TRANSAMERICAN REFINING CORP, 8-K, 1997-08-18

TRANSAMERICAN REFINING CORP
8-K, 1997-08-18
PETROLEUM REFINING

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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

TRANSAMERICAN REFINING CORPORATION
----------------------------------
(Exact name of registrant as specified in its charter)

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

33-85930 76-0229632
-------- ----------
(Commission File Number) (I.R.S. Employer
Identification No.)

1300 North Sam Houston Parkway East, Suite 320
Houston, Texas 77032
--------------------
(Address of principal executive offices, including zip code)

(281) 986-8811
--------------
(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.

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
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.

INTERCOMPANY LOANS TO TRANSTEXAS AND TARC. With the proceeds
of the TEC Notes Offering, TEC made intercompany loans to
TransTexas Gas Corporation ("TransTexas") in the principal
amount of $450 million (the "TransTexas Intercompany Loan")
and to TransAmerican Refining Corporation ("TARC") in the
original amount of $676 million (the "TARC Intercompany
Loan"). The promissory note evidencing the TransTexas
Intercompany Loan (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 other than inventory,
receivables and equipment. The promissory note evidencing
the TARC Intercompany Loan (i) accretes principal at a rate
of 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 including the
Disbursement Account (described below) but excluding
inventory, receivables and equipment. The Intercompany Loan
agreements contain certain restrictive covenants, including
among others, limitations on incurring additional debt,
asset sales, dividends and transactions with affiliates.
Each Intercompany Loan will mature on June 1, 2002.

<PAGE> 3

TARC used approximately $103 million of the proceeds of the
TARC Intercompany Loan to repay certain indebtedness,
including senior secured notes of TARC that were issued in
March 1997 and debt owed to an affiliate, and to complete
the TARC Notes Tender Offer described below. Remaining
proceeds will be used for the Capital Improvement Program
described below and for general corporate purposes.

Upon the occurrence of a Change of Control (as defined in
the indenture governing the TEC Notes (the "TEC Notes
Indenture")), 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 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 TARC and TransTexas to pay a pro rata
share of the purchase price paid by TEC.

TARC WARRANTS TENDER OFFER. On June 13, 1997, TEC completed
a tender offer for the outstanding common stock purchase
warrants of TARC ("TARC Warrants") at a price of $4.50 per
warrant. Pursuant to the tender offer, TEC purchased
7,335,452 TARC Warrants for an aggregate purchase price of
approximately $33 million. TARC intends to enter into a
merger with one of its affiliates pursuant to which each
remaining warrant would become exercisable (at an exercise
price of $.01) to receive $4.51 of cash instead of one share
of common stock of TARC.

TARC EQUITY CONTRIBUTION. TEC intends to make a capital
contribution to TARC in the aggregate amount of $226 million
from the proceeds of the TransTexas stock repurchase program
(discussed below). The amount of this capital contribution
will be retained initially in the Disbursement Account and
contributed to TARC pursuant to the terms of the
Disbursement Agreement.

TARC NOTES TENDER OFFER. On June 13, 1997, TARC completed a
tender offer ("TARC Notes Tender Offer") for the (i) TARC
Mortgage Notes for 112% of their principal amount (plus
accrued and unpaid interest) and (ii) TARC Discount Notes
for 112% of their accreted value. In connection with the
TARC Notes Tender Offer, TARC has obtained consents from
holders of the TARC Notes to certain waivers under, and
amendments to the indenture governing the TARC Notes (the
"TARC Notes Indenture"), which eliminate or modify certain
of the covenants and other provisions contained in the TARC
Notes Indenture. Approximately $423 million aggregate
principal amount of TARC Mortgage Notes and TARC Discount
Notes were tendered and accepted by TARC at a cost to TARC
of approximately $437 million (including accrued interest
and premiums).

TRANSTEXAS 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

<PAGE> 4

affiliated stockholders that it acquires from its public
stockholders. Shares may be purchased through open market
purchases, negotiated transactions or tender offers, or a
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.

CAPITAL IMPROVEMENT PROGRAM. In connection with the TEC
Notes Offering, the TARC Intercompany Loan and the TARC
Notes Tender Offer, TARC has adopted a revised capital
improvement program designed to increase the capacity and
complexity of the refinery ("Capital Improvement Program").
The most significant projects include: (i) conversion of the
visbreaker unit to a delayed coking unit to process vacuum
tower bottoms into lighter petroleum products, (ii)
modernization and upgrade of a fluid catalytic cracking unit
to increase gasoline production capacity and allow the
direct processing of low cost atmospheric residual
feedstocks, and (iii) upgrading and expanding hydrotreating,
alkylation and sulfur recovery units to increase sour crude
processing capacity. In addition, TARC plans to expand,
modify and add other processing units, tankage and offsite
facilities as part of the Capital Improvement Program. The
Capital Improvement Program includes expenditures necessary
to ensure that the refinery is in compliance with certain
existing air and water discharge regulations and that
gasoline produced will comply with federal standards. TARC
will act as general contractor, but has engaged a number of
specialty consultants and engineering and construction firms
to assist TARC in completing the individual projects that
comprise the Capital Improvement Program. Each of these
firms was selected because of its specialized expertise in a
particular process or unit integral to the Capital
Improvement Program.

The Capital Improvement Program will be executed in two
phases. TARC estimates that Phase I will be completed at a
cost of $223 million, will be tested and operational by
September 30, 1998 and will result in the refinery having
the capacity to process up to 200,000 BPD of sour crude oil.
Phase II of the Capital Improvement Program includes the
completion and start-up of the Fluid Catalytic Cracking Unit
utilizing state-of-the-art MSCC(SM) technology and the
installation of additional equipment expected to further
improve operating margins by allowing for a significant
increase in the refinery's capacity to produce gasoline.
TARC estimates that Phase II will be completed at a cost of
$204 million and will be tested and operational by July 31,
1999. The proceeds received or to be received by TARC from
the TARC Intercompany Loan, the TransTexas stock repurchase
program and the equity contribution from TEC will include
$427 million designated for use in the Capital Improvement
Program, which TARC believes is adequate to fund the
completion of the project. The foregoing estimates, as well
as other estimates and projections herein, are subject to
substantial revision upon the occurrence of future

<PAGE> 5

events, such as unavailability of financing, engineering
problems, work stoppages and cost overruns over which TARC
may not have any control, and there can be no assurance that
any such projections or estimates will prove accurate.

DISBURSEMENT AND COLLATERAL ACCOUNTS. Pursuant to a
disbursement agreement (the "Disbursement Agreement") among
TARC, TEC, the TEC Indenture Trustee, Firstar Bank of
Minnesota, as disbursement agent (the "Disbursement Agent"),
and Baker & O'Brien, Inc., as construction supervisor (the
"Construction Supervisor"), $208 million of the net proceeds
from the sale of the TEC Notes was placed into accounts in
the name of TARC and TEC (together, the "Disbursement
Account") to be held and invested by the Disbursement Agent
until disbursed. Proceeds to TEC and TARC of approximately
$300 million from the TransTexas stock repurchase program
will also be deposited in the Disbursement Account. All
funds in the Disbursement Account are pledged as security
for the repayment of the TEC Notes.

The Disbursement Agent will make disbursements for the
Capital Improvement Program out of the Disbursement Account
in accordance with requests made by TARC and approved by the
Construction Supervisor. The Construction Supervisor is
required to review each such disbursement request by TARC.
No disbursements may be made from the Disbursement Account
for purposes other than the Capital Improvement Program
other than (i) up to $1.5 million per month (except for
December 1997, in which disbursements may be up to $4.5
million) to fund administrative costs and certain taxes and
insurance payments, not in excess of $25.5 million in the
aggregate; provided, that if less than $1.5 million is spent
in any month (or less than $4.5 million is spent in December
1997) the amounts which may be disbursed in one or more
subsequent months will be increased by the amount of such
difference, (ii) up to $50 million for feedstock upon
certification by the Construction Supervisor that TARC has
satisfactorily completed construction of the Delayed Coking
Unit and associated facilities, (iii) up to $19 million to
pay interest on, and to redeem, repurchase, defease, or
otherwise retire the remaining TARC Notes and (iv) up to
$7.0 million for outstanding accounts payable. In addition,
interest income from the Disbursement Account may be used
for the Capital Improvement Program or disbursed to fund
administrative and other costs of TARC and TEC.

ITEM 6. RESIGNATIONS OF REGISTRANT'S DIRECTORS.

Not applicable.

ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.

The following financial statements, pro forma financial
information and exhibits are filed as a part of this report:

<PAGE> 6

(a) Financial Statements of Businesses Acquired:

Not applicable.

(b) Pro forma financial information:

(1) Pro Forma Condensed Balance Sheet dated April
30, 1997 (unaudited)

(2) Pro Forma Condensed Statement of
Operations for the three months ended
April 30, 1997 (unaudited) and the year
ended January 31, 1997 (unaudited)

4.1 Second Supplemental Indenture dated June 13, 1997
among the Company, TEC and First Union National
Bank.

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

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

4.4 Disbursement Agreement dated June 13, 1997 among the
Company, TEC, Firstar Bank of Minnesota, as
disbursement agent and trustee and Baker & O'Brien,
Inc., as construction supervisor.

ITEM 8. CHANGE IN FISCAL YEAR.

Not applicable.

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

Not applicable.

<PAGE> 7

PRO FORMA CONDENSED FINANCIAL INFORMATION OF
TRANSAMERICAN REFINING CORPORATION

The following unaudited pro forma condensed financial information of
TransAmerican Refining 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 transactions (the "Transactions") related to a private
offering of debt securities by TransAmerican Energy Corporation (the "TEC Notes
Offering"). The Transactions consist of the TARC Intercompany Loan, TARC
Warrants Tender Offer, TARC Equity Contribution, TARC Notes Tender Offer and
the TransTexas Stock Repurchase Program, all as described in Item 5 of this
Form 8-K. The unaudited pro forma condensed balance sheet has been prepared
assuming that the TEC Notes Offering and the Transactions were consummated on
April 30, 1997. The unaudited pro forma condensed 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 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 financial information are based on the assumptions noted in the
footnotes thereto. The unaudited pro forma condensed financial information does
not purport to represent what the Company's financial position or results of
operations would have been had 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 financial information and notes thereto
should be read in conjunction with the Company's historical 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.

<PAGE> 8

TRANSAMERICAN REFINING CORPORATION

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

<TABLE>
<CAPTION>
Historical Adjustments Pro Forma
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents......................... $ 1,307 $ 675,649 (a) $ 76,335
167,200 (b)
(767,821)(c)
Debt proceeds held in collateral amount........... 14,037 -- 14,037
Receivable from affiliates........................ 22 -- 22
Other .......................................... 448 -- 448
----------- ----------- -----------
Total current assets........................... 15,814 75,028 90,842
Net property and equipment........................... 567,421 -- 567,421
Disbursement account................................. -- 253,795 (c) 253,795
Receivable from affiliates........................... 503 -- 503
Other assets, net.................................... 24,666 (18,585)(d) 6,081
----------- ----------- -----------
$ 608,404 $ 310,238 $ 918,642
=========== =========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable.................................. $ 17,064 $ -- $ 17,064
Payable to affiliates............................. 8,444 (5,370)(c) 3,074
Accrued liabilities............................... 14,377 (3,840)(c) 10,537
Notes payable..................................... 36,000 (36,000)(c) --
----------- ----------- -----------
Total current liabilities...................... 75,885 (45,210) 30,675
----------- ----------- -----------
Payable to affiliates................................ 6,674 -- 6,674
Notes payable to affiliate........................... 60,630 675,649 (a) 675,649
(60,630)(c)
Long-term debt....................................... 379,638 (364,452)(c) 15,186
Investment in TransTexas............................. 22,756 (22,756)(b) --
Other................................................ 505 -- 505
Stockholders' equity:
Common stock, $0.01 par value,
100,000 shares authorized,
30,000,000 shares issued and outstanding........ 300 -- 300
Additional paid-in capital........................ 248,513 189,956 (b) 438,469
Accumulated deficit............................... (186,497) (62,319)(e) (248,816)
----------- ----------- -----------
Total stockholders' equity..................... 62,316 127,637 189,953
----------- ----------- -----------
$ 608,404 $ 310,238 $ 918,642
=========== =========== ===========
</TABLE>

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

<PAGE> 9

TRANSAMERICAN REFINING CORPORATION

NOTES TO UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
(DOLLARS IN THOUSANDS)

(a) To record the borrowing by the Company of $675.6 million from TEC pursuant
to the TARC Intercompany Loan.

(b) To record the sale of TransTexas common stock pursuant to the TransTexas
Stock Repurchase Program.

<TABLE>
<S> <C>
Cash to be received...................................................... $ 167,200
Investment in TransTexas................................................. 22,756
----------
Increase in additional paid-in capital.............................. $ 189,956
==========
</TABLE>

<TABLE>
<S> <C>
Payment of notes and payable to affiliates, including
accrued interest of $4,276........................................... $ 66,000
Repurchase of 96% of the TARC Notes...................................... 364,452
Premium of 12% for the TARC Notes repurchased............................ 43,734(e)
Accrued interest on the TARC Notes repurchased........................... 3,135
Payment of notes payable, including accrued interest of $705............. 36,705
Disbursement Account..................................................... 253,795
----------
$ 767,821
==========
</TABLE>

Approximately $16 million was used to pay accrued interest, accretion of
principal and premium on such accretion on the TARC Notes tendered in the TARC
Notes Tender Offer for the period from May 1, 1997 through June 13, 1997.

(d) To record the write-off of unamortized debt issue costs related to the
TARC Notes. See (e).

(e) To record the effects on retained earnings as a result of (c) and (d).

<TABLE>
<S> <C>
Premium of 12% for the TARC Notes repurchased........................ $ 43,734(1)
Unamortized debt issue costs......................................... 18,585(1)
----------
Net decrease in retained earnings................................ $ 62,319
==========
</TABLE>

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

<PAGE> 10

TRANSAMERICAN REFINING CORPORATION

PRO FORMA CONDENSED 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:
Product sales................................... $ -- $ -- $ --
----------- ----------- -----------

Costs and expenses:
Costs of products sold.......................... -- -- --
Processing arrangements, net.................... (175) -- (175)
Operations and maintenance...................... 3,613 -- 3,613
Depreciation and amortization................... 1,711 -- 1,711
General and administrative...................... 2,725 1,447 (a) 4,172
Taxes other than income taxes................... 903 -- 903
Loss on purchase commitments.................... 5,090 -- 5,090
----------- ----------- -----------
Total costs and expenses.................. 13,867 1,447 15,314
----------- ----------- -----------
Operating loss............................ (13,867) (1,447) (15,314)
----------- ----------- -----------
Other income (expense):
Interest income................................. 127 -- 127
Interest expense, net........................... (3,296) 2,217 (b) (4,841)
(3,762)(c)
Equity in loss of TransTexas.................... (2,050) 2,050 (d) --
Other .......................................... 39 -- 39
----------- ----------- -----------
Total other income (expense).............. (5,180) 505 (4,675)
----------- ----------- -----------
Net loss.................................. $ (19,047) $ (942) $ (19,989)
=========== =========== ===========

Net loss per share................................... $ (0.63) $ (0.67)
=========== ===========

Weighted average number of common
shares outstanding.............................. 30,000,000 30,000,000
=========== ===========
</TABLE>

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

<PAGE> 11

TRANSAMERICAN REFINING CORPORATION

PRO FORMA CONDENSED 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:
Product sales................................... $ 10,857 $ -- $ 10,857
----------- ----------- -----------
Costs and expenses:
Cost of products sold........................... 11,544 -- 11,544
Processing arrangements, net.................... 7,090 -- 7,090
Operations and maintenance...................... 23,945 -- 23,945
Depreciation and amortization................... 7,225 -- 7,225
General and administrative...................... 11,848 5,788 (a) 17,636
Taxes other than income taxes................... 4,200 -- 4,200
----------- ----------- -----------
Total costs and expenses.................. 65,852 5,788 71,640
----------- ----------- -----------
Operating loss............................ (54,995) (5,788) (60,783)
----------- ----------- -----------
Other income (expense):
Interest income................................. 204 -- 204
Interest expense, net........................... (4,663) 2,891 (b) (15,540)
(13,768)(c)
Equity in income of TransTexas.................. 12,325 (12,325)(d) --
Gain on sale of TransTexas stock and other income 56,535 -- 56,535
----------- ----------- -----------
Total other income (expense).............. 64,401 (23,202) 41,199
----------- ----------- -----------
Net income (loss)......................... $ 9,406 $ (28,990) $ (19,584)
=========== =========== ===========

Net income (loss) per share.......................... $ 0.25 $ (0.65)
=========== ===========

Weighted average number of common
shares outstanding.............................. 37,457,836 30,000,000
=========== ===========
</TABLE>

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

<PAGE> 12

TRANSAMERICAN REFINING CORPORATION

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

(a) To record an increase in additional expenses payable to TransTexas and for
fee for advisory services and other benefits payable to TransAmerican,
both pursuant to the Services Agreement.

<TABLE>
<CAPTION>
Three Months
Ended Year Ended
April 30, 1997 January 31, 1997
-------------- ----------------
<S> <C> <C>
Increase in Services Agreement fees.................... $ 822 $ 3,288
Advisory fees to TransAmerican......................... 625 2,500
----------- ----------
$ 1,447 $ 5,788
=========== ==========
</TABLE>

(b) To adjust interest expense as follows:

<TABLE>
<CAPTION>
Three Months
Ended Year Ended
April 30, 1997 January 31, 1997
-------------- ----------------
<S> <C> <C>
Historical interest on 90% of Mortgage Notes........... $ (3,895) $ (15,517)
Historical interest on 98% of Discount Notes........... (13,430) (47,482)
Historical interest on intercompany debt............... (2,038) (2,237)
Historical interest on notes payable................... (705) --
Interest expense on the TARC Intercompany Loan at
a rate of 16% (1)................................... 19,051 65,971
Amortization of historical debt issuance costs......... (1,200) (3,626)
---------- ----------
Total adjustment to interest expense.............. $ (2,217) $ (2,891)
========== ==========
</TABLE>

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

(1) Based on actual debt outstanding at April 30, 1997 and January 31,
1997. Pro forma interest expense on the entire TARC Intercompany Loan
is approximately $27.0 million and $112.4 million at April 30, 1997
and January 31, 1997, respectively.

(c) To adjust capitalized interest as a result of the lower weighted average
interest rate resulting from the TARC Intercompany Loan.

(d) To record the effect of the sale of the Company's investment in TransTexas
pursuant to the TransTexas Stock Repurchase Program.

<PAGE> 13

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.

TRANSAMERICAN REFINING CORPORATION

By: /s/ ED DONAHUE
----------------------------------
Name: Ed Donahue
Title: Vice President

Dated: August 15, 1997

<PAGE> 14

EXHIBITS

<TABLE>
<CAPTION>
Exhibit
No. Description
- -------------------------------------------------------------------------------
<S> <C>
4.1 Second Supplemental Indenture dated June 13, 1997 among the
Company, TEC and First Union National Bank.

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

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

4.4 Disbursement Agreement dated June 13, 1997 among the Company,
TEC, Firstar Bank of Minnesota, as disbursement agent and
trustee and Baker & O'Brien, Inc., as construction
supervisor.
</TABLE>

<PAGE> 1
EXHIBIT 4.1

================================================================================

TRANSAMERICAN REFINING CORPORATION,
Issuer

and

TRANSAMERICAN ENERGY CORPORATION,
Guarantor

and

FIRST UNION NATIONAL BANK, f/k/a FIRST FIDELITY BANK,
NATIONAL ASSOCIATION,
Trustee

_________________________

SECOND SUPPLEMENTAL INDENTURE

dated as of June 13, 1997

_________________________

$340,000,000 Guaranteed First Mortgage Discount Notes due 2002

and

$100,000,000 Guaranteed First Mortgage Notes due 2002

================================================================================
<PAGE> 2
THIS SECOND SUPPLEMENTAL INDENTURE, dated as of June 13, 1997 (the
"Supplemental Indenture"), is made and entered into by and among TRANSAMERICAN
REFINING CORPORATION, a Texas corporation (the "Company"), TRANSAMERICAN ENERGY
CORPORATION, a Delaware corporation ("TEC"), and FIRST UNION NATIONAL BANK,
formerly known as First Fidelity Bank, National Association, (the "Trustee"),
under an Indenture dated as of February 15, 1995, by and among the Company, TEC
and the Trustee (the "Original Indenture"), as supplemented by the First
Supplemental Indenture dated as of February 24, 1997 among the Company, TEC 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, 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 15, 1997, as supplemented and amended by that certain
Supplement to Offer to Purchase and Consent Solicitation dated May 30, 1997 and
that certain Second 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 Guaranteed First Mortgage Notes due 2002
and Guaranteed First Mortgage Discount Notes (collectively, the "Securities");
and

1
<PAGE> 3
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 Securities have consented to the Proposed Amendments pursuant to the
Offer; and

WHEREAS, the Boards of Directors of the Obligors have 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:

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:

"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.

"New Note" means a promissory note of the Company evidencing a loan
from TEC to the Company, the proceeds of which are used to finance the
purchase of the Notes pursuant to its Offer to Purchase and Consent

2
<PAGE> 4
Solicitation dated May 15, 1997, as amended or supplemented from time
to time, or for other purposes.

"Offer" means the offer to purchase the Notes made by the Company
pursuant to that certain Offer to Purchase and Consent Solicitation
dated May 15, 1997, as amended or supplemented from time to time, and
the accompanying Letter of Transmittal and Consent.

Section 1.02. Section 4.4 of the Current Indenture. Section 4.4 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
to read in its entirety as follows:

SECTION 4.4 Construction.

[intentionally omitted]

Section 1.03. 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 Limitation on Restricted Payments.

[intentionally omitted]

Section 1.04. Section 4.7 of the Current Indenture. Section 4.7 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
to read in its entirety as follows:

SECTION 4.7 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 60 days
after the same shall become delinquent, (a) 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 (b) 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;

3
<PAGE> 5
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 1.05. Section 4.9 of the Current Indenture. Section 4.9 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
to read in its entirety as follows:

4
<PAGE> 6
SECTION 4.9. Compliance Certificate; Notice of Default.

The Company and each Guarantor shall deliver to the Trustee
within 60 days after the end of its fiscal quarter an Officers'
Certificate complying with Section 314(a)(4) of the TIA and stating
that a review of its activities and the activities of its Subsidiaries
during the preceding fiscal quarter has been made under the
supervision of the signing Officers with a view to determining whether
the Company or such Guarantor, as the case may be, has kept, observed,
performed and fulfilled its obligations under this Indenture and
further stating, as to each such Officer signing such certificate,
whether or not such Officer knows of any failure by the Company, any
Guarantor or any Subsidiary of the Company or a Guarantor to comply
with any conditions or covenants in this Indenture and, if such
Officer does know of such a failure to comply, the certificate shall
describe such failure with particularity. The Officers' Certificate
shall also notify the Trustee should the relevant fiscal year end on
any date other than the current fiscal year end date and shall notify
the Trustee of any changes in the composition of the Board of
Directors of the Company, any Guarantor or any of their Subsidiaries
or of any amendment to the charter or bylaws of the Company, a
Guarantor or any of their Subsidiaries.

The Company and each Guarantor shall deliver to the Trustee
within 105 days after the end of each of its fiscal years a written
report of a firm of independent certified public accountants with an
established national reputation stating that in conducting their audit
for such fiscal year, nothing has come to their attention that caused
them to believe that the Company, any Guarantor or any Subsidiary of
the Company or a Guarantor was not in compliance with the provisions
set forth in Section 4.3, 4.16, 4.18 or 4.21 of this Indenture.

The Company and each Guarantor shall, so long as any of the
Notes are outstanding, deliver to the Trustee, immediately upon
becoming aware of any Default or Event of Default under this
Indenture, an Officers' Certificate specifying such Default or Event
of Default and what

5
<PAGE> 7
action the Company or such Guarantor is taking or proposes to take
with respect thereto. The Trustee shall not be deemed to have
knowledge of a Default or an Event of Default unless one of its trust
officers receives an Officers' Certificate specifying the Default or
Event of Default giving rise thereto from the Company or a Guarantor
or written notice specifying the occurrence of a Default or an Event
of Default from any of the Holders.

Section 1.06. 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. Limitation on Transactions with Related Persons.

[intentionally omitted]

Section 1.07. 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 Incurrences of Additional Debt and
Issuances of Disqualified Capital Stock.

[intentionally omitted]

Section 1.08. Section 4.14 of the Current Indenture. Section 4.14 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
to read in its entirety as follows:

SECTION 4.14. Limitations on Restricting Subsidiary Dividends.

[intentionally omitted]

Section 1.09. Section 4.15 of the Current Indenture. Section 4.15 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
to read in its entirety as follows:

SECTION 4.15. Limitation on Liens.

[intentionally omitted]

6
<PAGE> 8
Section 1.10. Section 4.19 of the Current Indenture. Section 4.19 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
to read in its entirety as follows:

SECTION 4.19. Restriction on Sale and Issuance of Subsidiary Stock.

[intentionally omitted]

Section 1.11. Section 4.20 of the Current Indenture. Section 4.20 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
to read in its entirety as follows:

SECTION 4.20. Limitations on Line of Business.

[intentionally omitted]

Section 1.12. Section 4.26 of the Current Indenture. Paragraph (a)
of Section 4.26 of the Current Indenture is hereby amended, effective as of the
Acceptance Date, to read in its entirety as follows:

SECTION 4.26. Additional Equity Investments.

(a) TEC shall make an Equity Exchange Offer unless, after the
Issue Date and prior to December 31, 1997, (i) the Company has
received cash equity Investments aggregating at least $100,000,000 and
an equivalent amount has thereafter and prior to December 31, 1997
been expended by the Company on the expansion and modification of the
Company's refinery and the Company has delivered to the Trustee an
Officers' Certificate to that effect, or (ii) TEC has sold for cash at
least 10,000,000 shares of TransTexas common stock (subject to
adjustment upon the occurrence of certain events, including
subdivisions, combinations and certain reclassifications, affecting
TransTexas common stock) and, as soon as practicable thereafter, used
the Net Proceeds of such sale or sales to purchase 8% Preferred Stock
of the Company, and the Company has, immediately upon receipt thereof,
deposited such Net Proceeds in the Collateral Account.

Section 1.13. Section 4.27 of the Current Indenture. Section

7
<PAGE> 9
4.27 of the Current Indenture is hereby amended, effective as of the Acceptance
Date, to read in its entirety as follows:

SECTION 4.27. Revolving Credit Facility.

[intentionally omitted]

Section 1.14. Section 4.28 of the Current Indenture. Section 4.28 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
to read in its entirety as follows:

SECTION 4.28. Registration of Pledged Shares.

[intentionally omitted]

Section 1.15. Section 4.29 of the Current Indenture. Section 4.29 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
to read in its entirety as follows:

SECTION 4.29. Limitation on Sale/Leaseback Transactions.

[intentionally omitted]

Section 1.16. Section 5.1 of the Current Indenture. Section 5.1 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
to read in its entirety as follows:

SECTION 5.1 When Company May Merge, Etc.

(a) Neither the Company nor any Guarantor shall, in a single
transaction or through a series of related transactions, consolidate
with or merge with or into any other Person or, directly or
indirectly, sell, lease, assign, transfer or convey all or
substantially all of its assets (computed on a consolidated basis), to
another Person or group of Affiliated Persons, unless:

(1) either (a) the Company or such Guarantor, as the
case may be, shall be the continuing Person, or (b) the Person
(if other than the Company) formed by such consolidation or
into which the Company or the Guarantor, as the case may be,
is merged or to which all or substantially all of the

8
<PAGE> 10
properties and assets of the Company or the Guarantor, as the case may
be, are transferred as an entirety or substantially as an entirety
(the Company or the Guarantor, as the case may be, or such other
Person being hereinafter referred to as the "Surviving Person") shall
be a corporation or partnership organized and validly existing under
the laws of the United States, any State thereof or the District of
Columbia, and shall expressly assume, by an indenture supplemental
hereto, and any supplements to any Security Documents as the Trustee
in its sole discretion may require, executed and delivered to the
Trustee, in form satisfactory to the Trustee, all the obligations of
the Company or such Guarantor, as the case may be, under the
Securities, any Guarantee, the Security Documents and this Indenture;
and

(2) [intentionally omitted]

(3) [intentionally omitted]

(4) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, assignment, or transfer and such supplemental
indenture comply with this Article V, that such consolidation, merger,
assignment or transfer will not have any adverse effect on the
validity, legality or enforceability of the Notes and that all
conditions precedent herein provided relating to such transaction have
been satisfied.

(b) For purposes of clause (a), the sale, lease, conveyance,
assignment, transfer, or other disposition of all or substantially all
of the properties and assets of one or more Subsidiaries of the
Company or a Guarantor, which properties and assets, if held by the
Company or a Guarantor instead of such Subsidiaries, would constitute
all or substantially all of the properties and assets of the Company
or such Guarantor, as the case may be, on a consolidated basis, shall
be deemed to be the transfer of all or substantially all of the
properties and assets of

9
<PAGE> 11
the Company or such Guarantor, as the case may be.

Section 1.17. Section 6.1 of the Current Indenture. Section 6.1 of
the Current Indenture is hereby amended, effective as of the Acceptance Date,
to read in its entirety as follows:

SECTION 6.1 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 any
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 (or premium, if any, applicable to) the Notes
when and as the same becomes due and payable at maturity,
redemption, by acceleration or otherwise, including default in
the payment of the Change of Control Purchase Price in
accordance with Article XI, the Offer Price in accordance with
Section 4.16, the Deficiency Purchase Price in accordance with
Section 4.21 or the Excess Cash Offer Price in accordance with
Section 4.24;

(c) default in the observance or performance of, or
breach of, any covenant, agreement or warranty of the Company
or a Guarantor contained in the Security Documents, the Notes
or this Indenture (other than a default in the performance of
any covenant, agreement or warranty which is specifically
dealt with elsewhere in this Section 6.1), and continuance of
such default or breach for a period of 30 days after there has
been given, by registered or certified mail, to the Company
and the Guarantors by the Trustee, or to the Company,

10
<PAGE> 12
the Guarantors and the Trustee by Holders of at least 25% in
aggregate principal amount of the outstanding Notes, a written
notice specifying such default or breach, requiring it to be
remedied and stating that such notice is a "Notice of Default"
hereunder;

(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, a Guarantor or any of
their Subsidiaries with an aggregate principal amount in
excess of $50,000,000, or failure to pay such Debt at its
stated maturity, it being understood that a waiver by the
lenders of such debt of such default 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
Company, a Guarantor or any of their Significant Subsidiaries
as bankrupt or insolvent, or approving as properly filed a
petition seeking reorganization of the Company, a Guarantor or
any of their Significant 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 Company, a Guarantor any of
their Significant 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 Company, a Guarantor or any of their
Significant Subsidiaries shall institute proceedings to be
adjudicated a voluntary bankrupt,

11
<PAGE> 13
or shall consent to the filing of a bankruptcy proceeding
against it, or shall file a petition or answer or consent
seeking reorganization 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, fails generally to pay
their debts as they become due, or takes any corporate action
in furtherance of or to facilitate, conditionally or
otherwise, any of the foregoing;

(g) [intentionally omitted]

(h) [intentionally omitted]

(i) [intentionally omitted]

(j) [intentionally omitted]

(k) [intentionally omitted]

(l) [intentionally omitted]

Any Defaults under Sections 4.21, 4.24, 4.26 or 5.1 of this
Indenture shall be Events of Default without the notice specified in
clause (c) above and upon the passage of 10 days.

Section 1.18. Section 12.6 of the Current Indenture. Paragraph (b)
of Section 12.6 of the Current Indenture is hereby amended, effective as of the
Acceptance Date, to read in its entirety as follows:

SECTION 12.6 Release of Collateral.

(b) Shares of TransTexas common stock may be

12
<PAGE> 14
released from the security interest created by the Pledge Agreements
as follows:

(1) Up to 15,000,000 shares of pledged TransTexas
common stock (subject to adjustment upon the occurrence of
certain events, including subdivision, combinations and
reclassifications, affecting TransTexas common stock) owned by
the Company may be released from the security interest created
by the Company Pledge Agreement if (A) such shares are sold
for cash and the Net Proceeds are immediately deposited in the
Collateral Account or (B) if the Company issues and sells
Preferred Stock that is exchangeable for TransTexas common
stock and the Net Proceeds of such sale are deposited
concurrently in the Collateral Account, provided such Net
Proceeds are at least equal to the Market Value, as of the
date of such release, of the shares of TransTexas common stock
that are released. Any such shares sold by the Company shall
be sold at prices no less favorable to the Company than those
that could be obtained in arm's-length transactions with
unrelated persons.

(2) Up to 10,000,000 shares of pledged TransTexas
common stock (subject to adjustment upon the occurrence of
certain events, including subdivisions, combinations and
reclassifications, affecting TransTexas common stock) owned by
TEC may be released from the security interest created by the
TEC Pledge Agreement if (A) such shares are sold after the
Phase I Completion Date and the Phase I Completion Date
occurred by the Required Phase I Completion Date, (B) the 15
million shares of TransTexas common stock referred to in
paragraph (b)(1) above have been sold in accordance with the
Indenture or reserved for issuance upon exchange of the
Preferred Stock referred to in paragraph (b)(1)(B) above, (C)
such shares are sold on or before December 31, 1997, (D) such
shares are sold for cash, (E) the Net Proceeds from such sale
are used to make a concurrent purchase of 8% Preferred Stock
of the Company, (F) the Company immediately

13
<PAGE> 15
deposits such Net Proceeds in the Collateral Account and (G)
the Net Proceeds from such sale, together with all other
amounts in the Collateral Account are sufficient to fund the
completion of Phase II. Any determination of sufficient funds
shall be evidenced by a resolution of the Board of Directors
of the Company, an Officers' Certificate and a certification
by the Construction Supervisor, each evidencing the parties'
respective determination of the sufficiency of funds, copies
of which shall be delivered to the Trustee prior to any
release of shares of TransTexas common stock. Any such shares
sold by TEC shall be sold at prices no less favorable to TEC
than those that could be obtained in arm's-length transactions
with unrelated persons.

(3) Pledged shares of TransTexas common stock owned
by TEC may be released from the security interest created by
the TEC Pledge Agreement if (A) TEC sells such shares at a
price of at least $12 per share, (B) the Net Proceeds of such
sale are immediately deposited in a segregated cash collateral
account established for such purpose and in which the Trustee
for the benefit of the Holders has a perfected first priority
security interest, (C) such account does not have a balance in
excess of $30 million for a period in excess of 30 consecutive
days, (D) funds in the account are released only to permit TEC
to purchase 8% Preferred Stock of the Company and (E)
simultaneously with TEC's purchase of such shares of 8%
Preferred Stock, the Company uses all such Net Proceeds to
fund a Note Redemption or a Note Repurchase. Until the Phase
II Completion Date has occurred, no shares of TransTexas
common stock may be released pursuant to this clause (3) if,
as a result of such release, less than 10 million shares of
TransTexas common stock (subject to adjustment upon the
occurrence of certain events, including subdivisions,
combinations and certain reclassifications, affecting
TransTexas common stock) would be pledged by TEC pursuant to
the TEC

14
<PAGE> 16
Pledge Agreement.

(4) Pledged shares of TransTexas common stock owned
by TEC may be released from the security interest created by
the TEC Pledge Agreement after a Public Equity Offering, if
(A) the outstanding Common Stock of the Company has a Public
Market Value of at least $750,000,000, (B) after such shares
are released, the Collateral Ratio is at least 3:1, and (C) at
any time thereafter that the Collateral Ratio is less than
3:1, within 5 Business Days, TEC pledges, as security for the
Notes and the Guarantee, additional shares of TransTexas
common stock sufficient to make the Collateral Ratio exceed
3:1.

(5) Pledged shares of TransTexas common stock owned
by TEC may be released from the security interest created by
the TEC Pledge Agreement if (A) TEC sells such shares and the
Net Proceeds of such sale are immediately deposited in a
segregated cash collateral account established for such
purpose and in which the Trustee for the benefit of the
Holders has a perfected first priority security interest, the
funds in the account are released only to permit TEC to
purchase 8% Preferred Stock of the Company and simultaneously
with TEC's purchase of such shares of 8% Preferred Stock, the
Company immediately uses all such Net Proceeds to fund a Note
Redemption or a Note Repurchase, or (B) the Company or TEC has
completed a Note Redemption or a Note Repurchase prior to such
release, and, in the case of both (A) and (B), (i) the number
of shares released does not exceed the product of (x) the
number of shares so pledged immediately prior to such release,
and (y) a fraction, the numerator of which is equal to the
Value of Notes subject to such Note Redemption or Note
Repurchase, and the denominator of which is equal to the Value
of Notes outstanding immediately prior to such Note Redemption
or Note Repurchase, (ii) the Market Value of the shares of
TransTexas common stock pledged to secure the Notes and the
Guarantee

15
<PAGE> 17
(excluding the shares to be released) is at least equal to the
outstanding principal amount of the Notes, plus all accrued
and unpaid interest thereon (after giving effect to such Note
Redemption or Note Repurchase) and (iii) the Phase II
Completion Date has occurred, except that if the Phase II
Completion Date has not occurred but the Phase I Completion
Date has, up to 10 million shares of TransTexas stock (subject
to adjustment) may be sold. Until the Phase II Completion
Date has occurred, no shares of TransTexas common stock may be
released pursuant to this clause (5) if, as a result of such
release, less than 10 million shares of TransTexas common
stock (subject to adjustment upon the occurrence of certain
events, including subdivisions, combinations and certain
reclassifications, affecting TransTexas common stock) would be
pledged by TEC pursuant to the TEC Pledge Agreement. The Net
Proceeds of any such sale of TransTexas common stock shall be
deposited in the Collateral Account and released from the
Collateral Account only in accordance with a Trustee's
Certificate given to the Disbursement Agent pursuant to
Section 6.1 of the Disbursement Agreement and shall be used by
the Trustee to make payments to Holders of Notes being
redeemed or purchased by the Company.

(6) Pledged shares of TransTexas common stock owned
by TEC may be released from the security interest created by
the TEC Pledge Agreement if (A) the Phase II Completion Date
has occurred, (B) the Company has received, subsequent to the
Issue Date, cash equity investments aggregating at least
$100,000,000 that have been deposited in the Collateral
Account prior to December 31, 1997 and, (C) after giving
effect to such release, at least 35,000,000 shares of
TransTexas common stock (subject to adjustment for stock
splits, stock dividends and other similar transactions) remain
subject to the pledge.

(7) All of the pledged shares of TransTexas

16
<PAGE> 18
common stock and pledged shares of capital stock of the
Company may be released from the security interest created by
the Pledge Agreements if the Notes have an Investment Grade
Rating and the rating agencies have indicated in writing that
the Notes will continue to have an Investment Grade Rating
after the release of the shares of TransTexas common stock and
the shares of the Company's capital stock.

(8) All of the pledged shares of TransTexas common
stock and pledged shares of capital stock of the Company shall
be released from the security interest created by the Pledge
Agreements upon the occurrence of a Change of Control (A) on
the day after the Change of Control Payment Date if a Change
of Control Offer has been consummated in accordance with the
Indenture or (B) at any time after a Change of Control has
occurred if the shares released from the security interest are
sold by TEC and (i) the Net Proceeds of such sale are,
together with other funds of the Company available therefor,
at least equal to the Change of Control Purchase Price
(including accrued and unpaid interest) of all outstanding
Notes, (ii) such Net Proceeds are immediately deposited in a
segregated cash collateral account established for such
purpose and in which the Trustee has a perfected first
priority security interest, (iii) funds in such account are
released only to permit TEC to purchase 8% Preferred Stock of
the Company, and (iv) simultaneously with TEC's purchase of
such shares of 8% Preferred Stock, the Company uses all of
such Net Proceeds to make payments to Holders of Notes in
connection with a Change of Control Offer.

(9) Up to all shares of pledged TransTexas common
stock owned by the Company may be released from the security
interest created by the Company Pledge Agreement at any time
upon the request of the Company; provided, that there shall
remain pledged to secure the Notes an aggregate number of
shares of TransTexas common stock at least equal to

17
<PAGE> 19
the number obtained by multiplying 50,450,000 by a fraction,
the numerator of which is the aggregate principal amount of
the Notes which remain outstanding immediately following
consummation of the Offer and the denominator of which is
$440,000,000.

(10) Up to all shares of pledged TransTexas common
stock owned by TEC may be released from the security interest
created by the TEC Pledge Agreement at any time upon the
request of TEC; provided, that there shall remain pledged to
secure the Notes an aggregate number of shares of TransTexas
common stock at least equal to the number obtained by
multiplying 50,450,000 by a fraction, the numerator of which
is the aggregate principal amount of the Notes which remain
outstanding immediately following consummation of the Offer
and the denominator of which is $440,000,000.

and Paragraph (h) of Section 12.6 of the Current Indenture is hereby amended,
effective as of the Acceptance Date, to read in its entirety as follows:

(h) Notwithstanding the foregoing, no Collateral may be
released from the security interest created by the Security Documents
if at the time of such proposed release, a Default or Event of Default
has occurred and is continuing or would occur as a result of such
release. Any shares of TransTexas common stock that is released
pursuant to this Section 12.6 (other than subsections (b)(9) or
(b)(10) hereof) in connection with a sale of such stock shall be sold
for cash at prices no less favorable to the seller than those that
could be obtained in arms-length transactions with unrelated persons.

Section 1.19. Section 12.7. There shall be added to the Current
Indenture a new Section 12.7, effective as of the Acceptance Date, to read in
its entirety as follows:

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<PAGE> 20
SECTION 12.7 Trustee's Execution of Intercreditor Agreements.

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, TEC 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

19
<PAGE> 21
for the account of the Holder of the New Note and/or the holders of
the Notes for application to the New 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 TEC
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.

20
<PAGE> 22
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.

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.

[THE NEXT-FOLLOWING PAGE IS THE SIGNATURE PAGE]

21
<PAGE> 23
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.

TRANSAMERICAN REFINING CORPORATION

Attest:____________________________________________________________________

By:________________________
Tim Moore Ed Donahue
Assistant Secretary Vice President

TRANSAMERICAN ENERGY CORPORATION

Attest:____________________________________________________________________

By:________________________
Tim Moore Ed Donahue
Assistant Secretary Vice President

FIRST UNION NATIONAL BANK, f/k/a
FIRST FIDELITY BANK, NATIONAL
ASSOCIATION, Trustee

By:_______________________
W. Jeffrey Kramer,
Vice President

22
<PAGE> 24
EXHIBIT A

TRANSAMERICAN REFINING CORPORATION

OFFICERS' CERTIFICATE

The undersigned, Ed Donahue, Vice President, and Tim Moore, Assistant
Secretary, of TransAmerican Refining Corporation, a Texas corporation (the
"Company"), do hereby certify pursuant to Section 2.03 of that certain Second
Supplemental Indenture, dated as of June 13, 1997, among the Company,
TransAmerican Energy Corporation, a Delaware corporation ("TEC") and First
Union National Bank, f/k/a First Fidelity Bank, National Association, as
Trustee (the "Trustee"), and Section 14.4 of that certain Indenture, dated as
of February 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 received 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 and TEC to or concurrently with the execution and delivery by
the Company and TEC 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 and TEC prior to or concurrently
with the execution and delivery by the Company and TEC 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.
<PAGE> 25
------------------------------
Ed Donahue, Vice President

------------------------------
Tim Moore, Assistant Secretary

24
<PAGE> 26
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 and TEC.

2. Each of the conditions precedent in the Current
Indenture requiring compliance by the Company and TEC prior to or
concurrently with the execution and delivery by the Company and TEC of
the Second Supplemental Indenture has been complied with by the
Company and TEC, and Section 9.2 of the Current Indenture authorizes
or permits the Trustee to execute the Second Supplemental Indenture.
<PAGE> 27
TRANSAMERICAN REFINING CORPORATION

OFFICERS' CERTIFICATE

The undersigned, Ed Donahue, Vice President, and Tim Moore, Assistant
Secretary, of TransAmerican Refining Corporation, a Texas corporation (the
"Company"), do hereby certify pursuant to Section 2.03 of that certain Second
Supplemental Indenture, dated as of June 13, 1997, among the Company,
TransAmerican Energy Corporation, a Delaware corporation ("TEC") and First
Union National Bank, f/k/a First Fidelity Bank, National Association, as
Trustee (the "Trustee"), and Section 14.4 of that certain Indenture, dated as
of February 15, 1995, among the Company, TEC 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.

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

------------------------------
Ed Donahue, Vice President

------------------------------
Tim Moore, Assistant Secretary

<PAGE> 1
EXHIBIT 4.2

LOAN AGREEMENT

by and between

TRANSAMERICAN REFINING 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 1.3 Computation of Time Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

SECTION 2 THE LOAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.1 Commitment to Make Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 2.2 Deposit of Loan Proceeds into Disbursement Account. . . . . . . . . . . . . . . . . . . . . 17
Section 2.3 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 2.4 Repayment of the Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

SECTION 3 PREPAYMENTS AND OTHER PAYMENTS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.1 Mandatory Prepayments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.2 Permitted Prepayments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 3.3 Place of Payment or Prepayment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

SECTION 4 APPLICATION OF PROCEEDS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 4.1 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19

SECTION 5 REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.1 Organization and Qualification. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.2 Power and Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.3 Enforceability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.4 Default. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.5 Title to Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.6 Payment of Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.7 Conflicting or Adverse Agreements or Restrictions. . . . . . . . . . . . . . . . . . . . . 20

SECTION 6 CONDITIONS OF LENDING. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.1 Conditions Precedent to the Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20

SECTION 7 AFFIRMATIVE COVENANTS OF BORROWER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 7.1 Payment of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 7.2 Construction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 7.3 Covenants Incorporated by Reference. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

SECTION 8 EVENTS OF DEFAULT AND REMEDIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 8.1 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 8.2 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 8.3 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

SECTION 9 MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 9.1 Waivers, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 9.2 Reimbursement of Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 9.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24

</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 9.4 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 9.5 Survival of Representations, Warranties and Covenants. . . . . . . . . . . . . . . . . . . 26
Section 9.6 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 9.7 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 9.8 Descriptive Headings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 9.9 Limitation of Liability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 9.10 Sale, Pledge or Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 9.11 Release . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 9.12 Indenture Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 9.13 Computation of Time Periods. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 9.14 Final Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
</TABLE>

Schedules and Exhibits:

Schedule 6.1(f) -- 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 TransAmerican Refining Corporation,
a Texas 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.

"Accreted Value" shall mean, with respect to each $1,000 principal
amount of the Note, as of any Semi-Annual Accretion Date set forth below as the
Accreted Value thereof set forth below and as of any other date as the Accreted
Value set forth below for the immediately preceding Semi-Annual Accretion Date
plus the Proportionate Amount to such date:
<TABLE>
<CAPTION>
Accreted Value
(per $1,000
Semi-Annual Accretion Date principal amount)
-------------------------- -----------------
<S> <C>
December 15, 1997 $ 793.832
June 15, 1998 $ 857.338
December 15, 1998 $ 925.925
June 15, 1999 and thereafter $1,000.000
</TABLE>

The Accreted Value prior to the first Semi-Annual Accretion Date will
be the sum of $734.401 plus the Proportionate Amount.

"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 or (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.

"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

1
<PAGE> 5
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 debtor.

"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.

"Budget" shall have the meaning ascribed to such term in the
Disbursement Agreement.

"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 Improvement Program" shall mean the expansion and improvement
program of the Borrower in connection with the reactivation and modification of
the Refinery.

"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,

2
<PAGE> 6
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.

"CATOFIN(R) Unit" shall mean certain real property currently owned by
the Borrower as more specifically defined in the TARC Mortgage, together with
all personal property of the Borrower now or hereinafter located on such real
property buy only to the extent that such property is part of a refining unit
designed to produce propane and butane mono-olefins using the CATOFIN(R)
process.

"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 or TransTexas' Capital Stock, respectively, but less than 50%, on a
fully diluted basis, of (x) the total voting power of the Borrower's or
TransTexas' then outstanding Voting Stock, or (y) the economic value of the
outstanding Capital Stock of the Borrower or TransTexas, respectively; 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 the assets of the Borrower that are mortgaged
or pledged to the Borrower as security for the Note in accordance with the TARC
Security Documents.

"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

3
<PAGE> 7
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.

"Construction Supervisor" shall mean Baker & O'Brien, Inc., as
construction supervisor of the Capital Improvement Program or any successor
construction supervisor appointed pursuant to the Disbursement Agreement.

"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 or (e) the Attributable Debt associated with any
Sale and Leaseback Transactions; (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, with
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 (1 1/2%).

"Delayed Coking Unit" shall mean the delayed coking unit being
constructed as part of the Capital Improvement Program.

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<PAGE> 8
"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, the disbursement agent named therein
and the Construction Supervisor, as amended pursuant to the terms thereof.

"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
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.

"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, 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 the Refinery or used in the Borrower's processing
or storage operations.

"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 TARC 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.

"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.

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<PAGE> 9
"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.

"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.

"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 in connection with any assets thereof, together with
interest payable thereon and the right to collect and receive the same,
including, without limitation, proceeds of casualty insurance, title insurance,
business interruption insurance and any other insurance now or hereafter
maintained with respect to such assets.

"Intercreditor Agreement" shall mean that certain Intercreditor
Agreement, dated as of the Closing Date, by and among the Lender, Borrower,
First Union National Bank, as trustee under that certain Indenture by and
between the Borrower and First Union National Bank dated as of February 23,
1995 and the Indenture Trustee.

"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.

"Inventory" shall mean and include feedstocks, refined products,
chemicals and catalysts, other supplies and storeroom items and similar items
accounted for as inventory by the Borrower on its financial statements, all
proceeds thereof, and all documents of title, books, records, ledger cards,
files,

6
<PAGE> 10
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).

"Loan Documents" shall mean this Agreement, the Note, the TARC
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.

"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 Loan.

"Mechanical Completion" shall mean with respect to the Capital
Improvement Program, Phase I, Phase II or any specified unit or component
thereof, sufficient completion of the construction of the Capital Improvement
Program, Phase I, Phase II or any specified unit or component, as the case may
be, in accordance with the Plans, as defined in the Disbursement Agreement, so
that the Capital Improvement

7
<PAGE> 11
Program, Phase I, Phase II or such unit or component, as the case may be, can
be operated for its intended purpose.

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

"Mortgage" shall mean that certain Act of Mortgage, Security Agreement
and Financing Statement, dated as of the Closing Date, 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.

"Mortgaged Property" shall have the meaning set forth in Section
6.1(e).

"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.

"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 TARC 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, 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.

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<PAGE> 12
"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 TARC Entities
as part of their normal business operations as a risk-management strategy or
hedge against adverse changes in market conditions in the natural gas industry
as prices of feedstock and refined products; provided, 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 Borrower that are engaged in Related TARC 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 of the assets constituting the CATOFIN(R) Unit
owned by the Borrower as of the date hereof; (ix) a guaranty by any Subsidiary
of the Borrower permitted under the Indenture; (x) deposits permitted by the
definition of Permitted Liens or any extension, renewal or replacement of any
of them; (xi) any acquisition by the Borrower of tank storage facilities (or
the company that owns such facilities) in the vicinity of the Refinery; (xii)
Investments in Accounts Receivables Notes by the Borrower in an Accounts
Receivable Subsidiary in amounts not to exceed the greater of $20 million or
20% of the Borrowing Base at any one time; (xiii) Investments by the Borrower
in an Accounts Receivable Subsidiary or in a reincorporation subsidiary, in
each case in connection with the initial capitalization thereof, and not to
exceed $1,000; (xiv) Investments by the Borrower or a wholly owned Subsidiary
solely for the purpose of facilitating a repurchase of the TARC Warrants in
connection with a short form merger; (xv) other Investments not in excess of $5
million at any time outstanding and (xvi) 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.

"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 proceedings, if adequate
reserves with respect thereto are maintained on the books of any of the TARC
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 TARC Entities in accordance with
GAAP; (c) deposits of cash or Cash Equivalents to secure (i) 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

9
<PAGE> 13
reimbursement obligations or letters of credit issued to secure such
performance or other obligations) in an aggregate amount outstanding at any one
time not in excess of $5 million or (ii) appeal or supersedeas bonds (or to
secure reimbursement obligations or letters of credit in support of such
bonds); (d) 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 TARC Entities) or materially interfere
with the ordinary conduct of the business of any of the TARC Entities; (e)
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; (f) Liens securing Debt or other obligations existing on
the Closing Date not in excess of $3 million; (g) 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; (h) Liens on Equipment, Receivables and
Inventory; (i) Liens on the assets of any entity existing at the time such
assets are acquired by any of the TARC 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 TARC Entities and (B) do not extend to any other assets of any of
the TARC Entities; (j) Liens (including extensions and renewals thereof) on
real or personal property, acquired after the Closing Date ("New TARC
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 the item of New TARC 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 TARC 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, (C) any
such Lien shall not extend to or cover any property or assets other than such
item of New TARC Property and any improvements on such New TARC Property and
(D) such Lien does not extend to assets or property which are part of the fixed
refinery assets that are part of the Capital Improvement Program; (k) leases or
subleases granted to others that do not materially interfere with the ordinary
course of business of any of the TARC Entities, taken as a whole; (l) Liens on
the assets of one of the TARC Entities in favor of another TARC Entity; (m)
Liens securing reimbursement obligations with respect to letters of credit that
encumber documents relating to such letters of credit and the products and
proceeds thereof provided, that such reimbursement obligations are not matured
for a period of over sixty (60) days; (n) Liens in favor of customs and revenue
authorities arising as a matter of law to secure payment of customs duties in
connection with the importation of goods; (o) Liens encumbering customary
initial deposits and margin deposits securing Swap Obligations or Permitted
Hedging Transactions; (p) Liens on cash deposits to secure reimbursement
obligations with respect to letters of credit after the Delayed Coking Unit is
completed; (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 imposed in connection with the Port Commission Bond Financing; provided,
that such liens do not extend to property other than Port Facility Assets; (u)
any extension, renewal or replacement of the Liens created pursuant to any of
the clauses (a) through (g) or (i) through (t) or (w); provided, that such
Liens would have otherwise been permitted under such clauses, and provided
further that the Liens permitted by this clause (u) do not secure any
additional Debt or encumber any additional property; (v) Liens of the trustee
under the indenture and related collateral documents governing the terms of the
Senior TARC Mortgage Notes and the Senior TARC Discount Notes, (w) Liens in
favor of the Lender

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<PAGE> 14
or its assignee under the TARC Security Documents and (y) Liens on tank storage
facilities in the vicinity of the Refinery acquired after the date hereof.

"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 Accreted Value 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 Accreted Value 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 Accreted Value 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 the 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 according to the Plans.

"Phase I Completion Date" shall mean the date on which the
Construction Supervisor issues a written notice (the "Phase I Completion
Notice") to the Borrower and the Disbursement Agent certifying that (a) the
process units and supporting facilities included in the definition of "Phase I"
have reached Mechanical Completion in accordance with the Plans, as defined in
the Disbursement Agreement and (b) for a period of at least 15 consecutive
days, the 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) 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 Capital Improvement Program in
which the Flue Catalytic Cracking Unit, FCC Flue Gas Scrubber, the Alkylation
Unit and certain additional offsite facilities will be completed according to
the Plans and Specifications.

"Phase II Completion Date" shall mean the date on which the
Construction Supervisor issues a written notice (the "Phase II Completion
Notice") to the Borrower and the Disbursement Agent certifying that (a) the
process units and supporting facilities included in the definition of "Phase
II" have reached Mechanical Completion in accordance with the Plans, as defined
in the Disbursement Agreement and (b) for a period of at least 72 uninterrupted
hours, the 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

11
<PAGE> 15
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."

"Plans" shall mean (a) the plans and specifications prepared by or on
behalf of the Borrower as used in the Disbursement Agreement, which described
and show the proposed expansion and modification of the Refinery and (b) a
budget prepared by or on behalf of the Borrower as used in the Disbursement
Agreement.

"Port Commission Bond Financing" shall mean a financing transaction
involving the following elements: (a) the transfer of the Borrower's interest
in all or some of the following assets that are under construction in or near
the Refinery: (i) the Prospect Road tank farm; (ii) certain dock improvements;
(iii) the dock vapor recovery system; (iv) the coke handling system; (v) the
Refinery waste water treatment facility; and (vi) tankage for liquefied
petroleum gas (the "Port Facility Assets") to the South Louisiana Port
Commission (the "Tax-Exempt Issuer") or its affiliate and a leaseback of the
Port Facility Assets to the Borrower or one of its Subsidiaries; (b) the
issuance of tax-exempt bonds by the Tax-Exempt Issuer, and the loan of proceeds
from such bonds to the Borrower or one of its Subsidiaries for the purpose of
financing completion of the Port Facility Assets.

"Port Facility Assets" shall have the meaning ascribed to such term in
the definition of Port Commission Bond Financing.

"Premises" shall mean the Mortgaged Property, the Refinery and all
fixtures, equipment, leases, rentals, accounts, general intangibles and
personal property of any kind or character now or hereafter related to,
situated on or used or acquired for use on or in connection with the Mortgaged
Property or in any improvements now or hereafter constructed thereon, and all
related parts, accessions and accessories thereto and all replacements or
substitutions therefor, as well as all other improvements, benefits and
appurtenances now or hereafter placed thereon or accruing thereto.

"Project Disbursement" shall have the meaning ascribed to such term in
the Disbursement Agreement.

"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.

"Proportionate Amount" shall mean, as of any date, an amount equal to
the product of (i) the Accreted Value for the immediately following Semi-Annual
Accretion Date less the Accreted Value for the immediately preceding
Semi-Annual Accretion Date (or, with respect to the period before the first
Semi-Annual Accretion Date, less $734.401) multiplied by (ii) a fraction, the
numerator of which is the actual number of days elapsed from the immediately
preceding Semi-Annual Accretion Date (or, with respect to the period before the
first Semi-Annual Accretion Date, the Closing Date) to the date for which the
Proportionate Amount is being determined and the denominator of which is the
actual number of days from the date of the immediately preceding Semi-Annual
Accretion Date to and including the immediately following Semi- Annual
Accretion Date or the actual number of days from the Closing Date to the first
Semi-Annual Accretion Date, as the case may be.

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<PAGE> 16
"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.

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

"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.

"Refinery" shall have the meaning ascribed to such term in Section
4.1.

"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 TARC Business" shall mean the business of (i) processing,
blending, terminalling storing, marketing (other than through operating retail
gasoline stations), refining, or distilling crude oil, condensate, natural gas
liquids, petroleum blendstocks or refined products thereof, (ii) owning and
operating an Accounts Receivable Subsidiary and (iii) after the Phase II
Completion Date, the exploration for, acquisition of, development of,
production, transportation and gathering of crude oil, natural gas, condensate
and natural gas liquids from outside of the United States.

"Required Phase I Completion Date" shall mean March 31, 1999.

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

"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, 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

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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 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, (vii)
any redemption, repurchase or other retirement for value of the TARC Warrants
by the Lender or the Borrower, including any premium paid thereon, (viii) any
redemption, defeasance, repurchase or other retirement for value of the Senior
TARC Mortgage Notes by the Borrower, including any premium paid thereon, (ix)
any redemption, defeasance, repurchase or other retirement for value of the
Senior TARC Discount Notes by the Lender or the Borrower, including any premium
paid thereon, (x) 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(2)(q) or
Section 4.11(4)(j) of the Indenture, (xi) the purchasing by the Borrower of
shares of the Capital Stock of TransTexas 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 (xii) any repayment or retirement for value by the Borrower of any loan
from the Lender incurred pursuant to Sections 4.11(2)(o), 4.11(2)(p),
4.11(4)(s) or 4.11(4)(t) of the Indenture.

"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 Loan Documents" shall mean the Senior TARC Discount Notes and
the Senior TARC Mortgage Notes.

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

"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

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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
or (ii) an Accounts Receivable Subsidiary.

"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 Discount Notes" shall mean the Guaranteed First Mortgage
Discount Notes due 2002 issued by the Borrower and guaranteed by the Lender.

"TARC Entities" shall mean the Borrower and each of its Subsidiaries.

"TARC Mortgage Notes" shall mean the Guaranteed First Mortgage Notes
due 2002 issued by the Borrower and guaranteed by the Lender.

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

"TARC Security Documents" shall mean the Disbursement Agreement, the
TARC Mortgage, the TARC 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.

"TARC Supplemental Indenture" shall mean that certain Supplemental
Indenture between the Borrower and the First Union National Bank, relating to
the Senior TARC Discount Notes.

"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.

"TransTexas" shall mean TransTexas Gas Corporation, a Texas
corporation.

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

"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.

"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 this 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 20% of Consolidated EBITDA since the Phase II
Completion Date 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

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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.

"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 $675,648,920.

(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 fully accreted
principal amount of $920,000,000; 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 $540,548,664.08. The Lender shall
deposit the remaining amount of the Loan, $135,100,255.92 (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.

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Section 2.3 Interest.

(a) The Note will accrete principal at sixteen percent
(16%) per annum commencing as of the Closing Date until June 15, 1999.
Interest will begin to accrue commencing June 15, 1999 and will be
payable semi- annually in arrears on June 15 and December 15 of each
year commencing on December 15, 1999.

(b) Borrower shall pay interest on the unpaid principal
amount of the Loan at a rate per annum equal to the lesser of (i)
sixteen percent (16%) and (ii) the Highest Lawful Rate from the
Closing Date until such principal amount shall be paid in full, at the
times and according to the terms and conditions set forth in the Note;
provided, however, that, in the event that the cost to complete Phase
I is in excess of $245 million, interest will begin to so accrue
commencing June 15, 1999 at a rate per annum equal to the lesser of
(i) sixteen and one quarter of one percent (16.25%) 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.

(c) 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 June 15, 1999. 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, plus all accrued and unpaid interest
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 Accreted Value of 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 Accreted Value of the outstanding principal amount of the Loan
plus (ii) the outstanding principal amount of the TransTexas 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

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<PAGE> 22
prepayment price equal to the Accreted Value of the portion of the outstanding
principal amount of the Note to be prepaid plus 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 for the purposes described more specifically in the
Offering Circular dated June 5, 1997 relating to the issuance of the TEC Notes,
including without limitation (a) to finance a two-phase construction and
expansion program designed to reactivate its petroleum refinery located
approximately twenty miles from New Orleans, Louisiana (the "Refinery") and (b)
to purchase for cash the TARC Discount Notes and the TARC Mortgage Notes, with
any remaining balance available to the Borrower for working capital and other
general purposes not otherwise prohibited by the Loan Documents. Borrower
agrees to place $135,100,255.92 million of the proceeds of the Loan in the
Disbursement Account, which funds will be restricted pursuant to the
Disbursement Agreement.

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 Texas; (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 Louisiana and in every jurisdiction in which the failure
to be qualified would reasonably be expected to have a material adverse effect.
Borrower has no Subsidiaries and is not a party to any joint venture or
partnership. 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. The Borrower 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 the Borrower 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 have been duly
executed and delivered by the Borrower and constitute valid and legally binding
obligations of the Borrower enforceable against the Borrower 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. The 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,

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<PAGE> 23
any order, regulation or demand of any Governmental Authority, which default or
violation would, 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 (including the Premises), 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 the Borrower of the Loan Documents 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 the
Borrower, (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 the
Borrower 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 the
Borrower 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 TARC Security Documents and the Financing Statements, each duly
executed and delivered by the parties thereto;

(b) the fully executed and delivered Intercreditor
Agreement;

(c) a commitment for mortgagee policy of title insurance
(the "Title Commitment") issued by First American Title Insurance
Company (the "Title Company") in favor of Lender and Indenture Trustee
in form and substance satisfactory to Lender and in an amount
satisfactory to Lender, committing to insure that the Mortgage creates
valid, first and prior Liens in the fee estate covered thereby
(collectively, the "Mortgaged Property"), except for Permitted Liens;

(d) 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(f) attached hereto
and made a part hereof;

(e) 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;

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<PAGE> 24
(f) 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;

(g) 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;

(h) the initial Budget, in form and substance
satisfactory to Lender; and

(i) certified copies of the fully executed and delivered
Senior Loan Documents, as amended by the TARC Supplemental Indenture
which shall be in form and substance satisfactory to Lender.

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 Construction. The Borrower shall use its best
efforts to expand and modify the Refinery pursuant to the Capital Improvement
Program with diligence and continuity in a good and workmanlike manner except
during the existence of delays caused by Force Majeure. The Borrower shall use
its best efforts to prevent and to minimize any delays caused by Force Majeure.

Section 7.3 Covenants Incorporated by Reference. The Borrower
shall, and shall cause each of its Subsidiaries to, comply with each covenant
applicable to the Borrower or its Subsidiaries, as 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;

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(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;

(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
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 lenders under such
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);

22
<PAGE> 26
(h) any of the TARC Security Documents shall for any reason cease
to be in full force and effect (except where no material adverse effect to the
Lenders would result), or shall cease to give the Lenders 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;

(i) if Phase I of the Capital Improvement Program is not completed
by the Required Phase I Completion Date; or

(j) if the Phase II Completion Date has not occurred by January
31, 2000.

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
TARC 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.

23
<PAGE> 27
(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 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:

24
<PAGE> 28
if to the Company:

TransAmerican Refining Corporation
1300 North Sam Houston Parkway East
Suite 320
Houston, Texas 77060
Attention: Ed Donahue
Vice President

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 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 TARC MORTGAGE OR THE CREATION, PERFECTION OR FORECLOSURE OF LIENS AND THE
ENFORCEMENT OF RIGHTS AND REMEDIES AGAINST THE COLLATERAL UNDER THE TARC
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

25
<PAGE> 29
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 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, the Indenture Trustee 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

26
<PAGE> 30
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.

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" shall each 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.

27
<PAGE> 31
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.

TRANSAMERICAN REFINING CORPORATION

By: ___________________________
Name: ___________________________
Title: ___________________________

TRANSAMERICAN ENERGY CORPORATION

By: ___________________________
Name: ___________________________
Title: ___________________________

28
<PAGE> 32
Exhibit A

[FORM OF PROMISSORY NOTE]

TRANSAMERICAN REFINING CORPORATION

$920,000,000

TransAmerican Refining Corporation, a Texas corporation (hereinafter
called the "Company," which term includes any successor corporation under the
Indenture hereinafter referred to), for value received, hereby promises to pay
to TransAmerican Energy Corporation, a Delaware corporation (the "Lender"), or
registered assigns, the principal sum of Nine Hundred Twenty Million Dollars,
on June 1, 2002.

Interest Payment Dates: June 15 and December 15, commencing
December 15, 1999 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:

TRANSAMERICAN REFINING CORPORATION

By:_____________________________________
Name:
Title:

A-1
<PAGE> 33
(BACK OF NOTE)

TRANSAMERICAN REFINING CORPORATION

1. Interest.

TransAmerican Refining Corporation, a Texas corporation (the
"Company"), promises to pay interest on the principal amount of this Note at a
rate of 16% per annum; provided, however, that in the event that the cost to
complete Phase I is in excess of $245 million, the Company promises to pay
interest on the principal amount of the Note at a rate of 16.25% 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,
1999. Interest on the Note will accrue commencing on June 15, 1999 from the
most recent date to which interest has been paid or, if no interest has been
paid, from June 15, 1997. Interest on the Note will be computed on the basis
of a 360-day year consisting of twelve 30-day months.

The Note will have the Accreted Value set forth below as of the dates
indicated:

<TABLE>
<CAPTION>
Accreted Value
(per $1,000
principal
Semi-Annual Accretion Date amount)
- -------------------------- -------------------
<S> <C>

December 15, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 793.832
June 15, 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 857.338
December 15, 1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 925.925
June 15, 1999 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,000.000
</TABLE>

2. Method of Payment.

The Company shall pay interest on the Note 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 $920,000,000.

A-2

<PAGE> 1
EXHIBIT 4.3

TRANSAMERICAN REFINING CORPORATION

SECURITY AND PLEDGE AGREEMENT

TRANSAMERICAN REFINING CORPORATION

in favor of

TRANSAMERICAN ENERGY CORPORATION

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

This Security and Pledge Agreement (this "Agreement") is made
and entered into as of June 13, 1997 by TransAmerican Refining Corporation, a
Texas 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 "TARC Intercompany Loan Agreement")
executed by the Company in favor of the Lender; and

WHEREAS, the Company's obligations under the TARC Intercompany
Loan Agreement are further evidenced by that certain promissory note in the
amount of $920,000,000 dated as of June 13, 1997 (the "TARC Intercompany
Note"), and executed by the Company in favor of the Lender; and

WHEREAS, the obligations of the Company under the TARC
Intercompany Note and the TARC Intercompany Loan Agreement are secured by that
certain Act of Mortgage, Security Agreement and Financing Statement dated as of
June 13, 1997 (the "TARC Mortgage"); and

WHEREAS, in order to secure the payment and performance in
full of the obligations of the Company under the TARC 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 TARC
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):

"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.
<PAGE> 3
"Equipment" shall mean and include all now owned or hereafter
acquired Vehicles, rolling stock and related equipment and other
assets accounted for as equipment by the Company 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 the Company's refinery or used in the Company's processing or
storage operations.

"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 TARC 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 TARC Intercompany Note, and

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

"Inventory" shall mean and include, feedstocks, refined
products, chemicals and catalysts, other supplies and storeroom items
and similar items accounted for as inventory by the Company on 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.

"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.

2
<PAGE> 4
"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
the "Company 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 .

(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 other subsidiary of the Company presently existing or
hereafter created or acquired (the "Pledged Subsidiaries")
therein set forth;

3
<PAGE> 5
(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 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.

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<PAGE> 6
(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 TARC
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 TARC 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 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 and Louisiana.

(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 TARC
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 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.

5
<PAGE> 7
(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 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 TARC 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

6
<PAGE> 8
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, assignment, mortgage,
hypothecation or transfer of the Collateral except as permitted
hereunder or under the TARC 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.

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<PAGE> 9
(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.

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:

8
<PAGE> 10
(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.

(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

9
<PAGE> 11
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.

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

10
<PAGE> 12
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.

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 Note is accelerated under the
provisions of the TARC Intercompany Loan Agreement, in addition to any
other rights and remedies that may be available to the Lender under
the UCC or the TARC 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

11
<PAGE> 13
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 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

12
<PAGE> 14
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 Note, presentment and
demand for payment, protest, notice of protest and nonpayment, notice
of dishonor, notice of the intention to accelerate and notice of
acceleration (except as otherwise set forth in the TARC 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.

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<PAGE> 15
(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 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.

(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

14
<PAGE> 16
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 TARC
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:

(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 TARC Intercompany Loan
Agreement or the 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 TARC Intercompany
Loan Agreement or the Note; or

15
<PAGE> 17
(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 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.

16
<PAGE> 18
(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 TARC
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.

(m) Release. The Collateral, in whole or in part, may be
released in accordance with the TARC Intercompany Loan Agreement and
the Indenture.

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

17
<PAGE> 19
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.

TRANSAMERICAN REFINING CORPORATION

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

TRANSAMERICAN ENERGY CORPORATION,
as Lender

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

By:
-----------------------------------
Name:
--------------------------------
Title:
--------------------------------
<PAGE> 21
EXHIBIT A

PERFECTION CERTIFICATE

The undersigned, Vice President of TransAmerican Refining
Corporation, a Texas 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:

TransAmerican Refining 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:

n/a

Section 2. Current Locations.

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

Mailing Address County State
--------------- ------ -----

1300 N. Sam Houston Parkway East Harris Texas
Houston, 77032

(b) The following are all the places of business of the
Company not identified above:

Mailing Address County State
--------------- ------ -----

14902 River Road St. Charles Louisiana
New Sarpy, 70078

A-1
<PAGE> 22
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:

n/a

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

================================================================================
Percentage
Stock Number of
Stock Class of Certificate Par of Outstanding
Issuer Stock No.(s) Value Shares Shares
- ------ ----- ------ ----- ------ ------
================================================================================

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

================================================================================

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

2
<PAGE> 27
SCHEDULE 5

SCHEDULE OF FILINGS

Debtor Filing Officer File Number Date(1)
- ------ -------------- ----------- ----

____________________

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

<PAGE> 1
EXHIBIT 4.4

DISBURSEMENT AGREEMENT

among

TRANSAMERICAN REFINING CORPORATION,

TRANSAMERICAN ENERGY CORPORATION,

FIRSTAR BANK OF MINNESOTA, N.A.,

as securities intermediary and disbursement agent,

FIRSTAR BANK OF MINNESOTA, N.A.,

as trustee,

and

BAKER & O'BRIEN, INC.,

as Construction Supervisor

June 13, 1997
<PAGE> 2
DISBURSEMENT AGREEMENT

This Disbursement Agreement dated as of June 13, 1997 (this
"Agreement") is entered into by and among TransAmerican Refining Corporation, a
Texas corporation ("TARC"), 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"), Firstar Bank of Minnesota, N.A., as trustee, and Baker &
O'Brien, Inc., as Construction Supervisor (the "Construction Supervisor").

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 TARC have entered into a loan agreement dated
as of the date hereof (the "TARC Loan Agreement"), pursuant to which TEC will
lend to TARC an aggregate of $675,648,920 out of the proceeds of the issuance
of the Notes and TARC will execute a promissory note in such amount in favor of
TEC (the "TARC Intercompany Note" and together with the TARC Loan Agreement,
the "TARC Intercompany Loan Documents");

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

WHEREAS, the Disbursement Agent has agreed to take such action
with respect to the Accounts 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 TARC Loan Agreement.

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

"Accounts" means the TARC Disbursement Account, the TEC Disbursement
Account, the Contingency Reserve Account, the Feedstock Reserve Account, the
Operating Reserve Account and the Interest Accumulation Account.

<PAGE> 3
"Agreement" has the meaning given to such term in the introductory
paragraph hereof.

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

"Budget" means the total budget for the Project attached hereto as
Exhibit A.

"Budgeted Line Item" means a separate line item included within the
Budget relating to a unit or component of the Project and specifying an amount
allocated for achieving Mechanical Completion of such unit or component in
accordance with the Plans.

"Coking Unit Completion Notice" has the meaning given to such term in
Section 5.4(a).

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

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

"Construction Supervisor Certificate" has the meaning given to such
term in Section 5.2(c).

"Contingency Reserve Account" has the meaning given to such term in
Section 4.1(b).

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

"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 5.2(a).

"Feedstock Disbursements" has the meaning given to such term in
Section 5.3(b).

"Feedstock Reserve Account" has the meaning given to such term in
Section 4.1(c).

"Final Disbursement Date" has the meaning given to such term in
Section 5.4(d).

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

"Initial Disbursement" has the meaning given to such term in Section
5.3(c).

"Interest Accumulation Account" has the meaning given to such term in
Section 4.2(b).

"Mechanical Completion" means with respect to the Project, Phase I,
Phase II or any specified unit or component thereof, sufficient completion of
the construction of the Project, Phase I, Phase II or such specified unit or
component, as the case may be, in accordance with the Plans, so that the
Project, Phase I, Phase II or such unit or component, as the case may be, can
be utilized for its intended purpose.

"Minimum Contingency Reserve Amount" means initially $75,000,000,
subject to reduction as set forth below in this definition. Upon delivery of a
Coking Unit Completion Notice by the Construction Supervisor to the
Disbursement Agent and TEC in accordance with the provisions of Section 5.4(a),
the Minimum Contingency Reserve Amount shall be reduced to zero.

2
<PAGE> 4
"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.

"Operating Disbursement" has the meaning given to such term in Section
5.3(e).

"Operating Reserve Account" has the meaning given to such term in
Section 4.1(d).

"Phase I Budgeted Amount" means the aggregate amount of expenditures
allocated for Phase I in the Budget.

"Phase I Completion Estimate" has the meaning given to such term in
Section 3.2(b).

"Phase I Completion Notice" has the meaning given to such term in
Section 5.4(b).

"Phase II Completion Estimate" has the meaning given to such term in
Section 3.2(b).

"Plans" means the plans and specifications relating to the proposed
expansion and modification of the Refinery, a summary of which is included in
the Offering Circular.

"Project" means the expansion and modification of the Refinery
pursuant to the Plans.

"Project Completion Notice" has the meaning given to such term in
Section 5.4(c).

"Refinery" means refinery owned and operated by TARC and located in
St. Charles Parish, Louisiana, as more fully described in the Offering
Circular.

"Reserve Accounts" means the Contingency Reserve Account, the
Feedstock Reserve Account and the Operating Reserve Account.

"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.

"Special Purpose Disbursements" means Feedstock Disbursements, the
Initial Disbursement, TARC Notes Disbursements, Operating Disbursements and
Interest Disbursements.

"Status Report" has the meaning given to such term in Section 3.2(b).

"Substantial Completion" means with respect to the Project, Phase I,
Phase II or any specified unit or component thereof, (a) the Mechanical
Completion of the Project, Phase I, Phase II or such specified unit or
component, as the case may be and (b) the completion of performance tests of
the Project, Phase I, Phase II or such specified unit or component, as the case
may be, that demonstrate

3
<PAGE> 5
performance in all material respects in accordance with the Plans. Without
limiting the generality of the foregoing, (a) Substantial Completion of Phase I
shall include without limitation, the Mechanical Completion of the process
units and supporting facilities set forth under the heading "Business of TARC
- -- Capital Improvement Program -- Phase I" in the Offering Circular and the
demonstration to the reasonable satisfaction of the Construction Supervisor
that for a period of at least fifteen consecutive days, the 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) 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, (b) Substantial
Completion of Phase II shall include without limitation, the Mechanical
Completion of the process units and supporting facilities set forth under the
heading "Business of TARC -- Capital Improvement Program -- Phase II" in the
Offering Circular and the demonstration to the reasonable satisfaction of the
Construction Supervisor that for a period of at least 72 uninterrupted hours,
the Refinery has sustained (i) the successful performance of all of the
facilities comprising Phase I 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 and (c) Substantial Completion of the Project
shall mean the occurrence of both Substantial Completion of Phase I and
Substantial Completion of Phase II.

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

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

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

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

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

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

"TARC Notes Disbursement" has the meaning given to such term in
Section 5.3(d).

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

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

"TEC Accounts" means the TEC Disbursement Account, the Contingency
Reserve Account, the Feedstock Reserve Account and the Operating Reserve
Account.

"TEC Certificate" has the meaning given to such term in Section 5.1.

"TEC Disbursement Account" has the meaning given to such term in
Section 4.1(a).

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

"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.

"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 TARC 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 TARC 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, TARC and the Construction Supervisor of any action taken by it
hereunder (provided that no such notice need be given under
circumstances in which TEC, TARC and the Construction Supervisor 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, TARC or any of
their respective agents or representatives to inspect and to make
copies of such books and records at TARC's sole cost and expense.

(d) The Disbursement Agent shall use its good faith
efforts and utilize prudence in

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performing its duties hereunder consistent with those of similar and
prudent institutions disbursing disbursement control funds.

(e) On or prior to the last day of each calendar month,
the Disbursement Agent shall deliver to each of TEC, TARC and the
Construction Supervisor a reasonably detailed statement showing the
balance of, disbursements from, reserves to, releases 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 TARC
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 TARC.

(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 TARC), 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, TARC 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,

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<PAGE> 8
TARC and the Trustee. Upon receipt of any such notice of resignation,
TARC 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 shall have been
appointed by TARC 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, TARC and the Trustee.

(b) Each of TEC and TARC 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, TARC, the Construction
Supervisor 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
Collateral Investments (and other funds on deposit in the Accounts)
within its possession or control 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 the Collateral
(and such other funds) 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 the Trustee as
entitled to exercise the rights that comprise any financial asset credited to
the account, (iv) all property delivered to the Disbursement Agent pursuant to
this Agreement will be promptly credited to the appropriate 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 each of 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 the Trustee and relating to any of
the Accounts, the Disbursement Agent shall comply with such entitlement order

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without further consent by TEC, TARC or any other Person.

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

(a) Each of 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 the Trustee (in
the case of the TEC Accounts) or TEC (in the case of the TARC
Accounts).

(b) No financial asset is or will be registered in the name
of TEC or TARC, payable to the order of TEC or TARC, or specially
endorsed to TEC or TARC, 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 any of 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, TARC 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 TARC 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 any of the Accounts or in any financial asset carried
therein, the Disbursement Agent will promptly notify TEC, the Trustee and TARC
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, TARC, the Construction Supervisor and the
Trustee in accordance with Section 8.2.

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 any of 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 the Trustee
and 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 it in respect of
its 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

CONSTRUCTION SUPERVISOR

SECTION 3.1 Appointment. TARC hereby designates and appoints Baker &
O'Brien, Inc., as the Construction Supervisor under this Agreement, and
authorizes the Construction Supervisor to take such actions, exercise such
powers and perform such duties as are expressly delegated to the Construction
Supervisor 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 Construction Supervisor 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
Construction Supervisor.

SECTION 3.2 Duties. In addition to those expressly set forth
elsewhere in this Agreement, the Construction Supervisor shall have the
following duties and responsibilities:

(a) The Construction Supervisor shall spend as much time
at the site of the Project as it determines to be reasonably necessary
to fulfill its duties hereunder but shall, in any event, inspect the
Project at least once per calendar week.

(b) During the term of this Agreement, the Construction
Supervisor shall deliver to the Disbursement Agent, TARC and TEC
reasonably detailed written reports on the progress of work on the
Project (each, a "Status Report"), at least once during each period of
two consecutive calendar months beginning on January 1, March 1, May
1, July 1, September 1 and November 1 of each calendar year. Each
Status Report shall include estimates as to (i) the total amount of
additional expenditures required to be incurred in order to achieve
Substantial Completion of Phase I (the "Phase I Completion Estimate")
and, (ii) the total amount of additional expenditures required to be
incurred in order to achieve Substantial Completion of Phase II (the
"Phase II Completion Estimate"). Such estimates shall be based on
estimates and reasonably detailed supporting documentation that TARC
shall prepare and provide to the Construction Supervisor. The
Construction Supervisor shall review such estimates prepared by TARC
as well as such supporting documentation, and if the Construction
Supervisor, in its sole judgment, believes that such estimates are
reasonable, then the Construction Supervisor shall include such
estimates in the Status Report; provided, however, that if the
Construction Supervisor, in its sole judgment, does not believe that
such estimates are reasonable, then the Construction Supervisor shall
revise such estimates in order to produce estimates that it believes
are reasonable, and shall include such revised estimates in the Status
Report. If the Phase I Completion Estimate exceeds the difference
between the Phase I Budgeted Amount and the aggregate amount of funds
expended in connection with Phase I on or prior to the date of the
Status Report, then the Status Report shall include an instruction to
the Disbursement Agent to reserve from the TEC Disbursement Account to
the Contingency Reserve Account an amount equal to the lesser of such
excess and the total amount remaining in the TEC Disbursement Account.
If the difference between the Phase I Budgeted Amount and the
aggregate amount of funds expended in connection with Phase I on or
prior to the date of the Status Report, exceeds the Phase I Completion
Estimate, then the Status Report shall include an instruction to the
Disbursement Agent to release from the Contingency Reserve Account to
the TEC Disbursement Account an amount equal to the lesser of such
excess and the positive difference, if any, between the total amount
remaining in the Contingency Reserve Account and the Minimum
Contingency Reserve Amount; provided, however, that such Status Report
shall include an instruction to the Trustee to not release any funds
from the Contingency

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Reserve Account to the TEC Disbursement Account, if such release would
cause the total amount of funds in the Contingency Reserve Account to
be less than the Minimum Contingency Reserve Amount.

(c) The Construction Supervisor shall review each
Disbursement Certificate submitted by TARC. The Construction
Supervisor shall deliver a Construction Supervisor Certificate to the
Disbursement Agent approving a disbursement if and only if the
Construction Supervisor determines that:

(i) such disbursement has been requested to (A)
reimburse TARC for a Budgeted Line Item or pay for any other
disbursement contemplated in Section 5.3, (B) reimburse TARC
for the cost of work that has been performed on the Project in
accordance with the Plans, (C) reimburse TARC for the cost of
goods or materials necessary for Substantial Completion of the
Project that have been or will be delivered to the Project
site, (D) reimburse TARC for the cost of progress payments
that have been made pursuant to contracts with other Persons
supplying goods or services to TARC that are necessary for
Substantial Completion of the Project, or (E) reimburse TARC
for the cost of deposits to secure letters of credit for goods
or materials to be delivered to the Project site and used in
the Project;

(ii) the reimbursement for which such disbursement is
requested does not cause the total expenditures for Phase II
to exceed $129,000,000 prior to the delivery by the
Construction Supervisor to the Disbursement Agent of a Coking
Unit Completion Notice;

(iii) with respect to any such disbursement relating
to Phase II and requested prior to the delivery of a Coking
Unit Completion Notice by the Construction Supervisor to the
Disbursement Agent and TEC, after giving effect to such
disbursement, there shall remain funds in the TEC Disbursement
Account that are not reserved in any of the Reserve Accounts;
and

(iv) the Construction Supervisor is satisfied, by
representations from TARC (unless the Construction Supervisor
has reason to believe otherwise) or by any other means, that
all of TARC's transactions in connection with the Project for
which a disbursement is requested are arm's length
transactions with unrelated, unaffiliated Persons or are on
terms that are at least as favorable to TARC as the terms that
could be obtained in a comparable transaction made on an arm's
length basis with unrelated, unaffiliated Persons.

(d) Prior to approving any requested disbursement, the
Construction Supervisor shall (i) review invoices for goods and
services provided to the Project for which TARC seeks reimbursement
from any of the Accounts, (ii) review all contracts of TARC pursuant
to which TARC is required to make progress payments, estimated
payments or deposits and for which TARC seeks a disbursement from any
of the Accounts, (iii) review copies of all lien waivers and releases
provided to TARC by its contractors and suppliers and (iv) review all
other documents and information that the Construction Supervisor deems
appropriate in order to determine the accuracy of the information set
forth in the Disbursement Certificate.

(e) If the Construction Supervisor is unable to approve a
disbursement within five (5) Business Days of receipt of the
Disbursement Certificate, the Construction Supervisor shall

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give written notice to TARC, the Disbursement Agent and TEC to such
effect.

SECTION 3.3 Rights of Construction Supervisor.

(a) The Construction Supervisor may execute any of its
duties under this Agreement by or through agents and shall be entitled
to advice of counsel concerning all matters pertaining to such duties.

(b) Neither the Construction Supervisor nor any of its
officers, directors, employees, agents, attorneys-in-fact or
affiliates shall be 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).

(c) The Construction Supervisor 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 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 TARC), independent accountants and
other experts selected by the Construction Supervisor. The
Construction Supervisor shall be fully justified in failing or
refusing to take any action hereunder if such action would, in the
opinion of the Construction Supervisor, be contrary to law or the
terms of this Agreement.

(d) If, with respect to a proposed action to be taken by
it, the Construction Supervisor shall determine in good faith that the
provisions of this Agreement relating to the functions or
responsibilities or discretionary powers of the Construction
Supervisor are or may be ambiguous or inconsistent, the Construction
Supervisor shall notify TARC and TEC (identifying the proposed action
and the provisions that it considers are or may be ambiguous or
inconsistent) and may decline either to perform such function or
responsibility or to exercise such discretionary power unless it has
received the written confirmation of TARC and TEC that it concurs in
the circumstances that the action proposed to be taken by the
Construction Supervisor is consistent with the terms of this Agreement
or is otherwise appropriate.

SECTION 3.4 Resignation and Removal of Construction Supervisor.

(a) Subject to the appointment and acceptance of a
successor Construction Supervisor as provided below, the Construction
Supervisor may, at any time, give a notice of resignation to TEC and
TARC. Upon receipt of any such notice of resignation, TARC shall have
the right to appoint a successor Construction Supervisor, which
successor shall not be affiliated with, or under the control of, TARC
or any of its affiliates. If no successor Construction Supervisor
shall have been appointed by TARC and shall have accepted such
appointment within thirty (30) days after the retiring Construction
Supervisor's giving of notice of resignation, then the retiring
Construction Supervisor may appoint a successor Construction
Supervisor, which shall be (i) reasonably acceptable to TARC but not
affiliated with, or under the control of, TARC or any of its
affiliates or (ii) one of the alternate Construction Supervisors set
forth on Schedule I hereto (each, an "Alternate").

(b) TARC and TEC shall each, individually, have the
right, upon the expiration of thirty (30) days following delivery of
written notice to the Construction Supervisor, TARC, TEC

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and the Disbursement Agent, to cause the Construction Supervisor to be
relieved of its duties hereunder and to select a successor
Construction Supervisor to serve hereunder, which shall be either (i)
reasonably acceptable to the other party or (ii) one of the
Alternates; provided, that the successor Construction Supervisor shall
not be affiliated with or under the control of, TARC or any of its
affiliates.

(c) Upon the acceptance of any appointment as
Construction Supervisor hereunder by a successor Construction
Supervisor, (i) such successor Construction Supervisor, the
Disbursement Agent, TEC and TARC shall enter into an agreement
substantially identical to this Agreement, and (ii) such agreement
shall provide that such successor Construction Supervisor shall
thereupon succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Construction Supervisor, and
that the retiring Construction Supervisor shall be discharged from its
duties and obligations hereunder. After any retiring Construction
Supervisor's resignation or removal hereunder as Construction
Supervisor, 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 Construction Supervisor.

ARTICLE IV

ACCOUNTS

SECTION 4.1 Establishment of the TEC Accounts.

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

(b) TEC shall maintain with the Disbursement Agent a
segregated subaccount of the TEC Disbursement Account (the
"Contingency Reserve Account") under the sole dominion and control of
the Trustee, in the name of TEC but indicating the lien of the
Trustee. Funds shall be released from the Contingency Reserve Account
only in accordance with the provisions of Section 4.4(b) and Article
V.

(c) TEC shall maintain with the Disbursement Agent a
segregated subaccount of the TEC Disbursement Account (the "Feedstock
Reserve Account") in the name of TEC but indicating the lien of the
Trustee. Funds shall be released from the Feedstock Reserve Account
only in accordance with the provisions of Article V.

(d) TEC shall maintain with the Disbursement Agent a
segregated subaccount of the TEC Disbursement Account (the "Operating
Reserve Account") under the sole dominion and control of the Trustee,
in the name of TEC but indicating the lien of the Trustee. Funds
shall be released from the Operating Reserve Account only in
accordance with the provisions of Article V.

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SECTION 4.2 Establishment of the TARC Accounts.

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

(b) TARC shall maintain with the Disbursement Agent a
separate custodial account (the "Interest Accumulation Account") under
the sole dominion and control of the Trustee, in the name of TARC but
indicating the lien of the Trustee as assignee. Funds shall be
released from the Interest Accumulation Account only in accordance
with the provisions of Article V.

SECTION 4.3 Deposits to the Accounts.

(a) On the date hereof, TEC shall deposit $73,293,184.54
in the TEC Disbursement Account. Thereafter, TEC shall deposit
promptly all funds that it receives pursuant to the TransTexas
Dividend/Share Repurchase Program.

(b) On the date hereof, TARC shall deposit in the TARC
Disbursement Account $135,100,255.92 out of the proceeds received by
it from the loan made pursuant to the TARC Intercompany Loan
Documents. Thereafter, TARC shall deposit promptly all funds that it
receives pursuant to the TransTexas Dividend/Share Repurchase Program.

(d) TARC may deposit in the TARC Disbursement Account the
Net Cash Proceeds from Asset Sales in accordance with Section 8.4 of
the TARC Loan Agreement.

SECTION 4.4 Reserves to and Releases from the Reserve Accounts.

(a) Initially, $25,500,000 of the amount deposited in the
TEC Disbursement Account shall be reserved in the Operating Reserve
Account. Upon any additional deposits to the TEC Disbursement Account
pursuant to the provisions of Section 4.3(a), the amount of such
additional deposits shall be reserved in the Contingency Reserve
Account until the aggregate amount reserved therein equals the Minimum
Contingency Reserve Amount, and thereafter, upon any additional
deposits to the TEC Disbursement Account pursuant to the provisions of
Section 4.3(a), the amount of such additional deposits shall be
reserved in the Feedstock Reserve Account, until the aggregate amount
reserved therein equals the difference between $50,000,000 and the
aggregate amount of Feedstock Disbursements made on or prior to the
date on which such amount is so reserved.

(b) Upon receipt of each Status Report, the Disbursement
Agent shall comply promptly (or as promptly as practicable when funds
become available in the appropriate Account) with the instructions, if
any, therein regarding the reserve of funds from the TEC Disbursement
Account to the Contingency Reserve Account or the release of funds
from the Contingency Reserve Account to the TEC Disbursement Account.
Upon delivery by the Construction Supervisor to the Disbursement Agent
of a Coking Unit Completion Notice, the Disbursement

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Agent shall release from the Contingency Reserve Account to the TEC
Disbursement Account all remaining funds in the Contingency Reserve
Account.

SECTION 4.5 Security Interest in the TEC Accounts.

(a) As security for the prompt and complete payment and
performance in full of all obligations under the Indenture and the
Notes, TEC has agreed, pursuant to the TEC Security Agreement, to
grant to the Trustee a security interest in and a lien on and to
pledge and assign to the Trustee all of its right, title and interest
in and to the TEC Accounts and all funds and investments deposited
therein.

(b) The Disbursement Agent acknowledges notice of, and
consents to the terms and provisions of, the TEC Security Agreement
and agrees that notwithstanding anything to the contrary in this or
any other agreement relating to the TEC Accounts, the TEC Accounts are
and will be subject to the terms and conditions of the TEC Security
Agreement, will be held in trust on behalf of 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 the Trustee pursuant to the TEC Security Agreement
and will be subject to the written instructions of the Trustee given
in accordance with the TEC Security Agreement.

SECTION 4.6 Security Interest in the TARC Accounts.

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

(b) The Disbursement Agent acknowledges notice of, and
consents to the terms and provisions of, the TARC Security Agreement
and the TEC Security Agreement and agrees that notwithstanding
anything to the contrary in this or any other agreement relating to
the TARC Accounts, the TARC Accounts are and will be subject to the
terms and conditions of the TARC 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 TARC 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 TARC Security Agreement and the TEC Security
Agreement.

SECTION 4.7 Certain Agreements with respect to the Accounts.

(a) In accordance with written instructions received from
TARC, the Disbursement Agent shall, unless otherwise instructed by the
Trustee, (i) invest amounts on deposit in each of the Accounts in such
Cash Equivalents as TEC may select (in the case of the TEC Accounts)
or as TARC may select (in the case of the TARC Accounts) and credit
such Cash Equivalents to the respective 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

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Equivalents as TARC may select and credit such Cash Equivalents to the
respective 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 as TEC may select (in the case of the
TEC Accounts) or as TARC may select (in the case of the TARC Accounts)
and credit such Cash Equivalents to the respective Account (all the
Cash Equivalents referenced in clauses (i) and (ii) above being,
collectively, "Collateral Investments") and (iv) deposit and hold in
the respective Accounts all proceeds that are not invested or
reinvested in Collateral 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) All service charges and fees with respect to this
Agreement or the Accounts shall be paid by TARC in accordance with the
provisions of Section 6.1(d).

(d) The Trustee and TEC shall be entitled to exercise any
and all rights of TARC in respect of the Accounts in accordance with
the terms of the TEC Security Agreement and the TARC Security
Agreement, respectively, and the Disbursement Agent shall comply with
such exercise, subject to the provisions of Section 8.8.

SECTION 4.8 Valuation of Accounts. For purposes of determining the
value of any amounts in the Accounts, all Collateral Investments shall be
valued at the lower of cost or market value.

ARTICLE V

DISBURSEMENTS FROM THE ACCOUNTS

SECTION 5.1 Priority Disbursements. At any time after the TARC
Intercompany Note is due and payable, upon maturity, acceleration thereof or
otherwise, funds in any of the Accounts specified by TEC shall be disbursed by
the Disbursement Agent to any account specified by TEC, upon receipt of a
certificate of TEC substantially in the form of Exhibit B hereto (each, a "TEC
Certificate"), certifying that such amounts will be applied promptly in
satisfaction of obligations of TARC under the TARC Intercompany Loan Documents.

SECTION 5.2 Conditions to Disbursement of Funds. Funds in the
Accounts shall be disbursed for the account of TARC pursuant to the provisions
of Section 5.3(a) or Section 5.3(b) only upon satisfaction of each of the
conditions set forth below in this Section 5.2. All other disbursements from
the Accounts shall be made only upon satisfaction of each of the conditions set
forth in Section 5.2(d) and Section 5.2(e).

(a) TARC shall have delivered to the Disbursement Agent,
TEC and the Construction Supervisor a written notice substantially in
the form of Exhibit C 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 TARC and shall be completed and certified to be accurate by
TARC. The Disbursement Certificate shall specifically identify the
nature of each expense.

(b) In addition to the copy of the Disbursement
Certificate referenced above and the

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<PAGE> 17
documents referenced therein (but without duplication), TARC shall
have delivered, or caused the delivery, to TEC and the Construction
Supervisor copies of invoices, purchase orders, contracts, delivery
receipts, payroll ledgers and any further information or certificates
required hereunder and such other information as TEC or the
Construction Supervisor may from time to time reasonably require to
determine the accuracy of the information set forth in the
Disbursement Certificate.

(c) The Construction Supervisor shall have reviewed and
approved the Disbursement Certificate and shall have sent a written
notice substantially in the form of Exhibit D hereto (the
"Construction Supervisor Certificate") to the Disbursement Agent and
TEC confirming its approval.

(d) If the Project has been materially injured or damaged
by fire or other casualty, funds equal to the amount of any insurance
proceeds received in respect of such fire or other casualty shall have
been deposited in the TARC Disbursement Account in accordance with the
provisions of the Mortgage.

(e) An Event of Default shall not have occurred and be
continuing.

SECTION 5.3 Disbursements from the Accounts.

(a) To the extent that the amount of funds in the TARC
Disbursement Account is greater than zero, all disbursements from the
Accounts (other than Special Purpose Disbursements) shall be made out
of the TARC Disbursement Account until the amount of funds in such
account is exhausted, and thereafter, as long as the TEC Disbursement
Account contains any funds that have not been reserved in any of the
Reserve Accounts, all disbursements from the Accounts (other than
Special Purpose Disbursements) shall be made from the TEC Disbursement
Account out of funds that have not been reserved in any of the Reserve
Accounts. If the amount of funds in the TEC Disbursement Account that
has not been reserved in any of the Reserve Accounts is zero,
disbursements from the Accounts (other than Special Purpose
Disbursements) shall be made first from the Contingency Reserve
Account, until the amount of funds therein is exhausted, and second
from the Feedstock Reserve Account, until the amount of funds therein
is exhausted, third from the Operating Account, until the amount of
funds therein is exhausted and fourth from the Interest Accumulation
Account, until the amount of funds therein is exhausted.

(b) Disbursements of funds specified in a Disbursement
Certificate for the purchase of feedstock to be used in the start up
and subsequent operation of the Delayed Coking Unit and/or Phase I
("Feedstock Disbursements") shall be made out of the Feedstock Reserve
Account; provided, that the Construction Supervisor shall have
previously delivered either a Coking Unit Completion Notice or a Phase
I Completion Notice to the Disbursement Agent.

(c) Notwithstanding any provision hereof to the contrary,
on the first Business Day after the initial deposit of funds into the
TARC Disbursement Account, the Disbursement Agent shall make a
disbursement (the "Initial Disbursement") to TARC in the amount of
$32,000,000 from the TARC Disbursement Account; provided, that the
Disbursement Agent has received a certificate of a duly authorized
officer of TARC certifying that at least $25,000,000 of the Initial
Disbursement shall be applied towards the construction of the Project
and that the remainder of the Initial Disbursement shall be applied
towards the payment of outstanding accounts payable.

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(d) Disbursements ("TARC Notes Disbursements") of funds
specified in a Disbursement Certificate for the payment of interest
on, or the redemption, purchase, defeasance or other retirement of,
any or all of TARC's Guaranteed First Mortgage Discount Notes due 2002
or TARC's Guaranteed First Mortgage Notes due 2002 (collectively,
"TARC Notes") shall be made out of the TARC Disbursement Account.

(e) If requested by TARC pursuant to a Disbursement
Certificate, once during each calendar month, the Disbursement Agent
shall make a disbursement from the Operating Reserve Account (an
"Operating Disbursement") to TARC in the amount requested by TARC (or
such lesser amount as may be reserved in the Operating Reserve
Account); provided, that the amount of each Operating Disbursement may
not exceed $1,500,000 (or $4,500,000 if such amount is to be disbursed
in December 1997); provided, further, that if less than $1,500,000 is
disbursed pursuant to this Section 5.3(e) in any calendar month (or
less than $4,500,000 is disbursed in December 1997), then each such
difference shall be carried forward and shall be added to the amounts
that may be disbursed pursuant to this Section 5.3(e) in one or more
subsequent months.

(f) If requested by TARC or TEC, the Disbursement Agent
shall make disbursements from the Interest Accumulation Account (an
"Interest Disbursement") to TARC or TEC, as the case may be, in the
amount requested by such party (or such lesser amount as may be on
deposit in the Interest Accumulation Account);

(g) Subject to the terms and conditions of the TARC
Security Agreement and the TEC Security Agreement, the Disbursement
Agent shall sell all or such portion of the investments held in the
appropriate Accounts (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 TARC, as the case may be,
delivered to the Disbursement Agent at least one Business Day prior to
any proposed Date of Disbursement.

(h) Subject to the provisions of this Section 5.3, if
TARC has delivered a Disbursement Certificate with all required
supporting information, the Construction Supervisor has delivered a
Construction Supervisor Certificate and the other conditions specified
in Section 5.2 have been satisfied, the Disbursement Agent shall make
the requested disbursement from the appropriate Account by the later
to occur of (i) the requested Date of Disbursement or (ii) the second
Business Day after satisfaction of all such conditions.

SECTION 5.4 Completion of the Project.

(a) Upon Mechanical Completion (in accordance with the
Plans) of the Delayed Coking Unit, the Hydrodesulfurization Unit and
the related Sulfur Recovery System (with a capacity of 160 long tons
per day), all of which are included within Phase I and described in
the Plans, TARC shall give written notice of such Mechanical
Completion to the Construction Supervisor. Promptly after receipt of
such notice, the Construction Supervisor shall determine, by whatever
means it deems appropriate, whether it agrees that such Mechanical
Completion has occurred, and if the Construction Supervisor so agrees,
then the Construction Supervisor shall provide prompt written notice
of such Mechanical Completion (a "Coking Unit Completion Notice") to
the Disbursement Agent and TEC.

(b) Upon Substantial Completion (in accordance with the
Plans) of Phase I, TARC shall give written notice of such Substantial
Completion to the Construction Supervisor.

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Promptly after receipt of such notice, the Construction Supervisor
shall determine, by whatever means it deems appropriate, whether it
agrees that such Substantial Completion has occurred, and if the
Construction Supervisor so agrees, then the Construction Supervisor
shall provide prompt written notice of such Substantial Completion (a
"Phase I Completion Notice") to the Disbursement Agent and TEC.

(c) Upon Substantial Completion (in accordance with the
Plans) of the Project, TARC shall give written notice of such
Substantial Completion to the Construction Supervisor. Promptly after
receipt of such notice, the Construction Supervisor shall determine,
by whatever means it deems appropriate, whether it agrees that such
Substantial Completion has occurred, and if the Construction
Supervisor so agrees, then the Construction Supervisor shall provide
prompt written notice of such Substantial Completion (a "Project
Completion Notice") to the Disbursement Agent and TEC.

(d) If the Construction Supervisor has provided a Project
Completion Notice to the Disbursement Agent and TEC and either (i)
sixty-five (65) days have passed since the date of such Project
Completion Notice and TARC has furnished to the Disbursement Agent and
TEC a clear lien and privilege certificate, dated after such
sixty-five (65) days have passed, from the St. Charles Parish Clerk of
Court, reflecting no outstanding mechanic's or materialman's liens
with respect to the Project, or (ii) TARC has obtained an endorsement
to its title policy for the Mortgage Property affirmatively insuring
against all liens that may be asserted with respect to the Project and
has delivered evidence of such endorsement to the Disbursement Agent
and TEC, then, within five (5) days after the satisfaction of such
conditions, the Disbursement Agent shall liquidate all investments in
the Accounts and release all amounts remaining on deposit in the
Accounts to TARC in accordance with written instructions provided by
TARC. The date of such release shall be the "Final Disbursement
Date."

ARTICLE VI

COVENANTS OF TARC AND TEC

SECTION 6.1 Covenants of TARC.

(a) Copies of the Contracts, Etc. TARC shall deliver to
the Construction Supervisor and, upon the request of the Disbursement
Agent or TEC, to the Disbursement Agent or TEC (i) as promptly as
practicable, and in any event no later than five (5) Business Days
after the execution thereof, copies of any contract for work or
materials for the Project, or series of related contracts for
substantially the same work or materials, with payments in an amount
equal to or in excess of $100,000, together with all amendments and
modifications thereto, and, upon the request of the Disbursement
Agent, TEC or the Construction Supervisor, copies of any other
contracts for work or materials for the Project, and (ii) as promptly
as practicable, copies of all work permits, building permits and other
required permits.

(b) Access to Information. TARC shall permit and cause
each of its Subsidiaries to permit the Construction Supervisor, TEC
and the Disbursement Agent on reasonable notice and at such times as
shall be reasonably requested (i) to inspect the Plans and the Budget,
(ii) to inspect and review (and receive copies of, if requested) (A)
all contracts relating to the Project, (B) all books and records of
TARC and any of its Subsidiaries related to the Project and (C) such
other information as such Person shall reasonably request relating to
the Project, including copies

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of receipts, invoices and other supporting documentation to
substantiate the costs to be paid from the proceeds of any requested
disbursement hereunder, (iii) to attend any job progress meetings and
(iv) to discuss the Project and other matters related thereto with any
Project engineer, any contractor or subcontractor performing work or
supplying material for the Project or any employee of TARC and its
Subsidiaries.

(c) Delivery of Prepaid Goods and Materials. TARC shall
cause all goods and materials paid for with funds disbursed from any
of the Accounts to be delivered to (to the extent TARC controls such
delivery), and used in, the Project in due course in accordance with
the Plans or cause such goods and materials to be (i) sold for cash
and the proceeds of such sale deposited in the TARC Disbursement
Account or (ii) exchanged for other goods and materials that are
delivered to, and used in, the Project, in the case of each of clause
(i) and (ii) above, to the extent not prohibited pursuant to the terms
of the TARC Intercompany Loan Agreement.

(d) Payment of Fees and Expenses. TARC 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 and the
Construction Supervisor in connection with this Agreement. To the
extent available, such fees and expenses may be paid through the TARC
Disbursement Account or the TEC Disbursement Account by including such
amounts in a Disbursement Certificate.

SECTION 6.2 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 such Event of Default known to it.

ARTICLE VII

ARBITRATION

SECTION 7.1 Arbitration. Any disagreement with respect to the
release of funds from any of the Accounts, or any related disagreement with
respect to the construction, meaning or effect of this Agreement, arising out
of this Agreement or concerning the rights or obligations of the parties
hereunder shall be submitted to arbitration, one arbitrator to be chosen by
TARC, one by the Construction Supervisor, and a third to be chosen by the first
two arbitrators before they enter into arbitration. The arbitrators shall be
impartial and shall be active or retired persons with experience in
construction, development and/or construction lending. The third arbitrator
chosen by the first two arbitrators shall also have experience in the petroleum
refining, energy or petrochemical industry.

In the event that either party should fail to choose an arbitrator
within fifteen (15) days following a written request by the other party to
enter into arbitration, the requesting party may choose two arbitrators who
shall, in turn, choose the third arbitrator. If the first two arbitrators have
not chosen a third arbitrator at the end of fifteen (15) days following the
last day of the selection of the first two arbitrators, each of the first two
arbitrators shall name three candidates, of whom the other arbitrator shall
eliminate two, and the determination of the third arbitrator shall be made from
the remaining two candidates by drawing lots. Each party shall present its
case to the arbitrators within fifteen (15) days following the date of the
appointment of the third arbitrator. The decision of a majority of the three
arbitrators shall be final and binding upon both parties. Judgment may be
entered upon the arbitration award in any court having jurisdiction. Each
party shall bear the expense of its own arbitrator and shall jointly and
equally bear with the other the expense of the third arbitrator and of the
arbitration. In the event that the two arbitrators are chosen by one party, as
above provided, the expense of the arbitrators

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and the arbitration shall be equally divided between the two parties. Any such
arbitration shall take place in New Orleans, Louisiana unless some other
location is mutually agreed upon by the parties. The arbitrators shall resolve
any dispute arising hereunder in a manner consistent with the intent of the
parties as expressed in this Agreement. The arbitrators shall not award any
punitive, consequential or exemplary damages or any amount in excess of the
amount to be released from the Accounts. All awards by the arbitrators shall
be payable solely from the amounts on deposit in the Accounts.

ARTICLE VIII

MISCELLANEOUS

SECTION 8.1 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 8.2 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

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To the Construction Supervisor:

Baker & O'Brien, Inc.
7557 Rambler Road, Suite 200 LB 85
Dallas, Texas 75231
Facsimile: (214) 368-0190
Attention: John O'Brien

To TARC:

TransAmerican Refining 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

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 8.3 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 8.4 Indemnity and Expenses.

(a) TARC agrees to indemnify the Disbursement Agent and
the Construction Supervisor, and their 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 TARC
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.

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(b) TARC shall, promptly upon demand but no later than
thirty (30) days after its receipt of an invoice, pay to the
Disbursement Agent and the Construction Supervisor 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, TEC or the Construction Supervisor may incur in
connection with (i) this Agreement, (ii) the exercise or enforcement
of any rights hereunder or (iii) the failure by TARC to perform or
observe any of the provisions hereof.

(c) The issuance of a Construction Supervisor's
Certificate or the making of any disbursement from any of the Accounts
or part thereof shall not constitute an approval or acceptance of the
work or material by TEC, the Construction Supervisor or the
Disbursement Agent, nor shall it give rise to any liability or
responsibility related to:

(i) the quality of the work, the quantity of the
work, the rate or progress in completion of the work, or the
sufficiency of materials or labor being supplied in connection
therewith; and

(ii) any errors, omissions, inconsistencies or
other defects of any nature in the Plans.

(d) Any inspection of the work that either TEC, the
Disbursement Agent or the Construction Supervisor may choose to make,
whether through any consulting engineer, agent or employee or officer,
during the progress of the work shall be solely for TEC's, the
Disbursement Agent's or the Construction Supervisor's information, and
under no circumstances will any such inspection be deemed to have been
made for the purpose of supervising or superintending the work or for
the information or protection of any right or interest of any Persons
other than TEC, the Disbursement Agent, the Construction Supervisor or
the Holders.

(e) In no event shall TEC, the Disbursement Agent or the
Construction Supervisor be liable for any Liens that may be filed by
third parties against the Project.

SECTION 8.5 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 8.6 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 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 Accounts or for disbursements therefrom, except as set forth
in this Agreement.

SECTION 8.7 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

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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 8.8 Certain Rights. None of the Disbursement Agent, the
Trustee, the Construction Supervisor, TEC and TARC shall have any rights with
respect to the Accounts, except as specifically set forth in the TARC Loan
Agreement, the TEC Security Agreement, the TARC 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 8.9 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, 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.

23
<PAGE> 25
SECTION 8.10 Termination. This Agreement shall terminate
automatically thirty (30) days following disbursement of all funds remaining in
the Accounts.

SECTION 8.11 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 8.12 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 or in Section 2.4; 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 8.13 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 8.14 Captions. Captions in this Agreement are for
convenience only and shall not be considered or referenced in resolving
questions of interpretation of this Agreement.

24
<PAGE> 26
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.

TRANSAMERICAN REFINING 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:
--------------------------------------

BAKER & O'BRIEN, INC.,
as Construction Supervisor

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

25
<PAGE> 27
Schedule I
Alternate Construction Supervisors

Muse, Stancil & Company Pace Consultants
3131 McKinney Avenue, Suite 100 4848 Loop Central Drive
Dallas, TX 75204 Houston, TX 77081

Ernst & Young / Wright Killen & Company Arthur D. Little
5847 San Felipe, Suite 3300 1001 Fannin, Suite 2050
Houston, TX 77057-3067 Houston, TX 77002-6678

Purvin & Gertz Bechtel Corporation
600 Travis, Suite 2150 3000 Post Oak Blvd.
Houston, TX 77002 Houston, TX 77056

Bonner & Moore Associates Foster Wheeler Engineering Co.
2727 Allen Parkway 2020 Dairy Ashford Avenue
Houston, TX 77019 Houston, TX 77002

1
<PAGE> 28
Exhibit A

<TABLE>
<CAPTION>
Budget
------
Daily Capacity
Expenditures --------------
to Complete (BPD)
-----------
(dollars in millions)
<S> <C> <C>
PHASE 1:
Crude Unit . . . . . . . . . . . . . $ 3 200,000
Delayed Coking Unit . . . . . . . . 27 75,000
Naphtha Pretreater . . . . . . . . . 12 30,000
No. 2 Reformer . . . . . . . . . . . 9 12,000
HDS Unit . . . . . . . . . . . . . . 24 60,000
Sulfur Recovery System . . . . . . . 53 370(1)
Offsite Facilities/Tankage . . . . . 46 N/A
Other . . . . . . . . . . . . . . 3 N/A
Engineering and Administrative . . . 7 N/A
Contingencies (2) . . . . . . . . . 39 N/A
---
Total Phase I . . . . . . . . . . . $223

PHASE II:
FCC Unit . . . . . . . . . . . . . . 115 100,000
FCC Flue Gas Scrubber . . . . . . . 14 N/A
Alkylation Unit . . . . . . . . . . 24 26,000
Offsite Facilities/Tankage . . . . . 26 N/A
Other . . . . . . . . . . . . . . 2 N/A
Engineering and Administrative . . . 3 N/A
Contingencies (2) . . . . . . . . . 20 N/A
---
Total Phase II . . . . . . . 204
---
Total Phase I and
Phase II . . . . . . . . . $427
====
</TABLE>

(1) Units are LT/D. Capacity can be increased to 510 LT/D with oxygen
enrichment.

(2) To the extent expenditures exceed the approved capital budget for a
unit or units, the contingencies portion of the budget will be
allocated to specific units.

A-1
<PAGE> 29
Exhibit B

[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

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

Baker & O'Brien, Inc.,
as Construction Supervisor under the Disbursement
Agreement referenced below
7557 Rambler Road, Suite 200 LB 85
Dallas, Texas 75231
Facsimile: (214) 368-0190
Attention: John O'Brien

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 TransAmerican Refining Corporation, a Texas
corporation ("TARC"), TransAmerican Energy Corporation, a Delaware corporation
("TEC"), Firstar Bank of Minnesota, N.A., as Disbursement Agent, Firstar Bank
of Minnesota, N.A., as Trustee, and Baker & O'Brien, Inc., as Construction
Supervisor, and (ii) the Loan Agreement dated as of June 13, 1997 (as amended,
supplemented or otherwise modified from time to time, the "TARC Loan
Agreement") between TEC and TARC. Capitalized terms used but not defined
herein have the respective meanings given to such terms in the Disbursement
Agreement and the TARC Loan Agreement.

TEC hereby requests that the Disbursement Agent disburse funds
from the Accounts 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

B-1
<PAGE> 30
such funds will be applied promptly to the satisfaction of TARC's obligations
under the TARC Intercompany Loan Documents. Such disbursement is to be made by
liquidating investments in the Accounts and making payment to TEC in accordance
with the following procedures and instructions:

[Insert procedures and instructions]

TRANSAMERICAN ENERGY CORPORATION

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

B-2
<PAGE> 31
Exhibit C
[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:

TARC hereby requests that the Construction Supervisor approve
the disbursement of, and the Disbursement Agent disburse, funds from the
Account specified below in an aggregate amount equal to $__________, on
________ __, ____ (the "Date of Disbursement"). Such funds will be used as
follows (with specific reference to each line item in the Budget, the amount
requested to be disbursed for such line item, the amount previously disbursed
in respect of the same line item and whether such funds will be expended in
connection with Phase I or Phase II):

[Insert specification of use of funds]

C-1
<PAGE> 32

The undersigned hereby certifies that the following statements
are true on the date hereof and will be true on the Date of Disbursement:

(a) No event has occurred and is continuing that
constitutes an Event of Default under the TARC Loan Agreement and no
Event of Default under the TARC Loan Agreement would result from such
disbursement or from the application of the proceeds thereof.

(b) All work and materials for which disbursement is
requested hereunder conform in all material respects with the Plans.

(c) The amount of the requested disbursement has been
incurred for costs of the Project. This disbursement is requested
expressly for the purpose of reimbursing TARC for actual expenditures
on the Project. TARC has provided to the Construction Supervisor
access to supporting invoices, receipts and other documentation for
all costs relating to the Project for which this disbursement is
requested.

(d) All amounts due and payable to any of our contractors
or suppliers in connection with the Project have been paid in full or
are not overdue or are being contested in good faith in appropriate
proceedings. We have used commercially reasonable efforts to cause
each such contractor and supplier that has completed work in
connection with the Project to provide lien waivers and releases and
subordination agreements to the Disbursement Agent, the Construction
Supervisor and TEC. Attached hereto are true, correct and complete
copies of all such lien waivers and releases provided to us by such
contractors and suppliers not heretofore delivered to the Disbursement
Agent, the Construction Supervisor and TEC.

(e) Attached hereto is an endorsement to TARC's title
policy for the Project site indicating that, as of a date not more
than three months prior hereto, there has been no change in the state
of title with respect to the Project site except for changes that are
permitted by the Indenture and the Mortgage.

(f) Attached hereto is evidence of the insurance coverage
required by the Indenture, the TARC Security Agreement and the
Mortgage (if different from the coverage reflected in evidence of
insurance previously provided in connection with a Disbursement
Certificate).

(g) TARC has received all authorizations, approvals,
permits and licenses from governmental authorities that are required,
as of the date hereof, for the Project; all work on the Project as of
the date hereof has been performed substantially in accordance with
applicable laws; and set forth below is a summary of each governmental
authorization, approval, permit and license related to the Project
that has been applied for, obtained, amended, challenged, revoked or
terminated since the date of the last Disbursement Certificate.

(h) Phase I is proceeding in such a manner that it is
estimated to be completed by ______________, and Phase II is
proceeding in such a manner that it is estimated to be completed by
______________.

(i) A copy of this Disbursement Certificate and the
attached documentation have been delivered to TEC and the Construction
Supervisor at their respective addresses for notices as set forth in
the Disbursement Agreement.

C-2
<PAGE> 33
(j) All conditions to this disbursement have been met in
accordance with the terms of the Disbursement Agreement.

TRANSAMERICAN REFINING CORPORATION

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

C-3
<PAGE> 34
Exhibit D
[Form of Construction Supervisor Certificate]

[Date]

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

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

Re: Disbursement Certificate No. [____].

Ladies and Gentlemen:

The Construction Supervisor has reviewed (i) from time to
time, and within the last calendar week, the progress of construction of the
Project and (ii) Disbursement Certificate No. ____.

D-1
<PAGE> 35
Our review and observations were performed in accordance with generally
accepted technical consulting practice and included such investigations,
observations and review as we in our professional capacity deemed necessary
under the circumstances within the scope of our service. Except as required by
Section 3.2 of the Disbursement Agreement, we have relied upon statements and
representations of TARC set forth in Disbursement Certificate No. ___ and have
not independently verified the accuracy or completeness of such statements and
representations. With respect to TARC's request for disbursement of funds
pursuant to Disbursement Certificate No. ___, the Construction Supervisor
hereby (i) approves such request to the extent of $_____________ and (ii)
rejects such request to the extent of $_____________ for the following reasons:

[insert reasons for rejection of request]

BAKER & O'BRIEN, INC.,
as Construction Supervisor under the
Disbursement Agreement

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

D-2