<PAGE>   1
                                                                    EXHIBIT 4.26

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                    IRREVOCABLE TRUST AND SECURITY AGREEMENT


                                     AMONG

                      TRANSAMERICAN REFINING CORPORATION,

                        TRANSAMERICAN ENERGY CORPORATION

                                      AND

                  FIRST UNION NATIONAL BANK, FORMERLY KNOWN AS
                   FIRST FIDELITY BANK, NATIONAL ASSOCIATION
                                   AS TRUSTEE



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


                                  DATED AS OF

                                JANUARY 16, 1998

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                               TABLE OF CONTENTS


<TABLE>
   <S>                                                                                                                  <C>
                                                        ARTICLE I

                                             DEFINITIONS AND INTERPRETATIONS

   Section 1.01. Definitions  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   2
   Section 1.02. Interpretations  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   2

                                                        ARTICLE II

                                              INITIAL TRANSFER TO TRUST FUND

   Section 2.01. Transfer to the Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   3
   Section 2.02. Execution of Funding Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   3
   Section 2.03. Sufficiency of Trust Fund  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   3

                                                       ARTICLE III

                                           CREATION AND OPERATION OF TRUST FUND

   Section 3.01. Establishment of Trust Fund  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   4
   Section 3.02. Payment of Principal and Interest; Redemption of Notes . . . . . . . . . . . . . . . . . . . . . . .   4
   Section 3.03. Trust Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   4
   Section 3.04. Return of Moneys . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   5

                                                        ARTICLE IV

                                                       INVESTMENTS

   Section 4.01. General  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   5
   Section 4.02. Security for Cash Balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   6

                                                        ARTICLE V

                                                    SECURITY INTEREST

   Section 5.01. Security Interest  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   6
   Section 5.02. Security for Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   6
   Section 5.03. Financing Statement  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   7
   Section 5.04. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   7

</TABLE>




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<TABLE>
   <S>                                                                                                                 <C>
                                                        ARTICLE VI

                                                   RECORDS AND REPORTS

   Section 6.01. Records  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   7
   Section 6.02. Reports  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   7

                                                       ARTICLE VII

                                                  CONCERNING THE TRUSTEE

   Section 7.01. Notices to be Given  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   8
   Section 7.02. Moneys to be Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   8
   Section 7.03. Concerning Compensation and Expenses of Trustee  . . . . . . . . . . . . . . . . . . . . . . . . . .   8
   Section 7.04. Responsibility of the Trustee  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   8
   Section 7.05. Reliance by the Trustee  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   9
   Section 7.06. Resolution of Disagreements  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .   9

                                                       ARTICLE VIII

                                                      MISCELLANEOUS

   Section 8.01. Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
   Section 8.02. Term . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
   Section 8.03. Binding Agreement  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
   Section 8.04. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  10
   Section 8.05. Texas Law Governs  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11
   Section 8.06. Time of the Essence  . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11
   Section 8.07. Performance on Business Days . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11
   Section 8.08. Inability of the Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .  11

</TABLE>




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<PAGE>   4
                    IRREVOCABLE TRUST AND SECURITY AGREEMENT


         This Irrevocable Trust and Security Agreement, dated as of January 16,
1998 (this "Agreement"), is 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 National Association, as trustee (the "Trustee") under an Indenture
dated as of February 15, 1995, by and among the Company, TEC and the Trustee,
as amended and supplemented by a First Supplemental Indenture dated as of
February 24, 1997, among the Company, TEC and the Trustee, a Second
Supplemental Indenture, dated as of June 13, 1997, among the Company, TEC and
the Trustee, and a Third Supplemental Indenture, dated as of January 16, 1998
among the Company, TEC and the Trustee (as so amended and supplemented, the
"Indenture").

                              W I T N E S S E T H:

         WHEREAS, the Company has previously issued its Guaranteed First
Mortgage Discount Notes due 2002 in the aggregate principal amount of
$340,000,000 (the "Discount Notes") and Guaranteed First Mortgage Notes due
2002 in the aggregate principal amount of $100,000,000 (the "Mortgage Notes"
and, together with the Discount Notes, the "1995 Notes"), pursuant to the terms
of the Indenture; and

         WHEREAS, the Company offered to purchase the 1995 Notes pursuant to an
Offer to Purchase and Consent Solicitation dated May 15, 1997 and the
supplements thereto dated May 30, 1997 and June 6, 1997 (the "Tender Offer");
and

         WHEREAS, pursuant to the Tender Offer, $92,235,000 principal amount of
Mortgage Notes and $295,777,013 accreted value of Discount Notes were tendered
to the Company and canceled; and

         WHEREAS, by Notice dated January 14, 1998, the Company has called for
redemption on February 17, 1998 $1,580,000 principal amount of Mortgage Notes
and $5,377,000 principal amount of Discount Notes; and

         WHEREAS, the Company intends to defease the Discount Notes that remain
outstanding after the foregoing redemption (the "Remaining Discount Notes") and
the Mortgage Notes that remain outstanding after the foregoing redemption (the
"Remaining Mortgage Notes" and, together with the Remaining Discount Notes, the
"Remaining 1995 Notes"); and

         WHEREAS, the Company intends to redeem the Remaining 1995 Notes on
February 15, 1999 (the "Final Redemption Date"); and
<PAGE>   5
         WHEREAS, the Indenture provides that if U.S. Legal Tender (as defined
in the Indenture), U.S. Government Obligations (as defined in the Indenture) or
a combination thereof in an amount sufficient to provide the entire amount
necessary for redemption of the Remaining 1995 Notes shall have been set aside
in trust with the Trustee as provided in the Indenture, and provisions
satisfactory to the Trustee shall have been made for the giving of notice of
redemption, from and after the date such assets are set aside in trust and the
Trustee receives a certification of independent certified public accountants,
an officers' certificate and an opinion of counsel, the Debt (as defined in the
Indenture) shall be deemed paid and the Company shall be released from all
liability under the Indenture other than as set forth in Sections 8.3 and 8.7
of the Indenture; and

         WHEREAS, the Company wishes to deposit or cause to be deposited cash
in the Trust Fund (as defined below) created pursuant to this Agreement in
order to cause the Remaining 1995 Notes to be defeased and redeemed under the
Indenture; and

         WHEREAS, the cash to be deposited, together with interest thereon, in
the Trust Fund, in the opinion of Coopers & Lybrand L.L.P., is sufficient to
pay interest on the Remaining 1995 Notes as it accrues and becomes payable and
the principal of the Remaining 1995 Notes when they are called for redemption
on the Final Redemption Date; and

         WHEREAS, in order to facilitate the receipt and transfer of the cash
to be deposited, the Company desires to establish a trust at the principal
corporate trust office of the Trustee (the "Trust Fund");

         NOW, THEREFORE, in consideration of the mutual undertakings, promises
and agreements herein contained, the sufficiency of which are hereby
acknowledged, and in order to secure the full and timely payment of principal
of and interest on the Remaining 1995 Notes which are to be defeased and
redeemed, the Company, TEC and the Trustee mutually undertake, promise, and
agree for themselves and their respective representatives and successors, as
follows:

                                   ARTICLE I

                        DEFINITIONS AND INTERPRETATIONS

         Section 1.01.     Definitions.  All capitalized terms used in this
Agreement that are defined in the Indenture have the meanings assigned to them
therein, except to the extent such terms are defined in this Agreement or the
context clearly requires otherwise.

         Section 1.02.     Interpretations.  The titles and headings of the
articles and sections of this Agreement have been inserted for convenience of
reference only and are not to be considered a part hereof and shall not in any
way modify or restrict the terms hereof.  This





                                       2
<PAGE>   6
Agreement and all of the terms and provisions hereof shall be liberally
construed to effectuate the purposes set forth herein and to achieve the
intended purpose of defeasing and redeeming the Remaining 1995 Notes in
accordance with applicable law.  Except where the context otherwise requires
herein, words imparting the singular number shall include the plural number and
vice versa.  Reference to any instrument or document shall include such
instrument or document as the same may be amended or supplemented from time to
time.  Reference to any party to any instrument or document shall include any
successor or assign of such party.

                                   ARTICLE II

                         INITIAL TRANSFER TO TRUST FUND

         Section 2.01.     Transfer to the Trust Fund.  The Company shall
transfer, or cause to be transferred, $9,754,694.34 in cash constituting U.S.
Legal Tender (the "Trust Deposit") to the Trustee to be held in trust for the
benefit of the Holders from time to time of the Remaining 1995 Notes.

         Section 2.02.     Execution of Funding Certificate.  Upon the receipt
by the Trustee of (i) the Trust Deposit, (ii) the payment of fees and all other
sums payable by the Company under the Indenture and described in Exhibit "A"
hereto and (iii) a final report prepared by Coopers & Lybrand, L.L.P., dated
January 15, 1998, regarding the sufficiency of the Trust Deposit and the
Permitted Investments (as defined in Section 4.01 hereof) made therewith to pay
amounts which will become due on the Remaining 1995 Notes, which is
incorporated herein for all purposes (the "Report"), the Trustee shall attach
to this Trust Agreement the Trust Funding Certificate (the form of which is
attached as Exhibit "B" hereto) fully executed by the Trustee.

         Section 2.03.     Sufficiency of Trust Fund.  The Company represents
that the Trust Deposit and the Permitted Investments made therewith, together
with the proceeds thereof, will provide, not later than one day before each of
(i) the Interest Payment Dates and (ii) the Final Redemption Date, sufficient
moneys for transfer to the Paying Agent in the amounts required to pay the
accrued interest on the Remaining 1995 Notes and the principal of the Remaining
1995 Notes on the Final Redemption Date, all as more fully set forth in the
Report attached hereto.  If, at any time and for any reason, the cash balances
on deposit in the Trust Fund shall be insufficient to transfer the amounts
required by the Paying Agent to make the payments set forth in Section 3.02
hereof, the Company shall timely deposit into the Trust Fund, from lawfully
available funds, additional funds in the amounts required to make such
payments.  Notice of any such insufficiency shall be given promptly as
hereinafter provided, but the Trustee shall not in any manner be responsible
for any insufficiency of funds in the Trust Fund or the Company's failure to
make additional deposits thereto.





                                       3
<PAGE>   7
                                  ARTICLE III

                      CREATION AND OPERATION OF TRUST FUND

         Section 3.01.     Establishment of Trust Fund.  The Trustee shall
create on its books a special trust fund to be known as the "TransAmerican
Notes due 2002 Trust Fund" (the "Trust Fund").  Upon receipt by the Trustee of
the Trust Deposit, the Trustee shall deposit the Trust Deposit in the Trust
Fund.

         Section 3.02.     Payment of Principal and Interest; Redemption of
Notes.  (a) On or prior to February 15, 1998, the Trustee is hereby irrevocably
instructed to transfer to the Paying Agent from the funds in the Trust Fund
$510,262.50, which is the amount required to pay the interest which will have
accrued on such date on the Remaining Mortgage Notes.  On or prior to August
15, 1998, the Trustee is hereby irrevocably instructed to transfer to the
Paying Agent from the funds in the Trust Fund $164,557.50 and $510,262.50,
which are the amounts required to pay the interest which will have accrued on
such date on the Remaining Discount Notes and Remaining Mortgage Notes,
respectively.  On or prior to the Final Redemption Date, the Trustee is hereby
irrevocably instructed to transfer to the Paying Agent from the funds in the
Trust Fund $2,045,850.00 and $7,050,900.00, which are the amounts which will be
required to pay the principal of (including premium), and the interest which
will have accrued on, the Remaining Discount Notes and Remaining Mortgage
Notes, respectively, on the Final Redemption Date.

         (b)  The Trustee, in its capacity as Paying Agent for the Remaining
1995 Notes, agrees, to the extent required hereby, to apply the funds
transferred to it pursuant to Section 2.01 above, together with the proceeds
from the investment thereof pursuant to Section 4.01 below, solely for the
purpose of paying the principal of and interest on the Remaining 1995 Notes in
the manner provided in this Agreement.  Except for amounts transferred to the
Paying Agents pursuant to Section 3.02(a) above or to the Company pursuant to
Section 3.04 below, and except as permitted in Article IV hereof, the Trustee
agrees that it shall never make any withdrawals from the Trust Fund or assert
any claims, liens or charges against the Trust Fund.

         Section 3.03.     Trust Fund.  The Trust Deposit and all proceeds
therefrom shall be the property of the Trust Fund, and shall be applied only in
strict conformity with the terms and conditions of the Indenture and this
Agreement.  All cash balances and other assets on deposit in the Trust Fund are
hereby irrevocably transferred to the Trustee in trust for the benefit of the
Holders from time to time of the Remaining 1995 Notes, subject to the
provisions of this Agreement, to provide for the payment of the principal of
and interest on the Remaining 1995 Notes, which payment shall be made by timely
transfers to the Paying Agent of such amounts at such times as are provided for
in Section 3.02 hereof, but solely from the sources specified in this Agreement
and the Indenture.  The Trustee shall hold at all times the Trust Fund and the
Permitted Investments in trust for the benefit of the





                                       4
<PAGE>   8
Holders from time to time of the Remaining 1995 Notes, wholly segregated from
all other funds and securities on deposit with the Trustee; it shall never
allow the assets of the Trust Fund to be commingled with any other funds or
securities of the Trustee; and it shall hold and dispose of the assets of the
Trust Fund only as set forth herein and in the Indenture.  Nothing herein
contained shall be construed as requiring the Trustee to keep the identical
money, or any part thereof, received for the Company's account in the Trust
Fund, if it is impractical, but money of an equal amount, or investments
thereof permitted hereby, must be maintained on deposit in the Trust Fund and
held by the Trustee during the term of this Agreement for the benefit of the
Holders from time to time of the Remaining 1995 Notes.

         Section 3.04.     Return of Moneys.  (a) In the event any Remaining
1995 Note shall not be presented for payment when the principal thereof becomes
due or is not thereafter presented for payment, any funds which shall be held
for such purpose by the Paying Agent and which remain unclaimed by the Holder
of the Remaining 1995 Note not presented for payment shall be held, without
liability for interest thereon, for the benefit of the owner of such Remaining
1995 Note who shall thereafter be restricted exclusively to such funds for any
claim of whatever nature on his part with respect to such Remaining 1995 Note;
provided that any funds which shall be so held by the Trustee and remain
unclaimed by the Holder of the Remaining 1995 Note not presented for payment
for a period of two years after the Final Redemption Date shall, subject to
Section 8.06 of the Indenture, be paid to the Company upon request and
thereafter the Holder of such Remaining 1995 Note shall look only to the
Company for payment, without any interest thereon, and the Trustee shall have
no responsibility with respect to such moneys.

         (b)  The Trustee shall maintain the Trust Fund until the date upon
which all of the payments required by Section 3.02(a) above have been made,
whereupon the Trustee shall remit, subject to Section 3.04(a) hereof, to the
Company the money, if any, then remaining in the Trust Fund.

                                   ARTICLE IV

                                  INVESTMENTS

         Section 4.01.     General.  Except as provided in this Article IV, the
Trustee shall have no power or duty to invest or reinvest any funds held
hereunder.  The Trustee will promptly invest the Trust Deposit in the
investments described on Exhibit "C" hereto (the "Permitted Investments").
Thereafter, at the request of the Company and upon compliance with the
conditions hereinafter stated, the Trustee shall reinvest the cash balances in
the Trust Fund, except as such proceeds are needed to make payments required to
be made pursuant to Sections 3.02(a) or 3.04 hereof, in U.S. Government
Obligations that mature the business day before any of the dates specified in
Section 3.02(a).  Any reinvestment pursuant to this Section 4.01 may be
effected only if written instructions from the Company are accompanied by a
certificate from a nationally recognized firm of independent certified





                                       5
<PAGE>   9
public accountants to the effect that, following the reinvestment, the funds on
deposit in the Trust Fund will be sufficient, without further investment or
reinvestment, to pay the principal and interest, as applicable, due on the
Remaining 1995 Notes as set forth in the Report.  Unless otherwise directed by
the Company, the Trustee may use a broker-dealer of its own selection,
including a broker-dealer owned by or affiliated with the Trustee or any of its
affiliates.  The Company shall be liable for all brokerage costs and related
expenses incurred hereunder.  To the extent the Trustee invests the Trust Funds
in Permitted Investments or at the request of the Company, other U.S.
Government Obligations, the Trustee shall not be liable for any losses on any
investments made by it.

         Section 4.02.     Security for Cash Balances.  Cash balances from time
to time held in the Trust Fund may be deposited by the Trustee in non-interest
bearing demand deposits with the Trustee to the extent not otherwise required
to be invested hereunder.  Any such deposits shall, to the extent not insured
by the Federal Deposit Insurance Corporation or its successor, be continuously
secured in the manner provided by law for deposits or trust funds by a pledge
of direct obligations of, or obligations unconditionally guaranteed by, the
United States of America, having a market value at least equal to such cash
balances, and the Holders of the Remaining 1995 Notes shall be entitled to a
preferred lien and claim upon such obligations in the event of any insolvency,
receivership, conservatorship or liquidation of the Trustee.

                                   ARTICLE V

                               SECURITY INTEREST

         Section 5.01.     Security Interest.  Although it is the intention of
the Company to convey the Trust Deposit and any and all proceeds thereof to the
Trustee for the benefit of the Holders of the Remaining 1995 Notes and that
such assets constitute the property of the Trust Fund and not of the Company,
in the event the Trust Fund, for any reason, is revoked or the proceeds thereof
are, but for this Article V, to be returned to the Company prior to the payment
required by Section 3.02(a) above being made to the Paying Agent for the
redemption of the Remaining 1995 Notes, the Company hereby assigns, pledges and
grants to the Trustee for its benefit and the benefit of the Holders of the
Remaining 1995 Notes, a security interest in all of the Company's right, title
and interest in and to all money and securities (if any) in the Trust Fund and
all proceeds and products thereof (the "Collateral").  The Holders of the
Remaining 1995 Notes shall be entitled to a preferred claim and first lien upon
the Collateral.  The amounts received by the Trustee under this Agreement shall
not be considered as a banking deposit by the Company and the Trustee shall
have no right or title with respect thereto except as set forth in this
Agreement.

         Section 5.02.     Security for Obligations.  This Article V secures
the payment and performance of all debt, liabilities and obligations of the
Company to the Holders of the Remaining 1995 Notes and the Trustee.





                                       6
<PAGE>   10
         Section 5.03.     Financing Statement.  The Company agrees to deliver
to the Trustee, on the effective date of this Agreement, a fully executed
financing statement relating to the Collateral.  The Company hereby authorizes
the Trustee to file one or more continuation statements, and amendments
thereto, relative to all or any part of the Collateral without the signature of
the Company where permitted by law (provided that the Trustee furnishes to the
Company a copy of each such statement filed, promptly after the filing
thereof).  A carbon, photographic or other reproduction of this Agreement or
any financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.

         Section 5.04.     Remedies.  In the event the Trust Fund, for any
reason, is revoked or the proceeds thereof are, but for this Article V, to be
returned to the Company prior to the payment required by Section 3.02(a) above
being made to the Paying Agent for the redemption of the Remaining 1995 Notes,
the Trustee may retain the Collateral pursuant to its security interest therein
and otherwise exercise its rights with respect to the Collateral, in addition
to other rights and remedies otherwise available to it, and the rights and
remedies of a secured party on default under the Uniform Commercial Code (the
"UCC") (whether or not the UCC applies to the Collateral).  If the proceeds
have been returned to the Company, the Trustee may require the Company to, and
the Company hereby agrees that it will at its expense and upon request of the
Trustee, forthwith, assemble the Collateral as directed by the Trustee and make
it available to the Trustee.

                                   ARTICLE VI

                              RECORDS AND REPORTS

         Section 6.01.     Records.  The Trustee will keep books of record and
account in which complete and correct entries shall be made of all transactions
relating to the receipts, disbursements, allocations and application of the
money and any other assets deposited in the Trust Fund and all proceeds
thereof, and such books shall be available for inspection at reasonable hours
and under reasonable conditions by the Company and the Holders of the Remaining
1995 Notes.

         Section 6.02.     Reports.  For the period beginning on the date
hereof and ending on December 31, 1998, and for each 12 month period thereafter
while this Agreement remains in effect, the Trustee shall prepare and send to
the Company within 30 days following the end of such period a written report
summarizing all transactions relating to the Trust Fund during such period
together with a detailed statement of the cash balance on deposit in the Trust
Fund as of the end of such period.





                                       7
<PAGE>   11
                                  ARTICLE VII

                             CONCERNING THE TRUSTEE

         Section 7.01.     Notices to be Given.  As soon as permitted by the
Indenture following the date of the transfer described in Section 2.01 hereof,
but in any event not later than the date required by the Indenture, the Trustee
shall give notice in the manner required by the Indenture of the redemption of
the Remaining 1995 Notes on the Final Redemption Date.

         Section 7.02.     Moneys to be Held in Trust.  All moneys and any
other assets received by the Trustee pursuant to this Agreement shall, until
used or applied as herein provided (including payment of moneys to the Company
under Section 3.04), be held in trust for the purposes for which they were
received, and be segregated from other funds.  The Trustee shall be under no
liability for interest on any moneys received by it hereunder other than such
interest as it expressly agrees to pay.

         Section 7.03.     Concerning Compensation and Expenses of Trustee.  In
consideration of the agreements of the Company contained in the Indenture with
respect to the compensation and indemnification of the Trustee and,
notwithstanding the provisions of Section 7.7 of the Indenture purporting to
give to the Trustee a first lien prior to payment on account of interest on or
principal of any 1995 Note under the Indenture with respect to certain amounts
due or claimed by the Trustee, the Trustee hereby agrees that it will not make
any claim to any amount on deposit in the Trust Fund and hereby waives any lien
or claim on such fund.  To the extent that this Section 7.03 conflicts with any
other provisions contained herein or in the Indenture, this Section 7.03 shall
control.

         Section 7.04.     Responsibility of the Trustee.  The Trustee shall
not be liable or responsible for any act done or step taken or omitted by it or
any mistake of fact or law or for anything which it may do or refrain from
doing, except for its own negligence or its default or failure in the
performance of any material obligation imposed upon it hereunder.  The Trustee
shall not be responsible in any manner whatsoever for the recitals made herein
or the statements contained in the 1995 Notes or any proceedings taken in
connection therewith.  The Trustee makes no representation as to the value,
conditions or sufficiency of the Trust Fund or as to the title of the Company
thereto, and the Trustee shall not incur any liability or responsibility with
respect to such matters.  The Trustee shall not have any liability whatsoever
for the insufficiency of monies available in the Trust Fund or for any failure
of the obligors of the Permitted Investments, or any other U.S. Government
Obligations in which the Trust Funds are invested at the request of the
Company, to make timely payment thereon.  It is the intention of the parties
hereto that the Trustee shall never be required to use or advance its own funds
or otherwise incur personal financial liability in the performance of any of
its duties or the exercise of any rights and powers hereunder.





                                       8
<PAGE>   12
         The Trustee, except with respect to the Indenture, the 1995 Notes, and
the Security Documents, is not a party to, nor is it bound by nor need it give
consideration to the terms or provisions of any other agreement or undertaking
between the Company and other persons, and (except as aforesaid) the Trustee is
to give consideration only to the terms and provisions of this Agreement.  The
Trustee has no duty to determine or inquire into the happening or occurrence of
any event or contingency or the performance or failure of performance of the
Company with respect to arrangements or contracts with others.  The Trustee's
sole duty hereunder is to safeguard the Trust Fund and to dispose of and
deliver the same in accordance with this Agreement.  If, however, the Trustee
is called upon by the terms of this Agreement to determine the occurrence of
any event or contingency, the Trustee shall be obligated, in making such
determination, only to exercise reasonable care and diligence, and in the event
of error in making such determination the Trustee shall be liable only for its
own willful misconduct or its gross negligence in the light of all
circumstances, taking into consideration the time and facilities available to
the Trustee in the ordinary conduct of its business.  In determining the
occurrence of any such event or contingency the Trustee may request from the
Company or any other person such reasonable additional evidence as the Trustee
in its discretion may deem necessary to determine any fact relating to the
occurrence of such event or contingency, and in this connection may inquire and
consult, among others, with the Company at any time, and the Trustee shall not
be liable for any damages resulting from its delay in acting hereunder pending
its examination of the additional evidence requested by it.

         Section 7.05.     Reliance by the Trustee.  This Agreement is between
the Company, TEC and the Trustee only and in connection therewith the Trustee
is authorized by the Company and TEC to rely upon the representations, both
actual and implied, of the Company in connection with this Agreement, and the
Trustee shall not be liable to any person in any manner for such reliance.  The
duty of the Trustee hereunder shall only be to the Company, TEC and the owners
of the Remaining 1995 Notes.  The Trustee may act upon any written notice,
request, waiver, consent, certificate, receipt, authorization, opinion of
counsel, power of attorney, or other instrument or document which the Trustee
in good faith believes to be genuine and to be what it purports to be.  The
Trustee may consult with legal counsel satisfactory to it concerning any
question relating to its duties or responsibilities hereunder or otherwise in
connection herewith and shall not be liable for any action taken, suffered or
omitted by it in good faith under the advice of such counsel.

         Section 7.06.     Resolution of Disagreements.  In the event of any
disagreement or controversy hereunder or if conflicting demands or notices are
made upon the Trustee growing out of or relating to this Agreement or in the
event that the Trustee in good faith is in doubt as to what action it should
take hereunder, the Company expressly agrees and consents that the Trustee
shall have the absolute right to file a suit in interpleader and obtain an
order from a court of appropriate jurisdiction requiring all persons involved
to interplead and litigate in such court their several claims and rights among
themselves; provided that this Section 7.06 shall not apply to the
unconditional duty of the Trustee to





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<PAGE>   13
hold the Trust Fund and to pay the principal of and interest on the Remaining
1995 Notes as the same come due and are payable, in accordance with this
Agreement.

                                  ARTICLE VIII

                                 MISCELLANEOUS

         Section 8.01.     Notice.  Any notice, authorization, request, or
demand required or permitted to be given hereunder shall be in writing and
shall be deemed to have been duly given in the manner and to the address as
provided in the Indenture.

         Section 8.02.     Term.  This Agreement shall be effective upon the
attachment hereto of an executed Trust Funding Certificate by the Trustee.
Upon the taking of all the actions as described herein by the Trustee, the
Trustee shall have no further obligations or responsibilities hereunder to the
Company, the Holders of the Remaining 1995 Notes or to any other person or
persons in connection with this Agreement except as otherwise provided in the
Indenture.

         Section 8.03.     Binding Agreement.  This Agreement shall be binding
upon the Company, TEC and the Trustee and their respective successors and legal
representatives, and shall inure solely to the benefit of the Holders of the
Remaining 1995 Notes, the Company, the Trustee and their respective successors
and legal representatives.  The purpose of this Agreement is to implement and
supplement the terms of the Indenture, and in the event of any conflict between
the provisions of the Indenture and the provisions of this Agreement, the
Indenture shall control; provided, that the Trustee and the Company recognize
that this Agreement is entered into for the benefit of the Holders of the
Remaining 1995 Notes from time to time and the Trustee hereby accepts the
benefits hereof on behalf of such Holders; provided, further, the Trustee and
the Company agree that this Agreement may be amended with the prior written
consent of each Holder of a Remaining 1995 Note who would be adversely affected
by such amendment , if any, (i) to cure any ambiguity, formal defect or
omission herein, (ii) to grant to or confer upon the Trustee, for the benefit
of the Holders of the Remaining 1995 Notes, any additional rights, remedies,
power or authority that may be conferred upon such Holders or the Trustee or
(iii) to subject additional funds, securities or other property to the terms of
this Agreement, but this Agreement shall never be amended for any other purpose
without the prior written consent of the Holders of all Remaining 1995 Notes
not theretofore finally paid.

         Section 8.04.     Severability.  In case any one or more of the
provisions contained in this Agreement shall for any reason be held to be
invalid, illegal or unenforceable in any respect, such invalidity, illegality
or unenforceability shall not affect any other provisions of this Agreement,
but this Agreement shall be construed as if such invalid or illegal or
unenforceable provision had never been contained herein.





                                       10
<PAGE>   14
         Section 8.05.     Texas Law Governs.  This Agreement shall be governed
exclusively by the provisions hereof and by the applicable law of the State of
Texas.

         Section 8.06.     Time of the Essence.  Time shall be of the essence
in the performance of obligations from time to time imposed upon the Trustee by
this Agreement.

         Section 8.07.     Performance on Business Days.  Whenever under the
terms of this Agreement the performance date of any provision hereof shall fall
on a day which is not a legal banking day, and upon which the Trustee is not
open for business, the performance thereof on the next succeeding business day
of the Trustee shall be deemed to be in full compliance.  Whenever time is
referred to in this Agreement it shall be time recognized by the Trustee in the
ordinary conduct of its normal business transactions.

         Section 8.08.     Inability of the Trustee.  In case at any time the
Trustee or its legal successor or successors should become unable, through
operation of law or otherwise, to act as Trustee, or if its property and
affairs shall be taken under the control of any state or federal court or
administrative body because of insolvency or bankruptcy or for any other
reason, a vacancy shall forthwith and ipso facto exist in the office of
Trustee, and a successor Trustee shall be appointed as provided in the
Indenture.





                                       11
<PAGE>   15
         EXECUTED as of the date first written above.

                                  FIRST UNION NATIONAL BANK, formerly known as
                                  FIRST FIDELITY BANK, NATIONAL ASSOCIATION,
                                           as Trustee


                                  By:
                                        ----------------------------------------

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




                                  TRANSAMERICAN REFINING CORPORATION


                                  By:
                                        ----------------------------------------
                                        Ed Donahue, Vice President and Secretary



                                  TRANSAMERICAN ENERGY CORPORATION


                                  By:
                                        ----------------------------------------
                                        Ed Donahue, Chief Financial Officer,
                                        Vice President and Secretary



                                       12