Document:

AMENDMENT NO. 3 TO ESCROW AGREEMENT

                  THIS AMENDMENT NO. 3 to the Escrow Agreement is made as of the
10th day of February, 2003 (as supplemented or modified from time to time, this
"Agreement") by and among AJG Financial Services, Inc., through its Vice-
President, General Counsel as agent (the "Major Shareholder Agent") for Bernard
J. Zahren, Finova Mezzanine Capital Corp., AJG Financial Services, Inc.,
Environmental Opportunities Fund (by itself and as successor to Environmental
Opportunities Fund Cayman), Fredric Rose, M&R  Associates, Martin F. Laughlin,
Richard C. Augustine and Michael J. Carolan (each, an "Initial Major
Shareholder") and for Stephen Rosenberg, U.S. Energy Systems, Inc., a Delaware
corporation ("USE"), and US Energy Biogas Corp. (formerly known as Zahren
Alternative Power Corporation), as the successor to USE Acquisition Corp. a
Delaware corporation (the "Sub" and together with USE, the "USE Parties"),
Cinergy Energy Solutions, Inc., a Delaware corporation ("CES" and together with
the USE Parties, the "Beneficiaries"), and Tannenbaum Helpern Syracuse &
Hirschtritt LLP having an office at 900 Third Ave., New York, New York, 10022
(the "Escrow Agent"). Unless indicated otherwise, capitalized terms shall have
the same meanings herein as they have in the Escrow Agreement(as defined below).

                              W I T N E S S E T H:

                  WHEREAS, the parties hereto and the Initial Major Shareholders
have previously entered into that certain Escrow Agreement dated as of November
28, 2000 (as amended by Amendment No. 1 dated as of May 11, 2001, and Amendment
No. 2 dated as of November 1, 2002, the "Escrow Agreement");

            WHEREAS, the parties hereto now wish to amend the Escrow Agreement;

                  NOW, THEREFORE, in consideration of $10.00 and other
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

                1.    The last sentence of Section 3(d) of the Escrow Agreement
                      is hereby amended by deleting the existing sentence in its
                      entirety and inserting in its place the following
                      sentence:

                      The "Release Date" shall be March 14, 2003.

                2.    Except as amended hereby, the Escrow Agreement is hereby
                      ratified and confirmed and, as so amended, remains in full
                      force and effect on the date hereof.

                  IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be Executed as of the date first written above.

                              MAJOR SHAREHOLDER AGENT:
                              AJG FINANCIAL SERVICES, INC.

                              By:/s/ John C. Rosengren
                                     -----------------
                              Name:  John C. Rosengren
                              Title: Vice President and
                                     General Manager

                              CINERGY ENERGY SOLUTIONS, INC.:

                              By: /s/ Donna Robichaud
                                      ---------------
                              Name:   Donna Robichaud
                              Title:  Vice President

                              U.S. ENERGY SYSTEMS, INC.:

                              By: /s/ Goran Mornhead
                                      --------------
                              Name:   Goran Mornhead
                              Title:  Chief Executive Officer

                              US ENERGY BIOGAS CORP:

                              By: /s/ Goran Mornhead
                                      --------------
                              Name:   Goran Mornhead
                              Title:  Chief Executive Officer

                              ESCROW AGENT:

                              TANNENBAUM HELPERN SYRACUSE & HIRSCHTRITT LLP

                             By: /s/ Stephen Rosenberg
                                     -----------------
                                     Stephen Rosenberg
                                     A Member of the FirmAMENDMENT NO. 4 TO ESCROW AGREEMENT

                  THIS AMENDMENT NO. 4 to the Escrow Agreement is made as of the
13th day of March, 2003 (as supplemented or modified from time to time, this
"Agreement") by and among AJG Financial Services, Inc., through its Vice-
President, General Counsel as agent (the "Major Shareholder Agent") for Bernard
J. Zahren, Finova Mezzanine Capital Corp., AJG Financial Services, Inc.,
Environmental Opportunities Fund (by itself and as successor to Environmental
Opportunities Fund Cayman), Fredric Rose, M&R  Associates, Martin F. Laughlin,
Richard C. Augustine and Michael J. Carolan (each, an "Initial Major
Shareholder") and for Stephen Rosenberg, U.S. Energy Systems, Inc., a Delaware
corporation ("USE"), and US Energy Biogas Corp. (formerly known as Zahren
Alternative Power Corporation), as the successor to USE Acquisition Corp. a
Delaware corporation (the "Sub" and together with USE, the "USE Parties"),
Cinergy Energy Solutions, Inc., a Delaware corporation ("CES" and together with
the USE Parties, the "Beneficiaries"), and Tannenbaum Helpern Syracuse &
Hirschtritt LLP having an office at 900 Third Ave., New York, New York, 10022
(the "Escrow Agent"). Unless indicated otherwise, capitalized terms shall have
the same meanings herein as they have in the Escrow Agreement (as defined
below).

                              W I T N E S S E T H:

                  WHEREAS, the parties hereto and the Initial Major Shareholders
have previously entered into that certain Escrow Agreement dated as of November
28, 2000 (as amended by Amendment No. 1 dated as of May 11, 2001, Amendment No.
2 dated as of November 1, 2002, and Amendment No. 3 dated as of February 10,
2003, the "Escrow Agreement");

                  WHEREAS, the parties hereto now wish to amend the Escrow
 Agreement;

                  NOW, THEREFORE, in consideration of $10.00 and other
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:

                1.    The last sentence of Section 3(d) of the Escrow Agreement
                      is hereby amended by deleting the existing sentence in its
                      entirety and inserting in its place the following
                      sentence:

                      The "Release Date" shall be April 15, 2003.

                2.    Except as amended hereby, the Escrow Agreement is hereby
                      ratified and confirmed and, as so amended, remains in full
                      force and effect on the date hereof.

<PAGE>

        IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be Executed as of the date first written above.

                                MAJOR SHAREHOLDER AGENT:
                                AJG FINANCIAL SERVICES, INC.

                                By:/s/ John C. Rosengren
                                       -----------------
                                Name:  John C. Rosengren
                                Title: Vice President and General Manager

                                CINERGY ENERGY SOLUTIONS, INC.:

                                 By: /s/ Donna Robichaud
                                         ---------------
                                  Name:  Donna Robichaud
                                         Title: Vice President

                                U.S. ENERGY SYSTEMS, INC.:

                                By: /s/ Goran Mornhed
                                        -------------
                                  Name: Goran Mornhed
                                 Title: Chief Executive Officer

                                US ENERGY BIOGAS CORP:

                                By:/s/ Goran Mornhed
                                       -------------
                                 Name: Goran Mornhed
                                 Title: Chief Executive Officer

                                   ESCROW AGENT:

                                   TANNENBAUM HELPERN SYRACUSE & HIRSCHTRITT LLP

                                    By: /s/ Stephen Rosenberg
                                            -----------------
                                            Stephen Rosenberg
                                            A Member of the FirmU.S. ENERGY SYSTEMS, INC.
                    2003 CORPORATE DEVELOPMENT INCENTIVE PLAN
            Approved by the Compensation Committee on March 19, 2003

1 - Plan Objectives

The following documents an incentive plan to recognize and reward employees who
make positive contributions to U.S. Energy Systems growth and profitability
goals through corporate development, including the development, acquisition,
monetization or sale of projects, assets or investments..

This plan is designed to provide an incentive for employees to increase sales,
revenues and income by developing or acquiring projects and assets, and to
increase liquidity by monetizing or selling assets or investments. This
incentive plan is independent from and additive to other U.S. Energy Systems
compensation plans for which employees may be eligible except that employees
cannot benefit twice from the same accomplishment.

2 - Eligible Employees

This plan is primarily structured to motivate and reward those employees
involved in the corporate development activities. However, all U.S. Energy
Systems employees are eligible to participate, as there may be occasions when
engineering, legal, tax or other corporate and/or other operating unit employees
play a role in closing a deal.

Receipt of awards under the Plan shall be limited to individuals employed by the
Company on the date of awards.

3 - Plan Awards

Individual employees or a team of employees, who make positive contributions to
U.S. Energy Systems growth and profitability goals through corporate
development, including the development, acquisition, monetization or sale of
projects, assets or investments, will be eligible to receive a cash award for
their accomplishments.

3.1 For corporate development involving the development or acquisition of
projects, assets or investments, the bonus award will be calculated based on the
anticipated net present value of the after tax cash flow with consideration for
the following items among other things:

         - Certainty and risk of the transaction.
         - Other intangible attributes and benefits gained as a result of the
           transaction.
<PAGE>

3.2 For corporate development involving the monetization or sale of assets,
projects or investments, the bonus award will be calculated based on the
anticipated present value of the net proceeds to the Company (after repayment of
debt and transaction costs) with consideration for the following items among
other things:

         - Net cash consideration paid to the Company - Value of non-cash
         consideration - Risk associated with deferred consideration - Book
         value of asset or investment

4 - Plan Administration

The Plan will be administered by the CEO and the President. Awards under the
Plan will be made by the Compensation Committee of the Board of Directors. Award
recommendations will be made to the Compensation Committee of the Board by an
Awards Committee that will include three senior managers of the company,
including the CEO.

5 - Awards Procedures

1. The employee leading the corporate development effort will make nominations
for awards under this plan.

2. The nominations shall be sent to the Awards Committee and shall include:

         -    A memorandum describing the transaction
         -    A copy of the transaction documents
         -    A calculation of the Net Present Value or Present Value to the
              Company
         -    A financial proforma reflecting future cash flow, where
              applicable
         -    Identification of other tangible and intangible benefits
              to the Company.
         -    Identification of the employee/employees recommended for the award
              and the proposed incentive percentage for each employee

3.   The Awards Committee will make recommendations to the Compensation
     Committee of the Board, which will make the awards in accordance with this
     plan.

6 - Awards Determination

6.1 For corporate development involving the development or acquisition of
projects , assets or investments, the bonus award will be calculated based on
the anticipated Net Present Value of the after tax cash flow to the company.

<PAGE>

The total dollar value of the award will be 4% of the NPV of the after tax Free
Cash Flow, discounted at the risk-adjusted WACC (Weighted Average Cost of
Capital) (typically 7.5% - 9.5%) for the project, as per the proforma approved
by the Board at the time of the transaction, and incorporating all aspects of
the transaction. The WACC will be determined for each project, using CAPM
(Capital Assets Pricing Model) and Miller-Modigliani, as included in the
proforma approved by the Board.

6.2 For corporate development involving the monetization or sale of assets,
projects or investments, the bonus award will be calculated based on the
anticipated present value of the net proceeds to the Company net of debt
repayment and transaction costs, with consideration for the following items:

The total dollar value of the award will be a percentage of the anticipated
present value of the consideration, with any deferred consideration discounted
at the risk-adjusted WACC (typically 7.5% - 9.5%) for the asset or investment:

        -        2% of the net proceeds up to net book value
        -        4% of the net proceeds in excess of book value

6.3 The award will be distributed to one or more employees who were responsible
for the achievement or contributed to the success in relation to each employee's
relative contribution and considering any other compensation that the employee
may receive for the same achievement. The final allocation of the award between
the employees will be recommended by the Awards Committee and determined by the
Compensation Committee of the Board.

7 - Awards Distribution Timing

All nominations for awards will be acted upon within 30 days following submittal
to the CEO and the President.

7.1 For corporate development involving the development or acquisition of
projects or assets, the bonus award will be distributed as follow:

         -    Step 1:  50% at transaction closing

         -    Step 2: 30% at commercial operation of the new asset, project or
              asset or project underlying an investment (after plant acceptance)
              and after true up of the NPV that was used for the initial bonus,
              by taking into account the actual construction cost and other
              potential changes in the project. The second award will be the
              difference between 80% of the revised bonus and the step 1
              distributed bonus. In the case of a transaction involving assets
              or projects in commercial operation at the time of closing, Step 2
              award distribution shall be paid at closing.

                                       3
<PAGE>

         -    Step 3: 20% after one year of operation in the case of assets or
              projects to be developed and after one year from closing in the
              case of assets or projects in operation at the time of closing,
              and after true up of the NPV that was used for the second bonus,
              by taking into account the actual operating cost and other
              potential changes in the project. The third award will be the
              difference between the new revised bonus and step 1 plus step 2
              distributed bonuses.

For projects, assets or investments with expected sales growth, the three NPV
calculations above will be done, for each step, with sales corresponding to
signed underlying contracts at that time, and not including additional, not yet
executed, contracts that were expected in the initial proforma approved by the
Board.

7.2      For corporate development involving the monetization or sale of assets
         or investments, the bonus award will be distributed as follow:

        -     Step 1:  The  percentage of the award equal to the  percentage of
the net proceeds paid at closing,  will be paid at the time of closing

        -     Step 2: The remaining portion of the award relating to the
              deferred consideration will be paid one year after closing, and
              after true up of the present value calculation that was used to
              determine the initial award. Net proceeds paid into escrow at
              closing shall be considered deferred consideration.

8 - Other Plan Features

The Company reserves the right to terminate or amend the plan to any extent and
in any manner at any time at the Company's sole discretion.

Eligibility or participation in the Plan does not imply nor constitute any type
of an employment agreement between the participant and the Company.

This 2003 Corporate Development Incentive Plan applies to projects, assets or
investments acquired, initiated, sold or monetized on or after April 1, 2003.

                                      # # #

                                       4

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