ZAPATA CORP - 10-K Annual Report

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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004

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)

NEVADA 74-1339132
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

100 MERIDIAN CENTRE, SUITE 350 14618
ROCHESTER, NY (Zip Code)
(Address of principal executive offices)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE
(585) 242-2000

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
NONE.

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 for 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 [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes [X] No [ ]

The aggregate market value of the voting stock held by non-affiliates of
the registrant as of June 30, 2004 (the last business day of the registrant's
most recently completed second fiscal quarter) was approximately $78.1 million.
For the sole purpose of making this calculation, the term "non-affiliate" has
been interpreted to exclude directors, corporate officers and holders of 10% or
more of the Company's common stock.

As of February 25, 2005, the Registrant had outstanding 2,391,565 shares of
common stock, $0.01 par value.

Documents Incorporated By Reference: Portions of the Registrant's
definitive Proxy Statement for its 2005 Annual Meeting of Stockholders, which
the Company plans to file with the Securities and Exchange Commission pursuant
to Regulation 14A, on or prior to May 2, 2005, are incorporated by reference in
Part III (Items 10, 11, 12, 13 and 14) of this Form 10-K.
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TABLE OF CONTENTS

1

FORWARD-LOOKING STATEMENTS

CAUTIONARY STATEMENT FOR PURPOSES OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. This document contains certain
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act"), and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). The Company
intends such forward-looking statements to be covered by the safe harbor
provisions for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995, and includes this statement for purposes of such
safe harbor provisions. Forward-looking statements, which are based upon certain
assumptions and describe future plans, strategies and expectations of the
Company, are generally identifiable by use of the words "believes," "expects,"
"intends," "anticipates," "plans," "seeks," "estimates," "projects" or similar
expressions. The ability of the Company to predict results or the actual effect
of future plans, strategies or expectations is inherently uncertain. Important
factors which may cause actual results to differ materially from the
forward-looking statements contained herein or in other public statements by the
Company are described under the caption "Part II -- Item 7 -- Management's
Discussion and Analysis of Financial Condition and Results of Operation-
Significant Factors That Could Affect Future Performance and Forward-Looking
Statements" appearing in this Report and other risks identified from time to
time in the Company's filings with the Securities and Exchange Commission
("SEC"), press releases and other communications by the Company, Safety
Components International, Inc., Omega Protein Corporation or Zap.Com
Corporation. The Company assumes no obligation to update forward-looking
statements or to update the reasons actual results could differ from those
projected in the forward-looking statements.

ITEM 1. BUSINESS

GENERAL

Zapata Corporation ("Zapata" or "the Company") was incorporated in Delaware
in 1954 and was reincorporated in Nevada in April 1999. The Company's principal
executive offices are at 100 Meridian Centre, Suite 350, Rochester, New York
14618. Zapata's common stock is listed on the New York Stock Exchange ("NYSE")
and trades under the symbol "ZAP."

Zapata is a holding company which currently has two operating companies,
Safety Components International, Inc. ("Safety Components" or "Safety") and
Omega Protein Corporation ("Omega Protein" or "Omega"). As of December 31, 2004,
the Company had a 79% ownership interest in Safety Components and a 58%
ownership interest in Omega Protein. Safety Components trades on the over-the
counter electronic bulletin board ("OTCBB") under the symbol "SAFY" and Omega
Protein trades on the NYSE under the symbol "OME." In addition, Zapata owns 98%
of Zap.Com Corporation ("Zap.Com"), which is a public shell company and trades
on the OTCBB under the symbol "ZPCM." This report should be read in conjunction
with the registration statements, reports and other items that these
subsidiaries file with the United States Securities and Exchange Commission
("SEC").

The Company files annual reports on Form 10-K, quarterly reports on Form
10-Q, current reports on Form 8-K, amendments to these reports, and Section 16
filings by officers and directors with the SEC. The Company makes these reports
and filings available free of charge on its website at www.zapatacorp.com as
soon as reasonably practicable after they are is electronically filed with, or
furnished to, the SEC. Information contained on the Company's website is not
incorporated by reference to this annual report on Form 10-K.

In addition, the public may read and copy any materials filed by the
Company with the SEC at the SEC's Public Reference Room at 450 Fifth Street, NW.
Washington, DC 20549. The public may obtain information on the operation of the
Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains an
Internet site that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the SEC at
www.sec.gov.

As used throughout this report, "Zapata Corporate" is defined as Zapata
Corporation exclusive of its majority owned subsidiaries Safety Components,
Omega Protein and Zap.Com.

2

ZAPATA CORPORATE

On September 23, 2003, Zapata purchased 2,663,905 shares of Safety
Components International, Inc. common stock for $30.9 million. On October 7,
2003, Zapata purchased an additional 1,498,489 shares of Safety common stock for
$16.9 million. These additional shares increased the Company's ownership
percentage of Safety's outstanding common stock to approximately 84% at that
time. The Company funded its purchases with cash, cash equivalents and
short-term investments. The Company accounted for these transactions under the
purchase method and began consolidating amounts related to Safety's assets and
liabilities as of September 30, 2003. Due to the timing of the acquisition, the
Company began consolidating amounts related to Safety's results of operations in
the fourth quarter of 2003.

In November 2003, Zapata informed Safety Components that it would like to
have its nominees elected to a majority of the positions on the Safety
Components Board of Directors. In considering the request, Safety Components'
Board of Directors adjourned the previously scheduled 2004 annual stockholders
meeting. Ultimately, two Zapata nominees, Avram Glazer and Len DiSalvo, were
elected to the Safety Components Board of Directors. In addition, Safety
Components' Board of Directors invited Zapata to submit a proposal to acquire
Safety's remaining public shares. Safety Components Board of Directors also
advised that it was prepared to elect additional Zapata nominees to a majority
of the Safety Components Board in connection with a transaction in which Zapata
acquired the remaining public shares.

On November 13, 2003, Zapata submitted to the Safety Components Board of
Directors a non-binding preliminary indication of interest to acquire the
outstanding shares of Safety Components common stock it did not own at a price
of $11.49 per share. On March 18, 2004, Safety Components and Zapata
concurrently announced that a special committee of Safety Components' Board of
Directors, formed to evaluate the proposal, determined that it could not approve
or recommend the proposed transaction to Safety Components' remaining
shareholders. Following Zapata's further discussions with that special
committee, the parties mutually determined not to proceed with a transaction at
that time.

After acquiring in excess of 80% of the voting interests in Safety
Components, the Company entered into a tax sharing and indemnity agreement with
Safety Components. On or about April 1, 2004, Zapata's stock ownership
percentage of Safety Components outstanding stock decreased below 80% due to
stock option exercises by Safety Components' employees. As a result of Zapata's
ownership of Safety Components outstanding stock falling below 80%, Zapata will
not consolidate Safety Components into Zapata's consolidated income tax returns
for periods subsequent to the first quarter of 2004. The Internal Revenue Code
generally prohibits the reconsolidation of companies for a period of 60 months.
Therefore, if Zapata's stock ownership percentage in Safety Components increases
to 80% or more, there can be no assurance that Safety would be reconsolidated
into Zapata's tax filing group before the 61st month after the first taxable
year in which it ceased to be a member of such group.

On September 2, 2004, the Malcolm I. Glazer Family Limited Partnership (the
"Glazer LP") filed a Schedule 13D indicating that it had acquired 114,700 shares
of common stock of Zapata Corporation. As a result of the transaction, the
Glazer LP now owns approximately 51.3% of the Company's outstanding common
stock.

In December 2002, the Board of Directors authorized the Company to purchase
up to 500,000 shares of its outstanding common stock in the open market or
privately negotiated transactions. The shares may be purchased from time to time
as determined by the Company. Any purchased shares would be placed in treasury
and may subsequently be reissued for general corporate purposes. The repurchases
will be made only at such times as are permissible under the federal securities
laws. No time limit has been placed on the duration of the program and no
minimum number or value of shares to be repurchased has been fixed. Zapata
reserves the right to discontinue the repurchase program at any time and there
can be no assurance that any repurchases will be made. As of the date of this
report, no shares have been repurchased under this program.

Zapata continues to evaluate strategic opportunities for the use of its
capital resources, including but not limited to the acquisition of other
operating businesses, the minority interest of controlled subsidiaries, funding
of start-up proposals and possible stock repurchases. The Company has not
focused and does not intend to

3

focus its acquisition efforts solely on any particular industry or geographical
market. While the Company focuses its attention in the United States, the
Company may investigate acquisition opportunities outside of the United States
when management believes that such opportunities might be attractive. Similarly,
the Company does not yet know the structure of any acquisition. The Company may
pay consideration in the form of cash, securities of the Company or a
combination of both. The Company may raise capital through the issuance of
equity or debt and may utilize non-investment grade securities as a part of an
acquisition strategy. Such investments often involve a high degree of risk and
may be considered highly speculative.

As of the date of this report, Zapata is not a party to any agreements
related to the acquisition of an operating business, business combination or for
the sale or other transaction related to any of its subsidiaries. There can be
no assurance that any of these possible transactions will occur or that they
will ultimately be advantageous to Zapata or enhance Zapata stockholder value.

Employees. As of December 31, 2004, Zapata Corporate employed 7 employees
who performed management and administrative functions, including managing the
assets of the Company, providing oversight of its subsidiary operating
companies, evaluating potential acquisition candidates, fulfilling various
reporting requirements associated with being a publicly traded company and
various other accounting, tax and administrative matters.

SAFETY COMPONENTS

Due to the timing of Zapata's acquisition of Safety Components common
stock, the Company began consolidating amounts related to Safety's results of
operations in the fourth quarter of 2003. Disclosures in the following section
regarding periods prior to Zapata's acquisition of Safety's common stock are
included to provide additional information regarding Safety Components.

General. Safety Components was incorporated in Delaware in 1994. Safety is
a leading low-cost, independent supplier of automotive airbag fabric and
cushions and technical fabrics with operations in North America and Europe.
Safety has recently entered into joint ventures to produce products in China and
South Africa, although commercial production has not yet commenced in either of
these locations. Safety sells airbag fabric domestically and cushions worldwide
to the major airbag module integrators that outsource such products. Safety
believes that it is also a leading manufacturer of value-added technical fabrics
used in a variety of niche industrial and commercial applications such as fire
service apparel, ballistics material for luggage, filtration and military tents.
The ability to interchange airbag and specialty technical fabrics using the same
equipment and similar manufacturing processes allows Safety to more effectively
utilize its manufacturing assets and lower its per unit overhead costs.

Total net sales which include automotive airbag cushions, automotive
fabrics and technical fabrics products (the "automotive airbag and fabrics
products" business) were approximately $247.9 million, $183.7 million and $244.3
million in the year ended December 31, 2004, the nine month period from March
30, 2003 to December 31, 2003, and the year ended March 29, 2003, respectively.

Fiscal Year. Until December 31, 2003, Safety's operations were based on a
fifty-two or fifty-three week fiscal year ending on the Saturday closest to
March 31. On November 12, 2003, Safety's Audit Committee and Board of Directors
determined that it was in Safety's best interest to change Safety's fiscal year
end from the last Saturday in the month of March to December 31 of each year. As
such, the period from March 30, 2003 to December 31, 2003 consists of nine
months of operations. The years ended December 31, 2004 and March 29, 2003 each
consisted of twelve months of operations.

The 2001 Restructuring. On April 10, 2000 (the "Petition Date"), Safety
and certain of its U.S. subsidiaries (collectively, the "Safety Filing Group"),
filed a voluntary petition under Chapter 11 of the United States Bankruptcy Code
("Chapter 11") with the United States Bankruptcy Court for the District of
Delaware (the "Bankruptcy Court"). On October 11, 2000 (the "Emergence Date"),
the Safety Filing Group emerged from Chapter 11 pursuant to the Plan of
Reorganization (the "Plan") confirmed by the Bankruptcy Court.

4

AUTOMOTIVE AIRBAG AND FABRICS PRODUCTS

Structure of the Automotive Airbag Industry. Airbag systems consist of
various airbag modules and an electronic control module, which are currently
integrated by automakers into their respective vehicles. Airbag modules
generally consist of inflators, cushions, housing and possibly trim covers and
are assembled by module integrators, most of whom produce a majority of the
components required for a complete module. As the industry has evolved, module
integrators have outsourced varying portions of non-proprietary components, such
as cushions, to those companies specializing in the production of individual
components. Safety believes that its module integrator customers will continue
to outsource a portion of their cushion requirements as they focus on the
development of proprietary technologies. A majority of the module integrators
purchase fabric from airbag fabric producers such as Safety.

Characteristic of the industry, Safety supplies airbag cushions to module
integrators, most of which also produce a portion of their cushion requirements
internally. As a result, Safety may compete with its customers who supply their
own internal cushion requirements. However, in most cases Safety's customers do
not produce the same cushions for the same car/truck models for which Safety
produces cushions.

Another characteristic of the airbag industry is the qualification process
for new suppliers. New suppliers that wish to produce and supply airbag cushions
or airbag fabric must undergo a rigorous qualification process, which can take
in excess of a year. Safety believes that the existence of this qualification
process can result in significant re-qualification costs for module integrators
that are required to assist the new supplier in meeting automakers'
requirements. Additionally, Safety believes module integrators are, like their
automaker customers, trying to reduce overall industry costs by limiting the
number of suppliers.

Establishment of Joint Ventures. On November 30, 2004, Safety Components
announced that it had signed an agreement to form a joint venture with KAP
Textile Holdings SA Ltd. ("Gelvenor") which, through its Gelvenor textiles
divisions produces high technology industrial, technical and specialized fabrics
in South Africa (the "South Africa Joint Venture"). Safety anticipates that the
South Africa Joint Venture, which as of December 31, 2004 had not yet commenced
commercial production, will produce automotive airbag cushions in South Africa
utilizing the fabrics produced by Gelvenor. The initial production will be
intended to satisfy the South African domestic market, with additional
production capacity available to support Safety's growing worldwide customer
base by the end of 2005. Safety owns 75% of the entity formed to conduct the
operations of the South Africa Joint Venture.

On January 4, 2005, Safety announced it had signed an agreement to form a
joint venture with Kingsway International Limited, an entity associated with
Huamao (Xiamen) Technical Textile Co., Ltd. ("Huamao") which manufactures airbag
fabrics, in China (the "China Joint Venture"). Safety anticipates that the China
Joint Venture, which has not yet commenced commercial production, will produce
automotive airbag cushions in China utilizing the fabrics produced by Huamao.
Pursuant to a technology transfer and joint venture agreement, Safety will
provide technical assistance to its partner in the development of airbag
fabrics. Production is intended to satisfy the Chinese domestic market. Safety
owns 65% of the entity formed to conduct the operations of the China Joint
Venture.

Safety has certain financial commitments to these joint ventures as
described in "Management Discussion and Analysis of Financial Condition and
Results of Operation -- Liquidity and Capital Resources -- Contractual
Obligations" below.

Products. Safety's automotive products include passenger, driver and side
(thorax) impact airbag cushions, side protection curtains, knee protection
cushions and related parts and accessory components manufactured for
installation in over 200 car and truck models sold worldwide and airbag fabric
for sale to airbag manufacturers. Sales of airbag related products (inclusive of
sales of airbag fabric) accounted for approximately 89% of Safety's consolidated
net sales in the fiscal year ended December 31, 2004, approximately 90% of
Safety's consolidated net sales in the nine month period from March 30, 2003 to
December 31, 2003 and approximately 91% of Safety's consolidated net sales in
the fiscal year ended March 29, 2003.

5

Safety also manufactures a wide array of specialty technical fabrics for
consumer and industrial uses. These fabrics include: (i) protective apparel worn
by firefighters; (ii) filtration fabrics used in the aluminum, coal, steel,
cement, clay and brewing industries; (iii) woven fabrics for use by
manufacturers of coated products; (iv) specialty fabrics used in fuel cells,
bomb and cargo chutes, oil containment booms and gas diaphragms, among other
uses; (v) release liners used in tire manufacturing; and (vi) high-end luggage
fabrics, including "ballistics" fabric used in Hartman and Tumi brands of
luggage. Sales of technical related products accounted for approximately 12% of
Safety's consolidated net sales in the fiscal year ended December 31, 2004
versus approximately 10% of Safety's consolidated net sales in the nine month
period from March 30, 2003 to December 31, 2003 and approximately 9% of Safety's
consolidated net sales in the fiscal year ended March 29, 2003. The market for
Safety's technical related products is highly segmented by product line.
Marketing and sales of Safety's technical related products is conducted by
Safety's marketing and sales staff based in Greenville, South Carolina.
Manufacturing of these products occurs at the South Carolina facility, using
much of the same equipment and manufacturing processes that Safety uses to
produce airbag fabric, enabling Safety to take advantage of demand requirements
for the various products by leveraging its expenditures on production retooling
costs. By manufacturing technical products using many of the same machines that
weave airbag fabric, Safety is able to more effectively utilize capacity at its
South Carolina plant and lower per unit overhead costs.

Safety attributes its revenues from external customers based on the
location of the sale. Summarized financial information by product type is as
follows:

SAFETY'S REVENUES FROM EXTERNAL CUSTOMERS:

Customers. Safety sells its airbag cushions to airbag module integrators
in North America and Europe for inclusion in specified model cars, generally
pursuant to contract requirements. Certain of these customers also manufacture
airbag cushions to be used in their production of airbag modules. Safety markets
and sells airbag cushions through its direct marketing and sales forces based in
South Carolina, California, Mexico, the United Kingdom and Germany.

Safety sells its fabric in North America either directly to a module
integrator or, in some cases, to a fabricator (such as Safety's own operations),
which sells a sewn airbag to the module integrator. In some cases, particularly
when the cushion requires lower air permeability to facilitate more rapid or
prolonged inflation, and to eliminate particulate burn-through caused by hot
inflators, the fabric must be coated before fabrication into airbags. Safety
also sells fabric to coating companies, which then resell the coated fabric to
either an airbag cushion fabricator (including Safety) or module integrator.
Sales are either made against purchase orders, pursuant to releases on open
purchase orders, or pursuant to short-term supply contracts generally having
durations of up to twelve months.

Safety has contractual relationships with several large module integrators,
the most significant being Autoliv, Takata and TRW, listed in alphabetical
order. Safety supplies airbag cushions and/or airbag fabric to

6

each of these customers based upon releases from formal purchase orders, which
typically cover periods of up to twelve months and are subject to periodic
negotiation with respect to price and quantity. The loss of any of its largest
customers could have a material adverse effect on Safety. See Note 2 to the
Company's Consolidated Financial Statements included in Item 8 of this Report.

Suppliers. Safety's principal customers generally require that they
approve all suppliers of major airbag components or airbag fabric raw materials,
as the case may be. These suppliers are approved after undergoing a rigorous
qualification process on their products and manufacturing capabilities. In many
cases, only one approved source of supply exists for certain airbag components.
In the event that a sole source supplier experiences prolonged delays in product
shipments or no longer qualifies as a supplier, Safety would work together with
its customers to identify another qualified source of supply. Although
alternative sources of supply generally exist, a prolonged delay in securing an
alternative supply or in obtaining the approval by Safety's customers of any
such alternative sources of supply could adversely affect Safety's operating
results.

The raw materials for Safety's fabric operations largely consist of
synthetic yarns provided by Invista, Pharr Yarns, DuPont, Polymide High
Performance ("PHP"), and Unifi, among others. The primary yarns include nylon,
polyester and Nomex. Invista and PHP are the leading suppliers of airbag fabric
yarn to both the market and Safety. Invista supplies a majority of the nylon
yarn used in Safety's airbag fabric operations pursuant to purchase orders or
releases on open purchase orders. The loss of Invista as a supplier could have a
material adverse effect on Safety.

In addition, in connection with its European operations, Safety has entered
into an agreement with a German industrial sewing company and its Romanian
subsidiary under which the Romanian subsidiary serves as a manufacturing
subcontractor for airbag cushions. Under the terms of this agreement, Safety
provides and retains control of the manufacturing equipment, processes and
production materials and the subcontractor provides sewing services for a price
per standard minute of acceptable units basis.

Significant problems with, or the loss of, any key supplier or
subcontractor (see also "Significant Factors That Could Affect Future
Performance and Forward-Looking Statements" below for further information) may
adversely affect Safety's operating results and ability to meet customer
contracts.

Capacity. Safety manufactured and shipped over 28.8 million airbag
cushions and related components to Safety's North American and European
customers during the fiscal year ended December 31, 2004. Safety believes it has
adequate capacity to manufacture for the anticipated customer requirements of
its 2005 fiscal year.

Safety's South Carolina facility produced approximately 18.5 million yards
of fabric in the fiscal year ended December 31, 2004. Safety believes it has
adequate capacity to manufacture for the anticipated customer requirements of
fiscal 2005. Safety utilizes weaving machines that are versatile in their
ability to produce a broad array of air restraint and specialty technical
fabrics for use in a large number of applications. The ability to interchange
the machines between air restraint fabric and other specialty technical fabrics
allows Safety to leverage its utilization of plant assets.

Competition. Safety competes with several independent suppliers of airbag
cushions in the United States and Europe for sales to airbag module integrators.
Safety also competes with plants owned by its airbag module integrator
customers, which produce a substantial portion of airbag cushions for their own
consumption, although they do not generally manufacture the same airbag cushions
for the same vehicle models for which Safety manufactures. Most airbag module
integrators subcontract a portion of their requirements for airbag cushions.
Safety believes that it has good working relationships with its customers due to
its high volume and low-cost manufacturing capabilities and consistency of
quality products and service.

Safety shares the North American airbag fabric market primarily with
Milliken, Takata-Highland, Mastex, Key Safety and Autoliv. Takata-Highland, Key
Safety and Autoliv, all airbag module integrators, produce a portion or all of
their airbag fabric for use in their own airbag cushions.

The automotive airbag cushion, airbag fabric and airbag module markets are
highly competitive. Some of Safety's current and potential competitors have
greater financial and other resources than Safety. Safety

7

competes primarily on the basis of its price, product quality, reliability,
flexibility and capability to produce a wide range of models of passenger and
driver airbag cushions and side impact airbag curtains and cushions. In
addition, Safety's weaving plant in South Carolina has provided it with some
measure of vertical integration, enhancing its ability to compete in the
automotive airbag industry. Increased competition, as well as price reductions
of airbag systems, could adversely affect Safety's revenues and profitability.

Technical Centers. Safety has technical centers in Greenville, South
Carolina; Ensenada, Mexico; and Hildesheim, Germany. The center in Hildesheim,
Germany has the ability to conduct static and dynamic deployment testing and
analysis using high-speed video equipment and includes pendulum-testing
capability, a sample shop with manual and CNC sewing equipment, a
production-style laser cutter, volumetric measurement and analysis equipment,
textile welding and other non-sewn fastening equipment. The center also has a
materials laboratory, and can access the services of laboratory and textile
personnel at Safety's facility in Greenville, South Carolina. In North America,
the module integrators customarily perform the majority of advanced cushion
testing; therefore, Safety has not seen a need for an advanced technical center
for cushions in North America. However, all necessary validation testing and
process development testing is performed in Ensenada, Mexico. The Ensenada,
Mexico technical center consists of a testing laboratory and a dedicated
prototype cell, complete with a separate staff and equipment.

Through its textile laboratory located in Greenville, South Carolina,
Safety has the ability to test and analyze a wide range of fabrics (airbag or
other) under internationally accepted testing standards, including US-ASTM,
Europe-DIN and ISO, Asian-JIS and Underwriters NFPA. The laboratory is A2LA
accredited (ISO 17025) and certified with ISO/TS 16949 -- the most important
certifications for the industry. All validation testing and analytical testing
of fabric is performed at this laboratory. Additionally, the Greenville facility
has prototype-manufacturing capabilities.

Qualification and Quality Control. Safety's customers require Safety to
meet specific requirements for design validation. Safety and its customers
jointly participate in design and process validations and customers must be
satisfied with the reliability and performance prior to awarding a purchase
order. All standards and requirements relating to product performance are
required to be satisfied before Safety is qualified as a supplier by its
customers.

Safety maintains extensive quality control and quality assurance systems in
its North American and European automotive facilities, including inspection and
testing of all products, and is TS 116949, ISO 9001 and/or ISO 9002 certified.
The more stringent TS 16949 replaces Safety's previous QS 9000 certification.
Safety is currently in the process of certification for TS 16949 for the South
Africa Joint Venture and the China Joint Venture, expecting completion by
December 2005 and July 2006, respectively. Safety also performs process
capability studies and design of experiments to determine that the manufacturing
processes meet or exceed the quality levels required by each customer.

The fabric operation's laboratories have ISO 17025 and A2LA, as well as UL,
accreditation. Safety's fabric operation is also certified under the
environmental and energy quality system ISO 14001. Safety was the first airbag
fabric manufacturer to have its entire business (not just its manufacturing
facility) certified under QS 9000.

Governmental Regulations. Safety's operations are subject to various
product safety, environmental, employee safety and wage and transportation
related statutes and regulations. Safety believes that it is in substantial
compliance with existing laws and regulations and has obtained or applied for
the necessary permits to conduct its business operations.

Product Liability. Safety is engaged in a business that could expose it to
possible claims for injury resulting from the failure of products sold by it. In
the past, there has been increased public attention to injuries and deaths of
children and small adults due to the force of the inflation of airbags. To date,
however, Safety has not been named as a defendant in any automotive product
liability lawsuit, nor been threatened with any such lawsuit. Safety maintains
product liability insurance coverage, which Safety's management believes to be
adequate. However, a successful claim brought against Safety resulting in a
product recall program or a final judgment in excess of its insurance coverage
could have a material adverse effect on Safety.

8

Seasonality. Safety's airbag cushions and airbag fabric business is
subject to the seasonal characteristics of the automotive industry, in which,
generally, there are seasonal plant shutdowns in the third and fourth quarters
of each calendar year.

Backlog. Safety does not reflect an order for airbag cushions or airbag
fabric in backlog until it has received a purchase order and a material
procurement release that specifies the quantity ordered and specific delivery
dates. Generally, these orders are shipped within two to eight weeks of receipt
of the purchase order and material release. As a result, Safety does not believe
its backlog is a reliable measure of future airbag sales.

Intellectual Property. Safety holds thirty-five patents and approval for
five additional patents are pending. All patents relate to technical
improvements for enhancement of product performance with respect to Safety's
airbag, fabric and technical related products. Provided that all requisite
maintenance fees are paid, the patents held by Safety will expire between the
years 2011 and 2021.

Engineering, Research & Development. Safety's fabric and airbag cushions
operations have maintained an active design and development effort focused
toward new and enhanced products and manufacturing processes. Safety designs and
engineers its fabrics to meet its customers' specific applications and needs.
While the component manufacturer originates most design requirements, Safety
remains dedicated to improving the quality of existing products, as well as
developing new products for all applications. Costs associated with design and
development for fabric and airbag cushions were approximately $1.5 million, $1.2
million and $1.2 million in the year ended December 31, 2004, the nine month
period from March 30, 2003 to December 31, 2003 and the year ended March 29,
2003, respectively.

Employees. At December 31, 2004, Safety employed approximately 2,800
employees. Safety's hourly employees in Mexico, Czech Republic and South Africa
are entitled to a federally regulated minimum wage, which is adjusted annually.
Safety's employees at its Mexican facility are unionized. In addition,
Automotive Safety Components International GmbH & Co. KG, Safety's wholly owned
German subsidiary, has a workers' council pursuant to German statutory labor
law. Safety has not experienced any work stoppages related to its work force and
considers its relations with its employees and all unions currently representing
its employees to be good.

OMEGA PROTEIN

General. Omega Protein is the largest processor, marketer and distributor
of fish meal and fish oil products in the United States. Omega produces and
sells a variety of protein and oil products derived from menhaden, a species of
wild herring-like fish found along the Gulf of Mexico and Atlantic coasts. The
fish is not genetically modified or genetically enhanced. Omega processes
several grades of fish meal (regular or "FAQ" meal and specialty meals), as well
as fish oil and fish solubles. Omega's fish meal products are primarily used as
a protein ingredient in animal feed for swine, cattle, aquaculture and household
pets. Fish oil is utilized for animal and aquaculture feeds, industrial
applications, and additives to human food products. Omega's fish solubles are
sold primarily to livestock feed manufacturers, aquaculture feed manufacturers
and for use as an organic fertilizer. See "Products -- Fish Meal" and "-- Fish
Oil."

All of Omega's products contain healthy long-chain Omega-3 fatty acids.
Omega-3 fatty acids are commonly referred to as "essential fatty acids" because
the body does not produce them. Instead, essential fatty acids must be obtained
from outside sources, such as food or special supplements. Long-chain Omega-3's
are also commonly referred to as a "good fat" for their health benefits, as
opposed to the "bad fats" that create or aggravate health conditions through
long-term consumption. Scientific research suggest that long-chain Omega-3's as
part of a balanced diet may provide significant benefits for health issues such
as cardiovascular disease, inflammatory conditions and other ailments.

Under its patented production process, Omega produces OmegaPure(R), a
taste-free, odorless refined fish oil that is the only marine source of
long-chain Omega-3's directly affirmed by the U.S. Food and Drug Administration
("FDA") as a food ingredient which is Generally Recognized as Safe ("GRAS"). See
"Products -- Refined Fish Oil -- Food Grade Oils."

9

Omega operates four menhaden processing plants: two in Louisiana, one in
Mississippi and one in Virginia, as well as a fish oil processing facility also
located in Virginia. The four plants have an aggregate annual processing
capacity as of December 31, 2004 of 950,000 tons of fish. Omega also completed
construction of a new Health and Science Center in Reedville, Virginia in
October 2004, which provides 100-metric tons per day fish oil processing
capacity. See "Meal and Oil Processing Plants" and "Health and Science Center."

Omega operates through three material subsidiaries: Omega Protein, Inc.,
Omega Shipyard, Inc. and Omega Protein Mexico, S. de R.L. de C.V. ("Omega
Mexico"). Omega Protein, Inc. is Omega's principal operating subsidiary for its
menhaden processing business and is the successor to a business conducted since
1913. Omega Shipyard, Inc. owns a drydock facility in Moss Point, Mississippi,
which is used to provide shoreside maintenance for Omega's fishing fleet and,
subject to outside demand and excess capacity, third-party vessels. Revenues
from shipyard work for third-party vessels in 2004 were not material. Omega
Mexico coordinates Omega's meal and oil sales and purchases in Mexico. Omega
also has a number of other immaterial direct and indirect subsidiaries.

Geographic Information. Omega operates within one industry segment,
menhaden fishing, for the production and sale of fish meal, fish solubles and
fish oil. Export sales of fish oil and fish meal were approximately $39 million,
$46 million and $44 million in 2004, 2003 and 2002, respectively. Such sales
were made primarily to the Mexican, European and Canadian markets. In 2004, 2003
and 2002, sales to one customer were approximately $8.8 million, $10.8 million
and $10.5 million, respectively. This customer differed from year to year.

The following table shows the geographical distribution of Omega Protein's
revenues (in thousands) based on location of customers. (For a consolidated
table of geographical distribution of revenues, see Note 24 to the Company's
Consolidated Financial Statements included in Item 8 of this Report.)

Fishing. During 2004, Omega owned a fleet of 66 fishing vessels and 32
spotter aircraft for use in its fishing operations and also leased additional
aircraft where necessary to facilitate operations. During the 2004 fishing
season in the Gulf of Mexico, which runs from mid-April through October, Omega
operated 31 fishing vessels and 28 spotter aircraft. The fishing area in the
Gulf is generally located along the Gulf Coast, with a concentration off the
Louisiana and Mississippi coasts. The fishing season along the Atlantic coast
begins in early May and usually extends into December. In 2004, Omega operated
10 fishing vessels and 7 spotter aircraft along the Mid-Atlantic coast,
concentrated primarily in and around Virginia and North Carolina. The remaining
fleet of fishing vessels and spotter aircraft are not routinely operated during
the fishing season and are back-up to the active fleet, used for other
transportation purposes, inactive or in the process of refurbishment in Omega's
shipyard.

Menhaden usually school in large, tight clusters and are commonly found in
warm, shallow waters. Spotter aircraft locate the schools and direct the fishing
vessels to them. The principal fishing vessels transport two 40-foot purse
boats, each carrying several fishermen and one end of a 1,500-foot net. The
purse boats

10

encircle the school and capture the fish in the net. The fish are then pumped
from the net into refrigerated holds of the fishing vessel or onto a carry
vessel, and then are unloaded at Omega's processing plants.

Meal and Oil Processing Plants. During 2004, Omega operated four meal and
oil processing plants, two in Louisiana, one in Mississippi and one in Virginia,
where the menhaden are processed into three general products types: fish meal,
fish oil and fish solubles. As of December 31, 2004, Omega's four active
processing plants had an aggregate annual capacity to process approximately
950,000 tons of fish. Omega's processing plants are located in coastal areas
near Omega's fishing fleet. Annual volume processed varies depending upon
menhaden catch and demand. Each plant maintains a dedicated dock to unload fish,
fish processing equipment and storage capacity.

The fish are unloaded from the fishing vessels into storage boxes and then
conveyed into steam cookers. The fish are then passed through presses to remove
most of the oil and water. The solid portions of the fish are dried and ground
into fish meal. The liquid that is produced in the cooking and pressing
operations contains oil, water, dissolved protein and some fish solids. This
liquid is decanted to remove the solids and is put through a centrifugal oil and
water separation process. The separated fish oil is a finished product called
crude oil. The separated water and protein mixture is further processed through
evaporators to recover the soluble protein, which can be sold as a finished
product or added to the solid portions of the fish for processing into fish
meal.

Health and Science Center. In October 2004, Omega completed construction
and commenced operation of a new Health and Science Center that provides
100-metric tons per day fish oil processing capacity. The new center is located
adjacent to Omega's Reedville, Virginia processing plant. The food-grade
facility includes state-of-the-art processing equipment and controls that will
allow Omega to refine, bleach, winterize and deodorize its menhaden fish oil and
has more than tripled Omega's previous refined fish oil production capacity. The
facility also provides Omega with automated packaging and refrigerated on-site
storage capacity and has a new fully equipped lipids laboratory to enhance the
development of Omega-3 oils and food products.

Products. Omega sells three general types of products: fish meal, fish oil
and fish solubles.

Fish Meal. Fish meal, the principal product made from menhaden, is sold
primarily as a high-protein feed ingredient. It is used as a protein supplement
in feed formulated for pigs and other livestock, aquaculture and household pets.
Each use requires certain standards to be met regarding quality and protein
content, which are determined by the freshness of the fish and by processing
conditions such as speed and temperatures. Omega produces fish meal of several
different types:

Special Select(TM). Special Select(TM) is a premium grade low
temperature processed fish meal. The quality control guidelines are very
stringent, producing a higher protein level and higher digestibility and a
lower total volatile nitrogen ("TVN") and histamine count. These guidelines
require that only the freshest fish and the most gentle drying process be
used. Special Select(TM) is targeted for monogastrics, including baby pigs,
turkey poults, pets, shrimp and trout.

SeaLac(TM). SeaLac(TM) is similar to Special Select(TM) in its
freshness (low TVN) and gentle drying (high digestibility). During the
processing however, Omega removes most of the soluble protein. This step
allows the amount of rumen undegradable protein to be maximized while still
maintaining excellent digestibility. This product is made specifically for
dairy and beef cattle, sheep, goats and other ruminants requiring bypass
protein.

FAQ Meal. FAQ (Fair Average Quality) Meal, Omega's commodity grade
fish meal, guarantees a protein content of at least 60%. This product
typically is used in protein blends for poultry, catfish, pets and other
animals.

Fish Oil. Omega produces crude unrefined fish oil, refined fish oil and
food grade oils.

Unrefined Fish Oil. Unrefined fish oil (also referred to as crude
fish oil) is Omega's basic fish oil product. This grade of fish oil has not
undergone any portion of the refining process. Omega's markets for crude
fish oil have changed over the past decade. In the early 1990's, Omega's
main crude fish oil market, which accounted for greater than 90% of Omega's
production, was utilized by manufacturers of
11

hydrogenated oils for human consumption such as margarine and shortening.
In 2004, Omega estimates that approximately 70% of its crude fish oil was
sold as a feed ingredient to the aquaculture industry. The growth of the
worldwide aquaculture industry has resulted in increasing demand for fish
oils in order to improve feed efficiency, nutritional value survivability
and health of farm-raised fish species.

Refined Fish Oil. Omega's refined fish oils come in three basic
grades and also includes crude fish oils of special quality or that may
require custom packaging or special additives.

Feed Grade Oils. Feed grade menhaden oil is processed and refined
to offer a high Omega-3 oil for use in premium pet, aquaculture and
livestock feeds, as well as agricultural and attractant applications.
The processing reduces oxidation while enhancing Omega-3 fatty acids for
incorporation in the final feed to enhance skin and coat conditioning,
reproductive performance, and increasing immunity. Both kosher and
organic products are available.

SeaCide(TM). One new product that Omega has developed from refined
fish oil is SeaCide(TM). SeaCide(TM) is a unique blend of refined
menhaden oil, cottonseed oil and an organic emulsifier developed for use
against target pests and diseases that occur in a variety of field
crops, orchards, vineyards and greenhouse operations. SeaCide(TM) is an
all natural organic alternative to chemical insecticides and fungicides,
is less phytotoxic than petroleum based oils, is compatible with most
fertilizers, and is versatile enough for use on virtually any crop.

Food Grade Oils. Omega has developed a patented process to fully
refine menhaden oil to remove flavor, odor, color and pro-oxidants and
offer a naturally high, long-chain Omega-3 content. Omega's main product
in this grade is OmegaPure(R). Food applications for OmegaPure(R) are
designed to deliver a stable, odorless, flavorless source of Omega-3
fatty acids to enhance human nutrition. These applications include
mainstream consumer foods, medical care foods and dietary supplements.
OmegaPure(R) is also kosher-certified and organic.

Omega-3 fatty acids exist in two forms: long-chain and short-chain.
Short-chain Omega-3's (or alpha-linolenic acid ("ALA")), are generally
found in canola oil, soy beans and flaxseed, and generally require five
to ten times as much concentration to approach the same benefit levels
as long-chain Omega-3's. Long-chain Omega-3 fatty acids are generally
found in marine sources and consist of two main types: eicosapentaenoic
acid ("EPA") and docosahexaenic acid ("DHA"). EPA is a fatty acid that
generally reduces inflammatory responses and has been linked to the
alleviation of symptoms from asthma, arthritis, psoriasis and other
inflammatory conditions. DHA is a major structural fatty acid in the
brain and the eye's retina. DHA is important for proper brain and eye
development in infants and has been shown to support cardiovascular
health in adults.

Various scientific studies have linked consumption of Omega-3 fatty
acids to a number of nutritional and health benefits, such as heart
health, treatment of arthritis and other inflammatory diseases,
improving brain and eye function and treatment of depression. For
example, in September 2004, the U.S. Food and Drug Administration
("FDA") announced that scientific evidence indicates that long-chain
Omega-3 fatty acids may be beneficial in reducing coronary heart
disease. In addition the American Heart Association ("AHA") issued a
Scientific Statement in November 2002, entitled "Fish Consumption, Fish
Oil, Omega-3 Fatty Acids, and Cardiovascular Disease." The Scientific
Statement outlines the findings of a comprehensive report that examined
the cardiovascular health benefit of Omega-3 fatty acids from fish
sources, specifically DHA and EPA. The report concluded that consumption
of such Omega-3 fatty acids, either through diet or supplements, may
reduce the incidence of cardiovascular disease. The statement referred
to studies that have indicated the following to be associated with the
intake of Omega-3 fatty acids: decreased risk of sudden death and
arrhythmia, decreased thrombosis (blood clot), decreased triglyceride
levels, decreased growth of atherosclerotic plaque, improved arterial
health and lower blood pressure. The Scientific Statement concludes that
Omega-3 fatty acids have been shown in epidemiological and clinical
trials to reduce the incidence of heart disease.

12

Menhaden oil currently is the only marine source of long-chain
Omega-3's directly affirmed by the FDA as a Generally Recognized As Safe
(or "GRAS") food ingredient for direct human consumption. The FDA has
approved menhaden oil use in 17 different food categories such as
margarine, salad dressings, condiments, yogurt, ice cream, cheese,
prepared meats, sauces, soups, crackers, cookies, cereals and bakery
products. In February 2002, the FDA posted for public comment a proposed
regulation that would add additional food categories to the list already
approved for the inclusion of rich menhaden oil. In January 2004, the
FDA published a tentative final rule for public comment which would
increase to 30 the number of food categories approved for inclusion of
menhaden oil, subject to the condition that menhaden oil is not used in
combination with other oils that are a significant source of EPA and
DHA.

Several additional developments have occurred in 2004 and early
2005 that Omega believes could potentially benefit its sales efforts for
OmegaPure(R).

- In September 2004, the FDA announced that scientific evidence
indicates that long-chain Omega-3 fatty acids containing both EPA
and DHA may be beneficial in reducing coronary heart disease. Omega
believes that this new qualified health claim should encourage
consumers to look for foods and beverages that contain long-chain
Omega-3s.

- In September 2004, Omega entered into a manufacturing and supply
agreement with National Starch and Chemical Company, a leading
producer of innovative starch-based ingredients for the global food
industry that sells to over 1,000 food manufacturers. Omega Protein
is the exclusive provider for 100% of National Starch's
requirements for long-chain Omega-3 fish oil. National Starch will
encapsulate OmegaPure(R) into a free-flowing dry powder called
Novomega(TM), which will then be marketed to National Starch's
worldwide customer base. Omega Protein has also granted National
Starch a license to use its OmegaPure(R) trademark in connection
with the packaging of National Starch's products.

- In October 2004, Omega completed its Health and Science Center in
Reedville, Virginia. Omega is the only fully-integrated fish oil
processing operation in the United States that both directly
conducts fishing operations and also manufactures highly refined
EPA and DHA from these marine resources. With the completion of
this new facility, Omega can control the purity and quality of its
product from harvesting all the way through manufacturing and
shipment.

- In January 2005, the U.S. Department of Agriculture and the
Department of Health and Human Services released the 2005 Dietary
Guidelines for Americans. The Guidelines, which are issued every
five years, represent the federal government's most current
science-based advice to promote human health and reduce the risk of
chronic diseases through nutrition and physical activity.

The previous Dietary Guidelines issued in 2000 recognized that
certain fish contain Omega-3 fatty acids that are being studied to
determine if they offer protection against heart disease, but did not
specifically identify these Omega-3 fatty acids as DHA and EPA. The 2005
Dietary Guidelines specifically mentioned DHA and EPA and stated the
"limited evidence suggests an association between consumption of fatty
acids in fish and reduced risks of mortality from cardiovascular disease
for the general population."

Industrial Grade Oils. Industrial grade menhaden oil is refined and
processed to enhance the unique fatty acid range, making it desirable for a
number of drying and lubricating applications including coolant transfer,
chemical raw material, drying and rustproofing paints, drilling fluids and
leather treatment chemicals.

13

Fish Solubles. Fish solubles are a liquid protein product used as an
additive in fish meal and are also marketed as an independent product to animal
feed formulators and the fertilizer industry. Omega's soluble-based products
are:

Neptune(TM) Fish Concentrate. This aqua grade liquid protein is
composed of low molecular weight, water-soluble compounds such as free
amino acids, peptides and nucleotides that are attractants for a variety of
aquaculture feeds. The product is utilized in both shrimp and finfish diets
to improve attractability and thus consumption and conversion.
Neptune(TM)Fish Concentrate also can be added directly to grow-out ponds as
a fertilizer to help feed plankton and other natural food sources.

OmegaGrow(TM). OmegaGrow(TM) is a liquid soil or foliar-applied
fertilizer for plant nutrition. OmegaGrow(TM) is approved for organic uses
by the Organic Materials Review Institute ("OMRI"). OmegaGrow(TM) is a
free-flowing product that has been filtered through an 80-mesh screen and
can be applied by sprayers or through irrigation systems.

OmegaGrow Plus(TM). OmegaGrow Plus(TM) is a liquid foliar-applied
fertilizer for plant nutrition that also helps to control insect and fungus
problems. This product has additional oil content of 25% to 30% which is
greater than the 7% to 10% oil content typically found in OmegaGrow(TM).
These higher levels are detrimental to soft-bodied insects, as well as
fungal diseases in citrus and vegetable crops. OmegaGrow Plus(TM) can be
used as a replacement for petroleum-based oil sprays.

Distribution System. Omega's distribution system of warehouses, tank
storage facilities, vessel loading facilities, trucks, barges and railcars
allows Omega to service customers throughout the United States and also foreign
locations. Omega owns and leases warehouses and tank storage space for storage
of its products, generally at terminals along the Mississippi River and
Tennessee River. See "Properties." Omega generally contracts with third-party
trucking, vessel, barge and railcar companies to transport its products to and
from warehouses and tank storage facilities and directly to its customers.

Historically, approximately 35% to 40% of Omega's Fair Average Quality
("FAQ") grade fish meal was sold on a two-to-twelve-month forward contract
basis. The balance of FAQ grade fish meal and other products was substantially
sold on a spot basis through purchase orders. In 2002, Omega began a similar
forward sales program for its specialty grade meals and crude fish oil due to
increasing demand for these products. During 2003, approximately 50% of Omega's
specialty meals and crude fish oil had been sold on a forward contract basis. In
2004, approximately 43% of Omega's specialty meals and crude oil had been sold
on a forward contract basis. Omega's annual revenues are highly dependent on
both annual fish catch and inventories and, in addition, inventory is generally
carried over from one year to the next year. Omega determines the level of
inventory to be carried over based on prevailing market prices of the products,
and sales volumes that will fluctuate from quarter to quarter and year to year.
Omega's fish meal products have a useable life of approximately one year from
date of production; however, Omega typically attempts to empty its warehouses of
the previous season's meal products by the second or third month of the new
fishing season. Omega's crude fish oil products do not lose efficacy unless
exposed to oxygen and, therefore, their storage life typically is longer than
that of fish meal.

Customers and Marketing. Most of Omega's marine protein products are sold
directly to about 600 customers by Omega's marketing department, while a smaller
amount is sold through independent sales agents. Product inventory was $30.3
million as of December 31, 2004 versus $30.2 million on December 31, 2003.

Omega's fish meal is sold primarily to domestic feed producers for
utilization as a high-protein ingredient for the swine, aquaculture, dairy and
pet food industries. Fish oil sales primarily involve export markets where the
fish oil is used for aquaculture feeds and is refined for use as a hydrogenated
edible oil.

Omega's products are sold both in the U.S. and internationally.
International sales consist mainly of fish oil sales to Norway, Canada, China,
Chile and Mexico. Omega's sales in these foreign markets are denominated in U.S.
dollars and not directly affected by currency fluctuations. Such sales could be
adversely affected by changes in demand resulting from fluctuations in currency
exchange rates.

14

A number of countries in which Omega currently sells products impose
various tariffs and duties, none of which have a significant impact on Omega's
foreign sales. Certain of these duties are being reduced annually for certain
countries under the North American Free Trade Agreement and the Uruguay Round
Agreement of the General Agreement on Tariffs and Trade. In all cases, Omega's
products are shipped to its customers either by FOB shipping point or CIF terms,
and therefore, the customer is responsible for any tariffs, duties or other
levies imposed on Omega's products sold into these markets.

During the off season, Omega fills purchase orders from the inventory it
has accumulated during the fishing season or in some cases, re-selling meal
purchased from other suppliers. Prices for Omega's products tend to be lower
during the fishing season when product is more abundant than in the off season.
Throughout the entire year, prices are often significantly influenced by supply
and demand in world markets for competing products, primarily other global
sources of fish meal and oil, and also soybean meal for its fish meal products,
and vegetable oils for its fish oil products when used as an alternative to
vegetable oils.

Quality Control. Omega believes that maintaining high standards of quality
in all aspects of its manufacturing operations play an important part in its
ability to attract and retain customers and maintain its competitive position.
To that end, Omega has adopted strict quality control systems and procedures
designed to test the quality aspects of its products, such as protein content
and digestibility. Omega regularly reviews, updates and modifies these systems
and procedures as appropriate.

Purchases and Sales of Third-Party Meal and Oils. Omega has from time to
time purchased fish meal and fish oil from other domestic and international
manufacturers. These purchase and resale transactions have been ancillary to
Omega's base manufacturing and sales business.

Part of Omega's business plan involves expanding its purchase and resale of
other manufacturers' fish meal and fish oil products. In 2002, Omega initially
focused on the purchase and resale of Mexican fish meal and fish oil and
revenues generated from these types of transactions in that year represented
less than 2% of total Company revenues. During 2003 and 2004, Omega's fish catch
and resultant product inventories were reduced, primarily due to adverse weather
conditions, and Omega further expanded its purchase and resales of other fish
meals and oils (primarily Panamanian, Peruvian and Mexican fish meal and U.S.
menhaden oil). Although operating margins from these activities are less than
the margins typically generated from Omega's base domestic production, these
operations provide Omega with a source of fish meal and oil to sell into other
markets where Omega has not historically had a presence. During 2003, Omega
purchased products totaling approximately 12,500 tons, or approximately 5% of
total volume 2003 sales. During 2004, Omega purchased products totaling
approximately 17,800 tons, or approximately 8% of total volume 2004 sales.

Insurance. Omega maintains insurance against physical loss and damage to
its assets, coverage against liabilities to third parties it may incur in the
course of its operations, as well as workers' compensation, United States
Longshoremen's and Harbor Workers' Compensation Act and Jones Act coverage.
Assets are insured at replacement cost, market value or assessed earning power.
Omega's limits for liability coverage are statutory or $50 million. The $50
million limit is comprised of several excess liability policies, which are
subject to deductibles, underlying limits and exclusions. Omega believes its
insurance coverage to be in such form, against such risks, for such amounts and
subject to such deductibles and self-retentions as are prudent and normal for
its operations. Omega has elected to increase its deductibles and
self-retentions in order to achieve lower insurance premium costs. These higher
deductibles and self-retentions will expose Omega to greater risk of loss if
claims occur.

Competition. The marine protein and oil business is subject to significant
competition from producers of vegetable and other animal protein products and
oil products such as Archer Daniels Midland and Cargill. In addition, but to a
lesser extent, Omega competes with smaller domestic privately-owned menhaden
fishing companies and international marine protein and oil producers, including
Scandinavian herring processors and South American anchovy processors. Many of
these competitors have significantly greater financial resources and more
extensive and diversified operations than Omega.

Omega competes on price, quality and performance characteristics of its
products, such as protein level and amino acid profile in the case of fish meal.
The principal competition for Omega's fish meal and fish

15

solubles is from other global production of marine proteins as well as other
protein sources such as soybean meal and other vegetable or animal protein
products. Omega believes, however, that these other non-marine sources are not
complete substitutes because fish meal offers nutritional values not contained
in such other sources. Other globally produced fish oils provide the primary
market competition for Omega's fish oil, as well as soybean and palm oil, from
time to time.

Fish meal prices have historically borne a relationship to prevailing
soybean meal prices, while prices for fish oil are generally influenced by
prices for vegetable fats and oils, such as soybean and palm oils. Thus, the
prices for Omega's products are established by worldwide supply and demand
relationships over which Omega has no control and tend to fluctuate
significantly over the course of a year and from year to year.

Regulation. Omega's operations are subject to federal, state and local
laws and regulations relating to the locations and periods in which fishing may
be conducted as well as environmental and safety matters. At the state and local
level, certain state and local government agencies have either enacted
legislation or regulations which prohibits, restricts or regulates menhaden
fishing within their jurisdictional waters.

Omega's menhaden fishing operations are also subject to regulation by two
interstate compacts created by federal law: the Atlantic States Marine Fisheries
Commission ("ASMFC") which consists of 15 states along the Atlantic Coast, and
the Gulf States Marine Fisheries Commission which consists of 5 states along the
Gulf of Mexico.

On February 11, 2005, the Menhaden Management Board of the ASMFC voted to
initiate the preparation of an addendum to the existing ASMFC Interstate
Management Plan for Atlantic Menhaden which would limit the amount of commercial
menhaden catch in the Chesapeake Bay for a two-year period. The proposal would
limit annual menhaden catch from the Chesapeake Bay to the Bay's 5-year average
catch, or 110,400 metric tons. (Omega's Chesapeake Bay fish catch was 99,300
metric tons in 2004 or approximately 22% of Omega's total 2004 fish catch.) The
proposal would also initiate a concurrent research program to determine the
status of menhaden populations in the Bay and other scientific and biological
issues that have been raised by various environmentalists, recreational
fishermen and other special interest groups before the ASMFC. If the addendum
were to be approved, it would be released for public hearings and comment over a
several month period and further review by interested federal agencies. After
that process is completed, the Menhaden Management Board may make a
recommendation on the addendum to the ASMFC Interstate Fisheries Management
Policy Board later in 2005. If that Board were to ultimately approve the
addendum, the addendum would be sent to individual ASMFC member states for their
adoption and implementation.

Omega plans to participate in the public hearing and comment process in
order to present evidence that the fishery is healthy and that no cap is needed
(and in fact, as proposed, may not be permissible under existing ASMFC
regulations and policies). The imposition of management measures by the ASMFC
such as the proposed cap, must, pursuant to the ASMFC's charter, be based on the
"best scientific information available." Omega believes, based on consultations
with its scientific and technical advisors, that the proposed cap falls short of
this standard. If any limitation were to be ultimately imposed, it would likely
become effective for Omega's 2006 and 2007 fishing seasons.

Omega, through its operation of fishing vessels, is subject to the
jurisdiction of the U.S. Coast Guard, the National Transportation Safety Board
and the U.S. Customs Service. The U.S. Coast Guard and the National
Transportation Safety Board set safety standards and are authorized to
investigate vessel accidents and recommend improved safety standards. The U.S.
Customs Service is authorized to inspect vessels at will.

Omega's operations are subject to federal, state and local laws and
regulations relating to the protection of the environment, including the federal
Clean Water Act, which imposes strict controls against the discharge of
pollutants in reportable quantities, and along with the Oil Pollution Act,
imposes substantial liability for the costs of oil removal, remediation and
damages. Omega's operations also are subject to the federal Clean Air Act, as
amended; the federal Comprehensive Environmental Response, Compensation, and
Liability Act, which imposes liability, without regard to fault, on certain
classes of persons that contributed to the release of any "hazardous substances"
into the environment; and the federal Occupational Safety and Health Act
("OSHA"). The implementation of continuing safety and environmental regulations
from these authorities

16

could result in additional requirements and procedures for Omega and it is
possible that the costs of these requirements and procedures could be material.

The OSHA hazard communications standard, the Environmental Protection
Agency community right-to-know regulations under Title III of the federal
Superfund Amendment and Reauthorization Act and similar state statutes require
Omega to organize information about hazardous materials used or produced in its
operations. Certain of this information must be provided to employees, state and
local governmental authorities and local citizens. Numerous other environmental
laws and regulations, along with similar state laws, also apply to the
operations of Omega, and all such laws and regulations are subject to change.

Omega has made, and anticipates that it will make in the future,
expenditures in the ordinary course of its business in connection with
environmental matters. Such expenditures have not been material in the past, and
while they are expected to increase in the future, such increases are not
expected to be material to Omega's business. However, there is no assurance that
environmental laws and regulations enacted in the future will not require
material expenditures or otherwise adversely affect Omega's operations.

Omega continually monitors regulations which affect fish meal and fish oil
in the United States and in those foreign jurisdictions where its sells its
products. In some cases, particularly in Europe, regulators have mandated
various environmental contaminant levels which, on occasion, certain of Omega's
products do not meet. In those instances, Omega has either negotiated a lower
price with the customer for that product lot or has sold the product lot in
another market where the regulatory standards are met. To date, such regulations
have not had a material adverse effect on Omega's business, but it is possible
they may do so in the future.

Omega's harvesting operations are subject to the Shipping Act of 1916 and
the regulations promulgated thereunder by the Department of Transportation,
Maritime Administration which require, among other things, that Omega be
incorporated under the laws of the U.S. or a state, Omega's chief executive
officer be a U.S. citizen, no more of Omega's directors be non-citizens than a
minority of the number necessary to constitute a quorum and at least 75% of
Omega's outstanding capital stock (including a majority of Omega's voting
capital stock) be owned by U.S. citizens. If Omega fails to observe any of these
requirements, it will not be eligible to conduct its harvesting activities in
U.S. jurisdictional waters. Such a loss of eligibility would have a material
adverse effect on Omega's business, results of operations and financial
condition.

To protect against such loss of eligibility, Omega's Articles of
Incorporation (i) contain provisions limiting the aggregate percentage ownership
by non-citizens of each class of Omega's capital stock to no more than 25% of
the outstanding shares of each such class (the "Permitted Percentage") so that
any purported transfer to non-citizens of shares in excess of the Permitted
Percentage will be ineffective as against Omega for all purposes (including for
purposes of voting, dividends and any other distribution, upon liquidation or
otherwise), (ii) provide for a dual stock certificate system to determine such
ownership pursuant to which certificates representing shares of Company Common
Stock bear legends that designate such certificates as either "citizen" or
"non-citizen" depending on the citizenship of the owner, and (iii) permit
Omega's Board of Directors to make such determinations as may reasonably be
necessary to ascertain such ownership and implement restrictive limitations on
those shares that exceed the Permitted Percentage (the "Excess Shares"). For
example, Omega's Board is authorized, among other things, to redeem for cash
(upon written notice) any Excess Shares in order to reduce the aggregate
ownership by non-citizens to the Permitted Percentage.

Omega believes that during the past five years it has substantially
complied with all material statutes and regulations applicable to its
operations, the failure to comply with which would have had a material adverse
impact on its operations.

Employees. At December 31, 2004, during Omega's off-season, Omega employed
approximately 470 persons. At August 31, 2004, during the peak of Omega's 2004
fishing season, Omega employed approximately 950 persons. Approximately 140
employees at Omega's Reedville, Virginia plant are represented by an affiliate
of the United Food and Commercial Workers Union. The union agreement for the
Reedville employees has a three-year term which will terminate on April 18,
2005. Omega has begun preliminary discussions with the union representatives
regarding the terms of a new union agreement, but it is

17

not possible at this time for Omega to predict the outcome of those discussions.
During the past five years Omega has not experienced any strike or work stoppage
which has had a material impact on its operations. Omega considers its employee
relations to be generally satisfactory.

ZAP.COM

Zap.Com is a public shell company which does not have any existing business
operations. From time to time, Zap.Com considers acquisitions that would result
in it becoming an operating company. Zap.Com may also consider developing a new
business suitable for its situation.

Employees. As of December 31, 2004, Zap.Com had two employees, Avram
Glazer, President and CEO, and Leonard DiSalvo, VP-Finance and Chief Financial
Officer. Neither Mr. Glazer nor Mr. DiSalvo receive a salary from Zap.Com and
currently devote a significant portion of their business time to Zapata, where
they hold the same offices. Both of these officers, however, devote such time to
Zap.Com's affairs as is required to perform their duties to Zap.Com.

FINANCIAL INFORMATION ABOUT SEGMENTS

Information required by this section is incorporated by reference from Note
24 to the Company's Consolidated Financial Statements included in Item 8 of this
Report.

ITEM 2. PROPERTIES

ZAPATA CORPORATE

Zapata's corporate headquarters are located in Rochester, New York where
the Company leases approximately 3,000 square feet of office space. Additional
leased space includes 5,000 square feet of office space located in New York City
which had been previously used by a former subsidiary of the Company. The lease
for the New York City facility expires in March of 2005. Zapata believes its
facilities and those of its subsidiaries are adequate and suitable for its
current level of operations.

SAFETY COMPONENTS

Safety's corporate headquarters are located in Greenville, South Carolina
in a facility owned by Safety, adjacent to its Safety Components Fabric
Technologies, Inc. ("SCFTI") manufacturing facility. Safety owns or leases five
facilities in which it manufactures airbag and technical fabrics related
products, with total plant area of approximately 1.2 million square feet
(including administrative, warehouse, engineering and research and development
areas housed at Safety locations). Below is an overview of Safety's properties
at its airbag and technical fabrics related products facilities as of December
31, 2004.

- ---------------

(1) Manufacturing, research and development and office space

(2) Lease also provides for five-year renewal option

(3) Location of corporate offices

(4) Manufacturing and office space

18

(5) Finished goods distribution center and office space

(6) Location of marketing and sales offices

(7) Facility is leased on a month-to-month basis

OMEGA PROTEIN

Omega's material properties are described below. Omega believes its
facilities are adequate and suitable for its current level of operations.

Plants. Omega owns its plants in Reedville, Virginia, Moss Point,
Mississippi and Abbeville, Louisiana (except for portions of the Abbeville
facility which are leased from unaffiliated third parties). Omega also owns its
Health and Science Center in Reedville, Virginia, as well as its Morgan City,
Louisiana property which was formally operated as a plant. Omega leases from
unaffiliated third parties the real estate on which its Cameron, Louisiana plant
is located.

Omega has entered into a non-binding letter of intent to purchase a 40-acre
facility containing office and warehouse space and located next to Omega's Moss
Point, Mississippi facility. The proposed purchase price is $1.75 million. Omega
believes that the utilization of this site would benefit its Gulf Coast
operations by allowing Omega to develop additional and more cost effective rail
and truck shipping opportunities, enhanced packaging capabilities and additional
valued-added products. The closing of the purchase is contingent on the
completion of Omega's due diligence on the property. If Omega acquires the
property, Omega estimates that it will spend an additional $2 million in 2005
for capital improvements to the property.

Warehouse and Storage. Omega owns, as well as leases from unaffiliated
third parties, warehouses and tank space for storage of its products, generally
at terminals located along the Mississippi River and Tennessee River. Omega's
material storage facilities are located at:

Shipyard. Omega owns a 49.4 acre shipyard facility in Moss Point,
Mississippi which includes two dry docks, each with a capacity of 1,300 tons.
The shipyard is used for routine maintenance and vessel refurbishment on its
fishing vessels and for shoreside maintenance services to third-party vessels if
excess capacity exists.

Administrative and Executive Offices. Omega leases office space from
unaffiliated third parties in Hammond, Louisiana for its administrative offices
and in Houston, Texas for its executive offices.

ZAP.COM

Zap.Com's headquarters are located in Rochester, New York, in space
subleased to it by Zapata on a month-to month basis. Zapata has advised Zap.Com
that it will not charge rent or other fees for the use of this space for future
periods until further notice.

19

ITEM 3. LEGAL PROCEEDINGS

LITIGATION

By letter dated November 2, 2004, a division employee, at the time a
controller for Safety's North American Automotive Group, filed a complaint with
the U.S. Department of Labor, Occupational Safety & Health Administration
("OSHA"), pursuant to Section 806 of the Corporate and Criminal Fraud
Accountability Act of 2002, Title VIII of the Sarbanes-Oxley Act of 2002 (the
"Act"), alleging that a change in his duties in September 2004 resulted from his
allegations of improprieties in Safety's operations in Mexico and California.
Safety has reported that neither the internal investigation conducted by
management nor the ensuing external investigation led by the Audit Committee of
Safety's Board of Directors following notification by management of the issues
raised substantiated any of the allegations. Due to circumstances unrelated to
the investigation or the complaint, Safety terminated the employee on December
15, 2004. By letter dated December 15, 2004, the employee amended his complaint
to allege that his termination was also in retaliation for his allegations. By
letter dated February 14, 2005, Safety was notified by OSHA that it had
completed its investigation and found that there is no reasonable cause to
believe that Safety violated the Act, and that the employee has 30 days from his
receipt of such notification to request a hearing before an Administrative Law
Judge. Safety has reported that, as of the date of this Annual Report on Form
10-K, to its knowledge, the employee has not yet sought such a hearing.

Zapata is involved in litigation relating to claims arising out of its past
and current operations in the normal course of business. Zapata maintains
insurance coverage against such potential ordinary course claims in an amount in
which it believes to be adequate. While the results of any ultimate resolution
cannot be predicted, in the opinion of Zapata's management, based upon
discussions with counsel, any losses resulting from these matters will not have
a material adverse effect on Zapata's consolidated results of operations, cash
flow or financial position.

ENVIRONMENTAL MATTERS

Like similar companies, Safety's operations and properties are subject to a
wide variety of increasingly complex and stringent federal, state, local and
international laws and regulations, including those governing the use, storage,
handling, generation, treatment, emission, release, discharge and disposal of
certain materials, substances and wastes, the remediation of contaminated soil
and groundwater, and the health and safety of employees (collectively,
"Environmental Laws"). Such laws may impose joint and several liability and may
apply to conditions at properties presently or formerly owned or operated by an
entity or its predecessor as well as to conditions of properties at which wastes
or other contamination attributable to an entity or its predecessor have been
sent or otherwise come to be located. The nature of Safety's operations exposes
it to the risk of claims with respect to such matters and there can be no
assurance that violations of such laws have not occurred or will not occur or
that material costs or liabilities will not be incurred in connection with such
claims. Safety has reported that, based upon its experience to date, it believes
that the future cost of compliance with existing Environmental Laws and
liability for known environmental claims pursuant to such Environmental Laws,
will not have a material adverse effect on its financial position, results of
operations or cash flows. However, future events, such as new information,
changes in existing Environmental Laws or their interpretation, and more
vigorous enforcement policies of regulatory agencies, may give rise to
additional expenditures or liabilities that could be material.

An undiscounted reserve of $277,000 has been included in "other long-term
liabilities" on the accompanying consolidated balance sheets for estimated
future environmental expenditures related to Safety's facility in Greenville,
South Carolina ("the Greenville facility") for conditions existing prior to
Safety's ownership of the facility. Such reserve was established at the time
Safety acquired the facility, and the amount was determined by reference to the
results of a Phase II study performed at the Greenville facility. In addition,
the Greenville facility has been identified along with numerous other parties as
a Potentially Responsible Party ("PRP") at the Aquatech Environmental, Inc.
Superfund Site. Safety has reported that it believes that Safety is a de minimis
party with respect to the site and that future clean-up costs incurred by Safety
will not be material.

20

Safety has received a General Notice of Potential Liability letter from the
U.S. Environmental Protection Agency ("EPA"), dated November 22, 2004, addressed
to Valentec Wells, LLC, an inactive subsidiary ("Valentec Wells") of Safety,
regarding the RRGClayton Chemical Site (the "Site"). The EPA Notice states that
the agency has received information indicating that Valentec Wells is a PRP for
the Site pursuant to the Comprehensive Environmental Response Compensation and
Liability Act. The EPA letter indicates that Valentec Wells is one of 73 PRPs
that were selected to receive this Notice as the alleged largest contributors of
waste to the Site. The EPA Notice invited Valentec Wells to attend PRP meetings
in early December 2004 and to respond indicating Safety's willingness to perform
or finance remedial response activities at the Site. In subsequent
communications, EPA has alleged that Valentec Wells may be connected to the Site
through another corporation. Safety has requested that EPA provide any
information in its possession related to the alleged successor relationship
between Valentec Wells and the other company. Safety has reported that, as of
the date of this Annual Report on Form 10-K, it has not been provided with any
information by the EPA and that its inquiry into this matter has not confirmed
any corporate relationship between Valentec Wells and the other company, nor has
it revealed any information to indicate that Valentec Wells ever sent wastes to
the Site. Safety has reported that it will continue to review this matter and
that as of the date of this Annual Report on Form 10-K it is unable to predict
the outcome or reasonably estimate a range of possible loss.

Although no assurances can be given in this regard, in the opinion of
Safety's management, no material expenditures beyond those accrued are expected
to be required for Safety's environmental control efforts and the final outcomes
of these matters are not expected to have a material adverse effect on Safety's
financial position or results of future operations. Safety has reported that
based on the advice of independent consultants on environmental matters it
believes that it currently is in compliance with applicable environmental
regulations in all material respects.

Zapata and its subsidiaries are subject to various possible claims and
lawsuits regarding environmental matters in addition to those discussed above.
Zapata's management believes that costs, if any, related to these matters will
not have a material adverse effect on the consolidated results of operations,
cash flows or financial position of the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company's Annual Meeting of Stockholders' was held on November 2, 2004.
In connection with the Annual Meeting of Stockholders, the following are the
results of the vote taken on the various matters presented to the Company's
stockholders.

All of the Board's nominees for directors were elected as follows:

The proposal to ratify the appointment of PricewaterhouseCoopers LLP as
independent auditors was passed with the following vote:

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES

Zapata's common stock is listed on the New York Stock Exchange ("NYSE") and
trades under the symbol "ZAP." The high and low sales prices for the common
stock, as reported in the consolidated

21

transactions reporting system, for each quarterly period for the last two fiscal
years, are shown in the following table.

The Company has not declared any dividends since the Company's Board of
Directors discontinued dividend payments in 1998. The Company may use all or a
significant portion of its cash assets in the acquisition of other operating
businesses, the minority interest of controlled subsidiaries, funding of
start-up proposals and possible stock repurchases as discussed below. In
deciding whether to declare dividends, the Company's Board of Directors will
consider the Company's operating results, cash flow, financial condition,
capital requirements, general business condition of its future operating
businesses and such other factors, as the Board deems relevant. The rights of
the holders of common stock to receive dividends or other payments with respect
thereto in the future will be subject to the prior and superior rights of
holders of Zapata's Preferred Stock and Preference Stock then outstanding.
Zapata has authorized Preferred Stock and Preference Stock, none of which are
outstanding as of the date of this report.

On December 6, 2002, the Board of Directors authorized the Company to
purchase up to 500,000 shares of its outstanding common stock in the open market
or privately negotiated transactions. The shares may be purchased from time to
time as determined by the Company. Any purchased shares would be placed in
treasury and may subsequently be reissued for general corporate purposes. The
repurchases will be made only at such times as are permissible under the federal
securities laws. No time limit has been placed on the duration of the program
and no minimum number or value of shares to be repurchased has been fixed.
Zapata reserves the right to discontinue the repurchase program at any time and
there can be no assurance that any repurchases will be made. As of the date of
this report, no shares have been repurchased under this program.

As of February 25, 2005, there were approximately 2,450 holders of record
of common stock. This number does not include the stockholders for whom shares
are held in a "nominee" or "street" name.

The following table sets forth information as of December 31, 2004, with
respect to compensation plans under which equity securities of the Company are
authorized for issuance:

22

ITEM 6. SELECTED FINANCIAL DATA

The following table sets forth certain selected historic consolidated
financial information of the Company for the periods and as of the dates
presented and should be read in conjunction with the Company's Consolidated
Financial Statements and the related notes thereto included in Item 8 of this
Report and with "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included in Item 7 of this Report. All amounts are in
thousands, except for per share amounts.

- ---------------

(1) During 2003, the Company purchased approximately 84% of the common stock of
Safety Components. Accordingly, balance sheet data related to Safety has
been included in the Company's consolidated balance sheet since the date of
acquisition. The Company began consolidating amounts related to Safety's
income statement and cash flow in the fourth quarter of 2003.

(2) During 2002, the Company received a federal tax refund of approximately
$17.3 million primarily related to losses realized on the sale in 2001 of
certain non-investment grade securities and the sale of the Company's
holdings of Viskase Corporation ("Viskase") common stock.

(3) During 2001, the Company recognized impairment charges of approximately
$11.8 million based on adverse market conditions and the sale of
non-investment grade securities.

(4) During 2001, the Company sold its Viskase shares. See Note 2 above.

(5) In December 2000, in connection with the termination of its Internet
businesses, Zap.Com recorded the necessary charges to write down applicable
investments in long-lived assets (which consisted mainly of its capitalized
software costs) to fair value, and to record estimated liabilities,
including costs associated with the termination of various contracts. These
charges totaled $1.5 million. In addition, Charged Productions, Inc. (a
former subsidiary of the Company) incurred a one-time charge of
approximately $434,000 related to asset write-downs and approximately
$182,000 related to contract termination expenses.

23

(6) During 2000, the Company recorded impairment losses of $13.2 million based
on adverse market conditions related to its non-investment grade holdings.

(7) During 2000, Omega Protein recorded inventory write-downs of $18.1 million
for market declines in the inventory values of Omega Protein's fish meal and
fish oil.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following is a discussion of the Company's financial condition and
results of operations. This discussion should be read in conjunction with the
Company's Consolidated Financial Statements included in Item 8 of this Report.
This discussion contains forward-looking statements that involve risks and
uncertainties. The Company's actual results could differ materially from those
discussed herein. Factors that could cause or contribute to such differences
include, but are not limited to, those discussed below in "Significant Factors
That Could Affect Future Performance and Forward-Looking Statements," as well as
those discussed in this section and elsewhere in this report.

GENERAL

Zapata is a holding company which currently has two operating companies,
Safety Components International, Inc. ("Safety Components" or "Safety") and
Omega Protein Corporation ("Omega Protein" or "Omega"). As of December 31, 2004,
the Company had a 79% ownership interest in Safety Components and a 58%
ownership interest in Omega Protein. Safety Components trades on the over-the
counter electronic bulletin board under the symbol "SAFY" and Omega Protein
trades on the New York Stock Exchange under the symbol "OME." In addition,
Zapata owns 98% of Zap.Com Corporation ("Zap.Com"), which is a public shell
company and trades on the over-the-counter electronic bulletin board under the
symbol "ZPCM."

ZAPATA CORPORATE

On September 23, 2003, Zapata purchased 2,663,905 shares of Safety
Components International, Inc. common stock for $30.9 million. On October 7,
2003, Zapata purchased an additional 1,498,489 shares of Safety common stock for
$16.9 million. These additional shares increased the Company's ownership
percentage of Safety's outstanding common stock to approximately 84% at that
time. The Company funded its purchases with cash, cash equivalents and
short-term investments. The Company accounted for these transactions under the
purchase method and began consolidating amounts related to Safety's assets and
liabilities as of September 30, 2003. Due to the timing of the acquisition, the
Company began consolidating amounts related to Safety's results of operations in
the fourth quarter of 2003.

After Zapata acquired more than 80% of its outstanding common stock, Safety
Components and its affiliated group of corporations became members of Zapata's
affiliated tax group. On March 19, 2004, Zapata and Safety Components entered
into a Tax Sharing and Indemnity Agreement to define their respective rights and
obligations relating to federal, state and other taxes for taxable periods
attributable to the filing of consolidated or combined income tax returns as
part of the Zapata affiliated tax group. Pursuant to the Tax Sharing and
Indemnity Agreement, Safety Components is required to pay Zapata its share of
federal income taxes, if any, for those periods. In addition, each party is
required to reimburse the other party for its use of either party's tax
attributes for those periods. Similar provisions apply under the Tax Sharing and
Indemnity Agreement to other taxes, such as state and local income taxes.

On or about April 1, 2004, Zapata's stock ownership percentage of Safety
Components outstanding stock decreased below 80% due to stock option exercises
by Safety Components' employees. As a result of Zapata's ownership of Safety
Components outstanding stock falling below 80%, Zapata will not consolidate
Safety Components into Zapata's consolidated income tax returns for periods
subsequent to the first quarter of 2004. Due to this deconsolidation, Zapata
Corporate began recording deferred taxes to reflect the impact of the basis
difference between "book" and "tax" resulting from the consolidation of Safety
Components for book purposes and the deconsolidation for tax purposes. Zapata
Corporate will continue to record deferred taxes for this basis difference as
long as Safety (or any of Zapata's subsidiaries) is consolidated for book
purposes and deconsolidated for tax purposes.

24

The Internal Revenue Code generally prohibits the reconsolidation of
companies for a period of 60 months. Therefore, if Zapata's stock ownership
percentage in Safety Components increases to 80% or more, there can be no
assurance that Safety would be reconsolidated into Zapata's tax filing group
before the 61st month after the first taxable year in which it ceased to be a
member of such group.

On September 2, 2004, the Malcolm I. Glazer Family Limited Partnership (the
"Glazer LP") filed a Schedule 13D indicating that it had acquired 114,700 shares
of common stock of Zapata Corporation. As a result of the transaction, the
Glazer LP now owns approximately 51.3% of the Company's outstanding common
stock.

In December 2002, the Board of Directors authorized the Company to purchase
up to 500,000 shares of its outstanding common stock in the open market or
privately negotiated transactions. No time limit has been placed on the duration
of the program and no minimum number or value of shares to be repurchased has
been fixed. As of the date of this report, no shares have been repurchased under
this program.

Zapata continues to evaluate strategic opportunities for the use of its
capital resources, including the acquisition of other operating businesses, ,
the minority interest of controlled subsidiaries, funding of start-up proposals
and possible stock repurchases. As of the date of this report, Zapata is not a
party to any agreements related to the acquisition of an operating business,
business combination or for the sale or other transaction related to any of its
subsidiaries. There can be no assurance that any of these possible transactions
will occur or that they will ultimately be advantageous to Zapata or enhance
Zapata stockholder value.

SAFETY COMPONENTS

Safety Components is a leading, low-cost, independent supplier of
automotive airbag fabric and cushions and technical fabrics with operations in
North America and Europe. Safety has recently entered into joint ventures to
produce products in China and South Africa, although commercial production has
not yet commenced in either of these locations. Safety Components sells airbag
fabric domestically and cushions worldwide to the major airbag module
integrators that outsource such products. Safety Components also manufactures
value-added technical fabrics used in a variety of niche industrial and
commercial applications such as ballistics material for luggage, filtration,
military tents and fire service apparel. Safety has reported that the ability to
interchange airbag and specialty technical fabrics using the same equipment and
similar manufacturing processes allows Safety to more effectively utilize its
manufacturing assets and lower per unit overhead costs.

As the automotive airbag industry has evolved, module integrators have
outsourced varying portions of non-proprietary components, such as cushions, to
companies like Safety Components specializing in the production of individual
components. Safety believes that its module integrator customers will continue
to outsource a portion of their cushion requirements as they focus on the
development of proprietary technologies. Safety also believes that a majority of
the module integrators purchase fabric from airbag fabric producers such as
Safety. Like the automotive supply industry generally, Safety continues to
experience significant competitive pressure. For example, Safety supplies airbag
cushions and/or airbag fabric to its three most significant customers based upon
releases from formal purchase orders, which typically cover periods of up to
twelve months and are subject to periodic negotiation with respect to price and
quantity. Safety expects that its customers, including these significant
customers, will continue to seek to negotiate lower prices for our products.
Although Safety believes that it has good working relationships with its
customers due to its high volume and low-cost manufacturing capabilities and
consistency of quality products and service, it cannot give assurances that
purchases by its module integrator customers will continue at their current
levels.

During the second quarter of 2004, one of Safety's largest raw materials
suppliers implemented a price increase of approximately 11% on raw material yarn
purchased for Safety's North America airbag fabric weaving facility. Safety's
management has estimated the impact on the cost of raw material purchases to be
approximately $1.4 million for the year ended December 31, 2004. Safety has not,
as yet, been successful in passing along most of this increase to its airbag
cushion customers in North America and continues in its efforts to do so,
although no assurances can be given in Safety maintaining such price levels.

25

During the third quarter of 2004, the Audit Committee of Safety's Board of
Directors, with the assistance of special outside counsel and a forensic
accounting firm, completed an investigation begun in July 2004 after
notification by Safety's management based upon issues raised by a Safety
employee who claimed improprieties in Safety's operations in Mexico and
California. The investigation of the issues raised did not substantiate any of
the concerns. Expenses related to the investigation of approximately $1 million
for the twelve months ended December 31, 2004 are included in general and
administrative expenses in the accompanying condensed consolidated statements of
operations.

On November 30, 2004, Safety announced that it had signed an agreement to
form the South Africa Joint Venture with Gelvenor. Safety anticipates that the
South Africa Joint Venture, which as of December 31, 2004 had not yet commenced
commercial production, will produce automotive airbag cushions in South Africa
utilizing the fabrics produced by Gelvenor. The initial production will be
intended to satisfy the South African domestic market, with additional
production capacity available to support Safety's growing worldwide customer
base by the end of 2005. Safety owns 75% of the entity formed to conduct the
operations of the South Africa Joint Venture.

On January 4, 2005, Safety announced it had signed an agreement to form the
China Joint Venture with Kingsway International Limited, an entity associated
with Huamao. Safety anticipates that the China Joint Venture, which has not yet
commenced commercial production, will produce automotive airbag cushions in
China utilizing the fabrics produced by Huamao. Pursuant to a technology
transfer and joint venture agreement, Safety will provide technical assistance
to its partner in the development of airbag fabrics. Production is intended to
satisfy the Chinese domestic market. Safety owns 65% of the entity formed to
conduct the operations of the China Joint Venture.

OMEGA PROTEIN

Business. Omega is the largest U.S. producer of protein-rich meal and oil
derived from marine sources. Omega's products are produced from menhaden (a
herring-like fish found in commercial quantities), and include FAQ grade and
value-added specialty fish meals, crude and refined fish oils and regular and
value-added fish solubles. Omega's fish meal products are used as nutritional
feed additives by animal feed manufacturers and by commercial livestock
producers. Omega's crude fish oil is sold to food producers and feed
manufacturers and its refined fish oil products are used in food production and
certain industrial applications. Fish solubles are sold as protein additives for
animal feed and as fertilizers.

Omega's harvesting season generally extends from May through December on
the mid-Atlantic coast and from April through October on the Gulf coast. During
the off season and the first few months of each fishing season, Omega fills
purchase orders from the inventory it has accumulated during the previous
fishing season. Prices for Omega's products tend to be lower during the fishing
season when product is more abundant than in the off season. Throughout the
entire year, prices are significantly influenced by supply and demand in world
markets for competing products, particularly other globally produced fish meal
and fish oil as well as other animal proteins and soybean meal for its fish meal
products and vegetable fats and oils for its fish oil products when used as an
alternative to vegetable fats and oils.

The fish catch is processed into FAQ grade fish meal, specialty fish meals,
fish oils and fish solubles at Omega's four operating plants located in
Virginia, Mississippi and Louisiana. Omega utilized 41 fishing vessels and 35
spotter craft in the harvesting operations during 2004. Menhaden are harvested
offshore the U.S. mid-Atlantic and Gulf of Mexico coasts. In 2000, Omega
converted several of its fishing vessels to "carry vessels" which do not engage
in active fishing but instead carry fish from Omega's offshore fishing vessels
to its plants. Utilization of carry vessels increases the amount of time that
certain of Omega's fishing vessels remain offshore fishing productive waters and
therefore increases Omega's fish catch per vessel employed. The carry vessels
have reduced crews and crew expenses and incur less maintenance cost then the
actual fishing vessels.

26

Harvesting and Production. The following table summarizes Omega's
harvesting and production for the indicated periods:

- ---------------

(1) Fish catch has been converted to tons using the National Marine Fisheries
Service ("NMFS") fish catch conversion ratio of 670 pounds per 1,000 fish.

During 2004 and 2003, Omega experienced a poor fish catch (approximately
18% and 11%, respectively, below expectations and a similar reduction from
2002), combined with poor oil yields. The reduced fish catch was primarily
attributable to adverse weather conditions and the poor oil yields due to the
reduced fat content of the fish. As a result of the poor fish catch and reduced
yields, Omega experienced significantly higher per unit product costs
(approximately 15% increase) during 2004 compared to 2003. The impact of higher
cost inventories and fewer volumes available for sale will be carried forward
and will adversely affect Omega's earnings through the first and second quarters
of 2005.

Markets. Pricing for Omega's products has been volatile in the past
several years and is attributable mainly to the international availability, or
the perceived international availability, of fish meal and fish oil inventories.
In an effort to reduce price volatility and to generate higher, more consistent
profit margins, in fiscal 2000 Omega embarked on a quality control program
designed to increase its capability of producing higher quality fish meal
products and, in conjunction therewith, enhanced it sales efforts to penetrate
premium product markets. Since 2000, Omega's sales volumes of specialty meal
products have increased approximately 41%. Future volumetric growth in specialty
meal sales will be dependant upon increased harvesting efforts and market
demand. Additionally, Omega is attempting to introduce its refined fish oil into
the food market. Omega has made sales, which to date have not been material, of
its refined fish oil, trademarked OmegaPure(R), to food manufacturers in the
United States and Canada at prices that provide substantially improved margins
over the margins that can be obtained from selling non-refined crude fish oil.
Omega cannot estimate, however, the size of the actual domestic or international
markets for Omega Pure or how long it may take to develop these markets.

During 2002, Omega developed a business plan to expand its purchase and
resale of other manufacturers' fish meal and fish oil products and engaged a
full-time consultant to implement Omega's business plan which focused initially
on the purchase and resale of Mexican fish meal and fish oil. In 2002, revenues
generated from these types of transactions represented less than 2% of total
Company revenues. During 2003 and again in 2004, Omega's fish catch and
resultant product inventories were reduced, primarily due to adverse weather
conditions. Omega supplemented its inventories and subsequent sales by
purchasing other fish meal and oil products. Although operating margins from
these activities are less than the margins typically generated from Omega's base
domestic production, these operations provide Omega with a source of fish meal
and oil to sell into other markets where Omega has not historically had a
presence. Omega purchased products totaling

27

approximately 17,800 and 12,500 tons, or approximately 8% and 5% of total volume
sales for the fiscal year ended December 31, 2004 and the fiscal year ended
December 31, 2003, respectively.

During 2004, Omega's fishing efforts in the Gulf of Mexico were hampered by
numerous hurricanes and bad weather which resulted in lower fish catches than
predicted. As a result, Omega's per unit product costs were higher than
anticipated and were higher than those experienced in the 2003 season. Such
reduced fish catch quantities results in higher cost inventories and
correspondingly higher cost of sales, as well as less available product for
sale. The impact of the higher costs inventories and fewer volumes available for
sale will be carried forward which will adversely affect Company earnings in the
first and second quarters of fiscal 2005.

Historically, approximately 35% to 40% of Omega's FAQ fish meal was sold on
a two-to-twelve-month forward contract basis. The balance of regular grade and
other products was substantially sold on a spot basis through purchase orders.
Omega began a similar forward sales program for its specialty grade meals and
crude fish oil for 2002 due to increasing demand for these products. During 2003
and 2004, approximately 50% and 43%, respectively, of its specialty meals and
crude fish oil had been sold on a forward contract basis. Omega's annual
revenues are highly dependent on both annual fish catch and inventories and, in
addition, inventory is generally carried over from one year to another year.
Omega determines the level of inventory to be carried over based on prevailing
market prices of the products and anticipated customer usage and demand during
the off season. Thus, production volume does not necessarily correlate with
sales volume in the same year and sales volumes will fluctuate from quarter to
quarter. Omega's fish meal products have a useable life of approximately one
year from date of production. Practically, however, Omega typically attempts to
empty its warehouses of the previous season's products by the second or third
month of the new fishing season. Omega's crude fish oil products do not lose
efficacy unless exposed to oxygen and therefore, their storage life typically is
longer than that of fish meal.

The following table sets forth Omega's revenues by product (in millions)
and the approximate percentage of total revenues represented thereby, for the
indicated periods:

Omega's principal raw material is menhaden, a species of fish that inhabits
coastal and inland tidal waters in the United States. Menhaden are undesirable
for direct human consumption due to their small size, prominent bones and high
oil content. Certain state agencies, as well as interstate compacts impose
resource depletion restrictions on menhaden pursuant to fisheries management
legislation or regulations and may impose additional legislation or regulations
in the future. For example, the Menhaden Management Board of the ASMFC voted in
February 2005 to initiate the preparation of an addendum to the existing ASMFC
Interstate Management Plan for Atlantic Menhaden which would limit the amount of
commercial menhaden catch in the Chesapeake Bay for a two-year period. The
proposal, if ultimately passed, would limit annual menhaden catch from the
Chesapeake Bay to the Bay's 5-year average catch, or 110,400 metric tons.
(Omega's Chesapeake Bay fish catch was 99,300 metric tons in 2004 or
approximately 22% of Omega's total 2004 fish catch). If any limitation were to
be ultimately imposed, it would likely become effective for Omega's 2006 and
2007 fishing seasons. See "-- Regulation." To date, Omega has not experienced
any material adverse impact on its fish catch or results of operations as a
result of these restrictions.

28

Omega from time to time considers potential transactions including, but not
limited to, enhancement of physical facilities to improve production
capabilities and the acquisition of other businesses. Certain of the potential
transactions reviewed by Omega would, if completed, result in its entering new
lines of business (generally including certain businesses to which Omega sells
its products such as pet food manufacturers, aquaculture feed manufacturers,
fertilizer companies and organic foods distributors) although historically,
reviewed opportunities have been generally related in some manner to Omega's
existing operations. Although Omega does not, as of the date hereof, have any
commitment with respect to a material acquisition, it could enter into such
agreement in the future.

Omega carries insurance for certain losses relating to its vessels and
Jones Act liability for employees aboard its vessels (collectively, "Vessel
Claims Insurance"). The typical Vessel Claims Insurance policy contains an
annual aggregate deductible ("AAD") for which Omega remains responsible, while
the insurance carrier is responsible for all applicable amounts which exceed the
AAD. It is Omega's policy to accrue current amounts due and record amounts paid
out on each claim. Once payments exceed the AAD, Omega records an insurance
receivable for a given policy year.

In 2003, Omega's Vessel Claims Insurance carrier for the period October 1,
1997 through September 30, 1998, and for 80% of Omega's Jones Act claims for the
period October 1, 1998 through March 31, 2000 was declared insolvent by a state
insurance regulator. Omega had previously provided an allowance for doubtful
accounts for all the amount due to Omega from the insurance carrier.

Seasonal and Quarterly Results. Omega's menhaden harvesting and processing
business is seasonal in nature. Omega generally has higher sales during the
menhaden harvesting season (which includes the second and third quarter of each
year) due to increased product availability, but prices during the fishing
season tend to be lower than during the off-season. As a result, Omega's
quarterly operating results have fluctuated in the past and may fluctuate in the
future. In addition, from time to time Omega defers sales of inventory based on
worldwide prices for competing products that affect prices for Omega's products
which may affect comparable period comparisons.

ZAP.COM

Zap.Com is a public shell company which does not have any existing business
operations. From time to time, Zap.Com considers acquisitions that would result
in it becoming an operating company. Zap.Com may also consider developing a new
business suitable for its situation.

29

CONSOLIDATED RESULTS OF OPERATIONS

The following tables summarize Zapata's consolidating results of operations
(in thousands). Certain reclassifications of prior year information have been
made to conform to the current presentation.

- ---------------

(1) For the year ended December 31, 2004, Safety's results of operations were
adjusted for the continuing effects of certain purchase accounting
adjustments. Net of tax effects, these adjustments reduced Zapata's
consolidated net income by approximately $498,000.

(2) Minority interest represents the minority stockholders' interest in the net
income (loss) of each segment.

(3) For the year ended December 31, 2003, due to the timing of the acquisition,
Safety's results of operations were included in Zapata's consolidated
results for the fourth quarter. This contribution to Zapata's consolidated
net income was impacted by purchase accounting adjustments, the largest of
which related to inventory. As of the date of the acquisition, and
consistent with the purchase method of accounting, Zapata recorded Safety's
inventory at fair value. This fair value was approximately $2.8 million
greater than the carrying value recorded by Safety. As all of the related
inventory was sold by December 31, 2003, Zapata recorded the entire amount
of the fair value mark-up as a charge to cost of goods sold during the
fourth quarter of 2003. Net of tax effects, this charge reduced Zapata's
consolidated net income by approximately $1.7 million.

For information affecting period to period comparability see the notes to
the selected financial data included in "Item 6 -- Selected Financial Data." For
more information concerning segments, see Note 24 to the Company's Consolidated
Financial Statements included in Item 8 of this Report.

2004 COMPARED TO 2003

Zapata reported consolidated net income of $3.7 million or $1.54 per
diluted share on revenues of $367.5 million for the year ended December 31, 2004
as compared to consolidated net income of $892,000 or $0.37 per diluted share on
revenues of $181.4 million in 2003. The increase in revenues is a result of the
consolidation of Safety's revenues for the full year ended December 31, 2004
into Zapata's consolidated

32

results. In the year ended December 31, 2003, Zapata's consolidated results
included Safety's revenues for only the fourth quarter. On a consolidated basis,
the increase in consolidated net income is a result of increased net income from
Safety Components, partially offset by a decrease in net income at Omega
Protein. In addition, Zapata Corporate's net loss increased due to an increase
in the provision for income taxes recognized to reflect changes in the Company's
book and tax basis in its subsidiaries.

Due to the timing of Zapata's acquisition of Safety Components common
stock, the Company began consolidating amounts related to Safety's results of
operations in the fourth quarter of 2003. Disclosures in the following section
regarding Safety's stand-alone results for periods prior to Zapata's acquisition
of Safety's common stock are included to provide additional information
regarding Safety Components. In addition, after Zapata's acquisition of Safety
Components, Safety changed its fiscal year end from the last Saturday in the
month of March to a calendar-based year ending December 31, to coincide with
Zapata's year end. To enhance comparability, Safety's operating results for the
year ended December 31, 2004 have been measured against the twelve months ended
December 31, 2003 (unaudited).

The following presents a more detailed discussion of the consolidated
operating results:

Revenues. Consolidated revenues increased $186.1 million from $181.4
million in 2003 to $367.5 million in 2004. This increase was attributable to the
timing of the acquisition of Safety Components and the consolidation of Safety's
revenues of $247.9 million for the year ended December 31, 2004 as compared to
the consolidation of $63.5 million for the year ended December 31, 2003. Omega's
revenues increased $1.7 million or 1%, from $117.9 million in 2003 to $119.6
million in 2004.

Safety's North American operations' net revenues decreased $8.4 million or
7% for the twelve months ended December 31, 2004 as compared to the 12 months
ended December 31, 2003, with the decrease principally due to decreased demand
in the North American automotive market. Net revenues for European operations
increased $9.1 million or 7% compared to the prior period. The increase in
European net revenues is due principally to the effect of changes in foreign
currency exchange rates that increased revenues as expressed in U.S. dollars by
approximately $12.5 million over the amount that would have been reported based
on exchange rates in effect in the twelve months ended December 31, 2003. The
favorable effect of exchange rates was offset by a reduction in volume of
approximately $3.3 million due to decreased demand in the European automotive
market.

Omega Protein's increase in revenues was due to higher selling prices of 7%
and 16% for fish meal and fish oil, respectively. 2004 sales volumes of fish
meal increased by 3% while 2004 sales volumes of the fish oil decreased by 29%.
Considering both fish meal and fish oil sales activities, Omega experienced an
$8.4 million increase in revenues due to higher prices, offset by a reduction of
$6.6 million in revenues caused by reduced sales volumes, when comparing 2004 to
2003. Omega attributes the lower fiscal 2004 oil sales volumes to a reduction in
fish oil inventories carried over the previous year and reduced fish catch
during 2004 attributable to adverse weather conditions resulting in fewer
volumes available for sale; fish meal volume sales were supplemented by
purchased products. Omega attributes the higher fish meal and fish oil prices to
lower available world supplies of fish meal and fish oil and higher prices for
other competing proteins and fats.

Cost of revenues. Zapata's consolidated cost of revenues for the year
ended December 31, 2004 was $314.3 million, a $159.7 million increase from
$154.6 million in 2003. This increase was primarily attributable to the
consolidation of Safety Components for a full year in 2004, rather than for
three months in 2003. In addition, consistent with purchase accounting, Zapata
recorded a $2.8 million charge to cost of revenues during the fourth quarter of
2003.

Including depreciation, amortization and purchase accounting adjustments,
Safety's cost of revenues was $210.0 million for 2004, a $4.9 million decrease
from the prior year. The decrease in cost of revenues as a percentage of
revenues was primarily attributable to a $3.6 million reduction in purchase
accounting adjustments during the current year as compared to the prior year,
$1.7 million cost savings which resulted from improvements in operating
efficiencies resulting from Safety's prior year closure of the United Kingdom
facility, and favorable effects of exchange rates of approximately $1.3 million.
These cost savings were partially

33

offset by an increase in costs at Safety's North American operations which were
caused by price increases in raw materials of approximately $1.4 million.

Omega's cost of revenues, including depreciation and amortization, for 2004
was $104.2 million, a $5.2 million increase or 5%. Cost of revenues as a
percentage of revenues was 87% for 2004 as compared to 84% for 2003. The 3%
increase in cost of revenues as percentage of revenue was primarily due to
higher 2004 cost of production due to reduced fish catch brought about by
adverse weather conditions along the Atlantic Coast and in the Gulf of Mexico.

Selling, general and administrative. Consolidated selling, general, and
administrative expenses increased $17.7 million from $20.0 million in 2003 to
$37.7 million in 2004. This increase was primarily attributable to the timing of
the acquisition of Safety Components and the consolidation of $23.2 million of
selling, general and administrative costs related to Safety for the year ended
December 31, 2004 as compared to $6.9 million for the quarter ended December 31,
2003.

Zapata Corporate's selling, general, and administrative increased
approximately $636,000 for the year ended December 31, 2004 as compared to the
same period in the prior year. This increase was primarily attributable to legal
reserves which were reversed in the prior year, partially offset by a reduction
in pension expense recognized during the current year. Additionally, Zapata
Corporate incurred approximately $112,000 of Sarbanes-Oxley related compliance
expenses during 2004.

Safety Components experienced an increase in selling and administrative
expenses for the year ended December 31, 2004 as compared to the twelve months
ended December 31, 2003. These additional expenses included: approximately
$300,000 in one-time charges associated with the closure of its United Kingdom
manufacturing facility which includes redundancy charges and moving expenses;
costs approximating $2.4 million in legal, professional and consulting expenses
regarding company financing, Sarbanes-Oxley related and other compliance
activities, including the investigation previously discussed; approximately
$566,000 in expense from the increased liability associated with recognized
gains on its deferred compensation plan assets; approximately $440,000 in
increased wage and employee benefits costs; and approximately $600,000 in costs
for implementation of new information systems. With the possible exception of
employee benefit and information systems costs, the above items are not expected
to continue at the current rate of expense for subsequent years.

Omega's selling, general and administrative expenses increased $751,000 or
8% from $9.4 million in 2003 to $10.1 million in 2004. The increase was
primarily due to increased consulting expenditures related to its governmental
relations program, Sarbanes-Oxley compliance efforts, and increases in
employee-related costs and marketing expenditures.

Interest income. Consolidated interest income decreased $571,000 from $1.6
million for the year ended December 31, 2003 as compared to $1.1 million for the
current year. This decrease is a result of a lower principal balance of cash and
cash equivalents at Zapata Corporate after spending $47.8 million in 2003 to
purchase a majority interest in Safety Components. In addition, interest income
decreased $349,000 at Safety Components, while interest income increased by
$151,000 at Omega Protein.

Interest expense. Interest expense increased $19,000 in 2004 from the
prior year. This increase was largely attributable to an increase at Safety
Components of $188,000 which was largely offset by a decrease in interest
expense at Omega Protein of $169,000.

Income taxes. The Company recorded a consolidated provision for income
taxes of $8.8 million for the year ended December 31, 2004 as compared to $3.7
million for the prior year. The increase in provision is primarily the result of
consolidating Safety Components for a full year in 2004 as compared to three
months in 2003, partially offset by a decrease in provision at Omega Protein
resulting from a decrease in pre-tax income during the period.

The Company's effective tax rate for the year ended December 31, 2004 was
55%. The high effective rate was primarily the result of Zapata Corporate's
current year recognition of a $2.1 million provision which reflects $2.7 million
of deferred tax liabilities recorded to reflect the Company's tax effected
proportionate

34

share of Omega and Safety's net income recognized during the period. For all
periods in which any of the Company's subsidiaries are consolidated for book
purposes and not consolidated for tax purposes, Zapata will recognize a
provision or benefit to reflect the increase or decrease in the difference
between the Company's book and tax basis in each subsidiary. The provision or
benefit will be equal to the sum of the Company's tax effected proportionate
share of each subsidiary's net income or loss. Accordingly, the Company's
effective tax rate for each period can vary significantly depending on the
changes in the underlying difference between the Company's book and tax basis in
its subsidiaries.

Minority interest. Minority interest from the consolidated statements of
operations represents the minority stockholders' interest in the net income of
the Company's subsidiaries (approximately 21% of Safety Components,
approximately 42% of Omega Protein and approximately 2% of Zap.Com). In 2004,
minority interest was a $3.4 million reduction to net income for Zapata's share
in the net incomes of Safety Components and Omega Protein, partially offset by
Zapata's share in the net loss of Zap.Com.

2003 COMPARED TO 2002

Zapata reported consolidated net income of $892,000 or $0.37 per share on
revenues of $181.4 million for the year ended December 31, 2003 as compared to
consolidated net income of $6.5 million or $2.71 per share on revenues of $117.0
million in 2002. The increase in revenues is a result of the consolidation of
Safety's revenues for the quarter ended December 31, 2003 into Zapata's
consolidated results. On a consolidated basis, the decrease in consolidated net
income is a result of decreased net income at Omega Protein, partially offset by
the consolidation of one quarter of Safety's net income.

The following presents a more detailed discussion of the consolidated
operating results:

Revenues. Consolidated revenues increased $64.4 million from $117.0
million in 2002 to $181.4 million in 2003. This increase was attributable to the
acquisition of Safety Components and the consolidation of Safety's revenues of
$63.5 million for the quarter ended December 31, 2003. Omega's revenues
increased $918,000 or 1%, from $117.0 million in 2002 to $117.9 million in 2003.
The increase in revenues was primarily due to higher selling prices of 7% and 1%
for Omega's fish meal and fish oil, respectively. Omega attributes the higher
fish meal and oil prices to lower available world supplies of fish meal and fish
oil and higher prices for other competing proteins and fats. 2003 sales volumes
for Omega's fish meal held constant, whereas fish oil volumes declined 12%
respectively. Omega attributes the lower 2003 sales volumes to a 11% reduction
in fish catch and a 14% reduction in total fish meal and fish oil production
during 2003, partially offset by purchased products.

Cost of revenues. Zapata's consolidated cost of revenues for the year
ended December 31, 2002 was $154.6 million, a $65.3 million increase from $89.3
million in 2002. This increase was primarily attributable to the acquisition of
Safety Components and the consolidation of Safety's cost of revenues for the
quarter ended December 31, 2003. In addition, as of the date of the acquisition,
and consistent with purchase accounting, Zapata recorded Safety's inventory at
fair value. The fair value was approximately $2.8 million greater than the
carrying value recorded by Safety. As all of the related inventory was sold by
December 31, 2003, the entire amount of the fair value mark-up was recorded as a
charge to cost of goods sold during the fourth quarter of 2003. Additionally,
Omega's cost of sales increased as a percentage of revenues to 84% in 2003 as
compared to 76% in 2002. Omega's increase in cost of sales as a percentage of
revenues was primarily due to higher 2003 cost of production due to reduced fish
catch brought about by adverse weather conditions along the Atlantic Coast and
Gulf of Mexico, combined with lower oil yields for Gulf of Mexico fish. Omega's
purchased meal and crude fish oil products (approximately 5% of sold volumes)
were purchased at prices higher than Omega's cost of production.

Selling, general and administrative. Consolidated selling, general, and
administrative expenses increased $8.1 million from $11.9 million in 2002 to
$20.0 million in 2003. This increase was primarily attributable to the
acquisition of Safety Components and the consolidation of $6.9 million of
selling, general and administrative costs related to Safety for the quarter
ended December 31, 2003. In addition, Zapata's pension expense increased in 2003
as compared to 2002, partially offset by a decrease in expenses under a
consultancy and retirement agreement entered into in 1981 with a former
executive officer of the Company.
35

Due to recent market conditions and plan assumptions, Zapata Corporate recorded
pension expense of approximately $508,000 for the year ended December 31, 2003
as compared to pension income of approximately $703,000 in 2002. Additionally,
Omega's selling, general and administrative expenses increased $335,000 over
2002 and was primarily attributable to increases in employee-related costs and
marketing expenses.

Interest income. Interest income decreased $377,000 from $2.0 million in
2002 to $1.6 million in 2003. This decrease was primarily due to a decrease in
interest income at Zapata Corporate after spending $47.8 million in 2003 to
purchase a majority interest in Safety, combined with a decrease at Omega
Protein as a result of lower interest rates as compared to 2002, partially
offset by the consolidation of three months of interest income from Safety
Components.

Interest expense. Interest expense increased $774,000 from $1.2 million in
2002 to $2.0 million in 2003. The increase is due to the consolidation of
$821,000 related to the acquisition of Safety Components for the year ended
December 31, 2003, and a decrease at Omega Protein of $47,000.

Income taxes. The Company recorded a consolidated provision for income
taxes of $3.7 million for the year ended December 31, 2003 as compared to a
provision of $5.1 million for the year ended December 31, 2002. The consolidated
provision for the year ended December 31, 2003 was primarily the result of
Omega's provision of $2.8 million resulting from the generation of operating
income. The decrease in the income tax provision in 2003 was primarily the
result in the decrease in taxable income generated by Omega Protein during 2003
as compared to 2002. Additionally, during 2003 Zapata finalized its audit with
the Internal Revenue Service for the tax years ended September 30, 1997 through
2001. This resulted in a net tax benefit of approximately $3.1 million relating
to a federal refund and the elimination of certain tax contingencies. This
benefit was offset by the recognition of a deferred tax liability of
approximately $4.5 million associated with the excess of book basis over tax
basis attributable to Zapata's investment in Omega Protein.

Minority interest. Minority interest from the consolidated statements of
operations represents the minority stockholders' interest in the net income of
the Company's subsidiaries (approximately 16% of Safety Components,
approximately 41% of Omega Protein and approximately 2% of Zap.Com). In 2003,
minority interest was a $2.8 million reduction to net income for Zapata's share
in the net incomes of Safety Components and Omega Protein, partially offset by
Zapata's share in the net loss of Zap.Com.

LIQUIDITY AND CAPITAL RESOURCES

Zapata, Safety Components, Omega Protein and Zap.Com are separate public
companies. Accordingly, the capital resources and liquidity of Safety
Components, Omega Protein and Zap.Com are legally independent of Zapata. The
working capital and other assets of Safety Components, Omega Protein and Zap.Com
are dedicated to their respective operations and are not expected to be readily
available for the general corporate purposes of Zapata, except for any dividends
that may be declared and paid to their respective stockholders. The credit
facilities of Safety Components and Omega Protein currently prohibit any
dividends from being declared or paid with respect to their respective
outstanding capital stock, including the shares held by Zapata. For all periods
presented in this Report, Zapata has not received any dividends from any of its
consolidated subsidiaries.

36

The following tables summarizes information about Zapata's consolidated
contractual obligations (in thousands) as of December 31, 2004 and the effect
such obligations are expected to have on its consolidated liquidity and cash
flow in future periods:

- ---------------

(1) As of December 31, 2004, the Company had $30.5 million in consolidated
indebtedness, of which $6.3 and $24.2 related to Safety Components and Omega
Protein, respectively. Amounts include allocations for future interest
payments on outstanding debt obligations. Zapata has neither guaranteed nor
otherwise agreed to be liable for the repayment of this debt. For more
information concerning debt, see Note 11 to the Company's Consolidated
Financial Statements included in Item 8 of this Report.

(2) As of December 31, 2004, the Company had $1.2 million in consolidated
capital lease obligations, all of which related to Safety Components.
Amounts include allocations for future interest payments on outstanding
capital lease obligations. Zapata has neither guaranteed nor otherwise
agreed to be liable for the repayment of these obligations. For more
information concerning capital lease obligations see Note 16 to the
Company's Consolidated Financial Statements included in Item 8 of this
Report.

(3) For more information concerning operating leases, see Note 16 to the
Company's Consolidated Financial Statements included in Item 8 of this
Report.

(4) For more information concerning the consulting agreement with Malcolm
Glazer, see Note 21 to the Company's Consolidated Financial Statements
included in Item 8 of this Report. Other amounts in this category are
related to a consultancy and retirement agreement entered into in 1981 with
a former executive officer of the Company.

(5) For more information concerning pension liabilities, see Note 12 to the
Company's Consolidated Financial Statements included in Item 8 of this
Report.

(6) As of December 31, 2004, Omega had no outstanding borrowings outstanding
under the $20 million Credit Facility other than $2.7 million in stand-by
letters of credit. In September 2004 the United States Department of
Commerce Fisheries Finance Program approved a $14 million financing
application ("Approval Letter") made by Omega. As of December 31, 2004,
Omega had no borrowings under the Approval Letter. In December 2004, Omega
submitted a $4.9 million financing request, and expects to receive the $4.9
million financing request in March 2005.

(7) As of December 31, 2004, Omega had normal purchase commitments for energy
usage of approximately $3.4 million, that will be delivered in quantities
expected to be used in the normal course of business during the 2005 fishing
season.

Safety Components has material commitments, but not an obligation in the
case of China, for funding of its joint ventures through the combination of
machinery and equipment, related in-kind services and loan contributions of up
to $6.5 million and $1.2 million for the China and South Africa joint venture
enterprises, respectively, as of December 31, 2004.

37

In October 2004, Omega completed construction and commenced operations of a
new Health and Science Center at a cost of $18.9 million. Omega anticipates
making approximately $9.6 million of capital expenditures in 2005. Safety
Components expects to incur capital expenditures of approximately $12.0 million
in 2005 to support new programs from the Company's customers, and to invest in
new technology and its joint venture operations.

Additionally, Omega has entered into a non-binding letter of intent to
purchase a 40-acre facility containing office and warehouse space located next
to its Moss Point, Mississippi facility. The proposed purchase price is $1.75
million. The property would allow Omega to develop additional and more cost
effective rail and trucking opportunities and enhanced packaging capabilities.
If Omega acquires the property, it estimates that it will spend an additional
$2.0 million in 2005 for capital improvements to the property.

ZAPATA CORPORATE

Because Zapata does not guarantee or otherwise assume the liabilities of
Safety Components, Omega Protein or Zap.Com or have any investment commitments
to these majority-owned subsidiaries, it is useful to separately review the cash
obligations of Zapata exclusive of its majority-owned subsidiaries ("Zapata
Corporate").

Zapata Corporate's liquidity needs are primarily for operating expenses,
litigation, insurance costs and possible Zapata stock repurchases. Zapata
Corporate may also invest a significant portion of its cash, cash equivalents
and short-term investments in the purchase of operating companies.

The following table summarizes information about Zapata Corporate's
contractual obligations (in thousands) as of December 31, 2004, and the effects
such obligations are expected to have on Zapata Corporate's liquidity and cash
flow in future periods:

- ---------------

(1) For more information concerning operating leases, see Note 16 to the
Company's Consolidated Financial Statements included in Item 8 of this
Report.

(2) For more information concerning the consulting agreement with Malcolm
Glazer, see Note 21 to the Company's Consolidated Financial Statements
included in Item 8 of this Report. Other amounts in this category are
related to a consultancy and retirement agreement entered into in 1981 with
a former executive officer of the Company.

(3) For more information concerning pension liabilities, see Note 12 to the
Company's Consolidated Financial Statements included in Item 8 of this
Report.

Zapata Corporate's current source of liquidity is its cash, cash
equivalents and short-term investments and the interest income it earns on these
funds. Zapata expects these assets to continue to be a source of liquidity
except to the extent that they may be used to fund any acquisitions of operating
companies, the minority interest of controlled subsidiaries, or repurchases of
Zapata stock. Zapata Corporate's investments consist of U.S. Government agency
securities and cash equivalents. As of December 31, 2004, Zapata Corporate's
cash, cash equivalents and short-term investments were $28.7 million as compared
to $31.6 million as of December 31, 2003. This decline resulted primarily from
cash used by Zapata Corporate's operations, largely offset by an income tax
refund and amounts received from Safety Components under a tax sharing
agreement.

38

In addition to its cash, cash equivalents, short-term investments and
interest income, Zapata Corporate has a potential secondary source of liquidity
from dividends declared by Safety Components, Omega Protein or Zap.Com, provided
a consent is obtained from their lenders. Also, the sale of the Company's
holdings of common stock in these subsidiaries could provide another secondary
source of liquidity. These holdings constitute "restricted stock" under SEC Rule
144 and may only be sold in the public market pursuant to an effective
registration statement under the Securities Act of 1933 and under any required
state securities laws or pursuant to an available exemption. These and other
securities law restrictions could prevent or delay any sale by Zapata of these
securities or reduce the amount of proceeds that might otherwise be realized
therefrom. Currently, all of Zapata's equity securities holdings are eligible
for sale under Rule 144. Zapata also has demand and piggyback registration
rights for its Omega Protein and Zap.Com shares. The low trading volumes for
Safety Components, Omega Protein and Zap.Com common stock may make it difficult
for Zapata to sell any significant number of shares in the public market.

Zapata management believes that, based on current levels of operations and
anticipated growth, cash flow from operations, together with other available
sources of funds, will be adequate to fund its operational and capital
requirements for at least the next twelve months. Depending on the size and
terms of future acquisitions of operating companies or of the minority interest
of controlled subsidiaries, Zapata may raise additional capital through the
issuance of equity or debt. There is no assurance, however, that such capital
will be available at the time, in the amounts necessary or with terms
satisfactory to Zapata.

OFF-BALANCE SHEET ARRANGEMENTS

The Company and its subsidiaries do not have any off-balance sheet
arrangements that are material to its financial position, results of operations
or cash flows. The Company is a party to agreements with its officers, directors
and to certain outside parties. For further discussion of these guarantees, see
Note 16 to the Consolidated Financial Statements included in Item 8 of this
report. In addition, Safety enters into derivative foreign contracts. See Note
23 to the Consolidated Financial Statements included in Item 8 of this report
for additional information related to derivatives and hedging.

SUMMARY OF CASH FLOWS

The following table summarizes Zapata's consolidating cash flow information
(in thousands) for the last three fiscal years:

- ---------------

(1) Due to the timing of the acquisition, Safety's cash flow information has
been included in Zapata's consolidated cash flows beginning in the fourth
quarter of 2003.

NET CASH PROVIDED BY OPERATING ACTIVITIES.

Consolidated cash provided by operating activities was $30.9 million and
$14.1 million for the years ended December 31, 2004 and 2003 respectively. The
increase in consolidated cash provided by operating activities was primarily due
to Omega's increase of $8.8 million in 2004 as compared to 2003 combined with an
increase of $5.4 million attributable to Safety Components. Omega's increase
resulted primarily from timing of receivables as compared to the prior year.
Safety's increase resulted primarily from including 12 months of its cash flow
results in 2004 as compared to three months in 2003 due to the timing of the
acquisition. These increases were partially offset by a decrease of $2.5 million
at Zapata Corporate primarily related to deferred income taxes.

Consolidated cash provided by operating activities was $14.1 million and
$33.1 million for the years ended December 31, 2003 and 2002 respectively. The
decrease in consolidated cash provided by operating activities was primarily due
to a federal income tax refund of $17.3 million that was received during 2002 by
Zapata Corporate. This refund caused Zapata Corporate to have a significant
amount of cash provided by operating activities during 2002. The decrease in
cash provided by Omega Protein's operating activities was primarily due the
timing of changes in the balances of certain assets and liabilities and lower
net income. On a consolidated basis, this decrease was partially offset by cash
provided by Safety Component's operating activities.

NET CASH USED IN INVESTING ACTIVITIES.

Consolidated cash used in investing activities was $29,000 and $46.8
million for the years ended December 31, 2004 and 2003 respectively. The
decrease in consolidated cash used in investing activities was primarily due to
the Company's purchase of 84% of Safety Components common stock for $47.8
million in 2003, compared to no such acquisitions in 2004. This decrease was
partially offset by an $11.9 million increase in cash used in investing
activities at Safety Components which primarily resulted from consolidating

40

12 months of cash flow results in 2004 as compared to three months in 2003 due
to the timing of the acquisition. This decrease was also partially offset by
increases in cash used in investing activities at Omega Protein of $8.1 million
related to funding of the construction of the new Health and Science Center. The
use of cash in investing activities at Omega Protein and Safety Components was
almost entirely offset by the change in the mix of Zapata Corporate's cash and
cash equivalents and short-term investments. Variations in the Company's
consolidated net cash (used in) provided by investing activities are typically
the result of the change in mix of cash, cash equivalents, short- and long-term
investments during the period. All highly liquid investments with original
maturities of three months or less are considered to be cash equivalents and all
investments with original maturities of greater than three months are classified
as either short- or long-term investments.

Other than possible acquisitions of operating companies, the minority
interest of controlled subsidiaries, funding of start-up proposals and possible
stock repurchases, Zapata Corporate does not expect any capital expenditures
during 2005. Safety Components has reported that it anticipates making $12.0
million of capital expenditures in 2005 to support new programs from its
customers, to invest in new technology and its joint venture operations. Omega
Protein has reported that it anticipates making $9.6 million of capital
expenditures during 2005. In addition, Omega has entered into a non-binding
letter of intent to purchase a 40-acre facility containing office and warehouse
space located next to its Moss Point, Mississippi facility. The proposed
purchase price is $1.75 million. The property would allow Omega to develop
additional and more cost effective rail and trucking opportunities and enhanced
packaging capabilities. If Omega acquires the property, Omega estimates that it
will spend an additional $2.0 million in 2005 for capital improvements to the
property.

Consolidated cash used in investing activities was $46.8 million and $13.7
million for the years ended December 31, 2003 and 2002 respectively. The
increase in consolidated cash used in investing activities was primarily due to
the Company's purchase of 84% of Safety Components common stock for $47.8
million in 2003.

NET CASH USED IN FINANCING ACTIVITIES.

Consolidated cash used in financing activities was $9.2 million and $4.6
million for the years ended December 31, 2004 and 2003 respectively. The
increase in consolidated cash used in financing activities was primarily due to
Omega's proceeds from Title XI and other borrowings of $5.3 million in 2003 as
compared to no such borrowings in 2004. This increase was partially offset by a
decrease of $632,000 at Safety Components resulting from consolidating 12 months
of cash flow results in 2004 as compared to three months in 2003 due to the
timing of the acquisition.

Consolidated cash used in financing activities was $4.6 million and $1.3
million for the years ended December 31, 2003 and 2002 respectively. The
increase in consolidated cash used in financing activities was primarily due to
Safety's net repayment on borrowings, partially offset by Omega's net borrowings
and cash proceeds from the exercise of stock options.

RECENT ACCOUNTING PRONOUNCEMENTS

In November 2004, the FASB issued Statement of Financial Accounting
Standards (SFAS) No. 151, "Inventory Costs," which clarifies the accounting for
abnormal amounts of idle facility expense, freight, handling costs, and wasted
material. SFAS No. 151 will be effective for inventory costs incurred during
fiscal years beginning after June 15, 2005. The Company is in the process of
reviewing the impact, if any, of the adoption of this statement and believes
that the adoption of this standard will not have a material effect on the
Company's consolidated financial position, results of operations or cash flows.

In December 2004, the FASB issued SFAS No. 123R, "Share Based Payment,"
that requires companies to expense the value of employee stock options and
similar awards for interim and annual periods beginning after June 15, 2005 and
applies to all outstanding and unvested stock-based awards at a company's
adoption date. The Company is in the process of reviewing the impact of the
adoption of this statement and believes that the adoption of this standard may
have a material effect on the Company's consolidated financial position and
results of operations.
41

In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary
Assets," which eliminates the exception for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance. SFAS No. 153 will be
effective for nonmonetary asset exchanges occurring in fiscal periods beginning
after June 15, 2005. The Company is in the process of reviewing the impact, if
any, of the adoption of this statement and believes that the adoption of this
standard will not have a material effect on the Company's consolidated financial
position, results of operations or cash flows.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The discussion and analysis of Zapata's consolidated financial condition,
liquidity and results of operations are based upon our consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States of America. The preparation of these
financial statements requires management to make estimates and assumptions that
affect amounts reported therein. The following lists our current accounting
policies involving significant management judgment and provides a brief
description of these policies:

Acquisition Accounting. The Company accounts for acquisitions using the
purchase method of accounting in accordance with SFAS No. 141, "Business
Combinations." Under the purchase method, the Company is required to record the
net assets acquired at the estimated fair value at the date of acquisition. The
determination of the fair value of the assets acquired and liabilities assumed
requires the Company to make estimates and assumptions that affect the Company's
financial statements. In addition, depending on the specific facts and
circumstances, goodwill and other intangible assets, including those intangible
assets with finite lives could result from an acquisition. Different estimates
and assumptions regarding these assets, specifically the estimated fair values
and lives, could result in materially different amortization expense over the
estimated lives of such assets.

For example, the Company's acquisition of Safety Components resulted in the
creation of a customer relationship intangible asset valued at approximately
$7.8 million. While the useful life of this customer relationship asset is not
limited by contract or any other economic, regulatory or other known factors, a
useful life of 4 years was determined based on the average duration of
established airbag programs in place as of the date of acquisition.

Litigation reserves. The establishment of litigation reserves requires
judgments concerning the ultimate outcome of pending litigation against the
Company and its subsidiaries. In applying judgment, management utilizes opinions
and estimates obtained from outside legal counsel to apply the standards of SFAS
No. 5 "Accounting for Contingencies." Accordingly, estimated amounts relating to
certain litigation have met the criteria for the recognition of a liability
under SFAS No. 5. Other litigation for which a liability has not been recognized
is reviewed on an ongoing basis in conjunction with the standards of SFAS No. 5.
A liability is recognized for all associated legal costs as incurred.
Liabilities for litigation settlements, legal fees and changes in these
estimated amounts may have a material impact on the Company's financial
position, results of operations or cash flows.

For example, in a claim settled in 2003 against Zapata and a non-operating
wholly-owned subsidiary of Zapata which commenced during the 1990's, the Company
had been carrying a reserve of $1.0 million due to the uncertainty regarding the
Company's insurance coverage as it related to the claim. During July 2003, a
court granted summary judgment to Zapata and our subsidiary holding that the
insurance carrier owed a duty to defend and indemnify both Zapata and our
subsidiary in this matter. Based on the court's decision, Zapata reversed the
entire $1.0 million reserve into income during 2003.

Deferred income taxes. Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates expected to apply to taxable income in the years in
which the temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in the tax rates is
recognized in earnings in the period that includes the enactment date.
Additionally, taxing jurisdictions could retroactively disagree with
42

the Company's tax treatment of certain items, and some historical transactions
have income tax effects going forward. Accounting rules require these future
effects to be evaluated using current laws, rules and regulations, each of which
can change at any time and in an unpredictable manner.

The Company reduces its deferred tax assets to an amount that it believes
is more likely than not to be realized. In so doing, the Company estimates
future taxable income in determining if any valuation allowance is necessary.
While the Company believes it is more likely than not that it will be able to
realize its amount of estimated deferred tax assets, it is possible that the
facts and circumstances on which the Company's estimates and judgments are based
could change, which could result in additional income tax expense in the future
to recognize or increase the associated valuation allowances.

Benefit plan assumptions. On a consolidated basis, the Company has three
defined benefit plans, under which participants earn a retirement benefit based
upon a formula set forth in each plan. The Company records income or expense
related to these plans using actuarially determined amounts that are calculated
under the provisions of SFAS No. 87, "Employers' Accounting for Pensions." Key
assumptions used in the actuarial valuations include the discount rate and the
anticipated rate of return on plan assets. These rates are based on market
interest rates, and therefore fluctuations in market interest rates could impact
the amount of pension income or expense recorded for these plans. Despite the
Company's belief that its estimates are reasonable for these key actuarial
assumptions, future actual results will likely differ from the Company's
estimates, and these differences could materially affect the Company's future
financial statements either unfavorably or favorably.

The discount rate enables a company to state expected future cash flows at
a present value on the measurement date. Both Zapata and Omega Protein have
little latitude in selecting this rate; it is based on the yield on high-quality
fixed income investments at the measurement date. A lower discount rate
increases the present value of benefit obligations and increases pension
expense. On a consolidated basis, a 50 basis point reduction in the discount
rate would increase pension expense by $62,000 in 2004.

To determine the expected long-term rate of return on pension plan assets,
Zapata and Omega Protein consider a variety of factors including historical
returns and asset class return expectations based on each Company's plan's
current asset allocation. On a consolidated basis, a 50 basis point reduction in
the expected return on assets would increase pension expense by $147,000 in
2004.

Safety's Foreign Currency Translation. Financial statements of
substantially all of Safety's foreign operations are prepared using the local
currency as the functional currency. In accordance with SFAS No. 52, "Foreign
Currency Translation," translation of these foreign operations to United States
dollars occurs using the current exchange rate for balance sheet accounts and a
weighted average exchange rate for results of foreign operations. Translation
gains or losses are recognized in "accumulated other comprehensive income
(loss)" as a component of stockholders' equity in the accompanying consolidated
balance sheets. Safety's subsidiary in Mexico prepares its financial statements
using the United States dollar as the functional currency. Since the Mexico
subsidiary does not have external sales and does not own significant amounts of
inventory or fixed assets, Safety has determined that the United States dollar
is the appropriate functional currency. Accordingly, the translation effects of
the financial statements are included in the results of operations.

Safety's operations in Mexico, Germany, the United Kingdom, the Czech
Republic, China and South Africa expose Safety to currency exchange rate risks
associated with the volatility of certain foreign currencies against its
functional currency, the U.S. dollar. In the fiscal year ended December 31,
2004, the nine month period from March 30, 2003 to December 31, 2003 and the
year ended March 29, 2003, the impact of changes in the relationship of other
currencies to the U.S. dollar resulted in the recognition of other income of
approximately $677,000, $2.0 million and $3.5 million, respectively. It is
unknown what effect foreign currency rate fluctuations will have on Safety's
financial position or results of operations in the future. If, however, there
were a sustained decline of these currencies versus the U.S. dollar, the
Consolidated Financial Statements could be materially adversely affected.

43

Omega's Impairment of Long-Lived Assets. Omega evaluates at each balance
sheet date the continued appropriateness of the carrying value of its long-lived
assets including its long-term receivables and property, plant and equipment in
accordance with Statement of Financial Accounting Standards ("SFAS") No. 144,
"Accounting for the Impairment or Disposals of Long-Lived Assets." Omega reviews
long-lived assets for impairment when events or changes in circumstances
indicate that the carrying amount of any such assets may not be recoverable. If
indicators of impairment are present, management would evaluate the undiscounted
cash flows estimated to be generated by those assets compared to the carrying
amount of those items. The net carrying value of assets not recoverable is
reduced to fair value. Omega considers continued operating losses, or
significant and long-term changes in business conditions, to be its primary
indicators of potential impairment. In measuring impairment, Omega looks to
quoted market prices, if available, or the best information available in the
circumstances.

Omega's lower-of-cost-or-market inventory analysis. Inventory is stated at
the lower of cost or market. Omega Protein's fishing season runs from mid-April
to the first of November in the Gulf of Mexico and from the beginning of May
into December in the Atlantic. Government regulations generally preclude Omega
Protein from fishing during the off-seasons.

Omega Protein's inventory cost system considers all costs associated with
an annual fish catch and its processing, both variable and fixed and including
both costs incurred during the off-season and during the fishing season. Omega
Protein's costing system allocates cost to inventory quantities on a per unit
basis as calculated by a formula that considers total estimated inventoriable
costs for a fishing season (including off-season costs) to total estimated fish
catch and the relative fair market value of the individual products produced.
Omega Protein adjusts the cost of sales, off-season costs and inventory balances
at the end of each quarter based on revised estimates of total inventoriable
costs and fish catch. Omega Protein's lower-of-cost-or-market-value analyses at
year-end and at interim periods compare the total estimated per unit production
cost of Omega's expected production to the projected per unit market prices of
the products. The impairment analyses involve estimates of, among other things,
future fish catches and related costs, and expected commodity prices for the
fish products. These estimates, which Omega's management believes are reasonable
and supportable, involve estimates of future activities and events which are
inherently imprecise and for which actual results may differ materially.
Revisions in such estimates or actual results could materially impact Omega
Protein's results of operation and financial position.

Omega's deferral of off-season costs. During the off-seasons, in
connection with the upcoming fishing seasons, Omega Protein incurs costs (i.e.,
plant and vessel related labor, utilities, rent and depreciation) that are
directly related to Omega's infrastructure. These costs accumulate in inventory
and are applied as elements of the cost of production of Omega Protein's
products throughout the fishing season ratably based on Omega's monthly fish
catch and the expected total fish catch for the season.

Omega's accounting for self-insurance retentions. Omega Protein carries
insurance for certain losses relating to its vessels and Jones Act liabilities
for employees aboard its vessels (collectively, "Vessel Claims Insurance"). The
typical Vessel Claims Insurance policy contains an annual aggregate deductible
("AAD") for which Omega remains responsible, while the insurance carrier is
responsible for all applicable amounts which exceed the AAD. It is Omega's
policy to accrue current amounts due and record amounts paid out on each claim.
Once payments exceed the AAD, Omega records an insurance receivable for a given
policy year. Omega Protein provides reserves for those portions of the AAD for
which Omega remains responsible by using an estimation process that considers
Omega Protein, Inc. specific and industry data as well as Omega Protein
management's experience assumptions and consultation with outside counsel. Omega
Protein management's current estimated range of liabilities related to such
cases is based on claims for which Omega's management can estimate the amount
and range of loss. The process of estimating and establishing reserves for these
claims is inherently uncertain, and the actual ultimate net cost of a claim may
vary materially from the estimated amount reserved. As additional information
becomes available, Omega will assess the potential liability related to its
pending litigation and revise its estimates. Such revisions in estimates of the
potential liability could materially impact Omega Protein's results of operation
and financial position.

44

The Company continually updates and assesses the facts and circumstances
regarding these critical accounting matters and other significant accounting
matters affecting estimates in its financial statements. See "Significant
Factors That Could Affect Future Performance and Forward-Looking Statements."

SIGNIFICANT FACTORS THAT COULD AFFECT FUTURE PERFORMANCE AND FORWARD-LOOKING
STATEMENTS

1. Zapata believes that its results of operations, cash flows and financial
condition could be negatively impacted by certain risks and uncertainties,
including, without limitation, the risks and uncertainties identified in
Zapata's other public reports and filings made with the SEC, press releases and
public statements made by authorized officers of Zapata from time to time and
those risks and uncertainties set forth below.

- Risks associated with the fact that a significant portion of Zapata's
assets have consisted of securities, including equity and other interests
in its operating companies. This could subject Zapata to the registration
requirements of the Investment Company Act of 1940 (the "Investment
Company Act"). The Investment Company Act requires registration of, and
imposes substantial restrictions on, certain companies that engage, or
propose to engage, primarily in the business of investing, reinvesting,
owning, holding or trading in securities, or that fail certain
statistical tests concerning a company's asset composition and sources of
income. Zapata intends to actively participate in the management of its
operating companies, consistent with applicable laws, contractual
arrangements and other requirements. Accordingly, Zapata believes that it
is primarily engaged in a business other than investing, reinvesting,
owning, holding or trading in securities. Further, Zapata endeavors to
ensure that its holdings of investment securities constitute less than
40% of its total assets (excluding Government securities and cash) on an
unconsolidated basis. Zapata intends to monitor and attempt to adjust the
nature of its interests in and involvement with operating companies in
order to avoid subjecting Zapata to the registration requirements of the
Investment Company Act. There can be no assurance, however, that Zapata's
business activities will not ultimately subject Zapata to the Investment
Company Act. If Zapata were required to register as an investment company
under the Investment Company Act, it would become subject to regulations
that would have a material adverse impact on its financial position,
results of operations and cash flows.

- Risks associated with the personal holding company penalty tax. Section
541 of the Internal Revenue Code of 1986, as amended (the "IRC"),
subjects a corporation, which is a "personal holding company" as defined
in the IRC, to a 15% penalty tax on "undistributed personal holding
company income" in addition to the corporation's normal income tax.
Generally, undistributed personal holding company income is based on
taxable income, subject to certain adjustments, most notably a reduction
for Federal incomes taxes. Personal holding company income is comprised
primarily of passive investment income plus, under certain circumstances,
personal service income. Zapata and its domestic subsidiaries (other than
Safety and Omega) could become subject to the penalty tax if (i) 60% or
more of its adjusted ordinary gross income is personal holding company
income and (ii) 50% or more of its outstanding common stock is owned,
directly or indirectly, by five or fewer individuals at any time during
the last half of the taxable year. The Company believes that five or
fewer of Zapata's stockholders hold 50% or more of its outstanding common
stock for purposes of IRC Section 541. However, as of December 31, 2004,
Zapata and its domestic subsidiaries (other than Safety and Omega) had no
undistributed personal holding company income and therefore has not
recorded a personal holding company tax liability. There can be no
assurance that Zapata will not be subject to this tax in the future that
in turn may materially and adversely impact the Company's financial
position, results of operations and cash flows.

- Risks associated with a change of ownership pursuant to Section 382 of
the Internal Revenue Code. Such risks could significantly or possibly
eliminate Zapata's utilization of its net operating losses and/or
alternative minimum tax credits. An ownership change for this purpose is
generally a change in the majority ownership of a company over a three
year period.

- Risks associated with the ownership by the Malcolm I. Glazer Family
Limited Partnership of approximately 51.3% of our outstanding common
stock. Our majority stockholder will have the ability

45

to effectively control our management and affairs. In addition, any
action requiring a simple-majority stockholder vote can be determined
solely by our majority stockholder. This includes the ability to elect
all members of our Board of Directors and determine the outcome of
certain corporate actions requiring majority stockholder approval, such
as merger and acquisition decisions, and the election of directors, or
sale of all or substantially all of our assets. This level of ownership
may also have a significant effect in delaying, deferring, or preventing
a change in control of Zapata and may adversely affect the voting and
other rights of other holders of our common stock.

- Risk that our earnings may be reduced in the future due to the potential
impairment of our intangible assets. The Company's acquisition of Safety
Components common stock resulted in the recognition of intangible assets.
As required by applicable accounting rules, we evaluate the carrying
value of our intangible assets whenever certain events or changes in
circumstances indicate that the carrying amount of these assets may not
be recoverable. If we determine through this process that the value of
these assets has been impaired, we may be required to record impairment
charges in our Statement of Operations. Such charges may be substantial.

- Risk that our subsidiaries' outstanding stock options could significantly
dilute our ownership in these subsidiaries. Such dilution would cause the
Company to consolidate proportionately less net income (or loss)
recognized by our subsidiaries and would increase minority interest. Such
dilution could also cause a loss of control (typically when ownership
falls below 50%) which could lead to deconsolidation. Such investments
would be subsequently accounted for under the equity method of
accounting.

- Risk that the carrying value of the Company's prepaid pension asset could
be significantly reduced. In the event that the Company decides to
terminate its pension plan (the "Plan"), at the time of this decision,
the Company would be required to incur a non-cash charge through earnings
in an amount equal to the remaining balance of the Plan's unrecognized
net losses and unrecognized prior service cost components of the Plan's
prepaid pension asset. If not terminated, the Plan would continue to be
subject to the additional minimum liability requirements of SFAS No. 87.
Such requirements require the recognition of an additional pension
liability in the amount of the unfunded accumulated benefit obligation in
excess of accrued pension with an equal amount to be recognized net of
the associated tax benefits in accumulated other comprehensive (loss)
income. Accordingly, depending on market conditions, the Company may have
to reverse its prepaid pension balance and record a pension liability
through a non-cash charge to equity. As the Company has not determined if
it will terminate the Plan, and due to the uncertainty of market
conditions, the Company can provide no assurances as to the ultimate
financial statement impact that Plan modifications or changes in market
conditions may have.

- Risks related to the costs of defending litigation and the risk of
unanticipated material adverse outcomes in such litigation or any other
unfavorable outcomes or settlements. There can be no assurance that
Zapata will prevail in any pending litigation and to the extent that the
Company sustains losses growing out of any pending litigation which are
not presently reserved or otherwise provided for or insured against, its
business, results of operation and/or financial condition could be
adversely affected.

- Risks associated with future acquisitions of operating companies. Any
future acquisitions could be material in size and scope, and since the
Company has not yet identified any additional assets, property or
business that it may acquire or develop, potential investors in the
Company will have virtually no substantive information about any such new
business upon which to base a decision whether to invest in the Company.
In any event depending upon the size and structure of any future
acquisitions, stockholders may not have the opportunity to vote on the
transaction, or access to any information about any new business until
such time as a transaction is completed and the Company files a report
with the SEC disclosing the nature of such transaction and/or business.
For example, during September and October, 2003, stockholders were
informed through press releases and SEC filings that the Company had
acquired a significant stake in Safety Components. Such transactions
materially affect the Company's financial position, results of operations
and cash flows. In the Safety Components acquisition, the Company
utilized approximately $47.8 million of its cash, cash equivalents and
short-

46

term investments and the acquisition contributed an additional $63.5
million to the Company's consolidated revenues for the fourth quarter of
2003.

There is no assurance that the Company will be successful in identifying
any suitable future acquisition opportunities. If the Company does
identify any additional potential acquisition opportunities, there is no
assurance that the acquisition will be consummated, and if the
acquisition does occur, there is no assurance that it will be successful
in enhancing the Company's business or will increase the Company's
earnings or not materially adversely affect the Company's financial
condition. The Company faces significant competition for acquisition
opportunities, which may inhibit its ability to complete suitable
transactions or increase the cost that must be paid. Future acquisitions
could also divert substantial management time, result in short term
reductions in earnings or special transactions or other charges and may
be difficult to integrate with existing operations or assets. We may, in
the future, issue additional shares of common stock or other securities
in connection with one or more acquisitions, which may dilute our
stockholders. Depending upon the size and number of any future
acquisitions, the Company may also borrow money to fund its acquisitions.
In that event, the Company's stockholders would be subject to the risks
normally associated with leveraged transactions, including the inability
to service the debt or the dedication of a significant amount of cash
flow to service the debt, limitations on the Company's ability to secure
future financing and the imposition of certain operating restrictions.

2. Risks associated with Safety Components that may impact Zapata include
the following, any of which could have a material adverse impact on Safety's
financial position, results of operations and cash flows:

- The impact of competitive products and pricing, dependence of revenues
upon several major module suppliers; worldwide economic conditions; the
results of cost savings programs being implemented; domestic and
international automotive industry trends, including the marketplace for
airbag related products; the ability of Safety Components to effectively
control costs and to satisfy customers on timeliness and quality;
approval by automobile manufacturers of airbag cushions currently in
production; pricing pressures and labor strikes.

- Certain of Safety's consolidated net sales are generated outside the
United States. Foreign operations and exports to foreign markets are
subject to a number of special risks including, but not limited to, risks
with respect to fluctuations in currency exchange rates, economic and
political destabilization and other disruption of markets, restrictive
actions by foreign governments (such as restrictions on transfer of
funds, export duties and quotas, foreign customs and tariffs and
unexpected changes in regulatory environments), changes in foreign laws
regarding trade and investment, difficulty in obtaining distribution and
support, nationalization, the laws and policies of the United States
affecting trade, foreign investment and loans and foreign tax laws. There
can be no assurance that one or a combination of these factors will not
have a material adverse effect on Safety's ability to increase or
maintain its foreign sales or on its future results of operations.

In addition, Safety has a significant portion of its manufacturing
operations in foreign countries and purchases a portion of its raw
materials from foreign suppliers. The production costs, profit margins and
competitive position of Safety are affected by the strength of the
currencies in countries where it manufactures or purchases goods relative
to the strength of the currencies in countries where its products are
sold.

Certain of Safety's operations generate net sales and incur expenses in
foreign currencies. Safety's financial results from international
operations may be affected by fluctuations in currency exchange rates.
Future fluctuations in certain currency exchange rates could adversely
affect Safety's financial results. Safety monitors its risk associated
with the volatility of certain foreign currencies against its functional
currency, the U.S. dollar. The impact of changes in the relationship of
other currencies to the U.S. dollar in the fiscal year ended December 31,
2004 has resulted in the recognition of other income of approximately
$677,000. However, it is unknown what the effect of foreign currency rate
fluctuations will have on Safety's financial position or results of
operations in the future. In certain

47

situations, Safety utilizes derivative financial instruments designated as
cash flow hedges to reduce exposures to volatility of foreign currencies
impacting the operation of its business.

- Our nominees on the Safety Components' Board of Directors do not comprise
a majority of the board members. Therefore, we do not have the ability to
directly influence the management of Safety Components and cannot be
assured that the actions taken by the Safety Components Board of
Directors will necessarily be consistent with Zapata's best interest.

3. Risks associated with Omega Protein that may impact Zapata include the
following, any of which could have a material adverse impact on Omega's
financial position, results of operations and cash flows:

Risks Relating to Omega's Business and Industry:

- Omega is dependent on a single natural resource and may not be able to
catch the amount of menhaden that it requires to operate profitably.
Omega's primary raw material is menhaden. Omega's business is totally
dependent on its annual menhaden harvest in ocean waters along the U.S.
Atlantic and Gulf coasts. Omega's ability to meet its raw material
requirements through its annual menhaden harvest fluctuates from year to
year, and even at times month to month, due to natural conditions over
which Omega has no control. These natural conditions, which include
varying fish population, adverse weather conditions and disease, may
prevent Omega from catching the amount of menhaden required to operate
profitability.

- Fluctuation in "oil yields" derived from Omega's fish catch could impact
Omega's ability to operate profitably. The "oil yield," or the percentage
of oil derived from the menhaden fish, while it is relatively high
compared to many species of fish, has fluctuated over the years and from
month to month due to natural conditions relating to fish biology over
which Omega has no control. The oil yield has at times materially
impacted the amount of fish oil that Omega has been able to produce from
its available fish catch and it is possible that oil yields in the future
could also impact Omega's ability to operate profitably.

- Laws or regulations that restrict or prohibit menhaden or purse seine
fishing operations could adversely affect Omega's ability to operate. The
adoption of new laws or regulations at federal, regional, state or local
levels that restrict or prohibit menhaden or purse seine fishing
operations, or stricter interpretations of existing laws or regulations,
could materially adversely affect Omega's business, results of operations
and financial condition. In addition, the impact of a violation by Omega
of federal, regional, state or local law or regulation relating to its
fishing operations, the protection of the environment or the health and
safety of its employees could have a material adverse affect on Omega's
business, results of operations and financial condition. One example of
potentially restrictive regulation involves a vote by a regional
regulatory board in February 2005 to permit discussion on, and consider
for potential adoption, a proposal which could limit for a two-year
period the annual amount of commercial menhaden catch in the Chesapeake
Bay to the Bay's 5-year average catch, or 110,400 metric tons. See Item
1. Business -- Omega Protein -- Regulation for more information.

- Omega's fish catch may be impacted by restrictions on its spotter
aircraft. If Omega's spotter aircraft are prohibited or restricted from
operating in their normal manner during Omega's fishing season, Omega's
business, results of operations and financial condition could be
adversely affected. For example, as a direct result of the September 11,
2001 terrorist attacks, the Secretary of Transportation issued a federal
ground stop order that grounded certain aircraft (including Omega's
fish-spotting aircraft) for approximately nine days. This loss of spotter
aircraft coverage severely hampered Omega's ability to locate menhaden
fish during this nine-day period and thereby reduced its amount of
saleable product.

- Worldwide supply and demand relationships, which are beyond Omega's
control, influence the prices that Omega receives for many of its
products and may from time to time result in low prices for many of
Omega's products. Prices for many of Omega's products are subject to, or
influenced by, worldwide supply and demand relationships over which Omega
has no control and which tend to fluctuate to a significant extent over
the course of a year and from year to year. The factors that influence
these
48

supply and demand relationships are world supplies of fish meal made from
other fish species, animal proteins and fats, palm oil, soy meal and oil,
and other edible oils.

- New laws or regulation regarding contaminants in fish oil or fish meal
may increase Omega's cost of production or cause Omega to lose business.
It is possible that future enactment of increasingly stringent
regulations regarding contaminants in fish meal or fish oil by foreign
countries or the United States may adversely affect Omega's business,
results of operations and financial condition. More stringent regulations
could result in: (i) Omega's incurrence of additional capital
expenditures on contaminant reduction technology in order to meet the
requirements of those jurisdictions, and possibly higher production costs
for Company's products, or (ii) Omega's withdrawal from marketing its
products in those jurisdictions.

Risks Relating to Omega's Ongoing Operations:

- Omega's strategy to expand into the food grade oils market may be
unsuccessful. Omega's attempts to expand its fish oil sales into the
market for refined, food grade fish oils for human consumption may not be
successful. Omega's expectations regarding future demand for Omega-3
fatty acids may prove to be incorrect or, if future demand does meet
Omega's expectations, it is possible that purchasers could utilize
Omega-3 sources other than Omega's products.

- Omega's quarterly operating results will fluctuate. Fluctuations in
Omega's quarterly operating results will occur due to the seasonality of
Omega's business, the unpredictability of Omega's fish catch and oil
yields, and Omega's deferral of sales of inventory based on worldwide
prices for competing products.

- Omega's business is subject to significant competition, and some
competitors have significantly greater financial resources and more
extensive and diversified operations than Omega. The marine protein and
oil business is subject to significant competition from producers of
vegetable and other animal protein products and oil products such as
Archer Daniels Midland and Cargill. In addition, but to a lesser extent,
Omega competes with small domestic privately-owned menhaden fishing
companies and international marine protein and oil producers, including
Scandinavian herring processors and South American anchovy processors.
Many of these competitors have significantly greater financial resources
and more extensive and diversified operations than Omega.

- Omega's foreign customers are subject to disruption typical to foreign
countries. Omega's sales of its products in foreign countries are subject
to risks associated with foreign countries such as changes in social,
political and economic conditions inherent in foreign operations,
including:

- Changes in the law and policies that govern foreign investment and
international trade in foreign countries;

- Changes in U.S. laws and regulations relating to foreign investment and
trade;

- Changes in tax or other laws;

- Partial or total expropriation;

- Current exchange rate fluctuations;

- Restrictions on current repatriation; or

- Political disturbances, insurrection or war.

In addition, it is possible that Omega, at any one time, could have a
significant amount of its revenues generated by sales in a particular
country which would concentrate Omega's susceptibility to adverse events
in that country.

- Omega may undertake acquisitions that are unsuccessful and Omega's
inability to control the inherent risks of acquiring businesses could
adversely affect its business, results of operations and financial
condition operations. In the future Omega may undertake acquisitions of
other businesses, located either in the United States or in other
countries, although there can be no assurances that this will

49

occur. There can be no assurance that Omega will be able (i) to identify
and acquire acceptable acquisition candidates on favorable terms, (ii) to
profitably manage future businesses it may acquire, or (iii) to
successfully integrate future businesses it may acquire without
substantial costs, delays or other problems. Any of these outcomes could
have a material adverse effect on Omega's business, results of operations
and financial condition.

- Omega's failure to comply with federal U.S. citizenship ownership
requirements may prevent it from harvesting menhaden in the U.S.
jurisdictional waters. Omega's harvesting operations are subject to the
Shipping Act of 1916 and the regulations promulgated thereunder by the
Department of Transportation, Maritime Administration which require,
among other things, that Omega be incorporated under the laws of the U.S.
or a state, Omega's chief executive officer be a U.S. citizen, no more of
Omega's directors be non-citizens than a minority of a number necessary
to constitute a quorum and at least 75% of Omega's outstanding capital
stock (including a majority of its voting capital stock) be owned by U.S.
citizens. If Omega fails to observe any of these requirements, Omega will
not be eligible to conduct its harvesting activities in U.S.
jurisdictional waters. Such a lost of eligibility would have a material
adverse effect on Omega's business, results of operations and financial
condition.

- Omega may not be able to recruit, train and retain qualified marine
personnel in sufficient numbers. Omega's business is dependent on its
ability to recruit, train and retain qualified marine personnel in
sufficient numbers such as vessel captains, vessel engineers and other
crewmembers. To the extent that Omega is not successful in recruiting,
training and retaining these employees in sufficient numbers, its
productivity may suffer. If Omega were unable to secure a sufficient
number of workers during periods of peak employment, the lack of
personnel could have an adverse effect on Omega's business, results of
operations and financial condition.

4. Risks associated with the foreign operations of our controlled
subsidiaries that may impact Zapata include the following, (any of which could
have a material adverse impact on any such subsidiary's financial position,
results of operations and cash flows): the strength of local currencies of the
countries in which its products are sold, changes in social, political and
economic conditions inherent in foreign operations and international trade,
including changes in the law and policies that govern foreign investment and
international trade in such countries, changes in U.S. laws and regulations
relating to foreign investment and trade, changes in tax or other laws, partial
or total expatriation, currency exchange rate fluctuations and restrictions on
currency repatriation, the disruption of labor, political disturbances,
insurrection or war and the effect of requirements of partial local ownership of
operations in certain countries.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Equity Price Risk. As the Company considers its holdings of Safety
Components, Omega Protein and Zap.Com common stock to be a potential source of
secondary liquidity, the Company is subject to equity price risk to the extent
of fluctuations in the market prices and trading volumes of these securities.
Fluctuation in the market price of a security may result from perceived changes
in the underlying economic characteristics of the investee, the relative price
of alternative investments and general market conditions. Furthermore, amounts
realized in the sale of a particular security may be affected by the relative
quantity of the security being sold.

Interest Rate Risk. Zapata Corporate and Zap.Com hold investment grade
securities which may include a mix of U.S. Government or Government agency
obligations, certificates of deposit, money market deposits and commercial paper
rated A-1 or P-1. In addition, Omega Protein holds certificates of deposit and
commercial quality grade investments rated A-2 P-2 or better with companies and
financial institutions. As the majority of the Company's consolidated investment
grade securities constitute short-term U.S. Government agency securities, the
Company does not believe that the value of these instruments have a material
exposure to interest rate risk. However, changes in interest rates do affect the
investment income the Company earns on its cash equivalents and marketable
securities and, therefore, impacts its cash flows and results of operations.
Accordingly, there is inherent roll-over risk for the Company's investment grade
securities as they mature and are renewed at current market rates. Using the
Company's consolidated

50

investment grade security balance of $67.4 million at December 31, 2004 as a
hypothetical constant cash balance, an adverse change of 1% in interest rates
would decrease interest income by approximately $674,000 during a twelve-month
period.

Market Risk. Both Safety and Omega are exposed to minimal market risk
associated with interest rate movements on their borrowings. A one percent
increase or decrease in the levels of interest rates on such borrowings would
not result in a material change to the Company's results of operations.

Currency Exchange Rates and Forward Contracts. Safety's operations in
Mexico, Germany, the United Kingdom, the Czech Republic, China and South Africa
expose Safety to currency exchange rate risks. Safety monitors its risk
associated with the volatility of certain foreign currencies against its
functional currency, the U.S. dollar. The impact of changes in the relationship
of other currencies to the U.S. dollar in year ended December 31, 2004 has
resulted in the recognition of other income of approximately $677,000. It is
unknown what the effect of foreign currency rate fluctuations will have on
Safety's financial position or results of operations in the future. If, however,
there were a sustained decline of these currencies versus the U.S. dollar, the
Consolidated Financial Statements could be materially adversely affected.

Derivative financial instruments are utilized from time to time by Safety
to reduce exposures to volatility of foreign currencies impacting the operations
of its business. Safety does not enter into financial instruments for trading or
speculative purposes.

Certain operating expenses at Safety's Mexican facilities are paid in
Mexican pesos. To reduce exposure to fluctuations in the U.S. dollar and Mexican
peso exchange rates, Safety periodically enters into forward contracts to buy
Mexican pesos for periods and amounts consistent with the related, underlying
forecasted cash outflows. These contracts are designated as hedges at inception
and are monitored for effectiveness on a routine basis. Safety recorded a credit
to net earnings of approximately $80,000 for the twelve months ended December
31, 2004 on these forward contracts. At December 31, 2004, Safety had no such
outstanding forward exchange contracts. At December 31, 2003, Safety had
outstanding forward exchange contracts that matured between January and March
2004 to purchase Mexican pesos with an aggregate notional amount of
approximately $2.7 million. The fair values of these contracts at December 31,
2003 totaled approximately $52,000, which was recorded as a liability on
Safety's Consolidated Balance Sheets in "other current liabilities." Safety
recorded a credit to earnings of approximately $47,000 for the nine months ended
December 31, 2003 and the unrealized loss on these forward contracts of
approximately $52,000 was included in "accumulated other comprehensive income"
at December 31, 2003.

Certain intercompany sales at Safety's Czech facility are denominated and
settled in Euros. To reduce exposure to fluctuation in the Euro and Czech Koruna
exchange rates, Safety periodically enters into forward contracts to buy Czech
Korunas for periods and amounts consistent with the related, underlying
forecasted cash inflows associated with the intercompany sales. These contracts
are designated as hedges at inception and are monitored for effectiveness on a
routine basis. Safety recorded a charge to net earnings of approximately
$141,000 for the twelve months ended December 31, 2004 on these forward
contracts. At December 31, 2004, Safety had no such outstanding forward exchange
contracts. At December 31, 2003, Safety had outstanding forward exchange
contracts that matured between January and March 2004 to purchase Czech Korunas
with an aggregate notional amount of approximately $2.1 million. The fair values
of these contracts at December 31, 2003 totaled approximately $100,000, which
was recorded as a liability on Safety's balance sheet in "other current
liabilities." Safety recorded a charge to earnings of approximately $47,000 for
the nine months ended December 31, 2003 and the unrealized loss on these forward
contracts of approximately $89,000 was included in "accumulated other
comprehensive income" at December 31, 2003.

Although Omega Protein sells products in foreign countries, all of Omega's
revenues are billed and paid for in US dollars. As a result, Omega's management
does not believe that it is exposed to any significant foreign country currency
exchange risk, and Omega does not utilize market risk sensitive instruments to
manage its exposure to this risk.

51

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders
of Zapata Corporation:

We have completed an integrated audit of Zapata Corporation's 2004
consolidated financial statements and of its internal control over financial
reporting as of December 31, 2004 and audits of its 2003 and 2002 consolidated
financial statements in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Our opinions, based on our audits,
are presented below.

CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

In our opinion, the consolidated financial statements listed in the index
appearing under Item 15(a)(1) present fairly, in all material respects, the
financial position of Zapata and its subsidiaries at December 31, 2004 and 2003,
and the results of their operations and their cash flows for each of the three
years in the period ended December 31, 2004 in conformity with accounting
principles generally accepted in the United States of America. In addition, in
our opinion, the financial statement schedules listed in the index appearing
under Item 15(a)(2) present fairly, in all material respects, the information
set forth therein when read in conjunction with the related consolidated
financial statements. These financial statements and financial statement
schedules are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and financial statement
schedules based on our audits. We conducted our audits of these statements in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit of financial statements includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

INTERNAL CONTROL OVER FINANCIAL REPORTING

Also, in our opinion, management's assessment, included in Management's
Annual Report on Internal Control Over Financial Reporting appearing under Item
9A, that the Company maintained effective internal control over financial
reporting as of December 31, 2004 based on criteria established in Internal
Control -- Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO), is fairly stated, in all
material respects, based on those criteria. Furthermore, in our opinion, the
Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2004, based on criteria established in
Internal Control -- Integrated Framework issued by the COSO. The Company's
management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal
control over financial reporting. Our responsibility is to express opinions on
management's assessment and on the effectiveness of the Company's internal
control over financial reporting based on our audit. We conducted our audit of
internal control over financial reporting in accordance with the standards of
the Public Company Accounting Oversight Board (United States). Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether effective internal control over financial reporting was maintained in
all material respects. An audit of internal control over financial reporting
includes obtaining an understanding of internal control over financial
reporting, evaluating management's assessment, testing and evaluating the design
and operating effectiveness of internal control, and performing such other
procedures as we consider necessary in the circumstances. We believe that our
audit provides a reasonable basis for our opinions.

A company's internal control over financial reporting is a process designed
to provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles. A company's internal control over

52

financial reporting includes those policies and procedures that (i) pertain to
the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (ii)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the
company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.

PricewaterhouseCoopers LLP
Rochester, New York
March 11, 2005

53

ZAPATA CORPORATION

CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

The accompanying notes are an integral part of the consolidated financial
statements.
54

ZAPATA CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

The accompanying notes are an integral part of the consolidated financial
statements.
55

ZAPATA CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

The accompanying notes are an integral part of the consolidated financial
statements.
56

ZAPATA CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS)

The accompanying notes are an integral part of the consolidated financial
statements
57

ZAPATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. BUSINESS AND ORGANIZATION

Zapata Corporation ("Zapata" or "the Company") is a holding company which
currently has two operating companies, Safety Components International, Inc.
("Safety Components" or "Safety") and Omega Protein Corporation ("Omega Protein"
or "Omega"). As of December 31, 2004, Zapata had a 79% ownership interest in
Safety and a 58% ownership interest in Omega. In addition, Zapata owns 98% of
Zap.Com Corporation ("Zap.Com"), a public shell company.

Safety Components is a leading, low-cost, independent supplier of
automotive airbag fabric and cushions and technical fabrics with operations in
North America and Europe. Safety has recently entered into joint ventures to
produce products in China and South Africa, although production has not yet
commenced in either of these locations. Safety Components sells airbag fabric
domestically and cushions worldwide to the major airbag module integrators that
outsource such products. Safety Components also manufactures value-added
technical fabrics used in a variety of niche industrial and commercial
applications such as ballistics material for luggage, filtration, military tents
and fire service apparel. The ability to interchange airbag and specialty
technical fabrics using the same equipment and similar manufacturing processes
allows Safety to more effectively utilize its manufacturing assets and lower per
unit overhead costs. Safety Components trades on the over-the counter electronic
bulletin board under the symbol "SAFY."

Omega Protein produces and markets a variety of products produced from
menhaden (a herring-like species of fish found in commercial quantities in the
U.S. coastal waters of the Atlantic Ocean and Gulf of Mexico), including regular
grade and value-added specialty fish meals, crude and refined fish oils and
regular and value-added fish solubles. Omega's fish meal products are primarily
used as a protein ingredient in animal feed for swine, cattle, aquaculture and
household pets. Fish oil is utilized for animal and aquaculture feeds,
industrial applications, as well as for additives to human food products.
Omega's fish solubles are sold primarily to livestock feed manufacturers,
aquaculture feed manufacturers and for use as an organic fertilizer. Omega
Protein trades on the New York Stock Exchange under the symbol "OME."

Zap.Com is a public shell company which does not have any existing business
operations. From time to time, Zap.Com considers acquisitions that would result
in it becoming an operating company. Zap.Com may also consider developing a new
business suitable for its situation. Zap.Com trades on the over-the-counter
electronic bulletin board under the symbol "ZPCM."

As used throughout this report, "Zapata Corporate" is defined as Zapata
Corporation exclusive of its majority owned subsidiaries Safety Components,
Omega Protein and Zap.Com.

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES

CONSOLIDATION

The consolidated financial statements include Zapata and its wholly and
majority-owned domestic and foreign subsidiaries (collectively, "Zapata" or the
"Company"). Consolidated financial statements are financial statements of a
parent company and its subsidiaries presented as if the entities were a single
economic unit. Although the assets, liabilities, revenues, and expenses of all
entities are combined to provide a single set of financial statements, certain
eliminations and adjustments are made. These eliminations are necessary to
ensure that only arm's-length transactions between independent parties are
reflected in the consolidated statements. In addition, when the parent company
consolidates non-wholly owned subsidiaries, minority interest on the
consolidated balance sheets and statements of operations represents the minority
stockholders' (those other than the parent company) interest in the net assets
and net income of such subsidiaries.

58

ZAPATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

FISCAL YEAR

Zapata and its consolidated subsidiaries have fiscal years ending on
December 31st with calendar quarter-end dates. Safety's operations were formerly
based on a fifty-two or fifty-three week fiscal year ending on the Saturday
closest to March 31st. Subsequent to the Company's purchase of Safety, Safety
changed its fiscal year to end on December 31 to coincide with Zapata's fiscal
year end.

CASH AND CASH EQUIVALENTS

The Company invests certain of its excess cash in government and corporate
debt instruments. All highly liquid investments with original maturities of
three months or less are considered to be cash equivalents. The recorded amounts
for cash equivalents approximate fair market value due to the short-term nature
of these financial instruments.

SHORT-TERM INVESTMENTS

The Company may invest certain of its excess cash in government debt
instruments. All highly liquid investments with original maturities of greater
than three months but not longer than one year are considered short-term
investments, available for sale. Accrued interest receivable is recorded on
short-term investments so that the original cost plus accrued interest
approximates fair market value due to the short-term nature of these
investments. As such, no unrealized holding gains or losses are recorded as a
separate component of accumulated other comprehensive (loss) income.

INVENTORIES

Safety Components' inventories represent direct materials, labor and
overhead costs incurred for products not yet delivered and are stated at the
lower of cost (first-in, first-out) or market.

Omega Protein's inventory is stated at the lower of cost or market. Omega
Protein's fishing season runs from mid-April to the first of November in the
Gulf of Mexico and from the beginning of May into December in the Atlantic.
Government regulations preclude Omega Protein from fishing during the
off-seasons.

Omega Protein's inventory cost system considers all costs associated with
an annual fish catch and its processing, both variable and fixed, including both
costs incurred during the off-season and during the fishing season. Omega
Protein's costing system allocates cost to inventory quantities on a per unit
basis as calculated by a formula that considers total estimated inventoriable
costs for a fishing season (including off-season costs) to total estimated fish
catch and the relative fair market value of the individual products produced.
Omega Protein adjusts the cost of sales, off-season costs and inventory balances
at the end of each quarter based on revised estimates of total inventoriable
costs and fish catch. Omega Protein's lower-of-cost-or-market-value analyses at
year-end and at interim periods compares the total estimated per unit production
cost of expected production to the projected per unit market prices of the
products. The impairment analyses involve estimates of, among other things,
future fish catches and related costs, and expected commodity prices for the
fish products. These estimates, which management believes are reasonable and
supportable, involve estimates of future activities and events which are
inherently imprecise and from which actual results may differ materially.

During the off-seasons, in connection with the upcoming fishing seasons,
Omega Protein incurs costs (i.e., plant and vessel related labor, utilities,
rent, repairs, and depreciation) that are directly related to Omega's
infrastructure. These costs accumulate in inventory and are applied as elements
of the cost of production of Omega Protein's products throughout the fishing
season ratably based on Omega's monthly fish catch and the expected total fish
catch for the season.

59

ZAPATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

INTANGIBLE ASSETS

Intangible assets consist of Safety Components' patents and customer
intangibles related to the Company's acquisition of Safety Components common
stock. Both patents and customer intangibles are stated at fair value less
accumulated amortization. We account for the impairment of long-lived assets in
accordance SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets", or in the case of goodwill, in accordance with SFAS No. 142,
"Goodwill and Other Intangible Assets". We evaluate the carrying value of our
intangible assets whenever certain events or changes in circumstances indicate
that the carrying amount of these assets may not be recoverable.

PENSION PLANS

Annual costs of pension plans are determined actuarially based on SFAS No.
87, "Employers' Accounting for Pensions." The Company applies revised SFAS No.
132, "Employers' Disclosures about Pensions and Other Postretirement Benefits"
disclosure requirements for its pensions and other postretirement benefit plans.

PROPERTY, PLANT AND EQUIPMENT

Consolidated property, plant and equipment is recorded at cost and
depreciated over the estimated useful lives of the assets using the
straight-line method. Estimated useful lives of assets acquired, determined as
of the date of acquisition, are as follows:

Buildings................................................... 20 - 40 years
Fishing vessels............................................. 15 - 20 years
Machinery and equipment..................................... 4 - 10 years
Furniture and fixtures...................................... 3 - 10 years

Leasehold improvements are depreciated over the lesser of their useful life
or the lease term; replacements and major improvements are capitalized;
maintenance and repairs are charged to expense as incurred. Upon sale or
retirement, the costs and related accumulated depreciation are eliminated from
the accounts. Any resulting gains or losses are included in the statement of
operations. Under certain conditions, interest may be capitalized as part of the
acquisition cost of an asset. Interest is capitalized only during the period of
time required to complete and prepare the asset for its intended use. At
December 31, 2004, property, plant and equipment included approximately $323,000
of capitalized interest related to Omega Protein.

FAIR VALUE OF FINANCIAL INSTRUMENTS

The consolidated financial statements include financial instruments whereby
the fair market value of such instruments may differ from amounts reflected on a
historical basis. Financial instruments of the Company may consist of cash
deposits, U.S. Government Agency Securities, accounts receivable, advances to
affiliates, accounts payable, certain accrued liabilities and long-term debt.
The carrying amount of the Company's consolidated long-term debt at December 31,
2004 and 2003 approximated fair market value based on prevailing market rates.
The Company's consolidated other financial instruments generally approximate
their fair values based on the short-term nature of these instruments. See Note
11 for further information regarding the fair value of debt.

DERIVATIVE FINANCIAL INSTRUMENTS

To the extent that derivative financial instruments are included in the
consolidated financial statements, they have been accounted for in accordance
with SFAS No. 133, "Accounting for Derivative Instruments and

60

ZAPATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Hedging Activities", which, as amended, establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
embedded in other contracts, and hedging activities. It requires the recognition
of all derivative instruments as either assets or liabilities in the statement
of financial position and measurement of those instruments at fair value. The
accounting treatment of changes in fair value is dependent upon whether or not a
derivative instrument is designated as a hedge and, if so, the type of hedge.
For derivatives designated as cash flow hedges, to the extent effective, changes
in fair value are recognized in accumulated other comprehensive loss until the
hedged item is recognized in earnings. Ineffectiveness is recognized immediately
in earnings. For derivatives designated as fair value hedges, changes in fair
value are recognized in earnings.

Safety Components utilizes derivative financial instruments to reduce
exposures to volatility of foreign currencies impacting the operations of its
business. Safety does not enter into financial instruments for trading or
speculative purposes. On December 31, 2004 Safety had no outstanding forward
exchange contracts. On December 31, 2003 Safety had outstanding forward exchange
contracts to purchase Mexican Pesos and Czech Korunas that met the requirements
of SFAS No. 133 and were accounted for as qualifying hedges.

DEFERRED FINANCING COSTS

Costs incurred in connection with financing activities are deferred and
amortized over the lives of the respective debt instruments using the
straight-line method (which approximates the effective interest method), and are
charged to interest expense in the accompanying consolidated statements of
operations.

COMPREHENSIVE INCOME

SFAS No. 130, "Reporting Comprehensive Income," establishes standards for
the reporting and display of comprehensive income and its components within the
financial statements. Other comprehensive income is comprised of charges to
stockholders' equity, other than contributions from or distributions to
stockholders, excluded from the determination of net income. The Company's other
comprehensive income is comprised of changes to minimum pension liabilities,
foreign currency translations, gains or losses on derivatives and
reclassification adjustments for gains and losses on sales of securities.

ISSUANCE OF STOCK BY SUBSIDIARIES

Sales of stock by a subsidiary and subsidiary stock option exercises are
accounted for in accordance with Staff Accounting Bulletin Topic 5H, "Accounting
for Sales of Stock by a Subsidiary." The Company has adopted the capital
transaction method to account for subsidiary stock sales and option exercises.
Accordingly, decreases in the Company's share of its subsidiary's net equity
resulting from subsidiary stock transactions are recorded on the Consolidated
Balance Sheets and Consolidated Statements of Stockholders' Equity as increases
or decreases to Capital in Excess of Par Value.

REVENUE RECOGNITION

Safety Components and Omega Protein recognize revenue from product sales
when goods have been shipped and the risk of loss has passed. Additionally,
Safety accrues for estimated sales returns and other allowances at the time of
shipment based upon historical experience. Safety's actual sales returns and
other allowances have not differed materially from such estimates.

ADVERTISING COSTS

The costs of advertising are expensed as incurred in accordance with
Statement of Position 93-7 "Reporting on Advertising Costs" and are included as
a component of selling, general and administrative expenses in the accompanying
consolidated statements of operations.

61

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

RESEARCH AND DEVELOPMENT EXPENSES

Research and development costs are charged to operations when incurred and
are included as a component of selling, general and administrative expenses in
the accompanying consolidated statements of operations.

INSURANCE

Omega Protein carries insurance for certain losses relating to its vessels
and Jones Act liabilities for employees aboard its vessel. Omega provides
reserves for those portions of the annual aggregate deductible for which Omega
remains responsible by using an estimation process that considers Omega
Protein-specific and industry data as well as its management's experience,
assumptions and consultation with counsel. Omega Protein management's current
estimated range of liabilities related to such cases is based on claims for
which its management can estimate the amount and range of loss. For those claims
where there may be a range of loss, Omega has recorded an estimated liability
inside that range, based on Omega's management's experience, assumptions and
consultation with counsel. The process of estimating and establishing reserves
for losses adjustment expenses related to these claims is inherently uncertain
and the actual ultimate net cost of a claim may vary materially from the
estimated amount reserved. There is some degree of inherent variability in
assessing the ultimate amount of losses associated with these claims due to the
extended period of time that transpires between when the claim might occur and
the full settlement of such claims. This variability is generally greater for
Jones Act claims by vessel employees. Omega continually evaluates loss estimates
associated with claims and losses as additional information becomes available
and revises its estimates. Although Omega's management believes estimated
reserves related to these claims are adequately recorded, it is possible that
actual results could significantly differ from the recorded reserves, which
could materially impact the Company's results of operations, financial position
and cash flow.

With respect to health insurance, Omega is primarily self-insured. Omega
purchases individual stop loss coverage with a large deductible. As a result,
Omega is primarily self-insured for claims and associated costs up to the amount
of the deductible, with claims in excess of the deductible amount being covered
by insurance. Expected claims estimates are based on health care trend rates and
historical claims data; actual claims may differ from those estimates. Omega
continually evaluates its claims experience related to this coverage with
information obtained from its risk management consultants.

Assumptions used in preparing these insurance estimates are based on
factors such as claims settlement patterns, claim development trends, claim
frequency and severity patterns, inflationary trends and data reasonableness.
Together these factors will generally affect the analysis and determination of
the "best estimate" of the projected ultimate claim losses. The results of these
evaluations are used to both analyze and adjust Omega's insurance loss reserves.

PUSH-DOWN ACCOUNTING

Under the SEC rules, financial statements filed for companies following a
more than 95% change in ownership have to be restated to reflect the purchaser's
push-down basis of accounting. Push down accounting is the establishment of a
new accounting and reporting basis for a subsidiary company in its separate
financial statements based on the purchase price paid by the parent company to
acquire a controlling interest in the outstanding voting stock of the subsidiary
company. Push-down is not allowed in the event of a less than 80% change in
control. If 80% or more, but no more than 95% change in control occurred,
application of the push-down basis is at the company's discretion. Because
Zapata acquired more than 80%, but less than 95% of Safety's shares and voting
power, Zapata had the choice of whether to apply push-down basis of accounting.
Zapata has elected not to apply push-down accounting, thus all purchase
accounting adjustments are maintained on Zapata's books and records and are
reflected in our "Safety Components" segment. Accordingly, amounts reflected in
our "Safety Components" segment will differ from amounts reported by
62

ZAPATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Safety. If push-down basis had been applied, all of the purchase accounting fair
value adjustments would have been made on the separate books and records of
Safety Components.

INCOME TAXES

Zapata and Omega each file a separate consolidated U.S. federal income tax
return. Zapata's consolidated U.S. federal income tax return includes
subsidiaries in which Zapata owns in excess of 80% of the voting interests. On
or about April 1, 2004, Zapata's stock ownership percentage of Safety Components
outstanding stock decreased below 80% due to stock option exercises by Safety
Components' employees. As a result of Zapata's ownership of Safety Components
outstanding stock falling below 80%, Zapata will not consolidate Safety
Components into Zapata's consolidated income tax returns for periods subsequent
to the first quarter of 2004. Zap.Com is included in Zapata's consolidated U.S.
federal income tax return.

The Company utilizes the liability method to account for income taxes. This
method requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of existing temporary differences between the
financial reporting and tax reporting basis of assets and liabilities, and
operating loss and tax credit carry-forwards for tax purposes. Valuation
allowances are recognized to reduce deferred tax assets to an amount that is
more likely than not to be realized. During the periods in which Safety
Components has been included in Zapata's consolidated federal return, the
assessment of Safety's tax liabilities, deferred tax assets and liabilities, and
valuation allowance have been calculated on a consolidated basis that includes
Zapata's and Zap.Com's activities and results of operations. With respect to
Safety's foreign operations, deferred tax assets and liabilities have been
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carry-forwards.

ENVIRONMENTAL EXPENDITURES

Environmental expenditures that result from the remediation of an existing
condition caused by past operations that will not contribute to current or
future revenues are expensed. Expenditures that extend the life of the related
property or prevent future environmental contamination are capitalized.
Undiscounted liabilities are recognized for remedial activities when the cleanup
is probable and the cost can be reasonably estimated.

FOREIGN CURRENCY TRANSLATION

Financial statements of substantially all of Safety's foreign operations
are prepared using the local currency as the functional currency. Translation of
these foreign operations to United States dollars occurs using the current
exchange rate for balance sheet accounts and a weighted average exchange rate
for results of foreign operations. Translation gains or losses are recognized in
"accumulated other comprehensive income (loss)" as a component of stockholders'
equity in the accompanying consolidated balance sheets.

Safety's subsidiary in Mexico prepares its financial statements using the
United States dollar as the functional currency. Since the Mexican subsidiary
does not have external sales and does not own significant amounts of inventory
or fixed assets, Safety has determined that the United States dollar is the
appropriate functional currency. Accordingly, the translation effects of the
financial statements are included in the results of operations. During the
periods presented herein, such amounts were not significant.

Safety's foreign currency transaction gains are reflected in operations in
"other income, net." During the year ended December 31, 2004, transaction gains
included in operations amounted to approximately $677,000.

Omega's Mexican operations use the local currency as the functional
currency. Assets and liabilities of those operations are translated into U.S.
dollars using period-end exchange rates; income and expenses are translated
using the average exchange rates for the reporting period. Translation
adjustments are deferred in accumulated other comprehensive income (loss), a
separate component of stockholders' equity.
63

ZAPATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

STOCK-BASED COMPENSATION

The Company accounts for stock- based compensation according to Accounting
Principles Board Opinion No. 25 and the related interpretations under Financial
Accounting Standards Board ("FASB") Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation." The Company adopted the
required disclosure provisions under Statement of Financial Accounting Standards
No. 148 and continues to use the intrinsic value method of accounting for
stock-based compensation. Had compensation expense for the Company's stock
option grants been determined based on fair value at the grant date using the
Black-Scholes option-pricing model, the Company's net income and earnings per
share (basic and diluted) would have been as follows:

Due to the timing of the acquisition, Safety's stock-based employee
compensation expense has been included in Zapata's amounts beginning in the
fourth quarter of 2003. However, Safety has reported no stock-based employee
compensation expense since the acquisition.

USE OF ESTIMATES

The preparation of financial statements in conformity with accounting
principals generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Due to the inherent uncertainty involved
in making estimates, actual results in future periods could differ from these
estimates.

64

ZAPATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONCENTRATIONS OF CREDIT RISK

Zapata invests the majority of its excess cash, cash equivalents and other
investments in U.S. Government Agency Securities and therefore has significantly
reduced its future exposure to market risk.

Safety Components is subject to a concentration of credit risk consisting
of its trade receivables and typically has a limited customer base that accounts
for a significant portion of its trade receivables. At December 31, 2004, three
customers accounted for approximately 36%, 11% and 10% of its trade receivables.
At December 31, 2003, these same three customers accounted for approximately
36%, 15% and 5% of its trade receivables. Safety performs ongoing credit
evaluations of its customers and generally does not require collateral. Safety
evaluates potential losses for uncollectible accounts and such losses have
historically been immaterial and within its management's expectations.

Omega Protein has cash deposits concentrated primarily in one major bank.
Also, Omega has Certificates of Deposit and commercial quality grade investments
rated A-2 P-2 or better short-term investments with companies and financial
institutions. As a result of the forgoing, Omega believes that credit risk in
such investments is minimal.

Omega's customer base generally remains consistent from year to year. Omega
performs ongoing credit evaluations of its customers and generally does not
require material collateral. Omega maintains reserves for potential credit
losses and such losses have historically been within its management's
expectations.

RECLASSIFICATION

Certain reclassifications of prior year information have been made to
conform to the current presentation.

NOTE 3. ACQUISITIONS

On September 23, 2003, Zapata purchased 2,663,905 shares of Safety
Components International, Inc. common stock for $30.9 million. On October 7,
2003, Zapata purchased an additional 1,498,489 shares of Safety common stock for
$16.9 million. These additional shares increased the Company's ownership
percentage of Safety's outstanding common stock to approximately 84% at that
time.

The Company accounted for these transactions under the purchase method and
began consolidating amounts related to Safety's assets and liabilities as of
September 30, 2003. Due to the timing of the acquisition, the Company began
consolidating amounts related to Safety's results of operations in the fourth
quarter of 2003.

In accordance with Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets", and as clarified by Emerging Issues Task
Force Issue 02-17, "Recognition of Customer Relationship Intangible Assets
Acquired in a Business Combination," contract and relationship intangibles were
recognized in conjunction with the assessment of the fair values of the assets
acquired. The value of contract intangibles was determined based on purchase
orders on hand as of the date of acquisition. Consistent with Safety's
historical experience, contractual purchase orders are established each week
based on the following week's requirements. Accordingly, the value of the
contract intangible asset was determined based on purchase orders which
represented approximately one week's sales. Based on the short-term nature of
these purchase orders, contract intangibles were fully amortized as of December
31, 2003. Customer relationship intangibles represent the present value of the
projected future earnings associated with business expected to be generated from
Safety's existing customers as of the date of acquisition. The discount rate
utilized in the calculation of customer relationship intangibles incorporated a
company specific risk factor to account for the uncertainty of future results
duplicating historical performance and to account for general market
uncertainties. While the useful life of this customer relationship asset is not
limited by contract or any other economic,

65

ZAPATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

regulatory or other known factors, a useful life of 4 years was determined based
on the average duration of established airbag programs in place as of the date
of acquisition.

The following table sets forth the unaudited pro forma condensed
consolidated summary financial information for the years ended December 31, 2003
and 2002. This information gives effect to the acquisition of 84% of Safety
Components common stock as if it had occurred as of the beginning of each of the
periods presented. These statements are presented after giving effect to certain
adjustments for compensation agreements, forgone interest and related income tax
effects which are based upon currently available information and upon certain
assumptions that the Company believes are reasonable. These pro forma amounts do
not purport to present what the Company's consolidated results of operations
would have been if the aforementioned transaction had in fact occurred at the
beginning of the periods indicated, nor do they project the Company's
consolidated results of operations for any future period.

NOTE 4. SHORT-TERM INVESTMENTS

Short-term investments are summarized as follows:

Interest rates on these investments ranged from 0.99% - 1.06% at December
31, 2003.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 5. ACCOUNTS RECEIVABLE

Accounts receivable are summarized as follows:

NOTE 6. INVENTORIES

Inventories are summarized as follows:

NOTE 7. INTANGIBLE ASSETS

Intangible assets, net are summarized as follows:

67

ZAPATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Amortization expense for the years ended December 31, 2004, 2003 and 2002
was approximately $1.9 million, $714,000, and $0, respectively. Estimated
amortization expense for each of the next five fiscal years is as follows (in
thousands):

2005........................................................ $2,054
2006........................................................ $2,054
2007........................................................ $1,568
2008........................................................ $ 111
2009........................................................ $ 111

As of December 31, 2004 and 2003, all patents were held by Safety
Components. These patents relate to technical improvements for enhancement of
product performance with respect to Safety's airbag, fabric and technical
related products.

Customer relationship intangibles represent the present value of the
projected future earnings associated with business expected to be generated from
Safety's existing customers as of the date of acquisition. The discount rate
utilized in the calculation of customer relationship intangibles incorporated a
company specific risk factor to account for the uncertainty of future results
duplicating historical performance and to account for general market
uncertainties.

NOTE 8. PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment, net are summarized as follows:

Due to the timing of the acquisition, Safety's depreciation expense has
been included in Zapata's consolidated results beginning in the fourth quarter
of 2003. Consolidated depreciation expense for years ended December 31, 2004,
2003 and 2002 was $21.4 million, $12.8 million, and $9.2 million, respectively.

68

ZAPATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 9. OTHER ASSETS

Other assets are summarized as follows:

Omega Protein's amortization expense for fishing nets amounted to $899,000,
$985,000, and $688,000 for the years ended December 31, 2004, 2003, and 2002,
respectively.

Omega carries insurance for certain losses relating to its vessels and
Jones Act liability for employees aboard its vessels (collectively, "Vessel
Claims Insurance"). The typical Vessel Claims Insurance policy contains an
annual aggregate deductible ("AAD") for which the Omega remains responsible,
while the insurance carrier is responsible for all applicable amounts which
exceed the AAD. It is Omega's policy to accrue current amounts due and record
amounts paid out on each claim. Once payments exceed the AAD, Omega records an
insurance receivable for a given policy year, net of allowance for doubtful
accounts.

For more information concerning the Safety Components International, Inc.
Executive Deferral Program, see Note 19.

NOTE 10. ACCRUED AND OTHER CURRENT LIABILITIES

Accrued and other current liabilities are summarized as follows:

69

ZAPATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 11. DEBT

Long-term debt consisted of the following:

As of December 31, 2004 and 2003, the estimated fair value of Safety's debt
obligations approximated book value. The estimated fair value of Omega Protein's
long-term debt at December 31, 2004 and 2003 was $19.0 million and $20.3
million, respectively, based on the borrowing rates currently available to Omega
for loans with similar term and maturities.

70

ZAPATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

SAFETY COMPONENTS

Safety has a credit facility with Congress Financial Corporation
(Southern), a subsidiary of Wachovia Bank, National Association ("Congress").
Safety has an aggregate $35.0 million revolving credit facility with Congress
(the "Congress Revolver") expiring October 8, 2006. Under the Congress Revolver,
Safety may borrow up to the lesser of (a) $35.0 million or (b) 85% of eligible
accounts receivable, plus 60% of eligible finished goods, plus 50% of eligible
raw materials. The amount outstanding under the Congress Revolver at December
31, 2004 was $105,000. The Congress Revolver also includes a $5.0 million letter
of credit facility, which was unutilized at December 31, 2004.

In addition, Safety has a term facility with Congress (the "Congress Term A
loan") under which $2.0 million was outstanding as of December 31, 2004. The
Congress Term A loan is payable in equal monthly installments of approximately
$45,000, with the unpaid principal amount due on October 8, 2006. Additional
amounts are not available for borrowing under the Congress Term A loan. In
addition to the Congress Revolver and the Congress Term A loan, Safety also has
an additional term loan (the "Congress Term B loan" and, collectively with the
Congress Revolver and the Congress Term A loan, the "Congress Facilities") which
is undrawn and under which $3.5 million was available as of December 31, 2004.
At December 31, 2004, Safety's availability for additional borrowings (based on
the maximum allowable limit) under the Congress Revolver and the Congress Term B
loan was approximately $38.4 million.

The interest rate on the Congress Revolver and Congress Term A loan is
variable, depending on the amount of Safety's Excess Availability (as defined in
the Congress Facilities) at any particular time and the ratio of Safety's
EBITDA, less certain capital expenditures made by Safety, to certain fixed
charges of Safety (the "Fixed Charge Coverage Ratio"). Safety may make
borrowings based on the prime rate as described in the Congress Facilities (the
"Prime Rate") or the LIBOR rate as described in the Congress Facilities, in each
case with an applicable margin applied to the rate. The Congress Term B loan
bears interest at the Prime Rate plus 3%. At December 31, 2004, the margin on
Prime Rate loans was 0.0% and the margin on LIBOR rate loans was 1.75%. Safety
is required to pay a monthly unused line fee of 0.25% per annum on the
unutilized portion of the Congress Revolver and a monthly fee equal to 1.75% per
annum of the amount of any outstanding letters of credit.

Under the Congress Revolver and Congress Term A loan, Safety is subject to
a covenant that requires it to maintain a certain tangible net worth. To the
extent that Safety has borrowings outstanding under the Congress Term B loan, it
is subject to additional financial covenants that require Safety: (i) to
maintain EBITDA of no less than certain specified amounts, (ii) to maintain a
Fixed Charge Coverage Ratio of no less than a specified amount, (iii) to
maintain a ratio of certain indebtedness to EBITDA not in excess of a specified
amount, and (iv) not to make capital expenditures in excess of specified
amounts. In addition, Safety would be required to repay the Congress Term B loan
to the extent of certain excess cash flow.

The Congress Facilities also impose limitations upon Safety's ability to,
among other things, incur indebtedness (including capitalized lease
arrangements); become or remain liable with respect to any guaranty; make loans;
acquire investments; declare or make dividends or other distributions; merge,
consolidate, liquidate or dispose of assets or indebtedness; incur liens; issue
capital stock; or change its business. At December 31, 2004, Safety was in
compliance with all financial covenants. At December 31, 2004, Safety was also
in compliance with all non-financial covenants other than a covenant requiring
Safety to dissolve certain inactive subsidiaries. The non-compliance under this
covenant was waived by Congress. Substantially all assets of Safety are pledged
as collateral for the borrowings under the Congress Facilities.

In July 2004, Safety and Congress entered into an amendment to the Congress
Facilities which, among other things, allows Safety to include its Romanian
subsidiary and entities formed in connection with its joint venture in China
within the group of affiliates to which Safety is permitted to make loans up to
an aggregate specified amount. In October 2004, Safety and Congress entered into
an amendment and consent to the

71

ZAPATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Congress Facilities pursuant to which Congress consented to certain actions by
Safety, and Safety and Congress agreed to certain amendments to the Congress
Facilities, in each case in order to permit Safety to enter into its joint
venture in South Africa with another third party. This amendment also, among
other things, allows Safety to include the entity formed to conduct this joint
venture within the group of affiliates to which Safety is permitted to make
loans up to an aggregate specified amount.

On March 28, 2002, Safety's Czech Republic subsidiary and HVB Bank Czech
Republic, successor to Bank Austria, entered into an amendment to its $7.5
million mortgage note facility dated June 4, 1997. This amendment extended the
mortgage facility for five years, established an interest rate of 1.7% over
EURIBOR (EURIBOR was 2.42% at December 31, 2004), requires monthly payments of
approximately $89,000 and is secured by the real estate assets of Safety's
subsidiary in the Czech Republic. Safety has guaranteed the repayment of up to
$500,000 of the obligations of this subsidiary with respect to this facility.

On July 10, 1998, Safety entered into a $10.0 million financing arrangement
with KeyCorp Leasing, a division of Key Corporate Capital Inc. ("KeyCorp"). The
KeyCorp financing agreement has a seven-year term, bears interest at a rate of
1.25% over LIBOR (LIBOR was 2.42% at December 31, 2004), requires monthly
payments of approximately $150,000 and is secured by certain equipment located
at Safety's Greenville, South Carolina facility.

Future annual minimum principal payments of long-term debt and capital
lease obligations at December 31, 2004 are due in the following fiscal years (in
thousands):

2005........................................................ $3,263
2006........................................................ 3,284
2007........................................................ 445
2008........................................................ --
2009........................................................ --
Thereafter.................................................. --
------
$6,992
======

All debt in the above chart consists of the obligations of Safety
Components. Zapata Corporate has neither guaranteed nor otherwise agreed to be
liable for the repayment of this debt.

OMEGA PROTEIN

Omega was initially authorized to receive up to $20.6 million in loans
under the Title XI program, and has borrowed the entire amount authorized under
such program. The Title XI loans are secured by liens on certain of Omega's
fishing vessels and mortgages on Omega's Reedville, Virginia and Abbeville,
Louisiana plants. Loans are now available under similar terms pursuant to the
Title XI program without intervening lenders.

On October 1, 2003, pursuant to the Title XI program, the United States
Department of Commerce approved the fiscal 2003 financing application made by
Omega in the amount of $5.3 million. Omega closed on the $5.3 million Title XI
loan on December 30, 2003.

In September 2004, the United States Department of Commerce Fisheries
Finance Program approved the Omega's financing application in an amount not to
exceed $14 million (the "Approval Letter"). Borrowings under the Approval Letter
are to be used to finance and/or refinance approximately 73% of the actual
depreciable cost of Omega's future fishing vessels refurbishments and capital
expenditures relating to shore-side fishing assets, for a term not to exceed 15
years from inception at interest rates determined by the U.S. Treasury. Final
approval for all such future projects requires individual approval through the
Secretary of

72

ZAPATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Commerce, National Oceanic and Atmospheric Administration and National Marine
Fisheries Service ("National Marine Fisheries Service"). Borrowings under the
United States Department of Commerce Fisheries Finance Program are required to
be such secured agreements, undertakings, and other documents of whatsoever
nature deemed by the National Marine Fisheries Service sole discretion, as
necessary to accomplish the intent and purpose of the Approval Letter. Omega is
required to comply with customary National Marine Fisheries Service covenants as
well as certain special covenants. In December 2004, Omega submitted a $4.9
million financing request. Omega expects to receive the $4.9 million financing
request in March of 2005. As of December 31, 2004, Omega had no borrowings
outstanding under the Approval Letter.

On December 20, 2000 Omega entered into a three-year $20 million revolving
credit agreement with Bank of America, N.A. (the "Credit Facility"). Borrowings
under this facility may be used for working capital and capital expenditures. On
May 19, 2003, Omega amended the existing Credit Facility and among other things,
these amendments extended the maturity until December 20, 2006, deleted certain
existing financial covenants and added certain affirmative covenants such as, a
Leverage Ratio covenant not to exceed 3 to 1 at any time and a Fixed Charge
Coverage Ratio covenant not to be less than 1 as of the end of each month,
measured for the twelve-month period then ended. Omega is required to comply
with the financial covenants from and after the last day of any month in which
the Credit Facility's availability is less than $3 million on any date or the
Credit Facility's availability averages less than $6 million for any calendar
month. A commitment fee of 50 basis points per annum is payable on the unused
portion of the Credit Facility. If at any time Omega's loan outstanding under
the Credit Facility is $5 million or greater, the commitment fee on the unused
portion shall be 25 basis points per annum. Applicable interest is payable at
alternative rates of LIBOR plus 2.25% or Prime plus 0%. The applicable interest
note will be adjusted (up or down) prospectively on a quarter basis from LIBOR
plus 2.25% to LIBOR plus 2.75% or at Omega's option Prime plus 0% to Prime plus
0.25% depending upon the Fixed Charge Coverage Ratio being greater than 2.5
times to less than or equal to 1.5 times, respectively. The Credit Facility is
collateralized by all of Omega's trade receivables, inventory and equipment. In
addition, the Credit Facility does not allow for the payment of cash dividends
or stock repurchases and also limits capital expenditures and investments. As of
December 31, 2004 Omega had no borrowings outstanding under the Credit Facility.
At December 31, 2004 and December 31, 2003, Omega had outstanding letters of
credit totaling approximately $2.7 million and $2.6 million, respectively,
issued primarily in support of worker's compensation insurance programs. Omega
had $15.3 million available under the Credit Facility at December 31, 2004.

Future annual minimum principal payments of long-term debt obligations at
December 31, 2004 are due in the following fiscal years (in thousands):

2005........................................................ $ 1,661
2006........................................................ 1,751
2007........................................................ 1,865
2008........................................................ 1,891
2009........................................................ 1,578
Thereafter.................................................. 8,858
-------
$17,604
=======

All debt in the above chart consists of the obligations of Omega Protein.
Zapata Corporate has neither guaranteed nor otherwise agreed to be liable for
the repayment of this debt.

73

ZAPATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 12. PENSION LIABILITIES

Pension liabilities are summarized as follows:

Pension liabilities are primarily derived from the additional minimum
pension liability requirements of SFAS No. 87 which requires the recognition of
an additional minimum pension liability in the amount of the unfunded
accumulated benefit obligation in excess of accrued pension cost with an equal
amount to be recognized net of the associated tax benefits in accumulated other
comprehensive income. Increases in the additional minimum liability do not
impact earnings or cash flow, and could reverse in future periods should either
interest rates increase or market performance and plan returns improve.

As it is Omega Protein's policy to fund U.S. pension plans at amounts not
less than the minimum requirements of the Employee Retirement Income Security
Act of 1974, Omega may be required to make contributions to its pension plan to
meet the minimum funding requirements as required by law. Omega does not expect
to contribute to its pension plan in 2005. Zapata is not responsible for any
funding of Omega's plan.

Zapata's supplemental retirement plan is an unfunded plan whereby plan
contributions are not required. Since entered into in 1992, fixed plan benefits
have been and continue to be paid on a monthly basis to certain former senior
executives of Zapata. The amounts of such payments equal the difference between
the amounts received under the applicable pension plan and the amounts that
would otherwise be received if pension plan payments were not reduced as the
result of the limitations upon compensation and benefits imposed by federal law.

For more information on benefit plans, see Note 17 Qualified Defined
Benefit Plans.

NOTE 13. STOCKHOLDERS' EQUITY

COMMON STOCK

On December 6, 2002, the Board of Directors further authorized the Company
to purchase up to 500,000 shares of its outstanding common stock in the open
market or privately negotiated transactions. The shares may be purchased from
time to time as determined by the Company. Any purchased shares would be placed
in treasury and may subsequently be reissued for general corporate purposes. The
repurchases will be made only at such times as are permissible under the federal
securities laws. No time limit has been placed on the duration of the program
and no minimum number or value of shares to be repurchased has been fixed.
Zapata reserves the right to discontinue the repurchase program at any time and
there can be no assurance that any repurchases will be made. As of December 31,
2004, no shares had been repurchased under this program.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME

Components of accumulated other comprehensive (loss) income in stockholders
equity (in thousands):

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ZAPATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 14. EARNINGS PER SHARE INFORMATION

The following reconciles amounts used in the computations of basic and
diluted income per common share (in thousands, except per share amounts):

The following table details the potential common shares excluded from the
calculation of diluted earnings per share because their exercise price was
greater than the average market price for the period (in thousands, except per
share amounts):

NOTE 15. INCOME TAXES

Domestic and foreign income before income taxes and minority interest are
as follows:

Safety's results of operations have been included in the Company's
consolidated amounts for 2004 and the fourth quarter of 2003.

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ZAPATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The combined income tax provision from continuing operations consisted of
the following:

The following table reconciles the income tax provisions for all periods
computed using the U.S. statutory rate of 35% to the provisions from continuing
operations as reflected in the financial statements:

No taxes have been provided relating to the possible distribution of
approximately $26.3 million of Safety's undistributed earnings considered to be
permanently reinvested in foreign operations.

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ZAPATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Temporary differences and tax credit carryforwards that gave rise to
significant portions of deferred tax assets and liabilities are as follows:

The Company has $18.3 million in deferred tax assets attributable to net
operating loss carry-forwards for federal income tax purposes, of which $9.4
million is attributable to Omega and the remaining $8.9 million is attributable
to Zapata. Since the two companies cannot currently file a consolidated federal
income tax return, the ability for each of these companies to utilize its own
net operating losses is dependent on the future taxable income that each company
separately generates. Net operating loss carry-forwards have a 20 year carry-
forward period. For Zapata and Omega, the net operating losses will begin to
expire in 2020 and 2019, respectively. Additionally, Zapata has approximately
$6.6 million and Omega has approximately $1.2 million in federal alternative
minimum tax credits which can be used to offset future federal tax liabilities.
Alternative minimum tax credits do not expire.

The Company has a valuation allowance for December 31, 2004 and 2003 of
$1.9 million and $852,000 respectively. The majority of the valuation allowance
for the year ended December 31, 2004 relates to state net operating loss carry
forwards of Zapata and capital loss carry forwards of Safety. To the extent that
Safety's capital losses are ultimately utilized, the recognized tax benefit will
be allocated to reduce non-current intangible assets of Safety Components. With
the exception of this valuation allowance, the Company believes it is more
likely than not that its remaining net deferred tax assets as of December 31,
2004 and 2003 will be realized. The ultimate realization of deferred tax assets
could be negatively impacted by market conditions and other variables not known
or anticipated at this time.

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During 2003, Zapata finalized its audit with the Internal Revenue Service
for the tax years ended September 30, 1997 through 2001. This resulted in a net
tax benefit of approximately $3.1 million relating to a federal refund and the
elimination of certain tax contingencies. This benefit was offset by the
recognition of a deferred tax liability of approximately $4.5 million associated
with the excess of book basis over tax basis attributable to Zapata's investment
in Omega Protein.

Effective December 31, 2002, Zapata changed its tax year-end from September
30 to a calendar year ending on December 31. Safety Components was included in
the consolidated federal tax return of Zapata for the fourth quarter of 2003. On
or about April 1, 2004, Zapata's ownership of Safety dropped below the necessary
level to allow Safety and Zapata to file a consolidated return. Accordingly, the
income (loss) from each of Zapata and Safety Components will be combined for
purposes of calculating federal tax liability only for the first quarter of
2004. The determination of whether Zapata and Safety Components will file on a
combined, consolidated or separate-company basis for state purposes in 2004 will
be made on a state by state basis.

If Zapata or Omega has a change of ownership pursuant to Section 382 of the
Internal Revenue Code, utilization of their respective net operating losses or
alternative minimum tax credits could be significantly limited or, in Zapata's
case, possibly eliminated. An ownership change for this purpose is generally a
change in the majority ownership of a company over a three year period.

Section 541 of the Internal Revenue Code of 1986, as amended (the "IRC"),
subjects a corporation, which is a "personal holding company" as defined in the
IRC, to a 15% penalty tax on "undistributed personal holding company income" in
addition to the corporation's normal income tax. Generally, undistributed
personal holding company income is based on taxable income, subject to certain
adjustments, most notably a reduction for Federal incomes taxes. Personal
holding company income is comprised primarily of passive investment income plus,
under certain circumstances, personal service income. Zapata and its domestic
subsidiaries (other than Omega and Safety) could become subject to the penalty
tax if (i) 60% or more of its adjusted ordinary gross income is personal holding
company income and (ii) 50% or more of its outstanding common stock is owned,
directly or indirectly, by five or fewer individuals at any time during the last
half of the taxable year. The Company believes that five or fewer of Zapata's
stockholders hold 50% or more of its outstanding common stock for purposes of
IRC Section 541. However, as of December 31, 2004, Zapata and its domestic
subsidiaries (other than Omega and Safety) had no undistributed personal holding
company income due to losses generated by the consolidated tax filing group and
therefore has not recorded a personal holding company tax liability. There can
be no assurance that Zapata will not be subject to this tax in the future that
in turn may materially and adversely impact the Company's financial position,
results of operations and cash flows.

On October 22, 2004, the American Jobs Creation Act of 2004 (the Act) was
signed into law. The Act provides a one-time elective incentive to repatriate
foreign earnings by providing an 85% dividend received deduction. Significant
uncertainty remains regarding the interpretation and application of the
repatriation incentive, therefore Safety has not yet made a decision regarding
its repatriation plans. Deferred income taxes have not been provided for
undistributed earnings because they are intended to be indefinitely reinvested
in operations outside the US.

Under the guidance in FASB Staff Position No. FAS 109-1, Application of
FASB Statement No. 109, "Accounting for Income Taxes," to the Tax Deduction on
Qualified Production Activities Provided by the American Jobs Creation Act of
2004, the deduction will be treated as a "special deduction" as described in
FASB Statement No. 109. As such, the special deduction has no effect on deferred
tax assets and liabilities existing at the enactment date. Rather, the impact of
this deduction will be reported in the period in which the deduction is claimed
on our tax return. This deduction should apply to the activities of Safety and
Omega.

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ZAPATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

NOTE 16. COMMITMENTS AND CONTINGENCIES

LEASES PAYABLE

Future annual minimum payments under non-cancelable lease obligations as of
December 31, 2004 are as follows (in thousands):

Rental expenses for leases were $2.4 million, $1.1 million, and $868,000 in
2004, 2003, and 2002, respectively.

LITIGATION

Zapata is involved in litigation relating to claims arising out of its past
and current operations in the normal course of business. Zapata maintains
insurance coverage against such potential ordinary course claims in an amount in
which it believes to be adequate. While the results of any ultimate resolution
cannot be predicted, in the opinion of Zapata's management, based upon
discussions with counsel, any losses resulting from these matters will not have
a material adverse effect on Zapata's results of consolidated operations, cash
flow or financial position.

By letter dated November 2, 2004, a division employee, at the time a
controller for Safety's North American Automotive Group, filed a complaint with
the U.S. Department of Labor, Occupational Safety & Health Administration
("OSHA"), pursuant to Section 806 of the Corporate and Criminal Fraud
Accountability Act of 2002, Title VIII of the Sarbanes-Oxley Act of 2002 (the
"Act"), alleging that a change in his duties in September 2004 resulted from his
allegations of improprieties in Safety's operations in Mexico and California.
Safety has reported that neither the internal investigation conducted by
management nor the ensuing external investigation led by the Audit Committee of
Safety's Board of Directors following notification by Safety management of the
issues raised substantiated any of the allegations. Due to circumstances
unrelated to the investigation or the complaint, Safety terminated the employee
on December 15, 2004. By letter dated December 15, 2004, the employee amended
his complaint to allege that his termination was also in retaliation for his
allegations. By letter dated February 14, 2005, Safety was notified by OSHA that
it had completed its investigation and found that there is no reasonable cause
to believe that Safety violated the Act, and that the employee has 30 days from
his receipt of such notification to request a hearing before an Administrative
Law Judge. Safety has reported that, as of the date of this Annual Report on
Form 10-K, to its knowledge, the employee has not yet sought such a hearing.

ENVIRONMENTAL MATTERS

Like similar companies, Safety's operations are subject to a wide variety
of increasingly complex and stringent federal, state, local and international
laws and regulations, including those governing the use, storage,

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handling, generation, treatment, emission, release, discharge and disposal of
certain materials, substances and wastes, the remediation of contaminated soil
and groundwater, and the health and safety of employees (collectively,
"Environmental Laws"). Such laws may impose joint and several liability and may
apply to conditions at properties presently or formerly owned or operated by an
entity or its predecessor as well as to conditions of properties at which wastes
or other contamination attributable to an entity or its predecessor have been
sent or otherwise come to be located. The nature of Safety's operations exposes
it to the risk of claims with respect to such matters and there can be no
assurance that violations of such laws have not occurred or will not occur or
that material costs or liabilities will not be incurred in connection with such
claims. Safety has reported that, based upon its experience to date, it believes
that the future cost of compliance with existing Environmental Laws and
liability for known environmental claims pursuant to such Environmental Laws,
will not have a material adverse effect on its financial position, results of
operations or cash flows. However, future events, such as new information,
changes in existing Environmental Laws or their interpretation, and more
vigorous enforcement policies of regulatory agencies, may give rise to
additional expenditures or liabilities that could be material.

An undiscounted reserve of $277,000 has been included in "other long-term
liabilities" on the accompanying consolidated balance sheets for estimated
future environmental expenditures related to Safety's facility in Greenville,
South Carolina (the "Greenville facility") for conditions existing prior to
Safety's ownership of the facility. Such reserve was established at the time
Safety acquired the facility, and the amount was determined by reference to the
results of a Phase II study performed at the Greenville facility. In addition,
the Greenville facility has been identified along with numerous other parties as
a Potentially Responsible Party ("PRP") at the Aquatech Environmental, Inc.
Superfund Site. Safety has reported that it believes that Safety is a de minimis
party with respect to the site and that future clean-up costs incurred by Safety
will not be material.

Safety has received a General Notice of Potential Liability letter from the
U.S. Environmental Protection Agency ("EPA"), dated November 22, 2004, addressed
to Valentec Wells, LLC, an inactive subsidiary ("Valentec Wells") of Safety,
regarding the RRGClayton Chemical Site (the "Site"). The EPA Notice states that
the agency has received information indicating that Valentec Wells is a PRP for
the Site pursuant to the Comprehensive Environmental Response Compensation and
Liability Act. The EPA letter indicates that Valentec Wells is one of 73 PRPs
that were selected to receive this Notice as the alleged largest contributors of
waste to the Site. The EPA Notice invited Valentec Wells to attend PRP meetings
in early December 2004 and to respond indicating Safety's willingness to perform
or finance remedial response activities at the Site. In subsequent
communications, EPA has alleged that Valentec Wells may be connected to the Site
through another corporation. Safety has requested that EPA provide any
information in its possession related to the alleged successor relationship
between Valentec Wells and the other company. Safety has reported that, as of
the date of this Annual Report on Form 10-K, it has not been provided with any
information by the EPA and that its inquiry into this matter has not confirmed
any corporate relationship between Valentec Wells and the other company, nor has
it revealed any information to indicate that Valentec Wells ever sent wastes to
the Site. Safety has reported that it will continue to review this matter and
that as of the date of this Annual Report on Form 10-K, it is unable to predict
the outcome or reasonably estimate a range of possible loss.

Although no assurances can be given in this regard, in the opinion of
Safety's management, no material expenditures beyond those accrued are expected
to be required for Safety's environmental control efforts and the final outcome
of these matters are not expected to have a material adverse effect on Safety's
financial position or results of future operations. Safety has reported that
based on the advice of independent consultants on environmental matters it
believes that it currently is in compliance with applicable environmental
regulations in all material respects.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Zapata and its subsidiaries are subject to various possible claims and
lawsuits regarding environmental matters in addition to those discussed above.
Zapata's management believes that costs, if any, related to these matters will
not have a material adverse effect on the consolidated results of operations,
cash flows or financial position of the Company.

SAFETY COMPONENTS BANKRUPTCY

Safety Components emerged from bankruptcy on October 11, 2000, and an order
entering the final decree and closing the Chapter 11 cases was signed on
November 21, 2003. The final decree is subject to a "Limited Reservation of
Jurisdiction" for a "Reporting/Fee Dispute" with the U.S. Trustee Office over
administrative matters associated with the cases. Safety has reserved $275,000
for any potential exposure associated with the Reporting/Fee Dispute. Although
no assurances can be given in this regard, in the opinion of Safety's
management, no material expenditures beyond those accrued will be required for
the Reporting/ Fee Dispute.

CAPITAL COMMITMENTS

Omega Protein entered into a non-binding letter of intent to purchase a
40-acre facility containing office and warehouse space and located next to its
Moss Point, Mississippi facility. The proposed purchase price is $1,750,000.
Omega believes that the utilization of this site would benefit its Gulf Coast
operations by allowing Omega to develop additional and more cost effective rail
and truck shipping opportunities, enhanced packaging capabilities and additional
value-added products. The closing of the purchase is contingent on the
completion of Omega's due diligence on the property. If Omega acquires the
property, Omega estimates that it will spend an additional $2.0 million in 2005
for capital improvements to the property.

GUARANTEES

The Company has applied the disclosure provisions of FASB Interpretation
No. 45 (FIN 45), "Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others," to its
agreements containing guarantee or indemnification clauses. These disclosure
provisions expand those required by SFAS No. 5, "Accounting for Contingencies,"
by requiring a guarantor to disclose certain types of guarantees, even if the
likelihood of requiring the guarantor's performance is remote. The following is
a description of arrangements in which the Company is the guarantor.

Zapata's articles of incorporation, bylaws and certain other agreements
contain indemnification clauses for its officers, directors and certain
consultants for losses incurred as a result of claims made against such
individuals arising out of, or because of their service to the Company. The
maximum potential amount of future payments the Company could be required to
make under these indemnification agreements is unlimited; however, Zapata
maintains Director and Officer Liability insurance that limits this exposure. As
a result of this insurance coverage, it is the opinion of Zapata's management
that the estimated fair value of any liabilities under these indemnification
agreements is minimal and should not materially impact the Company's financial
position, results of operations or cash flows. These indemnification obligations
were in effect prior to December 31, 2002 and are therefore grandfathered under
the provisions of FIN No. 45. Accordingly, no liabilities have been recorded for
the indemnification clauses in these agreements.

During February 2003, Zapata's directors and officers entered into
indemnification agreements with the Company. These agreements provide additional
rights to persons entitled to indemnification that is currently provided under
the Company's Articles of Incorporation and By-laws and will protect the
officers and directors from losses incurred as a result of claims made against
such individuals arising out of, or because of their service to the Company. The
maximum potential amount of future payments the Company could be required to
make under these indemnification agreements is unlimited; however, Zapata
maintains Director and Officer Liability insurance to limit potential exposure.
As a result of this insurance coverage, it is the opinion of
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ZAPATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Zapata's management that the estimated fair value of any liabilities under these
indemnification agreements is minimal and accordingly, no liabilities have been
recorded under the provisions of FIN 45.

Throughout its history, the Company has entered into numerous transactions
relating to the sale, disposal or spin-off of past operations. Pursuant to
certain of these transactions, the Company may be obligated to indemnify other
parties to these agreements. These obligations include indemnifications for
losses incurred by such parties arising out of the operations of such businesses
prior to these transactions or the inaccuracy of representations of information
supplied by the Company in connection with such transactions. These
indemnification obligations were in effect prior to December 31, 2002 and are
therefore grandfathered under the provisions of FIN No. 45. Accordingly, no
liabilities have been recorded for the indemnification clauses in these
agreements.

In addition, Safety Components, Omega Protein and Zap.Com have articles of
incorporation, bylaws and certain other agreements containing indemnification
clauses for their officers and directors. The estimated fair values of any
liabilities under these indemnification agreements are limited by insurance
coverages and should not materially impact the Company's financial position,
results of operations or cash flows. No liabilities have been recorded for the
indemnification clauses in these agreements.

NOTE 17. QUALIFIED DEFINED BENEFIT PLANS

GENERAL

Zapata and Omega Protein have separate and independent noncontributory
defined benefit pension plans covering certain U.S. employees. Benefits are
generally based on employees' years of service and compensation level. All of
the costs of these plans are borne by Zapata and Omega. Each plan has adopted an
excess benefit formula integrated with covered compensation. Both plan's
participants are 100% vested in the accrued benefit after five years of service.
The funding policy of each plan is to make contributions as required by
applicable regulations. All plans use a December 31 measurement date.

In 2002, Omega Protein's Board of Directors authorized a plan to freeze the
Omega pension plan in accordance with ERISA rules and regulations so that new
employees, after July 31, 2002, will not be eligible to participate in the
pension plan and further benefits will no longer accrue for existing
participants. The freezing of the pension plan had the effect of vesting all
existing participants in their pension benefits in the plan.

Additionally, effective April 1, 1992, Zapata adopted a supplemental
pension plan, which provides supplemental retirement payments to certain former
senior executives of Zapata. The amounts of such payments equal the difference
between the amounts received under the applicable pension plan and the amounts
that would otherwise be received if pension plan payments were not reduced as
the result of the limitations upon compensation and benefits imposed by federal
law. Effective December 1994, the supplemental pension plan was frozen.

83

ZAPATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

CONSOLIDATED OBLIGATIONS AND FUNDED STATUS

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ZAPATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ZAPATA CORPORATE PENSION PLAN INFORMATION

As of December 31, 2004, Zapata's fair value of plan assets of $20.5
million was in excess of accumulated benefit obligations of $19.4 million.
Zapata's unrecognized transition assets of $10.6 million at October 1, 1987 were
amortized over 15 years.

Zapata's Board of Directors has established a Pension Committee to oversee
plan assets. The Pension Committee is comprised of two members of management and
is responsible for establishing objectives and policies for the investment of
Plan assets with assistance from the Plan's investment consultant. As the
obligations of the Plan are relatively long-term in nature, the Plan's
investment strategy has been to maximize long-term capital appreciation. The
Plan has historically invested within and among equity and fixed income asset
classes in a manner that sought to achieve the highest rate of return consistent
with a moderate amount of volatility. At the same time, the Plan maintained a
sufficient amount invested in highly liquid investments to meet the Plan's
immediate and projected cash flow needs. To achieve these objectives, the
Committee developed guidelines for the composition of investments to be held by
the Plan. Due to varying rates of return among asset classes, the actual asset
mix may vary somewhat from these guidelines but are generally rebalanced as soon
as practical.

Plan Assets. The Zapata Pension Plan asset allocations and target Plan
asset allocations by asset category are as follows:

As of December 31, 2004 and 2003, no plan assets were invested in Zapata
common stock.

85

ZAPATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The Company's initial purchases of Safety's common stock resulted in an
ownership percentage in excess of 80%. Accordingly, the Company had previously
reported that such ownership created a parent-subsidiary controlled group for
purposes of the provisions of the Internal Revenue Code applicable to qualified
retirement plans. As a result of Zapata's ownership of Safety Components
outstanding stock subsequently falling below 80%, the Company does not have a
parent-subsidiary controlled group, and thus, the Plan is not currently required
to cover substantially all of the employees of Safety Components.

The Company currently has a prepaid pension asset of approximately $16.1
million as of December 31, 2004. If the Company decides to terminate the Plan,
at the time of this decision, the Company would be required to incur a non-cash
charge through earnings in an amount equal to the unrecognized net losses and
unrecognized prior service cost components of the remaining balance of the
Plan's prepaid pension asset. At December 31, 2004, these components represented
approximately $15.1 million. If the Company decides to freeze the Plan, the Plan
would continue to be subject to the additional minimum liability requirements of
SFAS No. 87. Such requirements require the recognition of an additional pension
liability in the amount of the unfunded accumulated benefit obligation in excess
of accrued pension with an equal amount to be recognized net of the associated
tax benefits in accumulated other comprehensive (loss) income. Accordingly,
depending on market conditions, the Company may have to reverse its prepaid
pension balance and record a pension liability through a non-cash charge to
equity. As the Company has not determined if it will freeze and/or terminate the
Plan, and due to the uncertainty of market conditions, the Company can provide
no assurances as to the ultimate financial statement impact that Plan
modifications may have.

For 2004, the Company assumed a long-term asset rate of return of 7.75%. In
developing this rate of return assumption, the Company obtained input from our
third party pension plan investment advisor which included a review of
historical returns and asset class return expectations based on the Plan's
current asset allocation. Despite the Company's belief that this assumption is
reasonable, future actual results may differ from this estimate.

Contributions. Zapata plans to make no contributions to its pension plan
in 2005.

Estimated Future Benefit Payments. The following benefit payments, which
reflect expected future service, as appropriate, are expected to be paid:

OMEGA PROTEIN PENSION PLAN INFORMATION

Omega's funding policy is to make contributions as required by applicable
regulations. The Company uses a December 31 measurement date for its pension
plan. The accumulated benefit obligation for the pension plan was $26.1 million
and $24.2 million in excess of plan assets of $17.2 million and $17.4 million as
of December 31, 2004 and 2003, respectively. The unrecognized transition asset
at October 1, 1987 was $5.2 million which is being amortized over 15 years. The
unrecognized net loss of $10.2 million at December 31, 2004 is expected to be
reduced by future returns on plan assets and through decreases in future net
pension credits.

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ZAPATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Omega, in consultations with its actuarial firm, employs a building block
approach in determining the assumed long-term rate of return for plan assets.
Omega reviews historical market data and long-term historical relationships
between equities and fixed income in accordance with the widely-accepted capital
market principle that assets with higher volatility generally generate greater
returns over the long run. Omega also evaluates current market factors such as
inflation and interest rates before it determines long-term capital market
assumptions. After taking into account diversification of asset classes and the
need to periodically re-balance asset classes, Omega establishes the assumed
long-term portfolio rate of return by a building block approach. Omega also
reviews peer data and historical returns to check its long-term rate of return
for reasonability and appropriateness.

Plan Assets. Omega's pension plan weighted-average asset allocations at
December 31, 2003, and 2002, by asset category are as follows:

As of December 31, 2004 and 2003, no plan assets were invested in Omega
Protein common stock.

Contributions. Omega Protein does not expect to contribute to its pension
plan in 2005.

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ZAPATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Estimated Future Benefit Payments. The following benefit payments, which
reflect expected future service, as appropriate, are expected to be paid:

ZAPATA CORPORATE SUPPLEMENTAL PENSION PLAN INFORMATION

Zapata's supplemental pension plan's accumulated benefit obligations of
$832,000 and $849,000 were in excess of plan assets of $0 as of December 31,
2004 and 2003, respectively. Zapata's supplemental plan is subject to the
additional minimum liability requirements of SFAS No. 87. Accordingly, based
upon plan actuarial and asset information, the Company had an additional pension
liability of $300,000 and $271,000 in 2004 and 2003 respectively. Amounts listed
as minimum pension liability adjustments under the caption "Comprehensive (Loss)
Income" on the Consolidated Statements of Stockholders' Equity represent the net
change in the portion of the additional pension liability recorded under
accumulated other comprehensive loss on the Consolidated Balance Sheets.

Plan Assets. Due to the nature of the plan, the Zapata Supplemental
Pension Plan has no plan assets.

Contributions. Zapata plans to make no contributions to its supplemental
pension plan in 2005. However, as the Zapata supplemental pension plan is an
unfunded plan, estimated future benefit payments will be made in accordance with
the schedule below.

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ZAPATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Estimated Future Benefit Payments. The following benefit payments, which
reflect expected future service, as appropriate, are expected to be paid:

NOTE 18. QUALIFIED DEFINED CONTRIBUTION PLANS

Effective May 31, 2001, the Company established the Zapata 401(k) Plan (the
"Zapata Plan") and simultaneously revoked its participation in the Omega Protein
401(k) Retirement and Savings Plan, (the "Profit Sharing Plan"). All amounts
held by the Profit Sharing Plan on behalf of current and former employees of
Zapata were transferred to the Zapata Plan. Participants may defer a fixed
amount or a percentage of their eligible compensation, subject to limitations of
the Zapata Plan. The Company makes a discretionary matching contribution of 100%
of the employee's contribution up to 3% of eligible compensation and 50% of the
employee's contribution between 3% and 5% of eligible compensation. In
accordance with Plan provisions, during 2003, the Company began funding its
matching contribution with funds held in a forfeitures account within the plan.
The Company recognized expenses for contributions to the Zapata Plan of
approximately $0, $9,000, and $18,000 in 2004, 2003 and 2002 respectively.

Safety has a defined contribution plan for eligible employees which
provides for discretionary employer contributions. Safety expensed approximately
$224,000 during the year ended December 31, 2004 to its plan.

All qualified employees of Omega are covered under the Omega Protein 401(k)
Savings and Retirement Plan (the "Plan"). Prior to 2001, Omega contributed
matching contributions to the Plan based on employee contributions and
compensation. Omega suspended its matching contributions to the Plan for 2001.
In 2002, the Board of Directors authorized the reinstatement of the Company's
matching cash contribution to the Plan, effective January 1, 2002, at levels
previously in place prior to the suspension of the match in 2001. Omega's
matching contributions to the Plan were approximately $660,000, $553,000 and
$627,000 during 2004, 2003, and 2002 respectively.

At December 31, 2003, the Company owned approximately 83% of Safety's
common stock which created a parent-subsidiary controlled group for purposes of
the provisions of the Internal Revenue Code applicable to qualified retirement
plans. However, during 2004, the Company's ownership of Safety's common stock
fell below 80%, the threshold for this distinction. Therefore, the Company
currently has no intent to modify the Zapata Plan or the Safety 401(k) Plan.

NOTE 19. OTHER EMPLOYEE BENEFIT PLANS

Safety established the Safety Components International, Inc. Executive
Deferral Program (the "Deferral Program") for the benefit of certain key
executive employees. The Deferral Program provides for participants to defer any
portion of their cash compensation until some future point in time. The
participants' contributions to the Deferral Program are immediately 100% vested.
Under the provisions of the Deferral Program, a trust was established to
maintain the amounts deferred by the participants. Additionally, Safety funds an
amount equal to the exercise price of the options associated with the deferred
compensation, which is payable by the employee upon exercise. The assets of the
trust are included in "assets held in subsidiary deferred

89

ZAPATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

compensation plan" and the related amounts due the participants are included in
"accrued and other current liabilities" in the accompanying consolidated balance
sheets. The amounts held in "assets held in subsidiary deferred compensation
plan" were $4.4 million and $3.3 million and included in "accrued and other
current liabilities" were $3.7 and $2.8 million at December 31, 2004 and 2003,
respectively.

NOTE 20. STOCK OPTION PLANS

Zapata's Amended and Restated 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 Zapata Board of Director's Compensation 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. All options granted vest ratably over three
years beginning on the first anniversary of the date of grant and have an
exercise price equal to the fair market value of the stock at grant date. 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
60,000 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. As of December 31, 2004, stock options covering a
total of 3,333 shares had been exercised. No shares of common stock are
available for future stock options or other awards under the Plan. As of
December 31, 2004, there were options for the purchase of up to 6,667 shares
outstanding under the 1987 plan.

On December 5, 1996, the Company's stockholders approved a long-term
incentive plan (the "1996 Plan"). The 1996 Plan provides for the granting of
restricted stock, stock appreciation rights, stock options and other types of
awards to key employees of the Company. Under the 1996 Plan, options may be
granted by the Committee at prices equivalent to the market value of the common
stock on the date of grant. Options become exercisable in one or more
installments on such dates as the Committee may determine. Unexercised options
will expire on varying dates up to a maximum of ten years from the date of
grant. All options granted vest ratably over three years beginning on the first
anniversary of the date of grant and have an exercise price equal to the fair
market value of the stock at grant date. The 1996 Plan provides for the issuance
of options to purchase up to 500,000 shares of common stock. During 1999, the
stockholders approved an amendment to the 1996 Plan which increased the number
of shares available for options granted under the plan to 1,000,000 shares. At
December 31, 2004, stock options covering a total of 104,816 shares had been
exercised and a total of 738,300 shares of common stock are available for future
stock options or other awards under the Plan. As of December 31, 2004 there were
options for the purchase of up to 156,884 shares outstanding under the 1996
plan.

In May 2002, the Stockholders approved specific stock option grants of
1,000 options to each of the six non-employee directors of the Company. These
grants had been approved by the Board of Directors and awarded by the Company in
March of 2002. These grants are non-qualified options with a ten year life and
are exercisable in cumulative one-third installments vesting annually beginning
on the first anniversary of the date of grant.

90

ZAPATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

A summary of the status of the Company's stock options is presented below:

Options outstanding and exercisable as of December 31, 2004 are summarized
below:

91

ZAPATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table gives the weighted-average assumptions used in the
determination of fair value of each stock option granted using the Black-Scholes
option-pricing model. No weighted average assumptions are shown for Zap.Com for
2003 and 2002 or for Safety Components since the acquisition because they
granted no stock options in those periods.

NOTE 21. RELATED PARTY TRANSACTIONS

SAFETY COMPONENTS

After acquiring in excess of 80% of the voting interests in Safety
Components, the Company entered into a tax sharing and indemnity agreement with
Safety Components. On or about April 1, 2004, Zapata's stock ownership
percentage of Safety Components outstanding stock decreased below 80% due to
stock option exercises by Safety Components' employees. As a result of Zapata's
ownership of Safety Components outstanding stock falling below 80%, Zapata will
not consolidate Safety Components into Zapata's consolidated income tax returns
for periods subsequent to the first quarter of 2004.

OMEGA PROTEIN

Upon completion of Omega's initial public offering in 1998, Omega and
Zapata entered into certain agreements including the Administrative Services
Agreement, which covers certain administrative services Omega provides to
Zapata. The Administrative Services Agreement allows Omega to provide certain
administrative services to Zapata at Omega's estimated cost. For the years ended
December 31, 2004, 2003 and 2002, Zapata reimbursed Omega $14,500, $17,000, and
$15,000 respectively for services provided under the plan.

Zapata and Omega also entered into a Sublease Agreement which provided for
Omega to lease its principal corporate offices in Houston, Texas from Zapata
Corporation of Texas, Inc., a non-operating wholly-owned subsidiary of Zapata,
and provided Omega with the ability to utilize telephone equipment worth
approximately $21,000 for no additional charge. In May 2003, Zapata Corporation
of Texas, Inc. assigned the lease to Omega who assumed all obligations under the
lease with the third party landlord.

92

ZAPATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

ZAP.COM

Since its inception, Zap.Com has utilized the services of the Zapata's
management and staff under a shared services agreement that allocated these
costs on a percentage of time basis. Zap. Com also subleases its office space in
Rochester, New York from Zapata. Under the sublease agreement, annual rental
payments are allocated on a cost basis. Zapata has waived its rights under the
shared services agreement to be reimbursed for these expenses since May 1, 2000.
For the years ended December 31, 2004 and 2003, approximately $13,000 and
$12,000, respectively, was recorded as contributed capital for these services.

In November 2004, Zap.Com granted stock options to its sole director,
corporate secretary and certain Zapata employees under the 1999 Plan. Zap.Com
accounted for the stock options granted to its director in accordance with FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation (an interpretation of APB Opinion No. 25)." Because Zapata controls
Zap.Com, the stock options granted to Zap.Com's Corporate Secretary and grants
to Zapata employees have been accounted for as a stock dividend from Zap.Com to
Zapata under Emerging Issues Task Force Issue 00-23, "Issues Related to the
Accounting for Stock Compensation under APB Opinion No. 25 and FASB
Interpretation No. 44." For options granted to the Company's corporate
secretary, Zapata will recognize compensation expense ratably over the three
year vesting period.

OTHER

During 2002, the Company finalized the terms of a consulting agreement with
its former Chairman of the Board of Directors, Malcolm Glazer. Subject to the
terms of the agreement, the Company pays Malcolm Glazer $122,500 per month until
April 30, 2006. The agreement also provides for health and other medical
benefits for Mr. Glazer and his wife. This agreement will terminate in the event
of Mr. Glazer's death or permanent disability.

For the years ended December 31, 2004, 2003 and 2002, the Company incurred
legal fees of approximately $0, $34,000 and $40,000, respectively, related to a
previously dismissed action against Malcolm I. Glazer, the Malcolm I. Glazer
Family Limited Partnership, and Malcolm I. Glazer GP, Inc.

NOTE 22. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In November 2004, the FASB issued Statement of Financial Accounting
Standards (SFAS) No. 151, "Inventory Costs," which clarifies the accounting for
abnormal amounts of idle facility expense, freight, handling costs, and wasted
material. SFAS No. 151 will be effective for inventory costs incurred during
fiscal years beginning after June 15, 2005. The Company is in the process of
reviewing the impact, if any, of the adoption of this statement and The Company
believes that the adoption of this standard will not have a consolidated
material effect on the Company's financial position, results of operations or
cash flows.

In December 2004, the FASB issued SFAS No. 123R, "Share Based Payment,"
that requires companies to expense the value of employee stock options and
similar awards for interim and annual periods beginning after June 15, 2005 and
applies to all outstanding and unvested stock-based awards at a company's
adoption date. The Company is in the process of reviewing the impact of the
adoption of this statement and believes that the adoption of this standard may
have a material effect on the Company's consolidated financial position and
results of operations.

In December 2004, the FASB issued SFAS No. 153, "Exchanges of Nonmonetary
Assets," which eliminates the exception for nonmonetary exchanges of similar
productive assets and replaces it with a general exception for exchanges of
nonmonetary assets that do not have commercial substance. SFAS No. 153 will be
effective for nonmonetary asset exchanges occurring in fiscal periods beginning
after June 15, 2005. The Company is in the process of reviewing the impact, if
any, of the adoption of this statement and believes that

93

ZAPATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

the adoption of this standard will not have a material effect on the Company's
consolidated financial position, results of operations or cash flows.

NOTE 23. DERIVATIVES AND HEDGING

Safety monitors its risk associated with the volatility of certain foreign
currencies against its functional currency, the U.S. dollar. Safety uses certain
derivative financial instruments to reduce exposure to volatility of foreign
currencies. Safety has formally documented all relationships between hedging
instruments and hedged items, as well as risk management objectives and
strategies for undertaking various hedge transactions. Derivative financial
instruments are not entered into for speculative purposes.

Certain operating expenses at Safety's Mexican facilities are paid in
Mexican pesos. To reduce exposure to fluctuations in the U.S. dollar and Mexican
peso exchange rates, Safety periodically enters into forward contracts to buy
Mexican pesos for periods and amounts consistent with the related, underlying
forecasted cash outflows. These contracts are designated as hedges at inception
and are monitored for effectiveness on a routine basis. Safety recorded a credit
to net earnings of approximately $80,000 for the twelve months ended December
31, 2004 on these forward contracts. At December 31, 2004, Safety had no such
outstanding forward exchange contracts. At December 31, 2003, Safety had
outstanding forward exchange contracts that matured between January and March
2004 to purchase Mexican pesos with an aggregate notional amount of
approximately $2.7 million. The fair values of these contracts at December 31,
2003 totaled approximately $52,000, which was recorded as a liability on
Safety's Consolidated Balance Sheets in "other current liabilities." Safety
recorded a credit to earnings of approximately $47,000 for the nine months ended
December 31, 2003 and the unrealized loss on these forward contracts of
approximately $52,000 was included in "accumulated other comprehensive income"
at December 31, 2003.

Certain intercompany sales at Safety's Czech facility are denominated and
settled in Euros. To reduce exposure to fluctuation in the Euro and Czech Koruna
exchange rates, Safety periodically enters into forward contracts to buy Czech
Korunas for periods and amounts consistent with the related, underlying
forecasted cash inflows associated with the intercompany sales. These contracts
are designated as hedges at inception and are monitored for effectiveness on a
routine basis. Safety recorded a charge to net earnings of approximately
$141,000 for the twelve months ended December 31, 2004 on these forward
contracts. At December 31, 2004, Safety had no such outstanding forward exchange
contracts At December 31, 2003, Safety had outstanding forward exchange
contracts that matured between January and March 2004 to purchase Czech Korunas
with an aggregate notional amount of approximately $2.1 million. The fair values
of these contracts at December 31, 2003 totaled approximately $100,000, which
was recorded as a liability on Safety's balance sheet in "other current
liabilities." Safety recorded a charge to earnings of approximately $47,000 for
the nine months ended December 31, 2003 and the unrealized loss on these forward
contracts of approximately $89,000 was included in "accumulated other
comprehensive income" at December 31, 2003.

NOTE 24. INDUSTRY SEGMENT AND GEOGRAPHIC INFORMATION

Since the acquisition of Safety Components in September 2003, all financial
results from Safety are reported as a separate segment. Safety's results of
operations have been included in the Company's consolidated amounts only for the
fourth quarter of 2003. Additionally, total assets include amounts attributable
to Safety as of December 31, 2003. Accordingly, no such amounts are included as
of December 31, 2002.

94

ZAPATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following summarizes certain financial information of each segment for
the years ended December 31, 2004, 2003, and 2002:

The following table shows the geographical distribution of revenues (in
thousands) based on location of customers:

95

ZAPATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

The following table shows the geographical distribution of consolidated
long-lived assets (in thousands) based on location of the assets:

Long-lived assets include property, plant and equipment, intangible assets
and certain other specified assets.

NOTE 25. QUARTERLY FINANCIAL DATA (UNAUDITED)

The following table presents certain unaudited consolidated operating
results for each of the Company's preceding eight quarters. The Company believes
that the following information includes all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation in accordance
with accounting principles generally accepted in the United States of America.
The operating results for any interim period are not necessarily indicative of
results for any other period.

As a result of the acquisition, Safety's results have been included in
Zapata's consolidated results of operations beginning in the fourth quarter of
2003.

96

ZAPATA CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

Omega Protein's menhaden harvesting and processing business is seasonal in
nature. Omega generally has higher sales during the menhaden harvesting season
(which includes the second and third quarter of each year) due to increased
product availability, but prices during the fishing season tend to be lower than
during the off-season. As a result, Omega's quarterly operating results have
fluctuated in the past and may fluctuate in the future. In addition, from time
to time Omega defers sales of inventory based on worldwide prices for competing
products that affect prices for Omega's products which may affect comparable
period comparisons.

NOTE 26. SUBSEQUENT EVENTS

On January 4, 2005, Safety Components announced it had signed an agreement
to form a joint venture with Kingsway International Limited, an entity
associated with Huamao (Xiamen) Technical Textile Co., Ltd. ("Huamao") which
manufactures airbag fabrics, in China (the "China Joint Venture"). Safety
anticipates that the China Joint Venture, which has not yet commenced commercial
production, will produce automotive airbag cushions in China utilizing the
fabrics produced by Huamao. Pursuant to a technology transfer and joint venture
agreement, Safety will provide technical assistance to its partner in the
development of airbag fabrics. Production is intended to satisfy the Chinese
domestic market. Safety owns 65% of the entity formed to conduct the operations
of the China Joint Venture. Pursuant to the joint venture agreement, Safety the
intention, but not an obligation, for funding of its China Joint Venture through
potential loan or capital contributions of up to $6.5 million as of December 31,
2004.

In February 2005, the Company modified the terms of certain outstanding
stock options held by Darcie Glazer and Edward Glazer, to extend the early
termination of the exercise period following Darcie Glazer's termination of
employment with the Company in 2001. Consistent with FASB Interpretation No. 44,
"Accounting for Certain Transactions involving Stock Compensation (an
interpretation of APB Opinion No. 25)" the Company will record a compensation
charge of approximately $353,000 in the first quarter of 2005 related to this
modification.

97

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures. An evaluation was
performed under the supervision of the Company's management, including the Chief
Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness
of the design and operation of the Company's disclosure controls and procedures
(as defined in Securities Exchange Act of 1934 (the "Exchange Act") Rules
13a-15(e) and 15d-15(e)) as of the end of the period covered by this report.
Based on that evaluation, the Company's management, including the CEO and CFO,
concluded that the Company's disclosure controls and procedures were effective
to provide reasonable assurance that information we are required to disclose in
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms.

Notwithstanding the foregoing, there can be no assurance that the Company's
disclosure controls and procedures will detect or uncover all failures of
persons within the Company and its consolidated subsidiaries to disclose
material information otherwise required to be set forth in the Company's
periodic reports. There are inherent limitations to the effectiveness of any
system of disclosure controls and procedures, including the possibility of human
error and the circumvention or overriding of the controls and procedures.
Accordingly, even effective disclosure controls and procedures can only provide
reasonable, not absolute, assurance of achieving their control objectives.

Management's Annual Report on Internal Control Over Financial
Reporting. The Company's management is responsible for establishing and
maintaining adequate internal control over financial reporting, as such term is
defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Internal control over
financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with generally accepted
accounting principles. The Company's internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the Company; (ii) provide
reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the Company are
being made only in accordance with authorizations of management and directors of
the Company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the
Company's assets that could have a material effect on the financial statements.

Under the supervision and with the participation of the Company's
management, including our CEO and CFO, the Company conducted an evaluation of
the effectiveness of the Company's internal control over financial reporting
based on the framework in Internal Control -- Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Because of its
inherent limitations, internal control over financial reporting may not prevent
or detect misstatements. Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate. Based on its evaluation under the
framework in Internal Control -- Integrated Framework,management concluded that
the Company's internal control over financial reporting was effective as of
December 31, 2004. Management's assessment of the effectiveness of the Company's
internal control over financial reporting as of December 31, 2004 has been
audited by PricewaterhouseCoopers LLP, an independent registered public
accounting firm, as stated in their report which is included herein.

Changes in Internal Controls. No changes in internal control over
financial reporting occurred during the quarter ended December 31, 2004 that has
materially affected, or is reasonably likely to materially affect, the Company's
internal control over financial reporting.

98

ITEM 9B. OTHER INFORMATION

Not Applicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Pursuant to General Instruction G on Form 10-K, the information called for
by Item 10 of Part III of Form 10-K is incorporated by reference to the
information set forth in the Company's definitive proxy statement relating to
its 2005 Annual Meeting of Stockholders (the "2005 Proxy Statement") to be filed
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), in response to Items 401 and 405 of Regulation S-K under
the Securities Act of 1933, as amended, and the Exchange Act ("Regulation S-K").

ITEM 11. EXECUTIVE COMPENSATION.

Pursuant to General Instruction G of Form 10-K, the information called for
by Item 11 of Part III of Form 10-K is incorporated by reference to the
information set forth in the 2005 Proxy Statement in response to Item 402 of
Regulation S-K, excluding the material concerning the report on executive
compensation and the performance graph specified by paragraphs (k) and (l) of
such Item.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.

Pursuant to General Instruction G of Form 10-K, the information called for
by Item 12 of Part III of Form 10-K is incorporated by reference to the
information set forth in the 2005 Proxy Statement in response to Item 403 of
Regulation S-K.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Pursuant to General Instruction G of Form 10-K, the information called for
by Item 13 of Part III of Form 10-K is incorporated by reference to the
information set forth in the 2005 Proxy Statement in response to Item 404 of
Regulation S-K.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Pursuant to General Instruction G of Form 10-K, the information called for
by Item 14 of Part III of Form 10-K is incorporated by reference to the
information set forth in the 2005 Proxy Statement in response to Item 9(e) of
Schedule 14A.

99

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) LIST OF DOCUMENTS FILED.

(1) Financial Statements

Financial Statements, Zapata Corporation.
Report of Independent Registered Public Accounting Firm.
Consolidated Balance Sheets as of December 31, 2004 and 2003.
Consolidated Statements of Operations for the years ended December
31, 2004, 2003, and 2002.
Consolidated Statements of Cash Flows for the years ended December
31, 2004, 2003, and 2002.
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 2004, 2003, and 2002.
Notes to Consolidated Financial Statements.

(2) Financial Statement Schedules

Schedule I -- Condensed Financial Information of the Registrant

Schedule II -- Valuation and Qualifying Accounts

(b) EXHIBITS

The exhibit list attached to this report is incorporated herein in its
entirety by reference as if fully set forth herein. The exhibits indicated by an
asterisk (*) are incorporated by reference.

100

101

- ---------------

+ Management contract or compensatory plan or arrangement required to be filed
as an exhibit pursuant to the requirements of Item 15(a)(3) of Form 10-K.

102

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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
(Registrant)

By: /s/ LEONARD DISALVO
------------------------------------
(Leonard DiSalvo Vice President)

March 10, 2005

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.

103

SCHEDULE I

CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT

ZAPATA CORPORATION

CONDENSED BALANCE SHEETS
(PARENT COMPANY ONLY)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)

The accompanying notes are an integral part of the condensed financial
statements.
104

ZAPATA CORPORATION

CONDENSED STATEMENTS OF OPERATIONS
(PARENT COMPANY ONLY)
(IN THOUSANDS)

The accompanying notes are an integral part of the condensed financial
statements.
105

ZAPATA CORPORATION

CONDENSED STATEMENTS OF CASH FLOWS
(PARENT COMPANY ONLY)
(IN THOUSANDS)

The accompanying notes are an integral part of the condensed financial
statements.
106

ZAPATA CORPORATION

NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(PARENT COMPANY ONLY)

NOTE 1. BASIS OF PRESENTATION

The Company's investment in subsidiaries in the parent company only
financial statements is stated at cost, plus equity in earnings of subsidiaries.
The parent company only financials should be read in conjunction with Zapata's
consolidated financial statements.

NOTE 2. RESTRICTED NET ASSETS

As discussed in Note 11 to the Consolidated Financial Statements included
in Item 8 of this report, the terms of the Safety Components and Omega Protein
current debt and credit facilities prohibit or place restrictions on each of
these subsidiaries' ability to transfer funds to Zapata in the form of cash
dividends, loans or advances. Due to the nature of the restrictions contained in
Safety's and Omega's debt and credit agreements, all of each company's
respective net assets are considered restricted. Zap.Com is not a party to any
agreement which restricts the use of its assets. Accordingly, none of Zap.Com's
net assets are considered restricted.

NOTE 3. COMMITMENTS AND CONTINGENCIES

LEASES PAYABLE

Future annual minimum payments under non-cancelable operating lease
obligations for Zapata Corporate as of December 31, 2004 are as follows (in
thousands):

Rental expenses for Zapata Corporate leases were approximately $279,000,
$275,000, and $270,000 in 2004, 2003, and 2002, respectively.

LITIGATION

See Note 16 to the Consolidated Financial Statements included in Item 8 of
this report for information regarding Zapata Corporate's litigation matters.

GUARANTEES

See Note 16 to the Consolidated Financial Statements included in Item 8 of
this Report for information regarding Zapata's guarantees.

NOTE 4. RELATED PARTY TRANSACTIONS

Included in the parent company only condensed balance sheets are amounts
receivable from Safety Components under a tax sharing and indemnity agreement of
approximately $401,000 and $1.1 million as of December 31, 2004 and 2003,
respectively. Also in the parent company only condensed balance sheets are

107

ZAPATA CORPORATION

NOTES TO THE CONDENSED FINANCIAL STATEMENTS
(PARENT COMPANY ONLY) -- (CONTINUED)

amounts payable to Omega Protein under an administrative services agreement of
approximately $105,000 and $108,000 as of December 31, 2004 and 2003.
Additionally, approximately $13,000 and $12,000 of amounts waived under Zapata's
shared services agreement with Zap.Com are included as increases in Zapata
Corporate's Investment in Zap.Com for the years ended December 31, 2004 and
2003. Included in the parent company only condensed statements of operations are
approximately $14,500, $17,000 and $15,000 for the periods ended December 31,
2004, 2003, and 2002, respectively. These expenditures are related to services
provided to Zapata by Omega under an administrative services agreement.

See Note 21 to the Consolidated Financial Statements included in Item 8 of
this Report for additional information regarding related party transactions.

NOTE 5. SUBSEQUENT EVENT

In February 2005, the Company modified the terms of certain outstanding
stock options held by Darcie Glazer and Edward Glazer, to extend the early
termination of the exercise period following Darcie Glazer's termination of
employment with the Company in 2001. Consistent with FASB Interpretation No. 44,
"Accounting for Certain Transactions involving Stock Compensation (an
interpretation of APB Opinion No. 25)" the Company will record a compensation
charge of approximately $353,000 in the first quarter of 2005 related to this
modification.

108

SCHEDULE II

ZAPATA CORPORATION

VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)

(A) Allowance for Doubtful Accounts -- uncollectible accounts written off

109

INDEX TO EXHIBITS

21 Subsidiaries of the Registrant.
23 Consent of PricewaterhouseCoopers LLP.
24 Powers of attorney.
31.1 Certification of CEO as required by Rule 13a-14(a), as
adopted Pursuant to Section 304 of the Sarbanes-Oxley Act of
2002.
31.2 Certification of CFO as required by Rule 13a-14(a), as
adopted Pursuant to Section 304 of the Sarbanes-Oxley Act of
2002.
32.1 Certification of CEO Pursuant to 18 U.S.C Section 1350, as
adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
32.2 Certification of CFO Pursuant to 18 U.S.C Section 1350, as
adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.