June 5, 2002



<<FirstName>> <<LastName>>
<<Company>>
<<Company1>>
<<Address1>>
<<Address2>>
<<City>>, <<State>> <<Zip>>

     RE:   AMENDMENT -  PROMISSORY NOTE ("NOTE") OF PENN OCTANE CORPORATION (THE
           "COMPANY") CURRENTLY HELD BY YOU WITH A DUE DATE OF JUNE 15, 2002 AND
           RELATED AGREEMENTS  AND  INSTRUMENTS

Dear Holder Of The Promissory Notes:

     Reference  is made to the promissory note(s) which is currently held by you
in  connection  with one or more of the following transactions with the Company:

     i.)       The  promissory  note(s)  originally  issued  by  the  Company in
               connection  with  the private placement on or around December 17,
               1999  (the  "Original  Notes"),  as  amended  (the  "Restructured
               Notes"),
     ii.)      The  promissory  note(s)  originally  issued  by  the  Company
               contemporaneously  with  the  issuance of the Original Notes (the
               "Original  Other  Notes"),  as  amended  (the "Other Restructured
               Notes"),  and/or
     iii.)     The  promissory  note(s)  originally  issued  by  the  Company
               contemporaneously  with  the  restructuring of the Original Notes
               and  the  Original  Other  Notes  (the  "New  Notes").

     The  Restructured Notes, the Other Restructured Notes and the New Notes are
     collectively  referred  to  as  the  "Promissory  Notes"  and  all  of  the
     underlying  agreements  pertaining  to  the Promissory Notes, including the
     purchase  agreement,  the note agreement, the common stock purchase warrant
     agreement,  the  registration rights agreement, and all related amendments,
     if  any,  are  collectively  referred  to  as  the  "Original  Documents".

     The Promissory Notes, including unpaid interest are due and payable on June
15, 2002.  The Company is currently attempting to close a transaction related to
the sale of an asset which would enable the Company to satisfy the June 15, 2002
payment  date.  However,  the Company would prefer to extend the payment date of
the Promissory Notes in order to finalize the transaction in a form satisfactory
to the Company.  Therefore the Company is willing to extend the payment due date
on  the  Promissory  Notes  until any one of the following trigger dates, at the
Company's  sole option:  August 15, 2002, October 15, 2002 or December 15, 2002,
continue interest payments on the Promissory Notes at a rate of 16.50% per annum
and  pay  you  a  1.5%  fee.


<PAGE>
     For  good  and valuable consideration, the receipt and sufficiency of which
are  hereby  acknowledged,  the  Company and you hereby agree that your Original
Documents  shall  be, and hereby are, amended, effective from and after June 15,
2002,  to  the  fullest  extent  necessary  to  effectuate  the  following:

     1.   Promissory  Notes. The Promissory Notes held by you are hereby amended
          -----------------
          to  the  full  extent  necessary  to  effectuate  the  following:

          (a)  Extend  the  payment  due date from "June 15, 2002" to any one of
               the  following  dates,  at the Company's sole option: "August 15,
               2002,  October  15,  2002  or  December  15,  2002".
          (b)  Pay  interest  on  the Promissory Notes at the rate of 16.50% per
               annum  on July 1, 2002, August 15, 2002, October 15, 2002 (if the
               Notes  have  not already been paid) and December 15, 2002 (if the
               Notes  have  not  already  been  paid).

     2.   Additional Payment. The Company will pay to you a fee equal to 1.5% of
          ------------------
          the  amount  of  your  Promissory Notes which are extended pursuant to
          this amendment letter. The fee will be paid on July 1, 2002 as well as
          any  unpaid  interest  due  on the Promissory Notes as of July 1, 2002
          (see  1(b)  above).

     3.   Declining  Noteholders.  Notwithstanding  anything  to  the  contrary
          ----------------------
          contained  in  your  Original Documents, you hereby agree that, to the
          extent  that any other holders of the Promissory Notes do not agree to
          this  amendment  letter by June 15, 2002 (collectively, the "Declining
          Promissory  Noteholders"), the Company shall be entitled to repay such
          Declining  Promissory  Noteholders all amounts owing by the Company to
          such  Declining Promissory Noteholders under their respective Original
          Documents  without,  by  virtue  thereof,  in  any  way  breaching  or
          otherwise being in default of any of your Original Documents. Any such
          amounts  paid,  shall  be  excluded from the definition of "Financing"
          provided  for  in  your  Original  Documents.


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<PAGE>
     If  you  are  in  agreement with the terms of this amendment letter, please
indicate  so  by  signing  below  and faxing an executed copy to Ian Bothwell at
(760)  772-8588  no  later  than  the  close  of  business  on  June  10,  2002.

Very truly yours,

Penn Octane Corporation



By:
     ------------------------------------------
Its: Vice President and Chief Financial Officer


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<PAGE>
     The  undersigned holder of the Promissory Note and other Original Documents
referred  to  in this amendment letter hereby acknowledges his/her/its agreement
to  all of the provisions of this amendment letter and intention to be so bound.
The  undersigned  also  agrees to keep the contents of this amendment letter and
any documents or discussions regarding the same strictly confidential and not to
use  the  same for any purpose pending public disclosure thereof by the Company;
provided,  however, that the undersigned may consult with his, her or its agents
and  advisors  with  respect  to  the  transactions  contemplated hereby and, in
connection  therewith,  disclose the terms and contents of this amendment letter
and  any  other  documents  relating  to  the  subject matter thereof or hereof.

<<FirstName>> <<LastName>>
<<Company>>
<<Company1>>


By: ___________________________________

Its: __________________________________

Date:

Promissory Note Amount:    $<<NoteAmt>>
                            -----------



Name and Telephone Number of Holder:

______________________________________

______________________________________

______________________________________


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<PAGE>