TRANSTEXAS GAS CORP, 8-K, 1997-08-18

TRANSTEXAS GAS CORP
8-K, 1997-08-18
CRUDE PETROLEUM & NATURAL GAS

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<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

FORM 8-K

CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of Earliest Event Reported): June 13, 1997

TRANSTEXAS GAS CORPORATION
--------------------------
(Exact name of registrant as specified in its charter)

DELAWARE
--------
(State or other jurisdiction of incorporation)

1-12204 76-0401023
------- ----------
(Commission File Number) (I.R.S. Employer
Identification No.)

1300 North Sam Houston Parkway East, Suite 310
Houston, Texas 77032
---------------------
(Address of principal executive offices, including zip code)

(281) 987-8600
--------------
(Registrant's telephone number, including area code)
<PAGE> 2
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.

Not applicable.

ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.

Not applicable.

ITEM 3. BANKRUPTCY OR RECEIVERSHIP.

Not applicable.

ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.

Not applicable.

ITEM 5. OTHER EVENTS.

LOBO SALE. On May 29, 1997, TransTexas Gas Corporation
("TransTexas") entered into and consummated a stock purchase
agreement with an unaffiliated buyer (the "Lobo Sale
Agreement"), with an effective date of March 1, 1997, to
effect the sale (the "Lobo Sale") of the stock of TransTexas
Transmission Corporation ("TTC"), its subsidiary that owned
substantially all of TransTexas' Lobo Trend producing
properties and related pipeline transmission system, for a
sales price of approximately $1.1 billion, subject to
adjustments as provided for in the Lobo Sale Agreement.
Purchase price adjustments were made for, among other things:
the value of certain NGLs and stored hydrocarbons; the value
of gas in TTC's pipeline; prepaid expenses relating to
post-effective date operations; post-closing expenses related
to pre-closing operations; the value of oil and gas produced
and sold between the effective date of the Lobo Sale Agreement
and closing (approximately $44 million); property defects;
and estimated costs associated with liabilities incurred
before closing. Purchase price adjustments made at the
closing of the Lobo Sale are subject to a review,
reconciliation and resolution process, which is expected to be
completed within 105 days following the closing. With
proceeds from the Lobo Sale, TransTexas repaid certain
indebtedness and other obligations, including production
payments, in an aggregate amount of approximately $84 million.
The remaining net proceeds have been or will be used for the
repurchase or redemption of the Senior Secured Notes and for
general corporate purposes.

TEC NOTES OFFERING. On June 13, 1997, TransAmerican Energy
Corporation ("TEC"), completed a private offering (the "TEC
Notes Offering") of $475 million aggregate principal amount of
11 1/2% Senior Secured Notes due 2002 (the "TEC Senior Secured
Notes") and $1.13 billion aggregate principal amount of 13%
Senior Secured Discount Notes due 2002 (the "TEC Senior
Secured Discount Notes" and, together with the TEC Senior
Secured Notes, the "TEC Notes") for net proceeds of

2
<PAGE> 3
approximately $1.3 billion. The TEC Notes are senior
obligations of TEC, secured by a lien on substantially all of
its existing and future assets, including the intercompany
loans described below. In conjunction with the TEC Notes
Offering, TransTexas has completed or intends to complete the
following transactions (collectively, the "Transactions"): (a)
borrowing $450 million pursuant to an intercompany loan from
TEC; (b) a tender offer and consent solicitation (the "Tender
Offer") for TransTexas' $800 million aggregate principal
amount of 11 1/2% Senior Secured Notes due 2002 (the "Senior
Secured Notes"), (c) an offer (the "Subordinated Notes
Exchange Offer") to exchange approximately $115.8 million
aggregate principal amount of new notes that pay interest in
cash at the rate of 13 3/4% per annum for TransTexas' $189
million aggregate principal amount of 13 1/4% Senior
Subordinated Notes due 2003 (the "Subordinated Notes"); and
(d) a dividend on, or share repurchase program for, shares of
TransTexas' common stock (the "Stock Repurchase Program") in
an aggregate amount of approximately $400 million.

INTERCOMPANY LOANS TO TRANSTEXAS AND TARC. With the proceeds
of the TEC Notes Offering, TEC made intercompany loans to
TransTexas (the "TransTexas Intercompany Loan") and
TransAmerican Refining Corporation ("TARC") (the "TARC
Intercompany Loan"). The TransTexas Intercompany Loan is in
the principal amount of $450 million and (i) bears interest at
a rate of 10 7/8% per annum, payable semi- annually in cash in
arrears and (ii) is secured initially by a security interest
in substantially all of the assets of TransTexas including
the TransTexas Disbursement Account (described below), but
excluding inventory, receivables and equipment. The TARC
Intercompany Loan is in the original amount of $676 million,
and (i) accretes principal at 16% per annum, compounded
semi-annually, until June 15, 1999, to a final accreted value
of $920 million, and thereafter pays interest semi-annually in
cash in arrears on the accreted value thereof, at a rate of
16% per annum, and (ii) is secured initially by a security
interest in substantially all of TARC's assets other than
inventory, receivables and equipment. The Intercompany Loans
will mature on June 1, 2002. The Intercompany Loan Agreements
contain certain restrictive covenants, including, among
others, limitations on incurring additional debt, asset sales,
dividends and transactions with affiliates. Upon the
occurrence of a Change of Control (as defined), TEC will be
required to make an offer to purchase all of the outstanding
TEC Notes at a price equal to 101% of the principal amount
thereof, together with accrued and unpaid interest, if any,
or, in the case of any such offer to purchase the TEC Senior
Secured Discount Notes prior to June 15, 1999, at a price
equal to 101% of the accreted value thereof, in each case, to
and including the date of purchase. Pursuant to the terms of
the Intercompany Loans, TEC may require TransTexas and TARC to
pay a pro rata share of the purchase price paid by TEC.

SENIOR SECURED NOTES TENDER OFFER. On June 13, 1997,
TransTexas completed a tender offer for its Senior Secured
Notes for 111 1/2% of their principal amount

3
<PAGE> 4
(plus accrued and unpaid interest). Approximately $785.4
million principal amount of Senior Secured Notes were tendered
and accepted by TransTexas. On June 30, 1997, TransTexas
redeemed the Senior Secured Notes remaining outstanding
pursuant to the terms of the Senior Secured Notes Indenture.

SUBORDINATED NOTES EXCHANGE OFFER. On June 19, 1997,
TransTexas completed an exchange offer, pursuant to which it
exchanged approximately $115.8 million aggregate principal
amount of its 13 3/4% Senior Subordinated Notes due 2001 (the
"Subordinated Exchange Notes") for all of the Subordinated
Notes. The indenture governing the Subordinated Exchange
Notes includes certain restrictive covenants, including, among
others, limitations on incurring additional debt, asset sales,
dividends and transactions with affiliates.

As a result of the Lobo Sale, the Tender Offer and the
Exchange Offer, TransTexas expects to record a pretax gain of
approximately $600 million and a pretax extraordinary charge
of approximately $120 million during the quarter ending July
31, 1997.

STOCK REPURCHASE PROGRAM. TransTexas has implemented a stock
repurchase program pursuant to which it plans to repurchase
common stock from its public stockholders and from its
affiliates, including TEC and TARC. It is anticipated that
TransTexas will acquire four times the number of shares from
its affiliated stockholders than it acquires from its public
stockholders. Shares may be purchased through open market
purchases, negotiated transactions or tender offers, or
combination of the above. It is anticipated that the price
paid to affiliated stockholders will equal the weighted
average price paid to purchase shares from the public
stockholders. Approximately $400 million from the proceeds of
the TransTexas Intercompany Loan was deposited in a
disbursement account to fund the stock repurchase program.
Funds from the disbursement account may also be used to pay
dividends on TransTexas common stock. As of July 31, 1997,
TransTexas had purchased approximately $49.6 million in value
of common stock from the public.

TRANSTEXAS DISBURSEMENT ACCOUNT. Pursuant to a disbursement
agreement (the "Disbursement Agreement") among TransTexas,
TEC, the TEC Indenture Trustee, and Firstar Bank of Minnesota,
N.A. as disbursement agent, approximately $400 million of the
proceeds of the TransTexas Intercompany Loan was placed in an
account (the "Disbursement Account") to be held and invested
by the disbursement agent until disbursed. Funds in the
Disbursement Account will be disbursed to TransTexas as needed
to fund the stock repurchase program. TransTexas may at any
time request disbursement of interest earned on the funds in
the Disbursement Account.

4
<PAGE> 5
ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS.

Not applicable.

ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.

(a) Financial Statements of Businesses Acquired:
Not applicable.

(b) Pro forma financial information:
The pro forma financial information is incorporated
herein by reference to pages PF-1 through PF-7 of the
Registration Statement of the Company on Form S-4
(333-33803).

The following exhibits are filed as a part of this report:

4.1 Second Supplemental Indenture dated June 13, 1997
between the Company, as issuer, and Firstar Bank of
Minnesota, N.A., as trustee.

4.2 Indenture dated June 13, 1997 governing the Company's
Senior Subordinated Notes due 2001 between the
Company, as issuer and Bank One, NA, as trustee (filed
as Exhibit 4.1 to the Company's registration
statement on Form S-4 (333-33803), and incorporated
herein by reference thereto).

4.3 Registration Rights Agreement dated June 13, 1997
between the Company and the holders of the Company's
Senior Subordinated Notes due 2001 (filed as Exhibit
4.2 to the Company's registration statement on Form S-4
(333-33803), and incorporated herein by reference
thereto).

4.4 Loan Agreement dated June 13, 1997 between the Company
and TEC.

4.5 Security and Pledge Agreement dated June 13, 1997 by
the Company in favor of TEC.

4.6 Disbursement Agreement dated June 13, 1997 among the
Company, TEC and Firstar Bank of Minnesota, as
disbursement agent and trustee.

99.1 Pro Forma Condensed Consolidated Financial Information
of TransTexas Gas Corporation. (Filed as a part of the
Company's registration statement on Form S-4
(333-33803), and incorporated herein by reference
thereto).

5
<PAGE> 6
ITEM 8. CHANGE IN FISCAL YEAR.

Not applicable.

ITEM 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S.

Not applicable.

6
<PAGE> 7
SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.

TRANSTEXAS GAS CORPORATION

By: /s/ ED DONAHUE
-----------------------------------
Name: Ed Donahue
Title: Vice President and Chief Financial
Officer

Dated: August 15, 1997
<PAGE> 8
INDEX TO EXHIBITS

EXHIBIT
NUMBER DESCRIPTION
------ -----------

4.1 Second Supplemental Indenture dated June 13, 1997
between the Company, as issuer, and Firstar Bank of
Minnesota, N.A., as trustee.

4.4 Loan Agreement dated June 13, 1997 between the Company
and TEC.

4.5 Security and Pledge Agreement dated June 13, 1997 by
the Company in favor of TEC.

4.6 Disbursement Agreement dated June 13, 1997 among the
Company, TEC and Firstar Bank of Minnesota, as
disbursement agent and trustee.

<PAGE> 1
EXHIBIT 4.1

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

TRANSTEXAS GAS CORPORATION,
Issuer

and

FIRSTAR BANK OF MINNESOTA, N.A., successor by merger to
AMERICAN BANK NATIONAL ASSOCIATION,
Trustee

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

SECOND SUPPLEMENTAL INDENTURE

Dated as of June 13, 1997

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

$800,000,000
11 1/2% Senior Secured Notes due 2002

- ------------------------------------------------------------------------------
<PAGE> 2
THIS SECOND SUPPLEMENTAL INDENTURE, effective as of June 13, 1997 (the
"Supplemental Indenture"), is made and entered into by and among TRANSTEXAS GAS
CORPORATION, a Delaware corporation (the "Company"), and FIRSTAR BANK OF
MINNESOTA, N.A., successor by merger to AMERICAN BANK NATIONAL ASSOCIATION (the
"Trustee"), under an Indenture dated as of June 15, 1995, by and among the
Company, TRANSTEXAS TRANSMISSION CORPORATION, a Delaware corporation ("TTC"),
and the Trustee (the "Original Indenture"), as supplemented by the First
Supplemental Indenture effective as of May 29, 1997 by and among the Company,
TTC and the Trustee (the Original Indenture, as so supplemented, is referred to
herein as the "Current Indenture"). All capitalized terms used in this
Supplemental Indenture that are defined in the Current Indenture, either
directly or by reference therein, have the meanings assigned to them therein,
except to the extent such terms are defined in this Supplemental Indenture or
the context clearly requires otherwise.

WHEREAS, by operation of Section 14.15 of the Current Indenture, TTC is
no longer a party to the Indenture since the Company sold all of the Capital
Stock of TTC, as permitted by the terms of the Current Indenture, on May 29,
1997; and

WHEREAS, Section 9.2 of the Current Indenture provides, among other
things, that with the consent of the Holders of not less than a majority in
aggregate principal amount of then outstanding Securities or, with respect to
certain matters, 66-2/3% of the aggregate principal amount of Notes then
outstanding, the Obligors, when authorized by Board Resolutions, and the
Trustee may amend or supplement the Current Indenture or the Securities or
enter into an indenture supplemental thereto for the purposes of adding any
provisions to or changing in any manner or eliminating any of the provisions of
the Current Indenture or the Securities or of modifying in any manner the
rights of the Holders under the Current Indenture or the Securities; and

WHEREAS, the Company has offered to purchase for cash, upon the terms
and subject to the conditions set forth in an Offer to Purchase and Consent
Solicitation dated May 14, 1997, as supplemented and amended by that certain
Supplement to Offer to Purchase and Consent Solicitation dated June 6, 1997
(collectively, the "Offer to Purchase and Consent Solicitation"), and in a
Letter of Transmittal and Consent (the "Letter of Transmittal and Consent" and,
together with the Offer to Purchase and Consent Solicitation, the "Offer") all
of its 11 1/2% Senior Secured Notes due 2002 (the "Securities"); and

WHEREAS, the Offer to Purchase and Consent Solicitation and Letter of
Transmittal and Consent also constitute a solicitation of consents from the
Holders of the Securities to certain amendments to the Current Indenture to
eliminate or modify certain of the covenants and other provisions contained in
the Current Indenture, as more particularly described in this Supplemental
Indenture (the "Proposed Amendments"); and

WHEREAS, the Holders of at least 66-2/3% of the aggregate principal
amount of Notes have consented to the Proposed Amendments pursuant to the
Offer; and

WHEREAS, the Board of Directors of the Company has adopted resolutions
authorizing and approving the Proposed Amendments and the Company and the
Trustee are executing and delivering this Supplemental Indenture in order to
provide for such amendments;

NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties to this Supplemental
Indenture hereby agree as follows:
<PAGE> 3
ARTICLE I

AMENDMENTS TO CURRENT INDENTURE

Section 1.01. New Definitions. The Current Indenture is hereby amended,
effective as of the Acceptance Date (as defined below), to add the following
definitions to Section 1.1 to read as follows:

"New Note" means a promissory note of the Company evidencing a loan to
the Company from TransAmerican Energy Company, a Delaware corporation
and parent corporation of the Company ("TEC"), the proceeds of which are
used to finance the purchase of the Notes pursuant to its Offer to
Purchase and Consent Solicitation dated May 14, 1997, as amended or
supplemented from time to time, or for other purposes.

"1997 Intercreditor Agreement" means an agreement between the Trustee
and the trustee under an indenture relating to indebtedness of TEC to
whom TEC collaterally assigns the New Note or any interest therein, with
such changes thereto, including without limitation changes to reflect
the circumstances of the transaction giving rise to the New Note or such
indebtedness of TEC, as do not have a material adverse effect on the
Notes.

Section 1.02. Amended Definitions. The following definitions in
Section 1.1 of the Current Indenture are hereby amended, effective as of the
Acceptance Date, to read in their entirety as follows:

"Incur" shall mean to, directly or indirectly, create, incur, assume,
guarantee or otherwise become liable for, contingently or otherwise.

"Independent Director" means an individual that is not and has not been
affiliated (other than as a director of TransAmerican or its parent or
present subsidiaries) with, and is not and has not been a Related Person
(other than solely as a director of TransAmerican or one of its past or
present subsidiaries) with respect to John R. Stanley, TransAmerican or
the Company or its Subsidiaries.

Section 1.03. Additional Amended Definitions. Subpart (q) of the
definition of Permitted Liens in Section 1.1 of the Current Indenture is hereby
amended, effective as of the Acceptance Date, to read as follows:

(q) Liens created on pipeline systems acquired or constructed with the
proceeds of Debt, provided that the obligations secured by such Liens do
not exceed the cost of acquiring or constructing such pipeline systems
plus interest, fees and expenses Incurred in connection therewith; and

and the third sentence of the definition of Unrestricted Subsidiary in Section
1.1 of the Current Indenture is hereby amended, effective as of the Acceptance
Date, to read in its entirety as follows:

The Board of Directors of any Person may designate any Unrestricted
Subsidiary of such Person as a Subsidiary of such Person; provided that
no Default or Event of Default would occur or be continuing after giving
effect to such designation.

-2-
<PAGE> 4
Section 1.04. Deleted Definition. The definition of Related Person
Transaction in Section 1.1 of the Current Indenture is hereby deleted,
effective as of the Acceptance Date.

Section 1.05. Section 4.3 of the Current Indenture. Section 4.3 of the
Current Indenture is hereby amended, effective as of the Acceptance Date, to
read in its entirety as follows:

SECTION 4.3 Limitation on Restricted Payments.

[intentionally omitted]

Section 1.06. Section 4.5 of the Current Indenture. Section 4.5 of the
Current Indenture is hereby amended, effective as of the Acceptance Date, to
read in its entirety as follows:

SECTION 4.5 Payment of Taxes and Other Claims. Each Obligor
shall, and shall cause each of its Subsidiaries to, pay or discharge or
cause to be paid or discharged within 150 days after the same shall
become delinquent, (i) all taxes, assessments and governmental charges
(including withholding taxes and any penalties, interest and additions
to taxes) levied or imposed upon such Obligor or any of its Subsidiaries
or any of their respective properties and assets and (ii) all lawful
claims, whether for labor, materials, supplies, services or anything
else, which have become due and payable and which by law have or may
become a Lien upon the property and assets of such Obligor or any of its
Subsidiaries; provided, however, that an Obligor shall not be required
to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim, whose amount, applicability or validity is
being contested in good faith by appropriate proceedings and for which
disputed amounts adequate reserves have been established in accordance
with GAAP.

Section 1.07. Section 4.6 of the Current Indenture. The first
paragraph of paragraph (b) of Section 4.6 of the Current Indenture is hereby
amended, effective as of the Acceptance Date, to read in its entirety as
follows:

(b) Each Obligor will maintain, for itself and each of its
Subsidiaries, with reputable insurers or with the government of the
United States of America (or an agency or instrumentality thereof)
insurance (including appropriate self-insurance) against loss or damage
of the kinds that, in its reasonable good faith opinion, are adequate
and appropriate for the conduct of its business and the businesses of
such Subsidiaries in a prudent manner, in such amounts, with such
deductibles and by such methods as are customary, in its reasonable,
good faith opinion, and adequate and appropriate for the conduct of its
business and the businesses of its Subsidiaries in a prudent manner for
companies engaged in a similar business in similar geographic areas.

Section 1.08. Section 4.10 of the Current Indenture. Section 4.10 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
to read in its entirety as follows:

-3-
<PAGE> 5
SECTION 4.10. Limitation on Transactions with Related Persons.

[intentionally omitted]

Section 1.09. Section 4.11 of the Current Indenture. Section 4.11 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
to read in its entirety as follows:

SECTION 4.11. Limitation on Incurrences of Additional Debt and
Issuances of Disqualified Capital Stock.

[intentionally omitted]

Section 1.10. Section 4.12 of the Current Indenture. Section 4.12 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
to read in its entirety as follows:

SECTION 4.12. Limitations on Restricting Subsidiary Dividends.

[intentionally omitted]

Section 1.11. Section 4.13 of the Current Indenture. Section 4.13 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
to read in its entirety as follows:

SECTION 4.13. Limitation on Liens.

[intentionally omitted]

Section 1.12. Section 4.14 of the Current Indenture. Clause (ii) of
part (A) of the first sentence of paragraph (a) of Section 4.14 of the Current
Indenture is hereby amended, effective as of the Acceptance Date, to read in
its entirety as follows:

(ii) used to make cash payments in the ordinary course of business in
consistent with past practices that are not otherwise prohibited by this
Indenture, provided that the aggregate amount so used pursuant to this
clause (ii) from and after the Issue Date does not exceed $150,000,000
(excluding amounts used to acquire any Capital Assets in accordance with
clause (iii) below) or

and the first sentence of paragraph (b) of Section 4.14 is hereby amended,
effective as of the Acceptance Date, to read in its entirety as follows:

(b) For the purposes of this Section 4.14, "Minimum Accumulation
Date" means each date on which the Accumulated Amount exceeds
$500,000,000.

Section 1.13. Section 4.16 of the Current Indenture. Section 4.16 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
to read in its entirety as follows:

-4-
<PAGE> 6
SECTION 4.16. Guarantee by Subsidiary.

[intentionally omitted]

Section 1.14. Section 4.17 of the Current Indenture. Section 4.17 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
to read in its entirety as follows:

SECTION 4.17. Restriction on Sale and Issuance of Subsidiary Stock.

[intentionally omitted]

Section 1.15. Section 4.18 of the Current Indenture. Section 4.18 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
to read in its entirety as follows:

SECTION 4.18. Limitations on Line of Business.

[intentionally omitted]

Section 1.16. Section 4.20 of the Current Indenture. The first
sentence of paragraph (a) of Section 4.20 of the Current Indenture is hereby
amended, effective as of the Acceptance Date, to read in its entirety as
follows:

(a) From and at all times after the first Business Day after the
Issued Date, the Company shall maintain an account (the "Interest
Reserve Account") from which funds may only be disbursed in accordance
with the terms of the Disbursement Agreement, including disbursements to
pay the portion of the Redemption Price or offer price attributable to
accrued but unpaid interest on the Notes in connection with the
redemption of the Securities pursuant to Article III or a purchase
thereof pursuant to an offer made by the Company to purchase all of the
outstanding Securities at a price equal to the Redemption Price that
would be payable therefor if such Securities were then being redeemed
pursuant to Section 3.1 in connection with a Major Asset Sale.

and paragraph (b) of Section 4.20 of the Current Indenture is hereby amended,
effective as of the Acceptance Date, by inserting a new sentence after the
first sentence of such paragraph to read in its entirety as follows:

The Company may also instruct the Disbursement Agent to deposit with the
Trustee, at any time in connection with the redemption, any or all of
the funds in the Interest Reserve Account, provided that such amount
shall not exceed that portion of the applicable redemption or purchase
price attributable to accrued but unpaid interest on the Notes being
redeemed or purchased pursuant thereto.

Section 1.17. Section 4.21 of the Current Indenture. Section 4.21 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
to read in its entirety as follows:

SECTION 4.21. Limitation on Capital Expenditures.

[intentionally omitted]

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<PAGE> 7
Section 1.18. Section 4.23 of the Current Indenture. Section 4.23 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
to read in its entirety as follows:

SECTION 4.23. Limitation on Assets Held by Nominees.

[intentionally omitted]

Section 1.19. Section 5.1 of the Current Indenture. Subparagraph (1)
of paragraph (a) of Section 5.1 of the Current Indenture is hereby amended,
effective as of the Acceptance Date, by adding the word "and" at the end of
such subparagraph after the semi-colon, and subparagraphs (2), (3) and (5) of
paragraph (a) of Section 5.1 are hereby amended, effective as of the Acceptance
Date, to read in their entirety, respectively, as follows:

(2) [intentionally omitted]

(3) [intentionally omitted]

(5) [intentionally omitted]

and paragraph (a) of Section 5.1 is hereby further amended, effective as of the
Acceptance Date, by deleting the two paragraphs following subparagraph (5) of
such paragraph (a).

Section 1.20. Section 6.1 of the Current Indenture. Paragraphs (d),
(g), (h), (i), (j) and (k) of Section 6.1 of the Current Indenture are hereby
amended to read in their entirety, respectively, as follows:

(d) a default which extends beyond any stated period of grace
applicable thereto, including any extension thereof, under any mortgage,
indenture or instrument under which there is outstanding any Debt of the
Company or any of its Subsidiaries with an aggregate principal amount in
excess of $20,000,000, or failure to pay such Debt at its stated
maturity, provided that a waiver by all of the lenders of such debt of
such default shall constitute a waiver hereunder for the same period;

(g) [intentionally omitted]

(h) [intentionally omitted]

(i) Independent Directors not constituting a majority of the
Board of Directors of the Company or any Guarantor for a period of 90
days in the aggregate in any twelve-month period; or

(j) there having occurred any amendment to the Certificate of
Incorporation or Bylaws of any Obligor that pertains to the directors
thereof and would have an adverse effect on the Securityholders or any
other amendment that would materially adversely affect the interests of
the Securityholders and, in the case of any such other amendment, the
failure

-6-
<PAGE> 8
to correct such other amendment continues for a period of 90 days after
written notice is given to the Obligor by the Trustee or to the Obligor
and the Trustee by the Holders of at least 25% in aggregate principal
amount of the Securities outstanding;

(k) [intentionally omitted]

and the first sentence of the paragraph following paragraph (k) of Section 6.1
of the Current Indenture is hereby amended to read in its entirety as follows:

A Default under clause (c) above (other than in the case of any
Defaults under Sections 4.14 or 5.1, which Defaults shall be Events of
Default without the notice specified in this paragraph or Section 4.7(c)
and upon the passage of 10 days) is not an Event of Default until the
Trustee notifies the Company, or the Holders of at least 25% in
principal amount of the outstanding Securities notify the Company and
the Trustee of the Default, and the Company does not cure the Default
within 30 days after receipt of the notice.

Section 1.21. Section 12.2 of the Current Indenture. Section 12.2 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
by redesignating the current paragraph (a) of Section 12.2 as subparagraph
(a)(1) and inserting after such redesignated subparagraph (a)(1) a new
subparagraph (a)(2) to read in its entirety as follows:

(2) Upon receipt of an Officers' Certificate requesting the
Trustee's execution and delivery of the 1997 Intercreditor Agreement,
the Trustee, at the Company's expense, will execute and deliver the 1997
Intercreditor Agreement and the Company, TTC and any other Guarantors
will execute, deliver, file and record, all instruments and do all acts
and other things as may be reasonably necessary to provide, pursuant to
the 1997 Intercreditor Agreement, (i) that (A) the New Note will be
subordinated in right of payment to the full and final payment of the
Notes, (B) the liens and security interests securing the New Note
encumbering collateral that secures both the Notes and the New Note (the
"Shared Collateral") will be subordinate and inferior to the liens and
security interests in the Shared Collateral that secure the Notes, and
(C) the rights of the holder of the New Note to proceed against the
Shared Collateral will be restricted to the extent necessary to effect
the intent of the 1997 Intercreditor Agreement, (ii) that the Company
will be permitted to pay, and the holder of the New Note will be
permitted to receive, regularly scheduled payments of interest and
principal under the New Note so long as at the time of such payment, or
after giving effect thereto, no Default or Event of Default shall have
occurred and then be continuing or would occur thereunder after giving
effect to such payment, (iii) that the holder of the New Note will be
required to pay or deliver to the Trustee cash or other assets received
with respect to the New Note, except payments permitted under the
preceding clause (ii), (iv) that (A) in the event of any case or
proceeding involving or seeking the liquidation or reorganization of the
Company (each, a "Proceeding"), any and all cash or other assets,
including proceeds received from realization on the Shared Collateral,
paid or distributed on account of the New Note, will be applied, after
payment of reasonable costs and expenses relating to obtaining such
proceeds, to the payment of the Notes, and only after the Notes have
been paid in full, to the payment of the New Note, and (B) in any other
event, any and all proceeds of the Shared Collateral received by or for
the account of the Holder of the New Note and/or the holders of the
Notes for application to the New

-7-
<PAGE> 9
Note and/or the Notes will be applied so as not to impair or affect the
right of the holders of the Notes to receive payments as and when due
(but nothing contained in the 1997 Intercreditor Agreement shall be
construed to prohibit, limit or otherwise affect the rights of the
Company to transfer, dispose of or otherwise deal with its properties
and assets included within the Shared Collateral, and the proceeds
thereof, in any manner permitted under the Indenture), (v) that the
rights of the holder of the New Note to vote or to take action in
connection with any Proceeding so as to contest (A) the validity of any
obligation of the Company or TTC under or with respect to the Indenture
or any collateral therefor or guaranties thereof, (B) the relative
rights of holders of the Notes with respect to any of such collateral or
guaranties or (C) the obligations and agreements of the holder of the
New Note as set forth in the Intercreditor Agreement will be
appropriately limited and restricted so as to effect the intent of the
Intercreditor Agreement, and (vi) that determinations regarding the
exercise of remedies against the Shared Collateral will be made by a
majority of the outstanding principal amount of the Notes and the New
Note, except that, and the Intercreditor Agreement will so provide, that
nothing contained in the Intercreditor Agreement will impair or affect
the right of the holder of any Note to institute suit for the
enforcement of any payment thereof as and when due.

ARTICLE II

GENERAL PROVISIONS

Section 2.01. Effectiveness of Amendments. The Supplemental Indenture
is effective as of the date first above written. The Current Indenture will
remain operative in the form in which it existed prior to the date hereof until
the date (the "Acceptance Date") on which the Company accepts for purchase and
payment all Securities that have been properly tendered and not withdrawn
pursuant to the Offer. On and after the Acceptance Date, the Proposed
Amendments will be effective.

Section 2.02. Ratification of Indenture. The Current Indenture is in
all respects acknowledged, ratified and confirmed, and shall continue in full
force and effect in accordance with the terms thereof and as supplemented by
this Supplemental Indenture. The Current Indenture and this Supplemental
Indenture, shall be read, taken and construed as one and the same instrument.

Section 2.03. Certificate and Opinion as to Conditions Precedent.
Simultaneously with and as a condition to the execution of this Supplemental
Indenture, the Company is delivering to the Trustee

(a) an Officer's Certificate in the form attached hereto as Exhibit
A; and

(b) an Opinion of Counsel covering the matters described in Exhibit B
attached hereto.

Section 2.04. Effect of Headings. The Article and Section headings in
this Supplemental Indenture are for convenience only and shall not affect the
construction of this Supplemental Indenture.

Section 2.05. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

-8-
<PAGE> 10
Section 2.06. Counterparts. This Supplemental Indenture may be
executed in any number of counterparts, each of which so executed shall be
deemed to be an original, but all such counterparts shall together constitute
the same instrument.

IN WITNESS WHEREOF, the parties to this Supplemental Indenture have
caused this Supplemental Indenture to be duly executed, and their respective
corporate seals to be hereunto affixed and attested, on this 13th day of June,
1997, but all to be effective as of day and year first above written.

TRANSTEXAS GAS CORPORATION

Attest: By:
------------------------ ----------------------------
Tim Moore Ed Donahue
Assistant Secretary Vice President, Chief Financial Officer
and Secretary

FIRSTAR BANK OF MINNESOTA, N.A.,
Trustee

By:
----------------------------
Frank P. Leslie, III,
Vice President

-9-
<PAGE> 11
EXHIBIT A

TRANSTEXAS GAS CORPORATION

OFFICERS' CERTIFICATE

The undersigned, Ed Donahue, Vice President and Chief Executive Officer,
and Tim Moore, Assistant Secretary, of TransTexas Gas Corporation, a Delaware
corporation (the "Company"), do hereby certify pursuant to Section 2.03 of that
certain Second Supplemental Indenture, dated as of June 13, 1997, between the
Company and Firstar Bank of Minnesota, N.A., successor to American Bank
National Association, as Trustee (the "Trustee"), and Section 14.4 of that
certain Indenture, dated as of June 15, 1995, among the Company, TransTexas
Transmission Corporation and the Trustee, as amended and supplemented (the
"Indenture"), as follows:

1. The undersigned have read Section 9.2 of the Indenture.

2. The undersigned have participated in the solicitation of consents
(the "Consents") to the Proposed Amendments (as defined in the Supplemental
Indenture), and the Company has recieved consents from the Holders (as defined
in the Indenture) of at least 66 2/3% of the aggregate principal amount of the
Notes to the Proposed Amendments.

3. In our opinion, we have made such examination and investigation
as is necessary to enable us to express an informed opinion as to whether or
not the conditions precedent in the Indenture requiring compliance by the
Company to or concurrently with the execution and delivery by the Company of
the Second Supplemental Indenture have been complied with.

4. In our opinion, each of the conditions precedent in the Indenture
requiring compliance by the Company prior to or concurrently with the execution
and delivery by the Company of the Second Supplemental Indenture have been
complied with, and the Trustee is authorized or permitted, pursuant to Section
9.2 of the Indenture, to execute the Second Supplemental Indenture.

IN WITNESS WHEREOF, we have executed this Certificate as of June 13,
1997.

Ed Donahue, Vice President and
Chief Financial Officer

Tim Moore, Assistant Secretary

<PAGE> 12
EXHIBIT B

Matters to be Covered by Gardere & Wynne, L.L.P. Opinion

1. The Second Supplemental Indenture has been duly
authorized, executed and delivered by the Company.

2. Each of the conditions precedent in the Current Indenture
requiring compliance by the Company prior to or concurrently with the
execution and delivery by the Company of the Second Supplemental
Indenture has been complied with by the Company, and Section 9.2 of the
Current Indenture authorizes or permits the Trustee to execute the
Second Supplemental Indenture.

<PAGE> 13
TRANSTEXAS GAS CORPORATION

OFFICERS' CERTIFICATE

1. The undersigned have read Section 9.2 of the Indenture.

IN WITNESS WHEREOF, we have executed this Certificate as of June 13,
1997.

Ed Donahue, Vice President and
Chief Financial Officer

Tim Moore, Assistant Secretary

<PAGE> 1
EXHIBIT 4.4

LOAN AGREEMENT

by and between

TRANSTEXAS GAS CORPORATION

and

TRANSAMERICAN ENERGY CORPORATION

Dated as of June 13, 1997
<PAGE> 2
Table of Contents

<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1 DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 1.3 Computation of Time Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

SECTION 2 THE LOAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.1 Commitment to Make Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.2 Deposit of Loan Proceeds into Disbursement Account. . . . . . . . . . . . . . . . . . . . . 19
Section 2.3 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 2.4 Repayment of the Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

SECTION 3 PREPAYMENTS AND OTHER PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.1 Mandatory Prepayments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.2 Permitted Prepayments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 3.3 Place of Payment or Prepayment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

SECTION 4 APPLICATION OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 4.1 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

SECTION 5 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.1 Organization and Qualification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.2 Power and Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.3 Enforceability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.4 Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.5 Title to Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 5.6 Payment of Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 5.7 Conflicting or Adverse Agreements or Restrictions. . . . . . . . . . . . . . . . . . . . . 22

SECTION 6 CONDITIONS OF LENDING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 6.1 Conditions Precedent to the Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

SECTION 7 AFFIRMATIVE COVENANTS OF BORROWER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.1 Payment of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.2 Covenants Incorporated by Reference. . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

SECTION 8 EVENTS OF DEFAULT AND REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 8.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 8.2 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 8.3 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26

SECTION 9 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 9.1 Waivers, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 9.2 Reimbursement of Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 9.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>

i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 9.4 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 9.5 Survival of Representations, Warranties and Covenants. . . . . . . . . . . . . . . . . . . 28
Section 9.6 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 9.7 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 9.8 Descriptive Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 9.9 Limitation of Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 9.10 Sale, Pledge or Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 9.11 Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 9.12 Indenture Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 9.13 Computation of Time Periods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 9.14 Final Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
</TABLE>

Exhibits and Schedules

Schedule 6.1(g) -- Insurance
Exhibit A -- Form of Promissory Note

ii
<PAGE> 4
LOAN AGREEMENT

This Loan Agreement dated as of June 13, 1997 (this
"Agreement") is entered into by and between TransTexas Gas Corporation, a
Delaware corporation (the "Borrower"), and TransAmerican Energy Corporation, a
Delaware corporation (the "Lender").

In consideration of the premises, mutual covenants and
agreements hereinafter contained and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Borrower and
the Lender hereby agree as follows:

SECTION 1 DEFINITIONS.

Section 1.1 Certain Defined Terms. Capitalized terms used in
this Agreement and not otherwise defined herein shall have the following
meanings or, if not defined below, shall have the meanings given to them in the
Indenture:

"Acceleration Notice" shall have the meaning ascribed to such term in
Section 8.2.

"Agreement" shall mean this Loan Agreement, as the same may be
amended, modified, supplemented, extended, restated, renewed, refunded,
replaced, increased in amount or refinanced, in each case from time to time and
whether in whole or in part.

"Asset Sale" shall mean any direct or indirect conveyance, sale,
transfer or other disposition (including through damage or destruction for
which Insurance Proceeds are paid or by condemnation), in one or a series of
related transactions, of any of the properties, businesses or assets of the
Borrower or any Subsidiary of the Borrower, whether owned on the Closing Date
or thereafter acquired; provided, however, that "Asset Sale" shall not include
(i) any disposition of property that is not Collateral, (ii) any pledge or
disposition of assets (if such pledge or disposition would otherwise constitute
an Asset Sale) to the extent and only to the extent that it results in the
creation of a Permitted Lien other than the creation of a Permitted Lien in
connection with a Dollar-Denominated Production Payment that the Borrower or
any of its Subsidiaries does not elect to treat as Debt or in connection with a
Volumetric Production Payment, which in either case shall be treated as an
Asset Sale hereunder; provided, however, that a contribution of a Dollar
Denominated Production Payment to a Hedging Subsidiary shall not constitute an
Asset Sale or (iii) conveyances, sales, transfers or other dispositions in
connection with a Drilling Program.

"Attributable Debt" in respect of a Sale and Leaseback Transaction
shall mean, at the time of determination, the present value (discounted at the
rate of interest implicit in such transaction, determined in accordance with
GAAP or, in the event that such rate of interest is not reasonably
determinable, discounted at the rate of interest borne by the Note) of the
obligation of the lessee for net rental payments during the remaining term of
the lease included in such Sale and Leaseback Transaction (including any period
for which such lease has been extended or may, at the option of the lessor, be
extended).

"Bankruptcy Law" shall mean Title II, U.S. Code or any similar
Federal, state or foreign law for the relief of debtors.

1
<PAGE> 5
"Board of Directors" shall mean, with respect to any Person, the Board
of Directors of such Person or any committee of the Board of Directors of such
Person authorized, with respect to any particular matter, to exercise the power
of the Board of Directors of such Person.

"Business Day" shall mean any day except Saturday, Sunday and any day
which shall be in New York City a legal holiday or a day on which banking
institutions are authorized or required by law or other government action to
close.

"Capital Expenditures" shall mean expenditures (whether paid in cash
or accrued as a liability) by such Person or any of its Subsidiaries that, in
conformity with GAAP, are or would be included in "capital expenditures,"
"additions to property, plant, or equipment" or comparable items in the
consolidated financial statements of the Borrower consistent with prior
accounting practices.

"Capital Expenditures Testing Quarter" shall mean any fiscal quarter
immediately following a Measurement Quarter in which the SEC PV10 of the
Borrower (based on the Borrower's then most recent Reserve Report) is less than
90% of the Net Debt of the Borrower, measured as of the last day of such
Measurement Quarter.

"Capital Stock" shall mean, with respect to any Person, any capital
stock of such Person and shares, interests, participations, or other ownership
interests (however designated) of such Person and any rights (other than debt
securities convertible into corporate stock), warrants or options to purchase
any of the foregoing, including without limitation, each class of common stock
and preferred stock of such Person, if such Person is a corporation, and each
general or limited partnership interest or other equity interest of such
Person, if such Person is a partnership.

"Capitalized Lease Obligation" shall mean obligations under a lease
that are required to be capitalized for financial reporting purposes in
accordance with GAAP, and the amount of Debt represented by such obligations
shall be the capitalized amount of such obligations, as determined in
accordance with GAAP.

"Cash Equivalents" shall mean (a) United States dollars, (b)
securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality thereof having maturities of
not more than one year from the date of acquisition, (c) certificates of
deposit with maturities of one year or less from the date of acquisition,
bankers' acceptances with maturities not exceeding one year, and overnight bank
deposits, in each case, with an Eligible Institution, (d) repurchase
obligations with a term of not more than seven days for underlying securities
of the types described in clauses (b) and (c) entered into with an Eligible
Institution, (e) commercial paper rated "P-1," "A-1" or the equivalent thereof
by Moody's or S&P, respectively, and in each case maturing within one year
after the date of acquisition, (f) shares of money market funds, including
those of the Indenture Trustee, that invest solely in United States dollars and
securities of the types described in clauses (a) through (e), (g) demand and
time deposits and certificates of deposit with any commercial bank organized in
the United States not meeting the qualifications specified in clause (c) above,
provided, that such deposits and certificates support bonds, letters of credit
and other similar types of obligations incurred in the ordinary course of
business, (h) deposits, including deposits denominated in foreign currency,
with any Eligible Institution; provided, that all such deposits do not exceed
$10 million in the aggregate at any one time, and (i) demand or fully insured
time deposits used in the ordinary course of business with commercial banks
insured by the Federal Deposit Insurance Corporation.

2
<PAGE> 6
"Change of Control" shall mean (i) the liquidation or dissolution of,
or the adoption of a plan of liquidation by, the Lender, (ii) any transaction,
event or circumstance pursuant to which any "person" or "group" (as such terms
are used for purposes of Sections 13(d) and 14(d) of the Exchange Act, whether
or not applicable), other than John R. Stanley (or his heirs, his estate or
any trust in which he or his immediate family members have, directly or
indirectly, a beneficial interest in 50%) and his Subsidiaries or the Indenture
Trustee, is or becomes the "beneficial owner" (as that term is used in Rules
13d-3 and 13d-5 of the Exchange Act, whether or not applicable), directly or
indirectly, of more than 50% of the total voting power of the Lender's then
outstanding Voting Stock, or (iii) any event that results in the Lender or any
of its Subsidiaries having beneficial ownership of at least some of the
Borrower's Capital Stock, but less than 50%, on a fully diluted basis, of (x)
the total voting power of the Borrower's Voting Stock, or (y) the economic
value of the outstanding Capital Stock of the Borrower; unless, at the time of
the occurrence of an event specified in clause (ii) or (iii), the TEC Notes
have an Investment Grade Rating; provided, however, that if at any time within
120 days after such occurrence, the TEC Notes cease having an Investment Grade
Rating, such event shall be a "Change of Control."

"Change of Control Payment Date" shall have the meaning ascribed to
such term in Section 3.1(a).

"Closing Date" shall mean June 13, 1997.

"Collateral" shall mean (x) the assets of the Borrower that are
mortgaged or pledged to the Borrower as security for the Note pursuant to the
terms of the TransTexas Security Documents and (y) the Guarantees by the
Subsidiaries of the Borrower of the Note.

"Consolidated EBITDA" of any Person for any period, unless otherwise
defined herein, shall mean (a) the Consolidated Net Income of such Person for
such period, plus (b) the sum, without duplication (and only to the extent such
amounts are deducted from net revenues in determining such Consolidated Net
Income) of (i) the provision for income taxes for such period for such Person
and its consolidated Subsidiaries, (ii) depreciation, depletion, and
amortization of such Person and its consolidated Subsidiaries for such period,
and (iii) Consolidated Fixed Charges of such Person for such period,
determined, in each case, on a consolidated basis for such Person and its
consolidated Subsidiaries in accordance with GAAP.

"Consolidated Fixed Charges" of any Person for any period shall mean
(without duplication) the sum of (i) Consolidated Interest Expense of such
Person for such period, (ii) dividend requirements of such Person and its
consolidated Subsidiaries (whether in cash or otherwise (except dividends
payable solely in shares of Qualified Capital Stock)) with respect to preferred
stock paid, accrued, or scheduled to be paid or accrued during such period, in
each case to the extent attributable to such period and excluding items
eliminated in consolidation, and (iii) fees paid, accrued, or scheduled to be
paid or accrued during such period by such Person and its Subsidiaries in
respect of performance bonds or other guarantees of payment. For purposes of
clause (ii) above, dividend requirements shall be increased to an amount
representing the pre-tax earnings that would be required to cover such dividend
requirements; accordingly, the increased amount shall be equal to a fraction,
the numerator of which is such dividend requirements and the denominator of
which is 1 minus the applicable actual combined effective Federal, state,
local, and foreign income tax rate of such Person and its Subsidiaries
(expressed as a decimal), on a consolidated basis, for the fiscal year
immediately preceding the date of the transaction giving rise to the need to
calculate Consolidated Fixed Charges.

3
<PAGE> 7
"Continuing Operations" shall mean the operations of the TransTexas
Entities after giving effect to the sale by the Borrower of the stock of
TransTexas Transmission Corporation.

"Custodian" means any receiver, trustee, assignee, liquidator,
sequestrator or similar official under any Bankruptcy Law.

"Debt" shall mean with respect to any Person, without duplication (i)
all liabilities, contingent or otherwise, of such Person (a) for borrowed money
(whether or not the recourse of the lender is the whole of the assets of such
Person or only to a portion thereof), (b) evidenced by bonds, notes, debentures
or similar instruments or letters of credit or representing the balance
deferred and unpaid of the purchase price of any property acquired by such
Person or services received by such Person (other than long-term service or
supply contracts which require minimum periodic payments), (c) evidenced by
bankers' acceptances or similar instruments issued or accepted by banks or
Interest Swap Obligations, (d) for the payment of money relating to a
Capitalized Lease Obligation, (e) the Attributable Debt associated with any
Sale and Leaseback Transactions or (f) Dollar-Denominated Production Payments
that the Borrower or any of its Subsidiaries elect to treat as Debt (excluding
all other Permitted Production Payment Obligations); (ii) reimbursement
obligations of such Person with respect to letters of credit; (iii) all
liabilities of others of the kind described in the preceding clause (i) or (ii)
that such Person has guaranteed or that is otherwise its legal liability other
than for endorsements, without recourse, of negotiable instruments in the
ordinary course of business); (iv) all obligations secured by a Lien (other
than Permitted Liens, except to the extent the obligations secured by such
Permitted Liens are otherwise included in clause (i), (ii) or (iii) of this
definition and are obligations of such Person) to which the property or assets
(including, without limitation, leasehold interests and any other tangible or
intangible property rights) of such Person are subject, regardless of whether
the obligations secured thereby shall have been assumed by or shall otherwise
be such Person's legal liability (but, if such obligations are not assumed by
such Person or are not otherwise such Person's legal liability, the amount of
such Debt shall be deemed to be limited to the fair market value of such
property or assets determined as of the end of the preceding fiscal quarter);
and (v) any and all deferrals, renewals, extensions, refinancings, and
refundings (whether direct or indirect) of, or amendments, modifications, or
supplements to, any liability of the kind described in any of the preceding
clauses (i) through (iv) regardless of whether between or among the same
parties.

"Default" shall mean an event or condition, the occurrence of which
is, or with the passage of time or the giving of notice, or both, would be an
Event of Default.

"Default Rate" shall mean, at any time, a per annum rate equal to the
then existing interest rate plus one and one half percent.

"Disbursement Account" shall mean the account or accounts created by
the Disbursement Agreement and owned by the Borrower.

"Disbursement Agreement" shall mean that certain Disbursement
Agreement among the Borrower, the Lender and Firstar Bank of Minnesota, N.A.

"Disqualified Capital Stock" shall mean, with respect to any Person,
any Capital Stock of such person or its subsidiaries that, by its terms or by
the terms of any security into which it is convertible or exchangeable, is, or
upon the happening of an event or the passage of time would be, required to be

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<PAGE> 8
redeemed or repurchased by such Person or its subsidiaries, including at the
option of the holder, in whole or in part, or has, or upon the happening of an
event or passage of time would have, a redemption or similar payment due, on or
prior to June 1, 2002.

"Dollars" and "$" shall mean lawful currency of the United States of
America.

"Dollar-Denominated Production Payments" shall mean production payment
obligations recorded as liabilities in accordance with GAAP, together with all
undertakings and obligations in connection therewith.

"Drilling Program" shall mean any arrangement between the Borrower or
any Subsidiary of the Borrower and another Person pursuant to which (i) such
Person agrees (x) to drill, complete or perform operations to enhance recovery
from, a well or wells on mineral interests owned by the Borrower or such
Subsidiary or (y) to pay to the Borrower or such Subsidiary all or a portion of
the costs paid or incurred in connection with drilling, completing or
performing such other operations (or to reimburse the Borrower or such
Subsidiary for such costs within six months of the incurrence thereof) and (ii)
the Borrower or such Subsidiary agrees to convey or assign to such person an
interest in such well or wells in accordance with clause (l) of the definition
of "Permitted Liens."

"Eligible Institution" shall mean a domestic commercial banking
institution that has combined capital and surplus of not less than $500
million, that is rated "A" (or higher) according to Moody's or S&P at the time
as of which any investment or rollover therein is made.

"Equipment" shall mean and includes all of any Person's now owned or
hereafter acquired Vehicles, drilling rigs, workover rigs, fracture stimulation
equipment, well site compressors, rolling stock and related equipment and other
assets accounted for as equipment by such Person in its financial statements,
all proceeds thereof, and all documents of title, books, records, ledger cards,
files, correspondence and computer files, tapes, disks and related data
processing software that at any time evidence or contain information relating
to the foregoing; provided, however that "Equipment" shall not include any
assets constituting part of a natural gas pipeline or the compression or
dehydration equipment used in the operation of any such pipeline.

"Equity Offering" of any Person shall mean any Public Equity Offering
or any private placement of any Capital Stock of such Person.

"Event of Default" shall have the meaning ascribed to such term in
Section 9.1.

"Exchange Act" shall have the meaning ascribed to such term in Section
5.13.

"Financing Statements" shall mean the financing statements dated as of
the Closing Date executed and delivered in connection with the TransTexas
Security Documents.

"Force Majeure" shall mean strikes, lockouts or other labor trouble,
fire or other casualty, governmental preemption in connection with a national
emergency, any rule, order or regulation of any governmental agency or any
department or subdivision thereof, or inability to secure materials or labor
because of any such emergency, rule, order, regulation, war, civil disturbance
or other emergency, cause or event beyond the reasonable control of the
Borrower or the Guarantors.

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<PAGE> 9
"GAAP" shall mean generally accepted accounting principles as in
effect in the United States on the Closing Date applied on a basis consistent
with that used in the preparation of the audited financial statements of the
Borrower delivered pursuant to this Agreement.

"Governmental Authority" shall mean any (domestic or foreign) federal,
state, county, municipal, parish, provincial or other government, or any
department, commission, board, court, agency (including, without limitation,
the Environmental Protection Agency) or any other instrumentality of any of
them or any other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of, or
pertaining to, government, including, without limitation, any arbitration
panel, any court or any commission.

"Guarantee" shall mean any guarantee of the obligations of the
Borrower under the Loan or by any Guarantor.

"Guarantor" shall mean each of the Borrower's Subsidiaries that
becomes a guarantor of the Borrower's obligations in compliance with this
Agreement.

"Hedging Subsidiary" shall mean a Subsidiary of the Borrower engaged
solely in the business of facilitating Permitted Hedging Transactions with the
Borrower or any of its Subsidiaries.

"Highest Lawful Rate" shall mean the maximum non-usurious interest
rate, if any, permitted from time to time under applicable Laws to be
contracted for, taken, reserved, charged or received by Lender. If the Highest
Lawful Rate shall change after the Closing Date, the Highest Lawful Rate shall
be automatically increased or decreased, as the case may be, from time to time
as of the effective time of each change in the Highest Lawful Rate, without
notice to Borrower; provided, that the Highest Lawful Rate shall decrease only
to any extent required by applicable Laws and shall increase only to the extent
permitted by applicable Laws.

"Hydrocarbons" shall mean oil, natural gas, condensate and natural gas
liquids.

"Incur" or "Incurrence" shall mean to, directly or indirectly, create,
incur, assume, guarantee, or otherwise become liable for, contingently or
otherwise, any Debt.

"Indenture" shall mean that certain Indenture dated as of the date
hereof between the Lender and the Indenture Trustee.

"Indenture Trustee" shall mean Firstar Bank of Minnesota, N.A.,
trustee under the Indenture.

"Independent Director" shall mean an individual that is not and has
not been affiliated (other than as a director of TransAmerican or its past or
present subsidiaries) with, and is not and has not been a Related Person (other
than solely as a director of TransAmerican or one of its past or present
subsidiaries) with respect to John R. Stanley, TransAmerican or the Borrower or
its Subsidiaries.

"Insurance Proceeds" shall mean the interest in and to all proceeds
(net of costs of collection including attorney's fees) which now or hereafter
may be paid under any insurance policies now or hereafter obtained by or on
behalf of the Borrower or any Guarantor in connection with any assets thereof,
together with interest payable thereon and the right to collect and receive the
same, including,

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<PAGE> 10
without limitation, proceeds of casualty insurance, title insurance, business
interruption insurance and any other insurance now or hereafter maintained with
respect to such assets.

"Interest Rate or Currency Agreement" of any Person shall mean any
forward contract, futures contract, swap, option or other financial agreement
or arrangement (including, without limitation, caps, floors, collars, puts and
similar agreements) relating to, or the value of which is dependent upon,
interest rates or currency exchange rates.

"Intercreditor Agreement" shall mean that certain Intercreditor
Agreement, dated as of the Closing Date, by and among the Lender, Borrower,
Firstar Bank of Minnesota, N.A., as trustee under the Senior TransTexas Notes,
Firstar Bank of Minnesota, N.A., as collateral agent, and the Indenture
Trustee.

"Inventory" shall mean and include all of the Borrower's now owned or
hereafter acquired casing, drill pipe and other supplies accounted for as
inventory by the Borrower or its financial statements (excluding any
Hydrocarbons), all proceeds thereof, and all documents of title, books,
records, ledger cards, files, correspondence, and computer files, tapes, disks
and related data processing software that at any time evidence or contain
information relating to the foregoing.

"Investment" by any Person in any other Person shall mean (a) the
acquisition (whether for cash, property, services, securities or otherwise) of
capital stock, bonds, notes, debentures, partnership, or other ownership
interests or other securities of such other Person or any agreement to make any
such acquisition; (b) the making by such Person of any deposit with, or
advance, loan or other extension of credit to, such other Person (including the
purchase of property from another Person subject to an understanding or
agreement, contingent or otherwise, to resell such property to such other
Person) and (without duplication) any amount committed to be advanced, loaned
or extended to such other Person; (c) the entering into of any guarantee of, or
other contingent obligation with respect to, Debt or other liability of such
other Person; (d) the entering into of any Swap Obligation with such other
Person; or (e) the making of any capital contribution by such Person to such
other Person.

"Investment Grade Rating" shall mean, with respect to any Person or
issue of debt securities or preferred stock, a rating in one of the four
highest letter rating categories (without regard to "+" or "-" or other
modifiers) by any rating agency or if any such rating agency has ceased using
letter rating categories or the four highest of such letter rating categories
are not considered to represent "investment grade" ratings, then the comparable
"investment grade" ratings (as designated by any such rating agency).

"Laws" shall mean all constitutions, treaties, statutes, laws,
ordinances, regulations, rules, orders, writs, injunctions or decrees of the
United States of America, any state or commonwealth, any municipality, any
foreign country, any territory or possession or any tribunal, as in effect on
the Closing Date and as the same may hereafter be amended, issued, promulgated
or otherwise hereafter come into effect, from time to time.

"Lien" shall mean any mortgage, lien, pledge, charge, security
interest, or other encumbrance of any kind, regardless of whether filed,
recorded, or otherwise perfected under applicable law (including any
conditional sale or other title retention agreement and any lease deemed to
constitute a security interest and any option or other agreement to give any
security interest).

"Loan" shall have the meaning ascribed to such term in Section 2.1(a).

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<PAGE> 11
"Loan Documents" shall mean this Agreement, the Note, the TransTexas
Security Documents, the Disbursement Agreement and all other agreements,
documents, financing statements, instruments and certificates now or hereafter
executed and delivered to Lender pursuant to any of the foregoing or the
transactions connected therewith, and all amendments, modifications,
supplements, restatements, renewals, refundings, replacements, extensions,
increases and rearrangements of, and substitutions for, any of the foregoing.

"Loan Parties" shall mean, collectively, Borrower and each Guarantor
and "Loan Party" shall mean any of the foregoing.

"Lobo Sale" shall mean the sale by the Borrower of the Stock of
TransTexas Transmission Corporation, a previous Subsidiary of the Borrower that
owned substantially all of the Borrower's producing properties and related
pipeline transmission system in the Lower Wilcox Lobo Trend.

"Maturity Date" shall mean the earlier to occur of (a) the Stated
Maturity Date and (b) any earlier maturity date resulting from the
acceleration, in accordance with the terms hereof, of the outstanding principal
amount of the Advances.

"Measurement Quarter" shall mean any fiscal quarter ending on or
after April 30, 1998.

"Moody's" shall mean Moody's Investors Service, Inc.

"Mortgages" shall mean (i) that certain Act of Mortgage, Security
Agreement and Financing Statement to be recorded in Louisiana, (ii) that
certain Mortgage, Deed of Trust, Assignment of Production, Security Agreement
and Financing Statement to be recorded in Alabama, (iii) that certain Mortgage,
Deed of Trust, Assignment of Production, Security Agreement and Financing
Statement to be recorded in Mississippi, (iv) that certain Mortgage, Deed of
Trust, Assignment of Production, Security Agreement and Financing Statement to
be recorded in North Dakota and (v) that certain Mortgage, Deed of Trust,
Assignment of Production, Security Agreement and Financing Statement to be
recorded in Texas, each dated as of the Closing Date and executed by Borrower
for the benefit of the Lender, and any and all amendments, modifications,
supplements, restatements, replacements, renewals and extensions thereof, in
each case from time to time and whether in whole or in part.

"Net Cash Proceeds" shall mean an amount equal to the aggregate amount
of cash received by the Borrower and its Subsidiaries in respect of an Asset
Sale or a Non-Collateral Asset Sale, less the sum of (i) all reasonable out-of-
pocket fees, commissions, and other expenses incurred in connection with such
Asset Sale or Non-Collateral Asset Sale, as the case may be, including the
amount (estimated in good faith by the Borrower) of income, franchise, sales,
and other applicable taxes required to be paid, payable or accrued by the
Borrower or any Subsidiary of the Borrower (in each case as estimated in good
faith by the Borrower or such Subsidiary without giving effect to tax
attributes unrelated to such Asset Sale) in connection with such Asset Sale or
Non-Collateral Asset Sale, as the case may be, and (ii) the aggregate amount of
cash so received which is used to retire any then existing Debt of the Borrower
or its Subsidiary (other than the Note), as the case may be, which is required
by the terms of such Debt to be repaid in connection with such Asset Sale or
Non-Collateral Asset Sale, as the case may be.

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<PAGE> 12
"Net Debt" of a Person means such Person's outstanding Debt to the
extent recorded in accordance with GAAP less cash and Cash Equivalents of such
Person, in each case as measured on a consolidated basis and as of the last day
of the measuring period.

"Net Worth" of any Person shall mean, at any date of determination,
stockholders' equity as set forth on the most recently available quarterly or
annual consolidated balance sheet of such Person and its Subsidiaries (which
shall be as of a date not more than 90 days prior to the date of such
computation), less any amounts included therein attributable to Disqualified
Capital Stock or any equity security convertible into or exchangeable for Debt,
the cost of treasury stock (not otherwise deducted from stockholder's equity),
and the principal amount of any promissory notes receivable from the sale of
the Capital Stock of such Person or any of its Subsidiaries, each item to be
determined in conformity with GAAP.

"New TransTexas Property" shall have the meaning ascribed to such term
in the definition of Permitted Liens.

"Non-Collateral Asset Sale" shall mean any direct or indirect
conveyance, sale, transfer or other disposition (including through damage or
destruction for which Insurance Proceeds are paid or by condemnation), in one
or a series of related transactions, of any of the properties, businesses or
assets of the Borrower or any Subsidiary of the Borrower (other than
properties, businesses or assets of any of the TTXD Entities after the TTXD
Spin-off), whether owned on the Closing Date or thereafter acquired, which
properties, businesses or assets do not constitute Collateral.

"Note" shall mean the promissory note executed by Borrower and payable
to the order of Lender pursuant to Section 2, as such promissory note may be
amended, modified, supplemented, restated, renewed, extended or increased in
amount, in each case from time to time.

"Officers' Certificate" shall mean a certificate signed in the name of
Borrower by either its President, one of its Vice Presidents or its Treasurer
and its Secretary or one of its Assistant Secretaries.

"Permitted Hedging Transactions" shall mean non-speculative
transactions in futures, forwards, swaps or option contracts (including both
physical and financial settlement transactions) engaged in by the TransTexas
Entities as part of their normal business operations as a risk-management
strategy or hedge against adverse changes in market conditions in the prices of
natural gas, feedstock or refined products; provided, that such transactions do
not in the case of the Borrower, on a monthly basis, relate to more than 90% of
the Borrower's average net natural gas production per month from the Continuing
Operations for the most recent 3-month period measured at the time of such
incurrence; provided, further, that at the time of such transaction (i) the
counter party to any such transaction is an Eligible Institution or a Person
that has an Investment Grade Rating or has an issue of debt securities or
preferred stock outstanding with an Investment Grade Rating or (ii) such
counter party's obligation pursuant to such transaction is unconditionally
guaranteed in full by, or secured by a letter of credit issued by, and Eligible
Institution or a Person that has an Investment Grade Rating or that has an
issue of debt securities or preferred stock outstanding with an Investment
Grade Rating.

"Permitted Investment" shall mean, when used with reference to the
Borrower or its Subsidiaries, (i) trade credit extended to persons in the
ordinary course of business; (ii) purchases of Cash Equivalents; (iii)
Investments by the Borrower or its wholly owned Subsidiaries in wholly owned
Subsidiaries of the

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<PAGE> 13
Borrower (other than TTXD) that are engaged in Related TransTexas Businesses;
(iv) Swap Obligations; (v) the receipt of capital stock in lieu of cash in
connection with the settlement of litigation; (vi) advances to officers and
employees in connection with the performance of their duties in the ordinary
course of business in an amount not to exceed $3 million in the aggregate
outstanding at any time; (vii) margin deposits in connection with Permitted
Hedging Transactions; (viii) an Investment in one or more Unrestricted
Subsidiaries of the Borrower in an aggregate amount, net of return on such
investment, not in excess of $25 million less the amount of any Unrestricted
Non-Recourse Debt outstanding of the Borrower or any of its Subsidiaries; (ix)
Investments and expenditures made in the ordinary course of business by the
Borrower or its Subsidiaries, and of a nature that is or shall have become
customary in, the oil and gas business as a means of actively exploiting,
exploring for, acquiring, developing, processing, gathering, marketing or
transporting oil or gas through agreements, transactions, interests or
arrangements which permit a person to share risks or costs, comply with
regulatory requirements regarding local ownership or satisfy other objectives
customarily achieved through the conduct of the oil and gas business jointly
with third parties, including, without limitation, (a) ownership interests in
oil and gas properties or gathering systems and (b) Investments and
expenditures in the form of or pursuant to operating agreements, processing
agreements, farm-in agreements, farm-out agreements, development agreements,
area of mutual interest agreements, unitization agreements, pooling
arrangements, joint bidding agreements, service contracts, joint venture
agreements, partnership agreements (whether general or limited), subscription
agreements, stock purchase agreements and other similar agreements with third
parties (including Unrestricted Subsidiaries); provided, that in the case of
any joint venture engaged in processing, gathering, marketing or transporting
oil or gas (i) all Debt of such joint venture (other than a joint venture that
is an Unrestricted Subsidiary) that would not otherwise constitute Debt of one
of the TransTexas Entities shall be deemed Debt of the Borrower in proportion
to its direct or indirect ownership interest in such joint venture (other than
through an Unrestricted Subsidiary) and (ii) such joint venture shall be
reasonably calculated to enhance the value of the reserves of the TransTexas
Entities or marketability of production from such reserves; (x) a guaranty by
any Subsidiary of the Borrower permitted under the Indenture; (xi) deposits
permitted by the definition of Permitted Liens or any extension, renewal or
replacement of any of them; (xii) the TTXD Equity Investment (in addition to
any contribution by the Borrower pursuant to clause (xiii) below, (xiii) a
capital contribution by the Borrower to TTXD or to a joint venture, a
partnership, a limited liability company or a similar entity of the Borrower's
drilling and energy services business and pipeline services business and
related assets, (xiv) an acquisition by the Borrower of tank storage facilities
(or the company that owns such facilities) in the vicinity of the TARC
Refinery; (xv) guarantees by the Borrower of Debt of TTXD to the extent such
Debt relates to assets contributed to TTXD pursuant to clause (xiii) hereof;
(xvi) other Investments not in excess of $5 million at any time outstanding,
(xvii) loans made (x) to officers, directors and employees of the Borrower or
any of its Subsidiaries approved by the applicable Board of Directors (or by an
authorized officer), the proceeds of which are used solely to purchase stock or
to exercise stock options received pursuant to an employee stock option plan or
other incentive plan, in a principal amount not to exceed the purchase price of
such stock or the exercise price of such stock options, as applicable, and (y)
to refinance loans, together with accrued interest thereon made pursuant to
this clause, in each case not in excess of $3 million in the aggregate
outstanding at anyone time, (xviii) a capital contribution by the Borrower of
any or all of its assets to a joint venture, a partnership, a limited liability
company or a similar entity or (xix) any deposit or escrow of funds in
connection with adjustments to the Lobo Sale purchase price.

"Permitted Liens" shall mean (a) Liens imposed by governmental
authorities for taxes, assessments, or other charges not yet due or which are
being contested in good faith and by appropriate

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<PAGE> 14
proceedings, if adequate reserves with respect thereto are maintained on the
books of any of the TransTexas Entities in accordance with GAAP; (b) statutory
Liens of landlords, carriers, warehousemen, mechanics, materialmen, repairmen,
mineral interest owners, or other like Liens arising by operation of law in the
ordinary course of business; provided, that (i) the underlying obligations are
not overdue for a period of more than 60 days or (ii) such Liens are being
contested in good faith and by appropriate proceedings and adequate reserves
with respect thereto are maintained on the books of any of the TransTexas
Entities in accordance with GAAP; (c) (i) pledges of assets or deposits of cash
or Cash Equivalents to secure the performance of bids, trade contracts (other
than borrowed money), leases, statutory obligations, surety bonds, performance
bonds, and other obligations of a like nature incurred in the ordinary course
of business (or to secure reimbursement obligations or letters of credit in
support of such bonds in an aggregate amount not in excess of 5% of the SEC
PV10 indicated on the Borrower's most recent Reserve Report at the time such
pledges or deposits are made or (ii) pledges of assets, the fair market value
of which is not in excess of $40 million in the aggregate pledged at any one
time, or deposits of cash or Cash Equivalents, in each case, to secure appeal
or supersedeas bonds (or to secure reimbursement obligations of letters of
credit in support of such bonds); (d) Liens encumbering customary initial
deposits and margin deposits securing Swap Obligations or Permitted Hedging
Transactions; (e) pledges of assets including, without limitation, the mortgage
of a production payment by a Hedging Subsidiary, to secure margin obligations,
settlement obligations, reimbursement obligations or letters of credit in
connection with Permitted Hedging Transactions; provided that at the time such
pledge is made (or, if such pledge secures future Permitted Hedging
Transactions, at the time any such Permitted Hedging Transaction is entered
into), the maximum aggregate exposure under such Permitted Hedging Transactions
does not exceed the greater of (i) $25 million or (ii) 10% of the SEC PV10
indicated on the Borrower's then most recent Reserve Report; (f) easements,
rights-of-way, zoning, similar restrictions and other similar encumbrances or
title defects incurred in the ordinary course of business which, in the
aggregate, are not material in amount and which do not, in any case, materially
detract from the value of the property subject thereto (as such property is
used by any of the TransTexas Entities) or materially interfere with the
ordinary conduct of the business of any of the TransTexas Entities; (g) Liens
arising by operation of law in connection with judgments, only to the extent,
for an amount and for a period not resulting in an Event of Default with
respect thereto; (h) Liens securing Debt or other obligations not in excess of
$3 million and Liens existing on the Closing Date; (i) pledges or deposits made
in the ordinary course of business in connection with worker's compensation,
unemployment insurance, other types of social security legislation, property
insurance and liability insurance; (j) Liens on Equipment, Receivables and
Inventory; (k) Liens granted in connection with the Presale of Gas, provided
that all of the proceeds from such Presale of Gas shall be applied to the
repurchase of the Note; (l) Liens created on acreage drilled or to be drilled
pursuant to Drilling Programs, on Hydrocarbons produced therefrom and on the
proceeds of such Hydrocarbons to secure the Borrower's obligations thereunder,
provided that (i) the number of wells included in such program commenced in any
fiscal year does not exceed 30 per fiscal year (plus the number of wells
included in programs commenced in prior years but not yet completed), (ii) such
obligations are limited to a percentage of production from such wells, (iii)
such Liens survive only until the Person to whom such Lien was granted has
received production with a value equal to the reimbursable costs, expenses and
fees related to property and services provided or paid for by such Person plus
an agreed-upon interest component, and (iv) such Liens secure obligations that
are nonrecourse to each of the Borrower and its Subsidiaries; (m) Liens on the
assets of any entity existing at the time such assets are acquired by any of
the TransTexas Entities, whether by merger, consolidation, purchase of assets
or otherwise so long as such Liens (A) are not created, incurred or assumed in
contemplation of such assets being acquired by any of the TransTexas Entities
and (B) do not extend to any other assets of any of the TransTexas Entities;
(n) any extension, renewal or replacement of the Liens

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<PAGE> 15
created pursuant to any of the clauses (a) through (g), (i), (k) through (m) or
(q) through (t) of this definition; or (r) through (v); provided, that such
Liens would have otherwise been permitted under such clauses, and provided
further that the Liens permitted by this clause (n) do not secure any
additional Debt or encumber any additional property; (o) Liens securing (i)
Royalty Payment Obligations and (ii) Permitted Production Payment Obligations;
(p) Liens on the assets of one of the TransTexas Entities in favor of another
TransTexas Entity; (q) Liens that secure Unrestricted Non-Recourse Debt;
provided, however, that at the time of incurrence the aggregate fair market
value of the assets securing such Lien (exclusive of the stock of the
applicable Unrestricted Subsidiary) shall not exceed the amount of Unrestricted
Non-Recourse Debt of the Borrower; (r) Liens on the proceeds of any property
subject to a Permitted Lien or on deposit accounts containing any such
proceeds; (s) Liens on the proceeds of any property that is not Collateral; (t)
Liens (including extensions and renewals thereof) on real or personal property,
acquired after the Closing Date ("New TransTexas Property"); provided, however,
that (A) such Lien is created solely for the purpose of securing Debt Incurred
to finance the cost (including the cost of improvement or construction) of New
TransTexas Property subject thereto and such Lien is created at the time of, or
within six months after the later of the acquisition, the completion of
construction, or the commencement of full operation of such New TransTexas
Property, (B) the principal amount of the Debt secured by such Lien does not
exceed 100% of such cost plus reasonable financing fees and other associated
reasonable out-of-pocket expenses and (C) any such Lien shall not extend to or
cover any property or assets other than such item of New TransTexas Property
and any improvements on such New TransTexas Property; (u) Liens of the trustee
under the indenture and related collateral documents governing the terms of the
TransTexas Senior Notes and (v) Liens in favor of the Lender or its assignee
under the TransTexas Security Documents.

"Permitted Prepayment" shall have the meaning ascribed to such term in
Section 3.2

"Permitted Prepayment Fee" shall mean an amount equal to (a) five
percent (5%) of the outstanding principal amount of the Note to be prepaid for
Permitted Prepayments made on or prior to December 31, 1997, (b) eight percent
(8%) of the outstanding principal amount of the Note to be prepaid for
Permitted Prepayments during the period from January 1, 1998 through June 14,
2000, (c) five and three quarters percent (5.750%) of the outstanding principal
amount of the Note to be prepaid for Permitted Prepayments made from June 15,
2000 through June 14, 2001 and (d) no additional amount for Permitted
Prepayments made on or after June 15, 2001.

"Person" shall mean a corporation, individual, joint venture,
partnership, unincorporated organization, governmental regulatory entity,
country, state or political subdivision thereof, trust, municipality, or other
entity.

"Phase I" shall mean that phase of TARC's capital improvement program
in which the Delayed Coking Unit, the Hydrosulfurization Unit, the Naphtha
Pretreater, the No.2 Reformer, the Sulfur Recovery System and certain
supporting offsite facilities will be completed.

"Phase I Completion Date" shall mean the date on which Baker &
O'Brien, Inc., as construction supervisor, issues a written notice (the "Phase
I Completion Notice") to TARC certifying that (a) the process units and
supporting facilities included in the definition of "Phase I" have reached
mechanical completion, and (b) for a period of at least 15 consecutive days,
the TARC Refinery has sustained (i) the successful performance of the Delayed
Coking Unit, the Hydrodesulfurization Unit and the Sulfur Recovery System, (ii)
an average feedstock throughput level of at least 150,000 barrels per day, and
(iii)

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<PAGE> 16
no net production of vacuum tower bottoms when using as input a combined
feedstock slate with an average API Gravity of 22 degrees or less.

"Phase I Completion Notice" shall have the meaning ascribed to such
term in the definition of "Phase I Completion Date."

"Phase II" shall mean that phase of the TARC capital improvement
program in which the Fluid Catalytic Cracking Unit, FCC Flue Gas Scrubber, the
Alkylation Unit and certain additional offsite facilities will be completed.

"Phase II Completion Date" shall mean the date on which Baker &
O'Brien, Inc., as construction supervisor, issues a written notice (the "Phase
II Completion Notice") to TARC certifying that (a) the process units and
supporting facilities included in the definition of "Phase II" have reached
mechanical completion, and (b) for a period of at least 72 uninterrupted hours,
the TARC Refinery has sustained (i) the successful performance of all of the
Phase I facilities plus the Fluid Catalytic Cracking (FCC) Unit, the FCC Flue
Gas Scrubber and the Alkylation Unit, (ii)an average feedstock throughput level
of at least 180,000 barrels per day, and (iii) average production yields
(measured as the liquid volume percent of feedstock throughput) of refined
products with a specific gravity of gasoline or lighter of at least 40% and of
middle distillates or lighter of at least 70%, when using as input a combined
Crude Unit feedstock slate with an average API Gravity of 22 degrees or less.

"Phase II Completion Notice" shall have the meaning ascribed to such
term in the definition of "Phase II Completion Date."

"Presale of Gas" shall mean any advance payment agreement or other
arrangement pursuant to which the Borrower or any Guarantor of the Note, having
received full payment of the purchase price for a specified quantity of
Hydrocarbons prior to the first scheduled date of delivery, is required to
deliver, in one or more installments subsequent to the date of such agreement
or arrangement, such quantity of Hydrocarbons to the purchaser of such
Hydrocarbons pursuant to and during the term of such agreement or arrangement;
provided, however, that the term "Presale of Gas" shall not include (i) any
such agreement or other arrangement covering deliveries of Hydrocarbons for a
period not exceeding three calendar months and pursuant to which the Borrower
has received full payment of the purchase price within 120 days of the last
scheduled delivery, (ii) a transaction to the extent and only to the extent
that it results in the creation of any Permitted Lien under clauses (l) or (o)
of the definition of "Permitted Liens," (iii) Permitted Hedging Transactions or
(iv) an Asset Sale involving Hydrocarbon reserves.

"Property" shall mean, with respect to any Person, all right, title
and interest of such Person in any kind of property or asset, whether real,
personal or mixed, owned or leased, tangible or intangible, and whether now
held or hereafter acquired, and in the case of Borrower shall include the
Premises.

"Public Equity Offering" shall mean an underwritten public offering by
a nationally recognized member of the National Association of Securities
Dealers of Qualified Capital Stock of any Person pursuant to an effective
registration statement filed with the SEC pursuant to the Securities Act.

"Qualified Capital Stock" shall mean any Capital Stock that is not
Disqualified Capital Stock.

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"Receivables" shall means and include, as to any Person, any and all
of such Person's now owned or hereafter acquired "accounts" as such term is
defined in Article 9 of the Uniform Commercial Code in the State of New York,
all products and proceeds thereof, and all books, records, ledger cards, files,
correspondence, and computer files, tapes, disks or software that at any time
evidence or contain information relating to the foregoing.

"Reference Period" shall mean, with regard to any Person, the four
full fiscal quarters of such Person ended on or immediately preceding any date
upon which any determination is to be made pursuant to the terms of the Note or
this Agreement.

"Reimbursement and Credit Facility" shall mean the Reimbursement and
Credit Agreement dated January 25, 1996, pursuant to which a third party caused
a $20 million letter of credit to be issued to collateralize a supersedeas bond
on behalf of the Borrower, as amended from time to time in a manner not adverse
to the Lender.

"Related Person" shall mean (i) any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
the Borrower or any Subsidiary of the Borrower or any officer, director, or
employee of the Borrower or any Subsidiary of the Borrower or of such Person,
(ii) the spouse, any immediate family member, or any other relative who has the
same principal residence of any Person described in clause (i) above, and any
Person, directly or indirectly, controlling or controlled by or under direct or
indirect common control with, such spouse, family member, or other relative,
and (iii) any trust in which any Person described in clause (i) or (ii), above,
is a fiduciary or has a beneficial interest. For purposes of this definition
the term "control" means (a) the power to direct the management and policies of
a Person, directly or through one or more intermediaries, whether through the
ownership of voting securities, by contract, or otherwise, or (b) the
beneficial ownership of 10% or more of the voting common equity of such Person
(on a fully diluted basis) or of warrants or other rights to acquire such
equity (whether or not presently exercisable).

"Related TransTexas Business" shall mean (i) the exploration for,
acquisition of, development of, production, transportation, gathering, and
processing (in connection with natural gas and natural gas liquids only) of,
crude oil, natural gas, condensate, and natural gas liquids; provided that the
Related TransTexas Business shall not include any refining or distilling of
Hydrocarbons other than processing and fractionating natural gas and natural
gas liquids, (ii) the drilling and energy services business and pipeline
services business or (iii) owning and operating a Hedging Subsidiary.

"Reserve Amount" shall have the meaning ascribed to such term in
Section 2.2(a).

"Reserve Report" shall mean a report prepared by independent petroleum
engineers with respect to Hydrocarbon reserves in accordance with guidelines
published by the SEC.

"Restricted Investment" shall mean any direct or indirect Investment
by the Borrower or any Subsidiary of the Borrower other than a Permitted
Investment.

"Restricted Payment" shall mean, with respect to any Person, (i) any
Restricted Investment, (ii) any dividend or other distribution on shares of
Capital Stock of such Person or any Subsidiary of such Person, (iii) any
payment on account of the purchase, redemption, or other acquisition or
retirement for value of any shares of Capital Stock of such Person, and (iv)
any defeasance, redemption, repurchase,

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<PAGE> 18
or other acquisition or retirement for value, or any payment in respect of any
amendment in anticipation of or in connection with any such retirement,
acquisition, or defeasance, in whole or in part, of any Subordinated Debt,
directly or indirectly, of such Person or a Subsidiary of such Person prior to
the scheduled maturity or prior to any scheduled repayment of principal in
respect of such Subordinated Debt; provided, however, that the term "Restricted
Payment" does not include (i) any dividend, distribution, or other payment on
shares of Capital Stock of an issuer solely in shares of Qualified Capital
Stock of such issuer that is at least as junior in ranking as the Capital Stock
on which such dividend, distribution, or other payment is to be made, (ii) any
dividend, distribution, or other payment to the Borrower from any of its
Subsidiaries, (iii) any defeasance, redemption, repurchase, or other
acquisition or retirement for value, in whole or in part, of any Subordinated
Debt of such Person payable solely in shares of Qualified Capital Stock of such
Person, (iv) any payments or distributions made pursuant to and in accordance
with the Transfer Agreement, the TransTexas Drilling Agreement, the Services
Agreement, the Office Leases or the Tax Allocation Agreement, or (v) any
dividend, distribution or other payment to the Borrower by any of its
Subsidiaries, (vi) any Permitted Prepayment, (ix) any redemption, defeasance,
repurchase or other retirement for value of the Senior TransTexas Notes by the
Borrower, including any premium paid thereon; (x) an Investment by the Borrower
in, or distribution by the Borrower on, its Capital Stock pursuant to share
repurchases or dividends on its Capital Stock in an aggregate amount not to
exceed $400 million; (xi) the redemption, purchase, retirement or other
acquisition of any Debt, including any premium paid thereon, with the proceeds
of any refinancing Debt permitted to be incurred pursuant to Section 4.11(1)(g)
and 4.11(3)(j) of the Indenture; (xii) the distribution by the Borrower of
shares of Capital Stock of TTXD in connection with the TTXD Spin-off; (xiii)
the purchase by the Borrower of shares of Capital Stock of TARC, TTXD or itself
in connection with its employee benefit plan, including without limitation any
employee stock ownership plan or any employee stock option plan in an aggregate
amount not to exceed 7% of the aggregate market value of the voting stock held
by non-affiliates of the issuer measured from the date of the first such
purchase; and (xiv) any repayment or retirement for value by the Borrower of
any loan from the Lender incurred pursuant to Sections 4.11(1)(q), 4.11(1)(r),
4.11(3)(u) or 4.11(3)(v) of the Indenture.

"Royalty Payment Obligations" shall mean (i) royalties, overriding
royalties, revenue interests, net revenue interests, net profit interests, and
reversionary interests, (ii) the interests of others in pooling or unitization
agreements, production sales contracts and operating agreements, (iii) Liens
arising under, in connection with or related to farm-out, farm-in, joint
operating, pooling, unitization or area of mutual interest agreements or other
similar or customary arrangements, agreements or interests, and (iv) similar
burdens on the property of the Borrower or any Subsidiary of the Borrower; each
as incurred in the ordinary course of business and to the extent such burdens
are limited in recourse to (x) the properties subject to such interests or
agreements, (y) the Hydrocarbons produced from such properties, and (z) the
proceeds of such Hydrocarbons.

"S&P" shall mean Standard and Poor's Corporation, Inc.

"Sale and Leaseback Transaction" shall mean an arrangement relating to
property owned on the Closing Date or thereafter acquired whereby the Borrower
or a Subsidiary of the Borrower transfers such property to a Person and leases
it back from such Person.

"SEC" shall mean the Securities and Exchange Commission.

"Senior Obligations" shall have the meaning ascribed to such term in
the Intercreditor Agreement.

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<PAGE> 19
"Senior TransTexas Notes" shall mean the 11 1/2% Senior Secured Notes
due 2002 issued by the Borrower .

"Stated Maturity Date" shall mean June 1, 2002.

"Subordinated Debt" shall mean Debt that (i) requires no payment of
principal prior to or on the date on which all principal of and interest on the
Note is paid in full and (ii) is subordinate and junior in right of payment to
the Note in the event of a liquidation.

"Subsidiary" with respect to any Person, shall mean (i) a corporation
with respect to which such Person or such Person and its Subsidiaries own,
directly or indirectly, at least fifty percent of whose Capital Stock with
voting power, under ordinary circumstances, to elect directors is at the time,
directly or indirectly, owned by such Person, by such Person and one or more
Subsidiaries of such Person or by one or more Subsidiaries of such Person, or
(ii) a partnership in which such Person or a subsidiary of such Person is, at
the time, a general partner of such partnership and has more than 50 % of the
total voting power of partnership interests entitled (without regard to the
occurrence of any contingency to vote in the election of managers thereof, or
(iii) any other Person (other than a corporation or a partnership) in which
such Person, one or more Subsidiaries of such Person, or such Person and one or
more Subsidiaries of such Person, directly or indirectly, at the date of
determination thereof has (x) at least a fifty percent ownership interest or
(y) the power to elect or direct the election of the directors or other
governing body of such Person; provided, however, that "Subsidiary" shall not
include (i) any Unrestricted Subsidiary of such Person, except for purposes of
Section 4.10 of the Indenture.

"Swap Obligation" of any person shall mean any Interest Rate or
Currency Agreement entered into with one or more financial institutions or one
or more futures exchanges in the ordinary course of business and not for
purposes of speculation that is designed to protect such Person against
fluctuations in (x) interest rates with respect to Debt Incurred and which
shall have a notional amount no greater than 105% of the principal amount of
the Debt being hedged thereby, or (y) currency exchange rate fluctuations.

"TARC" shall mean TransAmerican Refining Corporation, a Texas
corporation.

"TARC Loan" shall mean the loan from the Lender to TARC pursuant to
that certain Loan Agreement between the Lender and TARC dated as of the date
hereof.

"TARC Refinery" shall mean the petroleum refinery owned by TARC
located approximately 20 miles from New Orleans, Louisiana.

"TEC Notes" shall mean those certain 11 1/2% Senior Secured Notes due
2002 in the aggregate principal amount of $475,000,000 and 13% Senior Secured
Discount Notes due 2002 in the aggregate principal amount of $1,130,000,000
issued by the Lender.

"Termination Fee" shall mean a fee to be paid in the event of a
mandatory prepayment pursuant to Section 3.1 in the amount of one percent (1%)
of the amount of such prepayment.

"TransAmerican" shall mean TransAmerican Natural Gas Corporation, a
Texas corporation.

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<PAGE> 20
"TransTexas Entities" shall mean the Borrower and each of its
Subsidiaries.

"TransTexas Dividend/Share Repurchase Program" shall mean the dividend
and share repurchase program of the Borrower.

"TransTexas Guarantor Mortgage" shall mean each mortgage, deed of
trust, assignment, security agreement and financing statement by each Guarantor
of the Note to the trustee named therein for the benefit of the Lender.

"TransTexas Guarantor Security Agreement" shall mean any and each
Security and Pledge Agreement by each Guarantor of the Note in favor of the
Lender.

"TransTexas Interest Increase Quarter" shall mean any fiscal quarter
immediately following a Capital Expenditure Testing Quarter, in which Capital
Expenditure Testing Quarter the Capital Expenditures of TransTexas exceeded the
Consolidated EBITDA of TransTexas for the fiscal quarter immediately preceding
such Capital Expenditure Testing Quarter.

"TransTexas Security and Pledge Agreement" shall mean that certain
Security and Pledge Agreement by the Borrower in favor of the Lender.

"TransTexas Security Documents" shall mean the Disbursement Agreement,
the TransTexas Mortgages, the TransTexas Security Agreement, any Guaranty,
TransTexas Guarantor Mortgage, TransTexas Guarantor Security Agreement and each
other agreement relating to the pledge of assets to secure the Notes and any
guarantee of the obligations of the Borrower under the Note by any Guarantor
that may be entered into after the date of the Note, pursuant to the terms of
the Note.

"Tribunal" shall mean any state, commonwealth, federal, foreign,
territorial or other court or governmental or administrative department,
commission, board, bureau, district, authority, agency or instrumentality or
any arbitration authority.

"TTXD" shall mean TransTexas Drilling Services, Inc., a Delaware
corporation, or a newly formed corporation that is initially a wholly-owned
Subsidiary of the Borrower formed for the purpose of receiving the certain
investments described herein under clauses (xii) and (xiii) of the definition
of "Permitted Investments."

"TTXD Entities" shall mean TTXD and each of its Subsidiaries.

"TTXD Equity Investment" shall mean an equity Investment by the
Borrower in TTXD in an aggregate amount not in excess of $75 million.

"TTXD Spin-off" shall mean (i) the transfer of the drilling and
integrated services business and pipeline services business and related assets
from the Borrower to TTXD and (ii) the (x) dividend of shares of common stock
of the Borrower to holders of the Borrower's common stock or (y) any other
transaction that would result, in the case of (x) or (y), in the Borrower's
being the beneficial owner of less than 50% of the common stock of TTXD.

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<PAGE> 21
"Unrestricted Non-Recourse Debt" shall mean (i) Debt that is secured
solely (other than with respect to clause (ii) below) by a Lien upon the stock
of an Unrestricted Subsidiary of such Person and as to which there is no
recourse (other than with respect to clause (ii) below) against such Person or
any of its assets other than against such stock (and the dollar amount of any
Debt of such Person as described in this clause (i) shall be deemed to be zero
for purposes of all other provisions of the Indenture) and (ii) guarantees of
the Debt of Unrestricted Subsidiaries of such Person; provided, that the
aggregate of all Debt of such Person Incurred and outstanding pursuant to
clauses (i) and (ii) of this definition, together with all Permitted
Investments (net of any return on such Investment) in Unrestricted Subsidiaries
of such Person, does not exceed $25 million plus in the case of either (i) or
(ii), Restricted Payments permitted to be made pursuant to clauses (i) or (ii),
as applicable, of Section 4.3 of the Indenture.

"Unrestricted Subsidiary" of any Person shall mean any other Person
("Other Person") that would but for this definition of "Unrestricted
Subsidiary" be a Subsidiary of such Person organized or acquired after the
Closing Date as to which all of the following conditions apply: (i) neither
such Person nor any of its other Subsidiaries provides credit support of any
Debt of such Other Person (including any undertaking, agreement or instrument
evidencing such Debt), other than Unrestricted Non-Recourse Debt; (ii) such
Other Person is not liable, directly or indirectly, with respect to any Debt
other than Unrestricted Subsidiary Debt; (iii) neither such Person nor any of
its Subsidiaries has made an Investment in such Other Person unless such
Investment was permitted by the Indenture; and (iv) the Board of Directors of
such Person, as provided below, shall have designated such Other Person to be
an Unrestricted Subsidiary on or prior to the date of organization or
acquisition of such Other Person. Any such designation by the Board of
Directors of such Person shall be evidenced to the Indenture Trustee by
delivering to the Indenture Trustee a resolution thereof giving effect to such
designation and an Officers' Certificate certifying that such designation
complies with the foregoing conditions. The Board of Directors of any Person
may designate any Unrestricted Subsidiary of such Person as a Subsidiary of
such Person; provided, that, (a) if the Unrestricted Subsidiary has any Debt
outstanding or is otherwise liable for any Debt or has a negative Net Worth,
then immediately after giving pro forma effect to such designation, such Person
could incur at least $1.00 of additional Debt pursuant to the Indenture
(assuming, for purposes of this calculation, that each dollar of negative Net
Worth is equal to one dollar of Debt), (b) all Debt of such Unrestricted
Subsidiary shall be deemed to be incurred by a Subsidiary of the Person on the
date such Unrestricted Subsidiary becomes a Subsidiary, and (c) no Default or
Event of Default would occur or be continuing after giving effect to such
designation. Any subsidiary of an Unrestricted Subsidiary shall be an
Unrestricted Subsidiary for purposes of the Indenture.

"Unrestricted Subsidiary Debt" shall mean, as to any Unrestricted
Subsidiary of any Person, Debt of such Unrestricted Subsidiary (i) as to which
neither such Person nor any Subsidiary of such Person is directly or indirectly
liable (by virtue of such Person or any such Subsidiary being the primary
obligor on, guarantor of, or otherwise liable in any respect to, such Debt),
unless such liability constitutes Unrestricted Non-Recourse Debt and (ii)
which, upon the occurrence of a default with respect thereto, does not result
in, or permit any holder (other than the Borrower or any Subsidiary of the
Borrower) of any Debt of such Person or any Subsidiary of such Person to
declare, a default on such Debt of such Person or any Subsidiary of such Person
(other than the Borrower or any Subsidiary of the Borrower or cause the payment
thereof to be accelerated or payable prior to its stated maturity, unless, in
the case of this clause (ii), such Debt constitutes Unrestricted Non-Recourse
Debt.

"Vehicles" shall mean all trucks, automobiles, trailers and other
vehicles covered by a certificate of title.

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<PAGE> 22
"Volumetric Production Payments" shall mean production payment
obligations recorded as a deferred revenue in accordance with GAAP, together
with all undertakings and obligations in connection therewith.

"Voting Stock" shall mean Capital Stock of a Person having generally
the right to vote in the election of directors of such Person.

Section 1.2 Rules of Construction. The words "hereof", "herein"
and "hereunder" and words of similar import when used in this Agreement shall
refer to this Agreement as a whole and not to any particular provision of this
Agreement. Unless otherwise specified herein, the term "or" has the inclusive
meaning represented by the term "and/or" and the term "including" is not
limiting. All references as to "Sections", "Schedules" and "Exhibits" shall be
to Sections, Schedules and Exhibits, respectively, of this Agreement unless
otherwise specifically provided.

Section 1.3 Computation of Time Periods. In the computation of
periods of time from a specified date to a later specified date, unless
otherwise specified herein the words "commencing on" mean "commencing on and
including", the word "from" means "from and including" and the words "to" and
"until" each means "to but excluding".

SECTION 2 THE LOAN.

Section 2.1 Commitment to Make Loan.

(a) Lender, upon the terms and conditions set forth
herein and relying upon the representations and warranties set forth
herein, agrees to make a loan (the "Loan") to Borrower on the Closing
Date in an amount equal to $450,000,000.

(b) Borrower shall execute and deliver to Lender to
evidence the Loan made by Lender a promissory note (the "Note"), which
shall be (i) dated the Closing Date; (ii) in the aggregate principal
amount of $450,000,000; and (iii) in substantially the form attached
hereto as Exhibit A and made a part hereof, with the blanks
appropriately filled.

Section 2.2 Deposit of Loan Proceeds into Disbursement Account.

(a) The Lender shall deliver to the Borrower, on the
Closing Date, an amount equal to $50,716,000. The Lender shall
deposit the remaining amount of the Loan, $399,284,000 (the "Reserve
Amount") into the Disbursement Account.

(b) Funds in the Disbursement Account shall be disbursed
according to the terms and conditions of the Disbursement Agreement.

Section 2.3 Interest.

(a) Borrower shall pay interest on the unpaid principal
amount of the Loan at a rate per annum equal to the lesser of (i) ten
and seven-eighths of one percent (10.875%) and (ii) the Highest Lawful
Rate from the Closing Date until such principal amount shall be paid
in full, at

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<PAGE> 23
the times and according to the terms and conditions set forth in the
Note; provided, however, that during any TransTexas Interest Increase
Quarter, the unpaid principal amount of the Loan shall bear interest
at a rate per annum equal to the lesser of (i) twelve and
seven-eighths of one percent (12.875%) and (ii) the Highest Lawful
Rate; provided, further, that any amount of principal which is not
paid when due (whether at stated maturity, by acceleration or
otherwise) shall bear interest, from the date on which such amount is
due until such amount is paid in full, payable on demand at a rate per
annum equal at all times to the lesser of (i) the Default Rate and
(ii) the Highest Lawful Rate.

(b) Interest on the Note will accrue from the most recent
date to which interest has been paid, or, if no interest has been
paid, from the Closing Date. Interest on the Note will be computed on
the basis of a 360-day year consisting of twelve 30-day months.

Section 2.4 Repayment of the Loan. Borrower shall repay the
outstanding principal amount of the Loan as follows:

(a) Interest shall begin to accrue on June 13, 1997, and
interest shall thereafter be due and payable semiannually on June 15
and December 15 of each year, commencing December 15, 1997.

(b) The unpaid principal amount of the Note outstanding,
plus all accrued and unpaid interest, shall be due and payable on the
Stated Maturity Date.

SECTION 3 PREPAYMENTS AND OTHER PAYMENTS.

Section 3.1 Mandatory Prepayments.

(a) Change of Control. In the event that a Change of
Control occurs, the Lender will have the right, at the Lender's
option, subject to the terms and conditions of this Agreement and the
Indenture, to require the Borrower to repay the outstanding principal
amount of the Loan in an amount equal to the Borrower's pro rata share
of the Change of Control Purchase Price, as defined in the Indenture,
to be paid by the Lender pursuant to Section 11.1 of the Indenture
(such pro rata share to be calculated using the ratio of the
outstanding principal amount of the Loan to the sum of (i) the
outstanding principal amount of the Loan plus (ii) the Accreted Value
of the outstanding principal amount of the TARC Loan, plus any and all
accrued and unpaid interest, together with the Termination Fee, on a
date that is no later than 59 Business Days after the occurrence of
such Change of Control (the date on which the repayment is effected
being referred to herein as the "Change of Control Payment Date").

(b) The Borrower shall notify the Lender and the
Indenture Trustee within five Business Days after each date upon which
the Borrower knows, or reasonably should know, of the occurrence of a
Change of Control.

Section 3.2 Permitted Prepayments. The Borrower may at any time
make a prepayment of all or a portion of the principal amount of the Note then
outstanding (a "Permitted Prepayment") at a prepayment price equal to the
portion of the outstanding principal amount of the Note to be prepaid plus

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<PAGE> 24
the Permitted Prepayment Fee, together with accrued and unpaid interest, if
any, to and including the date of such Permitted Prepayment.

Section 3.3 Place of Payment or Prepayment. All payments and
prepayments made in accordance with the provisions of this Agreement or any
other Loan Document in respect of principal, interest, fees, costs or expenses
shall be made on the date when due in Dollars, without deduction, set-off or
counterclaim, to an account of the Lender located in New York, New York, or
such other place as designated by the Lender.

SECTION 4 APPLICATION OF PROCEEDS.

Section 4.1 Use of Proceeds. Borrower agrees that the proceeds
of the Loan shall be used to purchase for cash the TransTexas Senior Notes,
production repayments and purchase price adjustments relating to the Lobo Sale
and the TransTexas Dividend/Share Repurchase Program, with any remaining
balance available to the Borrower for working capital and other general
purposes not otherwise prohibited by the Loan Documents.

SECTION 5 REPRESENTATIONS AND WARRANTIES.

Borrower represents and warrants that:

Section 5.1 Organization and Qualification. The Borrower (a) is
duly organized, validly existing and in good standing under the laws of the
State of Delaware; (b) has the corporate power to own its Properties and to
carry on its business as now conducted; and (c) is duly qualified to do
business and is in good standing in every jurisdiction in which the failure to
qualify would reasonably be expected to have a material adverse effect.
Borrower has no Subsidiaries other than those listed on Schedule 5.1(a). All
of the issued and outstanding Capital Stock of Borrower have been authorized,
validly issued, and are fully paid and nonassessable and free of any Lien
whatsoever.

Section 5.2 Power and Authority. Each Loan Party has all
necessary corporate and other power and authority to enter into and perform its
obligations under the Loan Documents to which it is a party. The execution,
delivery and performance by each Loan Party of the Loan Documents to which it
is a party have been duly authorized by all necessary corporate proceedings on
its part.

Section 5.3 Enforceability. The Loan Documents to which each
Loan Party is a party have been duly executed and delivered by such Loan Party
and constitute valid and legally binding obligations of such Persons
enforceable against such Persons in accordance with their respective terms,
except as enforcement may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights generally.

Section 5.4 Default. Borrower is not in default under the
provisions of any agreement, document or instrument to which it is a party or
by which it or any of its properties is bound or in violation of any order,
writ, injunction or decree of any Tribunal or in default under, or in violation
of, any order, regulation or demand of any Governmental Authority, which
default or violation would,

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<PAGE> 25
individually or in the aggregate, materially and adversely affect the business,
financial condition, Properties, prospects or operations of the Borrower.

Section 5.5 Title to Assets. Borrower has good and marketable
title to its Properties, subject to no Liens except Permitted Liens.

Section 5.6 Payment of Taxes. The Borrower and each of its
Subsidiaries have filed all Federal, state and local tax returns that are or
were required to be filed or have obtained extensions thereof and have paid all
taxes shown on such returns and all assessments received by them, respectively,
to the extent that the same have become due except for such assessments that
the Borrower or such Subsidiary disputes in good faith and has adequately
reserved therefor.

Section 5.7 Conflicting or Adverse Agreements or Restrictions.
The execution and delivery by each Loan Party of the Loan Documents to which it
is a party and its compliance with and performance of the terms and provisions
thereof (a) is not contrary to the provisions of the Articles of Incorporation
or Bylaws of such Person, (b) does not violate any Law, regulation, writ,
injunction, order or decree of any Tribunal, (c) does not conflict with, result
in a breach of or cause a default under any agreement, document or instrument
to which such Person is a party or by which it or any of its Properties is
bound or to which it or any of its Properties is subject and (d) does not
result in the creation of any Lien upon or security interest in any of the
Property of such Person except for Permitted Liens.

SECTION 6 CONDITIONS OF LENDING.

Section 6.1 Conditions Precedent to the Loan. The obligation of
Lender to make the Loan on the Closing Date is subject to the conditions
precedent that Lender shall have received on or before the Closing Date all of
the following, each dated (unless otherwise indicated) the Closing Date and
each in form and substance satisfactory to Lender and in such number of
counterparts as may be requested by Lender:

(a) this Agreement, the Note, the Disbursement Agreement,
the TransTexas Security Documents and the Financing Statements, each
duly executed and delivered by the parties thereto;

(b) the Intercreditor Agreement;

(c) unless waived by Lender, loss payable endorsements
with respect to all property insurance maintained by Borrower as of
the Closing Date, all as described on Schedule 6.1(g) attached hereto
and made a part hereof;

(d) copies of UCC-11s, or equivalent reports, listing all
effective financing statements which name Borrower (under its present
name, any trade names and any previous names) as debtor and which are
filed, together with copies of all such financing statements;

(e) duly executed releases or assignments of Liens and
UCC-3 financing statements in recordable form, and in form and
substance satisfactory to Lender, covering such Collateral as may be
necessary to reflect that the Liens granted to Lender are first and
prior Liens, except for Permitted Liens;

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<PAGE> 26
(f) an insurance broker's certificate relating to each
insurance policy maintained by Borrower as of the Closing Date
together with a copy of each such insurance policy or certificates or
evidence of coverage under such policy, evidence of the payment of the
premiums therefor, all in form and substance satisfactory to Lender;
and

SECTION 7 AFFIRMATIVE COVENANTS OF BORROWER.

So long as Borrower may borrow hereunder and until payment in full of
the obligations and all other amounts payable to Lender under the Loan
Documents:

Section 7.1 Payment of Securities. The Borrower shall pay the
principal of and interest on the Note on the dates and in the manner provided
in the Note. An installment of principal of or interest on the Note shall be
considered paid on the date it is due if the Lender or Indenture Trustee holds
on or before 10:00 a.m. New York City time on the date, U.S. legal tender
deposited and designated for and sufficient to pay the installment. The
Borrower shall pay interest on overdue principal and on overdue installments of
interest at the rate specified in the Note compounded semi-annually, to the
extent permitted by law.

Section 7.2 Covenants Incorporated by Reference. The Borrower
shall, and shall cause each of its Subsidiaries to, comply with each covenant
applicable to such Borrower described in the Indenture as if made by the
Borrower as of the date hereof.

SECTION 8 EVENTS OF DEFAULT AND REMEDIES.

Section 8.1 Events of Default. "Event of Default," wherever used
herein, means any one of the following events (whatever the reason for such
Event of Default and whether it shall be caused voluntarily or involuntarily or
effected, without limitation, by operation of law or pursuant to any judgment,
decree or order of any court or any order, rule or regulation of any
administrative or governmental body):

(a) default in the payment of any interest upon the Note as and
when the same becomes due and payable, and the continuance of such default for
a period of 30 days;

(b) default in the payment of all or any part of the principal of
the Note when and as the same becomes due and payable at maturity, redemption,
by acceleration, or otherwise, including default in the payment on Change of
Control Payment Date in accordance with Section 3.1;

(c) default in the observance or performance of, or breach of, any
covenant (including covenants incorporated by reference pursuant to Section
7.2), agreement or warranty of the Borrower or any of its Subsidiaries
contained in the Note or this Agreement or any of the Security Documents (other
than a default in the performance of any covenant, agreement or warranty which
is specifically dealt with elsewhere in this Section 8.1), and continuance of
such default or breach for the period and after the notice, if any, specified
below;

23
<PAGE> 27
(d) a default which extends beyond any stated period of grace
applicable thereto, including any extension thereof, under (i) the
Reimbursement and Credit Facility or (ii) any mortgage, indenture or instrument
under which there is outstanding any Debt of the Borrower or any of its
Subsidiaries with an aggregate principal amount in excess of $25 million, or
failure to pay such Debt at its stated maturity, provided that a waiver of such
default by the requisite parties to such Reimbursement and Credit Agreement,
mortgage, indenture or instrument shall constitute a waiver hereunder for the
same period;

(e) a decree, judgment, or order by a court of competent
jurisdiction shall have been entered adjudging the Borrower or any of its
Subsidiaries as bankrupt or insolvent, or ordering relief against the Borrower
or any of its Subsidiaries in response to the commencement of an involuntary
bankruptcy case, or approving as properly filed a petition seeking
reorganization or liquidation of the Borrower or any of its Subsidiaries under
any bankruptcy or similar law, and such decree or order shall have continued
undischarged and unstayed for a period of 60 days; or a decree or order of a
court of competent jurisdiction over the appointment of a receiver, liquidator,
trustee, or assignee in bankruptcy or insolvency of the Borrower, any of its
Subsidiaries, or of the property of any such Person, or for the winding up or
liquidation of the affairs of any such Person, shall have been entered, and
such decree, judgment, or order shall have remained in force undischarged and
unstayed for a period of 60 days;

(f) the Borrower or any of its Subsidiaries shall institute
voluntary bankruptcy proceedings, or shall consent to the filing of a
bankruptcy proceeding against it, or shall file a petition or answer or consent
seeking reorganization or liquidation under any bankruptcy or similar law or
similar statute, or shall consent to the filing of any such petition, or shall
consent to the appointment of a Custodian, receiver, liquidator, trustee, or
assignee in bankruptcy or insolvency of it or any of its assets or property, or
shall make a general assignment for the benefit of creditors, or shall admit in
writing its inability to pay its debts generally as they become due, or shall,
within the meaning of any Bankruptcy Law, become insolvent, fail generally to
pay its debts as they become due, or take any corporate action in furtherance
of or to facilitate, conditionally or otherwise, any of the foregoing;

(g) final judgments not covered by insurance for the payment of
money, or the issuance of any warrant of attachment against any portion of the
property or assets of the Borrower or any Subsidiary, which, in the aggregate,
equal or exceed $25 million at any one time shall be entered against the
Borrower or any of its Subsidiaries by a court of competent jurisdiction and
not be stayed, bonded or discharged for a period (during which execution shall
not be effectively stayed) of 60 days (or, in the case of any such final
judgment which provides for payment over time, which shall so remain unstayed,
unbonded or undischarged beyond any applicable payment date provided therein);

(h) any of the TransTexas Security Documents shall for any reason
cease to be in full force and effect (except where no material adverse effect
to the Lender would result), or shall cease to give the Lender the Liens,
rights, powers and privileges purported to be created thereby including but not
limited to, a perfected security interest in, and Lien on, the Collateral in
accordance with the terms thereof, except where the failure to have such Lien,
rights, powers and privileges shall not have a material adverse effect on the
Lender; or

(i) Independent Directors not constituting a majority of the Board
of Directors of the Borrower for a period of 90 days in the aggregate in any
twelve-month period.

24
<PAGE> 28
A Default under clause (c) above (other than in the case of any
Defaults incorporated herein by reference and described in Sections 4.3, 4.11,
4.14 or 5.1 of the Indenture, which Defaults shall be Events of Default without
the notice specified in this paragraph or Section 4.7(c) of the Indenture and
upon the passage of 10 days) is not an Event of Default until the Lender
notifies the Borrower of the Default, and the Borrower does not cure the
Default within 30 days after receipt of the notice. The notice must specify
the Default, demand that it be remedied and state that the notice is a "Notice
of Default."

Section 8.2 Remedies.

(a) If an Event of Default occurs and is continuing
(other than an Event of Default specified in Section 8.1(e) or (f)
above, relating to the Borrower or it Subsidiaries), then in every
such case, unless the principal of the Note shall have already become
due and payable, either the Indenture Trustee or the Lender, by notice
in writing to the Borrower (and to the Indenture Trustee if given by
the Lender) (an "Acceleration Notice"), may declare all principal of
the Note and accrued and unpaid interest thereon or, as appropriate,
any prepayment under 3.1(a) to be due and payable immediately. If an
Event of Default specified in Section 8.1(e) or (f) above occurs
relating to the Borrower or its Subsidiaries, all principal and
accrued and unpaid interest thereon will be immediately due and
payable on the Note without any declaration or other act on the part
of the Indenture Trustee or the Lender. The Indenture Trustee
generally is authorized to rescind such acceleration if all existing
Events of Default, other than the non-payment of the principal and
interest on the Note which has become due solely by such acceleration,
have been cured or waived.

(b) In addition to and cumulative of any rights or
remedies expressly provided for in this Section 8, if any one or more
Events of Default shall have occurred, Lender (i) may proceed to
protect and enforce its rights hereunder and under any other Loan
Document by any appropriate proceedings and the Liens evidenced by the
TransTexas Security Documents shall be subject to foreclosure in any
manner provided for therein or provided for by law as Lender may elect
and (ii) may apply any cash collateral securing all or any part of the
Obligations to the payment of the obligations. Lender may also
proceed either by the specific performance of any covenant or
agreement contained in this Agreement or the other Loan Documents or
by enforcing the payment of the Note or by enforcing any other legal
or equitable right provided under this Agreement or the other Loan
Documents or otherwise existing under any law in favor of the Lender.
Lender shall not, however, be under any obligation to marshall any
assets in favor of Borrower or against or in payment of any or all
obligations under any Loan Document.

(c) Upon the occurrence of any Event of Default, Lender
shall have the right, immediately and without notice, to take
possession of and exercise possessory rights with regard to any
Property securing payment of amounts due hereunder or under any other
Loan Document.

(d) If Lender shall exercise its option to take over
management of the Premises pursuant to Section 8.2(b), Lender shall be
authorized to employ one or more independent managers to manage the
Premises, and Lender shall have no liability or responsibility absent
gross negligence or willful misconduct to Borrower or any other Person
with respect to its management of the Premises so long as Lender
exercises good faith in the selection and retention of such
independent manager or managers. All reasonable costs and expenses
incurred by Lender

25
<PAGE> 29
in managing the Premises shall, as paid, constitute indebtedness of
Borrower to Lender payable on demand, bearing interest at the Default
Rate from the date paid. All such demand indebtedness shall
constitute part of the indebtedness secured by the Collateral.

Section 8.3 Remedies Cumulative. No remedy, right or power
conferred upon Lender is intended to be exclusive of any other remedy, right or
power given hereunder or now or hereafter existing at law, in equity or
otherwise, and all such remedies, rights and powers shall be cumulative.

SECTION 9 MISCELLANEOUS.

Section 9.1 Waivers, Etc. No failure or delay on the part of
Lender in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power,
or any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. No course of dealing between Borrower and Lender shall operate
as a waiver of any right of Lender. No modification or waiver of any provision
of this Agreement, the Note or any other Loan Document nor consent to any
departure by Borrower therefrom shall in any event be effective unless the same
shall be in writing, and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice to or
demand on Borrower in any case shall entitle Borrower to any other or further
notice or demand in similar or other circumstances.

Section 9.2 Reimbursement of Expenses. The Borrower agrees to
pay or cause to be paid (i) all costs, expenses, fees and taxes incident to and
in connection with: the preparation, printing and distribution (including,
without limitation, word processing and duplication costs) and delivery of, and
performance under, each of the Loan Documents, (ii) all fees, disbursements and
expenses of the counsel and accountants of the Lender in connection with the
preparation, negotiation and execution of Loan Documents.

Section 9.3 Notices. Any notices or other communications to the
Borrower, the Lender or the Indenture Trustee required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by telex, by telecopier or registered or certified mail, postage prepaid,
return receipt requested, addressed as follows:

if to the Company:

TransTexas Gas Corporation
1300 North Sam Houston Parkway East
Suite 310
Houston, Texas 77060
Attention: Ed Donahue
Vice President

26
<PAGE> 30
if to the Lender:

TransAmerican Energy Corporation
1300 North Sam Houston Parkway East
Suite 200
Houston, Texas 77060
Attention: Ed Donahue
Vice President

if to the Indenture Trustee:

Firstar Bank of Minnesota, N.A.
Corporate Trust Department
101 East Fifth Street, 12th Floor
St. Paul, Minnesota 55101-1860
Attention: Frank Leslie

The Borrower, the Lender or the Indenture Trustee by notice to
each other party may designate additional or different addresses as shall be
furnished in writing by such party. Any notice or communication to the
Borrower, the Lender or the Indenture Trustee shall be deemed to have been
given or made as of the date so delivered, if personally delivered; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and
five Business Days after mailing if sent by registered or certified mail,
postage prepaid (except that a notice of change of address shall not be deemed
to have been given until actually received by the addressee).

Section 9.4 Governing Law. THIS AGREEMENT AND THE NOTE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
AS APPLIED TO CONTRACTS MADE AND PERFORMED WITHIN THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW. INSOFAR AS THIS AGREEMENT
RELATES TO THE MORTGAGES OR THE CREATION, PERFECTION OR FORECLOSURE OF LIENS
AND THE ENFORCEMENT OF RIGHTS AND REMEDIES AGAINST THE COLLATERAL UNDER THE
TRANSTEXAS SECURITY DOCUMENTS, IT SHALL BE GOVERNED BY THE LAWS OF THE
JURISDICTION SPECIFIED IN SUCH DOCUMENTS. THE BORROWER HEREBY IRREVOCABLY
SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH
OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL COURT SITTING IN THE
BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF ANY SUIT, ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT AND THE NOTE, AND
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE BORROWER
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING
HEREIN SHALL AFFECT THE RIGHT OF THE LENDER TO SERVE PROCESS IN ANY OTHER

27
<PAGE> 31
MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST THE BORROWER IN ANY OTHER JURISDICTION.

Section 9.5 Survival of Representations, Warranties and
Covenants. All representations, warranties and covenants contained herein and
in any other Loan Document or made in writing by Borrower in connection
herewith shall survive the execution and delivery of this Agreement and the
Note, and will bind and inure to the benefit of the respective successors and
assigns of the parties hereto, whether so expressed or not, provided that the
undertaking of Lender to make the Loan to Borrower shall not inure to the
benefit of any successor or assign of Borrower. No investigation at any time
made by or on behalf of Lender shall diminish Lender's right to rely thereon.
All statements contained in any certificate or other written instrument
delivered by Borrower or by any Person authorized by Borrower under or pursuant
to this Agreement or in connection with the transactions contemplated hereby
shall constitute representations and warranties hereunder as of the time made
by Borrower.

Section 9.6 Counterparts. This Agreement may be executed in
several counterparts, and by the parties hereto on separate counterparts, and
each counterpart, when so executed and delivered, shall constitute an original
instrument, and all such separate counterparts shall constitute but one and the
same instrument.

Section 9.7 Severability. In the event any one or more of the
provisions in this Agreement or in the Note shall be held invalid, illegal or
unenforceable, in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the
remaining provisions shall not in any way be affected or impaired thereby, it
being intended that all of the provisions hereof shall be enforceable to the
full extent permitted by law.

Section 9.8 Descriptive Headings. The section headings in this
Agreement have been inserted for convenience only and shall be given no
substantive meaning or significance whatsoever in construing the terms and
provisions of this Agreement.

Section 9.9 Limitation of Liability. No claim may be made by
Borrower or any other Person against Lender or the directors, officers,
employees, attorneys or agents of Lender or the Indenture Trustee for any
special, indirect, consequential or punitive damages in respect of any claim
for breach of contract arising out of or related to the transactions
contemplated by this Agreement, or any act, omission or event occurring in
connection herewith, and Borrower hereby waives, releases and agrees not to sue
upon any claim for any such damages, whether or not accrued and whether or not
known or suspected to exist in its favor.

Section 9.10 Sale, Pledge or Assignment. Lender may assign any of
its rights (including, without limitation, rights to payment of principal
and/or interest under the Note) under this Agreement and the other Loan
Documents to the Indenture Trustee without further notice to or consent of
Borrower, and the Borrower hereby agrees to such assignment. The Borrower
hereby acknowledges and consents to the collateral assignment by the Lender of
this Agreement and the Lender's interest in the Collateral to the Indenture
Trustee. The Borrower also agrees that, in the case of an Event of Default,
the Indenture Trustee may exercise any rights and remedies of the Lender under
this Agreement, and any reference to the "Lender" hereunder shall also include
the Indenture Trustee.

28
<PAGE> 32
Section 9.11 Release. The Collateral, in whole or in part, may be
released in accordance with the Indenture. Each of the Lender and the Borrower
hereby acknowledge and consent to the release of Collateral by the Indenture
Trustee, as the Lender's agent, pursuant to the terms of the Indenture.

Section 9.12 Indenture Controls. If there are any conflicts or
inconsistencies among this Agreement and any of the other Loan Documents, the
provisions of the Indenture shall prevail and control.

Section 9.13 Computation of Time Periods. In this Agreement, in
the computation of periods of time from a specified date to a later specified
date, unless otherwise specified herein, the word "from" means "from and
including" and the words "to" and "until" each shall mean "to but excluding."

Section 9.14 Final Agreement. THIS WRITTEN AGREEMENT, TOGETHER
WITH THE OTHER LOAN DOCUMENTS, REPRESENTS THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.

29
<PAGE> 33
IN WITNESS WHEREOF, the parties hereto, by their respective officers
thereunto duly authorized, have duly executed and delivered this Agreement as
of the date first above written.

TRANSTEXAS GAS CORPORATION

By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------

TRANSAMERICAN ENERGY CORPORATION

By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------

30
<PAGE> 34
Exhibit A

[FORM OF PROMISSORY NOTE]

TRANSTEXAS GAS CORPORATION

$450,000,000.00

TransTexas Gas Corporation, a Delaware corporation (hereinafter called
the "Company," which term includes any successor corporation, for value
received, hereby promises to pay to TransAmerican Energy Corporation, a
Delaware corporation (the "Lender"), or registered assigns, the principal sum
of Four Hundred Fifty Million Dollars, on June 1, 2002.

Interest Payment Dates: June 15 and December 15, commencing
December 15, 1997

Record Dates: June 1 and December 1

Reference is made to the further provisions of this Note on the
reverse side, which will, for all purposes, have the same effect as if set
forth at this place.

This is the Note referred to in that certain Loan Agreement between
the Company and the Lender, dated as of June 13, 1997 (the "Loan Agreement").

IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually or by facsimile by its duly authorized officers.

Dated:

TRANSTEXAS GAS CORPORATION

By:
-------------------------------------
Name:
Title:

A-1
<PAGE> 35
(BACK OF NOTE)

TRANSTEXAS GAS CORPORATION

1. Interest.

TransTexas Gas Corporation, a Delaware corporation (the "Company"),
promises to pay interest on the principal amount of this Note at a rate of
10.875 % per annum; provided, however, that during any TransTexas Interest
Increase Quarter, the Company promises to pay interest on the principal amount
of this Note at a rate of 12.875% per annum. To the extent it is lawful, the
Company promises to pay interest on any interest payment due but unpaid on such
principal amount at the Default Rate.

The Company will pay interest semi-annually on June 15 and December
15 of each year (each, an "Interest Payment Date"), commencing December 15,
1997. Interest on the Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
issuance of the Notes. Interest on the Notes will be computed on the basis of
a 360-day year consisting of twelve 30-day months.

2. Method of Payment.

The Company shall pay interest on the Notes to TransAmerican Energy
Corporation, a Delaware corporation (the "Lender") in accordance with the Loan
Agreement, defined below.

3. Loan Agreement.

The Company issued the Note under a Loan Agreement, dated as of June
13, 1997 (the "Loan Agreement"), among the Company and the Lender. Capitalized
terms herein are used as defined in the Loan Agreement unless otherwise defined
herein. The terms of the Note include those stated in the Loan Agreement. The
Note is limited in aggregate principal amount to $450,000,000.

A-2

<PAGE> 1

EXHIBIT 4.5

TRANSTEXAS GAS CORPORATION

SECURITY AND PLEDGE AGREEMENT

TRANSTEXAS GAS CORPORATION

in favor of

TRANSAMERICAN ENERGY CORPORATION

Dated as of June 13, 1997
<PAGE> 2
TRANSTEXAS GAS CORPORATION
SECURITY AND PLEDGE AGREEMENT

This Security and Pledge Agreement (this "Agreement") is made
and entered into as of June 13, 1997 by TransTexas Gas Corporation, a Delaware
corporation (the "Company"), in favor of TransAmerican Energy Corporation (the
"Lender").

RECITALS

WHEREAS, the Company has entered into that certain Loan
Agreement dated as of June 13, 1997 (the "TransTexas Intercompany Loan
Agreement") executed by the Company in favor of the Lender; and

WHEREAS, the Company's obligations under the TransTexas
Intercompany Loan Agreement are further evidenced by that certain promissory
note in the amount of $450,000,000 dated as of June 13, 1997 (the "TransTexas
Intercompany Note"), and executed by the Company in favor of the Lender; and

WHEREAS, the obligations of the Company under the TransTexas
Intercompany Note and the TransTexas Intercompany Loan Agreement are secured by
(i) that certain Mortgage, Deed of Trust, Assignment of Production, Security
Agreement and Financing Statement dated as of June 13, 1997 (the "TransTexas
Alabama Mortgage"), (ii) that certain Mortgage, Deed of Trust, Assignment of
Production, Security Agreement and Financing Statement dated as of June 13,
1997 (the "TransTexas Texas Mortgage"), (iii) that certain Mortgage, Deed of
Trust, Assignment of Production, Security Agreement and Financing Statement
dated as of June 13, 1997 (the "TransTexas Mississippi Mortgage"), (iv) that
certain Mortgage, Deed of Trust, Assignment of Production, Security Agreement
and Financing Statement dated as of June 13, 1997 (the "TransTexas North Dakota
Mortgage") and (v) that certain Act of Mortgage, Security Agreement and
Financing Statement dated as of June 13, 1997 (the "TransTexas Louisiana
Mortgage" and, together with the TransTexas Intercompany Loan Agreement, the
TransTexas Intercompany Note, the TransTexas Alabama Mortgage, the TransTexas
Texas Mortgage, the TransTexas Mississippi Mortgage and the TransTexas North
Dakota Mortgage, the "TransTexas Loan Documents"); and

WHEREAS, in order to secure the payment and performance in
full of the obligations of the Company under the TransTexas Intercompany Loan
Agreement, the parties hereto desire to set forth their mutual understanding
and certain agreements regarding the terms and conditions of the grant of a
security interest in the Company UCC Collateral, the Assigned Collateral and
the Pledged Collateral (as defined below);

NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Lender hereby agree as follows:

Section 1. Definitions.

(a) As used in this Agreement, capitalized terms not
otherwise defined herein have the meanings set forth in the TransTexas
Intercompany Loan Agreement, and the following terms shall have the
respective meanings set forth below (such meanings to be equally
applicable to both the singular and plural forms of the terms
defined):
<PAGE> 3
"Assigned Collateral" shall have the meaning assigned to that
term in Section 2 of this Agreement.

"Collateral" shall have the meaning assigned to that term in
Section 2 of this Agreement.

"Default" and "Event of Default" shall have the meanings
assigned to those terms in Section 6(a) of this Agreement.

"Disbursement Account" means the account or accounts owned by
the Company and created by that certain Disbursement Agreement by and
among the Company, the Lender, the disbursement agent named therein,
or its successor, and the construction supervisor named therein, as
amended pursuant to the terms thereof.

"Equipment" shall mean and include all now owned or hereafter
acquired Vehicles, drilling rigs, workover rigs, fracture stimulation
equipment, well site compressors, rolling stock and related equipment
and other assets accounted for as equipment in its financial
statements, all proceeds thereof, and all documents of title, books,
records, ledger cards, files, correspondence and computer files,
tapes, disks and related data processing software that at any time
evidence or contain information relating to the foregoing; provided,
however, that "Equipment" shall not include any assets constituting
part of a natural gas pipeline or the compression or dehydration
equipment used in the operation of any such pipeline.

"GAAP" means generally accepted accounting principles of the
United States of America, consistently applied.

"Obligations" shall have the meaning assigned to that term in
Section 2 of this Agreement.

"Indebtedness" means the following indebtedness and
liabilities of the Company (and any extensions, renewals, refunding,
increases, substitutions, replacements, consolidations, modifications
or rearrangements of such indebtedness and liabilities, regardless of
whether the Company executes any extension agreement or renewal
instrument):

(i) all amounts advanced or expended by the
Lender under the TransTexas Intercompany Loan Agreement and/or
under or in connection with this Agreement, all reasonable
costs and out-of-pocket expenses (excluding expenses
representing administrative overhead) at any time and from
time to time incurred by the Lender in connection with the
administration and/or enforcement of this Agreement
(including, without limitation, the reasonable fees and
out-of-pocket expenses of counsel employed by the Lender in
connection therewith), and all indemnities at any time and
from time to time payable hereunder to the Lender, and

(ii) all principal, premium and accrued interest
owing on the TransTexas Intercompany Note, and

(iii) all other amounts payable by the Company
under the TransTexas Intercompany Loan Agreement.

2
<PAGE> 4
"Inventory" shall mean and include now owned or hereafter
acquired drill casing, drill pipe and other supplies accounted for as
inventory by the Company on its financial statements (excluding
Hydrocarbons), all proceeds thereof, and all documents of title,
books, records, ledger cards, files, correspondence, and computer
files, tapes, disks and related data processing software that at any
time evidence or contain information relating to the foregoing.

"Pledged Collateral" shall have the meaning assigned to that
term in Section 2 of this Agreement.

"Receivables" shall mean and include, any and all now owned or
hereafter acquired "accounts" as such term is defined in Article 9 of
the Uniform Commercial Code in the State of New York, all products and
proceeds thereof, and all books, records, ledger cards, files,
correspondence, and computer files, tapes, disks or software that at
any time evidence or contain information relating to the foregoing.

"UCC" means the Uniform Commercial Code as in effect in the
State of New York.

"Vehicles" means all trucks, automobiles, trailers and other
vehicles covered by a certificate of title.

(b) All terms used in this Agreement which are defined in
the UCC, other than those which are defined in the Indenture or
specifically defined in Section 1(a) above, shall have the same
meaning herein as in the UCC.

Section 2. Grant of Security Interest.

(a) The Company hereby grants to the Lender, to secure
the payment and performance in full of the Obligations, a security
interest in and a lien on and so pledges and assigns to the Lender all
of the Company's right, title and interest in, to and under any and
all of the following described property, assets and rights, in each
case, wherever located, whether now owned or hereafter acquired or
arising, all accessions and additions thereto, all substitutions and
replacements therefor, and all proceeds and products thereof and
assigns all rights in and to all collateral securing the following
described property, assets and rights:

(i) all personal and fixture property of every
kind and nature including, without limitation, all furniture,
fixtures, raw materials, goods, contract rights, rights to the
payment of money, insurance refund claims and all other
insurance claims and proceeds, tort claims, chattel paper,
documents, instruments (including certificated securities),
deposit accounts and all general intangibles including,
without limitation, all uncertificated securities, tax refund
claims, license fees, patents, patent applications,
trademarks, trademark applications, trade names, copyrights,
copyright applications, rights to sue and recover for past
infringement of patents, trademarks and copyrights, computer
programs, computer software, engineering drawings, service
marks, customer lists, goodwill, and all licenses, permits,
agreements of any kind or nature pursuant to which the Company
possesses, uses or has authority to possess or use property
(whether tangible or intangible) of others or others possess,
use or have authority to possess or use property (whether
tangible or intangible) of the Company, and all recorded data
of any kind or nature, regardless of the medium of recording
including, without limitation, all software, writings, plans,
specifications and schematics (any and all such property being

3
<PAGE> 5
the "Company UCC Collateral"); provided, however, that nothing
herein shall be construed to include within and hereby is
expressly excluded from, the Company UCC Collateral, any now
owned or hereafter acquired Equipment, Inventory or
Receivables.

(b) The Company also pledges to the Lender, and grants to
the Lender a security interest in all of the Company's right, title
and interest in, to and under any and all of the following described
property, rights and interests, in each case, wherever located,
whether now owned or hereafter acquired or arising, all accessions and
additions thereto, all substitutions and replacements therefor, and
all proceeds and products thereof (collectively, the "Pledged
Collateral"):

(i) all of the issued and outstanding shares of
common stock identified on Schedule 2(b) attached hereto of
any subsidiary of the Company presently existing or hereafter
created or acquired (the "Pledged Subsidiaries") therein set
forth;

(ii) all other shares of common stock or other
equity securities now or hereafter acquired by the Company in
any manner issued by the Pledged Subsidiaries, and the
certificates representing such securities, and any present or
future options, warrants or other rights to subscribe for or
purchase any property described in Schedule 2(b)(i) or any
notes, bonds, debentures or other evidences of indebtedness
now or hereafter owned or acquired by the Company in any
manner that (A) are at any time convertible, exchangeable or
exercisable into capital stock or other equity securities of
the Pledged Subsidiaries or (B) have or at any time could by
their terms have voting rights with respect to any matter
affecting the Pledged Subsidiaries and all securities,
certificates and instruments representing or evidencing
ownership of any of the property described in Schedule 2(b)
hereof; and

(iii) all proceeds and products of the foregoing
and distributions thereof or with respect thereto, including
without limitation dividends, distributions, cash, instruments
and other property or securities, now or hereafter at any time
or from time to time received or receivable or otherwise
distributed or distributable in respect of or in exchange for
any or all of the foregoing.

(c) The Company hereby also assigns to the Lender and
grants to the Lender a security interest in, pledge of and lien on,
the Disbursement Account and all investments, securities, financial
assets credited thereto and security entitlements with respect thereto
and all certificates and instruments, if any, from time to time
representing or evidencing the Disbursement Account or any property
credited thereto, whether now owned by the Company or existing or
hereafter acquired, created or arising including the proceeds thereof
(the "Assigned Collateral" and, together with the Company UCC
Collateral and the Pledged Collateral, the "Collateral").

Subject to any Permitted Liens, pursuant to the terms
hereof, the Company has endorsed, assigned and delivered to the Lender
or such other Person that the Lender has designated as its agent to
hold for perfection purposes all negotiable or non-negotiable
instruments (including certificated securities) and chattel paper
pledged by it hereunder, together with instruments of transfer or
assignment duly executed in blank as the Lender may have specified.
In the event that the Company shall, after the date of this Agreement,
acquire any other negotiable or non-negotiable instruments (including
certificated securities) or chattel paper to be

4
<PAGE> 6
pledged by it hereunder, the Company shall, subject to Permitted
Liens, forthwith endorse, assign and deliver the same to the Lender,
accompanied by such instruments of transfer or assignment duly
executed in blank as the Lender may from time to time specify. To the
extent that any securities are uncertificated, appropriate book- entry
transfers reflecting the pledge of such securities created hereby have
been or, in the case of uncertificated securities hereafter acquired
by the Company, will at the time of such acquisition be, duly made for
the account of the Lender or one or more nominees of the Lender with
the issuer of such securities or other appropriate book-entry facility
or financial intermediary, with the Lender having at all times the
right to obtain definitive certificates (in the Lender's name or in
the name of one or more nominees of the Lender) where the issuer
customarily or otherwise issues certificates, all to be held as
Collateral hereunder. The Company hereby acknowledges that the Lender
may, in its discretion, appoint one or more financial institutions to
act as the Lender's agent in holding in custodial accounts instruments
or other financial assets, including securities, in which the Lender
is granted a security interest hereunder, including, without
limitation, certificates of deposit and other instruments evidencing
short term obligations.

(d) The inclusion of proceeds in this Agreement does not
authorize the Company to sell, dispose of or otherwise use the
Collateral in any manner not specifically authorized hereby or under
the Indenture.

(e) This Agreement secures the prompt and complete (i)
payment of all obligations of the Company to the Lender under the
TransTexas Intercompany Note, whether such obligations are now
existing or hereafter arising, and all renewals, extensions,
amendments, supplements and rearrangements thereof and (ii) payment
and performance of all covenants and conditions by the Company
contained herein and in the TransTexas Intercompany Loan Agreement in
each case whether for principal, interest, prepayment premium, taxes,
costs, losses, compensation, reimbursements, fees, expenses or any
other amount payable to the Lender under the terms of this Agreement
(all such obligations, covenants and conditions described in the
foregoing clauses (i) and (ii) being hereinafter collectively referred
to as the "Obligations").

(f) Notwithstanding anything contained herein to the
contrary, the stock of any Unrestricted Subsidiary shall not
constitute Collateral hereunder.

Section 3. Representations and Warranties. The Company
represents and warrants, as of the date hereof, to the Lender as follows:

(a) The chief executive office and principal place of
business of the Company is located at 1300 N. Sam Houston Parkway
East, Suite 320, Houston, Harris County, Texas 77032. Any and all
Collateral not delivered to the Lender or its designated agent is and
will continue to be located only in the States of Texas, Louisiana,
Alabama, Mississippi and North Dakota.

(b) The Company is the legal and beneficial owner of all
of the Collateral free and clear of any lien, security interest,
charge or encumbrance of any kind or nature, except for the lien and
security interest created hereby and for Permitted Liens, and has not
made any other pledge, assignment, mortgage, hypothecation or transfer
of the Collateral except as permitted hereunder or under the
TransTexas Intercompany Loan Agreement. Except for the lien and
security interest created hereby, all of the Collateral is free from
any material credit, deduction, allowance, defense, dispute, setoff or
counterclaim and there is no material extension or

5
<PAGE> 7
indulgence with respect thereto. The Pledged Collateral is not
subject to any put, call, option or other right in favor of any other
person whatsoever.

(c) The Pledged Collateral is accurately described in
Schedule 2(b) hereto and has been duly authorized and validly issued
and non-assessable.

(d) This Agreement has been duly executed and delivered
by the Company and creates a valid security interest in, and lien on,
the Collateral securing the payment of the Indebtedness. Upon the
delivery of physical certificates evidencing the Pledged Collateral to
the Lender or its designated agent and the making of the filings and
the taking of all other actions necessary to perfect the security
interests created hereby, including, without limitation, those actions
specified in Section 2(b) and Section 4, the security interests
created by this Agreement will be duly perfected security interests
subject to no equal or prior lien, security interest or encumbrance of
any kind or nature other than Permitted Liens.

(e) The Company has the requisite corporate power and
authority to pledge the Collateral in the manner hereby done or
contemplated and to defend its title thereto against the lawful claims
of all persons whomsoever.

(f) Neither the execution and delivery of this Agreement
by the Company, the performance by the Company of its obligations
hereunder, nor the transactions herein contemplated will (i) violate
the Company's charter or bylaws, (ii) violate the terms of any
agreement, indenture, mortgage, deed of trust, equipment lease,
instrument or other document to which the Company is a party, (iii)
violate any law, order, rule or regulation applicable to the Company
of any court or any government, regulatory body or administrative
agency or other governmental body having jurisdiction over the Company
or its properties, or (iv) result in or require the creation or
imposition of any lien (other than the lien contemplated hereby), upon
or with respect to any of the property now owned or hereafter acquired
by the Company, which violation or conflict would have a material
adverse effect on the financial condition, business, assets or
liabilities of the Company or on the value of the Collateral or a
material adverse effect on the security interests hereunder.

(g) The Pledged Collateral includes the issued and
outstanding shares of Common Stock of the Pledged Subsidiaries as
described in Schedule 2(b) attached hereto, and as of the date of
execution hereof, there are no outstanding options, warrants or other
rights to subscribe for or purchase any property described in Schedule
2(b) or any notes, bonds, debentures or other evidences of
indebtedness that (i) are at any time convertible into capital stock
of the Pledged Subsidiaries or (ii) have or at any time could by their
terms have voting rights with respect to any matters affecting the
Pledged Subsidiaries.

(h) No consent or approval which has not been obtained
prior to the date hereof of any other person or entity and no
authorization, approval or other action (other than delivery of
physical certificates evidencing the Pledged Collateral) by, and no
notice to or filing with any governmental body (other than UCC
filings), regulatory authority or securities exchange, was or is
necessary as a condition to the validity of the pledge hereunder of
the Collateral, and such pledge is effective to vest in the Lender
the rights of the Lender in the Collateral as set forth herein. There
are no restrictions on the transferability of any of the Collateral
transferred or delivered by the Company hereunder or, except for
restrictions related to federal and state

6
<PAGE> 8
securities laws governing the sale of "restricted stock" or "control
stock," with respect to the foreclosure, transfer or disposition
thereof by the Lender.

Section 4. Covenants. During the term of this Agreement and
until all the Obligations with respect to the Indebtedness have been fully and
finally paid and discharged in full, the Company covenants and agrees with the
Lender that:

(a) Except as permitted by the TransTexas Intercompany
Loan Agreement or in the ordinary course of business, the Company will
not make any compromise or settlement with respect to the Collateral
without notice to or consent of the Lender.

(b) The Company shall deliver to the Lender or its
designated agent concurrently with the execution of this Agreement or,
to the extent acquired subsequent to the date of execution hereof,
including without limitation Pledged Collateral issued by a newly
created or acquired Subsidiary, immediately upon the Company's
acquisition thereof: (i) all certificates and instruments
representing the Pledged Collateral and a revised Schedule 2(b), and
(ii) all certificates and instruments representing each other item of
Collateral (including all certificates, instruments and notes
representing any such Company UCC Collateral). Any and all Pledged
Collateral delivered to the Lender or its designated agent shall be
accompanied by undated duly executed powers in blank and by such other
instruments of transfer or documents as the Lender may reasonably
request. The Lender may hold the certificates representing the
Pledged Collateral delivered to it in its own name or in the name of
its nominee, all in form and substance satisfactory to the Lender.

(c) From time to time, the Company shall, at its own
expense, promptly give, execute, deliver, file and/or otherwise
formalize any such notice, statement, instrument, document, agreement
or other papers, and do all such other acts and things, as may be
necessary or desirable, or as the Lender may reasonably request, in
order to create, evidence, preserve, perfect, validate or continue any
lien or security interest created pursuant to this Agreement or to
enable the Lender to exercise or enforce its rights hereunder with
respect to such lien or security interest, or otherwise further to
effect the purposes of this Agreement. Without limiting the
generality of the foregoing, the Company shall, at any time or from
time to time upon the request of the Lender and at the Company's own
expense, execute, acknowledge, witness, deliver, file and/or record
such financing and continuation statements, notices, additional
assignments and other documents or instruments (all of which shall be
in form and substance satisfactory to the Lender and its counsel) as
the Lender may from time to time reasonably request for the perfection
of the liens and security interests created hereby.

(d) The Company shall promptly notify the Lender (i) of
any material changes in any fact or circumstance represented or
warranted by the Company with respect to any material portion of the
Collateral, (ii) of any material impairment of the Collateral and
(iii) of any claim, action or proceeding affecting title to all or any
of the Collateral.

(e) Except for the liens and security interests created
by this Agreement and the Permitted Liens in the Collateral, the
Company shall at its own expense defend the Collateral against any and
all liens, claims, security interests and other encumbrances or
interests, howsoever arising and shall maintain and preserve the
security interest granted hereunder with respect to the Collateral as
long as this Agreement shall remain in full force and effect. The
Company shall not make any other pledge, assignement, mortgage,
hypothecation or transfer of

7
<PAGE> 9
the Collateral except as permitted hereunder or under the TransTexas
Intercompany Loan Agreement.

(f) The Company shall at all times keep accurate and
complete records with respect to the Collateral, including, without
limitation, records of all payments made, credit granted and proceeds
received in connection therewith.

(g) The Company shall not relocate its principal place of
business or chief executive office to a county or state other than
that specified in Section 3(a) of this Agreement unless the Company
gives 30 days' prior written notice to the Lender, which notice shall
specify the county and state into which such relocation is to be made.
The Collateral, to the extent not delivered to the Lender pursuant to
Section 2, will be kept at those locations listed on the Perfection
Certificate delivered to the Lender herewith in the form attached as
Exhibit A hereto and the Company will not remove the Collateral from
such locations, without providing at least 30 days' prior written
notice to the Lender.

(h) The Company will keep the Collateral in good order
and repair, except in situations where not to do so would not be
material, and will not use the same in violation of law or any policy
of insurance thereon. The Lender, or its designee, may inspect the
Collateral at any reasonable time, wherever located.

(i) The Lender, or its representative, shall at all times
have full and free access during normal business hours to all of the
books, correspondence and records of the Company relating to the
Collateral (other than information that is privileged and
confidential) and the Lender and its representatives may examine the
same, make abstracts therefrom and make photocopies thereof, and the
Company agrees to render to the Lender, at the Company's cost and
expense, such clerical and other assistance as may be reasonably
requested by the Lender with regard thereto.

(j) The Company shall not permit any of the Pledged
Subsidiaries to issue to the Company any securities of the type
required to be pledged hereunder unless such securities are promptly
pledged and delivered hereunder to the Lender or its designated agent
in accordance with Section 2(b).

(k) If, while this Agreement is in effect, any stock
dividend, stock split, reclassification, readjustment, reorganization,
merger, consolidation, exchange offer, tender offer or other change in
the capital structure, including the creation of any subscription or
other rights relating to the Pledged Collateral, is declared or made,
or proposed to be declared or made, by any of the Pledged Subsidiaries
or any other issuer of the Collateral, all substituted and additional
securities or interest issued with respect to the Collateral and
evidenced by certificates shall be endorsed in blank by the Company
promptly upon receipt thereof or otherwise appropriately transferred
to the Lender in negotiable form, and all certificates or instruments
evidencing such securities shall be delivered to the Lender to be held
under the terms of this Agreement in the same manner as, and as a part
of, the Collateral. All Pledged Collateral shall be evidenced by one
or more certificates. Any securities that may be issued upon exercise
of any subscription or other rights relating to the Pledged Collateral
shall be endorsed in blank and delivered to the Lender with any
necessary powers.

8
<PAGE> 10
Section 5. Powers of the Secured Party.

(a) The Company hereby irrevocably designates and
appoints the Lender as its attorney-in-fact, with full power of
substitution, for the purposes of carrying out the provisions of this
Agreement and taking any action and executing any instrument,
including,without limitation, any financing statement or continuation
statement, and taking any other action to maintain the validity,
perfection, priority and enforcement of the security interest intended
to be created hereunder, that the Lender may reasonably deem necessary
or advisable to accomplish the purposes hereof, which appointment as
attorney-in-fact is irrevocable and coupled with an interest.

(b) Without limiting the generality of Section 5(a)
hereof, the Company hereby irrevocably authorizes and empowers the
Lender, upon the occurrence and during the continuation of any Event
of Default, at the expense of the Company, either in the Lender's own
name or in the name of the Company, at any time and from time to time:

(i) to ask, demand, receive, issue a receipt for,
give acquittance for, settle and compromise any and all monies
which may be or become due or payable or remain unpaid at any
time or times to the Company, and any and all other property
which may be or become deliverable at any time or times to the
Company, under or with respect to the Collateral;

(ii) to endorse any drafts, checks, orders or
other instruments for the payment of money payable to the
Company on account of the Collateral (including any such
draft, check, order or instrument issued by any insurance
company payable jointly to the Company and the Lender); and

(iii) to settle, compromise, prosecute or defend
any action, claim or proceeding, or take any other action, all
either in its own name or in the name of the Company or
otherwise, which the Lender may deem to be necessary or
advisable for the purpose of exercising and enforcing its
powers and rights under this Agreement or in furtherance of
the purposes hereof, including any action which by the terms
of this Agreement is to be taken by the Company.

(c) Nothing in this Agreement shall be construed as
requiring or obligating the Lender to make any commitment or to make
any inquiry as to the nature or sufficiency of any payment received by
it, or to present or file any claim or notice, or to take any other
action with respect to any of the Collateral or any part thereof or
the amounts due or to become due in respect thereof or any property
covered thereby, or to collect or enforce the payment of any amounts
assigned to it or to which it may otherwise be entitled hereunder at
any time or times other than to account for amounts or Collateral
received.

(d) The Lender shall be entitled at any time to file this
Agreement, or a carbon, photographic or any other reproduction of this
Agreement, as a financing statement, but the failure of the Lender to
do so shall not impair the validity or enforceability of this
Agreement. The Lender shall have no duty to comply with any
recording, filing or other legal requirements necessary to establish
or maintain the validity, priority or enforceability of, or the
Lender's rights in or to, any of the Collateral.

9
<PAGE> 11
(e) In its discretion, the Lender may discharge taxes and
other encumbrances at any time levied or placed on any of the
Collateral, make repairs thereto and pay any necessary filing fees.
The Company agrees to reimburse the Lender on demand for any and all
reasonable expenditures so made with interest on unpaid amounts at the
maximum rate permitted by law. The Lender shall have no obligation to
the Company to make any such expenditures, nor shall the making
thereof relieve the Company of any default.

(f) Anything herein to the contrary notwithstanding, the
Company shall remain liable under each contract or agreement comprised
in the Collateral to be observed or performed by the Company
thereunder. The Lender shall not have any obligation or liability
under any such contract or agreement by reason of or arising out of
this Agreement or the receipt by the Lender of any payment relating to
any of the Collateral, nor shall the Lender be obligated in any manner
to perform any of the obligations of the Company under or pursuant to
any such contract or agreement, to make inquiry as to the nature or
sufficiency of any payment received by the Lender in respect of the
Collateral or as to the sufficiency of any performance by any party
under any such contract or agreement, to present or file any claim, to
take any action to enforce any performance or to collect the payment
of any amounts which may have been assigned to the Lender or to which
the Lender may be entitled at any time or times other than to account
for amounts or Collateral received, and no action taken or omitted
shall give rise to any defense, counterclaim or right of action
against the Lender, unless the Lender's actions are taken or omitted
to be taken with gross negligence or bad faith or constitute willful
misconduct. The Lender's sole duty with respect to the custody, safe
keeping and physical preservation of the Collateral in its possession,
under Section 9-207 of the UCC or otherwise, shall be to deal with
such Collateral in the same manner as the Lender deals with similar
property for its own account.

(g) If an Event of Default has occurred and is
continuing, the Lender may at any time, at its option, transfer to
itself or any nominee any securities constituting the Pledged
Collateral, receive any income thereon and hold such income as
additional Collateral or apply it to the Indebtedness. Regardless of
whether any Indebtedness is due, the Lender may demand, sue for,
collect, or make any settlement or compromise which it deems desirable
with respect to the Collateral. Regardless of the adequacy of
Collateral or any other security for the Indebtedness, any deposits or
other sums at any time credited by or due from the Lender to the
Company may at any time be applied to or set off against any of the
Indebtedness.

(h) If an Event of Default shall have occurred and be
continuing, the Company shall, at the request of the Lender, notify
obligors on chattel paper and general intangibles of the Company and
obligors on instruments for which the Company is an obligee of the
security interest of the Lender in any chattel paper, general
intangible or instrument and that payment thereof is to be made
directly to the Lender or to any financial institution designated by
the Lender as the Lender's agent therefor, and the Lender may itself,
if an Event of Default shall have occurred and be continuing, without
notice to or demand upon the Company, so notify said obligors. After
the making of such a request or the giving of any such notification,
the Company shall hold any proceeds of collection of chattel paper,
general intangibles and instruments received by the Company as trustee
for the Lender without commingling the same with other funds of the
Company and shall turn the same over to the Lender in the identical
form received, together with any necessary endorsements or
assignments. The Lender shall apply the proceeds of collection of
chattel paper, general intangibles and instruments received by the
Lender to the Indebtedness, such proceeds to be immediately entered
after final payment in cash of the items giving rise to them.

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<PAGE> 12
Section 6. Voting Rights, Dividends, Etc.

(a) Until an Event of Default shall have occurred and be
continuing:

(i) except as otherwise provided in this
Agreement, the Company shall be entitled to exercise any and
all voting or consensual rights and powers, including
subscription rights, in relation to the Pledged Collateral;
provided, however, that no vote shall be cast or consent,
waiver or ratification given or action taken which would
materially impair the securities or the value thereof or
violate any provision of this Agreement, the Indenture or any
other ancillary document;

(ii) except as otherwise provided in this
Agreement, the Company shall be entitled to receive and retain
any and all dividends, distributions or other payments in
respect of the Pledged Collateral and the Lender, upon receipt
of any of the foregoing, shall promptly pay or distribute the
same to the Company, and, to the extent so permitted, any
distributions received by the Company and transferred to other
persons shall pass free and clear of the lien and security
interest hereof; and

(iii) the Lender shall execute and deliver to the
Company or cause to be executed and delivered to the Company,
all such proxies, powers of attorney, dividend orders and
other instruments as the Company may reasonably request for
the purpose of enabling it to exercise the voting or
consensual rights and powers which the Company is entitled to
exercise pursuant to the foregoing Section 6(a)(i) or to
receive the dividends, distributions or other payments which
the Company is authorized to retain pursuant to the foregoing
Section 6(a)(ii).

(b) Upon the occurrence and during the continuance of an
Event of Default, all rights of the Company to exercise the voting or
consensual rights and powers which the Company would otherwise be
entitled to exercise pursuant to Section 6(a)(i) and to receive the
dividends, distributions and other payments which the Pledgor would
otherwise be authorized to receive and retain pursuant to Section
6(a)(ii) shall automatically cease, and all such rights shall
thereupon become vested in the Lender, which shall then have the sole
and exclusive right and authority to exercise, in its sole discretion,
all such voting and consensual rights and powers and to receive and
retain as Collateral all such dividends, distributions and other
payments. Without limiting the foregoing, in such event the Lender
may exercise all voting and corporate rights at any meeting of any
corporation issuing any such securities and any and all rights of
conversion, exchange, subscription or any other rights, privileges or
options pertaining to any such securities as if it were the absolute
owner thereof, including, without limitation, the rights to exchange
at its discretion, any and all such securities upon the merger,
consolidation, reorganization, recapitalization or other readjustment
of any corporation issuing any such securities or upon the exercise by
any such issuer or the Lender of any right, privilege or option
pertaining to any such securities, and, in connection therewith, to
deposit and deliver any and all securities with any committee,
depository, transfer agent, registrar or other designated agency upon
such terms and conditions as it may determine, all without liability
except to account for the property actually received by it, but the
Lender shall have no duty to exercise any of the aforesaid rights,
privileges or options and the Lender shall not be responsible for any
failure to do so or delay in so doing.

11
<PAGE> 13
Section 7. Default.

(a) It shall constitute a Default or an Event of Default
under this Agreement if a "Default" or an "Event of Default" shall
occur under the Indenture.

(b) If an Event of Default shall have occurred and is
continuing and if the maturity of the TransTexas Intercompany Note is
accelerated under the provisions of the TransTexas Intercompany Loan
Agreement, in addition to any other rights and remedies that may be
available to the Lender under the UCC or the TransTexas Intercompany
Loan Agreement or under Section 5(a) or 5(b) of this Agreement or
otherwise under this Agreement or at law, the Lender shall also have
the following rights and powers:

(i) The Lender may, without being required to
give any notice except as hereinafter provided, sell the
Collateral, or any part thereof, at public or private sale,
for cash, upon credit or for future delivery and at such price
or prices as the Lender deems satisfactory, and the Lender
and/or its collateral agent may be the purchaser of any or all
of the Collateral so sold and thereafter hold the same
absolutely free from any right or claim of whatsoever kind,
and the Indebtedness or any portion of the Indebtedness may be
applied as a credit against the purchase price.

(ii) Upon any such sale, the Lender shall have the
right to deliver, assign and transfer to the purchaser thereof
the Collateral so sold. Each purchaser at any such sale shall
hold the property sold absolutely free from any claim or right
of whatsoever kind by or on behalf of the Company, including
any equity or rights of redemption of the Company, and the
Company hereby specifically waives, to the full extent
permitted by applicable law, all rights of redemption, stay or
appraisal which it has or may have under any rule or law or
statute now existing or hereafter adopted.

(iii) The Lender shall give the Company ten (10)
business days' written notice (which the Company agrees is
reasonable notification within the meaning of Section 9.504 of
the UCC) of its intention to make any such public or private
sale. Such notice, in case of public sale, shall state the
time and place fixed for such sale and, in case of a private
sale, shall state the date after which such sale is to be
made.

(iv) Any such public sale shall be held at such
time or times within ordinary business hours and at such
places as the Lender may fix in the notices of such sale. At
any such sale the Collateral may be sold in one lot as an
entirety or in separate parcels, as the Lender may, in its
sole discretion, determine.

(v) The Lender shall not be obligated to make any
sale of the Collateral if it shall determine not to do so,
regardless of the fact that notice of sale of the Collateral
may have been given. The Lender may, without notice or
publication, adjourn any public or private sale or cause the
same to be adjourned from time to time by announcement at the
time and place fixed for the sale, and such sale may, without
further notice, be made at any time or place to which the same
shall be so adjourned.

(vi) In case of any sale of all or any part of the
Collateral on credit or for future delivery, the Collateral so
sold may be retained by the Lender until the selling price is
paid by the purchaser thereof, but the Lender shall not incur
any liability in case

12
<PAGE> 14
of the failure of such purchaser to take up and pay for the
Collateral so sold and, in case of any such failure, such
Collateral may again be sold upon like notice.

(vii) The Lender, instead of exercising the power
of sale herein conferred upon it, may proceed by a suit or
suits at law or in equity to exercise its remedies regarding
the Collateral and sell the Collateral, or any portion
thereof, under a judgment or decree of a court or courts of
competent jurisdiction.

(viii) The Company agrees that if any Event of
Default shall have occurred and be continuing, then the Lender
shall have the right to take possession of the Collateral, and
for that purpose the Lender may, so far as the Company can
give authority therefor, enter upon any premises on which the
Collateral may be situated and remove the same therefrom with
or without notice or process of law. The Company waives any
and all rights that it may have to a judicial hearing in
advance of the enforcement of any of the Lender's rights
hereunder, including, without limitation, its right following
an Event of Default to take immediate possession of the
Collateral and to exercise its rights with respect thereto.
To the extent that any of the Obligations are to be paid or
performed by a person other than the Company, the Company
waives and agrees not to assert any rights or privileges which
it may have under Section 9-112 of the UCC.

(ix) If under mandatory requirements of applicable
law, the Lender shall be required to make disposition of the
Collateral within a period of time that does not permit the
giving of notice to the Company as hereinbefore provided, the
Lender need give the Company only such notice of disposition
as shall be reasonably practicable in view of such mandatory
requirements of law.

(x) The Lender may instruct the obligor or
obligors on any agreement, instrument or other obligation
constituting the Collateral to make any payment or render any
performance required by the terms of such agreement,
instrument or obligation directly to the Lender or its
designee.

(c) The Lender shall incur no liability as a result of
the sale of the Collateral, or any part thereof, at any private sale
other than for its own gross negligence, willful misconduct or bad
faith. The Company hereby waives, to the maximum extent permitted by
applicable law, any claims against the Lender arising by reason of the
fact that the price at which the Collateral may have been sold at such
private sale was less than the price which might have been obtained at
a public sale or was less than the aggregate amount of the
Indebtedness, even if the Lender accepts the first offer received and
does not offer such Collateral to more than one offeree.

(d) The Lender shall not be obligated to pursue or
exhaust its rights and remedies against any particular Collateral or
other security for the Indebtedness before pursuing or enforcing its
rights and remedies against any other Collateral or other security for
the Indebtedness.

(e) To the extent permitted by law, the Company hereby
waives (i) any rights to require the Lender to proceed first against
any other Person, to exhaust its rights in the Collateral or other
security for the Indebtedness or to pursue any other right that the
Lender might have, (ii) with respect to the TransTexas Intercompany
Note, presentment and demand for payment, protest, notice of protest
and nonpayment, notice of dishonor, notice of the intention to
accelerate

13
<PAGE> 15
and notice of acceleration (except as otherwise set forth in the
TransTexas Intercompany Loan Agreement), and (iii) all rights of
marshalling in respect of any and all of the Collateral.

(f) Without precluding any other methods of sale, the
Company acknowledges that the sale of the Collateral shall have been
made in a commercially reasonable manner if conducted in conformity
with reasonable commercial practices of banks disposing of similar
property. The Lender shall not be liable for any depreciation in the
value of the Collateral.

(g) The Company agrees that its obligation to deliver the
Collateral is of the essence of this Agreement and that accordingly,
upon application to a court of equity having jurisdiction, the Lender
shall be entitled to a decree requiring specific performance by the
Company of such obligation.

(h) Remedies of the Lender are cumulative and the
exercise of any one or more of the remedies provided herein shall not
be construed as a waiver of any of the other remedies of the Lender.

(i) If an Event of Default shall have occurred and be
continuing, the proceeds of any sale of or other realization upon all
or any part of the Collateral and any other amounts held by the Lender
under this Agreement shall be applied by the Lender as provided in the
Indenture.

Any amounts remaining after such applications and the payment
in full of the TransTexas Intercompany Note with respect to the Indebtedness
shall be remitted to the Company, its successors or assigns, or as a court of
competent jurisdiction may otherwise direct.

Section 8. Registration Rights.

(a) If the Lender shall determine to exercise the right
to sell any or all of the Pledged Collateral pursuant to Section 7
hereof, and if in the opinion of counsel for the Lender it is
necessary (or if in the opinion of the Lender it is advisable) to have
the Pledged Collateral, or that portion thereof to be sold, registered
under the provisions of the Securities Act of 1933, as amended (the
"Securities Act"), the Company will cause each issuing corporation to
execute and deliver, and cause the directors and officers of each
thereof to execute and deliver, all at the Company's expense, all such
instruments and documents, and to do or cause to be done all such
other acts and things as may be necessary or, in the opinion of the
Lender, advisable to register the Pledged Collateral, or that portion
thereof to be sold, under the provisions of the Securities Act and to
use its best efforts to cause the registration statement relating
thereto to become effective and to remain effective for a period of
one year from the date of the first public offering of the Pledged
Collateral, or that portion thereof to be sold, and to make all
amendments or supplements thereto and/or to the related prospectus
which, in the opinion of the Lender, are necessary or advisable, all
in conformity with the requirements of the Securities Act and the
rules and regulations of the Securities and Exchange Commission
applicable thereto. The Company agrees to use its best efforts to
cause each such issuing corporation to comply with the provisions of
the securities or "Blue Sky" laws of any jurisdiction which the Lender
shall designate and to cause each such issuing corporation to make
available to its security holders, as soon as practicable, an earnings
statement (which need not be audited) which will satisfy the
provisions of Section 11(a) of the Securities Act.

14
<PAGE> 16
(b) The Company recognizes that the Lender may be unable,
or find it undesirable, to effect a public sale of any or all the
Pledged Collateral by reason of certain prohibitions contained in the
Securities Act and applicable state securities laws or otherwise, but
may be compelled or desire to resort to one or more private sales
thereof to a restricted group of purchasers who will be obliged to
agree, among other things, to acquire such securities for their own
account for investment and not with a view to the distribution or
resale thereof in violation of the Securities Act. The Company
acknowledges and agrees that any such private sale may result in
prices and other terms less favorable to the seller than if such sale
were a public sale, but, notwithstanding such circumstances, such
private sale shall be deemed to have been made in a commercially
reasonable manner. The Lender shall be under no obligation to delay a
sale of any of the Pledged Collateral for the period of time necessary
to permit the issuing corporation of such securities to register such
securities for public sale under the Securities Act, or under
applicable state securities laws, even if the issuing corporation
would agree to do so.

(c) The Company further agrees to use commercially
reasonable efforts to do or cause to be done all such other acts and
things as may be necessary to make such sale or sales of any portion
or all of the Pledged Collateral valid and binding and in compliance
with any and all applicable laws, regulations, orders, writs,
injunctions, decrees or awards of any and all courts, arbitrators or
governmental instrumentalities, domestic or foreign, having
jurisdiction over any such sale or sales, all at the Company's
expense. The Company further agrees that a breach of any of the
covenants contained in this Section 8 will cause irreparable injury to
the Lender, that the Lender has no adequate remedy at law in respect
of such breach and, as a consequence, agrees that each and every
covenant contained in this Section 8 shall be specifically enforceable
against the Company, and the Company hereby waives and agrees not to
assert any defenses against an action for specific performance of such
covenants except for a defense that no Event of Default has occurred
under the Indenture.

Section 9. General Provisions.

(a) Continuing Security Interest; Binding Effect. This
Agreement shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until
termination of the obligations of the Company under the TransTexas
Intercompany Loan Agreement and the indefeasible payment in full
thereafter of the Obligations; (b) be binding upon the Company and its
successors and assigns; and (c) inure to the benefit of the Lender and
its successors, transferees and assigns. Without limiting the
generality of the foregoing clause (c), the Lender may assign or
otherwise transfer any of its rights under this Agreement to any other
Person, and such Person shall thereupon become vested with all the
benefits in respect thereof granted herein or otherwise to the Lender.
Upon the termination of the obligations of the Lender under the
Indenture and the indefeasible payment in full thereafter of the
Obligations, the Company shall be entitled to the return, upon its
request and at its expense, of such of the Collateral as is in the
Lender's possession and as shall not have been sold or otherwise
disposed of pursuant to the terms hereof.

(b) Security Interest Absolute. The lien and security
interest created hereunder and the Company's obligations hereunder and
the Lender's rights hereunder shall not be released, diminished,
impaired or adversely affected by the occurrence of any one or more of
the following events:

15
<PAGE> 17
(i) The taking or accepting of any other security
or assurance for any or all of the Indebtedness;

(ii) Any release, surrender, exchange,
subordination or loss of any security or assurance at any time
existing in connection with any or all of the Indebtedness;

(iii) The modification of, amendment to, or waiver
of compliance with any terms of the TransTexas Intercompany
Loan Agreement or the TransTexas Intercompany Note;

(iv) Any renewal, extension and/or rearrangement
of the payment of any or all of the Indebtedness or any
statement, indulgence, forbearance or compromise that may be
granted or given by the Lender to the Company or any other
Person;

(v) any neglect, delay, omission, failure or
refusal of the Lender to take or prosecute any action in
connection with any agreement, document or other instrument
evidencing, securing or assuring the payment of any or all of
the Indebtedness;

(vi) the illegality, invalidity or
unenforceability of all or any part of the TransTexas
Intercompany Loan Agreement or the TransTexas Intercompany
Note; or

(vii) any other circumstance (other than payment in
full of the Obligations) that might otherwise constitute a
defense available to, or a discharge of, the Company or any
party to any document in respect of the Obligations.

(c) Amendments. This Agreement or any term hereof may be
amended or changed only by an instrument in writing executed jointly
by the Company and the Lender and in accordance with Article IX of the
Indenture.

(d) Remedies Cumulative. Each right, power and remedy
herein specifically granted to the Lender or otherwise available to it
or now or hereafter existing in law or in equity shall be cumulative
and concurrent, and shall be in addition to every other right, power
and remedy herein specifically given or now or hereafter existing at
law, in equity, or otherwise (including, without limitation, all
rights, powers and remedies granted to a secured party under the UCC),
and each such right, power and remedy, whether specifically granted
herein or otherwise existing, may be exercised at any time and from
time to time as often and in such order as may be deemed expedient by
the Lender in its sole and complete discretion. The provisions of
this Agreement may only be waived by an instrument in writing signed
by the Lender, and no failure on the part of the Lender to exercise,
and no delay in exercising, and no course of dealing with respect to,
any such right, power or remedy, shall operate as a waiver thereof,
nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise
of any other right. No notice to or demand on the Company hereunder
shall, of itself, entitle the Company to any other or further notice
or demand in the same or similar circumstances.

(e) Assignment. Neither this Agreement nor any interest
herein or in the Collateral, or any part thereof, may be assigned by
the Company without the prior written consent of the Lender, except as
expressly permitted herein or in the Indenture or in the Disbursement
Agreement. The Company hereby acknowledges and consents to the
collateral assignment by the

16
<PAGE> 18
Lender of this Agreement and the Lender's interest in the Collateral
to the Indenture Trustee, as defined in the TARC Intercompany Loan
Agreement. The Company also agrees that, in the case of an Event of
Default, the Indenture Trustee may exercise any rights and remedies of
the Lender under this Agreement, and any reference to the "Lender"
hereunder shall also include the Indenture Trustee.

(f) Headings. The descriptive headings of the several
sections of this Agreement are inserted for convenience only and shall
not control or affect the meaning or construction of any of the
provisions hereof.

(g) Severability. Any provision of this Agreement that
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof
or affecting the validity of enforceability or such provision in any
other jurisdiction.

(h) Survival. All representations and warranties
contained herein, in the Indenture or made in writing by the Company
in connection herewith or therewith, shall survive the execution and
delivery of this Agreement, the Indenture and any documents executed
in connection herewith or therewith.

(i) Counterparts. This Agreement may be executed in any
number of counterparts and by different parties in separate
counterparts, each of which when so executed and delivered shall be
deemed to be an original, but all of which when taken together shall
constitute one and the same instrument. A complete set of
counterparts shall be lodged with the Lender.

(j) Waiver. To the extent permitted by applicable law
the Company hereby waives promptness, diligence, notice of acceptance
and any other notice with respect to any of the Indenture obligations
and this Agreement and any requirement that the Lender protect,
secure, perfect or insure any security interest or any property
subject thereto or exhaust any right or take any action against the
Company or any other person or entity; provided however, that the
Lender shall in any event take such care in the handling of any
Collateral in its possession as it takes with respect to its own
property of a similar nature in its possession.

(k) Notices. Any notices or other communications
required or permitted hereunder shall be in writing, and shall be
sufficiently given if made by hand delivery, by telex, by facsimile or
registered or certified mail, postage prepaid, return receipt
requested, addressed as provided in Section 9.3 of the TransTexas
Intercompany Loan Agreement. Any party hereto may by notice to the
other party designate such additional or different addresses as shall
be furnished in writing by such party. Any notice or communication to
any party shall be deemed to have been given or made as of the date so
delivered, if personally delivered; when answered back, if telexed;
when receipt is acknowledged, if faxed; and five (5) calendar days
after mailing, if sent by registered or certified mail (except that a
notice of change of address shall not be deemed to have been given
until actually received by the addressee).

(l) Conflicting Terms. In the event of any conflict or
inconsistency between the terms, covenants, conditions and provisions
set forth in this Agreement and the terms, covenants, conditions and
provisions set forth in the Indenture, the terms, covenants,
conditions and provisions of the Indenture shall prevail.

17
<PAGE> 19
(m) Release. The Collateral, in whole or in part, may be
released in accordance with the TransTexas Intercompany Loan Agreement
and the Indenture.

(n) Conflicts. If any provision of the TransTexas
Intercompany Loan Agreement limits, qualifies, or conflicts with any
similar provision of this Agreement, such provision of the TransTexas
Intercompany Loan Agreement shall control.

(o) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW EXCEPT SECTION 5-1401
OF THE NEW YORK GENERAL OBLIGATIONS LAW. THE COMPANY HEREBY
IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE COURT
SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY
FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW
YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN
RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION
OF THE AFORESAID COURTS. THE COMPANY IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TRIAL BY
JURY AND ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE LAYING
OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
THE COMPANY IRREVOCABLY CONSENTS, TO THE FULLEST EXTENT IT MAY
EFFECTIVELY DO SO UNDER APPLICABLE LAW, TO THE SERVICE OF PROCESS OF
ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR PROCEEDING BY
THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL, POSTAGE
PREPAID, TO THE COMPANY AT ITS SAID ADDRESS, SUCH SERVICE TO BECOME
EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN SHALL AFFECT THE
RIGHT OF THE LENDER TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY
LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED AGAINST THE
COMPANY IN ANY OTHER JURISDICTION.

18
<PAGE> 20
IN WITNESS WHEREOF, the Company and the Lender have executed
this Agreement as of the date first above written.

TRANSTEXAS GAS CORPORATION

By:
-------------------------
Name:
-------------------------
Title:
-------------------------

TRANSAMERICAN ENERGY CORPORATION,
as Lender

By:
-------------------------
Name:
-------------------------
Title:
-------------------------

<PAGE> 21
EXHIBIT A

PERFECTION CERTIFICATE

The undersigned, Chief Financial Officer of TransTexas Gas
Corporation, a Delaware corporation (the "Company"), hereby certify with
reference to the Security and Pledge Agreement dated as of June 13, 1997
between the Company and TransAmerican Energy Corporation, as Lender (terms
defined therein being used herein as therein defined), to the Lender as
follows:

Section 1. Names.

(a) The exact corporate name of the Company, as it
appears in its certificate of incorporation is as follows:

TransTexas Gas Corporation

(b) Set forth below is each other corporate name the
Company has had since its organization, together with the date of the
relevant change:

n/a

(d) The following is a list of all other names (including
trade names or similar appellations) used by the Company or any of its
divisions or other business units at any time during the past five
years:

Southwest Texas Services Diamond Services
Southwest Texas Drilling Diamond Frac
Southwest Petro American

Section 2. Current Locations.

(a) The chief executive office of the Company is located
at the following address:

<TABLE>
<CAPTION>
Mailing Address County State
--------------- ------ -----
<S> <C> <C>
1300 N. Sam Houston Parkway East Harris Texas
Houston, 77032
</TABLE>

A-1
<PAGE> 22
(b) The following are all the places of business of the
Company not identified above:

<TABLE>
<CAPTION>
Mailing Address County State
--------------- ------ -----
<S> <C> <C>
Alabama
Louisiana
Mississippi
North Dakota
</TABLE>

Section 3. Prior Locations. Set forth below is the information
required by subparagraphs (a) and (b) of Section 2 with respect to each
location or place of business maintained by the Company at any time during the
past five years:

<TABLE>
<CAPTION>
Mailing Address County State
--------------- ------ -----
<S> <C> <C>
363 N. Sam Houston Parkway East Harris Texas
Suite 1900
Houston, 77060

140 Cypress Station Drive Harris Texas
Houston, 77090
</TABLE>

Section 4. UCC Filings. A duly signed financing statement on
Form UCC-1 in substantially the form of Schedule 4(a) hereto has been duly
filed in the UCC filing office in each jurisdiction identified in Section 2
hereof. The Company will deliver a true copy of each such filing duly
acknowledged by the filing officer as soon as practicable after the date
hereof.

Section 5. Schedule of Filings. Attached hereto as Schedule 5
is a schedule setting forth filing information with respect to the filings
described in Section 4 above.

Section 6. Filings Fees. All filing fees and taxes payable in
connection with the filings described in Section 4 above have been paid.

A-2
<PAGE> 23
IN WITNESS WHEREOF, the undersigned have hereunto set their
hands this ___ day of June, 1997 in the respective capacities indicated below
their signatures.

-----------------------------------
Name:
-----------------------------
Title:
-----------------------------

A-3
<PAGE> 24
SCHEDULE 2(b)

PLEDGED COLLATERAL

<TABLE>
<CAPTION>
=====================================================================================================================
Percentage
Stock Number of
Stock Class of Certificate Par of Outstanding
Issuer Stock No.(s) Value Shares Shares
=====================================================================================================================
<S> <C> <C> <C> <C> <C>
TransTexas Drilling Common 1 $0.01 1,000 100%
Services, Inc.
=====================================================================================================================
</TABLE>

1
<PAGE> 25
SCHEDULE 4(a)

DESCRIPTION OF COLLATERAL

All of the Debtor's right, title and interest in, to and under any and all of
the following described property, assets and rights, in each case, wherever
located, whether now owned or hereafter acquired or arising, all accessions and
additions thereto, all substitutions and replacements therefor, and all
proceeds and products thereof and assigns all rights in and to all collateral
securing the following described property, assets and rights:

(i) all personal and fixture property of every
kind and nature including, without limitation, all furniture,
fixtures, raw materials, goods, contract rights, rights to the
payment of money, insurance refund claims and all other
insurance claims and proceeds, tort claims, chattel paper,
documents, instruments (including certificated securities),
deposit accounts and all general intangibles including,
without limitation, all uncertificated securities, tax refund
claims, license fees, patents, patent applications,
trademarks, trademark applications, trade names, copyrights,
copyright applications, rights to sue and recover for past
infringement of patents, trademarks and copyrights, computer
programs, computer software, engineering drawings, service
marks, customer lists, goodwill, and all licenses, permits,
agreements of any kind or nature pursuant to which the Debtor
possesses, uses or has authority to possess or use property
(whether tangible or intangible) of others or others possess,
use or have authority to possess or use property (whether
tangible or intangible) of the Debtor, and all recorded data
of any kind or nature, regardless of the medium of recording
including, without limitation, all software, writings, plans,
specifications and schematics (any and all such property being
the "UCC Collateral"); provided, however, that nothing herein
shall be construed to include within, and there is expressly
excluded from, the Company UCC Collateral, any now owned or
hereafter acquired equipment, inventory or receivables ;

(ii) all of the issued and outstanding shares of
common stock identified on Schedule 2(b) attached hereto of
any other subsidiary of the Debtor presently existing or
hereafter created or acquired (the "Pledged Subsidiaries")
therein set forth;

(iii) all other shares of common stock or other
equity securities now or hereafter acquired by the Debtor in
any manner issued by the Pledged Subsidiaries, and the
certificates representing such securities, and any present or
future options, warrants or other rights to subscribe for or
purchase any property described in Section 2(b)(i) or any
notes, bonds, debentures or other evidences of indebtedness
now or hereafter owned or acquired by the Debtor in any manner
that (A) are at any time convertible, exchangeable or
exercisable into capital stock or other equity securities of
the Pledged Subsidiaries or (B) have or at any time could by
their terms have voting rights with respect to any matter
affecting the Pledged Subsidiaries and all securities,
certificates and instruments representing or evidencing
ownership of any of the property described in Section 2(b)
hereof;

(iv) all proceeds and products of the foregoing
and distributions thereof or with respect thereto, including
without limitation dividends, distributions, cash,

1
<PAGE> 26
instruments and other property or securities, now or hereafter
at any time or from time to time received or receivable or
otherwise distributed or distributable in respect of or in
exchange for any or all of the foregoing; and

(v) The disbursement account (the "Disbursement
Account") maintained at Firstar Bank of Minnesota, N.A., more
specifically described on Schedule I attached hereto, owned by
the Debtor and created by that certain Disbursement Agreement
by and among the Debtor, the Secured Party, the disbursement
agent named therein and the construction supervisor named
therein, as amended pursuant to the terms thereof, and all
investments, securities, financial assets credited thereto and
security entitlements with respect thereto, and all
certificates and instruments, if any, from time to time
representing or evidencing the Disbursement Account or any
property credited thereto, whether now owned by the Debtor or
existing or hereafter acquired, created or arising including
the proceeds thereof (the "Assigned Collateral" and, together
with the UCC Collateral and the Pledged Collateral, the
"Collateral").

Notwithstanding anything contained herein to the contrary, the stock of any
Unrestricted Subsidiary shall not constitute Collateral hereunder.

2
<PAGE> 27
SCHEDULE 5

SCHEDULE OF FILINGS

<TABLE>
<CAPTION>
Debtor Filing Officer File Number Date (1)
- ------ -------------- ----------- ----
<S> <C> <C> <C>

</TABLE>

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

(1) Indicate lapse date, if other than fifth anniversary.

<PAGE> 1

EXHIBIT 4.6

DISBURSEMENT AGREEMENT

among

TRANSTEXAS GAS CORPORATION,

TRANSAMERICAN ENERGY CORPORATION,

FIRSTAR BANK OF MINNESOTA, N.A.,

as securities intermediary and disbursement agent,

and

FIRSTAR BANK OF MINNESOTA, N.A.,

as trustee

June 13, 1997
<PAGE> 2
DISBURSEMENT AGREEMENT

This Disbursement Agreement dated as of June 13, 1997 (this
"Agreement") is entered into by and among TransTexas Gas Corporation, a
Delaware corporation ("TransTexas"), TransAmerican Energy Corporation, a
Delaware corporation ("TEC"), Firstar Bank of Minnesota, N.A., as securities
intermediary (as defined in the Revised UCC) and disbursement agent (the
"Disbursement Agent"), and Firstar Bank of Minnesota, N.A., as Trustee.

WHEREAS, TEC and the Trustee have entered into an Indenture
dated as of June 13, 1997 (the "Indenture"), pursuant to which TEC will issue
$475,000,000 aggregate principal amount of Senior Secured Notes due 2002 and
$1,130,000,000 aggregate principal amount of Senior Secured Discount Notes due
2002 (collectively, the "Notes");

WHEREAS, TEC and TransTexas have entered into a loan agreement
dated as of the date hereof (the "TransTexas Loan Agreement"), pursuant to
which TEC will lend to TransTexas an aggregate of $450,000,000 out of the
proceeds of the issuance of the Notes and TransTexas will execute a promissory
note in such amount in favor of TEC (the "TransTexas Intercompany Note" and
together with the TransTexas Loan Agreement, the "TransTexas Intercompany Loan
Documents");

WHEREAS, as security for the prompt and complete payment and
performance in full of obligations of TransTexas under the TransTexas
Intercompany Loan Documents, TransTexas has granted to TEC a security interest
in, among other things, the Disbursement Account (as defined below);

WHEREAS, as security for the prompt and complete payment and
performance in full of TEC's obligations under the Indenture and the Notes, TEC
has granted to the Trustee a security interest in, among other things, the
TransTexas Intercompany Loan Documents; and

WHEREAS, the Disbursement Agent has agreed to take such action
with respect to the Disbursement Account as is specified herein.

NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1 Certain Defined Terms. Capitalized terms used but not
defined herein and in any schedules and exhibits hereto shall have the meanings
set forth in the TransTexas Loan Agreement.

As used in this Agreement, the following terms shall have the following
meanings:

"Accounts" means the Disbursement Account and the Interest Accumulation
Account.

"Agreement" has the meaning given to such term in the introductory
paragraph hereof.

"Date of Disbursement" means the date designated as such in each
Disbursement Certificate or
<PAGE> 3
TEC Certificate, as the case may be.

"Disbursement Account" has the meaning given to such term in Section
3.1(a).

"Disbursement Agent" has the meaning given to such term in the
introductory paragraph hereof.

"Disbursement Certificate" has the meaning given to such term in
Section 4.2(a).

"Indenture" has the meaning given to such term in the recitals hereof.

"Interest Accumulation Account" has the meaning given to such term in
Section 3.1(b).

"Investments" has the meaning given to such term in Section 3.4(a).

"New York UCC" means the Uniform Commercial Code as in effect in the
State of New York.

"Notes" has the meaning given to such term in the recitals hereof.

"Offering Circular" means TEC's Offering Circular dated June 5, 1997
relating to the offering of the Notes.

"Revised UCC" means Uniform Commercial Code, Revised Article 8,
Investment Securities (with Conforming and Miscellaneous Amendments to Articles
1, 3, 4, 5, 9 and 10), 1994 Official Text, as adopted by the American Law
Institute and the National Conference of Commissioners on Uniform State Laws
and approved by the American Bar Association on February 15, 1995; provided,
however, that if and when the Revised UCC is enacted in the State of New York,
"Revised UCC" shall mean the Revised UCC as enacted in the State of New York
from time to time.

"TARC Disbursement Agreement" means the Disbursement Agreement dated as
of June 13, 1997 by and among TransAmerican Refining Corporation, a Texas
corporation, TEC, Firstar Bank of Minnesota, N.A., as disbursement agent, the
Trustee and Baker & O'Brien, Inc., as Construction Supervisor.

"TransTexas" has the meaning given to such term in the introductory
paragraph hereof.

"TransTexas Dividend/Share Repurchase Program" means the dividend and
share repurchase program (including without limitation the dividend and share
repurchase program described in the Offering Circular) to be implemented by
TransTexas, pursuant to which TransTexas will effect the payment of one or more
dividends on the common stock of TransTexas or the redemption, acquisition or
purchase, pursuant to a tender offer or any other transaction or mechanism, of
any shares of common stock of TransTexas.

"TransTexas Intercompany Loan Documents" has the meaning given to such
term in the recitals hereof.

"TransTexas Intercompany Note" has the meaning given to such term in
the recitals hereof.

"TransTexas Loan Agreement" has the meaning given to such term in the
recitals hereof.

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"TransTexas Security Agreement" means the Security and Pledge Agreement
dated as of June 13, 1997 by and between TransTexas and TEC.

"TEC" has the meaning given to such term in the introductory paragraph
hereof.

"TEC Security Agreement" means the Security and Pledge Agreement dated
as of June 13, 1997 by and between TEC and the Trustee.

"Trustee" means the trustee under the Indenture.

SECTION 1.2 Computation of Time Periods. In this Agreement, in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
means "to but excluding."

ARTICLE II

DISBURSEMENT AGENT

SECTION 2.1 Appointment and Duties.

(a) TEC and TransTexas acknowledge and agree that Firstar
Bank of Minnesota, N.A. shall act as the Disbursement Agent under this
Agreement, and that the Disbursement Agent is and will act as a
"securities intermediary" (as defined in the Revised UCC) and as a
"financial intermediary" (as defined in the New York UCC as in effect
on the date hereof). TEC and TransTexas hereby authorize the
Disbursement Agent to take such actions, exercise such powers and
perform such duties as are expressly delegated to the Disbursement
Agent by the terms of this Agreement, together with such other powers
as are reasonably incidental thereto. Notwithstanding any provision to
the contrary elsewhere herein, the Disbursement Agent shall not have
any duties or responsibilities except those expressly set forth herein,
and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or
otherwise exist against the Disbursement Agent.

(b) The Disbursement Agent shall give written notice to
TEC and TransTexas of any action taken by it hereunder (provided that
no such notice need be given under circumstances in which TEC and
TransTexas shall have received such notice by any other Person pursuant
to the terms of any other document); such notice shall be given prior
to the taking of such action, unless the Disbursement Agent determines
that to do so would be detrimental to the interests of TEC, in which
event such notice shall be given promptly after the taking of such
action.

(c) The Disbursement Agent shall maintain appropriate
books and records with respect to the Accounts in which shall be
recorded all deposits and disbursements hereunder and any Investments
made by the Disbursement Agent and shall permit TEC, TransTexas or any
of their respective agents or representatives to inspect and to make
copies of such books and records at TransTexas's sole cost and expense.

(d) The Disbursement Agent shall use its good faith
efforts and utilize prudence in performing its duties hereunder
consistent with those of similar and prudent institutions disbursing
disbursement control funds.

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(e) On or prior to the last day of each calendar month,
the Disbursement Agent shall deliver to each of TEC and TransTexas a
reasonably detailed statement showing the balance of, disbursements
from and deposits to each of the Accounts.

SECTION 2.2 Rights of Disbursement Agent.

(a) The Disbursement Agent may execute any of its duties
under this Agreement by or through agents or attorneys-in-fact and
shall be entitled to rely on advice of counsel concerning all matters
pertaining to such duties, and protected in respect of any action taken
in good faith and in accordance with such advice.

(b) Neither the Disbursement Agent nor any of its
officers, directors, employees, agents, attorneys-in-fact or affiliates
shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with this Agreement
(except for its or such Person's own gross negligence or willful
misconduct) or (ii) responsible in any manner to TEC for any recitals,
statements, representations or warranties made by TransTexas or any
officer thereof contained in any certificate, report, statement or
other document referenced or provided for in, or received by the
Disbursement Agent under or in connection with, this Agreement. The
Disbursement Agent shall not be under any obligation to TEC to inspect
the properties, books or records of TransTexas.

(c) The Disbursement Agent shall be entitled to rely, and
shall be fully protected in relying, upon any note, writing,
resolution, notice, consent, certificate, affidavit, letter, cablegram,
telegram, telecopy, telex or teletype message, statement, order or
other document or conversation reasonably believed by it to be genuine
and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel (including,
without limitation, counsel to TransTexas), independent accountants and
other experts selected by the Disbursement Agent. The Disbursement
Agent shall be fully justified in failing or refusing to take any
action hereunder if such action would, in the opinion of the
Disbursement Agent, be contrary to law or the terms of this Agreement.

(d) The Disbursement Agent shall not be deemed to have
knowledge or notice of the occurrence of any Event of Default unless
the Disbursement Agent has received written notice from TEC, TransTexas
or the Trustee, describing such Event of Default and stating that such
notice is a "notice of default." The Disbursement Agent shall take
such action with respect to such Event of Default as shall be required
by this Agreement. No provision of this Agreement shall require the
Disbursement Agent to expend or risk its own funds or otherwise incur
any financial liability in the performance of any of its duties
hereunder or in the exercise of any of its rights or powers, if it
shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not
reasonably assured to it.

SECTION 2.3 Resignation and Removal of Disbursement Agent.

(a) Subject to the appointment and acceptance of a
successor Disbursement Agent as provided below, the Disbursement Agent
may, at any time, give a notice of resignation to TEC, TransTexas and
the Trustee. Upon receipt of any such notice of resignation,
TransTexas shall have the right to appoint a successor Disbursement
Agent, which shall be a bank or trust company reasonably acceptable to
TEC and the Trustee. If no successor Disbursement Agent

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shall have been appointed by TransTexas and shall have accepted such
appointment within thirty (30) days after the retiring Disbursement
Agent's giving of notice of resignation, then the retiring Disbursement
Agent may appoint a successor Disbursement Agent, which shall be a bank
or trust company reasonably acceptable to TEC, TransTexas and the
Trustee.

(b) Each of TEC and TransTexas shall have the right, upon
the expiration of thirty (30) days following delivery of written notice
to the Disbursement Agent and the other party, to cause the
Disbursement Agent to be relieved of its duties hereunder and to select
a successor Disbursement Agent to serve hereunder, which shall be a
bank or trust company reasonably acceptable to the other party.

(c) Upon the acceptance of any appointment as Disbursement
Agent hereunder by a successor Disbursement Agent, (i) such successor
Disbursement Agent, TEC, TransTexas and the Trustee shall enter into an
agreement substantially identical to this Agreement, (ii) such
agreement shall provide that such successor Disbursement Agent shall
thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Disbursement Agent, and that the
retiring Disbursement Agent shall be discharged from its duties and
obligations hereunder and (iii) the retiring Disbursement Agent shall
promptly transfer all cash and Investments in the Accounts to the
possession or control of the successor Disbursement Agent and shall
execute and deliver such notices, instructions and assignment as may be
necessary to transfer the rights of the Disbursement Agent with respect
to all such cash and Investments to the successor Disbursement Agent.
After any retiring Disbursement Agent's resignation or removal
hereunder as Disbursement Agent, the provisions of this Article shall
continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as Disbursement Agent.

SECTION 2.4 Confirmations. The Disbursement Agent hereby confirms
that (i) it is a "securities intermediary" within the meaning of such term in
the Revised UCC, (ii) each of the Accounts is a "securities account" as such
term in defined in Section 8-501(a) of the Revised UCC, (iii) the Disbursement
Agent shall, subject to the terms of this Agreement, treat TEC as entitled to
exercise the rights that comprise any financial asset credited to any of the
Accounts, (iv) all property delivered to the Disbursement Agent pursuant to
this Agreement will be promptly credited to the Disbursement Account in
accordance with the terms hereof and (v) all securities or other property
underlying any financial assets credited to the Accounts shall be registered in
the name of the Disbursement Agent, endorsed to the Disbursement Agent or in
blank or credited to another securities account maintained in the name of the
Disbursement Agent.

SECTION 2.5 "Financial Assets" Election. The Disbursement Agent
hereby agrees that each item of property (whether investment property,
financial asset, security, instrument or cash) credited to the Accounts shall
be treated as a "financial asset" within the meaning of Section 8-102(a)(9) of
the Revised UCC.

SECTION 2.6 Entitlement Orders. If at any time the Disbursement Agent
shall receive an "entitlement order" (within the meaning of Section 8-102(a)(8)
of the Revised UCC) issued by TEC and relating to the Accounts, the
Disbursement Agent shall comply with such entitlement order without further
consent by TransTexas or any other Person.

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SECTION 2.7 Representations, Warranties and Covenants of the
Disbursement Agent. The Disbursement Agent hereby makes the following
representations, warranties and covenants:

(a) The Accounts will be maintained in the manner set
forth herein until termination of this Agreement. The Disbursement
Agent shall not change the name or account number of any of the
Accounts without the prior written consent of TEC.

(b) No financial asset is or will be registered in the name
of TEC or TransTexas, payable to the order of TEC or TransTexas, or
specially endorsed to TEC or TransTexas, except to the extent such
financial asset has been endorsed to the Disbursement Agent or in
blank.

(d) The Disbursement Agent has not entered into, and until the
termination of this Agreement will not enter into, any agreement with
any other Person relating to the Accounts and/or any financial assets
credited thereto pursuant to which it has agreed to comply with
entitlement orders (as defined in Section 8- 102(a)(8) of the Revised
UCC) of such Person. The Disbursement Agent has not entered into any
other agreement with TEC, TransTexas or the Trustee purporting to limit
or condition the obligation of the Disbursement Agent to comply with
entitlement orders as set forth in Section 2.6.

SECTION 2.8 Notice of Adverse Claims. Except for the claims and
interest of TEC, the Trustee and of TransTexas in the Accounts, the
Disbursement Agent does not know of any claim to, or interest in, the Accounts
or in any "financial asset" (as defined in Section 8-102(a) of the Revised UCC)
credited thereto. If any Person asserts any lien, encumbrance or adverse claim
(including any writ, garnishment, judgment, warrant of attachment, execution or
similar process) against the Accounts or in any financial asset carried
therein, the Disbursement Agent will promptly notify TEC, the Trustee and
TransTexas thereof.

SECTION 2.9 Correspondence. The Disbursement Agent will promptly send
copies of all statements, confirmations and other correspondence concerning the
Accounts and/or any financial assets credited thereto simultaneously to each of
TEC, TransTexas and the Trustee in accordance with Section 6.2.

SECTION 2.10 Subordination of Lien; Waiver of Set-Off. In the event
that the Disbursement Agent has or subsequently obtains by agreement, operation
of law or otherwise a security interest in the Accounts or any security
entitlement credited thereto, the Disbursement Agent hereby agrees that such
security interest shall be subordinate to the security interests of TEC as
assigned to the Trustee. The financial assets and other items credited to the
Accounts will not be subject to deduction, set-off, banker's lien, or any other
right in favor of any Person other than the Trustee, except that the
Disbursement Agent may set off (i) all amounts due to the Disbursement Agent in
respect of the Disbursement Agent's customary fees and expenses for the routine
maintenance and operation of the Accounts, and (ii) the face amount of any
checks which have been credited to the Accounts but are subsequently returned
unpaid because of uncollected or insufficient funds.

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ARTICLE III

ACCOUNTS

SECTION 3.1 Establishment of the Accounts.

(a) On the date hereof, TransTexas has opened and shall
hereafter cause to be maintained with and at the corporate trust
department of the Disbursement Agent a custodial account (the
"Disbursement Account") under the sole dominion and control of the
Trustee, in the name of TransTexas but indicating the lien of the
Trustee as assignee. Funds shall be released from the Disbursement
Account only in accordance with the provisions of Article IV.

(b) TransTexas shall maintain with the Disbursement Agent
a segregated sub-account of the Disbursement Account (the "Interest
Accumulation Account") under the sole dominion and control of the
Trustee, in the name of TransTexas but indicating the lien of the
Trustee as assignee. Funds shall be deposited into the Interest
Accumulation Account in accordance with Section 3.4 and released
therefrom only in accordance with the provisions of Article IV.

SECTION 3.2 Deposits to the Disbursement Account. TransTexas shall
initially deposit to the Disbursement Account $399,284,000 out of the proceeds
received by it from the loan made pursuant to the TransTexas Intercompany Loan
Documents.

SECTION 3.3 Security Interest in the Disbursement Account.

(a) As security for the prompt and complete payment and
performance in full of all obligations under the TransTexas
Intercompany Loan Documents, including without limitation the
TransTexas Intercompany Note, TransTexas has agreed, pursuant to the
TransTexas Security Agreement, to grant to TEC a security interest in
and a lien on and to pledge and assign to TEC all of its right, title
and interest in and to the Accounts and all funds and investments
deposited therein. Furthermore, pursuant to the TEC Security
Agreement, TEC has assigned its interest in any collateral securing the
TransTexas Intercompany Note, including without limitation the
Accounts, to the Trustee.

(b) The Disbursement Agent acknowledges notice of, and
consents to the terms and provisions of, the TransTexas Security
Agreement and the TEC Security Agreement and agrees that
notwithstanding anything to the contrary in this or any other agreement
relating to the Accounts, the Accounts are and will be subject to the
terms and conditions of the TransTexas Security Agreement and the TEC
Security Agreement, will be held in trust on behalf of TEC and the
Trustee and not commingled with any ordinary deposit or commercial bank
account, will be maintained with the corporate trust department of the
Disbursement Agent solely for TEC and the Trustee pursuant to the
TransTexas Security Agreement and the TEC Security Agreement and will
be subject to the written instructions of TEC and the Trustee given in
accordance with the TransTexas Security Agreement and the TEC Security
Agreement.

SECTION 3.4 Certain Agreements with respect to the Accounts.

(a) In accordance with written instructions received from
TransTexas, the Disbursement Agent shall (i) invest amounts on deposit
in the Accounts in such Cash Equivalents

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as TransTexas may select and credit such Cash Equivalents to the
Disbursement Account, (ii) deposit and hold in the Interest
Accumulation Account all interest paid on the Cash Equivalents
referenced in clause (i) above and invest such interest in such Cash
Equivalents as TransTexas may select and credit such Cash Equivalents
to the Interest Accumulation Account, (iii) reinvest other proceeds of
the Cash Equivalents referred to in clause (i) or (ii) above that may
mature or be sold in such Cash Equivalents and credit such Cash
Equivalents to the respective Account (all the Cash Equivalents
referenced in clauses (i) and (ii) above being, collectively,
"Investments") and (iii) deposit and hold in the respective Account all
proceeds that are not invested or reinvested in Investments.

(b) All disbursements and releases made pursuant to this
Agreement shall be made by the Disbursement Agent irrespective of, and
without deduction for, any counterclaim, defense, recoupment or set-
off and shall be final, and the Disbursement Agent will not seek to
recover from TEC for any reason any such payment once made.

(c) The Trustee and TEC shall be entitled to exercise any
and all rights of TransTexas in respect of the Accounts in accordance
with the terms of the TEC Security Agreement and the TransTexas
Security Agreement, respectively, and the Disbursement Agent shall
comply with such exercise, subject to the provisions of Section 6.8.

(d) All service charges and fees with respect to this
Agreement or the Accounts shall be paid by TransTexas if not offset
against the Interest Accumulation Account.

SECTION 3.5 Valuation of Investments. For purposes of determining the
value of any amounts in the Accounts, all Investments shall be valued at the
lower of cost or market value.

ARTICLE IV

DISBURSEMENTS

SECTION 4.1 Priority Disbursements to TEC. At any time after the
TransTexas Intercompany Note is due and payable, upon maturity, acceleration
thereof or otherwise, funds in the Disbursement Account specified by TEC shall
be disbursed by the Disbursement Agent to any account specified by TEC, upon
receipt by the Disbursement Agent of a certificate of TEC substantially in the
form of Exhibit A hereto certifying that such amounts will be applied promptly
in satisfaction of obligations of TransTexas under the TransTexas Intercompany
Loan Documents.

SECTION 4.2 Ordinary Disbursements.

(a) Funds in the Disbursement Account shall be disbursed
at any time and from time to time for the account of TransTexas;
provided that TransTexas shall have delivered to the Disbursement Agent
and TEC a written notice substantially in the form of Exhibit B hereto
(the "Disbursement Certificate"), specifying the amount and date of the
requested disbursement. The Disbursement Certificate shall be executed
by a duly authorized officer of TransTexas.

(b) The Disbursement Agent shall disburse to TransTexas
from the Interest Accumulation Account any amount up to the balance
therein that TransTexas requests at any time that TransTexas so
requests;

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(c) All remaining funds in the Disbursement Account shall
be disbursed for the account of TransTexas upon satisfaction of any of
the following conditions:

(i) The Disbursement Agent (as defined in the
TARC Disbursement Agreement) shall have received a Phase II
Completion Notice (as defined in the TARC Disbursement
Agreement).

(ii) TransTexas shall have caused the Disbursement
Agent and TEC to receive an opinion of counsel reasonably
satisfactory to the Disbursement Agent, stating that
completion of the TransTexas Dividend/Share Repurchase Program
is precluded by applicable law.

SECTION 4.3 Disbursement Procedures.

(a) Subject to the terms and conditions of the TransTexas
Security Agreement and the TEC Security Agreement, the Disbursement
Agent shall sell all or such portion of the investments held in the
Disbursement Account (with the investments having the shortest
maturities sold first) as shall be necessary to fund the requested
disbursement in accordance with the terms hereof and in accordance with
written instructions of TEC or TransTexas, as the case may be,
delivered to the Disbursement Agent at least one Business Day prior to
any proposed Date of Disbursement.

(b) All disbursements shall be made by the later to occur
of (i) the requested Date of Disbursement or (ii) the second Business
Day after satisfaction of all conditions to such disbursement.

ARTICLE V

COVENANTS OF TRANSTEXAS AND TEC

SECTION 5.1 Covenants of TransTexas.

(a) Access to Information. TransTexas shall permit and
cause each of its Subsidiaries to permit TEC and the Disbursement Agent
on reasonable notice and at such times as shall be reasonably requested
to inspect and review all books and records of TransTexas and its
Subsidiaries relating to the TransTexas Dividend/Share Repurchase
Program and such other information as such Person shall reasonably
request relating to the TransTexas Dividend/Share Repurchase Program,
including contracts, offering documents and other supporting
documentation to substantiate amounts requested pursuant to a
Disbursement Certificate.

(b) Payment of Fees and Expenses. TransTexas shall
promptly, but no later than thirty (30) days after its receipt of an
invoice, pay the reasonable fees and expenses of the Disbursement Agent
in connection with this Agreement. To the extent available, such fees
and expenses may be paid through the Disbursement Account by including
such amounts in a Disbursement Certificate.

SECTION 5.2 Covenants of TEC. TEC shall give prompt written notice to
the Disbursement Agent upon (i) the occurrence of an Event of Default known to
it and (ii) upon cure or waiver of any

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such Event of Default known to it.

ARTICLE VI

MISCELLANEOUS

SECTION 6.1 Amendments, Etc. No amendment, modification or waiver of
any provisions of this Agreement may be made except by written agreement of the
parties hereto.

SECTION 6.2 Notices, Etc. All notices and other communications
required or permitted hereunder shall be in writing and shall be sufficiently
given if made by hand delivery, by telex, by facsimile or registered or
certified mail, postage prepaid, return receipt requested, addressed as
follows:

To the Disbursement Agent:

Firstar Bank of Minnesota, N.A.
Corporate Trust Department
101 East Fifth Street, 12th Floor
St. Paul, Minnesota 55101-1860
Facsimile: (612) 229-6415
Attention: Frank Leslie

To TEC:

TransAmerican Energy Corporation
1300 North Sam Houston Parkway East, Suite 310
Houston, Texas 77032-2949
Facsimile: (281) 986-8865
Attention: Ed Donahue

with a copy to:

Gardere & Wynne, L.L.P.
1601 Elm Street, Suite 3000
Dallas, Texas 75201
Facsimile: (214) 999-4667
Attention: C. Robert Butterfield

To TransTexas:

TransTexas Gas Corporation
1300 North Sam Houston Parkway East, Suite 310
Houston, Texas 77032-2949
Facsimile: (281) 986-8865
Attention: Ed Donahue

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with a copy to:

Gardere & Wynne, L.L.P.
1601 Elm Street, Suite 3000
Dallas, Texas 75201
Facsimile: (214) 999-4667
Attention: C. Robert Butterfield

Any party hereto may by notice to each other party designate such
additional or different addresses as shall be furnished in writing by such
party. Any notice or communication to any party shall be deemed to have been
given or made as of the date so delivered, if personally delivered; when
answered back, if telexed; when receipt is acknowledged, if faxed; five
calendar days after mailing, if sent by registered or certified mail; and one
business day after mailing, if sent by overnight delivery service (except that
a notice of change of address shall not be deemed to have been given until
actually received by the addressee).

SECTION 6.3 No Waiver, Remedies. No failure on the part of the
Disbursement Agent, TEC or any Holder to exercise, and no delay in exercising,
any right under any Security Document shall operate as a waiver thereof, nor
shall any single or partial exercise of any such right preclude any other or
further exercise thereof or the exercise of any other right.

SECTION 6.4 Indemnity and Expenses.

(a) TransTexas agrees to indemnify the Disbursement Agent
and its officers, directors, employees, agents, attorneys-in-fact and
affiliates (the "Indemnified Parties"), from and against any and all
claims, losses and liabilities directly or indirectly caused by,
related to or resulting from this Agreement (including, without
limitation, enforcement of this Agreement), except claims, losses or
liabilities resulting from (i) valid claims of TransTexas against such
Indemnified Party arising out of a breach of this Agreement by such
Indemnified Party or (ii) such Indemnified Party's bad faith, gross
negligence or willful misconduct, in either case, as determined by a
final judgment of a court of competent jurisdiction.

(b) TransTexas shall, promptly upon demand but no later
than thirty (30) days after its receipt of an invoice, pay to the
Disbursement Agent the amount of any and all reasonable expenses,
including the reasonable fees and expenses of its counsel and of any
experts and agents, that the Disbursement Agent may incur in connection
with (i) this Agreement, (ii) the exercise or enforcement of any rights
hereunder or (iii) the failure by TransTexas to perform or observe any
of the provisions hereof.

SECTION 6.5 Execution in Counterparts. This Agreement may be executed
in any number of separate counterparts and by different parties hereto in
separate counterparts, each of which, when so executed, shall be deemed to be
an original and all of which, taken together, shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.

SECTION 6.6 Relationship of Disbursement Agent. The Disbursement
Agent shall not be under any responsibility in respect of the validity or
sufficiency of this Agreement or the execution and delivery hereof or in
respect of the validity or sufficiency of any document or agreement delivered
in connection

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herewith, including, but not limited to, any document or agreement the forms of
which are attached hereto as Exhibits to this Agreement. The Disbursement
Agent shall not be accountable for the use or application of the funds in the
Disbursement Account or for disbursements therefrom, except as set forth in
this Agreement.

SECTION 6.7 Governing Law; Submission to Jurisdiction, Waiver of Jury
Trial; Etc. THIS AGREEMENT SHALL BE CONSTRUED, INTERPRETED AND THE RIGHTS OF
THE PARTIES HERETO DETERMINED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW EXCEPT SECTION 5-1401 OF
THE NEW YORK GENERAL OBLIGATIONS LAW. EACH OF THE PARTIES HERETO (OTHER THAN
THE DISBURSEMENT AGENT) HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY
NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW
YORK OR ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF
NEW YORK IN RESPECT OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR
RELATING TO THIS AGREEMENT, AND IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT
OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, JURISDICTION OF THE AFORESAID
COURTS. EACH OF THE PARTIES HERETO (OTHER THAN THE DISBURSEMENT AGENT)
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER
APPLICABLE LAW, TRIAL BY JURY AND ANY OBJECTION THAT IT MAY NOW OR HEREAFTER
HAVE TO THE LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT
IN ANY SUCH COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING
BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. EACH OF
THE PARTIES HERETO (OTHER THAN THE DISBURSEMENT AGENT) IRREVOCABLY CONSENTS, TO
THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW, TO THE
SERVICE OF PROCESS OF ANY OF THE AFOREMENTIONED COURTS IN ANY SUCH ACTION OR
PROCEEDING BY THE MAILING OF COPIES THEREOF BY REGISTERED OR CERTIFIED MAIL,
POSTAGE PREPAID, TO SUCH PARTY AT THE ADDRESS OF SUCH PARTY SET FORTH HEREIN,
SUCH SERVICE TO BECOME EFFECTIVE 30 DAYS AFTER SUCH MAILING. NOTHING HEREIN
SHALL AFFECT THE RIGHT OF THE DISBURSEMENT AGENT TO SERVE PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE PROCEED
AGAINST THE OTHER PARTIES HERETO IN ANY OTHER JURISDICTION.

SECTION 6.8 Certain Rights. None of the Disbursement Agent, TEC, the
Trustee and TransTexas shall have any rights with respect to the Disbursement
Account, except as specifically set forth in the TransTexas Loan Agreement, the
TransTexas Security Agreement and this Agreement. If at any time the
Disbursement Agent shall receive a notice, order or instruction from any
Person, which conflicts with a notice, order or instruction given by the
Trustee, the Trustee's notice, order or instruction shall always prevail. All
provisions of this Agreement are subject to the foregoing sentence.

SECTION 6.9 Confidentiality. The parties agree that they and their
employees have maintained and will maintain, in confidence, all data,
summaries, reports or information of all kinds, whether oral or written,
provided pursuant to this Agreement or acquired or developed in any manner from
any party's personnel or files (the "Confidential Information"), and that they
have not and will not reveal the same to any persons not employed by the party
from whom such information was obtained except: (a) at the written direction of
such party; (b) to the extent necessary to comply with the law, reporting
requirements imposed by the Securities and Exchange Commission or in connection
with any arbitration proceeding,

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or the valid order of a court of competent jurisdiction, in which event the
disclosing party shall so notify the party from whom such information was
obtained as promptly as practicable (and, if possible, prior to making any
disclosure) and shall seek confidential treatment of such information; (c) as
part of its normal reporting or review procedure to its parent company, its
auditors and its attorneys, and such parent company, auditors and attorneys
agree to be bound by the provisions of this Section; (d) in order to enforce
any of its rights pursuant to, or in any other dispute with respect to, this
Agreement; (e) if, at the time of disclosure to the recipient, the Confidential
Information is in the public domain; (f) if, after disclosure to the recipient,
the Confidential Information becomes part of the public domain by written
publication through no fault of the recipient; or (g) to any one or more
holders of Notes and their representatives and agents.

SECTION 6.10 Termination. This Agreement shall terminate
automatically thirty (30) days following disbursement of all funds remaining in
the Disbursement Account.

SECTION 6.11 Invalidity. If, for any reason whatsoever, any one or
more of the provisions of this Agreement shall be held or deemed to be
inoperative, unenforceable or invalid in a particular case or in all cases, it
is the intent of the parties hereto that such circumstances shall not have the
effect of rendering any of the other provisions of this Agreement inoperative,
unenforceable or invalid, and the inoperative, unenforceable or invalid
provisions shall be construed as if it were written so as to effectuate to the
maximum extent possible, the intent of the parties hereto.

SECTION 6.12 Assignment. This Agreement is personal to the parties
hereto, and the rights and duties hereunder of any party hereto shall not be
assignable, except with the prior written consent of the other parties hereto
or as described in Section 2.3; provided, however, that the rights and
obligations of TEC hereunder may be assigned to the Trustee in accordance with
the provisions of the TEC Security Agreement. In any event, this Agreement
shall inure to and be binding upon the parties and their successors and
permitted assigns.

SECTION 6.13 Entire Agreement. This Agreement contains the entire
agreement among the parties with respect to the subject matter hereof and
supersedes any and all prior agreements, understandings and commitments,
whether oral or written. This Agreement may only be amended as provided
herein.

SECTION 6.14 Captions. Captions in this Agreement are for convenience
only and shall not be considered or referenced in resolving questions of
interpretation of this Agreement.

13
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly
authorized, as of the date first above written.

TRANSTEXAS GAS CORPORATION

By:
------------------------
Name:
------------------------
Title:
------------------------

TRANSAMERICAN ENERGY CORPORATION

By:
------------------------
Name:
------------------------
Title:
------------------------

FIRSTAR BANK OF MINNESOTA, N.A.,
as Disbursement Agent

By:
------------------------
Name:
------------------------
Title:
------------------------

FIRSTAR BANK OF MINNESOTA, N.A.,
as Trustee

By:
------------------------
Name:
------------------------
Title:
------------------------

14
<PAGE> 16
Exhibit A

[Form of TEC Certificate]

[Date]

Firstar Bank of Minnesota, N.A.,
as Disbursement Agent under the Disbursement
Agreement referenced below
Corporate Trust Department
101 East Fifth Street, 12th Floor
St. Paul, Minnesota 55101-1860
Attention: Frank Leslie

TransTexas Gas Corporation
1300 North Sam Houston Parkway East, Suite 310
Houston, Texas 77032-2949
Attention: Ed Donahue

Ladies and Gentlemen:

We refer to (i) the Disbursement Agreement dated as of June
13, 1997 (as amended, supplemented or otherwise modified from time to time, the
"Disbursement Agreement") among TransTexas Gas Corporation, a Delaware
corporation ("TransTexas"), TransAmerican Energy Corporation, a Delaware
corporation ("TEC"), Firstar Bank of Minnesota, N.A., as Trustee, and Firstar
Bank of Minnesota, N.A., as Disbursement Agent, and (ii) the Loan Agreement
dated as of June 13, 1997 (as amended, supplemented or otherwise modified from
time to time, the "TransTexas Loan Agreement") between TEC and TransTexas.
Capitalized terms used but not defined herein have the respective meanings
given to such terms in the Disbursement Agreement and the TransTexas Loan
Agreement.

TEC hereby requests that the Disbursement Agent disburse funds
from the Disbursement Account in an aggregate amount equal to $______________,
on ______________ (the "Date of Disbursement"). In connection with the
requested disbursement of funds, TEC hereby represents, warrants and certifies
that such funds will be applied promptly to the satisfaction of TransTexas's
obligations under the TransTexas Intercompany Loan Documents. Such
disbursement is to be made by liquidating investments in the Disbursement
Account and making payment to TEC in accordance with the following procedures
and instructions:

[Insert procedures and instructions]

TRANSAMERICAN ENERGY CORPORATION

By:
-------------------------
Name:
-------------------------
Title:
-------------------------

A-1
<PAGE> 17
Exhibit B
[Form of Disbursement Certificate]

DISBURSEMENT CERTIFICATE NO. ___

[Date]

TransAmerican Energy Corporation
1300 North Sam Houston Parkway East, Suite 310
Houston, Texas 77032-2949
Attention: Ed Donahue

Ladies and Gentlemen:

TransTexas hereby requests that the Disbursement Agent
disburse, funds from the Disbursement Account in an aggregate amount equal to
$__________, on ________ __, ____ (the "Date of Disbursement"). Such funds
will be used within five (5) business days solely in connection with the
TransTexas Dividend/Share Repurchase Program or redeposited into the
Disbursement Account.

The undersigned hereby certifies that all conditions to this
disbursement have been met in accordance with the terms of the Disbursement
Agreement.

TRANSTEXAS GAS CORPORATION

By:
-------------------------
Name:
-------------------------
Title:
-------------------------

B-1

<PAGE> 1
EXHIBIT 99.1

PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION OF
TRANSTEXAS GAS CORPORATION

The following unaudited pro forma condensed consolidated financial
information of TransTexas Gas Corporation (the "Company") as of and for the
three months ended April 30, 1997 and for the year ended January 31, 1997,
illustrate the effect of the sale of the Company's wholly owned subsidiary,
TransTexas Transmission Corporation ("Lobo Sale"), and the following
transactions (the "Transactions") related to a private offering of debt
securities by TransAmerican Energy Corporation (the "TEC Notes Offering"):
(i) the TransTexas Intercompany Loan; (ii) the tender offer for the TransTexas
Senior Secured Notes; (iii) the June Exchange Offer; and (iv) the Stock
Repurchase Program. The unaudited pro forma condensed consolidated balance
sheet has been prepared assuming that the Lobo Sale, the TEC Notes Offering and
the Transactions were consummated on April 30, 1997. The unaudited pro forma
condensed consolidated statements of operations for the three months ended April
30, 1997 and for the year ended January 31, 1997 have been prepared assuming
that the Lobo Sale, the TEC Notes Offering and the Transactions were consummated
on February 1, 1997 and 1996, respectively.

The unaudited pro forma adjustments and the resulting unaudited pro
forma condensed consolidated financial information are based on the assumptions
noted in the footnotes thereto. The unaudited pro forma condensed consolidated
financial information does not purport to represent what the Company's
financial position or results of operations would have been had the Lobo Sale,
the TEC Notes Offering and the Transactions actually occurred on the dates
indicated or the financial position or results of operations for any future
date or period.

The unaudited pro forma condensed consolidated financial information
and notes thereto should be read in conjunction with the Company's historical
consolidated financial statements and the notes thereto included in the
Company's quarterly report on Form 10-Q for the period ended April 30, 1997 and
its annual report on Form 10-K for the period ended January 31, 1997.

PF-1
<PAGE> 2
TRANSTEXAS GAS CORPORATION

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
AS OF APRIL 30, 1997
(DOLLARS IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
Historical Adjustments Pro Forma
---------- ----------- ---------
ASSETS
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents . . . . . . . . . . $ 11,667 $ 1,073,424 (a) $ 197,669
450,000 (b)
65,000 (c)
(1,448,422)(d)
46,000 (f)
Cash restricted for interest . . . . . . . . . 46,000 (46,000)(f) --
Accounts receivable . . . . . . . . . . . . . 30,327 -- 30,327
Receivable from affiliates . . . . . . . . . . 70,436 (65,000)(c) 5,436
Inventories . . . . . . . . . . . . . . . . . 15,164 -- 15,164
Other current assets . . . . . . . . . . . . . 13,749 -- 13,749
----------- ----------- -----------
Total current assets . . . . . . . . . . . 187,343 75,002 262,345
Net property and equipment . . . . . . . . . . . 909,481 (450,592)(a) 458,889
Other assets . . . . . . . . . . . . . . . . . . 17,436 10,000 (d) 13,823
(13,613)(g)
Deferred tax asset . . . . . . . . . . . . . . . -- 21,987 (h) 21,987
----------- ----------- -----------
$ 1,114,260 $ (357,216) $ 757,044
=========== =========== ===========

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current maturities of long-term debt . . . . . $ 8,406 $ -- $ 8,406
Revolving credit agreement . . . . . . . . . . 8,386 -- 8,386
Accounts payable . . . . . . . . . . . . . . . 60,377 -- 60,377
Accrued liabilities . . . . . . . . . . . . . 102,609 (13,879)(d) 53,974
(34,756)(d)
----------- ----------- -----------
Total current liabilities . . . . . . . . . 179,778 (48,635) 131,143
----------- ----------- -----------
Long-term debt, less current maturities . . . . . 13,024 -- 13,024
Intercompany loan . . . . . . . . . . . . . . . . -- 450,000 (b) 450,000
Production payments, less current portion . . . . 25,362 (7,212)(d) 18,150
Senior secured notes . . . . . . . . . . . . . . 800,000 (800,000)(d) --
Subordinated notes . . . . . . . . . . . . . . . 104,386 11,429 (e) 115,815
Deferred revenue . . . . . . . . . . . . . . . . 46,176 (46,176)(d) --
Deferred income taxes . . . . . . . . . . . . . . 35,542 (57,529)(h) --
21,987 (h)
Payable to affiliates . . . . . . . . . . . . . . 7,618 205,000 (h) 82,618
(130,000)(i)
Other liabilities . . . . . . . . . . . . . . . . 8,429 (1,309)(d) 7,120
Stockholders' deficit:
Common stock . . . . . . . . . . . . . . . . . 740 (250)(d) 490
Paid-in capital (deficit) . . . . . . . . . . (123,524) 130,000 (i) 6,476
Retained earnings (accumulated deficit) . . . 16,729 (399,034)(d) (67,792)
314,513 (j)
----------- ----------- -----------
Total stockholders' deficit . . . . . . . . (106,055) 45,229 (60,826)
----------- ----------- -----------
$ 1,114,260 $ (357,216) $ 757,044
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of the pro forma financial
statements.

PF-2
<PAGE> 3
TRANSTEXAS GAS CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)

(a) To record the Lobo Sale for an adjusted purchase price of $1,073.4 million:

<TABLE>
<S> <C>
Cash proceeds . . . . . . . . . . . . . . . . . $ 1,073,424
Carrying value of stock sold . . . . . . . . . . (450,592)
-----------
Pretax gain on Lobo Sale . . . . . . . . $ 622,832 (j)
===========
</TABLE>

Purchase price adjustments were made for, among other things: the
value of certain NGLs and stored hydrocarbons; the value of gas in TTC's
pipeline; prepaid expenses relating to post-effective date operations;
post-closing expenses related to pre-closing operations; the value of oil
and gas produced and sold between the effective date of the Lobo Sale and
closing (approximately $44 million); property defects; and estimated costs
associated with liabilities incurred before closing. Purchase price
adjustments made at the closing of the Lobo Sale are subject to a review,
reconciliation and resolution process, which is expected to be completed
within 105 days following the closing.

(b) To record the borrowing by the Company of $450 million pursuant to the
TransTexas Intercompany Loan.

(d) To record the application of a portion of the proceeds from (a) through (c)
above:

<TABLE>
<S> <C>
Repurchase of Senior Secured Notes . . . . . . . $ 800,000
Premium of 11.5% for Senior Secured Notes . . . 92,000 (j)
Accrued interest on Senior Secured Notes . . . . 34,756
Lobo Sale production repayment . . . . . . . . . 43,806 (j)
Repayment of volumetric production payments
(deferred revenue), dollar-denominated
production payments and other debt . . . . . 68,576
Stock Repurchase Program . . . . . . . . . . . . 399,284
Debt issue costs . . . . . . . . . . . . . . . . 10,000
-----------
$ 1,448,422
===========
</TABLE>

Pending completion of the Stock Repurchase Program, up to $400 million
of proceeds from the TEC Notes Offering and the Transactions will be held
by the Company in a restricted cash account. Such proceeds will be
disbursed from such account (i) for purposes of the Stock Repurchase
Program or (ii) upon completion of Phase II of TARC's Capital Improvement
Program for general corporate purposes.

In addition to the above, proceeds of approximately $11 million were
used to pay accrued interest on the Senior Secured Notes for the period
from May 1, 1997 through June 13, 1997.

During the months of April and May 1997, the Company obtained
additional financing in the aggregate amount of $49.5 million, of which
approximately $29.2 million remained outstanding at June 30, 1997.

(e) To record the premium attributable to the Subordinated Notes Exchange
Offer. See (j).

(f) To release cash restricted pursuant to the Senior Secured Notes Indenture.

(g) To write off unamortized debt issue costs related to the Senior Secured
Notes and the Subordinated Notes. See (j).

PF-3
<PAGE> 4
(h) To record the income tax effects of the Lobo Sale and of expenses related
to the Senior Secured Notes Tender Offer and to reclassify $22.0 million of
deferred taxes to deferred tax assets.

<TABLE>
<S> <C>
Payable to TransAmerican pursuant to the Tax
Allocation Agreement . . . . . . . . . . . . $ 205,000
Deferred income taxes . . . . . . . . . . . . . (57,529)
-----------
$ 147,471
===========
</TABLE>

(i) To record the assumption of $130 million of estimated net tax liability by
TransAmerican in accordance with the Tax Allocation Agreement.

(j) To record the effects on retained earnings as a result of (a) through (i).

<TABLE>
<S> <C>
Pretax gain on Lobo Sale . . . . . . . . . . . . $ 622,832
Premium of 11.5% for Senior Secured Notes . . . (92,000)(1)
Lobo Sale production repayment . . . . . . . . . (43,806)
Premium attributable to the Subordinated
Notes Exchange Offer . . . . . . . . . . . . (11,429)(1)
Unamortized debt issue costs . . . . . . . . . . (13,613)(1)
Federal income taxes . . . . . . . . . . . . . . (147,471)
-----------
$ 314,513
===========
</TABLE>

_____________
(1) These amounts and the related income tax benefits, if any, will be
recorded as an extraordinary charge to income in the period that the
related debt is extinguished.

PF-4
<PAGE> 5
TRANSTEXAS GAS CORPORATION

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED APRIL 30, 1997
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)

<TABLE>
<CAPTION>
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
Revenues:
Gas, condensate and natural gas liquids . . . $ 72,882 $ (36,862)(a) $ 36,020
Transportation . . . . . . . . . . . . . . . . 9,291 (9,291)(a) --
Other . . . . . . . . . . . . . . . . . . . . 178 -- 178 (d)
----------- ----------- -----------
Total revenues . . . . . . . . . . . . . . 82,351 (46,153) 36,198
----------- ----------- -----------
Costs and expenses:
Operating . . . . . . . . . . . . . . . . . . 27,142 (21,936)(a) 5,206
Depreciation, depletion and amortization . . . 33,557 (14,408)(a) 19,149
General and administrative . . . . . . . . . . 15,140 (7,688)(a) 7,452
Taxes other than income taxes . . . . . . . . 5,214 (2,450)(a) 2,764
----------- ----------- -----------
Total costs and expenses . . . . . . . . . 81,053 (46,482) 34,571 (d)
----------- ----------- ------------
Operating income . . . . . . . . . . . . . 1,298 329 1,627
----------- ----------- -----------
Other income (expenses):
Interest income . . . . . . . . . . . . . . . 1,694 -- 1,694
Interest expense, net . . . . . . . . . . . . (25,358) 9,019 (b) (16,339)
----------- ----------- -----------
Total other income (expense) . . . . . . . (23,664) 9,019 (14,645)
----------- ----------- -----------
Loss before income taxes . . . . . . . . . (22,366) 9,348 (13,018)
Income taxes (benefit) . . . . . . . . . . . . . (7,828) 3,272 (c) (4,556)
----------- ----------- ------------
Net loss . . . . . . . . . . . . . . . . . $ (14,538) $ 6,076 $ (8,462)
=========== =========== ===========
Net loss per share . . . . . . . . . . . . . . . $ (0.20) $ (0.17)
=========== ===========
Weighted average number of common
shares outstanding . . . . . . . . . . . . . . 74,000,000 49,044,750 (e)
=========== ===========
</TABLE>

The accompanying notes are an integral part of the pro forma financial
statements.

PF-5
<PAGE> 6
TRANSTEXAS GAS CORPORATION

PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED JANUARY 31, 1997
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)

<TABLE>
<CAPTION>
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
Revenues:
Gas, condensate and natural gas liquids . . . $ 363,459 $ (173,761)(a) $ 189,698
Transportation . . . . . . . . . . . . . . . . 34,423 (34,423)(a) --
Gain on the sale of assets . . . . . . . . . . 7,856 -- 7,856
Other . . . . . . . . . . . . . . . . . . . . 609 -- 609(d)
----------- ----------- -----------
Total revenues . . . . . . . . . . . . . . 406,347 (208,184) 198,163
----------- ----------- -----------
Costs and expenses:
Operating . . . . . . . . . . . . . . . . . . 114,453 (97,494)(a) 16,959
Depreciation, depletion and amortization . . . 132,453 (78,932)(a) 53,521
General and administrative . . . . . . . . . . 45,596 (2,000)(a) 43,596
Taxes other than income taxes . . . . . . . . 22,566 (12,818)(a) 9,748
Litigation settlement . . . . . . . . . . . . (96,000) -- (96,000)
----------- ----------- -----------
Total costs and expenses . . . . . . . . . 219,068 (191,244) 27,824(d)
----------- ----------- -----------
Operating income . . . . . . . . . . . . . 187,279 (16,940) 170,339
----------- ----------- -----------

Other income (expenses):
Interest income . . . . . . . . . . . . . . . 5,544 -- 5,544
Interest expense, net . . . . . . . . . . . . (97,007) 24,368 (b) (72,639)
----------- ----------- -----------
Total other income (expense) . . . . . . . (91,463) 24,368 (67,095)
----------- ----------- -----------
Income before income taxes . . . . . . . . 95,816 7,428 103,244
Income taxes . . . . . . . . . . . . . . . . . . 12,491 23,644 (c) 36,135
----------- ----------- -----------
Net income . . . . . . . . . . . . . . . . $ 83,325 $ (16,216) $ 67,109
=========== =========== ===========
Net income per share . . . . . . . . . . . . . . $ 1.13 $ 1.37
=========== ===========
Weighted average number of common
shares outstanding . . . . . . . . . . . . . . 74,000,000 49,044,750 (e)
=========== ===========
</TABLE>

The accompanying notes are an integral part of the pro forma financial
statements.

PF-6
<PAGE> 7
TRANSTEXAS GAS CORPORATION

NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)

(a) To adjust revenues, including losses relating to risk management
activities, operating expenses, depreciation, depletion and amortization,
general and administrative and taxes other than income taxes as a result
of the Lobo Sale.

(b) To adjust interest expense as follows:

<TABLE>
<CAPTION>
Three Months
Ended Year Ended
April 30, 1997 January 31, 1997
-------------- ----------------
<S> <C> <C>
Interest on the Intercompany Loan at a rate of 10.875% . $ 12,234 $ 48,938
Interest on estimated federal income tax liability payable
to affiliate at an assumed rate of 9.0% . . . . . . . 1,688 6,750
Historical interest on Subordinated Notes . . . . . . . (3,294) (1,646)
Interest on Subordinated Exchange Notes at a rate of 13.75% 3,981 15,925
Historical interest expense on the Senior Secured Notes (23,000) (92,000)
Historical interest expense on other debt . . . . . . . (634) (2,500)
Amortization of estimated debt issuance costs . . . . . 500 2,000
Amortization of historical debt issuance costs . . . . . (606) (1,835)
Change in interest capitalized . . . . . . . . . . . . . 112 --
---------- ----------
Total adjustment to interest expense . . . . . . $ (9,019) $ (24,368)
========== ==========
</TABLE>

(c) To adjust income tax expense for the effects of adjustments (a) and (b)
above based on the federal statutory rate of 35%.

(d) Does not include revenues and related expenses attributable to the
Agreement for Services between the Company and Conoco Inc.

(e) Assumes 24,955,250 common shares are purchased pursuant to the Stock
Repurchase Program at $16 per share.

PF-7