Omega Protein Corporation
OMEGA PROTEIN CORP (Form: DEFM14A, Received: 11/24/2017 13:17:22)

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 


 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934

 


 

Filed by the Registrant             ☒            Filed by a Party other than the Registrant     ☐

 

Check the appropriate box:

 

Preliminary Proxy Statement

 

Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

 

Definitive Proxy Statement

 

Definitive Additional Materials

 

Soliciting Material under Rule 14a-12

 

OMEGA PROTEIN CORPORATION

(Name of Registrant as Specified In Its Charter)

 

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

 

Payment of Filing Fee (Check the appropriate box):

 

No fee required.

 

Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

 

 

(1)

Title of each class of securities to which transaction applies:

     
 

(2)

Aggregate number of securities to which transaction applies:  

     
 

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):  

     
 

(4)

Proposed maximum aggregate value of transaction:

     
 

(5)

Total fee paid:

     

 

Fee paid previously with preliminary materials.

 

Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

 

 

(1)

Amount Previously Paid:

     
 

(2)

Form, Schedule or Registration Statement No.:

     
 

(3)

Filing Party:

     
 

(4)

Date Filed:

     

 

 

 

November 24 , 2017

 

2105 City West Blvd., Suite 500
Houston, Texas 77042

 

SPECIAL MEETING OF STOCKHOLDERS

 

MERGER PROPOSED —YOUR VOTE IS VERY IMPORTANT

 

Dear Stockholder:

 

The board of directors of Omega Protein Corporation, a Nevada corporation, or Omega, has unanimously adopted and approved a merger agreement pursuant to which Omega will be acquired by Cooke Inc., a corporation duly incorporated under the laws of the Prov ince of New Brunswick, Canada, or Cooke, through a merger of a wholly owned subsidiary of Cooke with and into Omega. The proxy statement is dated November 24, 2017, and is first being mailed to our stockholders on or about November 27, 2017.

 

If the merger contemplated by the merger agreement is completed, (i) holders of our common stock will have their shares automatically cancelled and converted into the right to receive $22.00 in cash, less any required withholding taxes (the “merger consideration”), for each share of our common stock owned at the effective time of the merger, (ii) each outstanding option to purchase shares of our common stock (whether or not exercisable, each an “Omega Option”) will become fully exercisable and will be converted into the right to receive, less applicable withholding taxes, an amount in cash equal to the excess, if any, of $22.00 over the applicable per share exercise price of such Omega Option and (iii) the restrictions applicable to each share of our restricted common stock will immediately lapse and each such share of our restricted common stock will be converted into the right to receive the merger consideration. This consideration will be paid without interest. Receipt of this consideration in exchange for shares of our common stock pursuant to the merger generally will be a taxable transaction for U.S. federal income tax purposes.

 

Our stockholders will be asked to vote on: (i) a proposal to adopt and approve the merger agreement (which is a condition to the merger) at a special meeting of stockholders (the “merger proposal”), (ii) an advisory, non-binding proposal to approve compensation that will or may become payable to our named executive officers in connection with the merger (the “advisory, non-binding compensation proposal”), and (iii) a proposal to approve the adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger proposal (the “adjournment proposal”). Our board of directors has approved resolutions (i) adopting, approving, declaring advisable and authorizing the merger agreement and the transactions contemplated thereby, including the merger, (ii) directing that the merger be submitted to the stockholders of Omega for approval at a meeting of such stockholders and (iii) recommending that stockholders of Omega approve the merger and the merger agreement, compensation that may or will become payable to our named executive officers in connection with the merger and all other actions or matters necessary or advisable to give effect to the merger and merger agreement pursuant to the Nevada Revised Statutes. Our board of directors recommends that all of our stockholders vote “FOR” the merger proposal, the advisory, non-binding compensation proposal and the adjournment proposal .

 

The affirmative vote of holders of at least a majority of the outstanding shares of our common stock is required to approve the merger proposal. Additionally, the affirmative vote of a majority of the shares of our common stock present in person or represented by proxy at the special meeting and entitled to vote is required to approve each of the advisory, non-binding compensation proposal and the adjournment proposal.  Each holder of our common stock is entitled to one vote per share. Proxies returned to us that are properly signed and dated but not marked to indicate your voting preference will be counted as votes “FOR” the merger proposal, the advisory, non-binding compensation proposal and the adjournment proposal .

 

 

The date, time and place of the special meeting are as follows:

 

December 19, 2017
9 a.m. Central Time
First City Tower
1001 Fannin St.
Suite 2500
Houston, TX 77002

 

The proxy statement attached to this letter provides you with information about the special meeting of our stockholders and the proposed merger. We encourage you to read the entire proxy statement carefully. Please do not send in your stock certificates at this time. If the merger is completed, you will receive instructions regarding the surrender of your stock certificates or exchange of your book-entry shares, as applicable, and payment for your shares of common stock.

 

Your vote is very important . Whether or not you plan to attend the special meeting, if you are a holder of our common stock, please complete, sign, date and mail the enclosed proxy card to us or submit your proxy by telephone or Internet. If you attend the special meeting, you may vote in person even if you previously returned your proxy.

 

 

Sincerely,

 

Gary R. Goodwin

Chairman of the Board

 

Neither the U.S. Securities and Exchange Commission nor any state securities regulatory agency has approved or disapproved of the transactions described in this document, including the merger, or determined whether the information contained in this document is accurate or adequate. Any representation to the contrary is a criminal offense.

 

 

 

2105 City West Blvd., Suite 500
Houston, Texas 77042

 

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

 

To the stockholders of Omega Protein Corporation:

 

Notice is hereby given that on December 19 , 2017, at 9 a.m., Central Time, Omega Protein Corporation, a Nevada corporation, or “Omega”, will hold a special meeting of its stockholders (the “special meeting”) at First City Tower, 1001 Fannin St., Suite 2500,  Houston, TX 77002, for the following purposes:

 

 

1.

To consider and vote upon a proposal (the “merger proposal”) to adopt and approve the Agreement and Plan of Merger, dated as of October 5, 2017, as such agreement may be amended from time to time (the “merger agreement”), by and among Cooke Inc., a corporation duly incorporated under the laws of the Province of New Brunswick, Canada (“Cooke”), Alpha MergerSub, Inc., a Nevada corporation wholly owned by a subsidiary of Cooke (“Merger Sub”), and Omega;

 

 

2 .

To consider and vote upon an advisory, non-binding proposal to approve compensation that will be or may become payable to Omega’s named executive officers in connection with the merger contemplated by the merger agreement (the “advisory, non-binding compensation proposal”);

 

 

3.

To consider and vote upon a proposal to approve the adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger proposal (the “adjournment proposal”); and

 

 

4 .

To transact such other business as may properly come before the special meeting or any adjournment or postponement of the special meeting.

 

Each of the proposals is described more fully in the proxy statement of which this notice forms a part. Please give your careful attention to all of the inf ormation in the proxy statement.

 

Only holders of record of our common stock at the close of business on November 24, 2017 (the “ record date”) or their proxies can vote at the special meeting or any adjournment of the special meeting. The merger proposal requires the affirmative vote of holders of at least a majority of the outstanding shares of our common stock who are entitled to vote as of the record date. Additionally, the affirmative vote of a majority of the shares of our common stock present in person or represented by proxy at the special meeting and entitled to vote is required to approve each of the advisory, non-binding compensation proposal and the adjournment proposal.

 

Pursuant to Section 92A.390 of the N evada Revised Statutes , no holder of any shares of our c ommon s tock will have or will be entitled to assert dissenter’s rights or any rights of appraisal as a result of or in connection with the merger agreement or the transactions contemplated thereby, including the merger.

 

Your vote is important. Whether or not you expect to attend the special meeting in person, you are urged to complete, sign, date and return the enclosed proxy card or voting instruction card at your earliest convenience or to submit your vote by Internet or telephone. Instructions for voting your shares are included on the enclosed proxy card or voting instruction card. If you are a record holder and you send in your proxy and then decide to attend the special meeting to vote your shares, you may still do so. You may revoke your proxy in the manner described in the proxy statement at any time before it has been voted at the special meeting.

 

 

ADDITIONAL INFORMATION

 

For additional questions about the merger, assistance in submitting proxies or voting shares of our common stock, or to request additional copies of the proxy statement or the enclosed proxy card, please contact our proxy solicitor at:

 

 

470 West Avenue

 

Stamford, Connecticut 06902

 

Shareholders Call Toll Free: 1-800-662-5200

 

Banks and Brokers Call Collect: 1-203-658-9400
E-mail: OMEinfo @morrowsodali.com

 

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE

STOCKHOLDER MEETING TO BE HELD ON DECEMBER 19 , 2017.

 

The Notice of Special Meeting, proxy statement and Omega’s 2016 Annual Report on Form 10-K and other filings
with the United States Securities and Exchange Commission are available at www.omegaprotein.com.

 

 

By Order of the Board of Directors of Omega,

 

John D. Held

Executive Vice President, General Counsel and Secretary

Houston , Texas

November 24, 2017

 

 

TABLE OF CONTENTS

 

Page

 

SUMMARY

1

The Parties to the Merger

1

Omega Protein Corporation

1

Cooke Inc.

1

Alpha MergerSub, Inc.

2

The Special Meeting

2

Date, Time and Place

2

Record Date, Stock Entitled to Vote and Quorum

2

Vote Required

2

The Merger

2

Description of the Merger

2

Reasons for the Merger and the Recommendation of The Omega Board

3

Opinion of Omega ’s Financial Advisor Regarding the Merger Consideration

4

Interests of Omega ’s Executive Officers and Directors in the Merger

5

Regulatory Matters

5

U.S. Antitrust Approval

5

Foreign Antitrust Approval

5

MARAD

6

Judgments and Probation Conditions

6

FAA and FCC Approvals

6

No Appraisal Rights

6

Financing of the Merger

6

Delisting and Deregistration of the Common Stock

6

Material U.S. Federal Income Tax Consequences of the Merger

6

Litigation Relating to the Merger

7

The Merger Agreement

7

When the Merger Becomes Effective

7

Treatment of Equity Awards

7

Omega Options

7

Restricted Stock

8

No Solicitation

8

Change of Recommendation

9

Conditions to Completion of the Merger

9

Termination

10

Termination Fees and Expenses

11

Omega Termination Fee

11

Cooke Regulatory Termination Fee

11

Market Price of Our Common Stock

12

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING

13

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

20

THE PARTIES TO THE MERGER

21

THE SPECIAL MEETING

23

Date, Time and Place

23

Purpose of Special Meeting

23

Record Date, Stock Ent itled to Vote and Quorum

23

Vote Required

23

Voting of Proxies

24

Revocability of Proxies

24

Delivery of Proxy Materials to Households Where Two or More Omega Stockholders Reside

25

Solicitation of Proxies

25

Adjournment

25

Stock Certificates

25

Questions and Additional Information

26

 

 

THE MERGER

27

Description of the Merger

27

Background of the Merger

27

2015-2016 Initial Strategic Review

27

2017 Review of Human Nutrition Business and the Merger

28

Reasons for the Merger and the Recommendation of The Omega Board

34

Opinion of Omega ’s Financial Advisor Regarding the Merger Consideration

38

Unaudited Financial Projections of Omega

43

Interests of Omega ’s Executive Officers and Directors in the Merger

45

Consideration Payable for Shares Held Pursuant to the Merger Agreement

45

Treatment of Outstanding Equity and Long-Term Incentive Awards

45

Non-Employee Director Equity Awards

47

Co mpensation and Benefits Arrangements Post-Closing

47

2017 Annual Bonus

48

Severance Arrangements

48

Retention Awards

49

Information for Advisory Vote on Merger-Related Compensation for Our Named Executive Officers

50

Omega Board of Directors and Management Following the Merger

51

Indemnification and Insurance

51

Regulatory Matters

52

U.S. Antitrust Approval

52

Foreign Antitrust Approval

52

MARAD

52

Judgments and Probation Conditions

52

FAA and FCC Approvals

53

Other Regulatory Approvals

53

General

53

No Appraisal Rights

53

Financing of the Merger

53

Debt Commitment Letter

54

DNB Credit Facility

54

Delisting and Deregistration of the Common Stock

54

Accounting Treatment

54

Material U.S. Federal Income Tax Consequences of the Merger

54

U.S. Holders

55

Non-U.S. Holders

55

Information Reporting and Backup Withholding

56

Litigation Relating to the Merger

56

THE MERGER AGREEMENT

57

General

57

Explanatory Note

57

Structure of the Merger

57

Articles of Incorporation and Bylaws

57

Directors and Officers

58

When the Merger Becomes Effective

58

Effect of the Merger on the Common Stock

58

Treatment of Equity Awards

58

Payment of the Merger Consideration

59

Representations and Warranties; Material Adverse Effect

60

Conduct of Business Pending the Merger

62

No Solicitation

64

Change of Recommendation

66

MARAD

67

Reasonable Best Efforts

67

 

 

The Special Meeting

68

Employee Matters

68

Indemnification and Insurance

69

Stockholder Litigation

69

Compliance with Judgments

70

Financing

70

Financing Assistance from Omega

71

Directors

73

Other Covenants and Agreements

73

Conditions to Completion of the Merger

73

Mutual Conditions

73

Additional Conditions for Cooke and Merger Sub

73

Additional Conditions for Omega

74

Termination

74

Termination Fees and Expenses

74

Omega Termination Fee

74

Cooke Regulatory Termination Fee

75

Expenses

75

Other Remedies

75

Amendment, Extension and Waiver

76

Governing Law

76

THE MERGER PROPOSAL 77

NON-BINDING PROPOSAL ON COMPENSATION RELATED TO THE MERGER

78

ADJOURNMENT PROPOSAL

79

MARKET PRICE OF OUR COMMON STOCK

80

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

81

Security Ownership of Directors and Executive Officers

81

Security Ownership of Certain Beneficial Owners

82

STOCKHOLDER PROPOSALS

83

OTHER MATTERS

84

WHERE YOU CAN FIND MORE INFORMATION

85

MULTIPLE STOCKHOLDERS SHARING ONE ADDRESS

86

   
   
   

ANNEX A —CERTAIN DEFINED TERMS

A-1

ANNEX B —THE MERGER AGREEMENT

B-1

ANNEX C —FAIRNESS OPINION

C-1

ANNEX D—ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 2016

D-1

ANNEX E—QUARTERLY REPORT ON FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31, 2017

E-1

ANNEX F—QUARTERLY REPORT ON FORM 10-Q FOR THE THREE MONTHS ENDED JUNE 30, 2017

F-1

ANNEX G—QUARTERLY REPORT ON FORM 10-Q FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2017

G-1

 

 

SUMMARY

 

The following summary highlights selected information in this proxy statement and may not contain all the information that may be important to you. Accordingly, we encourage you to read carefully this entire proxy statement, its annexes and the documents referred to or incorporated by reference in this proxy statement. You may obtain the information incorporated by reference in this proxy statement at no charge by following the instructions under the section entitled “Where You Can Find More Information.” Where appropriate, we have set forth a section and page reference directing you to a more complete description of the topics described in this summary.

 

Unless indicated otherwise or the context otherwise requires, references in this proxy statement to "Omega," "us," "we," "our" or "ours" refer to Omega Protein Corporation. This proxy statement also includes certain defined terms, which are defined in "Annex  A : Certain Defined Terms ."

 

The Parties to the Merger

 

(Page 21 )

 

Omega Protein Corporation

 

Omega is a nutritional products company incorporated in Nevada that develops, produces and delivers nutrition products throughout the world to improve the nutritional integrity of foods, dietary supplements and animal feeds. Omega operates in two primary industry segments: animal nutrition and human nutrition. Omega’s animal nutrition segment is comprised primarily of two subsidiaries: Omega Protein, Inc. (“OPI”) and Omega Shipyard, Inc. (“Omega Shipyard”). OPI, our principal operating subsidiary, is predominantly dedicated to the production of animal nutrition products and operates in the menhaden harvesting and processing business and is the successor to a business conducted since 1913. A portion of OPI’s production is transferred to Omega’s human nutrition business. Omega Shipyard owns and operates a dry-dock facility in Moss Point, Mississippi that is used to provide shore side maintenance for OPI’s fishing fleet. The human nutrition business operates under the “tera’s ® ” branded product and “Bioriginal” names. Bioriginal has three primary product lines: specialty oils, protein products and other nutraceutical ingredients. Bioriginal is comprised primarily of three subsidiaries: Bioriginal Food & Science Corp. (“Bioriginal Food & Science”), Wisconsin Specialty Protein, L.L.C. (“WSP”) and Cyvex Nutrition, Inc. (“Cyvex”). Bioriginal Food & Science, acquired by Omega in September 2014 and headquartered in Saskatoon, Canada with additional operations in the Netherlands, is a supplier of plant and marine based specialty oils to the food and nutraceutical industries. WSP, acquired by Omega in 2013, is a manufacturer and marketer of specialty dairy proteins and other related products headquartered in Madison, Wisconsin and operates a production facility in Reedsburg, Wisconsin. Cyvex, acquired by Omega in 2010, is located in Irvine, California and is an ingredient supplier for the food and nutraceutical industries. Omega’s Common Stock is listed on the NYSE under the symbol “OME.” Omega’s principal executive office is located at 2105 City West Blvd., Suite 500, Houston, Texas 77042 and the telephone number of its principal executive office is 713-623-0600.

 

Cooke Inc.  

 

Cooke is a corporation incorporated under the laws of the Province of New Brunswick, Canada. Cooke is the sole shareholder of Cooke Aquaculture Inc. (“Cooke Aquaculture”), a vertically-integrated aquaculture corporation based in Saint John, New Brunswick, Canada with salmon farming operations carried on through its wholly owned subsidiaries in the U.S. (off the coasts of Maine and Washington), Chile and Scotland, as well as seabass and seabream farming operations in Spain. Cooke Aquaculture also manages the salmon farming operations of its affiliate Kelly Cove Salmon Ltd., which are located in Atlantic Canada (New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island). Members of the founding Cooke family, who collectively are the ultimate beneficial owners of all of the shares of Cooke, also have significant investments in wild fisheries globally through their ownership of Cooke Seafood USA, Inc. (“Cooke Seafood”) and Icicle Seafoods, Inc. (“Icicle”). Cooke’s principal executive office is located at 40 Wellington Row, Saint John, NB, Canada, E2L 3H3, and the telephone number of its principal executive office is 506-694-4900.

 

 

Alpha MergerSub, Inc.

 

Merger S ub is a Nevada corporation. The sole stockholder of Merger Sub is Alpha HoldCo, Inc., a Delaware corporation that is an indirect, wholly-owned subsidiary of Cooke. Merger Sub was formed solely for the purpose of entering into the merger agreement and consummating the transactions contemplated by the merger agreement, and has not engaged in any business except for activities incidental to its formation and as contemplated by the merger agreement. At the effective time of the merger, Merger Sub will be merged with and into Omega and will cease to exist and Omega will continue as the surviving corporation. Merger Sub’s principal executive office is located at 40 Wellington Row, Saint John, NB, Canada, E2L 3H3 and the telephone number of its principal executive office is 506-694-4900.

 

The Special Meeting

 

Date, Time and Place

 

(Page 23 )

 

A special meeting of our stockholders will be held on December 19 , 2017, at 9 a.m., Central Time, at First City Tower, 1001 Fannin St., Suite 2500, Houston, Texas 77002, to consider and vote upon a proposal to adopt and approve the merger agreement (the “merger proposal”). You will also be asked to consider and vote upon an advisory, non-binding proposal regarding compensation that will or may become payable to Omega’s named executive officers (the “advisory, non-binding compensation proposal”) as well as a proposal to approve the adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger proposal (the “adjournment proposal”).

 

Record Date, Stock Entitled to Vote and Quorum

 

(Page 23 )

 

You are entitled to vote at the special meeting if you owned shares of Common Stock at the close of business on  November 24, 2017, the record date for the special meeting. You will have one vote at the special meeting for each share of Common Stock you owned at the close of business on the record date. As of the record date, there were 22,478,928 shares of Common Stock outstanding held by approximately 29 holders of record. The holders of a majority of the issued and outstanding shares of Common Stock that are entitled to vote at the special meeting must be present in person or represented by proxy at the special meeting for a quorum to be present.

 

Vote Required

 

(Page 23 )

 

Approval of the merger proposal requires the affirmative vote of holders of at least a majority of the outstanding shares of Common Stock entitled to vote at the special meeting. The advisory, non-binding compensation proposal requires the affirmative vote of a majority of the shares of Common Stock present in person or represented by proxy at the special meeting and entitled to vote. The adjournment proposal requires the affirmative vote of a majority of the shares of Common Stock present in person or represented by proxy at the special meeting and entitled to vote.

 

The Merger

 

Description of the Merger

 

(Page 27 )

 

If the merger agreement is approved and adopted by Omega’s stockholders, then, subject to other closing conditions as described below in the section captioned “The Merger Agreement—Conditions to Completion of the Merger,” Merger Sub will be merged with and into Omega, with Omega as the surviving corporation in the merger. Upon completion of the merger, Omega will become a wholly owned subsidiary of Cooke. We strongly encourage you to read carefully the merger agreement in its entirety, a copy of which is attached as Annex B to this proxy statement, because it is the contract that governs the merger.

 

 

If the merger is completed, at the effective time of the merger (i) each outstanding share of Common Stock will automatically be cancelled and converted into the right to receive the merger consideration, (ii) each outstanding Omega Option will become fully exercisable and will be converted into the right to receive the option consideration and (iii) the restrictions applicable to each share of Omega Restricted Stock will immediately lapse and each such share of Omega Restricted Stock will be converted into the right to receive the merger consideration. The merger consideration and option consideration will be paid without interest. Receipt of the merger consideration and option consideration in exchange for shares of our Common Stock pursuant to the merger generally will be a taxable transaction for U.S. federal income tax purposes.

 

Reasons for t he Merger and the Recommendation of The Omega Board

 

(Page 34 )

 

At a meeting of our board of directors (the “Omega Board”) held on October 5, 2017, the Omega Board approved, adopted, declared advisable and authorized in all respects the merger agreement and the transactions contemplated thereby, including the merger. The Omega Board unanimously recommends that the stockholders of Omega vote “FOR the approval of the merger, the merger agreement and all other actions or matters necessary or desirable to give effect to the merger and merger agreement pursuant to the NRS. In the course of reaching its decision, the Omega Board consulted with our senior management and our financial and legal advisors, reviewed a significant amount of information and considered a number of factors, including, among others:

 

 

the fact that the $ 22.00 per share in cash to be paid as merger consideration represented a 32.9% premium to $16.55, the closing price of Common Stock on October 4, 2017, the last trading day prior to the approval of the merger by the Omega Board, and the belief of the Omega Board that the $22.00 per share in cash to be paid as the merger consideration was the highest price per share that Cooke was willing to agree to pay and that the merger consideration would be paid solely in cash without a financing contingency;

 

 

information with respect to our financial condition, results of operations, business, competitive position and business strategy on both a historical and prospective basis, current industry, economic and market conditions and trends as well as the potential future value of Omega, as compared to the value of the merger consideration;

 

 

the oral opinion of J.P. Morgan, delivered to the Omega Board, which was confirmed by delivery of a written opinion dated October 5, 2017, to the effect that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing the opinion, the merger consideration to be paid to the holders of Common Stock in the proposed merger was fair, from a financial point of view, to such stockholders, as more fully described below under the caption “The Merger —Opinion of Omega’s Financial Advisor Regarding the Merger Consideration ” beginning on page 38 of this proxy statement. The full text of the written opinion of J.P. Morgan, dated October 5, 2017, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken in rendering the opinion, is attached as Annex C to this proxy statement;

 

 

the business reputation and capabilities of Cooke and its management, Cooke’s experience executing acquisitions and its commitment to its growth strategy, the resources available to Cooke to complete the merger and the commercial incentives of Cooke to timely obtain all necessary regulatory approvals and complete the merger;

 

 

the terms of the Debt Commitment Letter and DNB Credit Facility provided to Cooke in connection with the merger and the commitments of Cooke to make the proceeds of the Debt Commitment Letter and DNB Credit Facility available to fund the merger consideration, together with the financial capabilities and reputation of the financing sources;

 

 

 

the likelihood that the merger would be completed in light of, among other things, the conditions to the merger and the absence of a financing condition, the absence of any condition related to the receipt of third party c ommercial consents or approvals and the relative likelihood of obtaining required regulatory approvals;

 

 

Cooke ’s representation that it will have sufficient financial resources to pay the merger consideration and the option consideration and consummate the merger and the remedies available to us under the merger agreement in the event of various breaches by Cooke or the failure to obtain required regulatory approvals;

 

 

the current state of the economy, debt financing markets, political climate and general uncertainty surrounding forecasted economic and political conditions, both in the near term and the longer term, and both generally and within our industry;

 

 

the risk that the announcement and pendency of the merger, including the restrictions on the conduct of our business, may cause harm to relationships with our employees, agents, customers and partners and may divert management and employee attention away from the day-to-day operation of our business;

 

 

the fact that there can be no assurance that all conditions to the parties ’ obligations to consummate the merger will be satisfied, and, as a result, the possibility necessary regulatory approvals may be delayed, conditioned or denied and that the merger might not be consummated, and further noted that these risks may be heightened due to the requirement for MARAD Approval and antitrust approvals;

 

 

the risk that, while the merger agreement is not by its terms subject to a financing condition, if Cooke fails to obtain sufficient financing (notwithstanding the terms of the Debt Commitment Letter and DNB Credit Facility), the merger may not be consummated; and

 

 

the fact that Omega will no longer exist as an independent public company and Omega’s stockholders will forego any future increase in Omega’s value that might result from our earnings or possible growth.

 

In the course of its deliberations, the Omega Board also considered a number of additional potentially positive factors and a number of additional potentially negative factors regarding the merger, as more fully described in the section entitled “The Merger—Reasons for the Merger and the Recommendation of The Omega Board.” The Omega Board concluded that, overall, the potentially positive factors outweighed the potentially negative factors. Accordingly, the Omega Board approved, adopted, declared advisable and authorized in all respects the merger agreement and the transactions contemplated thereby, including the merger.

 

Opinion of Omega’s Financial Advisor Regarding the Merger Consideration

 

(Page 38 )

 

Omega retained J.P. Morgan to act as financial advisor to the Omega Board in connection with the proposed merger. At the meeting of the Omega Board on October 5, 2017, J.P. Morgan rendered its oral opinion to the Omega Board that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing the opinion, the merger consideration to be paid to the holders of the Common Stock in the proposed merger was fair, from a financial point of view, to such stockholders. J.P. Morgan confirmed this oral opinion by delivering its written opinion to the Omega Board, dated October 5, 2017.

 

The full text of the written opinion of J.P. Morgan dated October 5, 2017, which sets forth the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing the opinion, is attached as Annex C to this proxy statement and is incorporated herein by reference. Omega ’s stockholders are urged to read the opinion in its entirety. J.P. Morgan’s written opinion was addressed to the Omega Board (in its capacity as such) in connection with and for the purposes of its evaluation of the proposed merger, was directed only to the merger consideration to be paid in the proposed merger and did not address any other aspect of the proposed merger. The opinion does not constitute a recommendation to any stockholder of Omega as to how such stockholder should vote with respect to the proposed merger or any other matter. For a description of the opinion that the Omega Board received from J.P. Morgan, see “ The Merger—O pinion of Omega’s Financial Advisor Regarding the Merger Consideration ” beginning on page 38 of this proxy statement.

 

 

Interests of Omega’s Executive Officers and Directors in the Merger

 

(Page 45 )

 

In considering the recommendation of the Omega Board with respect to the merger agreement and the merger, you should be aware that our executive officers and directors have interests in the merger that may be different from, or in addition to, the interests of our stockholders generally. Interests of directors and executive officers that may be different from or in addition to the interests of Omega’s stockholders generally include:

 

 

The merger agreement provides for the conversion of all Omega Options, including Omega Options held by Bret D. Scholtes and certain directors with exercise prices less than the $22.00 per share merger consideration, into the right to receive the option consideration;

 

 

The merger agreement also provides that the restrictions applicable to each share of Omega Restricted Stock granted under Omega’s equity plans, including shares of Omega Restricted Stock held by our executive officers at the effective time of the merger, will immediately lapse and each share will be converted into the right to receive the merger consideration;

 

 

The merger agreement further provides that all amounts owed pursuant to outstanding Performance Units (as defined below), including Performance Units held by our executive officers, will be accelerated and due as of the effective time of the merger in accordance with the terms of the applicable plan;

 

 

Possible cash payments and other benefits payable under award agreements and/or employment agreements with our executive officers either upon the consummation of the merger or in the event of a qualifying termination of employment following the merger; and

 

 

Requirements to provide i ndemnification and insurance for our directors and executive officers by the surviving corporation following the merger.

 

The Omega Board was aware of and considered these interests, among other matters, in making its determinations and recommendations in connection with the merger agreement and the transactions contemplated thereby, including the merger.

 

Regulatory Matters

 

(Page 52 )

 

U.S. Antitrust Approval

 

Under the HSR Act, we cannot complete the merger until we and Cooke give notification and furnish information to the Federal Trade Commission and the Antitrust Division of the Department of Justice and until the applicable waiting period expires or is terminated. On October 19, 2017, we and Cooke each filed a premerger notification and report form under the HSR Act. On October 30, 2017, U.S. antitrust authorities notified Omega and Cooke that early termination of the waiting period under the HSR Act had been granted.

 

Foreign Antitrust A pproval

 

C onsummation of the transactions contemplated by the merger agreement, including the merger, will require filings and approvals pursuant to Germany’s Act against Restraints of Competition and filings pursuant to Canada’s Competition Act. We and Cooke submitted the requisite filings in Canada and Germany on October 27, 2017. We obtained approval from the German competition authorities on November 22, 2017.

 

 

MARAD

 

C onsummation of the transactions contemplated by the merger agreement, including the merger, will require the approval of MARAD. Omega has agreed to reasonably assist Cooke in the preparation for the sale of certain or all of the MARAD Assets (including by transferring such MARAD Assets and FAA Assets identified by Cooke and related employees to the MARAD Subsidiary) pursuant to the MARAD Sale Agreement. Additionally, each of Omega and Cooke has agreed to comply in all material respects with all of its obligations under the MARAD Sale Agreement, and each of Cooke and Merger Sub has agreed to use its reasonable best efforts to do all things necessary, proper or advisable to obtain the approval of MARAD, including causing its affiliates to enter into the Fish Supply Agreement and the Stockholder Agreement on or prior to the closing date of the merger.

 

Judgments and Probation Conditions

 

Consummation of the transactions contemplated by the merger agreement, including the merger, will require OPI to notify and obtain permission of its Probation Officer required as part of its obligations to sell, assign or transfer assets (including the affected marine vessels) that are subject to the Judgments and Probation Conditions.   On November 15, 2017, OPI's probation officer notified OPI that she would not have any objection to the transactions contemplated by the merger agreement and OPI intends to file an appropriate notice with the relevant courts prior to the consummation of the merger.

 

FAA and FCC Approvals

 

Consummation of the transactions contemplated by the merger agreement and the MARAD Sale Agreement, including the transfer of certain radio licenses and spotter aircraft from OPI, will require the consent of the FAA and the FCC.

 

No Appraisal Rights

 

(Page 53 )

 

Pursuant to Section 92A.390 of the NRS, no holder of any shares of Common Stock will have or will be entitled to assert dissenter ’s rights or any rights of appraisal as a result of or in connection with the merger agreement and the transactions contemplated thereby, including the merger.

 

Financing of the Merger

 

(Page 53 )

 

The obligation of Cooke and Merger Sub to complete the merger is not conditioned upon Cooke obtaining financing. The total amount of funds necessary to consummate the merger and the related transactions will be funded by Cooke, including the funds needed to (i) pay our stockholders the aggregate merger consideration due to them under the merger agreement; (ii) pay the option consideration; and (iii) pay fees and expenses payable by Cooke and Merger Sub under the merger agreement and in connection with the debt financing described in the sectio n entitled “The Merger—Financing of the Merger.” Cooke estimates that the total amount of funds necessary to complete the merger and the related transactions will be approximately $525 million. 

 

Delisting and Deregistration of the Common Stock

 

(Page 54 )

 

If the merger is completed, the Common Stock will no longer be traded on the NYSE and will be delisted and deregistered under the Exchange Act.

 

Material U.S. Federal Income Tax Consequences of the Merger

 

(Page 54 )

 

The merger will be a taxable transaction for U.S. federal income tax purposes. Therefore, a U.S. Holder (as defined in the section entitled “The Merger —Material U.S. Federal Income Tax Consequences of the Merger”) generally will recognize capital gain or loss equal to the difference, if any, between the sum of any cash received by such U.S. Holder in the merger and such U.S. Holder’s adjusted tax basis in our Common Stock.

 

Except in certain specific circumstances described in “The Merger —Material U.S. Federal Income Tax Consequences of the Merger”, a Non-U.S. Holder (as defined in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”) generally will not be subject to U.S. federal income or withholding taxes on any gain recognized on the exchange of our Common Stock for any cash in the merger.

 

 

The tax consequences of the merger to you will depend on your particular circumstances, and you should consult your own tax advisors to determine how the merger will affect you. For a more detailed summary of the tax consequences of the merger, see the section entitled “The Merger —Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 54 of this proxy statement.

 

Litigation Relating to the Merger

 

(Page 56 )

 

Four putative class action lawsuits related to the merger have been filed against Omega, one of Omega ’s officers and seven of Omega’s directors. Omega believes the allegations in these complaints are without merit. See “ The Merger—Litigation Relating to the Merger.

 

The Merger Agreement

 

When the Merger Becomes Effective

 

(Page 58 )

 

The merger agreement provides that the completion of the merger of Merger Sub with an d into Omega will take place no later than the third business day after the satisfaction (or waiver) of the last to occur of the conditions to the completion of the merger (as described below), other than any such conditions which by their nature can only be satisfied at closing, which will be required to be satisfied (or waived) at that time; provided, however, that if the Marketing Period has not ended at least two business days prior to the date on which the closing would otherwise occur, the closing will instead occur on the earliest of:

 

 

a date specified by Cooke during the Marketing Period that is a business day on no fewer than two business days’ notice of such date from Cooke to Omega;

 

 

the second business d ay immediately following the last day of the Marketing Period; and

 

 

February 8, 2018 , which is the second business day prior to February 11, 2018 (the “Outside Date”) (in each case subject to the satisfaction or waiver of each of the conditions to the completion of the merger (other than any such conditions which by their nature can only be satisfied at closing, which are required to be so satisfied (or waived) at that time)).

 

The Marketing Period is a fifteen (15) consecutive business day period (subject to certain blackout dates) that will commence upon the receipt of certain specified required information by the lead arranger named in the Debt Commitment Letter, BMO Capital Markets Corp. (the “Lead Arranger”), subject to certain conditions.

 

We are working to complete the merger as promptly as practicable. Assuming timely satisfaction of necessary closing conditions set forth in the merger agreement, we anticipate that the merger will be completed by the end of 2017 or the first quarter of 2018. However, we cannot assure completion of the merger by any particular date, if at all.

 

Treatment of Equity Awards

 

(Page 58 )

 

Omega Options

 

The merger agreement provides that , at the effective time of the merger, each outstanding Omega Option will become fully exercisable (if not then fully exercisable) and will thereafter represent only the right to receive, upon delivery of an option surrender agreement in the form attached to the merger agreement (an “option surrender agreement”), the option consideration.

 

 

Restricted Stock  

 

Pursuant to the terms of the merger agreement, immediately prior to the effective time of the merger , the restrictions applicable to each share of Omega Restricted Stock will immediately lapse, and, at the effective time of the merger, each share of Omega Restricted Stock will be converted into the right to receive the merger consideration.

 

No Solicitation

 

(Page 64 )

 

Pursuant to the merger agreement, we have agreed not to:

 

 

solicit, initiate or knowingly facilitate or encourage the submission of an Acquisition Proposal or inquiries or proposals that could reasonably be expected to lead to an Acquisition Proposal (as defined in “The Merger Agreement—No Solicitation”);

 

 

enter into or participate in any substantive discuss ions or negotiations with, any third party regarding any Acquisition Proposal or any inquiries or proposals that could reasonably be expected to lead to an Acquisition Proposal;

 

 

furnish any confidential information or access to the properties, books, records or personnel of Omega or any subsidiary of Omega to any third party that has made, or informs Omega that it is considering making, an Acquisition Proposal; or

 

 

enter into any letter of intent, memorandum of understanding, merger agreement, asset or stock purchase or other acquisition agreement or other contract or agreement (other than a confidentiality agreement as contemplated by the merger agreement) relating to an Acquisition Proposal or requiring Omega to abandon or terminate its obligations under the merger agreement.

 

Notwithstanding the provisions of the merger agreement described above, at any time prior to obtaining the Omega Stockholder Approval, in response to (i) an Acquisition Proposal that the Omega Board determines in good faith constitutes, or could reasonably be expected to lead to, a Superior Proposal (as defined in “The Merger Agreement—No Solicitation”), or (ii) an inquiry relating to an Acquisition Proposal by a third party that the Omega Board determines in good faith is credible and reasonably capable of making a Superior Proposal (an “Inquiry”), Omega, directly or indirectly through its representatives may:

 

 

engage in negotiations or discussions with such third party and its representatives ; and

 

 

furnish to such third party or its representatives information relating to Omega or any subsidiary of Omega and access to the properties, books, records or personnel of Omega and its subsidiaries, in each case, pursuant to an Acceptable Confidentiality Agreement (as defined in the merger agreement).

 

W ithout any determination of the Omega Board as set forth in the preceding two bullets, Omega, directly or indirectly through its representatives, may have discussions with any third party that has made an Acquisition Proposal or Inquiry solely in order to clarify and understand the terms and conditions of such Acquisition Proposal or Inquiry and the ability of such third party to consummate a Superior Proposal. Omega must make available to Cooke any material information relating to Omega or its subsidiaries that is made available to such third party which was not previously made available to Cooke at substantially the same time it is made available to such third party.

 

 

Change of Recommendation

 

(Page 66 )

 

Pursuant to the merger agreement, neither the Omega Board nor any committee thereof may (i) withdraw, modify or qualify, or propose publicly to withdraw, modify or qualify, in a manner adverse to Cooke, the recommendation by the Omega Board of the merger agreement to Omega ’s stockholders or (ii) approve, endorse or recommend, or publicly propose to approve, endorse or recommend any Acquisition Proposal (each such action, an “Adverse Recommendation Change”). Notwithstanding the foregoing restriction, the Omega Board or any committee thereof may, (a) in response to a Superior Proposal, make an Adverse Recommendation Change or terminate the merger agreement pursuant to the Superior Proposal termination right, or (b) in response to an Intervening Event (as defined in “The Merger Agreement—Change of Recommendation”), make an Adverse Recommendation Change if the Omega Board has determined in good faith, after consultation with its legal counsel, that failure to make an Adverse Recommendation Change in response to such Intervening Event would reasonably be expected to be inconsistent with its fiduciary duties under applicable law, in each of (a) and (b), subject to the satisfaction of certain conditions described in “The Merger Agreement—Change of Recommendation.”

 

Conditions to Completion of the Merger

 

(Page 73 )

 

The respective obligations of Omega , Cooke and Merger Sub to complete the merger are subject to the satisfaction or waiver of certain conditions, including, but not limited to:

 

 

the Omega Stockholder Approval;

 

 

the waiting period applicable to the consummation of the merger pursuant to the premerger notification rules under the HSR Act has expired or been terminated (on October 30, 2017, U.S. antitrust authorities notified Omega and Cooke that early termination of the waiting period under the HSR Act had been granted); and all other consents, approvals, permits and authorizations required to be obtained prior to the effective time of the merger from any governmental authority have been obtained, or any applicable waiting period has expired or been terminated (the “approvals condition”);

 

 

no governmental authority has issued any order or other action (whether temporary, preliminary or permanent) restraining, enjoining or otherwise prohibiting the consummation of the merger and no applicable law has been adopted that makes consummation of the merger illegal or otherwise prohibited (the “no injunctions or restraints condition”); and

 

 

representations and warranties of the other party or parties to the merger agreement (subject to specified materiality, material adverse effect and other qualifications) are true and correct when made and as of immediately prior to the effective time of the merger as if made at and as of such time (the “representations and warranties condition”).

 

The obligations of Cooke and Merger Sub to complete the merger are subject to the satisfaction or waiver of certain additional conditions, including, but not limited to:

 

 

Omega has performed or complied in all material respects with its obligations required to be performed by it under the MARAD Sale Agreement, including consummation of the transfer of the MARAD Assets to VesselCo Holdings, provided all conditions to closing under such agreement to be performed by VesselCo Holdings have been met or waived and VesselCo Holdings has performed or complied with all of its obligations under the MARAD Sale Agreement required to be performed by it (the “MARAD performance condition”);

 

 

Omega has performed or complied in all material respects with all other obligations required to be performed by it under the merger agreement at or prior to the effective time of the merger (the “Omega performance condition”);

 

 

since the date of the merger agreement, there has not occurred any change or event that has had, individually or in the aggregate, an Omega Material Adverse Effect (as defined in “The Merger Agreement—Representations and Warranties; Material Adverse Effect”) (the “Omega MAE condition”); and

 

 

Omega has provided to Cooke (i) a certification in the form set out in the schedules to the merger agreement, dated as of the closing of the merger, signed by an officer of Omega to the effect that the shares of Omega are not “United States real property interests” within the meaning of Section 897 of the Code and (ii) an executed notice to the Internal Revenue Services (the “IRS”) as contemplated by Treasury Regulation Sections 1.897-2(h) and 1.1445-2(c).

 

 

The obligations of Omega to complete the merger are subject to the satisfaction or waiver of certain additional conditions, including, but not limited to:

 

 

Each of Cooke and Merger Sub has performed or complied in all material respects with all obligations required to be performed by it under the merger agreement at or prior to the effective time thereof (the “Cooke performance condition”); and

 

 

Cook e has deposited in the designated payment fund cash in an amount sufficient to permit payment of the aggregate merger consideration and option consideration (the “payment fund condition”).

 

Termination

 

(Page 74 )

 

The merger agreement may be terminated at any time prior to the effective time of the merger (subject to certain limitations):

 

 

by mutual written consent of Cooke and Omega;

 

 

by either Cooke or Omega, if:

 

 

the merger is not consummated on or before the Outside Date, February 11, 2018 (such right, the “Outside Date termination right”), subject to specified limitations, including the right of Cooke to extend the Outside Date by up to 60 days in order to obtain MARAD Approval if all other conditions to the closing of the Merger have been met (or waived, if permitted by law) and the Omega Board determines that there exists an objectively reasonable probability that MARAD Approval will be obtained and the merger will be consummated within such period;

 

 

any governmental authority has issued any order or taken any other action permanently restraining, enjoining or otherwise prohibiting the consummation of the merger and such order or other action has become final and non-appealable or there has been adopted any applicable law that makes consummation of the merger illegal or otherwise prohibited (the “injunction termination right”); or

 

 

the special meeting has concluded without the Omega Stockholder Approval having been obtained (the “adverse stockholder vote termination right”).

 

 

by Cooke:

 

 

within five business days after an Adverse Recommendation Change has occurred (the “change of recommendation termination right”);

 

 

in the event of a breach by Omega (an “Omega terminable breach”) of any representation, warranty, covenant or other agreement contained in the merger agreement which (i) would give rise to the failure of the representations and warranties condition, the MARAD performance condition or the Omega performance condition and (ii) cannot be or has not been cured by the earlier of thirty days after the giving of notice of such breach to Omega and the Outside Date (the “Omega breach termination right”).

 

 

by Omega:

 

 

if Omega ’s board of directors determines to enter into a letter of intent, memorandum of understanding or definitive agreement for a Superior Proposal (the “Superior Proposal termination right”);

 

 

 

in the event of a breach by Cooke or Merger Sub of any representation, warranty, covenant or other agreement contained in the merger agreement which (i) would give rise to the failure of the representations and warranties condition or the Cooke performance condition and (ii) cannot be or has not been cured by the earlier of thirty days after the giving of notice to Cooke of such breach and the Outside Date (the “Cooke breach termination right”); or

 

 

if (A) the conditions to the merger have been satisfied (other than any such conditions that by their nature can only be satisfied at closing, which are required to be so satisfied or (to the extent permitted by applicable law) waived), and (B) the closing has not been consummated within three business days after the delivery of notice to Cooke that the conditions to the merger have been satisfied (the “failure to close termination right”).

 

Termination Fees and Expenses

 

(Page 74 )

 

Omega Termination Fee

 

Omega is required to pay Cooke a termination fee of $20 million if the merger agreement is terminated:

 

 

by Cooke pursuant to its change of recommendation termination right or by Omega pursuant to its Superior Proposal termination right; or

 

 

by Cooke or Omega pursuant to the adverse stockholder vote termination right or by Cooke for an Omega terminable breach of the non-solicitation covenants contained in the merger agreement;

 

 

after the date of the merger agreement and prior to the special meeting or such termination, as applicable, an Acquisition Proposal was publicly announced or otherwise communicated to the Omega stockholders and not withdrawn (i) in the case of termination pursuant to the adverse stockholder vote termination right, prior to the special meeting or (ii) in the case of termination for an Omega terminable breach of the non-solicitation covenants contained in the merger agreement, prior to the date of termination (provided that for purposes of such clause, all references to “20%” in the definition of “Acquisition Proposal” will be deemed to be references to “50%”); and

 

 

within 12 months following the date of such termination, Omega enters into a definitive agreement with respect to such Acquisition Proposal.

 

Cooke Regulatory Termination Fee

 

Cooke is required to pay Omega a regulatory termination fee of $20 million if the merger agreement is terminated by either Cooke or Omega pursuant to:

 

 

the Outside Date termination right and, at the time of such termination, any of the conditions set forth in the approvals condition or the no injunctions or restraints condition (if, and only if, the applicable event giving rise to the failure of such condition to be satisfied arises in connection with clearance under HSR, any foreign antitrust laws or MARAD Approval), have not been satisfied; or

 

 

the injunction termination right (if, and only if, the applicable restraint or order giving rise to such termination arises in connection with HSR, any foreign antitrust laws, MARAD Approval or the Judgments and Probation Conditions).

 

Additionally, at the time of such termination pursuant to the Outside Date termination right or the injunction termination right, the conditions set forth in the no injunctions or restraints condition (other than those related to HSR, any foreign antitrust laws or MARAD Approval), the representations and warranties condition (with respect to Omega), the MARAD performance condition, the Omega performance condition and the Omega MAE condition (other than those conditions that by their nature can be satisfied only at the closing, but subject to such conditions being capable of being satisfied if the closing date of the merger were the date of such termination) must have been satisfied or waived in accordance with the merger agreement.

 

 

Market Price of Our Common Stock

 

(Page 80 )

 

Our Common Stock is listed on the NYSE under the symbol “ OME.” On October 4, 2017, the last trading day prior to the approval of the merger by the Omega Board, the Common Stock closed at $16.55. On November 22, 2017, the last practicable trading day prior to the date of this proxy statement, the Common Stock closed at $21.90. We encourage you to obtain a current market quotation for the Common Stock in connection with voting your shares but caution stockholders that, during the pendency of the merger, the trading price of the Common Stock may be impacted by the fact that we have entered into the merger agreement and investors’ speculating as to the likelihood and timing of the closing of the merger or the likelihood of a Superior Proposal.

 

 

QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING

 

The following questions and answers are intended to address briefly some commonly asked questions regarding the merger, the merger agreement and the special meeting. These questions and answers may not address all questions that may be important to you as a stockholder. Please refer to the “Summary” and the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to or incorporated by reference in this proxy statement, which you should read carefully. You may obtain the information incorporated by reference in this proxy statement without charge by following the instructions under the section entitled “Where You Can Find More Infor mation.”

 

Q:

What is the merger?

 

A:

The merger is the acquisition of Omega by Cooke pursuant to the merger agreement. Once the merger agreement has been approved and adopted by Omega’s stockholders and the other closing conditions under the merger agreement have been satisfied or waived, Merger Sub will merge with and into Omega. Omega will be the surviving corporation in the merger and will become a wholly owned subsidiary of Cooke.

 

Q:

Why am I receiving the proxy materials?

 

A:

You are receiving this proxy statement and the enclosed proxy card or enclosed voting instruction form because the Omega Board is soliciting your proxy to vote at the special meeting of Omega’s stockholders in connection with a proposal to adopt and approve the merger agreement. In addition, the Omega Board is soliciting your vote on the advisory, non-binding compensation proposal and the adjournment proposal.

 

Q:

What will I receive in the merger if I am an owner of Common Stock ?

 

A:

If the merger is completed, you will be entitled to receive $22.00, without interest and less any required withholding taxes, for each share of Common Stock that you own at the effective time of the merger. For example, if you own 100 shares of Common Stock, you will receive $2,200.00 in cash, less any required withholding taxes, in exchange for those shares. You will not receive any shares of capital stock in the surviving corporation.

 

Q:

How does the Omega Board recommend I vote?

 

A:

The Omega Board unanimously recommends that all of our stockholders vote “FOR” the approval and adoption of the merger proposal. The reasons for the Omega Board’s determination are discussed in this proxy statement. Additionally, the Omega Board unanimously recommends that you vote  FOR”  the advisory, non-binding compensation proposal and “FOR” the adjournment proposal.

 

Q:

What factors did the Omega Board consider in evaluating the merger agreement and the merger?

 

A:

In evaluating the merger agreement and the merger, the Omega Board consulted with our senior management team and outside legal and financial advisors and, in reaching its unanimous decision to approve the merger agreement and the merger and to recommend that our shareholders approve and adopt the merger agreement, the Omega Board considered a variety of factors, including positive factors and negative factors concerning the merger.

 

Some of the selected positive factors considered by the Omega Board included, among other things:

 

 

the fact that the $22.00 per share in cash to be paid as merger consideration represented a 32.9% premium to $16.55, the closing price of Common Stock on October 4, 2017, the last trading day prior to the approval of the merger by the Omega Board, and the belief of the Omega Board that the $22.00 per share in cash to be paid as the merger consideration was the highest price per share that Cooke was willing to agree to pay and that the merger consideration would be paid solely in cash without a financing contingency;

 

 

 

the oral opinion of J.P. Morgan, delivered to the Omega Board, which was confirmed by delivery of a written opinion dated October 5, 2017, to the effect that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing the opinion, the merger consideration to be paid to the holders of Common Stock in the proposed merger was fair, from a financial point of view, to such stockholders, as more fully described below under the caption “The Merger —Opinion of Omega’s Financial Advisor Regarding the Merger Consideration ” beginning on page 38 of this proxy statement;

 

 

the business reputation and capabilities of Cooke and its management, Cooke ’s experience executing acquisitions and its commitment to its growth strategy, the resources available to Cooke to complete the merger and the commercial incentives of Cooke to timely obtain all necessary regulatory approvals and complete the merger; and

 

 

the terms of the Debt Commitment Letter and DNB Credit Facility provided to Cooke in connection with the merger and the commitments of Cooke to make the proceeds of the Debt Commitment Letter and DNB Credit Facility available to fund the merger consideration, together with the financial capabilities and reputation of the financing sources.

 

Some of the negative factors considered by the Omega Board included, among other things:

 

 

the risk that the announcement and pendency of the merger, including the restrictions on the conduct of our business, may cause harm to relationships with our employees, agents, customers and partners and may divert management and employee attention away from the day-to-day operation of our business;

 

 

the fact that there can be no assurance that all conditions to the parties ’ obligations to consummate the merger will be satisfied, and, as a result, the possibility necessary regulatory approvals may be delayed, conditioned or denied and that the merger might not be consummated, and further noted that these risks may be heightened due to the requirement for MARAD Approval and antitrust approvals;

 

 

the risk that, while the merger agreement is not by its terms subject to a financing condition, if Cooke fails to obtain sufficient financing (notwithstanding the terms of the Debt Commitment Letter and DNB Credit Facility), the merger may not be consummated; and

 

 

the fact that Omega will no longer exist as an independent public company and Omega ’s stockholders will forego any future increase in Omega’s value that might result from our earnings or possible growth.

 

The above factors were not given greater weight than other factors considered by our board of directors. For a more detailed description of the factors considered by our board of directors when evaluating the merger agreement and the merger, which we encourage shareholders to read in their entirety, see  “The Merger—Reasons for the Merger and the Recommendation of the Omega Board” beginning on page 34.

 

After careful consideration of both positive and negative factors associated with the merger agreement and the merger, the Omega Board unanimously determined that, in the aggregate, the positive factors outweighed the negative factors.  Therefore, the Omega Board approved, adopted, declared advisable and authorized in all respects the merger agreement and the transactions contemplated thereby, including the merger.

 

Q:

Who will own Omega after the merger?

 

A:

After the merger, Omega will be an indirect wholly-owned subsidiary of Cooke. As a result of the receipt of cash in exchange for your shares of Common Stock following the merger, you will no longer benefit from any increase in Omega’s value, nor will you acquire an ownership interest in Cooke.

 

Q:

When do you expect the merger to be completed?

 

A:

We are working to complete the merger as soon as possible. The merger cannot be completed until each closing condition has been satisfied or, to the extent legally permitted, waived. While we cannot predict the exact timing of the closing of the merger or whether the merger will be consummated, assuming timely satisfaction of necessary closing conditions, we anticipate that the merger will be completed during the fourth quarter of 2017 or first quarter of 2018. If our stockholders vote to adopt and approve the merger agreement, the merger will become effective as promptly as practicable following the satisfaction or waiver of the other conditions to the merger, subject to certain extensions related to the Marketing Period as discussed in “The Merger Agreement—When the Merger Becomes Effective.” See the section entitled “The Merger Agreement—Conditions to Completion of the Merger” beginning on page 73 of this proxy statement.

 

 

Q:

What happens if the merger is not completed?

 

A:

If the merger agreement is not approved and adopted by our stockholders or if the merger is not completed for any other reason, our stockholders will not receive any payment for their shares of Common Stock. Instead, we will remain an independent public company and the Common Stock will continue to be listed and traded on the NYSE. Under specified circumstances, we may be required to pay to Cooke a fee, or Cooke may be required to pay us a fee, with respect to the termination of the merger agreement as described under the section entitled “The Merger Agreement—Termination Fees and Expenses” beginning on page 74 of this proxy statement.

 

Q:

What are the material U.S. federal income tax consequences of the merger to me?

 

A:

The merger will be a taxable transaction for U.S. federal income tax purposes. Therefore, a U.S. Holder (as defined in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”) generally will recognize capital gain or loss equal to the difference, if any, between the sum of any cash received by such U.S. Holder in the merger and such U.S. Holder’s adjusted tax basis in the Common Stock. Except in certain specific circumstances described in “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”, a Non-U.S. Holder (as defined in the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger”) generally will not be subject to U.S. federal income or withholding taxes on any gain recognized on the exchange of our Common Stock for any cash in the merger. The tax consequences of the merger to you will depend on your particular circumstances, and you should consult your own tax advisors to determine how the merger will affect you. For a more detailed summary of the tax consequences of the merger, see the section entitled “The Merger—Material U.S. Federal Income Tax Consequences of the Merger” beginning on page 54 of this proxy statement .

 

Q:

What will happen in the merger to stock options and restricted stock that have been granted to employees, officers and directors of Omega ?

 

A:

The merger agreement provides that each Omega Option will become exercisable at the effective time of the merger and be converted into the right to receive the option consideration and the restrictions applicable to each share of Omega Restricted Stock will immediately lapse at the effective time of the merger and be converted into the right to receive the merger consideration.

 

Q:

Do any of our directors or officers have interests in the merger that differ from or are in addition to my interests as a stockholder?

 

A:

Yes. In considering the recommendation of the Omega Board with respect to the approval and adoption of the merger agreement, you should be aware that our directors and executive officers have interests in the merger that are different from, or in addition to, the interests of our stockholders generally. The Omega Board was aware of and considered these interests, among other matters, in making its determinations and recommendations in connection with the merger agreement and the transactions contemplated thereby. See the section entitled “The Merger—Interests of Omega’s Executive Officers and Directors in the Merger” beginning on page 45 of this proxy statement.

 

Q:

When and where is the special meeting?

 

A:

The special meeting of our stockholders will be held on December 19, 2017, at 9 a.m. Central Time, at First City Tower, 1001 Fannin St., Suite 2500, Houston, TX 77002.

 

Q:

What vote is needed to adopt and approve the merger agreement?

 

A:

The affirmative vote of holders of at least a majority of the shares of our outstanding Common Stock as of the record date is required to adopt and approve the merger agreement.

 

 

Q:

Why are we asking that our stockholders approve, on an advisory, non-binding basis, certain compensation arrangements for our named executive officers?

 

A:

The SEC rules require that we provide our stockholders with the opportunity to vote on this proposal. However, approval of this proposal is not a condition to completion of the merger, and the vote with respect to this proposal is only an advisory vote by stockholders. Accordingly, the vote will not be binding on us or Cooke, the Omega Board or their board of directors or our compensation committee. If the merger is completed, the compensation that is the subject of the proposal will be paid to our named executive officers in accordance with the terms and conditions of their compensation agreements and arrangements even if our stockholders do not approve this proposal.

 

Q:

What vote is needed to approve the advisory, non-binding compensation proposal?

 

A:

The affirmative vote of a majority of the shares of Common Stock present in person or represented by proxy at the special meeting and entitled to vote is required to approve the advisory, non-binding compensation proposal.

 

Q:

Why are we asking that our stockholders approve the adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger proposal ?

 

A:

The SEC rules require that we provide our stockholders with the opportunity to vote on this proposal. Although it is not currently expected, we may wish to adjourn, recess or postpone the special meeting for the purpose of soliciting additional proxies. In the event that there is present, in person or by proxy, sufficient favorable voting power to secure the Omega Stockholder Approval to adopt and approve the merger agreement, Omega does not anticipate that it will need to adjourn or postpone the special meeting unless such adjournment or postponement is necessary to ensure that any required supplement or amendment to this proxy statement is provided to the Omega stockholders within a reasonable amount of time in advance of the special meeting or Omega is advised by counsel that failure to do so could reasonably be expected to result in a violation of applicable law

 

Q:

What vote is needed to approve the adjournment proposal?

 

A:

The affirmative vote of a majority of the shares of Common Stock present in person or represented by proxy at the special meeting and entitled to vote is required to approve the adjournment proposal.

 

Q:

Am I entitled to rights of appraisal under the NRS ?

 

A:

No. Pursuant to Section 92A.390 of the NRS, no holder of any shares of Common Stock will have or will be entitled to assert dissenter’s rights or any rights of appraisal as a result of or in connection with the merger agreement and the transactions contemplated thereby, including the merger.

 

Q:

Who can vote at the special meeting?

 

A:

Stockholders of record as of the close of business on November 24, 2017, the record date for the special meeting, are entitled to receive notice of the special meeting and vote their shares at the meeting. Each holder of Common Stock is entitled to one vote for each share of the Common Stock held on the record date on each of the proposals set forth in this proxy statement. There is no cumulative voting.

 

Q:

How do I vote if I am the record holder of my shares?

 

A:

You are entitled to vote at the meeting if you are a stockholder of record on the record date. You may vote:

 

 

in person by appearing and casting your vote at the special meeting; or

 

 

by proxy.

 

 

Stockholders of record have a choice of submitting a proxy:

 

 

by using the Internet voting instructions printed on your proxy card;

 

 

 

by using the telephone voting instructions printed on your proxy card; or

 

 

by completing, signing, dating and returning each enclosed proxy card you receive in the enclosed postage paid envelope.

 

If you are granting a proxy to vote by telephone or via the Internet, your voting instructions must be received by the date and time indicated on the applicable proxy card(s).

 

Granting a proxy to vote via the Internet, by telephone or by mailing in your proxy card will not prevent you from voting in person at the special meeting. You are encouraged to submit a proxy by mail, via the Internet or by telephone even if you plan to attend the special meeting in person, to ensure that your shares of Common Stock are present in person or represented at the special meeting.

 

If you return a properly signed and dated proxy card but do not mark the box showing how you wish to vote, your shares will be voted “ FOR ” the merger proposal, “ FOR ” the advisory, non-binding compensation proposal and “ FOR ” the adjournment proposal. With respect to any other matter that properly comes before the special meeting, shares present in person or represented by all proxies received by Omega will be voted with respect to such matter in accordance with the judgment of the persons named as attorneys-in-fact in the proxies.

 

Q:

How do I vote if my shares are held by my brokerage firm, bank, trust or other nominee?

 

A:

If your shares are held in a brokerage account or by another nominee, such as a bank or trust, then you are considered to be the beneficial owner of those shares, with your shares being held in “street name.” “Street name” holders generally cannot vote their shares directly and must instead instruct the brokerage firm, bank, trust or other nominee how to vote their shares. Your brokerage firm, bank, trust or other nominee will only be permitted to vote your shares for you at the special meeting if you instruct it how to vote. Therefore, it is important that you promptly follow the directions provided by your brokerage firm, bank, trust or other nominee regarding how to instruct it to vote your shares. If you wish to vote in person at the special meeting, you must bring a proxy from your brokerage firm, bank, trust or other nominee authorizing you to vote at the special meeting.

 

In addition, because any shares you may hold in “street name” will be deemed to be held by a different stockholder than any shares you hold of record, shares held in “street name” will not be combined for voting purposes with shares you hold of record. To be sure your shares are voted, you should instruct your brokerage firm, bank, trust or other nominee to vote your shares. Shares held by a corporation or business entity must be voted by an authorized officer of the entity.

 

Q:

What happens if I do not vote?

 

A:

The vote to adopt and approve the merger agreement is based on the total number of shares of Common Stock outstanding as of the close of business on the record date, not just the shares that are voted. If you do not vote, it will have the same effect as a vote against the merger proposal, the advisory, non-binding compensation proposal and the adjournment proposal.

 

Q:

What is the difference between a stockholder of record and a beneficial owner of shares held in street name?

 

A:

If your shares are registered in your name with Omega’s transfer agent, American Stock Transfer & Trust Company, you are the “stockholder of record” of those shares. In that case, the proxy statement and any accompanying documents have been provided directly to you by Omega.

 

If your shares are not registered in your own name and, instead, your broker, bank, trust or other nominee holds your shares, you are a “beneficial owner” of shares held in “street name.” The organization holding your account is considered the stockholder of record for purposes of voting at the special meeting. The proxy statement and any accompanying documents have been forwarded to you by your broker, bank, trust or other nominee. As the beneficial owner, you have the right to direct your broker, bank, trust or other nominee how to vote your shares by using the voting instruction card or by following their instructions for voting by telephone or on the Internet.

 

 

Q:

How can I change or revoke my vote?

 

A:

Proxies may be revoked or changed if you:

 

 

deliver a signed, written revocation letter, dated later than the proxy and which must be received prior to the special meeting, to Omega Protein Corporation, 2105 City West Blvd., Suite 500, Houston, Texas 77042, Attention: Corporate Secretary;

 

 

deliver a signed proxy, dated later than the prior proxy and which must be received prior to the special meeting, to American Stock Transfer & Trust Company at 6201 15th Avenue, Brooklyn, NY 11219;

 

 

vote again by telephone or on the Internet by 11:59 p.m. on the day before the special meeting; or

 

 

attend the special meeting and give notice to the inspector of election that you intend to vote in person rather than by proxy. Your attendance at the special meeting will not revoke your proxy unless you choose to vote in person.

 

If your shares are held in street name by a broker, bank, trust or other nominee, you must contact such broker, bank, trust or other nominee and follow its procedures to revoke your proxy.

 

Q:

What is a proxy?

 

A:

A proxy is your legal designation of another person, referred to as a proxy, to vote your shares of stock. The written document describing the matters to be considered and voted on at the special meeting is called a proxy statement. The document used to designate a proxy to vote your shares of stock is called a proxy card. The Omega Board has designated Bret D. Scholtes, Andrew C. Johannesen and John D. Held, and each of them, with full power of substitution, as proxies for the special meeting.

 

Q:

If a stockholder gives a proxy, how are the shares of Common Stock voted?

 

A:

Regardless of the method you choose to vote, the individuals named on the enclosed proxy card, as your proxies, will vote your shares of Common Stock in the way that you indicate. When completing the Internet or telephone processes or the proxy card, you may specify whether your shares of Common Stock should be voted for or against, or to abstain from voting, on all, some or none of the specific items of business to come before the special meeting.

 

If you are the stockholder of record, and you properly sign your proxy card but do not mark the boxes showing how your shares should be voted on a matter, the shares represented by your properly signed proxy will be voted “ FOR ” the proposal to adopt and approve the merger agreement, “ FOR ” the advisory, non-binding compensation proposal and for “ FOR ” the adjournment proposal. If you are the beneficial owner of shares held in street name, your broker will not be able to vote your shares without instructions from you.

 

Q:

What do I do if I receive more than one proxy or set of voting instructions?

 

A:

If you hold shares of Common Stock in “street name” and also directly as a record holder or otherwise, you may receive more than one proxy and/or set of voting instructions relating to the special meeting. Each proxy should be voted and/or returned separately in accordance with the instructions provided in this proxy statement in order to ensure that all of your shares of Common Stock are voted.

 

Q:

What happens if I sell my shares of Common Stock before the special meeting?

 

A:

The record date for stockholders entitled to vote at the special meeting is earlier than the date of the special meeting. If you transfer your shares of Common Stock after the record date but before the special meeting you will, unless special arrangements are made, retain your right to vote at the special meeting but will transfer the right to receive the merger consideration to the person to whom you transfer your shares.

 

 

Q:

Who will solicit and pay the cost of soliciting proxies?

 

A:

The expenses of preparing, printing and mailing this proxy statement and the proxies solicited thereby will be borne by us. Our directors, officers and employees may also solicit proxies by telephone, by facsimile, by mail, on the Internet or in person (all written soliciting materials, including scripts to be used in soliciting proxies, will be filed with the SEC). They will not be paid any additional amounts for soliciting proxies.

 

We have engaged Morrow Sodali LLC (“Morrow Sodali”) to assist in the solicitation of proxies for the special meeting. We estimate that we will pay Morrow Sodali a fee of approximately $15,000 in addition to an expense reimbursement. We will reimburse Morrow Sodali for reasonable out-of-pocket expenses and will indemnify Morrow Sodali and its affiliates against certain claims, liabilities, losses, damages and expenses.

 

We may also reimburse brokers, banks and other custodians, nominees and fiduciaries representing beneficial owners of shares of Common Stock for their expenses in forwarding soliciting materials to beneficial owners of Common Stock and in obtaining voting instructions from those owners.

 

Q:

What do I need to do now?

 

A:

Even if you plan to attend the special meeting, after carefully reading and considering the information contained in this proxy statement, please submit a proxy promptly to ensure that your shares are represented and voted at the special meeting. If you hold your shares of Common Stock in your own name as the stockholder of record, please submit a proxy to have your shares of Common Stock voted at the special meeting by completing, signing, dating and returning the enclosed proxy card in the accompanying prepaid reply envelope; by using the telephone number printed on your proxy card; or by using the Internet instructions printed on your proxy card. If you decide to attend the special meeting and vote in person, your vote by ballot will revoke any proxy previously submitted. If you are a beneficial owner, please refer to the instructions provided by your bank, brokerage firm or other nominee to see which of the above choices are available to you.

 

Q :

Should I send in my Omega stock certificates now?

 

A:

No. After the merger is completed, you will receive written instructions for exchanging your shares of Common Stock or book-entry shares, as applicable, for the merger consideration for each share of Common Stock that you own at the effective time of the merger, subject to the terms of the merger agreement.

 

Q:

I do not know where my stock certificate is. How will I get the merger consideration for my shares?

 

A:

If the merger is completed, the transmittal materials you will receive after the completion of the merger will include the procedures that you must follow if you cannot locate your stock certificate. This will include an affidavit that you will need to sign attesting to the loss of your stock certificate. Omega may also require that you provide a customary indemnity agreement to Omega in order to cover any potential loss.

 

Q:

Who can help answer my other questions?

 

A:

If you have additional questions about the merger, need assistance in submitting your proxy or voting your shares of Common Stock, or need additional copies of the proxy statement or the enclosed proxy card, please call Morrow Sodali, our proxy solicitor, who may be contacted by banks and brokers at 1-203-658-9400 and by all others toll-free at 1-800-662-5200.

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Forward-looking statements in this proxy statement are intended to be subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Investors are cautioned that all forward-looking statements involve risks and uncertainty. Omega believes that forward-looking statements made by it are based on reasonable expectations; however, no assurances can be given that actual results will not differ materially from those contained in such forward-looking statements. Forward-looking statements involve statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include the words “estimate,” “project,” “anticipate,” “expect,” “predict,” “assume,” “believe,” “could,” “would,” “hope,” “may” or similar expressions. The statements in this communication that are not historical statements are forward-looking statements within the meaning of the federal securities laws, including, among other things, statements regarding the expected timetable for completing the proposed transaction, benefits of the proposed transaction, costs of the proposed transaction and other anticipated financial impacts of the proposed transaction. These statements are subject to numerous risks and uncertainties, many of which are beyond Omega’s control, which could cause actual results to differ materially from the results expressed or implied by the statements. These statements include, but are not limited to, the expected timing of the merger; the ability of Cooke and Omega to close the merger; the performance of the parties to the merger agreement under the terms of the merger agreement; and statements regarding future performance. Investors are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date of this proxy statement. Investors are also urged to carefully review and consider the various disclosures in our periodic and interim reports filed with the SEC, including but not limited to our Annual Report on Form 10-K for the year ended December 31, 2016, attached as Annex D to this proxy statement, our Quarterly Reports on Form 10-Q for the quarters ended September 30, 2017,  June 30, 2017 and March 31, 2017, attached as Annexes E, F and G, respectively, to this proxy statement, and the Current Reports on Form 8-K filed from time to time by us, as well as the following factors:

 

 

uncertainties as to the timing of the merger and the possibility that the merger may not be completed;

 

 

the failure to receive approval of the merger by our stockholders;

 

 

the ability of the parties to the merger agreement to satisfy closing conditions to the merger;

 

 

the failure to obtain a regulatory or judicial approval (including MARAD Approval and approval by the court Probation Officer) that may be required to consummate the proposed transaction;

 

 

the impact of the pendency of the merger on our business, including our relationships with customers and employees;

 

 

changes in economic, business, competitive, technological and/or regulatory factors;

 

 

the outcome of any legal proceedings that have been or may be instituted against Omega and/or others relating to the merger agreement;

 

 

failure of a party to the merger agreement to comply with its obligations under the merger agreement; and

 

 

the amount of costs, fees and expenses we have, and may incur, related to the merger, whether or not the merger is ultimately completed.

 

Consequently, all of the forward-looking statements we make in this document are qualified by the information contained or incorporated by reference herein, including, but not limited to, (a) the information contained under this heading and (b) the inform ation contained in Part I, Item 1A under the caption “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2016, attached as Annex D to this proxy statement, as well as the various factors described herein. We are under no obligation to publicly release any revision to any forward-looking statement contained or incorporated herein to reflect any future events or occurrences.

 

You should carefully consider the cautionary statements contained or referred to in this section in connection with any subsequent written or oral forward-looking statements that may be issued by us or persons acting on our behalf.

 

 

THE PARTIES TO THE MERGER

 

Omega

 

Omega Protein Corporation

2105 City West Blvd., Suite 500

Houston, Texas 77042

713 -623-0060

 

Omega is a nutritional products company incorporated in Nevada that develops, produces and delivers nutrition products throughout the world to improve the nutritional integrity of foods, dietary supplements and animal feeds. Omega operates in two primary industry segments: animal nutrition and human nutrition. Omega’s animal nutrition segment is comprised primarily of two subsidiaries: OPI and Omega Shipyard. OPI, our principal operating subsidiary, is predominantly dedicated to the production of animal nutrition products and operates in the menhaden harvesting and processing business and is the successor to a business conducted since 1913. A portion of OPI’s production is transferred to Omega’s human nutrition business. Omega Shipyard owns and operates a dry-dock facility in Moss Point, Mississippi that is used to provide shore side maintenance for OPI’s fishing fleet. The human nutrition business operates under the “tera’s ® ” branded product and “Bioriginal” names. Bioriginal has three primary product lines: specialty oils, protein products and other nutraceutical ingredients. Bioriginal is comprised primarily of three subsidiaries: Bioriginal Food & Science, WSP and Cyvex. Bioriginal Food & Science, acquired by Omega in September 2014 and headquartered in Saskatoon, Canada with additional operations in the Netherlands, is a supplier of plant and marine based specialty oils to the food and nutraceutical industries. WSP, acquired by Omega in 2013, is a manufacturer and marketer of specialty dairy proteins and other related products headquartered in Madison, Wisconsin and operates a production facility in Reedsburg, Wisconsin. Cyvex, acquired by Omega in 2010, is located in Irvine, California and is an ingredient supplier for the food and nutraceutical industries. Omega’s Common Stock is listed on the NYSE under the symbol “OME.” Omega’s principal executive office is located at 2105 City West Blvd., Suite 500, Houston, Texas 77042 and the telephone number of its principal executive office is 713-623-0600. Additional information regarding Omega is contained in our filings with the SEC. Also, see the section of this proxy statement entitled “Where You Can Find More Information.”

 

Cooke

 

Cooke Inc.

40 Wellington Row

Saint John, NB E2L 3H3

Canada

506- 694-4900

 

Cooke is a corporation incorporated under the laws of the Province of New Brunswick, Canada. Cooke is the sole shareholder of Cooke Aquaculture, a vertically-integrated aquaculture corporation based in Saint John, New Brunswick, Canada with salmon farming operations carried on through its wholly owned subsidiaries in the U.S. (off the coasts of Maine and Washington), Chile and Scotland, as well as seabass and seabream farming operations in Spain. Cooke Aquaculture also manages the salmon farming operations of its affiliate Kelly Cove Salmon Ltd. which are located in Atlantic Canada (New Brunswick, Newfoundland and Labrador, Nova Scotia and Prince Edward Island). Members of the founding Cooke family, who collectively are the ultimate beneficial owners of all of the shares of Cooke, also have significant investments in wild fisheries globally through their ownership of Cooke Seafood and Icicle. Cooke’s principal executive office is located at 40 Wellington Row, Saint John, NB, Canada, E2L 3H3, and the telephone number of its principal executive office is 506-694-4900.

 

Merger Sub

 

Alpha MergerSub, Inc.

40 Wellington Row

Saint John, NB E2L 3H3

Canada

506- 694-4900

 

 

Merger Sub is a Nevada corporation. The sole stockholder of Merger Sub is Alpha HoldCo, Inc., a Delaware corporation that is an indirect, wholly-owned subsidiary of Cooke. Merger Sub was formed solely for the purpose of entering into the merger agreement and consummating the transactions contemplated by the merger agreement, and has not engaged in any business except for activities incidental to its formation and as contemplated by the merger agreement. Merger Sub’s principal executive office is located at 40 Wellington Row, Saint John, NB, Canada, E2L 3H3 and the telephone number of its principal executive office is 506-694-4900.

 

 

THE SPECIAL MEETING

 

We are furnishing this proxy statement to our stockholders as part of the solicitation of proxies by the Omega Board for use at the special meeting, and at any adjournments or postponements of the special meeting.

 

Date, Time and Place

 

We will hold the special meeting at First City Tower,  1001 Fannin St., Suite 2500, Houston, TX 77002, at 9 a.m., Central Time, on December 19, 2017.

 

Purpose of Special Meeting

 

At the special meeting, we will ask holders of Common Stock to adopt and approve the merger agreement. Our stockholders will also be asked to approve the advisory, non-binding compensation proposal and the adjournment proposal.

 

Record Date, Stock Entitled to Vote and Quorum

 

Only holders of record of Common Stock at the close of business on November 24, 2017, which is the record date for the special meeting, are entitled to notice of and to vote at the special meeting. As of the record date, 22,478,928  shares of Common Stock were outstanding and held by approximately 29 holders of record. A majority of the shares of Common Stock issued and outstanding and entitled to vote at the special meeting present in person or represented by proxy at the special meeting is required for a quorum. Shares of Common Stock represented at the special meeting but not voting, including shares of Common Stock for which proxies have been received but for which stockholders have abstained, will be treated as present at the special meeting for purposes of determining the presence or absence of a quorum for the transaction of all business at the special meeting.

 

Vote Required

 

The proposal to adopt and approve the merger agreement requires the affirmative vote of holders of at least a majority of the outstanding shares of Common Stock entitled to vote as of the record date. Accordingly, if you abstain or fail to vote on the proposal to adopt and approve the merger agreement, or if you fail to give voting instructions to your brokerage firm, bank, trust or other nominee, it will have the same effect as a vote against the merger proposal. If you hold your shares in “street name” through a broker, bank or other nominee, you must direct your broker, bank or other nominee how to vote your shares of Common Stock by following their instructions for voting. Brokers, banks or other nominees who hold shares of Common Stock in street name for customers who are the beneficial owners of those shares are not permitted to vote those customers’ shares in the absence of specific instructions from those customers.

 

The advisory,  non-binding proposal to approve compensation that will or may become payable to Omega’s named executive officers in connection with the merger requires the affirmative vote of a majority of the shares of Common Stock present in person or represented by proxy at the special meeting and entitled to vote. Accordingly, not attending the special meeting in person or by proxy will have no effect on the outcome of this proposal, but abstentions will have the effect of a vote against this proposal. Approval of this proposal is not a condition to completion of the merger, and the vote with respect to this proposal is only an advisory vote by stockholders. Accordingly, the vote will not be binding on us or the Omega Board or our compensation committee, Cooke or their board of directors. If the merger is completed, the compensation that is the subject of the proposal may be paid to our named executive officers in accordance with the terms and conditions of their compensation agreements and arrangements even if our stockholders do not approve this proposal.

 

The proposal to approve the adjournment or postponement of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve the merger proposal requires the affirmative vote of a majority of the shares of Common Stock present in person or represented by proxy at the special meeting and entitled to vote. Accordingly, not attending the special meeting in person or by proxy will have no effect on the outcome of this proposal, but abstentions will have the effect of a vote against this proposal.

 

 

If you are a stockholder of record, you may vote your shares of Common Stock in any of the following ways:

 

 

in person by appearing and casting your vote at the special meeting; or

 

 

by proxy.

 

 

Stockholders of record have a choice of submitting a proxy:

 

 

by using the Internet voting instructions printed on your proxy card;

 

 

by using the telephone voting instructions printed on your proxy card; or

 

 

by completing, signing, dating and returning each enclosed proxy card you receive in the enclosed postage paid envelope.

 

If you are not a stockholder of record, please refer to the instructions provided by your bank, brokerage firm or other nominee to see which of the above choices are available to you. Please note that if you are a beneficial owner and wish to vote in person at the special meeting, you must obtain a legal proxy from your bank, brokerage firm or other nominee.

 

A control number, located on your proxy card, is designed to verify your identity and allow you to vote your shares of Common Stock, and to confirm that your voting instructions have been properly recorded when submitting a proxy over the Internet or by telephone. Please be aware that if you submit a proxy over the Internet, you may incur costs such as telephone and Internet access charges for which you will be responsible.

 

Holders of record of Common Stock on the record date are entitled to one vote per share on each matter to be considered at the special meeting.

 

As of  November 22,  2017, directors and executive officers of Omega and their affiliates had the right to vote 603,253 shares of Common Stock, or approximately 2.7% of the outstanding Common Stock at that date.

 

Voting of Proxies

 

All shares represented by properly executed proxies received in time for the special meeting will be voted at the special meeting in the manner specified by the holders thereof. Properly executed proxies that do not contain voting instructions will be voted “FOR” the merger proposal,  FOR”  the advisory, non-binding compensation proposal and “ FOR ” the adjournment proposal.

 

Revocability of Proxies

 

The grant of a proxy on the enclosed form of proxy does not preclude a stockholder from voting in person at the special meeting. A s a stockholder, you may revoke a proxy if you:

 

 

deliver a signed, written revocation letter, dated later than the proxy and which must be received prior to the special meeting, to Omega Protein Corporation, 2105 City West Blvd., Suite 500, Houston, Texas 77042, Attention: Corporate Secretary;

 

 

deliver a signed proxy, dated later than the prior proxy and which must be received prior to the special meeting, to American Stock Transfer & Trust Company at 6201 15th Avenue, Brooklyn, NY 11219;

 

 

vote again by telephone or on the Internet by 11:59 p.m. on the day before the special meeting; or

 

 

attend the special meeting and give notice to the inspector of election that you intend to vote in person rather than by proxy. Your attendance at the special meeting will not revoke your proxy unless you choose to vote in person.

 

If your shares are held in street name by a broker, bank, trust or other nominee, you must contact such broker, bank, trust or other nominee and follow its procedures to revoke your proxy.

 

 

Omega stockholders who require assistance should contact the persons at the phone number provided on page 26 of this proxy statement.

 

Delivery of Proxy Materials to Households Where Two or More Omega Stockholders Reside

 

Because many stockholders hold shares of Common Stock in multiple accounts or share an address with other stockholders, stockholders may receive duplicate mailings of notices or proxy materials. Stockholders may avoid receiving duplicate mailings as follows:

 

 

Stockholders of Record . If your shares are registered in your own name and you are interested in consenting to the delivery of a single notice or single set of proxy materials, you may contact American Stock Transfer & Trust Company by phone at 1-800-627-7020 or by mail to 6201 15th Avenue, Brooklyn, NY 11219.

 

 

Beneficial Stockholders . If your shares are not registered in your own name, your broker, bank, trust or other nominee that holds your shares may have asked you to consent to the delivery of a single notice or single set of proxy materials if there are other Omega stockholders who share an address with you. If you currently receive more than one copy of the notice or proxy materials at your household and would like to receive only one copy in the future, you should contact your nominee.

 

 

Right to Request Separate Copies . If you consent to the delivery of a single notice or single set of proxy materials but later decide that you would prefer to receive a separate copy of the notice or proxy materials, as applicable, for each stockholder sharing your address, then please notify American Stock Transfer & Trust Company or your nominee, as applicable, and they will promptly deliver the additional notices or proxy materials. If you wish to receive a separate copy of the notice or proxy materials for each stockholder sharing your address in the future, you may also contact American Stock Transfer & Trust Company by phone at 1-800-627-7020 or by mail to 6201 15th Avenue, Brooklyn, NY 11219.

 

Solicitation of Proxies

 

All costs related to the solicitation of proxies, including the printing and mailing of this proxy statement, will be borne by us. We have retained Morrow Sodali to aid in the solicitation of proxies and to verify records relating to the solicitation. Morrow Sodali will receive a fee for its services of $ 15,000 in addition to an expense reimbursement. In addition, our directors, officers and employees may, without additional compensation, solicit proxies from stockholders by mail, telephone, facsimile, or in person. However, you should be aware that certain members of the Omega Board and our officers have interests in the merger that are different from, or in addition to, yours. See the section entitled “The Merger—Interests of Omega’s Executive Officers and Directors in the Merger.”

 

We will also reimburse brokers and other custodians, nominees and fiduciaries for their expenses in sending these materials to you and getting your voting instructions.

 

Adjournment

 

The special meeting may be adjourned from time to time by the chairman of the meeting or by the affirmative vote of a majority of the shares of Common Stock, present in person or by proxy at the special meeting and entitled to vote thereon, without further notice other than by an announcement made at the special meeting. At the adjourned meeting, Omega may transact any business that might have been transacted at the original meeting. If a quorum is not present at the special meeting, or if a quorum is present at the special meeting but there are not sufficient votes at the time of the special meeting to approve the merger proposal, then the chairman of the meeting has the power to adjourn the meeting, or, alternatively, Omega’s stockholders may be asked to vote on a proposal to adjourn the special meeting in order to permit the further solicitation of proxies.

 

Stock Certificates

 

Stockholders should not send stock cert ificates with their proxies. A Letter of Transmittal (as defined in the merger agreement and below under “The Merger Agreement—Payment of the Merger Consideration”) with instructions for the surrender of stock certificates or book-entry shares, as applicable, will be mailed to our stockholders as soon as practicable after completion of the merger.

 

 

Questions and Additional Information

 

If you have questions about the merger or how to submit your proxy, or if you need additional copies of this proxy statement or the enclosed proxy card or voting instructions, please contact our proxy solicitor at:

 

 

470 West Avenue
Stamford, Connecticut 06902
Shareholders Call Toll Free: 1-800-662-5200
Banks and Brokers Call Collect: 1-203-658-9400
E-mail: OMEinfo@morrowsodali.com

 

 

THE MERGER

 

Description of the Merger

 

The Omega Board adopted, approved and declared advisable the merger agreement and the transactions contemplated thereby, including the merger. If the stockholders of Omega vote “FOR the merger proposal, then, subject to other closing conditions as described in “The Merger Agreement—Conditions to Completion of the Merger,” Merger Sub will be merged with and into Omega, with Omega as the surviving corporation in the merger and a wholly owned subsidiary of Cooke. We strongly encourage you to read carefully the merger agreement in its entirety, a copy of which is attached as Annex B to this proxy statement, because it is the contract that governs the merger.

 

If the merger is completed, each share of Common Stock outstanding immediately prior to th e effective time of the merger will be converted into the right to receive the merger consideration, without interest.

 

After the merger is completed, you will have the right to receive the merger consideration but you will no longer have any rights as a stockholder of Omega. You will receive the merger consideration for your shares of Common Stock after exchanging your stock certificates or book-entry shares, as applicable, and delivering the letter of transmittal to be sent to you shortly after completion of the merger, duly completed and validly executed in accordance with the instructions thereto. Further, holders of Omega Options will, upon delivery of a duly executed option surrender agreement, be entitled to the option consideration, and the Omega Option so surrendered will then be canceled.

 

The Common Stock is currently registered under the Exchange Act and is designated for trading on the NYSE under the symbol “OME.” Following the merger, the Common Stock will be delisted from the NYSE and will no longer be publicly traded, and the registration of the Common Stock under the Exchange Act will be terminated.

 

Please see the section entitled “The Merger Agreement” for additional and more detailed information regarding the merger agreement.

 

Background of the Merger

 

The merger and the terms of the merger agreement are the result of arm ’s length negotiations conducted between representatives of Omega, Cooke and their respective legal and financial advisors. The following is a summary of the principal events, meetings, negotiations and actions among the parties leading up to the execution and public announcement of the merger agreement.

 

2015-2016 Initial Strategic Review

 

During the summer of 2015, the Omega Board held regular monthly meetings to receive financial updates from Omega ’s management and to evaluate and discuss Omega’s business operations and strategy. During such meetings, the Omega Board discussed, among other things, Omega’s business profile and value proposition, sector and industry developments, long-term forecasts and recent events, including activist shareholders’ ownership of Omega.

 

In August 2015, the Omega Board initiated a review of strategic alternatives to enhance shareholder value (the “Initial Strategic Review”), including continuing the current business strategy and pursuing growth opportunities, a share repurchase program, a sale, spin-off, or other separation of a selected business or businesses, a merger or other form of business combination involving the entire company, or a strategic acquisition. During the Initial Strategic Review, the Omega Board held monthly or bimonthly special meetings to discuss the status of various elements of the Initial Strategic Review. On September 25, 2015, the Omega Board announced in a press release it had engaged J.P. Morgan as its financial advisor and directed J.P. Morgan to discuss various potential transactions with third parties to determine interest in a transaction, including a potential business combination. At the direction of the Omega Board, representatives of J.P. Morgan contacted, or in some cases were contacted by, approximately 35 parties interested in a potential business combination. Of those parties, 20 signed confidentiality agreements with Omega and thereafter, at the direction of the Omega Board, representatives of J.P. Morgan provided such parties with access to additional diligence materials prepared by Omega to assist in their evaluation of potential transactions. Each of the  signed confidentiality agreements included standstill provisions (including “don’t ask, don’t waive” restrictions) ranging from one to two years.  Three of the parties to whom information was provided submitted preliminary indications of interest for an acquisition or business combination with Omega (the “initial bidders”) with implied equity values from $16.54 per share up to a range of $21 to $23 per share. From November 2015 through May 2016, representatives of J.P. Morgan, Mr. Scholtes, President and Chief Executive Officer of Omega, and other members of Omega management, engaged in discussions with the potential bidders concerning a potential transaction and granted access to Omega’s facilities and a data room to the two initial bidders with proposals Omega management considered sufficiently attractive to merit further consideration based on the equity value implied by such proposals.  In addition, representatives of J.P. Morgan, at the direction of the Omega Board, continued to contact potential interested third parties and respond to requests regarding Omega and the Initial Strategic Review.

 

 

In January 2016, at a special meeting of the Omega Board, representatives of J.P. Morgan and Mr. Scholtes expressed concern about the ability and continued interest of the first of the two initial bidders to follow through on a potential transaction, citi ng such bidder’s refusal to increase its price, its failure to obtain approval of its investment committee, the limited due diligence conducted by such bidder, the addition of a financing condition and other indications that it would decrease the previously offered purchase price range of $21-23.

 

In March 2016, the second of the two active initial bidders informed representatives of J.P. Morgan that it would not be able to proceed with its offer of $22 per share, based in part on the results of its diligence and on its inability to obtain financin g on acceptable terms, and offered to proceed with a $16 per share offer. During March and April 2016, representatives of J.P. Morgan, at the direction of the Omega Board, and Omega management continued to discuss a potential transaction with both of the initial bidders, in part based on the first initial bidder having expressed renewed interest in a possible acquisition at $19 per share subject to financing and to satisfactory conclusion of additional diligence. Representatives of J.P. Morgan, at the direction of the Omega Board, informed the first initial bidder that the Omega Board would reject an offer of $19 per share but would continue discussions at $22 per share or higher. In response, the first initial bidder revised its indication of interest to a possible acquisition at $20 per share. Representatives of J.P. Morgan and Mr. Scholtes continued to express concern, however, regarding the ability of the first initial bidder to follow through on a potential transaction for the reasons cited to the Omega Board in January 2016.

 

At a meeting in May 2016, after careful consideration and consultation with representatives of J.P. Morgan and Omega management, the Omega Board determined that the various transactions considered during the Initial Strategic Review were not sufficiently attractive to merit further consideration and authorized a share repurchase program of up to $40 million. On May 4, 2016, Omega announced in a press release the completion of the Initial Strategic Review and the Omega Board’s decision to authorize a share repurchase program.

 

2017 Review of Human Nutrition Business and the Merger

 

Following the completion of the Initial Strategic Review, between June 2016 and February 2017, Omega ’s management continued to communicate regularly with the Omega Board regarding Omega’s business, strategic plan and recent developments.

 

In August 2016, Gary R. Goodwin, the chairman of the Omega Board, formed an ad hoc “Human Nutrition Task Force” comprised of Mr. Scholtes and Stephen C. Bryan, Michael N. Christodolou and David W. Wehlmann, each a member of the Omega Board, to conduct internal and market research, analyze the cost structure and other financial information relating to Omega ’s human nutrition business and report to the Omega Board on strategic alternatives for the human nutrition business to best enhance shareholder value for Omega. The ad hoc Human Nutrition Task Force reviewed the following three general courses of action: maintaining, restructuring and divesting of the human nutrition business. In late September 2016, the ad hoc Human Nutrition Task Force presented its findings to the Omega Board and the Omega Board determined to continue its discussion of strategic alternatives for the human nutrition business, with a view to considering a more formal strategic review.

 

On February 22, 2017, Omega announced in a press release that the Omega Board had initiated a strategic alternatives review for its human nutrition business as well as an evaluation of its current operating plan (“2017 Strategic Review”). In connection with the 2017 Strategic Review, Omega engaged J.P. Morgan as financial advisor for the potential disposition of Bioriginal Food & Science and Cyvex, and BMO Capital Markets Corp. (“BMO”) as financial advisor for the potential disposition of WSP. In late February and early March 2017, representatives of J.P. Morgan and BMO, at the direction of the Omega Board, distributed information memoranda regarding the human nutrition business to potential buyers.

 

During the first week of April 2017, one of the companies that had been approached regarding the 2017 Strategic Review (“Potential Buyer B”) contacted Mr. Scholtes telephonically to express interest in exploring a transaction involving all of Omega’s businesses. Potential Buyer B did not make any written proposal following these discussions or propose a purchase price for the transaction.

 

 

On April 7, 2017, Mr. Scholtes met with some members of management of Cooke, who were all in Washington, D.C. for business unrelated to the 2017 Strategic Review. Cooke has been a customer of Omega since 2009, when Omega began selling animal nutrition products to Cooke. For the year ended December 31, 2016, sales to Cooke accounted for less than one percent of Omega’s animal nutrition revenue. At the April 7 meeting, Mr. Scholtes and the Cooke representatives discussed generally their business relationship and their respective businesses and strategies.

 

On April 10, 2017, Glenn B. Cooke, the Chief Executive Officer of Cooke, called Mr. Scholtes and raised the possibility of a business combination involving Coo ke and Omega. After the call, Mr. Scholtes informed Mr. Goodwin of the call from Mr. Cooke and Mr. Goodwin encouraged Mr. Scholtes to continue conversations with Cooke as well as Potential Buyer B. Later that week Mr. Scholtes and Monty C. Deihl, Vice President of Operations of Omega, had dinner with Mr. Cooke in New York and the next day Mr. Scholtes, Mr. Deihl and Mr. Cooke toured certain of Omega’s facilities.

 

Also during that week, Potential Buyer B and Omega entered into a confidentiality agreement in connection with a potential transaction and Omega began to provide Potential Buyer B with access to diligence materials for Potential Buyer B to further evaluate a potential transaction. The confidentiality agreement with Buyer B included a standstill provision that provided for its automatic termination upon the announcement of the signing of a merger or similar transaction involving Omega. On April 13, 2017, Mr. Scholtes and Andrew C. Johannesen, Executive Vice President and Chief Financial Officer of Omega, traveled to New Orleans, Louisiana and had an introductory dinner with Potential Buyer B’s Chief Executive Officer and its Vice President of Strategy and Corporate Development. They discussed generally a potential transaction between Omega and Potential Buyer B as well as the respective businesses of Omega and Potential Buyer B. During the next week, Mr. Scholtes, Mr. Johannesen and John D. Held, Executive Vice President, General Counsel and Secretary of Omega, met with Potential Buyer B’s management team to present a review of Omega’s business and further discuss a potential transaction. Also during that week, Cooke and Omega entered into a confidentiality agreement in connection with a potential transaction.

 

On April 28, 2017, Mr. Scholtes received a letter and telephone call from Mr. Cooke expressing Cooke ’s interest, based on its preliminary analysis and subject to satisfactory completion of its diligence, in acquiring Omega for total consideration of $540 million or $24 per share, which represented an approximate 23% premium over the 20-day average trading price as of April 28, 2017. Cooke’s letter also requested a 60-day exclusivity period. Mr. Scholtes forwarded the letter to the Omega Board and suggested that a special meeting of the Omega Board be held to evaluate the inbound indications of interest from Potential Buyer B and Cooke.

 

The next day, the Omega Board met telephonically with Mr. Held and Mr. Johannesen participating to discuss the Cooke proposal and the interest expressed by Potential Buyer B. At the meeting, Mr. Scholtes provided a summary of the communications and answer ed questions from the board members. The board discussed the proposal, Omega’s business and prospects and process considerations for evaluating a potential transaction. At that meeting the Omega Board authorized the engagement of J.P. Morgan as its financial advisor and V&E as its legal advisor to assist with negotiating and evaluating any potential transaction. The Omega Board’s decision to engage J.P. Morgan was based on, among other things, J.P. Morgan’s familiarity with Omega, its experience, including in connection with the Initial Strategic Review, and its reputation, generally. Prior to engaging J.P. Morgan, the Omega Board also evaluated potential conflicts of interests that J.P. Morgan might have with the most likely parties to any merger or business combination with Omega.  J.P. Morgan has informed Omega that neither it nor its affiliates has ever had any material commercial or investment banking relationships with Cooke. Pursuant to the engagement letter between Omega and J.P. Morgan, Omega agreed to pay J.P. Morgan a fee of $2.0 million at the time J.P. Morgan delivered its fairness opinion and an additional fee of approximately $5.5 million upon the closing of the merger. Omega also agreed to pay J.P. Morgan a fee in the event that Omega receives a break-up fee in connection with the termination, or abandonment of the merger, or failure of the merger to occur.  In addition, Omega agreed to reimburse J.P. Morgan for its expenses incurred in connection with its services, including the fees and disbursements of counsel, and will indemnify J.P. Morgan against certain liabilities arising out of J.P. Morgan’s engagement. Prior to approving the fee arrangement in the engagement letter, the Omega Board considered the amounts of the fees paid by companies to financial advisors in connection with similar type engagements and transactions.

 

The Omega Board next met on May 5, 2017, at the Omega offices in Houston, Texas with Mr. Held, Mr. Johannesen, and representatives of J.P. Morgan and V& E in attendance. At the meeting, Mr. Scholtes and representatives of J.P. Morgan provided an update on the status of the 2017 Strategic Review related to Omega’s human nutrition business. Representatives of J.P. Morgan, at the direction of the Omega Board, had contacted 136 potential buyers and Omega had entered into 72 confidentiality agreements with potential buyers for the disposition of Bioriginal Food & Science and Cyvex, which resulted in the receipt of 12 preliminary offers. BMO had contacted 197 potential buyers and Omega had entered into 87 confidentiality agreements with potential buyers for the disposition of WSP. Preliminary offers for the WSP business were due the following week. None of the confidentiality agreements entered into in connection with the 2017 Strategic Review related to Omega’s human nutrition business included any standstill provisions. Following the discussion of the human nutrition business, Mr. Scholtes provided an update on the discussions with Cooke and Potential Buyer B. Topics discussed included additional information needed by the Omega Board and its advisors to evaluate the potential transactions, the proposed purchase price offered by Cooke and its relation to the short term and long term projections and forecasts of management, and timing considerations. The Omega Board authorized management to continue discussions with Cooke and Potential Buyer B but after discussion of Cooke’s request, determined that exclusivity should not be granted to Cooke at such time, citing the potential interest of other buyers, including Potential Buyer B. The Omega Board discussed whether to direct Omega management or J.P. Morgan to approach other potential buyers, including those that had expressed interest in connection with the Initial Strategic Review. However, the Board determined that a thorough process had already been conducted through the Initial Strategic Review and that such additional contacts after such a brief intervening period were unlikely to yield any proposals that would be sufficiently attractive to merit consideration. Representatives of V&E provided an overview to the Omega Board regarding the Omega Board’s fiduciary duties in considering proposals by potential buyers and reviewed certain terms and legal aspects of the Cooke proposal.  The Omega Board discussed potential conflicts of interest in light of such fiduciary duties and determined that there were no potential conflicts preventing any members of the Omega Board from complying with their fiduciary duties in connection with the approval of a merger or similar transaction involving Omega.

 

 

On May 8, 2017, Omega announced financial results for the first quarter ended March 31, 2017, including a 13% decrease in Omega ’s revenues from the same period in the last year, and noted that recent global fish quota announcements were likely to put pressure on fish meal and fish oil pricing in the second half of 2017.

 

On May 11, 2017, the Omega Board, Mr. Johannesen, Mr. Held and representatives of V&E and J.P. Morgan held a telephonic meeting to review the continuing discussions with Potential Buyer B and the proposal that Omega had received from Cooke. The Omega Board approved Cooke’s request to retain Kelley, Drye & Warren LLP (“KDW”) as its legal counsel, a law firm that Omega had historically utilized in connection with fisheries regulatory matters. The Omega Board also decided to schedule a weekly update call on the status of efforts to divest the human nutrition businesses and the potential business combination with Potential Buyer B and Cooke.

 

In the Omega Board ’s update call on May 16, 2017, Mr. Scholtes informed the Omega Board that Potential Buyer B had not yet presented a more definitive proposal for a potential transaction and had communicated concerns about the strategic rationale for the potential transaction. Mr. Scholtes also noted that he continued to press Cooke management to increase the offered $24 per share purchase price. To permit continued dialogue with Potential Buyer B, the Omega Board again rejected Cooke’s request for an exclusivity agreement.

 

On May 21, 2017, the Omega Board held a telephonic meeting with Mr. Johannesen, Mr. Held and representatives of V& E and J.P. Morgan participating to review the status of Omega’s ongoing 2017 Strategic Review process and the ongoing discussions with Cooke and Potential Buyer B. The Omega Board discussed Cooke’s recent demand for a 60-day exclusivity period as a condition to continuing discussions. After a review of the factors supporting such an extension, including the lack of a definitive proposal from Buyer B and Cooke’s refusal to proceed with discussions absent such an exclusivity period, the Omega Board approved granting a limited 28-day exclusivity period to Cooke during which Omega would be restricted from initiating, encouraging or facilitating an alternative transaction, with an exception permitting unsolicited offers, and subject to an expense reimbursement to Cooke of up to $1,300,000 if Omega entered into a definitive binding agreement in connection with such an unsolicited offer within a certain period of time. In addition, the exclusivity agreement provided for a nine day extension to the 28-day exclusivity period if prior to the expiration of such period, Cooke provided notice to Omega reaffirming the $24 per share purchase price. Omega and Cooke entered into an exclusivity letter agreement on the terms approved by the Omega Board on May 21, 2017.

 

On May 22, 2017, Mr. Scholtes received an unsolicited telephone call from an additional interested party (“ Potential Buyer C”) regarding a potential acquisition of Omega. Potential Buyer C communicated its interest at that time, but did not indicate any material terms of the transaction. Mr. Scholtes informed the Omega Board of his call with Potential Buyer C.

 

Over the course of the next several weeks, Omega shared materials responsive to Cooke ’s diligence request with Cooke and its advisors and at the end of May 2017, members of the Omega management team met with Cooke in Suffolk, Virginia for diligence discussions.

 

On June 8, 2017, the Omega Board met telephonically with Mr. Johannesen, M r. Held and representatives of V&E and J.P. Morgan participating to discuss the status of the potential transaction, including Cooke’s diligence review of Omega and management meetings in connection therewith. During the meeting, Mr. Scholtes also summarized recent calls from Potential Buyer B and Potential Buyer C, noting that Potential Buyer B never formalized its offer and appeared uninterested in further pursuing a transaction. The Omega Board noted that the interest of these parties could be addressed at a later date, either after the current exclusivity period ended or under certain circumstances if a definitive agreement was entered into with Cooke. On June 8, 2017, the Omega Board also received presentations from representatives of BMO and J.P. Morgan regarding the human nutrition sales process. Representatives of J.P. Morgan updated that seven of the 12 initial bidders submitted second round offers for the acquisition of Bioriginal Food & Science and Cyvex and provided overviews of such offers. BMO summarized the six indications of interest for the acquisition of WSP that were received by the deadline on May 10, 2017. The Omega Board expressed its continued interest in evaluating potential sale transactions for the human nutrition business.

 

 

In mid-June, V&E delivered a draft merger agreement to Cooke and its counsel, KDW, which included among other things a provision allowing Omega to solicit alternative acquisition proposals for a limited period following the signing of the merger agreement. On June 19, 2017, Cooke provided notice to Omega reaffirming its proposed purchase price of $24 a share, thereby extending its exclusivity period by nine days to June 28, 2017 pursuant to the exclusivity agreement. A few days later, KDW delivered a revised draft merger agreement to V&E and Omega together with a memorandum outlining key issues and changes from the draft prepared by V&E. The revised proposal from Cooke reduced the proposed purchase price to $22 per share, revised the transaction structure to provide for the transfer of certain assets, including vessels and planes and related employees, to a qualifying U.S. citizen that is not an affiliate of Cooke in order to allow the vessels to maintain their U.S. fishing certificates required by the Merchant Marine Act of 1920 (the “Jones Act”). The Cooke merger agreement also proposed to prohibit Omega from soliciting alternative proposals but allowing Omega to consider unsolicited acquisition proposals following the signing of the merger agreement if certain conditions were met, including giving Cooke the right to match any such acquisition proposal as well as a $25 million termination fee payable by Omega.

 

On June 28, 2017, Gary Goodwin, Chairman of the Omega Board, and Mr. Cooke spoke by telephone during which Mr. Cooke reiterated Cooke ’s interest in acquiring Omega, explained that the decreased price of $22 per share was a result of Cooke’s view of the value of the business based on its diligence as well as their increased transaction costs. The price of $22 per share represented an approximate 25% premium over the 20-day average trading price as of June 28, 2017. Mr. Cooke assured Mr. Goodwin that financing of the transaction would not be a condition to closing and that Cooke would soon have committed financing in place. Mr. Goodwin communicated to Mr. Cooke that, while they were prepared to proceed for the time being, the Omega Board expected any agreed to transaction would be at least at the originally proposed $24 per share.

 

On June 29, 2017, at a regularly scheduled, in-person meeting of the Omega Board following the annual stockholders meeting in Houston, Texas, Omega management reviewed Omega’s long-range business plan and forecast with the Omega Board which had been prepared by management as part of its regular business practices. Management described, among other recent developments and trends, a forecasted decline in fish catch and yields in Omega’s current fishing season, and the expected global downward pressure on fish meal and fish oil pricing. A representative of V&E reviewed for the Omega Board a summary of the terms and differences between the draft merger agreement that Omega sent to Cooke and the agreement proposed by Cooke and discussed various risk associated with the agreement as proposed by Cooke, as well as possible responses. The Omega Board discussed and asked questions regarding the risks and benefits of the proposed transaction as well as the proposed valuation. The Omega Board continued to discuss next steps with Cooke and other potential purchasers. The consensus of the Omega Board following their discussion was that management should clearly communicate to Cooke that the Omega Board was not willing at this time to approve a transaction at less than $24 per share and that management should continue to work with Omega’s financial and legal advisors with the goal of continuing to develop and improve upon the proposal from Cooke, as well as evaluating other possible alternatives. In addition, representatives of J.P. Morgan provided an update on the human nutrition business sale process, noting that Omega and representatives of J.P. Morgan were in discussions with four potential purchasers for the Bioriginal Food & Science and Cyvex businesses at a proposed valuation range of approximately $75-100 million and Omega and BMO were in discussions with three financial potential purchasers for the WSP business at a proposed valuation range of approximately $10-20 million. Also on June 29, 2017, the compensation committee of the Omega Board met and discussed the effects of a potential purchase of Omega on Omega’s employees, benefits plans and employment and severance arrangements, and received advice from a representative from Frederic W. Cook & Co., Inc., the committee’s executive compensation advisor.

 

During the first week of July 2017, Omega and V&E delivered a revised draft of the merger agreement to Cooke and its counsel, KDW. This draft of the merger agreement accepted Cooke’s proposal to include a no solicitation provision that only allowed Omega to consider unsolicited acquisition proposals following the signing of the merger agreement and would give Cooke the right to match any such acquisition proposal but rejected the proposed $22 per share of Common Stock merger consideration and in addition proposed a reverse termination fee in an amount equal to the termination fee payable by Cooke in the event that required regulatory approvals were not obtained.

 

 

On July 13, 2017, the Omega Board held a telephonic meeting with Mr. Johannesen, Mr. Held and representatives of V&E and J.P. Morgan participating to discuss an update on the status of Omega’s discussions with Cooke. A representative from V&E summarized the MARAD Approval requirements for foreign purchasers of U.S. fishing vessels and how those MARAD Approval requirements may affect the proposed transaction, including Cooke’s demand to request confirmation from MARAD prior to executing a definitive merger agreement. A representative from V&E summarized the key terms of the draft merger agreement that Omega distributed to Cooke, as well as the manner in which certain key unresolved issues were addressed in the revised agreement.

 

On July 14, 2017, K&L Gates LLP, maritime counsel to Cooke, submitted a letter on behalf of Cooke to MARAD requesting confirmation by July 28, 2017 that upon consummation of the transactions contemplated by the merger agreement and the MARAD Sale Agreement, the applicable fishing vessels would continue to be eligible for documentation with a fishery endorsement required by the Jones Act.

 

At the Omega Board ’s status update call on July 20, 2017, Omega management and representatives from V&E updated the Omega Board on the status of various open issues. After deliberation, the Omega Board instructed Mr. Scholtes and Mr. Goodwin to continue to press for Cooke to increase the $22 per share proposed purchase price. During the call representatives of J.P. Morgan presented an update on the status of the human nutrition sales process, noting that discussions were ongoing with three bidders for the Bioriginal Food & Science and Cyvex businesses. Mr. Scholtes updated the Omega Board that one proposal for the WSP business remained that Omega management considered sufficiently attractive to merit further consideration.

 

On July 24, 2017, following the expiration of the exclusivity period, Mr. Scholtes and Mr. Goodwin met with Potential Buyer C in person to discuss a potential transaction and requested a formal indication of interest. Potential Buyer C did not deliver a formalized offer or indicate a proposed purchase price to Omega following the meeting. During the first week of August 2017, Mr. Held and Potential Buyer C’s General Counsel and outside counsel negotiated the terms of the confidentiality agreement to the point where it was completed on August 4, 2017, at which time Mr. Held transmitted a copy of such agreement signed by Omega to Potential Buyer C. Potential Buyer C never responded to subsequent requests for status updates and never returned an executed confidentiality agreement. Accordingly, Omega never shared any confidential information with Potential Buyer C or engaged in any further substantive discussions.

 

On August 10, 2017, the Omega Board held a telephonic meeting with Mr. Johannesen, Mr. Held and representatives of V& E and J.P. Morgan participating. During that meeting the Omega Board discussed the potential transaction with Cooke, including the proposed $22 per share purchase price relative to the current, historical and potential future Omega stock prices as well as Omega’s current projections, the current financial performance and position of Omega, future financial and operating forecasts, and other strategic alternatives. Mr. Held and Mr. Johannesen were excused from the meeting. Based on the discussion and preliminary information presented by representatives of J.P. Morgan, the Omega Board determined that the potential transaction could be viewed as attractive at $22 per share, but that the Omega Board would instruct management to continue to negotiate for a higher purchase price. The Omega Board also discussed strategic considerations related to the ongoing review process of the human nutrition business, including whether to continue the process in parallel with negotiations with Cooke or to include the human nutrition business in a business combination with Cooke. Management updated the Omega Board on the status of the financing efforts of Cooke, including the role of BMO as a potential financing source. The Omega Board considered the potential conflicts and risks presented by BMO’s role as a financing source for Cooke in connection with the proposed transaction and concluded that, by virtue of the limitations on the use of Omega’s confidential information agreed to in Omega’s engagement letter with BMO regarding the potential disposition of WSP, it would not to object to BMO’s role as a financing source for Cooke. The compensation committee of the Omega Board reported that they had discussed various management compensation and related issues that might arise in connection with a potential transaction, as well as certain employee matters that were subject to negotiation in the draft merger agreement. The compensation committee of the Omega Board further reported, based in part on management’s recommendation, that the existing executive employment agreements should be harmonized so that those without a constructive termination provision be amended to include a customary constructive termination provision in connection with entering into any definitive agreement relating to a merger or business combination of Omega. The compensation committee determined that it was in Omega’s best interests to approve such amendments because Omega would need a mechanism to retain key executives during the time between announcement of a transaction and closing.

 

On August 15, 2017, Mr. Held, Mr. Johannesen, representatives of Cooke, KDW, V&E and J.P. Morgan had an in-person meeting at V& E’s offices in Houston, Texas to discuss the terms of the proposed transaction, including the merger agreement, as well as open diligence issues, Cooke’s financing plan and the ongoing review process for the human nutrition business. At the meeting, Mr. Held and Mr. Johannesen reiterated that the $22 per share offer would need to be increased.

 

At its regularly scheduled update call on August 17, 2017, Mr. Held, Mr. Johannesen and representatives of V&E and J.P. Morgan updated the Omega Board on the resul ts of the August 15, 2017 in-person meeting with Cooke and KDW. The Omega Board used the opportunity to discuss and ask questions regarding Cooke’s financing efforts and the status of such efforts, the process and risks surrounding MARAD Approval and certain of the material terms of the merger agreement. The Omega Board reiterated to management that it had not determined whether the $22 per share offer was sufficient and instructed management to continue to negotiate for a higher purchase price.

 

 

On August 28, Mr. Scholtes met with Mr. Cooke and Mr. Leonard Stewart, Executive Vice President of Cooke, at Cooke Seafood USA, Inc. ’s offices in Suffolk, Virginia, to discuss outstanding issues in the merger agreement. Mr. Scholtes stressed to Mr. Cooke and Mr. Stewart that the Omega Board had not indicated that the $22 per share offer would be accepted and that a potential transaction would be more attractive to the Omega Board at a higher purchase price.  

 

On September 7, 2017 the Omega Board held a telephonic meeting. Mr. Johannesen, Mr. Held and representatives of V&E and J.P. Morgan participated in the meeting. Management updated the Omega Board on the status and open issues remaining in the merger agree ment and ancillary documents, analysis of regulatory approvals and consents and of the pending response from MARAD to the confirmation request submitted on July 14, 2017. The Omega Board also discussed Mr. Held’s, Mr. Scholtes’ and Mr. Johannesen’s recent conversation with the BMO team that was assisting with the financing for Cooke, and the perspective of representatives of J.P. Morgan’s on Cooke’s committed financing. The Omega Board reiterated its instruction to management to continue to negotiate for a higher purchase price and to not indicate any acceptance of the $22 per share offer. A representative from V&E reviewed the draft of the merger agreement, highlighting the material open issues.

 

From September 11, 2017 to September 29, 2017, KDW and V&E, on behalf of their respective clients discussed, negotiated and revised the merger agreement and ancillary agreements by telephone and electronic communication. During this period , Omega also provided additional diligence information and drafts of certain of the disclosure schedules under the merger agreement to Cooke or its representatives.

 

On September 24 and 25, 2017, the Omega Board held its regularly scheduled, in-person quarterly meeting at which Omega management participated. The Omega Board discussed the human nutrition business and strategic paths to drive shareholder value. Mr. Scholtes noted that one bidder remained under consideration in each sales process, but each was subject to financing risks and other uncertainties to closing and lower than originally proposed purchase prices. The Omega Board determined to continue discussions with potential buyers, but that the human nutrition sales process should not delay a potential transaction with Cooke. Omega management, except for Mr. Scholtes and Mr. Held, were excused from the meeting and a representative from V&E joined the meeting to review and answer questions regarding the remaining open material items in the draft merger agreement, MARAD Sale Agreement and other ancillary documents. After responding to the board members questions, the V&E representative and Mr. Held were excused from the meeting and the Omega Board continued to discuss the benefits and risks of the proposed Cooke merger transaction compared to Omega’s existing business plan or other potential transactions until its adjournment for the evening. Upon the Omega Board’s reconvening the next morning, they continued to discuss the various options and how best to create or enhance stockholder value. After the discussion, the Omega Board reached a consensus on its desired response to Cooke’s latest proposal and asked Mr. Goodwin to instruct V&E to prepare and deliver a letter to KDW outlining the board’s counter proposal with respect to each of the open material items and proposing merger consideration of $23.25 per share of Common Stock. The Omega Board also evaluated how to bring the discussion to a conclusion and its alternatives if the parties could not agree on material open terms. Following the meeting, Mr. Goodwin requested V&E prepare a letter for KDW on the terms determined by the Omega Board and on September 27, 2017, V&E delivered such letter by email to KDW.

 

On September 29, 2017, K&L Gates LLP received preliminary confirmation from MARAD that, in response to its letter dated July 14, 2017, and subsequent correspondence, upon consummation of the transactions described in such letter and correspondence (including the merger and the transactions contemplated by the MARAD Sale Agreement), the applicable fishing vessels would continue to be eligible for documentation with a fishery endorsement required under the Jones Act. Also on September 29, 2017, representatives from KDW and V&E discussed by phone the open issues in the transaction documents summarized by V&E in its September 27, 2017 letter.

 

On October 2, 2017, V&E delivered a revised draft merger agreement and draft MARAD Sale Agreement to KDW and Cooke. Later that evening, KDW delivered a further revised draft merger agreement to V&E and Omega together with an email outlining their proposal with respect to each of the open business issues. In its revised draft, Cooke agreed to Omega’s proposal that both the reverse termination fee payable by Cooke and the termination fee payable by Omega would be $20 million. Cooke reiterated its offer of $22 per share of Common Stock and did not respond in the revised draft to Omega’s proposal to increase the merger consideration to $23.25 per share of Common Stock.

 

 

On October 3, 2017 and October 4, 2017, management of Cooke and Omega and their respective counsel discussed the remaining open issues and exchanged revised drafts of the documents. That afternoon, Omega distributed near final versions of agreements, as well as a summary of the terms of the transaction and open points to the Omega Board for their review and consideration. Also on October 4, 2017, Mr. Goodwin called Mr. Cooke and again requested that Cooke increase its offer above $22 indicating that he was unsure if the Omega Board would approve a transaction at that price level. Mr. Cooke, citing Omega’s declining 2017 operating results and market prices for fish meal and fish oil as compared to results and market prices in the prior year, as well as increased financing costs, said that $22 was the highest price Cooke would pay and it would not increase its offer.

 

On the morning of October 5, 2017, the Omega Board held a telephonic meeting to discuss the outcome of negotiations with Cooke and the term s of the proposed transaction. A representative of Holland & Hart LLP, Nevada counsel to Omega, reviewed with the Omega Board their fiduciary duties in connection with the consideration of the proposed transaction with Cooke. Representatives of V&E described, and the Omega Board discussed, the terms of the final merger agreement, MARAD Sale Agreement, financing documents and ancillary agreements, each of which had been distributed to the Omega Board prior to the meeting. Representatives of J.P. Morgan then reviewed with the Omega Board its financial analysis of the merger consideration provided for in the merger agreement and delivered to the Omega Board its oral opinion, which was confirmed by delivery of a written opinion dated October 5, 2017, to the effect that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing the opinion, the merger consideration to be paid to the holders of Common Stock in the proposed merger, was fair, from a financial point of view, to such stockholders, as more fully described below in the section “Opinion of Omega’s Financial Advisor Regarding the Merger Consideration” beginning on page 38 of this proxy statement.

 

Following discussion, and after considering the foregoing and the interests of the members of the Omega Board and management in the potential transaction that are described in “ The Merger—Interests of Omega’s Executive Officers and Directors in the Merger,” including the factors described under “Reasons for the Merger and the Recommendation of The Omega Board,” the Omega Board unanimously adopted resolutions (i) adopting, approving, declaring advisable and authorizing the merger agreement and the transactions contemplated thereby, including the merger, (ii) directing that the merger be submitted to the stockholders of Omega for approval at a meeting of such stockholders and (iii) recommending that stockholders of Omega approve the merger and the merger agreement, compensation that may or will become payable to our named executive officers in connection with the merger and all other actions or matters necessary or advisable to give effect to the merger and merger agreement pursuant to the Nevada Revised Statutes.

 

After the Omega Board meeting concluded, Mr. Goodwin and Mr. Scholtes called Mr. Cooke and told him that the Omega Board had approved the proposed transaction under the terms set out in the merger agreement and related agreements, including the $22 price subject to Cooke’s providing evidence of committed financing sufficient to pay the aggregate merger consideration and expenses of the transaction. Late that evening, Omega, Cooke and Merger Sub executed and delivered to each other the definitive merger agreement, VesselCo Holdings and Omega executed and delivered the definitive MARAD Sale Agreement and Cooke provided copies of executed financing commitments and credit facilities. On October 6, 2017, Omega and Cooke issued a joint press release announcing the transaction.   As noted above, upon announcement of the transaction with Cooke, the standstill provisions in the confidentiality agreement with Buyer B automatically terminated.  In addition, the standstill provisions in all but three of the 20 confidentiality agreements entered into in connection with the Initial Strategic Review, including those of the initial bidders in the Initial Strategic Review, have expired and are no longer in effect. As of the date of this proxy statement, none of the parties to the three confidentiality agreements with standstill provisions still in effect has ever made any proposal related to a business combination or other transaction.

 

In August 2015, Wynnefield Capital Management, LLC (“ Wynnefield Capital”) first publicly disclosed through a Schedule 13D filing that it owned beneficially more than 5% of Omega’s outstanding common stock.  In August 2016, Wynnefield Capital filed an amendment to its Schedule 13D disclosing that it had ceased be a beneficial owner of 5% or more of Omega’s outstanding common stock.  The Omega Board and its members did not have any communications with representatives of Wynnefield Capital regarding any transactions being considered as part of the Initial Strategic Review or the 2017 Strategic Review or in connection with its evaluation and negotiation of the transaction with Cooke.  

 

Reasons for the Merger and the Recommendation of The Omega Board

 

At a mee ting of the Omega Board held on October 5, 2017, the Omega Board approved, adopted, declared advisable and authorized in all respects the merger agreement and the transactions contemplated thereby, including the merger. The Omega Board unanimously recommends that the stockholders of Omega vote “FOR the approval and adoption of the merger, the merger agreement and all other actions or matters necessary or desirable to give effect to the foregoing pursuant to the NRS.

 

 

In the course of reaching its decision, the Omega Board consulted with our senior management and our financial and legal advisors, reviewed a significant amount of information and considered a number of factors, including, among others:

 

 

Merger Consideration . The Omega Board considered the $22.00 per share in cash to be paid as merger consideration. Specifically, the Omega Board considered:

 

 

the fact that the $ 22.00 per share in cash to be paid as merger consideration represented a 32.9% premium to $16.55, the closing price of the Common Stock on October 4, 2017, the last trading day prior to the approval of the merger by the Omega Board;

 

 

the belief of the Omega Board that the $22.00 per share in cash to be paid as merger consideration was the highest price per share that Cooke was willing to agree to pay, and the views of our board of directors as to the likelihood that any third party would be willing to pay more to acquire Omega on the same or substantially similar terms;

 

 

the fact tha t the $22.00 per share in cash to be paid as merger consideration represents a premium of approximately 33.3% to the volume-weighted average trading price of $16.51 for the 90-day period ended October 4, 2017; and

 

 

the fact that the merger consideration would be paid solely in cash, without a financing contingency, which compared to non-cash consideration, provides certainty and immediate liquidity and value to our stockholders, in each case upon and assuming closing of the merger.

 

 

Omega ’s current condition and future prospects . The Omega Board considered information with respect to our financial condition, results of operations, business, competitive position and business strategy on a historical and prospective basis, as well as current industry, economic and market conditions and trends. The Omega Board also considered the potential future value of Omega, together with the risks associated with continued independence discussed above, as compared to the value of the merger consideration.

 

 

Possibility of more favorable bid . The Omega Board considered its assessment as to the possibility that a third party with the financial means would agree to a transaction at a higher price than Cooke on similar or more favorable terms, given Omega’s historical discussions with prospective counterparties and the nature of such discussions, as more fully described in “The Merger—Background of the Merger.”

 

 

Opinion of Omega ’s Financial Advisor . The Omega Board considered the oral opinion of J.P. Morgan, which was confirmed by delivery of a written opinion dated October 5, 2017, to the effect that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morgan in preparing the opinion, the merger consideration to be paid to the holders of Common Stock in the proposed merger was fair, from a financial point of view, to such stockholders, as more fully described below under the caption “Opinion of Omega’s Financial Advisor Regarding the Merger Consideration” beginning on page 38 of this proxy statement. The full text of the written opinion of J.P. Morgan, dated October 5, 2017, which sets forth, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken in rendering the opinion, is attached as Annex C to this proxy statement.

 

 

Characteristics of Cooke . The Omega Board considered the business reputation and capabilities of Cooke and its management, Cooke’s experience executing acquisitions (including of U.S.-based businesses), Cooke’s commitment to its growth strategy, the resources available to Cooke to complete the merger and the commercial incentives and motivations of Cooke to timely obtain all necessary regulatory approvals and complete the merger. The Omega Board also considered the culture and management of Cooke and that the merger would combine two highly-regarded, long-standing companies in the global fishing and seafood industry with complementary cultures and traditions of operating in small, coastal towns.

 

 

Financing . The Omega Board considered the terms of the Financing Facility provided to Cooke in connection with the merger together with the financial capabilities and reputation of the financing sources.

 

 

Likelihood of consummation . The Omega Board considered the likelihood that the merger would be completed in light of, among other things, the conditions to the merger and the absence of a financing condition, the absence of any condition related to the receipt of third party commercial consents or approvals, the relative likelihood of obtaining required regulatory approvals and the remedies available to us under the merger agreement in the event of various breaches by Cooke.

 

 

 

Cooke ’s representation regarding financial resources. Cooke’s representation that it will have sufficient financial resources to pay the merger consideration and consummate the merger, and the remedies available to us under the merger agreement in the event of various breaches by Cooke.

 

 

Merger Agreement . The Omega Board considered the terms of the merger agreement, including:

 

 

the representations, warranties and covenants of the parties to the merger agreement, the conditions to the parties’ obligations to complete the merger and their ability to terminate the merger agreement;

 

 

Cooke ’s undertakings in furtherance of obtaining required regulatory approvals and the fact that the consummation of the merger agreement is (i) conditioned on obtaining HSR and foreign anti-trust approval and MARAD Approval (on October 30, 2017, U.S. antitrust authorities notified Omega and Cooke that early termination of the waiting period under the HSR Act had been granted), as further described in “The Merger—Regulatory Matters” and (ii) not conditioned on obtaining the consent of any third party under commercial agreements;

 

 

the obligation of Cooke under certain circumstances to pay us a regulatory termination fee of $20 million;

 

 

the right of Omega and its board of directors to respond to a competing proposal from any bidder, subject to certain restrictions and the requirement that we pay Cooke a termination fee of $20 million if we terminate the merger agreement pursuant to the Superior Proposal termination right;

 

 

the belief of the Omega Board that, although the no solicitation covenant and termination fee provisions might have the effect of discouraging competing third-party proposals or reducing the price of such proposals, such provisions are customary for transactions of this size and type, and its belief that the $20 million termination fee, representing approximately 4% of the equity value of the transaction, was reasonable in the context of comparable transactions, particularly given the discussions with other potential bidders that we held in advance of the execution of the merger agreement, as more fully described in “The Merger—Background of the Merger”; and

 

 

the right of the Omega Board to make an Adverse Recommendation Change, subject to certain restrictions, in connection with a superior proposal or other circumstances in which the Omega Board determines the failure to do so would be inconsistent with its fiduciary duties under applicable law.

 

 

Current economic and political conditions . The Omega Board considered the current state of the economy, debt financing markets, political climate and general uncertainty surrounding forecasted economic and political conditions, both in the near term and the long term, and both generally and within our industry.

 

In the course of reaching its decision, the Omega Board also considered a number of potentially negative factors including, among others, the following:

 

 

Risks associated with announcement and pendency of the Merger . The Omega Board considered the risk that the announcement and pendency of the merger, including the restrictions on the conduct of our business, may cause substantial harm to relationships with our employees, agents, customers and partners and may divert management and employee attention away from the day-to-day operation of our business. The Omega Board also considered the possibility that the time period between the signing of the merger agreement and the closing of the merger could be significant due to the expected time necessary to obtain required regulatory approvals, which enhances those risks.

 

 

 

Risks associated with a failure to consummate the Merger . The Omega Board considered the fact that there can be no assurance that all conditions to the parties’ obligations to consummate the merger will be satisfied, and, as a result, the possibility that necessary regulatory approvals may be delayed, conditioned or denied and that the merger might not be completed, and further noted that these risks may be heightened due to the requirement of MARAD Approval. The Omega Board noted the fact that, if the merger is not completed:

 

 

we will have incurred significant risk and transaction and opportunity costs, including the possibility of disruption to our operations, diversion of management and employee attention, employee attrition and a potentially negative effect on our business and agent and customer relationships;

 

 

no Regulatory Termination Fee would be payable by Cooke if certain regulatory approvals, other than HSR, foreign antitrust or MARAD Approval, were not satisfied and certain other conditions have been satisfied or waived;

 

 

depending on the circumstances that caused the merger not to be completed, it is likely that the price of the Common Stock would decline significantly; and

 

 

the market ’s perception of our prospects could be adversely affected.

 

 

Financing risk . The Omega Board considered the risk that, while the merger agreement is not by its terms subject to a financing condition, if Cooke fails to obtain sufficient financing, the merger may not be consummated.

 

 

Merger Agreement . The Omega Board considered the terms of the merger agreement, including:

 

 

the restrictions on the conduct of our business prior to the completion of the merger, which could delay or prevent us from realizing certain business opportunities or taking certain actions with respect to our operations we would otherwise take absent the pending merger;

 

 

provisions that preclude us from actively soliciting alternative proposals to the merger; and

 

 

the requirement that, if the merger agreement is terminated under certain circumstances, including by Omega to accept a Superior Proposal, Omega would be obligated to pay a $20 million termination fee to Cooke, which might have the effect of discouraging alternative acquisition proposals or reducing the price of such proposals.

 

 

Tax treatment . The Omega Board considered the fact that an all cash transaction generally would be a taxable transaction to Omega’s stockholders for U.S. federal income tax purposes.

 

 

Participation in future gains . The Omega Board considered the fact that Omega will no longer exist as an independent public company and Omega’s stockholders will forgo any future increase in Omega’s value that might result from our earnings or possible growth.

 

 

Risk factors . The Omega Board considered other risks and uncertainties including those listed above in the section entitled “Cautionary Note Regarding Forward-Looking Statements.”

 

While the Omega Board considered potentially positive and potentially negative factors, the Omega Board concluded that, overall, the potentially positive factors outweighed the potentially negative factors. Accordingly, the Omega Board unanimously approved, adopted, declared advisable and authorized in all respects the merger agreement and the transactions contemplated thereby, including the merger.

 

The foregoing discussion is not intended to be an exhaustive list of the information and factors considered by the Omega Board in its consideration of the merger, but is merely a summary of the material positive factors and material negative factors considered by the Omega Board in that regard. In view of the number and variety of factors and the amount of information considered, the Omega Board did not find it practicable to make specific assessments of, quantify, or otherwise assign relative weights to the specific factors considered in reaching its determination. In addition, the Omega Board did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to its ultimate determination, and individual members of the Omega Board may have given different weights to different factors. Based on the totality of the information presented, the Omega Board collectively reached the unanimous decision to adopt, approve, declare advisable and authorize in all respects the merger agreement and the transactions contemplated thereby, including the merger, in light of the factors described above and other factors that the members of the Omega Board felt were appropriate.

 

 

When you consider the Omega Board’s recommendation, you should be aware that Omega’s directors may have interests in the merger that may be different from, or in addition to, the interests of Omega’s stockholders generally. These interests are described in the section entitled “The Merger—Interests of Omega’s Executive Officers and Directors in the Merger.”

 

This explanation of Omega’s reasons for the merger and other information presented in this section is forward-looking in nature and, therefore, should be read in light of the section entitled “Cautionary Note Regarding Forward-Looking Statements.”

 

Opinion of Omega’s Financial Advisor Regarding the Merger Consideration

 

Pursuant to an engagement letter dated May 18, 2017, Omega retained J.P. Morgan as its financial advisor in connection with the proposed merger .

 

At the meeting of the Omega Board on October 5, 2017, J.P. Morgan rendered its oral opinion to the Omega Board that, as of such date and based upon and subject to the assumptions made, procedures followed, matters considered and limitations on the review undertaken by J.P. Morga n in preparing the opinion, the merger consideration to be paid to holders of Common Stock in the proposed merger was fair, from a financial point of view, to such stockholders. J.P. Morgan has confirmed its October 5, 2017 oral opinion by delivering its written opinion to the Omega Board, dated October 5, 2017, that, as of such date, the merger consideration to be paid to the holders of Common Stock in the proposed merger was fair, from a financial point of view, to such stockholders.

 

The full text of the written opinion of J.P. Morgan dated October 5, 2017, which sets forth the assumptions made, procedures followed, matters considered and limits on the review undertaken, is attached as Annex C to this proxy statement and is incorporated herein by reference. The summary of the opinion of J.P. Morgan set forth in this proxy statement is qualified in its entirety by reference to the full text of such opinion. Omega ’s stockholders are urged to read the opinion in its entirety. J.P. Morgan’s written opinion was addressed to the Omega Board (in its capacity as such) in connection with and for the purposes of its evaluation of the proposed merger, was directed only to the merger consideration to be paid in the merger and did not address any other aspect of the merger. J.P. Morgan expressed no opinion as to the fairness of the merger consideration to the holders of any other class of securities, creditors or other constituencies of Omega or as to the underlying decision by Omega to engage in the proposed merger. The issuance of J.P. Morgan’s opinion was approved by a fairness committee of J.P. Morgan. The opinion does not constitute a recommendation to any stockholder of Omega as to how such stockholder should vote with respect to the proposed merger or any other matter.

 

In arriving at its opinions, J.P. Morgan, amo ng other things:

 

 

reviewed the merger agreement;

 

 

reviewed certain publicly available business and financial information concerning Omega and the industries in which it operates;

 

 

compared the proposed financial terms of the merger with the publicly available financial terms of certain transactions involving companies J.P. Morgan deemed relevant and the consideration received for such companies;

 

 

compared the financial and operating performance of Omega with publicly available information concerning certain other companies J.P. Morgan deemed relevant and reviewed the current and historical market prices of Common Stock and certain publicly traded securities of such other companies;

 

 

reviewed certain internal financial analyses and forecasts prepared by the management of Omega relating to its business; and

 

 

 

performed such other financial studies and analyses and considered such other information as J.P. Morgan deemed appropriate for the purposes of its opinion.

 

In addition, J.P. Morgan held discussions with certain members of the management of Omega with respect to certain aspects of the merger, and the past and current business operations of Omega, the financial condition and future prospects and operations of Omega and certain other matters J.P. Morgan believed necessary or appropriate to its inquiry.

 

In giving its opinion, J.P. Morgan relied upon and assumed the accuracy and completeness of all information that was publicly available or was furnished to or discussed with J.P. Morgan by Omega or otherwise reviewed by or for J.P. Morgan, and J.P. Morgan did not independently verify (and did not assume responsibility or liability for independently verifying) any such information or its accuracy or completeness. J.P. Morgan did not conduct or was not provided with any valuation or appraisal of any assets or liabilities, nor did J.P. Morgan evaluate the solvency of Cooke or Omega under any state or federal laws relating to bankruptcy, insolvency or similar matters. In relying on financial analyses and forecasts provided to J.P. Morgan or derived therefrom, J.P. Morgan assumed that they were reasonably prepared based on assumptions reflecting the best currently available estimates and judgments by management as to the expected future results of operations and financial condition of Omega to which such analyses or forecasts relate. J.P. Morgan expressed no view as to such analyses or forecasts or the assumptions on which they were based. J.P. Morgan assumed that the merger and the other transactions contemplated by the merger agreement will be consummated as described in the merger agreement. J.P. Morgan also assumed that the representations and warranties made by Omega and Cooke in the merger agreement and the related agreements were and will be true and correct in all respects material to its analysis. J.P. Morgan is not a legal, regulatory or tax expert and relied on the assessments made by advisors to Omega with respect to such issues. J.P. Morgan further assumed that all material governmental, regulatory or other consents and approvals necessary for the consummation of the merger will be obtained without any adverse effect on Omega or on the contemplated benefits of the merger.

 

The projections furnished to J.P. Morgan for Omega were prepared by Omega management. Omega does not publicly disclose internal management projections of the type provided to J.P. Morgan in connection with J.P. Morgan ’s analysis of the merger, and such projections were not prepared with a view toward public disclosure. These projections were based on certain variables and assumptions that are inherently uncertain and may be beyond the control of management, including, without limitation, factors related to general economic and competitive conditions and prevailing interest rates. Accordingly, actual results could vary significantly from those set forth in such projections. J.P. Morgan did not consider or rely upon any projections prepared in connection with the potential disposition of the WSP business or any projections prepared in connection with the potential disposition of the Bioriginal Food & Science and Cyvex businesses.  For more information regarding the use of projections and other forward-looking statements, please refer to the section entitled “Unaudited Financial Projections of Omega” beginning on page 43 of this proxy statement.

 

J.P. Morgan ’s opinion was necessarily based on economic, market and other conditions as in effect on, and the information made available to J.P. Morgan as of, the date of such opinion. J.P. Morgan’s opinion noted that subsequent developments may affect J.P. Morgan’s opinion, and that J.P. Morgan does not have any obligation to update, revise, or reaffirm such opinion. J.P. Morgan’s opinion is limited to the fairness, from a financial point of view, of the merger consideration to be paid to the holders of Common Stock in the proposed merger, and J.P. Morgan has expressed no opinion as to the fairness of any consideration to the holders of any other class of securities, creditors or other constituencies of Omega or the underlying decision by Omega to engage in the merger. Furthermore, J.P. Morgan expressed no opinion with respect to the amount or nature of any compensation to any officers, directors, or employees of any party to the proposed merger, or any class of such persons relative to the merger consideration to be paid to the holders of Common Stock in the proposed merger or with respect to the fairness of any such compensation . J.P. Morgan expressed no opinion as to the price at which Common Stock will trade at any future time.

 

The terms of the merger agreement were determined through arm ’s length negotiations between Omega and Cooke, and the decision to enter into the merger agreement was solely that of the Omega Board. J.P. Morgan’s opinion and financial analyses were only one of the many factors considered by the Omega Board in its evaluation of the proposed merger and should not be viewed as determinative of the views of the Omega Board or Omega management with respect to the proposed merger or the merger consideration.

 

 

In accordance with customary investment banking practice, J.P. Morgan employed generally accepted valuation methodology in rendering its opinion to the Omega Board on October 5, 2017 and in the presentation delivered to the Omega Board on such date in connection with the rendering of such opinion . The following is a summary of the material financial analyses utilized by J.P. Morgan in connection with rendering its opinion to the Omega Board and does not purport to be a complete description of the analyses or data presented by J.P. Morgan. Some of the summaries of the financial analyses include information presented in tabular format. The tables are not intended to stand alone, and in order to more fully understand the financial analyses used by J.P. Morgan, the tables must be read together with the full text of each summary. Considering the data set forth below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of J.P. Morgan’s analyses.

 

Public Trading Multiples . Using publicly available information, J.P. Morgan compared selected financial data of Omega with similar data for selected publicly traded companies engaged in businesses which J.P. Morgan judged to be sufficiently analogous to the business of Omega or aspects thereof.

 

The companies selected by J.P. Morgan were as f ollows:

 

 

Marine Harvest ASA

 

Austevoll Seafood ASA

 

Stepan Company

 

Innophos Holdings, Inc.

 

Oceana Group, Ltd.

 

These companies were selected, among other reasons, because they are publicly traded companies with operations and businesses that, for purposes of J.P. Morgan ’s analysis, may be considered similar to those of Omega. However, certain of these companies may have characteristics that are materially different from those of Omega. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the selected companies differently than they would affect Omega.

 

Using publicly available information, J.P. Morgan calculated, for each selected company, the ratio of the company’s firm value (calculated as the market value of the company’s common stock on a fully diluted basis, plus any debt and minority interest, less unconsolidated investments and cash and cash equivalents) to the consensus equity research analyst estimate for the company’s EBITDA (calculated as earnings before interest, tax, depreciation and amortization) for the years ending December 31, 2017 (the “2017E FV/EBITDA”) and December 31, 2018 (the “2018E FV/EBITDA”).

 

Based on the results of this analysis, J.P. Morgan selected (1) multiple reference ranges for 2017E FV/EBITDA of 5.5x – 9.0x and (2) multiple reference ranges for 2018E FV/EBITDA of 5.0x – 8.0x.

 

After applying such ranges to the projected EBITDA for Omega for the year ending December 31, 2017 and the year ending December 31, 2018, based on projections provided by Omega management, the analysis indicated the following implied per share equity value ranges for Common Stock, rounded to the nearest $0.05:

 

   

Implied Per Share Equity Value

 
   

Low

   

High

 

2017E FV/EBITDA

  $ 15.55     $ 24.90  

2018E FV/EBITDA

  $ 14.45     $ 22.55  

 

 

The ranges of implied per share equity value for Common Stock were compared to Omega’s closing share price of $16.55 on October 4, 2017 and the proposed merger consideration of $22.00 per share of Common Stock.

 

 

Selected Transaction Analysis . Using publicly available information, J.P. Morgan reviewed selected transactions involving acquired businesses and assets that, for purposes of J.P. Morgan’s analysis, may be considered similar to Omega’s business or assets. Specifically, J.P. Morgan reviewed the following transactions:

 

Month/Year Announced

 

Acquiror

 

Target/Seller (Business/Division)

June 2017

 

Pelagia AS

 

FMC Corporation (Epax)

May 2015

 

Oceana Group, Ltd.

 

Daybrook Fisheries, Inc.

October 2013

 

Darling International Inc.

 

Vion Holding N.V. (Vion Ingredients)

November 2012

 

BASF SE

 

Pronova BioPharma ASA

August 2012

 

Royal DSM N.V.

 

Tortuga Companhia Zootécnica Agrária

May 2012

 

Royal DSM N.V.

 

Ocean Nutrition Canada

December 2010

 

Royal DSM N.V.

 

Martek Biosciences Corporation

 

 

None of the selected transactions reviewed was identical to the merger. However, the transactions selected were chosen because certain aspects of the transactions, for purposes of J.P. Morgan ’s analysis, may be considered similar to the merger. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the transactions differently than they would affect the merger.

 

Using publicly available information, J.P. Morgan calculated, for each selected transaction, the ratio of the transaction value to the target company ’s EBITDA for the twelve-month period prior to announcement of the applicable transaction (“TV/LTM EBITDA”).

 

Based on the results of this analysis, J.P. Morgan selected multiple ranges for TV/LTM EBITDA of 5.5x – 8.5x and applied them to the EBITDA of Omega for the year ended December 31, 2017. This analysis indicated the following implied per share equity value range, rounded to the nearest $0.05, for Common Stock:

 

   

Implied Per Share Equity Value

 
   

Low

   

High

 

TV/LTM EBITDA for the year ended December 31, 2017

  $ 15.55     $ 23.55  

 

 

The range of implied per share equity values for Common Stock was compared to Omega’s closing share price of $16.55 on October 4, 2017 and the proposed merger consideration of $22.00 per share of Common Stock.

 

Discounted Cash Flow Analysis . J.P. Morgan conducted a discounted cash flow analysis for the purpose of determining an implied fully diluted equity value per share for Common Stock. A discounted cash flow analysis is a method of evaluating an asset using estimates of the future unlevered cash flows generated by the asset and taking into consideration the time value of money with respect to those cash flows by calculating their “present value”. The “unlevered free cash flows” refers to a calculation of the future cash flows generated by an asset without including in such calculation any debt servicing costs. Specifically, unlevered free cash flow for this purpose represents EBITDA less taxes, capital expenditures and increases in net working capital, as applicable. “Present value” refers to the current value of the cash flows generated by the asset, and is obtained by discounting those cash flows back to the present using a discount rate that takes into account macro-economic assumptions and estimates of risk, the opportunity cost of capital and other appropriate factors. “Terminal value” refers to the present value of all future cash flows generated by the asset for periods beyond the projections period.

 

J.P. Morgan calculated the unlevered free cash flows that Omega is expected to generate for the three months ending December 31, 2017 and during fiscal years 2018 through 2026 based upon financial projections prepared by Omega management. J.P. Morgan also calculated a range of terminal values of Omega at the end of the period ending in 2026 by applying a perpetual growth rate ranging from 1.5% to 2.5% to the unlevered free cash flow of Omega during the terminal period of the projections. The unlevered free cash flows and the range of terminal values were then discounted to present values as of September 30, 2017 using a range of discount rates from 7.5% to 8.5%. This discount rate range was based upon J.P. Morgan’s analysis of the weighted-average cost of capital of Omega.

 

 

Based on the foregoing, this analysis indicated the following implied per share equity value range, rounded to the nearest $0.05, for Common Stock:

 

   

Implied Per Share Equity Value

 
   

Low

   

High

 

Discounted Cash Flow Analysis

  $ 18.75     $ 23.50  

 

 

The range of implied per share equity values for Common Stock was compared to Omega’s closing share price of $16.55 on October 4, 2017 and the proposed merger consideration of $22.00 per share of Common Stock.

 

Miscellaneous . The foregoing summary of certain material financial analyses does not purport to be a complete description of the analyses or data presented by J.P. Morgan. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. J.P. Morgan believes that the foregoing summary and its analyses must be considered as a whole and that selecting portions of the foregoing summary and these analyses, without considering all of its analyses as a whole, could create an incomplete view of the processes underlying the analyses and its opinion. As a result, the ranges of valuations resulting from any particular analysis or combination of analyses described above were merely utilized to create points of reference for analytical purposes and should not be taken to be the view of J.P. Morgan with respect to the actual value of Omega. The order of analyses described does not represent the relative importance or weight given to those analyses by J.P. Morgan. In arriving at its opinion, J.P. Morgan did not attribute any particular weight to any analyses or factors considered by it and did not form an opinion as to whether any individual analysis or factor (positive or negative), considered in isolation, supported or failed to support its opinion. Rather, J.P. Morgan considered the totality of the factors and analyses performed in determining its opinion.

 

Analyses based upon forecasts of future results are inherently uncertain, as they are s ubject to factors or events beyond the control of the parties and their advisors. Accordingly, forecasts and analyses used or made by J.P. Morgan are not necessarily indicative of actual future results, which may be significantly more or less favorable than suggested by those analyses. Moreover, J.P. Morgan’s analyses are not and do not purport to be appraisals or otherwise reflective of the prices at which businesses actually could be acquired or sold. None of the selected companies reviewed as described in the above summary is identical to Omega, and none of the selected transactions reviewed was identical to the merger. However, these companies were selected, among other reasons, because they are publicly traded companies with operations and businesses that, for purposes of J.P. Morgan’s analysis, may be considered similar to those of Omega. The transactions selected were similarly chosen because certain aspects of the transactions, for purposes of J.P. Morgan’s analysis, may be considered similar to the merger. The analyses necessarily involve complex considerations and judgments concerning differences in financial and operational characteristics of the companies involved and other factors that could affect the companies compared to Omega and the transactions compared to the merger.

 

As a part of its investment banking business, J.P. Morgan and its affiliates are continually engaged in the valuation of businesses and their securities in connection with mergers and acquisitions, investments for passive and control purposes, negotiated underwritings, secondary distributions of listed and unlisted securities, private placements, and valuations for corporate and other purposes. J.P. Morgan was selected to advise Omega with respect to the merger on the basis of, among other things, such experience and its qualifications, including J.P. Morgan’s familiarity with Omega from its engagement in connection with the 2017 Strategic Review and Initial Strategic Review, and reputation in connection with such matters and its familiarity with Omega and the industries in which it operates.

 

J.P. Morgan received a fee from Omega of $2.0 million at the time J.P. Morgan delivered its opinion. Omega has agreed to pay J.P. Morgan an additional fee of approximately $5.5 million upon the closing of the merger. J.P. Morgan may also receive a fee fro m Omega in the event that Omega receives a break-up fee in connection with the termination, or abandonment of the merger, or failure of the merger to occur. In addition, Omega has agreed to reimburse J.P. Morgan for its expenses incurred in connection with its services, including the fees and disbursements of counsel, and will indemnify J.P. Morgan against certain liabilities arising out of J.P. Morgan’s engagement. During the two years preceding the date of J.P. Morgan’s opinion, J.P. Morgan and its affiliates have not had any material commercial or investment banking relationships with Omega (other than in connection with the 2017 Strategic Review, the Initial Strategic Review, and as a lender under Omega’s credit facility). J.P. Morgan and its affiliates have never had any material commercial or investment banking relationships with Cooke. J.P. Morgan and its affiliates hold, on a proprietary basis, less than 1% of the outstanding common stock of Omega. In the ordinary course of their businesses, J.P. Morgan and its affiliates may actively trade the debt and equity securities or financial instruments of Omega for their own accounts or for the accounts of customers and, accordingly, they may at any time hold long or short positions in such securities or other financial instruments.

 

 

 

Unaudited Financial Projections of Omega

 

Omega does not usually make public detailed projections as to earnings or other results, due to, among other reasons, the unpredictability of the underlying assumptions and estimates inherent in preparing financial projections. However, the senior managem ent of Omega regularly prepares, for internal purposes, prospective financial information on a standalone basis for up to five years in connection with its ordinary course strategic planning. In connection with the 2017 Strategic Review, management prepared prospective financial information regarding Omega’s future performance for an additional five years (collectively, the “Omega Unaudited Financial Projections”). The Omega Unaudited Financial Projections were provided to the Omega Board and representatives of J.P. Morgan, as the financial advisor to Omega, in July 2017 to assist in evaluating Omega’s operations and prospects and the merger.

 

The prospective financial information included in this proxy statement has been prepared by, and is the responsibility of, Omega's management. PricewaterhouseCoopers LLP has neither audited, reviewed, examined, compiled nor applied agreed-upon procedures with respect to the accompanying prospective financial information and, accordingly, PricewaterhouseCoopers LLP does not express an opinion or any other form of assurance with respect thereto. This prospective financial information was not prepared with a view towards compliance with published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for the preparation or presentation of prospective financial information. The PricewaterhouseCoopers LLP report contained in this proxy statement relates to Omega's historical financial information. It does not extend to the prospective financial information and should not be read to do so. In the view of Omega’s management, this information was, based on certain growth assumptions, prepared on a reasonable basis, reflected the best available estimates and judgments at the time of its preparation, and presented, to the best of Omega’s management’s knowledge and belief, the expected course of action and the expected future financial performance of Omega on a standalone basis at the time of its preparation. However, this information is not fact and should not be relied upon as being indicative of future results and you are cautioned not to rely on the Omega Unaudited Financial Projections. The Omega Unaudited Financial Projections do not reflect any impact of the merger and do not take into account the potential consequences should the merger fail to be consummated, and should not be viewed as accurate or continuing in those contexts.

 

Neither Omega ’s independent auditors, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability. The reports of the independent registered public accounting firms contained in this proxy statement relate to the historical financial information of Omega. The reports do not extend to the unaudited financial projections and should not be read to do so.

 

In developing the Omega Unaudited Financial Projections, Omega ’s management made material assumptions with respect to Omega and its business for the periods covered by the projections, including, but not limited to, the following:

 

 

for years 2017 throu gh 2021, production volumes, sales volumes, prices, revenues, operating and other expenses from existing and anticipated business activities, which resulted in animal nutrition segment operating income that decreased in 2017 and 2018 (due primarily to below average 2017 production) and increased in subsequent years, and human nutrition segment operating income that increased each year;  

 

 

for years 2022 through 2026, the expected rate of change of revenues and expenses from prior years ’ projected amounts for existing and anticipated business activities;  

 

 

maintenance capital expenditure levels consistent with recent historical levels that grow modestly over time and remain relatively stable as a percentage of revenues;

 

 

with respect to 2017 organic growth projects, the amounts and timing of capital expenditures and production associated with such projects;

 

 

that Omega would not make any material acquisitions during the projected period;

 

 

that working capital level s would fluctuate proportionally with revenue and expenses, and in aggregate remain relatively stable as a percentage of revenues;

 

 

the demand for Omega ’s products;

 

 

the taxes we will incur in the various jurisdictions in which we operate; and

 

 

other general business and market assumptions, including with respect to fish catch and yields, and other regulatory and financial assumptions.

 

 

All of these assumptions involve variables making them difficult to predict, and most are beyond the control of Omega. Although Omega ’s management believes that there was a reasonable basis for the underlying assumptions related to the Omega Unaudited Financial Projections, the degree of uncertainty inherent in such assumptions and the risk the projections will differ materially from actual results increases with the length of the forecasted period.  For example, when preparing the projections for the periods after 2021, Omega’s management did not reevaluate the individual assumptions on which the projections for the annual periods through 2021 were based because Omega’s management believed that such reevaluation would not be meaningful considering the number of unknown factors and distant time.  Instead, for the periods after 2021, management simply estimated the rate of change in the items estimated for prior periods.  Management believed that its assumptions regarding the rate of change for such periods were reasonable considering the task of forecasting annual periods which are well into the future, but management also believes that such assumptions are inherently highly speculative. As a result, the Omega Unaudited Financial Projections for the years 2022 through 2026 are subject to an even greater degree of uncertainty than the Omega Unaudited Financial Projections for the earlier periods.

 

   

Year Ending December 31 ,

 
   

2017 E

   

2018 E

   

2019 E

   

2020 E

   

2021 E

   

2022 E

   

2023 E

   

2024 E

   

2025 E

   

2026 E

 
   

($ in millions )

 

Revenue

  $ 346     $ 351     $ 366     $ 376     $ 387     $ 398     $ 408     $ 418     $ 428     $ 437  

Operating Income

  $ 34     $ 34     $ 43     $ 45     $ 46     $ 47     $ 48     $ 49     $ 50     $ 51  

Adjusted EBITDA(1)

  $ 61     $ 62     $ 72     $ 74     $ 76     $ 77     $ 77     $ 78     $ 79     $ 80  

 


(1 )

“Adjusted EBITDA” for purposes of this table means earnings before interest expense, tax, depreciation and amortization, and Bioriginal acquisition post-closing consideration. Omega believes Adjusted EBITDA is a measure commonly reported and widely used by investors as an indicator of Omega's performance of its ongoing operations, and assists such investors in comparing a company's performance of its ongoing operations on a consistent basis. Adjusted EBITDA is a non-GAAP financial measure and should not be considered as an alternative to operating income or net income as a measure of operating performance or cash flows or as a measure of liquidity. Adjusted EBITDA does not include the impact of any potential synergies or costs related to the merger.

 

The following table provides a reconciliation of net income, the most directly comparable financial measure calculated in accordance with GAAP, to Adjusted EBITDA, a non-GAAP (Generally Accepted Accounting Principles) financial measure:

 

   

Year Ending December 31 ,

 
   

2017 E

   

2018 E

   

2019 E

   

2020 E

   

2021 E

   

2022 E

   

2023 E

   

2024 E

   

2025 E

   

2026 E

 
   

($ in millions )

 

Net Income

  $ 21     $ 22     $ 27     $ 28     $ 29     $ 30     $ 30     $ 31     $ 32     $ 32  

Reconciling items:

                                                                               

Interest expense(1)

    0       0       0       0       0       0       0       0       0       0  

Income tax provision

    12       12       16       17       17       17       18       18       18       19  

Depreciation and amortization

    27       28       29       29       30       30       29       29       29       29  

Acquisition post-closing consideration(2)

    1       0       0       0       0       0       0       0       0       0  

Adjusted EBITDA

  $ 61     $ 62     $ 72     $ 74     $ 76     $ 77     $ 77     $ 78     $ 79     $ 80  

 


(1)

The Omega Unaudited Financial Projections assumed no debt, as Omega had less than $2 million of debt as of June 30, 2017 and debt balances were not expected to increase during the projection period.

   
(2)

Acquisition post-closing consideration represents expense related to restricted stock issued as partial consideration for the 2014 acquisition of Bioriginal.

 

 

The estimates and assumptions underlying the Omega Unaudited Financial Projections are inherent ly uncertain and, though considered reasonable by Omega’s management as of the date of the preparation of such projections, are subject to a wide variety of significant business, economic, regulatory and competitive risks and uncertainties that are outside of the control of Omega and could cause actual results to differ materially from those contained in the Omega Unaudited Financial Projections, including, among other things, the matters described in the section entitled “Cautionary Note Regarding Forward-Looking Statements.” The risk that actual results could differ materially from those contained in the Omega Unaudited Financial Projections increases with the length of the forecasted period. Accordingly, there can be no assurance that the projections are indicative of the future performance of Omega, or that actual results will not differ materially from those presented in the Omega Unaudited Financial Projections, particularly for projections beyond 2021. Inclusion of the Omega Unaudited Financial Projections in this proxy statement should not be regarded as a representation by any person that the results contained in the Omega Unaudited Financial Projections will be achieved.  In light of the foregoing factors and the uncertainties inherent in the Omega Unaudited Financial Projections, Omega’s stockholders are cautioned not to place undue, if any, reliance on the Omega Unaudited Financial Projections.

 

The inclusion of the Omega Unaudited Financial Projections in this proxy statement should not be regarded as an indication such projections are material information of Omega or predictive of actual future results nor should it be construed as financial guidance, and it should not be relied upon as such. The Omega Unaudited Financial Projections are not included in this proxy statement in order to induce any Omega stockholder to vote in favor of any of the proposals at the special meeting, but have been included solely because the Omega Unaudited Financial Projections were made available by Omega’s management to the Omega Board and representatives of J.P. Morgan, and the Omega Unaudited Financial Projections were used by representatives of J.P. Morgan in connection with the rendering of its fairness opinion to the Omega Board and performing its related financial analyses, as described in the section entitled “The Merger—Opinion of Omega’s Financial Advisor Regarding the Merger Consideration.” Omega has made no representation to Cooke or Merger Sub in the merger agreement or otherwise, concerning the Omega Unaudited Financial Projections.

 

 

Interests of Omega ’s Executive Officers and Directors in the Merger

 

In considering the recommendation of our board of directors with respect to the merger agreement and the merger, you should be aware that our executive officers and directors have interests in the merger described below that may be different from, or in addition to, the interests of our stockholders generally. The Omega Board was aware of and considered these interests, among other matters, in making its determinations and recommendations in connection with the merger agreement and the transactions contemplated thereby. You should consider the interests of our directors and executive officers that are described in this proxy statement as well as the intent of such directors and officers to vote their shares in favor of the merger agreement and the transactions contemplated thereby, including the merger.

 

Consideration Payable for Shares Held Pursuant to the Merger Agreement

 

The executive officers and directors of Omega who hold Common Stock at the closing of the merger will be eligible to receive the same merger consideration as the other Omega stockholders with respect to each outstanding share of Common Stock held. The exe cutive officers and directors of Omega held, in the aggregate, 486,930 shares of Common Stock (or approximately 2.2% of all outstanding Common Stock) as of November 22, 2017, excluding shares issuable upon exercise of outstanding Omega Options or subject to outstanding Omega Restricted Stock, which are discussed below. Dr. Gary L. Allee was a member of our board of directors at the beginning of the fiscal year, but upon the termination of his term as a director prior to the filing of this proxy statement, he held no outstanding Omega Options or Omega Restricted Stock.

 

The table below sets forth the number of shares held by the executive officers and directors of Omega as of November 22, 2017, excluding Omega Options and Omega Restricted Stock, and the value (at $22.00 per share) they would receive for those shares upon consummation of the merger.

 

Name

 

Number of Shares

Owned

   

Consideration for Shares

Owned ($)

 

Directors

               

David A. Owen

    23,157     $ 509,454  

David H. Clarke

    3,171     $ 69,762  

David W. Wehlmann

    14,527     $ 319,594  

Gary R. Goodwin

    14,329     $ 315,238  

Michael N. Christodolou

    3,171     $ 69,762  

Stephen C. Bryan

    10,364     $ 228,008  

Dr. Celeste A. Clark

    0     $ 0  

Executive Officers

               

Bret D. Scholtes

    113,472     $ 2,496,384  

Dr. Mark E. Griffin

    64,033     $ 1,408,726  

John D. Held

    55,228     $ 1,215,016  

Joseph R. Vidal

    122,898     $ 2,703,756  

Andrew C. Johannesen

    46,248     $ 1,017,456  

Mark. A. Livingston

    2,192     $ 48,224  

Montgomery C. Deihl

    14,080     $ 309,760  

 

Treatment of Outstanding Equity and Long-Term Incentive Awards

 

Under the merger agreement, outstanding Omega Options and Omega Restricted Stock held by all award holders, including Omega ’s executive officers and directors, will be converted into the right to receive the option consideration and the merger consideration, respectively, subject to applicable tax withholding.

 

Omega Options . As described in “The Merger Agreement—Treatment of Equity Awards,” unless otherwise agreed to in writing with the holder, each outstanding Omega Option, granted under Omega’s 2006 Incentive Plan or its 2015 Long-Term Incentive Plan (the “Omega Stock Plans”) will be converted into a cash payment (subject to any applicable tax withholding) equal to the option consideration.

 

 

The merger consideration is equal to $22.00 per share of Common Stock. Any Omega Option with an exercise price equal to or greater than the merger consideration will be cancelled without consideration. As of November 22, 2017, Mr. Scholtes was the only ex ecutive officer who held Omega Options that have exercise prices less than $22.00, and he held the following numbers of outstanding Omega Options, all of which were vested as of the date of this proxy statement.

 

   

Vested Options

   

 

 

Name

 

Number of Vested Omega

Options Outstanding

   

Exercise Price Per

Share

   

Cash Spread Value of

Vested Stock Options

   

Total Option Cash

Spread Value

 

Bret D. Scholtes

    100,000     $ 6.39     $ 15.61     $ 1,561,000  
      200,000     $ 7.07     $ 14.93     $ 2,986,000  

 

Omega Restricted Stock . As described in “The Merger Agreement—Treatment of Equity Awards,” immediately prior to the effective time of the merger, the restrictions applicable to each share of Omega Restricted Stock issued pursuant to the Omega Stock Plans will immediately lapse, and, at the effective time, each share of such Omega Restricted Stock will be converted into the right to receive the merger consideration in accordance with the terms of the merger agreement.

 

As of November 22 , 2017, Omega’s executive officers held the following numbers of outstanding Omega Restricted Stock (expressed in shares of Common Stock):

 

Name

 

Aggregate Number of

Shares of Omega

Restricted Stock

   

Total Cash Value of

Converted Awards

 

Bret D. Scholtes

    31,707     $ 697,554  

Dr. Mark E. Griffin

    13,244     $ 291,368  

John D. Held

    13,244     $ 291,368  

Joseph R. Vidal

    7,843     $ 172,546  

Andrew C. Johannesen

    13,672     $ 300,784  

Mark A. Livingston

    4,032     $ 88,704  

Montgomery C. Deihl

    9,023     $ 198,506  

 

Payment and Accelerated Earning of Performance Units . Pursuant to the terms of Omega’s 2015 Cash Incentive Performance Unit Plan (the “2015 Plan”), its 2016 Cash Incentive Performance Unit Plan (the “2016 Plan”) and its 2017 Cash Incentive Performance Unit Plan (the “2017 Plan” and, together with the 2015 Plan and the 2016 Plan, the “Omega Plans”), each governing long-term cash incentive performance unit awards (“Performance Units”) held by our executive officers, upon a Change of Control (as defined in the applicable Omega Plan), which will occur at the effective time of the merger, outstanding Performance Units that have been earned for completed calendar years of the applicable performance period will be paid at their actual amounts earned for that completed calendar year, and for incomplete calendar years, the earning of the remaining Performance Units will be accelerated as of the effective time and valued at the target value of $1.00 per Performance Unit; provided, that, if the effective time of the merger occurs following the end of the 2017 calendar year, the amount earned for the completed 2017 calendar year will be deemed to be $1.00 per Performance Unit. Thus, Performance Units granted pursuant to the 2015 Plan will be earned at $1.26 per Performance Unit; Performance Units granted pursuant to the 2016 Plan will be earned at $0.93 per Performance Unit; and Performance Units granted pursuant to the 2017 Plan will be earned at $1.00 per Performance Unit.

 

As of November 22, 2017, Omega’s executive officers held the following Performance Units:

 

   

Performance Units

         

Name

 

Granted Pursuant to

the 2015 Plan

   

Granted Pursuant to

the 2016 Plan

   

Granted Pursuant to

the 2017 Plan

   

Total Performance

Unit Value

 

Bret D. Scholtes

    302,500       330,000       302,500     $ 989,450  

Dr. Mark E. Griffin

    130,000       130,000       130,000     $ 414,267  

John D. Held

    130,000       130,000       130,000     $ 414,267  

Joseph R. Vidal

    71,100       90,000       107,800     $ 280,786  

Andrew C. Johannesen

    130,000       136,000       136,000     $ 425,827  

Mark A. Livingston

          40,000       40,000     $ 77,067  

Montgomery C. Deihl

    67,500       82,500       110,000     $ 271,500  

 

 

Non-Employee Director Equity Awards

 

Stock Options. Three of our non-employee directors, Messrs. Owen, Wehlmann and Goodwin, hold Omega Options as of the date of this proxy statement, all of which are vested.

 

Any Omega Option with an exercise price equal to or greater than the merger consideration will be cancelled without consideration as of the effective time of the merger. As of November 22, 2017, Messrs. Owen, Wehlmann and Goodwin were the only non-employee directors who held Omega Options that have exercise prices less than $22.00, which would be converted into the right to receive a cash payment equal to the option consideration immediately prior to the effective time, and they held the following numbers of outstanding Omega Options:

 

   

Vested Options

         

Name

 

Number of Vested

Stock Options

   

Exercise Price Per

Share

   

Cash Spread Value of

Vested Stock Options

   

Total Option Cash

Spread Value

 

David A. Owen

    10,000     $ 13.41     $ 8.59     $ 85,900  
      10,000     $ 6.53     $ 15.47     $ 154,700  

David W. Wehlmann

    10,000     $ 6.53     $ 15.47     $ 154,700  
      14,200     $ 7.74     $ 14.26     $ 202,492  

Gary R. Goodwin

    10,000     $ 13.41     $ 8.59     $ 85,900  
      10,000     $ 6.53     $ 15.47     $ 154,700  

 

Omega Restricted Stock . As described in “The Merger Agreement—Treatment of Equity Awards,” immediately prior to the effective time of the merger, the restrictions applicable to each share of Omega Restricted Stock issued pursuant to the Omega Stock Plans, at the effective time of the merger, will immediately lapse and each share of such Omega Restricted Stock will be converted into the right to receive the merger consideration in accordance with the terms of the merger agreement.

 

As of November 22 , 2017, Omega’s non-employee directors held the following numbers of outstanding Omega Restricted Stock (expressed in shares of Common Stock):

 

Name

 

Aggregate Number of

Shares of Omega

Restricted Stock

   

Total Cash Value of

Converted Awards

 

Gary R. Goodwin

    3,374     $ 74,228  

David W. Wehlmann

    3,374     $ 74,228  

David A. Owen

    3,374     $ 74,228  

Stephen C. Bryan

    3,374     $ 74,228  

Michael N. Christodolou

    3,374     $ 74,228  

David H. Clarke

    3,374     $ 74,228  

Dr. Celeste Clark

    3,374     $ 74,228  

 

Compensation and Benefits Arrangements Post-Closing

 

Under the merger agreement, Cooke has agreed to provide, or cause to be provided, to all continuing employees, for eleven months after the effective time of the merger, the following: (i) base salary or regular hourly rate of pay (as applicable) at least as favorable as the base salary or regular hourly rate of pay that such continuing employee received immediately prior to the effective time of the merger, and (ii) medical, dental and welfare benefits that in the aggregate are at least as favorable as the medical, dental and welfare benefits, exclusive of equity grants under Omega ’s employee benefit plans, provided to such continuing employee immediately prior to the effective time of the merger. Notwithstanding the foregoing, for at least eleven months after the effective time, Cooke will cause the surviving corporation to provide severance benefits to each continuing employee then eligible to participate in the employee severance benefits plan who is terminated during such period at least as favorable to those provided in the employee severance benefits plan, in accordance with the terms and conditions of such plan.

 

 

2017 Annual Bonus

 

Under the merger agreement, Cooke has agreed to pay, or cause to be paid, to each continuing employee (i) employed by the surviving corporation as of the date such bonus is paid or (ii) whose employment was terminated without cause by the surviving corporation, an annual bonus for 2017 in an amount calculated in the manner agreed upon in connection with negotiation of the merger within 60 days of the end of the year; provided , that, in the event a continuing employee is terminated without cause by the surviving corporation prior to the date that such bonus is paid, such amount will be pro-rated for the number of days in 2017 that such continuing employee was employed by Omega or the surviving corporation.

 

Severance Arrangements

 

Omega provides severance benefits to substantially all of its employees, the intended benefits of which are to provide financial protection in the event of a qualifying termination of employment event. Each of the executive officers has entered into an employment agreement with Omega (or Bioriginal in the case of Mr. Vidal), providing for severance benefits upon certain defined termination events, including heightened severance benefits upon the occurrence of certain termination events following a change of control, or in the case of Mr. Held, upon a change of control only. Omega has amended the employment agreement with each executive officer other than Messrs. Held and Vidal in connection with the merger to add constructive termination as a termination event triggering severance benefits. The events that trigger heightened severance payments following a change of control include (i) a termination of employment by Omega without cause and (ii) a detrimental changes in the executive ’s terms and conditions of employment, in each case within a certain period following a change of control.

 

Employment Agreement with Mr. Scholtes . Under Mr. Scholtes’ amended employment agreement, upon termination of his employment by Omega other than for Due Cause (as defined in the employment agreement), death or Disability (as defined in the employment agreement) and provided that Mr. Scholtes delivers an effective release in favor of Omega, Mr. Scholtes is entitled to receive a lump sum payment equal to his annual base salary, payable within five days after the date that such release becomes effective. Upon either (i) a termination by Omega for any reason other than Due Cause, death, Disability or (ii) a resignation by Mr. Scholtes due to a Constructive Termination within twelve months after a Change of Control (each as defined in the employment agreement), which will occur at the effective time of the merger, and provided that Mr. Scholtes delivers an effective release in favor of Omega, Mr. Scholtes is entitled to receive a lump sum payment equal to two times his annual base salary, payable within five days after the date that such release becomes effective.

 

Mr. Scholtes ’ employment agreement contains restrictions on his use of Omega’s confidential information and also provides that Mr. Scholtes will assign to Omega all worldwide rights in any intellectual property that he develops which relates to the business, products or services of Omega. During the term of the agreement, and for the three years following Mr. Scholtes’ termination of employment for any reason, Mr. Scholtes may not engage, directly or indirectly, in any business or enterprise that is primarily engaged in the business of producing or selling fish meal, fish oil or fish solubles, induce any Omega employee to leave his or her employment with Omega, or solicit any distributor or customer to amend its business relationship with Omega.

 

Employment Agreements with Dr. Griffin and Messrs. Johannesen, Livingston and Deihl . The terms of the amended employment agreements with Dr. Griffin and Messrs. Johannesen, Livingston and Deihl are substantially identical to Mr. Scholtes’ employment agreement, except that upon either (i) a termination of employment by Omega for any reason other than Due Cause, death, Disability or (ii) a resignation due to a Constructive Termination within twelve months after a Change of Control (each as defined in the employment agreements), which will occur at the effective time of the merger, and provided that the applicable executive officer delivers an effective release in favor of Omega, such executive officer is entitled to receive a lump sum payment equal to one-and-one-half times his annual base salary, payable within five days after the date that such release becomes effective.

 

 

Employment Agreement with Mr. Held . Under Mr. Held’s employment agreement, upon (i) a termination of his employment by Mr. Held for Good Reason (as defined in the employment agreement) or by Omega without Cause (as defined in the employment agreement), or (ii) a Change of Control of Omega (as defined in the employment agreement), which will occur at the effective time of the merger, Mr. Held is entitled to receive a lump sum payment equal to 2.99 times Mr. Held’s “base amount” (as defined in Section 280G of the Code). If the total amount of such payment were to be found by the IRS to equal or exceed three times Mr. Held’s “base amount,” then Mr. Held could incur an excise tax in connection with such excess parachute payment. If any excise or similar purpose taxes and/or penalties or interest thereon pursuant to Section 4999 of the Code or Section 409A of the Code (or any successor or other comparable federal, state or local tax law) are imposed on Mr. Held’s base salary, severance or change of control payments, other incentive or supplemental compensation, benefits, allowances, awards, payments, reimbursements or other perquisites, or other payment in the nature of compensation (whether or not provided for under the employment agreement), the employment agreement provides that Omega will reimburse Mr. Held for such taxes, penalties or interest thereon such that Mr. Held is placed in the same after-tax position (including federal, state and local taxes) he would have been in had no such taxes, penalties or interest thereon been incurred (such reimbursement, the “Excise Tax Gross-Up Payment”). Omega has also agreed to indemnify and hold Mr. Held harmless, on an after-tax basis, from any liabilities (including but not limited to costs and expenses) incurred in connection with the payment described in the preceding sentence.

 

Mr. Held ’s employment agreement contains restrictions on his use of Omega’s confidential information and also provides that Mr. Held will assign to Omega all worldwide rights in any intellectual property that he develops which relates to the business, products or services of Omega. During the term of the agreement, and for the three years following the termination of his employment agreement, Mr. Held may not engage, directly or indirectly, in any business or enterprise that is in competition with Omega, induce any Omega employee to leave his or her employment with Omega, or solicit any distributor or customer to amend its business relationship with Omega. The employment agreement also provides for the advancement and reimbursement of Mr. Held’s costs and expenses in conjunction with any disputes relating to the agreement.

 

Employment Agreement with Mr. Vidal . Under Mr. Vidal’s employment agreement with Bioriginal, upon a termination of his employment by Bioriginal other than for “just cause” (as defined in the employment agreement) or by Mr. Vidal as a result of a Constructive Dismissal (as defined in the employment agreement), (i) Mr. Vidal is eligible to receive a payment in lump sum or by salary continuance, at Bioriginal’s option, equal to 18 months’ compensation, defined as the average of base salary and bonus paid to Mr. Vidal in the two years immediately prior to the termination of his employment, (ii) any options held by Mr. Vidal under any employee stock option plan will remain outstanding until they expire by their terms, and (iii) for a period of 18 months, or until he becomes employed in another position providing similar benefits, Mr. Vidal is entitled to continued participation, or if such participation is not permitted, to a payment equal to the estimated cost to Bioriginal of providing such participation to Mr. Vidal, in all group medical, dental and insurance plans.

 

Mr. Vidal ’s employment agreement contains restrictions on his use of Bioriginal’s confidential information and also provides that Mr. Vidal will assign to Bioriginal all worldwide rights in any intellectual property that he develops which relates to the business, products or services of Bioriginal. For the twelve months following Mr. Vidal’s termination of employment for any reason, Mr. Vidal has agreed to not engage in any business that is in competition with Bioriginal, induce any Bioriginal employee to leave his or her employment with Bioriginal, or solicit any customer, supplier, reseller or personnel not to do business with Bioriginal.

 

Retention Awards

 

Under the terms of the retention bonus letter agreement between Omega and Mr. Vidal, Mr. Vidal is entitled to receive a one-time payment in the amount of $100,000, conditioned on his continued employment with Omega and its subsidiaries through June 30, 2018. If there is a sale of the Bioriginal business prior to June 30, 2018, then upon the consummation of such sale, (i) Mr. Vidal ’s retention bonus payment will be accelerated, (ii) Mr. Vidal’s outstanding long-term incentive awards will vest in full, and (iii) Mr. Vidal will receive an additional payment in the amount of $100,000.

 

 

Information for Advisory Vote on Merger-Related Compensation for Our Named Executive Officers

 

The information set forth below is intended to comply with Item 402(t) of Regulation S-K regarding compensation that is based on or otherwise relates to the merger that our named executive officers could receive in connection with the merger. The information being reported with respect to our named executive officers describes the payments and benefits that would be payable under our named executive officers ’ employment agreements and the existing award agreements governing Omega Options, Omega Restricted Stock and Performance Units, each as described above. The amounts in the table below were calculated using the following assumptions: (i) the effective time of the merger was November 22, 2017, (ii) the applicable price per share of Common Stock is $22.00 which is equal to the merger consideration, (iii) the merger would constitute a change of control for purposes of each named executive officers’ employment agreement and the Omega Plans, (iv) unless otherwise stated below, the employment of each named executive officer has been terminated by Cooke without cause or by (A) Mr. Held for Good Reason or (B) the other named executive officers due to a Constructive Termination (as defined in their respective employment agreements), (v) each named executive officer (other than Mr. Held) has properly executed a release of claims against us and complied with any restrictive covenants applicable to such named executive officer, and (vi) certain other assumptions as specified in the footnotes to the table have been made. Values shown below do not take into account any increase in compensation that may occur following the date of this filing or following the merger. Some of the assumptions used in the table below are based upon information not currently available and, as a result, the actual amounts to be received by our named executive officers may differ from the amounts set forth below. Except for payments made in connection with Omega Options, Omega Restricted Stock, Performance Units and certain cash payments made to Mr. Held as indicated in the footnotes to the table, which are “single trigger payments,” all payments quantified in the table below are “double trigger” payments.

 

Golden Parachute Compensation

 

Name

 

Cash ($)(1)

   

Equity

($)(2)

   

Tax

Reimbursement

($)(3)

   

Total ($)

 

Bret D. Scholtes

  $ 2,287,908     $ 5,244,554           $ 7,532,462  

Andrew C. Johannesen

  $ 1,121,263     $ 300,784           $ 1,422,047  

John D. Held

  $ 5,144,056     $ 291,368     $ 1,831,628    

$

7,267,052
 

Dr. Mark E. Griffin

  $ 1,079,482     $ 291,368           $ 1,370,850  

Montgomery C. Deihl

  $ 907,186     $ 198,506           $ 1,105,692  

 


(1)

The amounts in this column reflect the aggregate value of cash severance payments that would become payable to our named executive officers under their respective employment agreements. The payment under Mr. Scholtes’ employment agreement consists of an amount equal to two times his base salary at the time of termination, payable in a lump sum within five days after the date on which Mr. Scholtes’ release of claims in favor of Omega becomes effective. Payments under each of Messrs. Johannesen and Deihl and Dr. Griffin’s employment agreements consist of an amount equal to one-and-one-half times the applicable named executive officer’s base salary at the time of termination, payable in lump sum within five days after the date on which his release of claims in favor of Omega becomes effective. The payment under Mr. Held’s employment agreement is a “single trigger” payment due upon a Change of Control (as defined in his employment agreement), which will occur at the effective time of the merger, and consists of an amount equal to 2.99 times Mr. Held’s “base amount” (as defined in Section 280G of the Code), which as of November 22, 2017, such base amount is equal to $1,543,343.

 

The amounts in this column also reflect a pro-rata portion of each named executive officer ’s 2017 annual bonus, pursuant to the terms of the merger agreement, assuming a termination without cause as of November 22, 2017. If the named executive officer remains employed through the date the 2017 annual bonuses are regularly paid, then such named executive officer would receive the full amount of his 2017 annual bonus, rather than the pro-rated amount reflected in this column.

 

In addition, the amounts in this column reflect accelerated earning and payment of outstanding Performance Units anticipated to occur at the effective time of the merger at (i) earned levels for completed calendar years during the applicable performance period and (ii) at the target level of $1.00 per Performance Unit for incomplete calendar years during the applicable performance period. The Performance Units are “single trigger” awards that will be accelerated in accordance with the terms of the merger agreement at the effective time of the merger. The aggregate payments included in this column are comprised of the following:

 

Name

 

Cash Severance

   

2017 Annual

Bonus

   

Performance

Units

 

Bret D. Scholtes

  $ 1,100,000     $ 198,458     $ 989,450  

Andrew C. Johannesen

  $ 510,000     $ 185,436     $ 425,827  

John D. Held

  $ 4,614,595     $ 115,194     $ 414,267  

Dr. Mark E. Griffin

  $ 487,500     $ 177,715     $ 414,267  

Montgomery C. Deihl

  $ 450,000     $ 185,686     $ 271,500  

 

Each of the named executive officers is subject to certain trade secret, confidentiality and post-employment restriction provisions, pursuant to which the named executive officers have agreed to confidentiality and non-disparagement terms. In addition, each named executive officer has agreed to non-competition provisions with respect to certain competing businesses and non-solicitation restrictions with respect to employees and customer relationships for defined periods of time. See the section entitled “The Merger—Interests of Omega’s Executive Officers and Directors in the Merger—Severance Arrangements” for more information regarding such provisions.

 

 

(2)

The amounts in this column reflect the number of shares of time-based Omega Restricted Stock that each of our named executive officers holds as of November 22, 2017 multiplied by the merger consideration, which are “single trigger” awards that will be accelerated in accordance with the terms of the merger agreement at the effective time of the merger. In addition, with respect to Mr. Scholtes, the amount indicated includes an amount equal to the sum of the product, for each Omega Option that Mr. Scholtes holds as of November 22, 2017, of (x) the excess, if any, of the merger consideration over the applicable exercise price of such Omega Option and (y) the number (determined without reference to vesting requirements or other limitations on exercisability) of shares of Common Stock issuable upon exercise of such Omega Option.

 

The Omega Restricted Stock reported under this column consist of the grants made to our named executive officers on each of February 26, 2015, March 8, 2016 and February 27, 2017, that each of our named executive officers holds as of the date hereof that are anticipated to become converted into the right to receive the merger consideration at the effective time of the merger as described above. The Omega Options reported under this column consist of the number of Omega Options covering shares of our Common Stock that Mr. Scholtes hold s as of the date hereof, all of which are fully vested and will be cashed out in connection with the closing of the merger. The aggregate value of the Omega Restricted Stock and Omega Options held by our named executive officers are comprised of the following:

 

Name

 

Omega Options

   

Omega Restricted Stock

 

Bret D. Scholtes

  $ 4,547,000     $ 697,554  

Andrew C. Johannesen

        $ 300,784  

John D. Held

        $ 291,368  

Dr. Mark E. Griffin

        $ 291,368  

Montgomery C. Deihl

        $ 198,506  

 

( 3)

Amounts in this column reflect the estimated amount of the Excise Tax Gross-Up Payment for Mr. Held described above in the section entitled “The Merger—Interests of Omega’s Executive Officers and Directors in the Merger—Severance Arrangements,” based on an assumed excise tax rate of 20% and the compensation and benefit levels in effect as of November 22, 2017, which is a “single trigger” payment. Any change in the assumptions used to calculate this amount may produce different results.

 

Omega Board of Directors and Management Following the Merger

 

Pursuant to the terms of the merger agreement, from and after the effective time of the merger, until successors are duly elected or appointed in accordance with law, our board of directors will be replaced by the board of directors of Merger Sub, and our officers will be replaced by the officers of Merger Sub.

 

Indemnification and Insurance

 

The merger agreement provides that after the effective time of the merger, Cooke will cause Omega or the surviving corporation, as the case may be, to the extent permitted by applicable law, to indemnify, defend and hold harmless against any threatened or actual claim or proceeding and related losses, and provide advancement of expenses to, all present and former officers, directors, employees and agents (including fiduciaries with respect to employee benefit plans) of Omega or any of its subsidiaries (each, an “ Indemnified Person”), to the same extent such Indemnified Persons are indemnified or have the right to advancement of expenses as of the date of the merger agreement by Omega pursuant to Omega’s organizational documents and the indemnification agreements of Omega in existence on the date of the merger agreement. In addition, from and after the closing of the merger, and for six years after the effective time of the merger, Cooke will cause to be maintained in effect provisions in the articles of incorporation and bylaws of Omega or the surviving corporation, as the case may be, and each of its subsidiaries (or in such documents of any successor to the business of Omega or the surviving corporation, as the case may be, or any of its subsidiaries) regarding elimination of liability, indemnification and advancement of expenses that are no less favorable to the intended beneficiaries than the corresponding provisions in the articles of incorporation and bylaws of Omega and each of its subsidiaries in existence on the date of the merger agreement. From and after the effective time of the merger, any agreement between any Indemnified Person, on the one hand, and Omega or any of its subsidiaries, on the other hand, regarding elimination of liability, indemnification or advancement of expenses will be assumed by the surviving corporation, will survive the merger and will continue in full force and effect in accordance with its terms.

 

 

Additionally, prior to the closing of the merger, Omega will obtain and fully pay the premium for a non-cancellable extension of the directors ’ and officers’ liability coverage of Omega’s existing directors’ and officers’ insurance policies and Omega’s existing fiduciary liability insurance policies, in each case for a claims reporting or discovery period of at least six years from and after the effective time of the merger with respect to any claim related to any period or time at or prior to the effective time of the merger (including claims with respect to the adoption of the merger agreement and the consummation of the transactions contemplated thereby); provided that the cost per annum payable for such “tail” insurance policy will not exceed 250% of the amount per annum Omega paid in its current fiscal year (such maximum amount, the “Maximum Tail Premium”) and if the cost for such “tail” insurance policy exceeds the Maximum Tail Premium, then Omega will obtain a policy with the greatest coverage available for a cost not exceeding the Maximum Tail Premium.

 

If Omega for any reason fail s to obtain such “tail” insurance policy as of the closing of the merger, the surviving corporation will, and Cooke will cause the surviving corporation to, continue to maintain in effect for a period of at least six years from and after the effective time of the merger the current policies of directors’ and officers’ liability insurance and fiduciary liability insurance maintained by Omega in place as of the date of the merger agreement with benefits and levels of coverage at least as favorable as those provided under Omega’s existing policies as of the date of the merger agreement, or the surviving corporation will, and Cooke will cause the surviving corporation to purchase comparable policies for such six-year period with benefits and levels of coverage at least as favorable as those provided under Omega’s existing policies as of the date of the merger agreement; provided that the cost per annum payable for such “tail” insurance policy will not exceed the Maximum Tail Premium and if the cost for such “tail” insurance policies exceeds the Maximum Tail Premium, then the surviving corporation will, and Cooke will cause the surviving corporation to, obtain a policy with the greatest coverage available for a cost not exceeding the Maximum Tail Premium.

 

Regulatory Matters

 

U.S. Antitrust Approval

 

Under the HSR Act, we cannot complete the merger until we give notification and furnish information to the Federal Trade Commission and the Antitrust Division of the Department of Justice and until the applicable waiting period expires or is terminated. On October 19, 2017, we and Cooke each filed a premerger notification and report form under the HSR Act. On October 30, 2017, U.S. antitrust authorities notified Omega and Cooke that early termination of the waiting period under the HSR Act had been granted.

 

Foreign Antitrust Approval

 

C onsummation of the transactions contemplated by the merger agreement, including the merger, will require filings and approvals pursuant to Germany’s Act against Restraints of Competition and filings pursuant to Canada’s Competition Act. We and Cooke submitted the requisite filings in Canada and Germany on October 27, 2017. We obtained approval from the German competition authorities on November 22, 2017.

 

MARAD

 

Consummation of the transactions contemplated by the merger agreement, including the merger, will require the approval of MARAD. Omega has agreed to reasonably assist Cooke in the preparation for the sale of certain or all of the MARAD Assets (including by transferring such MARAD Assets and FAA Assets identified by Cooke and related employees to the MARAD Subsidiary) pursuant to the MARAD Sale Agreement. Additionally, each of Omega and Cooke has agreed to comply in all material respects with all of its obligations under the MARAD Sale Agreement, and each of Cooke and Merger Sub has agreed to use its reasonable best efforts to do all things necessary, proper or advisable to obtain the approval of MARAD, including causing its affiliates to enter into the Fish Supply Agreement and the Stockholder Agreement on or prior to the closing date of the merger.

 

Judgments and Probation Conditions

 

Consummation of the transactions contemplated by the merger agreement, including the merger, will require OPI to notify and obtain permission of its Probation Officer required as part of its obligations to sell, assign or transfer assets (including the affected marine vessels) that are subject to the Judgments and Probation Conditions.  On November 15, 2017, OPI's probation officer notified OPI that she would not have any objection to the transactions contemplated by the merger agreement and OPI intends to file an appropriate notice with the relevant courts prior to the consummation of the merger.

 

 

FAA and FCC App rovals

 

Consummation of the transactions contemplated by the merger agreement and the MARAD Sale Agreement, including the transfer of certain radio licenses and spotter aircraft from OPI, will require the consent of the FAA and the FCC.

 

Other Regulatory A pprovals

 

Other than as described above, neither Omega nor Cooke is currently aware of any material governmental approvals or actions that are required for completion of the merger. We expect that if any such additional material governmental approvals or actions are required, those approvals or actions will be sought.

 

General

 

E ach of the parties to the merger agreement has agreed to use reasonable best efforts to complete the merger and to prepare and file all necessary filings, notices, petitions, statements, registrations, submissions of information, applications and other documents to obtain approval from any governmental authority or other third party that is required to be obtained in connection with the merger, including approval from U.S. and foreign antitrust authorities and MARAD. The parties to the merger agreement have also agreed to use reasonable best efforts to obtain and maintain all approvals, consents, registrations, permits, authorizations, licenses, waivers, expiration of the applicable waiting periods and other confirmations required to be obtained from any governmental authority (including from MARAD) or other third parties that are necessary to consummate the transactions contemplated by the merger agreement and to defend or contest any proceeding challenging the merger agreement or the transactions contemplated thereby. In connection with obtaining MARAD Approval or compliance with the Premerger Notification Rules, Omega has also agreed not to discuss or commit to any divestiture transaction with any governmental authority or to alter its businesses or commercial practices in any way, or otherwise take or commit to take any action that limits Cooke’s freedom of action with respect to, or Cooke’s ability to retain any of the businesses, product lines or assets of Omega.

 

While we expect that all regulatory approvals will be obtained in a timely manner, there is no certainty that these approvals will be obtained or obtained within the period of time contemplated by the merger agreement, that any such approvals would not involve the imposition of conditions that may be materially adverse to Cooke, Merger Sub, any of their respective affiliates or the surviving corporation or that other regulatory challenge s to the merger will not be made. If a challenge is made, we cannot predict the result. Any conditions with respect to such regulatory approvals could result in the conditions to the completion of the merger not being satisfied.

 

The approval of any regulatory application or completion of regulatory review merely implies the satisfaction of certain regulatory criteria, which do not include review of the merger from the standpoint of the adequacy of the consideration to be received by our stockholders. Further, regulatory approvals or reviews do not constitute an endorsement or recommendation of the merger.

 

No Appraisal Rights

 

Pursuant to Section 92A.390 of the NRS, no holder of any shares of Common Stock will have or will be entitled to assert dissenter ’s rights or any rights of appraisal as a result of or in connection with the merger agreement and the transactions contemplated thereby, including the merger.

 

Financing of the Merger

 

The total amount of funds necessary to consummate the merger and the related transactions will be funded by Cooke, including the funds needed to (i) pay our stockholders the aggregate merger consideration due to them under the merger agreement; (ii) pay the option consideration; and (iii) pay fees and expenses payable by Cooke and Merger Sub under the merger agreement and in connection with the debt financing described below. Cooke will obtain such funding through the proceeds from one or more debt financing transactions. The obligation of Cooke and Merger Sub to complete the merger is not conditioned upon Cooke obtaining financing.

 

 

Debt Commitment Letter

 

Concurrently with the signing of the merger agreement, Cooke entered into the Debt Commitment Letter providing for financing of the transactions contemplated by the merger agreement through (a) either (i) up to $350 million in aggregate principal amount of senior secured notes (the “notes”) in a Rule 144A private placement, or (ii) if all or any portion of the notes are not issued on or prior to closing, up to $350 million of senior secured increasing rate loans (the “bridge loans”) or (iii) a combination of notes and bridge loans and (b) up to $25 million of loans under a $100 million senior secured asset-based revolving credit facility.

 

The obligations of the debt commitment parties to provide the debt financing under the Debt Commitment Letter will terminate at the earliest to occur of (i) the termination of the merger agreement, (ii) the Outside Date, unless each of the lenders agrees to an extension, and (iii) the consummation of the merger with or without the funding of the debt financing.

 

DNB Credit Facility

 

Concurrently with the signing of the merger agreement, Cooke entered into the DNB Credit Facility pursuant to which DNB agreed to loan Cooke a principal amount of $200 million, the proceeds of which will be contributed as equity to an intermediate holding company of Merger Sub and used to fund a portion of the merger consideration.

 

The definitive documentation governing the debt financing has not been finalized and, accordingly, the actual terms of the debt financing may differ from those described in this proxy statement.

 

Delisting and Deregistration of the Common Stock

 

If the merger is completed, the Common Stock will no longer be traded on the NYSE and will be delisted and deregistered under the Exchange Act.

 

Accounting Treatment

 

The merger will be accounted for as a “purchase transaction” for financial accounting purposes.

 

Material U.S. Federal Income Tax Consequences of the Merger

 

The following is a summary of certain material U.S. federal income tax consequences applicable to our stockholders due to the receipt of cash in exchange for shares of our Common Stock pursuant to the merger. This summary is based upon the provisions of the Code, applicable U.S. Treasury Regulations, judicial authority and administrative rulings and practice, all as in effect on the date of this proxy statement. All of these authorities are subject to change, possibly on a retroactive basis and to differing interpretations, all of which could result in tax consequences different from those described below. This discussion assumes that the shares of our Common Stock are held as capital assets within the meaning of Section 1221 of the Code by their beneficial owners. This discussion does not address all aspects of U.S. federal income taxation that may be relevant to a particular stockholder in light of such stockholder ’s unique investment circumstances, or to stockholders subject to special treatment under the U.S. federal income tax laws (for example, a bank, life insurance company or other financial institution; dealers or brokers in securities or currencies; a trader in securities that elects mark-to-market treatment; tax-exempt organizations; a retirement plan or other tax-deferred account; S-corporations, partnerships, or other pass-through entities; a mutual fund; a real estate investment trust or regulated investment company; a personal holding company; U.S. expatriates; controlled foreign corporations, passive foreign investment companies; a corporation that accumulates earnings to avoid U.S. federal income tax; “U.S. Holders” (as defined below) whose functional currency is not the U.S. dollar; stockholders who hold shares of our Common Stock as part of a hedging, “straddle,” constructive sale, conversion or other risk-reduction strategy or integrated transaction; or stockholders who acquired their shares of our Common Stock through the exercise of employee stock options or other compensation arrangements). In addition, this discussion is general in nature and does not address any aspect of state, local, alternative minimum, estate, gift or non-U.S. taxation that may be applicable to a particular stockholder.

 

No ruling has been requested from the IRS in connection with the merger or related transactions. Accordingly, the discussion below neither binds the IRS nor precludes it from adopting a contrary position. Furthermore, no opinion of counsel has been or will be rendered with respect to the tax consequences of the merger or related transactions.

 

 

For purposes of this discussion, the term “U.S. Holder” means a beneficial owner of our Common Stock that is, for U.S. federal income tax purposes, any of the following:

 

 

a citizen or individual resident of the U.S.;

 

 

a corporation, or other entity taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the U.S., any state in the U.S., or the District of Columbia;

 

 

a trust if (1) a court within the U.S. is able to exercise primary supervision over the trust’s administration and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) the trust has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person; or

 

 

an estate that is subject to U.S. federal income tax on all of its income regardless of source.

 

A “Non-U.S. Holder” is a beneficial owner of our Common Stock that is, for U.S. federal income tax purposes, an individual, corporation, estate, or trust that is not a U.S. Holder.

 

If a partnership (including any entity or arrangement treated as a partnership for U.S. federal income tax purposes) holds shares of our Common Stock, the tax treatment of a partner in that partnership generally will depend on the status of the partner and the activities of the partnership. If you are a partner in a partnership that holds our Common Stock, you are urged to consult your own tax advisor.

 

Omega stockholders should consult their own tax advisors to determine the particular tax consequences to them of the receipt of cash in exchange for shares of our Common Stock pursuant to the merger (including the application and effect of any state, local or non-U.S. income and other tax laws).

 

U.S. Holders

 

The merger will be a taxable transaction for U.S. federal income tax purposes. Therefore, a U.S. Holder will recognize capital gain or loss equal to the difference, if any, between the sum of any cash received by such U.S. Holder in the merger and such U.S. Holder ’s adjusted tax basis in our Common Stock.

 

Capital gains of a non-corporate U.S. Holder will be eligible for the preferential U.S. federal income tax rates applicable to long-term capital gains if the U.S. Holder has held our Common Stock for more than one year as of the date of the merger. The deductibility of capital losses is subject to certain limitations. If a U.S. Holder acquired different blocks of shares of our Common Stock at different times or at different prices, the U.S. Holder must determine its tax basis and holding period separately for each block of our Common Stock.

 

Non-U.S. Holders

 

Subject to the discussion below under the section titled “Information Reporting and Backup Withholding”, a Non-U.S. Holder generally will not be subject to U.S. federal income or withholding taxes on the exchange of our Common Stock for cash in the merger unless:

 

 

any gain recognized on the exchange is effectively connected with the Non-U.S. Holder ’s conduct of a trade or business in the U.S. (and, if an income tax treaty applies, is attributable to a U.S. permanent establishment of the Non-U.S. Holder);

 

 

the Non-U.S. Holder is an individual who is present in the U.S. for 183 days or more during the taxable year that includes the date of the merger and certain other conditions are satisfied; or

 

 

Omega is or has been a U.S. real property holding corporation (“USRPHC”) for U.S. federal income tax purposes at any time during the shorter of (i) the five-year period ending on the date of the merger and (ii) the Non-U.S. Holder’s holding period in the Common Stock, and, if the shares of our Common Stock are “regularly traded on an established securities market”, the Non-U.S. Holder held (directly, indirectly or constructively), at any time during such period, more than 5% of our outstanding Common Stock.

 

 

If the Non-U.S. Holder ’s gain is described in the first bullet, then the Non-U.S. Holder will generally be subject to U.S. federal income tax under the rules described above as if it were a U.S. Holder of our Common Stock and, in the case of a foreign corporation, may be subject to an additional “branch profits tax” at a 30% rate (or such lower rate as may be specified by an applicable income tax treaty).

 

If the Non-U.S. Holder is described in the second bullet, then such Non-U.S. Holder will generally be subject to U.S. federal income tax at a 30% rate (or such lower rate as may be specified by an applicable income tax treaty) on the gain, which may be offset by certain U.S. source capital losses of the Non-U.S. Holder.

 

If Omega and the Non-U.S. Holder meet the criteria described in the third bullet, then the Non-U.S. Holder will be subject to U.S. federal income tax under the rules described above as if it were a U.S. Holder of our Common Stock. Although there can be no assurances in this regard, Omega does not believe that it is or was a USRPHC for U.S. federal income tax purposes during the applicable five-year period preceding the merger.

 

Information Reporting and Backup Withholding  

 

Any cash received by a U.S. Holder or a Non-U.S. Holder in the merger may be subject to information reporting, and may be subject to backup withholding unless such holder provides proof of an applicable exemption or furnishes its taxpayer identification number and otherwise complies with all applicable requirements under the backup withholding rules. Any amounts withheld under the backup withholding rules are not an additional tax and may be allowed as a refund or credit against such holder ’s U.S. federal income tax liability, provided that the required information is timely furnished to the IRS.

 

The foregoing discussion of certain material U.S. federal income tax consequences is not intended to be, and should not be construed as, legal or tax advice to any stockholder of Common Stock . You should consult your own tax advisors to determine the particular tax consequences to you (including the application and effect of any state, local or non- U.S. income and other tax laws) of the receipt of cash in exchange for shares of Common Stock pursuant to the merger.

 

Litigation Relating to the Merger

 

On September 11, 2017, a shareholder derivative lawsuit captioned Sehlmeyer v. Scholtes was filed against two of Omega’s officers and six of its directors in the District Court of Clark County, Nevada for alleged breach of fiduciary duties. On October 11, 2017 and again on November 13, 2017 , the plaintiff amended his complaint, deleting the derivative claims and instead asserting putative class action claims against Omega, one of Omega’s officers, and seven of Omega’s directors arising out of the announcement that Omega had entered into a merger agreement under which it will be acquired by Cooke. In addition, after the filing of the preliminary proxy on October 30, 2017, three federal putative class actions captioned Franchi v. Omega Protein Corporation (November 6, 2017), Fromberger v. Omega Protein Corporation (November 7, 2017), and Durkee v. Omega Protein Corporation (November 13, 2017) were filed in the U.S. District Court for the District of Nevada.  These federal actions assert  fiduciary duty claims, as well as federal securities law claims involving purportedly insufficient disclosure to shareholders. The plaintiffs seek rescission of the merger, attorneys’ fees and other costs, other equitable relief and damages.

 

Omega believes the allegations in these complaints are without merit, and it intends to defend vigorously against all of the allegations. However, at this time it is not possible to predict the outcome of these matters or its effects on Omega or the merger. An adverse judgment for monetary damages could have an adverse effect on the operations and liquidity of Omega.

 

 

THE MERGER AGREEMENT

 

The following summary of the material terms of the merger agreement is qualified in its entirety by reference to the complete text of the merger agreement, which is incorporated by reference in this proxy statement and attached to this proxy statement as Annex B . The merger agreement has been included to provide you with information regarding its terms. It is not intended to provide you with any other factual information about Omega, Cooke or Merger Sub. Such information can be found elsewhere in this proxy statement and in other public filings made by Omega with the SEC, which are available without charge at www.sec.gov or as more fully described in the section entitled “Where You Can Find More Information.” Our stockholders are urged to read the full text of the merger agreement in its entirety.

 

General

 

Explanatory Note

 

The following summary of the merger agreement, and the copy of the merg er agreement attached as Annex B to this document, are intended to provide information regarding the terms of the merger agreement and are not intended to provide any factual information about Omega or modify or supplement any factual disclosures about Omega in its public reports filed with the SEC. The merger agreement contains representations and warranties by and covenants of Omega, Cooke and Merger Sub that were made only for purposes of that agreement and as of specified dates. The representations, warranties and covenants in the merger agreement were made solely for the benefit of the parties to the merger agreement, may be subject to limitations agreed upon by the contracting parties to the merger agreement, including being qualified by confidential disclosures and being made for the purposes of allocating contractual risk between the parties to the merger agreement instead of establishing these matters as facts, and may be subject to contractual standards of materiality or material adverse effect applicable to the contracting parties to the merger agreement that generally differ from those applicable to investors. In addition, information concerning the subject matter of the representations, warranties and covenants may change after the date of the merger agreement, which subsequent information may or may not be fully reflected in Omega’s public disclosures. The representations, warranties and covenants in the merger agreement and any descriptions thereof should be read in conjunction with the disclosures in Omega’s periodic and current reports, proxy statements and other documents filed with the SEC. See the section entitled “Where You Can Find More Information.” Moreover, the description of the merger agreement below does not purport to describe all of the terms of such agreement and is qualified in its entirety by reference to the full text of such agreement, a copy of which is attached hereto as Annex B and is incorporated in this proxy statement by reference.

 

Additional information about Omega may be found elsewhere in this document and Omega ’s other public filings. See the section entitled “Where You Can Find More Information.”

 

Structure of the Merger

 

At the effective time of the merger, Merger Sub will merge with and into Omega and Omega will continue its corporate existence under the Laws of the State of Nevada as the surviving corporation in the merger.

 

Articles of Incorporation and Bylaws

 

The articles of incorporation of Omega, as in effect as of immediately prior to the effective time of the merger, will be amended and restated immediately following the effective time of the merger so as to read in its entirety as set forth in Exhibit A to the merger agreement, and as so amended and restated will be the articles of incorporation of the surviving corporation following the merger until thereafter amended in accordance with the provisions thereof and of applicable law. The bylaws of Omega, as in effect as of immediately prior to the effective time of the merger, will be amended and restated immediately following the effective time of the merger so as to read in their entirety as the bylaws of Merger Sub in effect immediately prior to the effective time of the merger and as so amended and restated will be the bylaws of the surviving corporation until thereafter amended in accordance with the provisions thereof, the articles of incorporation of the surviving corporation and of applicable law.

 

 

Directors and Officers

 

The directors of Merger Sub immediately prior to the effective time of the merger will be the directors of the surviving corporation as of the effective time of the merger. The officers of Merger Sub immediately prior to the effective time of the merger will be the officers of the surviving corporation as of the effective time of the merger.

 

When the Merger Becomes Effective

 

The consummation of the merger will take place on a date to be specified by the parties to the merger agreement, which will be no later than the third business day after satisfaction (or waiver in accordance with the merger agreement) of the last to occur of the conditions to closing set forth in the merger agreement (other than any such conditions which by their nature can only be satisfied at closing, which will be required to be so satisfied or (to the extent permitted by applicable law) waived at such time); provided, however, that if the Marketing Period has not ended at least two business days prior to the date on which the closing would otherwise occur, the closing will instead occur on the earliest of:

 

 

a date specified by Cooke during the Marketing Period that is a business day on no fewer than two business days ’ notice of such date from Cooke to Omega;

 

 

the second business day immediately following the last day of the Marketing Period; and

 

 

the second business day prior to the Outside Date (in each case subject to the satisfaction or waiver of each of the conditions to the completion of the merger (other than any such conditions which by their nature can only be satisfied at closing, which will be required to be so satisfied (or waived) at that time).

 

The Marketing Period is a fifteen (15) consecutive business day period (subject to certain blackout dates) that will commence upon the receipt of certain specified required information by the Lead Arranger, subject to certain conditions.

 

As soon as practicable after the closing of the merger, articles of merger prepared and executed in accordance with the relevant provisions of the NRS (the “Articles of Merger”) will be filed with the Office of the Secretary of State of the State of Nevada. The merger will become effective upon the filing of the Articles of Merger with the Office of the Secretary of State of the State of Nevada, or at such later time as will be agreed upon by Cooke and Omega and specified in the Articles of Merger.

 

Effect of the M erger on the Common Stock

 

At the effective time of the merger each share of Common Stock issued and outstanding immediately prior to the effective time of the merger (excluding any shares of Common Stock to be cancelled without payment of any merger consideration therefor pursuant to the following paragraph), including the Omega Restricted Stock, will be cancelled and converted into the right to receive the merger consideration.

 

Each share of Common Stock held in the treasury of Omega and each share of Common Stock owned by Merger Sub, Cooke or any direct or indirect wholly owned subsidiary of Cooke or Omega immediately prior to the effective time of the merger will be canceled and cease to exist as of the effective time of the merger without any consideration being exchanged therefor and no payment or distribution will be made with respect thereto.

 

Each share of capital stock of Merger Sub issued and outstanding immediately prior to the effective time of the merger will remain outstanding and will be converted into and will represent one share of common stock, par value $0.01 per share, of the surviving corporation, so that, after the effective time of the merger, Cooke will be the holder indirectly of all of the issued and outstanding shares of the surviving corporation’s common stock.

 

Treatment of Equity Awards

 

Each of Cooke and Omega agrees that it will take such actions as are reasonably necessary to cause at the effective time of the merger each Omega Option then outstanding, whether or not exercisable, under the Omega Stock Plans, to become fully exercisable (if not then fully exercisable), and such Omega Options will thereafter represent only the right to receive, upon delivery of an option surrender agreement, for each share of Common Stock subject to such Omega Option, an amount in cash equal to the option consideration. The actions described in the preceding sentence will occur at the effective time of the merger without any action on the part of Merger Sub, Cooke or any of their respective stockholders.

 

 

Immediately prior to the effective time of the merger, the restrictions applicable to each share of Omega Restricted Stock will immediately lapse, and, at the effective time of the merger, each share of such Omega Restricted Stock will be converted into the right to receive the merger consideration. Cooke will cause the surviving corporation to pay through the surviving corporation’s payroll the merger consideration for the Omega Restricted Stock in accordance with the merger agreement, and Omega will cooperate with Cooke prior to the effective time of the merger to arrange for such payment at such time through payroll.

 

Payment of the Merger Consideration

 

Prior to the effective time of the merger, Merger Sub will enter into an agreement with Omega’s transfer agent (or another entity reasonably acceptable to Omega) to act as agent for the holders of Common Stock (but not holders of the Omega Restricted Stock or Omega Options) in connection with the merger (the “Paying Agent”) and to receive any merger consideration to which such holders will become entitled. On the closing date of the merger and prior to the filing of the Articles of Merger, Cooke will deposit, or cause to be deposited, with the Paying Agent, for the benefit of the holders of shares of Common Stock (but not Omega Restricted Stock or Omega Options), for payment through the Paying Agent, cash in an amount sufficient to permit payment of the aggregate merger consideration payable under the merger agreement (the “Payment Fund”). The Paying Agent will, pursuant to irrevocable instructions, deliver the merger consideration payable with respect to Common Stock (but not Omega Restricted Stock or Omega Options) out of the Payment Fund. The Payment Fund will be invested by the Paying Agent as directed by Merger Sub, subject to certain limitations. If for any reason (including losses) the Payment Fund is inadequate to pay the amounts owed to holders of shares of Common Stock, Cooke will take all steps necessary to enable or cause the surviving corporation promptly to deposit in trust additional cash with the Paying Agent sufficient to make all payments required under the merger agreement, and Cooke and the surviving corporation will in any event be liable for payment thereof.

 

As soon as practicable after the effective time of the merger, and in any e vent within three business days following the effective time of the merger, Cooke will cause the Paying Agent to deliver a letter of transmittal (“Letter of Transmittal”) to each record holder, as of the effective time of the merger, of  (a) an outstanding certificate or certificates which immediately prior to the effective time of the merger represented shares of Common Stock (the “Certificates”) or  (b) shares of Common Stock represented by book-entry (“Book-Entry Shares”). The Letter of Transmittal will specify that delivery will be effected only upon proper delivery of the Certificates to the Paying Agent or the surviving corporation, as applicable, or, in the case of Book-Entry Shares, upon adherence to the procedures set forth in the Letter of Transmittal, and will set forth instructions for use in effecting the surrender of the Certificates or, in the case of Book-Entry Shares, the surrender of such shares, for payment of the merger consideration. Additionally, as soon as practicable after the effective time of the merger, and in any event within three business days following the effective time of the merger, the surviving corporation will deliver to each holder of an Omega Option as of the effective time of the merger an option surrender agreement, and instructions for use in effecting the surrender of such Omega Option in exchange for the option consideration.

 

Upon surren der to the Paying Agent or the surviving corporation, as applicable, of a Certificate or Book-Entry Shares, together with the Letter of Transmittal, duly completed and validly executed in accordance with the instructions thereto, and such other documents as may be required pursuant to such instructions, the holder of such Certificate or Book-Entry Shares will be entitled to receive in exchange therefor, and Cooke will cause the Paying Agent or the Surviving Corporation, as applicable, to pay such holder, the merger consideration for each share of Common Stock and Omega Restricted Stock formerly represented by such Certificate or Book-Entry Shares and such Certificate or Book-Entry Shares will then be canceled. No interest will be paid or accrued for the benefit of holders of the Certificates or Book-Entry Shares on the merger consideration payable in respect of the Certificates or Book-Entry Shares.

 

Upon delivery of the option surrender agreement, duly executed, the holder of the Omega Option will be entitled to receive promptly and, in any event, within five business days after the later of the effective time of the merger or the delivery of the option surrender agreement in exchange therefor, and Cooke will cause the surviving corporation to pay to such holder through the surviving corporation’s payroll (or to the extent the holder is not then an employee, by check drawn on an Omega account), the amount of cash which such holder has the right to receive pursuant to the merger agreement, and the Omega Option so surrendered will then be canceled.

 

 

Representations and Warranties; Material Adverse Effect

 

The merger agreement contains representations and warranties of Omega, subject to certain exceptions in the merger agreement, in the confidential disclosure schedule delivered in connection with the merger agreement and in certain of Omega’s public filings, as to, among other things:

 

 

corporate existence and power;

 

 

corporate authorization;

 

 

governmental authorization;

 

 

non-contravention;

 

 

capitalization;

 

 

subsidiaries;

 

 

Omega ’s SEC filings and the Sarbanes-Oxley Act of 2002;

 

 

financial statements;

 

 

absence of certain changes or events;

 

 

the absence of undisclosed material liabilities;

 

 

compliance with applicable laws and court orders;

 

 

litigation;

 

 

real property and personal property matters;

 

 

intellectual property;

 

 

taxes;

 

 

employee benefit plans;

 

 

labor and employment matters;

 

 

insurance policies;

 

 

environmental matters;

 

 

material contracts;

 

 

customers ;

 

 

compliance with applicable anti-corruption laws;

 

 

information supplied ;

 

 

finder ’s fees;

 

 

 

receipt of a fairness opinion from J.P. Morgan;

 

 

state takeover laws ; and

 

 

the absence of other representations and warranties.

 

The merger agreement also contains representations and warranties of Cooke and Merger Sub, subject to certain exceptions in the merger agreement, as to, among other things:

 

 

corporate organization, standing and power;

 

 

corporate authority;

 

 

the absence of violations;

 

 

consents and approvals;

 

 

information supplied ;

 

 

ownership of shares of Common Stock ;

 

 

the absence of interested stockholders;

 

 

litigation ;

 

 

the debt financing;

 

 

b usiness Conduct of Merger Sub; and

 

 

acknowledgements of Cooke and Merger Sub.

 

Some of the representations and warranties in the merger agreement are qualified by materiality or knowledge qualifications or a “material adverse effect” qualification with respect to Omega (an “Omega Material Adverse Effect”) or Cooke (a “Cooke Material Adverse Effect”), as discussed below.

 

For purpo ses of the merger agreement, an “Omega Material Adverse Effect” means any occurrences, conditions, changes, events, developments or effects that are materially adverse to the business, assets, condition (financial or otherwise) or results of operations of Omega and its subsidiaries taken as a whole; provided, however that none of the following, and no change, event or effect resulting or arising from any of the following, will constitute or be taken into account in determining whether an Omega Material Adverse Effect has occurred (except that any underlying causes of changes referenced in the sixth or ninth bullet points below will not be excluded, and any change, event, and effect referred to in the first, second, third or fourth bullet points below will not be excluded to the extent of the disproportionate impact, if any it has on Omega and its subsidiaries compared to other participants in the industries or geographic regions in which Omega and its subsidiaries conduct their business):

 

 

changes in the financial market, or credit market, or in general economic, regulat ory or political conditions;

 

 

acts of terrorism, the initiation or escalation of any military action or operation, the declaration by the U.S. or any foreign country of a national emergency or war or the occurrence of any weather event or natural disaster except in the event, and only to the extent, of any damage or destruction to or loss of Omega’s physical properties;

 

 

changes in or events or conditions relating to the general economy of any nation or region in which Omega operates or generally affecting the industries in which Omega operates;

 

 

 

any change of applicable l aw after the date of the merger agreement (including any changes or adjustments in regional or sub-regional quotas or sub-quotas) or changes to GAAP or interpretations thereof after the date of the merger agreement;

 

 

the announcement, pendency or consummation of the transactions contemplated by the merger agreement or any actions required to be taken in accordance with the merger agreement (which for the sake of clarity will not include actions permitted by Omega’s conduct of business covenant in the merger agreement unless they are otherwise required by Cooke or Merger Sub) or the consummation of the transactions contemplated by the merger agreement (including (i) the filing, defense, or settlement of any proceeding relating to the transactions contemplated by the merger agreement, including those made or brought by any Omega stockholders on their own behalf or on behalf of Omega or (ii) any loss or change in relationship with any employee, customer, supplier, vendor or business partner of Omega or any other disruption to the business of Omega, in each case, resulting from or related to the announcement, pendency or consummation of the transactions contemplated by the merger agreement);

 

 

any failure of Omega to meet any published estimates, projections or other expectations of Omega’s revenues, earnings, cash flows or other operating results for any period, or any failure of Omega to meet its internal budgets, plans, forecasts or estimates of its revenues, earnings, cash flows, fish catch or yields, or other operating results for any period;

 

 

fluctuations in currency exchange rates;