U.S. ENERGY SYSTEMS, INC.
                           2000 EXECUTIVE BONUS PLAN


SECTION 1. Purpose.

The purpose of this Plan is to establish a program of incentive compensation for
designated  executive  officers  and  key  employees  of  the  Company  and  its
subsidiaries  that is  directly  related  to the  achievement  of goals  for the
Company.

SECTION 2. Definitions.

As used in this Plan, the following capitalized terms shall have the following
meanings:
a.       "Acquisition" shall mean the acquisition of an  Eligible  New  Business
          operations by the Company, whether by stock  or asset purchase, merger
          or any other means.

b.       "Acquisition Multiple" shall mean, with respect to any Acquisition, the
         quotient  of (i) the  purchase  price  paid  in  connection  with  such
         Acquisition over (ii) the Adjusted EBITDA of the acquired  business for
         the 12-month  period  ending on the last day of the acquired  company's
         most recently  completed  fiscal quarter ended prior to the date of the
         execution of the definitive agreement relating to such Acquisition.

c.       "Adjusted  EBITDA" for any Plan Year or other  referenced  period shall
         mean the operating  income for each  respective  Eligible New Business,
         for such Plan Year or other  referenced  period,  as  reflected  on its
         consolidated  audited  financial  statements,  adjusted  to exclude the
         impact of:

         1.       depreciation and amortization expenses;

         2.       any  amounts  accrued  pursuant  to  management  bonus plans
                  including, but not limited

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                  to, this  Plan, and  related  employer  payroll  taxes for the
                  applicable period;

         3.       any  discretionary or matching  contributions to the Company's
                  401 (k) Plan and  other  deferred  compensation  plans for the
                  applicable period;

         4.       all  items  of gain, loss  or  expense determined  to  be
                  extraordinary or unusual in nature or infrequent in occurrence
                  or  related  to  the  disposal of  a segment of  a business or
                  related  to  a  change in accounting  principles, all  as
                  determined in accordance with standards established by opinion
                  No. 30 of the Accounting  Principles Board (APB Opinion No.
                  30);

         5.       all items of gain,  loss or expense  related to  restructuring
                  charges of subsidiaries  whose  operations are not included in
                  operating income for the applicable period;

         6.       all items of gain,  loss or expense  related  to  discontinued
                  operations  that do not  qualify as a segment of a business as
                  defined under APB Opinion No. 30;

         7.       the  reduction  in  carrying  value  of long-lived assets, in
                  accordance with FASB Pronouncement No. 121; and

         8.       all  items  of  expense  related to equity-based compensation
                  determined in accordance with  the  standards  established by
                  Opinion No. 25 of the Accounting Principles Board or FASB
                  Pronouncement No. 123.

         9.       allocation  of  corporate   G&A  costs  and  other   corporate
                  allocations  that  are in  excess  of full  marginal  cost for
                  services used by an Eligible New  Business.  Each Eligible New
                  Business  shall,  for the purpose of this Plan, be charged the
                  full marginal cost for services provided by the Company,  such
                  as G&A costs.  The full marginal cost of such services will be
                  determined for each Eligible New Business to be costs that are

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                  specifically  incurred  with  respect  to  such  Eligible  New
                  Business,  plus an allocated  portion of the  remainder of the
                  corporate  G&A  costs.  G&A  costs  that are not  specifically
                  incurred  with respect to the  Company's  businesses  or other
                  activities   will  be  allocated   based  on  the   employees'
                  allocation  of time to each of the  Company's  businesses  and
                  other  activities,  and  the  associated  charges  of  salary,
                  benefits and overhead costs. The employees' allocation of time
                  will be based on time sheets,  signed by respective employees.
                  Each hour  charged will be charged at a rate that will include
                  the employee's hourly salary,  plus associated  benefit costs,
                  plus a prorated  portion of  corporate  G&A costs that are not
                  specifically  incurred for a business activity of the Company,
                  such  that  the  Company's   total  G&A  costs  that  are  not
                  specifically  incurred for a business  activity of the Company
                  are spread over the total amount of hours worked (40hrs/wk) by
                  all employees.

d.       "Annual Bonus" shall  have  the meaning  ascribed to it in Section 2(b)
         (ii).

e.       "Board" or "Board of  Directors"  shall mean the Board of  Directors of
         the Company, as constituted from time to time.

f.       "Bonus Period" shall mean the five  consecutive  365 day years from the
         later of the date the  applicable  Eligible New Business is acquired in
         the case of an  Acquisition  or the date  such  Eligible  New  Business
         commences  commercial operation in the case of a development project or
         business.

g.       "Capital  Charge"  shall  mean  the  Cost  of  Capital   multiplied  by
         Incremental Capital for the applicable Plan Year.

h.       "Code" shall mean the Internal Revenue Code of 1986, as amended.

i.       "Company" shall mean US Energy Systems, Inc. a Delaware corporation, or
          any successor corporation.

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j.       "Cost of Capital" shall mean 10%.

k.       "Covered Employee" shall mean a Participant who is a "covered employee"
         within the meaning of Section 162(m) of the Code.

l.       "Designated  Beneficiary"  shall mean the beneficiary or  beneficiaries
         designated  in  accordance  with  Section  4(f)  hereof to receive  the
         amount, if any, payable under the Plan on the Participant's death.

m.       "Economic Profit" with respect to any Plan Year shall be calculated for
         each Eligible New Business and shall mean (i) Adjusted  EBITDA for each
         Eligible New Business for such Plan Year minus (ii) Capital Charges for
         each Eligible New Business for such Plan Year.
         Economic Profit may be positive or negative.

n.       "Eligible New Business" shall mean a New Business with respect to which
         either (i)  a  definitive  agreement  respecting the  acquisition  or
         development  o f such New Business is fully executed  while  such
         Participant is employed by  the  Company or (ii)  in  the case of a New
         Business  where  no  definitive  agreement  is executed (such as an
         internally developed business), substantial action has been  taken  by
         the  Company  to implement such  New Business while the Participant is
         employed by the Company and, in the case of either (i) or (ii) the Plan
         Year for which the Formula Bonus Award is being calculated  includes a
         portion of the Bonus Period respecting such New Business.

o.       "FASB" shall mean the Financial Accounting Standards Board.

p.       "Formula  Bonus  Award" shall mean the award  payable to a  Participant
         pursuant to Section 2(b)(i) of the Plan.

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q.       "Incremental  Capital"  for any Plan Year shall mean the sum of (i) Net
         Stock Issued in such Plan Year and invested in any respective  Eligible
         New Business  plus (ii) New Net Debt in such Plan Year  invested in any
         respective  Eligible New Business.  Incremental Capital may be positive
         or  negative,  but shall  exclude any Net Stock  Issued or New Net Debt
         that are associated with construction of an Eligible New Business until
         such  construction  has been  completed  and the  Eligible New Business
         related to such construction is placed into commercial operation.

r.       "Improvement Bonus" shall  have the meaning ascribed to it  in  Section
         3(b)(3).

s.       "Improvement  in Economic  Profit"  with respect to any Plan Year shall
         mean the excess,  if any, of (i) the Economic Profit for such Plan Year
         with respect to the Eligible New Business  over (ii) the greater of (A)
         zero or (B) the Economic  Profit for such Eligible New Business for the
         preceding Plan Year.

t.       "Net Debt" shall mean (i) all debt recorded on the audited consolidated
         balance  sheet of the Company with respect to any  respective  Eligible
         New Business,  including  current  maturities of long term debt,  minus
         (ii)  cash,  cash  equivalents,  short term  investments  and long term
         investments, all for any respective Eligible New Business in the amount
         that such assets are carried on such balance sheet,  and as adjusted to
         fair value for any assets carried at other than fair value.

u.       "Net Stock Issued" shall mean the Value of Stock Issued minus the Value
         of Stock Repurchased. Net Stock Issued may be positive or negative.

v.       "New  Business"  shall  mean any new  activity,  in which  the  Company
         engages, such as a business segment, business, project or acquisition.

w.       "New  Net  Debt" shall  mean  the increase (decrease) in Net Debt with
         respect to any

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         respective Eligible New Business since the effective date of this Plan.
         New Net Debt may be positive or negative.

x.       "Participant"  shall mean each person  designated to participate in the
         Plan pursuant to Sections 3(a).

y.       "Plan" shall mean this 2000 Executive Bonus Plan.

z.       "Plan  Year" shall mean the  accounting  fiscal year of the Company for
         financial accounting  purposes,  provided that the 2000 Plan Year shall
         exclude the first three  fiscal  months  thereof  (i.e.  through May 4,
         2000).

aa.      "Value of Stock Issued" shall mean  the gross proceeds received for any
         equity  issued  that is  invested in respective Eligible  New  Business
         under  this Plan. Notwithstanding  the above, the Value of Stock Issued
         in connection with an Acquisition shall be deemed to be no greater than
         (i) ten times the acquired  company's Adjusted  EBITDA for the 12-month
         period ending on the last day of the acquired  company's most  recently
         completed fiscal quarter ended prior to the date  of  the execution  of
         the definitive agreement relating to such Acquisition  less the  sum of
         ((ii) any debt  assumed in  connection  with the acquisition plus (iii)
         any consideration as part of  the purchase price, not paid in the form
         of equity).

bb.      "Value of Stock Repurchased" shall mean the purchase price paid for any
         equity  repurchased  by the Company  with  respect to any  Eligible New
         Business  (including for this purpose,  the value of equity distributed
         to the  Company's  shareholders  in  connection  with a  spinoff  of an
         Eligible  New  Business  which is not  consolidated  with  the  Company
         immediately following such distribution, such value to be determined by
         the closing  price of such equity on its primary  public  market on the
         effective date of such distribution).


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SECTION 3. Formula Bonus Awards

a.       Eligibility.  Participants eligible for  a  Formula  Bonus  Award shall
         consist of Goran Mornhed and Larry Schneider.

b.       Formula Bonus Awards.  Formula Bonus Awards to  Participants  under the
         Plan are  potential  awards  that are based on the  Economic  Profit of
         Eligible New Businesses of the Company.

1.       Formula Bonus Awards.  For each Plan Year, each  Participant  under the
         Plan  chosen as  eligible  pursuant  to  Section  3(a)  above  shall be
         entitled to a Formula  Bonus Award which shall include  Annual  Bonuses
         and  Improvement  Bonuses (each as defined below) for the Bonus Period.
         Participant  shall have no financial  obligation  to the Company in the
         event the Economic Profit or Improvement in Economic Profit is negative
         in a Plan Year.

2.       Annual Bonus.  In each Plan Year for each of the years  of each Formula
         Bonus  Award, each Participant shall be eligible for an Annual Bonus in
         an  amount equal  to  two percent (2%) of the aggregate Economic Profit
         for such Plan Year for all Eligible New Businesses with respect to such
         Participant, subject to adjustments as provided for in Subsections (4),
         (5), (6) and (7) hereof. In the event the aggregate Economic Profit for
         such Plan Year for a Participant is a negative number, no  Annual Bonus
         shall be paid to such Participant for such Plan Year.

3.       Improvement  Bonus.  In each  Plan  Year for each of the  years of each
         Formula  Bonus  Award,  each  Participant  shall  be  eligible  for  an
         Improvement Bonus equal to twelve and one-half percent (12 1/2%) of the
         aggregate  Improvement  in  Economic  Profit  respecting  Eligible  New
         Businesses with respect to such Participant for such Plan Year, subject
         to adjustments  as provided for in Subsections  (4), (5) and (6) below,
         and  provided  that if in any Plan Year the  aggregate  Improvement  in
         Economic Profit respecting Eligible New Businesses

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         under an award is  negative,  no  Improvement  Bonuses  will be paid in
         respect of such Plan Year nor with respect to any subsequent  Plan Year
         until  Economic  Profit for a Plan Year  (included  in whole or in part
         during the Bonus Period) for (Eligible New  Businesses) is greater than
         it was for the Plan Year with respect to which an Improvement Bonus was
         last paid. For example,  if Economic  Profit of Eligible New Businesses
         in fiscal 2001 is $15  million and  Economic  Profit for  Eligible  New
         Businesses  in fiscal 2002 is $14  million,  no  Improvement  Bonus for
         Eligible New  Businesses  will be payable to any  Participant  for 2002
         unless Economic Profit for Eligible New Businesses exceeds $15 million.
         If Economic  Profit for Eligible New Businesses is $16 million in 2003,
         the  Improvement  Bonus  payable in  respect  to 2003 will be  $125,000
         (12.5% of $1 million). Notwithstanding anything to the contrary herein,
         any Improvement Bonus accruing after the Participant's  employment with
         the Company has been  terminated  for any reason shall only be measured
         with respect to Eligible New Businesses  whose Economic Profit improves
         after such  termination  directly as a result of contractual  terms and
         conditions  which  (i)  existed  prior  to such  termination  and  (ii)
         specifically  provide  for  automatic  improvements  in  the  Company's
         Adjusted EBITDA relating to such Eligible New Business.

4.       The  Acquisition  Adjustment.  In the event that the  Company  makes an
         Acquisition and the  Acquisition  Multiple is greater than the quotient
         of (i) one over (ii) the Cost of Capital  (the "Base  Multiple"),  then
         the Capital Charge  relating to such  Acquisition  will be adjusted for
         the first two Plan Years following such  Acquisition by multiplying the
         Capital Charge  attributable  to such  Acquisition  by a fraction,  the
         numerator of which is the Base Multiple and the denominator of which is
         the Acquisition Multiple.

5.       Partial Year.  For purposes of  calculating  Formula Bonus Awards under
         section  3(b)(2)  in the event the Bonus  Period  with  respect  to any
         Eligible New Business  commences or  terminates in the middle of a Plan
         Year or if the  Participant's  employment  commences in the middle of a
         Plan Year,  the Annual Bonus shall only be  calculated  with respect to
         Economic  Profit  accruing with respect to such Eligible New Businesses
         during that portion of the Plan

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         Year falling within the Bonus Period or the portion of the Plan Year in
         which the  Executive  is employed (a "Partial  Year").  For purposes of
         calculating the  Improvement  Bonus under Section 3(b)(3) if one of the
         Plan Years included in the  calculation of the  Improvement  Bonus is a
         Partial  Year,  the  Improvement  in Economic  Profit  respecting  such
         Eligible New Business  shall be  determined  by comparing  the Economic
         Profit  accruing  during such  Partial  Year with the  Economic  Profit
         accruing  during the  comparable  period  during the previous Plan Year
         included  in  the  calculation  of  Improvement  of  Economic   Profit.
         Notwithstanding  the above, unless otherwise specified in an employment
         agreement  between  the Company (or the  applicable  subsidiary  of the
         Company)  and a  Participant,  a  Participant  who is  employed  by the
         Company  or a  subsidiary  on the  last  day of a Plan  Year  shall  be
         entitled to receive  Formula  Bonus Awards in respect of such Plan Year
         notwithstanding   a  subsequent   termination   of  the   Participant's
         employment.

6.       Partial  Ownership.  In the event an Eligible New Business is partially
         owned by Company for purposes of calculating  the Formula Bonus Awards,
         the Economic Profit and Improvement In Economic Profit  respecting such
         partially  owned Eligible New Business shall be the product of (i) 100%
         of the Economic  Profit or Improvement In Economic  Profit  relating to
         such Eligible New Business  respectively and (ii) the percentage of the
         Economic Profit allocated to the Company's ownership share.

7.       Unconsummated Acquisitions. In  the  event (i) a definitive  agreement
         respecting the acquisition of a Eligible New Business is executed while
         the Participant is employed by the Company but such Acquisition is  not
         actually consummated until  after  the  Participant's  employment  has
         terminated, or (ii) in the case of an Eligible  New  Business  where no
         definitive agreement is executed, substantial action has been  taken by
         the Company to implement  such  Eligible  New  Business  while  the
         Participant is  Employed by the Company but such Eligible New Business
         which  is  not subject to a  definitive  agreement  is  not  put  into
         commercial  operation  until  after the  Participant's  employment  has
         terminated, for purposes of calculating a Formula Bonus Award hereunder
         , the Economic Profit respecting such Eligible New

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         Business shall be discounted by 50%.

c.       Form and Time of  Determination  of Award Payments and Caps. As soon as
         practicable  following the end of the applicable Plan Year, the Company
         shall

         1.       determine  the  Formula  Bonus  Awards  for each  Participant
                  eligible for a Formula Bonus Award for such Plan Year;

         2.       calculate  and  certify the  amounts  of  Economic Profit  and
                  Improvement In Economic Profit for  such Plan  Year  for  each
                  Annual Bonus  and  Improvement  Bonus  then payable under each
                  Formula Bonus  Award (the  Compensation Committee of the Board
                  shall oversee and approve such  calculations). Annual  Bonuses
                  and Improvement  Bonuses  shall for each  Plan  Year  be  paid
                  within 90 days after  the end of such Plan Year, following the
                  Board's certification and determination of the amounts payable
                  to each eligible Participant and following the delivery of the
                  audited consolidated  financial statements of the Company with
                  respect  to  such  Plan Year. Payment of  Formula Bonus Awards
                  shall be made in the form of cash provided  that  the  Company
                  shall have the right to defer a portion of such  Formula Bonus
                  Awards  for  a  Plan Year  if, during  such  Plan Year a) the
                  Company's EBITDA less  the regularly scheduled current portion
                  of long-term debt is less  than  all  Formula Bonus Awards due
                  under this Plan for such Plan Year, and  b) as  a  result  the
                  Company lacks the cash to pay  such  Formula  Bonus  Awards in
                  full. Such deferral  shall  not be made for more than 2 years.
                  Deferred  payments  shall  accrue  interest  at 16% per annum,
                  compounded  annually.  Such  deferral  shall  not  reduce  the
                  amount of the Formula Bonus Award otherwise payable under this
                  Agreement.  Deferred payments under this Section 3(c)(2) shall
                  not be subject to the Cap and time limits set forth in section
                  3(c)(3) below.  As between various Participants, to the extent
                  Formula Bonus  Awards  are  deferred  in  part, they  shall be
                  deferred on a non-discriminatory pro-rata basis.


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         3.       Notwithstanding anything  to  the  contrary  set forth in this
                  Agreement (but except for deferrals described  in section 3(c)
                  (2) above), in no event shall the sum of the Annual Bonus  and
                  the Improvement Bonus paid to any Participant under this  Plan
                  exceed $1.2 million in any one Plan Year  whether or  not  the
                  Company possesses  sufficient  funds  to  pay such  Bonus (the
                  "Cap") Any excess Annual Bonus or Improvement Bonus earned but
                  not paid in any one year  due to the Cap shall be carried over
                  to and paid the following year, without  interest, subject  to
                  the same maximum payment as the previous  year; provided  that
                  the obligation of the Company to carry over and pay any Annual
                  Bonus or Improvement Bonus which  is  not paid  due to the Cap
                  shall cease after the  fifth full Plan Year after  such  Bonus
                  was earned after which time  the  Participant  shall  have  no
                  further right to receive such payments.

SECTION 4. Miscellaneous.

a.       Taxes.  The Company shall have the right to deduct from all awards paid
         under the Plan any federal,  state or local taxes required by law to be
         withheld with respect to such payments.

b.       Non -Transferability.  No award made hereunder may be assigned, pledged
         or transferred, except, in the event of death of a Participant, by will
         or the laws of descent  and  distribution,  and any  attempt to assign,
         pledge or transfer such rights shall be void.

c.       Relationship  to Other  Benefits.  No  payment  under the Plan shall be
         taken into  account in  determining  any  benefits  under any  pension,
         profit sharing, group insurance or other benefit plan of the Company or
         any of its Subsidiaries.

d.       Governing  Law.  This  Plan  shall  be  governed  by and  construed  in
         accordance  with laws of the State of New York applicable to agreements
         made and to be performed  entirely within such state (without regard to
         any conflict of law provisions that might indicate the applicability of
         any  other  laws).  The  parties  hereby  agree to  submit  any and all
         disputes

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         arising  out  of  or in  connection  with  this  Agreement  to  binding
         arbitration  in accordance  with the  commercial  rules of the American
         Arbitration  Association.  Such  arbitration  shall be held in New York
         City.  Each party shall select one arbitrator and the two such selected
         arbitrators shall select a third arbitrator.  Notwithstanding  anything
         to the  contrary  in 4(d) this  Section,  such  parties may seek in any
         court of competent  jurisdiction any injunctive  relief relating to any
         dispute arising out of or in connection with this Agreement.

e.       Successors and Assigns.  This Plan and the obligations  hereunder shall
         be binding upon and inure to the benefit of any  successors in interest
         to the business of the Company and may be assigned to any company which
         acquires  substantially  all the business  operations  or assets of the
         Company provided that such successor assumes the obligations hereunder.

f.       Designation and  Change of Beneficiary.  Each Participant may designate
         one or more persons as the Designated Beneficiary who shall be entitled
         to receive his or her Formula Bonus Award, if any,  payable  under  the
         Plan upon the death of  the  Participant.  Such designation shall be in
         writing to the Company. A Participant may, from time to time, revoke or
         change  his  or  her  Designated Beneficiary without the consent of any
         prior  Designated Beneficiary by filing a written designation with  the
         Committee.  The last such designation received by  the Company shall be
         controlling;  provided, however, that  no  designation, or  change  or
         revocation  thereof, shall  be effective unless received by the Company
         prior to the Participant's death, and in no event shall it be effective
         as of a date prior to such receipt.

g.       Unfunded Plan.  Participants  shall have no right,  title,  or interest
         whatsoever in or to any investments,  which the Company may make to aid
         it in meeting its obligations under the Plan.  Nothing contained in the
         Plan, and no action taken pursuant to its  provisions,  shall create or
         be construed to create a trust of any kind, or a fiduciary relationship
         between   the   Company  and  any   Participant,   beneficiary,   legal
         representative  or any other  person.  To the  extent  that any  person
         acquires a right to receive  payments  from the Company under the Plan,
         such right shall be no greater than the right of an  unsecured  general
         creditor of the Company. All

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