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                                                                    EXHIBIT 10.4

                    AMENDED AND RESTATED EMPLOYMENT AGREEMENT
                                   MARCH, 2004

         THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "AGREEMENT") is
made as of this 1st day of March, 2004 by and between PHARMION CORPORATION, with
principal offices at 2525 28th Street, Boulder, Colorado (the "COMPANY"), and
Gillian C. Ivers-Read of 802 Neon Forest Circle, Longmont, Colorado 80501
("EXECUTIVE," and together with the Company, the "PARTIES").

         WHEREAS, the Executive is currently in the employ of the Company on the
terms and subject to the conditions as originally set forth between them in that
certain Employment Agreement dated January 4, 2002, as modified (the "Original
Agreement");

         WHEREAS, as a condition of the Executive's employment with the Company,
on or about April 1, 2002, the Executive executed that certain Confidential
Information and Invention Assignment Agreement (the "Confidentiality
Agreement");

         WHEREAS, the Company and the Executive have agreed to certain revisions
in the terms of the Original Agreement and wish to amend and restate the
Original Agreement in its entirety as set forth below; and

         WHEREAS, except as expressly set forth herein, the Parties intend that
this Amended and Restated Employment Agreement shall supersede and replace the
Original Agreement.

         NOW, THEREFORE, in consideration of the promises, mutual covenants, the
above recitals, and the agreements herein set forth, and for other good and
valuable consideration, the sufficiency of which is hereby acknowledged, the
Parties agree to the following amended and restated terms and conditions of
Executive's employment:

         1. EMPLOYMENT. The Company hereby agrees to employ Executive as Vice
President, Clinical Research and Regulatory Affairs, and Executive hereby
accepts such employment upon the terms and conditions set forth herein and
agrees to perform duties as assigned by the Company. Executive's employment as
provided herein, shall be deemed to have commenced, April 1, 2002 ("EFFECTIVE
DATE"), and shall continue until terminated pursuant to the provisions of
Section 9 below.

         2. AT-WILL EMPLOYMENT. IT IS UNDERSTOOD AND AGREED BY THE COMPANY AND
EXECUTIVE THAT THIS AGREEMENT DOES NOT CONTAIN ANY PROMISE OR REPRESENTATION
CONCERNING THE DURATION OF EXECUTIVE'S EMPLOYMENT WITH THE COMPANY. EXECUTIVE
SPECIFICALLY ACKNOWLEDGES THAT HIS/HER EMPLOYMENT WITH THE COMPANY IS AT-WILL
AND MAY BE ALTERED OR TERMINATED BY EITHER EXECUTIVE OR THE COMPANY AT ANY TIME,
WITH OR WITHOUT CAUSE AND/OR WITH OR WITHOUT NOTICE. EXECUTIVE ACKNOWLEDGES THAT
THE COMPANY'S ONLY OBLIGATIONS, IF ANY, UPON TERMINATION OF EXECUTIVE'S
EMPLOYMENT ARE SET FORTH IN SECTION 10

Amended and Restated Employment Agreement
Ivers-Read, Gillian
March, 2004
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BELOW, WHICH SECTION DOES NOT ALTER THE AT-WILL NATURE OF EXECUTIVE'S
EMPLOYMENT. THE NATURE, TERMS OR CONDITIONS OF EXECUTIVE'S EMPLOYMENT WITH THE
COMPANY CANNOT BE CHANGED BY ANY ORAL REPRESENTATION, CUSTOM, HABIT OR PRACTICE,
OR ANY OTHER WRITING EXCEPT AS PROVIDED FOR IN THE FINAL SENTENCE OF THIS
SECTION 2. IN ADDITION, THAT THE RATE OF SALARY OR OTHER COMPENSATION IS STATED
IN UNITS OF YEARS OR MONTHS DOES NOT ALTER THE AT-WILL NATURE OF THE EMPLOYMENT,
AND DOES NOT MEAN AND SHOULD NOT BE INTERPRETED TO MEAN THAT EXECUTIVE IS
GUARANTEED EMPLOYMENT TO THE END OF ANY PERIOD OF TIME OR FOR ANY PERIOD OF
TIME. IN THE EVENT OF CONFLICT BETWEEN THIS DISCLAIMER AND ANY OTHER STATEMENT,
ORAL OR WRITTEN, PRESENT OR FUTURE, CONCERNING TERMS AND CONDITIONS OF
EMPLOYMENT, THE AT-WILL RELATIONSHIP CONFIRMED BY THIS DISCLAIMER SHALL CONTROL.
THIS AT-WILL STATUS CANNOT BE ALTERED EXCEPT IN WRITING SIGNED BY EXECUTIVE AND
THE COMPANY, WITH EXPLICIT APPROVAL OF THE BOARD OF DIRECTORS.

         3. DUTIES. Executive shall render exclusive, full-time services (except
if and to the extent otherwise agreed to in advance by the Company's CEO or COO)
to the Company as its Vice President, Clinical Research and Regulatory Affairs.
Executive shall render such services diligently. At the outset of employment
with the Company, Executive shall report to the Company's Chief Operating
Officer, who is now Judith Hemberger. Executive shall perform services under
this Agreement at the Boulder, Colorado office of the Company, from such other
locations as directed by the Company, and from locations necessary to perform
the duties of Vice President, Clinical Research and Regulatory Affairs under
this Agreement. Executive's responsibilities, title, working conditions,
location, duties and/or any other aspect of Executive's employment may be
changed, added to or eliminated during Executive's employment at the sole
discretion of the Company. While employed by the Company under this Agreement,
Executive shall devote his/her time, skill and attention to the performance of
his/her duties on behalf of the Company.

         4. POLICIES AND PROCEDURES. Executive agrees that he/she is subject to
and will comply with the policies and procedures of the Company, as such
policies and procedures may be modified, added to or eliminated from time to
time at the sole discretion of the Company, except to the extent any such policy
or procedure specifically conflicts with the express terms of this Agreement.
Executive further agrees and acknowledges that any written or oral policies and
procedures of the Company do not constitute contracts between the Company and
Executive.

         5. COMPENSATION.

                  (a) BASE SALARY. For services rendered under this Agreement,
the Company agrees to pay to Executive, and Executive agrees to accept a salary
of $ 291,300.00 per annum ("Base Salary"). Such Base Salary shall be payable in
installments in accordance with the Company's normal payroll practices and shall
be subject to such deductions or withholdings as the Company is required to make
pursuant to law, or by further agreement with Executive. Executive's Base Salary
will be reviewed annually by the Company's Board of Directors beginning March 1,
2005, and may be adjusted from time to time as the Board, in its sole
discretion, deems appropriate.

Amended and Restated Employment Agreement
Ivers-Read, Gillian
March, 2004
                                       2
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                  (b) BONUS. Executive will be eligible to participate in a
bonus plan pursuant to which he/she may be entitled to receive an annual bonus,
of which the percentage is to be determined by the Board of Directors, of
his/her Base Salary based upon the achievement by Executive and the Company of
certain milestones as determined solely in the discretion of the Company's Board
of Directors.

         6. RELOCATION EXPENSES. Refer to attached Relocation Addendum

         7. OTHER BENEFITS. While employed by the Company as provided herein:

                  (a) EMPLOYEE BENEFITS. Executive shall be entitled to
participate in the Company's various employee benefit plans as such plans are
established pursuant to the terms and conditions of such plans. Currently, the
Company has adopted the following plans: Group health, vision and dental
insurance plan; short and long term disability plan; life insurance plan; and
401(k) plan. The Company reserves the right to alter, amend and/or terminate the
benefits provided to Executive from time to time at the Company's sole
discretion, and nothing in this Section shall require that the Company adopt,
amend, maintain or terminate any employee benefit plan.

                  (b) EXPENSE REIMBURSEMENT. Executive shall receive, against
presentation of proper receipts and vouchers, reimbursement for direct and
reasonable out-of-pocket expenses incurred in connection with the performance of
his/her duties hereunder, according to the policies of the Company.

                  (c) PAID VACATION TIME. Executive shall be entitled to 4 weeks
paid vacation time per year in accordance with the Company's vacation time
policy.

         8. CONFIDENTIAL INFORMATION AND OTHER OBLIGATIONS. Executive
understands, acknowledges and agrees that notwithstanding the fact that this
Agreement supersedes and replaces the Original Agreement, he/she continues to be
bound by the terms and conditions of the Confidentiality Agreement and agrees to
comply in all respects with his/her obligations under the Confidentiality
Agreement.

         9. TERMINATION. Executive's employment hereunder may be terminated
without any breach of this Agreement under the following circumstances (each, a
"Termination"):

                  (a) TERMINATION UPON EXECUTIVE'S DEATH. This Agreement shall
terminate upon the death of Executive.

                  (b) TERMINATION UPON EXECUTIVE'S DISABILITY. Subject to any
applicable state or federal law or regulation governing employees with
disabilities, the Company may terminate this Agreement upon the Disability of
Executive. For purposes of this Agreement, "Disability" shall mean that
Executive, due to illness, accident, or other physical or mental incapacity, has
been substantially unable to perform the duties required of him/her under this

Amended and Restated Employment Agreement
Ivers-Read, Gillian
March, 2004
                                       3
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Agreement, either with or without reasonable assistance, for a continuous period
of more than three months.

                  (c) TERMINATION BY THE COMPANY FOR JUST CAUSE. The Company may
terminate Executive's employment under this Agreement for Just Cause. For
purposes of this Agreement, "Just Cause" for termination shall mean that the
Company, acting in good faith based upon the information then known to it,
determines that:

                           (i) Executive has committed or engaged in negligent
or willful conduct that is likely to be detrimental to the Company;

                           (ii) Executive has engaged in acts which constitute
theft, fraud, or other illegal or dishonest conduct;

                           (iii) Executive has willfully disobeyed the
reasonable and lawful directives of the Company's Chief Executive Officer, Chief
Operating Officer, or Board of Directors;

                           (iv) Executive has refused or is unwilling to perform
his/her job duties;

                           (v) Executive has failed adequately to perform
his/her job duties (provided, however, that the Company shall first provide
Executive with written notice of the deficiencies in his/her performance and
Executive shall be given 45 days to remedy such deficiencies);

                           (vi) Executive has demonstrated habitual absenteeism;

                           (vii) Executive is substantially dependent on alcohol
or any controlled substance or violates any general Company policy with regard
to alcohol or controlled substances;

                           (viii) Executive has engaged in acts which constitute
sexual or other forms of illegal harassment or discrimination;

                           (ix) Executive makes public remarks that disparage
the Company, its Board of Directors, officers, directors, advisors, executives,
affiliates or subsidiaries;

                           (x) Executive violates his/her fiduciary duty to the
Company, or his/her duty of loyalty to the Company; or

                           (xi) Executive breaches any term of this Agreement or
the Confidentiality Agreement.

         The Parties acknowledge that this definition of "Just Cause" in not
intended and does not apply to any aspect of the relationship between the
Company and any of its employees, including Executive, beyond determining
Executive's eligibility for severance pay pursuant to Section 10 below.

Amended and Restated Employment Agreement
Ivers-Read, Gillian
March, 2004
                                       4
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                  (d) TERMINATION BY THE COMPANY WITHOUT JUST CAUSE. The Company
may terminate Executive's employment without Just Cause upon written notice to
Executive.

                  (e) TERMINATION BY EXECUTIVE FOR GOOD REASON. Upon written
notice to the Company, Executive may terminate his/her employment under this
Agreement for Good Reason. For purposes of this Agreement, "Good Reason" shall
mean:

                           (i) The Company becoming insolvent, as evidenced by
its inability to meet its obligations in the ordinary course of business;

                           (ii) A reduction in Executive's Base Salary of more
than 10% per year, without Executive's consent;

                           (iii) Executive being required to relocate his/her
residence further than 45 miles from the Company's office, without Executive's
consent; or

                           (iv) A material reduction in the scope of Executive's
duties or a material change in the content of Executive's duties.

         Executive must provide the Company with written notice of his/her
decision to terminate his/her employment for Good Reason pursuant to this
Section 9(e) no later than 90 days following the receipt of a notice from the
Company that an act or event constituting Good Reason has occurred.

                  (f) TERMINATION BY EXECUTIVE FOR OTHER THAN GOOD REASON.
Executive may terminate his/her employment under this Agreement other than for
Good Reason upon 30 days' advance written notice to the Company.

         10. COMPENSATION AND OTHER BENEFITS UPON TERMINATION. Executive shall
be entitled to the following compensation and benefits upon Termination:

                  (a) TERMINATION AS A RESULT OF EXECUTIVE'S DEATH OR
DISABILITY. Upon Termination pursuant to Section 9(a) [termination as a result
of Executive's death], or Section 9(b) [termination as a result of Executive's
Disability], Executive shall be entitled to receive any Base Salary and prorated
bonus earned but unpaid as of the date of Termination, accrued but unused
vacation benefits as of the date of Termination pursuant to the Company's
vacation policy, and any business expenses that were incurred but not reimbursed
as of the date of Termination.

                  (b) TERMINATION BY THE COMPANY FOR JUST CAUSE; TERMINATION BY
EXECUTIVE FOR OTHER THAN GOOD REASON. Upon Termination pursuant Section 9(c)
[termination by the Company for Just Cause] or Section 9(f) [termination by
Executive for other than Good Reason], Executive shall be entitled to receive
any Base Salary earned but unpaid as of the date of Termination, accrued but
unused vacation benefits as of the date

Amended and Restated Employment Agreement
Ivers-Read, Gillian
March, 2004
                                       5
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of Termination pursuant to the Company's vacation policy, and any business
expenses that were incurred but not reimbursed as of the date of Termination.

                  (c) TERMINATION BY THE COMPANY WITHOUT JUST CAUSE, TERMINATION
BY EXECUTIVE FOR GOOD REASON. Upon Termination pursuant to Section 9(d)
[termination by the Company without Just Cause] or Section 9(e) [termination by
Executive for Good Reason], Executive shall be entitled to receive any Base
Salary earned but unpaid as of the date of Termination, accrued but unused
vacation benefits as of the date of Termination pursuant to the Company's
vacation policy, and any business expenses that were incurred but not reimbursed
as of the date of Termination. In addition, upon the execution by Executive and
delivery to the Company, a Severance Agreement and General Release of all claims
that Executive may have against the Company, its officers, directors, employees
and shareholders, in a form provided by and acceptable to the Company, Executive
shall be entitled to receive severance pay ("SEVERANCE PAY") made either in a
lump sum or in twelve equal monthly installments, in the Company's sole
discretion, equal to twelve (12) months' of Executive's Base Salary (calculated
at the same rate of Base Salary most recently applicable to Executive
immediately prior to the date of termination), and 12 months COBRA benefit
coverage for health, dental and vision insurance (at a coverage level equal to
or below elected coverage on the day before the termination date). The Severance
Pay shall be subject to such deductions or withholdings as the Company is
required to make pursuant to law. Executive shall not be entitled to receive any
Severance Pay from the Company until Executive's general release of claims has
become effective pursuant to its terms.

                  Upon Termination pursuant to Section 9(d) [termination by the
Company without Just Cause] or Section 9(e) [termination by Executive for Good
Reason], Executive's outstanding balance of Relocation Loan will be forgiven.

                  (d) TERMINATION AFTER CHANGE IN CONTROL. Upon a Termination
pursuant to Section 9(d) [termination by the Company without Just Cause] or
Section 9(e) [termination by Executive for Good Reason] occurring on or within
twenty-four (24) months after a Change in Control (as defined below), (i) the
vesting and exercisability of all of Executive's stock options and other
equity-based awards will be accelerated in full so that all such stock options
will be immediately exercisable for fully vested stock and any other stock
awards will be fully vested as of the date of such Termination, and (ii)
Executive's stock options will remain exercisable in accordance with the plan
document. For purposes of this Agreement, "Change of Control" shall mean (1) a
sale of all or substantially all the assets of the Company; (2) a merger into or
consolidation of the Company with any other corporation, except any such merger
or consolidation involving the Company or a subsidiary of the Company in which
the holders of capital stock of the Company immediately prior to such merger or
consolidation continue to hold immediately following such merger or
consolidation at least 50% by voting power of the capital stock of (a) the
surviving or resulting corporation or (b) if the surviving or resulting
corporation is a wholly owned subsidiary of another corporation immediately
following such merger or consolidation, the parent corporation of such surviving
or resulting corporation, (3) the acquisition by any person, entity or group
within the meaning of Section 13(d) or 14(d)(2) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), or any comparable successor provisions
(excluding any employee benefit plan, or related trust, sponsored or maintained
by the Company or any parent or subsidiary corporation of the Company) of the
beneficial ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act, or comparable successor rule) of securities of the Company

Amended and Restated Employment Agreement
Ivers-Read, Gillian
March, 2004
                                       6
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representing at least fifty percent (50%) of the combined voting power entitled
to vote in the election of directors, or (4) individuals who, on the date of
execution of this Agreement, are members of the Company's Board of Directors
(the "Incumbent Board"), cease for any reason to constitute at least a majority
of the members of the Board of Directors; provided, however, that if the
appointment or election (or nomination for election) of any new Board of
Directors member was approved or recommended by a majority vote of the members
of the Incumbent Board then still in office, such new member shall, for purposes
of this Agreement, be considered as a member of the Incumbent Board.

                  (e) PARACHUTE PAYMENT GROSS-UP. If any payment or benefit
Executive would receive from the Company or otherwise would constitute a
parachute payment that would subject Executive to an excise tax ("Excise Tax")
under Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code")
(or any successor provision), Executive shall be entitled to receive an
additional lump sum payment in cash (the "Tax Gross-Up"), subject to mandatory
tax withholding, which, when added to all payments and benefits allocable to
Executive that constitute parachute payments, provides Executive with the same
after-tax compensation that he would have received from such parachute payments
had none of such compensation constituted a parachute payment. The amount of any
such Tax Gross-Up to which Executive becomes entitled under this paragraph will
be determined pursuant to the following formula:

                  X  =  Y divided by (1 - (A + B + C)), where

                  X is the total dollar amount of the Tax Gross-Up payable to
                  Executive;

                  Y is the total Excise Tax imposed on Executive;

                  A is the Excise Tax rate applicable to Executive's parachute
                  payments;

                  B is the highest combined marginal federal income and
                  applicable state income tax rate in effect for Executive,
                  after taking into account the deductibility of state income
                  taxes against federal income taxes to the extent allowable,
                  for the calendar year in which the Tax Gross-Up is paid; and

                  C is the applicable Hospital Insurance (Medicare) Tax Rate in
                  effect for Executive with respect to the Tax Gross-Up payment
                  for the calendar year in which the Tax Gross-Up is paid;

provided if there is a change in the tax laws after the date hereof that would
render the amount determined above insufficient to fully reimburse Executive on
an after-tax basis for the amount of any Excise Tax, Executive shall be entitled
to such additional amount as may be necessary to provide him/her with such
reimbursement.

         Within ninety (90) days after a determination is made by the Internal
Revenue Service or Executive's tax advisor that an item of compensation or
benefit payable hereunder constitutes a parachute payment under Code Section
280G for which Executive is liable for an Excise Tax, Executive shall identify
the nature of the payment to the Company and submit to the Company the

Amended and Restated Employment Agreement
Ivers-Read, Gillian
March, 2004
                                       7
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calculation of the Excise Tax attributable to that payment and the Tax Gross-Up
to which Executive is entitled with respect to such tax liability. The Company
will pay such Tax Gross-Up to Executive (net of all applicable withholding
taxes, including any taxes required to be withheld under Code Section 4999)
within ten (10) business days after Executive's submission of the calculation of
such Excise Tax and the resulting Tax Gross-Up, provided such calculations
represent a reasonable interpretation of the applicable law and regulations.

         In the event that Executive's actual Excise Tax liability is determined
by a Final Determination to be greater than the Excise Tax liability previously
taken into account for purposes of the Tax Gross-Up paid to Executive pursuant
to this Section 10(e), then within ninety (90) days following the Final
Determination, Executive shall submit to the Company a new Excise Tax
calculation based upon the Final Determination. Within ten (10) business days
after receipt of such calculation, the Company shall pay Executive the
additional Tax Gross-Up attributable to such excess Excise Tax liability.

         In the event that Executive's actual Excise Tax liability is determined
by a Final Determination to be less than the Excise Tax liability previously
taken into account for purposes of the Tax Gross-Up paid to Executive pursuant
to this Section 10(e), then Executive shall refund to the Company, promptly upon
receipt, any federal or state tax refund attributable to the Excise Tax
overpayment.

         For purposes of this Section 10(e), a "Final Determination" means an
audit adjustment by the Internal Revenue Service that is either (i) agreed to by
both Executive (or his estate) and the Company (such agreement by the Company to
be not unreasonably withheld) or (ii) sustained by a court of competent
jurisdiction in a decision with which Executive and the Company concur (such
concurrence by the Company to be not unreasonably withheld) or with respect to
which the period within which an appeal may be filed has lapsed without a notice
of appeal being filed.

         11. RESTRICTIVE COVENANT; NON-COMPETE. Executive acknowledges and
agrees that the agreements and covenants contained in this Section 11 are (i)
reasonable and valid in geographical and temporal scope and in all other
respects, and (ii) essential to protect the value of the Company's business and
assets, and by his employment with the Company, Executive will obtain knowledge,
contacts, know-how, training and experience and there is a substantial
probability that such knowledge, know-how, contacts, training and experience
could be used to the substantial advantage of a competitor of the Company and to
the Company's substantial detriment. For purposes of this Section 11, references
to the Company shall be deemed to include its subsidiaries.

                  (a) NON-COMPETE. Executive covenants and agrees that during
Executive's employment with the Company (the "Employment Period") and for a
period extending to the first anniversary of Executive's Termination for any
reason or for no reason (the "Restricted Period"), with respect to any state or
foreign country in which the Company is engaged in business at the time of such
Termination, Executive shall not, directly or indirectly, individually or
jointly, own any interest in, operate, join, control or participate as a
partner, director, principal, officer, or agent of, enter into the employment
of, act as a consultant to, or perform any services for any entity which
competes to a material extent with the business activities in which the Company
is engaged

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at the time of such termination or in which business activities the Company has
documented plans to become engaged in and as to which Executive has knowledge at
the time of Termination, or any entity in which any such relationship with
Executive would result in the inevitable use or disclosure of Confidential
Information (as defined in the Confidentiality Agreement). Notwithstanding
anything herein to the contrary, this Section 11(a) shall not prevent Executive
from acquiring as an investment securities representing not more than one
percent (1%) of the outstanding voting securities of any publicly-held
corporation.

                  (b) EXTENSION. If Executive violates the provisions of Section
11(a) above, Executive shall continue to be bound by the restrictions set forth
in Section 11(a) until a period of one year has expired without any violation of
such provisions.

                  (c) BLUE PENCIL. If any court of competent jurisdiction shall
at any time deem the duration or the geographic scope of any of the provisions
of this Section 11 unenforceable, the other provisions of this Section 11 shall
nevertheless stand and the duration and/or geographic scope set forth herein
shall be deemed to be the longest period and/or greatest size permissible by law
under the circumstances, and the parties hereto agree that such court shall
reduce the time period and/or geographic scope to permissible duration or size.

         12. MISCELLANEOUS.

                  (a) TAXES. Executive acknowledges that the Company will
withhold all taxes required by law with respect to any and all compensation or
benefits provided by the Company pursuant to this Agreement. Executive
acknowledges that the Company has not made, nor herein makes, any representation
about the tax consequences of any consideration provided by the Company to
Executive pursuant to this Agreement, except as expressly provided herein.

                  (b) MODIFICATION/WAIVER. This Agreement may not be amended,
modified, superseded, canceled, renewed or expanded, or any terms or covenants
hereof waived, except by a writing executed by each of the Parties hereto or, in
the case of a waiver, by the party waiving compliance. Failure of any party at
any time or times to require performance of any provision hereof shall in no
manner affect their or its right at a later time to enforce the same. No waiver
by a party of a breach of any term or covenant contained in this Agreement,
whether by conduct or otherwise, in any one or more instances shall be deemed to
be or construed as a further or continuing waiver of agreement contained in the
Agreement.

                  (c) SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and shall inure to the benefit of any successor or assignee of the business
of the Company. This Agreement shall not be assignable by the Executive.

                  (d) NOTICES. All notices given hereunder shall be given by
certified mail, addressed, or delivered by hand, to the other party at his/her
or its address as set forth herein, or at any other address hereafter furnished
by notice given in like manner. Executive promptly shall notify Company of any
change in Executive's address. Each notice shall be dated the date of its
mailing or delivery and shall be deemed given, delivered or completed on such
date.

Amended and Restated Employment Agreement
Ivers-Read, Gillian
March, 2004
                                       9
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                  (e) GOVERNING LAW; PERSONAL JURISDICTION AND VENUE. This
Agreement and all disputes relating to this Agreement shall be governed in all
respects by the laws of the State of Colorado. The Parties acknowledge that this
Agreement constitutes the minimum contacts to establish personal jurisdiction in
Colorado and agree to Colorado courts' exercise of personal jurisdiction. The
Parties further agree that if they are unable to reach an agreement concerning
the nature and terms of alternative dispute resolution, any disputes relating to
this Agreement shall be brought in the District Court of the 20th Judicial
District, Boulder, Colorado, and they hereby consent to the jurisdiction of such
Court.

                  (f) ENTIRE AGREEMENT. This Agreement together with the
Confidentiality Agreement, set forth the entire agreement and understanding of
the Parties hereto with regard to the employment of Executive by the Company and
supersedes any and all prior agreements, arrangements and understandings,
written or oral, pertaining to the subject matter hereof. No representation,
promise or inducement relating to the subject matter hereof has been made to a
party that is not embodied in this Agreement or the Confidentiality Agreement,
and no party shall be bound by or liable for any alleged representation, promise
or inducement not so set forth.

                            [Signature Page Follows]

Amended and Restated Employment Agreement
Ivers-Read, Gillian
March, 2004
                                       10
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          IN WITNESS WHEREOF, the Parties have each duly executed this Amended
and Restated Employment Agreement as of the day and year first above written.

                                    PHARMION CORPORATION

                                    --------------------------------------------
                                    By: Patrick Mahaffy
                                    Its: Chief Executive Officer

                                    EXECUTIVE

                                    --------------------------------------------
                                    Gillian C. Ivers-Read

                                       11EXECUTION COPY

                                ROYALTY AGREEMENT

         This Royalty Agreement,  dated as of April 8, 2004, is made by US
Energy Biogas Corporation,  a Delaware corporation ("USEB"), Countryside  Canada
Power Inc., a Canadian  corporation  ("Holder"),  U.S. Energy Systems,  Inc., a
Delaware corporation, and Cinergy Energy Solutions Inc., a Delaware corporation.

                             PRELIMINARY STATEMENT:

         WHEREAS, Holder and USEB desire to enter into an arrangement whereby
Holder will make a payment to USEB in exchange for an economic participation in
the distributable cash flow of USEB, and a right in certain circumstances to
exchange such economic participation for non-voting USEB Stock,

         THEREFORE, for good and valuable consideration, as described below, the
receipt and adequacy of which are hereby acknowledged, the parties agree as
follows:

SectioN 1. Definitions.

         "Acquisition Agreement" means that certain agreement to be entered into
between the Fund, Countryside  Canada  Acquisition Inc., an Ontario corporation,
and U.S. Energy Systems, Inc., a Delaware corporation, dated of even date
herewith.

         "AJG Note" means that certain  purchase money  note issued  by AJG
Financial Services Inc. to Resources Generating Systems, Inc. dated as of April
8, 2004.

         "AJG Subordinated Note" means that certain Amended and Restated
Subordinated Note issued by USEB to AJG Financial Services Inc. dated October
15, 2003.

         "Agreement" means this Royalty Agreement dated as of April 8, 2004,
including all Schedules and Attachments hereto.

         "Capital Event" means the liquidation of the USEB Operating Assets, the
sale of all or substantially all of the USEB Operating Assets, or the
refinancing of the USEB Loans.

         "Capital Distribution Cap" means the greatest amount of money such that
500% (five hundred percent) of such amount is, at the time such amount is
distributed to Holder pursuant to the provisions of Section 7c(i) hereof,
concurrently distributed to USEB Shareholders with respect to their USEB Stock.

         "Certificate of Incorporation" means that certain 2nd Amended and
Restated Certificate of Incorporation of U.S. Energy Biogas Corp. substantially
in the form attached hereto as Schedule 5 hereto.

         "Code" means the United States Internal Revenue Code of 1986, as
amended.

         "Conversion" means the exchange by Holder of the Royalty Interest for
the Equity Interest in accordance with the provisions of this Agreement.

         "Conversion Effective Date" means the date on which the Conversion
becomes effective for purposes of this Agreement, which shall occur as of the
first day on or after the Conversion Eligibility Date on which: (i) Holder has
given Notice of election to exchange the Royalty Interest for the Equity
Interest; (ii) Holder, USEB, and the Illinois Projects, as applicable, have
received all third party consents and final, non-appealable approvals from
government authorities as are required for such Conversion in the opinion of
counsel to USEB, including but not limited to any ICC approval necessary to
authorize a change of ownership of the Illinois Projects while maintaining their
QSWEF status; (iii) USEB has filed the Certificate of Incorporation, and (iv)
Holder has executed the Shareholder Agreement.

         "Conversion Eligibility Date" means the earlier to occur of the date on
which payment or prepayment of the USEB Loans is made in full and the 20th
(twentieth) anniversary of the date of this Agreement.

         "Distribution Cap" means the greatest amount of money such that at
least 104.09% (one hundred four and nine one-hundredths percent) of such amount
is at the time such amount is distributed with respect to the Royalty Interest,
concurrently distributed to USEB Shareholders with respect to their USEB Stock
which is neither (i) nonvoting stock which is limited and preferred as to
dividends, nor (ii) "excluded stock" within the meaning of Code Section 1563(c).

         "Dividend Distribution Requirement" means the requirement under Section
4 to make concurrent distributions to USEB Shareholders.

         "Equity Interest" means non-voting USEB Stock to be issued by USEB upon
the Conversion, conveying rights to the holder(s) thereof in the aggregate to
49% (forty-nine per cent) of any distribution authorized by the Board of
Directors of USEB from time to time to be paid to USEB Shareholders with respect
to USEB Stock. For purposes of the preceding sentence, "USEB Stock" does not
include stock which is (i) nonvoting stock which is limited and preferred as to
dividends, or (ii) "excluded stock" within the meaning of Code Section 1563(c).

         "Excluded Assets" means those certain assets of USEB identified in
Schedule 1 attached hereto.

         "Fiscal Quarter" means the three calendar months commencing on January
1, April 1, July 1, and October 1 each year.

         "Fund" means Countryside Power Income Fund, an unincorporated,
open-ended, limited purpose trust formed under the laws of the Province of
Ontario, Canada.

         "GAAP" means United States generally accepted accounting principles,
consistently applied.

                                       2

         "Gasco Notes" means those certain notes of indebtedness identified in
Schedule 2 attached hereto.

         "Gross Up Amount" shall have the meaning ascribed to such term in
Section 9 hereof.

         "Growth Capital Expenditures" means cash invested to expand the
capacity or production of USEB Operating Assets.

         "Holder" means Countryside Canada Power Inc., a Canadian corporation
which is a wholly-owned subsidiary of the Fund.

         "ICC" means the Illinois Commerce Commission, an official agency of the
State of Illinois.

         "Illinois Projects" means those certain landfill gas recovery and power
projects identified in Schedule 3 attached hereto.

         "Improvement Agreement" means that certain non-binding agreement
entered into as of April 8, 2004 between USEB and the Fund, describing an intent
to provide the Fund with a right of first offer to invest in two project
expansion projects and two greenfield development projects.

         "Net Residual Proceeds" means the sum of the gross cash and other
proceeds generated by a Capital Event and the amounts held in the Reimbursement
Accounts as of the date of such Capital Event, less: (i) all expenses of or
allocable to the USEB Operating Assets incurred in connection with the Capital
Event, including but not limited to legal and accounting fees and disbursements,
banking and investment banking fees, brokerage fees, and other internal and
third party fees and costs related to the Capital Event and of or allocable to
the USEB Operating Assets; (ii) all amounts required to pay the USEB Loans in
full; (iii) Rate Incentive Reimbursement amounts and all other amounts due or
reserved for future payments to the Illinois Public Utility Fund, the Illinois
General Revenue Fund or State of Illinois governmental entity in respect of the
Illinois Projects; (iv) all amounts required to pay the YESCO Note and the AJG
Subordinated Note in full; (v) federal, state and local taxes due and owing and
an amount to be reasonably reserved to pay all such taxes which will become
payable by the USEB Operating Assets; (vi) all amounts required to liquidate all
other financial and contractual liabilities and wind up the affairs of the USEB
Operating Assets; (vii) all dividends of USEB and Royalty Payments which are
declared and unpaid as of the date of the Capital Event; (viii) a stipulated
amount of $30,000,000 (thirty million U.S. Dollars) representing the book value
of the investment of USEB Shareholders in USEB Operating Assets including
minority interests, but excluding the Royalty Interest, determined in accordance
with GAAP as of the date of the Offering, (ix) a stipulated amount of
$6,000,000.00 (six million U.S. Dollars) representing the book value of the
Royalty Interest at the time of the Offering; provided that neither the USEB
Reserve nor distributions therefrom shall be taken into account for purposes of
determining Net Residual Proceeds, and provided further that for purposes of
this definition, Net Residual Proceeds shall not be less than zero. For purposes
hereof, non-cash proceeds shall be valued as follows: (i) publicly traded
securities shall be valued at the average of their closing prices (as reported
by the stock exchange upon which such securities had the highest daily volume)
for the five trading days prior to the closing of the Capital Event, and (ii)
any other non-cash proceeds shall be valued at their fair market value

                                       3

reasonably determined in good faith by USEB and Holder; provided that in the
event Holder and USEB fail to agree upon the fair market value of such proceeds,
either party may by Notice to the other, submit the question for final
determination by an accounting firm of greater than 250 professionals accredited
as such in the United States, that is unaffiliated with either party or their
parent or subsidiary companies, and that is not currently under contract with or
subject to a proposal for services to either party, their parent or subsidiary
companies; and provided further that the determination of fair market value by
such accounting firm shall be binding on both parties and not subject to
judicial appeal, and that the costs and fees charged by such accounting firm
shall be for the account of USEB and shall further reduce Net Residual Proceeds.

         "Notice" means the communication described below in Section 13.

         "Offering" means the distribution of trust units of the Fund, which
distribution is made pursuant to an initial public offering on April 8, 2004.

         "QSWEF" means a Qualifying Solid Waste Energy Facility as determined by
the ICC.

         "Rate Incentive Reimbursement" means the repayment of amounts received
by USEB Operating Assets under a certain QSWEF rate incentive program
established by the law of the State of Illinois.

          "Reimbursement Accounts" means those certain accounts required by the
ICC to be maintained to fund the Rate Incentive Reimbursement.

         "Reimbursement Account Deposits" means those deposits and reinvestments
of interest and earnings in the Reimbursement Accounts required by the
provisions of the USEB Loan Agreement.

         "Royalty Distribution" means any Royalty Payment and any other payment
by USEB to Holder with respect to the Royalty Interest, including without
limitation the payments described in Section 7c below.

         "Royalty Interest" means the right of Holder established by the terms
and conditions of this Agreement to receive: (i) from the date hereof until the
Conversion Eligibility Date, the lesser of (a) the sum of 7% (seven per cent) of
the USEB Distributable Cash Flow and 1.8% (one and eight-tenths of one per cent)
of the USEB Revenues, and (b) the Distribution Cap; and (ii) on and after the
Conversion Eligibility Date, the lesser of (x) 49% (forty-nine per cent) of USEB
Distributable Cash Flow and (y) the Distribution Cap; provided that the Royalty
Interest shall be determined in respect of each Fiscal Quarter or portion
thereof, as the case may be, and shall be limited in any event to an amount of
money equal to the USEB Distributable Cash Flow, if any, during such period.

         "Royalty Payment" means the sum of (i) any payment by USEB with respect
to the Royalty Interest to Holder in accordance with the provisions of this
Agreement, including without limitation any payment under Section 7 or Section 9
hereof, but not including the return of the $6,000,000.00 (six million U.S.
Dollars) in consideration paid by Holder, pursuant to a Capital Event as
provided in Section 7 (c) hereof, plus (ii) any applicable Gross Up Amount.

                                       4

         "Shareholder Agreement" means an agreement among the USEB Shareholders
substantially in the form attached hereto as Schedule 4 hereto.

         "Transfer" shall have the meaning described in Section 10 hereof.

         "USEB" means US Energy Biogas Corporation, a Delaware corporation.

          "USEB Distributable Cash Flow" means with respect to any period of
time, USEB Revenues less: (i) Reimbursement Account Deposits of cash during such
period; (ii) actual cash payments and distributions of every kind made by USEB
Operating Assets during such period (other than payments or distributions to
other USEB Operating Assets or to Excluded Assets), such payments to include
without limitation expenses, salaries, fees, rent, overhead not to exceed
$1,400,000.00 (one million four hundred thousand U.S. Dollars) per annum, taxes,
capital expense, and, if 100% (one hundred percent) of the revenues of Illinois
Electrical Generation Partners II, L.P., a Delaware limited partnership ("IEGP
II") are included in USEB Revenues, distributions to AJG Financial Services in
respect of its interests in IEGP II, but to exclude payments to USEB
Shareholders in respect of services rendered, and (iii) cash payments of
principal and interest, funding of reserve requirements in cash, including but
not limited to the USEB Reserve, and other cash payments and reimbursements
during such period as required by the USEB Loan Agreement and the YESCO Note;
provided that USEB Distributable Cash Flow shall not be reduced by Growth
Capital Expenditures during such period.

         "USEB Loan(s)" means two certain loans from Holder to USEB dated of
even date with the Offering, under which USEB will provide a first lien on all
of the USEB Operating Assets as security, the direct and indirect subsidiaries
of USEB will guarantee the USEB Loans jointly and severally, and such
subsidiaries will provide a first lien on all of their respective assets as
security for their guarantees.

         "USEB Loan Agreement" means that certain Loan Agreement evidencing the
USEB Loans, the collateral security agreements pertaining thereto, and certain
other agreements ancillary thereto, all dated as of the date of the Offering.

         "USEB Operating Assets" means the assets, liabilities and
capitalization of USEB and its predecessor company and their subsidiaries,
excluding the equity and assets and liabilities of the Excluded Assets.

         "USEB Reserve" means amounts held in that certain debt service cash
reserve account required by the terms of the USEB Loan Agreement to be funded
with an initial contribution of USD$2,000,000.00 (two million U.S. Dollars) and
thereafter increased and maintained by USEB.

         "USEB Revenues" means, with respect to any period of time, the
aggregate consolidated gross revenues received by the USEB Operating Assets
during such period, including but not limited to: (i) interest on and other
earnings from investment of the Reimbursement Accounts from time to time, to the
extent such interest and earnings are not required by the USEB Loan Agreement to
be reinvested in the Reimbursement Accounts and are reasonably determined by
USEB to be in excess of the amounts required to provide for the Rate Incentive
Reimbursement; (ii) interest on and other earnings from investment of the USEB
Reserve; (iii) repayments of principal or payments of interest actually received

                                       5

during such period under any of the Gasco Notes; (iv) fees and other payments
received from services rendered and sales made to persons or entities other than
to the USEB Operating Assets; (v) amounts received under the QSWEF rate
incentive program which have not otherwise been included in gross revenues, and
(vi) repayments of principal or payments of interest which are actually received
by USEB during such period pursuant to the AJG Note; provided that cash or other
proceeds generated by a Capital Event shall not be taken into account in
determining USEB Revenues. For purposes of this definition, in order to
eliminate multiple counting of revenues, aggregate consolidated gross revenues
shall be determined in a manner that does not take into account amounts of any
nature transferred among USEB Operating Assets.

         "USEB Shareholders" means all of the owners of USEB Stock.

         "USEB Stock" means all of the voting and nonvoting stock authorized and
issued by USEB from time to time, which, for greater certainty, shall exclude
the Royalty Interest.

         "YESCO Note" means that certain $4,700,000 Secured Promissory Note,
dated March 30, 2001, by BMC Energy LLC, Brookhaven Energy, LLC, Countryside
Genco, L.L.C., Countryside Landfill Gasco, L.L.C., Morris Genco, L.L.C. and
Morris Gasco, L.L.C., each a Delaware limited liability company, in favor of
Yankee Energy Services Company, as amended.

SECTION 2. Grant of Royalty Interest. In consideration of a cash payment by
Holder sto USEB in the amount of USD $6,000,000.00 (six million U.S. Dollars),
and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, USEB hereby grants to Holder the Royalty Interest,
subject to the terms and conditions of this Agreement.

SECTION 3. Royalty Payments. Subject to the following Section 4, Royalty
Payments shall be paid within 45 (forty-five) days following the last day of
each Fiscal Quarter, including the Fiscal Quarter in which the Conversion
Effective Date or a Capital Event may occur, and USEB shall provide with each
such payment a detailed statement of calculations supporting the determination
of the Royalty Payment.

SECTION 4. Dividend Distribution Requirement. Notwithstanding anything else in
this Agreement, no Royalty Distribution may be made unless, at the time of such
Royalty Distribution, an amount equal to or greater than 104.09% (one hundred
four and nine one hundredths percent) of the amount of the Royalty Distribution
is concurrently distributed to USEB Shareholders with respect to their USEB
Stock which is neither (i) nonvoting stock which is limited and preferred as to
dividends, nor (ii) "excluded stock" within the meaning of Code Section 1563(c).
In the event that a Royalty Distribution or any portion thereof is not timely
paid or a Royalty Distribution or any portion thereof would have been payable
but was not paid because USEB has not paid dividends to USEB Shareholders for
any reason (including (i) compliance with dividend distribution restrictions
provisions of the USEB Loans or the YESCO Note, (ii) restriction imposed by law,
statute, rule or regulation, or (iii) other good business reason (each of (i)
through (iii) a "Dividend Payment Restriction")), then such unpaid amounts shall
accrue for the account of Holder and be reserved by USEB, and, (A) in the case

                                       6

in which failure to pay the dividends was due to a Dividend Payment Restriction,
USEB shall pay such previously restricted dividends and the corresponding
accrued and unpaid Royalty Distributions as soon as practicable after such
Dividend Payment Restriction no longer remains operative, until all accrued and
unpaid Royalty Distributions have been paid in full, and (B) in all other cases,
USEB shall pay such dividends and the corresponding accrued and unpaid Royalty
Distributions as soon as practicable, until all accrued and unpaid Royalty
Distributions have been paid in full. For greater certainty, Holder shall in no
event be entitled to receive any such unpaid, accrued or reserved amounts except
in compliance with the first sentence of this Section 4.

SECTION 5. Term. The Term of this Agreement and the Royalty Interest conveyed
hereunder shall commence upon the date first appearing above, and shall
terminate upon the earlier to occur of (i) the payment of all amounts due to
Holder pursuant to the provisions of this Agreement following the occurrence of
a Capital Event other than a refinancing of the USEB Note, and (ii) the
Conversion Effective Date; provided that Holder's rights under this Agreement to
receive Royalty Payments which have accrued during the Term hereof shall survive
such termination until the date on which the final Royalty Payment due or
accrued to Holder have been paid.

SECTION 6. Conversion. Holder shall have the right to convert all but not less
than all of its rights in and to the Royalty Interest into the Equity Interest,
and shall have the right to own the Equity Interest, subject to the following
provisions of this Section 6:

         a. Holder shall have the right at its sole discretion to convert all
         but not less than all of its rights in and to the Royalty Interest at
         any time on or after the Conversion Eligibility Date.

         b. Holder shall exercise the right to convert the Royalty Interest to
         the Equity Interest by: (i) giving Notice of such exercise to USEB as
         provided below, and (ii) executing the Shareholder Agreement.

         c. Holder shall own the Equity Interest as of the Conversion Effective
         Date, at which time the Royalty Interest shall expire and terminate,
         whether this Agreement has terminated or not.

         d. Upon Notice from Holder of election to exercise its right to
         Conversion, USEB shall use its reasonable best efforts, and Holder
         shall use its reasonable best efforts to cooperate with USEB, to obtain
         all third party consents and approvals of government authorities
         required to effect the Conversion in the opinion of counsel to USEB,
         including but not limited to any ICC approval necessary to authorize a
         change of ownership of the Illinois Projects while maintaining their
         QSWEF status.

         e. Upon Notice from Holder of election to exercise its right to
         Conversion, U.S. Energy Systems, Inc. and Cinergy Energy Solutions Inc.
         shall execute the Shareholder Agreement and USEB shall file the
         Certificate of Incorporation.

         f. USEB shall calculate the Royalty Interest up to and including the
         Conversion Effective Date and shall make the final Royalty Payment not
         later than 45 days following the end of the Fiscal Quarter in which the
         Conversion Effective Date occurs, subject to the provisions of Section
         4 above.

                                       7

         g. USEB shall authorize and issue to Holder upon the Conversion
         Effective Date, one or more fully executed certificates evidencing, in
         the aggregate, ownership of the Equity Interest.

         h. For greater certainty, any Royalty Payment occurring as of or after
         the Conversion Effective Date shall be subject to the Dividend
         Distribution Requirement, provided that Holder shall not be treated as
         a USEB Shareholder for such purposes.

         i. Prior to the Conversion Effective Date, subject to the provisions of
         the USEB Loans, USEB shall have the right to distribute any or all of
         the USEB Reserve to the USEB Shareholders without the consent of
         Holder.

         j. Conversion of the Royalty Interest to the Equity Interest shall be
         further subject to and conditioned upon full compliance with the
         following conditions:

                  (i) The Conversion will not result in USEB being subject to
                  the registration and reporting requirements of the Investment
                  Company Act of 1940, as amended.

                  (ii) The Conversion shall not cause USEB to become a "holding
                  company" or a "public utility company" or an "affiliate" of a
                  "public utility company" as such terms are defined by the
                  Public Utility Holding Company Act of 1935.

                  (iii) The Conversion will not result in USEB or any USEB
                  Shareholder being subject to any additional material
                  regulatory burdens or adverse tax treatment.

                  (iv) The Conversion shall not cause USEB or its subsidiaries
                  to become subject to the Federal Power Act or Natural Gas Act
                  or regulation as a "public utility", a "local distribution
                  company", an "electric load serving entity" or a similar
                  entity under the law of any state except to the extent that,
                  at the time of the Conversion, USEB or any subsidiary thereof
                  is already subject to regulation thereunder.

                  (v) The Conversion shall not cause any "Qualifying Facility"
                  within the meaning of the Public Utility Regulatory Policies
                  Act of 1978 and 18 C.F.R. Part 292 in which USEB or its
                  subsidiaries hold an equity interest to lose its status as
                  such or have any material adverse effect on the federal, state
                  or local regulatory status of any project owned or operated by
                  USEB or its subsidiaries.

SECTION 7.          Capital Event.

         a. USEB shall give Holder prior Notice as soon as practicable of any
         potential Capital Event, in sufficient detail that Holder may have a
         reasonable opportunity to evaluate and at its discretion exercise its
         rights to Conversion prior to such Capital Event.

         b. Upon the occurrence of a Capital Event when Conversion has not
         occurred, the Royalty Interest shall be determined through the date of
         the Capital Event and the appropriate Royalty Payment, if any, shall be
         made.

                                       8

         c. Upon the occurrence of a Capital Event when Conversion has not
         occurred on or prior to such Capital Event, in addition to and not in
         lieu of any Royalty Payment due, USEB shall pay to Holder the aggregate
         of (i): the lesser of (A) the Capital Distribution Cap, and (B)
         $6,000,000 (six million U.S. Dollars), and (ii) the lesser of (C) the
         Distribution Cap, and (D) an amount of money equal to 49% (forty-nine
         per cent) of the Net Residual Proceeds, if any.

SECTION 8. Dividends. USEB shall at all times take such actions and cause such
actions to be taken, as the case may be, for USEB: (i) to authorize, declare and
pay dividends which will maximize the Distribution Cap and the Capital
Distribution Cap for purposes of determining the Royalty Interest and the
Royalty Distributions pursuant to the terms of this Agreement and permit the
payment in full of any Royalty Distribution when such Royalty Distribution is
first due, and (ii) to pay to Holder its share of the Net Residual Proceeds as
provided by this Agreement, provided that such obligation to take and cause such
actions shall be subject in each case to applicable law and the terms of the
USEB Loan Agreement, the YESCO Note, and the AJG Subordinated Note.

SECTION 9. Reimbursement of Withholding Tax. In addition to any other payments
due and payable to Holder under this Agreement, USEB shall make Holder whole for
any U.S. withholding taxes that are imposed on Holder with respect to any
Royalty Distribution, as follows: USEB shall be responsible for the payment of
United States federal and state withholding taxes with respect to Royalty
Distributions, and shall add to each Royalty Distribution such amount as is
necessary to put Holder in the same position it would have been in if no such
withholding taxes were imposed on such Royalty Distribution ("Gross Up Amount").

SECTION 10.        Assignment and Transfer.

         a. This Agreement shall be binding upon and inure to the benefit of the
         parties hereto and their respective successors and permitted assigns.

         b. USEB may not assign, assign as collateral, or Transfer (as defined
         below) any of its rights or obligations under this Agreement without
         the prior written consent of Holder, which consent shall not
         unreasonably be withheld. Except to the extent expressly restricted by
         this Section 10, Holder may freely assign, assign as collateral, or
         Transfer its rights and obligations under this Agreement. Each party
         shall use its commercially reasonable best efforts to assist and
         cooperate with the other parties in any manner reasonably requested to
         effect the assignment, collateral assignment or Transfer of rights and
         obligations under this Agreement, subject to the provisions of this
         Section 10. In the case of a permitted assignment hereunder (other than
         a permitted collateral assignment), the assignee shall have, to the
         extent of such assignment, the same rights, benefits and obligations as
         would assignor hereunder. In the case of any collateral assignment
         permitted under this Agreement, assignor's obligations under this
         Agreement shall remain unchanged and assignor shall remain solely
         responsible to the other parties hereto for the performance of such
         obligations, and the other parties may continue to deal directly with
         assignor. Without the prior written consent of USEB, Holder shall not
         assign, assign as collateral, or Transfer less than all of Holder's
         rights and obligations under this Agreement.

                                       9

         c. Notwithstanding any other provision of this Agreement, without the
         prior written consent of USEB, U.S. Energy Systems, Inc. and Cinergy
         Energy Solutions Inc., no assignment, assignment as collateral, or
         Transfer (including participations), shall be permitted to any person
         or entity that is engaged or that has affiliates engaged in the
         business of developing, owning or operating landfill gas recovery
         systems or power generating or thermal energy production facilities
         fueled by landfill gas, or in the business of developing, owning or
         operating district thermal energy systems.

         d. Except with respect to collateral assignments of Holder's rights
         and obligations under this Agreement which are not absolute assignments
         , the Royalty Interest shall not be sold, transferred, donated, given,
         assigned, or otherwise disposed of, whether voluntarily, by operation
         of law or otherwise (any of the foregoing acts with respect to rights
         and obligations under this Agreement including without limitation the
         Royalty Interest being referred to in this Section 10 as a "Transfer"),
         except subject to and conditioned upon full compliance by the
         transferor and transferee of such Royalty Interest with each of the
         following conditions:

                  (i) Each transferee shall have executed an agreement in form
                  and substance satisfactory to USEB, by which such transferee
                  shall have agreed to become a party to and bound by the terms
                  and conditions of this Agreement.

                  (ii) No Transfer shall be made: (A) to a person or other
                  entity who, in accordance with applicable law, lacks the
                  capacity to own, or otherwise is prohibited from owning, such
                  Royalty Interest by reason of minority, incompetence or
                  otherwise; or (B) to a person or entity otherwise prohibited
                  by applicable law from entering into such transaction or
                  holding such Royalty Interest; or (C) which violates any other
                  provision of this Agreement.

                  (iii) The transferor and transferee shall have delivered to
                  USEB such other agreements, instruments and other documents
                  (including opinions of counsel reasonably satisfactory to
                  USEB) as USEB shall request in order to demonstrate compliance
                  of any such Transfer with the provisions of this Agreement and
                  applicable law. (iv) The Transfer will not result in USEB
                  being subject to the registration and reporting requirements
                  of the Investment Company Act of 1940, as amended.

                  (v) The Transfer shall not cause USEB to become a "holding
                  company" or a "public utility company" or an "affiliate" of a
                  "public utility company" as such terms are defined by the
                  Public Utility Holding Company Act of 1935.

                  (vi) The Transfer will not result in USEB or any USEB
                  Shareholder being subject to any additional material
                  regulatory burdens or adverse tax treatment.

                                       10

                  (vii) The Transfer shall not cause USEB or its subsidiaries to
                  become subject to the Federal Power Act or Natural Gas Act or
                  regulation as a "public utility", a "local distribution
                  company", an "electrical load serving entity" or a similar
                  entity under the law of any state except to the extent that,
                  at the time of the Transfer, USEB or any subsidiary thereof is
                  already subject to regulation thereunder.

                  (viii) The Transfer shall not cause any "Qualifying Facility"
                  within the meaning of the Public Utility Regulatory Policies
                  Act of 1978 and 18 C.F.R. Part 292 in which USEB or its
                  subsidiaries hold an equity interest to lose its status as
                  such or have any material adverse effect on the federal, state
                  or local regulatory status of any project owned or operated by
                  USEB or its subsidiaries.

SECTION 11. Conditions of Effectiveness. This Agreement shall become effective
as of the date first set forth above when each of the following conditions shall
have been fulfilled:

         a. Each of USEB, Holder, U.S. Energy Systems, Inc. and Cinergy Energy
         Solutions Inc. shall have executed and delivered to each other a
         counterpart of this Agreement;

         b. USEB shall have delivered to Holder an opinion of counsel relating
         to the transactions contemplated by this Agreement in form and
         substance reasonably satisfactory to Holder;

         c. Holder shall have delivered to USEB the consideration described in
         Section 2 hereof;

         d. The representations and warranties set forth in Section 12 hereof
         shall be true and correct on and as of the date of effectiveness of
         this Agreement as though made on and as of such date; and

         e. All of the transactions contemplated in the Acquisition Agreement
         shall have been completed.

SECTION 12.       Representations, Warranties and Covenants.

         a. USEB, U.S. Energy Systems, Inc. and Cinergy Energy Solutions Inc.
         individually and not jointly and severally represent and warrant that:

         (i) Each of them is a corporation duly organized, validly existing and
         in good standing under the laws of the State of its respective
         incorporation and is duly qualified to do business and in good standing
         under each other jurisdiction in which it owns its properties or the
         conduct of its business requires such qualification.

         (ii) Each of them has the corporate power and authority to own, license
         or lease the properties and assets it purports to own, license or lease
         and to conduct its business as now conducted and as presently proposed
         to be conducted and to execute, deliver and perform its obligations
         under this Agreement.

                                       11

         (iii) The execution and delivery by each of them of this Agreement and
         the performance of its respective obligations hereunder have been or
         will be, as the case may be, duly authorized and constitute or will
         constitute, as the case may be, valid obligations legally binding upon
         it and enforceable in accordance with the terms hereof, except as
         enforcement may be limited by applicable bankruptcy, insolvency,
         reorganization, moratorium or similar laws affecting creditors' rights
         generally or by equitable principles relating to or limiting creditors'
         rights generally. This Agreement has been executed and delivered by
         each of them.

         (iv) The execution and delivery of this Agreement by each of them and
         the performance of its respective obligations hereunder do not, and
         will not, require any approval that has not been obtained, or the
         approval of any trustee or holder of any obligation or indebtedness of
         that has not been obtained, and do not, and will not, contravene any
         law, statute, rule or regulation, any governmental approval or
         authorization or its respective corporate governing documents, or
         constitute a default under any indenture, mortgage, deed of trust, loan
         , purchase or credit agreement, lease or any other agreement or
         instrument to which it is a party or by which it or its properties may
         be bound or affected, or result in the creation of any lien upon any of
         its property.

         b. Holder represents and warrants that:

                  (i) Holder is a corporation duly organized, validly existing
         and in good standing under the laws of Canada.

                  (ii) Holder has the corporate power and authority to execute
         and deliver this Agreement and to perform its obligations under this
         Agreement.

                  (iii) The execution and delivery of this Agreement by Holder
         and the performance by Holder of its obligations hereunder have been or
         will be, as the case may be, duly authorized and constitute or will
         constitute, as the case may be, valid obligations of Holder legally
         binding upon it and enforceable in accordance with the terms of this
         Agreement, except as enforcement may be limited by applicable
         bankruptcy, insolvency, reorganization, moratorium or similar laws
         affecting creditors' rights generally or by equitable principles
         relating to or limiting creditors' rights generally. This Agreement has
         been executed and delivered by Holder.

                  (iv) The execution and delivery by Holder of this Agreement
         and the performance by Holder of its obligations hereunder do not, and
         will not, require any approval that has not been obtained, or the
         approval of any trustee or holder of any obligation or indebtedness of
         Holder that has not been obtained, and do not, and will not, contravene
         any law, statute, rule or regulation, any governmental approval or
         authorization, or Holder's corporate governing documents, or constitute
         a default under any indenture, mortgage, deed of trust, loan, purchase
         or credit agreement, lease or any other agreement or instrument to
         which Holder is a party or by which Holder or its properties may be
         bound or affected.

                                       12

                  (v) In connection with the execution of this Agreement, Holder
         is delivering to USEB a complete and valid Form W-8BEN.

         c. Covenants.

                  (i) Other than the Royalty Interest and the right to acquire
         the Equity Interest as provided herein, Holder covenants not to acquire
         (until after the Conversion Effective Date) directly, indirectly, by
         operation of the constructive ownership rules of Code Section 318 as
         modified by Code Section 871(h)(3)(C), or through a person bearing a
         relationship to Holder described in Code Section 267, any equity
         interest or royalty interest or option, right of first refusal, right
         of first offer or similar right to acquire an equity interest or
         royalty interest in any of USEB, U.S. Energy Systems, Inc., or Cinergy
         Energy Solutions Inc., except as provided in the "Definitive Agreement"
         as that term is defined in the Improvement Agreement.

                  (ii) Holder and USEB agree to cooperate and to file or provide
         such forms, returns or other documentation as may at any time be
         required or appropriate to minimize the U.S. federal withholding tax
         applicable to any Royalty Payment or other transaction contemplated
         hereunder.

                  (iii) The parties hereto agree that except as required by a
         change in law or GAAP after the date hereof, they (and their respective
         direct and indirect subsidiaries) will not treat the Royalty Interest
         as debt for any purposes (including for accounting purposes).

                  (iv) No USEB Shareholder shall sell, transfer, donate, give,
         mortgage, pledge, hypothecate, or otherwise encumber or dispose of,
         whether voluntarily, by operation of law or otherwise (any of the
         foregoing acts being herein referred to as a "Transfer") any USEB Stock
         now or hereafter owned by such USEB Shareholder, except subject to and
         conditioned upon full compliance by the transferor and transferee with
         each of the following conditions:

                           (1) Each transferee shall have executed an agreement
                  in form and substance satisfactory to Holder, by which such
                  transferee shall have agreed to become a party to and bound by
                  the terms and conditions of this Agreement.

                           (2) No Transfer shall be made: (A) to a person or
                  other entity who, in accordance with applicable law, lacks the
                  capacity to own, or otherwise is prohibited from owning, such
                  USEB Stock by reason of minority, incompetence or otherwise;
                  or (B) to a person or entity otherwise prohibited by
                  applicable law from entering into such transaction or holding
                  such USEB Stock; (C) to any person if, as a result of such
                  Transfer, any USEB Stock would be "excluded stock" within the
                  meaning of Code Section 1563(c), or (D) which violates any
                  other provision of this Agreement.

                                       13

                           (3) The transferor and transferee shall have
                  delivered to Holder such other agreements, instruments and
                  other documents (including opinions of counsel reasonably
                  satisfactory to Holder) as Holder shall request in order to
                  demonstrate compliance of any such Transfer with the
                  provisions of this Agreement and applicable law.

                  (v) USEB shall not directly or indirectly solicit any
         proposals or enter into any agreements or arrangements of any kind with
         any person or entity, which proposals, agreements or arrangements, if
         given effect, would be inconsistent with the provisions of this
         Agreement or would frustrate its intent.

                  (vi) USEB will not authorize or issue any stock which is
         nonvoting and limited and preferred as to dividends, and will not issue
         any stock to a person if, in the hands of such person, such stock would
         be "excluded stock" within the meaning of Code Section 1563(c).

SECTION 13.  Notices. Notices and other communications provided for herein shall
be in writing and shall be delivered by overnight courier service next day
delivery, as follows:

         a. If to USEB, at its address at One North Lexington Avenue 15th Floor,
         ATTN: President, Facsimile number (914) 993-6303.

         b. If to Holder, at its address at 246 Waterloo Street, London,
         Ontario, N6B 2N4, ATTN: Nicole Archibald, Facsimile number (519)
         435-0396, with a copy to Countryside U.S. Power Inc., c/o U.S. Energy
         Systems, Inc. at its address at One North Lexington Avenue 15th Floor,
         ATTN: President, Facsimile number (914) 993-6303..

         c. If to U.S. Energy Systems, Inc., at its address at One North
         Lexington Avenue 15th Floor, ATTN: Goran Mornhed, President & COO,
         Facsimile number ( 914) 993-6303.

         d. If to Cinergy Energy Solutions Inc., at its address at 139 East
         Fourth Street, 5 Atrium II EA502, Cincinnati, Ohio 45202, ATTN:
         President, Facsimile number (513) 419-5672 with a copy to Cinergy
         Corp., 139 East Fourth Street, 5 Atrium II EA503, Cincinnati, Ohio
         45202, ATTN: General Counsel, Commercial Business Unit, Facsimile
         number (513) 419-6955.

         e. As to each party hereto, at such other address as shall be
         designated by such party from time to time by Notice to the other
         parties hereto.

All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of receipt if delivered by overnight courier service to such party as
provided in this Section or in accordance with the latest unrevoked direction
from such party given in accordance with this Section.

                                       14

SECTION 14. Books and Records. USEB shall keep and maintain proper books and
records of the transactions and payments under this Agreement, and shall permit
the other parties hereto access to review and make photocopies of such books and
records during normal business hours on reasonable prior Notice.

SECTION 15. Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so executed and delivered shall be deemed to be an original
and all of which taken together shall constitute but one and the same
instrument.

SECTION 16. Governing Law. This Amendment shall be governed by, and construed in
accordance with, the internal laws of the State of the New York.

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.

                          US Energy Biogas Corporation

                          By: _______________________________
                          Name:
                          Title:

                          Countryside Canada Power Inc.

                          By__________________________________
                            Name:
                            Title:

                          U.S. Energy Systems, Inc.

                          By_________________________________
                            Name:
                            Title:

                         Cinergy Energy Solutions, Inc.

                          By_________________________________
                            Name:
                            Title:

                                       15

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