Document:

Warrant to Purchase
WB-**                                                        ***
                                                      Shares of  Common Stock

NEITHER THIS WARRANT NOR THE SHARES OF COMMON STOCK  ISSUABLE  UPON  EXERCISE OF
THIS WARRANT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 ( THE "ACT"),
AND NEITHER  THIS WARRANT NOR SUCH SHARES MAY BE SOLD,  ENCUMBERED  OR OTHERWISE
TRANSFERRED  EXCEPT PURSUANT TO AN EFFECTIVE  REGISTRATION  STATEMENT UNDER SUCH
ACT OR AN EXEMPTION  FROM SUCH  REGISTRATION  REQUIREMENT,  AND, IF AN EXEMPTION
SHALL BE  APPLICABLE,  THE  HOLDER  SHALL HAVE  DELIVERED  AN OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

Void  after  5:00 P.M.  New York City time on July 30,  2005.  Subject  to Early
Termination as provided in Section 10(e) of this Warrant.

                    SERIES B WARRANT TO PURCHASE COMMON STOCK
                                       OF
                            U.S. ENERGY SYSTEMS, INC.

This is to certify that, FOR VALUE RECEIVED, Energy Systems Investors, L.L.C. or
assigns,  is entitled to purchase,  subject to the  provisions  of this Series B
Warrant to Purchase  Common Stock (the  "Warrant"  or "Series B Warrant"),  from
U.S.  ENERGY  SYSTEMS,  INC.,  a Delaware  corporation  (the  "Company"),  at an
exercise price of Four Dollars ($4.00) per share, [
               ] ([ ]) shares of Common Stock,  par value $.01 per share, of the
Company  (the  "Common  Stock") at any time  during the  period  (the  "Exercise
Period")  commencing as of July 31, 2000,  and ending at 5:00 p.m. New York City
time, on July 30, 2005, subject to earlier termination pursuant to Section 10(e)
of this Warrant.  Notwithstanding  anything to the contrary herein, this Warrant
may not be exercised  (a) unless and until the  Effective  Date (as such term is
defined in the Plan of  Recapitalization  (as  defined))  has  occurred  and (b)
unless the promissory note made by Energy Systems Investors,  L.L.C. in favor of
the Company (the "Note") in stated  principal  amount of  $7,741,378.90  and all
accrued  interest  and fees have been paid in full,  or if the Note has not been
paid in full, this Warrant may only be exercised to acquire the number of shares
of Common Stock equal to the quotient  obtained by dividing the principal amount
of the Note that is paid from time to time (less prior  payments of the Note for
which  portions  of  this  Warrant  have  previously   become   exercisable)  by
$5.160919269  and provided  further that all interest and fees  allocable to the
portion of the Note that has been paid and for which  Warrants  may be exercised
has also been paid. The number of shares of Common Stock to be received upon the
exercise of this  Warrant  and the price to be paid for a share of Common  Stock
may be adjusted from time to time as hereinafter set forth. The shares of Common
Stock deliverable upon such

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exercise,  and as adjusted from time to time, are hereinafter sometimes referred
to as "Warrant  Shares," and the  exercise  price for the purchase of a share of
Common Stock pursuant to this Warrant in effect at any time and as adjusted from
time to time is hereby referred to as the "Exercise Price".  This Warrant is one
of the  Series  B  Warrants  issued  pursuant  to the  Plan of  Recapitalization
pursuant to which an aggregate of up to 1,500,000  shares (subject to adjustment
as  provided  herein) of Common  Stock may be issued.  References  to all of the
Warrants  shall  include all  outstanding  Series B Warrants to Purchase  Common
stock of the Company originally issued pursuant to the Plan of Recapitalization,
including  Warrants  held by  transferees.  Except  as  provided  in the Plan of
Recapitalization  or  herein,  the  Company  shall not  issue any more  Series B
Warrants.  The term "Plan of Recapitalization"  has the meaning ascribed to such
term in the  letter  dated  as of July  31,  2000 by and  between  the  Company,
Lawrence I. Schneider, Henry Schneider and Energy Systems Investors, L.L.C.

                  1.  EXERCISE OF WARRANT.  Except as otherwise  provided in the
herein, this Warrant may be exercised in whole at any time, or in part from time
to time,  during the Exercise Period by presentation and surrender hereof to the
Company at its principal  office,  or at the office of its stock transfer agent,
if any, with the Purchase Form annexed  hereto as Exhibit A duly executed and by
paying in full, in lawful money of the United States,  in cash,  certified check
or bank draft payable to the order of the Company,  the Exercise  Price for each
full share of Common Stock as to which the Warrant is exercised  and any and all
applicable  taxes  due in  connection  with the  exercise  of the  Warrant,  the
exchange  of the Warrant for the Common  Stock,  and the  issuance of the Common
Stock. If this Warrant should be exercised in part only, the Company shall, upon
surrender  of this Warrant for  cancellation,  execute and deliver a new Warrant
evidencing the rights of the Holder hereof to purchase the balance of the shares
purchasable  hereunder.  Upon  receipt by the  Company of this  Warrant  and the
Exercise  Price  therefor at its office,  or by the stock  transfer agent of the
Company at its office,  in proper form for exercise,  the Registered  Holder (as
defined)  shall be  deemed to be the  holder  of record of the  shares of Common
Stock issuable upon such exercise  provided,  that if the date of such surrender
and payment is a date when the stock  transfer  books of the Company are closed,
such person shall be deemed to have become the Registered  Holder of such shares
at the close of business on the next succeeding date on which the stock transfer
books are open.

                  2. VALID ISSUANCE.  All shares of Common Stock issued upon the
proper  exercise of this  Warrant in  conformity  with the terms hereof shall be
validly issued, fully paid and non-assessable.

                  3. RESERVATION OF COMMON STOCK; LISTING OF SHARES. The Company
hereby agrees that: (a) at all times there shall be reserved for issuance and/or
delivery upon exercise of this Warrant such number of shares of its Common Stock
as shall be required for issuance and delivery  upon  exercise of this  Warrant;
and (b) in the event the shares of the  Company's  Common  Stock are included on
The Nasdaq Stock Market or a national  securities  exchange,  it shall cause the
Warrant Shares to be so listed.

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                  4.       FRACTIONAL SHARES.

                           (a)      The Company shall not  be required to  issue
fractional  shares  upon exercise of this Warrant.  If  upon  exercise  of  this
Warrant  the Company  would be required  to issue a fractional number of shares,
the Company  shall,  in lieu thereof, pay to the Registered  Holder an amount in
cash equal to such fraction multiplied by the current Market Price Per Share (as
defined),  as  of the last business day prior to the  date  of exercise of  this
Warrant.

                           (b) As used herein, the term "Market Price Per Share"
on any date shall mean the closing  price per share of the  Common Stock for the
trading  day immediately  preceding  such date.  The closing price for each such
day shall be the last  sale  price  or, in case no such sale takes place on such
day,  the average of the closing  bid and asked  prices,  in either  case on the
principal securities exchange (including any  automated system of quotation) (an
"Exchange") on which the Common Stock is listed or admitted for trading,  or, if
not so listed on an Exchange, the average of the closing bid and asked prices as
furnished by two members of the National Association of Securities Dealers, Inc.
selected  from time to time by the  Company  for that  purpose.  If such bid and
asked prices are not available,  then "Market Price Per Share" shall be the fair
market value of the  Company's  Common Stock as  determined in good faith by the
Board of Directors of the Company.

                  5.  EXCHANGE,  TRANSFER,  ASSIGNMENT OR LOSS OF WARRANT.  This
Warrant  is  exchangeable,  without  expense,  at the  option of the  Registered
Holder,  upon  presentation and surrender hereof to the Company or at the office
of  its  stock  transfer   agent,  if  any,  for  other  warrants  of  different
denominations  entitling  the  Registered  Holder  thereof  to  purchase  in the
aggregate  the same  number of shares of  Common  Stock  purchasable  hereunder.
Subject to the  provisions of Section 9 of this Warrant,  upon surrender of this
Warrant to the  Company or at the office of its stock  transfer  agent,  if any,
with the  Assignment  Form annexed  hereto as Exhibit A duly  executed and funds
sufficient to pay any transfer tax, the Company shall,  without charge,  execute
and deliver a new Warrant in the name of the assignee  named in such  instrument
of assignment and this Warrant shall  promptly be canceled.  This Warrant may be
divided or  combined  with  other  Warrants  which  carry the same  rights  upon
presentation  hereof at the office of the  Company or at the office of its stock
transfer agent, if any,  together with a written notice specifying the names and
denominations  in  which  new  Warrants  are  to be  issued  and  signed  by the
Registered  Holder  hereof.  The term  "Warrant"  as used  herein  includes  any
Warrants  into which this Warrant may be divided or  exchanged.  Upon receipt by
the  Company  of  evidence  reasonably  satisfactory  to it of the loss,  theft,
destruction  or mutilation of this Warrant,  and (in the case of loss,  theft or
destruction) of reasonably satisfactory indemnification,  and upon surrender and
cancellation of this Warrant, if mutilated, the Company will execute and deliver
a new Warrant of like tenor and date.

                  6. RIGHTS OF THE HOLDER. The holder of this Warrant shall not,
by virtue of this  Warrant,  be entitled to any rights of a  stockholder  in the
Company,  either at law or equity,  and the rights of the holder of this Warrant
are limited to those expressed in this Warrant and are not  enforceable  against
the Company except to the extent set forth herein.

<PAGE>

                  7.       ANTIDILUTION ADJUSTMENT OF NUMBER OF WARRANT
SHARES AND EXERCISE PRICE; OTHER RECLASSIFICATIONS, REORGANIZATIONS
OR MERGERS.

                           (a)      In case the Company shall (i) pay a dividend
or make a distribution on its shares of Common Stock in shares of  Common Stock,
(ii) split, subdivide or reclassify its outstanding  Common Stock into a greater
number  of  shares or (iii) combine  or reclassify its  outstanding Common Stock
into a smaller number of shares, then the number of Warrant Shares issuable upon
exercise of this Warrant, and the Exercise Price per share in effect at the time
of the record date for such dividend or distribution or at the effective date of
such  split, subdivision,  combination or  reclassification,  shall  be
proportionately adjusted so that if this  Warrant is exercised  after such date,
the  Registered  Holder shall  be  entitled  to  receive  for the same aggregate
purchase  price,  the aggregate number and kind of shares which, if this Warrant
had been exercised immediately prior to such time, such Holder  would have owned
after giving effect to  such  dividend  or   distribution,  split,  subdivision,
combination  or reclassification. Such  adjustments shall be  made  successively
whenever any event listed in this Section 7 shall occur. All price  calculations
under  this Section  7 shall be made  to  the  nearest whole  cent  and  share
adjustments  to the nearest whole share.

                           (b)      If  after the  date  hereof  any  capital
reorganization  or  reclassification of  the  Common Stock of the Company,  or
consolidation  or merger of the Company with or into another corporation, or the
sale of all or  substantially  all of its assets to another corporation or other
similar event  (collectively  referred to as a "Transaction") shall be effected,
then, as a condition of such Transaction, lawful  and  fair provision  shall  be
made whereby the  Registered  Holder of this Warrant shall  thereafter have  the
right  thereafter by exercising this Warrant, to purchase (in lieu of purchasing
the shares of Common  Stock of the Company immediately  theretofore  purchasable
and receivable upon the exercise of this Warrant), the kind and amount of shares
of  stock,  securities,  or assets receivable  upon such Transaction by a holder
of the number of shares of Common Stock  which  might have been  purchased  upon
exercise of this Warrant  immediately prior to such Transaction.  In such event,
appropriate  provision shall be made with respect to the rights and interests of
the  Registered  Holder of this Warrant to  the  end that  the provisions hereof
(including,  without  limitation, provisions  for  adjustments  of the  Exercise
Price and of the number of shares purchasable upon the exercise of this Warrant)
shall  thereafter be applicable, as  nearly as  may be, to any  share of  stock,
securities,  or assets  thereafter deliverable  upon the  exercise  hereof.  The
Company  shall not effect any such  Transaction unless prior to the consummation
thereof the successor  corporation  (if other than the Company)  resulting  from
such Transaction,  or the corporation purchasing  such  assets, shall assume the
obligations  to  deliver  to  the Registered  Holder of this Warrant such shares
of stock,  securities,  or  assets  which, in  accordance  with the  foregoing
provisions,  such holder may be entitled to purchase.

                  8. NOTICES OF CHANGE IN WARRANT.  Upon every adjustment of the
Exercise Price or the number of shares issuable on exercise of this Warrant, the
Company  shall give  written  notice  thereof to the  Registered  Holder of this
Warrant,  which  notice  shall  state the  Exercise  Price  resulting  from such
adjustment and the increase or decrease, if any, in the number

<PAGE>

of shares  purchasable  at such price upon the  exercise  of a Warrant,  setting
forth in reasonable  detail the method of  calculation  and the facts upon which
such calculation is based. Upon the occurrence of any event specified in Section
7,  then,  in any such  event,  the  Company  shall give  written  notice to the
Registered  Holder  of this  Warrant  of the  record  date  for  such  dividend,
distribution, split, reclassification or recombination, or the effective date of
Transaction.  Such notice shall also specify the date as of which the holders of
Common Stock of record shall participate in such dividend, distribution,  split,
reclassification or recombination, or shall be entitled to exchange their Common
Stock for stock,  securities,  or other assets  deliverable  upon a Transaction.
Failure  to give such  notice,  or any  defect  therein,  shall not  affect  the
legality or validity of such event.

                  9.       COMPLIANCE WITH THE SECURITIES ACT OF 1933.

                           (a)      This Warrant or the Warrant  Shares  or  any
other security issued or issuable upon exercise of this Warrant may not be sold
or otherwise  disposed of except as follows:

                                    (i)     to a person who, in  the  opinion of
counsel reasonably acceptable  the Company,  is a person to whom this Warrant or
Warrant Shares may legally be transferred without  registration and without  the
delivery of a current prospectus under the Act with respect thereto, and against
receipt of an  agreement  of such person to comply with the  obligations  of the
holder of this Warrant which agreement  shall be reasonably satisfactory in form
and substance to the Company; or

                                    (ii)  to  any  person  upon  delivery  of  a
prospectus then meeting the requirements of the Act relating to such securities
and the offering thereof for such sale or disposition.

                           (b)      Notwithstanding anything to the contrary
herein, the Company shall not be obligated to deliver any securities issuable on
exercise of  this  Warrant unless the issuance of  such  securities  has  been
registered  under the Act or, in the  opinion  of  counsel  to the  Company, the
issuance is exempt from the registration  requirements of the Act and applicable
state  securities laws. This  Warrant  may not be  exercised  by,  nor may any
securities  be issued  to, any  Registered Holder  in  any  state in which such
exercise would be unlawful.

                  10.      MISCELLANEOUS.

                           (a)      All communications provided for herein shall
be  sent, except  as  may be otherwise specifically provided, by  registered  or
certified mail: if  to  the Registered Holder  of this Warrant, to  the  address
shown  on  the  books of the Company; and  if  to  the Company, to  U.S.  Energy
Systems, Inc., 515 N. Flagler Drive, Suite 702, West Palm Beach, Florida  33401,
Attention: President, or to  such other  address as the Company  may  advise the
Registered Holder of this Warrant in writing.  Notices  shall  be  deemed  given
when mailed.

<PAGE>

                           (b)      The provisions of this Warrant  shall in all
respects be constructed  according to, and  the rights and  liabilities  of the
parties hereto shall in all respects be governed  by, the laws of the State of
Delaware,  without  regard to such state's choice of law rules.

                           (c)      The Company  shall  maintain books ("Warrant
Register") for the registration  of original  issuance and  the  registration of
transfer of  the  Series B Warrants.  Upon the initial issuance of the Warrants,
the  Company  shall  issue and register the Warrants in the names of the holders
thereof.

                           (d)      Prior to due presentment for registration of
transfer of this Warrant, the  Company may deem  and treat the person  in  whose
name this  Warrant  shall be registered  upon the Warrant Register  ("Registered
Holder"),  as the absolute owner of such Warrant and of each Warrant represented
thereby  (notwithstanding any notation of ownership  or  other  writing  on  the
Warrant  certificate  made by anyone other than the Company,  for the purpose of
any exercise thereof, and for all other  purposes,  and the Company shall not be
affected by any notice to the contrary).

                           (e)      This Warrant shall terminate and  be  of  no
further force or effect as and when the Plan of Recapitalization  terminates, in
the manner more fully set forth in Section 3 of the Plan of Recapitalization.

Dated:  July 31, 2000

                                       U.S. ENERGY SYSTEMS, INC.

                                      By:
                                         ------------------------

<PAGE>

                                                   Exhibit A

                                  PURCHASE FORM

                                                            Dated_______ , 20__

         The  undersigned  hereby  irrevocably  elects to  exercise  the  within
Warrant to the extent of purchasing  _________ shares of Common Stock and hereby
makes payment of _________ in payment of the actual exercise price thereof.

                     INSTRUCTIONS FOR REGISTRATION OF STOCK

Name___________________________________
         (Please typewrite or print in block letters)

Signature________________________________

                                 ASSIGNMENT FORM

                  FOR VALUE RECEIVED,
hereby sells, assigns and transfer unto

Name___________________________________
         (Please typewrite or print in block letters)

Address_________________________________

Social Security or Employer Identification No.__________
the right to purchase Common Stock  represented by this Warrant to the extent of
_____shares  as to which such right is exercisable  and does hereby  irrevocably
constitute and appoint  ________________  Attorney,  to transfer the same on the
books of the Company with full power of substitution in the premises.

Dated:___________, 20__

Signature_____________

Signature Guaranteed

--------------------------------------U.S. ENERGY SYSTEMS, INC.

                   AMENDED AND RESTATED STOCK OPTION AGREEMENT

Name of Optionee:    Lawrence I. Schneider

Date of Grant:    May 10, 2000

Number of Shares Subject to Option:     750,000

Exercise Price Per Share:      $3.00

Type of Option:  Non-qualified Stock Option

Expiration Date:  May 9, 2010 (subject to earlier termination)

Section 1.        Amendment  and  Restatement  of Option  Granted May 10, 2000;
                  Grant of Option.
                  (a) On May 10, 2000, U.S. Energy Systems, Inc. (the "Company")
                  granted  to  the Optionee (as  defined) an option  (the "Prior
                  Option"), to  acquire  the number  of shares of the  Company's
                  Common  Stock  set forth  above.  This  agreement  amends  and
                  restates the Prior Option.

                  (b) The Company hereby grants to the Optionee identified above
                  (the  "Optionee")  an option (the  "Option") to purchase up to
                  the number of shares of the Company's Common Stock,  $0.01 par
                  value per share set forth above (the "Shares"), at an exercise
                  price per share  equal to the  exercise  price set forth above
                  (the  "Exercise  Price").  The Option  shall be subject to the
                  terms and  conditions  set  forth  herein.  The  Option is not
                  intended to qualify as an ISO. The Option was issued  pursuant
                  to the (a) Company's  2000  Executive  Incentive  Compensation
                  Plan (the "Plan") and (b) employment agreement dated as of May
                  10, 2000 between the Company and the Optionee (the "Employment
                  Agreement"),  both of which are  incorporated  herein  for all
                  purposes.  The Optionee hereby acknowledges  receipt of a copy
                  of the Plan and Employment Agreement and agrees to be bound by
                  all of the terms and  conditions  hereof and  thereof.  In the
                  event of any inconsistency between the Employment Agreement on
                  the one hand and the Plan or this Stock  Option  Agreement  on
                  the other hand, the Employment  Agreement shall govern. In the
                  event of any  inconsistency  between  the Plan and this  Stock
                  Option Agreement, the Plan shall govern.

Section 2.        Definitions.  Unless  otherwise  provided  herein, terms  used
                  herein that  are  defined  in  the Plan  or the  Employment
                  Agreement and not defined herein shall have the meanings
                  attributed thereto in the Plan or the Employment Agreement, as
                  the case may be.

<PAGE>

Section 3.        Exercise Schedule.  (a) This  Option  vests  in full as of the
                  Date of Grant set forth above.

                 (b)  Notwithstanding  anything to the contrary herein,  the
                 Plan  or  the Employment  Agreement,  the Option shall not be
                 exercisable  until  the  Plan shall  have been  approved by a
                 Majority  of the  Shareholders  by November 15, 2000  provided
                 that if the Stock  Option  becomes a Voted Matter as defined in
                 Section 3(d) of the Employment  Agreement the Option  shall not
                 be exercisable  until the  Option  and the Plan shall have been
                 approved by a Majority of the  Shareholders  by November 15,
                 2000.

Section 4.        Method of Exercise.  The Option shall be exercisable in whole
                  or in part by written notice which shall state the election to
                  exercise the Option, the number of Shares in respect of which
                  the Option is being exercised, and  such other representations
                  and  agreements  as  to the  holder's investment  intent  with
                  respect  to  such  Shares  as  may be  required by the Company
                  pursuant to the provisions  of the  Plan. Such  written notice
                  shall  be  signed  by the  Optionee and shall  be delivered in
                  person or by certified mail to the  Secretary  of the Company.
                  The  written  notice  shall be  accompanied  by payment of the
                  exercise price in the manner contemplated by Section 5 hereof.
                  This Option shall be deemed to be  exercised  after  both  (a)
                  receipt by the Company of such written  notice accompanied  by
                  the  exercise  price  and the Option and (b) arrangements that
                  are  reasonably satisfactory  to the  Committee have been made
                  for Optionee's payment to the Company of the amount that  is
                  necessary to be withheld in accordance with applicable Federal
                  or  state  withholding requirements.  The  Company  and  the
                  Optionee shall  work  cooperatively, expeditiously and in good
                  faith to make such withholding arrangements. No Shares will be
                  issued pursuant to the Option unless and until such issuance
                  and such exercise shall comply with all relevant provisions of
                  applicable  law, including the  requirements of  any  stock
                  exchange (including any automated system  of  quotation)  upon
                  which the Shares then may be traded or quoted.

Section 5.        Method of Payment.  Payment of  the exercise  price  shall  be
                  by any of the  following,  or a  combination  thereof,  at the
                  election of the Optionee: (a) cash; (b) check; (c) with Shares
                  that have been held by the  Optionee for at least 6 months (or
                  such other Shares as the Company determines will not cause the
                  Company  to  realize  a  financial  account  charge);  (d)  as
                  provided in Section 9 of this Stock Option  Agreement;  or (e)
                  such other  consideration  or in such  other  manner as may be
                  determined  by the  Board  or the  Committee  in its  absolute
                  discretion.

Section 6.        Termination of Option.  Subject  to  earlier  termination as
                  provided in this Section 6, the Option shall terminate on, and
                  in no event  shall the  Option be  exercisable  after,  May 9,
                  2010.  The Option shall  terminate  and expire on November 16,
                  2000  unless the Plan has been  approved  by a Majority of the
                  Shareholders by November

<PAGE>

                  15, 2000 provided  that if the Option  becomes Voted Matter as
                  defined in Section 3(d) of the Employment Agreement the Option
                  shall  expire on  November  16,  2000  unless the Plan and the
                  Option are  approved  by a  Majority  of the  Shareholders  by
                  November 15, 2000. Any unexercised portion of the Option shall
                  automatically and without notice terminate and become null and
                  void on the terms and  conditions and at the time(s) set forth
                  in the Employment Agreement.

Section 7.        Transferability.  The  Option  is not  transferable  otherwise
                  than by will or the  laws of  descent  and  distribution,  and
                  during  the  lifetime  of the  Optionee  the  Option  shall be
                  exercisable  only by the  Optionee.  The terms of this  Option
                  shall be binding upon the  executors,  administrators,  heirs,
                  successors and assigns of the Optionee.

Section 8.        No Rights of Stockholder Nor  Rights to  Continued Employment.
                  Neither  the  Optionee nor  any  personal representative  (or
                  beneficiary) shall be, or  shall  have any  of the rights  and
                  privileges of, a stockholder of the  Company with  respect  to
                  any shares of Stock purchasable or  issuable upon the exercise
                  of  the  Option, in  whole  or  in part, prior to the date the
                  Option  is deemed  to have been  exercised.  Notwithstanding
                  Section 1 of this Stock Option Agreement, neither  the  Option
                  nor this Stock Option Agreement shall confer upon the Optionee
                  any right to continued employment or service with the Company.

Section 9.        Conversion.  (a) In  lieu  of exercise  of any  portion of the
                  Option as provided  herein,  and the  payment of the  exercise
                  price  therefor in the manner  contemplated  by Sections 5(a),
                  5(b),  5(c)  and  5(e)  hereof,  the  Option  (or any  portion
                  thereof)  may, at the election of the  Optionee,  be converted
                  into the nearest whole number of Shares determined pursuant to
                  the following formula:

                           Number of Shares = NOS multiplied by (MVPS minus EP)
                                                                 -------------
                                                                    ( MVPS )

                           where:

                           NOS is the number of Options to be exercised;

                           MVPS is the  Market  Value  Per  Share on the date of
                           exercise, which shall be determined in the manner set
                           forth in Section 9(c); and

                           EP is the  Exercise  Price in effect on the  business
                           day next preceding the date of exercise.

                  (b)  Notwithstanding  anything  to the  contrary  herein,  the
                  conversion privilege afforded under this Section 9 may only be
                  used if, at the date of  exercise,  the Market Value Per Share
                  is greater than the Exercise Price then in effect.

                  (c)  For   purposes  of  the  Option  and  this  Stock  Option
                  Agreement,  Market Value Per Share shall be the closing  price
                  of a Share as of the day in question, as

<PAGE>

                  reported  with  respect to the  principal  market or quotation
                  system in which  Shares are then  traded or quoted,  or, if no
                  such closing prices are reported,  on the basis of the closing
                  bid price as of the day in question on the principal market or
                  quotation  system on which  Shares are then  traded or quoted,
                  or, if not so traded or quoted, as furnished by a professional
                  securities  dealer  making a market in such stock  selected by
                  the Committee.

Section 10.       Law Governing.  This Agreement shall be governed in accordance
                  with and governed by  the internal laws  of the  State  of
                  Delaware.

Section 11.       Notices.  Any notice under this Agreement shall be in  writing
                  and  shall  be  given in the manner specified in Section 13 of
                  the Employment Agreement.

IN WITNESS  WHEREOF,  the undersigned have executed this Agreement as of May 10,
2000.

                                  COMPANY:

                                  U.S. ENERGY SYSTEMS, INC.

                                   By:Goran Mornhead
                                      ------------------------
                                      Goran Mornhed, President

         Optionee acknowledges receipt of a copy of the Plan and represents that
he or she is familiar with the terms and provisions thereof,  and hereby accepts
this Option  subject to all of the terms and  provisions  thereof.  Optionee has
reviewed the Plan and this Option in their  entirety,  has had an opportunity to
obtain  the  advice  of  counsel  prior to  executing  this  Option,  and  fully
understands all provisions of the Option.

                                   OPTIONEE:

                                   /s/ Lawrence I. Schneider
                                   ---------------------------------
                                       Lawrence I. Schneider

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00015-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00015-of-00352.parquet"}]]