PENN OCTANE CORP
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>11
<FILENAME>0011.txt
<TEXT>

                GUARANTY WITH RECOURSE LIMITED TO PLEDGED SHARES
                ------------------------------------------------

          THIS  GUARANTY  WITH  RECOURSE  LIMITED TO PLEDGED SHARES ("Guaranty")
dated as  of  January__, 2001, is made by JEROME B. RICHTER, an adult individual
("Guarantor"),  in  favor  of PMG CAPITAL CORP. ("PMG"), as collateral agent for
the  Secured  Noteholders  (as  such  term  is  hereinafter  defined).

                                   BACKGROUND
                                   ----------

     WHEREAS, commencing in December, 1999, Penn Octane Corporation ("POCC") has
issued  promissory  notes  in  the  aggregate principal amount of $5,654,000 (as
amended  from  time  to  time,  the  "Notes")  to  certain  holders thereof (the
"Noteholders")  which  Notes were to mature on a date (the "Maturity Date") that
was the earlier to occur of December 15, 2000 or upon the receipt of proceeds by
POCC  from  certain  future debt or equity financing and, in connection with the
issuance  of  the  Notes,  POCC  has  also  issued  warrants  to the Noteholders
("Warrants") to purchase certain shares of common stock of POCC on the terms and
conditions  set  forth  therein.

     WHEREAS, POCC and certain of the Noteholders (the "Consenting Noteholders")
have entered into a certain Second Amendment - Promissory Note (the "Agreement")
pursuant  to  which,  among  other  things,  the Maturity Date of the Consenting
Noteholders'  Notes  will  be  extended,  their Warrants will be amended and new
warrants  will  be issued by POCC, and POCC will execute such documents and take
such  action  as may be necessary or appropriate on or before March 15, 2001, to
grant  and perfect a security interest in and lien on all of POCC's right, title
and  interest  in  the American Assets and the Mexican Assets (as such terms are
defined  in  the  Agreement)  for the benefit of the Consenting Noteholders; and

     WHEREAS,  Guarantor  owns  in  excess of 2,000,000 shares of the issued and
outstanding  common  stock  of  POCC  of  which  Guarantor  has agreed to pledge
2,000,000  shares  to  secure  his  obligations  under  this  Guaranty;  and

     WHEREAS,  in  order  to  induce  the  Consenting Noteholders to execute the
Agreement,  Guarantor had agreed to execute and deliver (a) this Guaranty of all
of  POCC's  now existing and hereafter arising payment obligations under (i) the
Notes  and (ii) those certain promissory notes heretofore or hereafter issued by
POCC  to  any Additional Fund Providers (as defined in Section 10 of the various
Purchase  Agreements  entered  into commencing in December, 1999, by and between
each  Consenting  Noteholder  and  POCC,  as  amended,  but  including,  without
limitation, the holders of any Additional Working Capital Debt as defined in the
Agreement)  (collectively,  the  "Additional  Notes") and (b) a Pledge Agreement
(the  "Pledge  Agreement")  in favor of PMG, as collateral agent for the Secured
Noteholders  (as defined herein) granting a security interest in and lien on the
Pledged  Shares  (as defined in the Pledge Agreement) and having determined that
the  execution  and  delivery of this Guaranty and the Pledge Agreement directly
benefit  and  are  in  the  best  interest  of  Guarantor;  and


                                 Page 75 of 106
<PAGE>
     WHEREAS, PMG has agreed to serve as the collateral agent for the holders of
the  Notes  and  the  Additional  Notes  (the  "Secured  Noteholders").

                                    COVENANTS
                                    ---------

          NOW,  THEREFORE,  in  consideration of the undertakings of the Secured
Noteholders,  and  intending to be legally bound, the Guarantor hereby agrees as
follows:

          1.     Guaranty.  Subject only to the limitations as to enforceability
                 --------
set  forth  in  paragraph 2 hereof, the Guarantor hereby irrevocably, absolutely
and  unconditionally  guarantees and become surety for the following obligations
and  liabilities  (hereinafter  collectively  referred to as the "Obligations"):

               (a)     The  prompt payment by POCC, as and when due and payable,
whether  by  acceleration  or  otherwise of any and all amounts now or hereafter
owing by POCC to the Secured Noteholders, or any of them, whether for principal,
interest,  fees, expenses or otherwise under the Notes and the Additional Notes;
and

               (b)     Any  and  all  expenses,  including  reasonable attorneys
fees,  incurred  by  the  Secured  Noteholders in enforcing their payment rights
under  the  Notes  and  the  Additional Notes and by PMG, as collateral agent on
behalf  of  the Secured Noteholders, in enforcing its rights under this Guaranty
and  the  Pledge  Agreement.

          2.     Limited  Recourse.  Notwithstanding  anything  to  the contrary
                 -----------------
contained  herein,  in  the  Pledge Agreement or otherwise, the liability of the
Guarantor  hereunder or his legal representatives, heirs, estates, successors or
assigns  shall  be  enforceable  only  out of all or such portion of the Pledged
Shares  and  the proceeds thereof against which Pledgee has not yet released its
lien  or  is not then required to release its lien pursuant to Section 12 of the
Pledge  Agreement; and there shall be no other recourse against the Guarantor or
any  other  assets  or  property of the Guarantor.  If necessary, solely for the
purposes  of  enforcing  its rights and remedies against such Pledged Shares and
the  proceeds  thereof  under  applicable  law,  PMG  may seek personal judgment
against  the  Guarantor  in  the  amount  of  the  Obligations.


                                 Page 76 of 106
<PAGE>
          3.     Obligations  Unconditional.
                 --------------------------

               (a)     The Guarantor hereby guarantees that the Obligations will
be  paid  as  and  when  due  in  accordance with the terms of the Notes and the
Additional Notes, as amended from time to time.  Except as expressly provided in
this Guaranty and the Pledge Agreement, the liability of the Guarantor hereunder
shall  be absolute and unconditional, irrespective of:  (i) any lack of validity
or  enforceability of any of the Notes, the Additional Notes or any agreement or
instrument relating thereto, including, without limitation, the lack of validity
or  enforceability  of  all  or  any  portion of the liens or security interests
granted  thereby; (ii) any change in the time, manner or place of payment of, or
in  any  other  term  in respect of, all or any of the Obligations, or any other
amendment  or  waiver of or consent to any departure from the terms of the Notes
or  the Additional Notes; (iii) any exchange or release of, or non-perfection of
any lien on or security interest in, any collateral, or any release or amendment
or  waiver  of  or consent to any departure from the terms of any other guaranty
for all or any of the Obligations; (iv) the bankruptcy or insolvency of POCC; or
(v)  any other circumstance which might otherwise constitute a defense available
to,  or  a  discharge  of,  the  Guarantor  or any other guarantor or obligor in
respect  of  the  Obligations  or  the  Guarantors  in  respect  hereof.

               (b)     This  Guaranty is a continuing guarantee and shall remain
in  full  force  and  effect unless and until the Pledge Agreement is terminated
pursuant to Section 12 thereof; otherwise this Guaranty and the Pledge Agreement
shall  remain  in  full  force  and  effect.

               (c)     Subject  to  the  provisions  of Section 12 of the Pledge
Agreement,  this Guaranty shall continue to be effective or shall be reinstated,
as  the  case  may  be,  if at any time any payment of any of the Obligations is
rescinded,  avoided  or  rendered void as a preferential transfer, impermissible
set-off, fraudulent conveyance or must otherwise be returned or disgorged by PMG
or  the Secured Noteholders upon the insolvency, bankruptcy or reorganization of
either  PMG or the Guarantor or otherwise, all as though such rescinded, avoided
or  voided  payment had not been made, and notwithstanding any action or failure
to  act  on  the  part  of  PMG  in  reliance  on  such  payment.

          4.     Waivers.  The  Guarantor  hereby  waives  (i)  promptness  and
                 -------
diligence; (ii) notice of the incurrence of any Obligation by POCC; (iii) notice
of  any  actions  taken by PMG or POCC under the Notes or any other agreement or
instrument  relating  thereto;  (iv)  acceptance  of  this Guaranty and reliance
thereon  by  PMG;  (v)  presentment,  demand  of  payment, notice of dishonor or
nonpayment,  protest  and notice of protest with respect to the Obligations, and
all  other  formalities  of every kind in connection with the enforcement of the
Obligations  or  of  the  obligations of the Guarantor hereunder or of any other
guarantor,  the  omission  of  or delay in which, but for the provisions of this
Section  4,  might  constitute  grounds  for  relieving  the  Guarantor  of  his
obligations  hereunder;  and  (vi)  any  requirement  that  PMG protect, secure,
perfect or insure any security interest or lien or any property subject thereto.


                                 Page 77 of 106
<PAGE>
          5.     Subrogation  and  Similar Rights.  For so long as the Notes and
                 --------------------------------
the  Additional  Notes  remain  unpaid,  the  Guarantor  waives  any  right  of
subrogation  to the claims of PMG against POCC, and any right of indemnification
by  or  contribution  from  POCC,  arising  by reason of any payment made by the
Guarantor  hereunder  or otherwise.  If, notwithstanding such waiver, any amount
shall  be  paid to the Guarantor on account of such subrogation, indemnification
or contribution at any time when all of the Obligations shall not have been paid
in  full,  such amount shall be segregated from the other funds of the Guarantor
and shall forthwith be paid over to PMG to be applied in whole or in part by PMG
against  the  Obligations,  whether matured or unmatured, in accordance with the
terms  of  the  Notes.

          6.     Representations  and  Warranties.  The Guarantor represents and
                 --------------------------------
warrants  to  PMG  that:

               (a)     The  Guarantor  is sui juris and of full capacity to make
                                          ---------
and  perform  this  Guaranty;

               (b)     This Guaranty has been duly executed and delivered by the
Guarantor;  such  execution and delivery and the performance by the Guarantor of
the  Guarantor's  obligations hereunder will not violate any material applicable
provision  of law or judgment, order or regulation of any court or of any public
or  governmental  agency or authority nor conflict with or constitute a material
breach of or a material default under any instrument to which the Guarantor is a
party or by which the Guarantor or any of the Guarantor's property is bound; and
this  Guaranty  is  a  legal,  valid  and  binding  obligation  of the Guarantor
enforceable  in  accordance with its terms (except as such enforceability may be
limited,  in  the  future,  by  any  bankruptcy  or  insolvency  proceeding  of
Guarantor);

               (c)     There  is  no  litigation,  proceeding  or  investigation
pending or, to the knowledge of the Guarantor, threatened against the Guarantor,
the  adverse  result  of  which  might,  in  any  material  respect,  affect the
performance  by  the  Guarantor  of  the  Guarantor's  obligations  hereunder;

               (d)     To  the  knowledge  of Guarantor, the Guarantor has filed
all  material  federal, state and local tax returns required to be filed (or has
obtained  valid extensions of the dates on which such returns are required to be
filed)  and  has  paid  all  taxes  as  shown  on  the  said  returns to be due.

          7.     Notices.  Every  notice  and  communication under this Guaranty
                 -------
shall  be  in  writing  and shall be given in the manner specified in the Pledge
Agreement  for  giving  notices.


                                 Page 78 of 106
<PAGE>
          8.     Miscellaneous.
                 -------------

               (a)     This  Guaranty,  together  with  the  Pledge  Agreement,
contains  the entire agreement of the parties hereto with respect to the subject
matter  hereof.  No  amendment  of  any provision of this Guaranty or the Pledge
Agreement shall be effective unless it is in writing and signed by the Guarantor
and  PMG,  as collateral agent for the Secured Noteholders, and no waiver of any
provision  of this Guaranty or the Pledge Agreement, and no waiver or consent to
any  departure  by  the  Guarantor therefrom, shall be effective unless it is in
writing  and signed by PMG, as collateral agent for the Secured Noteholders, and
then such waiver or consent shall be effective only in the specific instance and
for  the  specific  purpose  for  which  given.

               (b)     No  failure  on the part of PMG to exercise, and no delay
in  exercising, any right hereunder or under any other document or instrument or
any  right  against  any  other  guarantor of the Obligations shall operate as a
waiver  hereof or thereof; nor shall any single or partial exercise of any right
preclude  any  other  or  further  exercise thereof or the exercise of any other
right.  The  rights  and  remedies  of  PMG, as collateral agent for the Secured
Noteholders,  provided  herein and in the other documents are cumulative and are
in  addition  to,  and not exclusive of, any rights or remedies provided by law.

               (c)     Any  provision  of  this  Guaranty which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to  the  extent of such prohibition or unenforceability, and such prohibition or
unenforceability  shall  not  invalidate  such provision to the extent it is not
prohibited  or  unenforceable  in  any  other  jurisdiction,  nor invalidate the
remaining  provisions hereof, all of which shall be liberally construed in favor
of  PMG  in  order  to  effect  the  provisions  hereof.

               (d)     The  obligations  of the Guarantor hereunder shall not be
subject to any counterclaim, setoff, deduction or defense based upon any related
or  unrelated  claim which the Guarantor may now or hereafter have against POCC,
PMG  or  the  Secured  Noteholders,  except  payment  of  the  Obligations.

               (e)     This  Guaranty  shall (i) be binding on the Guarantor and
his  heirs,  executors, administrators, successors, transferees and assigns, and
(ii)  inure,  together  with all rights and remedies of PMG, as collateral agent
for  the  Secured  Noteholders,  hereunder, to the benefit of PMG, as collateral
agent  for the Secured Noteholders, and their respective successors, transferees
and  assigns.

               (f)     This  Guaranty shall terminate on the earlier to occur of
(i)  payment in full of all of the Obligations, or (ii) Pledgee's release of its
lien  on  all  of  the  Pledged  Shares  pursuant  to  Section  12 of the Pledge
Agreement.


                                 Page 79 of 106
<PAGE>
               (g)     This  Guaranty  shall  be  governed  by  and construed in
accordance  with  the  internal  laws,  and  not  the  law  of conflicts, of the
Commonwealth  of  Pennsylvania.

               (h)     The  Guarantor  agrees  that  any  action  or  proceeding
against  him  to  enforce,  or arising out of, this Guaranty may be commenced in
state  or  federal  court  in  any county in the Commonwealth of Pennsylvania in
which  PMG has an office, or in any other location where the Guarantor or any of
the  Guarantor's  property is located, and the Guarantor waives personal service
of  process  and  agrees  that  a  summons and complaint commencing an action or
proceeding  in any such court shall be properly served and shall confer personal
jurisdiction  if  served  by registered or certified mail in accordance with the
notice  provisions  of  the  Pledge  Agreement.

               (i)     The  paragraph  headings  used herein are for convenience
only  and  do  not  affect  or  modify  the  terms  and  conditions  hereof.

          12.     Judicial  Proceedings.  Any  suit,  action,  or  proceeding,
                  ---------------------
whether claim or counterclaim, brought or instituted by the Guarantor or PMG, or
any  of  their successors or assigns, on or with respect to this Guaranty or the
dealings  of the Guarantor or PMG with respect hereto, shall be tried  only by a
court  and  not  by  a  jury.  THE  GUARANTOR  HEREBY KNOWINGLY, VOLUNTARILY AND
INTENTIONALLY  WAIVES  ANY RIGHT TO A  TRIAL BY JURY IN ANY SUCH SUIT, ACTION OR
PROCEEDING.  Further,  the  Guarantor  waives  any right he may have to claim or
recover,  in  any  such  suit,  action  or  proceeding,  any special, exemplary,
punitive or consequential damages or any damages other than, or  in addition to,
actual  damages.  THE GUARANTOR ACKNOWLEDGES AND AGREES THAT THIS PARAGRAPH IS A
SPECIFIC  AND MATERIAL ASPECT OF THIS AGREEMENT AND THAT THE SECURED NOTEHOLDERS
WOULD  NOT  HAVE  EXTENDED  CREDIT  TO  POCC  IF  THE  WAIVERS SET FORTH IN THIS
PARAGRAPH  WERE  NOT  A  PART  OF  THIS  AGREEMENT.

          IN  WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed  as  of  the  date  first  above  written.

WITNESS:

______________________________                 _________________________________
Name:                                          JEROME  B.  RICHTER

                                               Address:     ____________________
                                                            ____________________
                                               Telecopier  No.:  _______________


                                 Page 80 of 106
<PAGE>
</TEXT>
</DOCUMENT>
