REGISTRATION  RIGHTS  AGREEMENT

     This Registration Rights Agreement (this "Agreement") is entered into as of
the  Closing  Date  (as  defined herein) by and among Penn Octane Corporation, a
Delaware  corporation  (the  "Company"),  and  Van  Moer  Santerre  & Company, a
Luxembourg  company  ("Purchaser").

     This  Agreement  is entered into pursuant to the Purchase Agreement between
the  Company  and  Purchaser (the "Purchase Agreement").  In order to induce the
Purchaser  to  enter  into  the  Purchase  Agreement,  the Company has agreed to
provide  the  registration rights set forth in this Agreement.  The execution of
this  Agreement  by the Company is a condition to the closing under the Purchase
Agreement.

The  parties  hereby  agree  as  follows:

1.   Definitions
     -----------

     Capitalized  terms used herein without definition shall have the respective
meanings  set  forth  in the Purchase Agreement.  As used in this Agreement, the
following  terms  shall  have  the  following  meanings:

     Closing  Date:  The  date  on  which  the  Closing  occurs  pursuant to the
     --------------
Purchase  Agreement.

     Exchange  Act:  The  Securities  Exchange  Act of 1934, as amended, and the
     --------------
rules  and  regulations  of  the  Commission  promulgated  thereunder.

     Losses:  The term  "Losses"  shall have the  meaning set forth in Section 6
     ------
hereof. 

     Prospectus:   The  prospectus   included  in  any  Registration   Statement
     ----------
(including,   without  limitation,   a  prospectus  that  discloses  information
previously omitted from a prospectus filed as part of an effective  registration
statement in reliance upon Securities Act Rule 430A), as amended or supplemented
by any prospectus  supplement,  with respect to the terms of the offering of any
portion of the Registrable Securities covered by such Registration Statement and
all other amendments and supplements to the prospectus, including post-effective
amendments,  and  all  material  incorporated  by  reference  or  deemed  to  be
incorporated by reference in such prospectus.

     Registrable Securities:  The Shares and all shares of Common Stock issuable
     -----------------------
upon  exercise  of the Warrants, plus any Common Stock issued or issuable to the
Purchaser  in  respect  of  the  Shares or Warrant Shares, pursuant to any stock
split, stock dividend, recapitalization, or similar event.  The Warrant is not a
Registrable  Security  hereunder.  As  to  any  Registrable  Securities,  such
securities  shall  cease  to  be  Registrable Securities when (i) a registration
statement  with  respect  to  the  sale  of  such  securities  shall have become
effective  under the Securities Act and such securities shall have been disposed
of pursuant to such effective registration statement, (ii) such securities shall
have  been  distributed  pursuant  to  Rule 144 or any similar provision then in
force, under the Securities Act, (iii) such securities shall have been otherwise
transferred,  new  certificates  or  other  evidences  of ownership for them not
bearing  a  legend  restricting  further  transfer  and  not subject to any stop
transfer  order  or  other restrictions on transfer shall have been delivered by
the  Company  and  subsequent  disposition  of such securities shall not require

<PAGE>
registration or qualification of such securities under the Securities Act or any
state  securities  laws then in force or (iv) the sale of such securities by the
holder  thereof shall no longer require registration under the Securities Act or
such  securities  shall  cease  to  be  outstanding.

     Registration  Expenses:  All reasonable expenses incurred by the Company in
     ----------------------
complying  with  Section  3  hereof, including all registration and filing fees,
printing  expenses,  fees and disbursements of counsel for the Company, and blue
sky  fees  and  expenses.

     Registration  Statement:  Any  registration  statement of the Company which
     ------------------------
covers  any  of  the  Registrable  Securities pursuant to the provisions of this
Agreement,  including  the  Prospectus,  amendments  and  supplements  to  such
registration  statement,  including post-effective amendments, all exhibits, and
all material incorporated by reference or deemed to be incorporated reference in
such  registration  statement.

     Restricted  Securities:  The  Shares  and  the Warrant Shares upon original
     -----------------------
issuance thereof, and at all times subsequent thereto, until, in the case of any
such  security,  it  is  no longer required to bear the legend set forth on such
security  pursuant  to  the  terms  of  the security, the Purchase Agreement and
applicable  law.

     Purchase  Agreement:  The  Agreement  by  and  among  the  Company  and the
     --------------------
Purchaser  pursuant  to  which  the  Shares  and  the  Warrant  were  issued.

     Rule  144:  Rule  144 under the Securities Act, as such Rule may be amended
     ----------
from  time  to  time, or any similar rule or regulation hereafter adopted by the
Commission  (excluding  Rule  144A).

2.   Securities  Subject  to  this  Agreement
     ----------------------------------------

The  securities  entitled  to the benefits of this Agreement are the Registrable
Securities.

3.   "Piggy-Back"  Registrations.
     ---------------------------

     (a) If at any time the  Company  shall  determine  to  register  any of its
Common  Stock under the  Securities  Act,  whether in  connection  with a public
offering by the Company, a public offering by shareholders,  or both, including,
without  limitation,  by means of any shelf  registration  pursuant  to Rule 415
under the  Securities  Act or any similar rule or  regulation,  but other than a
registration to implement an employee benefit or dividend reinvestment plan, the
Company shall promptly give written notice thereof to the Purchaser who shall be
a  registered  holder of  Registrable  Securities  and shall use its  reasonable
efforts to effect the registration  under the Securities Act of such Registrable
Securities as may be requested in a writing  delivered to the Company  within 30
days after such notice by the  Purchaser as well as to include such  Registrable
Securities in any notifications, registrations or qualifications under any state
securities  laws which shall be made or obtained with respect to the  securities
being registered by the Company; provided, however, that (a) any distribution of
                                 --------  -------
Registrable  Securities  pursu-ant to such registration  shall be managed by the
investment  banking firm, if any,  managing the  distribution  of the securities
being  offered by the  Company on the same terms as all other  securities  to be
registered,  and (b) the Company  shall not be required  under this Section 3 to
include Registrable  Securities in any registration of securities if the Company
shall have been advised by the investment  banking firm managing the offering of
the  securities  proposed  to be  registered  by the  Company or others that the
inclusion  of  Registrable  Securities  in  such  offering  would  substantially
interfere with the orderly sale of such  securities  which the Company or others
propose to register;  provided,  however, that in making any determination under
this  subparagraph (b) as to the inclusion of the Registrable  Securities in any

<PAGE>
such offering,  Registrable  Securities  shall be registered on a pro-rata basis
with any other  securities  as to which the  Company  has  granted or may in the
future grant registration  rights. All expenses of any registration and offering
of  Registrable  Securities  pursuant  to this  Section  3  (including,  without
limitation,  registration  fees  and  fees and  disbursements  of the  Company's
counsel)  shall be borne by the Company,  except that the Company shall not bear
underwrit-ing  discounts or commissions  attributable to Registrable Securities,
the fees of any separate  counsel for the holders of  Registrable  Securities or
related transfer taxes.

4.   Registration  Procedures.
     ------------------------

     (a) In connection with any registration  pursuant to Section 3 hereof,  the
Company will prepare and file with the SEC, a  Registration  Statement,  and any
amendments  and  supplements  thereto,  on any form for which the  Company  then
qualifies or which counsel for the Company shall deem  appropriate,  and use its
reasonable  efforts to cause such  Registration  Statement to become  effective;
provided that before filing with the SEC a Registration  Statement or prospectus
--------
or any  amendments  or  supplements  thereto,  the  Company  will (i) furnish to
counsel  selected by the Purchaser  copies of all such documents  proposed to be
filed,  which documents will be subject to the review of such counsel,  and (ii)
notify the  Purchaser of any stop order issued or threatened by the SEC and take
all  reasonable  actions  required to prevent the entry of such stop order or to
remove it if entered. The Company will also (i) promptly notify the Purchaser of
the effectiveness of such Registration Statement,  (ii) furnish to the Purchaser
such number of copies of such  Registration  Statement,  and each  amendment and
supplement thereto,  the Prospectus included in such Registration  Statement and
such other  documents as the Purchaser  may  reasonably  request;  (iii) use its
reasonable efforts to register or qualify such securities to be registered under
such other  securities or blue sky laws of such  jurisdictions  as the Purchaser
reasonably  requests;  (iv)  use  its  reasonable  efforts  to  cause  all  such
securities to be registered  to be listed on each  securities  exchange on which
similar  securities  issued by the  Company  are then  listed,  and to provide a
transfer agent and registrar for such  securities to be registered no later than
the  effective  date  of  such  Registration  Statement;  (v)  enter  in to such
customary agreements (including an underwriting agreement in customary form) and
take all such other actions as the Lenders or the  underwriters  retained by the
Purchaser,  if any,  reasonably  request in order to expedite or facilitate  the
disposition   of  such   securities  to  be  registered,   including   customary
indemnification;  and (vi) otherwise use its  reasonable  efforts to comply with
all  applicable  rules and  regulations  of the SEC. The terms of this Section 4
shall not require the Company to qualify as a foreign corporation or as a dealer
in  securities  or to execute or file any general  consent to service of process
under the laws of any such jurisdiction where it is not so subject.

     (b) In connection with any effective  Registration Statement filed pursuant
to  this  Agreement,   the  Company  will   immediately   notify  the  Purchaser
participating in the distribution to which such  Registration  Statement relates
of the  happening of any event as a result of which the  prospectus  included in
such Registration  Statement  contains an untrue statement of a material fact or
omits to state any material fact  required to be stated  therein or necessary to
make the statements  therein not misleading in light of the  circumstances  then
existing, and will promptly prepare and furnish to the Purchaser a supplement or
amendment to such  prospectus so that such prospectus will not contain an untrue
statement of a material  fact or omit to state any material  fact required to be
stated  therein or necessary to make the  statements  therein not  misleading in
light of the circumstances then existing.  Notwithstanding the foregoing, if the
Company  determines  in its  reasonable  business  judgment that an amendment or
supplement to any such prospectus  would interfere with any material  financing,
acquisition,  corporate reorganization,  or other material corporate transaction
or development  involving the Company, the Company may delay the preparation and
filing of such amendment or supplement for a period of up to 60 days in order to
complete or make a public announcement with respect to such material transaction
or  development  (it being  understood  that the Company  shall be  obligated to
extend  the  period  of time it is  required  to  maintain  in  effect  any such
Registration  Statement  to take  into  account  the  period  of time  that  the
Purchaser is unable to offer or sell  Registrable  Securities  by reason of this
Section 4(c)).


<PAGE>
5.   Holdback  Agreements.
     --------------------

     (a) Restrictions on Public Sale by Holders of Registrable Securities.  Each
         ----------------------------------------------------------------
holder of Registrable  Securities whose Registrable  Securities are covered by a
Registration  Statement filed pursuant to Section 3 hereof agrees,  if requested
by the managing  underwriters in an underwritten  offering (to the extent timely
notified in writing by the Company or the managing underwriters),  not to effect
any  public  sale or  distribution  of  securities  of the  Company of any class
included in such Registration  Statement,  including a sale pursuant to Rule 144
(except as part of such underwritten  offering),  during the 10-day period prior
to, and the 90-day period  beginning on, the effective date of any  Registration
Statement.

     (b) The foregoing  provisions  shall not apply to any holder of Registrable
Securities if such holder is prevented by applicable  statute or regulation from
entering into any such agreement;  provided, however, that any such holder shall
                                   -----------------
undertake in its request to participate in any such underwritten offering not to
effect any public sale or  distribution  of the class of Registrable  Securities
covered by such  Registration  Statement  (except  as part of such  underwritten
offering) during such period unless it has provided five (5) business days prior
written  notice of such sale or  distribution  to the  managing  underwriter  or
underwriters.

6.   Indemnification
     ---------------

     (a)  Indemnification  by Company.  The  Company  shall  indemnify  and hold
          ---------------------------
harmless,  to the full  extent  permitted  by law,  each  holder of  Registrable
Securities,  its  officers,  directors,  agents and  employees,  each person who
controls such holder  (within the meaning of Section 15 of the Securities Act or
Section  20 of the  Exchange  Act),  and  the  officers,  directors,  agents  or
employees of any such controlling person,  from and against all losses,  claims,
damages,  liabilities,  costs  (including,  without  limitation,  all reasonable
attorneys' fees) and expenses (collectively,  "Losses"), arising out of or based
upon any untrue  statement  of a material  fact  contained  in any  Registration
Statement, Prospectus or preliminary prospectus, or arising out of or based upon
any omission of a material  fact  required to be stated  therein or necessary to
make the statements therein in light of the circumstances  under which they were
made (in the case of any Prospectus) not misleading,  except insofar as the same
are based  solely upon  information  furnished to the Company by such holder for
use therein; provided, however, that the Company shall not be liable in any such
             -----------------
case to the extent  that any such Loss  arises out of or is based upon an untrue
statement or omission  made in any  preliminary  prospectus or Prospectus if (i)
such holder  failed to send or deliver a copy of the  Prospectus  or  Prospectus
supplement with or prior to the delivery of written  confirmation of the sale of
Registrable  Securities and (ii) the Prospectus or Prospectus  supplement  would
have corrected such untrue statement or omission.

     (b) Indemnification by Holder of Registrable Securities. In connection with
         ---------------------------------------------------
any  Registration  Statement  in which a holder  of  Registrable  Securities  is
participating,  such  holder of  Registrable  Securities  shall  furnish  to the
Company in writing such  information as the Company may  reasonably  request for
use in connection with any Registration Statement or Prospectus.  Each holder of
Registrable  Securities  shall  indemnify and hold harmless,  to the full extent
permitted  by  law,  the  Company,  and  its  officers,  directors,  agents  and
employees,  each person who controls the Company  (within the meaning of Section
15 of the  Securities  Act or Section 20 of the Exchange  Act) and the officers,
directors,  agents or employees of any such controlling person, from and against
all Losses arising out of or based upon any untrue  statement of a material fact
contained in any Registration  Statement,  Prospectus or preliminary prospectus,
or arising out of or based upon any omission of a material  fact  required to be

<PAGE>
stated  therein  or  necessary  to make the  statements  therein in light of the
circumstances  under  which they were made (in the case of any  Prospectus)  not
misleading, to the extent, but only to the extent, that such untrue statement or
omission is contained in any  information so furnished in writing by such holder
to the Company for use in such Registration Statement, Prospectus or preliminary
prospectus.  Such indemnity shall remain in full force and effect  regardless of
any  investigation  made by or on behalf of the Company or any holder and any of
their respective directors,  officers,  agents, employees or controlling persons
(within  the  meaning of Section 15 of the  Securities  Act or Section 20 of the
Exchange Act) and shall survive the transfer of such securities by such holder.

     (c) Conduct of  Indemnification  Proceedings.  If any action or  proceeding
         ----------------------------------------
(including any  governmental  investigation  or inquiry) shall be brought or any
claim shall be asserted  against any person entitled to indemnity  hereunder (an
"indemnified  party"),  such  indemnified  party shall promptly notify the party
from which such indemnity is sought (the "indemnifying  party") in writing,  and
the  indemnifying  party  shall  assume  the  defense  thereof,   including  the
employment of counsel  reasonably  satisfactory to the indemnified party and the
payment  of all  fees and  expenses  incurred  in  connection  with the  defense
thereof. All such fees and expenses (including any fees and expenses incurred in
connection with  investigating or preparing to defend such action or proceeding)
incurred by the indemnified  party,  shall be paid to the indemnified  party, as
incurred,  within 20 days of written notice thereof to the  indemnifying  party;
provided,  however, that if, in accordance with this Section 6, the indemnifying
------------------
party is not liable to the  indemnified  party,  such fees and expenses shall be
returned  promptly to the indemnifying  party. Any such indemnified  party shall
have  the  right  to  employ  separate  counsel  in any  such  action,  claim or
proceeding and to participate in the defense thereof,  but the fees and expenses
of such counsel  shall be the expense of such  indemnified  party unless (a) the
indemnifying  party  has  agreed  to  pay  such  fees  and  expenses,   (b)  the
indemnifying  party  shall have  failed  promptly  to assume the defense of such
action, claim or proceeding and to employ counsel reasonably satisfactory to the
indemnified  party in any such  action,  claim or  proceeding,  or (c) the named
parties  to any  such  action,  claim or  proceeding  (including  any  impleaded
parties)  include both such indemnified  party and the  indemnifying  party, and
such indemnified  party shall have been advised by counsel that there may be one
or more legal defenses available to it which are different from or additional to
those available to the  indemnifying  party (in which case, if such  indemnified
party  notifies  the  indemnifying  party in  writing  that it  elects to employ
separate  counsel at the expense of the  indemnifying  party,  the  indemnifying
party  shall not have the right to assume the defense of such  action,  claim or
proceeding on behalf of such indemnified  party, it being  understood,  however,
that the  indemnifying  party shall not, in connection with any one such action,
claim or proceeding or separate but  substantially  similar or related  actions,
claims or proceedings in the same  jurisdiction  arising out of the same general
allegations or circumstances,  be liable for the reasonable fees and expenses of
more than one  separate  firm of  attorneys  (together  with  appropriate  local
counsel) at any time for all such indemnified parties,  unless in the opinion of
counsel for such indemnified party a conflict of interest may exist between such
indemnified party and any other of such indemnified parties with respect to such
action,  claim or  proceeding,  in which event the  indemnifying  party shall be
obligated to pay the fees and expenses of such additional  counsel or counsels).
No  indemnifying  party will  consent to entry of any judgment or enter into any
settlement which does not include as an  unconditional  term thereof the release
of such  indemnified  party  from all  liability  in  respect  to such  claim or
litigation  without the written  consent (which consent will not be unreasonably
withheld) of the indemnified  party. No indemnified party shall consent to entry
of any judgment or enter into any set-tlement without the written consent (which
consent will not be unreasonably  withheld) of the indemnifying party from which
indemnity or contribution is sought.

     (d)  Contribution.  If the  indemnification  provided for in this Section 6
          ------------
from the indemnifying  party is unavailable to an in-demnified  party in respect
of any Losses,  then each applicable  indemnifying party in lieu of indemnifying
such indemnified  party hereunder shall contribute to the amount paid or payable
by such indemnified  party as a result of such Losses,  in such proportion as is
appropriate  to  reflect  the  relative  fault  of the  indemnifying  party  and

<PAGE>
indemnified party in connection with the actions,  statements or omissions which
resulted in such Losses as well as any other relevant equitable  considerations.
The relative fault of such indemnifying party and the indemnified party shall be
determined by reference to, among other things,  whether any action in question,
including  any untrue  statement  of a material  fact or  omission of a material
fact,  has been taken or made by, or relates to  information  supplied  by, such
indemnifying  party or  indemnified  party,  and the parties'  relative  intent,
knowledge,  access to  information  and  opportunity  to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include,  subject to the  limitations set forth
in Section 6(c), any legal or other fees or expenses reasonably incurred by such
party in connection with any action, suit, claim, investigation or proceeding.

     The  parties  hereto  agree  that  it  would  not  be just and equitable if
contribution  pursuant  to  this  Section  6(d)  were  determined  by  pro  rata
allocation or by any other method of allocation which does not take into account
the equitable considerations referred to in the immediately preceding paragraph.
No  person guilty of fraudulent misrepresentation (within the meaning of Section
11(f)  of  the Securities Act) shall be entitled to contribution from any person
who  was  not  guilty  of  such  fraudulent  misrepresentation.

7.   Rule  144
     ---------

     The  Company  shall  file  the reports required to be filed by it under the
Securities Act and the Exchange Act and the rules and regulations adopted by the
Commission  thereunder,  and  will  take  such  further  action as any holder of
Registrable  Securities  may reasonably request, all to the extent required from
time  to  time  to  enable  such  holder  to sell Registrable Securities without
registration  under  the  Securities  Act within the limitation of the exemption
provided  by  Rule  144  or  Rule  144A.  Upon  the  request  of  any  holder of
Registrable  Securities,  the  Company  shall  deliver  to such holder a written
statement  as  to  whether  the  Company  has complied with such information and
requirements.  Notwithstanding the foregoing, nothing in this Section 7 shall be
deemed  to  require  the  Company  to  register  any of its securities under any
section  of  the  Exchange  Act.

8.   Underwritten  Registrations
     ---------------------------

     If  any of the Registrable Securities covered by any registration are to be
sold  in  an  underwritten offering, the investment banker or investment bankers
and  manager  or  managers that will administer the offering will be selected by
the  Company.  No  holder  of  Registrable  Securities  may  participate  in any
underwritten  registration  hereunder unless such holder (i) agrees to sell such
holder's  Registrable  Securities  on  the  basis  provided  in the underwriting
arrangements  approved  by  the  Company,  and  (ii)  completes and executes all
questionnaires,  powers  of  attorney,  indemnities, underwriting agreements and
other  documents  required  under  the  terms of such underwriting arrangements.

9.   Miscellaneous
     -------------

     (a) Amendments and Waivers. The provisions of this Agreement, including the
         ----------------------
provisions of this sentence, may not be amended,  modified or supplemented,  and
waivers or consents to departures  from the  provisions  hereof may not be given
unless the Company obtains the written consent of holders of at least a majority
of the then  outstanding  Registrable  Securities  affected  by such  amendment,
modification or supplement.  Notwithstanding the foregoing,  a waiver or consent
to depart from the  provisions  hereof with  respect to a matter  which  relates
exclusively to the rights of holders of Registrable Securities whose securi-ties
are being sold pursuant to a Registration  Statement and which does not directly
or  indirectly  affect the rights of holders  of  Registrable  Securities  whose

<PAGE>
securities  are not being sold  pursuant to such  Registration  Statement may be
given by holders of a majority of the Registrable  Securities being sold by such
holders.

     (b) Notices. All notices and other communications provided for or permitted
         -------
hereunder  shall be made in writing  by  hand-delivery,  registered  first-class
mail,  next  day  air  courier,  telex,  or  telecopy:  (i)  if to a  holder  of
Registrable Securities,  at the most current address given by such holder to the
Company in accordance  with the  provisions of this Section 9(b),  which address
initially is, with respect to the Purchaser, the address set forth in Section __
of the  Purchase  Agreement;  and  (ii)  if to  the  Company,  at  900  Veterans
Boulevard,  Suite 240, Redwood City California 94063, attention:  Secretary, and
thereafter at such other  address,  notice of which is given in accordance  with
the provisions of this Section 8(b).

     All  such  notices  and  communications  shall  be deemed to have been duly
given:  when delivered by hand, if personally delivered; two business days after
being  deposited in the mail, postage prepaid, if mailed; one business day after
being  sent  by  next  day air courier; when answered back, if telexed; and when
receipt  acknowledged,  if  telecopied.

     (c)  Transfer of  Registration  Rights.  The rights  granted to the holders
          ---------------------------------
pursuant to this  Agreement to cause the Company to register  securities may not
be assigned or  otherwise  transferred  in any way other than to an Affiliate of
the holder to whom the holder has transferred all or any part of the Warrant.

     (d)  Counterparts.  This  Agreement  may  be  executed  in  any  number  of
          ------------
counterparts  by the parties  hereto,  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.

     (e)  Headings.  The  headings  in this  Agreement  are for  convenience  of
          --------
reference only and shall not limit or otherwise affect the meaning hereof.

     (f)  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 conflict of laws.

     (g) Severability.  If any term, provision,  covenant or restriction of this
         ------------
Agreement is held by a court of competent  jurisdiction  to be invalid,  void or
unenforceable,   the   remainder  of  the  terms,   provisions,   covenants  and
restrictions set forth herein shall remain in full force and effect and shall in
no way be affected,  impaired or  invalidated,  and the parties hereto shall use
their best efforts to find and employ an  alternative  means to achieve the same
or substantially the same result as that  contemplated by such term,  provision,
covenant  or  restriction.  It is  hereby  stipulated  and  declared  to be  the
intention of the parties  that they would have  executed  the  remaining  terms,
provisions,  covenants and restrictions  without including any of such which may
be hereafter declared invalid, void or unenforceable.

     (h) Entire  Agreement.  This  Agreement  is intended by the parties to be a
         -----------------
final  expression of their  agreement and a complete and exclusive  statement of
the agreement and  understanding of the parties hereto in respect of the subject
matter contained  herein.  There are no restrictions,  promises,  warranties nor
undertakings,  other than those set forth or referred to herein with  respect to
the  registration  rights  granted by the Company with respect to the securities
sold pursuant to the Purchase  Agreement.  This  Agreement  supersedes all prior
agreements and  understandings  between the parties with respect to such subject
matter.

<PAGE>
     (i) Attorneys'  Fees. If any action or proceeding is brought to enforce any
         ----------------
provision of this Agreement,  or where any provision  hereof is validly asserted
as a defense,  the  successful  party shall be  entitled  to recover  reasonable
attorneys'  fees in addition to its costs and expenses  and any other  available
remedy.

     IN WITNESS WHEREOF, the parties have executed this agreement as of November
__,  1998.

                    PENN  OCTANE  CORPORATION



                    By:  /s/  Jerome  B.  Richter
                         -------------------------------------------------------
                              Jerome  B.  Richter
                              Chairman,  President  and  Chief Executive Officer


                    VAN  MOER  SANTERRE  &  COMPANY


                    By:  ____________________________________
                         Name:
                         Title:

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