<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6. DEBT--(CONTINUED)
Under the terms of the Norex Agreement, Zapata issued $50.0 million of senior
secured notes and $32.6 million of senior convertible notes to Norex. In
addition, Norex purchased 3 million shares of Common Stock for $11.25 million
and 17.5 million shares of $1 Preference Stock for $17.5 million. The $1
Preference Stock was to pay dividends at an annual rate of 8.5% and was
exchangeable into 673,077 shares of Zapata's Tidewater common stock at the
option of Norex. In August 1993, Norex exchanged all of its $1 Preference Stock
for $17.5 million aggregate principal amount of 8.5% unsecured exchangeable
note, maturing May 16, 1996. Such notes are also exchangeable into 673,077
shares of Tidewater common stock. An officer of Norex was elected to the Zapata
Board of Directors in July 1993 and was an executive officer of Zapata from
July 1994 to December 1994.
In December 1993, $73.7 million of the proceeds from the sale of 3.75 million
shares of Zapata's Tidewater common stock were used to prepay $68.5 million of
the Company's 13% senior indebtedness to Norex, along with accrued interest,
and to pay a $3.5 million prepayment premium. Also, Zapata wrote-off $3.3
million of previously deferred expenses related to the origination of such
indebtedness. In September 1994, Zapata repaid the remaining balance of its 13%
senior convertible indebtedness to Norex and a required prepayment premium of
$655,000 with proceeds from the initial drawdown of $15 million from a $30
million bank credit facility that Zapata arranged with Texas Commerce Bank
National Association (the "TCB Loan Agreement") for its natural gas compression
operations, Energy Industries.
The TCB Loan Agreement provides Energy Industries with a $30 million
revolving credit facility that converts after two years to a three year
amortizing term loan. The TCB Loan Agreement bears interest at a variable
interest rate that may be adjusted periodically based upon prime or Eurodollar
interest rates. Pursuant to the TCB Loan Agreement, Energy Industries agreed to
maintain certain financial covenants and to limit additional indebtedness,
dividends, dispositions and acquisitions. The amount of restricted net assets
for Energy Industries at September 30, 1994 was approximately $65.0 million.
Additionally, Energy Industries' ability to transfer funds to Zapata
Corporation was limited to $5.0 million at September 30, 1994. The Company
remains subject to a covenant in the Norex debt agreement that requires Zapata
to maintain a consolidated tangible net worth as defined in such agreement of
at least $100 million. As of September 30, 1994, the Company was in compliance
with all provisions governing its outstanding indebtedness.
During 1993, marine protein refinanced its U.S. government guaranteed debt in
order to achieve lower interest rates; other significant terms were unchanged.
Interest rates ranged from 10.0% to 10.2% prior to the refinancing and ranged
from 6.6% to 6.8% afterwards. The U.S. government guaranteed debt is
collateralized by a first lien on all of the vessels refurbished by the
financing proceeds and certain plant assets.
Annual maturities
The annual maturities of long-term debt for the five years ending September
30, 1999 are as follows (in thousands):
<TABLE>
<S> <C> <C> <C> <C>
1995 1996 1997 1998 1999
------ ------- ------- ------ ------
$3,009 $19,451 $21,104 $5,509 $5,538
</TABLE>
NOTE 7. CASH FLOW INFORMATION
For purposes of the statement of cash flows, all highly liquid investments
with an original maturity of three months or less are considered to be cash
equivalents.
Net cash provided (used) by operating activities reflects cash payments of
interest and income taxes.
<TABLE>
<CAPTION>
1994 1993 1992
------ ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash paid during the fiscal year for:
Interest....................................... $7,719 $13,680 $16,190
Income tax payments (refund)................... 5,960 37 204
</TABLE>
In fiscal 1994 and 1993, interest expense of $1.3 million and $1.7 million,
respectively, associated with the Norex senior secured and convertible notes
was deferred to the maturity date of such notes. As discussed in Note 6, these
notes were prepaid in full in fiscal 1994.
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