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EXHIBIT 17
[LOGO OF HOLT COMPANIES APPEARS HERE]
November 16, 1995
Board of Directors
Zapata Corporation
1717 St. James Place, Suite 550
Houston, Texas 77056
Attention: Mr. Malcolm I. Glazer, Chairman of the Board
Gentlemen:
As a shareholder and director of Zapata Corporation ("Zapata"), I am becoming
increasingly alarmed as I more fully understand the new objectives which have
been set for Zapata and various actions which have been or will soon be taken in
furtherance of these objectives.
For those who have become members of the Board of Directors since the
acquisition of my family's gas compression business ("Energy Industries") I
point out that when my family sold Energy Industries to Zapata in 1993, the sale
was not merely an act on our part to cash in on our work and investment. Rather,
we viewed the sale as an opportunity to insure the continued growth and success
of Energy Industries and looked forward to contributing to, and by taking a
substantial equity position, enjoying the benefit of, such success. At the time,
we believed that Zapata was committed to the common objective, recited in our
agreement, of "combining resources to allow for an enhanced natural gas
compression business and to lay the foundation
for the structuring of an
integrated gas services company." I have, since my involvement with Zapata,
considered Energy Industries to be Zapata's "flagship operation," thought its
markets continued to "appear attractive," have expected its profitability to
"improve" and believed that "the prospects for continued growth remain
favorable." The words quoted are those used by Malcolm Glazer in his letter to
Zapata's shareholders of December 28, 1994 and I quote them because I cannot
convey my sentiments of that date or today regarding Energy Industries any
better than did Malcolm.
Notwithstanding Malcolm's assurances that the prospects for Energy Industries
remained bright as of the end of 1994, Zapata has recently disclosed a new
strategic plan which is premised upon Zapata's departure from the energy
services industry and its entry into the food service industry. Our duty, as a
Board of Directors, requires that the Zapata's shareholders be told exactly why,
when and by whom this new strategy was adopted. The decision was not made by the
Board of Directors. To my knowledge, the September 20, 1995 special meeting of
the Board was the first occasion on which the new strategy was presented to the
Board for a vote, and the
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Board of Directors
Zapata Corporation
November 16, 1995
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conclusion, viewed in the most favorable light, to be drawn from the Board's
affirmative vote during this meeting is that, by implication, the new strategy
was ratified well after the fact of its implementation. And yet the shareholders
are told that this strategy has been in development since late 1994 and early
1995.
I have reviewed the Preliminary Proxy Statement filed by Zapata with the
Securities and Exchange Commission (the "SEC") on September 29, 1995 (the
"Initial Proxy Statement") and the latest version of the Preliminary Proxy
Statement filed November 14, 1995 (the "Proxy Statement"). Despite efforts in
the Proxy Statement to correct inaccurate or misleading statements in the
Initial Proxy Statement, there remain statements in the Proxy Statement which
must be corrected in order for Zapata's disclosures to be not misleading and as
Directors we cannot permit final proxy materials to be disseminated unless they
are accurate in all material respects. The following represent areas of
particular concern.
1. The Proxy Statement discloses that the proceeds of the Energy Industries
sale are intended to be used for general corporate purposes which may include
acquisitions in the food service industry, but states that the Company does not
have any current plans for specific acquisitions and has no plans to advance its
expansion into the food services industry. If it is appropriate or necessary to
disclose in the Proxy Statement the use of proceeds from the Energy Industries
sale, as I believe is the case, then it follows that Zapata's disclosure, in
this regard, must accurately state the relevant and material facts. In its
present form, this portion of the Proxy Statement conveys to the uninformed
reader, at best, only a half truth. The Agenda published for the September 20th
special meeting of the Board of Directors included a proposed resolution
creating a special committee to be vested with sole discretion to consider and
close the acquisition by Zapata of Houlihan's Restaurant Group, Inc. and
Specialty Equipment Companies, Inc., both of which are owned or controlled by
Malcolm Glazer and affiliates. I presume these resolutions were adopted and, as
was the case with Envirodyne acquisition, the acquisition of these two
additional investments will be committed to the discretion of a special
committee without further review by the Board, but in any event, it is apparent
to me that Zapata has already identified its acquisition candidates and its
failure to so state in the proxy materials is misleading.
The larger problem suggested by the foregoing is Zapata's failure to advise
its shareholders of what actually is meant by the words "new strategy" and
"acquisitions in the food service industry." To my knowledge, the only
acquisitions which have been seriously considered by Zapata in furtherance of
the "new strategy", utlizing the proceeds from the Energy Industries
transaction, are from Malcolm Glazer and his affiliates. It thus seems apparent
that it is Mr. Glazer's ownership of the target and consequent enrichment from
its acquisition that distinguish a particular acquisition candidate, not
industry segment.
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Board of Directors
Zapata Corporation
November 16, 1995
Page 3
2. In light of the foregoing discussion, I believe the portions of the Proxy
Statement which describe the factors that were considered by the Board in
reaching their decision to "begin the exit of the energy business" and to enter
the food service business are misleading. "In late 1994," there was no Board
action taken to develop a plan to exit the energy services business and enter
the food service business and, to my knowledge, the only Board action taken in
this regard was during the aforementioned meeting on September 20, 1995, well
after the exit had begun. The entry into food services, based upon the
information that has been made available to me, was predicated not upon the
identification of a more attractive industry segment than energy services, but
upon the make-up of Mr. Glazer's investment portfolio, apparently the only
source of candidates which are regarded, by those responsible for the new
strategy, as suitable for acquisition by Zapata.
For the foregoing reasons, I ask the Board to:
1. Resolve to conduct no further negotiations for the acquisition of
investments from Malcolm I. Glazer and his affiliates except upon the
condition that any such acquisition will be subjected to independent
scrutiny and the closing of the acquisition will be conditioned upon
shareholder approval;
2. Obtain the advice of independent counsel regarding the enforceability of
Zapata's obligation regarding the acquisition of the Envirodyne
investment, with a view towards rescission; and
3. Cause to be filed with the SEC proxy materials accurately reflecting the
matters discussed in this letter as well as the actions indicated in 1
and 2, above, and schedule and provide notice of a shareholder meeting to
approve the sale of Energy Industries to Enterra.
Nothing can be gained by delay. I see no reason why the foregoing described
acts cannot be accomplished promptly, so as not to unduly delay the
aforementioned shareholder meeting and vote upon the sale of Energy Industries
to Enterra.
Finally, I have become concerned with the practice of calling special meetings
of the Board on short notice to address matters of great importance to Zapata's
shareholders and without providing the directors sufficient information in
advance of the meeting to permit an informed vote. There are of course matters
which arise and which require a rapid response by the Board, but I have not been
able to discern any circumstances so compelling that the Board meetings which
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Board of Directors
Zapata Corporation
November 16, 1995
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advance of the meetings, of adequate information in support of the actions which
have been recommended for the Board. Moreover, when my attorneys or I have
requested materials relevant to Board actions and meetings, such requests have
been frequently ignored. For me this is intolerable.
For that reason, for the reason that I do not agree with and cannot support
the "new strategy" and in light of my serious reservations regarding the
intentions of those responsible for the misleading disclosures in the Proxy
Statement, not to mention the disclosures themselves, I am left no option except
to resign.
Accordingly, in addition to the foregoing, accept this as my resignation from
the Board of Directors of Zapata and of all management and Board positions I
hold with Energy Industries as well as any other affiliate of Zapata.
In this regard, I am sure that you are aware of Zapata's obligation under the
Securities Exchange Act of 1934 to file a Form 8-K due to my resignation because
of a disagreement with Zapata on matters relating to Zapata's operations,
policies and practices. This letter describes the nature of this disagreement
and I must insist that my resignation and this disagreement be disclosed. The
Form 8-K must state the date of my resignation (today), summarize my description
of this disagreement, and include a copy of this letter as an exhibit. The Form
8-K is due at the SEC and at the New York Stock Exchange within five business
days after today.
Sincerely,
/s/ Peter M. Holt
Peter M. Holt
cc: Mr. Joseph L. von Rosenberg, III
