AMENDMENT NO. 2 TO INDEMNIFICATION AGREEMENT


                  THIS AMENDMENT NO. 2 to the Indemnification Agreement is made
as of the   1st day of November, 2002 (as supplemented or modified from time to
time, this "Agreement") by and among AJG Financial Services, Inc., by its Vice
President, General Counsel, as agent (the "Major Shareholder Agent") for Bernard
J. Zahren, Finova Mezzanine Capital Corp., AJG Financial Services, Inc., ("AJG")
Environmental Opportunities Fund (for itself and as successor to) Environmental
Opportunities Fund Cayman, Fredric Rose, M&R Associates, Martin F. Laughlin,
Richard J. Augustine  and  Michael J. Carolan (each, an "Initial Major
Shareholder"), Stephen Rosenberg, Zahren Alternative Power Corporation, a
Delaware  corporation ("ZAPCO "), U.S. Energy Systems, Inc., a  Delaware
corporation ("USE"), and Cinergy Energy Solutions, Inc., a Delaware corporation
("CES").  Unless indicated otherwise, capitalized terms shall have the same
meanings herein as they have in the Indemnification Agreement (as defined
below).

                              W I T N E S S E T H:

                  WHEREAS, the parties hereto, the Initial Major Shareholders
and USE Acquisition Corp, which was merged into ZAPCO, have previously entered
into that certain Indemnification Agreement dated as of November 28, 2000 (as
amended by Amendment No. 1 dated as of May 11, 2001, the "Indemnification
Agreement");

                  WHEREAS, the parties hereto now wish to amend the
Indemnification Agreement:

                  NOW, THEREFORE, in consideration of $10.00 and other
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

            1.        Section 4(a)(i) of the Indemnification Agreement is hereby
                      amended by deleting the existing section in its entirety
                      and inserting in its place the following section:

                    i. unless a Notice of Claim (as defined herein) has been
         delivered to the Major Shareholders, on or prior to the date which is
         twenty one months after the Closing Date provided that notwithstanding
         anything to the contrary in this Section 4(a)(i) Notices of Claim
         arising from or relating to breaches of Section 3.10, 3.17 and 3.20 of
         the Merger Agreement may be delivered prior to the sixth anniversary of
         the Closing Date;

            2.        Clause (i) in Section 4(a) of the Indemnification
                      Agreement following "The ZAPCO Indemnitees shall not be
                      entitled to recover under Section 3(b):" is hereby amended
                      by deleting the existing clause in its entirety and
                      inserting in its place the following clause:

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                    i. unless a Notice of Claim (as defined herein) has been
         delivered to the Beneficiaries, on or prior to the date which is twenty
         one months after the Closing Date except that Notices of Claim arising
         from or relating to the breaches of Sections 4.09, 4.15 and 4.18 of the
         Merger Agreement may be delivered prior to the sixth anniversary of the
         Closing Date;

3.                    Except as amended hereby, the Indemnification Agreement is
                      hereby ratified and confirmed and, as so amended, remains
                      in full force and effect on the date hereof.

                  IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be Executed as of the date first written above.

                                      U.S. ENERGY BIOGAS CORPORATION

                                      By: /s/Frank Fitzgerald
                                             ----------------
                                      Name:  Frank Fitzgerald
                                      Title: Treasurer

                                       MAJOR SHAREHOLDER AGENT:


                                      By: /s/ John C. Rosengren
                                              -------------------
                                         Name:  John C. Rosengren
                                         Title: Vice President &
                                                General Counsel for
                                                AJG Financial Services, Inc.


                                      CINERGY ENERGY SOLUTIONS, INC.:


                                      By: /s/  Donna Robichaud
                                               ---------------
                                         Name: Donna Robichaud
                                         Title:Vice President


                                      U.S. ENERGY SYSTEMS, INC.:

                                      By: /s/   Goran Mornhed
                                              -------------------------
                                          Name: Goran Mornhed
                                         Title: Chief Executive Officer