Common use of Piggy-Back Clause in Contracts

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. (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for herein.

Piggy-Back. RegistrationsRegistration. --------------------------- (a) If at The Holder shall have the right to include the Registrable Securities as part of any time registration of securities filed by the Company shall determine to register any of its Common Stock under the Securities Act, whether (other than in connection with a public offering transaction contemplated by Rule 145(a) promulgated under the Company, a public offering by shareholders, Act 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 Form S-8) and must be a registered holder of Registrable Securities and shall use its reasonable efforts to effect the registration under the Securities Act notified in writing 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 Companyfiling; provided, however, that (a) the Holder agrees it shall not have any distribution of -------- ------- piggy-back registration rights pursuant to this Section if the Registrable Securities pursu-ant may be sold in the United States pursuant to such registration the provisions of Rule 144. The Holder shall be managed by have five (5) business days to notify the investment banking firm, if any, managing Company in writing as to whether the distribution Company is to include the Holder or not include the Holder as part 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 registerregistration; 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 if any registration and offering of Registrable Securities pursuant to this Section 3 (includingshall be underwritten, without limitationin whole or in part, registration fees the Company may require that the Registrable Securities requested for inclusion pursuant to this Section be included in the underwriting on the same terms and fees and disbursements conditions as the securities otherwise being sold through the underwriters. If in the good faith judgment of the Company's counselunderwriter evidenced in writing of such offering only a limited number of Registrable Securities should be included in such offering, or no such shares should be included, the holder, and all other selling stockholders, shall be limited to registering such proportion of their respective shares as shall equal the proportion that the number of shares of selling stockholders permitted to be registered by the underwriter in such offering bears to the total number of all shares then held by all selling stockholders desiring to participate in such offering. Those Registrable Securities which are excluded from an underwritten offering pursuant to the foregoing provisions of this Section (and all other Registrable Securities) shall be borne withheld from the market by the holders thereof for a period, not to exceed one hundred eighty (180) days, which the underwriter may reasonably determine is necessary in order to effect such underwritten offering. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section prior to the effectiveness of such registration. All registration expenses incurred by the Company in complying with this Section shall be paid by the Company, except that the Company shall not bear underwrit-ing discounts or exclusive of underwriting discounts, commissions attributable to Registrable Securities, the and legal fees of any separate and expenses for counsel for the holders of Registrable Securities or related transfer taxes. (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for hereinHolder.

Piggy-Back. RegistrationsRegistration. --------------------------- (a) If the Company at any time the Company shall determine -------------------------- proposes to register any of its Common Stock securities under the Securities ActAct for sale to the public, whether in connection for its own account or for the account of other security holders or both (except with a public offering respect to registration statements on Forms X-0, X- 0 or another form not available for registering the Restricted Shares for sale to the public), each such time it will give written notice to all holders of outstanding Restricted Shares of its intention so to do. Upon the written request of any such holder, received by the Company within 20 days after the giving of any such notice by the Company, a public offering to register any of its Restricted Shares, the Company will, subject as provided below, cause the Restricted Shares as to which registration shall have been so requested to be included in the securities to be covered by shareholdersthe registration statement proposed to be filed by the Company, all to the extent requisite to permit the sale or both, including, without limitation, other disposition by means the holder of such Restricted Shares so registered. In the event that any shelf registration pursuant to Rule 415 under the Securities Act this Section 4.01 shall be, in whole or any similar rule or regulationin part, but other than a registration to implement an employee benefit or dividend reinvestment planunderwritten public offering of Common Stock, the Company shall promptly give written notice thereof number of Restricted Shares to be included in such an underwriting may be reduced (pro rata among the requesting holders based upon the number of Restricted Shares owned by such holders) if and to the Purchaser who extent that the managing underwriter shall be a registered holder of Registrable Securities and shall use its reasonable efforts the opinion that such inclusion would adversely affect the marketing of the securities to effect the registration under the Securities Act of such Registrable Securities as may be requested in a writing delivered to sold by 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 Companytherein; provided, however, that (a) any distribution of such -------- ------- Registrable Securities pursu-ant to such registration shall be managed by the investment banking firm, if any, managing the distribution number of the securities being offered by the Company on the same terms as all other securities to be registered, and (b) the Company Restricted Shares shall not be required reduced if any shares are to be included in such underwriting for the account of any person other than the Company or requesting holders of Restricted Shares. Notwithstanding the foregoing provisions, the Company may withdraw any registration statement referred to in this Section 4.01 without thereby incurring any liability to the holders of Restricted Shares. There shall be no limit to the number of registrations of Restricted Shares which may be effected 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 taxes4.01. (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for herein.

Piggy-Back. RegistrationsREGISTRATIONS. --------------------------- (a) If at any time the Company shall determine to register any for its own account or the account 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 others under the Securities Act (including pursuant to the Qualified Public Offering, the Initial Public Offering or a demand for registration of any similar rule or regulation, but stockholder of the Company other than a registration the Purchasers) any of its equity securities, other than on Form S-8 or Form S-4 or their then equivalents or otherwise relating to implement an shares of Common Stock to be issued solely in connection with any acquisition of any entity or business or shares of Common Stock issuable in connection with stock option or other employee benefit or dividend reinvestment planplans, it shall send to each holder of Registrable Shares, including each holder who has the right to acquire Registrable Shares, written notice of such determination and, if within ten (10) business days after receipt of such notice, such holder shall so request in writing, the Company shall promptly give written notice thereof use its best efforts to include in such registration statement all or any part of the Purchaser who Registrable Shares such holder requests to be registered. If, in connection with any offering involving an underwriting, the managing underwriter shall impose a limitation on the number of shares of such Common Stock which may be included in the registration statement because, in its judgment, such limitation is necessary to effect an orderly public distribution, then the Company shall be a registered holder of Registrable Securities and shall use its reasonable efforts obligated to effect the include in such registration under the Securities Act of statement only such Registrable Securities as limited portion (which may be requested in a writing delivered to none) of 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 Shares with respect to the securities being registered which such holder has requested inclusion pursuant hereto as may reasonably be determined by the Companymanaging underwriters; 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 between the Company, except that the Company shall not bear underwrit-ing discounts or commissions attributable to Registrable Securitiesother stockholders holding contractual registration rights, the fees of any separate counsel for and the holders of Registrable Securities or related transfer taxes. (b) In the Shares, in no event the Company does not register shall the Registrable Securities as provided Shares included in 3-(asuch offering be limited to less than twenty-five percent (25%) above and/or through a Registration Statement covering of the aggregate shares offered. Any inclusion of Registrable Securities by December 1Shares in the offering, 1999when the managing underwriter has so limited the number of Registrable Shares that may be included in the offering, then the Company agrees that shall be allocated pro rata among the holders of Registrable Shares (or their permitted assigns) seeking to include such shares and the holders of other registration rights seeking to include their shares, in proportion to the number of Registrable Securities Shares (whether or not such shares are sought to be included in such offering) held by such persons. No incidental right under this Section 5.01 shall be entitled construed to receive an amount equal to 10% limit any registration required under Section 5.02. The obligations of the amount originally paid to acquire Company under this Section 5.01 may be waived at any time upon the Registrable Securities written consent of holders of sixty percent (60%) in connection with the Purchase Agreement among the parties (the "Penalty"). The holders interest of the Registrable Securities Shares who are participating in the offering and shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based expire on the average trading price seventh anniversary following the consummation of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Companyan Initial Public Offering or, then such shares shall be included if earlier, as Registrable Securities as provided for herein.set forth in Section

Piggy-Back. Registrations. --------------------------- (a) If at any time after the Company Distribution, ADA-ES shall determine to register any for its own account or the account 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 others under the Securities Act or any similar rule or regulation, but (other than a registration demanded by Arch Coal pursuant to implement an Section 3.02 hereof) any of its equity securities, other than on Form S-4 or Form S-8 or their then equivalents or otherwise relating to shares of Common Stock to be issued in connection with any acquisition of any entity or business or shares of Common Stock issuable in connection with stock option or other employee benefit or dividend reinvestment planplans, the Company it shall promptly give send to Arch Coal written notice thereof to the Purchaser who of such determination and, if within ten (10) business days after receipt of such notice, Arch Coal shall be a registered holder of Registrable Securities and so request in writing, ADA-ES shall use its reasonable best efforts to effect include in such registration statement all or any part of the Shares then held by Arch Coal ("Registrable Shares") and which Arch Coal requests to be registered. If, in connection with any offering involving an underwriting, the managing underwriter shall impose a limitation on the number of shares of Common Stock which may be included in the registration under the Securities Act of statement because, in its judgment, such Registrable Securities as limitation is necessary to effect an orderly public distribution, then ADA-ES shall be obligated to include in such registration statement only such limited portion (which may be requested in a writing delivered to none) of 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 Shares with respect to the securities being registered which Arch Coal has requested inclusion pursuant hereto as may reasonably be determined by the Companymanaging underwriters; provided, however, that (a) inclusion of any distribution of -------- ------- Arch Coal's Registrable Securities pursu-ant to such registration Shares shall be managed subordinate to the currently existing "piggyback" registration rights granted 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 ADA-ES. Any inclusion of Registrable Securities Shares in such offering would substantially interfere with an offering, when the orderly sale managing underwriter has so limited the number of such securities which the Company or others propose to register; provided, however, shares that may be included 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 proallocated as follows: first, pro rata among the holders of registration rights granted by ADA-rata basis with any other securities as ES prior to which the Company has granted date hereof seeking to include their shares, in proportion to the number of shares of Common Stock (whether or may not such shares are sought to be included in such offering) held by such persons; and thereafter, to Arch Coal. ADA-ES shall have the future grant registration rights. All expenses of right to withdraw any registration and offering of Registrable Securities initiated by it 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 taxes3.01. (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for herein.

Piggy-Back. RegistrationsRegistration. --------------------------- (a) If at any time the Company shall determine proposes to register any of its Common Stock capital stock under the Securities Act, whether 1933 Act in connection with a the public offering of such securities for its own account or for the account of its security Holders, other than Holders of Registrable Shares pursuant hereto (a "Piggy-Back Registration Statement"), except for (i) a registration relating solely to the sale of securities to participants in the Company's stock plans or employee benefit plans or (ii) a registration relating solely to an transaction for which Form S-4 may be used, then: (a) the Company shall give written notice of such determination to each Holder of Registrable Shares, and each such Holder shall have the right to request, by written notice given to the Company within fifteen (15) days of the date that such written notice was mailed by the Company to such Holder, that a specific number of Registrable Shares held by such Holder be included in the Piggy-Back Registration Statement (and related underwritten offering, if any); (b) If the Piggy-Back Registration Statement relates to an underwritten offering, the notice given to each Holder shall specify the name or names of the managing underwriter or underwriters for such offering. In addition, such notice shall also specify the number of securities to be registered for the account of the Company and for the account of its shareholders (other than the Holders of Registrable Shares), if any; (c) If the Piggy-Back Registration Statement relates to an underwritten offering, each Holder of Registrable Shares to be included therein must agree (i) to sell such Holder's Registrable Shares on the same basis as provided in the underwriting arrangement approved by the Company, a public offering by shareholdersand (ii) to timely complete and execute all questionnaires, or bothpowers of attorney, includingindemnities, without limitationhold-back agreements, by means of any shelf registration pursuant to Rule 415 underwriting agreements and other documents required 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 terms of such Registrable Securities as may be requested in a writing delivered to the Company within 30 days after such notice underwriting arrangements or by the Purchaser as well as to include such Registrable Securities in any notifications, registrations SEC or qualifications under by any state securities laws which regulatory body; (d) If the managing underwriter or underwriters for the underwritten offering under the Piggy-Back Registration Statement determines in writing that inclusion of all or any portion of the Registrable Shares in such offering would materially and adversely affect the ability of the underwriters for such offering to sell all of the securities requested to be included for sale in such offering, the aggregate number of Registrable Shares that may be sold by the Holders 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 limited to such registration shall be managed by the investment banking firmnumber of Registrable Shares, if any, that the managing underwriter or underwriters determine may be included therein without such adverse effect, as provided below. If the distribution number 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 sold in such underwritten offering exceeds the number of securities that may be sold in such offering, there shall be included in the offering, first, up to the maximum number of securities to be sold by the Company or others that for its own account, and, second, 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; providedbalance, howeverif any, that in making any determination under this subparagraph (b) as to the inclusion of the Registrable Securities in any such Shares requested to be included therein by the Holders; (e) Holders of Registrable Shares shall have the right to withdraw their Registrable Shares from the Piggy-Back Registration Statement, but if the same relates to an underwritten offering, they may only do so during the time period and on the terms agreed upon among the underwriters for such underwritten offering and the Holders of Registrable Securities shall be registered on a pro-rata basis with any other securities as to which Shares; (f) The Holders will advise the Company has granted or may at the time a registration becomes effective whether the Registrable Shares included in the future grant registration rights. will be underwritten or sold directly by the Holders; (g) All expenses of any demand and piggy-back registration and offering of Registrable Securities pursuant to this Section 3 (including, without limitation, registration fees and fees and disbursements rights of the Company's counsel) Holders 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. (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders terminate when all of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty Shares then outstanding may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used sold pursuant to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for hereinRule 144(k).

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. (b) In the event the Company does not register the participate in Piggy-Back registration, all Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities will be registered by December 1January 31, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for herein2000.

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. (b) In the event the Company does not register the participate in Piggy-Back registration, all Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities will be registered by December 1September 19, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for herein.

Piggy-Back. RegistrationsRights. --------------------------- If, after the Initial Closing (aas defined in the Purchase Agreement) If at any time of the Purchase Agreement, the Company shall determine proposes to register any shares of its Common Stock under the Securities ActAct on a registration statement on Form S-1, whether Form S-2 or Form S-3 (or an equivalent general registration form then in connection with effect) for purposes of a public offering 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 Company or any similar rule or regulation, but registration statement filed by the Company for any other than a holder of Common Stock holding registration rights with respect to implement an employee benefit or dividend reinvestment plansuch Common Stock (such other selling stockholders are referred to herein as "Other Stockholders"), the Company shall promptly give written notice thereof of such proposal at least thirty (30) days before the anticipated filing date, which notice shall include the intended method of distribution of such shares of Common Stock to each Holder. Such notice shall specify at a minimum the Purchaser who number of shares of Common Stock proposed to be registered, the proposed filing date of such registration statement, any proposed means of distribution of such shares of Common Stock and the proposed managing underwriter, if any. Subject to Section 2.3, upon the written request of a Holder, given within fifteen (15) days after the transmittal of any such written notice by facsimile confirmed by mail (which request shall be a registered holder of specify the Registrable Securities and shall intended to be disposed of by a Holder), the Company will use its reasonable best efforts to effect include in 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 statement with respect to such Public Offering the securities being registered by number of the Company; provided, however, that (a) any distribution of -------- ------- Registrable Securities pursu-ant referred to in such registration Holder's request; provided that any participation in such Public Offering by such Holder shall be managed by the investment banking firm, if any, managing the distribution of the securities being offered by the Company on substantially the same terms as all other securities those applicable to the participation therein by the Company or Other Stockholders; and provided, further, that the number of Registrable Securities to be registered, and (b) the Company included in any such Public Offering shall not be required under this Section 3 exceed the Maximum Number. Any such Holder shall have the right to withdraw a request 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 Public Offering pursuant to this Section 3 (including, without limitation, registration fees and fees and disbursements of the Company's counsel) shall be borne 2.2 by the Company, except that giving written notice to the Company shall not bear underwrit-ing discounts or commissions attributable of its election to Registrable Securities, the fees of any separate counsel for the holders of Registrable Securities or related transfer taxes. withdraw such request at least five (b5) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent days prior to the incurrence proposed effective date of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for hereinregistration statement.

Piggy-Back. Registrations. ---------------------------------------------------- (a) If at any time the Company shall determine to register any of its Common Stock under securities, either for its own account or the Securities Actaccount of a security holder or holders exercising their registration rights (subject to the provisions of Section 2), 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 relating solely to implement an employee benefit plans or dividend reinvestment plana registration on any registration form which does not permit secondary sales or does not include substantially the same information as would be required to be included in a registration statement covering the sale of Registrable Securities or pursuant to Form S-4, the Company shall promptly will: (i) Promptly give to each Holder of Registrable Securities written notice thereof (which shall include the number of shares the Company or other security holder proposes to register and, if known, the name of the proposed underwriter); and (ii) Use its best efforts to include in such registration all the Registrable Securities specified in a written request or requests, made by any Holder within twenty (20) days after the date of delivery of the written notice from the Company described in clause (i) above. If the underwriter advises the Company that marketing considerations require a limitation on the number of shares offered pursuant to any registration statement, then the Company may offer all of the securities it proposes to register for its own account and such limitation on any remaining securities that may, in the opinion of the underwriter, be sold will be imposed pro rata among such Holders who requested inclusions of --- ---- Registrable Securities in such registration according to the Purchaser who shall be a registered holder number of Registrable Securities and shall use its reasonable efforts to effect the registration under the Securities Act of then held by 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 CompanyHolders; provided, however, that (a) until October 6, 2001, any distribution such exclusion of -------- ------- Registrable Securities pursu-ant to such registration of Xxxxxx Xxxxxxxx, Xxxx Xxxxxxxx and ADC 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 affected such that ADC shall be registered, and (b) the Company shall not be required under this Section 3 entitled to include Registrable Securities such that ADC shall be entitled to participate in any such registration at twice the rate of securities if the Company shall have been advised Xxxxxx Xxxxxxxx and Xxxx Xxxxxxxx (by the investment banking firm managing the offering way of the securities proposed to be registered by the Company or others that the inclusion example, exclusions of Registrable Securities in could occur such offering that Xxxxxx Xxxxxxxx and Xxxx Xxxxxxxx would substantially interfere with the orderly sale of such securities which the Company or others propose be entitled to register; provided, however, that in making any determination under this subparagraph (b) as to the inclusion include 10% of the Registrable Securities held by them and ADC would be entitled to include 20% of the Registrable Securities held by it), provided, further, that in no event, shall any such offeringadjustment as between Xxxxxx Xxxxxxxx, Xxxx Xxxxxxxx and ADC entitle any of the same to any inclusion not otherwise permitted hereunder or which would result in exclusion of any other 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 taxesotherwise provided hereunder. (b) In The Company shall select the event underwriter for an offering made pursuant to this Section 3; provided that such underwriter must be reasonably -------- acceptable to the Company does not register the Registrable Securities as provided in 3-(a) above and/or through Holders of a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders majority of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities being registered in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for hereinoffering.

Piggy-Back. RegistrationsRegistration. --------------------------- (a) If Company at any time proposes to ------------------------ register any of its securities under the Securities Act for sale to the public, whether for its own account or for the account of other security holders or both (except with respect to registration statements on Forms X-0, X-0 or any successor or similar forms thereto and other than pursuant to a registration under Section 3), each such time it will give written notice to all holders of outstanding Registrable Shares of its intention to do so. Upon the written request of any such holder, received by Company shall determine within twenty (20) days after the giving of any such notice by Company, to register any of its Common Stock under Registrable Shares, Company will, except as provided below, cause the Securities Act, whether Registrable Shares as to which registration shall have been so requested to be included in connection with a public offering the securities to be covered by the registration statement proposed to be filed by 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 all to the Purchaser who shall be a registered extent requisite to permit the sale or other disposition by the 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 Shares so registered. In 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, event 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 (including2 shall be, without limitationin whole or in part, registration fees an underwritten public offering of securities, the number of securities to be included in such an underwriting may be reduced if and fees and disbursements to the extent that the managing underwriter shall be of the Company's counsel) shall opinion that such inclusion would adversely affect the marketing of the securities to be borne by the sold therein as follows: First, all persons (other than 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 requesting holders of Registrable Securities or related transfer taxes. (b) In Shares, the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the requesting holders of BAM Shares and the Registrable Securities requesting Stockholders) who have requested shares to be registered shall be entitled to receive an amount equal to 10% of reduced in the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the manner provided by Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects number of shares requested to pay the Penalty through shares of common stock be registered after such reduction shall still be in excess of the Companynumber of shares recommended to be registered by the underwriters, then such the number of shares shall be included as further reduced pro rata among the requesting holders of Registrable Securities as provided for hereinShares according to the number of shares requested by each such holder to be registered. In the event the number of shares requested to be registered after such reduction shall still be in excess of the number of shares recommended to be registered by the underwriters then the number of shares shall be reduced among the requesting holders of BAM Shares in accordance with the BAM Registration Rights. In the event the number of shares requested to be registered after such reduction shall still be in excess of the number of shares recommended to be registered by the underwriters then the number of shares shall be reduced among the requesting Stockholders in accordance with Article IV of the Stockholders Agreement. Notwithstanding the foregoing provisions, Company may withdraw any registration statement referred to in this Section 2 without thereby incurring any liability to the holders of Registrable Shares. There shall be no limit to the number of registrations of Registrable Shares which may be effected under this Section 2.

Piggy-Back. Registrations. --------------------------- (a) If at any time the Company shall -------------------------- determine to register any of its Common Stock or securities convertible into 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 Purchasers who shall be a registered holder holders of Registrable Securities Shares or Conversion Shares and shall use its reasonable efforts to effect the registration under the Securities Act of such Registrable Securities Conversion Shares as may be requested in a writing delivered to the Company within 30 days after such notice by the Purchaser Purchasers as well as to include such Registrable Securities Conversion Shares 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 Conversion Shares pursuant 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 7.3 to include Registrable Securities Conversion Shares 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 Conversion Shares 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 Conversion Shares in any such offering, Registrable Securities (i) a first priority shall be given to the registration of 1,750,000 Conversion Shares, (ii) thereafter, a second priority shall be given to all remaining Conversion Shares over any other securities as to which the Company has granted or may in the future grant registration rights that were (or will be) issued by the Company in any merger transaction or similar business combination transaction and (iii) with respect to circumstances not addressed in clauses (i) and (ii), Conversion Shares 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 Conversion Shares pursuant to this Section 3 7.3 (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 underwriting discounts or commissions attributable to Registrable SecuritiesConversion Shares, the fees of any separate counsel for the holders of Registrable Securities Conversion Shares or related transfer taxes. (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for herein.

Piggy-Back. RegistrationsRegistration. ---------------------------------------------------- (a) If at any time the Company shall determine at any time 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 securities which are convertible into or any similar rule or regulation, but exercisable for Common Stock (other than a registration relating solely to implement an employee benefit plans, a registration relating solely to an SEC Rule 145 transaction, a registration on Form S-4, or dividend reinvestment plana registration on any registration form which does not permit secondary sales or does not include substantially the same information as would be required to be included in a registration statement covering the sale of Registrable Securities), the Company shall will: (i) promptly give to the Holders written notice thereof (which shall include a list of the jurisdictions in which the Company intends to attempt to qualify such securities under the Purchaser who shall applicable blue sky or other state securities laws), and (ii) cause to be a registered holder of included in such registration and in any underwriting involved therein all the Registrable Securities and shall use its reasonable efforts to effect specified in a written request or requests made by the registration under the Securities Act Holders within ten (10) days after receipt of such Registrable Securities as may be requested in a writing delivered to the Company within 30 days after such written 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 from the Company; provided, however, that (a) any distribution the number of -------- ------- Registrable Securities pursu-ant to such registration shall so registered may be managed limited 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 underwriter's cut-back provision set forth in Subsection 2(c) below. (b) If the registration of which the Company gives notice is for a registered public offering involving an underwriting, the Company shall so advise the Holders as part of the written notice given pursuant to Subsection 2(a). In such event, the right of each Holder to register pursuant to Section 2 shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein. (c) Any Holders proposing to distribute their Registrable Securities through such underwriting shall (together with the Company) enter into an underwriting agreement in customary form with the representative of the underwriter or underwriters selected for underwriting by the Company. Notwithstanding any other provision of this Section 2, the Company shall not be required under this Section 3 to include Registrable Securities in any the 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 Holder unless the Holder accepts and offering of Registrable Securities pursuant agrees to this Section 3 (including, without limitation, registration fees and fees and disbursements of the Company's counsel) shall be borne terms proposed by the underwriters selected by the Company, except that and then only in such quantity as will not, in 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. (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders opinion of the Registrable Securities shall be entitled to receive an amount equal to 10% underwriters and based on marketing factors identified by such underwriters, jeopardize the success of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of offering by the Company. If the Penalty total number of Registrable Securities which the Holders request to be included in any offering exceeds the number of Shares which the underwriters reasonably believe is paid in common stockcompatible with the success of the offering, then the price used to determine the amount number of shares to be registered shall be reduced as between the Holders and the Company pro rata based on the average trading price ratio of Penn Octane Corporation common stock on (i) the first trading day subsequent Registrable Shares to the incurrence be registered to (ii) all shares of Common Stock of the Penalty. In the event Company to be registered, provided that the Company elects to pay the Penalty through number of shares of common stock Registrable Securities of the Company, then such shares shall Holders to be included as Registrable Securities as provided for hereinshall not be reduced by more than fifty percent (50%) of the total shares that the Holders have requested be included in the registration.

Piggy-Back. Registrations. ---------------------------------------------------- (a) If If, at any time anytime after the earlier of six months after an initial public offering of equity securities of the Company or the release of the lock- up restrictions imposed by Section 1.11 hereof or otherwise imposed by the Company's underwriters in connection with the Company's initial public offering, the Company shall determine to register any of its Common Stock under securities, either for its own account or the Securities Actaccount of a security holder or holders exercising their registration rights, 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 relating solely to implement an employee benefit plans, a registration on Form S-4 relating solely to a Rule 145 transaction or dividend reinvestment plana registration on any registration form which does not permit secondary sales, the Company shall will: (i) promptly give to each Holder of Registrable Securities written notice thereof (which shall include the number of shares the Company or other security holder(s) proposes to register and, if known, the name of the proposed underwriter); and (ii) use its reasonable best efforts to include in such registration all the Registrable Securities specified in a written request or requests, made by any Holder within fifteen (15) days after the date of delivery of the written notice from the Company described in clause (i) above. If the managing underwriter advises the Company that marketing considerations require a limitation on the number of shares offered pursuant to any registration statement, then the Company may offer all of the securities it proposes to register for its own account or the maximum amount that the managing underwriter considers saleable and such limitation on any remaining securities that may, in the opinion of the managing underwriter, be sold will be imposed pro rata among all stockholders who are entitled to include shares in such registration statement according to the Purchaser who shall be a registered holder number 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 other securities laws which shall be made or obtained with comparable rights with respect to the securities being registered by the Company; provided, however, that (a) any distribution of -------- ------- Registrable Securities pursu-ant registration each such stockholder requested to be included in 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 statement; provided that all other securities to be registered, and (b) the Company shall not be required under this Section 3 to include Registrable Securities in any shares without contractual registration of securities if the Company shall have been advised by the investment banking firm managing the offering of the securities rights proposed to be registered by the Company or others that the inclusion of Registrable Securities included 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 taxesare first excluded. (b) In The Company shall select the event underwriter for an offering made pursuant to this Section 1.3. The Company may, at its option, terminate or withdraw any registration statement filed pursuant to this Section 1.3 prior to the Company does not register the Registrable Securities as provided in 3-(aeffectiveness thereof. (c) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders If any Holder disapproves of the Registrable Securities shall be entitled to receive an amount equal to 10% terms of the amount originally paid underwriting, such holder may elect to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled withdraw therefrom by written notice to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares the underwriter and the Initiating Holders. The Registrable Securities so withdrawn shall be included as Registrable Securities as provided for hereinwithdrawn from registration.

Piggy-Back. Registrations. --------------------------- (a) If the Company at any time prior to two years from the Company shall determine date of the Closing proposes to register file a registration statement with respect to any of its Common Stock under equity securities (other than a registration statement on Form S-4 or S-8 or any successor or substantially similar form) (any of the Securities Actforegoing, whether in connection with a public offering "Company Registration"), for its own account or for the account of any holder of securities of the Company pursuant to demand registration rights granted by the Company, to the extent not prohibited by the terms of such demand registration rights (a public offering by shareholders"Requesting Securityholder" and, or bothsuch registration, includinga "Requesting Securityholder Registration"), 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, then the Company shall promptly in each case 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 proposed filing to Seller as may be requested in a writing delivered to representative of the Company within 30 holders of the Shares at least 20 days after before the anticipated filing date of any 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 registration statement by the Company; provided. Such notice shall offer to Seller and any holders of the Shares the opportunity to have any or all of the Shares held by them included in such registration statement and shall include the number of shares proposed to be registered, howeverthe proposed filing date, that (a) any the intended method of distribution of -------- ------- Registrable Securities pursu-ant to such registration shall be managed by shares and the investment banking firmproposed managing underwriter, if any, managing the distribution . If Seller or any of the securities being offered holders of the Shares desire to have the Shares registered on such Company Registration, Seller or the holders of the Shares shall so advise the Company in writing within 10 days after the date of receipt of such notice (which request shall set forth the amount of Shares and the holder of such Shares for which registration is requested), and the Company shall include in such registration statement all such Shares so requested to be included therein, subject to its receipt from any such holder of information required by the Company rules and regulations of the SEC to be set forth in such registration statement. If the registration statement relates to an underwritten offering, such Shares shall be included in the underwriting on the same terms and conditions as all the securities otherwise being sold through the underwriters. Seller or any holder of the Shares shall have the right to withdraw a request to include Shares in any public offering pursuant to this provision by giving written notice to the Company of its election to withdraw such request at least 10 business days prior to the proposed effective date of such registration statement. Notwithstanding the foregoing, if the managing or lead underwriter or underwriters of any such proposed underwritten offering advise the Company in writing that the total number of securities which the Seller, the holders of the Shares and the Company and any other securities persons or entities intended to be registered, and (b) included in such proposed underwritten offering exceeds the Company shall not number that can 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 sold in such offering would substantially interfere with the orderly sale of such securities which within a price range acceptable to the Company (in the case of a Company Registration) or others propose to register; provided, however, that in making any determination under this subparagraph (b) as to the inclusion Requesting Securityholder (in the case of a Requesting Securityholder Registration), then the amount or kind of securities offered at the request of Seller and the holders of the Registrable Securities in any such offering, Registrable Securities Shares shall be registered on a pro-rata basis reduced or eliminated in accordance with any other securities as such managing underwriter's recommendation. Expenses of registration, consisting of expenses relating to which the Purchaser and Company's compliance with this Section 9.5, including without limitation all registration and "blue sky" qualification fees, printers' and accounting fees, fees and disbursement of counsel for 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. All selling commissions applicable to the sale of the Shares, except that the Company shall not bear underwrit-ing discounts or commissions attributable to Registrable Securities, the including any fees and disbursements of any separate special counsel for the holders of Registrable Securities or related transfer taxes. (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that to Seller and the holders of the Registrable Securities Shares shall not be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of expenses borne by the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for herein.

Piggy-Back. Registrations. ---------------------------. (a) If If, at any time following the effective time of the Merger, the Company shall determine proposes to register any of its Common Stock under the Securities ActAct on a registration statement on Form S-1, whether Form S-2 or Form S-3 (or any equivalent general registration form then 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 effect other than pursuant to Rule 415 a Demand Registration under the Securities Act Section 3.1) for purposes of a primary offering, secondary offering or any similar rule or regulation, but other than a registration to implement an employee benefit or dividend reinvestment plancombined offering of such Common Stock, the Company shall promptly give prompt written notice thereof to the Purchaser who Shareholder of its intention to do so. Such notice shall be specify, at a registered holder minimum, the number of Registrable Securities and shall use its reasonable efforts to effect the registration under the Securities Act shares 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 Common Stock so proposed to be registered, the proposed date of filing of such registration statement, any proposed means of distribution of such Common Stock, any proposed managing underwriter or underwriters of such offering and a good faith estimate by the Company of the proposed maximum offering price thereof, as such price is proposed to appear on the facing page of such registration statement. Upon the written direction of the Shareholder (ba "Piggy-Back Request"), given within fifteen (15) business days following the receipt by the Shareholder of any such written notice (which direction shall specify the number of the Shares intended to be disposed of by the Shareholder), the Company shall not be required under this include in such registration statement (a "Piggy-Back Registration" and, collectively with a Demand Registration, a "Registration"), subject to the provisions of 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 3.2 hereof, such numbers of the securities proposed to Shares as shall be registered by the Company or others that the inclusion of Registrable Securities set forth 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 proPiggy-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 taxesBack Request. (b) In the event that the Company does not proposes to register Common Stock in connection with an underwritten offering and a nationally recognized independent investment banking firm selected by the Registrable Securities Company to act as managing underwriter thereof reasonably and in good faith shall have advised the Company, any holder of Common Stock intending to offer such Common Stock in a secondary offering or combined offering (each, an "Other Holder") or the Shareholder in writing that, in its opinion, the inclusion in the registration statement of some or all of the Shares sought to be registered by the Shareholder creates a substantial risk that the price per share of Common Stock that the Company or any Other Holder will derive from such registration will be materially and adversely affected or that the number of shares of Common Stock sought to be registered (including any shares of Common Stock sought to be registered at the request of the Company and any Other Holder and those sought to be registered by the Shareholder) is a greater number than can reasonably be sold, the Company shall include in such registration statement such number of shares of Common Stock as the Company, any Other Holder and the Shareholder are so advised can be sold in such offering without such an effect (the "Maximum Number") as follows and in the following order of priority: (A) first, such number of shares of Common Stock as the Company intended to be registered and sold by the Company and (B) second, in the case of a secondary offering or a combined offering and if and to the extent that the number of shares of Common Stock to be registered under clause (A) is less than the Maximum Number, such number of shares of Common Stock as the Shareholder and any Other Holder shall have intended to register which, when added to the number of shares of Common Stock to be registered under clause (A), is less than or equal to the Maximum Number; provided that if such number exceeds the Maximum Number, the shares of Common Stock of the Shareholder and such Other Holders will be excluded on a pro rata basis according to the total number of Shares and shares of Common Stock requested to be registered by such persons. (c) No Piggy-Back Registration effected under this Section 3.2 shall be deemed to have been effected pursuant to Section 3.1 hereof or shall release the Company of its obligations to effect any Demand Registration upon request as provided under Section 3.1 hereof. (d) Notwithstanding any request under this Section 3.2, a selling Holder may elect in 3-(awriting to withdraw its request for inclusion of its Shares in any registration statement; provided, however, that (i) above and/or through such request must be made in writing prior to the earlier of the execution of the underwriting agreement or the execution of the custody agreement with respect to such registration and (ii) such withdrawal shall be irrevocable and, after making such withdrawal, a Registration Statement covering Holder shall no longer have any right to include Shares in the Registrable Securities by December 1registration as to which such withdrawal was made. (e) If, 1999at any time after giving written notice of its intention to register any Common Stock and prior to the effective date of the registration statement filed in connection with such registration, then the Company agrees that shall determine for any reason not to register or to delay registration of such Common Stock, the holders Company may, at its election, give written notice of such determination to all Holders of record of Shares and (i) in the case of a determination not to register, shall be relieved of its obligation to register any Shares in connection with such abandoned registration, without prejudice, however, to the rights of Holders under Section 3.1 and (ii) in the case of a determination to delay such registration of the Registrable Securities Company's Common Stock, shall be permitted to delay the registration of such Shares for the same period as the delay in registering such other Common Stock. (f) If, as a result of the proration provisions of this Section 3.2, any Holder shall not be entitled to receive an amount equal include all Shares in a registration that such Holder has requested to 10% of be included, such Holder may elect to withdraw his request to include Shares in such registration or may reduce the amount originally paid number requested to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stockincluded, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event provided that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares same limitations in subsection (c) shall be included as Registrable Securities as provided for hereinapply.

Piggy-Back. Registrations. --------------------------- (a) If at any time the Company shall determine propose -------------------------- to register under the Securities Act (other than pursuant to Section 3 and 4 of this Agreement) any of its Common Stock under the Securities Actsecurities, whether in connection with a public offering for its own account or for the account of other security holders, each such time it will promptly give written notice to all holders of Registrable Shares of its intention so to do. Upon the written request of any such holder, received by the Company within thirty (30) days after the giving of any such notice by the Company, to register any or all of its Registrable Shares, the Company will use its best efforts to cause the Registrable Shares as to which registration shall have been so requested to be included in the securities to be covered by the registration statement proposed to be filed by the Company, all to the extent requisite to permit the sale or other disposition by the holder (in accordance with its written request) of such Registrable Shares so registered. If the registration of which the Company gives notice is for a registered 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 involving an employee benefit or dividend reinvestment planunderwriting, the Company shall promptly give so advise the holders of Registrable Shares as a part of the written notice thereof given pursuant to this Section 2. In such event the Purchaser who shall be a registered right of any holder of Registrable Securities and Shares to registration pursuant to this Section 2 shall use its reasonable efforts to effect the registration under the Securities Act of be conditioned upon such Registrable Securities as may be requested holder's participation in a writing delivered such underwriting to the Company within 30 days after extent provided herein. All holders of Registrable Shares proposing to distribute their securities through such notice by underwriting shall (together with 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 shares 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 Common Stock to be registered by the Company and shares of Common tock held by Persons who by virtue of agreements with the Company are entitled to include shares in such registration (the "Other Shareholders")) enter into an underwriting agreement in customary form with the underwriter or others that underwriters selected for underwriting by the inclusion Company. If any holder of Registrable Securities in Shares disapproves of the terms of any such offering would substantially interfere with the orderly sale of such securities which underwriting, it may elect to withdraw therefrom by written notice to the Company and the underwriter. Any Registrable Shares or others propose other securities excluded or withdrawn from such underwriting shall be withdrawn from such registration. Notwithstanding any other provision of this Section 2, if the underwriter determines that marketing factors require a limitation on the number of shares to register; providedbe underwritten, however, that in making any determination under this subparagraph (b) as to the inclusion underwriter may exclude from such registration and underwriting all of the Registrable Securities in any such offering, Registrable Securities shall Shares which would otherwise 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 underwritten pursuant to this Section 3 (including2. The Company shall so advise all holders of securities requesting registration of any limitations on the number of shares to be underwritten and the number of shares of securities that are entitled to be included in the registrationNotwithstanding the foregoing provisions, 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 may withdraw any registration statement referred to Registrable Securities, the fees of in this Section 2 without thereby incurring any separate counsel for liability to the holders of Registrable Securities or related transfer taxesShares. (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for herein.

Piggy-Back. RegistrationsREGISTRATION. --------------------------- (a) If at any time the Company shall determine proposes to register any of its Common Stock capital stock under the Securities Act, whether 1933 Act in connection with a the public offering of such securities for its own account or for the account of its security Holders, other than Holders of Registrable Shares pursuant hereto (a "Piggy-Back Registration Statement"), except for (i) a registration relating solely to the sale of securities to participants in the Company's stock plans or employee benefit plans or (ii) a registration relating solely to an transaction for which Form S-4 may be used, then: (a) the Company shall give written notice of such determination to each Holder of Registrable Shares, and each such Holder shall have the right to request, by written notice given to the Company within fifteen (15) days of the date that such written notice was mailed by the Company to such Holder, that a specific number of Registrable Shares held by such Holder be included in the Piggy-Back Registration Statement (and related underwritten offering, if any); (b) If the Piggy-Back Registration Statement relates to an underwritten offering, the notice given to each Holder shall specify the name or names of the managing underwriter or underwriters for such offering. In addition, such notice shall also specify the number of securities to be registered for the account of the Company and for the account of its shareholders (other than the Holders of Registrable Shares), if any; (c) If the Piggy-Back Registration Statement relates to an underwritten offering, each Holder of Registrable Shares to be included therein must agree (i) to sell such Holder's Registrable Shares on the same basis as provided in the underwriting arrangement approved by the Company, a public offering by shareholdersand (ii) to timely complete and execute all questionnaires, or bothpowers of attorney, includingindemnities, without limitationhold-back agreements, by means of any shelf registration pursuant to Rule 415 underwriting agreements and other documents required 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 terms of such Registrable Securities as may be requested in a writing delivered to the Company within 30 days after such notice underwriting arrangements or by the Purchaser as well as to include such Registrable Securities in any notifications, registrations SEC or qualifications under by any state securities laws which regulatory body; (d) If the managing underwriter or underwriters for the underwritten offering under the Piggy-Back Registration Statement determines that inclusion of all or any portion of the Registrable Shares in such offering would materially adversely affect the ability of the underwriters for such offering to sell all of the securities requested to be included for sale in such offering at the best price obtainable therefor, the aggregate number of Registrable Shares that may be sold by the Holders 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 limited to such registration shall be managed by the investment banking firmnumber of Registrable Shares, if any, that the managing underwriter or underwriters determine may be included therein without such adverse effect as provided below. If the distribution number of securities proposed to be sold in such underwritten offering exceeds the number of securities being offered that may be sold in such offering, there shall be included in the offering, first, up to the maximum number of securities to be sold by the Company on for its own account and for the same terms account of other stockholders (other than Holders of Registrable Shares), as all other securities they may agree among themselves, and second, as to the balance, if any, Registrable Shares requested 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 included therein by the investment banking firm managing Holders thereof (pro rata as between such Holders based upon the offering number of the securities Registrable Shares initially proposed to be registered by the Company each), or others that the inclusion of Registrable Securities in such other proportions as the managing underwriter or underwriters for the offering would substantially interfere with the orderly sale of such securities which the Company or others propose to registermay require; provided, however, that in making any determination under this subparagraph (b) the event that the number of securities proposed to be sold in such underwritten offering exceeds the number of securities that may be sold in such offering pursuant to the terms and conditions set forth above and the Piggy-Back Registration Statement is a result of public offering by the Company of its securities for its own account, there shall be included in the offering, first, up to the maximum number of securities to be sold by the Company for its own account and second, as to the inclusion of balance, if any, securities to be sold for 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 account of the Company's counselstockholders (both the Holders of Registrable Shares requested and such other stockholders of the Company requested to be included therein) on a pro rata basis; (e) Holders of Registrable Shares shall have the right to withdraw their Registrable Shares from the Piggy-Back Registration Statement, but if the same relates to an underwritten offering, they may only do so during the time period and on the terms agreed upon among the underwriters for such underwritten offering and the Holders of Registrable Shares; (f) The Holders will advise the Company at the time a registration becomes effective whether the Registrable Shares included in the registration will be borne underwritten or sold directly 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.Holders; (bg) In All demand and piggy-back registration rights of the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders Holders shall terminate when all of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty Shares then outstanding may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used sold pursuant to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for hereinRule 144(k).

Piggy-Back. Registrations. ---------------------------------------------------- (a) If at any time the Company shall determine to register any of its Common Stock under securities, either for its own account or the Securities Actaccount of a security holder or holders exercising their registration rights (subject to the provisions of Section 2), 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 relating solely to implement an employee benefit plans or dividend reinvestment plana registration on any registration form which does not permit secondary sales or does not include substantially the same information as would be required to be included in a registration statement covering the sale of Registrable Securities or pursuant to Form S-4, the Company shall promptly will: (i) Promptly give to each Holder of Registrable Securities written notice thereof (which shall include the number of shares the Company or other security holder proposes to register and, if known, the Purchaser who shall be a registered holder name of the proposed underwriter); and (ii) Use its best efforts to include in such registration all the Registrable Securities and shall use its reasonable efforts to effect the registration under the Securities Act of such Registrable Securities as may be requested specified in a writing delivered to written request or requests, made by any Holder within twenty (20) days after the date of delivery of the written notice from the Company within 30 days after such notice by described in clause (i) above. If the Purchaser as well as underwriter advises the Company that marketing considerations require a limitation on the number of shares offered pursuant to include such Registrable Securities in any notificationsregistration statement, registrations or qualifications under any state securities laws which shall be made or obtained with respect to then the Company may offer all of the securities being registered by it proposes to register for its own account and such limitation on any remaining securities that may, in the Company; providedopinion of the underwriter, however, that be sold will be imposed: (a) any distribution of -------- ------- first, so as to exclude all Registrable Securities pursu-ant to such registration shall be managed by of Holders other than 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, Investors and their assignees; and (b) thereafter, pro rata among 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 Holders who requested --- ---- 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 registration according 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 number 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 then held 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 taxessuch Holders. (b) In The Company shall select the event underwriter for an offering made pursuant to this Section 3, but shall not be required to register under the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled Exchange Act prior to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for hereindate.

Piggy-Back. RegistrationsRegistration. --------------------------- (a) If the Company proposes to register -------------------------- any of its securities under the Securities Act for sale to the public at any time during the Registration Period, whether for its own account or for the account of other security holders or both (except with respect to registration statements on Forms X-0, X-0 or another form not available for registering the Restricted Shares for sale to the public), each such time it will give written notice to all holders of outstanding Restricted Shares of its intention so to do. Upon the written request of any such holder, received by the Company shall determine within 20 days after the giving of any such notice by the Company, to register any of its Common Stock under Restricted Shares, the Securities ActCompany will, whether subject as provided below, cause the Restricted Shares as to which registration shall have been so requested to be included in connection with a public offering the securities to be covered by the registration statement proposed to be filed 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 all to the Purchaser who shall be a registered extent requisite to permit the sale or other disposition by the holder of Registrable Securities and shall use its reasonable efforts to effect such Restricted Shares so registered. In 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, event 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 (including1.01 shall be, without limitationin whole or in part, registration fees and fees and disbursements an underwritten public offering of Equity Securities of the Company's counsel) , the number of securities to be included in such an underwriting may be reduced if and to the extent that the managing underwriter shall be borne of the opinion that such inclusion would adversely affect the marketing of the securities to be sold therein as follows: first, all persons (other than the Company, the requesting holders of Restricted Shares and requesting holders of Equity Securities of the Company who are entitled to the benefits of a Contract entered into prior to the date hereof providing for the registration of Equity Securities of the Company) who have requested shares to be registered shall be reduced in the manner provided 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. (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects number of shares requested to pay the Penalty through shares of common stock be registered after such reduction shall still be in excess of the Companynumber of shares recommended to be registered by the underwriters, then such the number of shares shall be included as Registrable further reduced pro rata among the requesting holders of Restricted Shares according to the number of shares requested by each such holder to be registered. In the event the number of shares requested to be registered after such reduction shall still be in excess of the number of shares recommended to be registered by the underwriters then the number of shares shall be reduced among the requesting holders of Equity Securities as provided of the Company who are entitled to the benefits of a Contract entered into prior to the date hereof providing for hereinthe registration of Equity Securities of the Company in accordance with the applicable Contracts relating to such holders' registration rights. Notwithstanding the foregoing provisions, the Company may withdraw any registration statement referred to in this Section 1.01 without thereby incurring any liability to the holders of Restricted Shares. There shall be no limit to the number of registrations of Restricted Shares which may be effected under this Section 1.01.

Piggy-Back. Registrations. --------------------------- Registrations (ai) If at any time the Company shall determine to register any of its Common Stock under prepare and file with 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 Commission a registration statement relating to implement an employee benefit offering for its own account or dividend reinvestment plan, the Company shall promptly give written notice thereof to the Purchaser who shall be a registered holder account of Registrable Securities and shall use its reasonable efforts to effect the registration others under the Securities Act of any of its equity securities (other than on Form S-4 or Form S-8 (each as promulgated under the Securities Act) or their then equivalents relating to equity securities to be issued solely in connection with any acquisition of any entity or business or equity securities issuable in connection with stock option or other employee or director benefit plans), then the Company shall send to each Buyer written notice of such determination and, if within twenty days after receipt of such notice, any such holder shall so request in writing, the Company shall include in such registration statement all or any part of such Registrable Securities as may such holder requests to be requested in registered, subject to customary underwriter cutbacks applicable to all holders of registration rights on 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 pro rata basis (along with other holders of piggyback registration rights 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 (bA) the Company shall not be required under this Section 3 to include Registrable Securities in register 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 4(u) that are (includingI) eligible for resale under Rule 144 without the requirement to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144, without limitation, or (II) that are the subject of a then effective registration fees statement and fees (B) if at any time after giving written notice of its intention to register any securities and disbursements prior to the effective date of the Company's counsel) shall be borne by the Companyregistration statement filed in connection with such registration, except that the Company shall determine for any reason not bear underwrit-ing discounts to register or commissions attributable to Registrable Securitiesdelay registration of such securities, the fees Company may, at its election, give written notice of such determination to such Holder and, thereupon, (i) in the case of a determination not to register, shall be relieved of its obligation to register any separate counsel for the holders of Registrable Securities or related transfer taxes. (bpursuant to this Section 4(u) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with such registration (but not from its obligation to pay expenses in accordance with Section 4(u) hereof), and (ii) in the Purchase Agreement among the parties (the "Penalty"). The holders case of the a determination to delay registering, shall be permitted to delay registering any Registrable Securities shall be entitled being registered pursuant to receive this Section 4(u) for the Penalty on each monthly anniversary thereafter until same period as the Registrable Securities have been registered. The Penalty may be paid delay in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then registering such shares shall be included as Registrable Securities as provided for hereinother securities.

Piggy-Back. RegistrationsREGISTRATIONS. --------------------------- (a) If at any time the Company shall determine to register any for its own account or the account 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 others under the Securities Act (including pursuant to the Qualified Public Offering, the Initial Public Offering or a demand for registration of any similar rule or regulation, but stockholder of the Company other than a registration the Purchasers) any of its equity securities, other than on Form S-8 or Form S-4 or their then equivalents or otherwise relating to implement an shares of Common Stock to be issued solely in connection with any acquisition of any entity or business or shares of Common Stock issuable in connection with stock option or other employee benefit or dividend reinvestment planplans, it shall send to each holder of Registrable Shares, including each holder who has the right to acquire Registrable Shares, written notice of such determination and, if within ten (10) business days after receipt of such notice, such holder shall so request in writing, the Company shall promptly give written notice thereof use its best efforts to include in such registration statement all or any part of the Purchaser who Registrable Shares such holder requests to be registered. If, in connection with any offering involving an underwriting, the managing underwriter shall impose a limitation on the number of shares of such Common Stock which may be included in the registration statement because, in its judgment, such limitation is necessary to effect an orderly public distribution, then the Company shall be a registered holder of Registrable Securities and shall use its reasonable efforts obligated to effect the include in such registration under the Securities Act of statement only such Registrable Securities as limited portion (which may be requested in a writing delivered to none) of 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 Shares with respect to the securities being registered which such holder has requested inclusion pursuant hereto as may reasonably be determined by the Companymanaging underwriters; 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 between the Company, except that the Company shall not bear underwrit-ing discounts or commissions attributable to Registrable Securitiesother stockholders holding contractual registration rights, the fees of any separate counsel for and the holders of Registrable Securities or related transfer taxes. (b) In the Shares, in no event the Company does not register shall the Registrable Securities as provided Shares included in 3-(asuch offering be limited to less than twenty-five percent (25%) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the aggregate shares offered. Any inclusion of Registrable Securities shall be entitled to receive an amount equal to 10% Shares in the offering, when the managing underwriter has so limited the number of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty Shares that may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for herein.in

Piggy-Back. Registrations. ---------------------------------------------------- (a) If If, at any time after the date of the Company's first Qualified Public Offering, the Company shall determine to register any of its Common Stock under securities, either for its own account or for the account of a security holder or holders (including an Initiating Holder) exercising its registration rights, other than a registration relating solely to employee benefit plans, or a registration on any registration form which does not permit secondary sales, or a registration relating solely to a Commission Rule 145 transaction, or a registration that does not include substantially the same information as would be required to be included in a registration statement covering the sale of Registrable Securities Actor Other Registrable Securities, whether the Company will: (i) promptly (and in connection with no event less than 30 days before the anticipated filing date of such registration statement) give to each Holder of Registrable Securities and Other Registrable Securities written notice thereof, which shall include the number of shares the Company or other security holder proposes to register and, if known, the name of Underwriter selected by the Company (if the registration is for the account of the Company) or by such other person initiating such registration and reasonably acceptable to the Company; and (ii) use all of its commercially reasonable best efforts to include in such registration all the Registrable Securities and Other Registrable Securities specified in a public offering written request or requests made by any Holder within 30 days after the date of delivery of the written notice from the Company described in clause i) above. (b) The right of any Holder to registration pursuant to this Section 3 shall be conditioned upon such Holder's participation, and the inclusion of such Holder's Registrable Securities or Other Registrable Securities, in the underwriting (unless otherwise agreed by the Company, a public offering by shareholdersmajority in interest of the person(s) initiating such registration, or both, including, without limitation, by means of any shelf registration pursuant and the Underwriter). (c) All Holders proposing 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, distribute their securities through such underwriting shall (together with the Company and any other shareholders distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the Underwriter. The Company shall promptly give written notice thereof use all of its commercially reasonable best efforts to cause the Purchaser who shall be a registered holder Underwriter of such proposed underwritten offering to permit the Registrable Securities and shall use its reasonable efforts Other Registrable Securities requested to effect be included in the registration under the Securities Act of statement for such Registrable Securities as may offering to 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 included on the same terms and conditions as all other any similar securities to be registered, and (b) of the Company shall not be required under included therein. (d) Notwithstanding any other provision of this Section 3 to include Registrable Securities in any registration of securities 3, if the Company shall have been advised by the investment banking firm managing the offering of the securities proposed to be registered by Underwriter advises the Company or others that the inclusion of Registrable Securities and/or Other Registrable Securities in the subject registration statement would limit the number of securities originally determined to be included therein or would reduce the offering price thereof, then the Underwriter may require a limitation on the number of shares offered pursuant to such registration statement, as follows: (i) Any securities of the Company held by officers and directors of the Company (other than Registrable Securities or Other Registrable Securities) shall be excluded from such registration and underwriting to the extent required by such limitation: and (ii) if a limitation on the number of shares is still required, then: (a) if the registration is for the account of the Company, Registrable Securities and Other Registrable Securities shall be excluded from such registration and underwriting to the extent required by such limitation, in proportion, as nearly as practicable, to the respective amount of Registrable Securities and Other Registrable Securities which had been requested to be included in such offering would substantially interfere with the orderly sale of such securities which the Company or others propose registration, prior to register; provided, however, that in making any determination under this subparagraph (b) as to limiting 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 of the Company has granted or may in for 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 account 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.; and (b) In if the event registration is at the request of an Initiating Holder(s) of Registrable Securities and does not include shares to be sold by the Company does not register (except pursuant to the last sentence of this Section 3), Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the and Other Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities each other Holder shall be entitled excluded to receive an amount equal the extent required by such limitation, in proportion, as nearly as practicable, to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of Registrable Securities and Other Registrable Securities which had been requested to be included in such registration in accordance with this Section 3; and (c) if the registration is at the request of an Initiating Holder(s) of Other Registrable Securities and does not include shares to be sold by the Company (except pursuant to the last sentence of this Section 3), Registrable Securities and Other Registrable Securities of each other Holder shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent excluded to the incurrence extent required by such limitation, in proportion, as nearly as practicable, to the amount of Registrable Securities and Other Registrable Securities which had been requested to be included in such registration in accordance with this Section 3. (e) If any Holder of Registrable Securities, Other Registrable Securities or any officer or director disapproves of the Penalty. In terms of any such underwriting, such person may, prior to effectiveness of the event that registration, elect to withdraw therefrom by written notice to the Company elects to pay and the Penalty through shares of common stock of the Company, then Underwriter. Any securities excluded or withdrawn from such shares underwriting shall be included as withdrawn from such registration. (f) If the registration is for the account of a person other than the Company and the Underwriter has not limited the number of Registrable Securities as provided and Other Registrable Securities requested to be registered under this Section 3, the Company may include its securities for hereinits own account in such registration if the Underwriter so agrees and if the number of Registrable Securities and Other Registrable Securities which would otherwise have been included in such registration and underwriting will not thereby be limited.

Piggy-Back. RegistrationsRegistration. --------------------------- (a) If at If, but without any time obligation to do so, the Company shall determine Borrower proposes to register any of its Common Stock capital stock under the Securities Act, whether 1933 Act in connection with a the public offering of such securities for its own account or for the account of its security holders, other than Holders of Registrable Securities pursuant hereto (a "Piggy-Back Registration Statement"), (except for (i) a registration relating solely to the sale of securities to participants in the Borrower's stock plans or employee benefit plans or (ii) a registration relating solely to an SEC Rule 145 transaction or any rule adopted by the CompanySEC in substitution thereof or in amendment thereto), 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 then: (a) The Borrower shall promptly give written notice thereof of such determination to each Holder of Registrable Securities, and each such Holder shall have the right to request, by written notice given to the Purchaser who shall be Borrower within 15 days of the date that such written notice was mailed by the Borrower to such Holder, that a registered holder specific number of Registrable Securities held by such Holder be included in the Piggy-Back Registration Statement (and related underwritten offering, if any); (b) If the Piggy-Back Registration Statement relates to an underwritten offering, the notice given to each Holder shall use specify the name or names of the managing underwriter or underwriters for such offering. In addition such notice shall also specify the number of securities to be registered for the account of the Borrower and for the account of its reasonable efforts shareholders (other than the Holders of Registrable Securities), if any; (c) If the Piggy-Back Registration Statement relates to effect an underwritten offering, each Holder of Registrable Securities to be included therein must agree (I) to sell such Holder's Registrable Securities on the registration same basis as provided in the underwriting arrangement approved by the Borrower, and (ii) to timely complete and execute all questionnaires, powers of attorney, indemnities, hold-back agreements, underwriting agreements and other documents required under the Securities Act terms of such Registrable Securities as may be requested in a writing delivered to the Company within 30 days after such notice underwriting arrangements or by the Purchaser as well as to include such Registrable Securities in any notifications, registrations SEC or qualifications under by any state securities laws which shall be made regulatory body; (d) If the managing underwriter or obtained with respect to underwriters for the securities being registered by underwritten offering under the Company; provided, however, Piggy-Back Registration Statement determines that (a) inclusion of all or any distribution of -------- ------- Registrable Securities pursu-ant to such registration shall be managed by the investment banking firm, if any, managing the distribution portion 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 adversely affect the orderly ability of the underwriters for such offering to sell all of the securities requested to be included for sale in such offering at the best price obtainable therefor, the aggregate number of Registrable Securities that may be sold by the Holders shall be increased to such number of Registrable Securities, if any, that the managing underwriter or underwriters determine may be included therein without such adverse effect as provided below. If the number of securities which proposed to be sold in such underwritten offering exceeds the Company number of securities that may be sold in such offering, there shall be included in the offering, first, up to the maximum number of securities to be sold by the Borrower for its own account and for the account of other stockholders (other than Holders of Registrable Secunties), as they may agree among themselves, and second, as to the balance, if any, Registrable Securities requested to be included therein by the Holders thereof (pro rata as between such Holders based upon the number of Registrable Securities initially proposed to be registered by each), or others propose to registerin such other proportions as the managing underwriter or underwriters for the offering may require; 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. (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects number of securities proposed to pay be sold in such underwritten offering exceeds the Penalty through shares number of common stock securities that may be sold in such offering pursuant to the terms and conditions set form above and the Piggy-Back Registration Statement is a result of public offering by the CompanyBorrower of its securities for its own account, then such shares there shall be included In the offering, first, up to the maximum number of securities to be sold by the Borrower for its own account and second, as to the balance, if any, securities to be sold for the account of the Borrower's stockholders (both the Holders of Registrable Securities as provided request and such other stockholders of the Borrower requested to be included therein) on a pro rata basis; (e) Holders of Registrable Securities shall have the right to withdraw their Registrable Securities from a Piggy-Back Registration Statement, but if the same relates to an underwritten offering, they may only do so during the time period and on the terms agreed upon among the underwriters for hereinsuch underwritten offering and the Holders of Registrable Securities.

Piggy-Back. RegistrationsRights. --------------------------- (a) If at any time the Company shall determine to register any registers shares of its Common Stock under the Securities ActAct on a registration statement on Form S-1 or Form S-3 (or an equivalent general registration form then in effect) for purposes of a firm-commitment, whether in connection with a underwritten public offering by the Company, a public offering by shareholders, or both, including, without limitation, by means of any shelf registration Common Stock (other than issuances pursuant to Rule 415 under the Securities Act any employee benefit plan or agreement, an exercise of Warrants or other rights to acquire Common Stock or any merger, amalgamation, recapitalization, exchange offer or other similar rule or regulation, but transaction and other than a registration pursuant to implement an employee benefit or dividend reinvestment planSection 2.1), the Company shall promptly give prompt written notice thereof of such offering to each Specified Shareholder who holds of record Registrable Securities. Subject to Section 2.2, upon the Purchaser who written request of any such Specified Shareholder, given within 10 days after the transmittal of any such written notice (which request shall be a registered holder of specify the Registrable Securities and shall intended to be disposed of by such Specified Shareholder), the Company will use its reasonable best efforts to effect include in such Registered Public Offering any or all of the registration under Registrable Securities then owned by such Specified Shareholder (and so specified in such request) to the Securities Act extent necessary to permit the sale or other disposition of such Registrable Securities as may be requested by such Specified Shareholder (each, also a "Seller"), provided that any participation in a writing delivered to the Company within 30 days after such notice offering by the Purchaser as well as to include such Registrable Securities in any notifications, registrations or qualifications under any state securities laws which each Seller 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 substantially the same terms as all other securities the Company's participation therein (to the extent the Company participates therein), and provided, further, that the number of Registrable Securities to be registeredincluded in any such Registered Public Offering, together with any other shares of Common Stock that the Company wishes to be included for its own or any other Person's account, shall not exceed the Maximum Number, and (b) shares of Common Stock shall be allocated to give effect to this proviso as provided in Section 2.5. Any Seller shall have the Company shall not be required under this Section 3 right to withdraw a request 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 Registered Public Offering pursuant to this Section 3 (including, without limitation, registration fees and fees and disbursements of the Company's counsel) shall be borne 2.4 by the Company, except that giving written notice to the Company shall not bear underwrit-ing discounts or commissions attributable of its election to Registrable Securitieswithdraw such request, the fees of any separate counsel for the holders of Registrable Securities or related transfer taxes. (b) In the event but only if the Company does not register receives notice of such withdrawal at least 15 days before it proposes to price the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty")offering. The holders of the Registrable Securities shall be entitled Company may terminate or abandon any proposed Registered Public Offering that is not effected in response to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid a Demand Request at any time and for any reason in cash and/or common stock, at the its sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for hereindiscretion.

Piggy-Back. RegistrationsREGISTRATION. --------------------------- (a) ----------------------------------------- If at any time the Company shall determine Borrower proposes to register any of its Common Stock capital stock under the Securities Act, whether 1933 Act in connection with a the public offering by of such securities for its own account or for the Companyaccount of its security holders, 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 Holders of Registrable Securities pursuant hereto (a "Piggy-Back Registration Statement"), except for (i) a registration relating solely to implement an the sale of securities to participants in Borrower's stock plans or employee benefit plans or dividend reinvestment plan(ii) a registration relating solely to an transaction for which Form S-4 may be used, the Company then: (a) Borrower shall promptly give written notice thereof of such determination to each Holder of Registrable Securities, and each such Holder shall have the Purchaser who shall be right to request, by written notice given to Borrower within 15 days of the date that such written notice was mailed by Borrower to such Holder, that a registered holder specific number -------------------------------------------------------------------------------- 35 Agreement (Continued) -------------------------------------------------------------------------------- of Registrable Securities held by such Holder be included in the Piggy-Back Registration Statement (and related underwritten offering, if any); (b) If the Piggy-Back Registration Statement relates to an underwritten offering, the notice given to each Holder shall use specify the name or names of the managing underwriter or underwriters for such offering. In addition, such notice shall also specify the number of securities to be registered for the account of Borrower and for the account of its reasonable efforts shareholders (other than the Holders of Registrable Securities), if any; (c) If the Piggy-Back Registration Statement relates to effect an underwritten offering, each Holder of Registrable Securities to be included therein must agree (i) to sell such Holder's Registrable Securities on the registration same basis as provided in the underwriting arrangement approved by Borrower, and (ii) to timely complete and execute all questionnaires, powers of attorney, indemnities, hold-back agreements, underwriting agreements and other documents required under the Securities Act terms of such Registrable Securities as may be requested in a writing delivered to the Company within 30 days after such notice underwriting arrangements or by the Purchaser as well as to include such Registrable Securities in any notifications, registrations SEC or qualifications under by any state securities laws which shall be made regulatory body; (d) If the managing underwriter or obtained with respect to underwriters for the securities being registered by underwritten offering under the Company; provided, however, Piggy-Back Registration Statement determines that (a) inclusion of all or any distribution of -------- ------- Registrable Securities pursu-ant to such registration shall be managed by the investment banking firm, if any, managing the distribution portion 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 materially adversely affect the orderly ability of the underwriters for such offering to sell all of the securities requested to be included for sale in such offering at the best price obtainable therefor, the aggregate number of Registrable Securities that may be sold by the Holders shall be limited to such number of Registrable Securities, if any, that the managing underwriter or underwriters determine may be included therein without such adverse effect as provided below. If the number of securities which proposed to be sold in such underwritten offering exceeds the Company number of securities that may be sold in such offering, there shall be included in the offering, first, up to the maximum number of securities to be sold by Borrower for its own account and for the account of other stockholders (other than Holders of Registrable Securities), as they may agree among themselves, and second, as to the balance, if any, Registrable Securities requested to be included therein by the Holders thereof (pro rata as between such Holders based upon the number of Registrable Securities initially proposed to be registered by each), or others propose to registerin such other proportions as the managing underwriter or underwriters for the offering may require; provided, however, that in making any determination under this subparagraph (b) the event that the number of securities proposed to be sold in such underwritten offering exceeds the number of securities that may be sold in such offering pursuant to the terms and conditions set forth above and the Piggy-Back Registration Statement is a result of public offering by Borrower of its securities for its own account, there shall be included in the offering, first, up to the maximum number of securities to be sold by Borrower for its own account and second, as to the inclusion balance, if any, securities to be sold for the account of Borrower's stockholders (both the Holders of Registrable Securities requested and such other stockholders of Borrower requested to be included therein) on a pro rata basis; (e) Holders of Registrable Securities shall have the right to withdraw their Registrable Securities from the Piggy-Back Registration Statement, but if the same relates to an underwritten offering, they may only do so during the time period and on the terms agreed upon among the underwriters for such underwritten offering and the Holders of Registrable Securities; (f) The exercise of the registration rights of the Holders with respect to any specific underwritten offering shall be subject to a 90-day delay at the request of the managing underwriter; -------------------------------------------------------------------------------- 36 Agreement (Continued) -------------------------------------------------------------------------------- (g) The Holders will advise Borrower at the time a registration becomes effective whether the Registrable Securities included in the registration will be underwritten or sold directly by the Holders; (h) If an underwriter requests a reasonable lock-up period of Borrower and/or all sellers of Borrower's registered securities, the Holders will agree to such lock-up, provided that this provision shall be limited to persons or groups that hold ten percent (10%) or more of the Registrable Securities in any such offering, Registrable Securities shall be registered on a proThen Outstanding; and (i) All demand and piggy-rata basis with any other securities as to which the Company has granted or may in the future grant back 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 rights of the Company's counsel) Holders 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. (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders terminate when all of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty Then Outstanding may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used sold pursuant to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for hereinRule 144(k).

Piggy-Back. RegistrationsREGISTRATIONS. --------------------------- (a) If at any time the Company shall determine to register any for its own account or the account of its Common Stock under the Securities Actothers, 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 1933, as amended (the "SECURITIES ACT") any of its equity securities, it shall send to each holder of Registrable Shares (as defined below), including each holder who has the right to acquire Registrable Shares, written notice of such Registrable Securities as may be requested determination and, if within fifteen (15) days after receipt of such notice, such holder shall so request in a writing delivered to writing, the Company within 30 days after shall include in such notice registration statement all or any part of the Registrable Shares such holder requests to be registered. Nothing herein shall be construed so as to require the Company, in connection with any proposed offering, to engage the services of an underwriter under this Section 1.1 as, for example, if the Company shall file a registration statement under Rule 145 of the Securities Act without the services or engagement of any underwriter. "REGISTRABLE SHARES" shall consist of any and all shares of common stock, $0.01 par value per share (the "COMMON STOCK") held by the Purchaser as well as to include such Registrable Securities in any notificationsHolders issued or issuable upon conversion of the Series C Preferred, registrations Series D Preferred or qualifications under any state securities laws which shall be made or obtained with respect to the securities being registered by the CompanySeries E Preferred; 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 respect to this Section 1.1, Sections 1.4 through 1.14 and Sections 3 through 11, "Registrable Shares" shall also consist of (includingi) the Common Stock held by GATX, without limitationGE, registration fees SVB and fees Orix issued or issuable upon conversion of their Preferred Stock, which is in turn issuable upon exercise of certain warrants to purchase Preferred Stock (the "PREFERRED WARRANTS"); and disbursements (ii) the Common Stock held by Pentech issuable upon exercise of that certain warrant to purchase Common Stock held by Pentech (the Company's counsel) shall "PENTECH WARRANT"). If, in connection with any offering involving an underwriting of Common Stock to be borne issued by the Company, except that the Company managing underwriter shall not bear underwrit-ing discounts or commissions attributable impose a limitation on the number of shares of such Common Stock which may be included in the registration statement because, in its judgment, such limitation is necessary to Registrable Securities, the fees of any separate counsel for the holders of Registrable Securities or related transfer taxes. (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999effect an orderly public distribution, then the Company agrees may reduce the number of Registrable Shares to be included in such an underwriting (pro rata among the requesting stockholders based upon the number of Registrable Shares owned by such stockholders), provided, however that in no event may less than twenty percent (20%) of the total number of shares of Common Stock to be included in such underwriting be made available for Registrable Shares. No incidental right under this Section 1.1 shall be construed to limit any registration required under Section 1.2. The obligations of the Company under this Section 1.1 may be waived at any time upon the written consent of holders of the Registrable Securities shall be entitled to receive an amount equal to 10% a majority of the amount originally paid to acquire the outstanding Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for hereinShares.

Piggy-Back. RegistrationsRegistration. --------------------------- (a) If the Company at any time the Company shall determine ------------------------ proposes to register any of its Common Stock securities under the Securities ActAct for sale to the public, whether in connection for its own account or for the account of other security holders or both (except with a public offering respect to registration statements on Forms X-0, X- 0 or another form not available for registering the Restricted Shares for sale to the public), each such time it will give written notice to all holders of outstanding Restricted Shares of its intention so to do. Upon the written request of any such holder, received by the Company within 20 days after the giving of any such notice by the Company, a public offering to register any of its Restricted Shares, the Company will, subject as provided below, cause the Restricted Shares as to which registration shall have been so requested to be included in the securities to be covered by shareholdersthe registration statement proposed to be filed by the Company, all to the extent requisite to permit the sale or both, including, without limitation, other disposition by means the holder of such Restricted Shares so registered. In the event that any shelf registration pursuant to Rule 415 under the Securities Act this Section 4.01 shall be, in whole or any similar rule or regulationin part, but other than a registration to implement an employee benefit or dividend reinvestment planunderwritten public offering of Common Stock, the Company shall promptly give written notice thereof number of Restricted Shares to be included in such an underwriting may be reduced (pro rata among the requesting holders based upon the number of Restricted Shares owned by such holders) if and to the Purchaser who extent that the managing underwriter shall be a registered holder of Registrable Securities and shall use its reasonable efforts the opinion that such inclusion would adversely affect the marketing of the securities to effect the registration under the Securities Act of such Registrable Securities as may be requested in a writing delivered to sold by 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 Companytherein; provided, however, that (a) any distribution of such -------- ------- Registrable Securities pursu-ant to such registration shall be managed by the investment banking firm, if any, managing the distribution number of the securities being offered by the Company on the same terms as all other securities to be registered, and (b) the Company Restricted Shares shall not be required reduced if any shares are to be included in such underwriting for the account of any person other than the Company or requesting holders of Restricted Shares. Notwithstanding the foregoing provisions, the Company may withdraw any registration statement referred to in this Section 4.01 without thereby incurring any liability to the holders of Restricted Shares. There shall be no limit to the number of registrations of Restricted Shares which may be effected 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 taxes4.01. (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for herein.

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. (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for herein.

Piggy-Back. Registrations. ---------------------------Rights. (a) If at any time the Company shall determine proposes to register any of its Common Stock Shares, any other equity securities or securities convertible into or exchangeable for its equity securities under the Securities Act, whether or not for sale for its own account, in connection with a manner that would permit registration of Registrable Securities for sale for cash to the 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 planAct, 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 proposal at least thirty (30) days before the anticipated filing date, 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. (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the PenaltyShareholder. In the event that the Company elects to pay the Penalty through shares of common stock file a "universal shelf" registration statement which registers any of the Companyclasses of securities referred to in the first sentence of this Section 2.02(a), then the Company shall take such shares steps as would permit the shelf registration statement to be used to permit secondary sales by the Shareholders and shall give written notice of any proposal to make an offering off the shelf registration statement of any class of securities referred to in the first sentence of this Section 2.02(a) at least ten (10) days before, and, if practicable, up to thirty (30) days before, the anticipated offering date, to each Shareholder. Such notices, as applicable, shall specify at a minimum the intended method of distribution of such Common Shares or other securities, the number of Common Shares or other securities proposed to be registered or offered, the proposed filing date of such registration statement or offering date in the case of a shelf takedown, any proposed means of distribution of such Common Shares or other securities and the proposed managing underwriter, if any. Subject to Section 2.03, upon the written request of a Shareholder (the "PIGGYBACK REQUEST"), given within fifteen (15) days after the transmittal of any such written notice by email or facsimile confirmed by mail (which request shall specify the Registrable Securities intended to be disposed of by such Shareholder), the Company will include in the registration statement with respect to such Public Offering, or any prospectus supplement in the case of a shelf takedown, the number of the Registrable Securities referred to in such Shareholder's request; provided, that, any participation in such Public Offering by such Shareholder shall be included on substantially the same terms as the Company's participation therein; and provided, further, that the number of Registrable Securities as provided for hereinto be included in any such Public Offering shall not exceed the Maximum Number. (b) Any such Shareholder shall have the right to withdraw a request to include Registrable Securities in any Public Offering pursuant to Section 2.02(a), without any liability of such Shareholder by giving written notice to the Company of its election to withdraw such request at any time prior to the proposed effective date of such registration statement. (c) The Company shall not be required to effect any registration of Registrable Securities under Section 2.02(a) incidental to the registration of any equity securities on a Form S-8 or Form S-4 (or any successor forms). (d) No registration of Registrable Securities effected under Section 2.02(a) shall relieve the Company of its obligation to effect a registration of Registrable Securities pursuant to Section 2.01(a).

Piggy-Back. RegistrationsRights. --------------------------- (a) If at any time the Company shall determine to register any registers shares of its Common Stock under the Securities ActAct on a registration statement on Form S-1, whether Form S-2 or Form S-3 (or an equivalent general registration form then in connection with effect) for purposes of a firm-commitment, underwritten public offering by the Company, a public offering by shareholders, or both, including, without limitation, by means of any shelf registration Common Stock (other than issuances pursuant to Rule 415 under the Securities Act any employee benefit plan or agreement, an exercise of Warrants or other rights to acquire Common Stock or any merger, amalgamation, recapitalization, exchange offer or other similar rule or regulation, but transaction and other than a registration pursuant to implement an employee benefit or dividend reinvestment planSection 6.2), the Company shall promptly give prompt written notice thereof of such offering to each Shareholder who holds of record Registrable Securities. Subject to Section 6.3, upon the written request of any such Shareholder, given within 10 days after the transmittal of any such written notice (which request shall specify the Registrable Securities intended to be disposed of by such Shareholder), the Company will use its best efforts to include in such Registered Public Offering any or all of the Registrable Securities then owned by such Shareholder (and so specified in such request) to the Purchaser who shall be a registered holder of Registrable Securities and shall use its reasonable efforts extent necessary to effect permit the registration under the Securities Act sale or other disposition of such Registrable Securities as may be requested by such Shareholder (each, also a "Seller"), provided that any participation in a writing delivered to the Company within 30 days after such notice offering by the Purchaser as well as to include such Registrable Securities in any notifications, registrations or qualifications under any state securities laws which each Seller 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 substantially the same terms as all other securities the Company's participation therein (to the extent the Company participates therein), and provided, further, that the number of Registrable Securities to be registeredincluded in any such Registered Public Offering, together with any other shares of Common Stock that the Company wishes to be included for its own or any other Person's account, shall not exceed the Maximum Number, and (b) shares of Common Stock shall be allocated to give effect to this proviso as provided in Section 6.6. Any Seller shall have the Company shall not be required under this Section 3 right to withdraw a request 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 Registered Public Offering pursuant to this Section 3 (including, without limitation, registration fees and fees and disbursements of the Company's counsel) shall be borne 6.5 by the Company, except that giving written notice to the Company shall not bear underwrit-ing discounts or commissions attributable of its election to Registrable Securitieswithdraw such request, the fees of any separate counsel for the holders of Registrable Securities or related transfer taxes. (b) In the event but only if the Company does not register receives notice of such withdrawal at least 15 days before it proposes to price the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty")offering. The holders of the Registrable Securities shall be entitled Company may terminate or abandon any proposed Registered Public Offering that is not effected in response to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid a Demand Request at any time and for any reason in cash and/or common stock, at the its sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for hereindiscretion.

Piggy-Back. RegistrationsRegistration. --------------------------- (a) If at any time within the period commencing with the Effective Date and ending on the third anniversary thereof, at which time any Shares have not previously been registered under the Securities Act, the Company shall determine proposes to register any of its Common Stock equity securities under the Securities Act, whether or not for sale for its own account, in connection with a manner that would permit registration of the Shares for sale to the 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 regulationAct, but other than a registration to implement an employee benefit or dividend reinvestment planit will, the Company shall promptly each such time, give prompt written notice thereof to the Purchaser who Noteholder of its intention to do so, which notice shall be a registered holder set forth the intended method 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 disposition of the securities proposed to be registered by the Company or others that the inclusion of Registrable Securities Company. The notice shall offer to include in such offering would substantially interfere with registration such number of shares of the orderly sale Shares which have not previously been registered as Noteholder may request. The Noteholder shall advise the Company in writing within twenty (20) days after the date of receipt of such securities offer from the Company, setting forth the number of Shares, if any, for which registration is requested. The Company shall thereupon include in such registration the Company or others propose number of Shares for which registration is so requested and shall use its best efforts to registereffect registration under the Securities Act of such Shares, to the extent required to permit their public sale by the Noteholder; provided, howeverthat if, that in making at any determination under this subparagraph (b) as time after giving written notice of its intention to register any of its equity securities and prior to the inclusion Registration Date of the Registrable Securities registration statement filed in any such offeringconnection therewith, 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 determine for any reason not bear underwrit-ing discounts or commissions attributable to Registrable Securitiesregister any such equity securities, the fees Company shall give written notice of such determination and, thereupon, shall be relieved of its obligation to register any separate counsel for the holders of Registrable Securities or related transfer taxes. (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities Shares in connection with such registration (but not of its obligation to pay the registration expenses set forth in Section 6 hereof that then have been incurred in connection therewith). Each Noteholder shall be entitled to receive an amount equal make no more than one (1) Piggyback Registration Request, provided that if, with respect to 10% such Piggyback Registration Request, a Noteholder's Shares are not included in the offering (due to a withdrawal of such request by the Noteholder, the application of the amount originally paid to acquire the Registrable Securities "cut-back" provisions set forth in connection with the Purchase Agreement among the parties (the "Penalty"Section 4 herein or otherwise). The holders of the Registrable Securities , such Piggyback Registration Request shall be entitled deemed to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have not been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then given by such shares shall be included as Registrable Securities as provided for hereinholder.

Piggy-Back. Registrations. --------------------------- (a) REGISTRATION If the Company at any time the Company shall determine proposes to register any shares of its Common Stock under the Securities Act on a form and in a manner that would permit registration of Warrant Shares for sale to the public under the Securities Act, whether it will each such time give prompt written notice to AT&T of its intention to do so, describing such securities and specifying the form and manner and the other relevant facts involved in connection with a public offering by the Company, a public offering by shareholders, or both, such proposed registration (including, without limitation, by means whether or not such registration will be in connection with an underwritten offering of any shelf registration its Common Stock and, if so, the identity of the managing underwriter and whether such offering will be pursuant to Rule 415 a "best efforts" or "firm commitment" underwriting). Upon the written request of AT&T delivered to the Company within 20 days after such notice shall have been given (which request shall specify the number of Registrable Shares, excluding any Warrant Shares not yet exercisable under the Securities Act or any similar rule or regulationWarrant, but other than a registration intended to implement an employee benefit or dividend reinvestment planbe disposed of and the intended method of disposition), the Company shall promptly give written notice thereof to the Purchaser who shall be a registered holder of Registrable Securities and shall will use its reasonable best efforts to effect the registration under the Securities Act Act, as expeditiously as is reasonable, of such all Registrable Securities as may be Shares that the Company has been so requested in a writing delivered to register, to the Company within 30 days after such notice extent requisite to permit the disposition (in accordance with the intended methods thereof) of the Registrable Shares so to be registered under the procedures set forth in this Section 6; PROVIDED, that if the registration so proposed 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 Company involved an underwritten offering of the securities being offered by so to be registered, the Company shall use its best efforts to cause the managing underwriter to permit the Registrable Shares requested to be registered to be included on the same terms and conditions as all the other securities to be registeredshares in the offering; PROVIDED, and (b) HOWEVER, that if the managing underwriter of such underwritten offering selected by the Company shall not be required under this Section 3 to include Registrable Securities advise the Company in any registration writing that, in its judgment, the number of securities if proposed to be included in such offering by the Company (the "Company Securities") and the number of shares of Registrable Shares proposed to be included in such offering should be limited due to marketing conditions, then the Company will promptly advise AT&T and may require, by written notice to AT&T, that, to the extent necessary to meet such limitation, Registrable Shares be excluded from such offering until after the completion of the distribution of such securities by such underwriters; and PROVIDED, FURTHER, that the Company shall have been advised by the investment banking firm managing the offering right to postpone or withdraw any registration without obligation to AT&T. For purposes of this Agreement, "Registrable Securities" means 2/3 of the securities proposed Warrant Shares issuable upon exercise of the Warrants, taking into account any adjustments, less any Warrant Shares that have been sold to be registered by the public pursuant to a registration statement or Rule 144 under the Securities Act or, in the opinion of counsel to 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 reasonably satisfactory to the inclusion of the Registrable Securities in Holder, 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 Warrant Shares 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. (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stocksold by such Holder under Rule 144(k) under the Securities Act. Notwithstanding the foregoing, at the sole option of the Company. If the Penalty is paid in common stockif an Acceleration Event occurs, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as "Registrable Securities as provided for hereinShares" means all Warrant Shares.

Piggy-Back. Registrations. ---------------------------REGISTRATIONS. (a) If at any time after the Company Closing Date, NetScout shall determine to register any for its own account or the account 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 others under the Securities Act or any similar rule or regulation, but of the Common Stock (other than a registration (1) on Form S-8 or Form S-4 or their then equivalents relating to implement an shares of Common Stock to be issued solely in connection with any acquisition of any entity or business or issuable in connection with stock option or other employee benefit or dividend reinvestment planplans and (2) the Holder Registration Statement), the Company NetScout shall promptly give send to each Holder written notice thereof to the Purchaser who of such determination. If, within 10 days after NetScout sends such notice, a Holder shall be a registered holder of Registrable Securities and so request in writing, NetScout shall use its all reasonable efforts to effect the registration under the Securities Act of such Registrable Securities as may be requested include 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 statement all or any part of the securities being offered by the Company on the same terms as all other securities Registrable Shares such Holder requests to be registered; PROVIDED, and (b) HOWEVER, that NetScout shall have the Company shall not be required under this Section 3 right to include Registrable Securities in postpone or withdraw 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 effected pursuant to this Section 3 (including, 2.1 at any time 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 obligation or commissions attributable liability to Registrable Securities, the fees of any separate counsel for the holders of Registrable Securities or related transfer taxesHolder. (b) In connection with any offering under this Section 2.1 involving an underwriting, NetScout shall not be required to include any Registrable Shares in such underwriting unless the event holders thereof accept the Company does not register terms of the Registrable Securities underwriting as provided agreed upon between NetScout and the underwriters selected by it; PROVIDED, HOWEVER, that if, in 3-(a) above and/or through connection with any offering involving an underwriting of Common Stock to be issued by NetScout, the managing underwriter shall impose a Registration Statement covering limitation on the Registrable Securities by December 1number of shares of such Common Stock which may be included in the registration statement because, 1999in its reasonable judgment, the inclusion of such shares would be prejudicial to the public offering, including price, then the Company agrees that the holders NetScout shall be obligated to include in such registration statement only such limited portion (if any) of the Registrable Securities Shares with respect to which the Holders have requested inclusion hereunder and the managing underwriter shall approve. The Holders agree and acknowledge that the Registrable Shares held by the Holders shall be the first shares excluded from such registration, and that, for the avoidance of doubt, the Existing Rightsholders shall have senior rights to the Holders with respect to any such piggyback registration. NetScout shall so advise all holders of Registrable Shares requesting registration, and the number of shares that are entitled to receive an amount equal be included in the registration. Any exclusion of Registrable Shares held by the Holders shall be made pro rata among the Holders seeking to 10% include such shares in the registration statement, in proportion to the number of Registrable Shares owned by the Holders. The obligations of NetScout under this Section 2.1 may be waived at any time by the written consent of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties Holders who hold at least eighty (the "Penalty"). The holders 80%) of the total number of Registrable Securities shall be entitled to receive Shares held by the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for hereinHolders.

Piggy-Back. Registrations. --------------------------- (a) ---------------------------- If at any time after the Effective Date 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 Required Registration or a registration to implement an employee benefit or dividend reinvestment planplan or effect a business combination, the Company shall promptly give written notice thereof to the Purchaser who shall be a registered holder holders 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 such holders 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 pursuant 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 3(b) 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 (bSection 3(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. (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for herein.

Piggy-Back. Registrations. ---------------------------Rights. (a) If at any time the Company shall determine proposes to register any of its Common Stock Shares, any other equity securities or securities convertible into or exchangeable for its equity securities under the Securities Act, whether or not for sale for its own account, in connection with a manner that would permit registration of Registrable Securities for sale for cash to the 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 planAct, 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 proposal at least thirty (30) days before the anticipated filing date, 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. (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the PenaltyShareholder. In the event that the Company elects to pay the Penalty through shares of common stock file a "universal shelf registration statement which registers any of the Companyclasses of securities referred to in the first sentence of this Section 2.02(a), then the Company shall take such shares steps as would permit the shelf registration statement to be used to permit secondary sales by the Shareholders and shall give written notice of any proposal to make an offering off the shelf registration statement of any class of securities referred to in the first sentence of this Section 2.02(a) at least ten (10) days before, and, if practicable, up to thirty (30) days before, the anticipated offering date, to each Shareholder. Such notices, as applicable, shall specify at a minimum the intended method of distribution of such Common Shares or other securities, the number of Common Shares or other securities proposed to be registered or offered, the proposed filing date of such registration statement or offering date in the case of a shelf takedown, any proposed means of distribution of such Common Shares or other securities and the proposed managing underwriter, if any. Subject to Section 2.03, upon the written request of a Shareholder (the "PIGGYBACK REQUEST"), given within fifteen (15) days after the transmittal of any such written notice by email or facsimile confirmed by mail (which request shall specify the Registrable Securities intended to be disposed of by such Shareholder), the Company will include in the registration statement with respect to such Public Offering, or any prospectus supplement in the case of a shelf takedown, the number of the Registrable Securities referred to in such Shareholder's request; provided, that, any participation in such Public Offering by such Shareholder shall be included on substantially the same terms as the Company's participation therein; and provided, further, that the number of Registrable Securities as provided for hereinto be included in any such Public Offering shall not exceed the Maximum Number. (b) Any such Shareholder shall have the right to withdraw a request to include Registrable Securities in any Public Offering pursuant to Section 2.02(a), without any liability of such Shareholder by giving written notice to the Company of its election to withdraw such request at any time prior to the proposed effective date of such registration statement. (c) The Company shall not be required to effect any registration of Registrable Securities under Section 2.02(a) incidental to the registration of any equity securities on a Form S-8 or Form S-4 (or any successor forms). (d) No registration of Registrable Securities effected under Section 2.02(a) shall relieve the Company of its obligation to effect a registration of Registrable Securities pursuant to Section 2.01(a).

Piggy-Back. Registrations. --------------------------- (a) If at any time the Company shall determine to register any for its own account or the account of its Common Stock others under the Securities Act, whether Act (including in connection with a public Qualified Public Offering, the Initial Public Offering or a demand for registration of any stockholder of the Company other than any of the Parties) any of its equity securities, other than on Form S-8 or Form S-4 or their then equivalents relating to shares of Common Stock to be issued solely in connection with any acquisition of an entity or business or shares of Common Stock issuable in connection with stock option or other employee benefit plans, it shall send to each holder of Registrable Securities, including each holder who has the right to acquire Registrable Securities, written notice of such determination and if, within 15 days after receipt of such notice, such holder shall so request in writing, the Company shall use its best efforts to include in such registration statement all or any part of the Registrable Securities such holder requests to be registered. If, in connection with any offering involving an underwriting of Common Stock to be issued by the Company, the managing underwriter shall impose a limitation on the number of shares of such Common Stock which may be included in the registration statement because in its judgment, such limitation is necessary to affect an orderly public offering by shareholdersdistribution, 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, then the Company shall promptly give written notice thereof be obligated to include in such registration statement only such portion of 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 which such holder has requested inclusion pursuant hereto as such limitation permits after the securities being registered by the Company; provided, however, that (a) any distribution inclusion of -------- ------- Registrable Securities pursu-ant to such registration shall be managed by the investment banking firm, if any, managing the distribution all shares 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 Common Stock 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 registerfor its own account; provided, however, that as between the Company, other stockholders holding contractual registration rights and the holders of Registrable Securities, in making any determination no event shall the Registrable Securities included in such offering be limited to less than 25% of the aggregate shares offered. Any exclusion of Registrable Securities shall be made pro rata among such holders of Registrable Securities (or their assigns) seeking to include such shares, in proportion to the number of such shares sought to be included by such holders of Registrable Securities (or their assigns). No incidental right under this subparagraph (b) as Section 2.01 shall be construed to limit any registration required under Section 2.02. The obligations of the inclusion Company under this Section 2.01 may be waived at any time upon the written consent of holders of at least two-thirds in interest of the Registrable Securities in any such offering, Registrable Securities and 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. (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based expire on the average trading price fifth anniversary following the consummation of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for hereinan Initial Public Offering.

Piggy-Back. RegistrationsRegistration. --------------------------- (a) If at ------------------------------ If, but without any time obligation to do so, the Company shall determine from time to time proposes to register any of its Common Stock capital stock or other securities under the Securities Act, whether Act in connection with a the public offering of such securities for its own account or for the account of its security holders, other than Holders of Registrable Securities pursuant to Section 3.1 (a "Piggy-Back Registration Statement"), primarily for cash (other than (i) a registration relating solely to the sale of securities to participants in a Company stock plan or employee benefit plan, (ii) a registration relating solely to an SEC Rule 145 transaction or any rule adopted by the SEC in substitution thereof or in amendment thereto, or (iii) a registration on any form which does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities, the Holders of Registrable Securities shall be entitled to include all or any portion of their Registrable Securities in such registration (and related underwritten offering, if any) on the following terms and conditions: a. The Company shall give written notice of such determination to each Holder of Registrable Securities, and each such Holder shall have the right to request, by written notice given to the Company within fifteen (15) days of the date that such written notice was given by the Company to such Holder, that a specific number of Registrable Securities held by such Holder will be included in the Piggy-Back Registration Statement (and related underwritten offering, if any); b. If the Piggy-Back Registration Statement relates to an underwritten offering, the notice given to each Holder shall specify the name or names of the managing underwriter or underwriters for such offering. In addition such notice shall also specify the number of securities to be registered for the account of the Company and for the account of its shareholders (other than the Holders of Registrable Securities), if any; c. If the Piggy-Back Registration Statement relates to an underwritten offering, each Holder of Registrable Securities to be included therein must agree (x) to sell such Holder's Registrable Securities on the same basis as provided in the underwriting arrangement approved by the Company, a public offering by shareholdersand (y) to timely complete and execute all questionnaires, or bothpowers of attorney, includingindemnities, without limitationhold-back agreements, by means of any shelf registration pursuant to Rule 415 underwriting agreements and other documents required 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 terms of such Registrable Securities as may be requested in a writing delivered to the Company within 30 days after such notice underwriting arrangements or by the Purchaser as well as to include such Registrable Securities in any notifications, registrations SEC or qualifications under by any state securities laws which shall be made regulatory body; d. If the managing underwriter or obtained with respect to underwriters for the securities being registered by underwritten offering under the Company; provided, however, Piggy-Back Registration Statement determines that (a) inclusion of all or any distribution of -------- ------- Registrable Securities pursu-ant to such registration shall be managed by the investment banking firm, if any, managing the distribution portion 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 adversely affect the orderly ability of the underwriters for such offering to sell all of the securities requested to be included for sale in such offering at the best price obtainable therefor, the aggregate number of Registrable Securities that may be sold by the Holders shall be limited to such number of Registrable Securities, if any, that the managing underwriter or underwriters determine may be included therein without such adverse effect as provided below. If the number of securities which proposed to be sold in such underwritten offering exceeds the number of securities that may be sold in such offering, there shall be included in the offering, first, up to the maximum number of securities to be sold by the Company or others propose to register; providedfor its own account and second, however, that in making any determination under this subparagraph (b) as to the inclusion of balance, if any, securities to be sold for 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 account of the Company's counsel) shall be borne by stockholders (both 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 Holders of Registrable Securities or related transfer taxes. (b) In the event requested and such other stockholders of the Company does not register the Registrable Securities as provided in 3-(arequested to be included therein) above and/or through on a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders pro rata basis; e. Holders of the Registrable Securities shall be entitled have the right to receive an amount equal to 10% of the amount originally paid to acquire the withdraw their Registrable Securities in connection with from the Purchase Agreement Piggy-Back Registration Statement, but if the same relates to an underwritten offer, they may only do so during the time period and on the terms agreed upon among the parties (underwriters for such underwritten offering and the "Penalty"). The holders Holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for hereinSecurities.

Piggy-Back. RegistrationsREGISTRATION. --------------------------- (a) If at any time the Company shall determine proposes to register any of its Common Stock capital stock under the Securities Act, whether 1933 Act in connection with a the public offering of such securities for its own account or for the account of its security holders, other than Holders of Registrable Securities pursuant hereto (a "Piggy-Back Registration Statement"), except for (i) a registration relating solely to the sale of securities to participants in the Company's stock or stock option plans or employee benefit plans or (ii) a registration relating solely to a transaction for which Form S-4 may be used, then: (a) The Company shall give written notice of such determination to each Holder of Registrable Securities, and each such Holder shall have the right to request, by written notice given to the Company within 15 days of the date that such written notice was mailed by the Company to such Holder, that a specific number of Registrable Securities held by such Holder be included in the Piggy-Back Registration Statement (and related underwritten offering, if any) and the states in which such Registrable Securities are to be sold; (b) If the Piggy-Back Registration Statement relates to an underwritten offering, the notice given to each Holder shall specify the name or names of the managing underwriter or underwriters for such offering. In addition, such notice shall also specify the number of securities to be registered for the account of the Company and for the account of its shareholders (other than the Holders of Registrable Securities), if any; (c) If the Piggy-Back Registration Statement relates to an underwritten offering, each Holder of Registrable Securities to be included therein must agree (i) to sell such Holder's Registrable Securities on the same basis as provided in the underwriting arrangement approved by the Company, a public offering by shareholdersand (ii) to timely complete and execute all questionnaires, or bothpowers of attorney, includingindemnities, without limitationhold-back agreements, by means of any shelf registration pursuant to Rule 415 lock-up agreements, underwriting agreements and other documents required 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 terms of such Registrable Securities as may be requested in a writing delivered to the Company within 30 days after such notice underwriting arrangements or by the Purchaser as well as to include such Registrable Securities in any notifications, registrations SEC or qualifications under by any state securities laws which shall be made regulatory body; (d) If the managing underwriter or obtained with respect to underwriters for the securities being registered by underwritten offering under the Company; provided, however, Piggy-Back Registration Statement determines that (a) inclusion of all or any distribution of -------- ------- Registrable Securities pursu-ant to such registration shall be managed by the investment banking firm, if any, managing the distribution portion 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 materially adversely affect the orderly ability of the underwriters for such offering to sell all of the securities requested to be included for sale in such offering at the best price obtainable therefor, the aggregate number of Registrable Securities that may be sold by the Holders shall be limited to such number of Registrable Securities, if any, that the managing underwriter or underwriters determine may be included therein without such adverse effect as provided below. If the number of securities which proposed to be sold in such underwritten offering exceeds the number of securities that may be sold in such offering, there shall be included in the offering, first, up to the maximum number of securities to be sold by the Company for its own account and for the account of other stockholders (other than Holders of Registrable Securities), as they may agree among themselves, and second, as to the balance, if any, Registrable Securities requested to be included therein by the Holders thereof (pro rata as between such Holders based upon the number of Registrable Securities initially proposed to be registered by each), or others propose to registerin such other proportions as the managing underwriter or underwriters for the offering may require; provided, however, that in making any determination under this subparagraph (b) the event that the number of securities proposed to be sold in such underwritten offering exceeds the number of securities that may be sold in such offering pursuant to the terms and conditions set forth above and the Piggy-Back Registration Statement is a result of public offering by the Company of its securities for its own account, there shall be included in the offering, first, up to the maximum number of securities to be sold by the Company for its own account and second, as to the inclusion balance, if any, securities to be sold for the account of the Company's stockholders (both the Holders of Registrable Securities requested and such other stockholders of the Company requested to be included therein) on a pro rata basis; (e) Holders of Registrable Securities shall have the right to withdraw their Registrable Securities from the Piggy-Back Registration Statement, but if the same relates to an underwritten offering, they may only do so during the time period and on the terms agreed upon among the underwriters for such underwritten offering and the Holders of Registrable Securities; (f) The exercise of the registration rights of the Holders with respect to any specific underwritten offering shall be subject to a 90-day delay at the request of the managing underwriter; All piggyback registration rights of the Holders shall terminate when all of the Registrable Securities in any such offering, Registrable Securities shall Then Outstanding may 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 sold pursuant to this Section 3 (including, without limitation, registration Rule 144(k). The Holders shall pay all underwriting 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 on their Registrable Securities, as well as the fees and expenses of any separate counsel for the holders of Registrable Securities or related transfer taxestheir counsel. (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for herein.

Piggy-Back. Registrations. --------------------------- (a) If at any time the Company Borrower shall determine to register any of its Common Stock under the Securities Act, whether in connection with a public offering by the CompanyBorrower, 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 Borrower shall promptly give written notice thereof to the Purchaser Lenders who shall be a registered holder holders 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 Borrower within 30 days after such notice by the Purchaser Lenders 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 CompanyBorrower; provided, however, that (a) any distribution of -------- ------- 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 Borrower on the same terms as all other securities to be registered, and (b) the Company Borrower shall not be required under this Section 3 to include Registrable Securities in any registration of securities if the Company Borrower shall have been advised by the investment banking firm managing the offering of the securities proposed to be registered by the Company Borrower or others that the inclusion of Registrable Securities in such offering would substantially interfere with the orderly sale of such securities which the Company Borrower 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 Borrower 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 CompanyBorrower's counsel) shall be borne by the CompanyBorrower, except that the Company Borrower 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. (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for herein.

Piggy-Back. Registrations. --------------------------- (a) If at any time the Company shall determine to register any of its Common Stock or securities convertible into 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 Purchasers who shall be a registered holder holders of Registrable Securities Shares or Conversion Shares and shall use its reasonable efforts to effect the registration under the Securities Act of such Registrable Securities Conversion Shares as may be requested in a writing delivered to the Company within 30 days after such notice by the Purchaser Purchasers as well as to include such Registrable Securities Conversion Shares in any notifications, registrations or qualifications under any state securities laws which shall be made or obtained 21 with respect to the securities being registered by the Company; provided, however, that (a) any distribution of -------- ------- Registrable Securities pursu-ant Conversion Shares pursuant 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 7.3 to include Registrable Securities Conversion Shares 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 Conversion Shares 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 Conversion Shares in any such offering, Registrable Securities (i) a first priority shall be given to the registration of 1,750,000 Conversion Shares, (ii) thereafter, a second priority shall be given to all remaining Conversion Shares over any other securities as to which the Company has granted or may in the future grant registration rights that were (or will be) issued by the Company in any merger transaction or similar business combination transaction and (iii) with respect to circumstances not addressed in clauses (i) and (ii), Conversion Shares 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 Conversion Shares pursuant to this Section 3 7.3 (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 underwriting discounts or commissions attributable to Registrable SecuritiesConversion Shares, the fees of any separate counsel for the holders of Registrable Securities Conversion Shares or related transfer taxes. (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for herein.

Piggy-Back. RegistrationsREGISTRATION. --------------------------- (a) If at any time the Company shall determine to register under the Securities Act (including pursuant to a demand of any stockholder of the Company exercising registration rights) any of its Common Stock under the Securities Act, whether (except shares to be issued solely in connection with a public any acquisition of any entity or business, shares issuable solely upon exercise of stock options, or shares issuable solely pursuant to employee benefit plans), it shall send to each holder of Registrable Shares, written notice of such determination and, if within thirty (30) days after receipt of such notice, such holder shall so request in writing, the Company shall use its best efforts to include in such registration statement all or any part of the Registrable Shares that such holder requests to be registered, except that if, in connection with any offering involving an underwriting of Common Stock to be issued by the Company, the managing underwriter shall impose a limitation on the number of shares of such Common Stock included in any such registration statement because, in its judgment, such limitation is necessary to effect an orderly public offering distribution, and such limitation is imposed among all holders of Common Stock exercising their contractual incidental ("piggy back") right to include such Common Stock in the registration statement as provided below on a PRO RATA basis (according to the number of shares of Common Stock held by shareholders, or both, including, without such holders that are entitled to such "piggy-back" registration rights). In the event of any such limitation, by means the Company may include in such registration statement only (i) shares of any shelf Common Stock to be sold for the Company's account; (ii) Registrable Shares; and (iii) shares of Common Stock the holders of which are entitled to 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, agreement with the Company shall promptly give written notice thereof to approved by the Purchaser who Board of Directors; provided, that, in the case of clauses (ii) and (iii) of the preceding sentence, such inclusion shall be a registered holder of Registrable Securities and shall use its reasonable efforts to effect on the registration under PRO RATA basis hereinabove described. Notwithstanding the Securities Act of foregoing, no 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 reduction 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 for its own account. If any holder of Registrable Shares disapproves of the same terms as all other securities of such underwriting, he may elect to be registered, and (b) withdraw therefrom by written notice to the Company shall not be required under this Section 3 to include Registrable Securities in any registration of securities if and 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 taxesunderwriter. (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for herein.

Piggy-Back. RegistrationsRights. --------------------------- (a) If at any time the Company shall determine proposes to register any ------------------- shares of Common Stock for itself or any of its Common Stock under stockholders (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 "Existing -------- Holders") under the Securities Act on a Registration Statement on Form S-1, Form ------- S-2 or any similar rule Form S-3 (or regulation, but other than an equivalent general registration form then in effect) for purposes of a registration to implement an employee benefit or dividend reinvestment planPublic Offering of such shares, the Company shall promptly give written notice thereof of such proposal at least ten (10) business days before the anticipated filing date, which notice shall include the intended method of distribution of such shares, to the Purchaser who Shareholder Representative. Such notice shall specify at a minimum the number of shares of Common Stock proposed to be a registered holder registered, the proposed filing date of such Registration Statement, any proposed means of distribution of such shares and the proposed managing underwriter, if any. Subject to Section 2.6, upon the written request of any Shareholder given within five business days after the receipt of any such written notice by facsimile confirmed by mail (which request shall specify the Registrable Securities and shall intended to be disposed of by such Shareholder), the Company will use its commercially reasonable efforts to effect include in such Public Offering the Registrable Securities referred to in the Shareholder's request; provided, -------- however, that any participation in such Public Offering by any Shareholder shall ------- be on substantially the same terms as the Company's (or its other stockholders') participation therein; and provided further that the amount of Registrable -------- ------- Securities to be included in any such Public Offering shall not exceed the maximum number which the managing underwriter of such Public Offering considers in its reasonable commercial judgment to be appropriate based on market conditions and other relevant factors (the "Maximum Number"). The Shareholders -------------- shall have the right to withdraw a request to include Registrable Securities in any Public Offering pursuant to this Section 2.4 by giving written notice to the Company of its election to withdraw such request at least two (2) business days prior to the proposed effective date of such Registration Statement. In connection with any exercise of rights under this Section 2.4, the registration under the Securities Act of such the Registrable Securities as to be included therein 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 means of the securities being offered by shelf Registration Statement filed pursuant to Section 2.1, rather than a separate registration statement filed to register the Company on the same terms as all other securities shares to be registered, and (b) sold for the Company shall not be required under this Section 3 to include Registrable Securities in any registration account 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 any Existing Holders, so long as 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 rights of the Registrable Securities Shareholders to participate in the Public Offering being effected under Section 2.4 are not thereby prejudiced or impaired 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 taxesmaterial respect. (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for herein.

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 pursuant 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. (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for herein.

Piggy-Back. Registrations. --------------------------- (a) If at REGISTRATION If, but without any time obligation to do so, the Company shall determine Borrower proposes to register any of its Common Stock capital stock under the Securities Act, whether 1933 Act in connection with a the public offering of such securities for its own account or for the account of its security holders, other than Holders of Registerable Securities pursuant hereto (a "Piggy-Back Registration Statement"), (except for (i) a registration relating solely to the sale of securities to participants in the Borrower's stock plans or employee benefit plans; or (ii) a registration relating solely to an SEC Rule 145 transaction or any rule adopted by the CompanySEC in substitution thereof or in amendment thereto), 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 then: (a) The Borrower shall promptly give written notice thereof of such determination to each Holder of Registerable Securities, and each such Holder shall have the right to request, by written notice given to the Purchaser who Borrower within 15 days of the date that such written notice was mailed by the Borrower to such Holder, that a specific number of Registerable Securities held by such Holder be included in the Piggy-Back Registration Statement (and related underwritten offering, if any); (b) If the Piggy-Back Registration Statement relates to an underwritten offering, the notice given to each Holder shall specify the name or names of the managing underwriter or underwriters for such offering. In addition such notice shall also specify the number of securities to be a registered holder for the account of Registrable the Borrower and for the account of its shareholders (other than the Holders of Registerable Securities), if any; (c) If the Piggy-Back Registration Statement relates to an underwritten offering, each Holder of Registerable Securities to be included therein must agree (i) to sell such Holder's Registerable Securities on the same basis as provided in the underwriting arrangement approved by the Borrower; and shall use its reasonable efforts (ii) to effect the registration timely complete and execute all questionnaires, powers of attorney, indemnities, hold-back agreements, underwriting agreements and other documents required under the Securities Act terms of such Registrable Securities as may be requested in a writing delivered to the Company within 30 days after such notice underwriting arrangements or by the Purchaser as well as to include such Registrable Securities in any notifications, registrations SEC or qualifications under by any state securities laws which regulatory body; (d) If the managing underwriter or underwriters for the underwritten offering under the Piggy-Back Registration Statement determines that inclusion of all or any portion of the Registerable Securities in such offering would adversely affect the ability of the underwriters for such offering to sell all of the securities requested to be included for sale in such offering at the best price obtainable therefor, the aggregate number of Registerable Securities that may be sold by the Holders 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 limited to such registration shall be managed by the investment banking firmnumber of Registerable Securities, if any, that the managing underwriter or underwriters determine may be included therein without such adverse effect as provided below. If the distribution number of securities proposed to be sold in such underwritten offering exceeds the number of securities being offered by that may be sold in such offering, there shall be included in the Company on offering, first, up to the same terms as all other maximum number of securities to be registeredsold by the Borrower for its own account and for the account of other stockholders (other than Holders of Registerable Securities), as they may agree among themselves, and (b) second, as to the Company shall not balance, if any, Registerable Securities requested to be required under this Section 3 to include Registrable Securities in any registration of securities if the Company shall have been advised included therein by the investment banking firm managing Holders thereof (pro rata as between such Holders based upon the offering number of the securities Registerable Securities initially proposed to be registered by the Company each), or others that the inclusion of Registrable Securities in such other proportions as the managing underwriter or underwriters for the offering would substantially interfere with the orderly sale of such securities which the Company or others propose to registermay require; 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. (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects number of securities proposed to pay be sold in such underwritten offering exceeds the Penalty through shares number of common stock securities that may be sold in such offering pursuant to the terms and conditions set forth above and the Piggy-Back Registration Statement is a result of public offering by the CompanyBorrower of its securities for its own account, then such shares there shall be included in the offering, first, up to the maximum number of securities to be sold by the Borrower for its own account and second, as Registrable to the balance, if any, securities to be sold for the account of the Borrower's stockholders (both the Holders of Registerable Securities as provided requested and such other stockholders of the Borrower requested to be included therein) on a pro rata basis; (e) Holders of Registerable Securities shall have the right to withdraw their Registerable Securities from the Piggy-Back Registration Statement, but if the same relates to an underwritten offering, they may only do so during the time period and on the terms agreed upon among the underwriters for hereinsuch underwritten offering and the Holders of Registerable Securities.

Piggy-Back. Registrations. ---------------------------. (a) If If, at any time within three (3) years after the Effective Time of the Merger, the Company shall determine proposes or is required to register any shares of its Common Stock under the Securities ActAct (other than pursuant to Section 2.1) on a registration statement on Form S-1, Xxxx X-0 xx Form S-3, whether in connection with a public offering by or not for its own account, the Company, a public offering by shareholderson each such occasion, or both, including, without limitation, by means shall give prompt written notice of its intention to do so to the Shareholder. Upon the written request of the Shareholder made within fifteen (15) days following the receipt of any shelf registration pursuant such written notice (which request shall specify the Registrable Securities intended 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 planbe disposed of by each Holder), the Company shall promptly give written notice thereof shall, subject to the Purchaser who shall be a registered holder of Sections 2.2(b), 2.3, 2.4, 2.5 and 2.7 hereof, use its best efforts to cause all Registrable Securities and shall use its reasonable efforts requested by the Shareholder to effect the be included in such registration under the Securities Act (with the securities which the Company at the time proposes to register) to permit the sale or other disposition by the Holders of such Registrable Securities. (i) If, at any time after giving written notice of its intention to register any shares of Common Stock and prior to the effective date of the registration statement filed in connection therewith the Company shall determine for any reason not to register such shares of Common Stock, the Company shall give written notice to the Shareholder and, thereupon, shall be relieved of its obligation to register any Registrable Securities in connection with such abandoned registration. (ii) In case of a determination by the Company to delay the registration of shares of its Common Stock pursuant to this Section 2.2, the Company shall be permitted to delay the registration of Registrable Securities for the same period as the delay in registering all other equity securities to be included in such registration. (iii) The Company shall not be obligated to register any Holder's Registrable Securities pursuant to this Section 2.2 unless the sale or other disposition of such Registrable Securities as may be requested in a writing delivered is made pursuant to the Company within 30 days after such notice by the Purchaser as well as to include such Registrable Securities in any notificationssame terms, registrations or qualifications under any state securities laws which shall be made or obtained with respect conditions and method of distribution applicable to the securities being registered which the Company proposes to register. (iv) If any registration pursuant to Section 2.2 involves an underwritten offering, the Company shall have the right to select the investment bankers and underwriters or managing underwriters to administer the offering, and any Registrable Securities requested by the Company; provided, however, that (a) Shareholder to be included in any distribution of -------- ------- Registrable Securities pursu-ant to such registration shall be managed offered pursuant to an underwriting agreement with the managing underwriter so selected 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 Company. (bc) the Company shall not be required under this Section 3 to include Registrable Securities in any registration of securities if the Company The Shareholder shall have been advised by the investment banking firm managing the offering of the securities proposed right to be registered by the Company or others that the withdraw its request for inclusion of Registrable Securities in such offering would substantially interfere with the orderly sale of such securities which the Company all or others propose to register; provided, however, that in making any determination under this subparagraph (b) as to the inclusion portion 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 statement 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. (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for herein.to

Piggy-Back. Registrations. --------------------------- (a) If at any time after the Company purchase and sale, ADA-ES shall determine to register any for its own account or the account 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 others under the Securities Act or any similar rule or regulation, but (other than a registration demanded by the Purchasers pursuant to implement an Section 3.02 hereof) any of its equity securities, other than on Form S-4 or Form S-8 or their then equivalents or otherwise relating to shares of Common Stock to be issued in connection with any acquisition of any entity or business or shares of Common Stock issuable in connection with stock option or other employee benefit or dividend reinvestment planplans, it shall send to each Purchaser written notice of such determination and, if within ten (10) business days after receipt of such notice, the Company Purchaser(s) shall promptly give written notice thereof to the Purchaser who shall be a registered holder of Registrable Securities and so request in writing, ADA-ES shall use its reasonable best efforts to effect include in such registration statement all or any part of the Shares then held by such Purchaser ("Registrable Shares") and which such Purchaser requests to be registered. If, in connection with any offering involving an underwriting, the managing underwriter shall impose a limitation on the number of shares of Common Stock which may be included in the registration under the Securities Act of statement because, in its judgment, such Registrable Securities as limitation is necessary to effect an orderly public distribution, then ADA-ES shall be obligated to include in such registration statement only such limited portion (which may be requested in a writing delivered to none) of 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 Shares with respect to the securities being registered which a Purchaser has requested inclusion pursuant hereto as may reasonably be determined by the Companymanaging underwriters; provided, however, that (a) inclusion of any distribution of -------- ------- such Purchaser's Registrable Securities pursu-ant to such registration Shares shall be managed subordinate to the currently existing "piggyback" registration rights granted 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 ADA-ES. Any inclusion of Registrable Securities Shares in such offering would substantially interfere with an offering, when the orderly sale managing underwriter has so limited the number of such securities which the Company or others propose to register; provided, however, shares that may be included 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 proallocated as follows: first, pro rata among the holders of registration rights granted by ADA-rata basis with any other securities as ES prior to which the Company has granted date hereof seeking to include their shares, in proportion to the number of shares of Common Stock (whether or may not such shares are sought to be included in such offering) held by such persons; and thereafter, to each Purchaser. ADA-ES shall have the future grant registration rights. All expenses of right to withdraw any registration and offering of Registrable Securities initiated by it 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 taxes2.01. (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for herein.

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. (b) In the event the Company does not register that the Registrable Securities as provided in 3-(a) above and/or are not registered through a Registration Statement covering Piggy-Back registration, the Company will register all Registrable Securities by December 1January 31, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for herein2000.

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. (b) In the event the Company does not register the participate in "Piggy-Back" registration, all Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities will be registered by December 1September 19, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for herein.

Piggy-Back. RegistrationsRegistration. --------------------------- (a) If at The Holder shall have the right to include the Registrable Securities as part of any time registration of securities filed by the Company shall determine to register any of its Common Stock under the Securities Act, whether (other than in connection with a public offering transaction contemplated by Rule 145(a) promulgated under the Company, a public offering by shareholders, Act 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 Form S-8) and must be a registered holder of Registrable Securities and shall use its reasonable efforts to effect the registration under the Securities Act notified in writing 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 Companyfiling; provided, however, that (a) if any distribution of -------- ------- registration pursuant to this Section shall be underwritten, in whole or in part, the Company may require that the Registrable Securities pursu-ant requested for inclusion pursuant to such registration shall this Section be managed by included in the investment banking firm, if any, managing the distribution of the securities being offered by the Company underwriting on the same terms and conditions as the securities otherwise being sold through the underwriters. If in the good faith judgment of the underwriter evidenced in writing of such offering only a limited number of Registrable Securities should be included in such offering, or no such shares should be included, the holder, and all other securities selling stockholders, shall be limited to be registered, and (b) registering such proportion of their respective shares as shall equal the Company shall not be required under this Section 3 to include Registrable Securities in any registration proportion that the number of securities if the Company shall have been advised by the investment banking firm managing the offering shares of the securities proposed selling stockholders permitted to be registered by the Company or others that the inclusion of Registrable Securities underwriter 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 bears to the inclusion total number of the all shares then held by all selling stockholders desiring to participate in such offering. Those 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 are excluded from an underwritten offering of Registrable Securities pursuant to the foregoing provisions of this Section 3 (including, without limitation, registration fees and fees and disbursements of the Company's counselall other Registrable Securities) shall be borne withheld from the market by the holders thereof for a period, not to exceed one hundred eighty (180) days, which the underwriter may reasonably determine is necessary in order to effect such underwritten offering. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section prior to the effectiveness of such registration. All registration expenses incurred by the Company in complying with this Section shall be paid by the Company, except that the Company shall not bear underwrit-ing discounts or exclusive of underwriting discounts, commissions attributable to Registrable Securities, the and legal fees of any separate and expenses for counsel for the holders of Registrable Securities or related transfer taxes. (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for hereinHolder.

Piggy-Back. RegistrationsRegistration. --------------------------- (a) If the Company at any time the Company shall determine ------------------------ (other than pursuant to Section 6.03 or Section 6.05) proposes to register any of its Common Stock securities under the Securities ActAct for sale to the public, whether in connection for its own account or for the account of other security holders or both (except with a public offering respect to registration statements on Forms X-0, X-0 or another form not available for registering the Restricted Stock for sale to the public), each such time it will give written notice to all holders of outstanding Restricted Stock of its intention so to do. Upon the written request of any such holder, received by the Company within 20 days after the giving of any such notice by the Company, a public offering to register any of its Restricted Stock, the Company will use its best efforts to cause the Restricted Stock as to which registration shall have been so requested to be included in the securities to be covered by shareholdersthe registration statement proposed to be filed by the Company, all to the extent requisite to permit the sale or both, including, without limitation, other disposition by means the holder of such Restricted Stock so registered. In the event that any shelf registration pursuant to Rule 415 under the Securities Act this Section 6.04 shall be, in whole or any similar rule or regulationin part, but other than a registration to implement an employee benefit or dividend reinvestment planunderwritten public offering of Common Stock, the Company shall promptly give written notice thereof number of shares of Restricted Stock to be included in such an underwriting may be reduced (pro rata among the requesting holders based upon the number of shares of Restricted Stock owned by such holders) if and to the Purchaser who extent that the managing underwriter shall be a registered holder of Registrable Securities and shall use its reasonable efforts the opinion that such inclusion would adversely affect the marketing of the securities to effect the registration under the Securities Act of such Registrable Securities as may be requested in a writing delivered to sold by 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 Companytherein; provided, however, that (a) any distribution of such -------- ------- Registrable Securities pursu-ant to such registration shall be managed by the investment banking firm, if any, managing the distribution number of the securities being offered by the Company on the same terms as all other securities to be registered, and (b) the Company shares of Restricted Stock shall not be required reduced if any shares are to be included in such underwriting for the account of any person other than the Company or requesting holders of Restricted Stock. Notwithstanding the foregoing provisions, the Company may withdraw any registration statement referred to in this Section 6.04 without thereby incurring any liability to the holders of Restricted Stock. There shall be no limit to the number of registrations of Restricted Stock which may be effected 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 taxes6.04. (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for herein.

Piggy-Back. RegistrationsRights. --------------------------- (a) If at any time Holdings proposes to register, for its own account or for 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 account of any shelf shareholder, any Shares on a registration pursuant to Rule 415 statement on Form X-x, X-0 or F-3 (or Form X-x, X-0 or S-3) under the Securities Act or any similar rule or regulationfor purposes of a public offering of such Shares, but other than pursuant to a registration to implement an employee benefit or dividend reinvestment planDemand Request, the Company then Holdings shall promptly give prompt written notice thereof of such proposal, including the intended method of distribution of such Shares, to each Rightholder Subject to Section 1.3, upon the Purchaser who shall be written request (a registered holder “Piggy-Back Request”) of Registrable Securities and shall any Rightholder, given within fifteen (15) calendar days after the transmittal of any such written notice, Holdings will use its reasonable efforts to effect include in such public offering any or all of the registration under Registrable Shares then held by the Securities Act Rightholder Group of which such Rightholder is a member to the extent necessary to permit the sale of such Registrable Securities as may be requested in a writing delivered Shares pursuant to the Company within 30 days after intended method of distribution; provided that any participation in such notice public offering by the Purchaser as well as to include such Registrable Securities in any notifications, registrations or qualifications under any state securities laws which a Rightholder 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 substantially the same terms as all Holdings’ and each other securities shareholders’ participation therein; and provided further, that the total number of Shares 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 included in any such offeringpublic offering shall not exceed the Maximum Number, Registrable Securities and Shares shall be registered allocated to give effect to this proviso as provided in Section 1.3. Bowenvale may, on behalf of a proRightholder in accordance with Section 1.9, deliver to Holdings a Piggy-rata basis with any other securities as Back Request specifying which Rightholder has exercised its right to which require Bowenvale to deliver such Piggy-Back Request. Any Rightholder shall have the Company has granted or may right to withdraw a Piggy-Back Request by giving written notice to Holdings of its election to withdraw such request at least five (5) days prior to the proposed filing date of such registration statement. Each Piggy-Back Request by a Rightholder shall specify the members of its Rightholder Group whose Registrable Shares are to be included in the future grant registration rights. All expenses of any registration and offering the number of Registrable Securities such shares for each such member. Holdings shall be entitled to select any underwriter in a registration 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 taxes1.2. (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for herein.

Piggy-Back. RegistrationsRegistration. --------------------------- (a) If at The Holder shall have the right to include the Registrable Securities as part of any time registration of securities filed by the Company shall determine to register any of its Common Stock under the Securities Act, whether (other than in connection with a public offering transaction contemplated by Rule 145(a) promulgated under the Company, a public offering by shareholders, Act 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 Form S-8) and must be a registered holder of Registrable Securities and shall use its reasonable efforts to effect the registration under the Securities Act notified in writing 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 Companyfiling; provided, however, that (a) the Holder agrees it shall not have any distribution of -------- ------- piggy-back registration rights pursuant to this Section if the Registrable Securities pursu-ant may be sold in the United States pursuant to such registration the provisions of Rule 144. The Holder shall be managed by have five (5) business days to notify the investment banking firm, if any, managing Company in writing as to whether the distribution Company is to 36 include the Holder or not include the Holder as part 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 registerregistration; 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 if any registration and offering of Registrable Securities pursuant to this Section 3 (includingshall be underwritten, without limitationin whole or in part, registration fees the Company may require that the Registrable Securities requested for inclusion pursuant to this Section be included in the underwriting on the same terms and fees and disbursements conditions as the securities otherwise being sold through the underwriters. If in the good faith judgment of the Company's counselunderwriter evidenced in writing of such offering only a limited number of Registrable Securities should be included in such offering, or no such shares should be included, the holder, and all other selling stockholders, shall be limited to registering such proportion of their respective shares as shall equal the proportion that the number of shares of selling stockholders permitted to be registered by the underwriter in such offering bears to the total number of all shares then held by all selling stockholders desiring to participate in such offering. Those Registrable Securities which are excluded from an underwritten offering pursuant to the foregoing provisions of this Section (and all other Registrable Securities) shall be borne withheld from the market by the holders thereof for a period, not to exceed one hundred eighty (180) days, which the underwriter may reasonably determine is necessary in order to effect such underwritten offering. The Company shall have the right to terminate or withdraw any registration initiated by it under this Section prior to the effectiveness of such registration. All registration expenses incurred by the Company in complying with this Section shall be paid by the Company, except that the Company shall not bear underwrit-ing discounts or exclusive of underwriting discounts, commissions attributable to Registrable Securities, the and legal fees of any separate and expenses for counsel for the holders of Registrable Securities or related transfer taxes. (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for hereinHolder.

Piggy-Back. Registrations. ---------------------------------------------------- (a) If If, at any time time, the Company shall determine to register any of its Common Stock under securities, either for its own account or for the account of a security holder or holders exercising its registration rights (other than a registration statement filed pursuant to Section 2, or a registration relating solely to employee benefit plans, or a registration on any registration form which does not permit secondary sales, or a registration relating solely to a Commission Rule 145 transaction, or a registration that does not include substantially the same information as would be required to be included in a registration statement covering the sale of Registrable Securities, Other Registrable Securities Actor Make Systems Registrable Securities), whether the Company will: (i) promptly (and in connection with no event less than 30 days before the anticipated filing date of such registration statement) give to each Holder of Registrable Securities, Other Registrable Securities and Make Systems Registrable Securities written notice thereof, which shall include the number of shares the Company or other security holder proposes to register and, if known, the name of the Underwriter selected by the Company (if the registration is for the account of the Company) or by such other person initiating such registration and reasonably acceptable to the Company; and (ii) use all of its commercially reasonable best efforts to include in such registration all the Registrable Securities, Other Registrable Securities and Make Systems Registrable Securities specified in a public offering written request or requests made by any Holder within 30 days after the date of delivery of the written notice from the Company described in clause (i) above. (b) The right of any Holder to registration pursuant to this Section 3 shall be conditioned upon such Holder's participation, and the inclusion of such Holder's Registrable Securities, Other Registrable Securities or Make Systems Registrable Securities, in the underwriting (unless otherwise agreed by the Company, a public offering by shareholdersmajority in interest of the person(s) initiating such registration, or both, including, without limitation, by means of any shelf registration pursuant and the Underwriter). (c) All Holders proposing 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, distribute their securities through such underwriting shall (together with the Company and any other shareholders distributing their securities through such underwriting) enter into an underwriting agreement in customary form with the Underwriter. The Company shall promptly give written notice thereof use all of its commercially reasonable best efforts to cause the Purchaser who shall be a registered holder Underwriter of such proposed underwritten offering to permit the Registrable Securities, Other Registrable Securities and shall use its reasonable efforts Make Systems Registrable Securities requested to effect be included in the registration under the Securities Act of statement for such Registrable Securities as may offering to 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 included on the same terms and conditions as any similar securities of the Company included therein. (d) Notwithstanding any other provision of this Section 3, if the Underwriter advises the Company that the inclusion of Registrable Securities, Other Registrable Securities and/or Make Systems Registrable Securities in the subject registration statement would limit the number of securities originally determined to be included therein or would reduce the offering price thereof, then the Underwriter may require a limitation on the number of shares offered pursuant to such registration statement, as follows: (i) any securities of the Company held by officers and directors of the Company (other than Registrable Securities or Other Registrable Securities) shall be excluded from such registration and underwriting to the extent required by such limitation; and (ii) if a limitation on the number of shares is still required, then the number of shares available for inclusion in such registration and underwriting shall be allocated among all other Holders requesting registration in proportion, as nearly as practicable, to the respective number of shares of Common Stock they held at the time the Company gave the notice specified in Section 3(a)(i). If any Holder would thus be entitled to include more securities than such Holder requested to be registered, and (b) the Company excess shall not be required under this Section 3 to include Registrable Securities allocated among other requesting Holders pro rata in any registration of securities the manner described in the preceding sentence; provided, that, if the Company shall have been advised by registration is for the investment banking firm managing the offering account of the securities proposed Company, (x) all shares requested to be registered by the Company or others that the inclusion of Registrable Securities shall be included in such offering would substantially interfere with registration before including the orderly sale shares of any other party, and (y) any remaining shares available for inclusion in 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 registration shall be registered on a pro-rata basis with allocated as set forth in paragraphs (i) and (ii) above. (e) If any other securities as to which the Company has granted or may in the future grant registration rights. All expenses Holder 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 Other Registrable Securities, Make Systems Registrable Securities or related transfer taxesany officer or director disapproves of the terms of any such underwriting, such person may, prior to effectiveness of the registration, elect to withdraw therefrom by written notice to the Company and the Underwriter. Any securities excluded or withdrawn from such underwriting shall be withdrawn from such registration. (bf) In If the event registration is for the account of a person other than the Company does and the Underwriter has not register limited the number of Registrable Securities, Other Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the and Make Systems Registrable Securities by December 1requested to be registered under this Section 3, 1999, then the Company may include its securities for its own account in such registration if the Underwriter so agrees that and if the holders number of the Registrable Securities, Other Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the and Make Systems Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities which would otherwise have been registered. The Penalty may included in such registration and underwriting will not thereby be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for hereinlimited.

Piggy-Back. RegistrationsRegistration. --------------------------- (a) ---------------------------------------- If at any time the Company shall determine Borrower proposes to register any of its Common Stock capital stock under the Securities Act, whether 1933 Act in connection with a the public offering by of such securities for its own account or for the Companyaccount of its security holders, 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 Holders of Registrable Securities pursuant hereto (a "Piggy-Back Registration Statement"), except for (i) a registration relating solely to implement an the sale of securities to participants in Borrower's stock plans or employee benefit plans or dividend reinvestment plan(ii) a registration relating solely to an transaction for which Form S-4 may be used, the Company then: (a) Borrower shall promptly give written notice thereof of such determination to each Holder of Registrable Securities, and each such Holder shall have the Purchaser who shall be right to request, by written notice given to Borrower within fifteen (15) days of the date that such written notice was mailed by Borrower to such Holder, that a registered holder specific number of Registrable Securities held by such Holder be included in the Piggy-Back Registration Statement (and related underwritten offering, if any); (b) If the Piggy-Back Registration Statement relates to an underwritten offering, the notice given to each Holder shall use specify the name or names of the managing underwriter or underwriters for such offering. In addition, such notice shall also specify the number of securities to be registered for the account of Borrower and for the account of its reasonable efforts shareholders (other than the Holders of Registrable Securities), if any; (c) If the Piggy-Back Registration Statement relates to effect an underwritten offering, each Holder of Registrable Securities to be included therein must agree (i) to sell such Holder's Registrable Securities on the registration same basis as provided in the underwriting arrangement approved by Borrower, and (ii) to timely complete and execute all questionnaires, powers of attorney, indemnities, hold-back agreements, underwriting agreements and other documents required under the Securities Act terms of such Registrable Securities as may be requested in a writing delivered to the Company within 30 days after such notice underwriting arrangements or by the Purchaser as well as to include such Registrable Securities in any notifications, registrations SEC or qualifications under by any state securities laws which shall be made regulatory body; (d) If the managing underwriter or obtained with respect to underwriters for the securities being registered by underwritten offering under the Company; provided, however, Piggy-Back Registration Statement determines that (a) inclusion of all or any distribution of -------- ------- Registrable Securities pursu-ant to such registration shall be managed by the investment banking firm, if any, managing the distribution portion 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 materially adversely affect the orderly ability of the underwriters for such offering to sell all of the securities requested to be included for sale in such offering at the best price obtainable therefor, the aggregate number of Registrable Securities that may be sold by the Holders shall be limited to such number of Registrable Securities, if any, that the managing underwriter or underwriters determine may be included therein without such adverse effect as provided below. If the number of securities which proposed to be sold in such underwritten offering exceeds the Company number of securities that may be sold in such offering, there shall be included in the offering, first, up to the maximum number of securities to be sold by Borrower for its own account and for the account of other stockholders (other than Holders of Registrable Securities), as they may agree among themselves, and second, as to the balance, if any, Registrable Securities requested to be included therein by the Holders thereof (pro rata as between such Holders based upon the number of Registrable Securities initially proposed to be registered by each), or others propose to registerin such other proportions as the managing underwriter or underwriters for the offering may require; provided, however, that in making any determination under this subparagraph (b) the event that the number of securities proposed to be sold in such underwritten offering exceeds the number of securities that may be sold in such offering pursuant to the terms and conditions set forth above and the Piggy-Back Registration Statement is a result of public offering by Borrower of its securities for its own account, there shall be included in the offering, first, up to the maximum number of securities to be sold by Borrower for its own account and second, as to the inclusion balance, if any, securities to be sold for the account of Borrower's stockholders (both the Holders of Registrable Securities requested and such other stockholders of Borrower requested to be included therein) on a pro rata basis; provided, that the Holders shall be permitted to sell an aggregate of not less than fifteen percent (15%) of the securities to be offered in the Borrower's initial public offering to satisfy the underwriters' over-allotment option; (e) Holders of Registrable Securities shall have the right to withdraw their Registrable Securities from the Piggy-Back Registration Statement, but if the same relates to an underwritten offering, they may only do so during the time period and on the terms agreed upon among the underwriters for such underwritten offering and the Holders of Registrable Securities; (f) The exercise of the registration rights of the Holders with respect to any specific underwritten offering shall be subject to a ninety (90)-day delay at the request of the managing underwriter; and (g) All demand and piggy-back registration rights of the Holders shall terminate when all of the Registrable Securities in any such offering, Registrable Securities shall Then Outstanding may 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 sold 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 taxesRule 144(k). (b) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall be entitled to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for herein.

Piggy-Back. RegistrationsRegistration. --------------------------------------------------- (a) If at (but without any time obligation to do so) the Company shall determine proposes to register (including for this purpose a registration effected by the Company for stockholders other than the Holders) any of its Common Stock stock or other securities under the Securities Act, whether Act in connection with a the 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 such securities solely for cash (other than a registration relating solely to implement an employee benefit the sale of securities to participants in a stock plan, a registration on any form which does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities, or dividend reinvestment plana registration on Form S-4 (or any successor form) relating solely to a transaction pursuant to the SEC's Rule 145), the Company shall shall, at such time, promptly give each Holder 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 registration. Upon the Company written request of each Holder given within 30 twenty (20) days after mailing of such notice by the Purchaser as well as Company in accordance with Section 4.2, the Company shall, subject to include such the provisions of Section 2.3(b), cause to be registered under the Act all of the 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 each 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 Holder has requested to be registered, and . (b) In connection with any offering involving an underwriting of shares of the Company's capital stock, the Company shall not be required under this Section 3 2.3 to include any of the Holders' securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by it (or by other persons entitled to select the underwriters), and then only in such quantity as the underwriters determine in their sole discretion will not jeopardize the success of the offering by the Company. If the total amount of securities, including Registrable Securities Securities, requested by stockholders to be included in any registration such offering exceeds the amount of securities if to be sold (other than by the Company) that the underwriters determine in their sole discretion is compatible with the success of the offering, then the Company shall have been advised by the investment banking firm managing be required to include in the offering only that number of such securities, including Registrable Securities, which the underwriters determine in their sole discretion will not jeopardize the success 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 registeroffering; provided, however, that in making there shall first be excluded -------- ------- from such registration statement all shares of Common Stock sought to be included therein by (i) any determination under this subparagraph director, consultant, officer, or employee of the Company or any subsidiary, and (bii) as stockholders exercising any contractual or incidental registration rights subordinate and junior to the inclusion rights of the Holders of Registrable Securities. If after such shares are excluded, the underwriters shall determine in their sole discretion that the number of securities which remain to be included in the offering exceeds the amount of securities to be sold that the underwriters determine is compatible with the success of the offering, then the Registrable Securities to be included, if any, shall be apportioned pro rata among the Holders providing notice of their desire to participate in the offering according to the total amount of securities entitled to be included therein owned by each selling Holder or in such other proportions as shall mutually be agreed to by such Holders; provided, however, -------- ------- there shall first be excluded from such registration statement all shares of Common Stock sought to be included therein which are issued or issuable upon conversion of the Series D Stock; provided, further there shall next be excluded -------- ------- from such registration all shares of Common Stock sought to be included therein which are issued or issuable upon conversion of the Series C Stock; and provided, further, only after all shares of Common Stock issued or issuable upon -------- ------- conversion of the Series C Stock and Series D Stock have been excluded from such registration shall any shares of Common Stock sought to be included therein which are issued or issuable upon conversion of the Series A Stock, Series B Stock, Series E Stock or Series G Stock be excluded. For purposes of the preceding sentence concerning apportionment, for any selling Holder which is a partnership, limited liability company or corporation, the partners, retired partners, members, former members, stockholders, parent or subsidiary of such Holder, or the estates and family members of any such offeringpartners, Registrable Securities retired partners, members, former members and any trusts for the benefit of any of the foregoing persons shall be registered on deemed to be a pro-single "selling Holder," and any pro- rata basis reduction with any other securities as respect 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) such "selling Holder" shall be borne based upon the aggregate amount of shares carrying registration rights owned 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 taxesall entities and individuals included in such "selling Holder," as defined in this sentence. (bc) In the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities No incidental right under this Section 2.3 shall be entitled construed to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities in connection with the Purchase Agreement among the parties (the "Penalty"). The holders of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for limit any registration required under Section 2.2 or Section 2.4 herein.

Piggy-Back. Registrations. --------------------------- (a) Registrations If at any time prior to the expiration of the Registration Period (as defined below) the Company shall determine to register file with the SEC a registration statement relating to an offering for its own account or the account of others under the 1933 Act of 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 securities (other than a registration to implement an employee benefit or dividend reinvestment planExcluded Registration), the Company shall promptly give send to each Stockholder written notice of such determination and, if within fifteen (15) days after the effective date of such notice, the Stockholder shall so request in writing, the Company shall include in such Registration Statement all or any part of such Stockholder’s Registrable Securities the Stockholder requests to be registered, except that if, in connection with any underwritten public offering for the account of the Company, the managing underwriter(s) thereof to shall impose a limitation on the Purchaser who shall be a registered holder number of Registrable Securities and which may be included in the Registration Statement because, in such underwriter(s)’ judgment, marketing or other factors dictate such limitation is necessary to facilitate public distribution, then the Company shall use its reasonable efforts be obligated to effect include in such Registration Statement only such limited portion of 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 which the securities being registered by Stockholder has requested inclusion hereunder as the Companyunderwriter shall permit; provided, however, that (a) the Company shall not exclude any distribution of -------- ------- Registrable Securities pursu-ant unless the Company has first excluded all outstanding securities, the holders of which are not entitled by contract to inclusion of such registration securities in such Registration Statement or are not entitled to pro rata inclusion with the Registrable Securities; and that, after giving effect to the immediately preceding proviso, any exclusion of Registrable Securities shall be managed made pro rata with holders of other securities having the contractual right to include such securities in the Registration Statement other than holders of securities entitled to inclusion of their securities in such Registration Statement by reason of demand registration rights. No right to registration of Registrable Securities under this Section 2.2A shall be construed to limit any registration required under Section 2.1 or 2.2 hereof. If an offering in connection with which a Stockholder is entitled to registration under this Section 2.2A is an underwritten offering, then such Stockholder shall, unless otherwise agreed by the investment banking firmCompany, if anyoffer and sell such Registrable Securities in an underwritten offering using the same underwriter or underwriters and, managing subject to the distribution provisions of the securities being offered by the Company this Agreement, on the same terms and conditions as all other securities shares of Common Stock included in such underwritten offering. Notwithstanding anything to be registeredthe contrary set forth herein, 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 rights 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 Stockholder pursuant to this Section 3 (including, without limitation, registration fees and fees and disbursements of the Company's counsel) 2.2A shall only 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. (b) In available in the event the Company does not register the Registrable Securities as provided in 3-(a) above and/or through a fails to timely file, obtain effectiveness or maintain effectiveness of any Registration Statement covering the Registrable Securities by December 1, 1999, then the Company agrees that the holders of the Registrable Securities shall to be entitled filed pursuant to receive an amount equal to 10% of the amount originally paid to acquire the Registrable Securities Section 2(a) in connection accordance with the Purchase Agreement among the parties (the "Penalty"). The holders terms of the Registrable Securities shall be entitled to receive the Penalty on each monthly anniversary thereafter until the Registrable Securities have been registered. The Penalty may be paid in cash and/or common stock, at the sole option of the Company. If the Penalty is paid in common stock, then the price used to determine the amount of shares shall be based on the average trading price of Penn Octane Corporation common stock on the first trading day subsequent to the incurrence of the Penalty. In the event that the Company elects to pay the Penalty through shares of common stock of the Company, then such shares shall be included as Registrable Securities as provided for hereinthis Agreement.