<PAGE>
SECURITIES AND EXCHANGE COMMISSION
----------------------------------
Washington, D. C. 20549
FORM 10-Q
(Mark One)
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For Quarterly period ended June 30, 1994
--------------------------------------
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________________ to ____________________
Commission file number 1-4219
ZAPATA CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE C-74-1339132
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 4240, Houston, Texas 77210
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (713) 940-6100
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
------ ------
Number of shares outstanding of the registrant's Common Stock, par value $.25,
on August 11, 1994: 31,681,348
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Zapata Corporation
Balance Sheet
Income Statement
Divisional Revenues and Operating Income
Statement of Cash Flows
Notes to Financial Statements
2
<PAGE>
ZAPATA CORPORATION
BALANCE SHEET
ASSETS
(in thousands)
June 30, September 30,
1994 1993
----------- ------------
Current assets:
Cash and cash equivalents $11,736 $15,273
Restricted cash and
temporary investments --- 75,083
Receivables 38,836 28,321
Inventories
Fish products 31,971 33,504
Compressor equipment and
components 20,145 ---
Gas liquids products 1,572 1,271
Materials, parts and
supplies 3,349 3,392
Prepaid expenses and other
current assets 2,928 2,280
--------- ---------
Total current assets 110,537 159,124
--------- ---------
Investments and other assets:
Investments in unconsoli-
dated affiliates 7,893 56,289
Goodwill 27,233 7,781
Deferred income taxes 10,374 ---
Other assets 19,786 21,686
--------- ---------
65,286 85,756
--------- ---------
Property and equipment 209,388 141,393
Less accumulated depreciation (71,113) (41,156)
--------- ---------
138,275 100,237
--------- ---------
Total assets $314,098 $345,117
========= =========
(The accompanying notes are an integral part of the financial
statements.)
3
<PAGE>
ZAPATA CORPORATION
BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' INVESTMENT
----------------------------------------
(in thousands)
June 30, September 30,
1994 1993
----------- ------------
Current liabilities:
Current maturities of
long-term debt $2,997 $2,714
Accounts payable and accrued
liabilities 40,111 36,550
Income taxes payable 1,600 783
--------- ---------
Total current liabilities 44,708 40,047
--------- ---------
Long-term debt 70,323 139,646
--------- ---------
Deferred income taxes --- 3,686
--------- ---------
Other liabilities 15,559 15,474
--------- ---------
Stockholders' investment:
Preferred and preference
stock 2,258 4,503
Common stock 7,920 7,235
Capital in excess of par
value 152,037 121,847
Reinvested earnings from
October 1, 1990 21,293 12,679
--------- ---------
183,508 146,264
--------- ---------
Total liabilities and
stockholders' investment $314,098 $345,117
========= =========
(The accompanying notes are an integral part of the financial
statements.)
4
<PAGE>
ZAPATA CORPORATION
INCOME STATEMENT
------------------
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
June 30, June 30,
1994 1993 1994 1993
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Revenues $86,496 $58,173 $241,924 $200,952
------- -------- -------- --------
Expenses
Operating 74,214 52,089 209,215 178,822
Provision for oil & gas
property valuation 18,810 --- 18,810 ---
Depreciation, depletion
and amortization 4,475 2,879 11,969 10,165
Selling, general and
administrative 5,055 3,774 14,531 10,329
------- ------- ------- -------
102,554 58,742 254,525 199,316
------- ------- ------- -------
Operating income (loss) (16,058) (569) (12,601) 1,636
------- ------- ------- -------
Interest income (expense)
Interest income 431 483 1,628 1,440
Interest expense (1,869) (3,724) (7,482) (11,246)
------- ------- ------- -------
(1,438) (3,241) (5,854) (9,806)
------- ------- ------- -------
Other income (expense)
Gain on sale of Tidewater
stock --- 32,928 37,457 32,928
Other 3,016 (13,205) (2,859) (10,575)
------- ------- ------- -------
3,016 19,723 34,598 22,353
------- ------- ------- -------
Income (loss) before income
taxes (14,480) 15,913 16,143 14,183
------- ------- ------- -------
Provision for income
taxes (4,906) 5,423 6,117 4,197
------- ------- ------- -------
Net income (loss) (9,574) 10,490 10,026 9,986
------- ------- ------- -------
Preferred and preference
stock dividends 101 285 303 487
------- ------- ------- -------
Net income (loss) to common
stock ($9,675) $10,205 $9,723 $9,499
======= ======= ======= =======
Net income (loss) per
common share ($0.31) $0.37 $0.31 $0.36
Average common shares and
equivalents outstanding 31,671 27,807 31,708 26,641
</TABLE>
(The accompanying notes are an integral part of the financial statements.)
5
<PAGE>
ZAPATA CORPORATION
DIVISIONAL REVENUES AND OPERATING INCOME
----------------------------------------
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
1994 1993 1994 1993
-------- -------- ------ -------
<S> <C> <C> <C> <C>
Revenues
Natural gas compression $21,810 $ --- $49,874 $ ---
Natural gas gathering
and processing 41,957 40,972 120,456 148,715
Oil and gas 3,026 4,231 9,287 16,596
Marine protein 19,703 12,970 62,307 35,641
------- ------- ------- -------
$86,496 $58,173 $241,924 $200,952
======== ======= ======== ========
Operating income (loss)
Natural gas compression $2,460 $ --- $4,842 $ ---
Natural gas gathering
and processing (473) (340) (696) (158)
Oil and gas (18,743) 1,190 (18,103) 5,553
Marine protein 2,122 415 6,016 1,362
Corporate (1,424) (1,834) (4,660) (5,121)
-------- ------- ------- -------
($16,058) ($569) ($12,601) $1,636
======== ======= ======== =======
</TABLE>
(The accompanying notes are an integral part of the financial statements.)
6
<PAGE>
ZAPATA CORPORATION
STATEMENT OF CASH FLOWS
NINE MONTHS ENDED JUNE 30
-----------------------------
(in thousands)
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Operating activities:
Net income $10,026 $9,986
-------- --------
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation, depletion, amortization
and valuation provision 30,779 16,165
Gain on sale of Tidewater common stock (37,457) (32,928)
Changes in assets and liabilities:
Receivables (4,012) 6,086
Inventories (3,311) (4,253)
Accounts payable and accrued
liabilities (2,278) (4,108)
Other assets and liabilities 3,319 (2,718)
-------- --------
Total adjustments (12,960) (21,756)
-------- --------
Net cash used in
operating activities (2,934) (11,770)
-------- --------
Investing activities:
Proceeds from dispositions 88,533 74,332
Restricted cash investments 75,083 (75,735)
Proceeds from notes receivable 1,061 952
Business acquisitions (73,222) (2,491)
Capital expenditures (20,049) (1,685)
-------- --------
Net cash provided from
(used in) investing
activities 71,406 (4,627)
-------- --------
Financing activities:
Interest obligations deferred 1,297 523
Borrowings 170 82,625
Proceeds from issuance of preference and
common stock --- 28,750
Principal payments of long-term
obligations (70,827) (106,800)
Preferred stock redemption (2,245) ---
Dividend payments (404) ---
-------- --------
Net cash provided from
(used in) financing
activities (72,009) 5,098
-------- --------
Net decrease in cash and cash equivalents (3,537) (11,299)
Cash and cash equivalents at beginning of
period 15,273 35,544
-------- --------
Cash and cash equivalents at end of period $11,736 $24,245
======== ========
</TABLE>
(The accompanying notes are an integral part of the financial statements.)
7
<PAGE>
ZAPATA CORPORATION
NOTES TO FINANCIAL STATEMENTS
NOTE 1. FINANCIAL STATEMENTS
- - -----------------------------
The condensed consolidated financial statements included herein have been
prepared by Zapata, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. The financial statements reflect all
adjustments which are, in the opinion of management, necessary to fairly present
such information. All such adjustments are of a normal recurring nature.
Although Zapata believes that the disclosures are adequate to make the
information presented not misleading, certain information and footnote
disclosures, including significant accounting policies, normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. It is suggested that these condensed financial statements be read
in conjunction with the financial statements and the notes thereto included in
Zapata's latest annual report on Form 10-K.
In November 1992, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 112, "Employers Accounting for Post-
employment Benefits," which will require the recognition of an obligation by
employers who provide benefits to former or inactive employees after employment
but before retirement. Adoption of the new standard by Zapata is required no
later than the fiscal year ending September 30, 1995. Based on existing
conditions and a preliminary review, management believes adoption of the new
standard will not have a material impact on Zapata's results of operations or
financial position as Zapata currently provides post-employment benefits on a
very limited basis.
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" ("SFAS 115"), which addresses the accounting and
reporting for investments in equity securities that have readily determinable
fair values and for all investments in debt securities. Adoption by Zapata is
required no later than the fiscal year ending September 30, 1995. Zapata
currently owns approximately 673,000 shares of Tidewater Inc. ("Tidewater")
common stock which has a book value of approximately $7.9 million. Upon
adoption of SFAS 115, this security would be reported at fair value and any
unrealized gain or loss recorded as a separate component of stockholders' equity
(net of deferred income taxes). If Zapata had implemented the new standard at
June 30, 1994, an adjustment would have been made to increase other assets by
$7.7 million, with a corresponding decrease of $2.7 million to the deferred
income tax asset and an increase of $5.0 million to stockholders' investment for
the unrealized appreciation.
On April 27, 1994, Zapata's stockholders approved a one-for-five reverse stock
split of the Company's outstanding common stock effective May 3, 1994 that
reduced the number of common shares outstanding from approximately 158.3 million
to approximately 31.7 million. The number of authorized shares remained at
165.0 million and par value of the common stock was unchanged. All references
to earnings per share and average number of shares outstanding have been
restated to reflect the reverse stock split. Additionally Zapata's Board of
Directors declared a common stock dividend of $0.035 per share totalling
approximately $1.1 million to be paid in July 1994 to stockholders of record on
June 30, 1994.
8
<PAGE>
On June 7, 1994, Zapata announced that it would redeem one-half of the
approximately 45,000 outstanding shares of the Company's $6 Cumulative Preferred
Stock (Preferred Stock). The Preferred Stock was redeemed at $100 a share. The
Company presently intends to redeem the balance of its outstanding Preferred
Stock in 1995. Under terms of the Preferred Stock, Zapata can redeem a maximum
of 22,500 shares of such stock in a calendar year.
Note 2. Acquisition
- - --------------------
In November 1993, Zapata purchased the natural gas compression business of
Energy Industries, Inc. and certain other affiliated companies ("Energy
Industries"), as well as certain real estate used by the business. Energy
Industries is in the business of renting, fabricating, selling, installing and
servicing natural gas compressor packages. Total consideration paid for the
purchase of Energy Industries and certain real estate, and for a related
noncompetition agreement (collectively, the "Energy Industries Acquisition") was
$90.2 million consisting of $74.5 million and 2.7 million shares of Zapata
common stock based on an assigned value of $5.80 per share which approximated
the average trading price prior to closing of the acquisition (number of shares
and per share value have been adjusted to reflect May 1994 one-for-five reverse
stock split). Additionally, the Company incurred approximately $2.0 million in
fees associated with the Energy Industries Acquisition. The purchase price
reflects a downward adjustment of $700,000 based on an adjustment to the net
working capital of Energy Industries as of October 31, 1993. The cash portion of
the purchase price was funded by the proceeds which Zapata received from the
June 1993 sale of 3.5 million shares of Tidewater common stock in an
underwritten public offering. Zapata accounted for the acquisition using the
purchase method of accounting and recorded $20.0 million of goodwill in
connection therewith. The goodwill is being amortized over 40 years.
The following assets and liabilities were acquired in connection with the
Energy Industries Acquisition effective November 1, 1993 (in millions):
<TABLE>
<CAPTION>
<S> <C>
Cash $ 3.5
Receivables 9.3
Inventory 15.6
-----
28.4
Goodwill & other assets 20.4
Property & equipment, net 49.6
-----
$98.4
=====
Current Liabilities $ 5.8
Long-term debt .2
-----
$ 6.0
=====
</TABLE>
The following pro forma information for Zapata for the nine months ended June
30, 1994 and June 30, 1993 includes the historical results of Zapata, adjusted
for the results of Energy Industries as if the Energy Industries Acquisition had
been consummated on October 1, 1992 (unaudited) (in thousands, except per share
amounts).
9
<PAGE>
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
------------------
1994 1993
-------- --------
<S> <C> <C>
Revenues $247,938 $244,545
Income before taxes 16,441 18,680
Net income 10,220 12,842
Net income per share 0.31 0.42
</TABLE>
The pro forma adjustments to Zapata's results for the nine months ended June
30, 1994 to reflect the Energy Industries Acquisition increased revenues by
$6,014,000, as well as income before tax by $174,000. Additional pro forma
adjustments for the first nine months of fiscal 1994 included the elimination of
$124,000 of various operating and administrative expenses that were charged to
Energy Industries from an affiliate, additional depreciation of $120,000 and
$41,000 of goodwill amortization, a reduction in net interest expense of
$161,000 related to notes receivable and payable that were not acquired by
Zapata and a federal tax provision of $104,000.
The pro forma adjustments to Zapata's results for the nine months ended June
30, 1993 to reflect the Energy Industries Acquisition increased revenues by
$43,593,000, as well as income before tax by $2,752,000. Additional pro forma
adjustments for the first nine months of fiscal 1993 included the elimination of
$1,627,000 of various operating and administrative expenses that were charged to
Energy Industries from an affiliate, additional depreciation of $1,080,000 and
$328,000 of goodwill amortization, a reduction in net interest expense of
$1,526,000 related to notes receivable and payable that were not acquired by
Zapata, a federal tax provision of $1,641,000 and the issuance of 2.7 million
shares of Zapata common stock.
The pro forma amounts presented above may not be indicative of the results
that would have actually resulted if the transactions had occurred on the date
indicated or which may be obtained in the future.
Note 3. Sales of Tidewater Common Stock and Senior Debt Prepayment
- - -------------------------------------------------------------------
In November 1993, Zapata sold 3.75 million shares of its Tidewater common
stock for a net price of $20.75 per share or $77.8 million through an
underwritten public offering; the sale resulted in a pretax gain of $33.8
million. In December 1993, $73.7 million of the proceeds were used to prepay
$68.5 million of the Company's 13% senior indebtedness to Norex Drilling Ltd.,
along with accrued interest, and to pay a $3.5 million prepayment premium.
In connection with the debt prepayment, the Norex debt agreement was amended
to remove or lessen various restrictions on the Company. The Company will no
longer be required to maintain certain financial ratios and will no longer be
subject to limitations on its ability to incur additional indebtedness or
contingent obligations, to make capital expenditures, to pay dividends or to
enter into merger or consolidation transactions, to liquidate, wind up or
dissolve or to make investments or loans. In addition, the Company will no
longer be subject to limitations on the creation of liens or the sale of assets,
except in connection with Energy Industries and certain related subsidiaries.
The Company will remain subject to a covenant in the Norex debt agreement which
requires it to maintain a consolidated tangible net worth as defined in such
agreement of at least $100 million.
10
<PAGE>
In March 1994, Zapata sold 375,175 additional shares of its Tidewater common
stock for a net price of $21.34 per share or $8.0 million resulting in a pretax
gain of $3.6 million. The Company currently owns approximately 673,000 shares
of Tidewater common stock. The aggregate market value of Zapata's remaining
shares of Tidewater common stock as of June 30, 1994 was $15.6 million based on
the closing price of $23.25 per publicly-traded share on that date.
Note 4. Accounting for Income Taxes
- - ------------------------------------
In the first quarter of fiscal 1994, Zapata adopted Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes." The
adoption of SFAS 109 changes Zapata's method of accounting for income taxes to
the asset and liability approach. This approach requires the recognition of
deferred tax assets and liabilities for the expected future tax consequences of
existing temporary differences between the financial reporting and tax reporting
basis of assets and liabilities, and operating loss and tax credit carryforwards
for tax purposes. The impact of adopting SFAS 109 was to record an increase to
capital in excess of par value of $15.3 million and a net deferred tax asset of
$11.6 million arising from the recognition of previously existing credit
carryforward items.
Temporary differences and tax credit carryforwards that gave rise to
significant portions of deferred tax assets and liabilities as of October 1,
1993 as adjusted for adoption of SFAS 109 are as follows:
<TABLE>
<CAPTION>
October 1,
Deferred Tax Assets 1993
- - ------------------- -----------
<S> <C>
Asset write-downs not yet deductible $ 8,554
U.S. net operating loss carryforward 33
Investment tax credit carryforwards 27,446
Alternative minimum tax credit
carryforwards 11,180
Other 2,208
--------
Total deferred tax assets 49,421
Valuation allowance (5,596)
--------
Net deferred tax assets 43,825
--------
Deferred Tax Liabilities
------------------------
Property and equipment (12,526)
Investment in Tidewater (11,766)
Pension (3,690)
Other (4,210)
--------
Total deferred tax liabilities (32,192)
--------
Net deferred tax asset $ 11,633
========
</TABLE>
The valuation allowance required under SFAS 109 represents tax credits that
may not be ultimately utilized given current facts and circumstances.
11
<PAGE>
I
TEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
- - -------------------------------
At June 30, 1994, Zapata's financial condition remained stronger than that
of any time in recent history. Long-term debt of $70.3 million compares very
favorably to working capital of $65.8 million and stockholders' investment of
$183.5 million. Additionally, the Company owns approximately 673,000 shares of
Tidewater Inc. ("Tidewater") common stock.
In November 1993, Zapata purchased the natural gas compression business of
Energy Industries, Inc. and certain other affiliated companies as well as
certain real estate used by the business (collectively, "Energy Industries").
Energy Industries is engaged in the business of renting, fabricating, selling,
installing and servicing natural gas compressor packages. Total consideration
paid for the purchase and for a related noncompetition agreement (collectively,
the "Energy Industries Acquisition") was $90.2 million. The purchase price
consisted of $74.5 million and 2.7 million shares of the Company's common stock
valued at $5.80 per share, which approximated the average trading price prior to
closing of the acquisition (number of shares and per share value have been
adjusted to reflect the May 1994 one-for-five reverse stock split of Zapata's
outstanding common stock).
To fund the cash portion of the purchase price, Zapata used the proceeds
from the June 1993 sale of 3.5 million shares of its Tidewater common stock. In
November 1993, Zapata sold an additional 3.75 million shares of its Tidewater
common stock in an underwritten public offering for a net price of $20.75 per
share or $77.8 million. In December 1993, most of the proceeds from this sale
were used to prepay $68.5 million of the Company's 13% senior indebtedness owed
to Norex Drilling Ltd., along with accrued interest, and to pay a negotiated
prepayment premium of $3.5 million. In March 1994, Zapata sold 375,175
additional shares of Tidewater stock for a net price of $21.34 per share
generating $8.0 million.
As of June 30, 1994, the Company's weighted-average interest rate had been
reduced to 9.9% as a result of the Norex debt prepayment. Additionally, a
portion of such interest is deferred and added to principal in accordance with
certain loan provisions. Mandatory principal payments for the next twelve
months total $3.0 million; no significant amount of debt matures prior to fiscal
1996. Depending upon certain conditions, most of the principal payments due in
1996 may be either converted into shares of Zapata common stock or exchanged for
shares of Zapata's Tidewater common stock as provided for in the Norex loan
agreements.
While the Company considers its current liquidity position to be adequate,
it has entered into discussions with several financial institutions with the
intent of establishing committed lines of credit to fund future growth.
Following the acquisition of Energy Industries, Zapata believes that its cash
flow from operations will be sufficient to meet operating needs and its
financial commitments. In connection with the December debt prepayment, the
Norex debt agreement was amended to remove or lessen various restrictions on the
Company.
12
<PAGE>
Net cash used in operating activities during the first nine months of
fiscal 1994 totalled $2.9 million as compared to $11.8 million used in the
corresponding period in fiscal 1993. The lower use of cash in 1994 was
attributable to the positive contribution from the Company's compression
operations, reduced interest expense and lower fees associated with Zapata's
senior debt. During the third quarter, cash and restricted cash balances
declined by $16.4 million as a result of an increase in non-cash working capital
and capital expenditures.
Due to the significant transactions which occurred during the first nine
months of fiscal years 1993 and 1994, a more meaningful cash flow comparison can
be made if investing activities are combined with financing activities. On a
combined basis, these activities used $603,000 during the 1994 period and
generated $471,000 during the 1993 period. This difference can be attributed to
increased capital expenditures and to the redemption of preferred stock.
On April 27, 1994, Zapata's stockholders approved a one-for-five reverse
stock split of the Company's outstanding common stock effective May 3, 1994 that
reduced the number of common shares outstanding from approximately 158.3 million
to approximately 31.7 million. The number of authorized shares remained at
165.0 million and par value of the common stock was unchanged. All references
to earnings per share and average number of shares outstanding have been
restated to reflect the reverse stock split. Additionally Zapata's Board of
Directors declared a common stock dividend of $0.035 per share totalling
approximately $1.1 million to be paid in July to stockholders of record on June
30, 1994.
As of June 30, 1994, Zapata redeemed one-half of the approximately 45,000
outstanding shares of the Company's $6 Cumulative Preferred Stock (Preferred
Stock) at $100 per share. The Company presently intends to redeem the balance
of its outstanding Preferred Stock in 1995. Under terms of the Preferred Stock,
Zapata can redeem a maximum of 22,500 shares of the stock in a calendar year.
In July 1994 Zapata announced that it will separate its marine protein
operations from its energy-related businesses. Alternatives for a sale of the
marine protein operations or a spin-off of the business to the stockholders of
Zapata are being considered. The Company's Board of Directors believes that the
interest of Zapata's stockholders would best be served by completely separating
the two businesses.
In the first quarter of fiscal 1994, Zapata was required to adopt Statement
of Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income
Taxes." The adoption of SFAS 109 changed Zapata's method of accounting for
income taxes from the deferred method to an asset and liability approach. The
impact of adopting SFAS 109 was to give recognition to previously generated tax
credit carryforward items by recording a net deferred tax asset of $11.6 million
and increasing capital in excess of par value by $15.3 million.
RESULTS OF OPERATIONS
- - ---------------------
The Company's net loss of $9.6 million for the third quarter of fiscal 1994
compared unfavorably to the net income of $10.5 million for the same period in
fiscal 1993. The current quarter loss was attributable to an $18.8 million
pretax write-down of the Company's oil and gas properties in the Gulf of Mexico
that was required as a result of low gas prices and a revision in estimated
future costs. The 1993 period benefitted from a $32.9 million pretax gain from
the sale of 3.5 million shares of Tidewater common stock.
13
<PAGE>
The oil and gas valuation provision more than offset the contribution from
Zapata's natural gas compression operations and improved marine protein results.
For the third quarter of fiscal 1994, the Company incurred an operating loss of
$16.1 million on revenues of $86.5 million which compared unfavorably to the
$569,000 operating loss on revenues of $58.2 million reported for the
corresponding fiscal 1993 period.
For the first nine months of fiscal 1994, Zapata's net income of $10.0
million equaled the $10.0 million of net income earned during the corresponding
1993 period. For the 1994 period, increased gains realized from the sales of
Tidewater common stock and lower interest expense mitigated the effects of the
oil & gas write-down. Revenues of $241.9 million and an operating loss of $12.6
million for the 1994 period compared to the 1993 period revenues of $201.0
million and operating income of $1.6 million.
NATURAL GAS COMPRESSION - In November 1993 Zapata purchased Energy Industries, a
participant in all segments of the natural gas compression industry. And, in
April 1994 Energy Industries acquired 41 additional compressors for $2.0
million. Energy Industries operates one of the ten largest rental fleets of
natural gas compressor packages in the United States. Its compressor fleet is
located in Texas, Louisiana, Arkansas, Oklahoma and New Mexico, as well as
offshore in the Gulf of Mexico.
Energy Industries primarily supplies natural gas compressor packages in
natural gas production and processing applications. In natural gas production
applications, natural gas compression is used to increase the flow rate of gas
wells with low reservoir pressures. In natural gas processing applications,
natural gas compression is used in the process of separating the various
hydrocarbon components of the wellhead natural gas stream. In interstate
natural gas pipeline applications, natural gas compression is used to increase
the pressure of natural gas from reservoir levels to interstate pipeline
standards. Energy Industries maintains an inventory of compressor and engine
components to support the fabrication, service and repair of natural gas
compressor packages.
The major segments of Energy Industries' natural gas compression revenues
and operating results for the quarter and eight month period ended June 30,
1994, in thousands, are identified below.
<TABLE>
<CAPTION>
Three Months Ended Eight Months Ended
June 30, 1994 June 30, 1994
-------------------- --------------------
Operating Operating
Revenues Results Revenues Results
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Compressor Rental $ 5,163 $ 1,462 $12,066 $ 3,752
Fabrication and Sales 9,272 1,663 17,150 2,902
Parts & Service 5,187 1,107 14,123 2,826
Other 2,188 384 6,535 909
Selling & Administrative --- (2,156) --- (5,547)
------- ------- ------- -------
$21,810 $ 2,460 $49,874 $ 4,842
======= ======= ======= =======
</TABLE>
14
<PAGE>
Natural gas compressor package rental utilization is affected by the
number and age of producing oil and gas wells, the volume of natural gas
consumed and natural gas prices. Average rental rates are determined by the
demand for compressor packages and vary by size and horsepower of a compressor
package. Energy Industries' average utilization, rental rates and fleet size
during the last two quarters are in the following table. Utilization of the
Company's rental units remained below the reported industry average, however,
efforts undertaken to address this issue have resulted in an increase in the
Company's utilization rate.
<TABLE>
<CAPTION>
June 30, 1994 March 31, 1994
-------------- ---------------
<S> <C> <C>
Average fleet utilization:
Horsepower 77.8% 76.2%
Average monthly rental rate, based on:
Horsepower $ 17.43 $ 17.26
Average fleet size:
Number of units 701 662
Horsepower 107,494 104,524
</TABLE>
In addition to operating a fleet of natural gas compressor packages
for rental purposes, Energy Industries designs, fabricates and sells natural gas
compressor packages to customer specifications. Energy Industries sells
compressor packages to natural gas producers, gatherers and transmission
companies which expect the long life of their associated reserves or pipeline to
justify the capital cost of acquiring, rather than renting, a natural gas
compressor package. Most of Energy Industries' natural gas compressor package
sales are for larger, high horsepower packages. Fabrication backlog for the
division remains at a high level.
NATURAL GAS GATHERING, PROCESSING AND MARKETING - Zapata's natural gas
gathering, processing and marketing operations are conducted through Cimarron
Gas Holding Company and its subsidiaries. Cimarron was acquired early in fiscal
1993 to serve as the vehicle for the Company's expansion into the natural gas
services market. As a division of Zapata, Cimarron's operations involve two
major categories of business activities: the gathering and processing of natural
gas and its constituent products and the marketing and trading of natural gas
liquids (NGL's).
Revenues and operating results for the third quarter of fiscal 1994
and 1993 are presented in the following table by major category, in thousands.
For the third quarter of fiscal 1994, marketing revenues declined primarily due
to the Company's decision to reduce its natural gas trading activities while
gathering and processing revenues increased as a result of the expansion of the
division's gathering and processing operations during 1993. The gathering and
processing operation however, incurred an operating loss for the third quarter
as depressed prices for natural gas liquids resulted in reduced processing
margins. Subsequent to the end of the quarter, liquids prices and processing
margins improved.
<TABLE>
<CAPTION>
Revenues Operating Results
---------------- -------------------
1994 1993 1994 1993
------- ------- -------- ---------
<S> <C> <C> <C> <C>
Gathering & Processing $ 7,255 $ 2,500 $(164) $ 147
NGL Marketing 34,702 38,472 147 191
Selling & Administrative --- --- (456) (678)
------- ------- ----- -----
$41,957 $40,972 $(473) $(340)
======= ======= ===== =====
</TABLE>
15
<PAGE>
Gas gathering is the collection of natural gas from various individual
wells, combining it into a single gas stream and delivering it into a major
transmission line for transportation to market. A gathering system sometimes
includes an associated processing plant for the removal of gas liquids,
depending on the content of liquefiable hydrocarbons in the gas streams and the
capabilities of transmission lines.
In September 1993, Cimarron significantly expanded its natural gas
gathering and processing activities by acquiring approximately 350 miles of
natural gas gathering systems in West Texas and Oklahoma and a gas processing
plant in Sutton County, Texas. A comparison of average daily volumes of gas,
measured in thousands of cubic feet, gathered and processed during the third
quarter of fiscal 1994 and 1993 is shown below.
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Gathering 47,700 10,220
Processing 25,000 9,398
</TABLE>
For the nine months ended June 30, 1994, revenues totalled $120.5 million
with an operating loss of $696,000 as compared to revenues of $148.7 million and
an operating loss of $158,000 in the corresponding fiscal 1993 period reflecting
a decrease in marketing activity and the effect of continued lower prices for
natural gas liquids on processing margins.
OIL AND GAS - Reflecting the $18.8 million property valuation provision, as
well as lower prices for U.S. natural gas and lower U.S. natural gas production,
revenues of $3.0 million and an operating loss of $18.7 million for the third
quarter of fiscal 1994 compared unfavorably to the fiscal 1993 third quarter
revenues of $4.2 million and operating income of $1.2 million. The valuation
provision was the result of several factors: lower natural gas prices,
additional capitalized costs incurred recently in connection with several
workover wells at the Company's Wisdom gas field and an increase in estimated
future costs.
The Bolivian operations contributed approximately $500,000 to operating
income in the third quarters of 1994 and 1993; likewise, year-to-date, fiscal
1994 and 1993 Bolivian operations contributed approximately $2.4 million in each
period.
Zapata's domestic natural gas production for the third quarter of fiscal
1994 was 25% lower than the fiscal 1993 period's level of production. The
decline in production was due to production difficulties encountered during 1993
at the Wisdom gas field, the Company's most significant oil and gas property.
Efforts to restore production commenced in February 1994 and the
workover/recompletion of the first two wells successfully restored production of
these wells to acceptable levels. The Company has undertaken the recompletion
of an additional well in the Wisdom gas field which the Company currently
estimates will cost approximately $1.8 million.
Until such time that repairs to additional wells in the Wisdom gas field
can be effected and production restored, revenues from domestic oil and gas
operations will be based on lower production quantities than in prior years.
16
<PAGE>
Year-to-date fiscal 1994 revenues of $9.3 million and an operating loss of
$18.1 million compared unfavorably to the 1993 revenues of $16.6 million and
operating income of $5.6 million as a result of the write-down and lower natural
gas production.
MARINE PROTEIN - Revenues of $19.7 million and operating income of $2.1 million
for the third quarter of fiscal 1994 compared favorably to the 1993 third
quarter revenues of $13.0 million and operating income of $415,000. The
improved results were achieved by increased sales volumes that resulted from
higher levels of inventories which were carried over from the fiscal 1993
fishing season. Compared to the year-earlier period, sales volume of fish meal
during the third quarter of 1994 was 43% higher while the average per ton price
of $346 was 5% lower. Likewise, fish oil volumes increased significantly while
the average per ton price of $302 was slightly lower.
As a result of increased sales volumes, year-to-date fiscal 1994 revenues
of $62.3 million and operating income of $6.0 million compared favorably to the
1993 revenues of $35.6 million and operating income of $1.4 million.
OTHER INCOME (EXPENSE)
- - ----------------------
The current quarter includes a $2.8 million gain related to the settlement
of a coal note receivable that had previously been written off while the prior
year quarter includes a $6.4 million prepayment penalty that Zapata was required
to pay in connection with the refinancing of its senior indebtedness and a $6.0
million write-down of the Company's investment in Arethusa Off-Shore Ltd. to
approximate estimated market value.
RECENTLY ISSUED ACCOUNTING STANDARDS
- - ------------------------------------
In November 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 112, "Employers' Accounting for Post-
employment Benefits," which will require the recognition of an obligation by
employers who provide benefits to former or inactive employees after employment
but before retirement. Adoption of the new standard by the Company is required
no later than the fiscal year ending September 30, 1995. Based on existing
conditions and a preliminary review, management believes adoption of the new
standard will not have a material impact on the Company's results of operations
or financial position as the Company currently provides post-employment benefits
on a very limited basis.
In May 1993, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 115, "Accounting for Certain Investments in
Debt and Equity Securities" ("SFAS 115"), which addresses the accounting and
reporting for investments in equity securities that have readily determinable
fair values and for all investments in debt securities. Adoption by Zapata is
required no later than the fiscal year ending September 30, 1995. Zapata
currently owns approximately 673,000 shares of Tidewater common stock which has
a book value of approximately $7.9 million. Upon adoption of SFAS 115, this
security would be reported at fair value and any unrealized gain or loss
recorded as a separate component of stockholders' equity (net of deferred income
taxes). If Zapata had implemented the new standard at June 30, 1994, an
adjustment would have been made to increase other assets by $7.7 million, with a
corresponding decrease of $2.7 million to the deferred income tax asset and an
increase of $5.0 million to stockholders' investment for the unrealized
appreciation.
17
<PAGE>
Part II. Other Information
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
---------------------------------------------------
The Company held its 1994 Annual Meeting of Stockholders on April 27, 1994
(the "1994 Annual Meeting"). An aggregate of 158,350,538 shares of the
Company's equity securities were outstanding and entitled to vote at the 1994
Annual Meeting as follows: 158,302,958 shares of Common Stock; 44,943 shares of
$6 Cumulative Preferred Stock and 2,637 shares of $2 Noncumulative Convertible
Preference Stock. At this meeting, the stockholders voted on the following
matters:
Election of Class II Directors
------------------------------
<TABLE> Withhold
<CAPTION> Authority
For To Vote
--- -------
<S> <C> <C>
Peter M. Holt 143,954,750 752,249
Kristian Siem 143,969,356 737,643
</TABLE>
In addition to the Class II directors elected at the 1994 Annual Meeting,
Jack T. Trotter and Daniel P. Whitty continue to serve as Class III directors
until the 1995 annual meeting of stockholders, and Ronald C. Lassiter, Avram A.
Glazer and Malcolm I. Glazer continue to serve as Class I directors until the
1996 annual meeting of stockholders.
Reverse Stock Split
-------------------
<TABLE>
<CAPTION>
Broker
For Against Abstained Non-Vote
--- ------- --------- --------
<S> <C> <C> <C>
142,033,221 2,385,029 259,709 29,040
</TABLE>
The Board of Directors of the Company approved the 1-for-5 reverse stock
split (the "Reverse Stock Split") of the Company's Common Stock and directed
that it be submitted to the Company's stockholders for consideration and action.
In the Reverse Stock Split, the total number of shares outstanding of Common
Stock held by each stockholder prior to the Reverse Stock Split was
converted automatically into the right to receive an amount of whole shares of
new Common Stock equal to the number of shares owned immediately prior to the
Reverse Stock Split divided by five. No fractional shares are being issued, and
no such fractional share interest will entitle the holder thereof to vote, or to
any rights of a stockholder of the Company. In lieu of any fractional share
interest, each holder of Common Stock who would otherwise be entitled to receive
a fractional share of Common Stock after the Reverse Stock Split will be paid
cash upon the surrender of the certificate(s) representing Common Stock held by
such holder in an amount equal to the product of such fraction multiplied by
$5.50, which is the closing price on the first trading date after the
18
<PAGE>
effective date of the Reverse Stock Split. The number of authorized shares of
the Company's Common Stock shall remain at 165,000,000 and the par value of the
Common Stock shall remain at $0.25 per share.
Stockholder Proposal on Cumulative Voting
-----------------------------------------
<TABLE>
<CAPTION>
Broker
For Against Abstained Non-Vote
--- ------- --------- --------
<S> <C> <C> <C>
7,077,149 95,917,885 17,744,511 23,967,454
</TABLE>
Mr. Martin Glotzer, a shareholder of the Company, presented the stockholder
proposal to be voted on at the 1994 Annual Meeting in which he requested that
the stockholders of the Company amend the Company's Restated Certificate of
Incorporation, as amended, to provide for cumulative voting on the election of
directors of the Company.
Ratification of the Appointment of Coopers & Lybrand
----------------------------------------------------
as Independent Public Accountants
---------------------------------
<TABLE>
<CAPTION>
Broker
For Against Abstained Non-Vote
--- ------- --------- --------
<S> <C> <C> <C>
142,523,121 441,038 1,713,800 29,040
</TABLE>
Subject to stockholder approval, the Board of Directors of the Company
appointed Coopers & Lybrand to serve as the Company's independent public
accountant for the fiscal year ending September 30, 1994.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits:
Exhibit 10(a) - Consulting Agreement between Ronald C. Lassiter
and Zapata Corporation dated as of July 15, 1994.
(b) Reports on Form 8-K:
Current report on Form 8-K dated April 27, 1994 (Item 5. Other
Events).
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ZAPATA CORPORATION
(Registrant)
Dated: August 12, 1994 By: /s/ M. J. Migura
-----------------------
Marvin J. Migura
Senior Vice President
/s/ M. J. Migura
------------------------
Marvin J. Migura
Chief Financial Officer
20
<PAGE>
EXHIBIT 10(a)
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") made and entered into as of the 15th
day of July, 1994, by and between ZAPATA CORPORATION, a Delaware corporation
(the "Company"), ZAPATA PROTEIN, INC., a Delaware corporation ("Zapata
Protein"), and R. C. LASSITER, an individual residing in Houston, Harris County,
Texas (the "Executive");
W I T N E S S E T H:
WHEREAS, the Executive has been an officer of the Company pursuant to the
Employment Agreement dated effective March 15, 1991 between the Company and the
Executive (the "Employment Agreement"); and
WHEREAS, the Employment Agreement provided for certain additional remuneration
and certain additional benefits to be paid to the Executive if the Executive
terminated his employment with the Company in the event of a Change of Control
under certain conditions (as defined in Paragraph 5.B(i) of the Employment
Agreement) after March 15, 1991; and
WHEREAS, a Change of Control of the Company occurred on or about July 16, 1992;
and
WHEREAS, pursuant to Paragraph 5.B of the Employment Agreement, a Good Reason
(as defined in the Employment Agreement) has occurred, pursuant to which the
Executive may terminate his employment on or before July 16, 1994 and receive
three years' salary from the date of such termination; and
WHEREAS, the Executive has given notice to the Company, dated July 15, 1994, to
terminate his employment pursuant to Paragraph 5.B of the Employment Agreement;
and
WHEREAS, the Company desires to retain the Executive to continue to provide
management services to its subsidiary, Zapata Protein, after his termination of
employment and Executive is willing and able to provide such services under the
terms and conditions of this Agreement;
NOW, THEREFORE, in consideration of these premises and other good and valuable
consideration, the parties agree as follows:
1. Consulting Employment: The Company and the Executive agree that
Executive's full-time employment under the Employment Agreement with the
Company will terminate as of July 15, 1994. The Company hereby employs the
Executive as an independent consultant and the Executive agrees to render
consulting services to act as general manager of Zapata Protein for a term
beginning on July 15, 1994 and ending on January 16, 1995 (the "Term of
this Agreement"), and the Executive shall provide services as more fully
described in the attached
1
<PAGE>
EXHIBIT "A" incorporated herein by reference. The Executive shall provide
such services in compliance with the requests of the Company's Board of
Directors, and the Executive shall report the progress of his efforts to
the Board of Directors on a regular basis. Executive shall perform the
services at Zapata's One Riverway offices or such other location(s) as the
Company may reasonably designate, and he shall be an independent consultant
and shall not be deemed for any purpose to be an employee, agent or servant
of the Company or Zapata Protein. The Company shall have no direction or
control of the Executive except in the results to be obtained.
2. Direct Compensation: As compensation for services rendered hereunder, the
Company shall pay the Executive the amounts due pursuant to Paragraph 5.B
of the Employment Agreement commencing on July 15, 1994, in a monthly
amount equal to Fourteen Thousand Five Hundred Eighty-Three and 33/100
Dollars ($14,583.33), until the earlier of: (a) January 15, 1995 or (b) the
sale of all or substantially all of the capital stock or assets of Zapata
Protein.
If the event in subparagraph 2(a) of this Agreement occurs first, the
Company shall pay any remaining amounts owed under Paragraph 5.B of the
Employment Agreement at the rate of Three Hundred Fifty-Eight Thousand Six
Hundred and No/100 Dollars ($358,600.00) per year until the full amount to
which the Executive is entitled under Paragraph 5.B of the Employment
Agreement is paid to the Executive.
If the event in subparagraph 2(b) of this Agreement occurs first, the
Company shall assign all of its rights and obligations under this Agreement
to Zapata Protein and/or its successor; provided, however, that if all or
substantially all of the capital stock or assets of Zapata Protein are sold
to a party with which the Executive has no relationship or interest of any
kind, including, but not limited to, a relationship or interest as an
investor, stockholder, officer or consultant, then the Company shall remain
liable for all remaining amounts payable to the Executive pursuant to
Paragraph 2(c) of this Agreement. Subject to the foregoing, the Executive
and Zapata Protein hereby consent to any such assignment pursuant to this
Agreement, and Zapata Protein agrees to pay or cause to be paid all
remaining amounts due to the Executive under Paragraph 5.B of the
Employment Agreement in the event of such assignment at a rate of One
Hundred Seventy-Five Thousand and No/100 Dollars ($175,000.00) per year
until the full amount to which the Executive is entitled under Paragraph
5.B of the Employment Agreement is paid to the Executive.
In no event shall the amounts payable hereunder pursuant to Paragraph 5.B
of the Employment Agreement be less than or exceed the total amount due
under Paragraph 5.B of the Employment Agreement as of July 15, 1994.
3. Reimbursement of Expenses: The Company shall reimburse the Executive for
all reasonable and necessary expenses he incurs under this Agreement. The
Company shall provide the Executive office space at One Riverway, Houston,
Texas 77056 (or at such other location(s) as the Company may reasonably
designate) and one reserved parking space for the duration
2
<PAGE>
of the Term of this Agreement.
4. Benefits: During the Term of this Agreement, the Executive shall be
entitled to participate in the Company's group health and dental care plans
pursuant to the terms and conditions of those plans. Premiums will be
deducted from each monthly check paid to the Executive. Executive shall
not participate in any other employee benefit plan or program sponsored by
the Company, Zapata Protein or its successor during the Term of this
Agreement.
5. Directors' and Officers Insurance and Indemnity: The Company agrees to use
reasonable efforts to obtain a directors' and officers' liability
insurance policy covering Executive and to continue to maintain such
policy. The amount of such coverage, if available, shall be reasonable in
relation to the Executive's responsibilities during the Term of this
Agreement. Additionally, the Company agrees to indemnify fully and hold
the Executive harmless against any causes of action of any type whatsoever
to the fullest extent permitted by law and consistent with the Company's
Certificate of Incorporation and By-laws in effect as of the date hereof
with respect to any acts or non-acts he may commit in connection with the
performance of his consulting services under this Agreement and during the
Term of this Agreement, even if the Executive is shown to be negligent or
grossly negligent, in whole or in part.
6. Notices: Any notices required to be made hereunder shall be deemed
effective when placed in writing and hand-delivered or mailed in the U.S.
mail, postage-prepaid, as follows:
To Company: Zapata Corporation
One Riverway, Suite 2200
Houston, Texas 77056
Attention: Corporate Secretary
To Executive: Mr. R. C. Lassiter
11115 Wickwood
Houston, Texas 77024
7. Death or Disability: If, during the Term of this Agreement, Executive dies
or becomes totally and permanently disabled (as defined in the Company's
Long-Term Disability Plan), the Company shall be obligated to pay (in the
case of death) to the Executive's beneficiary or beneficiaries designated
in writing, or to his estate in the absence or lapse of such designation,
or (in the case of such disability) to the Executive or his representative,
the remaining amount payable under Paragraph 5.B of the Employment
Agreement in a lump sum.
8. Covenant Not to Disclose: In consideration for mutual covenants and
agreements herein, the Executive agrees that he shall not, except as
permitted by the Company in writing, in any manner, at any time, directly
or indirectly, disclose or appropriate to his own use or the use
3
<PAGE>
of others any Company, Zapata Protein or affiliate trade secrets, supplier
or customer lists or any other "confidential information." Confidential
information means any and all information concerning the Company, Zapata
Protein or an affiliate thereof not known to the general public or in the
industry in which the Executive is engaged that is disclosed to the
Executive or known or acquired by the Executive as a consequence of his
prior full-time employment or the Term of this Agreement with the Company,
Zapata Protein or any affiliate thereof, or that was acquired during his
prior full-time employment or the Term of this Agreement with the Company,
Zapata Protein or an affiliate thereof. The Executive confirms that any
such trade secrets, supplier or customer lists, and any other confidential
information are the exclusive property of the Company. The Executive
acknowledges that the Company, Zapata Protein or an affiliate would be
irreparably injured by a violation of the provisions of this Paragraph and
the Company, Zapata Protein or an affiliate would have no adequate remedy
at law. Therefore, the Executive acknowledges and agrees that injunctive
relief, specific performance or any other appropriate equitable remedy
(without any bond or other security being required) are appropriate
remedies to enforce compliance with this Paragraph.
9. Restrictive Covenant Not to Compete: In consideration for mutual covenants
and agreements contained herein, the Executive agrees that during the Term
of this Agreement he will engage in no direct competition with the Company
or Zapata Protein in Louisiana without prior consent of the Board of
Directors of the Company. Nothing contained herein shall prevent Executive
from accepting less than full-time employment from other third-party
employers, from engaging in his own business as an employee or otherwise,
or from engaging in other business or investment opportunities provided the
Executive does not violate the foregoing provisions of this Paragraph.
10. Source of Payments: All payments provided in this Agreement shall be paid
in cash from the general funds of the Company, Zapata Protein or its
successor, and no special or separate funds shall be established and not
other segregation of assets shall be made to assure payment. The Executive
shall have no right, title or interest whatever in or to any investments
which the Company, Zapata Protein or its successors may make to aid the
Company, Zapata Protein and its successor in meeting its obligations
hereunder. Nothing contained in this Agreement, and no action taken
pursuant to this provision, shall create or be construed to create a trust
of any kind, or a fiduciary relationship, between the Company, Zapata
Protein and its successor and the Executive or any other person. To the
extent that any person acquires a right to receive payments from the
Company, Zapata Protein and its successor hereunder, such right shall be no
greater than the right of an unsecured creditor of the Company, Zapata
Protein and its successor.
11. Income Tax: The Executive shall have the sole responsibility of the
payment of all federal, state, city or other taxes that shall be required
pursuant to any law or governmental regulation or ruling. Where the
Company chooses not to withhold taxes, Executive shall pay all such taxes
directly and shall indemnify and hold the Company harmless from any and all
claims,
4
<PAGE>
demands, costs, penalties, attorneys' fees and liabilities arising
as a result of Company's failure to do so.
12. Effect of Prior Agreements: This Agreement contains the entire
understanding between the parties hereto and supersedes any prior
employment agreement between the Company or any predecessor of the Company
and the Executive, except that this Agreement shall not affect or operate
to reduce or increase any benefit or compensation inuring to the Executive
the amount payable to the Executive under Paragraph 5.B of the Employment
Agreement.
13. Enforceability and Governing Law: Should any portion of this Agreement be
held unenforceable or inoperative for any reason, in whole or in part, it
shall not affect any other portion of this Agreement, but the remainder
shall be effective as though the ineffective portion is not contained
herein. The Executive shall not assign or transfer his rights or duties
under this Agreement without the prior written consent of the Company. No
waiver or any breach or violations of this Agreement by the parties shall
be deemed made unless made in writing. Any such waiver shall not operate
or be construed as a waiver of any subsequent breach or violation of this
Agreement. This Agreement is to be effective in and shall be construed in
accordance with the laws of the State of Texas. This Agreement is binding
upon and shall inure to the benefit of the parties hereto and their
successors and assigns. This Agreement contains the entire understanding
of the parties.
14. General Provisions:
a. Non-Assignability: Neither this Agreement nor any right or interest
hereunder shall be assignable by the Executive, his beneficiaries or
legal representatives without the Company's prior written consent;
provided, however, nothing in this Paragraph 12.A shall preclude (i)
the Executive from designating a beneficiary to receive any benefit
payable hereunder upon his death or (ii) the executors, administrators
or other legal representatives of the Executive or his estate from
assigning any rights hereunder to the person or persons entitled
thereto.
b. No Attachment: Except as required by law, no right to receive
payments under this Agreement shall be subject to anticipation,
commutation, alienation, sale, assignment, encumbrance, charge,
pledge, hypothecation, execution, attachment, levy or similar process
or assignment by operation of law, and any attempt, voluntary or
involuntary, to effect such action shall be null, void and of no
effect.
c. Binding Effect: This Agreement shall be binding upon and inure to the
benefit of the Company, its successors and assigns, except as
otherwise provided herein.
d. Modification and Waiver:
(i) Amendment of Agreement: This Agreement may not be modified or
5
<PAGE>
amended except by an instrument in writing signed by the parties
hereto.
(ii) Waiver: No term or condition of this Agreement shall be deemed
to have been waived, nor shall there be an estoppel against the
enforcement of any provision of this Agreement, except by written
instrument of the party charged with such waiver or estoppel. No
such written waiver shall be deemed a continuing waiver unless
specifically stated therein, and each such waiver shall operate
only as to the specific term or condition waived and shall not
constitute a waiver of such term or condition for the future or
as to any act other than that specifically waived.
e. Headings: The headings of paragraphs herein are included solely for
convenience and reference and shall not control the meaning or
interpretation of any of the provisions of this Agreement.
IT WITNESS WHEREOF, the Company has caused this Agreement to be executed by its
officer thereunto duly authorized, and the Executive has signed this Agreement
all as of the day and year first written above.
ZAPATA CORPORATION
By: /s/ Kristian Siem
_____________________________________
Kristian Siem
Chief Executive Officer and President
ZAPATA PROTEIN, INC.
By: /s/ Joseph D. Oliver
_____________________________________
Joseph D. Oliver
Executive Vice President
EXECUTIVE
/s/ R. C. Lassiter
______________________________________
R. C. Lassiter
6
<PAGE>
EXHIBIT "A"
1. Responsible to the Board of Directors for profitable long-term management
of the business.
2. Developing, and with the Board of Directors approval, implement both annual
and long-range business plans and organizational policies.
3. Responsible for directing operations, accounting and control functions,
marketing, and within guidelines established by the Board of Directors,
managing capital investment and the administration of broad corporation
strategy.
4. Exercising due care and loyalty towards the corporation and its
shareholders while conducting activities in the ordinary course of
business.
7
