Document:

NETTAXI.COM

                       WEB CONTENT DISTRIBUTION AGREEMENT

This  Web  Content  Distribution agreement (hereinafter "Agreement") is made and
entered  into on this 1st day of January by and between NETTAXI.COM (hereinafter
"Nettaxi"),  a  Nevada  corporation  with  offices  located at 1696 Dell Avenue,
Campbell,  California  95008  (hereinafter  "Nettaxi")  and  Whitehorn  Ventures
Limited,  a  company located at 2001 Central Plaza, l Harbor Road, Wanchai, Hong
Kong  (hereinafter  "Customer").

WHEREAS,  Nettaxi  provides  a  service  whereby  Internet content providers can
distribute  a  variety  of  Content through the Internet and World Wide Web, and

WHEREAS,  Customer  wishes  to  have Nettaxi distribute Content through Internet
Servers  using  streaming  technology,

NOW  THEREFORE, for good and valuable consideration, the parties do hereby agree
as  follows:

     1.   GENERAL TERMS

          A. This  document,  along with the Content  Management  Service  Order
          (CMSO)  agreement,  shall  comprise a complete  and binding  agreement
          between Content  Provider and Nettaxi,  Each CMSO  agreement,  and any
          amendments thereto, when dated and subscribed by Customer and Nettaxi,
          shall  incorporate the terms and conditions of this Agreement.  In the
          event of any conflict or inconsistency  between this Agreement and the
          terms set forth in a CMSO  agreement,  the terms of the CMSO agreement
          shall in all cases prevail.

          B. Web Content  Management  services shall consist of the distribution
          of content  provided by Customer through computer servers owned and/or
          operated and/or controlled by Nettaxi.

     2.   STREAM MAGIC SERVICES

          A. Content  Preparation:  Nettaxi shall prepare Content  consisting of
             ---------------------
          fully encoded audio or video product  provided by Content Provider for
          placement  on Nettaxi  servers.  (Encoding  may also be  performed  by
          Nettaxi for an  additional  fee, as agreed by the  parties).  Customer
          shall  provide  Nettaxi with timely  access to its Content as required
          for Nettaxi to prepare said Content and provide all services  Customer
          has elected to receive.  Customer  understands and  acknowledges  that
          Nettaxi's performance depends, in part, upon Customer's assistance and
          cooperation in all matters pertaining to this Agreement.

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          B. Connectivity and Content  Streaming:  Utilizing  Nettaxi's servers,
             ------------------------------------
          Customer   shall  be  provided  with  Content   storage  and  Internet
          connectivity.   Customer's   content  shall  be   distributed   on  an
          "On-demand" basis on the Internet utilizing the Internet video formats
          specified by Customer,  including,  but riot limited to,  Microsoft(R)
          Windows  Media  Server(TM) ("WMS"), Real  Networks (R) Real Server(TM)
          ("Real"), Apple(R) QuickTime Server(TM) ("QuickTime"), Server Push and
          Web Page serving.

          C. Technical Support/Maintenance:  Nettaxi shall provide Customer with
             -----------------------------
          technical  support  upon  Customer's  request and in  accordance  with
          Nettax's terms and conditions and any applicable fee.

     3.   LICENSES

          Customer hereby grants Nettaxi a worldwide,  non-exclusive  license to
          host,  distribute,  display,  cache and transmit Content in connection
          with  the  Web  Content  Distribution  Services.   Nettaxi  will  take
          reasonable  precautions to prevent the unauthorized  reception and use
          of the Content while being streamed onto the Internet,  which includes
          taking  reasonable  security  measures to prevent  unauthorized use or
          copying of Content by third parties not intended to receive Content.

     4.   OWNERSHIP

          Customer  retains all right,  title and interest in and to the Content
          it places with Nettaxi.  Nettaxi is the Licensee authorized to provide
          streaming  content services through the use of the licensed  software,
          hardware,  products,  equipment and any other applicable  intellectual
          properties.  Nettaxi's Licensor, its heirs,  successors and/or assigns
          retain all right, title and interest in and to all software, hardware,
          products,  equipment and other  intellectual  properties created by or
          for Nettaxi in connection with the Web Content Distribution Services.

     5.   MARKETING AND PROMOTION

          Both   Customer   and   Nettaxi   shall   have  the  right  to  create
          advertisements,  make public  announcements  and press  releases using
          each others names provided they have received prior written  approval,
          which shall not be unreasonably withheld.

     6.   TERM OF AGREEMENT

          A.  The term of this Agreement shall be two (2) years unless otherwise
          specified in the CMSO.  Either party may terminate this agreement upon
          thirty (30) days written notice.

          B.  Following the expiration of the Term or the failure of the Parties
          to enter into a renewal,  the services as  enumerated in the then most
          recent CMSO shall continue in effect on a month-to-moth basis upon the
          same terms and  conditions  specifies  herein,  unless  terminated  by
          either Customer of Nettaxi upon thirty (30) days.

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     7.   TERMINATION

          A.  Either  party  shall have the right to  terminate  this  agreement
          should the other party  breach a material  term or  condition  of this
          Agreement  and fail to cure such breach  within thirty (30) days after
          receipt of written notice of the breach, except in the case of failure
          to make timely payment to Nettaxi, which must be cured within ten (10)
          days of the  payment due date.  Nettaxi  has the  option,  at its sole
          discretion,   to  terminate  this  Agreement  should  Customer  become
          insolvent or the subject of bankruptcy  proceedings,  a  receivership,
          liquidation or a sale for the benefit of creditors.

          B.  Upon  termination  or  expiration  of the  Term or any  subsequent
          renewal,  Customer agrees to do the following: (i) pay any outstanding
          fees within ten (10) days of termination  of service;  (ii) return any
          confidential information it has received from Nettaxi and (iii) return
          any equipment or supplies that are the property of Nettaxi.

     8.   DEFAULT

          A. If Customer fails to perform its  obligations,  or fails to pay for
          services rendered hereunder,  Nettaxi may, at its sole option and with
          written notice,  issue a default notice letter to Customer,  demanding
          the  default  condition  be cured.  If the  default  condition  is not
          remedied  within  thirty  (30) days,  Nettaxi  may then,  without  the
          necessity of any further notice, discontinue performance and terminate
          this Agreement,  for default,  and pursue any other remedies available
          at law or in equity, including reimbursement of the cost of collection
          and reasonable attorney fees. Nettaxi's failure to exercise any of its
          rights  hereunder  shall not constitute or be construed by Customer as
          being a waiver of any past, present, or future right or remedy. In the
          case of Customer's  failure to cure any default within the thirty (30)
          day time period,  Nettaxi may  discontinue any or all services for any
          period  of time as it deems  appropriate  without  written  notice  to
          Customer,  and  Nettaxi  shall not deem  such  action a breach of this
          Agreement.

          B.  Nettaxi may,  without  notice,  suspend or  terminate  services to
          customer if Customer is found to be engaged in unlawful  activities or
          upon the request to do so by any legal or governmental agencies.

     9.   PRICES AND PAYMENT TERMS

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          A. Customer shall pay Stream Magic in accordance with the most current
          CMSO associated with this Agreement.  Fees shall include,  but are not
          limited  to, an initial  set up fee,  monthly  minimum  fees,  Webcast
          distribution  fees  and monthly storage fees.  All  payments  will  be
          made  in  U.S.  dollars.   Late   payments   hereunder   will   accrue
          interest   at   a   rate  of  one   and   one-half   percent (1 1/2 %)
          per   month,   or  the  highest  rate  allowed   by  applicable   law,
          whichever  is  lower.  If in  its  judgment  Nettaxi  determines  that
          Customer is not  creditworthy or is otherwise not financially  secure,
          Nettaxi may, upon written notice to Customer, modify the payment terms
          to  require  assurances  to  secure  Customer's  payment   obligations
          hereunder.

          B. All  payments  required  by this  Agreement  are  exclusive  of all
          national,  state,  municipal  or  other  governmental  excise,  sales,
          value-added,  use, personal property, and occupational taxes, excises,
          withholding  taxes and  obligations  and other  levies now in force or
          enacted in the future,  all of which Customer will be responsible  for
          and will pay in full.  Customer agrees to pay or reimburse Nettaxi for
          any  applicable  taxes  that  are  levied  based  on the  transactions
          hereunder, exclusive of taxes on income or real estate taxes, Any such
          charges shall be invoiced and payable within the payment terms of this
          Agreement.   Nettaxi  agrees  to  provide   Customer  with  reasonable
          documentation  to support  invoiced  amounts  applied to taxes  within
          thirty (30) calendar days of receipt of a Customer's written request.

          C. Payments  shall be due thirty (30) days  Customers  receipt of each
          monthly invoice. Late payment charges will be calculated based on 1.5%
          per month of the unpaid amount.

     10.  WARRANTIES AND INDEMNIFICATION

          A.  Customer  warrants  and  represents  that it owns or licenses  all
          rights  in or has the  right  to  distribute,  the  Content;  that the
          Content does not violate any  trademarks,  service marks or copyrights
          or any right of privacy or publicity or  otherwise  infringe  upon the
          rights of any third  party;  that the  Content  does not  violate  any
          federal,  state or local  laws,  statutes  or unless  or  regulations.
          Customer  shall  indemnify  and hold harmless  Nettaxi,  its officers,
          directors, agents, contractors and employees, from and against any and
          all third party claims, costs, expenses or liabilities arising from or
          in connection  with  Customer's  Content.  Customer  further agrees to
          indemnify Nettaxi against  Customer's acts of negligence  resulting in
          damage to third parties.

          B. Nettaxi  warrants and represents that it owns or licenses all right
          in and to the technology  associated with the Web Content Distribution
          service, that, to the best of its knowledge, none of the technology it
          uses for its  services  infringes  upon or the  intellectual  property
          right of any third party and that, to the best of its  knowledge,  the
          operation of the Web Content Distribution Service does not violate any
          applicable federal, state or local statutes, rules or regulations.

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<PAGE>
          C. EXCEPT FOR THE WARRANTIES SET FORTH Herein, NEITHER PARTY MAKES ANY
          OTHER  WARRANTIES  in  CONNECTION  WITH  THE  SUBJECT  MATER  OF  THIS
          AGREEMENT,  WHETHER  EXPRESSED  OR  Implied,  AND  DISCLAIMS  ANY SUCH
          WARRANTIES,   INCLUDING  THOSE  OF  MERCHANTABILITY,   FITNESS  FOR  A
          PARTICULAR  PURPOSE,   AND   NON-INFRINGEMENT.   NETTAXI  SPECIFICALLY
          DISCLAIMS ALL  WARRANTIES  THAT THE WEB CONTENT  DISTRIBUTION  SERVICE
          WILL MEET ANY STANDARD OF  PERFORMANCE  OR ACCURACY OR THAT IT WILL BE
          TIMELY OR FREE OF ERRORS.

          D. In the event of any breach,  or reasonably  anticipated  breach, of
          any of the  foregoing  warranties,  in addition to any other  remedies
          available in law or equity, Nettaxi shall have the right, at Nettaxi's
          sole  discretion,  to suspend  Web  Content  Distribution  Services if
          deemed  reasonably  necessary  by Nettaxi  to prevent  any harm to its
          business.

     11.  LIMITATION OF LIABILITIES

          A. IN NO EVENT WILL  EITHER  PARTY BE LIABLE TO THE OTHER OR ANY THIRD
          PARTY  FOR  SPECIAL,   COLLATERAL,   PUNITIVE,   EXEMPLARY,   INDIRECT
          INCIDENTAL  OR  CONSEQUENTIAL  DAMAGES,  INCLUDING BUT NOT LIMITED TO,
          LOSS  OF  GOODWILL,   LOSS  OF  PROFITS  OR  REVENUES,  LOSS  OF  USE,
          interruptions  OF BUSINESS OR CUSTOMER  CLAIMS  ALLEGED AS A RESULT OF
          TORTUOUS CONDUCT OR BREACH OF ANY OF THE PROVISIONS OF THIS AGREEMENT,
          EVEN IF EITHER  PARTY HAS BEEN ADVISED BY THE OTHER OR ANY THIRD PARTY
          OF THE POSSIBILITY OF SUCH DAMAGES.

          B. THE  LIABILITY  OF NETTAXI FOR DAMAGES  ARISING OUT OF THE SERVICES
          PROVIDED HEREIN, INCLUDING, WITHOUT LIMITATION,  MISTAKES,  OMISSIONS,
          INTERRUPTIONS,  DELAYS,  TORTUOUS CONDUCT OR ERRORS, WHETHER CAUSED BY
          ACTS OF COMMISSION OR OMISSION,  SHALL BE LIMITED TO A PRORATED REFUND
          OF THE  CHARGES  PAID  BY  CLIENT  FOR THE  WEB  CONTENT  DISTRIBUTION
          SERVICES.  THE  RECEIPT  OF SUCH  REFUNDS  SHALL  BE THE  SOLE  REMEDY
          AFFORDED TO CUSTOMER.

     12.  CONFIDENTIAL INFORMATION

          A. Each party  acknowledges  that during the term of this Agreement it
          will have  access to  certain  confidential  information  of the other
          party  concerning  the  other  party's   business  plans,   customers,
          technology,  financial  status and  products,  including the terms and
          conditions   of   this   Agreement    ("Confidential    Information").
          Confidential  Information  will  include,  but not be limited to, each
          party's  proprietary  software  and customer  information.  Each party
          agrees  that it will not use in any way,  for its own  account  or the
          account of any third  party,  except as  expressly  permitted  by this
          Agreement,  nor disclose to any third party (except as required by law
          or to that  party's  attorneys,  accountants  and  other  advisors  as
          reasonably  necessary),  any  of  the   other   party's   Confidential
          Information  and  will  take  reasonable  precautions  to  protect the
          confidentiality  of such information.

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<PAGE>
          B. Information will not be deemed Confidential  Information  hereunder
          if such  information:  (i) is known to the  receiving  party  prior to
          receipt from the disclosing party directly or indirectly from a source
          other  than  one  having  an  obligation  of  confidentiality  to  the
          disclosing party;  (ii) becomes known  (independently of disclosure by
          the  disclosing  party) to the receiving  party directly or indirectly
          from a source other than one having an obligation  of  confidentiality
          to the  disclosing  party;  (iii) becomes  publicly known or otherwise
          ceases to be secret or  confidential,  except through a breach of this
          Agreement by the receiving party; or (iv) is  independently  developed
          by the receiving party.

     13.  EXCUSED PERFORMANCE

          Neither Party shall be liable to the other Party under this  Agreement
          for any failure nor delay in performance  that is due to causes beyond
          its reasonable control,  including but not limited to, acts of nature,
          governmental  actions,  fires,  civil  disturbances,  interruptions of
          power, or transportation problems.

     14.  ASSIGNMENT OR TRANSFER

          Customer  shall  not  assign or  transfer  the  rights or  obligations
          associated with this Agreement, in whole or in part, without Nettaxi's
          prior written consent.

     15.  GOVERNING LAW

          This  Agreement  shall be governed  and  construed  by the laws of the
          State of  California  except as they  pertain to its  conflict  of law
          provisions.  The  courts  of the  State of  California,  County of Los
          Angeles shall have jurisdiction over any legal disputes relating to or
          in connection with this Agreement.

     16.  RELATIONSHIP? OF PARTIES

          The Parties to this Agreement shall be deemed independent  contractors
          and neither  Party shall have the right or authority to bind the other
          to any obligation not expressly agreed to in writing.

     17.  WAIVER

          Conduct by either  party  amounting to a waiver of a breach or default
          of any of the  terms of this  Agreement  shall not be  construed  as a
          waiver of any subsequent breach or default.

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<PAGE>PROMISSORY  NOTE
                                ----------------

$3,196,693.00                                                 New York, New York
                                                              April  11,  2000

     FOR  VALUE  RECEIVED,  Jerome  B.  Richter,  an individual residing at  335
Tomahawk  Drive, Palm Desert, California 92211 (the "Borrower"), hereby promises
to  pay  to  the  order  of Penn Octane Corporation, a Delaware corporation (the
"Lender"), at its offices located at 55-730 Enfield Lane, Bldg. D,  Palm Desert,
California  92211,  or  at  such  other place as the Lender shall designate, the
principal  amount  of  Three  Million,  One Hundred and Ninety Six Thousand, Six
Hundred  and  Ninety-Three  Dollars  ($3,196,693.00)  on  April  30,  2001.  The
Borrower  shall pay interest on the unpaid principal amount hereof from the date
hereof  until  paid,  at a rate of ten percent (10.00%) per annum, to be paid in
arrears  on April 30, 2001, provided however, that Borrower will not be required
to  pay  or  accrue  interest  beginning  September 17, 2000 so long as Borrower
continues  to  provide a personal guaranty on behalf of the Lender in connection
with the Lender's credit facility with RZB Finance LLC or in connection with the
Lender's  letter  of  credit  requirement  as  provided  under the certain lease
agreements  between  the  Lender and CPSC International Inc. (the "Guaranties").
Interest  will  commence  immediately  upon  the  termination  of  both  of  the
Guaranties.

     Should  the  indebtedness  represented  by this Promissory Note or any part
thereof be collected at law or in equity or in bankruptcy, receivership or other
similar  court  proceedings  or  this  Promissory Note be placed in the hands of
attorneys  for collection before or after maturity, the Borrower, its successors
and  assigns,  agree  to  pay, in addition to the principal and interest due and
payable  hereon,  reasonable  attorneys'  and  collection  fees.

<PAGE>
     If  the  Borrower shall fail to make payment of any installment of interest
on  this  Promissory  Note when due, and if such default is not cured within ten
(10)  days  thereafter, or if the Borrower shall become insolvent or a voluntary
or  uncontroverted  petition shall be filed under the Federal Bankruptcy Code or
other  similar  Federal or state law dealing with arrangements for the relief of
creditors  with  respect  to the Borrower (in each case, an "Event of Default"),
and  in  any  such  event, the holder shall have the right without notice to the
Borrower  to  declare  this  Promissory  Note with accrued interest hereon to be
immediately  due  and  payable  (whether  or  not  then  due by the stated terms
hereof),  whereupon  the  same  shall  become and be immediately due and payable
without  presentment,  demand,  protest  or notice of any kind, all of which are
hereby  expressly  waived  by  the  Borrower.

     This  Note  is  secured  by  and  entitled  to the benefits of a Pledge and
Security  Agreement  dated  the  date  hereof  pursuant  to  which  Borrower's
obligations  hereunder  are  secured by one million (1,000,000) shares of Common
Stock,  $0.01  par  value,  of  the  Lender  owned  by  Borrower.

     No  waiver  by  the  holder  of  any breach of any covenant of the Borrower
herein  contained or any term or condition hereof shall be construed as a waiver
of any subsequent breach of the same or of any other covenant, term or condition
herein.

<PAGE>
     This  Promissory  Note  shall be deemed to have been made under, and in all
respects  shall be governed by and construed in accordance with, the laws of the
State  of  New  York.

                                      ----------------------------
                                      Jerome  B.  Richter

<PAGE>
                          PLEDGE AND SECURITY AGREEMENT

     PLEDGE AND SECURITY AGREEMENT dated as of April 11, 2000, made by Jerome B.
Richter ("Borrower") in favor of Penn Octane Corporation, a Delaware corporation
(the  "Corporation"),  for  the  benefit  of  the  Corporation.

                              W I T N E S S E T H:
                              -------------------

     WHEREAS,  on  April 11, 1997 in connection with the exercise by Borrower of
warrants  to  purchase 2,200,000 shares of Common Stock, $0.01 par value, of the
Corporation (the "Common Stock") for $1.25 per share, the Corporation accepted a
three-year  promissory  note  dated  April 11, 1997 (the "Promissory Note") from
Borrower  in  the amount of $2,728,000 bearing interest at the rate of 8.25% per
annum,  payable  annually,  and subject to the terms and conditions set forth in
the  Promissory  Note;  and

     WHEREAS,  in  connection  with  the  Promissory  Note,  Borrower  granted a
security interest in certain shares of Common Stock owned by Borrower to secure,
equally  and ratably, the prompt and complete payment when due of all Borrower's
payment  obligations  under  the Promissory Note (the "Secured Obligations") and
the  performance  and  observance  by Borrower of the covenants, obligations and
conditions  to  be performed and observed by Borrower pursuant to the Promissory
Note;

     WHEREAS,  on  April  11,  2000,  in  exchange  for the Promissory Note, the
Company  agreed  to accept a new promissory note from the Borrower in the amount
of  $3,196,693  (the "New Promissory Note"), representing all amounts then owing
under  the  Promissory  Note,  bearing  interest  at  the rate of 10% per annum.
Principal  and  accrued  interest  is  due on April 30, 2001, and subject to the
terms  and  conditions  set  forth  in  the  New  Promissory  Note.

     WHEREAS,  Borrower  has  agreed to continue to grant a security interest in
certain shares of Common Stock owned by Borrower to secure, equally and ratably,
the  prompt  and complete payment when due of all Borrower's payment obligations
under  the  New  Promissory Note (the "Secured Obligations") and the performance
and  observance  by  Borrower of the covenants, obligations and conditions to be
performed  and  observed  by  Borrower  pursuant  to  the  New  Promissory Note;

<PAGE>
     NOW,  THEREFORE, in consideration of the premises and the mutual agreements
set  forth  herein,  the  parties  hereto  agree  as  follows:

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

     (a)     The  words  "hereof," "herein" and "hereunder" and words of similar
import,  when  used  in this Agreement, shall refer to this Agreement as a whole
and  not  to  any particular provision of this Agreement, and section references
are  to  this  Agreement,  unless  otherwise  specified.

     (b)     Unless otherwise defined herein, all terms defined in Article 8 and
9 of the Uniform Commercial Code in effect as of the date hereof in the State of
New  York  (the  "Uniform  Commercial Code") are used herein as therein defined.

2.   Grant  of  Security  Interest.
     ------------------------------

     (a)     To  secure  the prompt and complete payment when due to all Secured
Obligations,  now  existing  or  hereafter  arising,  and  the  performance  and
observance  by  Borrower  of  the  covenants,  obligations  and conditions to be
performed and observed by Borrower pursuant to the New Promissory Note, Borrower
hereby  assigns  and  pledges to the Corporation and grants to the Corporation a
continuing  security  interest in all of its right, title and interest in and to
one  million  (1,000,000)  shares  of  Common  Stock of the Corporation owned by
Borrower  (the  "Pledged  Stock") and the certificates representing such Pledged
Stock,  and  all  dividends, cash rights, instruments and other property and all
proceeds of every kind thereof (whether the same are now owned or exist or arise
or  are  acquired  before  or after the date hereof) from time to time received,
receivable or otherwise distributed in respect of or in exchange for, any or all
of the Pledged Stock (whether the same are now owned or exist or arise before or
after  the  date hereof) (the Pledged Stock together with all such certificates,
dividends,  cash,  rights, instruments, property and proceeds, being hereinafter
referred  to  as  the  "Pledged  Stock  Collateral").

     (b)     Borrower hereby delivers to the Corporation, duly endorsed in blank
or  accompanied  by appropriate undated stock powers duly executed in blank, all
certificates  or  instruments  representing  or  evidencing  the  Pledged Stock.

3.     Stock  Dividends,  Distributions,  Etc.  If,  while  this Agreement is in
       ---------------------------------------
effect,  Borrower  shall  become entitled to receive or shall receive any stock,
any  stock  certificate  representing  same,  options,  rights or other Property
(including, without limitation, any certificate representing a stock dividend or
any  distribution  in  connection  with any re-capitalization, reclassification,
increase  or  reduction  of  capital,  or  issued  in  connection  with  any
reorganization), whether as an additional to, in substitution of, or in exchange
for, any shares of any Pledged Stock Collateral, or otherwise, or any payment or
distribution  of  capital  on  account of any Pledged Stock Collateral, Borrower
agrees  to  accept  the  same as the Corporation's agent and to hold the same in
trust  on  behalf  of  and for the benefit of the Corporation and to deliver the
same  to  the  Corporation  on  or  before  the  close of business on the second
Business  Day  following  the  receipt  thereof  by  Borrower, in the exact form

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<PAGE>
received, with the endorsement of Borrower when necessary or appropriate undated
stock  powers  duly executed in blank, to be held by the Corporation, subject to
the terms of this Agreement, as additional Pledged Stock Collateral and any cash
distribution  in  connection  therewith  or  cash  proceeds  therefrom  shall be
deposited by the Corporation in a segregated account for Borrower (the "Borrower
Collateral  Account"),  and  thereafter  disposed  of  in  accordance  with this
Agreement.

4.     Cash  Dividends;  Voting  Rights.  Unless  Borrower  is in default of his
       ---------------------------------
payment  obligations under the New Promissory Note for a period of ten (10) days
after  written  notice  from  the Corporation of such default, Borrower shall be
entitled,  except  as  otherwise  provided  in  Section  3,  to receive all cash
distributions and cash dividends in respect of the Pledged Stock and to exercise
all  voting  and  other  consensual  rights  pertaining  to  the  Pledged Stock.
Borrower  agrees to exercise all such voting and other consensual rights for the
purpose  not inconsistent with or voilative of the terms of this Agreement.  The
Corporation  shall  not have the right at any time to exercise any voting rights
with  respect  to  the  Pledged  Stock; provided, however, that upon the sale or
other disposition of the Corporation's interest in the Pledged Stock or any part
thereof,  any  third party purchaser or other transferee shall have the full and
unrestricted  right  to  vote  the  Pledged  stock,  in  any manner permitted by
applicable  law.

5.     Proxies,  Etc.  The Corporation shall execute and deliver (or cause to be
       --------------
executed  and  delivered)  to Borrower all such proxies and other instruments as
Borrower  may  be  reasonable  request  for  the purpose of enabling Borrower to
exercise  the  voting  or  other  rights  which Borrower is entitled to exercise
pursuant  to  Section 4 hereof and to receive all distributions and dividends he
is  authorized  to  receive  and  retain  pursuant  to  Section  4  hereof.

6.     Financing  Statement.  Borrower  hereby  agrees to execute such financing
       ---------------------
statements  as  the  Corporation may request, from time to time, with respect to
the Pledged Stock Collateral, and take such action as may be required to perfect
and keep perfected the security interest in the Pledged Stock Collateral created
hereby,  and  Borrower  hereby  authorizes  the  Corporation  to  execute as its
attorney  in  fact  and file any such financing statements on Borrower's behalf.

7.     Rights  of  the  Corporation.  If  Borrower  is in default of his payment
       -----------------------------
obligations under the New Promissory Note and such default is not cured within a
period  of  ten (10) days thereafter, or if Borrower shall become insolvent or a
voluntary  or  uncontroverted  involuntary  petition  shall  be  filed under the
Federal  Bankruptcy  Code  or  other  similar  Federal or state law dealing with
arrangements for the relief of creditors with respect to Borrower (in each case,
an  "Event  of  Default"),  Borrower shall not longer be entitled to receive any
cash  dividends  or distributions in respect of the Pledged Stock or to exercise
any  voting  rights, rights of conversion, exchange or subscription or any other
rights,  privileges  or  options  pertaining to any shares of the Pledged Stock;
and,  upon  the  sale  or other disposition of the Corporation's interest in the
Pledged Stock or any part thereof, any third party purchaser or other transferee
shall  have the full and unrestricted right to exercise any and all such rights,
privileges  or  options.

8.   Remedies.
     ---------

     (a)     If  there  shall have occurred an Event of Default, the Corporation
may  at  any  time or from time to time exercise in respect of the Pledged Stock
Collateral, in addition to all other rights, powers and remedies provided for in
Section  7,  at  law, in equity or otherwise available to it, all the rights and
remedies  of  a  secured  party  under the uniform Commercial Code and under any
other  applicable  law  as  in  effect  in  any  relevant  jurisdiction  and, in

                                        3
<PAGE>
connection therewith but not in limitation thereof, the Corporation may, without
demand  for  performance  or  other  demand, advertisement or notice of any kind
(except  the  notice specified below of time and place of public or private sale
or  other  disposition)  to  Borrower or any other Person (all and each of which
demands,  advertisement  and notices are hereby expressly waived), sell, assign,
grant an option or options to purchase or otherwise dispose of the Pledged Stock
Collateral  or any part thereof in one or more parcels at public or private sale
or sales, at any exchange, broker's board or at any of the corporation's offices
or  elsewhere  and at such prices as the Corporation may deem best, for cash, or
credit  or  for future delivery, without assumption any credit risk, free of any
claim  or right of whatsoever kind (including any right or equity of redemption)
of  Borrower,  which  claim,  right  and  equity are hereby expressly waived and
released,  and  upon such other terms and conditions as the Corporation may deem
commercially  reasonable, provided, however, that Borrower shall not be credited
                          -----------------
with  the net proceeds of any such credit sale or future delivery until the cash
proceeds thereof are actually received by the Corporation and are applied to the
Secured  Obligations  until  satisfied.

     (b)     Borrower  agrees  that,  to  the  extent  notice  of  sale or other
disposition  shall be required by applicable law, at least ten (10) days' notice
to Borrower of the time and place of any public sale or other disposition or the
time  after  which  any  private sale or other intended disposition may be made.
Notice  shall constitute reasonable notification thereof.  Notification need not
be given to Borrower if it has signed, after an Event of Default has occurred, a
statement  renouncing  any  right  to  notification  of  sale  or other intended
disposition.  The  Corporation  shall not be obligated to make any sale or other
disposition  of  Pledged  Stock  regardless  of  notice  having  been  given.

     (c)     The  Corporation  may  adjourn  any public or private sale or other
disposition  from  time  to  time  by  announcement  at the time and place fixed
therefore,  and  such sales or other disposition may, without further notice, be
made  at the time and place to which it was so adjourned.  The Corporation shall
have  the  right  upon any such public sales or other disposition, to the extent
permitted  by  applicable  law, to purchase the whole or any part of the Pledged
Stock  Collateral  so sold or disposed of.  Any and all proceeds received by the
Corporation  in respect part of the Pledged Stock, whether consisting of moneys,
checks,  notes,  drafts,  bills of exchange, money orders or commercial paper of
any  kind  whatsoever,  shall  be  deposited  by the Corporation in the Borrower
Collateral  Account  and  shall  be held by the Corporation, to be withdrawn and
distributed  by  the  Corporation  as  provided  herein.

     (d)     The  rights  and  remedies  provided  under  this  Agreement  are
cumulative  and  may be exercised singly or concurrently, and are note exclusive
of  any  rights  and  remedies  provided  by  law  or  equity.

     (e)     Borrower  recognizes that the Corporation may be unable to effect a
public  sales  of  all  or  a  part of the Pledged Stock Collateral by reason of
certain  prohibitions  contained  in  the Securities Act of 1933, as amended, or
other  federal  securities laws, as now or hereafter in effect, or in applicable
Blue  Sky or other state securities laws, as now or hereafter in effect, but may
be  compelled  to  resort  one  or  more  private sales to a restricted group or
purchasers  who  own  account,  for  investment  and  not  with  a  view  to the
distributions or resale thereof.  Borrower agrees that private sales so made may
be  at prices and one other terms less favorable to the Corporation than if such

                                        4
<PAGE>
Pledged Stock Collateral were sold at public sales, and that the Corporation has
no  obligation  to delay sale of any such Pledged Stock Collateral of the period
of  time  necessary  to permit the registration of such Pledged Stock Collateral
for  the  period  of  time  necessary to permit the registration of such Pledged
Stock  Collateral  for  public  sales  under  such  applicable  securities laws.
Borrower  agrees that private sales made under the foregoing circumstances shall
be  deemed  to  have  been  made  in  a  commercially  reasonable  manner.

     (f)     If  the Corporation determines to exercise its right to sell all or
any  of  the  Collateral, upon written request, Borrower shall from time to time
furnish  to  the Corporation all such information as the Corporation may request
in  order  to  determine  the Collateral which may be sold by Borrower as exempt
transactions  under  the  federal  securities  laws.

     (g)     The  proceeds  of  the  sale of any of the Pledged Stock Collateral
sold  pursuant  to  the Section 8 and cash constituting Pledged Stock Collateral
received  under  Section  2(a)  shall  be applied to the Corporation as follows:

          FIRST:     to  the  payment  of  the costs and expenses of such sales,
          ------
including  out-of-pocket  expenses  of  the  Corporation  and  the  fees  and
out-of-pocket  expenses  of  legal  advisers  employed  by  the  Corporation  in
connection therewith, and to the payment of all advances made by the Corporation
hereunder  and  payment of all costs and expenses incurred by the Corporation in
connection  with  the  administration  and  enforcement  of  this  Agreement:

          SECOND:     to  the  payment  in  full of the New Promissory Note: and
          -------

          THIRD:     the  balance  (if  any)  of  such proceeds to Borrower, the
          ------
successors  or  assigns of Borrower, or as a court of competent jurisdiction may
direct.

9.     Representations:  No  Disposition,  Etc.  Borrower  hereby represents and
       ----------------------------------------
warrants  that  it now owns good and marketable title to the Pledged Stock, free
and  clear of any liens, charges, encumbrances or security interests of any kind
whatsoever,  and  that  the  Pledge  Stock  is not subject to any restriction on
alienation  or  transfer,  in  each  case,  other  than this Agreement, Borrower
covenants  to defend the right, title and special property of Borrower in and to
the  Pledged  Stock  against  the  claims and demands of all persons whatsoever.
Borrower  hereby  represents, warrants and covenants that Borrower is currently,
or shall be, the only owner of the Pledged Stock and that Borrower does not, and
will not have, outstanding rights, options, warrants, conversion rights or other
commitments  or agreements for the purchase or acquisition of the Pledged Stock.
Borrower  agrees that he will not sell, assign, transfer, exchange, or otherwise
dispose  of,  or  grant  any  option or right with respect to, the Pledged Stock
Collateral,  nor  will  it  create,  incur or permit to exist any lien, security
interest therein, change or encumbrance with respect to any of the Pledged Stock
Collateral,  any  interest,  or any proceeds thereof except as permitted by this
Agreement.

10.     Possession  of  the  Collateral.  The  Corporation  shall  hold  in  its
        --------------------------------
possession  in  the  State  of  California  all  the Pledged Stock and all other
certificates,  documents  or  instruments  constituting Pledged Stock Collateral
pledged,  assigned to transferred hereunder except as form time to time any such
certificate,  document  or instrument may be required for recordation or for the

                                        5
<PAGE>
purchase  of enforcing or realizing upon any right or value thereby represented;
provided,  however,  that  Borrower  in  his  capacity  as  an  officer  of  the
Corporation  or otherwise, shall have no ability to assign, release, transfer or
otherwise  deal  with  the  Pledged Stock Collateral.  The Corporation may, from
time  to  time,  in  its  sole discretion appoint one or more agents or trustees
(which  in  no case shall be Borrower or any of his affiliates) to hold physical
custody,  for  the  account of the Corporation, of any or all such certificates,
documents  or  instruments.

11.     Collateral  Agreement.  Each of Borrower and the Corporation agrees that
        ----------------------
the  parties  hereto  may  supplement, amend or superseded this Agreement with a
collateral  agreement among the Corporation, Borrower and a third party bank, as
trustee,  pursuant  to  which  such  third  party bank shall accept and maintain
possession  of  the  Pledged  Stock  Collateral  until  such time as the Secured
Obligations  shall  have  been  satisfied.

12.     Further  Assurance.  Borrower agrees that at any time and from time upon
        ------------------
the  written  request of the Corporation, Borrower will execute and deliver such
further  documents,  including a collateral agreement appointing a trustee other
than  the  Corporation and necessary financing statements, and do or cause to be
done  such  further acts and things as the Corporation may be reasonable request
in  order  to  effect  the  purposes  of  this  Agreement.

13.     Release  of  Security  Interest.  Upon  termination  of  this  Agreement
        --------------------------------
pursuant  to  Section  17  hereof,  the  security  interest granted hereby shall
terminate.  Upon  any  such  termination,  the  Corporation  will, at Borrower's
expense,  execute  and  deliver  to  Borrower  such  documents as Borrower shall
reasonably  request  to  evidence such termination including without limitation,
duly  executed  Uniform  Commercial  Code  termination  statement.

14.     Limitation  by  Law;  Severability.
        -----------------------------------

     (a)     All  rights,  remedies  and power provided in this Agreement may be
exercised  only  to  the  extent  that the exercise thereof does not violate any
applicable  provision  of  law,  and  all  the  provisions of this Agreement are
intended  to  be subject to all applicable mandatory provisions of law which may
be  controlling  and to be limited to the extent necessary so that they will not
render  this  Agreement illegal, invalid, unenforceable, in whole or in part, or
not  entitled  to  be recorded, registered, or filed under the provisions of any
applicable  law.

     (b)     Any  provision  of  this  Agreement  which  is  prohibited  or
unenforceable  in any jurisdiction shall not invalidate the remaining provisions
hereof,  and  any such prohibition or unenforceability in any jurisdiction shall
not invalidate or render unenforceable such provision in any other jurisdiction.

15.     Waivers,  Amendments.  None of the terms or provisions of this Agreement
        ---------------------
may  be  waived,  altered,  modified  or  amended by any act, delay, omission or
otherwise, except by an instrument in writing which is duly executed by Borrower
and  the  Corporation.  Any  such  waiver, alteration, modification or amendment
shall  be  valid  only  to  the  extent  therein  set  forth.  A  waiver  by the
Corporation  of  any  right  or  remedy under this Agreement on any one occasion

                                        6
<PAGE>
shall  not  be  construed  as  a  bar  to  any right, remedy or power, which the
Corporation would otherwise have on any future occasion.  No failure to exercise
not any delay in exercising on the part of the corporation, any right, remedy or
power  under  this  Agreement,  shall  operate  as a waiver thereof; further, no
single  or  partial  exercise of any right, remedy or power under this Agreement
shall  preclude  any  other  or  further exercise thereof or the exercise of any
other  right,  remedy  or  power.

16.     Binding  Effect; Successor and Assigns.  This Agreement shall be binding
        ---------------------------------------
upon  and  inure  to  the  benefit  of the parties hereto and shall inure to the
benefit  of  the  Corporation  its  successors and assigns and nothing herein is
intended  or  shall  be  construed to give any other Person any right, remedy or
claim under, to or in respect of this Agreement or any Pledged Stock Collateral.

17.     Termination  of  This  Agreement.  This  Agreement  shall  terminate
        ---------------------------------
simultaneously  with the payment in full of all principal and interest due under
the New Promissory Note and, upon such termination, any Pledged Stock Collateral
held  hereunder shall be released and delivered to Borrower or at his direction.

18.     Notices.  All  notices  or other communications hereunder shall be given
        --------
in  the  following  manner.

If  to  the  Corporation:

Penn Octane Corporation
77-530  Enfield Lane,  Bldg  D
Palm  Desert, California  92211
Attention:  Chief Financial Officer

If  to  Borrower:

Mr. Jerome  Richter
335 Tomahawk Drive
Palm Desert, California  92211

     Any  of  the  addresses set forth above may be changed from time to time by
written  notice  from  the  party  requesting  the  change.

19.     Applicable  Law.  This  Agreement shall be governed by, and be construed
        ----------------
and  interpreted  in accordance with, the internal laws of the State of New York
without  reference  to  principles  of  conflict  of laws, except as required by
mandatory  provisions  of  law.

                                        7
<PAGE>

     IN  WITNESS  WHEREOF,  the  parties  hereto have executed this Agreement or
caused this Agreement to be duly executed and delivered by their duly authorized
officers  as  of  the  date  first  above  written.

                                       BORROWER

                                       -----------------------------------
                                             Jerome  B.  Richter

                                        PENN  OCTANE  CORPORATION

                                        By:
                                           -------------------------------
                                           Name:  Ian  T.  Bothwell
                                           Title: Vice President and Chief
                                           Financial  Officer

                                        8
<PAGE>

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