TOREADOR RESOURCES CORP

We also may be required to pay ZaZa a termination fee of $3,500,000 under certain conditions of the merger agreement, including, but not limited to, termination to accept a superior proposal, our board of directors withdraws its recommendation to approve the merger agreement, our board recommends an alternative acquisition proposal of Toreador, or the merger agreement is terminated because our stockholders do not approve the merger agreement and Toreador enters into an agreement for an acquisition proposal within 12 months of such termination. We also may be required to reimburse ZaZa’s out of pocket expenses up to a maximum of $750,000 if ZaZa terminates the merger agreement because we breach any of our representations, warranties or covenants in the merger agreement or any of our representations or warranties become untrue such that the relevant closing conditions relating to the accuracy of our representations and warranties or our compliance with our covenants cannot be satisfied. If we fail to consummate the merger, we may need to raise additional capital to ensure we are able to meet our ongoing capital obligations and to pay these fees and other legacy costs associated with the proposed merger.

We refer to this condition as the “minimum cash condition.” Toreador and ZaZa estimate that New ZaZa, Toreador and/or ZaZa may need to raise up to $76 million of financing for the minimum cash condition to be satisfied (less unrestricted cash available at closing). Cash on hand fluctuates during the course of the year. Moreover, the amount of cash that Toreador and ZaZa will have on hand at closing is subject to a variety of factors, many of which are beyond the control of Toreador and ZaZa. Accordingly, the cash on hand at closing may be substantially less than estimated. Toreador’s, ZaZa’s and New ZaZa’s ability to raise the necessary financing may be hindered by the uncertain nature of the credit and capital markets as well as by the fact that, upon consummation of the transaction, New ZaZa may issue an aggregate principal amount of up to $67.1 million of secured subordinated promissory notes to the holders of the limited liability company interests of ZaZa and the managing partners of ZaZa. Accordingly, we cannot provide any assurance that we will be successful in raising the necessary financing. In addition, if we are able to raise the necessary financing, the terms of any such financing may not be favorable to New ZaZa.

Toreador and ZaZa estimate that New ZaZa, Toreador and/or ZaZa may need to raise up to $76 million of financing for the minimum cash condition to be satisfied (less unrestricted cash available at closing). Cash on hand fluctuates during the course of the year. Moreover, the amount of cash that Toreador and ZaZa will have on hand at closing is subject to a variety of factors, many of which are beyond the control of Toreador and ZaZa. Accordingly, the cash on hand at closing may be substantially less than estimated. Toreador is seeking to raise debt financing, and, after the closing, Toreador and ZaZa may seek to raise additional capital for New ZaZa, if and when necessary. In addition, under the terms of the transactions, New ZaZa may issue to the holders of the limited liability company interests of ZaZa and the managing partners of ZaZa, upon consummation of the transaction, secured subordinated promissory notes with aggregate principal amount of up to $67.1 million. Under the terms of the transactions the aggregate principal amount of the secured subordinated promissory notes would be reduced to the extent that ZaZa or New ZaZa has cash available to pay to the holders of the limited liability company interests of ZaZa and the managing partners of ZaZa without causing the minimum cash condition to fail to be satisfied. However, such cash is likely to be available only to the extent that ZaZa, Toreador and/or New ZaZa are able to secure financing.

After the consummation of the proposed transactions, the former holders of Toreador common stock will own 25% of the outstanding New ZaZa common stock and the current ZaZa owners will own the remaining 75%. Under the stockholders’ agreement entered into between the current ZaZa owners and New ZaZa, during the three years following the closing, the current ZaZa owners will be entitled to designate a proportional number of directors to the Board of directors of New Zaza (the “Board”) ((but not more than seven) based upon the current ZaZa owners’ (and their permitted transferees’) percentage ownership of New ZaZa. During such period, as long as the current ZaZa owners (and their permitted transferees) own at least 72.2% of the outstanding shares of New ZaZa common stock, they will continue to have the right to designate seven directors. The remaining directors of New ZaZa will be nominated by a nominating committee consisting of two directors selected by the Toreador designees on the Board (and their successors) and one independent director selected by the current ZaZa owners. During the three years after closing, the current ZaZa owners will be required to vote their ZaZa shares in favor of the nominees of the nominating committee. However, after the third anniversary of the closing, there will be no limitation on the number of directors of New ZaZa that the current ZaZa owners may nominate and elect and, as such, they may be able to nominate and elect the entire Board and remove any directors, including directors who were Toreador designees or nominated by the Board’s nominating committee. In addition, as a result of their share ownership in New ZaZa, the current ZaZa owners will be able to control all matters requiring approval by New ZaZa stockholders, including, but not limited to: mergers, consolidations or acquisitions; the sale of all or substantially all of New ZaZa’s assets and other decisions affecting New ZaZa’s capital structure; the amendment of New ZaZa’s certificate of incorporation and bylaws, and New ZaZa’s liquidation, winding up and dissolution. Finally, under the stockholders’ agreement, the current ZaZa owners are subject to a three-year standstill period starting on the date of the consummation of the proposed transactions. However, once the stand-still period ends, there will be no contractual restriction on the current ZaZa owners’ ability to purchase additional shares of New ZaZa common stock or take New ZaZa private on terms that may not be favorable to the other stockholders of New ZaZa. The interests of the current ZaZa owners may not be aligned with the interests of the former Toreador stockholders. This concentration of share ownership may have a material adverse effect on the trading price of New ZaZa’s common stock because investors may perceive disadvantages in owning shares in a company with significant stockholders.

Uncertainty about the effect of the transactions on customers and suppliers may have a material adverse effect on Toreador and ZaZa and, consequently, on New ZaZa. These uncertainties could cause customers, suppliers and others who deal with Toreador and ZaZa to seek to change existing business relationships with Toreador and ZaZa. In addition, the merger agreement restricts Toreador and ZaZa, without the other party’s consent and subject to certain exceptions, from making certain acquisitions and taking other specified actions until the transactions occur or the merger agreement terminates. These restrictions may prevent Toreador and ZaZa from pursuing otherwise attractive business opportunities that may arise prior to completion of the transactions or termination of the merger agreement and from making other changes to their businesses. Management’s and our employees’ attention may be diverted from our day-to-day business because matters related to the proposed merger transactions may require substantial commitments of their tile and resources. Toreador’s relationships with customers, partners and vendors may be harmed due to uncertainties with regard to our business and prospects.