PROMISSORY NOTE

$25,000                 New York, New York                 October 29, 1996


 FOR VALUE RECEIVED, PENN OCTANE CORPORATION, a Delaware Corporation
 ("Maker"), promises to pay to FREDERICK KASSNER ("Holder") at such
 place as Holder may designate in writing, the entire principal sum
 of Twenty Five Thousand Dollars ($25,000), together with interest
 at the rate of ten percent (10%) per annum, on November 7, 1997
 (the "Payment Date"), at which time all principal and interest shall
 be due and owing.  In the event the Company receives in excess of
 two hundred fifty thousand ($250,000) dollars in connection with an
 offering of Maker's securities prior to the Payment Date, the
 Company shall utilize one-half of the proceeds from such sale to
 satisfy the Promissory Note.  In the event such payment does not
 fully satisfy the Promissory Note, Maker shall pay the balance on
 the Payment Date.

 All payments of principal and interest hereunder shall be payable
 in lawful money of the United States.

 Maker shall be in default hereunder, at the option of Holder, upon
 the occurrence of any of the following events:  (i) the failure by
 Maker to make any payment of principal or interest when due
 hereunder, and such failure shall have continued for a period of
 more than ten (10) days;  (ii) the entering into of a decree or
 order by a court of competent jurisdiction adjudicating Maker a
 bankrupt or the appointing of a receiver or trustee of Maker upon
 the application of any creditor in an insolvency or bankruptcy
 proceeding or other creditor's suit; (iii) a court of competent
 jurisdiction approving as properly filed, a petition for
 reorganization or arrangement filed against Maker under the Federal
 bankruptcy laws and such decree or order not being vacated
 within thirty (30) days; (iv) the pendency of
 any bankruptcy proceeding or other creditors' suit against Maker;
 (v) a petition or answer seeking reorganization or arrangement
 under the Federal bankruptcy laws with respect to Maker;
 (vi) an assignment for the benefit of creditors by Maker;
 (vii) Maker consents to the appointment of a receiver or trustee
 in an insolvency or bankruptcy proceeding or other creditors' suit;
 (viii) the existence of any uncured event of default under the
 terms of any instrument in writing evidencing a
 debt to someone other than Holder, provided, the Maker is not
 contesting in good faith by appropriate proceedings such uncured
 event of default; (ix) the existence of any judgment against, or
 any attachment of property of Maker; or (x) any other condition
 which, in the good faith determination of Holder, would materially
 impair the timely repayment of this Note.

 Upon the occurrence of any event or condition of default hereunder,
 or at any time thereafter, Holder at his option may accelerate the
 maturity of this Note and declare all of the indebtedness or any
 portions thereof to be immediately due and payable, together with
 accrued interest thereon, and payment thereof may be enforced by
 suit or other process of law.

 If this Note is not paid when due, whether at maturity or by
 acceleration, Maker agrees to pay all reasonable costs of collection
 and such costs shall include without limitation all costs, attorneys'
 fees and expenses incurred by Holder hereof in connection with any
 insolvency, bankruptcy, reorganization, arrangement or similar
 proceedings involving Holder, or involving any endorser or guarantor
 hereof, which in any way affects the exercise by Holder hereof of its
 rights and remedies under this Note.

 Presentment, demand, protest, notices of protest, dishonor and
 non-payment of this Note and all notices of every kind are hereby waived.

 The terms "Maker" and "Holder" shall be construed to include their
 respective heirs, personal representatives, successors, subsequent
 holders and assigns.

 Regardless of the place of execution or performance, this letter and
 the Note shall be governed by, and construed in accordance with, the
 laws of the State of New York without giving effect to such state's
 conflicts of laws provisions.  Each of the parties hereto irrevocably
 consents to the jurisdiction and venue of the federal and state
 courts located in the State of New York, County of New York.



PENN OCTANE CORPORATION






By: /s/ J.B. Richter

President