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  Steve  Payne  ("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
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.

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<PAGE>
     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
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.

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<PAGE>
(b)     In  the  event  the  Company  does  not  participate  in  Piggy-Back
registration,  all  Registrable  Securities  will be registered by September 19,
1999.

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)).

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<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.

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<PAGE>
     (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
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.

                                        5
<PAGE>
     (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
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.

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<PAGE>
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  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.

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<PAGE>
     (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.

     (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  March
19,  1999.

                         PENN  OCTANE  CORPORATION



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


                              Steve  Payne


                         By:  ____________________________________
                              Name:
                              Title:

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