LIMITED RESOURSE PROMISSORY NOTE




                                                                 July 31, 2000
 $7,741,378.90                                                New York, New York


FOR VALUE  RECEIVED,  Energy  Systems  Investors,  L.L.C.,  a  Delaware  limited
liability  company with its offices at 920 Park Avenue,  Apt. 4D, New York,  New
York 10028,  Attn:  Lawrence I. Schneider  (the "Maker")  promises to pay to the
order of U.S.  Energy  Systems,  Inc., a Delaware  corporation or any subsequent
holder of this Note (the  "Payee") on July 30, 2001,  at its offices  located at
U.S.  Energy  Systems,  Inc., 515 N. Flagler Drive,  Suite 702, West Palm Beach,
Florida 33401,  or at such other location as Payee may designate in writing from
time to  time,  the  principal  sum of Seven  Million  Seven  Hundred  Forty-One
Thousand  Three  Hundred  Seventy-Eight  and  90/100  ($7,741,378.90)   Dollars,
together with interest  from August 1, 2000 on the unpaid  principal  balance at
the rate of nine and one-quarter  percent  (9.25%) per annum.  Interest shall be
payable in arrears on July 31,  October  31,  January  31, and April 30 of every
year  commencing  October  31,  2000,  with any  unpaid  interest  to be paid at
maturity,  whether by  acceleration  or  otherwise.  Upon  maturity,  whether by
acceleration,  or  otherwise,  this Note shall bear  interest  at the rate which
shall be twelve  percent  (12%) per annum,  but not more than the  maximum  rate
allowed by law. All interest calculations hereunder shall be calculated based on
a 365 day year and on the number of days actually elapsed. Payments of principal
and interest  shall be made in lawful  money of the United  States of America in
immediately  available funds. The obligations evidenced by this Note are secured
by the Pledge  Agreement  dated as of the date hereof  between the Maker and the
Payee (the "Pledge Agreement"). This Note has been issued by Maker in connection
with its exercise of the balance of an option to acquire an aggregate of 888,888
shares of Series A  Convertible  Preferred  Stock (the "Series A Stock") of U.S.
Energy Systems,  Inc.  ("USE"),  such option having previously been exercised to
acquire an aggregate of 27,778 shares of Series A Stock.

                  1. EVENTS OF DEFAULT.  The  occurrence of any of the following
events will be deemed to be an Event of Default  under this Note:  (a) the Maker
shall fail to make any payment of principal or of interest on this Note when due
and such  payment is not  received by the Payee within five days after notice of
such failure is given to Maker; (b) the Maker shall fail,  beyond any applicable
notice,  grace or cure  period,  to make  any  payment  or  shall  fail to keep,
observe,  comply  with or  perform  any  term,  provision,  covenant,  warranty,
agreement,  condition or undertaking  on its part required to be paid,  complied
with or  performed  or  observed,  by the  provisions  of this Note,  the Pledge
Agreement  or any of the other  agreements,  documents or  instruments  executed
and/or  delivered by the Maker to the Payee in connection  with the execution of
this Note or the Pledge  Agreement;  (c) the Maker shall (i)  commence any case,
proceeding or other action under any existing or future law of any jurisdiction,
domestic or foreign,  relating to  bankruptcy,  insolvency,  reorganization,  or
relief of debtors,  seeking to have an order for relief  entered with respect to
it, or seeking to adjudicate it a bankrupt or insolvent, or seeking


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reorganization,  arrangement, adjustment, winding-up, liquidation,  dissolution,
composition,  or other relief with respect to its debts; (ii) commence any case,
proceeding  or  other  action  seeking  appointment  of  a  receiver,   trustee,
custodian,  or other similar  official for it or for all or any substantial part
of its  assets;  or (iii)  make a  general  assignment  for the  benefit  of its
creditors;  (d) there  shall be  commenced  against  the Maker by any person any
case,  proceeding  or other  action of a nature  referred to in clause (c) above
that  results  in the entry of an order for relief or any such  adjudication  or
appointment,  and such order,  adjudication or appointment remains  undismissed,
undischarged,  or unbonded for a period of thirty (30) days;  or (e) there shall
be  commenced  against  the Maker by any person any case,  proceeding,  or other
action seeking  issuance of a warrant of attachment,  execution,  distraint,  or
similar process  against all or any substantial  part of its assets that results
in the entry of an order for any such relief  that shall not have been  vacated,
discharged,  or stayed or bonded pending appeal within thirty (30) days from the
entry  thereof;  (f) the  Maker  shall  take any  action in  furtherance  of, or
indicating its consent to, approval of, or acquiescence  in, any of the acts set
forth in  clauses  (a),  (b),  (c),  (d) and (e) above;  or (g) the Maker  shall
generally  not, or shall be unable to, or shall  admit in writing its  inability
to, pay its debts as they become due.

         If an Event of Default shall have occurred and be continuing, Payee may
declare this Note  immediately due and payable in full, both as to principal and
accrued  interest without any further notice to the Maker, and Payee may proceed
to exercise and enforce any and all of the rights and  remedies  available to it
hereunder and at law or in equity.

                  2. LIMITED RECOURSE. (a) Payee hereby covenants and agrees for
itself,  its successors and assigns (this covenant to be binding upon any future
holder or holders of the Note and upon any and all persons making a claim of any
kind  against  the Maker  arising out of the Note),  that,  except to the extent
otherwise provided in this paragraph 2, Payee or any future holder or holders of
the Note shall enforce  payment of any obligation or warranty  contained in this
Note,  solely  from (i) the Pledged  Collateral  (as such term is defined in the
Pledge  Agreement)  and (ii) not more than  $100,000 of the Maker's other assets
(i.e.,  excluding the Pledged Collateral),  and that except as set forth in this
paragraph 2, no deficiency,  after applying the net proceeds of any  foreclosure
or other sale or disposition (judicial or otherwise) of the pledged,  mortgaged,
hypothecated,  or  assigned  property  against any and all amounts due under the
Note,  shall ever be asserted  against the Maker, or in any manner realized upon
the personal liability of the Maker.

                           (b)  The  provisions  of paragraph  2(a) shall not,
however, (i) constitute a waiver,  release or impairment  of any  obligation
evidenced or secured by the Pledge  Agreement; (ii) impair the right of Payee to
name  Maker as a party defendant  in any action or suit for foreclosure and sale
under  the  Pledge  Agreement; nor (iii) impair the enforcement  of  the Pledge
Agreement.

                  3.  OPTIONAL  PREPAYMENTS.  The Maker  shall have the right to
prepay  all or any part of this  Note at any time or from  time to time  without
penalty. All such prepayments shall be first applied to accrued costs,  expenses
and fees, if any, on the Note and/or

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the  Pledge  Agreement  then to  interest  due on the  Note  and/or  the  Pledge
Agreement, and then to the reduction of the principal amount of this Note.

                  4. WAIVER OF JURY TRIAL. THE MAKER IRREVOCABLY  WAIVES ANY AND
ALL RIGHTS THE MAKER MAY HAVE TO A TRIAL BY JURY IN ANY  ACTION,  PROCEEDING  OR
CLAIM OF ANY NATURE RELATING TO THIS NOTE, ANY DOCUMENTS  EXECUTED IN CONNECTION
WITH  THIS  NOTE OR THE  PLEDGE  AGREEMENT.  THE  MAKER  ACKNOWLEDGES  THAT  THE
FOREGOING WAIVER IS KNOWING AND VOLUNTARY.  THE MAKER  ACKNOWLEDGES  THAT IT HAS
READ AND  UNDERSTOOD  ALL THE  PROVISIONS OF THIS NOTE,  INCLUDING THE WAIVER OF
JURY TRIAL, AND HAS BEEN ADVISED BY COUNSEL AS NECESSARY OR APPROPRIATE.

                  5. MAXIMUM RATE OF INTEREST.  NOTHING  CONTAINED  HEREIN OR IN
ANY INSTRUMENT OR TRANSACTION  RELATED HERETO,  SHALL BE CONSTRUED OR OPERATE AS
TO REQUIRE THE MAKER, TO PAY INTEREST,  OR ANY CHARGE IN THE NATURE OF INTEREST,
IN AN AMOUNT OR AT A RATE WHICH EXCEEDS THE MAXIMUM RATE OF INTEREST  ALLOWED BY
APPLICABLE  LAW  RELATING  TO USURY.  IN THE EVENT  THAT PAYEE  DETERMINES  THAT
CHARGES AND FEES INCURRED IN CONNECTION WITH THIS NOTE MAY UNDER SUCH APPLICABLE
LAWS CAUSE THE  INTEREST  RATE HEREON TO EXCEED THE MAXIMUM RATE ALLOWED BY LAW,
THEN SUCH INTEREST SHALL BE RECALCULATED AND ANY AMOUNT IN EXCESS OF THE MAXIMUM
INTEREST PERMITTED BY LAW SHALL BE APPLIED TO REDUCE THE PRINCIPAL AMOUNT OF THE
NOTE. IT IS THE INTENT OF THE PARTIES HERETO THAT UNDER NO  CIRCUMSTANCES  SHALL
THE MAKER OR ANY OTHER PERSON LIABLE FOR THE PAYMENT OF THIS NOTE BE REQUIRED TO
PAY, NOR SHALL PAYEE BE ENTITLED TO COLLECT,  ANY INTEREST WHICH IS IN EXCESS OF
THE  MAXIMUM  LEGAL RATE  PERMITTED  UNDER SUCH  APPLICABLE  LAW.  PAYEE MAY, IN
DETERMINING  THE  MAXIMUM  RATE OF INTEREST  ALLOWED  UNDER  APPLICABLE  LAW, AS
AMENDED FROM TIME TO TIME,  TAKE  ADVANTAGE OF ANY STATE OR FEDERAL LAW, RULE OR
REGULATION  IN EFFECT  FROM TIME TO TIME WHICH MAY GOVERN  THE  MAXIMUM  RATE OF
INTEREST WHICH MAY BE RESERVED,  CHARGED OR TAKEN.  THE MAKER AND THE PAYEE HAVE
AGREED THAT NEW YORK LAW SHALL GOVERN ALL CONSIDERATIONS AND DETERMINATIONS WITH
REGARD TO USURY.

                  6.       MISCELLANEOUS.

                           (a)      No delay or omission of Payee  to  exercise
any right or power arising  hereunder  or by law  shall impair any such right or
power or be  considered to be  a waiver of any such  right or power, nor  shall
Payee's  action or inaction impair any  such right or power. No remedy conferred
upon or reserved or available to Payee shall be exclusive of any other

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<PAGE>

remedy  or  remedies  available  to it,  but  each  and  every  remedy  shall be
cumulative  and shall be in  addition  to every  such  remedy  now or  hereafter
existing at law or in equity.  Any right or power of Payee may be exercised from
time to time and as often as may be deemed  expedient by it. The Maker agrees to
pay on demand,  to the extent permitted by law, all costs and expenses  incurred
by Payee in the  enforcement  of its  rights  with  respect to this Note and any
security  therefor  (including  pursuant  to the  Pledge  Agreement),  including
without  limitation,  reasonable  fees and expenses of Payee's  counsel.  If any
provision  of this  Note is  found  to be  invalid  by a  court,  all the  other
provisions of this Note will remain in full force and effect.

                           (b)      The  Maker and all other parties who  at any
time  may  be  liable  hereon in  any  capacity, jointly  or  severally, waive
presentment,  demand for payment,  protest and  notice  of dishonor of this Note
and authorize the holder hereof,  without  notice,  to grant  extensions  in the
time of  payment  of and changes in the rate of interest pursuant to Section 5
hereof on any moneys owing on this  Note.  The Maker also  waives  all  defenses
based on  suretyship or impairment of collateral.

                           (c)      This  Note  shall be  binding upon the Maker
and its respective successors and assigns.

                           (d)      Any  notice or  request hereunder  shall be
given by hand delivery,  overnight  courier,  or registered  or certified  mail,
return  receipt  requested. Any notice or  other  communication  required  or
permitted  pursuant to  this Note shall be deemed given (i) when personally
delivered to any party or any officer of the party to whom it is addressed, (ii)
on the  earlier  of actual  receipt thereof or three (3) days following  posting
thereof by certified or registered mail, postage  prepaid,  or (iii) upon actual
receipt  thereof  when sent by a recognized overnight delivery service.

                           (e)      Caption headings  in  this  Note  are  for
convenience only and are not to be used to interpret or define the provisions of
this Note.

                           (f)      This Note has been delivered to and accepted
by Payee and will be deemed to be made in the New York State.  THIS NOTE WILL BE
INTERPRETED AND THE  RIGHTS  AND  LIABILITIES  OF PAYEE AND THE  MAKER  SHALL BE
DETERMINED  IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,  EXCLUDING ITS
CHOICE OF LAWS RULES.

                                        ENERGY SYSTEMS INVESTORS, L.L.C.


                                   By: Henry Schneider
                                       -------------------------
                                       Henry Schneider, Manager