PENN OCTANE CORPORATION/EXXON COMPANY, U.S.A.
                                 SALE AGREEMENT

                          PENN NO. ___/EXXON NO. PEB221


*    The Sale Agreement set forth below hereby replaces the Sale Agreement which
     had an  effective  date of  November 1, 1997,  entered  into by and between
     Exxon Company, U.S.A. (a division of Exxon Corporation), hereinafter called
     "Exxon" and Penn Octane Corporation, hereinafter called "Penn".

*    The Sale  Agreement  (November  1, 1997) is revised  effective  November 1,
     1998,  to revise  the  volume and  pricing  and to extend the term  through
     September 30, 1999.

Penn  and  Exxon  agree  to  a  product  sale  as  outline  below:

1.   TERM  OF  AGREEMENT
     -------------------

*    This Agreement shall begin with the first shipment to Penn in November 1998
     and shall continue through September 30, 1999.

2.   PRODUCT  VOLUMES/PRICES
     -----------------------

*    Exxon  agrees to deliver to Penn the  approximate  product  volumes show on
     Exhibit A during the term of this  Agreement  at the  location  and pricing
     basis outlined in Exhibit A.

3.   PRODUCT  SPECIFICATIONS
     -----------------------

     Exxon shall deliver to Penn products that meets applicable  federal,  state
     and local requirements, as shown below:

     -    Propane Butane Mix: 90 vol % Propane and 10 vol % Butane,  meeting HD5
          ------------------
          spec unodorized.

4.   GENERAL  PROVISIONS
     -------------------

     Exxon's  General  Provisions  dated December 1996 and attached as Exhibit C
     are incorporated herein by reference and made a part hereof.

5.   EXPORTS/IMPORTS
     ---------------

     This is a domestic  transaction.  Penn is responsible for obtaining  export
     licenses   and/or  export   documentation   required  for  any   subsequent
     exportation that may occur.

6.   ACCOUNTING
     ----------

     Forward all shipping  documents,  statements,  and invoices,  and demurrage
     claims to:

          PENN  OCTANE  CORPORATION
          12118  South  Bloomfield
          Santa  Fe  Springs,  CA  90670
          Attention:  Ian  Bothwell

                                                                  Page  1  of  2
<PAGE>


     Send  payments  by  wire  transfer  to:

          CITIBANK,  N.A.
          ABA  0201-0008-9
          Credit  to  Exxon  Company  U.S.A.
          Regular  Account  #  00034219

7.   INVOICE  PAYMENT  METHOD/TERMS
     ------------------------------

     In  accordance  with Exhibit C, General  Provisions,  except that  invoices
     shall be issued  weekly and shall be paid by wire transfer with payment due
     twelve (12) working days from receipt of invoice and acceptable  supporting
     documentation.  If the invoice and acceptable supporting  documentation are
     received at the billing  address on or before  12:00 noon on a working day,
     working day 1 begins on that day. If the invoice and acceptable  supporting
     documentation are received at the billing address after 12:00 noon (or on a
     non-working  day),  working day 1 begins on the first working day following
     receipt.

     If the  transaction  if effected  via book  transfer,  quantity to be exact
     barrels.  Payment  due date  shall be the  effective  book  transfer  date,
     provided the invoice and book transfer  confirmation  have been received by
     12:00  noon  on  the  day  preceding  the  effective  book  transfer  date;
     otherwise,  the payment due date shall be the next  business day  following
     receipt of invoice and book transfer confirmation.

8.   CREDIT  PROVISIONS
     ------------------

     Penn  agrees to  provide a letter of  credit  acceptable  to Exxon.  Credit
     balances  shall be  monitored  by Exxon,  and  amendments  to the letter of
     credit may be  required  when it appears  that  those  balances  may exceed
     current security levels. Timely receipt by Exxon of acceptable security and
     amendments  is a  condition  precedent  to Exxon's  performance  under this
     Agreement.  Any  letter of  credit  provided  to Exxon  must be issued in a
     format,  for and amount,  by a bank and for a time  duration  acceptable to
     Exxon.

9.   EXHIBITS
     --------

     The following  Exhibits are attached and are a part of this Agreement.  All
     references herein to the Agreement shall include the applicable Exhibits.

          Exhibit  A  -  Product  Volumes/Locations/Differentials
          Exhibit  B  -  Product  Specifications  -  Note Used (see paragraph 3)
          Exhibit  C  -  General  Provisions

EXXON  COMPANY,  U.S.A.                     PENN  OCTANE  CORPORATION
a division of Exxon Corporation


BY   _________________________________      BY _____________________________
     F.S.  Panebianco
     Manager, Products and Gas Liquids      TITLE __________________________

DATE _________________________________      DATE ___________________________


                                                                  Page  2  of  2
<PAGE>
<TABLE>
<CAPTION>

                                    EXHIBIT A
                     PRODUCT VOLUMES/LOCATIONS/DIFFERENTIALS
                        PENN NO. _______/EXXON NO. PEB221
                                 SALE AGREEMENT


EXXON  DELIVERS
---------------

                                                                          *Quantity
                       Product           Method                          Approximate      *Exxon Receives
Location             Description      of Delivery       Measurement       Bbls/Daily           Price
------------------  --------------  ----------------  ---------------  -----------------  ---------------
<S>                 <C>             <C>               <C>              <C>                <C>
Exxon's King Ranch  Propane/Butane  Into UCC          By meter ticket  9,000 (Nov - Mar)              (1)
Gas Plant. . . . .  Mix             Ella-Brownsville  at origin        6,600 (Apr - Sep)
                                      6" pipeline
<FN>
*     (1)     Price - Mt. Belvieu, TX Oil Price Information Service (OPIS) NON TET price average for the
              first  business  day  for  interim  pricing less x.x xxxx per gallon for each product.
              Invoices will be issued weekly.  At the end of the month, pricing will be adjusted to  the
              Mt. Belvieu OPIS NON TET day weighted average for the delivery month for each product less
              x.x xxxx per  gallon.
</TABLE>

                                                                  Page  1  of  1
<PAGE>
                                    EXHIBIT C

<TABLE>
<CAPTION>
EXXON COMPANY, U.S.A. (A DIVISION OF EXXON CORPORATION)
       PETROLEUM PRODUCTS & NATURAL GAS LIQUIDS
       ----------------------------------------
                   DECEMBER 1996

            INDEX TO GENERAL PROVISIONS
            ---------------------------

                                          Page  Number
                                          ------------

<C>  <S>                                      <C>
 1.    Special Provisions Shall Govern . . .  1
 2.    Deliveries. . . . . . . . . . . . . .  1
 3.    Volumes . . . . . . . . . . . . . . .  1
 4.    Measurements. . . . . . . . . . . . .  1
 5.    Data Integrity. . . . . . . . . . . .  1
 6.    Inspection. . . . . . . . . . . . . .  2
 7.    Title . . . . . . . . . . . . . . . .  2
 8.    Importer/Exporter of Record . . . . .  2
 9.    Drawback. . . . . . . . . . . . . . .  2
10.    Warranty. . . . . . . . . . . . . . .  2
11.    Additional Equipment. . . . . . . . .  3
12.    Safety Regulations. . . . . . . . . .  3
13.    Safety and Health Information . . . .  3
14.    Statements and Invoices (Exchanges) .  3
       Payment (Purchases and Sales) . . . .  3
15.    Taxes . . . . . . . . . . . . . . . .  4
16.    Financial Responsibility. . . . . . .  4
17.    Exchange Basis. . . . . . . . . . . .  4
       Balances Products . . . . . . . . . .  5
       Balances Natural Gas Liquids. . . . .  5
       Exchange Imbalances . . . . . . . . . .5
18.    Set-Off . . . . . . . . . . . . . . .  5
19.    Continuing Obligation . . . . . . . .  5
20.    Applicable Laws . . . . . . . . . . .  5
21.    Compliance with Laws and Regulations.  5
22.    Product Compliance and Documentation.  5
23.    Indemnity . . . . . . . . . . . . . .  6
24.    Claims. . . . . . . . . . . . . . . .  6
25.    Waiver. . . . . . . . . . . . . . . .  6
26.    Force Majeure and Contingencies . . .  6
27.    Business Practices. . . . . . . . . .  7
28.    Conflict of Interest. . . . . . . . .  7
29.    Audit . . . . . . . . . . . . . . . .  7
30.    Assignment. . . . . . . . . . . . . .  7
31.    Odorization . . . . . . . . . . . . .  7
32.    Quality . . . . . . . . . . . . . . .  8
33.    Storage . . . . . . . . . . . . . . .  8
34.    Demurrage on Tank Cars. . . . . . . .  8
</TABLE>

<PAGE>
                                                                     PAGE 1 OF 8
                                                           EXXON COMPANY, U.S.A.
                                                              GENERAL PROVISIONS

             EXXON COMPANY, U.S.A. (A DIVISION OF EXXON ORPORATION)
                    PETROLEUM PRODUCTS & NATURAL GAS LIQUIDS
         GENERAL PROVISIONS FOR EXCHANGE, PURCHASE, AND SALE AGREEMENTS

1.   Special  Provisions  Shall  Govern   -   All  provision  of  this Agreement
     ----------------------------------
     (including  amendments)  other than the  "General  Provisions"  and "Marine
     Provisions" (if applicable) comprise the "Special Provisions". In the event
     of any conflict between the Special Provisions and the General  Provisions,
     the Special  Provisions shall govern.  In the event of any conflict between
     the Marine  Provisions and the General  Provisions,  the Marine  Provisions
     shall govern.

2.   Deliveries   -   Deliveries shall be made at such times within the contract
     ----------
     delivery  window,  as may be  required by  Receiving  Party  provided  that
     reasonable  advance notice of each delivery has been given by the Receiving
     Party.  At the time of giving  notice,  the  Receiving  Party shall furnish
     Delivering  Party  all  necessary  shipping  instructions.  At the  time of
     delivery,  the  Delivering  Party shall  prepare and furnish the  Receiving
     Party with copies of bills of lading and other shipping papers.  Deliveries
     into trucks and/or tank cars shall be made within the delivering terminal's
     usual  business  hours (See Exhibit "E" for Truck Loading  Documentation  /
     Communications  Requirements as applicable).  Where  applicable,  Receiving
     Party agrees to  Delivering  Party's  Facility  Access  Agreement  prior to
     withdrawal of product from Delivering Party's truck loading rack.

3.   Volumes   -   Unless  otherwise  specifically  indicated,  all  quantities
     -------
     delivered  shall be adjusted to net gallons at 60 deg F. in accordance with
     ASTM D-1250 Petroleum  Measurement  Tables, or latest revisions  thereof. A
     barrel shall consist of 42 U.S. gallons and a U.S. gallon shall contain 231
     cubic inches.

4.   Measurements  -  Unless  otherwise  specified,  quantities  delivered:
     ------------
     (A)  into or from transport trucks shall be measured by calibrated  meters,
          or if such meters are unavailable, by applicable calibration tables;
     (B)  into or from tank cars shall be measured by calibrated  meters,  or if
          such meters are unavailable, by applicable calibrated tank car tables;
     (C)  into or from private pipelines shall be measured by calibrated meters,
          or if such meters are unavailable, by terminal tank gauges; and
     (D)  into or from common  carrier  pipeline  shall be measured by carrier's
          meter tickets.

     Meters and temperature  probes shall be calibrated  according to applicable
     API  standards  (but not less  frequently  than once every six (6) months).
     Receiving Party given  reasonable cause shall have the right at its expense
     to independently certify and calibration. Each party to the Agreement shall
     have the  right to have one  representative  present,  in  addition  to the
     independent inspector, to witness all gauges, tests, meter calibration, and
     measurements.  Such  representative  must comply with any applicable  dock,
     terminal and/or pipeline facilities' safety procedures and/or requirements.
     However,  the gauges,  tests,  meter  calibration,  and measurements of the
     independent inspector, when present, shall be deemed to be binding.

5.   Data  Integrity  -  Delivering Party shall be accountable for the integrity
     ---------------
     of any product quality test performed by it, and the results of any product
     quality  test  performed  by a third  party  laboratory  employed by it, in
     connection  with this  Agreement,  including the recording and retention of
     such data. Delivering Party agrees as to any such test performed by it:
     (A)  Product  quality test  measurements  shall be  complete,  accurate and
          timely based upon unaltered  samples collected in a manner which would
          be expected to yield reasonably  representative  samples or which have
          been collected in the manner  specified by written  agreement  between
          the Parties.
     (B)  Specified  industry  standard test methods and instrument  calibration
          procedures   shall  be  used   without   modification,   unless   that
          modification  has  been  approved  by  industry  standard  or  written
          agreement between the Parties,  or unless the certificates of analysis
          of such data indicate such test method or procedure was altered. In no
          event  will  any  such  alteration  yield  materially  different  test
          results, unless approved in writing.

<PAGE>
                                                                     PAGE 2 OF 8
                                                           EXXON COMPANY, U.S.A.
                                                              GENERAL PROVISIONS

     (C)  A  quality  assurance  system  shall  be in place  for any  laboratory
          facility  involved.  This  system  shall  be  designed  to  aid in the
          deterrence,  detection and  correction of any incorrect data generated
          or communicated and shall also include the maintenance and calibration
          of measurement instruments
     (D)  Testing and  measurement  personnel  involved  shall be trained in the
          necessary skills involved in data generation and data management. This
          shall include initial and ongoing  personnel  training,  testing,  and
          verification of knowledge transfer.
     (E)  Delivering Party shall utilize a self-monitoring and assessment system
          to determine the extent to which the requirements above are being met.
          This system  shall  include the  resolution  of problems  found in the
          assessments,   with  plans  and   responsibilities   for   appropriate
          follow-up.

6.   Inspection  -  Unless  otherwise  agreed:
     ----------
     (A)  Quantity - For all deliveries  into or from  pipelines  where terminal
          --------
          tank  gauges  must be used for  measurement,  and into or from  marine
          vessels,   quantity  shall  be  determined  by  independent   licensed
          petroleum inspector.  Either party may arrange for the inspector,  and
          the cost of the  inspection  service shall be shared  equally  between
          both parties.
     (B)  Quality - For all  deliveries  into or from  pipelines  where terminal
          -------
          tank gauges are  required,  and into or from marine  vessels,  quality
          inspection  by  independent   licensed  petroleum   inspector  may  be
          requested with tests specified by the Receiving Party and the costs of
          the inspection service shared equally.

7.   Title - Title  to,  and all  risk of  loss of or  damage  to,  any  product
     -----
     delivered shall pass as follows:
     (A)  when into  transport  and tank cars as product  enters  the  Receiving
          Party's equipment;
     (B)  when into pipeline as product enters the receiving equipment;
     (C)  when into any storage (other than from marine  vessels),  when product
          passes into the receiving facilities of the Receiving Party; and
     (D)  when by book, stock, and/or inventory transfer,  on the effective date
          of the transfer.

8.   Importer/Exporter  of Record - The party that is the  Importer/Exporter  of
     ---------------------------
     Record of the petroleum  products  received/delivered  under this Agreement
     agrees to fulfill all requirements  applicable to the  Importer/Exporter of
     Record,  including  but not limited to those of the U.S.  Customs and shall
     pay any  applicable  import  duty or any other  applicable  fees and fines,
     penalties or costs.  The other party hereto shall  provide all  information
     necessary for such importation/exportation in a timely manner.

9.   Drawback - Unless  otherwise  negotiated  and  confirmed  in  writing,  the
     --------
     Delivery Party retains the right to claim, receive, and retain drawbacks on
     imported  duty-paid  products and whenever such products are exported,  the
     exporting  party  shall  promptly  notify  the  Delivering  Party and shall
     execute  drawback  claim forms and  assignments  in favor of the Delivering
     Party to enable it to  establish  its drawback  rights  under U.S.  Customs
     Regulations.

10.  Warranty  -  The  Delivery  Party  warrants:
     --------
     (A)  that the product conforms to the product  specifications  set forth in
          the Agreement;
     (B)  that the  Delivering  Party  has free and clear  title to the  product
          delivered under the Agreement;
     (C)  that  such  product  shall be  delivered  free  from  lawful  security
          interests, liens, taxes, and encumbrances;
     (D)  that to the best of Delivering Party's  knowledge,  the product in the
          form  delivered is free from any valid claim for patent  infringement;
          and
     (E)  that the Delivering Party has or shall obtain, at its expense, all the
          necessary   registrations,   certificates,   permits,   licenses   and
          authorizations to deliver the product pursuant to this Agreement.

     THE  DELIVERING  PARTY  MAKES NO OTHER  WARRANTIES,  EXPRESSED  OR IMPLIED,
     INCLUDING THE IMPLIED WARRANTY OF MERCHANTABILITY AND THAT OF FITNESS FOR A
     PARTICULAR  PURPOSE,  IN NO EVENT,  REGARDLESS OF NEGLIGENCE,  SHALL EITHER
     PARTY BE LIABLE FOR PUNITIVE DAMAGES.

     All  warranties  made under the Agreement  shall  survive  acceptance of or
     payment for the products by Receiving Party.

<PAGE>
                                                                     PAGE 3 OF 8
                                                           EXXON COMPANY, U.S.A.
                                                              GENERAL PROVISIONS

11.  Additional  Equipment - Both  parties  agree that either party may elect to
     ---------------------
     install  additional  equipment at the other party's terminal  provided that
     the engineering and installation of any fixture, equipment, or appurtenance
     placed at the terminal(s) shall be subject to terminal  operator's approval
     and supervision.  The terminal  operator shall obtain necessary  permits or
     licenses  for  such  equipment.  Unless  parties  agree in  writing  to the
     contrary,  such  additional  equipment  shall be the property of requesting
     party,  and  requesting  party shall pay for,  operate,  and maintain  such
     additional  equipment,  and  upon  termination  of this  Agreement,  remove
     additional equipment and restore the terminal to its condition prior to the
     installation of such additional equipment.  Should aforementioned equipment
     be observed by the terminal operator to be deficient in operation, terminal
     operator will notify the equipment owner immediately.

12.  Safety  Regulations  - Each party agrees that its agents,  representatives,
     -------------------
     and employees  will comply with all  applicable  safety  regulations of the
     other's facilities when such agents, representatives, or employees are upon
     the  facilities of the other in  connection  with the  performance  of this
     Agreement.  For either party desiring written copies of these  regulations,
     copies  may be  obtained  by  request  to the local  office  operating  the
     facility.

13.  Safety and Health  Information - The  Delivering  Party will furnish to the
     ------------------------------
     Receiving  Party  information  (including  Material  Safety  Data  Sheet(s)
     concerning  the safety and health  aspects of  product(s)  delivered to the
     Receiving  Party  hereunder,  including  safety  and health  warnings.  The
     Receiving Party agrees to communicate  such warnings and information to all
     persons whom the Receiving  Party can reasonably  foresee may be exposed to
     or may handle such products,  including,  but not limited to, the Receiving
     Party's employees, agents, contractors, and customers.

14.  Statementsand Invoices (Exchanges)  -  Unless  otherwise  provided  in  the
     ----------------------------------
     Special Provisions of this Agreement, each party shall render to the other,
     at the end of each calendar month, statements,  reconciliations of exchange
     balances,  as well as invoices for any  differentials,  charges,  and taxes
     payable or  reimbursable  to it, with respect to its deliveries  during the
     month.  Each invoices  shall be paid (without  discount) with fourteen (14)
     days after receipt.  Unless otherwise  specified,  in the event the payment
     due date falls on a Sunday or Monday banking  holiday,  payment will be due
     on the next  succeeding  business  day.  In the event the  payment due date
     falls on a Saturday or bank  holiday  other than a Monday,  payment will be
     due on the first, preceding business day.

     Payment  (Purchases  & Sales) - Unless  otherwise  provided  in the Special
     -----------------------------
     Provisions  of this  Agreement,  each  invoice  will be paid net  three (3)
     working  days by wire  transfer  from  receipt  of invoice  and  acceptable
     supporting   documents.   If  the   invoice   and   acceptable   supporting
     documentation  are received at the billing  address on or before 12:00 noon
     (Central  Standard  Time) on a working  day,  working day one (1) begins on
     that day.  If the  invoice  and  acceptable  supporting  documentation  are
     received at the billing  address after 12:00 noon (Central  Standard  Time)
     (or on a non-working day),  working day one (1) begins on the first working
     day following receipt. Unless otherwise specified, in the event the payment
     due date falls on a Sunday or Monday banking  holiday,  payment will be due
     on the next  succeeding  business  day.  In the event the  payment due date
     falls on a Saturday or bank  holiday  other than a Monday,  payment will be
     due on the first preceding business day. If Receiving Party fails to comply
     with the terms of payment,  Delivering Party may, at its option:  a) change
     the terms of payment; b) without notice to Receiving Party, defer or divert
     shipments  until  payments are made;  and c) cancel this Agreement in which
     event,  Delivering  Party shall not be required to make  further  shipments
     hereunder.  In the  event of a, b, or c,  Receiving  Party  will  reimburse
     Delivering  Party for all  actual  collection  and legal fees  incurred  to
     affect  Receiving  Party's payment and interest  incurred on unpaid amounts
     and said fees.  The  exercise by either party of any right  reserved  under
     this paragraph  shall be without  prejudice to any claim for damages or any
     other right under this Agreement or any other  agreement or applicable law.
     If the  transaction  is effective via book  transfer,  quantity to be exact
     barrels and due date shall be the effective  book transfer  date,  provided
     the invoice and book  transfer  confirmations  have been  received by 12:00
     noon (Central  Standard  Time) on the day preceding the book transfer date;
     otherwise, the due date shall be the next business day following receipt of
     the invoice and book transfer confirmation.

<PAGE>
                                                                     PAGE 4 OF 8
                                                           EXXON COMPANY, U.S.A.
                                                              GENERAL PROVISIONS

15.  Taxes - Unless otherwise specifically provided elsewhere in this Agreement,
     -----
     or required  by law,  the  Receiving  Party  shall pay (or  reimburse)  the
     Delivering  Party for its payment of taxes,  fees, or other similar  levies
     which are levied or assessed  upon the  purchase,  exchange,  use,  resale,
     withdrawal,  transportation,  or  handling  of the  products  if  levied or
     assessed at the time of or after  delivery  to the  Receiving  Party.  Such
     taxes,  fees,  or other  similar  levies  include,  but are not limited to,
     federal  manufacturers  excise  taxes,  environmental  taxes (which are not
     based on alternative minimum taxable income of the Delivering Party), state
     and local  motor fuel  taxes,  state and local  sales and use  taxes,  "oil
     company"  gross  receipts  or  franchise  taxes  (which are not based on or
     measured by the net income or net worth of the Delivering Party),  business
     and occupation  taxes (except  business and occupation  taxes levied by the
     State of Washington or any political  subdivision  thereof,  which shall be
     paid by the  Delivering  Party  without  reimbursement  from the  Receiving
     Party),  state and  local  inspection  fees,  and state and local oil spill
     taxes or fees. If gasoline, diesel, or aviation fuel is sold, purchased, or
     exchanged hereunder, each party represents that it is a registered producer
     of  gasoline,  diesel,  or  aviation  fuel for the  purpose of the  federal
     manufacturers excise tax.

     The  receiving  party  represents  that it holds the  applicable  state tax
     registrations to purchase,  exchange, use, resale,  transport or handle the
     products.  Such receiving party must furnish the delivering  party with the
     appropriate state registration number(s) for all state in which business is
     conducted.  In addition,  the  receiving  party must furnish  their federal
     employer  identification  number to delivering party.  These  notifications
     must be  received  by the  delivering  party  within  thirty  (30)  days of
     contract  execution or applicable  state taxes will be invoiced.  Receiving
     party  is also  required  to  notify  delivering  party  of any  change  in
     registration status in states where business is conducted.  Notification of
     state registration  numbers or changes in registration  status must be mail
     to Exxon Company,  U.S.A., Tax Department,  P.O. Box 4541,  Houston,  Texas
     77210-4541.

     If the Receiving  Party claims  exemption from any of the aforesaid  taxes,
     then  Receiving  Party must  furnish the  Delivering  Party with a properly
     completed and executed exemption  certificate in the form prescribed by the
     appropriate taxing authority in lieu of payment of or reimbursement of such
     taxes to the  Delivering  Party.  Receiving  Party  shall  promptly  notify
     Delivering  Party in writing  of any change in the status of its  exemption
     certificate.

16.  Financial  Responsibility  - If, during the term of this  Agreement and any
     -------------------------
     liquidation  thereof,  the  financial  responsibility  (including,  but not
     limited to, either  party's  ability to perform under any warranty of title
     provided  thereunder) of either party becomes impaired or unsatisfactory to
     the other party,  advance cash payment,  properly endorsed negotiable bills
     of lading, or satisfactory  security reasonably acceptable to the demanding
     party shall be given upon demand,  and performance  under this Agreement or
     any other agreement may be withheld until such payment, bills of lading, or
     security reasonably  acceptable to the demanding party is received. If such
     payment,  bills  of  lading,  or  security  reasonably  acceptable  to  the
     demanding  party is not received  within  fifteen (15)  calendar  days from
     demand  therefore,  the party  demanding such payment,  bill of lading,  or
     security  may cancel this  Agreement.  In the event  either  party makes an
     assignment  for the benefit or  creditors or any general  arrangement  with
     creditors,  the other party may cancel this Agreement  without notice.  The
     exercise by either party of any right reserved  under this paragraph  shall
     be without prejudice to any claim for damages or any other right under this
     Agreement or any other agreement or applicable law.

17.  Exchange Basis - Except for the differentials, taxes, governmental fees, or
     --------------
     other payments expressly provided in the Special Provisions,  the Agreement
     shall be on a  barrel-for-barrel  basis without the payment of money by one
     party to the other party.

     Balances - Unless  otherwise  specified  in the  Special  Provisions,  both
     --------
     parties will keep the volumes  exchanged under the Agreement in approximate
     balance at all times.  Upon  termination  of this  Agreement  and after the
     reconciliation  and agreement of balances,  all remaining balances shall be
     settled within ninety (90) calendar days as follows:

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                                                                     PAGE 5 OF 8
                                                           EXXON COMPANY, U.S.A.
                                                              GENERAL PROVISIONS

     (A)  Products
          1.   Any product  balances equal to or greater than 5,000 barrels will
               be settled by either a physical  delivery  or a book  transfer to
               another  agreement  as  mutually  agreed in writing  before  such
               settlement is made.
          2.   Any product  balance  less than 5,000  barrels will be settled by
               either a book transfer to another  agreement or be bought or sold
               based  on a price as  mutually  agreed  in  writing  before  such
               settlement is made. If not other basis has been agreed upon,  the
               price for the product will be the month  average  contract  price
               for the date of last activity.
     (B)  Natural Gas Liquids
          1.   Any product  balance  equal to or greater than 1,000 barrels will
               be settled by either a physical  delivery  or a book  transfer to
               another  agreement  as  mutually  agreed in writing  before  such
               settlement is made.
          2.   Any product  balance  less than 1,000  barrels will be settled by
               either a book transfer to another agreement, a stock transfer, or
               be bought or sold based on a price as mutually  agreed in writing
               before such settlement is made.

     Exchange Imbalances - In the event an exchange imbalance arises as a result
     -------------------
     of one party delivering  prior to or more than the other party,  subsequent
     deliveries shall be applied first to such exchange  imbalance,  and then to
     further delivery obligations, if any, under this Agreement.

18.  Set-off - In the event  either  party shall fall to make timely  deliver of
     -------
     any product(s) due and owing to the other party, or in the party, or in the
     event either party shall fail to make timely  payment or  reimbursement  of
     any monies due and owing to the other  party,  the other  party may set-off
     any  deliveries or payments or  reimbursements  due under this Agreement or
     any other  agreement  between the parties during the term of this Agreement
     any liquidation thereof with prior written notice.

19.  Continuing  Obligation  - The parties do not intend to create a  continuing
     ----------------------
     obligation  to buy,  sell,  or exchange  petroleum  products  other than as
     specified  in the Special  Provisions.  Accordingly,  each party  expressly
     waives any right it may have under any existing or future, state or federal
     government  regulations  to insist upon the  continued  purchase,  sale, or
     exchange of petroleum products provided in this Agreement.

20.  Applicable  Laws - THIS AGREEMENT  SHALL BE INTERPRETED IN ACCORDANCE  WITH
     ----------------
     THE LAWS OF THE STATE OF TEXAS  WITHOUT  REGARD TO ANY CHOICE OF LAW RULES,
     NOTWITHSTANDING  ANYTING  TO THE  CONTRARY,  THIS  AGREEMENT  SHALL  NOT BE
     INTERPRETED  OR APPLIED SO AS TO REQUIRE  EITHER PARTY TO DO, OR TO REFRAIN
     FROM DOING, ANYTHING WHICH WOULD CONSTITUTE A VIOLATION OF ANY U.S. LAWS OR
     REGULATIONS.

21.  Compliance  With Laws and Regulations - Each party shall be responsible and
     -------------------------------------
     liable  for and  agrees  to  indemnify  and hold the other  party  harmless
     against  all  costs,  expenses,   losses,  claims,   damages,   assessments
     (including without limitation professional fees, penalties,  and interest),
     causes of action, judgements, fines, settlements, penalties and liabilities
     (joint and several),  without regard to amount,  arising out of, caused by,
     or  resulting  from  the  indemnifying   party's  failure  to  comply,   or
     indemnifying  party's  products  failure  to  comply,  with all  applicable
     federal, state, and local laws, ordinances,  orders, rules and regulations,
     including  but not limited to, those  governing  Reid Vapor  Pressure,  low
     sulfur diesel,  reformulated gasoline, and additives.  The Delivering Party
     certifies  that he  product(s)  it  delivers  under the  Agreement  will be
     produced and delivered in full compliance with all applicable  governmental
     laws, regulations,  and orders including, but not limited to, the Clean Air
     Act and the EPA regulations promulgated  thereunder,  the Equal Opportunity
     Clause  contained in 41 C.F.R.  60-1.4 relating to race,  color,  religion,
     sex, or national  origin,  the  Affirmative  Action Clause  contained in 41
     C.F.R.  60-250.4  relating  to  disabled  veterans  and to  veterans of the
     Vietnam  Era,  and the  Affirmative  Action  Clause  contained in 41 C.F.R.
     60-741.4  relating  to  handicapped  workers  are  incorporated  herein  by
     reference.

22.  Product  Compliance  and  Documentation  -
     ---------------------------------------
     (A)  Gasoline - Each party agrees to comply with all  federal,  state,  and
     local  volatility  regulations for gasoline and alcohol blends  (including,
     but not  limited  to, 40 C.F.R.  80.27 and  80.28)  and to comply  with all
     federal and state

<PAGE>
                                                                     PAGE 6 OF 8
                                                           EXXON COMPANY, U.S.A.
                                                              GENERAL PROVISIONS

     laws for oxygenated  gasoline.  Delivering  party hereby certifies that any
     product  delivered  pursuant to this  Agreement is in  compliance  with the
     standards(s)  applicable  to the delivery  location  when  delivered to the
     receiving party.  Delivering party agrees to provide to receiving party for
     each  delivery of  certificate  of analysis,  a bill of lading,  a delivery
     ticket, or a loading ticket that certifies and correctly states the maximum
     Ried Vapor Pressure (RVP) of the product at the time of delivery during the
     government  mandated  season for RVP and that certifies that the product is
     in compliance with all applicable regulations during the control period for
     oxygenated  gasoline.  Receiving  party  agrees  to sell,  offer  for sale,
     dispense,   supply,  offer  for  supply,  and  transport  said  product  in
     compliance  with  all  federal  state,   and  local  volatility  and  other
     applicable regulations.
     (B) Low  Sulfur  Diesel - Each  party  agrees to comply  with all  federal,
     state, and local regulations for low sulfur diesel fuel (including, but not
     limited to, 40 C.F.R.  80.29 and 80.30) and hereby  certifies  and warrants
     that any products  delivered  pursuant to this Agreement  complies with the
     applicable standards when delivered to the receiving party. Receiving party
     agrees to sell, offer for sale,  dispense,  supply,  offer for supply,  and
     transport  in  compliance   with  all  said  federal,   state,   and  local
     regulations.
     (C)  Reformulated  Gasoline - Each party agrees to comply with all federal,
     state, and local regulations for reformulated gasoline (including,  but not
     limited  to, 40  C.F.R.,  Part 80,  Subpart  D) and  hereby  certifies  and
     warrants that any product  delivered  pursuant to this  Agreement  complies
     with the  applicable  standards  when  delivered  to the  receiving  party.
     Receiving party agrees to sell, offer to sale, dispense,  supply, offer for
     supply, and transport in compliance with all said federal, state, and local
     regulations.
     (D)  Additives - Each party agrees to comply with all federal,  state,  and
     local regulations for gasoline additives (including, but not limited to, 40
     C.F.R.,  Part 80,  Subpart G) and hereby  certifies  and warrants  that any
     product delivered  products to this agreement  complies with the applicable
     standards  when  delivered  to the other party.  Receiving  party agrees to
     sell, offer for sale, dispense,  supply, offer for supply, and transport in
     compliance with all said federal, state, and local regulations.

23.  Indemnity - EACH PARTY TO THIS AGREEMENT SHALL INDEMNIFY,  DEFEND, AND HOLD
     ---------
     THE OTHER  HARMLESS  FROM CLAIMS,  DEMANDS,  AND CAUSES OF ACTION  ASSERTED
     AGAINST  THE  OTHER  BY ANY  OTHER  PERSON  (INCLUDING  WITHOUT  LIMITATION
     EMPLOYEES OF EITHER  PARTY) FOR PERSONAL  INJURY,  FOR LESS OF OR DAMAGE TO
     PROPERTY, OR FOR ALLEGED VIOLATIONS OF LAW (INCLUDING,  BUT NOT LIMITED TO,
     THE LAWS  REFERENCED IN PARAGRAPHS  19 AND 20,  ABOVE)  RESULTING  FROM THE
     WILLFUL OR NEGLIGENT  ACTS OR OMISSIONS OF THE  INDEMNIFYING  PARTY.  WHERE
     PERSONAL  INJURY,  DEATH, OR LOSS OF OR DAMAGE TO PROPERTY IS THE RESULT OF
     THE JOINT  NEGLIGENCE  OR  MISCONDUCT  OF THE PARTIES  HERETO.  THE PARTIES
     EXPRESSLY  AGREE TO INDEMNIFY EACH OTHER IN PROPORTION TO THEIR  RESPECTIVE
     SHARE OF SUCH JOINT NEGLIGENCE OR MISCONDUCT.

24.  Claims - Claims as to shortage  in quantity or defects in quality  shall be
     ------
     made by written notice to the other party within ninety (90) days after the
     delivery in questions or shall be deemed to have been waived. NO CLAIMS FOR
     SPECIAL,  INDIRECT, OR CONSEQUENTIAL DAMAGES OF ANY NATURE SHALL BE MADE BY
     EITHER PARTY UNDER THIS AGREEMENT.

25.  Waiver - No waiver by either  party of any breach by the other party of any
     ------
     of the  convenants or condition  herein  contained  shall be construed as a
     waiver of any  succeeding  breach of the same or of any other  covenant  or
     condition thereof.

26.  Force  Majeure  and  Contingencies  - Neither  party shall be liable to the
     ----------------------------------
     other for failure or delay in making or accepting  deliveries hereunder the
     extent that such failure or delay is excused by law or is the result of (1)
     action of the elements  resulting in failure or delay beyond the reasonable
     control of the party,  or (2) a disruption  or breakdown of  production  or
     transportation  facilities  beyond the reasonable  control of the party, or
     (3) any other  cause,  whether  or not of the same  class or kind,  that is
     beyond the reasonable control of such party.

     In  addition,  either  party  shall be  excused  from  making or  accepting
     deliveries to the extent making or accepting deliveries is prevented by (1)
     compliance, whether voluntary or involuntary, with acts, orders,

<PAGE>
                                                                     PAGE 7 OF 8
                                                           EXXON COMPANY, U.S.A.
                                                              GENERAL PROVISIONS

     regulations,  or  requests  of any  federal,  state,  or local  civilian or
     military  authority,  or any person  purporting  to act  therefore,  or (2)
     insurrections,  wars,  rebellions,  or  riots,  or  (3)  strikes  or  labor
     difficulties,  even through the labor difficulty or strike could be settled
     by  acceding  to the  demands  of a labor  group or  others.  Where mode of
     delivery is by or to pipeline the Delivering Party shall also have the same
     rights  under  force  majeure  as granted  to the  pipeline  carrier by the
     relevant tariff, if any.

     If,  by  reason  of  the  causes  enumerated  above,  making  or  accepting
     deliveries under the terms and conditions of this Agreement is curtailed in
     part, the prevented party shall allocate the volumes  otherwise meeting the
     terms of the Agreement that it can deliver or accept in the ordinary course
     of business  among its  suppliers  or customers in manner which is fair and
     reasonable.  The  prevented  party may  include  its own  requirements  and
     contractual  obligations  in allocating  any volumes.  In the event of such
     curtailments,  neither party is required to deliver or receive volumes that
     do not otherwise  meet the terms and  conditions  of this  Agreement in all
     respects including, but not limited to, time of delivery and description.

     In the even a party is  unable  to  perform  hereunder,  such  party  shall
     promptly notify that other party in writing of the underlying circumstances
     and the expected duration.

27.  Business  Practices  -
     -------------------
     (A)  Each  party  hereto   agrees  to  comply  with  all  laws  and  lawful
          regulations applicable to any activities carried out in the name of or
          on behalf of the other party under the  provisions  of this  Agreement
          and/or any amendments to it.
     (B)  Each party hereto agrees that all financial settlements,  billing, and
          reports  rendered to the other party as provided for in this Agreement
          and/or  any  amendments  to it will to the best of its  knowledge  and
          belief   reflect   properly  the  facts  about  all   activities   and
          transactions related to this Agreement,  which data may be relied upon
          as being complete and accurate in any further  recording and reporting
          made by such other party for whatever purpose.
     (C)  Each party  hereto  agrees to notify  the other  party  promptly  upon
          discovery of any instance  where the  notifying  party fails to comply
          with provision (A) above,  or where the notifying  party has reason to
          believe data covered by (B) above is not longer accurate and complete.

28.  Conflict of Interest - Each party, in performing its obligations under this
     --------------------
     Agreement,  shall establish and maintain  appropriate  business  standards,
     procedures,  and control,  including  those necessary and avoid any real or
     apparent  impropriety or adverse impact on the interest of the other party.
     Each party shall review with reasonable  frequency  during the term of this
     Agreement  such  business  standards  and  procedures  including,   without
     limitation,  those related to the activities of its employees and agents in
     their   relations   with  the  other   party's   employees,   agents,   and
     representatives, and other third parties.

29.  Audit - Each party and its duly authorized  representatives  shall have the
     -----
     right to witness custody transfer measurement procedures. In addition, each
     party  and  its  duly  authorized   representatives  shall  access  to  the
     accounting records, laboratory test records, and other documents maintained
     by the other party or subcontractors  which relate to any performance under
     this Agreement, and shall have the right to audit at their own expense such
     records at any  reasonable  time or times during the term of this Agreement
     or within  three (3) year after the  termination  of this  Agreement.  Each
     party shall preserve and shall cause all  subcontractors to preserve all of
     the above referenced  documents  regarding each delivery for a period of at
     least three (3) years after such delivery is made under this Agreement. any
     costs (including but not limited to, employee time, office  space/overhead,
     photocopying  pulling  records,  etc.) incurred by the audited party during
     the audit shall be borne by the audited party.

30.  Assignment - Neither  party shall assign this  Agreement  without the prior
     ----------
     written consent of the other.

In addition to the above paragraphs (1-30), the following paragraphs (31-34) are
applicable  to  Natural  Gas  Liquid  agreements  only:

<PAGE>
                                                                     PAGE 8 OF 8
                                                           EXXON COMPANY, U.S.A.
                                                              GENERAL PROVISIONS

31.  Odorization  -  Unless  otherwise  provided  in  the  Special   Provisions,
     -----------
     Delivering  Party  shall  odorize  with 68cc of ethyl  mercaptan  per 1,000
     gallons  any  delivery of propane in trucks or tank cars.  Receiving  party
     shall not accept delivery until  Receiving Party has ascertained  that this
     has been done properly.

32.  Quality - The product corrected to sixty (60) degrees Fahrenheit  delivered
     -------
     hereunder  shall conform to the  specifications  now  prescribed,  or later
     adopted or revised, for said product by the Gas Processors Association (GPA
     Publication  2140, as revised)  unless  otherwise  indicated in the Special
     Provision.

33.  Storage  - If,  as a  result  of the  Receiving  Party's  failure  to  take
     -------
     according  to  schedule,  the  storage  herein  provided is  exceeded,  the
     Delivering  Party shall not be  obligated  to change the  operation  of its
     plant but shall have the right to  dispose of the  product by sale to third
     parties;  with the sold barrels being deemed  delivered under the Agreement
     and Receiving  Party being  credited with the net proceeds of the sale less
     8% to cover marketing fees unless otherwise agreed.

34.  Demurrange On Tank Cars - Receiving  Party shall pay all demurrage  charges
     -----------------------
     direct to the applicable  party on all tank cars not loaded and returned to
     the railroads within the applicable demurrage-free time.



                            END OF GENERAL PROVISIONS

<PAGE>