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                               ZAPATA CORPORATION
 
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
 
NOTE 9. PREFERRED, PREFERENCE AND COMMON STOCK--(CONTINUED)
 
  In April 1995, Zapata repurchased 2.25 million shares of Common Stock from
Norex 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.
 
  On April 27, 1994, Zapata's stockholders approved a one-for-five reverse
stock split of the Company's outstanding Common Stock effective May 3, 1994
that reduced the number of shares of Common Stock outstanding from
approximately 158.3 million to approximately 31.7 million. The number of
authorized shares remained at 165.0 million and par value of the Common Stock
was unchanged.
 
  Under the Company's 1981 Stock Incentive Plan (the "1981 Plan"), options may
be granted at prices equivalent to the market value of the Company's Common
Stock at the date of the grant. Options become exercisable in annual
installments equal to one-third of the shares covered by the grant beginning
one year from the grant date. Options not exercised in the period they become
exercisable may be carried forward and exercised in subsequent periods.
 
  During 1986, the Company amended and restated the 1981 Plan to provide for
the award of restricted shares of Common Stock. All shares of Common Stock
awarded to participants as restricted stock are subject to certain conditions.
At the time of each award, the Compensation Committee of the Board of Directors
(the "Committee") establishes a restricted period of not less than one and not
more than five years within which the shares covered by the award cannot be
sold, assigned, transferred, pledged or otherwise encumbered. Except for such
transfer restrictions, the participant as the owner of such shares has all the
rights of a holder of Common Stock, including the right to receive dividends
paid on such shares and the right to vote the shares. The total of restricted
shares issued and shares issued upon the exercise of options granted under the
1981 Plan cannot exceed 140,000, which was the number of shares authorized for
issuance prior to the amendment and restatement. No shares of Common Stock are
available for further grants of stock options or awards of restricted stock
under the 1981 Plan. During 1995, options to purchase 18,000 shares under the
1981 Plan were exercised at $3.13. At September 30, 1995, options to purchase
12,000 shares under the 1981 Plan at $3.13 were outstanding and exercisable.
 
  Zapata's Special Incentive Plan (the "1987 Plan") provides for the granting
of stock options and the awarding of restricted stock. Under the 1987 Plan,
options may be granted at prices equivalent to the market value of the Common
Stock at the date of grant. Options become exercisable on dates as determined
by the Committee, provided that the earliest such date cannot occur before six
months after the date of grant. Unexercised options will expire on varying
dates, up to a maximum of ten years from the date of grant. The awards of
restricted stock have a restriction period of not less than six months and not
more than five years. The 1987 Plan provided for the issuance of up to 600,000
shares of the Common Stock. During 1992, the stockholders approved an amendment
to the 1987 Plan that provides for the automatic grant of a nonqualified stock
option to directors of Zapata who are not employees of Zapata or any subsidiary
of Zapata. At September 30, 1995, a total of 203,666 shares of Common Stock
were reserved for the future granting of stock options or the awarding of
restricted stock under the 1987 Plan. During 1995, options to purchase 80,000
shares under the 1987 Plan at prices ranging from $3.38 to $3.94 were granted
and options to purchase 120,000 shares at prices ranging from $3.94 to $4.22
were cancelled. At September 30, 1995, 132,000 options were outstanding under
the 1987 Plan at prices ranging from $3.13 to $7.19 and 58,667 options were
exercisable.
 
  On December 6, 1990, the Company's stockholders approved a new stock option
plan (the "1990 Plan"). The 1990 Plan provides for the granting of nonqualified
stock options to key employees of the Company. Under the 1990 Plan, options may
be granted by the Committee at prices equivalent to the market value of
 
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