or any renewal(s), extension(s), restructuring(s), reamortization(s), any other sums provided for in any loan document, and/or any other loan treatment(s) thereof, or any part thereof, and the interest thereon and any and all other indebtedness(es) (including future advance(s) now or hereafter owed by any of the undersigned to the Beneficiary), whether such indebtedness(es) is primary or secondary, direct or indirect, contingent or absolute, matured or unmatured, joint or several, and otherwise secured or not, and the faithful performance of and compliance with all the terms, agreements, provisions, obligations, covenants, conditions, warrants, representations, and stipulations herein made, or made in any Loan Agreement or in any other document related to the promissory note described as follows:

(a.) The Promissory Note to the United States of America executed by Grantor in the principal amount of Fourteen Million & No/100 Dollars, ($14,000,000.00), with interest on the unpaid principal computed from the 17th day of October, 2005, at the rate of Six and 484/1000 per cent (6.485%) per year, payment to be made in installments of Three hundred sixty-six thousand six hundred eighty-two and No/100 Dollars ($366,682.00), including principal and interest quarterly, with the balance of principal and interest due 15 years from the date of said Note. The first quarterly payment shall be due on the 17th day of January, 2006, and each quarterly payment thereafter shall be due on the day of the month that the first quarterly payment is due thereunder.

3. THE PROPERTY: OMEGA PROTEIN, INC., hereinafter Grantor, whether one or more, in consideration of the premises and other good and valuable consideration paid to Grantor by Matson C. Terry, II, Esq., and B.H.B. Hubbard, III, Esq., as Trustees, either of whom may act, whose address is 293, Steamboat Road, P.O. Box 340, Irvington, Virginia 22480, hereinafter, “Trustee”, does hereby convey and warrant unto Trustees with General Warranty the real estate, hereinafter “The Property”, situate in Northumberland County, Virginia, more particularly described on Exhibit A, attached hereto, recorded herewith, and, by this reference , expressly made a part hereof for a further and more accurate description of the real estate hereby encumbered, together with all buildings and other improvements, hereditaments and appurtenances thereunto belonging, or in any wise appertaining now existing or hereafter erected upon the premises and all the income and rents arising therefrom. Grantor does hereby intend to convey and does convey all of Grantor’s right, title and interest in and to any strips and gores Grantor may now own contiguous to the above described property.

4. MINERALS INCLUDED: It is expressly understood and agreed, as a part of the consideration for the loan made to the Grantor and secured by the premises hereinabove described, that this instrument covers and includes all surface, subsurface and/or mineral estate ownership now or after acquired by the undersigned in the above-property and whether or not expressly excepted from the description to the above security premises, any provisions herein to the contrary being of no force and effect.

5. PLEDGE OF PERSONAL PROPERTY: AND FOR THE CONSIDERATION AFORESAID, and as further security for any and all debt(s) and obligation(s) described above, said Grantor does hereby assign, pledge and transfer to the Beneficiary, and grant to the Beneficiary a security interest in and to the following described property and interests, to-wit: (1) all timber of all kind, character and description planted and/or growing, or to be planted and/or grown, on the hereinabove described property; (2) all crop allotments, quotas, and/or (3) all rents, profits, issues, income, royalties, bonuses, and revenues of said property, or any part or interest herein, from time to time accruing whether under leases or tenancies now existing or hereafter created; (4) each and every policy of hazard insurance or the like now or hereafter in effect which insures said property or any building, fixture and/or improvement thereon or any part thereof, together with all the right, title and interest of Grantor in and to such policy, including but not limited to any premiums paid (or rights to return premiums) and/or all proceeds or payments thereunder; (5) all judgments, award of damages and settlements hereafter made resulting from condemnation proceedings or the taking of the real property, or any part thereof, under the power of eminent domain, or for any damage (whether caused by such taking or otherwise) to the property, or any part thereof, or to any rights appurtenant thereto; (6) all building materials, equipment, fixtures and fittings of all kind, character, and description used in connection with or relating to said property and/or buildings, fixtures or improvements thereon; (7) all equipment, including, but not limited to: forklifts, bobcats, cranes, pallet trucks, lift trucks and other product or material movement equipment of whatsoever nature; all trailers, tanks, trucks, or other rolling stock of whatsoever nature; all fish unloading, transfer and conveying equipment of whatsoever nature; all fish processing equipment of whatsoever nature; all fish weighing equipment of whatsoever nature; all cooling, refrigerating, freezing and other fish holding equipment (blast freezers, plate freezers, coolers, or other refrigeration equipment) of whatsoever nature; all fish packaging equipment of whatsoever nature; all fish baskets, totes, tanks, tubs, and other fish holding equipment of whatsoever nature; all ice makers of whatsoever nature; all hand and power tolls of whatsoever nature; all office equipment of whatsoever nature; all fish hatching, releasing, rearing, growing, tending, and other equipment of whatsoever nature in any way associated with fisheries cultivation of every sort-all together with all associated equipment, machinery, parts, tools, or other items of whatsoever nature and whether fixed or unfixed to the Project Property or any other premises whatsoever; and/or (8) all tangible or intangible property found on the premises and products, proceeds, and additions and/or replacement of any or all of the property described above in items 1 through 8.

Additionally, Grantor does hereby assign, pledge and transfer to the Beneficiary, and grant to the Beneficiary a security interest in any transferable fishing conservation and management allocation (including, but not limited to, allocations, permits, quotas, licenses, cage tags, or any other fisheries access restriction or right, however characterized, of whatsoever nature) affecting, necessary for, or in any other way, however characterized, associated with any of the property included in the collateral, the Grantor agrees to grant to the Beneficiary a full senior security interest in such allocation by whatsoever means deemed by the Beneficiary to be appropriate (including, but not limited to, the Grantor’s execution of security agreements and the filing of financing statements under the UCC), presently owned or

acquired at any time in the future. Further, if the Grantor fails to do so, the Grantor agrees that the Beneficiary may use, for the purpose of executing and otherwise perfecting whatever documents may be required to effect the grant to the Beneficiary of such a full security interest in such fisheries conservation and management allocation, the attorney-in-fact authority conferred upon the Beneficiary by Article XI of the Title XI Financial Agreement.

IN TRUST, however, to secure and enforce the repayment of all of Grantor’s obligations under the promissory note set forth above and to secure Grantor’s promises contained hereinafter.

GRANTOR FURTHER COVENANTS, WARRANTS AND AGREES:

7. TAXES, FEES: To pay when due all taxes, liens, judgments, assessments or fees assessed against said property and to promptly furnish Beneficiary with tax receipts or like documents evidencing payment of or release from all taxes, liens, judgments, assessments or fees. By execution hereof, Grantor agrees to pay when due all community water system assessment and meter fees, if any, applicable to said property, and in the event of foreclosure, hereby does transfer and assign to the purchaser all of Grantor’s interest and membership, if any, in said community water system applicable to said property, and agrees to execute such documents as are necessary to effectuate such transfer.

8. INSURANCE REQUIREMENT: To insure and keep insured buildings and other improvements now on or which may hereafter be placed on said premises, against loss or damage by fire, water windstorm and/or all hazards included within “extended coverage”, as well as loss or damage by flood in areas designated by the U.S. Department of Housing and Urban Development as subject to flood, any policy evidencing such insurance to be deposited with, and the loss thereunder to be payable to Beneficiary as its interest may appear, and providing for immediate notification to Beneficiary of any lapse, cancellation or other impairment of said insurance. All policies shall be written by reliable insurance companies authorized to write policies of insurance in the State of Virginia, acceptable to Beneficiary. At the option of Beneficiary, and subject to the general regulations of U.S. Department of Commerce, where applicable, sums received by Beneficiary from such insurance companies may be used to pay for reconstruction or repair of destroyed or damaged buildings or improvement(s); or, if not so applied may, at the sole option of the Beneficiary, be applied in payment of any indebtedness, matured or unmatured, secured by this deed of trust and security agreement. The Beneficiary will be listed on any insurance policy and named as First Loss Payee on all insurance covering real property, except Liability coverage, in which case the Beneficiary is named a Loss Payee as its interest may appear. The Beneficiary will also be listed as a First Loss Payee on all insurance covering personal property, as its interest may appear.

9. USE OF THE PROPERTY: That the aquaculture portion of the premises hereinbefore described, if any, shall be continuously used in a husbandlike manner for aquaculture production which incorporates good aquaculture practices that will produce the maximum yield consistent with conservation goals; that in the event that any part of the premises is used for agriculture, it shall be conducted in a husbandlike manner, that Waste will not be committed or permitted; if timber land is involved as security, Grantor will follow good and approved forestry practices to minimize or prevent fire danger, erosion or depreciation, protect young trees, and maintain forest production; it is agreed, however, that no timber now or hereafter affected hereby will be cut, removed, damaged or turpentined (except such as is customarily used on the property for fuel, fencing or repairs) without the prior written consent of the Beneficiary. Grantor will promptly notify Beneficiary of any damage to timber from any source. Grantor will, where practical, promptly notify Beneficiary of any potential damage to timber. In the event this covenant, or any part, is breached, Grantor agrees to pay all costs and expenses, including reasonable attorney’s fees, incurred by Beneficiary in investigating such violation and in protecting and preserving this security.

10. EVENTS OF DEFAULT-REMEDIES: This conveyance, however, is in trust to secure the payment and performance of the obligations. But if Grantor fails to pay when due any sums secured hereby or if default is made by Grantor (or any one of them) in the payment or performance of any of the obligations under the Note, Promissory Note to the United States, Deed of Trust and Security Agreement, Title XI Agreement, or any other document or agreement associated with

this transaction, or in case Grantor should become insolvent, commit an Act of Bankruptcy, or apply to a bankruptcy court to be adjudicated a voluntary bankrupt, or proceedings be instituted to put Grantor in involuntary bankruptcy, or should any proceedings be taken against Grantor for the appointment of a receiver, assignee or trustee, or should Grantor make an assignment for benefit of one or more creditors, or should Beneficiary in good faith deem itself insecure and its prospect of payment impaired, or if any loan proceeds are used for a purpose that will: (1) contribute to excessive erosion of highly erodible land or to the conversion of wetlands to produce an agricultural commodity, as further explained in 7 CFR Part 1940, Subpart G, Exhibit M, or (2) result in poor aquaculture practices, then in that event all of the obligations shall, at the option of Beneficiary, be and become at once due and payable without notice to Grantor, and Trustee herein named or his successor or successors shall, at the request of Beneficiary, sell all or any part of the Property as set out in ¶ 30 of this Deed of Trust and Security Agreement. In the event of any such default, Beneficiary shall also have all the remedies of a secured party under the Uniform Commercial Code of Virginia and any other applicable law, including, but not limited to the right to seek a judgment for any deficiency in the amount owed, following liquidation of collateral. All remedies of Beneficiary shall be cumulative. A failure on the part of Beneficiary to exercise any remedy or option contained in this Deed of Trust and Security Agreement in the event of default shall not constitute a waiver of Beneficiary’s right to exercise said remedy or option in the event of that or any subsequent default.

11. COMPLIANCE WITH ALL REGULATIONS: With respect to the Property, Grantor covenants with Beneficiary, that Grantor has complied, is in compliance, and will at all times comply in all respects with all applicable laws (whether statutory, common law or otherwise), rules, regulations, orders, permits, licenses, ordinances, judgments, or decrees of all governmental authorities (whether federal, state, local or otherwise), including, without limitation, all laws regarding public health or welfare, environmental protection, water and air pollution, composition of product, underground storage tanks, toxic substances, hazardous substances, hazardous materials, hazardous wastes, other wastes or used oil, asbestos, occupational health and safety, nuisances, trespass, and negligence.

12. HOLD HARMLESS AGREEMENT: Grantor agrees to indemnify and hold Beneficiary, its directors, employees, agents, and its successors and assigns, harmless from and against any and all claims, losses, damages, liabilities, fees, penalties, charges, judgments, administrative orders, remedial action requirements, enforcement actions of any kind, and all costs and expenses incurred in connection therewith (including but not limited to, attorney’s fees and expenses, including all attorney’s fees and expenses incurred by Beneficiary in and for this indemnity), arising directly or indirectly, in whole or in part out of any failure of Grantor to comply with the environmental representations, warranties and covenants contained herein.

13. SURVIVAL OF GRANTOR’S LIABILITY: Grantor’s representations, warranties, covenants and indemnities contained herein shall survive the occurrence of any event whatsoever, including without limitation, the satisfaction of the promissory note secured hereby, the reconveyance or foreclosure of the mortgage, the acceptance by Beneficiary of a deed in lieu of foreclosure, or any transfer or abandonment of the property, failure to comply strictly with the representations, warranties, covenants and indemnities commenced herein shall constitute a default under this deed of trust.

14. VALID SEVENTH LIEN: That this deed of trust and security agreement is a valid seventh lien against all the land, interests and improvements offered and/or appraised as security for this loan and that the property and interests described herein is now free and clear of any and all other liens and encumbrances except as otherwise set forth herein. If the validity of this deed of trust, or if Grantor’s title to any of said land, interests or improvements is questioned in any manner, or if any part of such land, interests or improvements is not properly described herein, Beneficiary may, in its discretion, investigate and take such action as it considers necessary or desirable for the protection of its interests and for this purpose may employ legal counsel or expert assistance and the Grantor will promptly pay all expenses so incurred by Beneficiary.

The lien of this deed of trust is subordinate and of inferior dignity to the lien of that certain prior deed of trust dated July 18, 1989, from Zapata Haynie Corporation to Michael T. Bradshaw, et al, Trustees, securing the United States of America in the original amount of $4,675,000.00, recorded in Deed Book 298, at Page 80, in the Clerk’s Office of the Circuit Court of Northumberland County, Virginia, as amended by that certain Amendment dated March 31, 1993, recorded in Deed Book 348, at Page 130, in the Clerk’s Office aforesaid.

The lien of this deed of trust further is subordinate and of inferior dignity to the lien of that certain prior deed of trust dated October 30, 1996, from Zapata Protein (USA), Inc., to James C. Breeden, et al, Trustees, securing the United States of America in the original amount of $1,848,562.00, recorded in Deed Book 407, at Page 706, in the Clerk’s Office of the Circuit Court of Northumberland County, Virginia.

The lien of this deed of trust further is subordinate and of inferior dignity to the lien of that certain prior deed of trust dated May 12, 1998, from Omega Protein, Inc., to Matson C. Terry, II, et al, Trustees, securing the United States of America in the original amount of $2,593,761.00, recorded in Deed Book 431, at Page 200, in the Clerk’s Office of the Circuit Court of Northumberland County, Virginia.

The lien of this deed of trust further is subordinate and of inferior dignity to the lien of that certain prior deed of trust dated December 21, 1999, from Omega Protein, Inc., to Matson C. Terry, II, et al, Trustees, securing the United States of America in the original amount of $2,030,661.00, recorded in Deed Book 460, at Page 721, in the Clerk’s Office of the Circuit Court of Northumberland County, Virginia.

The lien of this deed of trust further is subordinate and of inferior dignity to the lien of that certain prior deed of trust dated October 19, 2001, from Omega Protein, Inc., to Matson C. Terry, II, et al, Trustees, securing the United States of America in the original amount of $1,900,000.00, recorded in Deed Book 495, at Page 338, in the Clerk’s Office of the Circuit Court of Northumberland County, Virginia.

The lien of this deed of trust further is subordinate and of inferior dignity to the lien of that certain prior deed of trust dated December 29, 2003, from Omega Protein, Inc., to Matson C. Terry, II, et al, Trustees, securing the United States of America in the original amount of $5,300,000.00, recorded in Deed Book 564, at Page 674, in the Clerk’s Office of the Circuit Court of Northumberland County, Virginia.

15. GRANTOR TO PAY EXPENSES: That if Grantor defaults in any of the provisions of this Deed of Trust and Security Agreement, particularly, but not limited to, ¶¶ 7, 8, 9 or 14, then Beneficiary may pay such taxes, liens, judgments or assessments, obtain and pay for such insurance, advance such attorney’s fees, expenses and costs, or take any other action or incur any other expenditures that Beneficiary determines are necessary to protect Beneficiary’s interests and Grantor agrees to immediately pay Beneficiary all amounts so advanced and that all amounts so advanced shall be secured hereby.

16. USE OF PROCEEDS: That all representations and statements made in the application for this loan are true and correct, that the proceeds of this loan will be used solely for the purposes specified in said application and that Grantor will comply with all requirements and conditions imposed by Beneficiary in making this loan.

17. NON-ALIENATION CLAUSE: To not sell, assign or convey any part or all of the mortgaged premises (regardless of whether the buyer or assignee “assumes” the note or takes the mortgage premises “subject to” such note, or whether by contract for deed or sale) without first obtaining the Beneficiary’s prior written consent as long as the above note, or any part, or any other sum owed to the Beneficiary, remain unpaid. If Grantor is a corporation, not to change the substantial ownership and/or control of said corporation without first obtaining the Beneficiary’s prior written consent as long as the above note, or any part, or any other sums owed to the Beneficiary, remain unpaid.

18. PROMPT PAYMENT PROVISION: That all payments of principal and interest (or any part thereof) not made when due shall bear interest from due date to the date of payment thereof by maker or assumptor at the default rate which is equal to eighteen percent (18%) per annum. All advances made by the holder hereof shall be secured by and under this Deed of Trust and Security Agreement and shall be payable with interest from the date each advance is made until paid by maker or assumptor at the default rate.

19. RELEASE PROVISION: That Beneficiary may at any time, without notice, release any of the property described herein, grant extensions or deferments of time of payment of the indebtedness secured hereby, or any part thereof, grant subordinations of lien(s) or release from liability any parties who are or may become liable for the payment of said indebtedness, without affecting the priority of this lien or the personal liability of the Grantor or any other party liable or who may

become liable for the indebtedness secured by this instrument. If all or any part of the property hereinabove described becomes vested in any party other than Grantor, Beneficiary may, without notice to Grantor, deal with such successor in interest with reference to this instrument and the debt(s) and obligation(s) hereby secured in the same manner as with the Grantor, without in any way releasing, vitiating or discharging the Grantor’s liability hereunder or for the debt(s) and obligation(s) hereby secured and extension(s) of time for payment or other loan treatment(s) described herein given or permitted by Beneficiary shall not operate to release, vitiate, or discharge the liability of the Grantor herein, either in whole or in part.

20. BENEFICIARY NON-WAIVER: That the failure of Beneficiary to exercise any option or make any decision or election under any term or covenant herein expressed shall not be deemed a waiver of the right to exercise such option or to make such decision or election at any time.

21. SUCCESSORS & ASSIGNS BOUND: That each covenant and agreement herein contained shall inure to the benefit of and bind the successors and assigns of Beneficiary and Grantor.

22. SUBSTITUTE TRUSTEE: Beneficiary may, without notice to any party to this Deed of Trust and Security Agreement, or to the successors or assigns, and without regard to the willingness or inability of Trustee to act, or to execute this trust, appoint another person or succession of persons to act as Trustee herein, and such appointee or substitute shall have all the title, authority and powers in the execution of this trust as are vested in Trustee. If Beneficiary be a corporation such appointment may be made by any one of its officers or agents. No single exercise of this power of appointment, the power of sale, or any other power or right given in this Deed of Trust and Security Agreement shall exhaust the right to exercise such power but all rights and powers herein given may be exercised as often as may be necessary for the collection of all amounts secured by this Deed of Trust and Security Agreement until said amounts are fully paid and discharged. At any sale hereunder, Trustee may from time to time, adjourn said sale to a later date without re-advertising the sale by giving notice of the time and place of such continued sale at the time Trustee shall make such adjournment. And at any sale made to enforce the trust herein given, Beneficiary or any person in interest may become a purchaser and upon payment of the purchase price, Trustee shall provide a deed of conveyance by Special Warranty, which conveyance shall vest full and perfect title in such purchaser upon payment of the purchase price.

23. LIFE INSURANCE: That in the event Grantor purchases life insurance (group, credit or other) in connection with this loan but subsequently fails to pay the premium to keep same in force, the Beneficiary, at its option, may pay such premium on Grantor’s behalf, charge such payment to the loan, and such advance of premiums shall be secured by this mortgage and bear interest the same as other advances provided for in this Deed of Trust and Security Agreement. Any policy evidencing such insurance to be deposited with and any loss thereunder to be payable to Beneficiary as its interest may appear.

24. FINANCIAL STATEMENT: To furnish to the Beneficiary annually a financial statement and income statement attested to by Grantor or verified by a public accountant.

25. DEATH OF SIGNATORY: All parties to this deed of trust or to the note hereby secured covenant and agree that upon the death of any signatory, maker, or comaker of such note the owner and holder of said note may, at holder’s option, mature or accelerate the entire balance owing on said note whereupon all amounts owing by virtue thereof shall be immediately due and payable.

26. INSPECTION: The Grantor hereby grants and will cause any tenants to grant to Beneficiary, its agents, attorneys, employees, consultants, contractors, successors and assigns, an irrevocable license and authorization upon reasonable notice to enter upon and inspect the Property and facilities thereon and perform such tests, including without limitation, subsurface testing soils and groundwater testing and other tests which may physically invade the Property thereon, as the Beneficiary, in its sole discretion, determines is necessary to protect its security interest, provided however, that under no circumstances shall the Beneficiary be obligated to perform such inspections or tests. Any such inspections or tests shall be at the sole cost of the Grantor.

27. NONTRANSFERABILITY: Except as provided by regulations of the Beneficiary neither the property or any portion thereof or interest therein shall be leased, assigned, sold, transferred, or encumbered, voluntarily or otherwise, without the prior written consent of the Beneficiary. The Beneficiary shall

have the sole and exclusive rights as Beneficiary hereunder, including but not limited to the power to grant consents, partial releases, subordinations and satisfaction, and no insured holder shall have any right, title and interest in or to the lien or any benefits hereof.

28. ACCELERATION OPTION: If all or any part of the Property or an interest therein is sold, transferred, encumbered or otherwise disposed of by Grantor without Beneficiary’s prior written consent, Beneficiary may, at Beneficiary’s option, declare all of the obligations to be immediately due and payable. Beneficiary shall have waived such option to accelerate if, prior to the sale or transfer, Beneficiary and the person to whom the Property is to be sold or transferred reach agreement in writing that the credit of such person is satisfactory to Beneficiary and that the interest payable on the sums secured by the Deed of Trust and Security Agreement shall be at such rate as Beneficiary shall request and the party assuming the obligations meets the criteria set out in Title XI for all borrowers. Regardless of any assumption or transfer of the Property and/or the obligations arising under the Deed of Trust and Security Agreement, Grantor will not be released from any obligation to Beneficiary until the entire debt and all sums associated therewith are paid in full. If Beneficiary exercises such option to accelerate, Beneficiary shall mail Grantor notice of acceleration. Such notice shall provide a period of not less than 30 days from the date of notice is mailed within which Grantor may pay the sums ordered due. If Grantor fails to pay such sums prior to the expiration of such period, Beneficiary may, without further notice or demand on Grantor, invoke any remedies permitted by this Deed of Trust and Security Agreement, or any other security document associated with this transaction.

29. PAYMENT OF ADVANCES: Now, if Grantor shall pay said indebtedness and any future advances, additional advances, readvances or any other indebtedness in addition to the original indebtedness set forth herein, and secured hereby, and keep and perform all of the covenants and agreements of this deed of trust, it shall become null and void.

30. FORECLOSURE AND SALE OF THE PROPERTY: This deed of trust shall be construed to impose and confer upon the parties hereto, and the Beneficiaries hereunder, all duties, rights and obligations as set forth in Section 55-59, and 55-59.1 through 55-59.4 and 55-60 of the Code of Virginia as now in force and (to the extent that any amendment thereof shall not limit the rights of the Trustees or Beneficiaries hereunder or the obligations of the Grantor) as hereafter amended; and further to incorporate herein the following provisions by the short form references below, of Sections 55-59 and 55-59.1 through 55-59.4 and 55-60 of the Code of Virginia:

ADVERTISEMENT REQUIRED: Four times in a newspaper

published or having general circulation in Northumberland County

BIDDER’S DEPOSIT: of Ten Percent (10%) may be required.

EXEMPTIONS WAIVED.

SUBJECT TO CALL UPON DEFAULT.

RENEWAL OR EXTENSIONS PERMITTED.

Grantor acknowledges that Beneficiary will have the right to seek a deficiency judgment in the event of default, sale of the property and Beneficiary not being made whole from the proceeds of such sale.

31. MULTIPLE COUNTIES: In case the real estate herein described is situated in more than one county or in more than one judicial district of a county or counties, a foreclosure sale of all of said real estate may be made in any one of the counties or judicial districts in which any part thereof is situated, after giving notice of the time, place and terms of sale in the manner above described in each county and judicial district in which any part of said land lies.

32. SURRENDER OF POSSESSION: It is further stipulated and agreed that in case of any sale hereunder Grantor shall immediately surrender possession to the purchaser. If Grantor fails to do so, Grantor shall become a tenant at sufferance of the purchaser, subject to an action for unlawful entry and detainer.

33. BENEFICIARY’S RIGHT TO BID: It is expressly agreed between the parties hereto, that in the event of foreclosure and sale, that the Beneficiary hereunder, or its successors and assigns, may bid at any such sale or sales and may purchase the property secured hereunder if the high bidder therefor, as if Beneficiary were a stranger to this conveyance.

34. MAILING ADDRESS: For purposes of giving any notice that may be required by the terms of this deed of trust, Grantor hereby stipulates and agrees that his mailing address is P.O. Box 2866, Hammond, La 70404 and Beneficiary may rely upon this stipulation until such time as Beneficiary has been advised in writing by Grantor of a change of address.

35. SEVERABILITY: The unenforeceability or invalidity of any provision(s) of this Deed of Trust and Security Agreement shall not render any other provision(s) herein unenforceable or invalid. This Deed of Trust and Security Agreement may be amended only by an instrument in writing, signed by Grantor and Beneficiary, and may not be amended orally or by any course of conduct or otherwise than by written instrument.

All riders, appendages, exhibits, erasures, corrections and interlineations, if any, have been made and approved before signing hereof.

IN WITNESS WHEREOF, the Grantor has caused its name to be signed hereto and its corporate seal affixed and attested pursuant to corporate resolutions, which resolutions have not been rescinded, revoked or modified.

Omega Protein, Inc.
By:	/s/    ROBERT W. STOCKTON
Its	Vice President

ATTEST:

/s/    JOHN D. HELD        

Secretary

STATE OF TEXAS

CITY/COUNTY OF HARRIS

Personally appeared before me, the undersigned authority in and for said County and State the within named Robert W. Stockton,    , the Vice President, and John D. Held , the Secretary, Vice President and Chief Financial Officer of Omega Protein, Inc., who acknowledged that they signed and delivered the above and foregoing instrument on the day and year and for the purposes therein mentioned as their own voluntary acts and deeds.

WITNESS my hand and official seal this 17th day of October, 2005.

Notary Public

My commission expires:                                     

NOTARY AFFIX SEAL HERE!

EX-10.2

Exhibit 10.2

Case No. FF-G-013

PROMISSORY NOTE TO THE UNITED STATES OF AMERICA

City and State: Houston, Texas

Date: October 17, 2005

All terms contained herein are defined in the Acknowledgment of Definitions executed by all parties to this transaction.

FOR VALUE RECEIVED, the undersigned (hereinafter, the “Borrower”), promises to pay to the order of the UNITED STATES OF AMERICA, acting by and through the Secretary of Commerce, National Oceanic and Atmospheric Administration, National Marine Fisheries Service, Financial Services Division (hereinafter, the “Government”), P. O. Box 9008, St. Louis, Missouri 63197-9008, or at the Government’s option, at such other place as may be designated from time to time by the Government, the principal amount of FOURTEEN MILLION and No/100 Dollars ($14,000,000.00) with interest on the unpaid principal computed from the date of funding at the rate of 6.485% per year, payments, in lawful currency of the United States of America, to be made in installments as follows:

Payments of $366,682.00, including principal and interest, payable quarterly. Payments will be due on January 17, April 17, July 17, and October 17, of each year until sixty (60) quarterly payments are made with the balance of principal and interest due on October 17, 2020.

This Note is given pursuant to the provisions of Title XI of the Merchant Marine Act, 1936, as amended, found at 46 USC §1271 et seq., and 50 CFR 253, as amended by Public Law 104-297 on October 11, 1996, known as the Fisheries Finance Program.

The Borrower may prepay principal at any time, and from time to time, without penalty. However, the Government may require that any partial prepayments (a) be made on the date regular installments are due and (b) be in the amount of one or more installments which would be applicable to principal. Any partial prepayment shall be applied against the principal amount outstanding and shall not postpone the due date of any subsequent installments or change the amount of such installments, unless the Government shall otherwise agree in writing.

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Time is of the essence hereof. In the event that the Borrower fails to pay any installment of principal or interest within fifteen (15) days after its due date, then, at the option of the Government or other holder of the Note, the entire principal sum, plus all accrued interest, shall be immediately due and payable, without presentment, notice of dishonor, protest, opportunity to cure, or any other demand or notice, said demands and notices being hereby expressly waived. The Government or other holder of this Note may exercise this option to accelerate after any default by the Borrower which is not cured within fifteen (15) days from the occurrence thereof, regardless of any prior forbearance.

If the Government elects to accept a late payment, the Borrower shall pay an additional sum of five percent (5%) of the overdue amount or one thousand dollars ($1,000.00), whichever is less, as a late charge and said amount will be added to total indebtedness until paid. Acceptance of any late charge or the election not to assess a late charge, shall not constitute a waiver of the default with respect to the overdue amount, and shall not prevent the Government from exercising any of the other rights and remedies available to it.

Payments shall be made payable in lawful money of the United States of America to the United States Department of Commerce/NOAA/NMFS/ FSFF, or as the Government, or other holder of the Note, may, from time-to-time designate in writing to the Borrower. Payments shall be applied first to accrued interest and the balance, if any, shall be applied to principal. The Borrower shall identify each payment by the designation FF-G-013.

The accelerated interest rate shall be eighteen percent (18%) per annum, and shall apply to all sums due and accruing hereunder or under the Mortgage or Security Agreement, as defined below, unless such would violate applicable usury laws, if any, in which case, the maximum legal rate permitted by applicable laws shall prevail.

This Note shall be construed and interpreted in accordance with the laws of the United States of America.

This Note is secured by certain preferred ship mortgages (hereinafter, the “Ship Mortgages”) dated the date hereof, from the Borrower to the Government relating to certain vessels ALBERT J. BOURG, Official Number 298585, REEDVILLE, Official Number 569161, GALVESTON BAY, Official Number 508776, and TANGIER ISLAND, Official Number 565268, hereinafter, the “Vessels”), a security agreement (hereinafter, the “Security Agreement”) dated October 17, 2005, between the Borrower and the Government and a certain deed of trust and security agreement (hereinafter, the “Deed”), dated the date hereof, from the Borrower to the Government

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relating to certain property located in Northumberland County, Commonwealth of Virginia.

This Note has been negotiated and received by the Government subject to and secured by the terms of the Approval Letter dated September 28,2005, all Mortgages, Deeds, Security Agreements, and any other loan documents.

The aforesaid payments shall constitute payment of the principal of, and the interest on this Note as of the date on which and to the extent such payment is made, and this Note shall be discharged to the extent of such payment of principal.

This Note is not negotiable, assignable, or transferable without the prior written consent of the Government. This Note shall be canceled by the Government and surrendered to the Borrower if all outstanding obligations accruing hereunder or under the Loan documents are fully paid or performed.

The undersigned agrees to pay and shall pay all reasonable expenses of any nature, whether incurred in or out of court, and whether incurred before or after this Note shall become due at its maturity date or otherwise, including but not limited to reasonable attorney’s fees and costs, which the Government may deem necessary or proper in connection with the collection of sums due under the Note, or in the administration, supervision, preservation, protection and costs of care and preservation of any Collateral. The Government is authorized to pay, and add to the indebtedness of the Borrower at any time, and from time to time, any and all of such expenses, add the amount of such expenses to the principal amount of the Note and Mortgages, and charge interest thereon at the rate of eighteen percent (18%) per annum, or such lesser rate as determined by the Government. In connection with said expenses, and notwithstanding the Government’s election to fix an interest rate of less than 18%, acceleration of sums due under the Note and any other loan documents will result in application of the accelerated interest rate of 18% to all sums due hereunder, whether said sums constitute principal, interest or expenses.

The term “Collateral” as used in this Note shall have the same meaning as used in the Security Agreement and in the Acknowledgment of Definitions and shall further mean any funds, guaranties, or other property or rights therein of any nature whatsoever or the proceeds thereof which may have been, are, or hereafter may be hypothecated, directly or indirectly by the undersigned or others, in connection with, or as security for, this Note or any part hereof.

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The obligation of the undersigned hereunder shall not be impaired by the Government’s indulgence, including, but not limited to (a) any renewal, extension, or modification which the Government may grant with respect to the Note or any part hereof, (b) any surrender, compromise, release, renewal, extension, exchange, or substitution, which the Government may grant in respect of the said Mortgage, as amended, or other Collateral, or (c) any indulgence granted in respect of any endorser, grantor, or insurer.

All provisions of this Note shall be construed, given effect, and enforced according to the laws of the United States. With respect to any claim or proceeding relating to this Note, the Borrower hereby consents to and subjects itself to the jurisdiction of the federal court of competent jurisdiction, which we, in our sole discretion, may choose. If the Government has instituted proceedings where any of the collateral may be found, the Borrower also consents to and subjects itself to the jurisdiction of the federal court which maintains jurisdiction over said collateral.

This Note is severable, and in the event that any of its terms are declared invalid, the remaining terms shall be severed and remain in full force and effect.

When applicable, the obligation of the undersigned hereunder shall be joint and several.

BORROWER: Omega Protein, Inc.
BY:	/s/    ROBERT W. STOCKTON
TITLE:	Vice President and Treasurer
DATE:	October 17, 2005

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EX-10.3

Exhibit 10.3

Case No. FF-G-013

SECURITY AGREEMENT

This Security Agreement (hereinafter, the “Agreement”), made between Omega Protein, Inc., (hereinafter, the “Borrower”), whose address is 835 B Pride Drive, Hammond, Louisiana 70401 and the UNITED STATES OF AMERICA, acting by and through the Secretary of Commerce, National Oceanic and Atmospheric Administration, National Marine Fisheries Service, Financial Services Division, 1315 East-West Highway, Silver Spring, Maryland 20910, which is the Secured Party, (hereinafter the “Government”).

All terms contained herein are defined in the Acknowledgment of Definitions executed by all parties to this transaction.

W I T N E S S E T H

WHEREAS, the Borrower desires to enter into a Promissory Note to the United States (hereinafter, the “Note”), dated October 17, 2005, in the amount of FOURTEEN MILLION and No/100 Dollars ($14,000,000.00), pursuant to the provisions of Title XI of the Merchant Marine Act, 1936, as amended, found at 46 USC § 1271 et seq., and 50 CFR 253, as amended by Public Law 104-297 on October 11, 1996, known as the Fisheries Finance Program, (hereinafter, the “FFP Debt”); and

WHEREAS, the Government will not enter into this transaction unless the Government is granted a security interest in certain property.

NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt whereof being hereby acknowledged, the parties agree as follows:

Section 1. The Borrower hereby grants to the Government a security interest in the following described property, together with all accessories, substitutions, additions, replacements, parts and accessions affixed to or used in connection therewith (hereinafter, the “Collateral”):

(a) The whole of the fishing vessels ALBERT J. BOURG, Official Number 298585, REEDVILLE, Official Number 596161, GALVESTON BAY, Official Number 508776, and TANGIER ISLAND, Official Number 565268, together with all related gear, boilers, machinery, electronics, equipment, motors, skiffs, inventory, supplies, contracts, contract rights, charter hire, freight, licenses and/or permits, general intangibles, transferable fishery conservation and management allocations, now owned or hereafter acquired, attached or not attached or to be attached, to secure payment of the Borrower’s debt to the

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Government as evidenced hereby and by Borrower’s Note to the Government of even date herewith payable to the Government, in accordance with the Note, in the amount of FOURTEEN MILLION and no/Dollars, ($14,000,000.00) payable on the terms, at the times, and with interest as set forth in said Note. Borrower agrees to pay the Note and, if any portion thereof, principal or interest, is not paid when due, Borrower agrees to pay, in addition to the foregoing, the reasonable collection costs of the Government;

(b) Any and all federal or state fisheries permits, individual fishing quotas (IFQ), individual transferable quotas (ITQ), community development quotas (CDQ), quota shares, allocations, endorsements, rights, licenses, or tags, whether vested individually with the Borrower or appurtenant to the Vessels, whether now owned or hereafter acquired, whether now existing or hereafter created by rule, regulation, statute or fishery management council action, which now exist or are hereafter created pursuant to any limited entry programs, moratorium periods, high seas permits, license limitation programs or total allowable catch and domestic annual processing assessments or like programs or assessments whether or not any of the foregoing relate to or affect the fishing operations of the vessels.

(c) All insurances pertaining to the Collateral, including, without limitation, hull and machinery, increased value, war risk, protection and indemnity, pollution, worker’s liability and compensation, loss of earnings, personal property, liability and all other insurances and association entries, and all claims and all returns of premiums, dues, calls, and assessments that are not immediately applied to future premiums, dues, calls, and assessments, and all other sums or claims for sums due or to become due thereunder;

(d) All debts and obligations owing to the Borrower, including, without limitation, interest thereon, charges and other expenses and fees advanced by or incurred by or for the Government, and all liens and encumbrances securing any or all of the foregoing;

(e) Borrower grants the Government a security interest in the following real estate situated in Northumberland County, Commonwealth of Virginia and fully described in Exhibit A.

EXHIBIT “A” IS ATTACHED AND MADE A PART HEREOF

together with all buildings and other improvements, hereditaments and appurtenances thereunto belonging, or in any wise appertaining now existing or hereafter erected upon the premises and all the income and rents arising therefrom. Borrower does hereby intend to convey and does convey all of Borrower’s right, title and interest in and to any strips and gores Borrower may now own contiguous to the above described property;

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(f) It is expressly understood and agreed, as a part of the consideration for the loan made to the Borrower and secured by the premises described in Exhibit A, this instrument covers and includes all surface, subsurface and/or mineral estate ownership now or after acquired by the undersigned in the above property and whether or not expressly excepted from the description to the above security premises, any provisions herein to the contrary being of no force and effect;

(g) For the consideration aforesaid, and as further security for any and all debt(s) and obligation(s) described above, said Borrower does hereby assign, pledge and transfer to the Government, and grant to the Government a security interest in and to the following described property and interests which are listed on Exhibit B and/or set out as follows: (1) all timber of all kind, character and description planted and/or growing, or to be planted and/or grown, on the hereinabove described property; (2) all crop allotments, quotas, and/or (3) all rents, profits, issues, income, royalties, bonuses, and revenue of said property, or any part or interest herein, from time to time accruing whether under leases or tenancies now existing or hereafter created; (4) each and every policy of hazard insurance, or the like, now or hereafter in effect which insures said property or any building, fixture and/or improvement thereon, or any part thereof, together with all the right, title and interest of Borrower in and to such policy, including but not limited to any premiums paid (or rights to return premiums) and/or all proceeds or payments thereunder; (5) all judgments, award of damages and settlements hereafter made resulting from condemnation proceedings or the taking of the real property, or any part thereof, under the power of eminent domain, or for any damage (whether caused by such taking or otherwise) to the property, or any part thereof, or to any rights appurtenant thereto; (6) all building materials, equipment, fixtures and fittings of all kind, character, and description used in connection with or relating to said property and/or buildings, fixtures or improvements thereon; (7) all equipment, including, but not limited to: forklifts, bobcats, cranes, pallet trucks, lift trucks and other product or material movement equipment of whatsoever nature; all trailers, tanks, trucks or other rolling stock of whatsoever nature; all fish unloading, transfer and conveying equipment of whatsoever nature; fungible goods, including fish; all fish processing equipment of whatsoever nature; all fish weighing equipment of whatsoever nature; all cooling, refrigerating, freezing and other fish holding equipment (blast freezers, coolers, or other refrigeration equipment) of whatsoever nature; all fish packaging equipment of whatsoever nature; all fish baskets, totes, tanks, tubs and other fish holding equipment of whatsoever nature; all ice makers of whatsoever nature, all hand and power tools of whatsoever nature; all office equipment of whatsoever nature; all fish hatching, releasing, rearing, growing, tending and other equipment of whatsoever nature in any way associated with fisheries cultivation of every sort—all together with all associated

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equipment, machinery, parts, tools, or other items of whatsoever nature and whether fixed or unfixed to the property or any other premises whatsoever; and/or (8) all tangible or intangible property found on the premises which is not listed on Exhibit “B”, and products, proceeds, and additions and/or replacements of any or all of the property described above in Items 1 through 7, also including all after-acquired personal property to be located in or about the said facility of Borrower, subject to any purchase-money security interest acquired by any vendor of said after-acquired personal property;

EXHIBIT “B” IS ATTACHED AND MADE A PART HEREOF

Section 2. The Borrower hereby warrants and covenants that:

(a) Except as may otherwise be required in the ordinary course of business, at all times the items listed on Exhibit B will be kept on the property itself, in transit, or in storage and shall not be removed from said location, in whole or in part, until such time as written consent to a change of location is obtained by the Borrower from the Government;

(b) The Collateral is to be used primarily for business use and kept at the Borrower’s principal place of business.

Section 3. Other terms and conditions:

(a) In the event that this Security Agreement, the Note, or any provisions hereof or thereof shall be deemed invalid in whole or in part by reason of any present or future law of the United States or any decision of any authoritative court, or if the documents at any time held by the Government be deemed by the Government, for any reason, insufficient to carry out the true intent and spirit of this Security Agreement and the Note, then, from time to time, the Borrower will execute on its own behalf such other and further assurances and documents as in the opinion of counsel for the Government may be required to more effectually subject the Collateral to the payment of the principal sum of the Note, together with interest thereon, as in the Note and as herein provided, and in the performance of the terms and conditions of the Note and this Security Agreement. Upon failure of the Borrower so to do, the Government may execute such other and further assurances and documents, for and in the name of the Borrower, and the Borrower hereby irrevocably appoints the Government the agent attorney-in-fact of the Borrower so to do. Any expenses of the Government in connection with the foregoing shall be a debt due from the Borrower to the Government in payment thereof and shall be secured by the lien of this Security Agreement;

(b) The Borrower will faithfully observe, perform and discharge all of the covenants, conditions, and obligations which are imposed on the Borrower by any and all indentures and other agreements or

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documents and will not permit to occur any act or omission which is or may be declared to be a default under any such indenture, agreement, or document;

Section 4. The Borrower hereby further warrants and covenants that:

(a) No financing statement covering any of the Collateral described herein is on file in any public office except in favor of the Government. The Borrower is the owner of the Collateral free from any prior lien, security interest or encumbrance, except in favor of the Government, and will defend the Collateral against the claims and demands of all persons whomsoever;

(b) Except as may otherwise be required in the ordinary course of business, the Borrower will not sell, exchange, lease, or otherwise dispose of the Collateral, or any part thereof, or suffer or permit any lien, levy, or attachment, or security interest therein, or financing statement to be filed with reference thereto, other than that of the Government;

(c) The Borrower will maintain the Collateral in good condition and repair and preserve the same against waste, loss, damage, or depreciation in value other than by reasonable wear. The Borrower will not use any of the Collateral in violation of any law or public regulation. The Government may examine and inspect the Collateral at any reasonable times, wherever located, and for that purpose hereby is authorized by the Borrower to enter any place or places where the Collateral may be;

(d) The Borrower will keep the Collateral fully insured against loss or damage by fire, theft (and collision if applicable), and such other hazards as the Government may from time to time require, with such deductible provisions, upon such terms, including loss payable and other endorsements, and in such company or companies as the Government may approve; Borrower immediately will deliver all policies to the Government, to be retained by the latter in pledge to secure Borrower’s obligations hereunder, with irrevocable authority to adjust any loss, receive and receipt for any sum payable, surrender any policy, discharge and release any insurer, endorse in Borrower’s name any loss or refund check or draft and, in general, exercise in the name of the Borrower or otherwise, any and all rights of the Borrower in respect thereto or in respect to the proceeds thereof;

(e) The Borrower will pay, when due, all taxes, license fees and assessments relative to the Collateral or its use and relative to the Note. Should the Borrower fail in its performance of any of the foregoing, the Government may pay the same, including any security interest having priority hereto, may order and pay for the repair, maintenance and preservation of the Collateral, or any part thereof,

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may place and pay for any such insurance and may pay any such taxes; the Borrower agrees to pay to the Government on demand all of the latter’s disbursements for any of said purposes with interest at the rate of eighteen percent (18%) per annum, or such lesser rate which the Government, in its sole discretion, may determine. Said sum shall be added to the sums due under the Note, shall be an indebtedness of the Borrower, immediately due and payable, and shall be secured by this Security Agreement. Notwithstanding the Government’s election under this provision to fix an interest rate of less than eighteen percent (18%), acceleration of sums due under this Note will result in the application of the accelerated interest rate of eighteen percent (18%), on all sums so paid from the date of payment until repaid;

(f) The Borrower agrees to notify the Government promptly in writing of any change in its business name or address, corporate structure (including the jurisdiction under which it is incorporated), principal place of business and Borrower’s residence.

(g) By executing this Security Agreement, the Borrower authorizes the Government to file financing statements and amendments thereto to perfect the security interests created by this Agreement. The recording of these financing statements will be at the Borrower’s expense.

(h) The Borrower hereby consents to any extension of time of payment and to any substitution, exchange, or release of Collateral and to the addition to or release of any party or person primarily or secondarily liable for the Note.

Section 5. General terms:

(a) The Note is a separate instrument and may be negotiated, extended, or renewed by the Government without releasing the Borrower, all Collateral, or any guarantor or co-maker;

(b) All of the benefits of this Security Agreement shall inure to the Government, its successor in interest and assigns, and the obligations hereunder shall be binding upon the Borrower, its legal representatives, successors and assigns;

(c) If there is more than one Borrower or guarantor or co-maker of the Note, the obligation of each and all shall be primary and joint and several;

(d) The provisions of this Security Agreement are severable, if a provision is held invalid or unenforceable by a court of competent jurisdiction, such holding shall not affect or impair any of the remaining provisions;

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(e) The Government shall not be deemed to have waived any of its rights under this or any other agreement executed by the Borrower unless the waiver is in writing signed by the Government. No delay in exercising the Government’s rights shall be a waiver nor shall a waiver on one occasion operate as a waiver of such right on a future occasion;

(f) Each notice from one to the other party in this Security Agreement shall be sufficient if served personally or given by U. S. registered or certified mail, addressed to the other party at its last known address. Reasonable notice, when notice is required, shall be deemed to be five days from date of mailing;

Section 6. Default:

(a) The Borrower shall be in default under this Security Agreement upon the happening of any of the following events or conditions:

(1) The Borrower’s failure to pay, when due, the principal of or interest on the Note, including any amendments thereto or substitutions therefore, and/or any other amounts due the Government in connection with this transaction;

(2) The Borrower’s failure to keep, observe, or perform any provision of this Security Agreement or any other agreement between the Borrower and the Government, including but not limited to, the Preferred Ship Mortgages on the aforementioned fishing vessels, and the Deed of Trust on the aforementioned real property, and all loan documents;

(3) The failure of any guarantor, co-maker, or other party to keep, observe or perform any agreement between said party and the Government connected with or arising from the aforementioned obligation;

(4) The discovery of any misrepresentation, or material falsity of any warrant, representation, or statement made or furnished by the Borrower to the Government, whether or not in connection with this Security Agreement;

(5) The loss, theft, or destruction of or substantial damage to the Collateral;

(6) The Government deems or has reasonable cause to deem itself insecure;

(7) The failure or termination of the business, or commencement of any insolvency or receivership proceedings by or against the Borrower, or if the Borrower dies or becomes

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insolvent, and if Borrower is a partnership, the death of any partner, and if the Borrower is a corporation, the dissolution of said corporation;

(8) The occurrence of any event that would adversely affect the ability of the Borrower or the Guarantor to timely service the debt owed the Government or that would cause the Government to reasonably deem itself an insecure creditor.

Section 7. Cure of Defaults:

If the Borrower shall have, within fifteen (15) days after the occurrence thereof, removed and remedied each event of default as set forth herein, then in every such case, the Secretary shall waive any such event of default; but no such waiver shall extend to nor affect any subsequent or other event of default nor impair any rights or remedies consequent thereon.

Section 8. Remedies of the Government:

Upon Borrower’s default, the Government shall have each and all of the rights and remedies granted to him by the Uniform Commercial Code of the state in which this Security Agreement is filed, by the Note, by this Security Agreement, and by the Preferred Ship Mortgages, by the Deed of Trust, and other loan documents, and may declare the Note immediately due and payable and thereafter shall bear interest at eighteen percent (18%) per annum, unless limited by applicable state law, and may require the Borrower to assemble the Collateral and make it available to the Government at a place to be designated by the Government which is reasonably convenient to both parties. The Borrower agrees to pay the Government’s reasonable counsel fees and other expenses incurred by the latter in retaking, holding, preparing for sale, and realizing on said Collateral. Should suit or action be instituted on this Security Agreement, on the Note, or to replevy the Collateral, or any part thereof, Borrower agrees to pay (1) the Government’s reasonable attorney’s fees to be fixed by the trial court and (2) on appeal, if any, similar fees in the appellate court. Provided, however, that if the Borrower shall have removed and remedied each Event of Default within fifteen (15) days after the occurrence thereof, then in every such case the Government shall waive any such Event of Default; but no such waiver shall extend to nor affect any subsequent or other Event of Default nor impair any rights or remedies consequent thereon; and provided further that if at any time after the expiration of fifteen (15) days after any Event of Default shall have occurred, all Events of Default shall have been remedied and removed and full performance made by the Borrower to the satisfaction of the Government and all installments of principal and interest in arrears (including interest at the rate per year, as aforesaid) and the reasonable charges and expenses, if any, of the Government, its agents and attorneys, shall have been paid, then and in every such case the

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Government may waive any such Event of Default; and provided, also, that no waiver hereunder shall extend to nor affect any subsequent or other Event of Default nor impair any rights or remedies consequent thereon.

Section 9. Governing Law:

Except to the extent that the laws of the United States govern, all provisions of this Agreement shall be construed, given effect, and enforced according to the laws of the Commonwealth of Virginia. With respect to any claim or proceeding related to this Agreement the Borrower hereby consents to and subjects itself to the jurisdiction of the federal court of competent jurisdiction of the Commonwealth of Virginia and agrees that the venue of any action or proceeding relating to this Agreement shall be exclusively in the federal court situated in the Commonwealth of Virginia unless the Secretary has instituted proceedings where the Collateral may be found and in such case, Borrower consents to and subjects itself to the jurisdiction of the federal court which maintains jurisdiction over the Collateral.

IN WITNESS WHEREOF, the parties have executed and delivered this Security Agreement as of the 17th day of October, 2005.

GOVERNMENT: UNITED STATES OF AMERICA Acting by and through the Secretary of Commerce National Oceanic and Atmospheric Administration National Marine Fisheries Service Financial Services Division
By:	/s/    MICHAEL BARRY
Title:	Chief, Financial Services Branch Southeast Region

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Attest:		BORROWER: Omega Protein, Inc.
By:	/s/    JOHN D. HELD	By:	/s/    ROBERT W. STOCKTON
Title:	Secretary	Title:	Vice President and Treasurer
Date:	October 17, 2005	Date:	October 17, 2005

(SEAL)

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ACKNOWLEDGMENT

STATE OF FLORIDA	)
	)	ss
COUNTY OF PINELLAS	)

On the 17th day of October, 2005, before me personally came Michael S. Barry to me known and known to me to be the duly authorized representative of the Secretary of Commerce of the United States of America and he duly acknowledged to me that he executed the above instrument as such representative of the Secretary of Commerce pursuant to the authority vested in him by the laws of the United States.

Notary Public

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ACKNOWLEDGMENT

STATE OF TEXAS	)
	)	ss
COUNTY OF HARRIS	)

On the 17th day of October, 2005, before me personally appeared Robert W. Stockton, to me known or produced satisfactory identification, who being duly sworn, did depose and say that he is the Vice President and Treasurer of Omega Protein, Inc., and that he signed his name to said Security Agreement by like order, and the said Vice President and Treasurer acknowledged to me that he executed said Security Agreement as the Vice President and Treasurer of said corporation; and that the same is the free and voluntary act and deed of said corporation and of himself as such Vice President and Treasurer for the uses and purposes therein expressed.

Notary Public

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ACKNOWLEDGMENT

STATE OF TEXAS	)
	)	ss
COUNTY OF HARRIS	)

On the 17^th day of October, 2005, before me personally appeared Robert W. Stockton, to me known or produced satisfactory identification, who being duly sworn, did depose and say that he is the Executive Vice President and Chief Financial Officer of Omega Protein Corporation, and that he signed his name to said Security Agreement by like order, and the said Executive Vice President and Chief Financial Officer acknowledged to me that he executed said Security Agreement as the Executive Vice President and Chief Financial Officer of said corporation; and that the same is the free and voluntary act and deed of said corporation and of himself as such Executive Vice President and Chief Financial Officer for the uses and purposes therein expressed.

Notary Public

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EX-10.4

Exhibit 10.4

Case No. FF-G-013

TITLE XI FINANCIAL AGREEMENT

THIS TITLE XI FINANCIAL AGREEMENT (hereinafter, the “Financial Agreement”), dated October 17, 2005, is made and entered into by Omega Protein, Inc., (hereinafter, the “Borrower”), Omega Protein Corporation, (hereinafter, the “Guarantor”),¹ and the UNITED STATES OF AMERICA acting by and through the Secretary of Commerce, (hereinafter, the “Government”),

DEFINITIONS: All terms contained herein are defined in the Acknowledgment of Definitions executed by all parties to this transaction.

WHEREAS, heretofore, the Government, pursuant to the provisions of Title XI of the Merchant Marine Act, 1936, as amended, found at 46 USC § 1271 et seq., and 50 CFR 253, as amended by Public Law 104-297 on October 11, 1996, known as the Fisheries Finance Program (FFP), made, entered into, and delivered certain agreements and covenants, as contained in an approval and agreement letter (hereinafter, the “Approval Letter”), dated September 28, 2005, and such Approval Letter has been accepted by the Borrower and the Guarantor. The Approval Letter contemplates a loan from the Government to the Borrower, in the amount of $14,000,000.00, (hereinafter, the “Loan”). This transaction will be evidenced by the issuance of a promissory note in the amount of $14,000,000.00 (hereinafter, the “Note”). The Loan, including but not limited to the Note, will be secured by the property listed in ARTICLES I and II, below; and

WHEREAS, the Borrower and Guarantor understand that the Government is unwilling to enter into the aforementioned transaction unless this Financial Agreement and related documents are executed by the Borrower and Guarantor. For that reason, the Borrower and Guarantor have agreed to execute and deliver this Financial Agreement.

NOW THEREFORE, in consideration of the premises and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the Borrower and Guarantor hereby agree to the following:

¹ In this agreement, use of the singular includes the plural and vice versa.

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ARTICLE I: COLLATERAL

The Collateral which the Borrower is giving to the Government in order to obtain this loan from the Government, includes all of the items listed below:

1. THE EQUIPMENT: The Borrower will provide to the Government security interests, evidenced by UCC filings, in the full amount of the Promissory Note, on all of the property described below (hereinafter, the “Equipment”).

All fisheries unloading, processing holding and distribution equipment of whatsoever nature, now or at any time in the future, together with all accessories, improvements, replacements, substitutions, or additions thereto, used for the Borrower’s business on the properties which secure the Promissory Note and any other debt to the Government, or on any other Borrower’s business premises at any other site at which the Borrower now conducts, or in the future may conduct, its operations and regardless of the Equipment’s actual location at any given time. The Equipment shall include, but not be limited to: all forklifts, bobcats, cranes, pallet trucks, lift trucks, and other product or material movement equipment; all trailers, tanks, trucks, or other rolling stock; all fish unloading, transfer, and conveying equipment, all fish processing and fish weighing equipment; all cooling, refrigerating, freezing, and other fish holding equipment (blast freezers, plate freezers, coolers, or other refrigeration equipment); all fish packaging equipment; all fish baskets, totes, tanks, tubs, and other fish holding equipment; all ice makers; all hand and power tools; all inventory and product, subject to lien of credit line lender; and all office equipment—all together with all associated equipment, machinery, parts, tools, or other items of whatsoever nature and whether fixed or unfixed to the aforementioned properties securing the Promissory Note.

THIS EXCLUDES ONLY SUCH FIRST UCC SECURITY INTERESTS TO THIRD PARTIES as may be necessary and appropriate to secure credit from such parties for the specific purpose of purchasing specific equipment (hereinafter, the “Purchase-Money Equipment”). In such cases, the Borrower agrees to the following:

(a) To give to the Government UCC security interests on the Purchase-Money Equipment second only to the first interests pledged to the lenders of the purchase money (hereinafter, the “Purchase-Money UCC security interests”); and

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Article I, COLLATERAL (continued)

(b) That the amount secured by the Purchase-Money UCC security interests shall not exceed the specific purchase cost of said equipment; and

(c) The term of the credit secured to buy the Purchase-Money Equipment (and likewise, the duration of the Purchase-Money UCC security interests) shall not exceed an ordinarily prudent commercial term; and

(d) No other Equipment or rights shall be secured by the Purchase-Money UCC security interests; and

(e) Upon full repayment of the amounts secured by the Purchase-Money Equipment, as reflected in the Purchase-Money UCC security interests, these interests shall be satisfied and the Government’s second UCC security interest will ascend to first priority.

THE EQUIPMENT SHALL BE INVENTORIED sufficiently to describe with certainty in the security agreement and associated UCC filing. The inventory shall be valued by appraisers acceptable to the Government. The inventory and appraisals shall be at the Borrower’s cost and paid before this loan is closed, unless this requirement is specifically waived by the Government.

THE UCC SECURITY AGREEMENT SHALL CONTAIN the following provisions:

(a) That the Government may enter upon any premises where the Equipment may be located and marshal, secure, protect, and do all things necessary to preserve the Equipment immediately upon the Borrower’s default, but before any judicial action regarding such default; and

(b) Such other provisions as the Government deems necessary to accomplish the intent and purpose of the Approval Letter and otherwise protect its interest; and

(c) Omega Protein, Inc., and Omega Protein Corporation, agree that none of these corporations will enter into any transaction or agreement with any party which will result in that party having a secured interest in the Equipment unless that party first enters into a written agreement, with provisions acceptable to the Government, that:

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Article I, COLLATERAL (continued)

(i) Except for purchase money lien holders, recognize the Government’s senior interest in, and sole rights to, the Equipment or proceeds of the Equipment’s liquidation; and

(ii) Agree not to interfere in any way with, but instead to cooperate in all reasonable ways with, the Government entering upon any property owned or leased by the Borrower in order to marshal, secure, protect, and do all things necessary to preserve the Equipment.

2. THE REAL PROPERTY includes:

(a) A seventh Deed of Trust in the full amount of the FFP Debt, on such property as more fully described in Exhibit A, attached hereto, owned by Borrower, together with all improvements thereon which comprise the Borrower’s fisheries processing facility in Reedville, Virginia.

3. PREFERRED SHIP MORTGAGES:

(a) A Preferred Ship Mortgage in the full amount of the FFP Debt, on the vessel ALBERT J. BOURG, O.N. 298585.

(b) A Preferred Ship Mortgage in the full amount of the FFP Debt, on the vessel REEDVILLE, O.N. 569161.

(c) A Preferred Ship Mortgage in the full amount of the FFP Debt, on the vessel GALVESTON BAY, O.N. 508776.

(d) A Preferred Ship Mortgage in the full amount of the FFP Debt, on the vessel TANGIER ISLAND, O.N. 565268.

4. THE GUARANTEE: An unconditional guarantee of repayment of the FFP Debt will be given to the Government by Omega Protein Corporation.

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ARTICLE II: ADDITIONAL COLLATERAL

1. INDIVIDUAL TRANSFERABLE QUOTAS: Should a limited fisheries access system be initiated at some future date under which the Borrower is granted a transferable fishery conservation and management allocation (including, but not limited to, allocations, permits, quotas, licenses, cage tags, or any other fisheries access restriction or right, however characterized, of whatsoever nature) affecting, necessary for, or in any other way, however characterized, associated with any of the property included in the Collateral, the Borrower agrees to grant to the Government a full senior security interest in such allocation by whatsoever means deemed by the Government to be appropriate (including, but not limited to, the Borrower’s execution of security agreements and the filing of financing statements under the UCC). Further, if the Borrower fails to do so, the Borrower agrees that the Government may use, for the purpose of executing and otherwise perfecting whatever documents may be required to effect the grant to the Government of such a full security interest in such fisheries conservation and management allocation, the attorney-in-fact authority conferred upon the Government by ARTICLE IX of this agreement.

2. OTHER COLLATERAL: Any new, different, substitute or other collateral which may, from time to time, be provided by the Borrower or the Guarantor to the Government, will be subject to all of the covenants and provisions of all of the documents executed in connection with this transaction, including, but not limited to the Deed of Trust, Security Agreement, this Financial Agreement, the Promissory Note, the Approval Letter, and UCC security interests.

ARTICLE III: GOVERNMENT’S PRIOR WRITTEN CONSENT REQUIRED

Without the prior written consent of the Chief, Financial Services Division, National Marine Fisheries Service, which consent will not unreasonably be withheld, (1) The Borrower, the Principals, or the Guaranteeing Company may not take any of the actions prohibited by the Approval Letter dated September 28, 2005; or prohibited by any other of the loan documents.

ARTICLE IV: BORROWER’S OBLIGATIONS AND COVENANTS

The Borrower shall be bound by and do, perform or discharge all of the following actions.

1. NOTICES TO THE GOVERNMENT: within ten (10) days of its occurrence, Borrower and the Guarantor must give the Government written notice of any of the following:

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Article IV, BORROWER’S OBLIGATIONS AND COVENANTS (continued)

(a) Any pending litigation, business reverse, casualty, loss, or any other matter which diminishes:

(i) its ability to service any debt actually or contingently owed the Government; or

(ii) its ability to perform any other duty or obligation owed the Government; or

(iii) its ability to fully and faithfully perform any covenant with the Government; or

(iv) the value of any property or other assets pledged to the Government; or

(v) the net worth of any party against whom the Government has recourse for this debt.

(b) The institution of any suit against the Borrower which demands $50,000 or more; or the institution of any suit demanding $50,000 or more against any other person or entity that may adversely affect the Government’s interest hereunder, in the Promissory Note or otherwise.

ARTICLE V: FINANCIAL REPORTING TO AND INSPECTIONS BY THE GOVERNMENT

1. BORROWER AGREES TO PROVIDE THE GOVERNMENT WITHIN 20 DAYS FOLLOWING THE END OF EACH QUARTER of its tax or accounting years, a certified correct copy of:

(a) a balance sheet; and

(b) an income and expense statement for the preceding twelve months; and

(c) an aging report of all receivables outstanding; and

(d) an inventory report for all inventories maintained at the end of each year.

2. CERTIFICATION OF FINANCIAL INFORMATION: Borrower agrees that:

ANNUALLY: At the end of each fiscal year, said Article V, l(a) through (d) will be compiled by independent certified public accountants who are acceptable to the Government.

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Article V, FINANCIAL REPORTING (continued)

ALL ANNUAL financial reports required hereunder shall include a certification from the Borrower’s Chief Financial Officer that either:

(a) There has been no default, as provided by the security instruments, during the reporting period; or

(b) There has been a default, as provided by said security instruments, during the reporting period. In this case the nature, extent, prospective consequences, and all other relevant details of such default shall be fully set forth in such certification.

3. INCOME TAX RETURNS: All tax returns shall be timely filed² and an executed copy of Borrower’s Federal Income Tax Return, along with all supporting schedules, must be delivered to the Government within 15 days of its filing or issuance. Borrower agrees to execute a consent and waiver, valid so long as Borrower owes a debt to the Government, which allows the Internal Revenue Service to release directly to the Government, Borrower’s Federal Income Tax Returns, whenever the Government requests same.³

4. BORROWER TO DELIVER ALL REQUIRED FINANCIAL STATEMENTS, notices, returns or reports to the Government’s Southeast Regional Financial Services Branch. All financial statements shall be signed and delivered within 90 days of the close of the fiscal or accounting year, or such quarter in such year, to which they relate.

5. METHOD OF BOOKKEEPING: Borrower will, at all times, keep proper books of account according to generally accepted accounting principles, including financial and operating statements that include schedules showing all compensation paid by the Borrower.

6. GOVERNMENT INSPECTIONS: Permit the Government, or any representative selected by the Government, in such manner and at such times as the Government may require, to (a) make inspections and audits of any books, records, papers, or other documents⁴ of whatsoever nature in the custody and control of the Borrower, Guarantor, or any other entity, relating in any way to the financial or business condition or prospects of the Borrower, or Guarantor, including the making of copies thereof and extracts therefrom, and

² Timely filing shall include valid extensions filed with the Internal Revenue Service.

³ Borrower agrees to execute IRS Form Nos. 4506 and 8821 or any other form necessary to implement the provisions of 26 USC §6103(c). Failure to do so constitutes an event of default.

⁴ Including but not limited to off-loading receipts, business transaction journals, etc.

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Article V, FINANCIAL REPORTING (continued)

(b) make inspections and appraisals of any of the Borrower’s or Guarantor’s physical assets.

7. BORROWER TO PAY THE COST OF ALL SUCH INSPECTIONS: The cost of all such inspections, audits, or appraisals shall be initially paid by the Government, but the Borrower shall reimburse the Government for the full cost thereof within 30 days of the Government’s demand and all such amounts disbursed by the Government for such purpose shall, until fully repaid by the Borrower, be added to the Borrower’s Promissory Note to the Government (payable on demand) and shall earn interest at the same rate as the other principal of the Borrower’s Promissory Note and shall be secured by the security instruments securing the Borrower’s Promissory Note.

8. GUARANTOR’S OBLIGATIONS: Paragraphs 1, 2, 3, 4, 5, and 6, above, of this ARTICLE V, apply to the Guarantor, with the only exception being in Paragraph 4, the Guarantor has 120 days to deliver financial statements. Additionally, the Guarantor shall provide to the Government, at the end of each tax year, a certified correct copy of its Statement of Financial Condition, and if applicable its SEC-10K Report.

ARTICLE VI: VIRGINIA LAW TO GOVERN

To the extent not governed by the laws of the United States, all provisions of this Financial Agreement shall be construed, given effect, and enforced according to the laws of the Commonwealth of Virginia. With respect to any claim or proceeding relating to this Financial Agreement, the Borrower and Guarantor hereby consent to and subject themselves to the jurisdiction of the state and federal courts located in the Commonwealth of Virginia, and agree that the venue of any action or proceeding relating to this Financial Agreement shall lie exclusively in said state. The parties hereto acknowledge and agree, however, that in the event that an action to foreclose a real property mortgage and security agreement or deed of trust and security agreement is brought, it will be brought pursuant to the laws of the state where the real property is located and the parties hereto hereby consent to and subject themselves to the jurisdiction of the courts of said state.

ARTICLE VII: DEFAULT

1. THE OCCURRENCE OF ANY OF THE FOLLOWING CONSTITUTES AN EVENT OF DEFAULT:

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Article VII, DEFAULT (continued)

(a) ANY FAILURE TO OBSERVE, PERFORM, COMPLY WITH AND DISCHARGE ALL OF THE COVENANTS, CONDITIONS, AND OBLIGATIONS WHICH ARE IMPOSED ON:

(i) BORROWER by the Approval Letter, dated September 28, 2005, this Title XI Financial Agreement, the Promissory Note, dated October 17, 2005, the Deed of Trust dated October 17, 2005, Preferred Ship Mortgages dated October 17, 2005, and any other agreement or document executed in connection with this Financial Agreement and the Promissory Note, concurrently or otherwise, inclusive of amendments thereto, in connection with this Financial Agreement, or subsequent amendment or agreement, regardless of whether or not the Borrower shall be a party to said agreement or document, and such default shall continue for fifteen (15) days; or

(ii) ANY GUARANTOR by any Guaranty Agreement, or any other agreement or document executed in connection with this transaction, whether or not the Borrower is party to said agreement; or

(b) ANY FAILURE TO PAY OR MAKE PAYMENTS ON:

(i) INTEREST ON THE PROMISSORY NOTE when and as the same shall become due and payable as therein provided; or

(ii) PRINCIPAL ON THE PROMISSORY NOTE when and as the same shall become due and payable, whether at maturity, by notice of acceleration, or otherwise;

(iii) ANY OTHER AMOUNT DUE in connection with this transaction; or

(c) FINANCIAL EVENTS:

(i) Borrower makes a general assignment for the benefit of the Borrower’s creditors; or

(ii) Borrower loses the right to do business, by forfeiture or otherwise; or

(iii) A receiver or receivers of any kind whatsoever, whether appointed or not, in admiralty, bankruptcy law, common law, or equity proceedings, and whether temporary or permanent, shall be appointed for property of the Borrower; or

(iv) PETITION OR OTHER PROCEEDING OR ACTION IN BANKRUPTCY, regarding the BORROWER, is filed by the BORROWER or by creditors of the BORROWER; however, no proceeding or action

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Article VII, DEFAULT (continued)

in bankruptcy filed against BORROWER by its creditors shall constitute an event of default under the Financial Agreement unless such proceeding or action has not been dismissed within 60 days of filing. ALL PARTIES TO THIS AGREEMENT ACKNOWLEDGE AND UNDERSTAND THAT IN THE EVENT THAT A PETITION IN BANKRUPTCY IS FILED BY ANY PARTY OR AN INVOLUNTARY BANKRUPTCY PETITION FILED BY A THIRD PARTY IS NOT DISMISSED WITHIN 60 DAYS OF FILING, THAT THE FOLLOWING EVENT WILL OCCUR:

1. THE GOVERNMENT WILL IMMEDIATELY ACCELERATE THE ENTIRE AMOUNT OUTSTANDING AND DEMAND IMMEDIATE PAYMENT THEREOF; AND

2. ANY VESSEL THAT SECURES, IN WHOLE OR IN PART, THE SUM OWED THE GOVERNMENT WILL RETURN TO PORT AND NOT DEPART UNLESS ORDERED BY THE BANKRUPTCY COURT.

(d) FAILURE TO MAINTAIN ANY OF THE INSURANCE COVERAGE as outlined in Paragraph (4): Insurance Requirements, found on page 14 of the Approval Letter.

(e) A MISREPRESENTATION OR UNDISCLOSED FACT, deemed material by the Government, made or omitted in any application, agreement, affidavit, or other document, submitted in connection with this transaction, on behalf of, or for the benefit of, or by the Borrower; or

(f) INSTITUTION OF ANY SUIT AGAINST THE BORROWER or others deemed by the Government to affect adversely its interest hereunder, in the Promissory Note or otherwise;

(g) THE OCCURANCE OF ANY EVENT that would adversely affect the ability of the Borrower or Guarantor to timely service the debt, actually or contingently, owed the Government or that would cause the Government to reasonably deem itself an insecure creditor.

2. UPON OCCURRENCE OF AN EVENT OF DEFAULT, THE BORROWER AGREES, ACKNOWLEDGES AND CONSENTS TO the Government, within its authority or discretion, to take any or all of the following steps, measures or actions, including but not limited to:

(a) Declare the Promissory Note to be due and payable immediately and upon such declaration the entire principal of and interest on the Promissory Note, and any other sums owed to the Government, shall become and be immediately due and payable, and

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Article VII, DEFAULT (continued)

thereafter shall bear interest at eighteen percent (18%) per annum unless such would violate applicable usury laws, if any, in which case, the maximum legal rate permitted by applicable laws shall prevail; provided, however, that if the Borrower shall have removed and remedied each Event of Default within fifteen (15) days after the occurrence thereof, then in every such case, the Government shall waive any such Event of Default; but no such waiver shall extend to nor affect any subsequent or other Event of Default nor impair any rights or remedies consequent thereon; and provided, further, that if at any time after the expiration of fifteen (15) days after any Event of Default shall have occurred, all Events of Default shall have been remedied and removed and full performance made by the Borrower to the satisfaction of the Government and all installments of principal and interest in arrears (including interest at the rate per annum, as aforesaid) and the reasonable charges and expenses, if any, of the Government, its agents and attorneys, shall have been paid (including interest at the rate per annum, as aforesaid), then and in every such case the Government may, in its discretion, waive any such Event of Default; and provided, also, that no waiver hereunder shall extend to nor affect any subsequent or other Event of Default nor impair any rights or remedies consequent thereon;

(b) BRING SUIT IN COURT OF COMPETENT JURISDICTION, at the discretion of the Government, to obtain judgment for any and all amounts due under the Promissory Note, or otherwise hereunder, and collect the same out of any and all collateral of the Borrower; and/or

(c) FORECLOSE THE REAL ESTATE MORTGAGES AND SECURITY AGREEMENTS AND/OR PREFERRED SHIP MORTGAGE AND SELL any real and/or personal property which secures the FFP Debt; and/or in the case of a Vessel, retake the Vessel without legal process wherever the same may be found, and the Borrower or other person in possession, forthwith upon demand of the Government, shall immediately surrender to the Government possession of the Vessel, and, without being responsible for loss or damage, the Government may hold, lay-up, lease, charter, operate, or otherwise use the Vessel for such time and upon such terms as it may deem to be for its best advantage, accounting only for the net profits, if any, arising from such use of the Vessel and charging against all receipts from the use of the Vessel, or from the sale thereof by court proceeding or pursuant to subsection (e) below, all costs, expenses, charges, damages, or losses by reason of such use; and if at any time the Government shall avail itself of the right herein given it to retake the Vessel and shall retake it, the

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Article VII, Default (continued)

Government shall have the right to dock the Vessel for a reasonable time at any dock, pier, or other premises of the Borrower without charge, or to dock it at any other place at the cost and expense of the Borrower; IT IS EXPRESSLY UNDERSTOOD AND AGREED TO BY THE BORROWER THAT SURRENDER OF THE VESSEL UNDER THIS SECTION MUST BE AND WILL BE IMMEDIATE AND IN ACCORDANCE WITH THE DIRECTIONS OF THE GOVERNMENT. FAILURE OF THE BORROWER TO IMMEDIATELY COMPLY WITH THE GOVERNMENT’S DEMAND FOR SURRENDER OF THE VESSEL WILL CAUSE THE POSSESSION OF THE VESSEL BY THE BORROWER (INCLUDING, BUT NOT LIMITED TO, POSSESSION AND CONTROL OF THE VESSEL BY A MASTER OR CREW MEMBER ON BOARD THE VESSEL) TO BE UNLAWFUL AND TO CONSTITUTE A CONVERSION OF THE VESSEL, ITS APPURTENANCES AND EQUIPMENT, THEREBY SUBJECTING THE BORROWER (EXPRESSLY INCLUDING, IF APPLICABLE, ITS OFFICERS AND DIRECTORS) TO ALL FINES, PENALTIES AND ACTIONS WHICH THE GOVERNMENT DEEMS APPLICABLE AND APPROPRIATE. SHOULD THE BORROWER CONTINUE TO OPERATE, POSSESS OR CONTROL THE VESSEL CONTRARY TO THE GOVERNMENT’S DIRECTIONS AND THE PROVISIONS HEREIN, THEN THE GOVERNMENT SHALL, IN ADDITION TO ANY OTHER RIGHTS AND REMEDIES AT LAW AND IN EQUITY, BE ENTITLED TO A TEMPORARY RESTRAINING ORDER AND/OR ORDER FOR INJUNCTIVE RELIEF NECESSARY TO GAIN COMPLIANCE HEREWITH, IN ADDITION TO EXPRESSLY CONSENTING THAT THE INJURY AND DAMAGE RESULTING FROM BREACH HEREOF WOULD BE IMPOSSIBLE TO MEASURE MONETARILY, BORROWER EXPRESSLY WAIVES ANY DEFENSE BASED UPON AN ALLEGED EXISTENCE OF AN ADEQUATE REMEDY AT LAW.

(d) Foreclose this Mortgage pursuant to the terms and provisions of the 46 USC, Chapter 313, or by other judicial process as may be provided in the statutes; and

(e) In addition to any and all other rights, powers, and remedies elsewhere in this Mortgage or by law granted to and conferred upon the Government, sell the Vessel upon such terms and conditions as it may deem to be for its best advantage, including the right to sell and dispose of the Vessel free from any claim of or by the Borrower, at public sale, by sealed bids or otherwise, after first giving notice of the time and place of sale, with a general description of the property by first publishing notice of any such sale for ten (10) consecutive days, except Sundays, in some newspaper of general circulation at the place designated for such sale, and by mailing notice of such sale to the Borrower at its last known address; such sale may be held at such place and at such time as the Government in such notice may have specified, or may be adjourned by the Government from time to time by announcement at the time and place appointed for such sale or for such adjourned sale, and without further notice of publication and the Government may make any such sale

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Article VII, Default (continued)

at the time and place to which the same shall be so adjourned; and any such sale may be conducted without bringing the Vessel to the place designated for such sale and in such manner as the Government may deem to be for its best advantage, and the Government may become the purchaser at any such sale, and shall have the right to credit on the purchase price any or all sums of money due to the Government under the Promissory Note, or otherwise hereunder. THE BORROWER EXPRESSLY AGREES AND ACKNOWLEDGES THAT SALE OF THE VESSEL PURSUANT TO THIS SECTION WILL NOT (NOTWITHSTANDING FEDERAL OR STATE LAW TO THE CONTRARY, IF ANY,) IMPAIR OR LIMIT THE GOVERNMENT’S LEGAL RIGHT TO COLLECT FROM THE BORROWER OR GUARANTOR ANY DEFICIENCY REMAINING AFTER THE SALE. IF ANY SUCH FEDERAL OR STATE LAWS OR LEGAL PRECEDENTS MAY BE CONSTRUED TO LIMIT THE GOVERNMENT’S RIGHTS TO COLLECTION OF SAID DEFICIENCY FROM THE BORROWER, THEN BORROWER HEREBY EXPRESSLY WAIVES, RELINQUISHES AND FOREVER GIVES UP THE RIGHT TO AVAIL ITSELF OF SUCH LAWS AND/OR DEFENSES.

(f) RETAKE AND/OR SELL THE EQUIPMENT WITHOUT LEGAL PROCESS as provided by the Real Estate Mortgages, Security Agreements, and Preferred Ship Mortgages, or any other document which has been executed by or on behalf of the Borrower; and

(g) Make demand upon, institute action against, foreclose collateral, if any, or make any attempt of any nature to collect outstanding sums from any Guarantor, whether or not similar efforts have been made against the Borrower.

ARTICLE VIII: TITLE XI FINANCIAL AGREEMENT GOVERNS; SEVERABILITY

1. To the extent that any of the terms and conditions of this Financial Agreement are inconsistent or in contradiction with the terms and conditions of any other agreement between the Government and the Borrower, including but not limited to previously executed Title XI Financial Agreements, then the terms of this Financial Agreement shall govern, otherwise, all such terms and conditions of such other agreements will continue with full force and effect.

2. The unenforceability or invalidity of any provision(s) of this Title XI Financial Agreement shall not render any other provision(s) herein unenforceable or invalid.

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ARTICLE IX: POWER OF ATTORNEY

Borrower hereby irrevocably appoints the Government the true and lawful attorney of the Borrower, in its name and stead to execute any other document necessary to perfect the Government’s security interests regarding this transaction and/or all aspects of the FFP Debt.

ARTICLE X: ENVIRONMENTAL HAZARD INDEMNIFICATION

Borrower and Guarantor hereby agree to the following with respect to any environmental hazards or contamination associated with the Collateral:

1. At closing, Borrower must certify in writing that, to the best of its knowledge, there are currently no defects or environmental hazards on or about the Collateral. Notwithstanding this, at closing, Borrower and Guarantor will execute a Certification and Indemnification Agreement Regarding Environmental Matters which provides that they shall, jointly and severally, be liable for any and all contamination, cleanup, and environmental actions against the Collateral and that they are, jointly and severally, liable for all costs and claims associated with or resulting from any claim, cleanup, or lien imposed against any of the Collateral.

2. That Borrower and Guarantor will hold the Government harmless from any claim or duty arising from environmental defects or hazards associated with the Collateral.

In the event this loan is not closed because of the discovery of such defects or environmental hazards previously unknown to Borrower, the Government will refund the commitment fee less all costs incurred by the Government in attempting to close.

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IN WITNESS WHEREOF, the Borrower and the Guarantor have executed this Title XI Financial Agreement.

		GOVERNMENT:
		UNITED STATES OF AMERICA
		Acting by and through the Secretary of Commerce National Oceanic and Atmospheric Administration National Marine Fisheries Service Financial Services Division
		By:	/s/    MICHAEL BARRY
		Title:	Chief, Financial Services Branch Southeast Region
		Date:	October 17, 2005
Attest:		BORROWER: OMEGA PROTEIN, INC.
By:	/s/    JOHN D. HELD	By:	/s/    ROBERT W. STOCKTON
Title:	Secretary	Title:	Vice President and Treasurer
Date:	October 17, 2005	Date:	October 17, 2005
(SEAL)
Attest:		GUARANTOR: OMEGA PROTEIN CORPORATION
By:	/s/    JOHN D. HELD	By:	/s/    ROBERT W. STOCKTON
Title:	Secretary	Title:	Executive Vice President and Chief Financial Officer
Date:	October 17, 2005	Date:	October 17, 2005
(SEAL)

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EX-10.5

Exhibit 10.5

Case No. FF-G-013

GUARANTY AGREEMENT

RECITALS: THIS GUARANTY AGREEMENT, is made and entered into by Omega Protein Corporation, 1717 St. James Place, Suite 550, Houston, Texas 77056 (hereinafter, the “Guarantor”), and the UNITED STATES OF AMERICA, acting by and through the Secretary of Commerce, National Oceanic and Atmospheric Administration, National Marine Fisheries Service, Financial Services Division (hereinafter, the “Government”).

DEFINITIONS: All terms contained herein are defined in the Acknowledgment of Definitions executed by all parties to this transaction.

WHEREAS, the Government has made, entered into, and delivered that certain Approval in Principle Letter dated September 28, 2005, (the “Approval Letter”), which Approval Letter has been accepted by Omega Protein, Inc., (the “Borrower”) and the Guarantor, and which Approval Letter contemplates the Government providing financing to the Borrower in the amount of $14,000,000.00 (the “Loan”). The Government will provide the Borrower with $14,000,000.00 evidenced by the execution and delivery to the Government of a promissory note (the “Note) dated October 17, 2005, in the principal amount of $14,000,000.00, and the Borrower has agreed to execute and deliver certain Preferred Ship Mortgages, a Deed of Trust and Security Agreement, UCC Financing Statements, (collectively, the “Loan Documents”) to the Government for the purpose of securing the payment of the principal of and interest on the Note and all other sums due the Government in connection with the Loan and in accordance with its terms and the terms contained in the Loan Documents.

WHEREAS, the Guarantor understands that the Government is unwilling to enter into the aforementioned transaction, unless this Guaranty Agreement is executed by the Guarantor, therefore, in order to induce the Government to enter into the aforementioned transaction with the Borrower, the Guarantor has agreed to execute and deliver to the Government an absolute and unconditional guaranty, (hereinafter, the “Guaranty”) of the above-referenced Note, thereby guaranteeing that all sums stated in the Note and all other sums of any nature owed to the Government by the Borrower, shall be promptly paid in full when due.

WHEREAS, Omega Protein Corporation further represents to the Government that it is a corporation in good standing in the State of Nevada and that it will not allow or permit said status to change, except with the express, written consent of the Government.

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NOW THEREFORE, in consideration of the premises and other good and valuable consideration, the receipt whereof is hereby acknowledged, the parties agree as follows:

1. The Guarantor unconditionally guarantees that all sums stated in, arising under the Note, including any and all amendments thereto, to be payable to the Government, shall be promptly paid in full when due, in accordance with the provisions governing such payment. This Guaranty Agreement is unconditional and absolute and if for any reason such sums, or any part thereof, shall not be paid promptly when due, the Guarantor will immediately pay the same to the Government pursuant to the provisions governing such payment, regardless of any defenses or rights of set-off or counterclaims which the Borrower, Guarantor or any other party may have or assert, and regardless of whether the Government shall have taken any steps to enforce any rights against the Borrower, the Guarantor or any other person to collect such sums, or any part thereof, and regardless of any other condition or contingency. The Guarantor also expressly agrees to pay the Government all the costs and expenses of collecting such sums, or any part thereof, or of enforcing this Guaranty Agreement, expressly including, but not limited to, attorney’s fees. It is expressly understood by the Guarantor that collection expenses may accrue rapidly and result in significant expenses for which the Guarantor agrees to be liable. It is further agreed to and understood by the Guarantor that “costs and expenses” of collection are deemed to include any and all costs, including but not limited to, accelerated interest charges, attorney fees, and all other costs and expenses, which the Government may incur to collect sums due under the Note or hereunder or to protect and preserve collateral pledged in relation to the obligation, regardless of whether said collateral was pledged by the Guarantor. The Guarantor agrees to be liable for and pay for said costs and expenses (including all interest charges thereon) which will continue to accrue until such time as the Guarantor fully satisfies and discharges the obligation arising under this Guaranty Agreement.

2. The Guarantor unconditionally guarantees that the Borrower will promptly and punctually pay all other sums payable under the Note and the Loan Documents, including any amendments or substitutions therefor, and will duly perform and observe each and every agreement, covenant, term and condition in such Note and Loan Documents, or amendments thereto, to be performed or observed by the Borrower, and upon the Borrower’s failure to do so, the Guarantor will promptly pay such sums and duly perform and observe each such agreement, covenant, term and condition, or cause the same promptly to be performed and observed.

3. The obligations, covenants, agreements and duties of the Guarantor under this Guaranty shall in no way be affected or impaired by reason of the happening from time to time of any of the following with respect to the Note or the Loan Documents, including amendments or substitutions therefor, or any other document executed in connection therewith, although without notice to or the further consent of the Guarantor:

a. the waiver by the Government, or its successors or assigns, of the performance or observance by the Borrower, the Guarantor or any other party of any of the agreements, covenants, terms or conditions contained in the Note and the Loan Documents, or any other document executed in connection therewith;

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b. the extension, in whole or in part, of the time for payment by the Borrower, the Guarantor or any other party to the obligation of any sums owing or payable under the Note, the Loan Documents or this Guaranty Agreement or of the time for performance by the Borrower, the Guarantor or any other party to the obligation of any other obligations under or arising out of or on account of the Note, the Loan Documents any other document executed in connection therewith;

c. the modification or amendment (whether material or otherwise) of any of the obligations of the Borrower, the Guarantor or any other party to the obligation as set forth in the Note, the Loan Documents or any other documents executed in connection therewith;

d. the doing or the omission of any of the acts referred to in the Note, the Loan Documents or any other document executed in connection therewith;

e. any failure, omission, or delay of the Government to enforce, assert, or exercise any right, power or remedy conferred on the Government in the Note, the Loan Documents or any other document or agreement executed in connection therewith, or any action on the part of the Borrower or the Government granting indulgence or extension in any form whatsoever; and

f. the voluntary or involuntary liquidation, dissolution, sale of all or substantially all of the assets, marshalling of assets and liabilities, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition, or readjustment of, or other similar proceeding affecting the Borrower or any of its assets or any other party to the obligation; and

g. the release of the Borrower, the Guarantor or any other party from the performance or observance of any of the agreements, covenants, terms or conditions contained in the Note, the Loan Documents or any other document executed in connection therewith, by the operation of law; and

h. any Order of Judgment entered by a Bankruptcy Court which diminishes, discharges or declares any of the obligations or amounts owed under the Note and Loan Documents to be paid or satisfied. The undersigned hereby waive any defense based upon any Bankruptcy Court order or judgment with respect to any action based upon this Guaranty Agreement, which is brought against the undersigned in Federal District Court, or any other court of competent jurisdiction; and

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i. the assumption and/or refinancing of the underlying indebtedness by a third party.

4. Notice of acceptance of this Guaranty Agreement and notice of any obligations or liabilities contracted or incurred by the Borrower or any other party to the obligation are hereby waived by the Guarantor.

5. This Guaranty Agreement may not be modified or amended except by a written agreement executed by the Guarantor with the consent in writing of the Government.

6. This Guaranty Agreement may be assigned to any holder of the Note.

7. All agreements, covenants, terms and conditions in this Guaranty Agreement shall inure to the benefit of the Government and its successors and assigns, and, without limitation of the generality of the foregoing, shall in particular inure to the benefit of any holder of the Note.

8. The signature of the Guarantor hereto is, in addition to and not in limitation of the foregoing, intended as and to have the effect of an endorsement of the Note by the Guarantor, who hereby waives presentment, demand of payment, protest and notice of nonpayment of dishonor, and of protest of the Note and any and all other notices and demands whatsoever.

9. The terms of this Guaranty Agreement shall apply to the Note and all other loan documents and shall bind the Guarantor to the same extent as though the Guarantor executed and delivered a separate instrument of guaranty with respect to each of such instruments and annexed the same thereto.

10. This Guaranty Agreement shall be binding upon the Guarantor and the Guarantor’s heirs, executors, administrators, successors, assigns and all other legal representatives.

11. Community Property Rights: Each and every term and provision of this Agreement shall, to the extent necessary or required to subject community property rights, if any, in the collateral, to the terms hereof and herein contained be read and interpreted to apply to the Guarantor.

12. The Guarantor acknowledges and represents to the Government that it is a principal party of interest with respect to the past, present and future operation of the Borrower’s business and that the past, present and future financial success of the Borrower’s business has, does and will directly, materially and substantially benefit the Guarantor. Accordingly, the Guarantor acknowledges and consents to any and all regulations and/or Financial Services Division requirements

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which require, permit or authorize the Government to request that the Guarantor execute and deliver a guaranty of sums due under the Note.

13. All provisions of this Guaranty Agreement shall be construed, given effect, and enforced according to the laws of the United States. With respect to any claim or proceeding relating to this Guaranty Agreement, the Guarantor hereby consents to and subjects itself to the jurisdiction of the federal court of competent jurisdiction of the State of Louisiana, and agrees that the venue of any action or proceeding relating to this Guaranty Agreement shall lie exclusively in the federal court situated in the State of Louisiana, unless the Government has instituted proceedings where the collateral may be found and in such case, the Guarantor consents to and subjects itself to the jurisdiction of the federal court which maintains jurisdiction over the collateral.

14. Prior written consent must be granted by the Government, consent of which will not be unnecessarily withheld, before the Guarantor shall split-up, spin-off, merge, consolidate, transfer or allow transfer of its shares and/or assets as to effect a change in its controlling interest, management, and financial conditions.

15. If the Guarantor is a corporation, the Guaranty Agreement shall be binding upon its parent corporation and its subsidiaries.

16. Severability: The unenforceability or invalidity of any provision(s) of this Guaranty Agreement shall not render any other provision(s) herein unenforceable or invalid.

IN WITNESS WHEREOF, the undersigned has executed and delivered this Guaranty Agreement.

UNITED STATES OF AMERICA Acting by and through the Secretary of Commerce National Oceanic and Atmospheric Administration National Marine Fisheries Service Financial Services Division
By:	/s/    MICHAEL BARRY
Title:	Chief, Financial Services Branch Southeast Region
Date:	October 17, 2005

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Attest:		GUARANTOR: Omega Protein Corporation
By:	/s/    JOHN D. HELD	By:	/s/    ROBERT W. STOCKTON
		Title:	Executive Vice President and Chief Financial Officer
Date:	October 17, 2005	Date:	October 17, 2005

(SEAL)

6

ACKNOWLEDGMENT

STATE OF FLORIDA	)
	)	ss
COUNTY OF PINELLAS	)

On this the 17th day of October ,2005, Michael S. Barry, Chief, Financial Services Branch, National Marine Fisheries Service, Southeast Region, who is the duly authorized representative of the Secretary of Commerce of the United States of America, acknowledged that he executed the foregoing instrument as such representative of the Secretary of Commerce pursuant to the authority vested in him by the laws of the United States. He is personally known to me and did not take an oath.

Notary Public

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ACKNOWLEDGMENT

STATE OF TEXAS	)
	)	ss
COUNTY OF HARRIS	)

On the 17 day of October, 2005, before me personally appeared Robert W. Stockton, to me known or produced satisfactory identification, who being duly sworn, did depose and say that he is the Executive Vice President and Chief Financial Officer of Omega Protein Corporation, and that he signed his name to said Guaranty Agreement by like order, and the said Executive Vice President and Chief Financial Officer acknowledged to me that he executed said Guaranty Agreement as the Executive Vice President and Chief Financial Officer of said corporation; and that the same is the free and voluntary act and deed of said corporation and of himself as such Executive Vice President and Chief Financial Officer for the uses and purposes therein expressed.

Notary Public

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EX-10.6

Exhibit 10.6

Case No. FF-G-013

CERTIFICATION AND INDEMNIFICATION AGREEMENT

REGARDING ENVIRONMENTAL MATTERS

THIS INDEMNITY AGREEMENT is entered into this 17th day of October, 2005, between Omega Protein, Inc., 835 B Pride Drive, Hammond, Louisiana 70401, (hereinafter, the “Borrower”), Omega Protein Corporation, 1717 St. James Place, Suite 550, Houston, Texas 77056, (hereinafter, the “Guarantor”) and the United States of America, acting by and through the Secretary of Commerce, National Oceanic and Atmospheric Administration, National Marine Fisheries Service, Office of Financial Services, Southeast Region, 263 13^th Avenue South, St. Petersburg, Florida 33701, (hereinafter, the “Government”); and

RECITALS:

1. The Borrower is the owner of certain real property, (hereinafter, the “Premises”), located in the Commonwealth of Virginia, which is more particularly described in Exhibit A, attached hereto and incorporated herein by this reference, and defined below.

2. The Government has agreed to lend a certain sum to the Borrower (hereinafter, the “Loan”) in consideration for which the Borrower has executed and delivered to the Government a certain Promissory Note payable to the Government (hereinafter, the “Note”), which Note is secured by, among other things, a certain mortgage and/or deed of trust, respecting the Premises (hereinafter, the “Mortgage”). This mortgage and/or deed of trust is more particularly described in Exhibit B, attached hereto and incorporated herein by this reference.

3. As a condition to providing the Loan, the Government requires the Borrower and Guarantor to provide certain indemnities concerning Hazardous Materials or Contamination (both as hereinafter defined) affecting the Premises.

DEFINITIONS:

All terms contained herein are defined in the Acknowledgement of Definitions executed by all parties to this transaction.

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IN CONSIDERATION OF the issuance of certain Loans pursuant to the provisions of Title XI of the Merchant Marine Act, 1936, as amended, found at 46 USC §1271 et seq., and 50 CFR 253, as amended by Public Law 104-297 on October 11, 1996, known as the Fisheries Finance Program (FFP), Borrower hereby represents, warrants, covenants, acknowledges and agrees in favor of the Government, on a continuing basis, as follows:

BORROWER’S REPRESENTATIONS AND WARRANTIES:

The Borrower hereby represents and warrants, to the best of its knowledge, in favor of the Government, as follows:

1. The Premises, and its existing and prior uses, comply, and have at all times complied with, and neither the Borrower or any other individual or entity is in violation of, nor has violated, in connection with the ownership, use, maintenance or operation of the Premises or the conduct of the business related thereto (including manufacturing, importing, processing, using, distribution, discharging, storing, treating and disposing of any substance) any applicable federal, state, county or local statute, law, regulation, rule, ordinance, code, license and permit of any and all governmental authorities relating to environmental matters, including, but not limited to, the Clean Air Act, the Federal Water Pollution Control Act of 1972, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Solid Waste Disposal Act, the Resource Conservation and Recovery Act and the Toxic Substances Control Act, and any amendments or extensions of the foregoing statutes, and all other applicable environmental requirements.

2. The Borrower and/or any other individual or entity have operated the Premises and have at all times received, handled, used, stored, treated, shipped and disposed of all hazardous materials, substances, petroleum products and waste in strict compliance with all applicable environmental, health or safety statutes, ordinances, orders, rules, regulations or requirements, and have removed in compliance with all applicable environmental requirements from and off the Premises all hazardous materials, substances, petroleum products and waste.

3. There are no statutes, orders, rules, regulations or agreements relating to environmental matters requiring any work, repairs, feasibility studies, remedial investigations, clean up costs, construction or capital expenditures, or any other response costs with respect to the Premises, nor have the Borrower or any other individual or entity received any notice of any of the same.

4. No hazardous or toxic materials, substances, pollutants, contaminants or wastes have been released, spilled, leaked, poured, dumped, deposited, discharged or disposed of into the air, land or water at, on or from the Premises, nor have the Premises been used at any time by any person or entity as a landfill or a waste disposal site.

5. No notices of any violation of any of the matters referred to in the preceding sections, above, relating to the Premises or its use have been received by the Borrower and the Guarantor and/or any other individual or entity, and there are no writs, injunctions, decrees, rulings, orders or judgments outstanding, no law suits, claims, proceedings, investigations, remedial investigations, feasibility studies, clean up costs or other response costs pending or threatened, relating to the ownership, use, maintenance or operations of the Premises, nor is there any basis for such law suits, claims, proceedings or investigations being instituted or filed.

6. The Borrower and/or any other individual or entity will operate the Premises and shall at all times receive, handle, use, store, treat, ship and dispose of all hazardous materials, substances, petroleum products and waste in strict compliance with all applicable environmental, health or safety statutes, ordinances, orders, rules, regulations

2

or requirements, and will remove in compliance with all applicable environmental requirements from and off the Premises all hazardous materials, substances, petroleum products and waste.

7. The Borrower further covenants that it will promptly notify the Government of any fact or event which affects, alters or limits the representations and warranties made in the preceding sections, above, and that it will provide the Government upon demand with information or access to information relating to the Borrower’s compliance with this Agreement. The Borrower further warrants that it has fully disclosed all actions, law suits, notices, citations or any other incident or condition that has ever existed on the Premises.

The foregoing representations and warranties shall survive the execution of this Agreement and any closing occurring under any of the Loan Documents (defined hereafter) and shall be of continuing effect.

INDEMNITY:

To the maximum extent permitted by law, the Borrower and the Guarantor hereby agree to defend and indemnify the Government against and hold it harmless from any and all losses, claims, liabilities, judgments, damages (including exemplary, actual, compensatory and punitive), penalties, expenditures, costs and legal or other expenses which the Government may suffer or incur as a direct or indirect consequence of any of the following:

1. The execution or performance of this Agreement or other loan documents, instruments or agreements now or hereafter existing between the Borrower and the Guarantor and the Government (together, the “Loan Documents”);

2. The exercise, enforcement, release, defense or forbearance by the Government of any of its rights, remedies, liens, interest or discretion under this Agreement or any of the other Loan Documents, against the Borrower and the Guarantor or any other person or entity, or in or to any property now or hereafter constituting collateral for or on account of any loans or obligations of the Borrower and the Guarantor;

3. The fact that any representation, warranty, acknowledgment or other statement of fact by the Borrower and the Guarantor or any of the undersigned was untrue or incomplete at any time;

4. The existence, for whatever reasons, of any contamination, including, without limitation, the presence of any hazardous or toxic waste, substance or material existing on, above, or under any of the Premises; or the fact that the Borrower and the Guarantor or any other individual or entity is or was responsible for the improper or unlawful production, handling, storage, transportation or disposition of any hazardous or toxic waste, substance or material;

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5. Any investigation, feasibility studies, monitoring, clean up, removal, restoration, remedial response or remedial work undertaken on or with respect to any of the Premises at any time hereafter, voluntarily or involuntarily, by the Government;

6. The imposition or attachment of any statutory lien, including any arising under any environmental or land use matters.

The Government’s equitable and implied rights of indemnity against the Borrower and the Guarantor shall not be limited or impaired in any way by reason of the explicit indemnities set forth in this Agreement. The Government’s rights of indemnity shall not be directly or indirectly limited, prejudiced, impaired or eliminated in any way:

i. by any finding or allegation that the Government is directly or indirectly responsible under any theory of any kind for any act or omission of the Borrower and the Guarantor or any other individual or entity; or

ii. by any finding or allegation that the Government is or was an “owner” or “operator” of the Premises; or

iii. by the kind, character or nature of any act or omission of the Government; except that the Borrower and the Guarantor shall not be obligated to pay any judgment which any court of competent jurisdiction may render against the Government upon an express finding that the Government personally and directly committed an intentional tort against the Plaintiff.

COVENANTS:

The Borrower shall, with respect to the Premises:

1. Comply with, and require all tenants and subtenants, if any, to comply with, all Environmental Laws and obtain, comply with, and maintain, and require that all such tenants and subtenants obtain, comply with, and maintain, any and all licenses, approvals, registrations or permits required by Environmental Laws.

2. Conduct and complete all investigations, studies, sampling and testing, all remedial, removal and other actions required under Environmental Laws and promptly comply with all lawful orders and directives of all Governmental Authorities respecting Environmental Laws.

3. Defend, indemnify and hold harmless the Government, from and against any claims, demands, penalties, fines, clean-up expenses, liabilities, settlements, damages, costs and expenses of whatever kind or nature known or unknown, contingent or otherwise, arising out of, or in any way relating to the violation or noncompliance by the Borrower or any predecessor or successor of or with any Environmental Laws applicable to the Premises, or any orders, requirements or demands of Governmental Authorities related thereto, including, without limitation, attorney’s and consultant’s fees, investigation and laboratory fees, removal, remedial, and response costs, court costs and litigation expenses.

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UNCONDITIONAL OBLIGATIONS:

The Borrower and the Guarantor hereby agree that their obligations, covenants and agreements under this Agreement shall be irrevocable, absolute and unconditional, and shall not be affected or impaired, notwithstanding, among other things, any of the following, any defense on account of which is hereby expressly waived by the Borrower and the Guarantor:

1. The waiver, compromise, settlement, termination or other release of the performance or observance by the Borrower and the Guarantor, of any or all of the agreements, covenants, terms or conditions in favor of the Government contained herein or in any of the Loan Documents;

2. The granting of one or more extensions of time renewals or other indulgence(s) to the Borrower, or by the Government heretofore, now or hereafter acquiring, releasing or in any way modifying any guaranty from any other person or persons or any security in whatever form for any or all of the Borrower’s obligations to the Government, whether or not notice thereof shall have been or be given to the Borrower;

3. Any failure, omission, delay or lack on the part of the Government to enforce, assert or exercise any right, power, remedy or claim conferred on the Government herein or in any of the Loan Documents or by applicable law, or the inability of the Government to enforce any provision of this Agreement or any of the Loan Documents for any reason, or any other act or omission on the part of the Government, including without limitation any failure to obtain, perfect or realize upon any security, rights, endorsements or guaranties which the Government may now or hereafter hold or be offered with respect to any of the Borrower’s obligations to the Government;

4. Any change in ownership of any corporation which has executed this agreement, and/or any change in ownership of any property securing this agreement.

5. The voluntary or involuntary liquidation, dissolution, sale of all or substantially all of the assets, marshalling of assets and liabilities, receivership, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization or other similar proceeding affecting the Borrower, or any of its assets;

6. Any fraudulent, illegal, improper or invalid acts heretofore or hereafter undertaken by the Borrower, or because of any failure of the Government to discover any such acts or irregularities;

7. The invalidity or unenforceability of any of the Borrower’s obligations to the Government;

8. The modification or amendment (whether material or otherwise) of any term or condition of any of the Loan Documents heretofore or hereafter undertaken;

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The Borrower and the Guarantor acknowledge and agree that the Government shall have absolutely no responsibility to monitor the Borrower’s compliance with applicable laws, including without limitation environmental laws and regulations, or to insure such compliance.

ADDITIONAL PROVISIONS:

1. RELATIONSHIP OF THE PARTIES: The Government is not (and shall not be construed as) a partner, joint venturer, alter ego, manager, controlling person or other business associate or participant of any kind of the Borrower, nor an “owner” or “operator” for the Premises, nor a “facility” (as such terms are defined by applicable state and federal statutes) and the Government does not intend to assume any such status; and the Government is not and shall not be deemed responsible for (or a participant in) any acts, omissions or decisions of the Borrower.

2. NOTICES AND REQUESTS: Any and all notices, elections, demands, or requests permitted or required to be made under this Agreement shall be in writing, signed by the party giving such notice, election, demand or request, and shall be delivered personally or sent by registered, certified, or Express United States mail, postage prepaid, or Federal Express or any similar service requiring a receipt, to the other party at the following address:

Omega Protein, Inc.

835 B Pride Drive

Hammond, LA 70401

U.S. Department of Commerce

National Oceanic and Atmospheric Administration

National Marine Fisheries Service

Financial Services Branch, Southeast Region

263 13^th Avenue South

St. Petersburg, FL 33701

3. GOVERNING LAW: Except to the extent that Federal Law controls, this Agreement shall be construed in all respects in accordance with and governed by the laws of the State in which the Premises are located.

4. AMENDMENTS: No provision of this Agreement may be changed, waived, discharged or terminated orally, by telephone or by any other means except by an instrument in writing signed by the Government.

5. SEVERABILITY: Wherever possible, each provision of this Agreement shall be interpreted in such a manner as to be effective and valid under applicable law, but if any provision of this Agreement shall be prohibited by, unenforceable or invalid under applicable law, such provision shall be ineffective to the extent of such prohibition, un-enforceability or invalidity, without invalidating the remainder of such provision or the remaining provisions of this Agreement.

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6. CONSTRUCTION: The singular form of any word used herein shall include the plural, and vice versa. The use herein of a word of any gender shall include each of the masculine, feminine, and neuter genders. The headings or titles of the several sections and paragraphs of this Agreement shall be solely for convenience of reference and shall not affect the meaning, construction or effect of the provisions hereof.

7. BINDING EFFECT: Except as herein provided, this Agreement shall be binding upon the Borrower and the Guarantor, their successors and permitted assigns, and shall inure to the benefit of the Government, and its successor and assigns. Notwithstanding the foregoing, the Borrower, without the prior written consent of the Government in each instance, may not assign, transfer or set over to another, in whole or in part, all or any part of its benefits, rights, duties and obligations hereunder, including, but not limited to, performance of and compliance with the conditions hereof. Any reference to the Borrower shall include the Borrower’s successors and assigns.

8. SURVIVAL: The obligations set forth herein shall survive the payment of any other obligations of the Borrower to the Government and shall not terminate until this Agreement has been expressly canceled and terminated by the Government in writing.

9. This agreement, supplements and reaffirms the Indemnity Agreement Regarding Environmental Matters executed by some of the parties on December 20, 1999. Where a provision in this agreement conflicts with a provision of said 1999 agreement, the provisions of this agreement shall prevail.

IN WITNESS WHEREOF, the parties hereto have caused this agreement to be duly executed and delivered to the Government on the 17^th day of October, 2005.

ATTEST:		BORROWER: Omega Protein, Inc.
By:	/s/    JOHN D. HELD	By:	/s/    ROBERT W. STOCTON
Title:	Secretary	Title:	Vice President and Treasurer
Date:	October 17, 2005	Date:	October 17, 2005

(SEAL)

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ATTEST:		GUARANTOR: Omega Protein Corporation
By:	/s/    JOHN D. HELD	By:	/s/    ROBERT W. STOCKTON
Title:	Secretary	Title:	Executive Vice President and Chief Financial Officer
Date:	October 17, 2005	Date:	October 17, 2005

(SEAL)

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EX-10.7

Case No. FF-G-013 EXHIBIT 10.7

PREFERRED SHIP MORTGAGE

TO THE UNITED STATES OF AMERICA

ARTICLE I: CREATION OF ENCUMBRANCE

SECTION 1. PREFERRED SHIP MORTGAGE: THIS MORTGAGE, dated the 17^th day of October , 2005, by Omega Protein, Inc., 835 B Pride Drive, Hammond, Louisiana 70401, owning 100%, (the “Borrower”), to the United States of America, acting by and through the Secretary of Commerce, National Oceanic and Atmospheric Administration, National Marine Fisheries Service, Financial Services Division, 1315 East-West Highway, Silver Spring, Maryland 20910 (the “Government”),

DEFINITIONS: All terms contained herein are defined in the Acknowledgment of Definitions executed by all parties to this transaction.

WITNESSETH:

SECTION 2. ENCUMBERED VESSEL: WHEREAS, The Borrower owns 100% of the fishing vessel, more fully described below in Section 4; and

SECTION 3. OBLIGATIONS SECURED: WHEREAS, The Government, pursuant to the provisions of Title XI of the Merchant Marine Act, 1936, as amended, found at 46 USC § 1271 et seq., and 50 CFR 253, as amended by public law no. 104-297 on October 11, 1996, known as the Fisheries Finance Program, made, entered into, and delivered certain agreements and covenants, as contained in the Approval-in-Principle Letter dated September 28, 2005, (the “Approval Letter”) and such Approval Letter has been accepted by the Borrower and Omega Protein Corporation, (the “Guarantor”). The Approval Letter contemplates a loan from the Government to the Borrower, in the amount of up to $14,000,000.00, (the “Loan”). This transaction will be evidenced by the issuance of a promissory note, in the principal amount of $14,000,000.00 (“the Note”) to the United States of America by the Borrower, dated October 17, 2005, a copy of which is attached hereto as Exhibit 1, and which will be secured by this Preferred Ship Mortgage (the “Ship Mortgage”) to the Government for the purpose of securing the Loan, including, but not limited to, the payment of the principal of and interest of the Note in accordance with its terms and the terms of this Ship Mortgage, as well as any future advances, and all other sums owed the Government.

WHEREAS, the Government has entered into an Approval and Agreement letter dated September 28, 2005, (the “Approval Letter”), and Security Agreement dated October 17, 2005, with the Borrower, and will execute other documents, including all Loan Documents.

1                     Initial

CONSIDERATION:

NOW, THEREFORE, in consideration of the Government having agreed to enter into the Approval Letter dated September 28, 2005, with the Borrower and for other good and valuable consideration, receipt whereof is hereby acknowledged by the Borrower, and in order to secure the payment of the principal of and interest on the Note and all other sums which accrue according to the terms thereof and the payment of all other sums that may hereafter become secured by this Mortgage in accordance with the terms hereof and to secure the performance and observance of and compliance with the covenants, terms and conditions herein and in the Note contained, or contained in any other document executed by the Borrower, the Borrower has granted, conveyed, mortgaged, pledged, assigned, transferred, set over and confirmed unto the Government the whole of the vessel described as follows:

SECTION 4. SECURITY AGREEMENT: THE VESSEL SUBJECT TO THIS MORTGAGE is that certain oil screw vessel named ALBERT J. BOURG, Official Number 298585 together with all her accessories and appurtenances, including, but not limited to accounts receivable, anchors, apparel, boats, boilers, cables, catch, chains, charter hire, contract rights, contracts, electronics, engines, equipment, fishing gear, freight, furniture, general intangibles, inventory, licenses, machinery, masts, motors, nets, permits, proceeds, product, related gear, rents or profits, rigging, sails, skiffs, spare parts, spars, substitutions, supplies, tackle, hydraulics, safety equipment, and parts and accessories affixed to or used in connection therewith, whether now owned or hereafter acquired, whether on board or not, and all additions, improvements, renewals, and replacements hereafter made in, on or to the said vessel or any part thereof, and in, on, or to its equipment and appurtenances as aforesaid (the “Vessel”).

INDIVIDUAL TRANSFERABLE QUOTAS: If a limited fisheries access system is in effect, or should a limited fisheries access system be initiated at some future date under which the Borrower is granted a transferable fishery conservation and management allocation (including, but not limited to, allocations, permits, quotas, licenses, cage tags, or any other fisheries access restriction or right, however characterized, of whatsoever nature) affecting, necessary for, or in any other way, however characterized, associated with any of the property included in the Collateral, the Borrower agrees to grant to the Government a full senior security interest in such allocation by whatsoever means deemed by the Government to be appropriate (including, but not limited to, the Borrower’s execution of security agreements and the filing of financing statements under the UCC). Further, if the Borrower fails to do so, the Borrower agrees that the Government may use, for the purpose of executing and otherwise perfecting whatever documents may be required to effect the grant to the Government of such a full security interest in such fisheries conservation and management allocation, the attorney-in-fact authority conferred upon the Government by ARTICLE IX of the Title XI Financial Agreement.

SECTION 5. FINANCING STATEMENT: Some of the items of property described herein are goods that are or are to become accessories and appurtenances to the vessel described herein, and it is intended that as to those goods, this mortgage shall be effective as a financing statement. Information concerning the security interest created by this instrument may be obtained from the Borrower or the Government, at the addresses sent out in the first paragraph of this Preferred Ship Mortgage.

TO HAVE AND TO HOLD ALL and each of the above-mortgaged and described property unto the Government and its successors and assigns, to its use and benefit forever;

PROVIDED ALWAYS, and the condition of these presents is such, that if the Borrower, its successors or assigns shall pay, or cause to be paid, the principal of and interest on the Note in accordance with the terms of the Note and the Mortgage and shall pay any and all other sums that may hereinafter become secured by this Mortgage in accordance with the terms hereof, and shall keep, perform, and observe all and each of the covenants and promises in the Note and in the Mortgage contained, expressed, or implied to be kept, performed, and observed by or on the part of the Borrower, then this Mortgage and the estate and rights hereby granted shall cease, determine, and be void; otherwise to remain in full force and effect.

The Government hereby covenants and agrees that the Vessel is to be held by the Borrower subject to the further covenants, conditions, and uses hereinafter set forth as follows:

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ARTICLE II: BORROWER’S OBLIGATIONS

SECTION 1. CITIZENSHIP AND TITLE REQUIREMENTS: The Borrower (i) is and shall continue to be a citizen of the United States as defined in section 2 of the Shipping Act, 1916, as amended, for coastwise trade, and (ii) is entitled to own and operate the Vessel under her marine document and shall maintain such marine document in full force and effect. The Note and the Mortgage have been duly executed and delivered, and the Note in the hands of the holder thereof is and will be a valid and enforceable obligation of the Borrower in accordance with its terms. The Borrower lawfully owns and is lawfully possessed of the whole of the Vessel free from any lien whatsoever except the lien of this Mortgage, and liens expressly permitted herein and other Preferred Ship Mortgages in favor of the Government, and covenants that it will warrant and defend the title and possession thereto and every part thereof for the benefit of the Government against the claims and demands of all persons whomever.

SECTION 2. INSURANCE REQUIREMENTS:

(a) The Borrower will, at all times and at its own expense, keep the Vessel insured with responsible underwriters and through responsible brokers, all in good standing and satisfactory to the Government, in an amount that fully and adequately protects the Vessel and the Government’s interest therein against all marine perils and disasters and all hazards, risks, and liabilities in any way arising out of the ownership, operation, or maintenance of the Vessel, including but not limited to insurance as follows:

(i) While being operated, navigating hull insurance must be in an amount equal to the full commercial value of the Vessel. In no event may this be less than one hundred ten percent (110%) of the unpaid principal, at the time outstanding, of the Note. The policy valuation on the hull shall not exceed the aggregate amount insured by hull policies. The hull insurance shall be placed under the form of policy known as American Institute of Marine Underwriters form, or under such other form of policy as the Government may approve, insuring against the usual risks covered by such policies, including four-fourths running down clause, Inchmaree clause, and breach of warranty clause; and

(ii) Protection and indemnity insurance under form of protection and indemnity policies approved by the Government and issued by marine insurance companies approved by the Government. The amount of protection and indemnity insurance shall be fixed by the Government; and

(iii) When and while the Vessel is laid up, and in lieu of the aforesaid navigating hull insurance referred to in (i) of this Section, port risk insurance under forms of port risk policies approved by the Government.

(b) The Borrower expressly covenants and agrees to keep the policies renewed from time to time, to keep the same valid at all times for the amounts aforesaid, and to keep the premiums thereon fully paid at all times. The Borrower shall not do any act nor voluntarily suffer or permit any act to be done whereby insurance is or may be suspended, impaired, or defeated, and shall not suffer nor permit the Vessel to engage in any voyage or to carry any cargo not permitted under the policy or policies of insurance in effect, unless and until the Borrower shall first cover the Vessel in the amount herein provided for, with insurance satisfactory to the Government for such voyage or for the carriage of such cargo.

(c) In the event the Borrower fails to procure any of the insurance, satisfactory to the Government, or fails to perform any of the covenants and agreements contained herein, the Government may, but shall be under

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no duty to, procure such other or different insurance or coverage as it may deem advisable with uncontrolled discretion in the Government as to the source, nature, form, type, class, amount, and extent of such insurance or coverage; and all sums expended or advanced by the Government in procuring such insurance shall be secured by and shall be due and payable as provided in Article II, Section 2 hereof.

(d) All insurance shall be taken out in the name of the Borrower and the Government as their interest may appear and policies and certificates shall provide that there shall be no recourse against the Government for payment of premiums and shall further provide for at least 20 days prior written notice to be given to the Government by the underwriters in the event of cancellation or modification. All original policies, binders, certificates, and covenants and all endorsements and riders thereto shall be delivered to the Government for approval and custody.

(e) Except as provided in (f) below, all insurance policies or certificates shall provide that losses thereunder shall be payable to the Government. If no Event of Default exists under this Mortgage, the Government may, in its discretion, pay, from the proceeds of the insurance directly to the repairer, the amount of any authorized repairs or if the Borrower shall have first fully repaired the damage to the satisfaction of the Government and paid the cost thereof, to the Borrower as reimbursement therefor. Any balance remaining from the aforesaid insurance proceeds will be applied as directed by the Government. If an Event of Default exists, the Government shall retain such insurance and if such Event of Default is not cured within fifteen (15) days of the occurrence thereof, apply the same in the manner provided in Article II, Section 2 hereof.

(f) Any loss under any insurance on the Vessel with respect to protection and indemnity risks may be paid directly to the person to whom any liability, covered by such insurance, has been incurred or to the Borrower to reimburse the Borrower for any loss, damage, or expense incurred by the Borrower and covered by such insurance; provided, that the underwriter shall have first received evidence that the liability insured against has been discharged.

(g) In the event of an actual or constructive total loss, or an agreed or compromised total loss of or in case of requisition of title to the Vessel, all amounts payable therefor shall, subject to Article II, Section 2 hereof, be paid to the Government and shall be applied first, to the payment of the expenses of the Government in collecting such payments, and second, as provided in Article II, Section 2 hereof.

(h) In the event that any claim or lien is asserted against the Vessel for loss, damage, or expense which is covered by insurance hereunder, and it is necessary for the Borrower to obtain a bond or supply other security to prevent arrest of the Vessel or to release the Vessel from arrest on account of such claim or lien, the Government, on request of the Borrower, may, in the sole discretion of the Government, and upon notice to the Borrower, assign to any person, firm, or corporation executing a surety or guarantee bond or other agreements, to save or release the Vessel from such arrest, all right, title, and interest of the Government in and to said insurance covering said loss, damage, or expense, as collateral security to indemnify against liability under said bond or other agreement.

SECTION 3. NO LIENS TO BE PLACED AGAINST THE VESSEL:

(a) Neither the Borrower, any charterer, the Master of the Vessel, nor any other person has or shall have any right, power, or authority to create, incur, or permit to be placed, imposed, or continued upon the Vessel any lien whatsoever other than the lien of this Mortgage or permitted liens as defined herein.

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(b) Permitted Liens. “Permitted Liens” means liens or other charges or encumbrances:

(i) arising for damages out of tort covered by insurance except for any deductible amounts applicable thereto, for wages of a stevedore when employed directly by the owner, operator, master, ship’s husband or agent of any Vessel, for wages of the crew of the Vessel, for general average, for salvage, including contract salvage, provided the same are paid immediately when due;

(ii) in favor of any person furnishing repairs, supplies, towage, use of dry dock or marine railway, or other necessaries to a Vessel on the order of the Borrower, or of a person authorized by the Borrower, provided the same are paid immediately when due.

(iii) imposed on the Vessel for taxes or governmental charges or levies, provided the same are paid immediately when due;

(iv) incurred in the ordinary course of business of the Vessel not relating to money borrowed which (1) will be paid immediately when due, and (2) which, in the aggregate, at any time are not material to the operations or financial condition of the Borrower; and

(v) arising by operation of law as a result of the modification of the Vessel, including mechanic’s liens, provided the same are paid immediately when due;

(vi) in favor of the United States of America, the United States Department of Commerce, National Oceanic and Atmospheric Administration, National Marine Fisheries Service, Financial Services Division;

PROVIDED, HOWEVER, that with respect to the deductible amounts described in clause (i) and liens or encumbrances of the type described in clauses (ii), (iii) and (v) not arising from or incurred in the ordinary course of business of the Borrower, the Borrower shall have set aside adequate reserves determined in accordance with generally accepted accounting principles (GAAP), provided that for such deductible amounts and liens or encumbrances which, in the aggregate, exceed $25,000.00 USD, shall include only liens which are subordinate to or which pursuant to applicable law cannot be subordinated by contract to the lien of the security interest in the vessel granted to the Government.

As used herein, the term “immediately when due” shall mean the time when, according to applicable law, customary industry practices, or a prior course of dealing or other agreement between the Borrower and the lienholder, the lienholder expects payment to be made; provided that, if the Borrower desires to contest an asserted lien, the Borrower may do so if the Borrower acts in good faith and by appropriate proceedings and has set aside the reserves described above.

SECTION 4. NOTICE OF MORTGAGE: The Borrower shall carry a properly certified copy of this Mortgage with the Vessel’s papers on board the Vessel, shall exhibit the same on demand to any person having business with the Vessel, or to any representative of the Government, and shall place and keep prominently displayed in the pilot house, master’s cabin, and engine room of the Vessel a framed, printed or typewritten notice reading as follows:

“NOTICE OF MORTGAGE: This Vessel is covered by a Preferred Ship Mortgage given to the United States of America, under authority of the Ship Mortgage Act, 1920, as amended. Under the terms of said Mortgage, neither the owner of this Vessel, any charterer, the Master of this Vessel, nor any other person has any right, power, or authority to create, incur, or permit to be imposed upon the Vessel any liens, maritime or

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otherwise, other than the lien of said Mortgage and liens for crew’s wages, emergency safety repairs, or salvage.”

SECTION 5: NOTICES TO THE GOVERNMENT:

(a) OF ACTION AGAINST VESSEL: In the event that a libel is filed against the Vessel, or if the Vessel shall be levied upon or taken into custody, or detained by any proceeding in any court, or tribunal, the Borrower will, within 48 hours, notify the Government by telegram, telex, or facsimile and confirmed by letter, and the Borrower will, within fifteen (15) days thereafter, cause the Vessel to be discharged. Within ten (10) days of its occurrence, the Borrower will notify the Government of any claim that could result in a lien being placed against the Vessel.

(b) OF CASUALTIES OR DAMAGE TO THE VESSEL: Within 24 hours of the event, the Borrower shall furnish the Government full information regarding any casualties or other accidents or damage to the Vessel, including copies of any supporting documents, i.e, accident reports, claims, etc.

(c) OF ACTION AGAINST THE BORROWER OR GUARANTOR: Within ten (10) days of its occurrence, the Borrower must give the Government written notice of any pending litigation, business reverse, casualty, loss, or any other matter (however characterized) that diminishes; (i) The Borrower’s ability to service any debt actually or contingently owed the Government, (ii) The Borrower’s ability to perform any other duty or obligation owed to the Government, (iii) The Borrower’s ability to fully and faithfully perform any covenant with the Government, (iv) the value of any property or other assets pledged to the Government, or (v) the net worth of any party against whom the Government has recourse for this debt.

SECTION 6: MAINTENANCE AND INSPECTION COSTS:

(a) VESSEL MAINTENANCE: At all times, at the Borrower’s own cost and expense, the Borrower will maintain and preserve the Vessel in as good condition, working order and repair as on the date of this Mortgage, ordinary wear and tear excepted; provided, however, if subsequent to the date of this Mortgage, the Vessel is reconstructed or reconditioned, the Borrower will keep the Vessel in as good condition, working order, and repair as the Vessel was on the date said reconstruction or reconditioning was completed, ordinary wear and tear excepted. In addition to the foregoing, the Borrower will keep the Vessel in as good condition as will enable her to pass such inspection as may be required by marine underwriters as a condition of their writing such insurance in such amounts as are required under this Mortgage or as required by the United States Coast Guard as a condition to certifying that the Vessel is seaworthy and in compliance with all applicable safety and navigational requirements.

(b) INSPECTION OF VESSEL: The Borrower shall afford the Government or its authorized representatives full and complete access to the Vessel, in port or at sea, at such times as the Government, in its sole discretion, may require, for the purpose of inspecting or valuing the vessel, her cargo, log, and papers.

(c) INSPECTION OF BORROWER’S FINANCIAL RECORDS: The Borrower agrees to execute a consent and waiver, valid for the term of the mortgage, which allows the Internal Revenue Service to release directly to the Government, Borrower’s Federal Income Tax Returns¹, whenever the Government requests same. Additionally, the Borrower shall permit the Government, or any representative selected by it, in such manner and at such times as the Government, in its sole discretion, requires, to make inspections and audits of any books, records, off-loading receipts, fish-sale receipts, papers, or other documents of whatsoever nature in the custody

¹ Borrower agrees to execute IRS Forms #4506 and 8821, thereby implementing the provisions of 26 USC §6103(c).

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and control of the Borrower, or any other individual or entity, relating in any way to the financial or business condition of the Borrower or the operation or company. At the Government’s request, these statements, books, records, receipts or reports must be delivered to the Southeast Region of the National Marine Fisheries Service, Financial Services Branch, in St. Petersburg, Florida.

(d) BORROWER TO PAY THE COST OF ALL SUCH INSPECTIONS, audits or appraisals, provided for in Paragraphs 6(a), 6(b) and 6(c), immediately above, within 30 days of the Government’s demand and all such amounts disbursed by the Government for such purpose shall, until fully repaid by the Borrower, be added (payable upon the Government’s demand) to the Borrower’s Note to the Government and shall earn interest at the same rate as the other principal of the Borrower’s Promissory Note and shall be secured by the ship mortgage and other securities which secure the Borrower’s promissory note to the Government.

SECTION 7. FINANCIAL REPORTING TO THE GOVERNMENT:

(a) The Borrower will, within 20 days after the close of each fiscal year, and at such other times and in such form as the Government may prescribe, furnish to the Government, the Borrower’s financial and operating statements including schedules showing all compensation paid by the Borrower;

(b) The Borrower will, at all times, keep proper books of account in accordance with generally accepted accounting principles and practice; and

(c) The Borrower will permit the Government, at the Borrower’s expense and in such manner and at such time as the Government may require, to (i) make inspections and audits of any books, records, and papers in the custody and control of the Borrower or others, relating to the Borrower’s financial or business conditions, including making copies thereof, and extracts therefrom, and (ii) make inspections and appraisals of any of the Borrower’s assets.

SECTION 8. TAXES & FEES: The Borrower will pay and discharge when due and payable, from time to time, all taxes, assessments, governmental charges, fines, and penalties lawfully imposed on the Vessel.

SECTION 9. REIMBURSEMENT OF GOVERNMENT EXPENDITURES: The Borrower will reimburse the Government for any and all expenditures which the Government may reasonably elect to make from time to time to protect the security granted hereunder (in the event of the Borrower’s failure to do so), including, without limitation of the foregoing, payment of taxes, repairs, insurance premiums, the discharge of any lien, libel or seizure of the Vessel, and expenses incurred by the Government in retaking the Vessel; and any such payment made by the Government shall be for the account of the Borrower, and the making thereof by the Government shall not cure the Borrower’s default in that regard nor constitute a waiver of any right or remedy granted to the Government hereunder, and all reasonable sums so expended by the Government or any liability incurred by it shall be immediately due and payable and shall be deemed to be an indebtedness of the Borrower and secured by this Mortgage, and until paid shall bear interest at the same rate as that provided in the Note.

SECTION 10: GOVERNMENT’S PRIOR WRITTEN CONSENT REQUIRED: The Borrower shall not, without prior written consent of the Chief, Financial Services Division, National Marine Fisheries Service, which consent will not unreasonably be withheld, take any of the following actions:

(a) sell, mortgage, transfer, nor charter the Vessel, and any such written consent obtained from the Government to any one sale, mortgage, transfer, or charter, shall not be construed to be a waiver of this provision with respect to any subsequent proposed sale, mortgage, transfer, or charter. Any such sale, mortgage, transfer, or charter of the Vessel shall be subject to the provisions of this Mortgage and to the lien it creates.

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(b) Pay to any officer, partner, or other party any salary, commission, bonus, management fee, dividend, or other consideration (however characterized) in excess of either reasonable industry standards or ordinary financial prudence for a company or operation of the Borrower’s size and financial condition at the time that such consideration is paid (and the burden of proving reasonableness shall be on the Borrower).

(c) Purchase or redeem any shares of the Borrower’s or the Borrower’s company’s own stock.

(d) Exclusive of such fixed assets to be acquired with the proceeds of the Note or any part thereof, or any fixed assets acquired prior to the date of this Mortgage, make any additional investment (excluding purchases, etc., in connection with the routine and continuing maintenance and preservation of the Vessel and its productivity) in, or incur any additional liability for, the purchase, acquisition, lease, or other use (however characterized) of any real property, machinery, equipment, fixtures, or furniture, or fixed property in connection with the Borrower’s present level of operations in any one fiscal year in excess of an aggregate of 5% of the Borrower’s total assets.

(e) Start any new business or acquire any other business, or the assets of any other business, whether by purchase, merger, consolidation, affiliation, or any other means (however characterized) except as may otherwise be permitted herein, or sell, liquidate, dissolve, spin-off, split-up or in any other way (however characterized) dispose of its own assets except as may be required in the normal course of operations reasonably necessary to carry on its day-to-day operation.

(f) The Borrower will not split-up, split-off, spin-off, merge, consolidate, or transfer or allow transfer of its shares so as to effect a change in its controlling interest or management.

(g) Guarantee or become contingently liable in any way as surety, endorser, creditor, co-maker, accommodation maker, or in any other way (however characterized) for the debt or obligation of any other party, individual or entity, except as may be permitted herein or required in the normal course of operations reasonably necessary to carry on its day-to-day business.

(h) By any means whatsoever, allow the company or operation to be acquired by, or otherwise reorganized into (however characterized) any other company or operation, unless the acquiring company, operation or reorganized entity is acceptable to the Government, and said company, operation or reorganized entity agrees to do the following: (i) provide to the Government a 100% unconditional guarantee of all debt actually or contingently owed it; and (ii) be bound by these covenants; and (iii) be bound by such other covenants as the Government shall reasonably require to protect its interest; and (iv) provide such other assurances and security as the Government, in its sole discretion, requires.

(i) Make any distribution of the Borrower’s assets for compensation (including salaries, withdrawals, fees, bonuses, commissions, drawing accounts, and other payments, whether directly or indirectly, in money or otherwise) for services, or give any preferential treatment, make any advances, directly or indirectly by way of loans, gifts, notes, or otherwise, to any employee or Affiliate or increase the compensation of any person above that set forth in any application or document submitted in connection with the Note. In the event an Affiliate increases the compensation (including salaries, withdrawals, fees, bonuses, commissions, drawing accounts, and other payments, whether directly or indirectly, in money or otherwise) paid to the Borrower or any employee of the Borrower, beyond that authorized or consented to by the Government, the compensation payable to such person by the Borrower will be forthwith correspondingly reduced and immediate notice thereof given to the Government by the Borrower.

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SECTION 11. COMPLIANCE WITH FEDERAL SHIP MORTGAGE ACT: The Borrower will comply with and satisfy all the provisions of the Ship Mortgage Act, 1920, as amended, 46 USC, Chapter 313, § 31301, et seq. (Supp. 2003), in order to establish and maintain this Mortgage as a Preferred Ship Mortgage upon the Vessel.

SECTION 12. OPERATING RESTRICTIONS:

(a) DOCUMENTATION: The Borrower will keep the Vessel documented under the laws of the United States and no transfer of port of hailing of the Vessel shall be made without the prior written consent thereto of the Government.

(b) LAWFUL OPERATION: The Borrower will not cause or permit the Vessel to be operated in any manner contrary to law or contrary to any rules and regulations which may from time to time be prescribed pursuant to law.

(c) VESSEL SHALL NOT LEAVE UNITED STATES’ WATERS: The Borrower will not remove, attempt to remove, or allow the vessel to be moved beyond the limits of the United States without the written consent of the Government. If said written consent is obtained, the Borrower will execute certain documents and will not abandon the Vessel in a foreign port. The Borrower will not engage in any unlawful trade or violate any law or carry any cargo that will expose the Vessel to penalty, forfeiture, or capture, and will not do, or suffer or permit to be done, anything which can or may injuriously affect the documentation of the Vessel under the laws and regulations of the United States.

(d) Upon demand by the Government to the master of the Vessel or the Borrower, the Borrower will return the vessel to the waters known as the Exclusive Economic Zone (EEZ) of the United States and, if the Government so demands, to a port of call chosen by the Government, thereby revoking any prior consent extended by the Government with respect to operation of the Vessel outside the Exclusive Economic Zone of the United States.

SECTION 13. PAYMENTS MUST BE TIMELY MADE AND TERMS OF THE MORTGAGE , NOTE AND OTHER LOAN DOCUMENTS MUST BE MET: The Borrower will duly and punctually pay all the principal of and interest on the Note and the Mortgage as herein and in the Note and other loan documents provided, and will at all times keep, perform, and observe all and singular the covenants, conditions, stipulations, promises, and agreements in this Mortgage and in the Note expressed or implied on its part to be kept, performed, and observed, and will duly punctually pay all sums that may hereinafter become due hereunder.

ARTICLE III: DEFAULT

SECTION 1. The Borrower agrees that it will faithfully observe, perform, comply with and discharge all of the covenants, conditions, and obligations which are imposed on the Borrower by any other agreement or document executed in connection with this Mortgage and the Note, concurrently or otherwise, and that the Borrower’s failure to do so shall constitute an Event of Default under this Mortgage.

SECTION 2. The Borrower agrees that any material default under any guarantor agreement, security agreements, Title XI financial agreements, or other loan documents which may be executed in connection with this Mortgage or Note, whether or not the Borrower is party to said agreement, shall constitute an Event of Default under this Mortgage.

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SECTION 3. The Borrower agrees that all reasonable attorney fees incurred by the Government because of the Borrower’s failure to perform or discharge its obligations, as provided by this Mortgage, the Note, or any other document or agreement executed in connection therewith, shall be deemed to be an indebtedness of the Borrower and shall be secured by this Mortgage and shall be due and payable and until paid, shall bear interest at the same rate as that provided in the Note, and upon acceleration of the amounts owed under the Note, shall bear interest at the accelerated rate of eighteen percent (18%) per annum, unless limited by applicable state law.

SECTION 4. Each of the following events shall constitute an Event of Default:

(a) default shall be made in the payment of the principal of the Note when and as the same shall become due and payable, whether at maturity, by notice of acceleration, or otherwise; or

(b) default shall be made in the payment of any interest on the Note (including any amendments thereto or substitution therefor), when and as the same shall become due and payable as therein and herein provided; or

(c) default shall be made in the due and punctual observance and performance of any provision of Article I, hereof; or

(d) the Borrower shall be dissolved or adjudged a bankrupt or shall make a general assignment for the benefit of the Borrower’s creditors, or shall lose the right to do business by forfeiture or otherwise, or a receiver or receivers of any kind whatsoever, whether appointed or not, in admiralty, bankruptcy, common law, or equity proceedings, and whether temporary or permanent, shall be appointed for the Vessel or for any other property of the Borrower; or a petition for reorganization of, or other proceeding or action in reference to the Borrower under any of the provisions of the Bankruptcy Act shall be filed by the Borrower or by creditors of the Borrower; or if reorganization of the Borrower under said Act is approved by the Court, whether proposed by a creditor, stockholder, or any other person whomsoever; and

THE BORROWER AND THE GUARANTOR BOTH UNDERSTAND THAT IF EITHER FILES BANKRUPTCY, THE BORROWER WILL LOSE THE VESSEL.

THE BORROWER AND THE GUARANTOR EXPRESSLY AGREE TO, AND UNDERSTAND THAT IN THE EVENT OF BANKRUPTCY, THE VESSEL WHICH IS THE SECURITY FOR THIS PREFERRED SHIP MORTGAGE WILL NOT BE PERMITTED TO GO OUT TO SEA, AND WILL REMAIN IN PORT IN THE JURISDICTION OF THE COURT WHERE THE BANKRUPTCY PETITION IS FILED OR SUCH OTHER JURISDICTION WHERE THE BOAT MAY BE OR OTHER COLLATERAL MAY BE FOUND.

(e) there shall be an actual or constructive total loss of the Vessel; or

(f) default shall be made by the Borrower in the prompt and faithful performance or observance of any other covenant, condition, or agreement by it to be performed and observed, contained in this Mortgage, Note, or any other loan documents and such default shall continue for fifteen (15) days; or

(g) the making in any application, agreement, affidavit, or other document, submitted in connection with the Note, of any misrepresentation, on behalf of, or for the benefit of, the Borrower. Failure to disclose any material fact may be deemed a misrepresentation; or

(h) the institution of any suit against the Borrower or others deemed by the Government to affect adversely its interest hereunder, in the Note or otherwise; or

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(i) failure of any signator to any of the Loan Documents, to observe any of the conditions contained in said Loan Documents, or any other document or agreement executed (concurrently or otherwise), inclusive of amendments thereto, in connection with this Mortgage, or subsequent mortgage, regardless of whether or not the Borrower shall be a party to said agreement or document; or

(j) impairment of any collateral including the vessel or which is given in addition to the vessel which is the subject of this Preferred Ship Mortgage; or

(k) the Borrower shall, without first obtaining written permission from the Secretary, transfer, sell, assign, hypothecate, or alienate or attempt to transfer, sell, assign, hypothecate or alienate any rights, licenses or permits appurtenant to and/or necessary for the Vessel to engage in any commercial fisheries; or

(l) the Borrower shall, intentionally or through neglect, permit a material diminution of the value of the Vessel and/or its appurtenances and equipment; or

SECTION 5. UPON OCCURRENCE OF AN EVENT OF DEFAULT THE GOVERNMENT, MAY IN ITS DISCRETION:

(a) Declare the Note to be due and payable immediately and upon such declaration the entire principal of and interest on the Note shall become and be immediately due and payable, and thereafter shall bear interest at eighteen percent (18%) per annum unless such would violate the usury laws of the state where this Mortgage and the Note are executed, in which case the maximum legal rate of that state shall prevail; provided, however, that if the Borrower shall have removed and remedied each Event of Default within fifteen (15) days after the occurrence thereof, then in every such case the Government shall waive any such Event of Default; but no such waiver shall extend to nor affect any subsequent or other Event of Default nor impair any rights or remedies consequent thereon; and provided, further, that if at any time after the expiration of fifteen (15) days after any Event of Default shall have occurred, all Events of Default shall have been remedied and removed and full performance made by the Borrower to the satisfaction of the Government and all installments of principal and interest in arrears (including interest at the aforesaid rate) and the charges and expenses, if any, of the Government, it agents and attorneys, shall have been paid, then and in every such case the Government may waive any such Event of Default; and provided, also, that no waiver hereunder shall extend to nor affect any subsequent or other Event of Default nor impair any rights or remedies consequent thereon;

(b) Bring suit at law, in equity, or in admiralty, as it may be advised, to receive judgment for any and all amounts due under the Note and other Loan Documents, or otherwise hereunder, and collect the same out of any and all property of the Borrower whether covered by this Mortgage or otherwise;

(c) Retake the Vessel without legal process wherever the same may be found, and the Borrower or other person in possession forthwith upon demand of the Government shall immediately surrender to the Government possession of the Vessel, and, without being responsible for loss or damage, the Government may hold, lay-up, lease, charter, operate, or otherwise use the Vessel for such time and upon such terms as it may deem to be for its best advantage, accounting only for the net profits, if any, arising from such use of the Vessel and charging against all receipts from the use of the Vessel, or from the sale thereof by court proceeding or pursuant to subsection (e) following, all costs, expenses, charges, damages, or losses by reason of such use; and if at any time the Government shall avail itself of the right herein given it to retake the Vessel and shall retake it, the Government shall have the right to dock the Vessel at any dock, pier, or other premises of the Borrower without charge, or to dock it at any other place at the cost and expense of the Borrower; IT IS EXPRESSLY UNDERSTOOD AND AGREED TO BY THE BORROWER THAT SURRENDER OF THE VESSEL UNDER

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THIS SECTION MUST BE AND WILL BE IMMEDIATE AND IN ACCORDANCE WITH THE DIRECTIONS OF THE GOVERNMENT. FAILURE OF THE BORROWER TO IMMEDIATELY COMPLY WITH THE GOVERNMENT’S DEMAND FOR SURRENDER OF THE VESSEL WILL CAUSE THE POSSESSION OF THE VESSEL BY THE BORROWER (INCLUDING, BUT NOT LIMITED TO, POSSESSION AND CONTROL OF THE VESSEL BY A MASTER OR CREW MEMBER ON BOARD THE VESSEL) TO BE UNLAWFUL AND TO CONSTITUTE A CONVERSION OF THE VESSEL, ITS APPURTENANCES AND EQUIPMENT, THEREBY SUBJECTING THE BORROWER (EXPRESSLY INCLUDING, IF APPLICABLE, ITS OFFICERS AND DIRECTORS) TO ALL FINES, PENALTIES AND ACTIONS WHICH THE GOVERNMENT DEEMS APPLICABLE AND APPROPRIATE. SHOULD THE BORROWER CONTINUE TO OPERATE, POSSESS OR CONTROL THE VESSEL CONTRARY TO THE GOVERNMENT’S DIRECTIONS AND THE PROVISIONS HEREIN, THEN THE GOVERNMENT SHALL, IN ADDITION TO ANY OTHER RIGHTS AND REMEDIES AT LAW AND IN EQUITY, BE ENTITLED TO A TEMPORARY RESTRAINING ORDER AND/OR ORDER FOR INJUNCTIVE RELIEF NECESSARY TO GAIN COMPLIANCE HEREWITH, IN ADDITION TO EXPRESSLY CONSENTING THAT THE INJURY AND DAMAGE RESULTING FROM BREACH HEREOF WOULD BE IMPOSSIBLE TO MEASURE MONETARILY, THE BORROWER EXPRESSLY WAIVES ANY DEFENSE BASED UPON AN ALLEGED EXISTENCE OF AN ADEQUATE REMEDY AT LAW.

(d) Foreclose this Mortgage pursuant to the terms and provisions of the Ship Mortgage Act, 1920, as amended, 46 USC, Chapter 313, § 31301, et seq. (Supp. 2003), or by other judicial process as may be provided in the Statutes; and

(e) In addition to any and all other rights, powers, and remedies elsewhere in this Mortgage or by law granted to and conferred upon the Government, sell the Vessel upon such terms and conditions as it may deem to be for its best advantage, including the right to sell and dispose of the Vessel free from any claim of or by the Borrower, at public sale, by sealed bids or otherwise, after first giving notice of the time and place of sale, with a general description of the property by first publishing notice of any such sale for ten (10) consecutive days, except Sundays, in some newspaper of general circulation at the place designated for such sale, and by mailing notice of such sale to the Borrower at his last known address; such sale may be held at such place and at such time as the Government in such notice may have specified, or may be adjourned by the Government from time to time by announcement at the time and place appointed for such sale or for such adjourned sale, and without further notice of publication the Government may make any such sale at the time and place to which the same shall be so adjourned; and any such sale may be conducted without bringing the Vessel to the place designated for such sale and in such manner as the Government may deem to be for its best advantage, and the Government may become the purchaser at any such sale, and shall have the right to credit on the purchase price any or all sums of money due to the Government under the Note, any other Loan Documents, or otherwise hereunder. The Borrower expressly agrees and acknowledges that sale of the Vessel pursuant to this section will not (notwithstanding federal or state law to the contrary, if any,) impair or limit the Government’s legal right to collect from the Borrower any deficiency remaining after the sale. If any such federal or state laws or legal precedents may be construed to limit the Government’s rights to collection of said deficiency from the Borrower, then Borrower hereby expressly waives, relinquishes and forever gives up the right to avail itself of such laws and/or defenses.

(f) the Borrower agrees, acknowledges and consents to and with the authority of the Government, to take all steps, measures or actions which are within the discretion or authority of the Government.

SECTION 6. Any sale of the Vessel made in pursuance of this Mortgage shall operate to divest and forever bar the Borrower from any and all right, title, and interest of any nature whatsoever of the Borrower therein and thereto. No purchaser shall be bound to inquire whether notice has been given, or whether any default has occurred, or as to the propriety of the sale, or as to the application of proceeds thereof.

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SECTION 7. The Borrower does hereby irrevocably appoint the Government the true and lawful attorney of the Borrower, in its name and stead to make all necessary transfers of the Vessel, and for that purpose it shall execute all necessary instruments of assignment and transfer, the Borrower hereby ratifying and confirming all that its said attorney shall lawfully do by virtue hereof. Nevertheless, the Borrower shall, if so requested by the Government, ratify and confirm such sale by executing and delivering to the purchaser of the Vessel such proper bill of sale, conveyance, instrument of transfer, and release as may be designated in such request.

SECTION 8. The Borrower hereby irrevocably appoints the Government the true and lawful attorney of the Borrower so long as an Event of Default shall have occurred and shall not have been waived in accordance with Section 2 hereof, in the name of the Borrower, to demand, collect, receive, compromise, and sue for, so far as may be permitted by law, all hire, earnings, issues, revenues, income, and profits of the Vessel and all amounts due from underwriters under any insurance thereon as payment of losses or as return premiums or otherwise, salvage awards and recoveries, recoveries in general average or otherwise, any right of action against the designer, builder, surveyor, or other material party for any fault, negligence, or deficiency in design, construction or survey of the Vessel, and all other sums, due or to become due, at or after the time of the happening of any Event of Default, in respect of the Vessel or in respect of any insurance thereon from any person whomsoever, and to make, give and execute in the name of the Borrower, acquittances, receipts, releases, or other discharges for the same, whether under seal or otherwise, and to endorse and accept in the name of the Borrower all checks, notes, drafts, warrants, agreements, and all other instruments in writing with respect to the foregoing.

SECTION 9. The Borrower covenants and agrees that so long as an Event of Default shall have occurred and shall not have been waived in accordance with Section 2 hereof, the Government in any suit to enforce any of its rights, powers, or remedies shall be entitled as a matter of right and not as a matter of discretion (i) to the appointment of a receiver or receivers of the Vessel and that any receiver so appointed shall have full right and power to use and operate the Vessel, and (ii) to a decree ordering and directing the sale and disposal of the Vessel, and the Government may become the purchaser at said sale, and the Government shall have the right to credit on the purchase price any and all sums of money due to the Government under the Note, or otherwise hereunder.

SECTION 10.

(a) In the event that the Vessel shall be arrested or detained by a marshal or other officer of any court of law, equity, or admiralty jurisdiction in any country or nation of the world or by any government or other authority and shall not be released from arrest or detention within fifteen (15) days from the date of arrest or detention, the Borrower does hereby authorize and empower the Government in the name of the Borrower and does hereby irrevocably appoint the Government and its successors and assigns the true and lawful attorney of the Borrower, in its name and stead to apply for and receive possession of and to take possession of the Vessel pursuant to the terms of this Mortgage and any other documents executed by the Borrower, with all rights and powers that the Borrower might have, possess, or exercise in any such event; and this power of attorney shall be irrevocable and may be exercised not only by the Government but also by an appointee or appointees, with full power of substitution, to the same extent as if the said appointee or appointees had been named as one of the attorneys above named by express designation.

(b) The Borrower also authorizes and empowers the Government or the Government’s appointee or appointees, as the true and lawful attorney of the Borrower, to appear in the name of the Borrower, or its successors or assigns, in any court of any country or nation of the world where a suit is pending against the Vessel because of or on account of any alleged lien against the Vessel from which the Vessel has not been released and to take such proceedings as to them or any of them as may seem proper towards the defense of such suit and the discharge of such lien, and all expenditures made or incurred by them or any of them for the purpose

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of such defense or discharge shall be a debt due from the Borrower to the Government and payment thereof shall be secured by the lien of this Mortgage and shall be due and payable and until paid, shall bear interest at the same rate as that provided in the Note and upon acceleration of the amounts owed under the Note, shall bear interest at the rate of eighteen percent (18%) per annum.

SECTION 11.

(a) The Borrower hereby expressly and irrevocably consents to the jurisdiction of any court in any country whatsoever wherein the Vessel may at any time be located for the foreclosure of this Mortgage, the sale of the Vessel, or the enforcement of any other remedy or right hereunder, and hereby expressly and irrevocably submits the person of the Borrower and the Vessel to the jurisdiction of any such court in any country in any such action or proceeding which is brought, in its sole discretion, by the Government.

(b) To the extent not governed by the laws of the United States, this Mortgage shall in all respects be governed by and construed in accordance with the laws of the Commonwealth of Virginia. The Borrower and Guarantor irrevocably submit to the non-exclusive jurisdiction of the state and federal courts situated in the Commonwealth of Virginia in any proceeding relating to this Mortgage and agrees that any process or summons in any such action may be served by mailing to the Borrower a copy thereof. The Borrower and Guarantor consent to and subject themselves itself to the jurisdiction of the federal court in the jurisdiction where the Vessel is found.

SECTION 12.

(a) Each and every power and remedy herein specifically given to the Government or otherwise in this Mortgage shall be cumulative and shall be in addition to every other power and remedy herein specifically given or now or hereafter existing at law, in equity, admiralty, or by statute, and each and every power and remedy whether specifically herein given or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the Government, and shall not be construed to be a waiver of the right to exercise at the same time or thereafter any other power or remedy. No delay or omission by the Government in the exercise of any right or power or in the pursuance of any remedy occurring upon any Event of Default shall impair any such right, power, or remedy or be construed to be a waiver of any such Event of Default or to be any acquiescence therein; nor shall the acceptance by the Government of any security or of any payment of or on account of the Note maturing after any Event of Default or of any payment on account of any past Event of Default be construed to be a waiver of any right to take advantage of any future Event of Default or of any past Event of Default not completely cured thereby.

(b) The Government, in addition to such other rights or remedies it may have, shall have the right, in its discretion, to take any and all action authorized by Sections 1105(c) and 1105(e) of Title XI and, to the extent not in express conflict with the action authorized by said Sections, or with this Section, any and all action provided for in or authorized or permitted by or in respect of this Mortgage, Note, Collateral or Security, and Policies of Insurance (including all action provided for in or authorized or permitted by or in respect of any or all said documents by the Government).

SECTION 13. In case the Government shall have proceeded to enforce any right, power, or remedy under this Mortgage by foreclosure, entry, or otherwise, and such proceedings shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Government, then and in every such case the Borrower and the Government shall be restored to their former positions and rights hereunder with respect to the property subject or intended to be subject to this Mortgage, and all rights, remedies, and powers of the Government shall continue as if no such proceedings had been taken.

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SECTION 14. The proceeds of any sale of the Vessel (after paying or deducting, in the case of sale, under any judicial proceedings, the fees, costs, and other charges therein), and the net earnings from any management, charter, or other use of the Vessel by the Government under any of the powers above specified, and the proceeds of any claim for damages on account of the Vessel received by the Government while exercising any such power, and the proceeds of any insurance on the Vessel (subject to the provisions of this agreement) shall be applied as follows:

First: To the payment of all expenses and charges including the expenses of any sale, counsel fees, the expenses of any taking of possession of the Vessel, and any other expenses or advances made or incurred by the Government in the protection of its rights or in the pursuance of its remedies hereunder and to the payment of any damages sustained by the Government from the default or defaults of the Borrower; and at the option of the Government to provide a fund adequate in the opinion of the Government to furnish suitable indemnity against liens claiming priority over this Mortgage;

Second: To the payment of the amount then due and unpaid upon the Note for principal and interest and other sums occurring thereunder, including, but not limited to, costs and expenses of collection; and

Third: To the payment of all other sums secured hereby, including fees, whether due or not, and of all damages liquidated or otherwise hereunder; and

Fourth: Any surplus then remaining shall belong and be paid or returned to the Borrower or to whomever shall be lawfully entitled to receive the same.

ARTICLE IV: POSSESSION AND USE OF VESSEL DURING TERM OF MORTGAGE

Until an Event of Default hereunder shall happen, the Borrower (a) shall be suffered and permitted to retain actual possession and use of the Vessel and (b) subject to default, hereof, shall have the right, from time to time, in its discretion, and without application to the Government, and without obtaining a release thereof by the Government, to dispose of, free from the lien hereof, any boilers, engines, machinery, bowsprits, masts, spars, sails, rigging, boats, fishing gear, anchors, chains, tackle, apparel, furniture, fittings, equipment, or any other appurtenances of the Vessel that are no longer useful, necessary, profitable, or advantageous in the operation of the Vessel, first or simultaneously replacing the same by new boilers, engines, machinery, bowsprits, masts, spars, sails, rigging, boats, fishing gear, anchors, chains, tackle, apparel, furniture, fittings, equipment, or any other appurtenances of substantially equal value to the Borrower, which shall forthwith become subject to the lien of this Mortgage.

ARTICLE V: GENERAL TERMS AND CONDITIONS OF MORTGAGE

SECTION 1. MULTIPLE ORIGINALS: This Mortgage may be executed simultaneously in any number of counterparts and all such counterparts executed and delivered each as an original shall constitute but one and the same instrument.

SECTION 2. SEVERABILITY CLAUSE: In the event that this Mortgage, the Note, any other loan documents, or any provisions hereof or thereof shall be deemed invalid in whole or in part by reason of any present or future law of the United States or any decision of any authoritative court, or if the documents at any time held by the Government be deemed by the Government for any reason insufficient to carry out the true intent and spirit of this Mortgage and the Note, then, from time to time the Borrower will execute on its own behalf such other and further assurances and documents as in the opinion of counsel for the Government may be

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required more effectually to subject the Vessel to the payment of the principal sum of the Note, together with interest thereon, as in the Note and as herein provided, and in the performance of the terms and conditions of the Note and this Mortgage. Upon failure of the Borrower to do so, the Government may execute any and all such other and further assurances and documents, for and in the name of the Borrower, and the Borrower hereby irrevocably appoints the Government the agent attorney-in-fact of the Borrower to do so. Any expenses of the Government in connection with the foregoing shall be a debt due from the Borrower to the Government in payment thereof and shall be secured by the lien of this Mortgage.

SECTION 3. MORTGAGE BINDING ON HEIRS, ETC.: All the covenants, promises, stipulations, and agreements of the Borrower in this Mortgage shall bind the Borrower, the Borrower’s heirs, executors, administrators, successors, and assigns. Whenever used, the singular number shall include the plural, the plural the singular, and the use of any gender shall be applicable to all genders.

SECTION 4. NO WAIVER OF PREFERRED STATUS: Nothing in this Mortgage shall be construed as a waiver of the preferred status of this Mortgage by the Government. In the event that any provision of this Mortgage would, as a matter of law, operate to waive the preferred status thereof, such provision for all intents and purposes, shall be deemed eliminated therefrom as though such provision had never been inserted herein.

SECTION 5. MORTGAGE CANNOT BE ALTERED OR WAIVED: This Mortgage may not be amended or supplemented except in writing by the Borrower with the written consent thereto of the Government. The provisions of this Mortgage may not be waived except in writing by the Government.

SECTION 6. TERMINATION OF MORTGAGE: If the whole amount of the Note including all amendments or substitutions, (principal and interest) shall be paid in accordance with its terms and the terms of this Mortgage, and all other sums that may have become secured by the lien of this Mortgage shall be paid, then this Mortgage and the estate and rights hereunder shall cease, terminate and be void; and the Government shall prepare and deliver to Borrower proper instruments acknowledging satisfaction of and discharging this Mortgage.

ARTICLE VI

For the purposes of this Mortgage, the total amount is FOURTEEN MILLION, and No/100 Dollars ($14,000,000.00) and interest and performance of mortgage covenants; the date of maturity is October 17, 2020 and the discharge amount is the same as the total amount set out above plus any other sums due the Government as provided by the provision of any Loan Documents.

IN WITNESS WHEREOF, THE Borrower has executed this Mortgage the day and year first above written.

Attest		BORROWER: Omega Protein, Inc.
By:	/s/    JOHN D. HELD	By:	/s/    ROBERT W. STOCKTON
			Vice President and Treasurer

(SEAL)

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		GUARANTOR ACKNOWLEDGES AND AGREES
Attest			GUARANTOR: Omega Protein Corporation
By:	/s/    JOHN D. HELD		By:	/s/    ROBERT W. STOCKTON
				Executive Vice President and Chief Financial Officer

(SEAL)

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ACKNOWLEDGMENT

STATE OF TEXAS	)
	)	ss
COUNTY OF HARRIS	)

On the 17th day of October , 2005, before me personally appeared Robert W. Stockton, to me known or produced satisfactory identification, who being duly sworn, did depose and say that he is the Vice President and Treasurer of Omega Protein, Inc., and that he signed his name to said Mortgage by like order, and the said Vice President and Treasurer acknowledged to me that he executed said Mortgage as the Vice President and Treasurer of said corporation; and that the same is the free and voluntary act and deed of said corporation and of himself as such Vice President and Treasurer for the uses and purposes therein expressed.

Notary Public

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ACKNOWLEDGMENT

STATE OF TEXAS	)
	)	ss
COUNTY OF HARRIS	)

On the 17^th day of October, 2005, before me personally appeared Robert W. Stockton, to me known or produced satisfactory identification, who being duly sworn, did depose and say that he is the Executive Vice President and Chief Financial Officer of Omega Protein Corporation, and that he signed his name to said Mortgage by like order, and the said Executive Vice President and Chief Financial Officer acknowledged to me that he executed said Mortgage as the Executive Vice President and Chief Financial Officer of said corporation; and that the same is the free and voluntary act and deed of said corporation and of himself as such Executive Vice President and Chief Financial Officer for the uses and purposes therein expressed.

Notary Public

Case No. FF-G-013

PREFERRED SHIP MORTGAGE

TO THE UNITED STATES OF AMERICA

ARTICLE I: CREATION OF ENCUMBRANCE

SECTION 1. PREFERRED SHIP MORTGAGE: THIS MORTGAGE, dated the 17^th day of October , 2005, by Omega Protein, Inc., 835 B Pride Drive, Hammond, Louisiana 70401, owning 100%, (the “Borrower”), to the United States of America, acting by and through the Secretary of Commerce, National Oceanic and Atmospheric Administration, National Marine Fisheries Service, Financial Services Division, 1315 East-West Highway, Silver Spring, Maryland 20910 (the “Government”),

DEFINITIONS: All terms contained herein are defined in the Acknowledgment of Definitions executed by all parties to this transaction.

WITNESSETH:

SECTION 2. ENCUMBERED VESSEL: WHEREAS, The Borrower owns 100% of the fishing vessel, more fully described below in Section 4; and

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SECTION 3. OBLIGATIONS SECURED: WHEREAS, The Government, pursuant to the provisions of Title XI of the Merchant Marine Act, 1936, as amended, found at 46 USC § 1271 et seq., and 50 CFR 253, as amended by public law no. 104-297 on October 11, 1996, known as the Fisheries Finance Program, made, entered into, and delivered certain agreements and covenants, as contained in the Approval-in-Principle Letter dated September 28, 2005, (the “Approval Letter”) and such Approval Letter has been accepted by the Borrower and Omega Protein Corporation, (the “Guarantor”). The Approval Letter contemplates a loan from the Government to the Borrower, in the amount of up to $14,000,000.00, (the “Loan”). This transaction will be evidenced by the issuance of a promissory note, in the principal amount of $14,000,000.00 (“the Note”) to the United States of America by the Borrower, dated October 17, 2005, a copy of which is attached hereto as Exhibit 1, and which will be secured by this Preferred Ship Mortgage (the “Ship Mortgage”) to the Government for the purpose of securing the Loan, including, but not limited to, the payment of the principal of and interest of the Note in accordance with its terms and the terms of this Ship Mortgage, as well as any future advances, and all other sums owed the Government.

WHEREAS, the Government has entered into an Approval and Agreement letter dated September 28, 2005, (the “Approval Letter”), and Security Agreement dated October 17 , 2005, with the Borrower, and will execute other documents, including all Loan Documents.

CONSIDERATION:

NOW, THEREFORE, in consideration of the Government having agreed to enter into the Approval Letter dated September 28, 2005, with the Borrower and for other good and valuable consideration, receipt whereof is hereby acknowledged by the Borrower, and in order to secure the payment of the principal of and interest on the Note and all other sums which accrue according to the terms thereof and the payment of all other sums that may hereafter become secured by this Mortgage in accordance with the terms hereof and to secure the performance and observance of and compliance with the covenants, terms and conditions herein and in the Note contained, or contained in any other document executed by the Borrower, the Borrower has granted, conveyed, mortgaged, pledged, assigned, transferred, set over and confirmed unto the Government the whole of the vessel described as follows:

SECTION 4. SECURITY AGREEMENT: THE VESSEL SUBJECT TO THIS MORTGAGE is that certain oil screw vessel named GALVESTON BAY, Official Number 508776 together with all her accessories and appurtenances, including, but not limited to accounts receivable, anchors, apparel, boats, boilers, cables, catch, chains, charter hire, contract rights, contracts, electronics, engines, equipment, fishing gear, freight, furniture, general intangibles, inventory, licenses, machinery, masts, motors, nets, permits, proceeds, product, related gear, rents or profits, rigging, sails, skiffs, spare parts, spars, substitutions, supplies, tackle, hydraulics, safety equipment, and parts and accessories affixed to or used in connection therewith, whether now owned or hereafter acquired, whether on board or not, and all additions, improvements, renewals, and replacements hereafter made in, on or to the said vessel or any part thereof, and in, on, or to its equipment and appurtenances as aforesaid (the “Vessel”).

INDIVIDUAL TRANSFERABLE QUOTAS: If a limited fisheries access system is in effect, or should a limited fisheries access system be initiated at some future date under which the Borrower is granted a transferable fishery conservation and management allocation (including, but not limited to, allocations, permits, quotas, licenses, cage tags, or any other fisheries access restriction or right, however characterized, of whatsoever nature) affecting, necessary for, or in any other way, however characterized, associated with any of the property included in the Collateral, the Borrower agrees to grant to the Government a full senior security interest in such allocation by whatsoever means deemed by the Government to be appropriate (including, but not limited to, the

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Borrower’s execution of security agreements and the filing of financing statements under the UCC). Further, if the Borrower fails to do so, the Borrower agrees that the Government may use, for the purpose of executing and otherwise perfecting whatever documents may be required to effect the grant to the Government of such a full security interest in such fisheries conservation and management allocation, the attorney-in-fact authority conferred upon the Government by ARTICLE IX of the Title XI Financial Agreement.

SECTION 5. FINANCING STATEMENT: Some of the items of property described herein are goods that are or are to become accessories and appurtenances to the vessel described herein, and it is intended that as to those goods, this mortgage shall be effective as a financing statement. Information concerning the security interest created by this instrument may be obtained from the Borrower or the Government, at the addresses sent out in the first paragraph of this Preferred Ship Mortgage.

TO HAVE AND TO HOLD ALL and each of the above-mortgaged and described property unto the Government and its successors and assigns, to its use and benefit forever;

PROVIDED ALWAYS, and the condition of these presents is such, that if the Borrower, its successors or assigns shall pay, or cause to be paid, the principal of and interest on the Note in accordance with the terms of the Note and the Mortgage and shall pay any and all other sums that may hereinafter become secured by this Mortgage in accordance with the terms hereof, and shall keep, perform, and observe all and each of the covenants and promises in the Note and in the Mortgage contained, expressed, or implied to be kept, performed, and observed by or on the part of the Borrower, then this Mortgage and the estate and rights hereby granted shall cease, determine, and be void; otherwise to remain in full force and effect.

The Government hereby covenants and agrees that the Vessel is to be held by the Borrower subject to the further covenants, conditions, and uses hereinafter set forth as follows:

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ARTICLE II: BORROWER’S OBLIGATIONS

SECTION 1. CITIZENSHIP AND TITLE REQUIREMENTS: The Borrower (i) is and shall continue to be a citizen of the United States as defined in section 2 of the Shipping Act, 1916, as amended, for coastwise trade, and (ii) is entitled to own and operate the Vessel under her marine document and shall maintain such marine document in full force and effect. The Note and the Mortgage have been duly executed and delivered, and the Note in the hands of the holder thereof is and will be a valid and enforceable obligation of the Borrower in accordance with its terms. The Borrower lawfully owns and is lawfully possessed of the whole of the Vessel free from any lien whatsoever except the lien of this Mortgage, and liens expressly permitted herein and other Preferred Ship Mortgages in favor of the Government, and covenants that it will warrant and defend the title and possession thereto and every part thereof for the benefit of the Government against the claims and demands of all persons whomever.

SECTION 2. INSURANCE REQUIREMENTS:

(a) The Borrower will, at all times and at its own expense, keep the Vessel insured with responsible underwriters and through responsible brokers, all in good standing and satisfactory to the Government, in an amount that fully and adequately protects the Vessel and the Government’s interest therein against all marine perils and disasters and all hazards, risks, and liabilities in any way arising out of the ownership, operation, or maintenance of the Vessel, including but not limited to insurance as follows:

(i) While being operated, navigating hull insurance must be in an amount equal to the full commercial value of the Vessel. In no event may this be less than one hundred ten percent (110%) of the unpaid principal, at the time outstanding, of the Note. The policy valuation on the hull shall not exceed the aggregate amount insured by hull policies. The hull insurance shall be placed under the form of policy known as American Institute of Marine Underwriters form, or under such other form of policy as the Government may approve, insuring against the usual risks covered by such policies, including four-fourths running down clause, Inchmaree clause, and breach of warranty clause; and

(ii) Protection and indemnity insurance under form of protection and indemnity policies approved by the Government and issued by marine insurance companies approved by the Government. The amount of protection and indemnity insurance shall be fixed by the Government; and

(iii) When and while the Vessel is laid up, and in lieu of the aforesaid navigating hull insurance referred to in (i) of this Section, port risk insurance under forms of port risk policies approved by the Government.

(b) The Borrower expressly covenants and agrees to keep the policies renewed from time to time, to keep the same valid at all times for the amounts aforesaid, and to keep the premiums thereon fully paid at all times. The Borrower shall not do any act nor voluntarily suffer or permit any act to be done whereby insurance is or may be suspended, impaired, or defeated, and shall not suffer nor permit the Vessel to engage in any voyage or to carry any cargo not permitted under the policy or policies of insurance in effect, unless and until the Borrower shall first cover the Vessel in the amount herein provided for, with insurance satisfactory to the Government for such voyage or for the carriage of such cargo.

(c) In the event the Borrower fails to procure any of the insurance, satisfactory to the Government, or fails to perform any of the covenants and agreements contained herein, the Government may, but shall be under

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no duty to, procure such other or different insurance or coverage as it may deem advisable with uncontrolled discretion in the Government as to the source, nature, form, type, class, amount, and extent of such insurance or coverage; and all sums expended or advanced by the Government in procuring such insurance shall be secured by and shall be due and payable as provided in Article II, Section 2 hereof.

(d) All insurance shall be taken out in the name of the Borrower and the Government as their interest may appear and policies and certificates shall provide that there shall be no recourse against the Government for payment of premiums and shall further provide for at least 20 days prior written notice to be given to the Government by the underwriters in the event of cancellation or modification. All original policies, binders, certificates, and covenants and all endorsements and riders thereto shall be delivered to the Government for approval and custody.

(e) Except as provided in (f) below, all insurance policies or certificates shall provide that losses thereunder shall be payable to the Government. If no Event of Default exists under this Mortgage, the Government may, in its discretion, pay, from the proceeds of the insurance directly to the repairer, the amount of any authorized repairs or if the Borrower shall have first fully repaired the damage to the satisfaction of the Government and paid the cost thereof, to the Borrower as reimbursement therefor. Any balance remaining from the aforesaid insurance proceeds will be applied as directed by the Government. If an Event of Default exists, the Government shall retain such insurance and if such Event of Default is not cured within fifteen (15) days of the occurrence thereof, apply the same in the manner provided in Article II, Section 2 hereof.

(f) Any loss under any insurance on the Vessel with respect to protection and indemnity risks may be paid directly to the person to whom any liability, covered by such insurance, has been incurred or to the Borrower to reimburse the Borrower for any loss, damage, or expense incurred by the Borrower and covered by such insurance; provided, that the underwriter shall have first received evidence that the liability insured against has been discharged.

(g) In the event of an actual or constructive total loss, or an agreed or compromised total loss of or in case of requisition of title to the Vessel, all amounts payable therefor shall, subject to Article II, Section 2 hereof, be paid to the Government and shall be applied first, to the payment of the expenses of the Government in collecting such payments, and second, as provided in Article II, Section 2 hereof.

(h) In the event that any claim or lien is asserted against the Vessel for loss, damage, or expense which is covered by insurance hereunder, and it is necessary for the Borrower to obtain a bond or supply other security to prevent arrest of the Vessel or to release the Vessel from arrest on account of such claim or lien, the Government, on request of the Borrower, may, in the sole discretion of the Government, and upon notice to the Borrower, assign to any person, firm, or corporation executing a surety or guarantee bond or other agreements, to save or release the Vessel from such arrest, all right, title, and interest of the Government in and to said insurance covering said loss, damage, or expense, as collateral security to indemnify against liability under said bond or other agreement.

SECTION 3. NO LIENS TO BE PLACED AGAINST THE VESSEL:

(a) Neither the Borrower, any charterer, the Master of the Vessel, nor any other person has or shall have any right, power, or authority to create, incur, or permit to be placed, imposed, or continued upon the Vessel any lien whatsoever other than the lien of this Mortgage or permitted liens as defined herein.

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(b) Permitted Liens. “Permitted Liens” means liens or other charges or encumbrances:

(i) arising for damages out of tort covered by insurance except for any deductible amounts applicable thereto, for wages of a stevedore when employed directly by the owner, operator, master, ship’s husband or agent of any Vessel, for wages of the crew of the Vessel, for general average, for salvage, including contract salvage, provided the same are paid immediately when due;

(ii) in favor of any person furnishing repairs, supplies, towage, use of dry dock or marine railway, or other necessaries to a Vessel on the order of the Borrower, or of a person authorized by the Borrower, provided the same are paid immediately when due.

(iii) imposed on the Vessel for taxes or governmental charges or levies, provided the same are paid immediately when due;

(iv) incurred in the ordinary course of business of the Vessel not relating to money borrowed which (1) will be paid immediately when due, and (2) which, in the aggregate, at any time are not material to the operations or financial condition of the Borrower; and

(v) arising by operation of law as a result of the modification of the Vessel, including mechanic’s liens, provided the same are paid immediately when due;

(vi) in favor of the United States of America, the United States Department of Commerce, National Oceanic and Atmospheric Administration, National Marine Fisheries Service, Financial Services Division;

PROVIDED, HOWEVER, that with respect to the deductible amounts described in clause (i) and liens or encumbrances of the type described in clauses (ii), (iii) and (v) not arising from or incurred in the ordinary course of business of the Borrower, the Borrower shall have set aside adequate reserves determined in accordance with generally accepted accounting principles (GAAP), provided that for such deductible amounts and liens or encumbrances which, in the aggregate, exceed $25,000.00 USD, shall include only liens which are subordinate to or which pursuant to applicable law cannot be subordinated by contract to the lien of the security interest in the vessel granted to the Government.

As used herein, the term “immediately when due” shall mean the time when, according to applicable law, customary industry practices, or a prior course of dealing or other agreement between the Borrower and the lienholder, the lienholder expects payment to be made; provided that, if the Borrower desires to contest an asserted lien, the Borrower may do so if the Borrower acts in good faith and by appropriate proceedings and has set aside the reserves described above.

SECTION 4. NOTICE OF MORTGAGE: The Borrower shall carry a properly certified copy of this Mortgage with the Vessel’s papers on board the Vessel, shall exhibit the same on demand to any person having business with the Vessel, or to any representative of the Government, and shall place and keep prominently displayed in the pilot house, master’s cabin, and engine room of the Vessel a framed, printed or typewritten notice reading as follows:

“NOTICE OF MORTGAGE: This Vessel is covered by a Preferred Ship Mortgage given to the United States of America, under authority of the Ship Mortgage Act, 1920, as amended. Under the terms of said Mortgage, neither the owner of this Vessel, any charterer, the Master of this Vessel, nor any other person has any right, power, or authority to create, incur, or permit to be imposed upon the Vessel any liens, maritime or

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otherwise, other than the lien of said Mortgage and liens for crew’s wages, emergency safety repairs, or salvage.”

SECTION 5: NOTICES TO THE GOVERNMENT:

(a) OF ACTION AGAINST VESSEL: In the event that a libel is filed against the Vessel, or if the Vessel shall be levied upon or taken into custody, or detained by any proceeding in any court, or tribunal, the Borrower will, within 48 hours, notify the Government by telegram, telex, or facsimile and confirmed by letter, and the Borrower will, within fifteen (15) days thereafter, cause the Vessel to be discharged. Within ten (10) days of its occurrence, the Borrower will notify the Government of any claim that could result in a lien being placed against the Vessel.

(b) OF CASUALTIES OR DAMAGE TO THE VESSEL: Within 24 hours of the event, the Borrower shall furnish the Government full information regarding any casualties or other accidents or damage to the Vessel, including copies of any supporting documents, i.e, accident reports, claims, etc.

(c) OF ACTION AGAINST THE BORROWER OR GUARANTOR: Within ten (10) days of its occurrence, the Borrower must give the Government written notice of any pending litigation, business reverse, casualty, loss, or any other matter (however characterized) that diminishes; (i) The Borrower’s ability to service any debt actually or contingently owed the Government, (ii) The Borrower’s ability to perform any other duty or obligation owed to the Government, (iii) The Borrower’s ability to fully and faithfully perform any covenant with the Government, (iv) the value of any property or other assets pledged to the Government, or (v) the net worth of any party against whom the Government has recourse for this debt.

SECTION 6: MAINTENANCE AND INSPECTION COSTS:

(a) VESSEL MAINTENANCE: At all times, at the Borrower’s own cost and expense, the Borrower will maintain and preserve the Vessel in as good condition, working order and repair as on the date of this Mortgage, ordinary wear and tear excepted; provided, however, if subsequent to the date of this Mortgage, the Vessel is reconstructed or reconditioned, the Borrower will keep the Vessel in as good condition, working order, and repair as the Vessel was on the date said reconstruction or reconditioning was completed, ordinary wear and tear excepted. In addition to the foregoing, the Borrower will keep the Vessel in as good condition as will enable her to pass such inspection as may be required by marine underwriters as a condition of their writing such insurance in such amounts as are required under this Mortgage or as required by the United States Coast Guard as a condition to certifying that the Vessel is seaworthy and in compliance with all applicable safety and navigational requirements.

(b) INSPECTION OF VESSEL: The Borrower shall afford the Government or its authorized representatives full and complete access to the Vessel, in port or at sea, at such times as the Government, in its sole discretion, may require, for the purpose of inspecting or valuing the vessel, her cargo, log, and papers.

(c) INSPECTION OF BORROWER’S FINANCIAL RECORDS: The Borrower agrees to execute a consent and waiver, valid for the term of the mortgage, which allows the Internal Revenue Service to release directly to the Government, Borrower’s Federal Income Tax Returns², whenever the Government requests same. Additionally, the Borrower shall permit the Government, or any representative selected by it, in such manner and at such times as the Government, in its sole discretion, requires, to make inspections and audits of any books, records, off-loading receipts, fish-sale receipts, papers, or other documents of whatsoever nature in the custody

¹ Borrower agrees to execute IRS Forms #4506 and 8821, thereby implementing the provisions of 26 USC §6103(c).

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and control of the Borrower, or any other individual or entity, relating in any way to the financial or business condition of the Borrower or the operation or company. At the Government’s request, these statements, books, records, receipts or reports must be delivered to the Southeast Region of the National Marine Fisheries Service, Financial Services Branch, in St. Petersburg, Florida.

(d) BORROWER TO PAY THE COST OF ALL SUCH INSPECTIONS, audits or appraisals, provided for in Paragraphs 6(a), 6(b) and 6(c), immediately above, within 30 days of the Government’s demand and all such amounts disbursed by the Government for such purpose shall, until fully repaid by the Borrower, be added (payable upon the Government’s demand) to the Borrower’s Note to the Government and shall earn interest at the same rate as the other principal of the Borrower’s Promissory Note and shall be secured by the ship mortgage and other securities which secure the Borrower’s promissory note to the Government.

SECTION 7. FINANCIAL REPORTING TO THE GOVERNMENT:

(a) The Borrower will, within 20 days after the close of each fiscal year, and at such other times and in such form as the Government may prescribe, furnish to the Government, the Borrower’s financial and operating statements including schedules showing all compensation paid by the Borrower;

(b) The Borrower will, at all times, keep proper books of account in accordance with generally accepted accounting principles and practice; and

(c) The Borrower will permit the Government, at the Borrower’s expense and in such manner and at such time as the Government may require, to (i) make inspections and audits of any books, records, and papers in the custody and control of the Borrower or others, relating to the Borrower’s financial or business conditions, including making copies thereof, and extracts therefrom, and (ii) make inspections and appraisals of any of the Borrower’s assets.

SECTION 8. TAXES & FEES: The Borrower will pay and discharge when due and payable, from time to time, all taxes, assessments, governmental charges, fines, and penalties lawfully imposed on the Vessel.

SECTION 9. REIMBURSEMENT OF GOVERNMENT EXPENDITURES: The Borrower will reimburse the Government for any and all expenditures which the Government may reasonably elect to make from time to time to protect the security granted hereunder (in the event of the Borrower’s failure to do so), including, without limitation of the foregoing, payment of taxes, repairs, insurance premiums, the discharge of any lien, libel or seizure of the Vessel, and expenses incurred by the Government in retaking the Vessel; and any such payment made by the Government shall be for the account of the Borrower, and the making thereof by the Government shall not cure the Borrower’s default in that regard nor constitute a waiver of any right or remedy granted to the Government hereunder, and all reasonable sums so expended by the Government or any liability incurred by it shall be immediately due and payable and shall be deemed to be an indebtedness of the Borrower and secured by this Mortgage, and until paid shall bear interest at the same rate as that provided in the Note.

SECTION 10: GOVERNMENT’S PRIOR WRITTEN CONSENT REQUIRED: The Borrower shall not, without prior written consent of the Chief, Financial Services Division, National Marine Fisheries Service, which consent will not unreasonably be withheld, take any of the following actions:

(a) sell, mortgage, transfer, nor charter the Vessel, and any such written consent obtained from the Government to any one sale, mortgage, transfer, or charter, shall not be construed to be a waiver of this provision with respect to any subsequent proposed sale, mortgage, transfer, or charter. Any such sale, mortgage, transfer, or charter of the Vessel shall be subject to the provisions of this Mortgage and to the lien it creates.

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(b) Pay to any officer, partner, or other party any salary, commission, bonus, management fee, dividend, or other consideration (however characterized) in excess of either reasonable industry standards or ordinary financial prudence for a company or operation of the Borrower’s size and financial condition at the time that such consideration is paid (and the burden of proving reasonableness shall be on the Borrower).

(c) Purchase or redeem any shares of the Borrower’s or the Borrower’s company’s own stock.

(d) Exclusive of such fixed assets to be acquired with the proceeds of the Note or any part thereof, or any fixed assets acquired prior to the date of this Mortgage, make any additional investment (excluding purchases, etc., in connection with the routine and continuing maintenance and preservation of the Vessel and its productivity) in, or incur any additional liability for, the purchase, acquisition, lease, or other use (however characterized) of any real property, machinery, equipment, fixtures, or furniture, or fixed property in connection with the Borrower’s present level of operations in any one fiscal year in excess of an aggregate of 5% of the Borrower’s total assets.

(e) Start any new business or acquire any other business, or the assets of any other business, whether by purchase, merger, consolidation, affiliation, or any other means (however characterized) except as may otherwise be permitted herein, or sell, liquidate, dissolve, spin-off, split-up or in any other way (however characterized) dispose of its own assets except as may be required in the normal course of operations reasonably necessary to carry on its day-to-day operation.

(f) The Borrower will not split-up, split-off, spin-off, merge, consolidate, or transfer or allow transfer of its shares so as to effect a change in its controlling interest or management.

(g) Guarantee or become contingently liable in any way as surety, endorser, creditor, co-maker, accommodation maker, or in any other way (however characterized) for the debt or obligation of any other party, individual or entity, except as may be permitted herein or required in the normal course of operations reasonably necessary to carry on its day-to-day business.

(h) By any means whatsoever, allow the company or operation to be acquired by, or otherwise reorganized into (however characterized) any other company or operation, unless the acquiring company, operation or reorganized entity is acceptable to the Government, and said company, operation or reorganized entity agrees to do the following: (i) provide to the Government a 100% unconditional guarantee of all debt actually or contingently owed it; and (ii) be bound by these covenants; and (iii) be bound by such other covenants as the Government shall reasonably require to protect its interest; and (iv) provide such other assurances and security as the Government, in its sole discretion, requires.

(i) Make any distribution of the Borrower’s assets for compensation (including salaries, withdrawals, fees, bonuses, commissions, drawing accounts, and other payments, whether directly or indirectly, in money or otherwise) for services, or give any preferential treatment, make any advances, directly or indirectly by way of loans, gifts, notes, or otherwise, to any employee or Affiliate or increase the compensation of any person above that set forth in any application or document submitted in connection with the Note. In the event an Affiliate increases the compensation (including salaries, withdrawals, fees, bonuses, commissions, drawing accounts, and other payments, whether directly or indirectly, in money or otherwise) paid to the Borrower or any employee of the Borrower, beyond that authorized or consented to by the Government, the compensation payable to such person by the Borrower will be forthwith correspondingly reduced and immediate notice thereof given to the Government by the Borrower.

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SECTION 11. COMPLIANCE WITH FEDERAL SHIP MORTGAGE ACT: The Borrower will comply with and satisfy all the provisions of the Ship Mortgage Act, 1920, as amended, 46 USC, Chapter 313, § 31301, et seq. (Supp. 2003), in order to establish and maintain this Mortgage as a Preferred Ship Mortgage upon the Vessel.

SECTION 12. OPERATING RESTRICTIONS:

(a) DOCUMENTATION: The Borrower will keep the Vessel documented under the laws of the United States and no transfer of port of hailing of the Vessel shall be made without the prior written consent thereto of the Government.

(b) LAWFUL OPERATION: The Borrower will not cause or permit the Vessel to be operated in any manner contrary to law or contrary to any rules and regulations which may from time to time be prescribed pursuant to law.

(c) VESSEL SHALL NOT LEAVE UNITED STATES’ WATERS: The Borrower will not remove, attempt to remove, or allow the vessel to be moved beyond the limits of the United States without the written consent of the Government. If said written consent is obtained, the Borrower will execute certain documents and will not abandon the Vessel in a foreign port. The Borrower will not engage in any unlawful trade or violate any law or carry any cargo that will expose the Vessel to penalty, forfeiture, or capture, and will not do, or suffer or permit to be done, anything which can or may injuriously affect the documentation of the Vessel under the laws and regulations of the United States.

(d) Upon demand by the Government to the master of the Vessel or the Borrower, the Borrower will return the vessel to the waters known as the Exclusive Economic Zone (EEZ) of the United States and, if the Government so demands, to a port of call chosen by the Government, thereby revoking any prior consent extended by the Government with respect to operation of the Vessel outside the Exclusive Economic Zone of the United States.

SECTION 13. PAYMENTS MUST BE TIMELY MADE AND TERMS OF THE MORTGAGE , NOTE AND OTHER LOAN DOCUMENTS MUST BE MET: The Borrower will duly and punctually pay all the principal of and interest on the Note and the Mortgage as herein and in the Note and other loan documents provided, and will at all times keep, perform, and observe all and singular the covenants, conditions, stipulations, promises, and agreements in this Mortgage and in the Note expressed or implied on its part to be kept, performed, and observed, and will duly punctually pay all sums that may hereinafter become due hereunder.

ARTICLE III: DEFAULT

SECTION 1. The Borrower agrees that it will faithfully observe, perform, comply with and discharge all of the covenants, conditions, and obligations which are imposed on the Borrower by any other agreement or document executed in connection with this Mortgage and the Note, concurrently or otherwise, and that the Borrower’s failure to do so shall constitute an Event of Default under this Mortgage.

SECTION 2. The Borrower agrees that any material default under any guarantor agreement, security agreements, Title XI financial agreements, or other loan documents which may be executed in connection with this Mortgage or Note, whether or not the Borrower is party to said agreement, shall constitute an Event of Default under this Mortgage.

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SECTION 3. The Borrower agrees that all reasonable attorney fees incurred by the Government because of the Borrower’s failure to perform or discharge its obligations, as provided by this Mortgage, the Note, or any other document or agreement executed in connection therewith, shall be deemed to be an indebtedness of the Borrower and shall be secured by this Mortgage and shall be due and payable and until paid, shall bear interest at the same rate as that provided in the Note, and upon acceleration of the amounts owed under the Note, shall bear interest at the accelerated rate of eighteen percent (18%) per annum, unless limited by applicable state law.

SECTION 4. Each of the following events shall constitute an Event of Default:

(a) default shall be made in the payment of the principal of the Note when and as the same shall become due and payable, whether at maturity, by notice of acceleration, or otherwise; or

(b) default shall be made in the payment of any interest on the Note (including any amendments thereto or substitution therefor), when and as the same shall become due and payable as therein and herein provided; or

(c) default shall be made in the due and punctual observance and performance of any provision of Article I, hereof; or

(d) the Borrower shall be dissolved or adjudged a bankrupt or shall make a general assignment for the benefit of the Borrower’s creditors, or shall lose the right to do business by forfeiture or otherwise, or a receiver or receivers of any kind whatsoever, whether appointed or not, in admiralty, bankruptcy, common law, or equity proceedings, and whether temporary or permanent, shall be appointed for the Vessel or for any other property of the Borrower; or a petition for reorganization of, or other proceeding or action in reference to the Borrower under any of the provisions of the Bankruptcy Act shall be filed by the Borrower or by creditors of the Borrower; or if reorganization of the Borrower under said Act is approved by the Court, whether proposed by a creditor, stockholder, or any other person whomsoever; and

THE BORROWER AND THE GUARANTOR BOTH UNDERSTAND THAT IF EITHER FILES BANKRUPTCY, THE BORROWER WILL LOSE THE VESSEL.

THE BORROWER AND THE GUARANTOR EXPRESSLY AGREE TO, AND UNDERSTAND THAT IN THE EVENT OF BANKRUPTCY, THE VESSEL WHICH IS THE SECURITY FOR THIS PREFERRED SHIP MORTGAGE WILL NOT BE PERMITTED TO GO OUT TO SEA, AND WILL REMAIN IN PORT IN THE JURISDICTION OF THE COURT WHERE THE BANKRUPTCY PETITION IS FILED OR SUCH OTHER JURISDICTION WHERE THE BOAT MAY BE OR OTHER COLLATERAL MAY BE FOUND.

(e) there shall be an actual or constructive total loss of the Vessel; or

(f) default shall be made by the Borrower in the prompt and faithful performance or observance of any other covenant, condition, or agreement by it to be performed and observed, contained in this Mortgage, Note, or any other loan documents and such default shall continue for fifteen (15) days; or

(g) the making in any application, agreement, affidavit, or other document, submitted in connection with the Note, of any misrepresentation, on behalf of, or for the benefit of, the Borrower. Failure to disclose any material fact may be deemed a misrepresentation; or

(h) the institution of any suit against the Borrower or others deemed by the Government to affect adversely its interest hereunder, in the Note or otherwise; or

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(i) failure of any signator to any of the Loan Documents, to observe any of the conditions contained in said Loan Documents, or any other document or agreement executed (concurrently or otherwise), inclusive of amendments thereto, in connection with this Mortgage, or subsequent mortgage, regardless of whether or not the Borrower shall be a party to said agreement or document; or

(j) impairment of any collateral including the vessel or which is given in addition to the vessel which is the subject of this Preferred Ship Mortgage; or

(k) the Borrower shall, without first obtaining written permission from the Secretary, transfer, sell, assign, hypothecate, or alienate or attempt to transfer, sell, assign, hypothecate or alienate any rights, licenses or permits appurtenant to and/or necessary for the Vessel to engage in any commercial fisheries; or

(l) the Borrower shall, intentionally or through neglect, permit a material diminution of the value of the Vessel and/or its appurtenances and equipment; or

SECTION 5. UPON OCCURRENCE OF AN EVENT OF DEFAULT THE GOVERNMENT, MAY IN ITS DISCRETION:

(a) Declare the Note to be due and payable immediately and upon such declaration the entire principal of and interest on the Note shall become and be immediately due and payable, and thereafter shall bear interest at eighteen percent (18%) per annum unless such would violate the usury laws of the state where this Mortgage and the Note are executed, in which case the maximum legal rate of that state shall prevail; provided, however, that if the Borrower shall have removed and remedied each Event of Default within fifteen (15) days after the occurrence thereof, then in every such case the Government shall waive any such Event of Default; but no such waiver shall extend to nor affect any subsequent or other Event of Default nor impair any rights or remedies consequent thereon; and provided, further, that if at any time after the expiration of fifteen (15) days after any Event of Default shall have occurred, all Events of Default shall have been remedied and removed and full performance made by the Borrower to the satisfaction of the Government and all installments of principal and interest in arrears (including interest at the aforesaid rate) and the charges and expenses, if any, of the Government, it agents and attorneys, shall have been paid, then and in every such case the Government may waive any such Event of Default; and provided, also, that no waiver hereunder shall extend to nor affect any subsequent or other Event of Default nor impair any rights or remedies consequent thereon;

(b) Bring suit at law, in equity, or in admiralty, as it may be advised, to receive judgment for any and all amounts due under the Note and other Loan Documents, or otherwise hereunder, and collect the same out of any and all property of the Borrower whether covered by this Mortgage or otherwise;

(c) Retake the Vessel without legal process wherever the same may be found, and the Borrower or other person in possession forthwith upon demand of the Government shall immediately surrender to the Government possession of the Vessel, and, without being responsible for loss or damage, the Government may hold, lay-up, lease, charter, operate, or otherwise use the Vessel for such time and upon such terms as it may deem to be for its best advantage, accounting only for the net profits, if any, arising from such use of the Vessel and charging against all receipts from the use of the Vessel, or from the sale thereof by court proceeding or pursuant to subsection (e) following, all costs, expenses, charges, damages, or losses by reason of such use; and if at any time the Government shall avail itself of the right herein given it to retake the Vessel and shall retake it, the Government shall have the right to dock the Vessel at any dock, pier, or other premises of the Borrower without charge, or to dock it at any other place at the cost and expense of the Borrower; IT IS EXPRESSLY UNDERSTOOD AND AGREED TO BY THE BORROWER THAT SURRENDER OF THE VESSEL UNDER

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THIS SECTION MUST BE AND WILL BE IMMEDIATE AND IN ACCORDANCE WITH THE DIRECTIONS OF THE GOVERNMENT. FAILURE OF THE BORROWER TO IMMEDIATELY COMPLY WITH THE GOVERNMENT’S DEMAND FOR SURRENDER OF THE VESSEL WILL CAUSE THE POSSESSION OF THE VESSEL BY THE BORROWER (INCLUDING, BUT NOT LIMITED TO, POSSESSION AND CONTROL OF THE VESSEL BY A MASTER OR CREW MEMBER ON BOARD THE VESSEL) TO BE UNLAWFUL AND TO CONSTITUTE A CONVERSION OF THE VESSEL, ITS APPURTENANCES AND EQUIPMENT, THEREBY SUBJECTING THE BORROWER (EXPRESSLY INCLUDING, IF APPLICABLE, ITS OFFICERS AND DIRECTORS) TO ALL FINES, PENALTIES AND ACTIONS WHICH THE GOVERNMENT DEEMS APPLICABLE AND APPROPRIATE. SHOULD THE BORROWER CONTINUE TO OPERATE, POSSESS OR CONTROL THE VESSEL CONTRARY TO THE GOVERNMENT’S DIRECTIONS AND THE PROVISIONS HEREIN, THEN THE GOVERNMENT SHALL, IN ADDITION TO ANY OTHER RIGHTS AND REMEDIES AT LAW AND IN EQUITY, BE ENTITLED TO A TEMPORARY RESTRAINING ORDER AND/OR ORDER FOR INJUNCTIVE RELIEF NECESSARY TO GAIN COMPLIANCE HEREWITH, IN ADDITION TO EXPRESSLY CONSENTING THAT THE INJURY AND DAMAGE RESULTING FROM BREACH HEREOF WOULD BE IMPOSSIBLE TO MEASURE MONETARILY, THE BORROWER EXPRESSLY WAIVES ANY DEFENSE BASED UPON AN ALLEGED EXISTENCE OF AN ADEQUATE REMEDY AT LAW.

(d) Foreclose this Mortgage pursuant to the terms and provisions of the Ship Mortgage Act, 1920, as amended, 46 USC, Chapter 313, § 31301, et seq. (Supp. 2003), or by other judicial process as may be provided in the Statutes; and

(e) In addition to any and all other rights, powers, and remedies elsewhere in this Mortgage or by law granted to and conferred upon the Government, sell the Vessel upon such terms and conditions as it may deem to be for its best advantage, including the right to sell and dispose of the Vessel free from any claim of or by the Borrower, at public sale, by sealed bids or otherwise, after first giving notice of the time and place of sale, with a general description of the property by first publishing notice of any such sale for ten (10) consecutive days, except Sundays, in some newspaper of general circulation at the place designated for such sale, and by mailing notice of such sale to the Borrower at his last known address; such sale may be held at such place and at such time as the Government in such notice may have specified, or may be adjourned by the Government from time to time by announcement at the time and place appointed for such sale or for such adjourned sale, and without further notice of publication the Government may make any such sale at the time and place to which the same shall be so adjourned; and any such sale may be conducted without bringing the Vessel to the place designated for such sale and in such manner as the Government may deem to be for its best advantage, and the Government may become the purchaser at any such sale, and shall have the right to credit on the purchase price any or all sums of money due to the Government under the Note, any other Loan Documents, or otherwise hereunder. The Borrower expressly agrees and acknowledges that sale of the Vessel pursuant to this section will not (notwithstanding federal or state law to the contrary, if any,) impair or limit the Government’s legal right to collect from the Borrower any deficiency remaining after the sale. If any such federal or state laws or legal precedents may be construed to limit the Government’s rights to collection of said deficiency from the Borrower, then Borrower hereby expressly waives, relinquishes and forever gives up the right to avail itself of such laws and/or defenses.

(f) the Borrower agrees, acknowledges and consents to and with the authority of the Government, to take all steps, measures or actions which are within the discretion or authority of the Government.

SECTION 6. Any sale of the Vessel made in pursuance of this Mortgage shall operate to divest and forever bar the Borrower from any and all right, title, and interest of any nature whatsoever of the Borrower therein and thereto. No purchaser shall be bound to inquire whether notice has been given, or whether any default has occurred, or as to the propriety of the sale, or as to the application of proceeds thereof.

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SECTION 7. The Borrower does hereby irrevocably appoint the Government the true and lawful attorney of the Borrower, in its name and stead to make all necessary transfers of the Vessel, and for that purpose it shall execute all necessary instruments of assignment and transfer, the Borrower hereby ratifying and confirming all that its said attorney shall lawfully do by virtue hereof. Nevertheless, the Borrower shall, if so requested by the Government, ratify and confirm such sale by executing and delivering to the purchaser of the Vessel such proper bill of sale, conveyance, instrument of transfer, and release as may be designated in such request.

SECTION 8. The Borrower hereby irrevocably appoints the Government the true and lawful attorney of the Borrower so long as an Event of Default shall have occurred and shall not have been waived in accordance with Section 2 hereof, in the name of the Borrower, to demand, collect, receive, compromise, and sue for, so far as may be permitted by law, all hire, earnings, issues, revenues, income, and profits of the Vessel and all amounts due from underwriters under any insurance thereon as payment of losses or as return premiums or otherwise, salvage awards and recoveries, recoveries in general average or otherwise, any right of action against the designer, builder, surveyor, or other material party for any fault, negligence, or deficiency in design, construction or survey of the Vessel, and all other sums, due or to become due, at or after the time of the happening of any Event of Default, in respect of the Vessel or in respect of any insurance thereon from any person whomsoever, and to make, give and execute in the name of the Borrower, acquittances, receipts, releases, or other discharges for the same, whether under seal or otherwise, and to endorse and accept in the name of the Borrower all checks, notes, drafts, warrants, agreements, and all other instruments in writing with respect to the foregoing.

SECTION 9. The Borrower covenants and agrees that so long as an Event of Default shall have occurred and shall not have been waived in accordance with Section 2 hereof, the Government in any suit to enforce any of its rights, powers, or remedies shall be entitled as a matter of right and not as a matter of discretion (i) to the appointment of a receiver or receivers of the Vessel and that any receiver so appointed shall have full right and power to use and operate the Vessel, and (ii) to a decree ordering and directing the sale and disposal of the Vessel, and the Government may become the purchaser at said sale, and the Government shall have the right to credit on the purchase price any and all sums of money due to the Government under the Note, or otherwise hereunder.

SECTION 10.

(a) In the event that the Vessel shall be arrested or detained by a marshal or other officer of any court of law, equity, or admiralty jurisdiction in any country or nation of the world or by any government or other authority and shall not be released from arrest or detention within fifteen (15) days from the date of arrest or detention, the Borrower does hereby authorize and empower the Government in the name of the Borrower and does hereby irrevocably appoint the Government and its successors and assigns the true and lawful attorney of the Borrower, in its name and stead to apply for and receive possession of and to take possession of the Vessel pursuant to the terms of this Mortgage and any other documents executed by the Borrower, with all rights and powers that the Borrower might have, possess, or exercise in any such event; and this power of attorney shall be irrevocable and may be exercised not only by the Government but also by an appointee or appointees, with full power of substitution, to the same extent as if the said appointee or appointees had been named as one of the attorneys above named by express designation.

(b) The Borrower also authorizes and empowers the Government or the Government’s appointee or appointees, as the true and lawful attorney of the Borrower, to appear in the name of the Borrower, or its successors or assigns, in any court of any country or nation of the world where a suit is pending against the Vessel because of or on account of any alleged lien against the Vessel from which the Vessel has not been released and to take such proceedings as to them or any of them as may seem proper towards the defense of such suit and the discharge of such lien, and all expenditures made or incurred by them or any of them for the purpose

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of such defense or discharge shall be a debt due from the Borrower to the Government and payment thereof shall be secured by the lien of this Mortgage and shall be due and payable and until paid, shall bear interest at the same rate as that provided in the Note and upon acceleration of the amounts owed under the Note, shall bear interest at the rate of eighteen percent (18%) per annum.

SECTION 11.

(a) The Borrower hereby expressly and irrevocably consents to the jurisdiction of any court in any country whatsoever wherein the Vessel may at any time be located for the foreclosure of this Mortgage, the sale of the Vessel, or the enforcement of any other remedy or right hereunder, and hereby expressly and irrevocably submits the person of the Borrower and the Vessel to the jurisdiction of any such court in any country in any such action or proceeding which is brought, in its sole discretion, by the Government.

(b) To the extent not governed by the laws of the United States, this Mortgage shall in all respects be governed by and construed in accordance with the laws of the Commonwealth of Virginia. The Borrower and Guarantor irrevocably submit to the non-exclusive jurisdiction of the state and federal courts situated in the Commonwealth of Virginia in any proceeding relating to this Mortgage and agrees that any process or summons in any such action may be served by mailing to the Borrower a copy thereof. The Borrower and Guarantor consent to and subject themselves itself to the jurisdiction of the federal court in the jurisdiction where the Vessel is found.

SECTION 12.

(a) Each and every power and remedy herein specifically given to the Government or otherwise in this Mortgage shall be cumulative and shall be in addition to every other power and remedy herein specifically given or now or hereafter existing at law, in equity, admiralty, or by statute, and each and every power and remedy whether specifically herein given or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the Government, and shall not be construed to be a waiver of the right to exercise at the same time or thereafter any other power or remedy. No delay or omission by the Government in the exercise of any right or power or in the pursuance of any remedy occurring upon any Event of Default shall impair any such right, power, or remedy or be construed to be a waiver of any such Event of Default or to be any acquiescence therein; nor shall the acceptance by the Government of any security or of any payment of or on account of the Note maturing after any Event of Default or of any payment on account of any past Event of Default be construed to be a waiver of any right to take advantage of any future Event of Default or of any past Event of Default not completely cured thereby.

(b) The Government, in addition to such other rights or remedies it may have, shall have the right, in its discretion, to take any and all action authorized by Sections 1105(c) and 1105(e) of Title XI and, to the extent not in express conflict with the action authorized by said Sections, or with this Section, any and all action provided for in or authorized or permitted by or in respect of this Mortgage, Note, Collateral or Security, and Policies of Insurance (including all action provided for in or authorized or permitted by or in respect of any or all said documents by the Government).

SECTION 13. In case the Government shall have proceeded to enforce any right, power, or remedy under this Mortgage by foreclosure, entry, or otherwise, and such proceedings shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Government, then and in every such case the Borrower and the Government shall be restored to their former positions and rights hereunder with respect to the property subject or intended to be subject to this Mortgage, and all rights, remedies, and powers of the Government shall continue as if no such proceedings had been taken.

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SECTION 14. The proceeds of any sale of the Vessel (after paying or deducting, in the case of sale, under any judicial proceedings, the fees, costs, and other charges therein), and the net earnings from any management, charter, or other use of the Vessel by the Government under any of the powers above specified, and the proceeds of any claim for damages on account of the Vessel received by the Government while exercising any such power, and the proceeds of any insurance on the Vessel (subject to the provisions of this agreement) shall be applied as follows:

First: To the payment of all expenses and charges including the expenses of any sale, counsel fees, the expenses of any taking of possession of the Vessel, and any other expenses or advances made or incurred by the Government in the protection of its rights or in the pursuance of its remedies hereunder and to the payment of any damages sustained by the Government from the default or defaults of the Borrower; and at the option of the Government to provide a fund adequate in the opinion of the Government to furnish suitable indemnity against liens claiming priority over this Mortgage;

Second: To the payment of the amount then due and unpaid upon the Note for principal and interest and other sums occurring thereunder, including, but not limited to, costs and expenses of collection; and

Third: To the payment of all other sums secured hereby, including fees, whether due or not, and of all damages liquidated or otherwise hereunder; and

Fourth: Any surplus then remaining shall belong and be paid or returned to the Borrower or to whomever shall be lawfully entitled to receive the same.

ARTICLE IV: POSSESSION AND USE OF VESSEL DURING TERM OF MORTGAGE

Until an Event of Default hereunder shall happen, the Borrower (a) shall be suffered and permitted to retain actual possession and use of the Vessel and (b) subject to default, hereof, shall have the right, from time to time, in its discretion, and without application to the Government, and without obtaining a release thereof by the Government, to dispose of, free from the lien hereof, any boilers, engines, machinery, bowsprits, masts, spars, sails, rigging, boats, fishing gear, anchors, chains, tackle, apparel, furniture, fittings, equipment, or any other appurtenances of the Vessel that are no longer useful, necessary, profitable, or advantageous in the operation of the Vessel, first or simultaneously replacing the same by new boilers, engines, machinery, bowsprits, masts, spars, sails, rigging, boats, fishing gear, anchors, chains, tackle, apparel, furniture, fittings, equipment, or any other appurtenances of substantially equal value to the Borrower, which shall forthwith become subject to the lien of this Mortgage.

ARTICLE V: GENERAL TERMS AND CONDITIONS OF MORTGAGE

SECTION 1. MULTIPLE ORIGINALS: This Mortgage may be executed simultaneously in any number of counterparts and all such counterparts executed and delivered each as an original shall constitute but one and the same instrument.

SECTION 2. SEVERABILITY CLAUSE: In the event that this Mortgage, the Note, any other loan documents, or any provisions hereof or thereof shall be deemed invalid in whole or in part by reason of any present or future law of the United States or any decision of any authoritative court, or if the documents at any time held by the Government be deemed by the Government for any reason insufficient to carry out the true intent and spirit of this Mortgage and the Note, then, from time to time the Borrower will execute on its own behalf such other and further assurances and documents as in the opinion of counsel for the Government may be

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required more effectually to subject the Vessel to the payment of the principal sum of the Note, together with interest thereon, as in the Note and as herein provided, and in the performance of the terms and conditions of the Note and this Mortgage. Upon failure of the Borrower to do so, the Government may execute any and all such other and further assurances and documents, for and in the name of the Borrower, and the Borrower hereby irrevocably appoints the Government the agent attorney-in-fact of the Borrower to do so. Any expenses of the Government in connection with the foregoing shall be a debt due from the Borrower to the Government in payment thereof and shall be secured by the lien of this Mortgage.

SECTION 3. MORTGAGE BINDING ON HEIRS, ETC.: All the covenants, promises, stipulations, and agreements of the Borrower in this Mortgage shall bind the Borrower, the Borrower’s heirs, executors, administrators, successors, and assigns. Whenever used, the singular number shall include the plural, the plural the singular, and the use of any gender shall be applicable to all genders.

SECTION 4. NO WAIVER OF PREFERRED STATUS: Nothing in this Mortgage shall be construed as a waiver of the preferred status of this Mortgage by the Government. In the event that any provision of this Mortgage would, as a matter of law, operate to waive the preferred status thereof, such provision for all intents and purposes, shall be deemed eliminated therefrom as though such provision had never been inserted herein.

SECTION 5. MORTGAGE CANNOT BE ALTERED OR WAIVED: This Mortgage may not be amended or supplemented except in writing by the Borrower with the written consent thereto of the Government. The provisions of this Mortgage may not be waived except in writing by the Government.

SECTION 6. TERMINATION OF MORTGAGE: If the whole amount of the Note including all amendments or substitutions, (principal and interest) shall be paid in accordance with its terms and the terms of this Mortgage, and all other sums that may have become secured by the lien of this Mortgage shall be paid, then this Mortgage and the estate and rights hereunder shall cease, terminate and be void; and the Government shall prepare and deliver to Borrower proper instruments acknowledging satisfaction of and discharging this Mortgage.

ARTICLE VI

For the purposes of this Mortgage, the total amount is FOURTEEN MILLION, and No/100 Dollars ($14,000,000.00) and interest and performance of mortgage covenants; the date of maturity is October 17, 2020 and the discharge amount is the same as the total amount set out above plus any other sums due the Government as provided by the provision of any Loan Documents.

IN WITNESS WHEREOF, THE Borrower has executed this Mortgage the day and year first above written.

Attest		BORROWER: Omega Protein, Inc.
By:	/s/    JOHN D. HELD	By:	/s/    ROBERT W. STOCKTON
			Vice President and Treasurer
(SEAL)

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		GUARANTOR ACKNOWLEDGES AND AGREES
Attest			GUARANTOR: Omega Protein Corporation
By:	/s/    JOHN D. HELD		By:	/s/    ROBERT W. STOCKTON
				Executive Vice President and Chief Financial Officer
(SEAL)

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ACKNOWLEDGMENT

STATE OF TEXAS	)
	)	ss
COUNTY OF HARRIS	)

On the 17th day of October, 2005, before me personally appeared Robert W. Stockton, to me known or produced satisfactory identification, who being duly sworn, did depose and say that he is the Vice President and Treasurer of Omega Protein, Inc., and that he signed his name to said Mortgage by like order, and the said Vice President and Treasurer acknowledged to me that he executed said Mortgage as the Vice President and Treasurer of said corporation; and that the same is the free and voluntary act and deed of said corporation and of himself as such Vice President and Treasurer for the uses and purposes therein expressed.

Notary Public

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ACKNOWLEDGMENT

STATE OF TEXAS	)
	)	ss
COUNTY OF HARRIS	)

On the 17th day of October, 2005, before me personally appeared Robert W. Stockton, to me known or produced satisfactory identification, who being duly sworn, did depose and say that he is the Executive Vice President and Chief Financial Officer of Omega Protein Corporation, and that he signed his name to said Mortgage by like order, and the said Executive Vice President and Chief Financial Officer acknowledged to me that he executed said Mortgage as the Executive Vice President and Chief Financial Officer of said corporation; and that the same is the free and voluntary act and deed of said corporation and of himself as such Executive Vice President and Chief Financial Officer for the uses and purposes therein expressed.

Notary Public

Case No. FF-G-013

PREFERRED SHIP MORTGAGE

TO THE UNITED STATES OF AMERICA

ARTICLE I: CREATION OF ENCUMBRANCE

SECTION 1. PREFERRED SHIP MORTGAGE: THIS MORTGAGE, dated the 17^th day of October , 2005, by Omega Protein, Inc., 835 B Pride Drive, Hammond, Louisiana 70401, owning 100%, (the “Borrower”), to the United States of America, acting by and through the Secretary of Commerce, National Oceanic and Atmospheric Administration, National Marine Fisheries Service, Financial Services Division, 1315 East-West Highway, Silver Spring, Maryland 20910 (the “Government”),

DEFINITIONS: All terms contained herein are defined in the Acknowledgment of Definitions executed by all parties to this transaction.

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WITNESSETH:

SECTION 2. ENCUMBERED VESSEL: WHEREAS, The Borrower owns 100% of the fishing vessel, more fully described below in Section 4; and

SECTION 3. OBLIGATIONS SECURED: WHEREAS, The Government, pursuant to the provisions of Title XI of the Merchant Marine Act, 1936, as amended, found at 46 USC § 1271 et seq., and 50 CFR 253, as amended by public law no. 104-297 on October 11, 1996, known as the Fisheries Finance Program, made, entered into, and delivered certain agreements and covenants, as contained in the Approval-in-Principle Letter dated September 28, 2005, (the “Approval Letter”) and such Approval Letter has been accepted by the Borrower and Omega Protein Corporation, (the “Guarantor”). The Approval Letter contemplates a loan from the Government to the Borrower, in the amount of up to $14,000,000.00, (the “Loan”). This transaction will be evidenced by the issuance of a promissory note, in the principal amount of $14,000,000.00 (“the Note”) to the United States of America by the Borrower, dated October 17 , 2005, a copy of which is attached hereto as Exhibit 1, and which will be secured by this Preferred Ship Mortgage (the “Ship Mortgage”) to the Government for the purpose of securing the Loan, including, but not limited to, the payment of the principal of and interest of the Note in accordance with its terms and the terms of this Ship Mortgage, as well as any future advances, and all other sums owed the Government.

WHEREAS, the Government has entered into an Approval and Agreement letter dated September 28, 2005, (the “Approval Letter”), and Security Agreement dated October 17 , 2005, with the Borrower, and will execute other documents, including all Loan Documents.

CONSIDERATION:

NOW, THEREFORE, in consideration of the Government having agreed to enter into the Approval Letter dated September 28, 2005, with the Borrower and for other good and valuable consideration, receipt whereof is hereby acknowledged by the Borrower, and in order to secure the payment of the principal of and interest on the Note and all other sums which accrue according to the terms thereof and the payment of all other sums that may hereafter become secured by this Mortgage in accordance with the terms hereof and to secure the performance and observance of and compliance with the covenants, terms and conditions herein and in the Note contained, or contained in any other document executed by the Borrower, the Borrower has granted, conveyed, mortgaged, pledged, assigned, transferred, set over and confirmed unto the Government the whole of the vessel described as follows:

SECTION 4. SECURITY AGREEMENT: THE VESSEL SUBJECT TO THIS MORTGAGE is that certain oil screw vessel named REEDVILLE, Official Number 5969161 together with all her accessories and appurtenances, including, but not limited to accounts receivable, anchors, apparel, boats, boilers, cables, catch, chains, charter hire, contract rights, contracts, electronics, engines, equipment, fishing gear, freight, furniture, general intangibles, inventory, licenses, machinery, masts, motors, nets, permits, proceeds, product, related gear, rents or profits, rigging, sails, skiffs, spare parts, spars, substitutions, supplies, tackle, hydraulics, safety equipment, and parts and accessories affixed to or used in connection therewith, whether now owned or hereafter acquired, whether on board or not, and all additions, improvements, renewals, and replacements hereafter made in, on or to the said vessel or any part thereof, and in, on, or to its equipment and appurtenances as aforesaid (the “Vessel”).

INDIVIDUAL TRANSFERABLE QUOTAS: If a limited fisheries access system is in effect, or should a limited fisheries access system be initiated at some future date under which the Borrower is granted a transferable fishery conservation and management allocation (including, but not limited to, allocations, permits, quotas, licenses, cage tags, or any other fisheries access restriction or right, however characterized, of whatsoever nature) affecting, necessary for, or in any other way, however characterized, associated with any of the property

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included in the Collateral, the Borrower agrees to grant to the Government a full senior security interest in such allocation by whatsoever means deemed by the Government to be appropriate (including, but not limited to, the Borrower’s execution of security agreements and the filing of financing statements under the UCC). Further, if the Borrower fails to do so, the Borrower agrees that the Government may use, for the purpose of executing and otherwise perfecting whatever documents may be required to effect the grant to the Government of such a full security interest in such fisheries conservation and management allocation, the attorney-in-fact authority conferred upon the Government by ARTICLE IX of the Title XI Financial Agreement.

SECTION 5. FINANCING STATEMENT: Some of the items of property described herein are goods that are or are to become accessories and appurtenances to the vessel described herein, and it is intended that as to those goods, this mortgage shall be effective as a financing statement. Information concerning the security interest created by this instrument may be obtained from the Borrower or the Government, at the addresses sent out in the first paragraph of this Preferred Ship Mortgage.

TO HAVE AND TO HOLD ALL and each of the above-mortgaged and described property unto the Government and its successors and assigns, to its use and benefit forever;

PROVIDED ALWAYS, and the condition of these presents is such, that if the Borrower, its successors or assigns shall pay, or cause to be paid, the principal of and interest on the Note in accordance with the terms of the Note and the Mortgage and shall pay any and all other sums that may hereinafter become secured by this Mortgage in accordance with the terms hereof, and shall keep, perform, and observe all and each of the covenants and promises in the Note and in the Mortgage contained, expressed, or implied to be kept, performed, and observed by or on the part of the Borrower, then this Mortgage and the estate and rights hereby granted shall cease, determine, and be void; otherwise to remain in full force and effect.

The Government hereby covenants and agrees that the Vessel is to be held by the Borrower subject to the further covenants, conditions, and uses hereinafter set forth as follows:

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ARTICLE II: BORROWER’S OBLIGATIONS

SECTION 1. CITIZENSHIP AND TITLE REQUIREMENTS: The Borrower (i) is and shall continue to be a citizen of the United States as defined in section 2 of the Shipping Act, 1916, as amended, for coastwise trade, and (ii) is entitled to own and operate the Vessel under her marine document and shall maintain such marine document in full force and effect. The Note and the Mortgage have been duly executed and delivered, and the Note in the hands of the holder thereof is and will be a valid and enforceable obligation of the Borrower in accordance with its terms. The Borrower lawfully owns and is lawfully possessed of the whole of the Vessel free from any lien whatsoever except the lien of this Mortgage, and liens expressly permitted herein and other Preferred Ship Mortgages in favor of the Government, and covenants that it will warrant and defend the title and possession thereto and every part thereof for the benefit of the Government against the claims and demands of all persons whomever.

SECTION 2. INSURANCE REQUIREMENTS:

(a) The Borrower will, at all times and at its own expense, keep the Vessel insured with responsible underwriters and through responsible brokers, all in good standing and satisfactory to the Government, in an amount that fully and adequately protects the Vessel and the Government’s interest therein against all marine perils and disasters and all hazards, risks, and liabilities in any way arising out of the ownership, operation, or maintenance of the Vessel, including but not limited to insurance as follows:

(i) While being operated, navigating hull insurance must be in an amount equal to the full commercial value of the Vessel. In no event may this be less than one hundred ten percent (110%) of the unpaid principal, at the time outstanding, of the Note. The policy valuation on the hull shall not exceed the aggregate amount insured by hull policies. The hull insurance shall be placed under the form of policy known as American Institute of Marine Underwriters form, or under such other form of policy as the Government may approve, insuring against the usual risks covered by such policies, including four-fourths running down clause, Inchmaree clause, and breach of warranty clause; and

(ii) Protection and indemnity insurance under form of protection and indemnity policies approved by the Government and issued by marine insurance companies approved by the Government. The amount of protection and indemnity insurance shall be fixed by the Government; and

(iii) When and while the Vessel is laid up, and in lieu of the aforesaid navigating hull insurance referred to in (i) of this Section, port risk insurance under forms of port risk policies approved by the Government.

(b) The Borrower expressly covenants and agrees to keep the policies renewed from time to time, to keep the same valid at all times for the amounts aforesaid, and to keep the premiums thereon fully paid at all times. The Borrower shall not do any act nor voluntarily suffer or permit any act to be done whereby insurance is or may be suspended, impaired, or defeated, and shall not suffer nor permit the Vessel to engage in any voyage or to carry any cargo not permitted under the policy or policies of insurance in effect, unless and until the Borrower shall first cover the Vessel in the amount herein provided for, with insurance satisfactory to the Government for such voyage or for the carriage of such cargo.

(c) In the event the Borrower fails to procure any of the insurance, satisfactory to the Government, or fails to perform any of the covenants and agreements contained herein, the Government may, but shall be under

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no duty to, procure such other or different insurance or coverage as it may deem advisable with uncontrolled discretion in the Government as to the source, nature, form, type, class, amount, and extent of such insurance or coverage; and all sums expended or advanced by the Government in procuring such insurance shall be secured by and shall be due and payable as provided in Article II, Section 2 hereof.

(d) All insurance shall be taken out in the name of the Borrower and the Government as their interest may appear and policies and certificates shall provide that there shall be no recourse against the Government for payment of premiums and shall further provide for at least 20 days prior written notice to be given to the Government by the underwriters in the event of cancellation or modification. All original policies, binders, certificates, and covenants and all endorsements and riders thereto shall be delivered to the Government for approval and custody.

(e) Except as provided in (f) below, all insurance policies or certificates shall provide that losses thereunder shall be payable to the Government. If no Event of Default exists under this Mortgage, the Government may, in its discretion, pay, from the proceeds of the insurance directly to the repairer, the amount of any authorized repairs or if the Borrower shall have first fully repaired the damage to the satisfaction of the Government and paid the cost thereof, to the Borrower as reimbursement therefor. Any balance remaining from the aforesaid insurance proceeds will be applied as directed by the Government. If an Event of Default exists, the Government shall retain such insurance and if such Event of Default is not cured within fifteen (15) days of the occurrence thereof, apply the same in the manner provided in Article II, Section 2 hereof.

(f) Any loss under any insurance on the Vessel with respect to protection and indemnity risks may be paid directly to the person to whom any liability, covered by such insurance, has been incurred or to the Borrower to reimburse the Borrower for any loss, damage, or expense incurred by the Borrower and covered by such insurance; provided, that the underwriter shall have first received evidence that the liability insured against has been discharged.

(g) In the event of an actual or constructive total loss, or an agreed or compromised total loss of or in case of requisition of title to the Vessel, all amounts payable therefor shall, subject to Article II, Section 2 hereof, be paid to the Government and shall be applied first, to the payment of the expenses of the Government in collecting such payments, and second, as provided in Article II, Section 2 hereof.

(h) In the event that any claim or lien is asserted against the Vessel for loss, damage, or expense which is covered by insurance hereunder, and it is necessary for the Borrower to obtain a bond or supply other security to prevent arrest of the Vessel or to release the Vessel from arrest on account of such claim or lien, the Government, on request of the Borrower, may, in the sole discretion of the Government, and upon notice to the Borrower, assign to any person, firm, or corporation executing a surety or guarantee bond or other agreements, to save or release the Vessel from such arrest, all right, title, and interest of the Government in and to said insurance covering said loss, damage, or expense, as collateral security to indemnify against liability under said bond or other agreement.

SECTION 3. NO LIENS TO BE PLACED AGAINST THE VESSEL:

(a) Neither the Borrower, any charterer, the Master of the Vessel, nor any other person has or shall have any right, power, or authority to create, incur, or permit to be placed, imposed, or continued upon the Vessel any lien whatsoever other than the lien of this Mortgage or permitted liens as defined herein.

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(b) Permitted Liens. “Permitted Liens” means liens or other charges or encumbrances:

(i) arising for damages out of tort covered by insurance except for any deductible amounts applicable thereto, for wages of a stevedore when employed directly by the owner, operator, master, ship’s husband or agent of any Vessel, for wages of the crew of the Vessel, for general average, for salvage, including contract salvage, provided the same are paid immediately when due;

(ii) in favor of any person furnishing repairs, supplies, towage, use of dry dock or marine railway, or other necessaries to a Vessel on the order of the Borrower, or of a person authorized by the Borrower, provided the same are paid immediately when due.

(iii) imposed on the Vessel for taxes or governmental charges or levies, provided the same are paid immediately when due;

(iv) incurred in the ordinary course of business of the Vessel not relating to money borrowed which (1) will be paid immediately when due, and (2) which, in the aggregate, at any time are not material to the operations or financial condition of the Borrower; and

(v) arising by operation of law as a result of the modification of the Vessel, including mechanic’s liens, provided the same are paid immediately when due;

(vi) in favor of the United States of America, the United States Department of Commerce, National Oceanic and Atmospheric Administration, National Marine Fisheries Service, Financial Services Division;

PROVIDED, HOWEVER, that with respect to the deductible amounts described in clause (i) and liens or encumbrances of the type described in clauses (ii), (iii) and (v) not arising from or incurred in the ordinary course of business of the Borrower, the Borrower shall have set aside adequate reserves determined in accordance with generally accepted accounting principles (GAAP), provided that for such deductible amounts and liens or encumbrances which, in the aggregate, exceed $25,000.00 USD, shall include only liens which are subordinate to or which pursuant to applicable law cannot be subordinated by contract to the lien of the security interest in the vessel granted to the Government.

As used herein, the term “immediately when due” shall mean the time when, according to applicable law, customary industry practices, or a prior course of dealing or other agreement between the Borrower and the lienholder, the lienholder expects payment to be made; provided that, if the Borrower desires to contest an asserted lien, the Borrower may do so if the Borrower acts in good faith and by appropriate proceedings and has set aside the reserves described above.

SECTION 4. NOTICE OF MORTGAGE: The Borrower shall carry a properly certified copy of this Mortgage with the Vessel’s papers on board the Vessel, shall exhibit the same on demand to any person having business with the Vessel, or to any representative of the Government, and shall place and keep prominently displayed in the pilot house, master’s cabin, and engine room of the Vessel a framed, printed or typewritten notice reading as follows:

“NOTICE OF MORTGAGE: This Vessel is covered by a Preferred Ship Mortgage given to the United States of America, under authority of the Ship Mortgage Act, 1920, as amended. Under the terms of said Mortgage, neither the owner of this Vessel, any charterer, the Master of this Vessel, nor any other person has any right, power, or authority to create, incur, or permit to be imposed upon the Vessel any liens, maritime or

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otherwise, other than the lien of said Mortgage and liens for crew’s wages, emergency safety repairs, or salvage.”

SECTION 5: NOTICES TO THE GOVERNMENT:

(a) OF ACTION AGAINST VESSEL: In the event that a libel is filed against the Vessel, or if the Vessel shall be levied upon or taken into custody, or detained by any proceeding in any court, or tribunal, the Borrower will, within 48 hours, notify the Government by telegram, telex, or facsimile and confirmed by letter, and the Borrower will, within fifteen (15) days thereafter, cause the Vessel to be discharged. Within ten (10) days of its occurrence, the Borrower will notify the Government of any claim that could result in a lien being placed against the Vessel.

(b) OF CASUALTIES OR DAMAGE TO THE VESSEL: Within 24 hours of the event, the Borrower shall furnish the Government full information regarding any casualties or other accidents or damage to the Vessel, including copies of any supporting documents, i.e, accident reports, claims, etc.

(c) OF ACTION AGAINST THE BORROWER OR GUARANTOR: Within ten (10) days of its occurrence, the Borrower must give the Government written notice of any pending litigation, business reverse, casualty, loss, or any other matter (however characterized) that diminishes; (i) The Borrower’s ability to service any debt actually or contingently owed the Government, (ii) The Borrower’s ability to perform any other duty or obligation owed to the Government, (iii) The Borrower’s ability to fully and faithfully perform any covenant with the Government, (iv) the value of any property or other assets pledged to the Government, or (v) the net worth of any party against whom the Government has recourse for this debt.

SECTION 6: MAINTENANCE AND INSPECTION COSTS:

(a) VESSEL MAINTENANCE: At all times, at the Borrower’s own cost and expense, the Borrower will maintain and preserve the Vessel in as good condition, working order and repair as on the date of this Mortgage, ordinary wear and tear excepted; provided, however, if subsequent to the date of this Mortgage, the Vessel is reconstructed or reconditioned, the Borrower will keep the Vessel in as good condition, working order, and repair as the Vessel was on the date said reconstruction or reconditioning was completed, ordinary wear and tear excepted. In addition to the foregoing, the Borrower will keep the Vessel in as good condition as will enable her to pass such inspection as may be required by marine underwriters as a condition of their writing such insurance in such amounts as are required under this Mortgage or as required by the United States Coast Guard as a condition to certifying that the Vessel is seaworthy and in compliance with all applicable safety and navigational requirements.

(b) INSPECTION OF VESSEL: The Borrower shall afford the Government or its authorized representatives full and complete access to the Vessel, in port or at sea, at such times as the Government, in its sole discretion, may require, for the purpose of inspecting or valuing the vessel, her cargo, log, and papers.

(c) INSPECTION OF BORROWER’S FINANCIAL RECORDS: The Borrower agrees to execute a consent and waiver, valid for the term of the mortgage, which allows the Internal Revenue Service to release directly to the Government, Borrower’s Federal Income Tax Returns³, whenever the Government requests same. Additionally, the Borrower shall permit the Government, or any representative selected by it, in such manner and at such times as the Government, in its sole discretion, requires, to make inspections and audits of any books, records, off-loading receipts, fish-sale receipts, papers, or other documents of whatsoever nature in the custody

¹ Borrower agrees to execute IRS Forms #4506 and 8821, thereby implementing the provisions of 26 USC §6103(c).

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and control of the Borrower, or any other individual or entity, relating in any way to the financial or business condition of the Borrower or the operation or company. At the Government’s request, these statements, books, records, receipts or reports must be delivered to the Southeast Region of the National Marine Fisheries Service, Financial Services Branch, in St. Petersburg, Florida.

(d) BORROWER TO PAY THE COST OF ALL SUCH INSPECTIONS, audits or appraisals, provided for in Paragraphs 6(a), 6(b) and 6(c), immediately above, within 30 days of the Government’s demand and all such amounts disbursed by the Government for such purpose shall, until fully repaid by the Borrower, be added (payable upon the Government’s demand) to the Borrower’s Note to the Government and shall earn interest at the same rate as the other principal of the Borrower’s Promissory Note and shall be secured by the ship mortgage and other securities which secure the Borrower’s promissory note to the Government.

SECTION 7. FINANCIAL REPORTING TO THE GOVERNMENT:

(a) The Borrower will, within 20 days after the close of each fiscal year, and at such other times and in such form as the Government may prescribe, furnish to the Government, the Borrower’s financial and operating statements including schedules showing all compensation paid by the Borrower;

(b) The Borrower will, at all times, keep proper books of account in accordance with generally accepted accounting principles and practice; and

(c) The Borrower will permit the Government, at the Borrower’s expense and in such manner and at such time as the Government may require, to (i) make inspections and audits of any books, records, and papers in the custody and control of the Borrower or others, relating to the Borrower’s financial or business conditions, including making copies thereof, and extracts therefrom, and (ii) make inspections and appraisals of any of the Borrower’s assets.

SECTION 8. TAXES & FEES: The Borrower will pay and discharge when due and payable, from time to time, all taxes, assessments, governmental charges, fines, and penalties lawfully imposed on the Vessel.

SECTION 9. REIMBURSEMENT OF GOVERNMENT EXPENDITURES: The Borrower will reimburse the Government for any and all expenditures which the Government may reasonably elect to make from time to time to protect the security granted hereunder (in the event of the Borrower’s failure to do so), including, without limitation of the foregoing, payment of taxes, repairs, insurance premiums, the discharge of any lien, libel or seizure of the Vessel, and expenses incurred by the Government in retaking the Vessel; and any such payment made by the Government shall be for the account of the Borrower, and the making thereof by the Government shall not cure the Borrower’s default in that regard nor constitute a waiver of any right or remedy granted to the Government hereunder, and all reasonable sums so expended by the Government or any liability incurred by it shall be immediately due and payable and shall be deemed to be an indebtedness of the Borrower and secured by this Mortgage, and until paid shall bear interest at the same rate as that provided in the Note.

SECTION 10: GOVERNMENT’S PRIOR WRITTEN CONSENT REQUIRED: The Borrower shall not, without prior written consent of the Chief, Financial Services Division, National Marine Fisheries Service, which consent will not unreasonably be withheld, take any of the following actions:

(a) sell, mortgage, transfer, nor charter the Vessel, and any such written consent obtained from the Government to any one sale, mortgage, transfer, or charter, shall not be construed to be a waiver of this provision with respect to any subsequent proposed sale, mortgage, transfer, or charter. Any such sale, mortgage, transfer, or charter of the Vessel shall be subject to the provisions of this Mortgage and to the lien it creates.

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(b) Pay to any officer, partner, or other party any salary, commission, bonus, management fee, dividend, or other consideration (however characterized) in excess of either reasonable industry standards or ordinary financial prudence for a company or operation of the Borrower’s size and financial condition at the time that such consideration is paid (and the burden of proving reasonableness shall be on the Borrower).

(c) Purchase or redeem any shares of the Borrower’s or the Borrower’s company’s own stock.

(d) Exclusive of such fixed assets to be acquired with the proceeds of the Note or any part thereof, or any fixed assets acquired prior to the date of this Mortgage, make any additional investment (excluding purchases, etc., in connection with the routine and continuing maintenance and preservation of the Vessel and its productivity) in, or incur any additional liability for, the purchase, acquisition, lease, or other use (however characterized) of any real property, machinery, equipment, fixtures, or furniture, or fixed property in connection with the Borrower’s present level of operations in any one fiscal year in excess of an aggregate of 5% of the Borrower’s total assets.

(e) Start any new business or acquire any other business, or the assets of any other business, whether by purchase, merger, consolidation, affiliation, or any other means (however characterized) except as may otherwise be permitted herein, or sell, liquidate, dissolve, spin-off, split-up or in any other way (however characterized) dispose of its own assets except as may be required in the normal course of operations reasonably necessary to carry on its day-to-day operation.

(f) The Borrower will not split-up, split-off, spin-off, merge, consolidate, or transfer or allow transfer of its shares so as to effect a change in its controlling interest or management.

(g) Guarantee or become contingently liable in any way as surety, endorser, creditor, co-maker, accommodation maker, or in any other way (however characterized) for the debt or obligation of any other party, individual or entity, except as may be permitted herein or required in the normal course of operations reasonably necessary to carry on its day-to-day business.

(h) By any means whatsoever, allow the company or operation to be acquired by, or otherwise reorganized into (however characterized) any other company or operation, unless the acquiring company, operation or reorganized entity is acceptable to the Government, and said company, operation or reorganized entity agrees to do the following: (i) provide to the Government a 100% unconditional guarantee of all debt actually or contingently owed it; and (ii) be bound by these covenants; and (iii) be bound by such other covenants as the Government shall reasonably require to protect its interest; and (iv) provide such other assurances and security as the Government, in its sole discretion, requires.

(i) Make any distribution of the Borrower’s assets for compensation (including salaries, withdrawals, fees, bonuses, commissions, drawing accounts, and other payments, whether directly or indirectly, in money or otherwise) for services, or give any preferential treatment, make any advances, directly or indirectly by way of loans, gifts, notes, or otherwise, to any employee or Affiliate or increase the compensation of any person above that set forth in any application or document submitted in connection with the Note. In the event an Affiliate increases the compensation (including salaries, withdrawals, fees, bonuses, commissions, drawing accounts, and other payments, whether directly or indirectly, in money or otherwise) paid to the Borrower or any employee of the Borrower, beyond that authorized or consented to by the Government, the compensation payable to such person by the Borrower will be forthwith correspondingly reduced and immediate notice thereof given to the Government by the Borrower.

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SECTION 11. COMPLIANCE WITH FEDERAL SHIP MORTGAGE ACT: The Borrower will comply with and satisfy all the provisions of the Ship Mortgage Act, 1920, as amended, 46 USC, Chapter 313, § 31301, et seq. (Supp. 2003), in order to establish and maintain this Mortgage as a Preferred Ship Mortgage upon the Vessel.

SECTION 12. OPERATING RESTRICTIONS:

(a) DOCUMENTATION: The Borrower will keep the Vessel documented under the laws of the United States and no transfer of port of hailing of the Vessel shall be made without the prior written consent thereto of the Government.

(b) LAWFUL OPERATION: The Borrower will not cause or permit the Vessel to be operated in any manner contrary to law or contrary to any rules and regulations which may from time to time be prescribed pursuant to law.

(c) VESSEL SHALL NOT LEAVE UNITED STATES’ WATERS: The Borrower will not remove, attempt to remove, or allow the vessel to be moved beyond the limits of the United States without the written consent of the Government. If said written consent is obtained, the Borrower will execute certain documents and will not abandon the Vessel in a foreign port. The Borrower will not engage in any unlawful trade or violate any law or carry any cargo that will expose the Vessel to penalty, forfeiture, or capture, and will not do, or suffer or permit to be done, anything which can or may injuriously affect the documentation of the Vessel under the laws and regulations of the United States.

(d) Upon demand by the Government to the master of the Vessel or the Borrower, the Borrower will return the vessel to the waters known as the Exclusive Economic Zone (EEZ) of the United States and, if the Government so demands, to a port of call chosen by the Government, thereby revoking any prior consent extended by the Government with respect to operation of the Vessel outside the Exclusive Economic Zone of the United States.

SECTION 13. PAYMENTS MUST BE TIMELY MADE AND TERMS OF THE MORTGAGE , NOTE AND OTHER LOAN DOCUMENTS MUST BE MET: The Borrower will duly and punctually pay all the principal of and interest on the Note and the Mortgage as herein and in the Note and other loan documents provided, and will at all times keep, perform, and observe all and singular the covenants, conditions, stipulations, promises, and agreements in this Mortgage and in the Note expressed or implied on its part to be kept, performed, and observed, and will duly punctually pay all sums that may hereinafter become due hereunder.

ARTICLE III: DEFAULT

SECTION 1. The Borrower agrees that it will faithfully observe, perform, comply with and discharge all of the covenants, conditions, and obligations which are imposed on the Borrower by any other agreement or document executed in connection with this Mortgage and the Note, concurrently or otherwise, and that the Borrower’s failure to do so shall constitute an Event of Default under this Mortgage.

SECTION 2. The Borrower agrees that any material default under any guarantor agreement, security agreements, Title XI financial agreements, or other loan documents which may be executed in connection with this Mortgage or Note, whether or not the Borrower is party to said agreement, shall constitute an Event of Default under this Mortgage.

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SECTION 3. The Borrower agrees that all reasonable attorney fees incurred by the Government because of the Borrower’s failure to perform or discharge its obligations, as provided by this Mortgage, the Note, or any other document or agreement executed in connection therewith, shall be deemed to be an indebtedness of the Borrower and shall be secured by this Mortgage and shall be due and payable and until paid, shall bear interest at the same rate as that provided in the Note, and upon acceleration of the amounts owed under the Note, shall bear interest at the accelerated rate of eighteen percent (18%) per annum, unless limited by applicable state law.

SECTION 4. Each of the following events shall constitute an Event of Default:

(a) default shall be made in the payment of the principal of the Note when and as the same shall become due and payable, whether at maturity, by notice of acceleration, or otherwise; or

(b) default shall be made in the payment of any interest on the Note (including any amendments thereto or substitution therefor), when and as the same shall become due and payable as therein and herein provided; or

(c) default shall be made in the due and punctual observance and performance of any provision of Article I, hereof; or

(d) the Borrower shall be dissolved or adjudged a bankrupt or shall make a general assignment for the benefit of the Borrower’s creditors, or shall lose the right to do business by forfeiture or otherwise, or a receiver or receivers of any kind whatsoever, whether appointed or not, in admiralty, bankruptcy, common law, or equity proceedings, and whether temporary or permanent, shall be appointed for the Vessel or for any other property of the Borrower; or a petition for reorganization of, or other proceeding or action in reference to the Borrower under any of the provisions of the Bankruptcy Act shall be filed by the Borrower or by creditors of the Borrower; or if reorganization of the Borrower under said Act is approved by the Court, whether proposed by a creditor, stockholder, or any other person whomsoever; and

THE BORROWER AND THE GUARANTOR BOTH UNDERSTAND THAT IF EITHER FILES BANKRUPTCY, THE BORROWER WILL LOSE THE VESSEL.

THE BORROWER AND THE GUARANTOR EXPRESSLY AGREE TO, AND UNDERSTAND THAT IN THE EVENT OF BANKRUPTCY, THE VESSEL WHICH IS THE SECURITY FOR THIS PREFERRED SHIP MORTGAGE WILL NOT BE PERMITTED TO GO OUT TO SEA, AND WILL REMAIN IN PORT IN THE JURISDICTION OF THE COURT WHERE THE BANKRUPTCY PETITION IS FILED OR SUCH OTHER JURISDICTION WHERE THE BOAT MAY BE OR OTHER COLLATERAL MAY BE FOUND.

(e) there shall be an actual or constructive total loss of the Vessel; or

(f) default shall be made by the Borrower in the prompt and faithful performance or observance of any other covenant, condition, or agreement by it to be performed and observed, contained in this Mortgage, Note, or any other loan documents and such default shall continue for fifteen (15) days; or

(g) the making in any application, agreement, affidavit, or other document, submitted in connection with the Note, of any misrepresentation, on behalf of, or for the benefit of, the Borrower. Failure to disclose any material fact may be deemed a misrepresentation; or

(h) the institution of any suit against the Borrower or others deemed by the Government to affect adversely its interest hereunder, in the Note or otherwise; or

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(i) failure of any signator to any of the Loan Documents, to observe any of the conditions contained in said Loan Documents, or any other document or agreement executed (concurrently or otherwise), inclusive of amendments thereto, in connection with this Mortgage, or subsequent mortgage, regardless of whether or not the Borrower shall be a party to said agreement or document; or

(j) impairment of any collateral including the vessel or which is given in addition to the vessel which is the subject of this Preferred Ship Mortgage; or

(k) the Borrower shall, without first obtaining written permission from the Secretary, transfer, sell, assign, hypothecate, or alienate or attempt to transfer, sell, assign, hypothecate or alienate any rights, licenses or permits appurtenant to and/or necessary for the Vessel to engage in any commercial fisheries; or

(l) the Borrower shall, intentionally or through neglect, permit a material diminution of the value of the Vessel and/or its appurtenances and equipment; or

SECTION 5. UPON OCCURRENCE OF AN EVENT OF DEFAULT THE GOVERNMENT, MAY IN ITS DISCRETION:

(a) Declare the Note to be due and payable immediately and upon such declaration the entire principal of and interest on the Note shall become and be immediately due and payable, and thereafter shall bear interest at eighteen percent (18%) per annum unless such would violate the usury laws of the state where this Mortgage and the Note are executed, in which case the maximum legal rate of that state shall prevail; provided, however, that if the Borrower shall have removed and remedied each Event of Default within fifteen (15) days after the occurrence thereof, then in every such case the Government shall waive any such Event of Default; but no such waiver shall extend to nor affect any subsequent or other Event of Default nor impair any rights or remedies consequent thereon; and provided, further, that if at any time after the expiration of fifteen (15) days after any Event of Default shall have occurred, all Events of Default shall have been remedied and removed and full performance made by the Borrower to the satisfaction of the Government and all installments of principal and interest in arrears (including interest at the aforesaid rate) and the charges and expenses, if any, of the Government, it agents and attorneys, shall have been paid, then and in every such case the Government may waive any such Event of Default; and provided, also, that no waiver hereunder shall extend to nor affect any subsequent or other Event of Default nor impair any rights or remedies consequent thereon;

(b) Bring suit at law, in equity, or in admiralty, as it may be advised, to receive judgment for any and all amounts due under the Note and other Loan Documents, or otherwise hereunder, and collect the same out of any and all property of the Borrower whether covered by this Mortgage or otherwise;

(c) Retake the Vessel without legal process wherever the same may be found, and the Borrower or other person in possession forthwith upon demand of the Government shall immediately surrender to the Government possession of the Vessel, and, without being responsible for loss or damage, the Government may hold, lay-up, lease, charter, operate, or otherwise use the Vessel for such time and upon such terms as it may deem to be for its best advantage, accounting only for the net profits, if any, arising from such use of the Vessel and charging against all receipts from the use of the Vessel, or from the sale thereof by court proceeding or pursuant to subsection (e) following, all costs, expenses, charges, damages, or losses by reason of such use; and if at any time the Government shall avail itself of the right herein given it to retake the Vessel and shall retake it, the Government shall have the right to dock the Vessel at any dock, pier, or other premises of the Borrower without charge, or to dock it at any other place at the cost and expense of the Borrower; IT IS EXPRESSLY UNDERSTOOD AND AGREED TO BY THE BORROWER THAT SURRENDER OF THE VESSEL UNDER

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THIS SECTION MUST BE AND WILL BE IMMEDIATE AND IN ACCORDANCE WITH THE DIRECTIONS OF THE GOVERNMENT. FAILURE OF THE BORROWER TO IMMEDIATELY COMPLY WITH THE GOVERNMENT’S DEMAND FOR SURRENDER OF THE VESSEL WILL CAUSE THE POSSESSION OF THE VESSEL BY THE BORROWER (INCLUDING, BUT NOT LIMITED TO, POSSESSION AND CONTROL OF THE VESSEL BY A MASTER OR CREW MEMBER ON BOARD THE VESSEL) TO BE UNLAWFUL AND TO CONSTITUTE A CONVERSION OF THE VESSEL, ITS APPURTENANCES AND EQUIPMENT, THEREBY SUBJECTING THE BORROWER (EXPRESSLY INCLUDING, IF APPLICABLE, ITS OFFICERS AND DIRECTORS) TO ALL FINES, PENALTIES AND ACTIONS WHICH THE GOVERNMENT DEEMS APPLICABLE AND APPROPRIATE. SHOULD THE BORROWER CONTINUE TO OPERATE, POSSESS OR CONTROL THE VESSEL CONTRARY TO THE GOVERNMENT’S DIRECTIONS AND THE PROVISIONS HEREIN, THEN THE GOVERNMENT SHALL, IN ADDITION TO ANY OTHER RIGHTS AND REMEDIES AT LAW AND IN EQUITY, BE ENTITLED TO A TEMPORARY RESTRAINING ORDER AND/OR ORDER FOR INJUNCTIVE RELIEF NECESSARY TO GAIN COMPLIANCE HEREWITH, IN ADDITION TO EXPRESSLY CONSENTING THAT THE INJURY AND DAMAGE RESULTING FROM BREACH HEREOF WOULD BE IMPOSSIBLE TO MEASURE MONETARILY, THE BORROWER EXPRESSLY WAIVES ANY DEFENSE BASED UPON AN ALLEGED EXISTENCE OF AN ADEQUATE REMEDY AT LAW.

(d) Foreclose this Mortgage pursuant to the terms and provisions of the Ship Mortgage Act, 1920, as amended, 46 USC, Chapter 313, § 31301, et seq. (Supp. 2003), or by other judicial process as may be provided in the Statutes; and

(e) In addition to any and all other rights, powers, and remedies elsewhere in this Mortgage or by law granted to and conferred upon the Government, sell the Vessel upon such terms and conditions as it may deem to be for its best advantage, including the right to sell and dispose of the Vessel free from any claim of or by the Borrower, at public sale, by sealed bids or otherwise, after first giving notice of the time and place of sale, with a general description of the property by first publishing notice of any such sale for ten (10) consecutive days, except Sundays, in some newspaper of general circulation at the place designated for such sale, and by mailing notice of such sale to the Borrower at his last known address; such sale may be held at such place and at such time as the Government in such notice may have specified, or may be adjourned by the Government from time to time by announcement at the time and place appointed for such sale or for such adjourned sale, and without further notice of publication the Government may make any such sale at the time and place to which the same shall be so adjourned; and any such sale may be conducted without bringing the Vessel to the place designated for such sale and in such manner as the Government may deem to be for its best advantage, and the Government may become the purchaser at any such sale, and shall have the right to credit on the purchase price any or all sums of money due to the Government under the Note, any other Loan Documents, or otherwise hereunder. The Borrower expressly agrees and acknowledges that sale of the Vessel pursuant to this section will not (notwithstanding federal or state law to the contrary, if any,) impair or limit the Government’s legal right to collect from the Borrower any deficiency remaining after the sale. If any such federal or state laws or legal precedents may be construed to limit the Government’s rights to collection of said deficiency from the Borrower, then Borrower hereby expressly waives, relinquishes and forever gives up the right to avail itself of such laws and/or defenses.

(f) the Borrower agrees, acknowledges and consents to and with the authority of the Government, to take all steps, measures or actions which are within the discretion or authority of the Government.

SECTION 6. Any sale of the Vessel made in pursuance of this Mortgage shall operate to divest and forever bar the Borrower from any and all right, title, and interest of any nature whatsoever of the Borrower therein and thereto. No purchaser shall be bound to inquire whether notice has been given, or whether any default has occurred, or as to the propriety of the sale, or as to the application of proceeds thereof.

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SECTION 7. The Borrower does hereby irrevocably appoint the Government the true and lawful attorney of the Borrower, in its name and stead to make all necessary transfers of the Vessel, and for that purpose it shall execute all necessary instruments of assignment and transfer, the Borrower hereby ratifying and confirming all that its said attorney shall lawfully do by virtue hereof. Nevertheless, the Borrower shall, if so requested by the Government, ratify and confirm such sale by executing and delivering to the purchaser of the Vessel such proper bill of sale, conveyance, instrument of transfer, and release as may be designated in such request.

SECTION 8. The Borrower hereby irrevocably appoints the Government the true and lawful attorney of the Borrower so long as an Event of Default shall have occurred and shall not have been waived in accordance with Section 2 hereof, in the name of the Borrower, to demand, collect, receive, compromise, and sue for, so far as may be permitted by law, all hire, earnings, issues, revenues, income, and profits of the Vessel and all amounts due from underwriters under any insurance thereon as payment of losses or as return premiums or otherwise, salvage awards and recoveries, recoveries in general average or otherwise, any right of action against the designer, builder, surveyor, or other material party for any fault, negligence, or deficiency in design, construction or survey of the Vessel, and all other sums, due or to become due, at or after the time of the happening of any Event of Default, in respect of the Vessel or in respect of any insurance thereon from any person whomsoever, and to make, give and execute in the name of the Borrower, acquittances, receipts, releases, or other discharges for the same, whether under seal or otherwise, and to endorse and accept in the name of the Borrower all checks, notes, drafts, warrants, agreements, and all other instruments in writing with respect to the foregoing.

SECTION 9. The Borrower covenants and agrees that so long as an Event of Default shall have occurred and shall not have been waived in accordance with Section 2 hereof, the Government in any suit to enforce any of its rights, powers, or remedies shall be entitled as a matter of right and not as a matter of discretion (i) to the appointment of a receiver or receivers of the Vessel and that any receiver so appointed shall have full right and power to use and operate the Vessel, and (ii) to a decree ordering and directing the sale and disposal of the Vessel, and the Government may become the purchaser at said sale, and the Government shall have the right to credit on the purchase price any and all sums of money due to the Government under the Note, or otherwise hereunder.

SECTION 10.

(a) In the event that the Vessel shall be arrested or detained by a marshal or other officer of any court of law, equity, or admiralty jurisdiction in any country or nation of the world or by any government or other authority and shall not be released from arrest or detention within fifteen (15) days from the date of arrest or detention, the Borrower does hereby authorize and empower the Government in the name of the Borrower and does hereby irrevocably appoint the Government and its successors and assigns the true and lawful attorney of the Borrower, in its name and stead to apply for and receive possession of and to take possession of the Vessel pursuant to the terms of this Mortgage and any other documents executed by the Borrower, with all rights and powers that the Borrower might have, possess, or exercise in any such event; and this power of attorney shall be irrevocable and may be exercised not only by the Government but also by an appointee or appointees, with full power of substitution, to the same extent as if the said appointee or appointees had been named as one of the attorneys above named by express designation.

(b) The Borrower also authorizes and empowers the Government or the Government’s appointee or appointees, as the true and lawful attorney of the Borrower, to appear in the name of the Borrower, or its successors or assigns, in any court of any country or nation of the world where a suit is pending against the Vessel because of or on account of any alleged lien against the Vessel from which the Vessel has not been released and to take such proceedings as to them or any of them as may seem proper towards the defense of such suit and the discharge of such lien, and all expenditures made or incurred by them or any of them for the purpose

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of such defense or discharge shall be a debt due from the Borrower to the Government and payment thereof shall be secured by the lien of this Mortgage and shall be due and payable and until paid, shall bear interest at the same rate as that provided in the Note and upon acceleration of the amounts owed under the Note, shall bear interest at the rate of eighteen percent (18%) per annum.

SECTION 11.

(a) The Borrower hereby expressly and irrevocably consents to the jurisdiction of any court in any country whatsoever wherein the Vessel may at any time be located for the foreclosure of this Mortgage, the sale of the Vessel, or the enforcement of any other remedy or right hereunder, and hereby expressly and irrevocably submits the person of the Borrower and the Vessel to the jurisdiction of any such court in any country in any such action or proceeding which is brought, in its sole discretion, by the Government.

(b) To the extent not governed by the laws of the United States, this Mortgage shall in all respects be governed by and construed in accordance with the laws of the Commonwealth of Virginia. The Borrower and Guarantor irrevocably submit to the non-exclusive jurisdiction of the state and federal courts situated in the Commonwealth of Virginia in any proceeding relating to this Mortgage and agrees that any process or summons in any such action may be served by mailing to the Borrower a copy thereof. The Borrower and Guarantor consent to and subject themselves itself to the jurisdiction of the federal court in the jurisdiction where the Vessel is found.

SECTION 12.

(a) Each and every power and remedy herein specifically given to the Government or otherwise in this Mortgage shall be cumulative and shall be in addition to every other power and remedy herein specifically given or now or hereafter existing at law, in equity, admiralty, or by statute, and each and every power and remedy whether specifically herein given or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the Government, and shall not be construed to be a waiver of the right to exercise at the same time or thereafter any other power or remedy. No delay or omission by the Government in the exercise of any right or power or in the pursuance of any remedy occurring upon any Event of Default shall impair any such right, power, or remedy or be construed to be a waiver of any such Event of Default or to be any acquiescence therein; nor shall the acceptance by the Government of any security or of any payment of or on account of the Note maturing after any Event of Default or of any payment on account of any past Event of Default be construed to be a waiver of any right to take advantage of any future Event of Default or of any past Event of Default not completely cured thereby.

(b) The Government, in addition to such other rights or remedies it may have, shall have the right, in its discretion, to take any and all action authorized by Sections 1105(c) and 1105(e) of Title XI and, to the extent not in express conflict with the action authorized by said Sections, or with this Section, any and all action provided for in or authorized or permitted by or in respect of this Mortgage, Note, Collateral or Security, and Policies of Insurance (including all action provided for in or authorized or permitted by or in respect of any or all said documents by the Government).

SECTION 13. In case the Government shall have proceeded to enforce any right, power, or remedy under this Mortgage by foreclosure, entry, or otherwise, and such proceedings shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Government, then and in every such case the Borrower and the Government shall be restored to their former positions and rights hereunder with respect to the property subject or intended to be subject to this Mortgage, and all rights, remedies, and powers of the Government shall continue as if no such proceedings had been taken.

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SECTION 14. The proceeds of any sale of the Vessel (after paying or deducting, in the case of sale, under any judicial proceedings, the fees, costs, and other charges therein), and the net earnings from any management, charter, or other use of the Vessel by the Government under any of the powers above specified, and the proceeds of any claim for damages on account of the Vessel received by the Government while exercising any such power, and the proceeds of any insurance on the Vessel (subject to the provisions of this agreement) shall be applied as follows:

First: To the payment of all expenses and charges including the expenses of any sale, counsel fees, the expenses of any taking of possession of the Vessel, and any other expenses or advances made or incurred by the Government in the protection of its rights or in the pursuance of its remedies hereunder and to the payment of any damages sustained by the Government from the default or defaults of the Borrower; and at the option of the Government to provide a fund adequate in the opinion of the Government to furnish suitable indemnity against liens claiming priority over this Mortgage;

Second: To the payment of the amount then due and unpaid upon the Note for principal and interest and other sums occurring thereunder, including, but not limited to, costs and expenses of collection; and

Third: To the payment of all other sums secured hereby, including fees, whether due or not, and of all damages liquidated or otherwise hereunder; and

Fourth: Any surplus then remaining shall belong and be paid or returned to the Borrower or to whomever shall be lawfully entitled to receive the same.

ARTICLE IV: POSSESSION AND USE OF VESSEL DURING TERM OF MORTGAGE

Until an Event of Default hereunder shall happen, the Borrower (a) shall be suffered and permitted to retain actual possession and use of the Vessel and (b) subject to default, hereof, shall have the right, from time to time, in its discretion, and without application to the Government, and without obtaining a release thereof by the Government, to dispose of, free from the lien hereof, any boilers, engines, machinery, bowsprits, masts, spars, sails, rigging, boats, fishing gear, anchors, chains, tackle, apparel, furniture, fittings, equipment, or any other appurtenances of the Vessel that are no longer useful, necessary, profitable, or advantageous in the operation of the Vessel, first or simultaneously replacing the same by new boilers, engines, machinery, bowsprits, masts, spars, sails, rigging, boats, fishing gear, anchors, chains, tackle, apparel, furniture, fittings, equipment, or any other appurtenances of substantially equal value to the Borrower, which shall forthwith become subject to the lien of this Mortgage.

ARTICLE V: GENERAL TERMS AND CONDITIONS OF MORTGAGE

SECTION 1. MULTIPLE ORIGINALS: This Mortgage may be executed simultaneously in any number of counterparts and all such counterparts executed and delivered each as an original shall constitute but one and the same instrument.

SECTION 2. SEVERABILITY CLAUSE: In the event that this Mortgage, the Note, any other loan documents, or any provisions hereof or thereof shall be deemed invalid in whole or in part by reason of any present or future law of the United States or any decision of any authoritative court, or if the documents at any time held by the Government be deemed by the Government for any reason insufficient to carry out the true intent and spirit of this Mortgage and the Note, then, from time to time the Borrower will execute on its own behalf such other and further assurances and documents as in the opinion of counsel for the Government may be

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required more effectually to subject the Vessel to the payment of the principal sum of the Note, together with interest thereon, as in the Note and as herein provided, and in the performance of the terms and conditions of the Note and this Mortgage. Upon failure of the Borrower to do so, the Government may execute any and all such other and further assurances and documents, for and in the name of the Borrower, and the Borrower hereby irrevocably appoints the Government the agent attorney-in-fact of the Borrower to do so. Any expenses of the Government in connection with the foregoing shall be a debt due from the Borrower to the Government in payment thereof and shall be secured by the lien of this Mortgage.

SECTION 3. MORTGAGE BINDING ON HEIRS, ETC.: All the covenants, promises, stipulations, and agreements of the Borrower in this Mortgage shall bind the Borrower, the Borrower’s heirs, executors, administrators, successors, and assigns. Whenever used, the singular number shall include the plural, the plural the singular, and the use of any gender shall be applicable to all genders.

SECTION 4. NO WAIVER OF PREFERRED STATUS: Nothing in this Mortgage shall be construed as a waiver of the preferred status of this Mortgage by the Government. In the event that any provision of this Mortgage would, as a matter of law, operate to waive the preferred status thereof, such provision for all intents and purposes, shall be deemed eliminated therefrom as though such provision had never been inserted herein.

SECTION 5. MORTGAGE CANNOT BE ALTERED OR WAIVED: This Mortgage may not be amended or supplemented except in writing by the Borrower with the written consent thereto of the Government. The provisions of this Mortgage may not be waived except in writing by the Government.

SECTION 6. TERMINATION OF MORTGAGE: If the whole amount of the Note including all amendments or substitutions, (principal and interest) shall be paid in accordance with its terms and the terms of this Mortgage, and all other sums that may have become secured by the lien of this Mortgage shall be paid, then this Mortgage and the estate and rights hereunder shall cease, terminate and be void; and the Government shall prepare and deliver to Borrower proper instruments acknowledging satisfaction of and discharging this Mortgage.

ARTICLE VI

For the purposes of this Mortgage, the total amount is FOURTEEN MILLION, and No/100 Dollars ($14,000,000.00) and interest and performance of mortgage covenants; the date of maturity is October 17, 2020 and the discharge amount is the same as the total amount set out above plus any other sums due the Government as provided by the provision of any Loan Documents.

IN WITNESS WHEREOF, THE Borrower has executed this Mortgage the day and year first above written.

Attest		BORROWER: Omega Protein, Inc.
By:	/s/    JOHN D. HELD	By:	/s/    ROBERT W. STOCKTON
			Vice President and Treasurer

(SEAL)

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		GUARANTOR ACKNOWLEDGES AND AGREES
Attest			GUARANTOR: Omega Protein Corporation
By:	/s/    JOHN D. HELD		By:	/s/    ROBERT W. STOCKTON
				Executive Vice President and Chief Financial Officer

(SEAL)

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ACKNOWLEDGMENT

STATE OF TEXAS	)
	)	ss
COUNTY OF HARRIS	)

On the 17th day of October, 2005, before me personally appeared Robert W. Stockton, to me known or produced satisfactory identification, who being duly sworn, did depose and say that he is the Vice President and Treasurer of Omega Protein, Inc., and that he signed his name to said Mortgage by like order, and the said Vice President and Treasurer acknowledged to me that he executed said Mortgage as the Vice President and Treasurer of said corporation; and that the same is the free and voluntary act and deed of said corporation and of himself as such Vice President and Treasurer for the uses and purposes therein expressed.

Notary Public

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ACKNOWLEDGMENT

STATE OF TEXAS	)
	)	ss
COUNTY OF HARRIS	)

On the 17^th day of October, 2005, before me personally appeared Robert W. Stockton, to me known or produced satisfactory identification, who being duly sworn, did depose and say that he is the Executive Vice President and Chief Financial Officer of Omega Protein Corporation, and that he signed his name to said Mortgage by like order, and the said Executive Vice President and Chief Financial Officer acknowledged to me that he executed said Mortgage as the Executive Vice President and Chief Financial Officer of said corporation; and that the same is the free and voluntary act and deed of said corporation and of himself as such Executive Vice President and Chief Financial Officer for the uses and purposes therein expressed.

Notary Public

Case No. FF-G-013

PREFERRED SHIP MORTGAGE

TO THE UNITED STATES OF AMERICA

ARTICLE I: CREATION OF ENCUMBRANCE

SECTION 1. PREFERRED SHIP MORTGAGE: THIS MORTGAGE, dated the 17th day of October, 2005, by Omega Protein, Inc., 835 B Pride Drive, Hammond, Louisiana 70401, owning 100%, (the “Borrower”), to the United States of America, acting by and through the Secretary of Commerce, National Oceanic and Atmospheric Administration, National Marine Fisheries Service, Financial Services Division, 1315 East-West Highway, Silver Spring, Maryland 20910 (the “Government”),

DEFINITIONS: All terms contained herein are defined in the Acknowledgment of Definitions executed by all parties to this transaction.

WITNESSETH:

SECTION 2. ENCUMBERED VESSEL: WHEREAS, The Borrower owns 100% of the fishing vessel, more fully described below in Section 4; and

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SECTION 3. OBLIGATIONS SECURED: WHEREAS, The Government, pursuant to the provisions of Title XI of the Merchant Marine Act, 1936, as amended, found at 46 USC § 1271 et seq., and 50 CFR 253, as amended by public law no. 104-297 on October 11, 1996, known as the Fisheries Finance Program, made, entered into, and delivered certain agreements and covenants, as contained in the Approval-in-Principle Letter dated September 28, 2005, (the “Approval Letter”) and such Approval Letter has been accepted by the Borrower and Omega Protein Corporation, (the “Guarantor”). The Approval Letter contemplates a loan from the Government to the Borrower, in the amount of up to $14,000,000.00, (the “Loan”). This transaction will be evidenced by the issuance of a promissory note, in the principal amount of $14,000,000.00 (“the Note”) to the United States of America by the Borrower, dated October 17, 2005, a copy of which is attached hereto as Exhibit 1, and which will be secured by this Preferred Ship Mortgage (the “Ship Mortgage”) to the Government for the purpose of securing the Loan, including, but not limited to, the payment of the principal of and interest of the Note in accordance with its terms and the terms of this Ship Mortgage, as well as any future advances, and all other sums owed the Government.

WHEREAS, the Government has entered into an Approval and Agreement letter dated September 28, 2005, (the “Approval Letter”), and Security Agreement dated October 17, 2005, with the Borrower, and will execute other documents, including all Loan Documents.

CONSIDERATION:

NOW, THEREFORE, in consideration of the Government having agreed to enter into the Approval Letter dated September 28, 2005, with the Borrower and for other good and valuable consideration, receipt whereof is hereby acknowledged by the Borrower, and in order to secure the payment of the principal of and interest on the Note and all other sums which accrue according to the terms thereof and the payment of all other sums that may hereafter become secured by this Mortgage in accordance with the terms hereof and to secure the performance and observance of and compliance with the covenants, terms and conditions herein and in the Note contained, or contained in any other document executed by the Borrower, the Borrower has granted, conveyed, mortgaged, pledged, assigned, transferred, set over and confirmed unto the Government the whole of the vessel described as follows:

SECTION 4. SECURITY AGREEMENT: THE VESSEL SUBJECT TO THIS MORTGAGE is that certain oil screw vessel named TANGIER ISLAND, Official Number 565268 together with all her accessories and appurtenances, including, but not limited to accounts receivable, anchors, apparel, boats, boilers, cables, catch, chains, charter hire, contract rights, contracts, electronics, engines, equipment, fishing gear, freight, furniture, general intangibles, inventory, licenses, machinery, masts, motors, nets, permits, proceeds, product, related gear, rents or profits, rigging, sails, skiffs, spare parts, spars, substitutions, supplies, tackle, hydraulics, safety equipment, and parts and accessories affixed to or used in connection therewith, whether now owned or hereafter acquired, whether on board or not, and all additions, improvements, renewals, and replacements hereafter made in, on or to the said vessel or any part thereof, and in, on, or to its equipment and appurtenances as aforesaid (the “Vessel”).

INDIVIDUAL TRANSFERABLE QUOTAS: If a limited fisheries access system is in effect, or should a limited fisheries access system be initiated at some future date under which the Borrower is granted a transferable fishery conservation and management allocation (including, but not limited to, allocations, permits, quotas, licenses, cage tags, or any other fisheries access restriction or right, however characterized, of whatsoever nature) affecting, necessary for, or in any other way, however characterized, associated with any of the property included in the Collateral, the Borrower agrees to grant to the Government a full senior security interest in such allocation by whatsoever means deemed by the Government to be appropriate (including, but not limited to, the Borrower’s execution of security agreements and the filing of financing statements under the UCC). Further, if

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the Borrower fails to do so, the Borrower agrees that the Government may use, for the purpose of executing and otherwise perfecting whatever documents may be required to effect the grant to the Government of such a full security interest in such fisheries conservation and management allocation, the attorney-in-fact authority conferred upon the Government by ARTICLE IX of the Title XI Financial Agreement.

SECTION 5. FINANCING STATEMENT: Some of the items of property described herein are goods that are or are to become accessories and appurtenances to the vessel described herein, and it is intended that as to those goods, this mortgage shall be effective as a financing statement. Information concerning the security interest created by this instrument may be obtained from the Borrower or the Government, at the addresses sent out in the first paragraph of this Preferred Ship Mortgage.

TO HAVE AND TO HOLD ALL and each of the above-mortgaged and described property unto the Government and its successors and assigns, to its use and benefit forever;

PROVIDED ALWAYS, and the condition of these presents is such, that if the Borrower, its successors or assigns shall pay, or cause to be paid, the principal of and interest on the Note in accordance with the terms of the Note and the Mortgage and shall pay any and all other sums that may hereinafter become secured by this Mortgage in accordance with the terms hereof, and shall keep, perform, and observe all and each of the covenants and promises in the Note and in the Mortgage contained, expressed, or implied to be kept, performed, and observed by or on the part of the Borrower, then this Mortgage and the estate and rights hereby granted shall cease, determine, and be void; otherwise to remain in full force and effect.

The Government hereby covenants and agrees that the Vessel is to be held by the Borrower subject to the further covenants, conditions, and uses hereinafter set forth as follows:

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ARTICLE II: BORROWER’S OBLIGATIONS

SECTION 1. CITIZENSHIP AND TITLE REQUIREMENTS: The Borrower (i) is and shall continue to be a citizen of the United States as defined in section 2 of the Shipping Act, 1916, as amended, for coastwise trade, and (ii) is entitled to own and operate the Vessel under her marine document and shall maintain such marine document in full force and effect. The Note and the Mortgage have been duly executed and delivered, and the Note in the hands of the holder thereof is and will be a valid and enforceable obligation of the Borrower in accordance with its terms. The Borrower lawfully owns and is lawfully possessed of the whole of the Vessel free from any lien whatsoever except the lien of this Mortgage, and liens expressly permitted herein and other Preferred Ship Mortgages in favor of the Government, and covenants that it will warrant and defend the title and possession thereto and every part thereof for the benefit of the Government against the claims and demands of all persons whomever.

SECTION 2. INSURANCE REQUIREMENTS:

(a) The Borrower will, at all times and at its own expense, keep the Vessel insured with responsible underwriters and through responsible brokers, all in good standing and satisfactory to the Government, in an amount that fully and adequately protects the Vessel and the Government’s interest therein against all marine perils and disasters and all hazards, risks, and liabilities in any way arising out of the ownership, operation, or maintenance of the Vessel, including but not limited to insurance as follows:

(i) While being operated, navigating hull insurance must be in an amount equal to the full commercial value of the Vessel. In no event may this be less than one hundred ten percent (110%) of the unpaid principal, at the time outstanding, of the Note. The policy valuation on the hull shall not exceed the aggregate amount insured by hull policies. The hull insurance shall be placed under the form of policy known as American Institute of Marine Underwriters form, or under such other form of policy as the Government may approve, insuring against the usual risks covered by such policies, including four-fourths running down clause, Inchmaree clause, and breach of warranty clause; and

(ii) Protection and indemnity insurance under form of protection and indemnity policies approved by the Government and issued by marine insurance companies approved by the Government. The amount of protection and indemnity insurance shall be fixed by the Government; and

(iii) When and while the Vessel is laid up, and in lieu of the aforesaid navigating hull insurance referred to in (i) of this Section, port risk insurance under forms of port risk policies approved by the Government.

(b) The Borrower expressly covenants and agrees to keep the policies renewed from time to time, to keep the same valid at all times for the amounts aforesaid, and to keep the premiums thereon fully paid at all times. The Borrower shall not do any act nor voluntarily suffer or permit any act to be done whereby insurance is or may be suspended, impaired, or defeated, and shall not suffer nor permit the Vessel to engage in any voyage or to carry any cargo not permitted under the policy or policies of insurance in effect, unless and until the Borrower shall first cover the Vessel in the amount herein provided for, with insurance satisfactory to the Government for such voyage or for the carriage of such cargo.

(c) In the event the Borrower fails to procure any of the insurance, satisfactory to the Government, or fails to perform any of the covenants and agreements contained herein, the Government may, but shall be under

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no duty to, procure such other or different insurance or coverage as it may deem advisable with uncontrolled discretion in the Government as to the source, nature, form, type, class, amount, and extent of such insurance or coverage; and all sums expended or advanced by the Government in procuring such insurance shall be secured by and shall be due and payable as provided in Article II, Section 2 hereof.

(d) All insurance shall be taken out in the name of the Borrower and the Government as their interest may appear and policies and certificates shall provide that there shall be no recourse against the Government for payment of premiums and shall further provide for at least 20 days prior written notice to be given to the Government by the underwriters in the event of cancellation or modification. All original policies, binders, certificates, and covenants and all endorsements and riders thereto shall be delivered to the Government for approval and custody.

(e) Except as provided in (f) below, all insurance policies or certificates shall provide that losses thereunder shall be payable to the Government. If no Event of Default exists under this Mortgage, the Government may, in its discretion, pay, from the proceeds of the insurance directly to the repairer, the amount of any authorized repairs or if the Borrower shall have first fully repaired the damage to the satisfaction of the Government and paid the cost thereof, to the Borrower as reimbursement therefor. Any balance remaining from the aforesaid insurance proceeds will be applied as directed by the Government. If an Event of Default exists, the Government shall retain such insurance and if such Event of Default is not cured within fifteen (15) days of the occurrence thereof, apply the same in the manner provided in Article II, Section 2 hereof.

(f) Any loss under any insurance on the Vessel with respect to protection and indemnity risks may be paid directly to the person to whom any liability, covered by such insurance, has been incurred or to the Borrower to reimburse the Borrower for any loss, damage, or expense incurred by the Borrower and covered by such insurance; provided, that the underwriter shall have first received evidence that the liability insured against has been discharged.

(g) In the event of an actual or constructive total loss, or an agreed or compromised total loss of or in case of requisition of title to the Vessel, all amounts payable therefor shall, subject to Article II, Section 2 hereof, be paid to the Government and shall be applied first, to the payment of the expenses of the Government in collecting such payments, and second, as provided in Article II, Section 2 hereof.

(h) In the event that any claim or lien is asserted against the Vessel for loss, damage, or expense which is covered by insurance hereunder, and it is necessary for the Borrower to obtain a bond or supply other security to prevent arrest of the Vessel or to release the Vessel from arrest on account of such claim or lien, the Government, on request of the Borrower, may, in the sole discretion of the Government, and upon notice to the Borrower, assign to any person, firm, or corporation executing a surety or guarantee bond or other agreements, to save or release the Vessel from such arrest, all right, title, and interest of the Government in and to said insurance covering said loss, damage, or expense, as collateral security to indemnify against liability under said bond or other agreement.

SECTION 3. NO LIENS TO BE PLACED AGAINST THE VESSEL:

(a) Neither the Borrower, any charterer, the Master of the Vessel, nor any other person has or shall have any right, power, or authority to create, incur, or permit to be placed, imposed, or continued upon the Vessel any lien whatsoever other than the lien of this Mortgage or permitted liens as defined herein.

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(b) Permitted Liens. “Permitted Liens” means liens or other charges or encumbrances:

(i) arising for damages out of tort covered by insurance except for any deductible amounts applicable thereto, for wages of a stevedore when employed directly by the owner, operator, master, ship’s husband or agent of any Vessel, for wages of the crew of the Vessel, for general average, for salvage, including contract salvage, provided the same are paid immediately when due;

(ii) in favor of any person furnishing repairs, supplies, towage, use of dry dock or marine railway, or other necessaries to a Vessel on the order of the Borrower, or of a person authorized by the Borrower, provided the same are paid immediately when due.

(iii) imposed on the Vessel for taxes or governmental charges or levies, provided the same are paid immediately when due;

(iv) incurred in the ordinary course of business of the Vessel not relating to money borrowed which (1) will be paid immediately when due, and (2) which, in the aggregate, at any time are not material to the operations or financial condition of the Borrower; and

(v) arising by operation of law as a result of the modification of the Vessel, including mechanic’s liens, provided the same are paid immediately when due;

(vi) in favor of the United States of America, the United States Department of Commerce, National Oceanic and Atmospheric Administration, National Marine Fisheries Service, Financial Services Division;

PROVIDED, HOWEVER, that with respect to the deductible amounts described in clause (i) and liens or encumbrances of the type described in clauses (ii), (iii) and (v) not arising from or incurred in the ordinary course of business of the Borrower, the Borrower shall have set aside adequate reserves determined in accordance with generally accepted accounting principles (GAAP), provided that for such deductible amounts and liens or encumbrances which, in the aggregate, exceed $25,000.00 USD, shall include only liens which are subordinate to or which pursuant to applicable law cannot be subordinated by contract to the lien of the security interest in the vessel granted to the Government.

As used herein, the term “immediately when due” shall mean the time when, according to applicable law, customary industry practices, or a prior course of dealing or other agreement between the Borrower and the lienholder, the lienholder expects payment to be made; provided that, if the Borrower desires to contest an asserted lien, the Borrower may do so if the Borrower acts in good faith and by appropriate proceedings and has set aside the reserves described above.

SECTION 4. NOTICE OF MORTGAGE: The Borrower shall carry a properly certified copy of this Mortgage with the Vessel’s papers on board the Vessel, shall exhibit the same on demand to any person having business with the Vessel, or to any representative of the Government, and shall place and keep prominently displayed in the pilot house, master’s cabin, and engine room of the Vessel a framed, printed or typewritten notice reading as follows:

“NOTICE OF MORTGAGE: This Vessel is covered by a Preferred Ship Mortgage given to the United States of America, under authority of the Ship Mortgage Act, 1920, as amended. Under the terms of said Mortgage, neither the owner of this Vessel, any charterer, the Master of this Vessel, nor any other person has any right, power, or authority to create, incur, or permit to be imposed upon the Vessel any liens, maritime or

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otherwise, other than the lien of said Mortgage and liens for crew’s wages, emergency safety repairs, or salvage.”

SECTION 5: NOTICES TO THE GOVERNMENT:

(a) OF ACTION AGAINST VESSEL: In the event that a libel is filed against the Vessel, or if the Vessel shall be levied upon or taken into custody, or detained by any proceeding in any court, or tribunal, the Borrower will, within 48 hours, notify the Government by telegram, telex, or facsimile and confirmed by letter, and the Borrower will, within fifteen (15) days thereafter, cause the Vessel to be discharged. Within ten (10) days of its occurrence, the Borrower will notify the Government of any claim that could result in a lien being placed against the Vessel.

(b) OF CASUALTIES OR DAMAGE TO THE VESSEL: Within 24 hours of the event, the Borrower shall furnish the Government full information regarding any casualties or other accidents or damage to the Vessel, including copies of any supporting documents, i.e, accident reports, claims, etc.

(c) OF ACTION AGAINST THE BORROWER OR GUARANTOR: Within ten (10) days of its occurrence, the Borrower must give the Government written notice of any pending litigation, business reverse, casualty, loss, or any other matter (however characterized) that diminishes; (i) The Borrower’s ability to service any debt actually or contingently owed the Government, (ii) The Borrower’s ability to perform any other duty or obligation owed to the Government, (iii) The Borrower’s ability to fully and faithfully perform any covenant with the Government, (iv) the value of any property or other assets pledged to the Government, or (v) the net worth of any party against whom the Government has recourse for this debt.

SECTION 6: MAINTENANCE AND INSPECTION COSTS:

(a) VESSEL MAINTENANCE: At all times, at the Borrower’s own cost and expense, the Borrower will maintain and preserve the Vessel in as good condition, working order and repair as on the date of this Mortgage, ordinary wear and tear excepted; provided, however, if subsequent to the date of this Mortgage, the Vessel is reconstructed or reconditioned, the Borrower will keep the Vessel in as good condition, working order, and repair as the Vessel was on the date said reconstruction or reconditioning was completed, ordinary wear and tear excepted. In addition to the foregoing, the Borrower will keep the Vessel in as good condition as will enable her to pass such inspection as may be required by marine underwriters as a condition of their writing such insurance in such amounts as are required under this Mortgage or as required by the United States Coast Guard as a condition to certifying that the Vessel is seaworthy and in compliance with all applicable safety and navigational requirements.

(b) INSPECTION OF VESSEL: The Borrower shall afford the Government or its authorized representatives full and complete access to the Vessel, in port or at sea, at such times as the Government, in its sole discretion, may require, for the purpose of inspecting or valuing the vessel, her cargo, log, and papers.

(c) INSPECTION OF BORROWER’S FINANCIAL RECORDS: The Borrower agrees to execute a consent and waiver, valid for the term of the mortgage, which allows the Internal Revenue Service to release directly to the Government, Borrower’s Federal Income Tax Returns⁴, whenever the Government requests same. Additionally, the Borrower shall permit the Government, or any representative selected by it, in such manner and at such times as the Government, in its sole discretion, requires, to make inspections and audits of any books, records, off-loading receipts, fish-sale receipts, papers, or other documents of whatsoever nature in the custody

¹ Borrower agrees to execute IRS Forms #4506 and 8821, thereby implementing the provisions of 26 USC §6103(c).

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and control of the Borrower, or any other individual or entity, relating in any way to the financial or business condition of the Borrower or the operation or company. At the Government’s request, these statements, books, records, receipts or reports must be delivered to the Southeast Region of the National Marine Fisheries Service, Financial Services Branch, in St. Petersburg, Florida.

(d) BORROWER TO PAY THE COST OF ALL SUCH INSPECTIONS, audits or appraisals, provided for in Paragraphs 6(a), 6(b) and 6(c), immediately above, within 30 days of the Government’s demand and all such amounts disbursed by the Government for such purpose shall, until fully repaid by the Borrower, be added (payable upon the Government’s demand) to the Borrower’s Note to the Government and shall earn interest at the same rate as the other principal of the Borrower’s Promissory Note and shall be secured by the ship mortgage and other securities which secure the Borrower’s promissory note to the Government.

SECTION 7. FINANCIAL REPORTING TO THE GOVERNMENT:

(a) The Borrower will, within 20 days after the close of each fiscal year, and at such other times and in such form as the Government may prescribe, furnish to the Government, the Borrower’s financial and operating statements including schedules showing all compensation paid by the Borrower;

(b) The Borrower will, at all times, keep proper books of account in accordance with generally accepted accounting principles and practice; and

(c) The Borrower will permit the Government, at the Borrower’s expense and in such manner and at such time as the Government may require, to (i) make inspections and audits of any books, records, and papers in the custody and control of the Borrower or others, relating to the Borrower’s financial or business conditions, including making copies thereof, and extracts therefrom, and (ii) make inspections and appraisals of any of the Borrower’s assets.

SECTION 8. TAXES & FEES: The Borrower will pay and discharge when due and payable, from time to time, all taxes, assessments, governmental charges, fines, and penalties lawfully imposed on the Vessel.

SECTION 9. REIMBURSEMENT OF GOVERNMENT EXPENDITURES: The Borrower will reimburse the Government for any and all expenditures which the Government may reasonably elect to make from time to time to protect the security granted hereunder (in the event of the Borrower’s failure to do so), including, without limitation of the foregoing, payment of taxes, repairs, insurance premiums, the discharge of any lien, libel or seizure of the Vessel, and expenses incurred by the Government in retaking the Vessel; and any such payment made by the Government shall be for the account of the Borrower, and the making thereof by the Government shall not cure the Borrower’s default in that regard nor constitute a waiver of any right or remedy granted to the Government hereunder, and all reasonable sums so expended by the Government or any liability incurred by it shall be immediately due and payable and shall be deemed to be an indebtedness of the Borrower and secured by this Mortgage, and until paid shall bear interest at the same rate as that provided in the Note.

SECTION 10: GOVERNMENT’S PRIOR WRITTEN CONSENT REQUIRED: The Borrower shall not, without prior written consent of the Chief, Financial Services Division, National Marine Fisheries Service, which consent will not unreasonably be withheld, take any of the following actions:

(a) sell, mortgage, transfer, nor charter the Vessel, and any such written consent obtained from the Government to any one sale, mortgage, transfer, or charter, shall not be construed to be a waiver of this provision with respect to any subsequent proposed sale, mortgage, transfer, or charter. Any such sale, mortgage, transfer, or charter of the Vessel shall be subject to the provisions of this Mortgage and to the lien it creates.

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(b) Pay to any officer, partner, or other party any salary, commission, bonus, management fee, dividend, or other consideration (however characterized) in excess of either reasonable industry standards or ordinary financial prudence for a company or operation of the Borrower’s size and financial condition at the time that such consideration is paid (and the burden of proving reasonableness shall be on the Borrower).

(c) Purchase or redeem any shares of the Borrower’s or the Borrower’s company’s own stock.

(d) Exclusive of such fixed assets to be acquired with the proceeds of the Note or any part thereof, or any fixed assets acquired prior to the date of this Mortgage, make any additional investment (excluding purchases, etc., in connection with the routine and continuing maintenance and preservation of the Vessel and its productivity) in, or incur any additional liability for, the purchase, acquisition, lease, or other use (however characterized) of any real property, machinery, equipment, fixtures, or furniture, or fixed property in connection with the Borrower’s present level of operations in any one fiscal year in excess of an aggregate of 5% of the Borrower’s total assets.

(e) Start any new business or acquire any other business, or the assets of any other business, whether by purchase, merger, consolidation, affiliation, or any other means (however characterized) except as may otherwise be permitted herein, or sell, liquidate, dissolve, spin-off, split-up or in any other way (however characterized) dispose of its own assets except as may be required in the normal course of operations reasonably necessary to carry on its day-to-day operation.

(f) The Borrower will not split-up, split-off, spin-off, merge, consolidate, or transfer or allow transfer of its shares so as to effect a change in its controlling interest or management.

(g) Guarantee or become contingently liable in any way as surety, endorser, creditor, co-maker, accommodation maker, or in any other way (however characterized) for the debt or obligation of any other party, individual or entity, except as may be permitted herein or required in the normal course of operations reasonably necessary to carry on its day-to-day business.

(h) By any means whatsoever, allow the company or operation to be acquired by, or otherwise reorganized into (however characterized) any other company or operation, unless the acquiring company, operation or reorganized entity is acceptable to the Government, and said company, operation or reorganized entity agrees to do the following: (i) provide to the Government a 100% unconditional guarantee of all debt actually or contingently owed it; and (ii) be bound by these covenants; and (iii) be bound by such other covenants as the Government shall reasonably require to protect its interest; and (iv) provide such other assurances and security as the Government, in its sole discretion, requires.

(i) Make any distribution of the Borrower’s assets for compensation (including salaries, withdrawals, fees, bonuses, commissions, drawing accounts, and other payments, whether directly or indirectly, in money or otherwise) for services, or give any preferential treatment, make any advances, directly or indirectly by way of loans, gifts, notes, or otherwise, to any employee or Affiliate or increase the compensation of any person above that set forth in any application or document submitted in connection with the Note. In the event an Affiliate increases the compensation (including salaries, withdrawals, fees, bonuses, commissions, drawing accounts, and other payments, whether directly or indirectly, in money or otherwise) paid to the Borrower or any employee of the Borrower, beyond that authorized or consented to by the Government, the compensation payable to such person by the Borrower will be forthwith correspondingly reduced and immediate notice thereof given to the Government by the Borrower.

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SECTION 11. COMPLIANCE WITH FEDERAL SHIP MORTGAGE ACT: The Borrower will comply with and satisfy all the provisions of the Ship Mortgage Act, 1920, as amended, 46 USC, Chapter 313, § 31301, et seq. (Supp. 2003), in order to establish and maintain this Mortgage as a Preferred Ship Mortgage upon the Vessel.

SECTION 12. OPERATING RESTRICTIONS:

(a) DOCUMENTATION: The Borrower will keep the Vessel documented under the laws of the United States and no transfer of port of hailing of the Vessel shall be made without the prior written consent thereto of the Government.

(b) LAWFUL OPERATION: The Borrower will not cause or permit the Vessel to be operated in any manner contrary to law or contrary to any rules and regulations which may from time to time be prescribed pursuant to law.

(c) VESSEL SHALL NOT LEAVE UNITED STATES’ WATERS: The Borrower will not remove, attempt to remove, or allow the vessel to be moved beyond the limits of the United States without the written consent of the Government. If said written consent is obtained, the Borrower will execute certain documents and will not abandon the Vessel in a foreign port. The Borrower will not engage in any unlawful trade or violate any law or carry any cargo that will expose the Vessel to penalty, forfeiture, or capture, and will not do, or suffer or permit to be done, anything which can or may injuriously affect the documentation of the Vessel under the laws and regulations of the United States.

(d) Upon demand by the Government to the master of the Vessel or the Borrower, the Borrower will return the vessel to the waters known as the Exclusive Economic Zone (EEZ) of the United States and, if the Government so demands, to a port of call chosen by the Government, thereby revoking any prior consent extended by the Government with respect to operation of the Vessel outside the Exclusive Economic Zone of the United States.

SECTION 13. PAYMENTS MUST BE TIMELY MADE AND TERMS OF THE MORTGAGE , NOTE AND OTHER LOAN DOCUMENTS MUST BE MET: The Borrower will duly and punctually pay all the principal of and interest on the Note and the Mortgage as herein and in the Note and other loan documents provided, and will at all times keep, perform, and observe all and singular the covenants, conditions, stipulations, promises, and agreements in this Mortgage and in the Note expressed or implied on its part to be kept, performed, and observed, and will duly punctually pay all sums that may hereinafter become due hereunder.

ARTICLE III: DEFAULT

SECTION 1. The Borrower agrees that it will faithfully observe, perform, comply with and discharge all of the covenants, conditions, and obligations which are imposed on the Borrower by any other agreement or document executed in connection with this Mortgage and the Note, concurrently or otherwise, and that the Borrower’s failure to do so shall constitute an Event of Default under this Mortgage.

SECTION 2. The Borrower agrees that any material default under any guarantor agreement, security agreements, Title XI financial agreements, or other loan documents which may be executed in connection with this Mortgage or Note, whether or not the Borrower is party to said agreement, shall constitute an Event of Default under this Mortgage.

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SECTION 3. The Borrower agrees that all reasonable attorney fees incurred by the Government because of the Borrower’s failure to perform or discharge its obligations, as provided by this Mortgage, the Note, or any other document or agreement executed in connection therewith, shall be deemed to be an indebtedness of the Borrower and shall be secured by this Mortgage and shall be due and payable and until paid, shall bear interest at the same rate as that provided in the Note, and upon acceleration of the amounts owed under the Note, shall bear interest at the accelerated rate of eighteen percent (18%) per annum, unless limited by applicable state law.

SECTION 4. Each of the following events shall constitute an Event of Default:

(a) default shall be made in the payment of the principal of the Note when and as the same shall become due and payable, whether at maturity, by notice of acceleration, or otherwise; or

(b) default shall be made in the payment of any interest on the Note (including any amendments thereto or substitution therefor), when and as the same shall become due and payable as therein and herein provided; or

(c) default shall be made in the due and punctual observance and performance of any provision of Article I, hereof; or

(d) the Borrower shall be dissolved or adjudged a bankrupt or shall make a general assignment for the benefit of the Borrower’s creditors, or shall lose the right to do business by forfeiture or otherwise, or a receiver or receivers of any kind whatsoever, whether appointed or not, in admiralty, bankruptcy, common law, or equity proceedings, and whether temporary or permanent, shall be appointed for the Vessel or for any other property of the Borrower; or a petition for reorganization of, or other proceeding or action in reference to the Borrower under any of the provisions of the Bankruptcy Act shall be filed by the Borrower or by creditors of the Borrower; or if reorganization of the Borrower under said Act is approved by the Court, whether proposed by a creditor, stockholder, or any other person whomsoever; and

THE BORROWER AND THE GUARANTOR BOTH UNDERSTAND THAT IF EITHER FILES BANKRUPTCY, THE BORROWER WILL LOSE THE VESSEL.

THE BORROWER AND THE GUARANTOR EXPRESSLY AGREE TO, AND UNDERSTAND THAT IN THE EVENT OF BANKRUPTCY, THE VESSEL WHICH IS THE SECURITY FOR THIS PREFERRED SHIP MORTGAGE WILL NOT BE PERMITTED TO GO OUT TO SEA, AND WILL REMAIN IN PORT IN THE JURISDICTION OF THE COURT WHERE THE BANKRUPTCY PETITION IS FILED OR SUCH OTHER JURISDICTION WHERE THE BOAT MAY BE OR OTHER COLLATERAL MAY BE FOUND.

(e) there shall be an actual or constructive total loss of the Vessel; or

(f) default shall be made by the Borrower in the prompt and faithful performance or observance of any other covenant, condition, or agreement by it to be performed and observed, contained in this Mortgage, Note, or any other loan documents and such default shall continue for fifteen (15) days; or

(g) the making in any application, agreement, affidavit, or other document, submitted in connection with the Note, of any misrepresentation, on behalf of, or for the benefit of, the Borrower. Failure to disclose any material fact may be deemed a misrepresentation; or

(h) the institution of any suit against the Borrower or others deemed by the Government to affect adversely its interest hereunder, in the Note or otherwise; or

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(i) failure of any signator to any of the Loan Documents, to observe any of the conditions contained in said Loan Documents, or any other document or agreement executed (concurrently or otherwise), inclusive of amendments thereto, in connection with this Mortgage, or subsequent mortgage, regardless of whether or not the Borrower shall be a party to said agreement or document; or

(j) impairment of any collateral including the vessel or which is given in addition to the vessel which is the subject of this Preferred Ship Mortgage; or

(k) the Borrower shall, without first obtaining written permission from the Secretary, transfer, sell, assign, hypothecate, or alienate or attempt to transfer, sell, assign, hypothecate or alienate any rights, licenses or permits appurtenant to and/or necessary for the Vessel to engage in any commercial fisheries; or

(l) the Borrower shall, intentionally or through neglect, permit a material diminution of the value of the Vessel and/or its appurtenances and equipment; or

SECTION 5. UPON OCCURRENCE OF AN EVENT OF DEFAULT THE GOVERNMENT, MAY IN ITS DISCRETION:

(a) Declare the Note to be due and payable immediately and upon such declaration the entire principal of and interest on the Note shall become and be immediately due and payable, and thereafter shall bear interest at eighteen percent (18%) per annum unless such would violate the usury laws of the state where this Mortgage and the Note are executed, in which case the maximum legal rate of that state shall prevail; provided, however, that if the Borrower shall have removed and remedied each Event of Default within fifteen (15) days after the occurrence thereof, then in every such case the Government shall waive any such Event of Default; but no such waiver shall extend to nor affect any subsequent or other Event of Default nor impair any rights or remedies consequent thereon; and provided, further, that if at any time after the expiration of fifteen (15) days after any Event of Default shall have occurred, all Events of Default shall have been remedied and removed and full performance made by the Borrower to the satisfaction of the Government and all installments of principal and interest in arrears (including interest at the aforesaid rate) and the charges and expenses, if any, of the Government, it agents and attorneys, shall have been paid, then and in every such case the Government may waive any such Event of Default; and provided, also, that no waiver hereunder shall extend to nor affect any subsequent or other Event of Default nor impair any rights or remedies consequent thereon;

(b) Bring suit at law, in equity, or in admiralty, as it may be advised, to receive judgment for any and all amounts due under the Note and other Loan Documents, or otherwise hereunder, and collect the same out of any and all property of the Borrower whether covered by this Mortgage or otherwise;

(c) Retake the Vessel without legal process wherever the same may be found, and the Borrower or other person in possession forthwith upon demand of the Government shall immediately surrender to the Government possession of the Vessel, and, without being responsible for loss or damage, the Government may hold, lay-up, lease, charter, operate, or otherwise use the Vessel for such time and upon such terms as it may deem to be for its best advantage, accounting only for the net profits, if any, arising from such use of the Vessel and charging against all receipts from the use of the Vessel, or from the sale thereof by court proceeding or pursuant to subsection (e) following, all costs, expenses, charges, damages, or losses by reason of such use; and if at any time the Government shall avail itself of the right herein given it to retake the Vessel and shall retake it, the Government shall have the right to dock the Vessel at any dock, pier, or other premises of the Borrower without charge, or to dock it at any other place at the cost and expense of the Borrower; IT IS EXPRESSLY UNDERSTOOD AND AGREED TO BY THE BORROWER THAT SURRENDER OF THE VESSEL UNDER

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THIS SECTION MUST BE AND WILL BE IMMEDIATE AND IN ACCORDANCE WITH THE DIRECTIONS OF THE GOVERNMENT. FAILURE OF THE BORROWER TO IMMEDIATELY COMPLY WITH THE GOVERNMENT’S DEMAND FOR SURRENDER OF THE VESSEL WILL CAUSE THE POSSESSION OF THE VESSEL BY THE BORROWER (INCLUDING, BUT NOT LIMITED TO, POSSESSION AND CONTROL OF THE VESSEL BY A MASTER OR CREW MEMBER ON BOARD THE VESSEL) TO BE UNLAWFUL AND TO CONSTITUTE A CONVERSION OF THE VESSEL, ITS APPURTENANCES AND EQUIPMENT, THEREBY SUBJECTING THE BORROWER (EXPRESSLY INCLUDING, IF APPLICABLE, ITS OFFICERS AND DIRECTORS) TO ALL FINES, PENALTIES AND ACTIONS WHICH THE GOVERNMENT DEEMS APPLICABLE AND APPROPRIATE. SHOULD THE BORROWER CONTINUE TO OPERATE, POSSESS OR CONTROL THE VESSEL CONTRARY TO THE GOVERNMENT’S DIRECTIONS AND THE PROVISIONS HEREIN, THEN THE GOVERNMENT SHALL, IN ADDITION TO ANY OTHER RIGHTS AND REMEDIES AT LAW AND IN EQUITY, BE ENTITLED TO A TEMPORARY RESTRAINING ORDER AND/OR ORDER FOR INJUNCTIVE RELIEF NECESSARY TO GAIN COMPLIANCE HEREWITH, IN ADDITION TO EXPRESSLY CONSENTING THAT THE INJURY AND DAMAGE RESULTING FROM BREACH HEREOF WOULD BE IMPOSSIBLE TO MEASURE MONETARILY, THE BORROWER EXPRESSLY WAIVES ANY DEFENSE BASED UPON AN ALLEGED EXISTENCE OF AN ADEQUATE REMEDY AT LAW.

(d) Foreclose this Mortgage pursuant to the terms and provisions of the Ship Mortgage Act, 1920, as amended, 46 USC, Chapter 313, § 31301, et seq. (Supp. 2003), or by other judicial process as may be provided in the Statutes; and

(e) In addition to any and all other rights, powers, and remedies elsewhere in this Mortgage or by law granted to and conferred upon the Government, sell the Vessel upon such terms and conditions as it may deem to be for its best advantage, including the right to sell and dispose of the Vessel free from any claim of or by the Borrower, at public sale, by sealed bids or otherwise, after first giving notice of the time and place of sale, with a general description of the property by first publishing notice of any such sale for ten (10) consecutive days, except Sundays, in some newspaper of general circulation at the place designated for such sale, and by mailing notice of such sale to the Borrower at his last known address; such sale may be held at such place and at such time as the Government in such notice may have specified, or may be adjourned by the Government from time to time by announcement at the time and place appointed for such sale or for such adjourned sale, and without further notice of publication the Government may make any such sale at the time and place to which the same shall be so adjourned; and any such sale may be conducted without bringing the Vessel to the place designated for such sale and in such manner as the Government may deem to be for its best advantage, and the Government may become the purchaser at any such sale, and shall have the right to credit on the purchase price any or all sums of money due to the Government under the Note, any other Loan Documents, or otherwise hereunder. The Borrower expressly agrees and acknowledges that sale of the Vessel pursuant to this section will not (notwithstanding federal or state law to the contrary, if any,) impair or limit the Government’s legal right to collect from the Borrower any deficiency remaining after the sale. If any such federal or state laws or legal precedents may be construed to limit the Government’s rights to collection of said deficiency from the Borrower, then Borrower hereby expressly waives, relinquishes and forever gives up the right to avail itself of such laws and/or defenses.

(f) the Borrower agrees, acknowledges and consents to and with the authority of the Government, to take all steps, measures or actions which are within the discretion or authority of the Government.

SECTION 6. Any sale of the Vessel made in pursuance of this Mortgage shall operate to divest and forever bar the Borrower from any and all right, title, and interest of any nature whatsoever of the Borrower therein and thereto. No purchaser shall be bound to inquire whether notice has been given, or whether any default has occurred, or as to the propriety of the sale, or as to the application of proceeds thereof.

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SECTION 7. The Borrower does hereby irrevocably appoint the Government the true and lawful attorney of the Borrower, in its name and stead to make all necessary transfers of the Vessel, and for that purpose it shall execute all necessary instruments of assignment and transfer, the Borrower hereby ratifying and confirming all that its said attorney shall lawfully do by virtue hereof. Nevertheless, the Borrower shall, if so requested by the Government, ratify and confirm such sale by executing and delivering to the purchaser of the Vessel such proper bill of sale, conveyance, instrument of transfer, and release as may be designated in such request.

SECTION 8. The Borrower hereby irrevocably appoints the Government the true and lawful attorney of the Borrower so long as an Event of Default shall have occurred and shall not have been waived in accordance with Section 2 hereof, in the name of the Borrower, to demand, collect, receive, compromise, and sue for, so far as may be permitted by law, all hire, earnings, issues, revenues, income, and profits of the Vessel and all amounts due from underwriters under any insurance thereon as payment of losses or as return premiums or otherwise, salvage awards and recoveries, recoveries in general average or otherwise, any right of action against the designer, builder, surveyor, or other material party for any fault, negligence, or deficiency in design, construction or survey of the Vessel, and all other sums, due or to become due, at or after the time of the happening of any Event of Default, in respect of the Vessel or in respect of any insurance thereon from any person whomsoever, and to make, give and execute in the name of the Borrower, acquittances, receipts, releases, or other discharges for the same, whether under seal or otherwise, and to endorse and accept in the name of the Borrower all checks, notes, drafts, warrants, agreements, and all other instruments in writing with respect to the foregoing.

SECTION 9. The Borrower covenants and agrees that so long as an Event of Default shall have occurred and shall not have been waived in accordance with Section 2 hereof, the Government in any suit to enforce any of its rights, powers, or remedies shall be entitled as a matter of right and not as a matter of discretion (i) to the appointment of a receiver or receivers of the Vessel and that any receiver so appointed shall have full right and power to use and operate the Vessel, and (ii) to a decree ordering and directing the sale and disposal of the Vessel, and the Government may become the purchaser at said sale, and the Government shall have the right to credit on the purchase price any and all sums of money due to the Government under the Note, or otherwise hereunder.

SECTION 10.

(a) In the event that the Vessel shall be arrested or detained by a marshal or other officer of any court of law, equity, or admiralty jurisdiction in any country or nation of the world or by any government or other authority and shall not be released from arrest or detention within fifteen (15) days from the date of arrest or detention, the Borrower does hereby authorize and empower the Government in the name of the Borrower and does hereby irrevocably appoint the Government and its successors and assigns the true and lawful attorney of the Borrower, in its name and stead to apply for and receive possession of and to take possession of the Vessel pursuant to the terms of this Mortgage and any other documents executed by the Borrower, with all rights and powers that the Borrower might have, possess, or exercise in any such event; and this power of attorney shall be irrevocable and may be exercised not only by the Government but also by an appointee or appointees, with full power of substitution, to the same extent as if the said appointee or appointees had been named as one of the attorneys above named by express designation.

(b) The Borrower also authorizes and empowers the Government or the Government’s appointee or appointees, as the true and lawful attorney of the Borrower, to appear in the name of the Borrower, or its successors or assigns, in any court of any country or nation of the world where a suit is pending against the Vessel because of or on account of any alleged lien against the Vessel from which the Vessel has not been released and to take such proceedings as to them or any of them as may seem proper towards the defense of such suit and the discharge of such lien, and all expenditures made or incurred by them or any of them for the purpose

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of such defense or discharge shall be a debt due from the Borrower to the Government and payment thereof shall be secured by the lien of this Mortgage and shall be due and payable and until paid, shall bear interest at the same rate as that provided in the Note and upon acceleration of the amounts owed under the Note, shall bear interest at the rate of eighteen percent (18%) per annum.

SECTION 11.

(a) The Borrower hereby expressly and irrevocably consents to the jurisdiction of any court in any country whatsoever wherein the Vessel may at any time be located for the foreclosure of this Mortgage, the sale of the Vessel, or the enforcement of any other remedy or right hereunder, and hereby expressly and irrevocably submits the person of the Borrower and the Vessel to the jurisdiction of any such court in any country in any such action or proceeding which is brought, in its sole discretion, by the Government.

(b) To the extent not governed by the laws of the United States, this Mortgage shall in all respects be governed by and construed in accordance with the laws of the Commonwealth of Virginia. The Borrower and Guarantor irrevocably submit to the non-exclusive jurisdiction of the state and federal courts situated in the Commonwealth of Virginia in any proceeding relating to this Mortgage and agrees that any process or summons in any such action may be served by mailing to the Borrower a copy thereof. The Borrower and Guarantor consent to and subject themselves itself to the jurisdiction of the federal court in the jurisdiction where the Vessel is found.

SECTION 12.

(a) Each and every power and remedy herein specifically given to the Government or otherwise in this Mortgage shall be cumulative and shall be in addition to every other power and remedy herein specifically given or now or hereafter existing at law, in equity, admiralty, or by statute, and each and every power and remedy whether specifically herein given or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the Government, and shall not be construed to be a waiver of the right to exercise at the same time or thereafter any other power or remedy. No delay or omission by the Government in the exercise of any right or power or in the pursuance of any remedy occurring upon any Event of Default shall impair any such right, power, or remedy or be construed to be a waiver of any such Event of Default or to be any acquiescence therein; nor shall the acceptance by the Government of any security or of any payment of or on account of the Note maturing after any Event of Default or of any payment on account of any past Event of Default be construed to be a waiver of any right to take advantage of any future Event of Default or of any past Event of Default not completely cured thereby.

(b) The Government, in addition to such other rights or remedies it may have, shall have the right, in its discretion, to take any and all action authorized by Sections 1105(c) and 1105(e) of Title XI and, to the extent not in express conflict with the action authorized by said Sections, or with this Section, any and all action provided for in or authorized or permitted by or in respect of this Mortgage, Note, Collateral or Security, and Policies of Insurance (including all action provided for in or authorized or permitted by or in respect of any or all said documents by the Government).

SECTION 13. In case the Government shall have proceeded to enforce any right, power, or remedy under this Mortgage by foreclosure, entry, or otherwise, and such proceedings shall have been discontinued or abandoned for any reason or shall have been determined adversely to the Government, then and in every such case the Borrower and the Government shall be restored to their former positions and rights hereunder with respect to the property subject or intended to be subject to this Mortgage, and all rights, remedies, and powers of the Government shall continue as if no such proceedings had been taken.

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SECTION 14. The proceeds of any sale of the Vessel (after paying or deducting, in the case of sale, under any judicial proceedings, the fees, costs, and other charges therein), and the net earnings from any management, charter, or other use of the Vessel by the Government under any of the powers above specified, and the proceeds of any claim for damages on account of the Vessel received by the Government while exercising any such power, and the proceeds of any insurance on the Vessel (subject to the provisions of this agreement) shall be applied as follows:

First: To the payment of all expenses and charges including the expenses of any sale, counsel fees, the expenses of any taking of possession of the Vessel, and any other expenses or advances made or incurred by the Government in the protection of its rights or in the pursuance of its remedies hereunder and to the payment of any damages sustained by the Government from the default or defaults of the Borrower; and at the option of the Government to provide a fund adequate in the opinion of the Government to furnish suitable indemnity against liens claiming priority over this Mortgage;

Second: To the payment of the amount then due and unpaid upon the Note for principal and interest and other sums occurring thereunder, including, but not limited to, costs and expenses of collection; and

Third: To the payment of all other sums secured hereby, including fees, whether due or not, and of all damages liquidated or otherwise hereunder; and

Fourth: Any surplus then remaining shall belong and be paid or returned to the Borrower or to whomever shall be lawfully entitled to receive the same.

ARTICLE IV: POSSESSION AND USE OF VESSEL DURING TERM OF MORTGAGE

Until an Event of Default hereunder shall happen, the Borrower (a) shall be suffered and permitted to retain actual possession and use of the Vessel and (b) subject to default, hereof, shall have the right, from time to time, in its discretion, and without application to the Government, and without obtaining a release thereof by the Government, to dispose of, free from the lien hereof, any boilers, engines, machinery, bowsprits, masts, spars, sails, rigging, boats, fishing gear, anchors, chains, tackle, apparel, furniture, fittings, equipment, or any other appurtenances of the Vessel that are no longer useful, necessary, profitable, or advantageous in the operation of the Vessel, first or simultaneously replacing the same by new boilers, engines, machinery, bowsprits, masts, spars, sails, rigging, boats, fishing gear, anchors, chains, tackle, apparel, furniture, fittings, equipment, or any other appurtenances of substantially equal value to the Borrower, which shall forthwith become subject to the lien of this Mortgage.

ARTICLE V: GENERAL TERMS AND CONDITIONS OF MORTGAGE

SECTION 1. MULTIPLE ORIGINALS: This Mortgage may be executed simultaneously in any number of counterparts and all such counterparts executed and delivered each as an original shall constitute but one and the same instrument.

SECTION 2. SEVERABILITY CLAUSE: In the event that this Mortgage, the Note, any other loan documents, or any provisions hereof or thereof shall be deemed invalid in whole or in part by reason of any present or future law of the United States or any decision of any authoritative court, or if the documents at any time held by the Government be deemed by the Government for any reason insufficient to carry out the true intent and spirit of this Mortgage and the Note, then, from time to time the Borrower will execute on its own behalf such other and further assurances and documents as in the opinion of counsel for the Government may be

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required more effectually to subject the Vessel to the payment of the principal sum of the Note, together with interest thereon, as in the Note and as herein provided, and in the performance of the terms and conditions of the Note and this Mortgage. Upon failure of the Borrower to do so, the Government may execute any and all such other and further assurances and documents, for and in the name of the Borrower, and the Borrower hereby irrevocably appoints the Government the agent attorney-in-fact of the Borrower to do so. Any expenses of the Government in connection with the foregoing shall be a debt due from the Borrower to the Government in payment thereof and shall be secured by the lien of this Mortgage.

SECTION 3. MORTGAGE BINDING ON HEIRS, ETC.: All the covenants, promises, stipulations, and agreements of the Borrower in this Mortgage shall bind the Borrower, the Borrower’s heirs, executors, administrators, successors, and assigns. Whenever used, the singular number shall include the plural, the plural the singular, and the use of any gender shall be applicable to all genders.

SECTION 4. NO WAIVER OF PREFERRED STATUS: Nothing in this Mortgage shall be construed as a waiver of the preferred status of this Mortgage by the Government. In the event that any provision of this Mortgage would, as a matter of law, operate to waive the preferred status thereof, such provision for all intents and purposes, shall be deemed eliminated therefrom as though such provision had never been inserted herein.

SECTION 5. MORTGAGE CANNOT BE ALTERED OR WAIVED: This Mortgage may not be amended or supplemented except in writing by the Borrower with the written consent thereto of the Government. The provisions of this Mortgage may not be waived except in writing by the Government.

SECTION 6. TERMINATION OF MORTGAGE: If the whole amount of the Note including all amendments or substitutions, (principal and interest) shall be paid in accordance with its terms and the terms of this Mortgage, and all other sums that may have become secured by the lien of this Mortgage shall be paid, then this Mortgage and the estate and rights hereunder shall cease, terminate and be void; and the Government shall prepare and deliver to Borrower proper instruments acknowledging satisfaction of and discharging this Mortgage.

ARTICLE VI

For the purposes of this Mortgage, the total amount is FOURTEEN MILLION, and No/100 Dollars ($14,000,000.00) and interest and performance of mortgage covenants; the date of maturity is October 17, 2020 and the discharge amount is the same as the total amount set out above plus any other sums due the Government as provided by the provision of any Loan Documents.

IN WITNESS WHEREOF, THE Borrower has executed this Mortgage the day and year first above written.

Attest		BORROWER: Omega Protein, Inc.
By:	/s/    JOHN D. HELD	By:	/s/    ROBERT W. STOCKTON
			Vice President and Treasurer

(SEAL)

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		GUARANTOR ACKNOWLEDGES AND AGREES
Attest			GUARANTOR: Omega Protein Corporation
By:	/s/    JOHN D. HELD		By:	/s/    ROBERT W. STOCKTON
				Executive Vice President and Chief Financial Officer

(SEAL)

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ACKNOWLEDGMENT

STATE OF TEXAS	)
	)	ss
COUNTY OF HARRIS	)

On the 17^th day of October, 2005, before me personally appeared Robert W. Stockton, to me known or produced satisfactory identification, who being duly sworn, did depose and say that he is the Vice President and Treasurer of Omega Protein, Inc., and that he signed his name to said Mortgage by like order, and the said Vice President and Treasurer acknowledged to me that he executed said Mortgage as the Vice President and Treasurer of said corporation; and that the same is the free and voluntary act and deed of said corporation and of himself as such Vice President and Treasurer for the uses and purposes therein expressed.

Notary Public

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ACKNOWLEDGMENT

STATE OF TEXAS	)
	)	ss
COUNTY OF HARRIS	)

On the 17^th day of October, 2005, before me personally appeared Robert W. Stockton, to me known or produced satisfactory identification, who being duly sworn, did depose and say that he is the Executive Vice President and Chief Financial Officer of Omega Protein Corporation, and that he signed his name to said Mortgage by like order, and the said Executive Vice President and Chief Financial Officer acknowledged to me that he executed said Mortgage as the Executive Vice President and Chief Financial Officer of said corporation; and that the same is the free and voluntary act and deed of said corporation and of himself as such Executive Vice President and Chief Financial Officer for the uses and purposes therein expressed.

Notary Public

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