<PAGE>
ZAPATA CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Because of the expiration of the investment tax credits, the deferred tax
asset of $851,000 and its related valuation allowances were eliminated. Also, in
prior years the Company recorded deferred tax assets related to the decreased
value of its investments. Valuation allowances were recorded to fully offset
these deferred tax assets. These investments were sold prior to September 30,
2001. As a result, Zapata will realize a tax benefit from a capital loss
carryback. Accordingly, the valuation allowances associated with these assets
were reversed and much of the benefit is recognized in 2001.
The Company believes it is more likely than not that its net deferred tax
assets as of December 31, 2001 will be realized. Accordingly, no valuation
allowances have been established to offset any deferred tax assets. The ultimate
realization of deferred tax assets could be negatively impacted by market
conditions and other variables not known or anticipated at this time.
NOTE 15. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES PAYABLE
Future minimum payments under non-cancelable operating lease obligations
aggregate $2.4 million, and for the five years ending December 31, 2006 are (in
thousands):
<Table>
<S> <C>
2002........................................................ $837
2003........................................................ 573
2004........................................................ 519
2005........................................................ 458
2006........................................................ 56
</Table>
Rental expenses for operating leases were $923, $1,045, and $971 in 2001,
2000, and 1999, respectively.
LITIGATION
On April 30, 1999, a State District Court in Houston, Texas entered
judgment against Zapata in a lawsuit brought by a former employee which was
commenced on April 1, 1998. The former employee claimed that he was entitled to
the value of options for approximately 240,000 shares (24,000 shares subsequent
to the reverse stock split) of Zapata stock, which he alleges should have been
issued to him in 1998 pursuant to his employment agreement with Zapata. The
judgment against Zapata was for approximately $3.45 million, which includes
pre-judgment interest. Zapata then appealed, and on March 15, 2001, the Court of
Appeals for the 14th District at Houston issued an opinion reversing the jury
verdict in favor of the former employee and rendering judgment in favor of
Zapata. On January 10, 2002, the Texas Supreme Court denied the former
employee's petition for review.
A non-operating wholly-owned subsidiary of Zapata, Energy Industries, Inc.,
was named as a defendant in three cases commenced in 1996 and 1997 pending in
the 83rd Judicial District Court of Upton County, Texas involving the death of
one individual and personal injuries to two others. The cases resulted from an
explosion and fire at a gas processing plant in Upton County caused by the
failure of a valve cover. Zapata was named as a defendant in one of the cases.
The owners of the plant have also filed a cross-claim against Energy Industries
for property damage and lost profits resulting from the explosion and fire.
Plaintiffs and the cross-plaintiff owners base their claim on a theory of
manufacturing or design defect of the valve cover. Plaintiffs seek compensatory
damages. Zapata and Energy Industries deny liability in each of the lawsuits,
and have vigorously contested these matters and intend to vigorously defend
against these actions. In January 2002, Zapata's primary insurance carrier for
these lawsuits, for the first time, notified it that it did not believe that
Zapata and Energy Industries had primary insurance coverage for the losses
arising out of these incidents. The insurance carrier had been providing for the
defense of these actions and had not reserved its rights with respect to that
defense. The insurance carrier has not yet discontinued providing for the
defense of these
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