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                                     PART I
 

ITEM 1 AND 2. BUSINESS AND PROPERTIES
 
GENERAL
 
  Zapata Corporation is a Delaware corporation organized in 1954. As used
herein, the term "Zapata" or the "Company" refers to Zapata Corporation or to
Zapata Corporation and its consolidated subsidiaries, as applicable.
 
  In fiscal 1993, Zapata began to redirect its operations into the natural gas
services market. The Company acquired the common stock of Cimarron Gas Holding
Company ("Cimarron") in fiscal 1993. Cimarron was engaged in the business of
marketing and trading natural gas liquids, as well as gathering and processing
natural gas and its constituent products. Cimarron was purchased to serve as
the vehicle for Zapata's expansion into the gathering and processing segments
of the natural gas services markets. Since being acquired, Cimarron has
purchased additional gathering and processing assets through the acquisition of
Stellar Energy Corporation and three affiliated companies (collectively,
"Stellar") in September 1993. Zapata acquired the natural gas compression
businesses of Energy Industries, Inc. and certain other affiliated companies
(collectively, "Energy Industries") in November 1993. Energy Industries was
engaged in the business of renting, fabricating, selling, installing and
servicing natural gas compressor packages.
 
  In late 1994 and early 1995, the Company began to develop a strategic plan
involving the repositioning of the Company into the food packaging, food and
food service equipment and supply (collectively, "food services") businesses
and exiting the energy business. The strategic plan that was developed called
for the divestiture of most of the Company's remaining energy operations,
including Energy Industries, Cimarron and the Company's remaining domestic oil
and gas assets, and the acquisition of, or joint ventures with, selected
companies in the food services industry.
 
  In September 1994, Zapata's Board of Directors announced that the Company
would immediately undertake efforts to sell its U.S. natural gas producing
properties. The six properties in the Gulf of Mexico, representing Zapata's
domestic oil and gas producing operations, were sold in fiscal 1995. Zapata
received cash of $4.0 million and recorded an $8.9 million receivable
representing (i) a production payment entitling Zapata to a share of revenues
from certain properties and (ii) a share of future proceeds from a revenue
sharing agreement. No gain or loss resulted from the sales. The decision to
sell its U.S. natural gas producing properties did not impact Zapata's Bolivian
oil and gas operations.
 
  In September 1995, Zapata entered into an agreement (the "Purchase
Agreement") to sell the assets of Energy Industries (the "Energy Industries
Sale") to Weatherford Enterra, Inc. and its wholly owned subsidiary, Enterra
Compression Company (collectively, "Weatherford Enterra"). Pursuant to the
Purchase Agreement, Weatherford Enterra purchased from the Company all of the
assets of Energy Industries for approximately $131 million in cash and assumed
certain liabilities of Energy Industries, subject to final post closing
adjustments. The Energy Industries Sale closed on December 15, 1995 after
receiving stockholder approval. The Energy Industries Sale resulted in an
after-tax gain of approximately $14.0 million, which will be reflected in the
Company's fiscal 1996 financial results. Although a sale price for Cimarron has
not been determined, the Company estimates that, based on preliminary
indications of interest from potential purchasers, the minimum sale price for
Cimarron should be at least equal to book value. The Company expects to
complete the sale of Cimarron in fiscal 1996.
 
  In 1994, the Board of Directors determined that the interests of Zapata's
stockholders would best be served by a sale of the marine protein operations.
In March 1995, the Company executed an agreement to sell its marine protein
operations to an investor group. However, that agreement was terminated in
April 1995 due to the investor group's failure to obtain sufficient financing.
The Company has since decided to retain the marine protein operations.
 
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