AMENDMENT NO. 1 TO AGREEMENT AND PLAN OF REORGANIZATION AND MERGER BY AND AMONG U.S. ENERGY SYSTEMS, INC., USE ACQUISITION CORP. AND ZAHREN ALTERNATIVE POWER CORPORATION

                                AMENDMENT NO. 1
                            TO AGREEMENT AND PLAN OF
                            REORGANIZATION AND MERGER
                     BY AND AMONG U.S. ENERGY SYSTEMS, INC.,
                            USE ACQUISITION CORP. AND
                      XXXXXX ALTERNATIVE POWER CORPORATION



                  This Amendment No. 1 to Agreement  and Plan of Reorganization
and Merger (the "Amendment") is made as of the __ day of December, 2000 by and
among U.S. Energy Systems, Inc. ("Parent"), USE Acquisition Corp.("Merger Sub"),
and  Xxxxxx  Alternative  Power  Corporation  (the "Company").  Unless indicated
otherwise, capitalized terms shall have the same meanings herein as they have in
the Merger Agreement (as defined below).

                               W I T N E S S E T H

                  WHEREAS, Parent, Merger Sub and the Company previously entered
into that certain  Agreement and Plan of  Reorganization  and Merger dated as of
November 28, 2000 (the "Merger Agreement"); and

                  WHEREAS,  the  Parent,  Merger Sub and the Company now wish to
amend the  Agreement.

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

                  1. The last unlettered paragraph of Section 8.01 of the Merger
Agreement is hereby  amended by deleting the existing  paragraph in its entirety
and inserting in its place the following paragraph:


                  This Agreement will be terminated and be void and of no effect
         in the event  Xxxxxxx  does not  consent in  writing on or before  5:00
         p.m.,  Eastern  Standard  time on December 19, 2000,  to the  Company's
         entering into the Merger Agreement and the Exhibits hereto to which the
         Company  is a party  and which  are to be  entered  into as of the date
         hereof; provided, however, that the terms of the consent are subject to
         the prior approval of Parent and Merger Sub.

                  2. Except as amended hereby, the Merger Agreement is as hereby
ratified and confirmed  and, as so amended,  remains in full force and effect on
the date hereof.
                  IN WITNESS  WHEREOF,  Parent,  Merger Sub and the Company have
caused this Agreement to be executed as of the date first written above.

                                    U.S. ENERGY SYSTEMS, INC.


                                By:  /s/   Xxxxx Xxxxxxx
                                    --------------------------------
                                    Name:  Xxxxx Xxxxxxx
                                    Title: President and
                                    Chief Operating Officer


                                    USE ACQUISITION CORP.


                                By:    /s/ Xxxxx Xxxxxxx
                                    ---------------------------------
                                    Name:  Xxxxx Xxxxxxx
                                    Title: President


                                    XXXXXX ALTERNATIVE POWER CORPORATION


                                By:  /s/   Xxxxxxx X. Xxxxxx
                                    ----------------------------------
                                    Name:  Xxxxxxx X. Xxxxxx
                                    Title: President