INDEMNIFICATION AGREEMENT


              INDEMNIFICATION  AGREEMENT  dated  as of  November  28,  2000  (as
amended,  supplemented or modified from time to time,  this  "Agreement") by and
among U.S. Energy Systems, Inc., a Delaware corporation ("USE"), USE Acquisition
Corp.,  a Delaware  corporation  (the "Sub" and together  with the USE, the "USE
Parties") and Cinergy Energy Solutions, Inc., a Delaware corporation ("CES")


                              W I T N E S S E T H:

              WHEREAS,  Zahren  Alternative Power Corporation  ("ZAPCO") and the
USE Parties are party to that certain agreement and plan of  reorganization  and
merger (the "Merger  Agreement")  dated as of the date hereof  providing for the
merger (the "Merger") of ZAPCO and the Sub, as contemplated therein;

              WHEREAS,  concurrently with the execution of the Merger Agreement,
USE  and  CES  are  entering  into  a  certain   subscription   agreement   (the
"Subscription Agreement") dated as of the date hereof to acquire 4,574 shares of
the Sub's Class B Common Stock (the "Class B Stock");

              WHEREAS,  it is a condition to the  willingness of the USE Parties
to enter into the Subscription  Agreement and the obligations of the USE Parties
to consummate the transactions  contemplated thereby that CES indemnify and hold
harmless the USE Parties; (and, following the Merger, the Surviving Corporation)
and their respective affiliates,  shareholders,  officers, directors,  employees
and agents, and the heirs, successors and assigns of each of the foregoing (each
a "USE  Indemnitee"  and,  collectively,  the "USE  Indemnitees")  from  certain
Damages (as defined herein), all as provided herein.

              WHEREAS, it is a condition to the willingness of CES to enter into
the  Subscription  Agreement  and  the  obligations  of  CES to  consummate  the
transactions  contemplated  thereby  that  the USE  Parties  indemnify  and hold
harmless CES and its affiliates,  shareholders,  officers, directors,  employees
and agents and the heirs,  successors and assigns of each of the foregoing (each
a "CES Indemnitee" and, collectively, the "CES Indemnitees"; the CES Indemnitees
and the USE Indemnitees are collectively  referred to as the "Indemnitees") from
Damages, all as provided herein.

              NOW,  THEREFORE,  in consideration of the benefits accruing to the
parties,  the  receipt and  sufficiency  of which are hereby  acknowledged,  the
parties  hereto hereby make the following  representations  and  warranties  and
hereby covenant and agree as follows:

<PAGE>

              1. As used in this Agreement, capitalized terms not defined herein
which are defined in the Merger  Agreement  are used herein as therein  defined,
and the following terms shall have the following meanings:

                    "Damages" means all liabilities, judgments, demands, claims,
              actions or causes of action,  regulatory,  legislative or judicial
              proceedings or investigations, assessments, levies, losses, fines,
              penalties,  damages,  costs and  expenses.  Without  limiting  the
              generality of the foregoing,  Damages include, without limitation:
              reasonable attorneys', arbitrators', accountants', investigators',
              environmental   consultants'   and  experts'  fees  and  expenses,
              sustained or incurred in  connection  with the  enforcement  by an
              Indemnitee of its rights and remedies  under this  Indemnification
              Agreement,  or  the  Subscription  Agreement,  or  any  agreement,
              instrument  or document  executed or to be delivered in connection
              with  the  Subscription  Agreement  (collectively,  including  the
              Subscription Agreement, the "Transaction Documents").

                    "Person" shall mean an individual, partnership, corporation,
              limited  liability  company,  association,  joint  stock  company,
              trust,  joint  venture,  or  unincorporated  organization,  or the
              United  States of  America  or any other  nation,  or any state or
              other political subdivision thereof, or any entity with executive,
              legislative,  judicial,  regulatory or administrative functions of
              government; and


              2. (a) From and after the  Closing,  CES shall  indemnify  the USE
Indemnitees as provided in this Indemnification  Agreement.  For the purposes of
this  Indemnification  Agreement,  CES  shall  be  deemed  to  have  remade  all
representations and warranties of CES contained in the Subscription Agreement at
the Closing with the same effect as if originally made at the Closing.

                    (b)  From and  after  the  Closing,  the USE  Parties  shall
indemnify the CES Indemnitees as provided in this Indemnification Agreement. For
the purposes of this Indemnification  Agreement, the USE Parties shall be deemed
to have remade all  representations  and warranties of the USE Parties contained
in the  Subscription  Agreement  at the  Closing  with  the  same  effect  as if
originally made at the Closing.

              3. (a) CES  hereby  unconditionally  and  irrevocably,  subject to
Section 4, agrees to indemnify,  save and keep the USE  Indemnitees  harmless at
all times after the Closing  Date  against  and from all  Damages  sustained  or
incurred by any USE  Indemnitee as a result of, or arising out of, by virtue of,
or in connection with:

                    i.     any inaccuracy in or breach of any representation and
                    warranty made by CES in the Transaction Documents;

                    ii. any breach by CES of, or failure by CES to comply  with,
                    any of its covenants or  obligations  under the  Transaction
                    Documents; and

                                       2
<PAGE>
                    iii.  and all claims, actions, suits,  proceedings, demands,
                    assessments, judgments, costs and expenses incident to any
                    of the foregoing;


              (b)  Each  of  the  USE   Parties   hereby   unconditionally   and
irrevocably,  subject to Section 4, agrees to  indemnify,  save and keep the CES
Indemnitees  harmless at all times after the Closing  Date  against and from all
Damages  sustained or incurred by any CES  Indemnitee as a result of, or arising
out of, by virtue of, or in connection with:

                    i.     any inaccuracy in or breach of any representation and
                    warranty made by the USE Parties in the Transaction
                    Documents;

                    ii. any breach by the USE  Parties of, or failure by the USE
                    Parties  to  comply   with,   any  of  their   covenants  or
                    obligations under the Transaction Documents;

                    iii.  the  amount  ZAPCO is liable for  pursuant  to Section
                    10(b) of that certain indemnification agreement by and among
                    the USE  Parties  and  certain  shareholders  of ZAPCO  (the
                    "ZAPCO  Indemnification  Agreement")  dated  as of the  date
                    hereof;  less any  amounts  paid by the  Major  Shareholders
                    pursuant  to Section  3(a)(v)  of the ZAPCO  Indemnification
                    Agreement;  provided,  however,  if the amount payable under
                    this Section  3(b)(iii) is paid by the Sub or the  Surviving
                    Corporation  (but not by USE), then the Sub or the Surviving
                    Corporation,  as the case may be,  shall  also be liable for
                    the amount for which Cinergy Gasco Solutions, Inc. is liable
                    pursuant  to  Section  10(b)  of the  ZAPCO  Indemnification
                    Agreement; and

                    iv.  all  claims,  actions,  suits,  proceedings,   demands,
                    assessments,  judgments,  costs and expenses incident to any
                    of the foregoing.

              (c) The respective  obligations of CES and the USE Parties,  under
Sections 3(a) and 3(b) hereof are referred to herein as the "Obligations."

              4. (a) The USE Indemnitees  shall not be entitled to recover under
Section 3(a):

                    i.     unless a Notice of Claim (as defined herein) has been
                    delivered to CES, on or prior to the date which is  eighteen
                    months after the Closing Date;

                    ii.    for Damages to the extent such Damages do  not exceed
                    $500,000 in the aggregate;

                    iii. For Damages to the extent that CES has previously  paid
                    Damages to a USE Indemnitee  with respect to the same matter
                    pursuant to the Merger  Agreement  or any of the  agreements
                    executed  in  connection   therewith  and  the  transactions
                    contemplated by the Merger Agreement;

                                       3
<PAGE>
                    iv. with respect to lost profits or punitive  damages (other
                    than  punitive  damages  paid or  payable  to, or claimed by
                    third parties); and

                    v.     more than $11,500,000.

The CES Indemnitees shall not be entitled to recover under Section 3(b):

                    i.     unless a Notice of Claim (as defined herein) has been
                    delivered to the USE Parties, on or prior to the  date which
                    is eighteen months after the Closing Date;

                    ii.    for Damages to the extent such Damages do not  exceed
                    $500,000 in the aggregate;

                    iii.  For  Damages  to the  extent  that any USE  Party  has
                    previously  paid Damages to a CES Indemnitee with respect to
                    the same matter  pursuant to the Merger  Agreement or any of
                    the  agreements  executed in  connection  therewith  and the
                    transactions contemplated by the Merger Agreement;

                    iv. with respect to lost profits or punitive  damages (other
                    than  punitive  damages  paid or  payable  to, or claimed by
                    third parties); and

                    v.     more than $11,500,000

                    (b) The payment of any Damages to which the  Indemnitees are
entitled  pursuant  to  Section  3 of this  Indemnification  Agreement  shall be
satisfied by disbursing cash.

                    (c) The parties  hereto  agree that the  provisions  of this
Section 4 will govern any claims for indemnification  under this Indemnification
Agreement.  If and when a USE  Indemnitee  desires to assert a claim for Damages
against CES pursuant to the provisions of this Indemnification  Agreement,  or a
CES  Indemnitee  desires to assert a claim for  Damages  against the USE Parties
pursuant to the provisions of this Indemnification Agreement, the USE Indemnitee
or the CES  Indemnitee,  shall deliver to (i) CES or (ii) the USE Parties as the
case may be (the "Indemnifying  Party") reasonably promptly after its receipt of
a  claim  or  specific  and  affirmative  awareness  of  a  potential  claim,  a
certificate  signed by the Indemnitee  (the "Notice of Claim"):  (i) stating the
amount of Damages (to the extent then known); and, (ii) specifying to the extent
possible (A) the individual  items of Damages  included in the amount so stated,
(B) the date  each  such item is to be paid or  accrued  and (C) the basis  upon
which Damages are claimed. CES and the USE Parties shall proceed, in good faith,
and using reasonable  efforts,  to agree upon the amount of such Damages. If the
Indemnifying Party does not notify the Indemnitee within thirty (30) days of the
giving of such  Notice  of Claim  that the  Indemnifying  Party)  disputes  such
Damages,  the amount of such Damages shall be conclusively deemed a liability of
the Indemnifying Party hereunder. If CES and the USE Parties are unable to agree
on the amount of such Damages within thirty (30) days after giving the Notice of
Claim then the provisions of Section 4(d) shall become effective.

                                       4
<PAGE>

                    (d) Each and every  controversy  or claim  arising out of or
relating  to  indemnification  for  Damages  pursuant  to  Section  4(c) of this
Indemnification  Agreement which the Indemnifying  Party and the Indemnitee (the
"Parties")  have not resolved,  shall be resolved by  arbitration  in accordance
with the rules of the American  Arbitration  Association  ("AAA") as modified by
this Agreement. Each party shall select one arbitrator and the two such selected
arbitrators  shall select a third  arbitrator (who shall not be appointed by the
Parties)  selected  from  the AAA.  Judgment  upon the  award  rendered  in such
arbitration  shall be final and  binding  upon the Parties and may be entered in
any court  having  jurisdiction  thereof.  Notice of the demand for  arbitration
shall be filed in writing  with the other  party and with the office of the AAA,
located in  Manhattan,  New York,  which such demand shall set forth in the same
degree of  particularity  as required for complaints  under the Federal Rules of
Civil  Procedure the claims to be submitted to  arbitration.  Additionally,  the
demand for  arbitration  shall  include  appropriate  copies of all documents on
which  the  claims  are based and a list of all  persons  who the party  seeking
arbitration will call as witnesses with respect to such claims.  The arbitration
shall take place in  Manhattan,  New York.  This  agreement to arbitrate  may be
specifically enforced by a court of competent  jurisdiction under the applicable
law of the State of New York pertaining to arbitrations.

              The arbitrator  shall have the authority and jurisdiction to enter
any  pre-arbitration  awards  that  would  aid and  assist  the  conduct  of the
arbitration or preserve the Parties'  rights with respect to the  arbitration as
the  arbitrator  shall  deem  appropriate  in his  discretion.  The award of the
arbitrator  shall be in  writing  and it shall  specify  in  detail  the  issues
submitted to arbitration and the award of the arbitrator with respect to each of
the issues so submitted.

              The provisions of the Federal Rules of Civil Procedure relating to
the right of discovery in civil actions shall be applicable to such  arbitration
proceedings except as modified by the terms of this  Indemnification  Agreement.
Within thirty (30) days after the  commencement  of any  arbitration  proceeding
under this Indemnification  Agreement, each party shall file with the arbitrator
its contemplated  discovery plan outlining the desired documents to be produced,
the  depositions  to be taken  and any  other  discovery  action  sought  in the
arbitration  proceeding.  After a hearing,  the  arbitrator  in an interim award
shall fix the scope and content of each Party's discovery plan as the arbitrator
deems appropriate.  The arbitrator shall have the authority to modify,  amend or
change  such  interim  award  fixing the  discovery  plans of the  Parties  upon
application by either Party, if good cause appears for doing so.

                    The "Prevailing Party" as determined by the arbitrator shall
be entitled to recover from the losing  party  reasonable  expenses,  attorneys'
fees and costs  incurred  in  connection  therewith  and in the  enforcement  or
collection of any judgment or award rendered  therein.  The  "Prevailing  Party"
means the Party determined by the arbitrator to have most nearly prevailed, even
if such Party  does not  prevail  in all  matters,  or is not the Party in whose
favor an award is rendered. Included within the cost recoverable pursuant to the
terms of this Section 4(d) shall be included  service of process  costs,  filing
fees,   arbitration   fees,   arbitrators'   fees,  court  and  reporter  costs,
investigative  costs,  and  expert  witness  fees.  The award  pursuant  to such
arbitration will be final, binding and conclusive.

                                       5

<PAGE>

              5.  The  liability  of  each   Indemnifying   Party  hereunder  is
independent of any agreements to indemnify the Indemnitees  whether  executed by
the parties hereto, any other indemnifying person or by any other party, and the
liability of the parties  hereunder shall not be affected or impaired by (a) any
direction  as to  application  of  payment  by any party  hereto,  (b) any other
continuing  or other  indemnity,  undertaking  of a party hereto or of any other
indemnifying person or other party as to the Obligations,  (c) any payment on or
in reduction of any such other indemnity or undertaking, or (d) any dissolution,
termination or increase, decrease or change in personnel by any party hereto.

              6. The obligations of each party hereto  hereunder are independent
of the obligations of any other party hereto,  or  indemnifying  person or other
party of any of the Obligations, and a separate action or actions may be brought
and prosecuted against any party hereto, subject to Section 4(a), whether or not
action is brought  against any other party  hereto,  or  indemnifying  person or
other party of, or with respect to, any of the  Obligations,  and whether or not
any other party hereto or indemnifying person or other party of, or with respect
to,  any of the  Obligations,  be  joined  in any such  action  or  actions.  No
Indemnifying  Party  shall be  entitled  to  require  that any action be brought
against any other Person  before  action is brought  against it hereunder by the
Indemnitee.  Subject to Section 4(a) hereof,  each party hereto  waives,  to the
fullest  extent  permitted  by law,  the benefit of any  statute of  limitations
affecting its liability hereunder or the enforcement thereof. Any payment by any
party  hereto,  or other  circumstance  which  operates  to toll any  statute of
limitations  as to any  party  hereto  shall  operate  to toll  the  statute  of
limitations as to each Indemnifying Party.

              7. No invalidity,  irregularity or  unenforceability of all or any
part of the Obligations or of any security therefor shall affect, impair or be a
defense to this  Agreement,  and  (except  to the  extent,  if any,  as shall be
required by  applicable  statute and cannot be waived) this  Agreement  shall be
primary, absolute and unconditional  notwithstanding the occurrence of any event
or the existence of any other  circumstances  which might  constitute a legal or
equitable  discharge of an  indemnifying  person  except  payment in full of the
Obligations.  No provision of this  Agreement  shall be deemed to be a waiver by
any party hereto of its right to assert that its  Obligations  have been paid in
full.

              8. Each  Indemnifying  Party waives any right  (except as shall be
required  by  applicable  statute or law and  cannot be  waived) to require  the
Indemnitees  to: (i) proceed  against any party hereto,  indemnifying  person or
other  person of, or with  respect to, any of the  Obligations  or; (ii) proceed
against or exhaust  any  security  held from or any party  hereto,  indemnifying
person of, or with respect to, any of the Obligations; or (iii) pursue any other
remedy in any Indemnitee's power whatsoever.  Each Indemnifying Party waives (to
the fullest extent  permitted by applicable law) any defense based on or arising
out of any defense of any party hereto,  indemnifying person of, or with respect
to,  any of the  Obligations  other  than  payment  in full of the  Obligations,
including,  without  limitation,  any  defense  based on or  arising  out of the
disability of any party hereto,  indemnifying person of, or with respect to, any
of the  Obligations,  or the  unenforceability  of the  Obligations  or any part

                                       6
<PAGE>

thereof from any cause.  Each party  waives any defense  arising out of any such
election by the  Indemnitees,  even though such  election  operates to impair or
extinguish any right of reimbursement or subrogation or other right or remedy of
any party hereto against any party or any security.

              9. In  order to  induce  the  parties  hereto  to  enter  into and
consummate the  transactions  contemplated by the Subscription  Agreement,  each
party hereto represents, warrants and covenants that:

                    (a) no  consent  of any  other  Person  and  no  consent  or
authorization of, filing with or other act by or in respect of, any Governmental
Entity or any  other  Person  is  required  in  connection  with the  execution,
delivery or performance  by such party,  or the validity or  enforceability  of,
this Agreement, except for consents, authorizations,  filings or acts which have
been made or obtained, as the case may be, and are in full force and effect; and

                    (b) the execution, delivery and performance by such party of
this  Indemnification  Agreement  will not (i) violate any law,  statute,  rule,
regulation  or  ordinance or any order,  writ,  junction or decree of any court,
Governmental  Entity or  arbitration  board or tribunal,  or (ii) conflict or be
inconsistent  with or result in any  breach  of,  any of the  terms,  covenants,
conditions  or  provisions  of, or  constitute a default  under,  or (other than
pursuant to the Transaction  Documents)  result in the creation or imposition of
(or the  obligation  to create or impose)  any lien upon any of the  property or
assets of such party pursuant to the terms of any indenture,  mortgage,  deed of
trust,  loan agreement,  credit  agreement or other material  agreement or other
instrument  to which such party is a party or by which it or any of its property
or assets is bound or to which it may be subject.

              10.  Nothing  contained in this  Indemnification  Agreement  shall
limit the ability of the  Indemnitees to pursue Damages or such other  remedies,
at law or in equity, resulting from fraud or intentional misrepresentation.

              11.  (a) All  representations  and  warranties  set  forth in this
Indemnification  Agreement  shall  survive the Closing for a period of six years
following  the  Effective  Time (and none  shall  merge into any  instrument  of
conveyance)  regardless of any  investigation  or lack of  investigation  by the
parties  hereto  provided  that this sentence is not intended to extend the time
limits  respecting  the  delivery of Notices of Claims set forth in Section 4(a)
hereof.  No specific  representation  and warranty shall limit the generality or
applicability of a more general  representation and warranty. The failure in any
one or more instances of a party to insist upon performance of any of the terms,
covenants or conditions of this Indemnification Agreement, to exercise any right
or privilege conferred in this Indemnification  Agreement, or the waiver by said
party  of any  breach  of any of the  terms,  covenants  or  conditions  of this
Indemnification  Agreement, shall not be construed as a subsequent waiver of any
such  terms,  covenants,  conditions,  right or  privileges,  but the same shall
continue and remain in full force and effect as if no such forbearance or waiver
had occurred. No waiver shall be effective unless it is in writing and signed by
an authorized representative of the waiving party.

                                       7
<PAGE>

                    (b) This Indemnification  Agreement sets forth the exclusive
remedies of the Indemnitees  against the Indemnifying  Parties,  absent fraud or
intentional  misrepresentation,  with respect to the matters expressly set forth
in Section 3 hereof.

              12. This  Indemnification  Agreement shall inure to the benefit of
and be binding  upon the parties  hereto,  and their  successors  and  permitted
assigns.  Nothing in this  Indemnification  Agreement,  express or  implied,  is
intended  to confer on any  person  other  than the  parties  hereto,  and their
respective successors and permitted assigns any rights, remedies, obligations or
liabilities under or by reason of this Indemnification Agreement.

              13. This Indemnification  Agreement shall not be assignable by the
parties  without the prior  written  consent of the other  parties,  except that
after the Closing,  subject to compliance with all applicable  securities  laws,
each  party may  assign  its  respective  rights  and  delegate  its  respective
obligations  under  this  Indemnification  Agreement  to any third  party  which
assumes all of the assigning party's obligations  hereunder  provided,  however,
that such assigning shall remain liable for all of its obligations hereunder.

              14.  This  Indemnification  Agreement  may be executed in multiple
counterparts,  each of which  shall be  deemed to be an  original,  and all such
counterparts shall constitute but one instrument.

              15. The parties shall execute such further documents,  and perform
such further  acts,  as may be  necessary to otherwise  comply with the terms of
this Indemnification Agreement, and the Transaction Documents and consummate the
transactions  contemplated thereby. In addition,  the USE Indemnitees shall, and
shall cause the Surviving  Corporation to,  cooperate with the CES in connection
with all  claims  giving  rise to any claim for  indemnification  hereunder.  In
furtherance  of the  foregoing,  the USE  Indemnitees  shall and shall cause the
Surviving  Corporation  (at the expense of CES) to make  available  to CES,  and
permit CES to make copies of all records, data and other materials and otherwise
to  cooperate  in all  respects  with the  prosecution  and  defense of all such
claims.

              16.  None of the  terms or  provisions  of this  Agreement  may be
amended,  supplemented  or  otherwise  modified  except by a written  instrument
executed by the parties hereto.

              17. Any notice or request hereunder may be given to the parties as
follows:

If to the USE Parties:

                           U.S. Energy Systems, Inc.
                           One North Lexington Avenue, 4th Floor
                           White Plains, New York 10601
                           Facsimile No.: 561-820-9775
                           Attention: Goran Mornhed, President and Chief
                           Operating Officer

                                       8
<PAGE>

with a copy to:

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


If to CES:

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

with a copy to:

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

or, at such other address as may  hereafter be specified in a notice  designated
as a notice of change of  address  under  this  Section.  Any  notice or request
hereunder  shall be given by reputable  overnight  courier.  Any notice or other
communication  required or permitted  pursuant to this Agreement shall be deemed
given upon actual receipt thereof when sent by a recognized  overnight  delivery
service.

              19.  Subject to  Section  4(d)  hereof,  this  Agreement  shall be
governed by and construed in  accordance  with the laws of the State of New York
applied  to  contracts  to be  performed  wholly  within  the State of New York,
without  giving  effect to the  principles  of  conflicts  of law.  Any judicial
proceeding brought by or against any party hereto with respect to this Agreement
or any related agreement may be brought in the Supreme Court of the State of New
York located in the County of New York or in the United  States  District  Court
for the  Southern  District of New York and, by  execution  and delivery of this
Agreement,  each party accepts, for itself or himself and in connection with its
or his properties, generally and unconditionally, the non-exclusive jurisdiction
of the  aforesaid  courts,  and  irrevocably  agrees to be bound by any judgment
rendered  thereby in connection  with this  Agreement.  Each party hereto hereby
waives personal  service of any and all process upon it or him and consents that
all such  service of process  may be made by  registered  mail  (return  receipt
requested)  directed to such party at the address set forth  pursuant to Section

                                        9
<PAGE>

18 hereto and service so made shall be deemed  completed five (5) days after the
same shall have been so deposited in the mails of the United  States of America.
Nothing  herein shall affect the right to serve process in any manner  permitted
by law or shall  limit the right of any party to bring  proceedings  against any
other party in the courts of any other  jurisdiction.  The parties  hereto waive
any objection to jurisdiction  and venue of any action  instituted  hereunder in
any court  referred to above and shall not assert any  defense  based on lack of
jurisdiction or venue or based upon forum non conveniens.

              20. All payments made by the Indemnifying  Parties  hereunder will
be made without set off, counterclaim or other defense.

              21. If any part of this  Agreement is contrary to,  prohibited by,
or deemed invalid under applicable laws or regulations,  such provision shall be
inapplicable  and  deemed  omitted  to the  extent so  contrary,  prohibited  or
invalid,  but the remainder hereof shall not be invalidated thereby and shall be
given effect so far as possible.

              23. This Agreement  shall not become  effective  until the Closing
Time.  If the Merger  Agreement  is  terminated  before the Closing  Time,  this
Agreement shall be null and void and of no effect.

                                       10

<PAGE>

              IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the day and year first above written.

                         CINERGY ENERGY SOLUTIONS, INC.


                         By: M. Stephen  Harkness
                             ----------------------------------------
                             Name:
                             Title:




                            U.S. ENERGY SYSTEMS, INC.


                              /s/   Goran Mornhed
                              ---------------------------
                              Name: Goran Mornhed
                              Title:President and Chief Operating Officer

                              USE ACQUISITION CORP.:

                               /s/ Goran Mornhed
                               ---------------------------
                               Name:
                               Title:

                                       11