U.S. ENERGY SYSTEMS, INC.
                    2003 CORPORATE DEVELOPMENT INCENTIVE PLAN
            Approved by the Compensation Committee on March 19, 2003



1 - Plan Objectives

The following documents an incentive plan to recognize and reward employees who
make positive contributions to U.S. Energy Systems growth and profitability
goals through corporate development, including the development, acquisition,
monetization or sale of projects, assets or investments..

This plan is designed to provide an incentive for employees to increase sales,
revenues and income by developing or acquiring projects and assets, and to
increase liquidity by monetizing or selling assets or investments. This
incentive plan is independent from and additive to other U.S. Energy Systems
compensation plans for which employees may be eligible except that employees
cannot benefit twice from the same accomplishment.


2 - Eligible Employees

This plan is primarily structured to motivate and reward those employees
involved in the corporate development activities. However, all U.S. Energy
Systems employees are eligible to participate, as there may be occasions when
engineering, legal, tax or other corporate and/or other operating unit employees
play a role in closing a deal.

Receipt of awards under the Plan shall be limited to individuals employed by the
Company on the date of awards.


3 - Plan Awards

Individual employees or a team of employees, who make positive contributions to
U.S. Energy Systems growth and profitability goals through corporate
development, including the development, acquisition, monetization or sale of
projects, assets or investments, will be eligible to receive a cash award for
their accomplishments.

3.1 For corporate development involving the development or acquisition of
projects, assets or investments, the bonus award will be calculated based on the
anticipated net present value of the after tax cash flow with consideration for
the following items among other things:

         - Certainty and risk of the transaction.
         - Other intangible attributes and benefits gained as a result of the
           transaction.
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3.2 For corporate development involving the monetization or sale of assets,
projects or investments, the bonus award will be calculated based on the
anticipated present value of the net proceeds to the Company (after repayment of
debt and transaction costs) with consideration for the following items among
other things:

         - Net cash consideration paid to the Company - Value of non-cash
         consideration - Risk associated with deferred consideration - Book
         value of asset or investment


4 - Plan Administration

The Plan will be administered by the CEO and the President. Awards under the
Plan will be made by the Compensation Committee of the Board of Directors. Award
recommendations will be made to the Compensation Committee of the Board by an
Awards Committee that will include three senior managers of the company,
including the CEO.


5 - Awards Procedures

1. The employee leading the corporate development effort will make nominations
for awards under this plan.

2. The nominations shall be sent to the Awards Committee and shall include:

         -    A memorandum describing the transaction
         -    A copy of the transaction documents
         -    A calculation of the Net Present Value or Present Value to the
              Company
         -    A financial proforma reflecting future cash flow, where
              applicable
         -    Identification of other tangible and intangible benefits
              to the Company.
         -    Identification of the employee/employees recommended for the award
              and the proposed incentive percentage for each employee

3.   The Awards Committee will make recommendations to the Compensation
     Committee of the Board, which will make the awards in accordance with this
     plan.


6 - Awards Determination

6.1 For corporate development involving the development or acquisition of
projects , assets or investments, the bonus award will be calculated based on
the anticipated Net Present Value of the after tax cash flow to the company.

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The total dollar value of the award will be 4% of the NPV of the after tax Free
Cash Flow, discounted at the risk-adjusted WACC (Weighted Average Cost of
Capital) (typically 7.5% - 9.5%) for the project, as per the proforma approved
by the Board at the time of the transaction, and incorporating all aspects of
the transaction. The WACC will be determined for each project, using CAPM
(Capital Assets Pricing Model) and Miller-Modigliani, as included in the
proforma approved by the Board.

6.2 For corporate development involving the monetization or sale of assets,
projects or investments, the bonus award will be calculated based on the
anticipated present value of the net proceeds to the Company net of debt
repayment and transaction costs, with consideration for the following items:

The total dollar value of the award will be a percentage of the anticipated
present value of the consideration, with any deferred consideration discounted
at the risk-adjusted WACC (typically 7.5% - 9.5%) for the asset or investment:

        -        2% of the net proceeds up to net book value
        -        4% of the net proceeds in excess of book value

6.3 The award will be distributed to one or more employees who were responsible
for the achievement or contributed to the success in relation to each employee's
relative contribution and considering any other compensation that the employee
may receive for the same achievement. The final allocation of the award between
the employees will be recommended by the Awards Committee and determined by the
Compensation Committee of the Board.


7 - Awards Distribution Timing

All nominations for awards will be acted upon within 30 days following submittal
to the CEO and the President.

7.1 For corporate development involving the development or acquisition of
projects or assets, the bonus award will be distributed as follow:

         -    Step 1:  50% at transaction closing

         -    Step 2: 30% at commercial operation of the new asset, project or
              asset or project underlying an investment (after plant acceptance)
              and after true up of the NPV that was used for the initial bonus,
              by taking into account the actual construction cost and other
              potential changes in the project. The second award will be the
              difference between 80% of the revised bonus and the step 1
              distributed bonus. In the case of a transaction involving assets
              or projects in commercial operation at the time of closing, Step 2
              award distribution shall be paid at closing.

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         -    Step 3: 20% after one year of operation in the case of assets or
              projects to be developed and after one year from closing in the
              case of assets or projects in operation at the time of closing,
              and after true up of the NPV that was used for the second bonus,
              by taking into account the actual operating cost and other
              potential changes in the project. The third award will be the
              difference between the new revised bonus and step 1 plus step 2
              distributed bonuses.

For projects, assets or investments with expected sales growth, the three NPV
calculations above will be done, for each step, with sales corresponding to
signed underlying contracts at that time, and not including additional, not yet
executed, contracts that were expected in the initial proforma approved by the
Board.

7.2      For corporate development involving the monetization or sale of assets
         or investments, the bonus award will be distributed as follow:

        -     Step 1:  The  percentage of the award equal to the  percentage of
the net proceeds paid at closing,  will be paid at the time of closing

        -     Step 2: The remaining portion of the award relating to the
              deferred consideration will be paid one year after closing, and
              after true up of the present value calculation that was used to
              determine the initial award. Net proceeds paid into escrow at
              closing shall be considered deferred consideration.


8 - Other Plan Features

The Company reserves the right to terminate or amend the plan to any extent and
in any manner at any time at the Company's sole discretion.

Eligibility or participation in the Plan does not imply nor constitute any type
of an employment agreement between the participant and the Company.

This 2003 Corporate Development Incentive Plan applies to projects, assets or
investments acquired, initiated, sold or monetized on or after April 1, 2003.


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