<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 March 31, 1995
-----------------------------------------------------
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
per share, on May 10, 1995: 29,502,407.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
Zapata Corporation
Condensed Consolidated Balance Sheet
Condensed Consolidated Income Statement
Divisional Revenues and Operating Results
Condensed Consolidated Statement of Cash Flows
Notes to Financial Statements
2
<PAGE>
ZAPATA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
(in thousands)
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1995 1994
-------------- -------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 6,598 $ 14,386
Restricted cash 12,704 779
Receivables 20,650 27,591
Inventories:
Compressor equipment and components 25,757 17,629
Gas liquids products 557 414
Prepaid expenses and other current assets 2,391 2,049
Net assets of discontinued operations 55,000 55,000
-------- --------
Total current assets 123,657 117,848
-------- --------
Investments and other assets:
Notes receivable 914 1,925
Investment in equity securities --- 14,471
Goodwill 25,385 25,812
Deferred income taxes 6,288 3,315
Other assets 8,502 8,420
-------- --------
41,089 53,943
-------- --------
Property and equipment 163,965 157,335
Accumulated depreciation (74,841) (70,252)
-------- --------
89,124 87,083
-------- --------
Total assets $253,870 $258,874
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
ZAPATA CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
MARCH 31, SEPTEMBER 30,
1995 1994
--------- -------------
<S> <C> <C>
Current liabilities:
Current maturities of long-term debt $ 15,187 $ 2,478
Accounts payable and accrued liabilities 22,617 27,258
-------- --------
Total current liabilities 37,804 29,736
-------- --------
Long-term debt 51,346 59,860
-------- --------
Other liabilities 14,421 14,736
-------- --------
Stockholders' equity:
Preferred and preference stock 3 2,258
Common stock 7,939 7,930
Capital in excess of par value 137,782 138,293
Reinvested earnings from October 1, 1990 4,575 1,785
Investment in equity securities-unrealized
gain, net of taxes --- 4,276
-------- --------
150,299 154,542
-------- --------
Total liabilities and stockholders' equity $253,870 $258,874
======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
4
<PAGE>
ZAPATA CORPORATION
CONDENSED CONSOLIDATED INCOME STATEMENT
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
------------------ ----------------
1995 1994 1995 1994
------- ------- ------- --------
<S> <C> <C> <C> <C>
Revenues $38,127 $53,285 $84,097 $112,824
Expenses:
Operating 33,138 47,294 72,359 100,678
Depreciation, depletion and
amortization 2,864 2,832 5,741 5,246
Selling, general and administrative 2,521 3,934 5,063 7,337
------- ------- ------- --------
38,523 54,060 83,163 113,261
------- ------- ------- --------
Operating income (loss) (396) (775) 934 (437)
------- ------- ------- --------
Other income (expense):
Interest income 331 391 684 1,197
Interest expense (1,455) (1,189) (2,904) (3,707)
Gain on sale of Tidewater common
stock 4,811 3,605 4,811 37,457
Other 595 306 1,085 (5,967)
------- ------- ------- --------
4,282 3,113 3,676 28,980
------- ------- ------- --------
Income from continuing operations
before taxes 3,886 2,338 4,610 28,543
------- ------- ------- --------
Provision for income taxes
State 120 254 240 283
Federal 1,318 730 1,529 9,891
------- ------- ------- --------
1,438 984 1,769 10,174
------- ------- ------- --------
Income from continuing operations 2,448 1,354 2,841 18,369
------- ------- ------- --------
Income from discontinued operations,
net of income taxes --- 918 --- 1,231
------- ------- ------- --------
Net income 2,448 2,272 2,841 19,600
------- ------- ------- --------
Preferred stock dividends --- 101 51 202
------- ------- ------- --------
Net income to common stockholders $ 2,448 $ 2,171 $ 2,790 $ 19,398
======= ======= ======= ========
Per share data:
Income from continuing operations $ 0.08 $ 0.04 $ 0.09 $ 0.57
Income from discontinued operations --- 0.03 --- 0.04
------- ------- ------- --------
Net income per share $ 0.08 $ 0.07 $ 0.09 $ 0.61
======= ======= ======= ========
Average common shares and equivalents
outstanding 31,779 32,140 31,768 31,565
======= ======= ======= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
5
<PAGE>
ZAPATA CORPORATION
DIVISIONAL REVENUES AND OPERATING RESULTS
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
------------------ ----------------
1995 1994 1995 1994
------- ------- ------- --------
<S> <C> <C> <C> <C>
Revenues:
Natural gas compression $15,594 $15,433 $33,757 $ 28,064
Natural gas gathering and processing 20,289 35,028 45,320 78,499
Oil and gas 2,244 2,824 5,020 6,261
------- ------- ------- --------
$38,127 $53,285 $84,097 $112,824
======= ======= ======= ========
Operating income (loss):
Natural gas compression $ 1,174 $ 1,395 $ 3,097 $ 2,382
Natural gas gathering and processing (273) (784) (443) (223)
Oil and gas (192) 432 218 640
Corporate (1,105) (1,818) (1,938) (3,236)
------- ------- ------- --------
$ (396) $ (775) $ 934 $ (437)
======= ======= ======= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
6
<PAGE>
ZAPATA CORPORATION
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
MARCH 31,
-----------------
1995 1994
-------- --------
<S> <C> <C>
Cash flow used by operating activities:
Continuing operations:
Net income from continuing operations $ 2,841 $ 18,369
-------- --------
Adjustments to reconcile net income to net cash used
by operating activities:
Depreciation and amortization 5,741 5,246
Gain on sale of assets (5,720) (37,457)
Changes in other assets and liabilities (6,657) 6,642
-------- --------
Total adjustments (6,636) (25,569)
-------- --------
Cash flow used by continuing operations (3,795) (7,200)
-------- --------
Discontinued operations:
Income from discontinued operations --- 1,231
Decrease in net assets of discontinued operations --- 5,207
-------- --------
Cash flow provided by discontinued operations --- 6,438
-------- --------
Net cash used by operating activities (3,795) (762)
-------- --------
Cash flow provided (used) by investing activities:
Proceeds from dispositions of investments and other 15,957 88,533
Restricted cash investments (11,925) 74,733
Proceeds from notes receivable 920 967
Business acquisitions, net of cash acquired --- (73,622)
Capital expenditures (9,229) (7,969)
-------- --------
Net cash provided (used) by investing activities (4,277) 82,642
-------- --------
Cash flow provided (used) by financing activities:
Principal borrowing (payments) of long-term obligations 4,195 (68,962)
Preferred stock redemption and common stock buyback (2,758) ---
Dividend payments (1,153) (303)
-------- --------
Net cash provided (used) by financing activities 284 (69,265)
-------- --------
Net increase (decrease) in cash and cash equivalents (7,788) 12,615
Cash and cash equivalents at beginning of period 14,386 16,008
-------- --------
Cash and cash equivalents at end of period $ 6,598 $ 28,623
======== ========
</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 Corporation ("Zapata" or the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
The financial statements reflect all adjustments that 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 March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 121 "Accounting for the Impairment of Long-
Lived Assets and for Long-Lived Assets to be Disposed Of," which established
accounting standards for the impairment of long-lived assets, certain
identifiable intangibles, and goodwill related to those assets to be held and
used, and for long-lived assets and certain identifiable intangibles to be
disposed of. Adoption of the new standard by the Company is required no later
than the fiscal year ending September 30, 1997. 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.
In April 1995, Zapata announced that the Company is considering the sale of
its two natural gas services businesses: the natural gas compression operation
and the natural gas gathering and processing operation. The decision to consider
exiting the energy industry is based on the belief that businesses outside the
energy industry may provide better opportunities for the Company to pursue. Due
to the preliminary nature of this decision process, the financial statement
impact of the ultimate disposition or retention of these businesses cannot be
determined at this time. The decision to consider redirecting operations away
from the energy industry does not imply a decision to liquidate Zapata. The
Company is evaluating opportunities to reinvest the shareholders' capital.
The Company has cancelled the sale of the marine protein division. Zapata
had previously announced that an agreement to sell its marine protein operations
for $56 million in cash and approximately $11 million in assumed obligations had
been reached with a group led by current management of the marine protein
operation. However, the acquisition group was unable to close the transaction
by the scheduled closing date after all conditions precedent to the closing had
been met. The acquisition group's inability to close was apparently due to the
inability of its financing source to provide proper funding on a timely basis.
The Company is studying alternatives for the marine protein operation at this
time.
8
<PAGE>
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 Acquisition"). The following pro forma information for Zapata for
the six months ended March 31, 1994 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, 1993 (unaudited) (in thousands,
except per share amounts).
<TABLE>
<S> <C>
Revenues $118,838
Income from continuing operations before taxes 28,841
Income from continuing operations 18,563
Income per share from continuing operations 0.58
</TABLE>
The pro forma adjustments to Zapata's results for the six months ended
March 31, 1994 to reflect the Energy Industries Acquisition increased revenues
by $6,014,000, as well as income from continuing operations before taxes by
$174,000. Additional pro forma adjustments for the first six 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 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 that may be obtained in the future.
NOTE 3. RESTRICTED CASH
In accordance with terms of a debt covenant, $12.7 million from the sale of
the Company's Tidewater Inc. ("Tidewater") common stock was held in a restricted
account at March 31, 1995. At September 30, 1994, restricted cash held in
short-term investments to collateralize letters of credit totalled $779,000.
NOTE 4. SUBSEQUENT EVENTS
In April 1995, Zapata reduced its $17.5 million in notes to Norex America,
Inc. by $12.7 million. The Company used the restricted cash received in the
March 1995 sale of its remaining shares of Tidewater common stock to reduce this
indebtedness.
Also, in April 1995, Zapata Corporation repurchased 2.25 million shares of
Zapata's common stock from Norex America, Inc. for $4.00 per share. The shares
repurchased by Zapata represented 7% of the Company's then outstanding common
stock. Following the repurchase of the shares, Zapata had approximately 29.5
million shares outstanding.
9
<PAGE>
I
TEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1995, Zapata's long-term debt of $51.3 million compared
favorably to working capital of $85.9 million and stockholders' equity of $150.3
million. During March 1995, Zapata sold its remaining 673,077 shares of
Tidewater Inc. ("Tidewater") common stock for $12.7 million. In April 1995,
Zapata used the proceeds from this sale to reduce the Company's $17.5 million in
notes due to Norex America, Inc. in May 1996. Remaining mandatory principal
payments for the next twelve months total $2.5 million.
Cash used by operating activities increased to $3.8 million during the
first six months of fiscal 1995 from $762,000 during the corresponding prior-
year period. This increase was primarily due to increases in working capital.
Cash used by investing activities totalled $4.3 million during the first six
months of fiscal 1995 as compared to the $82.6 million provided during the first
six months of fiscal 1994. The fiscal 1994 period included $85.9 million from
the sale of 4.13 million shares of Zapata's Tidewater common stock. Net cash
provided by financing activities totalled $284,000 during the first six months
of fiscal 1995 as compared to a net use of $69.3 million in the corresponding
prior-year period, which included a $68.5 million prepayment of senior debt.
In April 1995, Zapata repurchased 2.25 million shares of
Zapata's common stock from Norex America, Inc. for $4.00 per share. The shares
repurchased by Zapata represented 7% of the Company's then outstanding common
stock. Following the repurchase of these shares, Zapata had approximately 29.5
million shares of common stock outstanding.
In April 1995, Zapata announced that the Company is considering
the sale of its two natural gas services businesses: the natural gas compression
operation and the natural gas gathering and processing operation. The decision
to consider exiting the energy industry is based on the belief that businesses
outside the energy industry may provide better opportunities for the Company to
pursue. Due to the preliminary nature of this decision process, the financial
statement impact of the ultimate disposition or retention of these businesses
cannot be determined at this time. The decision to consider redirecting
operations away from the energy industry does not imply a decision to liquidate
Zapata. The Company is evaluating opportunities to reinvest the shareholders'
capital.
The Company has cancelled the sale of the marine protein division. Zapata
had previously announced that an agreement to sell its marine protein operations
for $56 million in cash and approximately $11 million in assumed obligations had
been reached with a group led by current management of the marine protein
operation. However, the acquisition group was unable to close the transaction
by the scheduled closing date after all conditions precedent to the closing had
been met. The acquisition group's inability to close was apparently due to the
inability of its financing source to provide proper funding on a timely basis.
The Company is studying alternatives for the marine protein operation at this
time.
10
<PAGE>
RESULTS OF OPERATIONS
Zapata reported net income of $2.4 million for the second quarter of fiscal
1995 as compared to net income of $2.3 million for the same period in fiscal
1994. The fiscal 1995 second quarter results included a $4.8 million pretax gain
from the sale of 673,077 shares of Tidewater common stock, while the
corresponding fiscal 1994 period results included a $3.6 million pretax gain
from the sale of 375,175 shares of Tidewater stock. The fiscal 1994 second
quarter net income also included $918,000 from the Company's discontinued marine
protein operations.
The Company's operating loss of $396,000 for the second quarter of fiscal
1995 compared favorably to the operating loss of $775,000 for the corresponding
fiscal 1994 period. The improvement was primarily attributable to reduced
general and administrative expenses associated with the Company's corporate
headquarters and improved results from the Company's natural gas gathering,
processing and marketing operations. These improvements were partially offset by
the effects of significantly lower natural gas prices that negatively impacted
the operating results of the Company's natural gas compression and domestic oil
and gas divisions. Revenues for the second quarter of fiscal 1995 totalled $38.1
million as compared to $53.3 million for the second quarter of fiscal 1994.
For the first six months of fiscal 1995, Zapata's net income of $2.8
million was significantly lower than the $19.6 million for the corresponding
1994 period as a result of pretax gains totalling $37.5 million realized from
the sales of Tidewater common stock in 1994. Revenues of $84.1 million and
operating income of $934,000 for the 1995 period compared to the 1994-period
revenues of $112.8 million and operating loss of $437,000.
NATURAL GAS COMPRESSION - In November 1993, Zapata purchased Energy Industries,
Inc. ("Energy Industries"), a participant in all segments of the natural gas
compression industry. During the second quarter of fiscal 1995, Energy
Industries acquired 59 additional compressor units in two separate transactions
for $3.4 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.
11
<PAGE>
The major segments of Energy Industries' natural gas compression revenues
and operating results for the three- and six-month periods ended March 31, 1995
and the three- and five-month periods ended March 31, 1994, in thousands, are
identified below.
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Five Months
March 31, Ended March 31,
--------------------- ------------------------
1995 1994 1995 1994
------- ------- ------- -------
Revenues
Compressor Rental $ 4,246 $ 3,989 $ 8,575 $ 6,903
Fabrication and Sales 6,045 4,385 12,890 7,878
Parts & Service 4,804 4,770 10,188 8,936
Other 499 2,289 2,104 4,347
------- ------- ------- -------
$15,594 $15,433 $33,757 $28,064
======= ======= ======= =======
Operating Results
Compressor Rental $ 969 $ 1,385 $ 2,417 $ 2,350
Fabrication and Sales 625 466 1,546 556
Parts & Service 960 873 1,968 1,608
Other (26) 433 150 525
Selling & Administrative (1,354) (1,762) (2,984) (2,657)
------- ------- ------- -------
$ 1,174 $ 1,395 $ 3,097 $ 2,382
======= ======= ======= =======
</TABLE>
(The Other segment includes the results of the heat exchanger manufacturing
operation and used equipment sales.)
During the second quarter of fiscal 1995, Energy Industries disposed of its
heat exchanger manufacturing operation for $1.5 million, resulting in a gain of
$452,000. The heat exchanger operation was not material to the operating results
or financial position of the Company.
Natural gas compressor package rental utilization is affected primarily by
the number and age of producing oil and gas wells, the volume of natural gas
consumed and natural gas prices. Rental rates are determined primarily by the
demand for compressor packages and vary by size and horsepower of a compressor
package. Energy Industries' utilization, rental rates and fleet size as of March
31, 1995 and 1994 are compared in the following table.
<TABLE>
<CAPTION>
March 31, 1995 March 31, 1994
--------------- ---------------
<S> <C> <C>
Fleet utilization:
Horsepower 80.0% 76.2%
Monthly rental rate, based on:
Horsepower $ 16.07 $ 17.26
Fleet size:
Number of units 766 662
Horsepower 121,693 108,316
</TABLE>
12
<PAGE>
Reflecting the effects of generally lower natural gas prices, Energy
Industries' compressor rental rates and used equipment sales were negatively
impacted during the second quarter of fiscal 1995. As a result, Energy
Industries' operating income during the second quarter of fiscal 1995 compared
unfavorably to the second quarter fiscal 1994.
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 that 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.
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 (collectively, "Cimarron"), which were
acquired early in fiscal 1993. 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 three- and six-month periods
ended March 31, 1995 and 1994 are presented in the following table by major
category, in thousands.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
-----------------------------------------------
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues
Gathering & Processing $ 4,284 $ 5,123 $ 8,589 $11,203
NGL Marketing 16,005 29,905 36,731 67,296
------- ------- ------- -------
$20,289 $35,028 $45,320 $78,499
======= ======= ======= =======
Operating Results
Gathering & Processing $ 68 $ (246) $ 155 $ 312
NGL Marketing (30) 14 28 549
Selling & Administrative (311) (552) (626) (1,084)
------- ------- ------- -------
$ (273) $ (784) $ (443) $ (223)
======= ======= ======= =======
</TABLE>
For the second quarter of fiscal 1995, gathering and processing revenues
were lower than the prior year as a result of the negative impact of
significantly lower natural gas prices, while operating results improved,
reflecting increased processing margins. However, marketing revenues and
operating income declined in fiscal 1995 as compared to 1994, reflecting the
Company's decision to reduce its natural gas trading activities.
13
<PAGE>
A comparison of average daily volumes of gas, measured in millions of
cubic feet, gathered and processed during the three- and six-month periods ended
March 31, 1995 and 1994 is shown below.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
------------------ ----------------
Average Daily Volumes 1995 1994 1995 1994
- --------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
(MMCF)
Gathering 54.1 46.4 52.5 43.6
Processing 26.4 21.2 26.6 20.1
</TABLE>
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.
OIL AND GAS - Revenues of $2.2 million and an operating loss of $192,000 for
the second quarter of fiscal 1995 compared unfavorably to the corresponding
fiscal 1994 period's revenues of $2.8 million and operating income of $432,000.
The decline was attributable to significantly lower natural gas prices, as well
as reduced income from the Bolivian operations ($116,000 in 1995 as compared to
$876,000 in 1994). Zapata's domestic natural gas production was approximately
58% higher in the second quarter of fiscal 1995 as compared to the level of
production in fiscal 1994 when the Company encountered production difficulties
at the Wisdom gas field, the Company's most significant domestic oil and gas
property.
Similarly, year-to-date fiscal 1995 revenues of $5.0 million and operating
income of $218,000 compared unfavorably to the fiscal 1994 revenues of $6.3
million and operating income of $640,000, reflecting lower natural gas prices
and reduced receipts from the Bolivian operations.
RECENTLY ISSUED ACCOUNTING STANDARDS
In April 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 121 "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of," which
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used, and for long-lived assets and certain identifiable intangibles to
be disposed of. Adoption of the new standard by the Company is required no
later than the fiscal year ending September 30, 1997. 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.
14
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
The exhibits indicated by an asterisk (*) are incorporated by
reference to the Zapata Corporation Annual Report on Form 10-K for
the fiscal year ended September 30, 1994.
3(a)* --Restated Certificate of Incorporation of Zapata filed
with Secretary of State of Delaware May 3, 1994 (Exhibit
3(a) to Current Report on Form 8-K dated April 27, 1994
(File No. 1-4219)).
3(b)* --Certificate of Designation, Preferences and Rights of $1
Preference Stock (Exhibit 3(c) to Zapata's Quarterly
Report on Form 10-Q for the fiscal quarter ended March
31, 1993 (File No. 1-4219)).
3(c)* --Certificate of Designation, Preferences and Rights of
$100 Preference Stock (Exhibit 3(d) to Zapata's Quarterly
Report on Form 10-Q for the fiscal quarter ended March
31, 1993 (File No. 1-4219)).
3(d)* --By-laws of Zapata, as amended effective August 17, 1994.
4(a)* --Second Amended and Restated Master Restructuring
Agreement, dated as of April 16, 1993 between Zapata and
Norex Drilling Ltd. (Exhibit 12 to Zapata's Amendment No.
3 to Schedule 13D dated April 30, 1993).
4(b)* --First Amendment to Second Amended and Restated Master
Restructuring Agreement, dated as of May 17, 1993 between
Zapata and Norex Drilling, Ltd. (Exhibit 4(c) to Zapata's
Registration Statement on Form S-1 (No. 33-68034)).
4(c)* --Second Amendment to Second Amended and Restated Master
Restructuring Agreement, dated as of December 17, 1993
between Zapata and Norex Drilling, Ltd. (Exhibit 4(c) to
Zapata's Annual Report on Form 10-K for the fiscal year
ended September 30, 1993 (File No. 1-4219)).
4(d)* --Securities Liquidity Agreement, dated as of December 19,
1990, and among Zapata and each of the securities holders
parties thereto (Exhibit 4(b) to Zapata's Annual Report
on Form 10-K for the fiscal year ended September 30, 1990
(File No. 1-4219)).
4(e) --Consent Letter and Waiver dated as of March 7, 1995 by
and between Norex America, Inc. and Zapata Corporation.
10(a) --Zapata Corporation and ZP Acquisition Corp. Stock
Purchase Agreement dated as of February 14, 1995.
10(b) --Termination Letter dated as of April 20, 1995 relating to
the Zapata Corporation and ZP Acquisition Corp. Stock
Purchase Agreement dated as of February 14, 1995.
10(c) --Purchase Agreement dated as of April 10, 1995 by and
between Norex America, Inc. and Zapata Corporation
relating to 2,250,000 shares of Zapata Corporation Common
Stock.
27 --Financial Data Schedule.
(b) Reports on Form 8-K
Current report on Form 8-K dated March 1, 1995 (Item 5. Other
Events-reported the execution of a Stock Purchase Agreement
relating to the proposed sale of Zapata Protein, Inc. and the
appointment of Avram A. Glazer as President and Chief Executive
Officer of the Company).
Current report on Form 8-K dated March 31, 1995 (Item 5. Other
Events-reported (i) the sale of the Company's remaining shares of
Tidewater common stock and the application of the proceeds thereof
to reduce indebtedness and (ii) the acquisition of additional gas
compression assets).
15
<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
May 15, 1995 By: /s/ JOSEPH L. VON ROSENBERG III
------------------------------------
Joseph L. von Rosenberg III
Vice President, General Counsel
and Corporate Secretary
May 15, 1995 /s/ LAMAR C. MCINTYRE
---------------------------------------
Lamar C. McIntyre
Vice President, Chief Financial Officer,
Treasurer and Assistant Secretary
16
<PAGE>
EXHIBIT INDEX
3(a)* --Restated Certificate of Incorporation of Zapata filed
with Secretary of State of Delaware May 3, 1994 (Exhibit
3(a) to Current Report on Form 8-K dated April 27, 1994
(File No. 1-4219)).
3(b)* --Certificate of Designation, Preferences and Rights of $1
Preference Stock (Exhibit 3(c) to Zapata's Quarterly
Report on Form 10-Q for the fiscal quarter ended March
31, 1993 (File No. 1-4219)).
3(c)* --Certificate of Designation, Preferences and Rights of
$100 Preference Stock (Exhibit 3(d) to Zapata's Quarterly
Report on Form 10-Q for the fiscal quarter ended March
31, 1993 (File No. 1-4219)).
3(d)* --By-laws of Zapata, as amended effective August 17, 1994.
4(a)* --Second Amended and Restated Master Restructuring Agreement,
dated as of April 16, 1993 between Zapata and Norex
Drilling Ltd. (Exhibit 12 to Zapata's Amendment No. 3 to
Schedule 13D dated April 30, 1993).
4(b)* --First Amendment to Second Amended and Restated Master
Restructuring Agreement, dated as of May 17, 1993
between Zapata and Norex Drilling, Ltd. (Exhibit 4(c) to
Zapata's Registration Statement on Form S-1
(No. 33-68034)).
4(c)* --Second Amendment to Second Amended and Restated Master
Restructuring Agreement, dated as of December 17, 1993
between Zapata and Norex Drilling, Ltd. (Exhibit 4(c) to
Zapata's Annual Report on Form 10-K for the fiscal year
ended September 30, 1993 (File No. 1-4219)).
4(d)* --Securities Liquidity Agreement, dated as of December 19,
1990, and among Zapata and each of the securities holders
parties thereto (Exhibit 4(b) to Zapata's Annual Report
on Form 10-K for the fiscal year ended September 30, 1990
(File No. 1-4219)).
4(e) --Consent Letter and Waiver dated as of March 7, 1995 by
and between Norex America, Inc. and Zapata Corporation.
10(a) --Zapata Corporation and ZP Acquisition Corp. Stock
Purchase Agreement dated as of February 14, 1995.
10(b) --Termination Letter dated as of April 20, 1995 relating to
the Zapata Corporation and ZP Acquisition Corp. Stock
Purchase Agreement dated as of February 14, 1995.
10(c) --Purchase Agreement dated as of April 10, 1995 by and
between Norex America, Inc. and Zapata Corporation
relating to 2,250,000 shares of Zapata Corporation Common
Stock.
27 --Financial Data Schedule.
- --------------
* Incorporated by reference to the Zapata Corporation Annual Report on Form 10-K
for the fiscal year ended September 30, 1994.
<PAGE>
EXHIBIT 4(e)
NOREX AMERICA, INC.
P. O. Box HM 429
Hamilton, HMBX, Bermuda
March 7, 1995
Zapata Corporation
Attention: Chief Financial Officer
One Riverway, Suite 2200
777 South Post Oak Lane
Houston, Texas 77056
Re: $17,500,000 Aggregate Principal Amount 8.5% Unsecured Exchangeable
Notes Due 1996 of Zapata Corporation
Gentlemen:
The purpose of this letter is to reflect the terms of the consent by Norex
America, Inc. ("Norex"), as holder of all of the above outstanding Notes (the
"Notes"), (i) as to certain prepayments which may be made on the Notes by Zapata
Corporation (the "Company") using proceeds from the sale by the Company of the
673,077 shares of TDW Stock (as defined in the Notes) which the Company is
currently prohibited from selling pursuant to Section 4.B. of the Notes (the
"Restricted Shares") and (ii) as to a cash tender offer to be made by the
Company to all common stockholders of the Company.
Prepayments on the Notes
Notwithstanding the provisions of Section 4.B. and Section 6 of the Notes,
Norex agrees that the Company may, from time to time, sell Restricted Shares to
parties who are not affiliated with either the Company or any officer, director
or principal stockholder of the Company at prices equal to their fair market
value
at the respective times of such sales, provided that the net proceeds from
such sales are paid by the purchasers, of such Restricted Shares directly to
Norex or Norex's designee in accordance with the payment instructions issued by
Norex to the Company with respect to the Notes in effect at the respective times
of such sales. In addition, the broker handling each such sale shall be
instructed to deliver to Norex or Norex's designee a copy of the confirmation of
the trade showing the net proceeds payable therefrom.
<PAGE>
Each such payment of net proceeds from the sale of Restricted Shares shall be
deemed to be a prepayment of a like amount of principal under the Notes and
shall be allocated pro rata between the two outstanding Notes. Quarterly
interest payments on the Notes shall be adjusted to reflect such prepayments of
principal and the timing thereof.
All sales of Restricted Shares by the Company, as described above, must be
made in arms-length transactions, and under no circumstances may the Company or
any officer, director or principal stockholder of the Company acquire, directly
or indirectly, any payment, right to purchase or any other right related to any
Restricted Shares in connection with any such sale thereof. Any sale of
Restricted Shares by the Company which is not made in compliance with all of the
terms described in this letter (including the payment of proceeds from such
sales directly to Norex), shall be deemed to be an "Event of Default" under the
Second Amended and Restated Master Restructuring Agreement dated as of April
16, 1993, as amended between the Company and Norex Drilling Ltd (the "MRA").
Notwithstanding anything to the contrary herein, the requirements of the
second and fourth paragraphs of this letter prohibiting participation in any
purchases of Restricted Shares by the Company or any officer, director or
principal stockholder thereof shall be deemed satisfied if neither the Company
nor any such officer, director or principal stockholder (other than Norex and
its affiliates, including Kristian Siem) has knowledge of any such
participation, and the requirement of the second paragraph of this letter that
sales be made at fair market value shall be deemed satisfied if such sales are
made in customary market transactions to or through a broker or dealer.
The number of shares of TDW Stock which may be acquired by Norex pursuant to
Section 4.A of the Notes shall be reduced from time to time by the corresponding
number of Restricted Shares which are sold by the Company in compliance with the
terms described in this letter. Following the sale by the Company of all of the
Restricted Shares in compliance with the terms described in this letter, Section
4 of the Notes shall be deemed to be deleted.
Cash Tender Offer
Norex, as holder of all the outstanding Notes, hereby waives any breach by
the Company of the covenant set forth in Section 8.1(c) of the MRA resulting
from a single cash tender offer made by the Company to all of its stockholders
for the purchase of up to 15,000,000 shares of Common Stock at a purchase price
of not less than $4.00 per share, which offer shall be completed prior to
April 30, 1995. If, as a result of the completion of such cash tender offer, the
Company's Consolidated Tangible Net Worth (as defined in the MRA) falls below
$100,000,000, Section 8.1(c) of the MRA shall thereupon be deemed to be amended
to read in its entirety as follows:
(c) Consolidated Tangible Net Worth. At any time permit Consolidated
Tangible Net Worth to be less than $75,000,000.
2
<PAGE>
Except as set forth herein, the terms and provisions of the Notes and the MRA
shall remain unchanged and in full force and effect. Please signify your
agreement with the foregoing by executing a copy of this letter in the space
below and returning the executed copy to Norex.
Very truly yours,
NOREX AMERICA, INC.
By /s/ Frank Capstick
-----------------------------
Frank Capstick
President
AGREED TO THIS
7th DAY OF MARCH, 1995
ZAPATA CORPORATION
BY (SIGNATURE APPEARS HERE)
--------------------------
3
<PAGE>
EXHIBIT 10(a)
CONFIDENTIAL
ZAPATA CORPORATION
AND
_______________________________________________
ZP ACQUISITION CORP.
_______________________________________________
STOCK PURCHASE AGREEMENT
_______________________________________________
FOR THE SALE OF
ZAPATA PROTEIN, INC.
DATED AS OF FEBRUARY 14, 1995
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT ("Agreement") dated as of February 14, 1995,
by and between ZP Acquisition Corp., a corporation formed under the laws of the
State of Texas ("Buyer"), and Zapata Corporation, a corporation formed under the
laws of the State of Delaware ("Zapata").
RECITALS
On the basis of the representations, warranties, covenants and agreements
and subject to the terms and conditions contained herein, Zapata wishes to sell
to Buyer, and Buyer wishes to purchase from Zapata, all of the issued and
outstanding shares of the common stock, one dollar ($1.00) par value (the
"Shares"), of its wholly owned subsidiary Zapata Protein, Inc., a corporation
formed under the laws of the State of Delaware ("Protein");
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. PURCHASE AND SALE
1.1 THE TRANSACTION
Subject to the terms and conditions of this Agreement, at the Closing (as
defined herein) Zapata shall sell, assign and transfer to Buyer and Buyer shall
purchase from Zapata all the Shares.
1.2 PAYMENT OF PURCHASE PRICE
Subject to the
adjustments set forth in Section 1.3 below, the total
purchase price for the Shares to be paid by Buyer at Closing shall be Fifty Six
Million Dollars ($56,000,000.00) ("Purchase Price"), which shall be wire-
transferred to Zapata's bank account on or before the date of the Closing
("Closing Date"), in accordance with instructions to be given by Zapata to Buyer
at least one business day prior to the Closing Date. At the Closing, Zapata
shall deliver to Buyer the Protein stock certificates evidencing the Shares,
such certificates to be duly endorsed or accompanied by appropriate stock
transfer powers duly executed to Buyer.
1
<PAGE>
1.3 TREATMENT OF INTERCOMPANY ACCOUNTS; ADJUSTMENT TO PURCHASE PRICE
Zapata will cause all intercompany indebtedness owed by Protein or any of
its subsidiaries to Zapata or any of its subsidiaries (other than Protein or any
of its subsidiaries), net of any amounts owed by Zapata or any of its
subsidiaries, to Protein or any of Protein's subsidiaries, as reflected on the
audited consolidated balance sheet of Protein as of September 30, 1994 referred
to in Section 2.1(f), to be contributed to the capital of Protein.
The Purchase Price set forth in Section 1.2 above shall be adjusted for
changes in intercompany accounts after September 30, 1994, as follows:
1.3(a) Prior to February 16, 1995, Zapata shall deliver to Buyer the
General Ledger run of its intercompany balances with Protein for the period
ending January 31, 1995, accompanied by a certificate signed by a Vice President
of Zapata to the effect that the General Ledger run is true and correct and has
to his knowledge been prepared on a basis consistent with accounting principles
used in the preparation of the audited balance sheet of Protein as of September
30, 1994. Within ten (10) days of receiving the General Ledger run, Buyer shall
notify Zapata of any disagreement Buyer may have with the amount of the balance
of the intercompany balance shown on the General Ledger run.
1.3(b) Within thirty (30) days following the Closing Date, Zapata shall
deliver to Buyer the General Ledger run of its intercompany balances with
Protein for the period February 1, 1995, through the Closing Date accompanied by
a certificate signed by a Vice President of Zapata to the effect that the
General Ledger run is true and correct and has to his knowledge been prepared on
a basis consistent with the accounting principles used in the preparation of the
audited balance sheet of Protein as of September 30, 1994. Within ten (10) days
of receiving the General Ledger run, Buyer shall notify Zapata of any
disagreement Buyer may have with the amount of the balance of the intercompany
balance shown on the General Ledger run.
1.3(c) In the event Buyer disagrees with the adjustment to the Purchase
Price determined pursuant to either Section 1.3(a) or (b), Zapata and Buyer
shall confer and, in good faith, seek to reconcile the adjustment to the
Purchase Price. If, after the parties confer, Buyer and Zapata reconcile the
adjustment to Purchase Price, then within three (3) business days, as the case
may be, either Buyer will pay to Zapata any increase to the Purchase Price or
Zapata will pay to Buyer any decrease to the Purchase Price.
1.3(d) If Buyer and Zapata are unable to reconcile the adjustment to the
Purchase Price, as soon as practical, and in any event within thirty (30) days,
Buyer and Zapata shall select a nationally recognized accounting firm which
shall determine the balance owing to Buyer or Zapata hereunder, as the case may
be, and the determination of such accounting firm shall be final and binding on
the parties hereto. The fees and
2
<PAGE>
expenses of such accounting firm shall be borne equally by Zapata and Buyer.
The parties hereto agree to cooperate fully with such accounting firm and
furnish such firm with such information as it may require to make such
determination.
1.3(e) After the determination of the balance owing to Buyer or Zapata
hereunder, as the case may be, by the accounting firm provided for in Section
1.3(d), within three (3) days after such determination, either Buyer will pay to
Zapata any increase to the Purchase Price or Zapata will pay to Buyer any
decrease to the Purchase Price.
2. REPRESENTATIONS AND WARRANTIES
2.1 REPRESENTATIONS AND WARRANTIES OF ZAPATA
Zapata represents and warrants to and agrees with Buyer as follows:
2.1(a) Organization. Protein is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Protein
has all requisite corporate power and authority needed to carry on its business
as now conducted and is qualified to do business in every jurisdiction in which
the character and location of assets owned by it, or the nature of the business
transacted by it, or both, require qualification, except where the failure to be
so qualified does not and will not have a material adverse effect on the
business, properties, financial condition or results of operations of Protein
and its subsidiaries, taken as a whole ("Material Adverse Effect").
2.1(b) Corporate Status. The authorized capital stock of Protein
consists of one thousand (1,000) shares of common stock of which one thousand
(1,000) shares are validly issued and outstanding, fully paid and nonassessable
and are owned beneficially and of record by Zapata, free and clear of any claim,
lien or encumbrance.
2.1(c) Outstanding Options and Warrants. There are no outstanding
options, warrants, subscriptions, calls, unsatisfied preemptive rights, voting
agreements or other right for the purchase of, and no securities convertible
into, capital stock of Protein.
2.1(d) Certificate of Incorporation and Bylaws. Zapata has delivered to
Buyer true and complete copies of the Certificate of Incorporation and Bylaws of
Protein, each as amended to date; there are no dissolution, liquidation or
bankruptcy proceedings pending, contemplated by or, to the knowledge of Zapata,
threatened against Protein.
2.1(e) Execution of Agreement. Except as set forth in Schedule 2.1(e),
the execution and delivery of this Agreement by Zapata do not and the
consummation of the transactions contemplated hereby by Zapata will not violate
any provision of the Certificate of Incorporation or Bylaws of Zapata, Protein
or any of the Subsidiaries (as hereinafter defined) or result in any conflict
with, breach or violation of, or creation of lien or default under, any
mortgage, indenture, borrowing agreement or other arrangement or instrument
3
<PAGE>
to which Zapata, Protein or any of the Subsidiaries is a party or to which any
of their respective assets are subject or, to the best knowledge of Zapata, any
statute, rule, regulation, judicial or governmental decree, order or judgment
applicable to Zapata, Protein or any of the Subsidiaries. Zapata has the full
corporate power, authority and legal right to enter into this Agreement and to
consummate the transactions contemplated hereby, and the execution, delivery and
performance of this Agreement have been duly authorized by the Board of
Directors of Zapata. Except as set forth in Schedule 2.1(e), no consent,
approval, authorization, permit or order of any nature whatsoever from any
federal, state or other domestic or foreign government or regulatory body is
required, except (i) such as may be required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (ii) such as may
be required under any loan documentation between Protein and the United States
of America (the "Title XI Financing"), and (iii) such other consents, approvals,
authorizations, permits or orders which have heretofore been obtained and are
in full force and effect.
2.1(f) Financial Statements of Protein. Attached hereto as Schedule
2.1(f) are the following unaudited consolidated financial statements of Protein
and its subsidiaries: income statements, balance sheets, statements of cash
flows and the notes relating thereto as at and for the fiscal years ending
September 30, 1994 and September 30, 1993. At least ten (10) days prior to the
Closing Date, Zapata shall deliver to Buyer the following consolidated audited
financial statements of Protein and its subsidiaries (and Schedule 2.1(f) shall
be deemed to include such audited financial statements): income statements,
balance sheets, statements of cash flows, statement of changes in stockholder
equity and the notes relating thereto as at and for the fiscal years ended
September 30, 1994 and September 30, 1993. Except as set forth in Schedule
2.1(f), all of the financial statements referred to above in this Section 2.l(f)
will present fairly, in conformity with generally accepted accounting principles
applied on a consistent basis during the periods involved the financial
condition of Protein and its consolidated subsidiaries and the results of their
operations as of the dates and for the periods indicated as being covered
thereby. (All of the foregoing financial statements are referred to
collectively herein as the "Financial Statements.")
2.1(g) Investment in Other Entities. Except for the entities listed in
Schedule 2.1(g) (the "Subsidiaries"), Protein has no capital stock interests or
other equity interests, or right or option to acquire any equity interest in any
corporation, partnership, limited liability company or other business entity.
Protein owns of record and beneficially the capital stock interests or other
equity interests disclosed in Schedule 2.1(g) and owns good, valid title
thereto, free and clear of any claim, lien or encumbrance. Each of the
Subsidiaries is duly organized, validly existing and in good standing under the
laws of the jurisdiction in which it was organized. Each of the Subsidiaries
has all requisite power and authority needed to carry on its business as now
conducted and is qualified to do business in every jurisdiction in which the
character and location of assets owned by it, or the nature of the business
transacted by it, or both, require qualification, except where the failure to be
so qualified would not have a Material Adverse Effect. Zapata has delivered to
Buyer true and complete copies of the organization documents of the
Subsidiaries, each as amended to date,
4
<PAGE>
and there are no dissolution, liquidation or bankruptcy proceedings pending,
contemplated by or, to the knowledge of Zapata, threatened against any of the
Subsidiaries.
2.1(h) Absence of Changes. Except as disclosed in Schedule 2.1(h),
there has not been since September 30, 1994:
(1) Any material adverse change in the business, properties or
financial condition of Protein and the Subsidiaries, taken as a whole,
and no such change is anticipated;
(2) Any material labor dispute involving or affecting Protein or
any of the Subsidiaries, and, to the knowledge of Zapata, no such labor
dispute is threatened or anticipated;
(3) Any change in consolidated long-term debt, other than
regularly scheduled payments of principal or changes in the balance of
the working capital facility maintained by Venture Milling Company
pursuant to the terms thereof, or the capital stock of Protein or any of
the Subsidiaries;
(4) Any cancellation of debts or claims or waiver by Protein or
any of the Subsidiaries of any right of material value outside the
ordinary course of business and without adequate consideration;
(5) Any direct or indirect purchase, redemption or other
acquisition by Protein or any of the Subsidiaries of any security issued
by it;
(6) Any material contract or arrangement made by Protein or any
of the Subsidiaries with any of its officers, directors or employees or
any benefit plan or arrangement (whether written or oral) adopted or
commenced by Protein or any of the Subsidiaries affecting one or more of
its officers, directors or employees;
(7) Any action taken or transaction entered into by Protein or
any of the Subsidiaries other than in the ordinary course of business,
except for the transactions contemplated by this Agreement;
(8) Any mortgage, pledge, lien or other encumbrance of any assets
of Protein or any of the Subsidiaries (except liens and encumbrances
arising as a matter of law in the ordinary course of business);
(9) Any incurring of any obligations or liabilities, absolute or
contingent, except in the ordinary course of business;
5
<PAGE>
(10) Any material obligation or liability (absolute or
contingent) paid except in the ordinary course of business;
(11) Any payment of dividends or distributions of any assets of
any kind whatsoever in respect of Protein's capital stock declared or
made;
(12) Any sale, transfer or other disposition of, or agreement
entered into to sell, transfer or otherwise dispose of any assets (except
inventories), property or rights of Protein or of its any Subsidiaries,
except inventory in the ordinary course of business and consistent with
prior practices;
(13) Any agreement or arrangement entered into granting any
preferential rights to purchase any assets, property or rights of Protein
or any of the Subsidiaries including inventories, or requiring the
consent of any party to the transfer and assignment of any of such
assets, property or rights; or
(14) Any amendment or termination (other than an expiration
pursuant to its terms) of any material contract, agreement or license to
which Protein or any of the Subsidiaries is or was a party or by which it
or any properties of Protein or any of the Subsidiaries is or was
subject.
2.1(i) Tax Returns and Audits. All federal, state and local tax returns
and tax reports required to be filed with respect to Protein or any of the
Subsidiaries have been timely filed with the appropriate governmental agencies
in all jurisdictions in which such returns and reports are required to be filed
for all periods ending on or prior to the Closing Date. Schedule 2.1(i) sets
forth a list of all tax returns and tax reports of Zapata, Protein or any of the
Subsidiaries as to which an extension of the time to file is currently in
effect. All federal, state and local taxes due from or with respect to Protein
or any of the Subsidiaries for all periods ending on or prior to the Closing
Date have been fully paid or are adequately reflected in the Financial
Statements. To the extent tax liabilities have accrued but have not yet become
due, they have been adequately reflected in the Financial Statements. There are
no federal, state or local tax liens upon any property or assets of Protein or
any of the Subsidiaries. Except as set forth in Schedule 2.1(i), there are no
specific tax deficiencies on the part of Zapata, Protein or any of the
Subsidiaries relating to any tax year ended on or before September 30, 1994
which are expected to arise from issues which have been raised or from issues
which have not yet been raised but which are reasonably expected to be raised.
Except as set forth in Schedule 2.1(i), there is not currently pending any audit
of Zapata, Protein or any of the Subsidiaries with respect to any tax.
For purposes of this Agreement, "taxes" or "tax" includes (a) all net
income, gross income, gross receipts, sales and use, ad valorem, franchise,
profits, licenses, payroll withholding, social security, excise, severance,
occupation, real or personal property taxes, or other taxes, fees, or charges of
any kind whatsoever imposed by a federal, state,
6
<PAGE>
county or local taxing authority, together with any interest or penalty thereon
(including, without limitation, United States federal income taxes), and (b) the
liability for the payment of any consolidated tax, including penalty or interest
thereon, of the type described in the immediately preceding subsection (a),
including any federal, state or local consolidated income tax liability,
including any penalty or interest thereon, as a result of being a member of, and
which may be imposed upon, an affiliated group (as defined in Section 1504(a) of
the Internal Revenue Code of 1986, as amended to date, or other applicable law).
2.1(j) Litigation and Related Matters. Except as set forth in Schedule
2.1(j), there is no litigation, proceeding, investigation or claim pending in
any court or before any governmental, regulatory or administrative board, agency
or commission pending or, to the knowledge of Zapata, threatened against Protein
or any of the Subsidiaries.
2.1(k) Compliance with Laws. Except as set forth in Schedule 2.1(k), to
the best knowledge of Zapata, (i) Protein is in compliance in all material
respects with all applicable domestic and foreign laws, rules, regulations,
judgment, orders and other legal requirements affecting its business and
operations and (ii) all licenses, franchises, permits, approvals and other
authorizations that are required in connection with the ownership or leasing and
the operation of the properties and the conduct of the business of Protein have
been obtained or applied for.
2.1(l) Insurance. For the current policy year, Protein carries or
causes to be carried insurance coverage against such casualties, risks and
contingencies, and in such amounts, types and forms, as determined to be prudent
by Zapata and Protein. All of the foregoing insurance policies are in full
force and effect and all premiums heretofore billed and due have been paid.
Zapata has not received any notification of the cancellation of any of such
policies or to the effect that any such policies will not be renewed. Set forth
in Schedule 2.1(l) is a list of all insurance policies maintained by or covering
Protein or any of the Subsidiaries for the current year. Zapata has furnished
Buyer a true and correct copy of each of the insurance policies listed on
Schedule 2.1(l). To the extent that any insurance policy of, or any risk
retention program provided or guaranteed by, Zapata or any of its subsidiaries
(other than Protein and the Subsidiaries) provides coverage for any property or
assets of Protein or any of the Subsidiaries, such policy, program or coverage
may be terminated at any time after the Closing Date; provided, however, that
Zapata agrees to use its reasonable best efforts to maintain such policies,
programs or coverages (or policies of substantially the same nature) in full
force and effect at all times until their normal expiration dates, provided,
however, that Protein must pay its pro rata share of all costs, fees and
premiums related thereto. At Closing, Protein's pro rata share of premiums
prepaid by Zapata shall be repaid to Zapata, unless such prepayments shall have
been repaid to Zapata as an adjustment to the Purchase Price pursuant to the
provisions of Section 1.3 hereof. All premiums due and payable after the
Closing Date shall be paid by Protein directly to Minet Insurance Services, Inc.
of Texas in accordance with Schedule 2.1(l) or to Zapata within ten (10) days
after receipt by Protein of a request for payment thereof by Zapata. With
respect to the insurance policies and programs maintained by Zapata after
7
<PAGE>
the Closing Date as described above, Zapata shall have no liability to Protein
or any of the Subsidiaries for any coverage deficiency, or any costs, expenses
or liabilities arising therefrom, which occur as a result of any claim which
arises out of an incident occurring after September 30, 1994. To the extent
that the policy limits under any insurance policy shared between Zapata and
Protein hereunder are exceeded, the coverage under such policy shall be
allocated among the parties on the same pro rata basis as the premiums for such
policy were allocated hereunder. Once the policy limits have been exceeded, the
party that has used more than its allocated share of coverage shall have the
obligation to reimburse the other party, up to the amount of such excess use,
for all amounts that otherwise would have been payable to such other party under
the policy, but for the shortfall. The limits of coverage under each insurance
policy providing coverage for Protein or any of the Subsidiaries are adequate
for payment of all claims thereunder which have been or are expected to be made
prior to the Closing Date or adequate provision for such claims has been or will
be made in the Financial Statements.
2.1(m) Properties. Protein and each of the Subsidiaries has good and
marketable title, subject to all matters of record and/or visible on the ground,
to all of its properties and assets, as listed on Schedule 2.1(m), free and
clear of all liens, security interests and encumbrances, except as set forth in
the Financial Statements or as otherwise disclosed in Schedule 2.l(m) and except
for such liens, security interests and encumbrances as may have arisen in the
ordinary course of business as a matter of law and, with respect to the real
property of Protein and its Subsidiaries, such imperfections in title as may
exist that do not have any material adverse effect on the ability of Protein and
the Subsidiaries to use such real properties in a manner consistent with past
practice. The plants, structures, leasehold improvements, equipment, furniture
and other tangible assets owned or leased by Protein and the Subsidiaries
comprise all of the fixed tangible assets necessary for the operation of the
businesses of Protein and the Subsidiaries, taken as a whole, in accordance with
their current methods of operation and such assets, considered in the aggregate,
are in satisfactory operating condition and repair, subject only to ordinary
wear and tear. EXCEPT AS SET FORTH HEREIN, ZAPATA EXPRESSLY DISCLAIMS ANY
WARRANTY AS TO THE CONDITION OF ANY ASSETS OR PROPERTIES OF PROTEIN INCLUDING
ANY IMPLIED OR EXPRESS WARRANTY OF MERCHANTABILITY AND ANY IMPLIED OR EXPRESS
WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE.
2.1(n) Contracts and Other Agreements. Except for contracts and
documents listed in Schedule 2.1(n), to the best knowledge of Zapata, neither
Protein nor any of the Subsidiaries is a party to or bound by any written or
oral (i) contract not made in the ordinary course of business; (ii) employment
contract; (iii) lease with respect to any property, real or personal, whether as
lessor or lessee requiring total lease payments within any twelve (12) month
period in excess of $25,000; (iv) contract for the future purchase or sale of
materials, supplies or equipment involving total payments within any twelve (12)
month period in excess of $100,000; (v) contract or commitment for any capital
expenditure in excess of $100,000; (vi) contract involving total payments in
excess of $25,000 that is not
8
<PAGE>
terminable or cancelable within sixty (60) days of the date hereof; or (vii) any
other lease, agreement, contract or commitment that, to the knowledge of Zapata,
is material to the business and operations of Protein and the Subsidiaries taken
as a whole. True and correct copies of the documents listed on Schedule 2.1(n)
have been made available to Buyer. To the best knowledge of Zapata, except as
set forth in Schedule 2.1(n), there is no material breach or default (which has
not been cured or waived) by Protein or any of the Subsidiaries or, to the best
knowledge of Zapata, by any other party to any lease, agreement, contract or
commitment listed on Schedule 2.1(n) to which Protein is a party, or by which
Protein or any of its property is bound, and, to the best knowledge of Zapata,
no event has occurred which, with notice or lapse of time or both, would
constitute such a breach or default.
2.1(o) Employee Benefit Plans.
(1) Schedule 2.1(o) sets forth a list, which is complete,
accurate and correct, of all bonus, deferred compensation, medical, stock
purchase, stock option, insurance, severance, employee welfare, pension,
profit sharing, retirement and other employee benefit plans, funds,
programs or arrangements currently in effect which have been maintained,
established or contributed to by Protein or any of the Subsidiaries or
with respect to any of their respective employees (collectively, the
"Plans"). Zapata has delivered to Buyer true, correct and complete
copies of the plan documents (including trust, investment management or
custodial agreements and insurance policies or contracts) relating to the
Plans.
(2) Schedule 2.1(o) also identifies each Plan which constitutes
(i) an "employee pension benefit plan" ("Pension Plan"), as such term is
defined in Section 3(2) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), (ii) an "employee welfare benefit plan"
("Welfare Plan"), as such term is defined in Section 3(1) of ERISA, or
(iii) a "multiemployer plan" ("Multiemployer Plan"), as such term is
defined in Section 4001 of ERISA. Each Pension Plan which is intended to
be qualified under Section 401(a) of the Internal Revenue Code of 1986,
as amended (the "Code") has received a favorable determination letter
from the Internal Revenue Service (the "IRS"); to the best knowledge of
Zapata, nothing has occurred which has resulted or is likely to result in
the revocation of such qualification; and Zapata has delivered to Buyer a
copy of the most recent determination letter for each Pension Plan. Each
Pension and Welfare Plan has been administered in all material respects
in accordance with ERISA, and Zapata has delivered to Buyer true, correct
and complete copies of the most recent IRS Form 5500 Series filing for
each Pension or Welfare Plan and each Pension Plan's most recent annual
actuarial valuation report and certified financial audit, both of which
to the best knowledge of Zapata have been prepared accurately and in
accordance with standard and reasonable actuarial assumptions and
generally accepted accounting principles.
9
<PAGE>
(3) Neither Protein nor any of the Subsidiaries (or any other
person under common control within the meaning of Section 4001(a)(14) of
ERISA) has incurred any liability to the Pension Benefit Guaranty
Corporation ("PBGC"), except for required premium payments, which
payments have been made when due. Neither Protein nor any of the
Subsidiaries (or any other person under common control within the meaning
of Section 4001(a)(14) of ERISA) has ceased operations at any facility or
withdrawn from a Pension Plan in a manner which could subject it to
material liability under Section 4062, 4063 or 4064 of ERISA, and no
events have occurred which might give rise to any liability of Protein or
any of the Subsidiaries (or any other person under common control within
the meaning of Section 4001(a)(14) of ERISA) to the PBGC under Title IV
of ERISA or which could reasonably be anticipated to result in any claims
being made against Buyer by the PBGC. Neither Protein nor any of the
Subsidiaries (or any other person under common control within the meaning
of Section 4001(a)(14) of ERISA) has incurred any withdrawal liability
(including any contingent or secondary withdrawal liability) within the
meaning of Sections 4201 and 4204 of ERISA to any Multiemployer Plan.
(4) Full payment has been made of all amounts which Protein or
any of the Subsidiaries is required under applicable law to make to any
Pension or Welfare Plan or any agreement relating to any Pension or
Welfare Plan, as a contribution to each Pension or Welfare Plan, as of
the last day of the most recent fiscal year of such Pension or Welfare
Plan ended prior to the date hereof, and no accumulated funding
deficiency (as defined in Section 302 of ERISA and Section 412 of the
Code), whether or not waived, exists with respect to any Pension Plan.
The Financial Statements reflect adequate provisions for reserves to meet
contributions relating to periods ended prior to October 1, 1994, which
have not been made because they were not yet due under the terms of any
Pension Plan or related agreements. There will be no change on or before
the Closing Date in the operation of any Pension or Welfare Plan or
documents under which any such Plan is maintained which will result in a
material increase in the benefit liabilities under such Plan.
(5) No Reportable Event (as such term is defined in Section 4043
of ERISA) for which the thirty (30) day notice requirement has not been
waived by the PBGC has occurred with respect to any Pension Plan other
than the transactions contemplated by this Agreement. To the best
knowledge of Zapata, neither Protein nor any of the Subsidiaries has
engaged in any transaction with respect to any Plan which would subject
Zapata, Protein or any of the Subsidiaries to a tax, penalty or liability
for prohibited transactions under ERISA or the Code. To the best
knowledge of Zapata, no director, officer or employee of Zapata, Protein
or any of the Subsidiaries, to the extent he is a fiduciary with respect
to any Pension or Welfare Plan, has breached any of his responsibilities
or obligations imposed upon fiduciaries under Title I of ERISA or which
would
10
<PAGE>
result in any material claim being made under, by or on behalf of any
Pension or Welfare Plan.
(6) As of October, 1993, the current value of the assets of each
Pension Plan which is subject to Title IV of ERISA exceeded the
accumulated benefit obligations of all participants and beneficiaries in
such Plan when such benefits were determined under the Financial
Accounting Standards Board's Statement of Financial Accounting Standards
No. 87.
(7) Except as disclosed on Schedule 2.1(o), neither Zapata,
Protein nor any of the Subsidiaries has (i) any material liability for
unfunded retiree medical plans, or (ii) any material liability related to
a failure to satisfy the group health plan continuation requirements
under Section 4980B of the Code and Section 601 et seq. of ERISA.
2.1(p) Intellectual Property. Attached hereto as Schedule 2.1(p) is a
list of all trademarks, trademark registrations, trademark registration
applications and trade names which either Protein or any of the Subsidiaries
owns or uses and each license agreement in respect of such intellectual property
that is utilized in the operation of the business of either Protein or any of
the Subsidiaries under which either Protein or any of the Subsidiaries is either
licensor or licensee.
2.1(q) Absence of Undisclosed Liabilities. Except as set forth in the
Financial Statements and except for liabilities and obligations arising under
contracts, claims, proceedings and other matters identified in any schedule
delivered or to be delivered to Buyer pursuant to this Agreement, to the best
knowledge of Zapata, neither Protein nor any of the Subsidiaries has, and none
of the assets or properties of either Protein or any of the Subsidiaries is
subject to, any liabilities (accrued, absolute, contingent or otherwise) which,
net of insurance proceeds, exceed, in the aggregate, the liabilities reflected
in the Financial Statements, whether or not such liabilities are normally shown
or reflected on a balance sheet prepared in a manner consistent with generally
accepted accounting principles, other than obligations under operating leases
and Federal income taxes in respect of the operations of Protein or any of the
Subsidiaries since September 30, 1994. Except as reflected in the Financial
Statements, neither Protein nor any of the Subsidiaries is in default in respect
of any term or condition of any material indebtedness or liability. There are
no facts in existence on the date hereof which, to the knowledge of Zapata, are
expected to create or result in any liabilities or obligations of Protein or any
of the Subsidiaries not contemplated by Section 3.1(b) of this Agreement or in
the schedules delivered by Zapata to Buyer pursuant to this Agreement.
2.1(r) Questionable Payments. To the best knowledge of Zapata, neither
Protein nor any of the Subsidiaries nor any employee, agent or representative
thereof has made, directly or indirectly, any bribes, kickbacks, illegal
payments, political contributions with corporate funds, payments from corporate
funds not recorded on the appropriate books
11
<PAGE>
and records, payments from corporate funds that were falsely recorded on the
books and records of Protein or any Subsidiary, payments from corporate funds to
governmental officials for improper purposes or illegal payments from corporate
funds to obtain or retain business within or without the United States which, in
the case of any of the foregoing, would constitute a violation of the Foreign
Corrupt Practices Act.
2.1(s) Environmental Matters. To the best knowledge of Zapata, except
as disclosed in Schedule 2.1(s), neither Protein nor any of the Subsidiaries has
(i) any liability under any Environmental Law (as hereinafter defined), as
currently in effect, except to the extent such liability could not be reasonably
expected to result in a Material Adverse Effect on Protein or the Subsidiaries,
(ii) any knowledge of the presence of any Hazardous Substances on, under or at
any of Protein's or any of the Subsidiaries' properties or the presence on,
under or at any other property of any Hazardous Substances generated or released
from Protein's or any of the Subsidiaries' properties, prior to the date hereof
that constitutes a violation of any applicable Environmental Law or a
significant threat to human health or the environment, or (iii) received any
written notice within the last eighteen (18) months (a) of any violation of any
statute, law, ordinance, regulation, rule, judgment, decree or order of any
governmental entity relating to any matter of pollution, protection of the
environment, environmental regulation or control or regarding Hazardous
Substances on or under any of Protein's or any of the Subsidiaries' properties
or any other properties (collectively, "Environmental Laws") or the institution
or pendency of any suit, action, claim, proceeding or investigation by any
governmental entity or any third party in connection with or resulting from any
such violation, (b) requiring the response to or remediation of Hazardous
Substances at or arising from any of Protein's or any of the Subsidiaries'
properties or any other properties, or (c) demanding payment for response to or
remediation of Hazardous Substances at or arising from any of the Protein's or
any of the Subsidiaries' properties or any other properties. For purposes of
this Agreement, the term "Hazardous Substances" shall mean any toxic or
hazardous materials or substances, including asbestos, buried contaminants,
pollutants, chemicals, flammable explosives, radioactive materials, oil,
petroleum and petroleum products and any substances defined as, or included in
the definition of "hazardous substances", "hazardous wastes", "hazardous
materials" or "toxic substances" under any Environmental Law.
To the best knowledge of Zapata, except as disclosed in Schedule
2.1(s), (i) no Environmental Law imposes any obligation upon Protein or the
Subsidiaries arising out of or as a condition to any transaction described in
this Agreement, including, without limitation, any requirement to modify or to
transfer any permit or license, any requirement to file any notice or other
submission with any governmental entity, the placement of any notice,
acknowledgement or covenant in any land records, or the modification of or
provision of notice under any agreement, consent order or consent decree and
(ii) no lien or encumbrance has been placed upon any of Protein's or the
Subsidiaries' properties under any Environmental Law.
12
<PAGE>
2.1(t) Transfer of Shares. Zapata is the lawful owner of the Shares to
be sold, transferred and delivered to Buyer hereunder, and the sale, transfer
and delivery of the Shares to Buyer at the Closing will transfer to Buyer valid
title to the Shares, free and clear of all liens, charges, encumbrances and
claims whatsoever.
2.1(u) Survival. All representations, warranties and covenants made in
this Agreement shall survive the Closing for a period of twelve (12) months
following the Closing Date, except that (i) Section 2.1(i) shall survive the
Closing until the expiration of the statute of limitations (including any
extension thereof) applicable to a particular Tax Claim, and (ii) Section 2.1(l)
shall survive the Closing for a period of thirty-six (36) months following the
Closing Date. All representations, warranties and covenants made in this
Agreement shall terminate as set forth in the preceding sentence and be of no
further force and effect except to the extent they relate to claims made in
writing pursuant to Section 6.3 prior to the end of the applicable period.
2.2 REPRESENTATIONS AND WARRANTIES OF BUYER.
Buyer represents and warrants to and agrees with Zapata as follows:
2.2(a) Organization. Buyer is a corporation duly organized, validly
existing and in good standing under the laws of the State of Texas. Buyer has
all requisite corporate power and authority needed to carry on its business as
now conducted. A majority of the outstanding capital stock of Buyer is owned by
Bankhouse Texas, a Pennsylvania business trust ("BT"). Except for BT's control
of Buyer, no other person or entity controls, is controlled by or is under
common control with either BT or Buyer. Without limiting the generality of the
foregoing, no person or entity has the right to 50% or more of the profits of BT
or the right to 50% or more of the assets of BT upon the dissolution of BT, and
no person or entity has the contractual power presently to designate 50% or more
of the trustees of BT. BT is not a party to the financing obtained by Buyer for
purposes of funding the payment of the Purchase Price and is not a guarantor
with respect to such financing. BT and Buyer are newly formed entities
established for purposes of acquiring Protein, and neither of them has
previously had any revenue-generating activities. BT and Buyer do not, either
individually or considered together, have total assets of $10,000,000.00 or more
(exclusive of cash to be used by Buyer to pay the Purchase Price). The
organizational and other transactions effected by Buyer and its shareholders and
their respective affiliates in contemplation of this Agreement, and the
organizational structure resulting therefrom, were undertaken for, and reflect,
bona fide business purposes, including obtaining financing and implementing a
bona fide allocation of ownership, and were not employed for the purpose of
avoiding the obligation to comply with the requirements of the HSR Act. As used
in this Section 2.2(a), the terms "person," "entity," "control," "controlled by"
and "under common control with" have the meanings specified in the premerger
notification rules of the Federal Trade Commission, 16 CFR Parts 801-803.
13
<PAGE>
2.2(b) Execution of Agreement. The execution and delivery of this
Agreement by Buyer do not and the consummation of the transactions contemplated
hereby by Buyer will not violate, result in any conflict with, breach or
violation of, or creation of lien or default under any provision of the Articles
of Incorporation or bylaws of Buyer or with any judgment, order, injunction,
decree, award or any statute, rule, regulation judicial or governmental decree,
order or judgment applicable to Buyer or any mortgage, indenture, borrowing
agreement or other arrangement or instrument to which Buyer is a party or to
which any of its properties is subject. Buyer has the full corporate power,
authority and legal right to enter into this Agreement and to consummate the
transactions contemplated hereby, and the execution, delivery and performance of
this Agreement have been duly authorized by all necessary corporate action by
Buyer.
2.2(c) Consents. No authorizations, approvals, or consents, that have
not previously been obtained, of any governmental department, commission,
bureau, agency or other public body or authority are required for consummation
of the transactions contemplated by this Agreement except such consents as may
be necessary under the Title XI Financing. Without limiting the generality of
the foregoing, no filing under the HSR Act is required for consummation of the
transactions contemplated hereby.
2.2(d) Articles of Incorporation and Bylaws. Buyer has delivered to
Zapata true and complete copies of its Articles of Incorporation and Bylaws.
There are no dissolution, liquidation, or bankruptcy proceedings pending,
contemplated by or, to the best knowledge of Buyer, threatened against Buyer.
2.2(e) Financing. Buyer has secured sufficient financing, or otherwise
has sufficient funds available, to permit it to pay the total purchase price set
forth in Section 1.2.
2.2(f) Investment Representation. The Shares are being acquired by
Buyer for its own account and without a view to the sale or distribution
thereof. Buyer acknowledges that it has been provided with such information as
it deems necessary to enable it to fully evaluate the merits and risks of an
investment in Protein and that it is able to bear the economic risk of the
investment. Buyer acknowledges that any subsequent disposition of the Shares
(which is not now contemplated) must be made in compliance with the applicable
federal and state securities laws.
2.2(g) Disclaimer of Warranties. EXCEPT AS OTHERWISE PROVIDED HEREIN,
BUYER ACKNOWLEDGES THAT ZAPATA MAKES NO WARRANTY, EXPRESS OR IMPLIED, TO ANYONE,
AS TO PROTEIN, THE BUSINESS IT CONDUCTS OR THE ASSETS IT OWNS. BUYER AFFIRMS
THAT IT HAS INDEPENDENTLY, AND IN ITS SOLE JUDGMENT, SELECTED THE SHARES FOR
PURCHASE AND HAS NOT RELIED UPON ANY STATEMENT OR REPRESENTATION OF ZAPATA
EXCEPT AS CONTAINED IN THIS AGREEMENT IN DECIDING TO PURCHASE THE SHARES.
14
<PAGE>
3. COVENANTS
3.1 ZAPATA'S COVENANTS
Zapata covenants and agrees as follows:
3.1(a) Approvals to be Obtained by Zapata. Zapata shall use its best
efforts to obtain as soon as possible all required approvals, consents, permits,
authorizations and orders from any domestic or foreign jurisdiction or
regulatory body and to make as soon as possible any governmental filings deemed
reasonably necessary or desirable by Buyer in connection with this Agreement or
to permit the consummation of the transactions contemplated hereby.
3.1(b) Conduct Prior to the Closing Date. Between the date of this
Agreement and the Closing Date, unless Buyer has given its prior written consent
otherwise, Zapata shall:
(1) Cause Protein to conduct its business only in the ordinary
course of business as now conducted;
(2) Not permit Protein to amend its Certificate of Incorporation
or Bylaws;
(3) Not take any action, and not permit Protein to take any
action, which will result in a breach of any representation, warranty or
covenant made by Zapata in this Agreement;
(4) Not permit Protein to guarantee any obligations of others and
not permit Protein to incur any liabilities or obligations (absolute or
contingent) except in the ordinary course of business;
(5) Not permit Protein to mortgage, pledge or subject to any
security interest, lien, encumbrance, claim, proscription, restriction,
covenant or easement any of its assets, rights or businesses to secure
any indebtedness;
(6) Not permit Protein to increase the pension, retirement or
other employment benefits of its employees, except as may be required by
existing agreements, or the compensation of any member of its management,
except for increases to management compensation consistent with prior
practice not to exceed a cumulative aggregate of five percent (5%) per
annum;
15
<PAGE>
(7) Cause Protein to use its reasonable best efforts to preserve
its business organization intact and to keep available the services of
its present officers, directors and employees and to preserve the
goodwill of its suppliers, customers and others having business relations
with it;
(8) Not permit Protein to purchase or lease any real property;
(9) Not permit Protein to change any of its basic policies and
practices with respect to any material aspect of its business or
operations;
(10) Give, and cause Protein to give, Buyer's representatives
reasonable access during normal business hours to all of Protein's
assets, books, records, agreements and commitments, and furnish Buyers
representative during such period with all such information concerning
Protein's affairs as Buyer may reasonably request. Buyer shall hold, and
shall cause its representatives to hold, all such information and
documents in accordance with, and subject to the terms of, the
confidentiality agreement referred to in Section 9.3;
(11) Use its best efforts, and cause Protein to use its best
efforts, to do and perform all things to be done and performed under this
Agreement by or on behalf of Zapata and to satisfy all conditions
precedent to the Closing;
(12) Not permit Protein to sell, discount or, except in the
ordinary course of business, compromise any of its notes or accounts
receivable.
3.1(c) Preservation of Books and Records. For a period of two (2) years
after the Closing Date, Zapata will (i) preserve and retain the corporate,
accounting, legal, auditing and other books and records of Zapata (including,
but not limited to, any documents relating to any governmental or non-
governmental actions, suits, proceedings or investigations arising out of the
conduct of the business and operations of Zapata and its subsidiaries prior to
the Closing Date) which specifically relate to or affect Protein and (ii) make
such books and records available at the then current administrative headquarters
of Zapata to Buyer, and its officers, employees and agents, upon reasonable
notice and at reasonable times, it being understood that Buyer shall be entitled
to make copies of any such books and records as it shall deem necessary. Zapata
agrees to permit representatives of Buyer to meet with employees of Zapata or
its subsidiaries on a mutually convenient basis in order to enable Buyer to
obtain additional information and explanations of any materials provided
pursuant to this Section 3.1(c).
3.1(d) Certain Post-Closing Assistance by Zapata. Zapata agrees to
cause the appropriate personnel at Zapata to assist Buyer in the prosecution or
defense of any claims and litigation (including counterclaims filed by Buyer)
for which Buyer has indemnified Zapata hereunder. Such services shall be
rendered by Zapata to Buyer at no cost and expense to Buyer except that Buyer
shall reimburse Zapata for any reasonable out-of-pocket
16
<PAGE>
travel and similar expenses incurred by the personnel of Zapata in performing
these functions. Zapata agrees to promptly pay to Buyer upon receipt by Zapata
of any amount collected by Zapata in connection with any action, suit or
proceeding for which Buyer has agreed to indemnify Zapata under Section 6.1.
3.1(e) Public Announcements. Subject to applicable securities law or
stock exchange requirements, at all times until the Closing Date, Zapata will
promptly advise, and obtain the approval of, Buyer before issuing, or permitting
any of Zapata's directors, officers, employees, agents or subsidiaries to issue,
any press release with respect to this Agreement or the transactions
contemplated hereby.
3.2 BUYER'S COVENANTS
Buyer covenants and agrees as follows:
3.2(a) Buyer to Use Best Efforts. Buyer shall use its best efforts to
cause all things to be done and performed under this Agreement by or on behalf
of Buyer or its designee (including without limitation the obtaining of any
required waivers and consents in connection with the Title XI Financing)
3.2(b) No Action Resulting in Breach. Between the date of this
Agreement and the Closing Date, Buyer will not, without Zapata's prior written
consent, take any action which will result in a breach of any representation,
warranty or covenant made by Buyer in this Agreement.
3.2(c) Name Changes. As soon as practicable after the Closing, and in
any event within three (3) business days of the Closing, Buyer will cause
Protein to change its corporate name to a name which does not use the word
"Zapata" or any word similar to such word. Buyer acknowledges and agrees that,
except as expressly provided herein, no rights of any kind whatsoever in the
name "Zapata" or in any of the trademarks or service marks of Zapata or any of
its affiliates are being granted or transferred in connection with this
Agreement. As promptly as practicable after the Closing Date, but in any event
within six (6) months after the Closing Date (subject however, to the following
sentence), Buyer shall refrain from using the word "Zapata" or any word or
expression similar thereto in the name under which it does business or in any
corporate name, trademark, service mark or other name or mark used in connection
with its business; provided, however, that for a period of two (2) years
following the Closing Date, Buyer may use the word "Zapata" in the phrase
"formerly Zapata Protein, Inc." immediately following Buyer's name in marketing
materials prepared by Buyer. Buyer will not permit Protein to undertake any new
business opportunity or market any new product or enter into any contract or
commitment using the word "Zapata" or any word or expression similar thereto
after the Closing Date. As promptly as practicable after the Closing Date, but
in any event within two (2) years after the Closing Date, the foregoing name and
the "Stylized Z" logo shall be removed from the assets of Protein and its
Subsidiaries. The parties agree and acknowledge that, in the event
17
<PAGE>
of a breach or threatened breach of any of the provisions of this Section
3.2(c), Zapata shall be entitled to immediate and temporary injunctive relief,
as any such breach would cause Zapata irreparable injury for which it would have
no adequate remedy at law. Nothing herein shall be construed so as to prohibit
Zapata from pursuing any other remedies available to it for any such breach or
threatened breach. Buyer agrees to indemnify and hold harmless Zapata and its
affiliates from any and all damages, losses, costs and expenses (including
reasonable attorneys' fees) incurred by Zapata or any of its affiliates due to
any use of such name or marks by Buyer or any of its affiliates, including
Protein or any of the Subsidiaries at any time after the Closing Date.
3.2(d) Employee Benefit Matters. Effective as of the Closing Date, each
of Protein and the Subsidiaries shall withdraw and terminate its participation
in any employee benefit plan (as defined in Section 3(3) of ERISA) or any other
benefit plan or program sponsored or maintained by Zapata (each a "Zapata Plan")
in which employees of Protein or any of the Subsidiaries participate. Benefits
accrued and claims incurred by Protein employees with respect to any Zapata Plan
prior to the Closing Date, whether such claims are reported or unreported as of
the Closing Date (including claims incurred as a result of hospitalization at
the Closing Date), shall be the responsibility of Buyer. No changes shall be
made to or any funds withdrawn by or reverted to Zapata from the Zapata Haynie
Corporation Profit Sharing/Savings Plan and Pension Plan prior to and through
the time of Closing. For a period of at least eighteen (18) months after the
Closing Date, Buyer shall provide medical and dental benefits for Protein
employees under one of Protein's existing plans or a new plan for similarly
situated employees with medical and dental benefits not less favorable as to
both conditions covered and amounts of coverage and cost of coverage as provided
to Protein employees on the date of this Agreement and any pre-existing
condition restrictions under Buyer's medical plan for the Protein employees will
be waived.
3.2(e) Preservation of Books and Records. For a period of seven (7)
years after the Closing Date, Buyer will (i) preserve and retain the corporate,
accounting, legal, auditing and other books and records of Protein and the
Subsidiaries (including, but not limited to, any documents relating to any
governmental or non-governmental actions, suits, proceedings or investigations
arising out of the conduct of the business and operations of Protein and its
subsidiaries prior to the Closing Date) and (ii) make such books and records
available at the then current administrative headquarters of Protein to Zapata,
and its officers, employees and agents, upon reasonable notice and at reasonable
times, it being understood that Zapata shall be entitled to make copies of any
such books and records as it shall deem necessary. Buyer agrees to permit
representatives of Zapata to meet with employees of Buyer, Protein or its
subsidiaries on a mutually convenient basis in order to enable Zapata to obtain
additional information and explanations of any materials provided pursuant to
this Section 3.2(e).
18
<PAGE>
3.2(f) Certain Post-Closing Assistance by Protein.
(1) Buyer agrees to cause the appropriate personnel at Protein, at no cost or
expense to Zapata, to prepare all accounting and related reports for
Protein for periods up to the Closing Date which are required by Zapata in
connection with Zapata's preparation and filing of various financial, tax
and accounting reports.
(2) Buyer agrees to cause the appropriate personnel at Protein to assist Zapata
in the prosecution or defense of any claims and litigation (including
counterclaims filed by Zapata) for which Zapata has indemnified Buyer
hereunder. Such services shall be rendered by Protein to Zapata at no cost
and expense to Zapata except that Zapata shall reimburse Protein for any
reasonable out-of-pocket travel and similar expenses incurred by the
personnel of Protein in performing these functions. Buyer agrees to
promptly pay to Zapata (or cause Protein to promptly pay to Zapata) upon
receipt by Buyer or Protein of any amount collected by Protein or Buyer in
connection with any action, suit or proceeding for which Zapata has agreed
to indemnify Buyer under Section 6.1.
3.2(g) Public Announcements. Subject to applicable securities law or
stock exchange requirements, at all times until the Closing Date, Buyer will
promptly advise, and obtain the approval of, Zapata before issuing, or
permitting any of Buyer's directors, officers, employees, agents or subsidiaries
to issue any press release with respect to this Agreement or the transactions
contemplated hereby.
4. CONDITIONS PRECEDENT TO CLOSING
4.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
The obligations of Buyer under this Agreement shall be subject to the
fulfillment of each and all of the following conditions at or before the Closing
(unless an earlier time is specified in this Agreement, in which case on or
before such earlier time), any of which may be waived by Buyer.
4.1(a) Representations and Warranties. Each of the representations,
warranties and statements made by Zapata contained in this Agreement shall be
true and correct in all material respects on and as of the Closing Date to the
same extent and with the same effect as if made on and as of that date.
4.1(b) Performance by Zapata. Zapata shall have performed and complied
in all material respects with all covenants and agreements required by this
Agreement to be performed or complied with by it on or before the Closing
(unless an earlier time is specified in this Agreement in which case on or
before such earlier time).
19
<PAGE>
4.1(c) Closing Certificate. Buyer shall have received a certificate,
dated the Closing Date, of Zapata signed by a Vice President of Zapata,
certifying as to the matters specified in Sections 4.1(a) and 4.1(b).
4.l(d) Regulatory Approvals and Consent. There shall have been obtained
by Buyer, Zapata and Protein all material consents, approvals, authorizations,
permits and orders referred to in this Agreement.
4.1(e) Opinion of Zapata's Counsel. Zapata shall have delivered to
Buyer the opinions of Joseph L. von Rosenberg III, Vice President and General
Counsel of Zapata, dated as of the Closing Date, which opinion shall be
addressed to Buyer and shall be in the form attached as Schedule 4.1(e) hereto.
4.1(f) Contribution of Assets. Zapata shall have contributed all right,
title and interest in and to the assets described in Schedule 4.1(f) hereto.
4.1(g) Pension Plan. Zapata shall have furnished evidence, reasonably
satisfactory to Buyer, that the current value, as of October 1, 1994, of each
Pension Plan which is subject to Title IV of ERISA exceeds the present value of
the accrued benefits of all participants and beneficiaries in such Plan when
such benefits are valued on a termination basis using the PBGC interest and
other assumptions.
4.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF ZAPATA
The obligations of Zapata under this Agreement shall be subject to the
fulfillment of each and all of the following conditions at or before the Closing
(unless an earlier time is specified in this Agreement, in which case on or
before such specified time), any of which may be waived by Zapata.
4.2(a) Representations and Warranties. Each of the representations,
warranties and statements made by Buyer contained in this Agreement shall be
true and correct in all material respects on and as of the Closing Date to the
same extent and with the same effect as if made on and as of that date.
4.2(b) Performance by Buyer. Buyer shall have performed and complied in
all material respects with all covenants and agreements required by this
Agreement to be performed or complied with by it on or before the Closing
(unless an earlier time is specified in this Agreement, in which case on or
before such specified time).
4.2(c) Closing Certificate. Zapata shall have received a certificate,
dated the Closing Date, of Buyer signed by an executive officer of Buyer
certifying as to the matters specified in Sections 4.2(a) and 4.2(b).
20
<PAGE>
4.2(d) Regulatory Approvals and Consent. There shall have been obtained
by Zapata, Buyer and Protein all material consents, approvals, authorizations,
permits and orders referred to in this Agreement.
4.2(e) Opinion of Buyer's Counsel. Buyer shall have delivered to Zapata
the opinion of Chamberlain, Hrdlicka, White, Williams & Martin, dated as of the
Closing, which opinion shall be addressed to Zapata and shall be in the form
attached as Schedule 4.2(e) hereto.
5. CLOSING
5.1 CLOSING
The closing of the transactions contemplated by this Agreement (the
"Closing") shall take place at Zapata's principal executive offices at One
Riverway, Suite 2100, Houston, Texas 77056, 9:00 a.m. local time, on February
28, 1995, or at such other place, date or time as the parties may agree. The
date upon which the Closing occurs is called the "Closing Date."
6. INDEMNIFICATION
6.1 OBLIGATION OF ZAPATA TO INDEMNIFY
(1) Subject to the limitations contained in this Section 6.1,
Zapata agrees to hold harmless, indemnify, and defend Buyer (and each of
its directors, officers, employees and affiliates) from and against any
and all losses, liabilities, damages, deficiencies, costs or expenses
suffered, incurred or paid ("Losses" or "Loss," as the case may be) based
upon, arising out of or otherwise in respect of any inaccuracy in or
breach of any representation, warranty or covenant of Zapata contained in
this Agreement (other than any representation or warranty which has
expired in accordance with Section 2.1(u)). Zapata's obligations to
indemnify shall be subject to the following qualifications:
(a) Zapata shall not be obligated to indemnify or defend
Buyer for the first Five Thousand Dollars ($5,000.00) (the "Threshold
Amount") of each individual Loss arising out of any single event
condition, third-party claim or demand (each such Loss for the
purpose of this subsection being referred to as a "Claim" or, in the
aggregate, "Claims"). The Threshold Amount is not intended to imply
a standard of materiality for purposes of the representations and
warranties contained in this Agreement. A Claim shall not be deemed
individual, but shall be aggregated for the purposes of this
Agreement with another Claim or Claims, if all such Claims are
related. Claims will not be deemed to be related unless: (i) they
are shown to be the proximate result of the same specific act,
omission or event
21
<PAGE>
or (ii) they are shown to be the proximate result of intentional
repetition of the same specific act or omission by the same person,
or by a group of persons who intentionally have acted in concert; and
(b) Subject to Section 6.1(1)(a) Zapata shall be obligated
to indemnify Buyer fully and completely for all Losses in excess of
the Threshold Amount only to the extent they exceed Two Hundred Fifty
Thousand Dollars ($250,000.00).
(2) Zapata's indemnification obligations pursuant to this Section
6.1 shall be limited to an aggregate amount equal to Five Million Dollars
($5,000,000.00) (for all Losses except Losses arising from any breach of
the representations and warranties in Section 2.1(i)). There shall be no
limit on Zapata's indemnification obligations for Losses arising from any
breach of the representations and warranties in Section 2.1(i).
(3) ln determining the amount of any loss, liability or expense
for which Buyer is entitled to indemnification under this Agreement (i)
the gross amount thereof will be reduced by any correlative federal tax
benefit and by insurance proceeds realized or to be realized by Buyer (or
by Protein or any Subsidiary of Protein) and (ii) no amount shall be
included for Buyer's special or consequential damages.
6.2 OBLIGATION OF BUYER TO INDEMNIFY
Buyer agrees to hold harmless, indemnify and defend Zapata (and each of
its directors, officers, employees and affiliates) from and against any Losses
based upon, arising out of or otherwise in respect of any inaccuracy in or
breach of any representation, warranty or covenant of Buyer contained in this
Agreement. Buyer's indemnification obligations pursuant to this Section 6.2
shall be limited to an amount equal to Five Million Dollars ($5,000,000.00) (for
all Losses except Losses arising from any breach of the representations and
warranties in Sections 2.2(a) and 2.2(c)). There shall be no limit on Buyer's
indemnification obligations for Losses arising from any breach of the
representations and warranties in Sections 2.2(a) and 2.2(c).
6.3 INDEMNIFICATION PROCEDURE
6.3(a) Notice. Promptly after any party hereto claiming indemnification
under this Agreement (hereinafter the "Indemnified Party") has notice of or
knowledge of the occurrence of any event which the Indemnified Party asserts is
an indemnifiable claim or promptly, but in no event more than ten (10) business
days, after the commencement of any action, claim, or proceeding commenced
against the Indemnified Party by a third party that might result in any claim
for indemnity pursuant to this Agreement (hereinafter referred to as a "Third
Party Claim"), the Indemnified Party shall notify the party obligated to provide
22
<PAGE>
indemnification hereunder (the "Indemnifying Party"). Either such notice is
hereafter referred to as a "Commencement Notice." The Commencement Notice shall
include a reasonably detailed description of the nature of the claim, an
estimate of the amount of damages attributable to the claim and a statement of
the basis of the Indemnified Party's request for indemnification under this
Agreement. In the case of a Third Party Claim, the Indemnified Party shall
transmit, together with the Commencement Notice, a copy of all papers served
with respect to such claim. In the event the Indemnified Party fails to provide
a Commencement Notice with respect to a Third Party Claim pursuant to the terms
of this Section 6.3(a) and such failure materially adversely affects the ability
of the Indemnifying Party to defend the Third Party Claim, then the Indemnified
Party shall be deemed to have waived its indemnification rights as to such Third
Party Claim.
6.3(b) Post-Notice Procedures. The following procedures shall apply to
a response to a claim for indemnity by the Indemnified Party.
(1) Promptly after receipt by the Indemnifying Party of the
Commencement Notice, the Indemnifying Party shall, (i) within fifteen
(15) business days of receipt of a Commencement Notice with respect to a
Third Party Claim, notify the Indemnified Party (A) whether the
Indemnified Party disputes its potential liability to the Indemnified
Party under this Article 6 with respect to such Third Party Claim and (B)
whether the Indemnifying Party desires to defend the Indemnified Party
against such Third Party Claim and (ii) within sixty (60) business days
of receipt of a Commencement Notice with respect to a claim other than a
Third Party Claim, either (A) acknowledge the debt, liability or
obligation for which indemnity is sought as a valid claim and shall
forthwith, subject to the provisions of Sections 6.1 and 6.2, pay the
Indemnified Party an amount sufficient to discharge such debt, liability
or obligation; or (B) in the event the Indemnifying Party desires to
challenge the claim for indemnification, notify the Indemnified Party of
such challenge. Failure to respond within the appropriate time period
following the Commencement Notice shall be deemed acknowledgment of the
right to be indemnified and give rise to the immediate right in the
Indemnified Party to payment in full of the amount claimed, subject to
the provisions of Section 6.1 and 6.2 and 6.3(b)(8).
(2) If the Indemnifying Party notifies the Indemnified Party
within the period specified in Section 6.3(b)(1) that the Indemnifying
Party elects to assume the defense of the Third Party Claim, then the
Indemnifying Party shall have the right to defend, at its sole cost and
expense, such Third Party claim by all appropriate proceedings. The
Indemnifying Party shall have full control of such defense and
proceedings, including any compromise or settlement thereof, subject to
the provisions of Section 6.3(b)(4). The Indemnified Party may
participate in, but not control, any defense or settlement of any Third
Party Claim controlled by the Indemnifying Party pursuant to this Section
6.3(b)(2) and shall bear its own costs and expenses with respect to such
participation. In connection
23
<PAGE>
with such participation, the Indemnified Party shall be permitted to have
reasonable access from time to time to the Indemnifying Party's attorneys
and be advised by them, upon request, as to the conduct of the defense
including, but not limited to, such matters as selection of theories of
action and defense, discovery matters, other motion practice, and general
trial strategy, such as selection of and order of presentation of
witnesses. If it is necessary for some action to be taken or defense to
be made in respect of the Third Party Claim prior to confirmation by the
Indemnified Party that the Indemnifying Party will assume such defense,
the Indemnified Party shall assume such defense with counsel selected by
the Indemnified Party for the limited purpose of contesting such Third
Party Claim until the Indemnifying Party assumes such defense. If the
Indemnified Party is entitled to indemnification hereunder with respect
to such Third Party Claim, the Indemnifying Party shall promptly pay all
Litigation Costs (defined in Section 6.3(b)(7) below) as and when
incurred by the Indemnified Party in assuming the defense against the
Third Party Claim, subject to the provisions of Sections 6.1, 6.2 and
6.3(b)(8).
(3) Notwithstanding the provisions of paragraph (2) above to the
contrary, if the character of a Third Party Claim is such that it is
covered by insurance policies maintained or previously maintained by the
Indemnified Party, its affiliates or the Indemnifying Party, and the
insurer under such policies is entitled to select counsel to defend such
Third Party Claim, then, in the event such insurer confirms coverage with
respect to the Third Party Claim and assumes the defense thereof, the
parties acknowledge and agree that counsel selected by such insurer shall
conduct the defense against the Third Party Claim. In the event that an
insurance carrier assumes the defense of the Third Party Claim, any
Litigation Costs required to be borne by the parties hereto as if such
Litigation Costs were the result of a defense assumed by the Indemnifying
Party.
(4) The Indemnifying Party may settle or compromise any Third
Party Claim defended by it without the consent of the Indemnified Party,
provided such settlement or compromise (i) involves only the payment of
monetary consideration by the Indemnifying Party or consideration or
agreements given by the Indemnifying Party of a non-monetary nature which
have no material adverse effect on the Indemnified Party, and (ii) does
not involve any admission of liability, or stipulations of fact which,
would reasonably be expected to have a material adverse effect on the
Indemnified Party or which might prejudice the Indemnified Party in
subsequent or other litigation. In the event that the Indemnifying Party
desires to settle or compromise a Third Party Claim on a basis which the
Indemnifying Party believes requires the consent of the Indemnified
Party, the Indemnifying Party shall notify the Indemnified Party in
writing and describe in such written notice the terms and conditions of
the proposed settlement or compromise. Any such consent requested from
the Indemnified Party shall not be unreasonably withheld. The failure of
the Indemnified Party
24
<PAGE>
to give written notice expressly objecting to the terms and conditions of
the proposed settlement or compromise within ten (10) days after receipt
of notice shall be deemed for all purposes to be an approval of the
proposed settlement or compromise described in the notice. If the
Indemnified Party reasonably objects to the proposed settlement, the
Indemnifying Party shall continue to litigate or resist such Third Party
Claim until a final judgment is rendered by a court of competent
jurisdiction or until a settlement or compromise is effected pursuant to
the provisions hereof.
(5) In the event of a settlement or compromise pursuant to
Section 6.3(b)(4) above, with respect to a Third Party Claim as to which
the Indemnified Party is entitled to indemnification hereunder, the
Indemnifying Party shall pay and otherwise satisfy in full such
settlement or compromise and shall pay the Litigation Costs borne by it
as provided in Section 6.3(b)(8). If a final judgment is rendered
against the Indemnified Party in respect of a Third Party Claim, then the
Indemnifying Party shall promptly satisfy such judgment in full and shall
pay the Litigation Costs borne by it as provided in Section 6.3(b)(8).
Notwithstanding the foregoing, in no event shall the Indemnifying Party
be obligated to pay any amount to the extent that payment would cause the
total amounts paid or to be paid by the Indemnifying Party pursuant to
its indemnity obligations set forth in this Agreement to exceed the
maximum indemnity amount specified in Section 6.1 or 6.2.
(6) If the Indemnifying Party fails or refuses to timely assume
and prosecute the defense of a Third Party Claim, the Indemnified Party
shall have the right to assume the defense of such claim by all
appropriate proceedings with counsel selected by it. The Indemnified
Party shall have full control of such defense and proceedings; provided,
however, that the Indemnified Party may not enter into, without the
Indemnifying Party's consent, which shall not be unreasonably withheld,
any compromise or settlement of such Third Party Claim. In the event
that the Indemnified Party assumes the defense of a Third Party Claim
pursuant to this paragraph then, if the Indemnified Party is entitled to
indemnification hereunder with respect to such Third Party Claim, in such
event: (i) all Litigation Costs paid or incurred by the Indemnified Party
in connection with defending such claim shall be paid exclusively by the
Indemnifying Party directly as and when payment of such Litigation Costs
is due; and (ii) all costs and expenses of a settlement or compromise of
such Third Party Claim or upon rendition of a final judgment with respect
thereto shall be paid exclusively by the Indemnifying Party.
Notwithstanding the foregoing, if the Indemnifying Party has delivered a
notice to the Indemnified Party pursuant to Section 6.3(b)(1) to the
effect that the Indemnifying Party disputes its potential liability to
the Indemnified Party under this Article 6 and if such dispute is
resolved in favor of the Indemnifying Party, the Indemnifying Party shall
not be required to bear the costs and expenses of the Indemnified Party's
defense pursuant to this paragraph, and
25
<PAGE>
the Indemnified Party shall reimburse the Indemnifying Party in full for
all costs and expenses of such litigation. The Indemnifying Party may
participate in, but not control, any defense or settlement controlled by
the Indemnified Party pursuant to this paragraph, and the Indemnifying
Party shall bear its own costs and expenses with respect to such
participation. Notwithstanding the foregoing, in no event shall the
Indemnifying Party be obligated to pay any amount to the extent that
payment would cause the total amounts paid or to be paid by the
Indemnifying Party pursuant to its indemnity obligations set forth in
this Agreement to exceed the maximum indemnity amount specified in
Section 6.1 or 6.2, as applicable.
(7) As used herein, the term "Litigation Costs" shall mean
reasonable costs and expenses paid or incurred by the party or parties
charged with defending against a Third Party Claim in connection with so
defending or contesting a Third Party Claim including, without
limitation, all reasonable retainers required by outside counsel, all
attorneys' fees and expenses payable to such counsel, fees and expenses
of expert witnesses, bonds required to obtain injunctive relief, appeal
or supersedeas bonds, and other costs of court. The defense against, or
the contesting of, the Third Party Claim may include, without limitation,
the bringing and prosecution of (i) suit for declaratory judgment
regarding the disputed matters, (ii) suit for injunctive relief, (iii)
counterclaims or cross-claims, (iv) interpleader or impleader actions, or
(v) any other form of action or defense which is reasonably advisable and
proper to defend against or contest such Third Party Claim.
(8) Payments of all amounts owing by an Indemnifying Party pursuant
to this Article 6 relating to a Third Party Claim shall be made within
thirty (30) days after the latest of (i) the settlement of such Third
Party Claim, (ii) the expiration of the period for appeal of a final
adjudication of such Third Party Claim or (iii) the expiration of the
period for appeal of a final adjudication of the Indemnifying Party's
liability to the Indemnified Party under this Agreement. Payments of all
amounts owing by an Indemnifying Party with respect to a claim hereunder
that does not involve a Third Party Claim shall be made within thirty
(30) days after the later of (i) the expiration of the 60-day indemnity
notice period with respect to such claim or (ii) the expiration of the
period for appeal of a final adjudication of the Indemnifying Party's
liability to the Indemnified Party under this Agreement.
6.3(c) Exclusive Remedy. The indemnification rights and remedies
granted under this Agreement to the Indemnified Party shall be deemed to be
exclusive of any other remedies of the Indemnified Party and shall be in lieu of
any other rights or remedies to which the Indemnified Party would otherwise be
entitled as a result of any breach by the Indemnifying Party of this Agreement,
or any provision hereof.
26
<PAGE>
7. TERMINATION; AMENDMENT AND WAIVERS
7.1 TERMINATION
Notwithstanding anything to the contrary contained in this Agreement,
this Agreement may be terminated and the transactions contemplated hereby may be
abandoned at any time prior to the Closing:
(1) by mutual written consent of Buyer and Zapata;
(2) by Buyer or Zapata if the Closing shall not have occurred on
or before March 15, 1995;
(3) by Zapata if any of the conditions to its obligations to
consummate this Agreement set forth in Section 4.2 of this Agreement or
elsewhere herein shall not have been fulfilled on or prior to the date
specified for fulfillment thereof, or shall have become incapable of
fulfillment, and shall not have been waived as provided herein;
(4) by Buyer if any of the conditions to its obligations to
consummate this Agreement set forth in Section 4.1 of this Agreement or
elsewhere herein shall not have been fulfilled on or prior to the date
specified for fulfillment thereof, or shall have become incapable of
fulfillment, and shall not have been waived as provided herein;
(5) by Zapata if any of the representations, warranties or
statements made by Buyer in this Agreement shall be untrue or incorrect
in any respect;
(6) by Buyer if any of the representations, warranties or
statements made by Zapata in this Agreement shall be untrue and incorrect
in any respect; or
(7) by Zapata or Buyer if the consummation of such transactions
would violate any nonappealable final order, decree or judgment of any
court or governmental body having competent jurisdiction enjoining,
restraining or otherwise preventing, or awarding substantial damages in
connection with or imposing a material adverse condition upon, the
consummation of this Agreement or the transactions contemplated hereby.
27
<PAGE>
7.2 EFFECT OF TERMINATION
The following provisions shall apply in the event of a termination of
this Agreement:
(1) If this Agreement is terminated by Zapata or by Buyer as
permitted under Section 7.1 hereof and not as the result of the negligent
or willful failure of any party to perform its obligations hereunder,
such termination shall be without liability to any party to this
Agreement or any stockholder, director, officer, employee, agent or
representative of such party.
(2) If this Agreement is terminated as a result of the negligent
or willful failure of Buyer to perform its obligations hereunder, Buyer
shall be fully liable for any and all damages (other than special,
consequential or punitive damages) sustained or incurred by Zapata.
(3) If this Agreement is terminated as a result of the negligent
or willful failure of Zapata to perform its obligations hereunder, Zapata
shall be fully liable for any and all damages (other than special,
consequential or punitive damages) sustained or incurred by Buyer.
(4) Zapata and Buyer hereby agree that the provisions of Section
9.1 and this Section 7.2 shall survive any termination of this Agreement.
Any such termination shall not affect the confidentiality agreement
referred to in Section 9.3. In the event of any such termination, each
party promptly will destroy or, if requested, redeliver to the other
party all documents, work papers and other materials furnished by such
party relating to the transaction contemplated hereby (including all
copies made thereof), and all confidential information received by any
party, or any employee or agent of any party, concerning the other party
shall be treated in accordance with the confidentiality obligations.
8. TAX MATTERS
8.1 TAX SEPARATION AND INDEMNIFICATION AGREEMENT.
At the Closing, Zapata and Buyer each shall execute and deliver to the
other the Tax Separation and Indemnification Agreement in the form set forth as
Schedule 8.1 hereto.
8.2 ELIGIBILITY UNDER SECTION 338(h)(10). Zapata represents that it filed a
consolidated federal income tax return with Protein for the taxable year
immediately preceding the current taxable year and that Zapata is eligible to
make an election under Section 338(h)(10) of the Code (and any comparable
election under state, local or foreign tax law) with respect to Protein.
28
<PAGE>
8.3 TAX ELECTION. All material elections with respect to taxes affecting
Protein as of the date hereof are set forth in Schedule 8.3. After the date
hereof, no election with respect to taxes affecting Protein will be made without
the written consent of Buyer.
8.4 ELECTION UNDER SECTION 338(h)(10). Buyer shall have the option to make the
election prescribed by Section 338(g) of the Code (and any comparable election
under state, local or foreign tax law) with respect to Protein. Upon Buyer's
written request to Zapata, Buyer and Zapata shall make an election under Section
338(h)(10) of the Code (and any comparable election under state, local or
foreign tax law) with respect to the acquisition of Protein by Buyer. Buyer and
Zapata shall cooperate fully with each other in the making of such election. In
particular, and not by way of limitation, in order to effect such election, on
or prior to the Closing Date, Buyer and Zapata shall jointly execute necessary
copies of Internal Revenue Service Form 8023 and all attachments required to be
filed therewith pursuant to applicable Treasury regulations.
8.5 PURCHASE PRICE ALLOCATION. If an election is made under Section 338 of the
Code, the Purchase Price shall be allocated among the purchased assets in the
manner required by Section 338 of the Code and the Treasury Regulations
promulgated thereunder. If such an election is made, the allocation of the fair
market values of the purchased assets shall be set forth in Schedule 8.5, which
shall be attached hereto at Closing, and both Zapata and Buyer agree to file
returns in a manner consistent therewith.
9. MISCELLANEOUS
9.1 EXPENSES
Each of the parties hereto agrees to pay all of its own expenses
(including without limitation fees of attorneys and accountants) incurred in
connection with this Agreement, the transactions contemplated hereby, the
negotiations leading to the same and the preparations made for carrying the same
into effect, whether or not the transactions contemplated hereby are
consummated.
9.2 NOTICES
Any notice, request, instruction or other document deemed by either of
the parties to be necessary or desirable to be given to the other party shall be
in writing and shall be deemed to have been given at the time when mailed by
registered or certified mail, return receipt requested, or when delivered in
person or upon receipt of confirmation of receipt of a telegram or facsimile
transmission by the intended party, at the following addresses:
29
<PAGE>
If to Zapata: Zapata Corporation
One Riverway, Suite 2200
P.O. Box 4240
Houston, Texas 77210-4240
Attention: Chief Financial Officer
Fax No. (713) 940-6111
With a copy to: Zapata Corporation
One Riverway, Suite 2200
P.O. Box 4240
Houston, Texas 77210-4240
Attention: General Counsel
Fax No. (713) 940-6111
If to Buyer: ZP Acquisition Corp.
c/o William H. Murphy & Co., Inc.
2200 Post Oak Blvd., Suite 514
Houston, Texas 77056
Attention: President
Fax No. (713) 965-9497
With a copy to: Mr. James J. Spring, III
Chamberlain, Hrdlicka, White, Williams
& Martin
1200 Smith Street, Suite 1400
Houston, Texas 77002
Fax No. (713) 658-2553
The persons and addresses set forth above may be changed from time to time by a
notice sent as aforesaid.
9.3 ENTIRE AGREEMENT
This Agreement, together with the Schedules hereto and the
confidentiality agreement between the parties, contains the entire agreement
between the parties hereto and supersedes any and all prior agreements,
arrangements, or understandings between the parties relating to the subject
matter hereof. No oral misunderstandings, statements, promises or inducements
contrary to the terms of this Agreement exist. No representations, warranties,
covenants or conditions, express or implied, other than as set forth herein and
in the aforementioned confidentiality agreement, have been made by the parties
hereto.
30
<PAGE>
9.4 WAIVER AND MODIFICATION
Any of the terms and conditions of this Agreement may be waived at any
time prior to Closing by the party entitled to the benefit thereof, provided
that such waiver shall be in writing and signed on behalf of the party granting
the waiver. No waiver of any term, provision or condition of this Agreement,
whether by conduct or otherwise, in any one or more instances, shall be deemed
to be or construed as a further or continuing waiver of any such term, provision
or condition of this Agreement.
9.5 SCHEDULES AND HEADINGS
Any matter disclosed on any Schedule to this Agreement shall be deemed to
have been disclosed on all other Schedules to this Agreement to the extent that
it should have been disclosed on such other Schedule. Unless the context
otherwise requires, the inclusion of any specific item in any Schedule hereto is
not meant to imply that the item so included or any other item is or is not
material, and no party shall use the inclusion of any such item in any dispute
or controversy between the parties as to whether any obligation, item or matter
is not described herein or on a Schedule hereto is or is not material for
purposes hereof. The section headings of this Agreement and titles given to
Schedules to this Agreement are for reference purposes only and are to be given
no effect in the construction or interpretation of this Agreement.
9.6 SEVERABILITY
The unenforceability or invalidity of any provision of this Agreement
shall not affect the enforceability or validity or the balance of this
Agreement.
9.7 FINDER'S AND RELATED FEES
Each of the parties hereto is responsible for, and shall indemnify and
hold the other harmless from and against, any agreements made or acts committed
by it which would entitle any third party to a fee, commission, bonus or other
remuneration as a result of this Agreement or the transactions contemplated
hereby.
9.8 GOVERNING LAW
This Agreement has been negotiated and executed in the State of Texas and
shall be construed and enforced in accordance with the laws of such state
without giving effect to any principles of conflicts of laws.
31
<PAGE>
9.9 ARBITRATION
9.9(a) All disputes, differences or questions arising out of or relating
to this Agreement (including, without limitation, those as to the validity,
interpretation, breach, violation or termination thereof) shall, at the written
request of either party, be finally determined and settled pursuant to
arbitration in Houston, Texas, by three arbitrators, one to be appointed by
Buyer, and one by Zapata, and a neutral arbitrator to be appointed by such two-
party appointed arbitrators. The neutral arbitrator shall be an attorney and
shall act as chairman. Should (i) either party fail to appoint an arbitrator as
hereinabove contemplated within ten (10) days after the party not requesting
arbitration has received such written request, or (ii) the two arbitrators
appointed by or on behalf of the parties as contemplated in this Section 9.9
fail to appoint a neutral arbitrator as hereinabove contemplated within ten (10)
days after the date of the appointment of the last arbitrator appointed by or on
behalf of the parties, then any person sitting as Judge of the United States
District Court for the Southern District of Texas, Houston Division, upon
application of Zapata or of Buyer, shall appoint an arbitrator to fill such
position with the same force and effect as though such arbitrator had been
appointed as hereinabove contemplated.
9.9(b) The arbitration proceeding shall be conducted in Houston, Texas,
in accordance with the Commercial Arbitration Rules of the American Arbitration
Association. A determination, award or other section shall be considered the
valid action of the arbitrators if supported by the affirmative vote of two or
three of the three arbitrators. The costs of arbitration (exclusive of
attending the arbitration, and of the fees and expenses of legal counsel to such
party, all of which shall be borne by such party) shall be shared equally by
Zapata and Buyer. The arbitration award shall be final and conclusive and shall
receive recognition, and judgment upon such award may be entered and enforced in
any court of competent jurisdiction.
9.10 BINDING EFFECT; ASSIGNMENT
This Agreement shall inure to the benefit of and be binding upon the
parties hereto. Except as otherwise expressly provided for herein, this
Agreement shall not inure to the benefit of, be enforceable by or create any
right or cause of action in any person other than the parties hereto, including
without limitation any shareholder of either Buyer or Zapata. No party hereto
shall assign this Agreement or any part hereof without the prior written consent
of the other party. No such assignment shall release a party of any of its
obligations under this Agreement unless the other party hereto shall have
consented to such assignment in writing.
32
<PAGE>
9.11 EXECUTION OF ADDITIONAL DOCUMENTS
Each party hereto shall make, execute, acknowledge and deliver such other
instruments and documents and take all such other actions as may be reasonably
required to effectuate the purposes of this Agreement and to consummate the
transactions contemplated hereby.
9.12 INTERPRETATION. When a reference is made in this Agreement to Sections,
such reference shall be to a Section of this Agreement unless otherwise
indicated. The phrase "made available" in this Agreement shall mean that the
information referred to have been made available if requested by the party to
whom such information is to be made available. Unless the context otherwise
requires, "or" is disjunctive but not necessarily exclusive, and words in the
singular include the plural and in the plural include the singular. When the
context so requires in this Agreement, the masculine gender includes the
feminine and/or neuter. Any representations and warranties of Zapata that are
qualified by the phrase "to the best knowledge of Zapata" or phrases with
similar wording shall be interpreted to refer to the knowledge, after reasonable
investigation, of Messrs. Malcolm I. Glazer, Lamar C. McIntyre, Joseph L. von
Rosenberg, Kenneth W. Robichau, Mark H. Frank, Sharon M. Brunner and Robert A.
Gardiner.
9.13 COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which
shall be deemed to be an original, but all of which together shall constitute
one and the same instrument.
33
<PAGE>
WHEREFORE, the parties have caused this Agreement to be executed by their
duly authorized officers as of the date first above written.
ZAPATA CORPORATION
By: /s/ Lamar C. McIntyre
-----------------------------
Name: Lamar C. McIntyre
---------------------------
Title: V.P. Treas. & CFO
--------------------------
ZP ACQUISITION CORP.
By: /s/ Joseph D. Oliver
-----------------------------
Name: Joseph D. Oliver
------------------------
Title: Vice President
-----------------------
Codepa, Ltd. Financing Facility, a Massachusetts Business Trust, hereby
fully and unconditionally guarantees the performance by the Buyer of all
obligations, covenants and agreements of Buyer to be performed before or at the
Closing, pursuant to the terms of the Agreement set forth above.
CODEPA, LTD. FINANCING FACILITY,
a Massachusetts Business Trust
By:
------------------------------
Name:
-------------------------
Title: Trustee
34
<PAGE>
JOSEPH L. VON ROSENBERG III
VICE PRESIDENT, GENERAL COUNSEL
AND CORPORATE SECRETARY
[LOGO OF ZAPATA CORPORATION APPEARS HERE]
EXHIBIT 10(b)
April 20, 1995
VIA FACSIMILE (965-9497)
ZP Acquisition Corp.
c/o William H. Murphy & Co., Inc.
2200 Post Oak Boulevard
Suite 514
Houston, Texas 77056
Attention: President
Gentlemen:
Pursuant to Section 7.1(2) of the Stock Purchase Agreement dated as of February
14, 1995 between Zapata Corporation, a Delaware corporation ("Zapata"), and ZP
Acquisition Corp., a Texas corporation ("Buyer"), as amended by amendments
thereto dated as of March 14, 1995 and March 31, 1995 (as so amended, the "Stock
Purchase Agreement"), Zapata hereby terminates the Stock Purchase Agreement. In
connection with such termination, Zapata expressly reserves any and all rights
and claims Zapata may have against Buyer (whether pursuant to the Stock Purchase
Agreement [including, but not limited to, Zapata's rights pursuant to Section
7.2 thereof] or otherwise) and against Codepa, Ltd. Financing Facility, a
Massachusetts business trust, as guarantor of the performance of Buyer's
obligations, covenants and agreements before or at the closing contemplated by
the Stock Purchase Agreement.
Sincerely,
[Signature of Joseph
L. von Rosenberg III Appears Here]
Joseph L. von Rosenberg III
Vice President, General Counsel
and Corporation Secretary
JLvR/jb
<PAGE>
ZP Acquisition Corp.
April 20, 1995
Page 2
cc: VIA FACSIMILE (617-367-0002)
Mr. James S. Pomeroy II
President
Societe Bank House
VIA FACSIMILE (617-720-1020)
Mr. Robert Masud
Masud & Associates
VIA FACSIMILE (658-2553)
Mr. James J. Spring III
Chamberlain, Hrdlicka, White,
Williams & White
VIA HAND DELIVERY
Mr. R. C. Lassiter
<PAGE>
JOSEPH L. VON ROSENBERG III
VICE PRESIDENT, GENERAL COUNSEL
AND CORPORATE SECRETARY
[LOGO OF ZAPATA CORPORATION APPEARS HERE]
EXHIBIT 10(c)
April 7, 1995
VIA FACSIMILE (011-44-71-304-4885)
Mr. Kristian Siem
Norex Plc
4th Floor
Stratton House, Stratton Street
London England W1X 6BN
Dear Mr. Siem:
Pursuant to the conditional letter dated March 7, 1995 between Zapata
Corporation and yourself, and in consideration thereof, you are advised that
Zapata and/or Malcolm Glazer or his designees are ready, willing and able to
effectuate the purchase of 2,250,000 shares of Common Stock of Zapata at a
price of $4 per share.
This offer must be accepted by you by notice in writing to me no later that 5:00
p.m., C.S.T., Monday, April 10, 1995. Closing shall occur three (3) business
days after the date on which you give such notice. Payment of the proceeds will
be made to Norex America, Inc. by wire transfer to such account as you designate
in your notice upon surrender and delivery by Norex of the certificates
representing the shares, accompanied by duly-completed stock powers at Zapata's
One Riverway offices in Houston.
Sincerely,
[Signature of Joseph L. von Rosenberg III Appears Here]
Joseph L. von Rosenberg III
JLvR/jb
cc: VIA HAND DELIVERY
Mickey
Finch
VIA FACSIMILE (809-293-3231)
Frank Capstick
VIA FACSIMILE (840-8701)
Mike DeLouche
<PAGE>
[LOGO OF
NOREX AMERICA, INC. NOREX AMERICA, INC.
APPEARS HERE] P.O. Box HM 429, Hamilton, HM BX, Bermuda
Telephone: (809) 293-2058 Telefax: (809) 293-3231
April 10, 1995
Mr. Avram A. Glazer, President and CEO
Zapata Corporation
777 South Post Oak Lane
One Riverway, Suite 2200
Houston, Texas 77056
Dear Avram:
We accept you offer to purchase 2,250,000 shares of Zapata stock at $4.00 per
share from Norex America, Inc. with the $9,000,000 to be wire transferred upon
surrender and delivery of the certificates representing such shares. Our share
certificates are in the process of being couriered to the United States from
Norway and such certificates are expected to arrive by Wednesday. Our wire
transfer instructions are as follows:
Correspondent Bank: The Bank of New York, 51 West 51st Street, New York,
ABA No. 50000047
Credit to: NordlandsBanken AS, Oslo, Norway,
SWIFT Code: NOBANO 22 OSL
Further Credit to: Norex America, Inc.
Account No.: 34766DB0100
Regards,
/s/ SIGNATURE APPEARS HERE
for Kristian Siem
cc: Joe von Rosenberg, III
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1994
<PERIOD-END> MAR-31-1995
<CASH> 19,302
<SECURITIES> 0
<RECEIVABLES> 20,650
<ALLOWANCES> 0
<INVENTORY> 26,314
<CURRENT-ASSETS> 123,657
<PP&E> 163,965
<DEPRECIATION> 74,841
<TOTAL-ASSETS> 253,870
<CURRENT-LIABILITIES> 37,804
<BONDS> 51,346
<COMMON> 7,939
<PREFERRED-MANDATORY> 0
<PREFERRED> 3
<OTHER-SE> 142,357
<TOTAL-LIABILITY-AND-EQUITY> 253,870
<SALES> 84,097
<TOTAL-REVENUES> 84,097
<CGS> 72,359
<TOTAL-COSTS> 83,163
<OTHER-EXPENSES> (5,896)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,220
<INCOME-PRETAX> 4,610
<INCOME-TAX> 1,769
<INCOME-CONTINUING> 2,841
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,841
<EPS-PRIMARY> .09
<EPS-DILUTED> .09
</TABLE>
