TERMINATION FEE AGREEMENT

                  TERMINATION FEE AGREEMENT, dated as of November 28, 2000 (this
"Agreement"),  among U.S. ENERGY SYSTEMS,  INC., a Delaware corporation ("USE"),
CINERGY  ENERGY  SOLUTIONS,  INC., a Delaware  corporation  ("CES"),  and ZAHREN
ALTERNATIVE POWER CORPORATION, a Delaware corporation ("Zapco").

                  WHEREAS,  USE,  Zapco and USE  Acquisition  Corp.,  a Delaware
corporation  (the "Sub"),  have entered into that certain  Agreement and Plan of
Reorganization  and  Merger,  dated  as  of  even  date  herewith  (the  "Merger
Agreement").  All capitalized terms used herein but not otherwise defined herein
shall have their respective meanings as set forth in the Merger Agreement;

                  WHEREAS,  it is a condition to the  effectuation of the Merger
that CES, an indirect  wholly  owned  subsidiary  of Cinergy  Solutions  Holding
Company,  Inc. ("CSHC"),  shall purchase 4,574 shares of Class B Common Stock of
Sub for $11,500,000  pursuant to a subscription  agreement dated as of even date
herewith (the "Subscription Agreement"; and

                  WHEREAS, each of USE, CES and Zapco desires to enter into this
Agreement  to  restrict  USE's and  Zapco's  ability  to  solicit  or  entertain
alternative merger or acquisition  proposals and to provide for the payment of a
Termination  Fee (as defined  below) and certain  expense  reimbursements  under
certain circumstances as set forth in this Agreement.

                  NOW,  THEREFORE,  in  consideration  of the  foregoing and the
respective  representations,  warranties,  covenants and agreements set forth in
this Agreement, the parties hereto agree as follows:

                  SECTION 1.  No Solicitation of Transactions by USE and Zapco.
(a) Zapco  and USE  immediately  shall  cease  and  cause to be  terminated  all
existing  discussions or negotiations with any parties conducted heretofore with
respect to a Competing Transaction (as defined below) from the date hereof until
the earlier of (i) the  Effective  Time, or (ii) the  termination  of the Merger
Agreement in accordance with its terms (the "Period").  During the Period, Zapco
and USE shall not, directly or indirectly,  and each will instruct its officers,
directors, employees,  subsidiaries, agents or advisors or other representatives
(including,  without limitation,  any investment banker,  attorney or accountant
retained  by  it)   (collectively   "Representatives"),   not  to,  directly  or
indirectly,  (i) solicit,  initiate or knowingly encourage  (including by way of
furnishing  nonpublic  information),  or take  any  other  action  knowingly  to
facilitate,  any  inquiries or the making of any  proposal or offer  (including,

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without limitation, any proposal or offer to its stockholders) that constitutes,
or may reasonably be expected to lead to, any Competing Transaction,  (ii) enter
into or maintain or continue  discussions or negotiate with any person or entity
in furtherance of such  inquiries,  (iii) obtain a Competing  Transaction,  (iv)
agree to or endorse any  Competing  Transaction,  or (v)  authorize or knowingly
permit any  Representative  of such party or any of its Subsidiaries to take any
such action. If any proposal or offer, or any inquiry or contact with any person
with respect thereto,  regarding a Competing Transaction is made to Zapco or USE
(any party which receives such a proposal, other inquiry or contact is hereafter
referred to as the  "Receiving  Party"),  such  Receiving  Party  promptly shall
notify the other parties hereto.  Each of ZAPCO and USE shall  immediately cease
and cause to be terminated  all existing  discussions or  negotiations  with any
parties conducted  heretofore with respect to a Competing  Transaction.  Each of
Zapco and USE agrees not to release any third party from, or waive any provision
of,  any   confidentiality   or  standstill   agreement  relating  to  Competing
Transactions to which it is a party.

                  (b)  Notwithstanding  anything to the contrary in Section 1(a)
above,  the Board of Directors of such Receiving  Party may cause such Receiving
Party  to  furnish  information  to,  and  may  participate  in  discussions  or
negotiations  with, any person that, without any solicitation by or on behalf of
such  Receiving  Party,  has  submitted  a  written  proposal  to such  Board of
Directors which  constitutes a Superior Proposal (as hereafter  defined,  except
that for purposes of this Section 1(b) a Superior  Proposal  shall not require a
financing  commitment),  to the  extent  that  the  Board of  Directors  of such
Receiving  Party  determines in good faith that the failure to do so would cause
such Board of Directors to breach its fiduciary duties to the Receiving Party or
its  stockholders  under  applicable  Laws if the  Receiving  Party has received
advice to such effect from  independent  legal  counsel (who may be such party's
regularly engaged  independent legal counsel,  it being understood that Robinson
Brog  Leinwand  Greene  Genovese & Gluck  P.C.,  Tannenbaum  Helpern  Syracuse &
Hirschtritt  LLP and  Shipman  & Goodwin  LLP shall be deemed to be  independent
legal  counsel).  Notwithstanding  anything to the  contrary  contained  in this
Agreement,  any  such  furnishing  of  information  and  participation  in  such
discussions or  negotiations  shall not constitute a breach of this Agreement by
such party.

                  (c) A  "Competing  Transaction"  means  any of  the  following
involving Zapco or USE (other than the Merger and the Investment): (i) a merger,
consolidation, share exchange, business combination or other similar transaction
as a result of which the  stockholders of such party  immediately  prior to such
transaction will, after such transaction,  own less than 50% of the voting stock
of the combined,  surviving or merged entity;  (ii) any sale,  lease,  exchange,
transfer or other disposition of 50% or more of the assets of such party and its
subsidiaries, taken as a whole or (iii) a tender offer or exchange offer for, or
any  acquisition of, 50% or more of the  outstanding  voting  securities of such
party by a person not affiliated with any party hereto.

                  (d) A "Superior  Proposal"  shall mean any proposal  made by a
third  party for a  Competing  Transaction  with Zapco or USE which the Board of
Directors of such party reasonably  determines in its good faith judgment (based

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on the  advice  of a  financial  advisor  and  independent  counsel)  to be more
favorable to such party's  stockholders than the Merger and for which financing,
to the  extent  required,  is then  committed,  subject  to  standard  terms and
conditions  at the  time  ZAPCO or USE as  applicable,  exercises  any  right to
terminate the Merger Agreement provided for in this Agreement.

                  SECTION 2.  Termination of Merger Agreement.  (a) In  addition
to the provisions of Section 8.01 of the Merger Agreement, the  Merger Agreement
may be terminated at any time prior to the Effective Time as follows:

                           (i) By USE,  if (A) the Board of  Directors  of Zapco
         does not recommend to its stockholders the approval of the transactions
         contemplated by the Merger Agreement or withdraws,  modifies or changes
         its  recommendation  of the  transactions  contemplated  by the  Merger
         Agreement in a manner  adverse to USE or shall have  resolved to do so,
         (B) the Board of  Directors  of Zapco  shall  have  recommended  to the
         stockholders of Zapco a Competing Transaction or shall have resolved to
         do so, or (C) if the transactions  contemplated by the Merger Agreement
         shall fail to receive  the  requisite  vote for  adoption  at the Zapco
         Stockholders'  Meeting held within thirty days of the Merger  Agreement
         execution date; provided, however, that nothing herein shall reduce the
         liability  of the  shareholders  of Zapco under the  Stockholders'  and
         Voting  Agreement by and among USE and certain  shareholders of USE and
         Zapco dated as of the date hereof (the  "Stockholders  Agreement")  for
         any breach of their obligations under the Stockholders Agreement;

                           (ii) By Zapco,  if (A) the Board of  Directors of USE
         does not recommend to its stockholders the approval of the transactions
         contemplated by the Merger Agreement or withdraws,  modifies or changes
         its  recommendation  of the  transactions  contemplated  by the  Merger
         Agreement in a manner adverse to Zapco or shall have resolved to do so,
         (B) the  Board  of  Directors  of USE  shall  have  recommended  to the
         stockholders  of USE a Competing  Transaction or shall have resolved to
         do so, or (C) a tender  offer or exchange  offer for 50% or more of the
         outstanding shares of capital stock of USE is commenced,  and the Board
         of Directors of USE fails to recommend within ten Business Days against
         acceptance of such tender offer or exchange  offer by its  stockholders
         (for purposes of this Agreement, taking no position with respect to the
         acceptance of such tender offer or exchange  offer by its  stockholders
         shall be considered to be a failure to recommend  against  acceptance),
         provided,  however,  that nothing  herein shall reduce the liability of
         any shareholder of USE under the Stockholders  Agreement for any breach
         of its obligations under the Stockholders Agreement; or

                           (iii)   By   Zapco   or  USE   if  the   transactions
         contemplated  by  the  Merger  Agreement  shall  fail  to  receive  the
         requisite vote for adoption at (A) the USE Stockholders' Meeting or any
         adjournment  or  postponement  thereof  or (B) the Zapco  Stockholders'

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<PAGE>

         Meeting or any adjournment or postponement  thereof provided that Zapco
         may  terminate the Merger  Agreement  pursuant to this clause B, if and
         only  if  the  Zapco  Stockholders  (as  defined  in  the  Stockholders
         Agreement)  are not  obligated to vote in favor of the Merger under the
         express  terms  of  Section  2.01(a)  of  the  Stockholders  Agreement;
         provided,  however,  that nothing  herein shall reduce the liability of
         the shareholders of USE or Zapco under the  Stockholders  Agreement for
         any breach of their obligations under the Stockholders Agreement.

                  (b) In  addition  to the  provisions  of  Section  8.01 of the
Merger  Agreement,  the Merger  Agreement may be terminated at any time prior to
the Effective Time as follows:

                           (i) By USE, if (A) USE shall pay the  Termination Fee
         and (B)  (1) the  Board  of  Directors  of USE  shall  have  withdrawn,
         modified  or  changed  its   recommendation  of  the  adoption  of  the
         transactions  contemplated by the Merger  Agreement in a manner adverse
         to Zapco following such Board's receipt of advice of independent  legal
         counsel (who may be USE's regularly engaged  independent legal counsel)
         that failure to terminate the Merger Agreement would cause the Board of
         Directors  of  USE  to  breach  its  fiduciary  duties  to  USE  or its
         stockholders  under  applicable  Laws and (2) any  person  (other  than
         Zapco) shall have made a public  announcement  or  communicated  to USE
         with respect to a Superior  Proposal  with respect to USE and the Board
         of Directors of USE fails to recommend within ten Business Days against
         acceptance of such Superior Proposal; or

                           (ii) By Zapco, if (A) Zapco shall pay the Termination
         Fee and (B) (1) the Board of Directors  of Zapco shall have  withdrawn,
         modified  or  changed  its   recommendation  of  the  approval  of  the
         transactions  contemplated by the Merger  Agreement in a manner adverse
         to USE following such Board's  receipt of advice of  independent  legal
         counsel  (who  may  be  Zapco's  regularly  engaged  independent  legal
         counsel) that failure to terminate the Merger Agreement would cause the
         Board of Directors of Zapco to breach its fiduciary  duties to Zapco or
         its  stockholders  under applicable Laws and (2) any person (other than
         USE) has made a public announcement or otherwise  communicated to Zapco
         with respect to a Superior Proposal with respect to Zapco.

                  SECTION 3. Termination Fee and Expenses. In the event that the
Merger Agreement is terminated in the following circumstances,  then (subject to
the provisions of Section 4 hereof) the party  indicated below shall be required
to pay to the other parties hereto (to be shared equally by the other  parties),
the  Termination  Fee,  and shall be required to  reimburse  the other  parties'
Expenses  (as  defined  in  Section   3(d))  upon  the  receipt  of   reasonable
documentation in respect thereof:

                  (a)  Zapco  shall  pay to USE and CES  the  lesser  of (i) the
highest  amount then  allowed  under the Laws of the State of Delaware  and (ii)

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<PAGE>

$2,000,000 in cash (the "Pre-Approval  Termination Fee") and shall reimburse USE
and CES for all of their Expenses in the following circumstances:

                   (i)  If USE  terminates  the  Merger  Agreement  pursuant  to
         Section  2(a)(i)  hereof  before  or at the time  Zapco's  stockholders
         approve the  transactions  contemplated  by the Merger  Agreement  (the
         "Zapco Shareholder Approval") and at the time of such termination,  any
         person shall have made a public announcement or otherwise  communicated
         to Zapco with respect to a Competing Transaction with respect to Zapco;
         or

                  (ii) If Zapco terminates the Merger Agreement before or at the
         time of the Zapco  Shareholder  Approval  pursuant to Section  2(b)(ii)
         hereof;


                  (b)  USE  shall   pay  to  Zapco  and  CES  the   Pre-Approval
Termination  Fee and shall  reimburse Zapco and CES for all of their Expenses in
the following circumstances:

                  (i) If Zapco  terminates  the  Merger  Agreement  pursuant  to
         Section  2(a)(ii)  hereof  before  or at the  time  USE's  stockholders
         approve the transactions contemplated by the Merger Agreement (the "USE
         Shareholder Approval") and at the time of such termination,  any person
         shall have made a public announcement or otherwise  communicated to USE
         with  respect to a Competing  Transaction  with  respect to USE and the
         Board of Directors of USE fails to recommend  within  fifteen  Business
         Days against acceptance of such Competing Transaction;

                  (ii) Zapco terminates the Merger Agreement pursuant to Section
         2(a)(iii) (A) hereof and at the time of such failure,  any person shall
         have made a public  announcement or otherwise  communicated to USE with
         respect to a Competing Transaction with respect to USE and the Board of
         Directors  of USE  fails to  recommend  within  fifteen  Business  Days
         against acceptance of such Competing Transaction.

                  (iii) If USE terminates the Merger  Agreement before or at the
         time  of the USE  Shareholder  Approval  pursuant  to  Section  2(b)(i)
         hereof.


                  (c)  Zapco  shall  pay to USE and CES  the  lesser  of (i) the
highest  amount then  allowed  under the Laws of the State of Delaware  and (ii)
$5,000,000 in cash (the  "Post-Approval  Termination  Fee" and together with the
Pre-Approval Termination Fee, the "Termination Fee") and shall reimburse USE and
CES for all of their Expenses in the following circumstances:

                  (i) If USE terminates the Merger Agreement pursuant to Section
         2(a)(i) hereof after the Zapco Shareholder  Approval and at the time of

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         such termination,  any person shall have made a public  announcement or
         otherwise communicated to Zapco with respect to a Competing Transaction
         with respect to Zapco; or

                  (ii) If Zapco  terminates the Merger Agreement after the Zapco
         Shareholder Approval pursuant to Section 2(b)(ii) hereof.

(d) USE shall pay to Zapco and CES the  Post-Approval  Termination Fee and shall
reimburse   Zapco  and  CES  for  all  of  their   Expenses  in  the   following
circumstances:

                  (i) If Zapco  terminates  the Merger  Agreement  after the USE
         Shareholder  Approval  pursuant to Section  2(a)(ii)  hereof and at the
         time  of  such  termination,  any  person  shall  have  made  a  public
         announcement  or  otherwise  communicated  to  USE  with  respect  to a
         Competing Transaction with respect to USE and the Board of Directors of
         USE fails to recommend within fifteen Business Days against  acceptance
         of such Competing Transaction;

                  (ii) If USE  terminates  the  Merger  Agreement  after the USE
         Shareholder Approval pursuant to Section 2(b)(i) hereof.

                  (e) CES shall pay the  Pre-Approval  Termination Fee and shall
reimburse the other parties'  Expenses if the Merger  Agreement is terminated by
ZAPCO  or  USE  as the  result  of a  breach  by  CES  of  one  or  more  of its
representations,   warranties,   covenants  or   agreements   contained  in  the
Subscription  Agreement  provided  that CES  shall  not be  required  to pay the
Pre-Approval  Termination  Fee if CES terminates the  Subscription  Agreement in
accordance with the terms of such agreement. In no event will CES be required to
pay the Post-Approval Termination Fee.

                  (f) "Expenses" as used in this Agreement  shall consist of all
out-of-pocket expenses (including,  without limitation, all fees and expenses of
counsel,  accountants,  investment  bankers,  experts and consultants to a party
hereto and its affiliates)  incurred by a party on its behalf in connection with
or  related  to  the  authorization,  preparation,  negotiation,  execution  and
performance  of  the  Merger   Agreement  (and  the  related   documents),   the
preparation,  printing,  filing and mailing of the proxy  statements  of USE and
ZAPCO, the solicitation of stockholder approvals,  the Investment,  the purchase
of securities of Energy Systems  Investors LLC by certain  shareholders of Zapco
and all other matters related to the closing of the Merger.

                  (g) All  payments  required  to be made  pursuant to Section 3
above shall be made to the parties  entitled to receive such  payments not later
than thirty  Business Days after  delivery to the other parties hereto of notice
of  demand  for  payment  and  shall  be made by wire  transfer  of  immediately
available  funds to an  account  designated  by the party  entitled  to  receive
payment in such notice of demand,  except that all payments  required to be made
pursuant to a  termination  by either  party  pursuant  to Sections  3(a)(ii) or
3(b)(iii)  shall be made by wire transfer of immediately  available  funds to an

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account  designated by the other parties entitled to receive payment on or prior
to the effective date of such termination.

                  (h) In the event that  Zapco,  USE or CES, as the case may be,
shall fail to pay any Expense or any Termination Fee when due, the amount of any
such  Expense or  Termination  Fee shall be  increased  to include the costs and
expenses  actually incurred or incurred by the party entitled to receive payment
(including, without limitation, fees and expenses of counsel) in connection with
the collection  under and  enforcement of this Section 3, together with interest
on such unpaid  Expenses and Termination  Fee,  commencing on the date that such
Expenses  and  Termination  Fee became  due,  at a rate equal to (i) the rate of
interest publicly announced by Citibank, N.A., from time to time, in the City of
New York, as such bank's Prime Rate plus (ii) 1.00%.

                  SECTION 4. Limitation on Section 3 Hereof. (a) Notwithstanding
anything to the contrary herein, no party to this Agreement shall be entitled to
receive any portion of a Termination Fee or to be reimbursed for its Expenses to
the extent such party has materially  breached its obligations  under the Merger
Agreement (or the  Subscription  Agreement) or, in the case of Zapco, any of the
Zapco  Stockholders  (as defined in the  Stockholders  Agreement) has materially
breached its  obligations  under the  Stockholders  Agreement or, in the case of
USE, any of the USE Stockholders has materially  breached its obligations  under
the Stockholders  Agreement to the party that is required to pay the Termination
Fee and to reimburse  Expenses  hereunder.  In the event that one of the parties
hereto is required to pay the  Termination  Fee and reimburse  Expenses and only
one of the other parties is entitled to receive such  Termination  Fee and to be
reimbursed for such Expenses, then the full Termination Fee shall be paid to the
party entitled to receive payment and only the Expenses of the party entitled to
receive payment shall be reimbursed.

         Notwithstanding  anything  to the  contrary  herein,  no  party to this
Agreement  shall be required to pay more than one  Termination  Fee and no party
shall  be  entitled  to  receive  any  portion  of a  Termination  Fee  or to be
reimbursed  for its expenses if the Merger  Agreement is terminated by any party
because the Average Parent Share Price is less than $4.00.

                  SECTION 5.  Difficulty  of  Calculating  Actual  Damages.  The
parties hereby  acknowledge and agree that it would not be possible to calculate
the magnitude of their damages in the event the Merger Agreement were terminated
in any of the circumstances described in Section 2 hereof.  Accordingly,  in the
event the Merger Agreement were terminated in any of the circumstances described
in Section 2 hereof,  they agree that the Termination Fee and Expenses represent
(a) a fair and  reasonable  measure  of the  value of the time  expended  by the
management of the parties  hereto and the  opportunities  that such parties have
foregone the payment of which is consistent  with any  fiduciary  duties owed to
the  shareholders of the party making such payment and (b) the parties' sole and
exclusive remedy arising from such termination of the Merger Agreement.

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<PAGE>

                  SECTION   6.   Effect  of   Merger,   Termination.   Upon  the
consummation of the Merger,  this Agreement  shall forthwith  become void and be
terminated  and there shall be no liability  under this Agreement on the part of
USE, CES or Zapco,  provided,  however that if CES is liable for the Termination
Fee and the  Expenses  of any  other  party  at the  time  when  the  Merger  is
consummated,   then  such  liability  shall  survive  the  termination  of  this
Agreement.

                  SECTION 7. Notices. All notices and other communications given
or made  pursuant  hereto  shall be in writing  and shall be deemed to have been
duly given or made as of the date delivered, mailed or transmitted, and shall be
effective upon receipt, if delivered personally, mailed by overnight, registered
or certified mail (postage prepaid,  return receipt requested) to the parties at
the  following  addresses  (or at such  other  address  for a party  as shall be
specified by like changes of address) or sent by electronic  transmission to the
facsimile number specified below:

                  (a)      If to USE:

                           U.S. Energy Systems, Inc.
                           One North Lexington Avenue, 4th Floor
                           White Plains, New York 10601
                           Facsimile No.: 914-271-5315 and 718-832-0263
                           Attention:        Goran Mornhed, President & COO
                                             Barbara Farr, General Counsel

                           With a copy to:

                           Robinson Brog Leinwand Greene
                           Genovese & Gluck P.C.
                           1345 Avenue of the Americas
                           New York, New York 10105-0143
                           Facsimile No.: (212) 956-2164
                           Attention: Allen J. Rothman

                  (b)      If to Zapco:

                           Zahren Alternative Power Corporation
                           40 Tower Lane
                           Avon, CT 06001
                           Facsimile No.: (860) 677-6054
                           Attention: Bernard J. Zahren, President


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                           With a copy to:

                           Shipman & Goodwin LLP
                           One American Row
                           Hartford, CT 06103-2819
                           Facsimile No.: (860) 251-5999
                           Attention: John H. Lawrence Jr., Esq. and
                                      Marcus D. Wilkinson, Esq.
                           and

                           Tannenbaum Helpern Syracuse & Hirschtritt LLP
                           900 Third Avenue
                           New York, New York 10022
                           Facsimile No.: (212) 826-0773
                           Attention: Stephen Rosenberg, Esq.

                  (c)      If to CES:

                           Cinergy Energy Solutions, Inc.
                           c/o Cinergy Solutions, Inc.
                           1000 East Main Street
                           Plainfield, IN 46168
                           Attention:  M. Stephen Harkness, President & COO
                           Facsimile: 317-838-2090

                           With a copy to:

                           Cinergy Corp.
                           221 East Fourth Street
                           Cincinnati, Ohio  45201
                           Attention: Jerome A. Vennemann, General Counsel
                                    Facsimile: 513-287-1363

                  SECTION 8.  Headings. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way  the  meaning or
interpretation of this Agreement.

                  SECTION 9.  Severability.  If any term or other  provision  of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
Law or public  policy,  all other  conditions  and  provisions of this Agreement
shall  nevertheless  remain in full force and effect so long as the  economic or
legal substance of the transactions  contemplated  hereby is not affected in any
manner materially adverse to any party. Upon such determination that any term or
other provision is invalid,  illegal or incapable of being enforced, the parties
hereto shall  negotiate  in good faith to modify this  Agreement so as to effect

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the  original  intent of the  parties as closely as  possible  in an  acceptable
manner to the end that  transactions  contemplated  hereby are  fulfilled to the
extent possible.

                  SECTION 10. Entire Agreement.  This Agreement  constitutes the
entire  agreement  of the  parties  and  supersedes  all  prior  agreements  and
undertakings,  both written and oral, between the parties,  or any of them, with
respect to the subject matter hereof and, except as otherwise expressly provided
herein,  is not  intended to confer upon any other person any rights or remedies
hereunder;  provided  however,  that nothing herein shall be deemed to supercede
the Merger  Agreement or the  Stockholders  Agreement  and nothing in the Merger
Agreement  or the  Stockholders  Agreement  shall be  deemed to  supercede  this
Agreement.

                  SECTION 11.  Assignment.  This Agreement shall not be assigned
by operation of law or otherwise.

                  SECTION  12.  Parties in  Interest.  This  Agreement  shall be
binding upon and inure solely to the benefit of each party  hereto,  and nothing
in this Agreement,  express or implied,  is intended to or shall confer upon any
other person any right,  benefit or remedy of any nature  whatsoever under or by
reason of this Agreement.

                  SECTION 13.  Mutual Drafting.  Each  party  hereto  has
participated in the drafting of this Agreement, which each party acknowledges is
the result of extensive negotiations between the parties.

                  SECTION 14.  Governing Law. This  Agreement  shall be governed
by,  and  construed  in  accordance  with,  the Laws of the  State of  Delaware,
regardless of the Laws that might otherwise govern under  applicable  principles
of conflicts of law.

                  SECTION 15.  Specific  Performance.  The parties  hereto agree
that irreparable damage would occur in the event any provision of this Agreement
was not performed in accordance with the terms hereof and that the parties shall
be entitled  to specific  performance  of the terms  hereof,  in addition to any
other remedy at law or in equity.

                  SECTION 16. Jurisdiction.  Each party hereby irrevocably:  (1)
agrees  that any suit,  action,  or other legal  proceeding  arising out of this
Agreement or out of any of the transactions  contemplated hereby or thereby, may
be brought in any New York court or United  States  federal court located in the
County of New York; (2) consents to the  jurisdiction  of each such court in any
such suit,  action,  or legal  proceeding;  (3) waives any objection  which such
party  may  have to the  laying  of venue of any  such  suit,  action,  or legal
proceeding  in any of  such  courts;  (4)  agrees  that  New  York  is the  most
convenient forum for litigation of any such suit,  action,  or legal proceeding;
and (5)  designates  the  Secretary  of State  of the  State of New York as such
party's  agent to accept and  acknowledge  on its behalf  service of any and all
process in any such suit, action or legal proceeding  brought in any such court,

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<PAGE>

and agrees and  consents  that any such service of process upon such agent shall
be taken and held to be valid personal service upon such party and that any such
service of process  shall be of the same force and  validity as if service  were
made  upon  such  party  according  to  the  laws  governing  the  validity  and
requirements  of such service in the State of New York,  and waives all claim of
error by reason of any such service.

                  SECTION 17.  Counterparts.  This  Agreement may be executed in
one or more  counterparts,  and by the  different  parties  hereto  in  separate
counterparts,  each of which when executed shall be deemed to be an original but
all of which taken together shall constitute one and the same agreement.

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<PAGE>

                  IN  WITNESS  WHEREOF,  USE,  CES and Zapco  have  caused  this
Agreement to be executed as of the date first written above.

                                 U.S. ENERGY SYSTEMS, INC.


                                     By: /s/ Goran Mornhed
                                      ---------------------
                                      Name:  Goran Mornhed
                                      Title: President & COO


                                 CINERGY ENERGY SOLUTIONS, INC.


                                 By:    /s/ M. Stephen Harkness
                                     ---------------------------
                                     Name:  M. Stephen Harkness
                                     Title: President & COO


                                  ZAHREN ALTERNATIVE POWER
                                  CORPORATION

                                  By: /s/  Bernard J. Zahren
                                     ---------------------------
                                     Name:  Bernard J. Zahren
                                     Title: President


                                       12