PROMISSORY NOTE

$150,000                New York, New York            October 9, 1996


 FOR VALUE RECEIVED, PENN OCTANE CORPORATION, a Delaware Corporation
 ("Maker"), promises to pay to RICHARD SERBIN ("Holder") at such place
 as Holder may designate in writing, the entire principal sum of
 One Hundred Fifty Thousand Dollars ($150,000), 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, that 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