EMPLOYMENT AGREEMENT

                  THIS EMPLOYMENT AGREEMENT  ("Agreement "), dated as of May 10,
2000, between US ENERGY SYSTEMS,  INC., a Delaware  corporation (the "Company"),
and Lawrence Schneider (the "Executive").

                              W I T N E S S E T H:

                  WHEREAS,  the Company's business consists of (a) acquiring and
operating existing independent power plants ("IPPs") and cogeneration facilities
throughout  the world,  (b)  developing,  building  and  operating  new IPPs and
cogeneration  facilities throughout the world, and (c) developing,  building and
selling  special  energy  efficient  products  using   cogeneration   technology
throughout the world and (d) developing,  building,  acquiring  and/or operating
"inside  the  fence"  energy   facilities  and  operations  for  commercial  and
industrial users throughout the world, and (e) developing,  building,  acquiring
and/or operating district heating and cooling systems throughout the world.

                  WHEREAS,  the  Company and the  Executive  now desire to enter
into this Agreement in its entirety.

                  NOW,  THEREFORE,  in  consideration  of the  mutual  promises,
representations and warranties set forth herein. and for other good and valuable
consideration, it is hereby agreed as follows:

                  1.       Position and Duties.

                           a)       Employment and Position -The Company  hereby
agrees to employ the Executive as set forth in the next succeeding sentence, and
the Executive hereby accepts such employment,  upon the terms and conditions set
forth  herein. The  Executive  shall serve as  Chief Executive  Officer  of  the
Company and shall have such other duties  consistent  with such  office, as from
time to time may be prescribed by the Board of  Directors  of the  Company (the
"Board ").

                           (b)      Duties - During  the  Term  (as defined  in
Section 5(f) below), the Executive  shall  perform and discharge the duties that
may  be assigned  to  him by the  Board from  time to time as provided  in  this
Agreement,  and the Executive shall devote his reasonable best talents,  efforts
and  abilities  to the performance of his duties hereunder. During the Term, the
Executive shall devote such time  as is  reasonably  necessary  to  perform  his
duties and the  Executive  shall have  no other employment whatsoever that would
prevent him from fulfilling his obligations hereunder.

                                        1

<PAGE>

                  2. Compensation.  Notwithstanding anything to the contrary in
this  Agreement,  during  the term of this  Agreement,  each  part of the  total
compensation  paid to the Executive by the Company as well as Executive's  total
compensation  shall be no less than such part of the compensation and such total
compensation paid by the Company to Goran Mornhed in his capacity as an employee
of the Company or any successor President with respect to the corresponding time
period.

                           (a)      Base Salary - The Company shall pay the
Executive for his services hereunder a salary (as the same may be increased from
time to time,  the "Base Salary") at the annual rate of $180,000.00  which shall
be payable in accordance with the customary payroll practices of the Company but
not less frequently than on a monthly basis. The Base  Salary shall be  reviewed
periodically by the Board and shall be subject to such  increases  as the Board,
in its sole  discretion, from time to time may determine.

                           (b)      Incentive Bonus -  In addition  to the Base
Salary, the Executive shall  at the  end of each  fiscal  year  for the  Company
be  awarded  a bonus determined in accordance with the 2000 Executive Bonus Plan
(the "Bonus Plan") annexed hereto as Exhibit A  and  incorporated  herein  as if
fully set forth.  In addition,  the Executive is eligible for such other bonuses
which may be awarded by the Board in its sole discretion under such other  plans
that the Board may establish in its sole discretion from time to time.

                           (c)      Simultaneous herewith, the Company and the
Executive are executing (i) a Stock Option Agreement  respecting  750,000 shares
(the "750,000 Share Agreement"), and (ii) a  Stock Option  Agreement  respecting
1,000,000 shares (the  "1,000,000  Share Agreement") dated as of the date hereof
providing collectively  for  up  to 1,750,000 stock  options  (collectively  the
"Stock Options") annexed hereto as Exhibit B and incorporated herein as if fully
set forth.

                           (d)      Shareholder Consent - Executive acknowledges
that the Board may  determine  that it is  required or  advisable  for the Board
to present the Stock Options, the 2000 Executive  Incentive Plan (the "Incentive
Plan")  and/or  the  Bonus  Plan  to  the Company's shareholders for a vote
(individually  each of the matters described above submitted to the Shareholders
for  a  vote shall be referred to as a "Voted  Matter").  In the event the Board
presents  any of the foregoing matters to the Company's shareholders for a vote,
in order for such Voted  Matter to become  effective,  the  affirmative  vote of
a majority of the Company's  shares, present in person or represented  by proxy,
at a meeting of shareholders at which a quorum is present and in fact voting (a
"Majority of the Shareholders")  must  approve the  material  terms of the Voted
Matter,  it being further  understood that if the Majority of the  Shareholders
do not approve the Incentive Plan none of the Stock Options shall be  effective.
The Board shall present any Voted

                                        2



<PAGE>


Matter (or the material terms thereof) to the Company's  shareholders for a vote
as soon as reasonably  possible  after the execution of this  Agreement.  In the
event any Voted  Matter (or the  material  terms  thereof) is not  approved by a
Majority of the  Shareholders by November 15, 2000, the Executive shall have the
rights set forth in Section 5(g) hereof.

                           (e)      Withholding. All  payments  required  to  be
made by the Company to the Executive  under  this Agreement  (whether under this
Section 2 or otherwise) shall be subject to withholding of employment and income
taxes and other  payroll  deductions in  accordance  with  applicable  tax
requirements,  the  Company's policies applicable to employees of the Company at
the  Executive's level and  the provisions  of the Benefit Plans (as defined in
Section 3 below).

                  3. Benefits.  (a) Benefit Plans - During the Term, the Company
shall provide to the Executive all fringe benefits currently  provided,  as well
as  those  which  the  Company  may  generally  make  available  to  its  senior
executives, including, without limitation, benefits provided under the Company's
pension and profit-sharing plans (if any), health benefit plans (such as medical
and hospitalization  coverage),  and insurance plans (such as life, supplemental
life,   disability,   business   travel,   accident  and  accidental  death  and
dismemberment) (collectively,  the "Benefit Plans"). Such plans shall during the
term  provide  for at least the same  level of  benefits  as the  Benefit  Plans
provide at the date of this  Agreement and at least as provided for below.  Such
Benefit Plans shall generally provide the following benefits:

         o    Medical and Dental Insurance
         o    401K plan with Company, matching or equal, to  be  structured  for
              Company management
         o    $1 million Life Insurance (the employee's estate shall be the
              beneficiary)
         o    Disability Insurance: 60% of base compensation for life

                           (b)      Automobiles - During the Term, the  Company
shall provide the Executive with a Company-owned or leased  automobile of a type
to be agreed upon by the Executive and the Company, or at the Executive's option
a car allowance of $600  per  month in lieu  thereof.  The Company will bear all
insurance, gasoline, registration, maintenance and repair costs  incident to the
Executive's use of such  Company-owned or leased or  Executive-owned  or leased
automobile in the performance of his duties hereunder.

                           (c)      Vacations, sick leave and holidays. The
Executive shall be entitled to no less  than  four (4) weeks  of paid  vacation
during each year of the Term (and a pro rata portion  thereof for any portion of
the Term that is less than a fiscal year). In addition,  the Executive  shall be
entitled to paid sick leave and holidays in  accordance with the Company's usual
policies for its senior executives.

                                        3

<PAGE>

                           (d)      Company Life Insurance. In addition to  the
life insurance policy described  above,  the  Company  intends  to  obtain a  $5
million  policy on  Executive's  life  for which the  Company shall be  the
beneficiary. Executive shall cooperate  with  the  Company in  obtaining  such
insurance.

                  4.  Reimbursement  of Expenses.  During the Term,  the Company
shall pay or reimburse the Executive for all  reasonable  travel,  entertainment
and other business  expenses  actually  incurred or paid by the Executive in the
performance of his duties hereunder upon  presentation of expense  statements or
vouchers or such other  supporting  information  as the  Company may  reasonably
require of the Executive.

                  5.  Term:  Termination.  Subject  to the  provisions  of  this
Section 5, the term of the  Executive's  employment  under this Agreement  shall
commence  on the date  hereof  and shall end on the  fifth  anniversary  hereof,
provided  that the term of this  Agreement  shall  automatically  be renewed for
successive  additional  one-year periods at the end of such five-year period and
of each such one-year renewal period, unless either party elects not to renew by
giving  written  notice to the other at least 90 days  before an annual  renewal
date. The initial  five-year term referred to herein,  together with any renewal
thereof,  is referred to in this Agreement as the "Term".  The employment of the
Executive  may be terminated  prior to the  expiration of the Term in the manner
described in this Section 5 solely on the following grounds.

                           (a)      Termination by the Company for Cause -  The
Company shall have the right to terminate the employment of the Executive  prior
to expiration of the Term for Cause (as  defined in Section  5(i)(iii) below) by
written notice to the  Executive  specifying  the  particulars of the conduct of
the Executive forming the basis for such  termination, as  provided  in  this
Agreement.

                           (b)      Termination by the Executive for Good Reason
 - The Executive shal   have  the right to terminate  his  employment hereunder
prior to expiration  of the Term for Good  Reason  (as such term is  defined  in
Section 5(i)(iv) below) by written notice to the Company specifying  the grounds
constituting such Good Reason,  provided such written notice is given within six
months  of the  date  the  Executive  reasonably  became  aware of such an event
constituting such Good Reason.

                           (c)      Termination upon Death - The employment of
the Executive hereunder shall terminate immediately upon his death.

                           (d)      The Company's Option upon Disability. If the
Executive becomes physically or mentally  disabled during the Term so that he is
unable to perform the  services  required of him  pursuant to this Agreement for
a period of six successive months, or an aggregate

                                        4


<PAGE>

of six months in any consecutive  twelve-month period (the "Disability Period"),
the Company shall have the option,  in its discretion,  by giving written notice
thereof, to terminate the Executive's  employment  hereunder prior to expiration
of the Term.  Regardless of whether the Company exercises such option,  during a
period of 18 month's from the date of the commencement of the Disability Period,
the Executive shall continue to receive his full compensation and other benefits
provided  herein net of any payments  received  under any  disability  policy or
program  provided  by the Company of which the  Executive  is a  beneficiary  or
recipient.

                           (e)      Termination by the Company for other  reason
than under 5(a), 5(c), 5(d) - The Company shall have the right to  terminate the
employment of the Executive  prior to  expiration of the Term for other  reasons
than defined in 5(a), 5(c) and 5(d) above  ("Without  Cause") by written  notice
to  the Executive  as  provided in this Agreement. Such notice shall state for
informational reasons only, the reason for such Termination.

                           (f)      Termination by the  Executive  for  other
reason than under 5(b) The Executive  shall have the right to terminate his
employment  hereunder prior to  expiration  of the Term for other  reason than
under 5(b) by written  notice given at least 90 days  prior to the  "Termination
Date" as  defined in section 5(h) below..

                           (g)      Termination By Executive if A Voted Matter
is Not Approved  --  The  Executive  shall have the right to terminate  his
employment  if Company's shareholders  do not approve any Voted Matter (or
material  terms thereof) on or before  November 15, 2000  provided  that such
notice is given within 30 days of the earlier of November 15, 2000 or the date
the  shareholders  reject the Voted Matter.

                           (h)      Termination Date - Any notice of termination
given by the Company or the  Executive  pursuant to the  provisions of this
Agreement  shall specify therein the effective date of such termination (the
"Termination Date").

                           (i)      Certain Definitions - For purposes of this
Agreement, the following terms shall have the following meanings:

                                    (i)     The "Affiliate" of any  Person means
any other Person directly or indirectly through one or more intermediary
Persons,  controlling, controlled  by or under common control  with such Person.
For purposes of this definition, "control" shall mean  the power  to direct the
management and policies of such Person, directly or indirectly,  by or through
equity ownership, agency or otherwise, or  pursuant to  or in connection with an
agreement,  arrangement or understanding  (written  or oral) with one or more
other  Persons by or through equity  ownership,   agency or otherwise;  and  the
terms  "controlling"  and "controlled" shall have meanings correlative to  the
foregoing.

                                        5

<PAGE>

                                    (ii) "Change of Control" with respect to the
Company, means the occurrence of any of the following:

                                            (A) the acquisition, with or without
                  the approval of the Board, directly or indirectly (in  one  or
                  more related transactions),  by any Person (other than (i) the
                  Executive or an Affiliate of the Executive (ii) Sparkenergy or
                  any of their Affiliates  (iii) Ormat or any of its  Affiliates
                  or (iv) the Marmon Group or any of its  Affiliates  or
                  (collectively  the "Excluded  Group")) or two  or more Persons
                  acting as a group, of beneficial ownership (as that term  is
                  defined in Rule 13d-3 under the Securities Exchange Act of
                  1934) of more than 30% of the outstanding voting stock  of the
                  Company (Voting Stock");


                                            (B) the merger or  consolidation  of
                  the Company with one or more other Persons (other than any one
                  or  more  of the Excluded Group) as a result of which the
                  holders  of the  outstanding Voting Stock of the Company
                  immediately before the merger hold less than 30% of the Voting
                  Stock (or  equivalent  thereof) of the surviving  or resulting
                  Person;

                                            (C) the  sale to any  Person  (other
                  than  any  one or  more of the Excluded Group) of all or
                  substantially  all of the assets of the Company or its
                  subsidiaries  taken as a whole, and this Agreement is not
                  assumed by the acquiring Person in connection therewith; or

                                            (D)  the   Company  or  any  of  its
                  members  enters  into  any agreement providing for any of the
                  foregoing and the transaction contemplated thereby is
                  ultimately consummated.

provided,  however, that for purposes of this Agreement,  the sale of any Voting
Stock (or equivalent  thereof) of the Company (or any successor  Person thereto)
pursuant to a public offering shall not constitute a Change of Control.

                                    (iii)  "Cause"  shall mean (A) the continued
failure of the Executive to perform substantially his duties with  the   Company
('Non-Performance')   other  than  any  such  failure  resulting  from  (1)  the
Executive's  incapacity due to physical or mental illness or (2) the Executive's
delivery  to the  Company of a notice of  termination  for Good  Reason or other
reason), which failure continues for a period of more than 7 business days after
a written  demand for  substantial  performance is given to the Executive by the
Board which specifically  identifies the manner in which the Board believes that
the Executive has not substantially performed his duties,

                                        6


<PAGE>

                                            (B) the Executive  having been
                                                convicted of a crime which
                                                constitutes a felony under
                                                applicable law or having
                                                entered a plea of guilty or
                                                nolo contendere with respect
                                                thereto, or

                                            (C) the engaging by the Executive
                                                in illegal or fraudulent conduct
                                                with respect to the Company.

                                (iv)    "Good Reason" means  the  occurrence  of
any one of the following events:

                                            (A) a Change of Control of the
                                                Company;

                                            (B) the  assignment to the Executive
                  of any duties inconsistent in any material respect with the
                  Executive's then position  (including status, offices,  titles
                  and  reporting relationships),  authority, duties or
                  responsibilities, or any other  action  by the  Company  which
                  when taken  as a whole results  in  a  significant  diminution
                  in  the  Executive's position, authority, duties or
                  responsibilities, excluding for this purpose any isolated,
                  immaterial and inadvertent  action not taken in bad faith and
                  which is  remedied  by the  Company within 7 business days
                  after receipt of notice thereof given by the Executive;

                                            (C) a  reduction  by the  Company in
                  the  Executive's  Base  Salary  without  the  consent  of such
                  Executive or the failure by the  Company to continue in effect
                  any  material benefit  or  compensation  plan, life  insurance
                  plan, health and accident plan or disability plan in existence
                  as  of  the  date  of  this  Agreement (or  a replacement  or
                  substitute  plan  providing  the  Executive with substantially
                  similar  benefits) in which the Executive is participating  or
                  the material reduction of the Executive's  benefits under any
                  of such plans (or replacement or substitute plans); or

                                             (D)  the  Company   requiring   the
                  Executive to be based at any location other than New York City
                  or  any  county  in  New York, New Jersey  or Connecticut that
                  abuts New York City, Westchester, NY and north of the southern
                  boundary of New York City except for requirements of travel on
                  the  Company's business  which travel may  be on a regular and
                  extensive basis given the geographic scope of  the  Company's
                  franchise territories.

                                    (v)     "Person" means any individual,
corporation, partnership, limited  liability  company, association,  joint-stock
company, trust, unincorporated  organization, joint venture, court or government
or political subdivision or agency thereof).

                  6.       Obligations on Termination.

                           (a)      Payment Obligations of the Company in Case
of Termination for Good Reason Under Section 5(b) and the Company's Termination
Without Cause under Section 5(e).

                                        7

<PAGE>


                                    (i)     Upon termination of the Executive's
employment  pursuant  to Section 5(b) and Section  5(e),  then, in lieu of any
further  payment under 2(a), the Company shall pay the Executive a lump sum cash
payment equal to 2.9 times the Base Salary then in effect, plus any unreimbursed
expenses and unpaid accrued benefits  (collectively,  the "Severance Payment).
The Severance Payment shall be payable within 60 days after the Termination
Date. Executive's rights to payments  under the Bonus Plan shall not be affected
by  termination  under Sections 5(b) and 5(e) except as provided in such Bonus
Plan.

                                    (ii)   Notwithstanding   anything   to   the
contrary contained herein or in any other  agreement between the Company and the
Executive,  in the event that the Executive's employment is terminated pursuant
to Section 5(b) and 5(e),  then  (I) (A)  any  Stock Options which  vest  solely
based on the Executive's employment by the Company for specified periods of time
(including the options covered by the 750,000 Share Agreement) heretofore or
hereafter  granted to the Executive vested and unvested, will be automatically
vested and may be exercised in full (to the extent not previously exercised  and
provided that the term of the applicable  option has not otherwise expired) at
any time within six months after such  cessation of employment  after which time
such options shall expire; and (B) any Stock Options  described in the 1,000,000
Share  Agreement shall be unaffected by any termination of employment under
Sections 5(b) and 5(e) hereof and shall  continue to be in full force and effect
as if the  Executive had continued to be an employee of the Company. Any and all
reasonable  costs and expenses,  including but not limited to, reasonable  legal
fees incurred by the Executive in good faith in enforcing or establishing any of
his rights hereunder shall be  immediately  paid to the Executive  upon
presentation  of appropriate documentation to the Company.



                           (b)      Payment Obligations of the Company  in  case
of Termination for Non-Performance as defined in Section 5(i)(iii)(A) Under
Section 5(a).

                                    (i)     Upon termination of the Executive's
employment for Non- Performance, then, in lieu of any further payment under 2(a)
the Company shall pay the Executive a lump sum cash payment equal to 1 times the
Base Salary then in  effect,   plus any unreimbursed expenses and unpaid accrued
benefits (collectively,  the "Severance Payment). The Severance Payment shall be
payable within 60 days after the Termination  Date. Executive's rights under the
Bonus Plan shall not be affected by termination  under Section 5(a) except as
provided in such Bonus Plan.


                                        8

<PAGE>


                                    (ii)   Notwithstanding   anything   to   the
contrary contained herein or in any other agreement between the Company and the
Executive,  in the event that the  Executive's employment is terminated pursuant
to Section  5(a) for Non-Performance,

                                            (A) then any stock options (or
equivalent thereof) heretofore  or hereafter  granted to the Executive  pursuant
to this Agreement, which have  vested,  may be  exercised in full (to the extent
not previously exercised and provided that the term of the applicable option has
not  otherwise  expired) at any time within six months after such cessation of
employment  after which time such options shall expire; and

                                            (B) any and all reasonable costs and
expenses, including  but not  limited to, reasonable legal fees incurred  by the
Executive  in  good  faith  in  enforcing  or establishing  any  of  his rights
hereunder shall  be immediately paid  to  the Executive upon presentation of
appropriate documentation to the Company.

                           (c)      Payment Obligations of the Company  in case
of Termination for Death.

                                    (i)     Upon termination of the Executive's
employment upon death, the  Company shall have no payment obligations  to  the
Executive hereunder, except for the  payment  of any  proceeds  received  by the
Company  from  the $1,000,000  Life Insurance policy  described in Section 3(a)
hereof,  any  accrued  and  unpaid  compensation (including  unpaid  accrued
benefits),  and reimbursement of any unreimbursed expenses.  Executive's rights
under the Bonus  Plan  shall not be affected by  termination  under Section 5(c)
except as provided in such Bonus Plan.

                                    (ii)   Notwithstanding   anything   to   the
contrary contained herein or in any other  agreement between the Company and the
Executive, in the event that the Executive's employment is terminated pursuant
to Section 5(c),

                                            (A) then any stock options (or
equivalent thereof) heretofore  or hereafter  granted to the Executive  pursuant
to this  Agreement, which have  vested,  may be exercised in full (to the extent
not previously exercised and provided that the term of the applicable option has
not otherwise expired) by the  Executive's estate at any time  within six months
after such termination; and

                                            (B) any and all reasonable costs and
expenses, including but not limited to, reasonable legal  fees  incurred  by the
Executive's estate in good faith in enforcing or establishing any of his  rights
hereunder shall be immediately paid to the Executive's estate upon  presentation
of appropriate documentation to the Company.

                                        9

<PAGE>


                           (d)      Payment Obligations of the Company in case
of Termination for Disability.

                                    (i)     Upon termination of the Executive's
employment  upon  disability, the  Executive shall receive the compensation
provided for in Section 5(d) hereof plus any  unreimbursed  expenses and unpaid
accrued benefits.  Upon termination under Section 5(d), Executive shall have the
same rights under the Bonus  Plan  as if his employment continued for  eighteen
months  after  the commencement of the Disability Period.

                                    (ii)   Notwithstanding   anything   to   the
contrary  contained herein or in any other agreement between the Company and the
Executive, in  the  event that the Executive's employment is terminated pursuant
to Section 5(d),

                                            (A) then  any  stock  options (or
equivalent thereof) heretofore  or hereafter  granted to the Executive  pursuant
to this Agreement, which have vested or which vest in accordance  with the terms
of the Stock Option Agreement  within  the 18 month  period  after  commencement
of  the Disability Period, will vest as if the Executive's  employment  did  not
terminate and may be exercised in full (to the extent not previously  exercised
and provided that the term of the applicable option has not otherwise expired)
at  any  time within  such  eighteen month  period after which time such options
shall expire; and

                                            (B) any and all reasonable costs and
expenses, including but not limited to, reasonable legal fees incurred by the
Executive in good faith in enforcing or establishing any of his rights hereunder
shall be immediately paid to the Executive upon presentation of appropriate
documentation to the Company.

                           (e)      Payment Obligations of the Company in  case
of Termination for Voluntary Resignation or Cause as defined  in Section 5(i)
(iii)(B) and (C).

                                    (i)     Upon termination of the Executive's
employment as a result of the  voluntary  resignation  of  the  Executive  under
Section 5(f) or termination of the Executive by the Company for Cause (except
Non-Performance) as defined in Section  5(i)(iii)(B) and (C) under Section 5(a),
the Company shall have no payment obligations to the Executive hereunder, except
for the payment of any accrued and unpaid compensation (including unpaid accrued
benefits),  and reimbursement of any unreimbursed  expenses.  Executive's rights
under the Bonus Plan shall not be affected by such termination except as
provided in such Bonus Plan.

                                    (ii)   Notwithstanding   anything   to   the
contrary contained herein

                                       10



<PAGE>


or in any other  agreement  between the Company and the Executive,  in the event
the Executive  terminates  his employment by voluntary  resignation  pursuant to
Section 5(f) or the  Executive's  employment is  terminated  pursuant to Section
5(a) for Cause (except Non-Performance),

                                            (A) then any stock options (or
equivalent thereof) heretofore  or hereafter  granted to the Executive  pursuant
to this  Agreement, which have  vested,  may be exercised in full (to the extent
not previously exercised and provided that the term of the applicable option has
not otherwise expired) at  any  time  within six months after such cessation of
employment  after which time such options shall expire; and

                                            (B) any and all reasonable costs and
expenses, including, but not limited to, reasonable legal fees incurred by  the
Executive in good faith in enforcing or establishing any of his rights hereunder
shall  immediately  be  paid  to  the Executive upon presentation of appropriate
documentation to the company.

                           (f)      Continued Medical Dental Coverage. Upon  the
termination of the Executive's  employment with the Company for whatever reason,
to the extent permitted by applicable law, the Company shall continue to provide
the Executive (at the  Company's cost or, in the case of a termination  pursuant
to Sections 5(a) for other than  Non-Performance  and Section 5(f), at the
Executive's cost) with medical, dental and  hospitalization  insurance coverage
for the longest of- (i) the 18-month period from the Termination Date; (ii) the
period prescribed by applicable law; and (iii) the period set forth in the
applicable Benefit Plans.

                           (g)      Company Obligations  Upon  Termination If a
Voted Matter is Not Approved.

                                    (i)     If the Executive  terminates  this
Agreement  pursuant  to  Section 5(g) because any Voted Matter (or the material
terms  thereof) is not approved by a Majority of the Shareholders  then in lieu
of any further payments under 2(a) the Company shall pay the Executive  $500,000
plus any unreimbursed expenses  (collectively the "Severance Payment").  50% of
such Severance Payment shall be made within  60 days of the Termination Date and
the remaining 50% shall be made within 420 days of the Termination Date.

                                    (ii)  In  the  event  that  the  Executive's
employment is terminated pursuant to Section 5(g) then

                                            (A) any stock options heretofore  or
hereafter granted to the Executive  pursuant  to  this  Agreement  pursuant to
authorized stock option plans which  have  vested  may be exercised in full (to
the extent not previously exercised and provided that the term of the applicable
option has not otherwise expired) at any time within six months after such

                                       11

<PAGE>


cessation of employment after which time such options shall expire and

                                            (B) any and all reasonable costs and
expenses, including but not limited to reasonable  legal fees  incurred  by  the
Executive in good faith in enforcing or establishing any of his rights hereunder
shall  be  immediately paid to the Executive upon  presentation  of  appropriate
documentation to the Company.

                           (h)      Obligations of  Company  Under  Bonus Plan.
Notwithstanding anything to the contrary  subject to Executive's full compliance
under Section 7 after the Term, and 8 hereof,  the Company's  obligation  to the
Executive  under the Bonus  Plan  shall not be affected  by the  termination  or
renewal of the Executive's  employment except as provided in such Bonus Plan. In
the event the Executive  commits a breach of Section 7 after the Term or Section
8 of this Agreement  and  fails  to  cure such breach  within  seven days  after
receiving written notice describing such breach (provided the Company sends such
notice to Executive within 14 days of obtaining actual knowledge of the material
facts relating to such  breach), the Company shall have  the  right to terminate
this Agreement under  paragraph 5(a) (if Executive's  employment has not already
been terminated or expired  at such  time) and effective upon  the  date of such
Termination  (if  Executive's  employment  has not already  been  terminated  or
expired  at  such  time)  or the  lapse  of such  cure  period  (if  Executive's
employment  has already been  terminated  or expired at such time),  the Company
shall be relieved of its obligation to make any further payments under the Bonus
Plan. In the event the Executive and the Company dispute  whether  Executive has
committed an uncured breach of Sections 7 or 8 hereof,  the Parties'  rights and
obligations  under the Bonus Plan shall remain in effect except that the Company
shall make any payments due under the Bonus Plan into an interest-bearing escrow
held by an outside  escrow  agent  designated  jointly by the parties  until the
earlier of the passage of 180 days from the date of the lapse of the cure period
described  above (in which case the Escrow  shall be released to the  Executive)
or;

                                    (i)     an  arbitration  panel described in
Section 12 of this Agreement and, finds that

                                            (A) the Executive  breached Sections
7 or 8, in which case, the escrow shall be released to  the  Company  and  the
Company shall have no further obligations to Executive under the Bonus Plan, or

                                            (B)  that  the   Executive  did  not
breach  Sections  7 or 8, in  which  case  the  escrow  shall be released to the
Executive  and the Company shall thereafter make payments to the Executive under
the Bonus Plan in accordance with its terms, or

                                    (ii) the Company and the Executive deliver a
joint  written  instruction  to such escrow holder respecting the disposition of
the funds.

                                       12

<PAGE>


At the  request  of the  escrow  holder,  the  parties  shall  execute an escrow
agreement containing normal terms and conditions consistent with this paragraph.
The parties agree to proceed  expeditiously  under any  arbitration in which the
Executive's  rights under the Bonus Plan is at issue so that the  arbitration is
adjudicated within the 180 day period described above.

                           (i)      Liability of the Company for Compensation in
the Event of Termination - Provided the Company fully complies with this Section
6, then  the  Company  shall  have  no further liability to the Executive  under
Section 2 above in the event of termination as provided for herein.

                  7. Trade Secrets;  Confidentiality.  The Executive  recognizes
and  acknowledges  that, in connection with his employment with the Company,  he
has had  and  will  continue  to have  access  to  valuable  trade  secrets  and
confidential  information of the Company and its Affiliates  including,  but not
limited  to,  customer  lists,   business  methods  and  processes,   marketing,
promotional,  pricing,  financial  information,  technical  information and data
relating to clients,  employees  and  consultants  (collectively,  "Confidential
Information") and that such Confidential  Information is being made available to
the Executive only in connection with the furtherance of his employment with the
Company.  The Executive  agrees that during the Term and for a period of 2 years
thereafter, the Executive shall not disclose any Confidential Information to any
Person,  except that disclosure of Confidential  Information  will be permitted:
(a) to the Company  and its  respective  Affiliates  and  advisors;  (b) if such
Confidential  Information has previously  become available to the public through
no fault of the Executive;  (c) if required by law or any court or  governmental
agency or body,  provided  that in any such case  covered by this clause (c) the
Executive  shall provide the Company,  in advance of any such  disclosure,  with
prompt notice of such  requirement(s) and shall cooperate fully with the Company
to the  extent  it may  seek to  limit  such  disclosure;  (d) if  necessary  to
establish or assert the rights of the Executive  hereunder;  or (e) if expressly
consented to by the Company.


                  8.       Noncompetition and Nonsolicitation.

                           (a)      The Executive  hereby  covenants  and agrees
that during the Term and for the  respective periods set forth below immediately
following  the termination  by the Company or the Executive,  as applicable,  of
his employment under the  respective circumstances set forth below he shall not,
without  the  prior  written consent  of  the  Board, at any time, directly or
indirectly,  on his own behalf or on behalf of any Person:

                                    (i)     own, manage, operate, control, be
employed by, participate in, provide consulting  services to, or be connected or
associated in any manner with the ownership, management, operation or control of
any business which is in competition with the

                                       13

<PAGE>


Company (in the business in which the Company is  substantially  engaged  during
the Term in the case of acts  committed  during the Term or in the  business  in
which  the  Company  is  substantially  engaged  at the time of  termination  of
Executive's  Employment in the case of acts committed  after the Term) or any of
its  Affiliates in any state of the United  States or in any foreign  country in
which any of them are  engaged in  business  during the Term in the case of acts
committed during the Term or in any state of the United States or in any foreign
country in which any of them are engaged in business at the time of  termination
of Executive's  employment in the case of acts  committed  after the Term for as
long as the Company continues to conduct such business (the "Non-Compete"),

                                    (ii) solicit or take any action to cause the
solicitation of, or recommend that, any supplier,  client, customer, contractor,
vendor, agent or consultant  of the  Company or any of its  Affiliates  or other
Person  having business  relations  with  the  Company, discontinue business  or
cease  such relationship,  in whole or in part,  with the  Company or any of its
Affiliates (the "Customer Non-Solicit"),

                                    (iii)   employ any Person  employed  by  the
Company or  any  of  its Affiliates  at  the time of, or  during  the  12 months
preceding,  such termination of the Executive's employment with the Company
(the "Non-Hire") or

                                    (iv)  solicit  for  employment  (other  than
through unaffiliated employment  recruiting or placement  firms  or services who
are not  specifically directed to solicit  employees  of the Company or provided
with the names of any such  employees) any Person employed by the Company or any
of its Affiliates at the  time  of,  or  during  the 12  months  preceding  such
termination  of the Executive's  employment with the Company,  or otherwise
encourage or entice any such Person to leave such employment (the "Employee Non-
Solicit"),  provided, however, that nothing in this Agreement shall preclude the
executive from  owning  less  than five percent of any class of publicly traded
equity of any entity

<TABLE>
<CAPTION>
<C>
                                            <S>               <S>               <S>              <S>
                                                              Customer                           Employee
Reason for Termination                      Non-Compete       Non-Solicit       Non-Hire         Non-Solicit

Good Reason                                 1  1/2 years      1 1/2 years       1 1/2 years      1 1/2 years

For Cause other than                        2 years           2 years           1 1/2 years        2 years
Non-Performance

For Non-Performance                         1 years           1 years           1 years          1 years

</TABLE>


                                       14



<PAGE>
<TABLE>
<CAPTION>
<C>
                                            <S>               <S>               <S>             <S>


Company Termination                         0 years           1 1/2 years       1 1/2 years      1 1/2 years
for other than Cause and
Disability

Voluntary Resignation not for               2 years           2 years           2 years          2 years
Good Reason

Company Failure to Renew                    0 years           2 years           1 year           2 years

Executive Failure to Renew                  0 years           2 years           1 year           2 years

Disability                                  0 years           1 1/2 years       1 year           1 year


</TABLE>


                           (b)      The Employee acknowledges and agrees that

                                    (i)     the  restrictive covenants set forth
in this Section 8 (the "Restrictive Covenants") are  reasonable  and  valid  in
geographical and temporal scope and in all other respects, and

                                    (ii)  it is the  intention  of  the  parties
hereto that the Restrictive Covenants be  enforceable  to the fullest  extent
permitted by applicable  law. Therefore, if any court determines that any of the
Restrictive Covenants, or any part thereof,  is invalid or  unenforceable,  the
remainder of the  Restrictive Covenants shall not thereby be affected  and shall
be given  full  force and effect, without regard to the invalid or unenforceable
parts. Specifically,  if any court of competent jurisdiction  should  hold  that
any  portion  of the  Restrictive  Covenants is  overly broad as to one or more
states of the United States  or one or more  foreign  jurisdictions,  then  that
state or states or foreign  jurisdiction or  jurisdictions  shall be  eliminated
from the territory to which the Restrictive Covenants apply and the restrictions
shall  remain applicable in all other states  of  the  United States and foreign
jurisdictions.

                           (c)      If any court determines that any of the
Restrictive Covenants, or any part thereof,  is invalid or unenforceable for any
reason,  such court shall have the power to modify such Restrictive Covenant, or
any part thereof, and, in its  modified  form, such  restrictive  covenant shall
then  be  valid  and enforceable.

                  9.  Equitable  Relief.  In the event of a breach or threatened
breach by the Executive of any of the covenants contained in this Agreement, the
Company  shall be entitled  to a  temporary  restraining  order,  a  preliminary
injunction and/or a permanent injunction restraining the

                                       15

<PAGE>



Executive from breaching or continuing to breach any of said covenants.  Nothing
herein contained shall be construed as prohibiting the Company from pursuing any
other  remedies that may be available to it under this Agreement for such breach
or threatened breach.

                  10.  Severability.  Should any provision of this  Agreement be
held, by a court of competent jurisdiction, to be invalid or unenforceable, such
invalidity or unenforceability  shall not render the entire Agreement invalid or
unenforceable,  and this Agreement and each individual provision hereof shall be
enforceable and valid to the fullest extent permitted by law.

                  11.      Successors and Assigns.

                           (a)      This Agreement and  all  rights  under  this
Agreement are personal to the  Executive  and shall not be assignable other than
by  will  or  the  laws of descent.  All  of  the  Executive's  rights under the
Agreement shall inure to the benefit  of his  heirs,  personal  representatives,
designees  or  other  legal representatives, as the case may be.

                           (b)      This Agreement shall inure to the benefit of
and be binding upon the  Company  and its  successors  and  assigns.  Any Person
succeeding  to the business of the Company by merger, purchase, consolidation or
otherwise  shall assume  by contract or operation of law the obligations of  the
Company under this Agreement.

                  12.  Governing  Law:  Jurisdiction.  This  Agreement  shall be
construed in accordance  with and governed by the laws of the State of New York.
The parties  hereby  agree to submit any and all  disputes  arising out of or in
connection  with this Agreement to binding  arbitration  in accordance  with the
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 this  Section 12,  such  parties may seek in any court of  competent
jurisdiction  any  injunctive  relief  pursuant to Section 9 of this  Agreement.
Provided that  Executive's  position in such dispute has a good faith basis, any
and all  reasonable  out of pocket costs incurred by the Executive in connection
with any dispute arising out of this Agreement shall be immediately  paid to the
Executive by the Company upon presentation of appropriate  documentation,  up to
an aggregate amount equal to $180,000.

                  13.  Notices.  All notices,  requests and demands  given to or
made upon the respective  parties hereto shall be deemed to have been given when
received or refused if mailed by registered or certified mail,  postage prepaid,
if delivered by hand,  or if delivered by Federal  Express or similar  overnight
delivery service, addressed to the parties at their addresses set forth below or
to such  other  addresses  furnished  by notice  given in  accordance  with this
Section 13:

                           (a)      if to the Company, to

                                       16



<PAGE>


                                    Company Headquarters
                                    Attention CEO

                           (b)      if to the Executive, to
                                    Lawrence Schneider
                                    (most recent residential address
                                     according to company records)


                  14.  Complete  Understanding.  Together  with the Stock Option
Agreement,  Stock Option Plans and the Bonus Plan, this Agreement supersedes any
prior  contracts,   understandings,   discussions  and  agreements  relating  to
employment  between the Executive and the Company and  constitutes  the complete
understanding  between the parties  with respect to the subject  matter  hereof.
Notwithstanding  anything to the contrary herein, this Agreement is not intended
to affect the Company's and the Executive's  rights and obligations with respect
to any matters that are  independent of the  Executive's  employment  including,
without  limitation,  any  stock  options  issued  to  Executive  prior  to  the
effectiveness  of this Agreement and the Company's  Class A Preferred  Stock. No
statement,  representation,  warranty or covenant  has been made by either party
with respect to the subject  matter  hereof except as expressly set forth herein
or therein.

                  15.      Modification:


                           (a)      This Agreement may be amended or waived if,
and only if, such amendment or waiver is in writing and signed,  in  the case of
an amendment, by the Company and the  Executive or in the case of a waiver,  by
the party against whom the waiver is to be effective.  Any such  waiver shall be
effective  only to the extent specifically set forth in such writing.

                           (b)      No  failure  or  delay  by any  party  in
exercising any right, power or privilege  hereunder shall operate  as a waiver
thereof,  nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.

                  16.      Mutual Representations.

                           (a)      The Executive represents and warrants to the
Company that the execution and delivery of this Agreement and the fulfillment of
the terms hereof

                                    (i)     will not constitute a  default under
or conflict with any agreement or other instrument to which he is a party or  by
which he is bound, and

                                       17

<PAGE>



                                    (ii)  do  not  require  the  consent  of any
Person.

                           (b)      The Company represents  and  warrants to the
Executive that this Agreement  has been duly  authorized, executed and delivered
by the Company and that except with  respect to any Voted Matter the fulfillment
of the terms hereof

                                    (i)     will  not constitute a default under
or conflict with any agreement or other instrument to  which it is a party or by
which it is bound and

                                    (ii)  do  not  require  the  consent  of any
Person.

                           (c)      Each party hereto warrants and represents to
the other that this Agreement  constitutes  the  valid and binding obligation of
such party enforceable against such party in accordance with its terms.

                           (d)      The parties agree  to indemnify, defend  and
hold the each other harmless  for  any  claim,  loss,   damage,   cost,  expense
including  without limitation,  reasonable  attorney  fees  arising  out  of  or
relating to a breach of the foregoing  representations  in Section 16 (a), (b),
and (c). The Executive's obligation  under this  Section 16 shall be  limited to
an  aggregate  amount of $180,000.

                  17.   Headings.   The  headings  in  this  Agreement  are  for
convenience  of  reference  only and shall not  control or affect the meaning or
construction of this Agreement.

                  18.  Counterparts.  This Agreement may be signed in any number
of counterparts,  each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.  This Agreement
shall become  effective when each party hereto shall have received  counterparts
hereof signed by the other party hereto.

                  19. Inconsistencies. In the event of any inconsistency between
this  Agreement on the one hand and the Incentive  Plan or the Bonus Plan on the
other hand, this Agreement shall govern.


                                       18



<PAGE>




                  IN WITNESS  WHEREOF,  the Company has caused this Agreement to
be duly executed in its corporate name by one of its officers duly authorized to
enter into and execute this Agreement, and the Executive has manually signed his
name hereto, all as of the day and year first above written.

                                US ENERGY SYSTEMS, INC.


                               By:  /s/ Goran Mornhed
                                    ------------------------
                                    Goran Mornhed, President



                                 /s/ Lawrence Schneider
                                     ------------------
                                     Lawrence Schneider