NEITHER
THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION OF THESE SECURITIES
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT
BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN
EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OR
(B) AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
APPLICABLE STATE SECURITIES LAWS OR BLUE SKY LAWS AS EVIDENCED BY A LEGAL
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY AND ITS TRANSFER AGENT
OR (II) UNLESS SOLD PURSUANT TO RULE 144 UNDER SAID ACT.

    


    NOTWITHSTANDING
THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE
MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE
SECURITIES.

    


    CONVERTIBLE
SECURED PROMISSORY NOTE

    


    
      	
              US$______

            	
              Shenyang,
      China     

            


    

    __________,
2010

    


     

    Pursuant
to the terms of the Securities Purchase Agreement, dated __________, 2010 (the
“Agreement”), NF Energy Saving Corporation, a Delaware corporation (the
“Company”), HEREBY UNCONDITIONALLY PROMISES TO PAY to _______________ (the
“Holder”), or its permitted assigns, the principal sum of _______________
Dollars ($_______), together with interest from the date of this Note on the
unpaid principal balance at a rate equal to six percent (6%) simple interest per
annum, or the maximum amount permitted by law, whichever is less. The simple
interest rate shall be computed on the basis of the actual number of days
elapsed and a year of 365 days.

     

    All
unpaid principal, together with the balance of unpaid and accrued interest shall
be due and payable on
the earliest to occur of (i) a conversion in accordance with Section 4, (ii)
_______, 2011 (the “Maturity Date”) or (iii) an Event of Default (as defined
below) as set forth in Section 3.

     

    The
following is a statement of the rights of the Holder and the conditions to which
this Note is subject, and to which the Holder hereof, by the acceptance of this
Note, agrees:

     

    1.             Definitions.  All
capitalized terms used but not defined herein shall have the meanings ascribed
to such terms in the Agreement. In addition, as used in this Note, the following
capitalized terms have the following meanings:

     

    (a)            “Conversion
Price” shall mean $3.00 per share, subject to adjustment in accordance with
Section 5.

     

    (b)            “Conversion
Shares” shall mean those shares of Common Stock issued to Holder upon conversion
of the principal and interest owed under this Note pursuant to Section 4
below.

     

    (c)            "Obligations"
shall mean all principal, accrued interest and costs of enforcement and
collection (including court costs and reasonable attorney’s fees) due
hereunder.

     

    
      
        
        

      

      
        1

        
          

        

      

      
        
        

      

    

     

    2.             Events of
Default.  The occurrence of any one or more of the following
events shall constitute an "Event of Default" hereunder:

     

    (a)           Insolvency.  (i)
The Company shall be dissolved, liquidated, wound up or cease its corporate
existence; or (ii) the Company (A) shall make a general assignment for the
benefit of creditors, or shall generally fail to pay, or admit in writing its
inability to pay, its debts as they become due, subject to applicable grace
periods, if any, whether at stated maturity or otherwise; (B) shall voluntarily
cease to conduct its business in the ordinary course; (C) shall commence any
Insolvency Proceeding with respect to itself; or (D) shall take any action to
effectuate or authorize any of the foregoing.  As used herein, "Insolvency
Proceeding" means (i) any case, action or proceeding before any court or other
governmental agency or authority relating to Bankruptcy (as such term is defined
in the Bankruptcy Code), reorganization, insolvency, liquidation, receivership,
dissolution, winding-up or relief of debtors, or (ii) any general assignment for
the benefit of creditors, composition, marshalling of assets for creditors, or
other, similar arrangement in respect of its creditors generally or any
substantial portion of its creditors, in each case undertaken under U.S.
federal, state or foreign law, including the Bankruptcy Code; and "Bankruptcy
Code" means Title 11 of the United States Code entitled
"Bankruptcy".

     

    (b)           Involuntary
Proceedings.  (i) Any involuntary Insolvency Proceeding is
commenced or filed against the Company or any writ, judgment, warrant of
attachment, execution or similar process, is issued or levied against a
substantial part of the Company's properties, and any such proceeding or
petition shall not be dismissed, or such writ, judgment, warrant of attachment,
execution or similar process shall not be released, vacated or fully bonded
within thirty (30) days after commencement, filing or levy; (ii) the Company
admits the material allegations of a petition against it in any Insolvency
Proceeding, or an order for relief (or similar order under non-U.S. law) is
ordered in any Insolvency Proceeding; or (iii) the Company acquiesces in the
appointment of a receiver, trustee, custodian, conservator, liquidator,
mortgagee in possession (or agent therefore), or other similar person for itself
or a substantial portion of its property or business.

     

    (c)           Non-Payment and Certain
Other Breaches.  The Company does not pay when due the amounts
owed under this Note or breaches any material representation, warranty, covenant
or agreement set forth in this Note or the Transaction Documents.

     

    If any
Event of Default shall occur and be continuing, the Holder may, by notice to the
Company, (i) declare the entire outstanding Obligations payable by the Company
hereunder to be forthwith due and payable, whereupon the principal hereof and
all accrued interest thereon, plus all costs of enforcement and collection
(including court costs and reasonable attorney’s fees), shall immediately become
and be forthwith due and payable, without presentment, demand, protest or
further notice of any kind, all of which are hereby expressly waived by the
Company, provided that if an event described in paragraph 2(b) above shall
occur, the result which would otherwise occur only upon giving of notice by the
Holder to the Company as specified above shall occur automatically, without the
giving of any such notice; (ii) convert this Note in accordance with Section 4;
and (iii) exercise all rights and remedies available to the Holder under the
Agreement and applicable law. The rights and remedies under the Agreement are
cumulative and not exclusive of any rights, remedies, powers and privileges that
may otherwise be available to the Holder. No delay or omission on the part of
the Holder in exercising any right under the Agreement shall operate as a waiver
of such right or any other right hereunder.

     

    3.             Prepayments.  The
Company shall not  make any voluntary prepayment, whether in whole or
in part, under this Note without the prior written consent of the
Holder.

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    4.             Conversion.

     

    4.1           Mandatory
Conversion.  Provided an Event of Default has not occurred and
is not then continuing, upon the earlier of (A) the commencement of trading of
the Company’s Common Stock on  a U.S. major securities exchange such
as the NYSE, AMEX or NASDAQ; or (B) the Maturity Date, this Note shall
automatically convert, through no action on the part of the Holder, into that
number of shares of Common Stock equal to the quotient obtained by dividing (a)
the then outstanding Obligations by (b) the Conversion Price then in
effect.

     

    4.2           
Reservation of Shares
Issuable Upon Conversion. The Company shall take all action necessary to
at all times have authorized, and reserved for the purpose of issuance, the
number of shares of Common Stock issuable upon conversion of the principal and
accrued interest due under the Note.  The Company covenants that all
Conversion Shares, when issued in accordance with the terms of this Note and the
Agreement, shall, upon issuance, be duly authorized, validly issued, fully paid
and nonassessable.

     

    4.3           Fractional
Shares.  The Company shall not be required to issue fractions
of shares upon the conversion hereof or to distribute certificates that evidence
fractional shares nor shall the Company be required to make any cash payments in
lieu of fractional shares. In lieu of issuance any fractional shares or payment
therefore, the Company will round up to the nearest whole share.

     

    5.     Certain
Adjustments.

     

    5.1           Stock Dividends and Stock
Splits.  If the Company, at any time while this Note is
outstanding: (i) pays a stock dividend or otherwise makes a distribution or
distributions payable in shares of Common Stock on shares of Common Stock or any
Common Stock equivalents (which, for avoidance of doubt, shall not include any
shares of Common Stock issued by the Company upon conversion of the Notes), (ii)
subdivides outstanding shares of Common Stock into a larger number of shares,
(iii) combines (including by way of a reverse stock split) outstanding shares of
Common Stock into a smaller number of shares or (iv) issues, in the event of a
reclassification of shares of the Common Stock, any shares of capital stock of
the Company, then the Conversion Price shall be multiplied by a fraction of
which the numerator shall be the number of shares of Common Stock (excluding any
treasury shares of the Company) outstanding immediately before such event and of
which the denominator shall be the number of shares of Common Stock outstanding
immediately after such event. Any adjustment made pursuant to this Section 5.1
shall become effective immediately after the record date for the determination
of stockholders entitled to receive such dividend or distribution and shall
become effective immediately after the effective date in the case of a
subdivision, combination or reclassification.

     

    5.2           Reorganization,
Reclassification, Consolidation, Merger, Sale; Company Not
Survivor.  If any capital reorganization, reclassification of
the capital stock of the Company, consolidation or merger of the Company with
another corporation in which the Company is not the survivor, or sale, transfer
or other disposition of all or substantially all of the Company’s assets to
another corporation shall be effected, then, at the Company’s option, either (i)
the Holder of the Note shall be paid an amount equal to the outstanding
Obligations due under the Note at the time of such reorganization,
reclassification, consolidation, merger, sale, transfer or other disposition, or
(ii) as a condition of such reorganization, reclassification, consolidation,
merger, sale, transfer or other disposition, lawful and adequate provision shall
be made whereby each Holder shall thereafter have the right to purchase and
receive upon the basis and upon the terms and conditions herein specified and in
lieu of the Conversion Shares immediately theretofore issuable upon conversion
of the Note, such shares of stock, securities or assets as would have been
issuable or payable with respect to or in exchange for a number of Conversion
Shares equal to the number of Conversion Shares immediately theretofore issuable
upon conversion of the Note, had such reorganization, reclassification,
consolidation, merger, sale, transfer or other disposition not taken place, and
in any such case appropriate provision shall be made with respect to the rights
and interests of Holder to the end that the provisions hereof (including,
without limitation, provision for adjustment of the Conversion Price) shall
thereafter be applicable, as nearly equivalent as may be practicable in relation
to any shares of stock, securities or assets thereafter deliverable upon the
exercise hereof.  In the case of clause (ii) above, the Company shall
not effect any such consolidation, merger, sale, transfer or other disposition
unless prior to or simultaneously with the consummation thereof the successor
corporation (if other than the Company) resulting from such consolidation or
merger, or the corporation purchasing or otherwise acquiring such assets or
other appropriate corporation or entity shall assume the obligation to deliver
to the Holder, at the last address of the Holder appearing on the books of the
Company, such shares of stock, securities or assets as, in accordance with the
foregoing provisions, the Holder may be entitled to purchase, and the other
obligations under this Note.  The provisions of this Section 5.2 shall
similarly apply to successive reorganizations, reclassifications,
consolidations, mergers, sales, transfers or other dispositions.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    5.3           Issuance of Additional
Securities.  If, during the period of one year after the
original issuance date of this Note:

     

    (a)           the
Company, in connection with a private placement of its securities in which
Rodman & Renshaw, LLC acts as the lead placement agent (the “Rodman
Offering”), issues any Common Stock at a purchase price less than the Conversion
Price (then in effect) or issues any securities convertible into Common Stock at
a conversion price less than the Conversion Price (then in effect), then the
Conversion Price (then in effect) will be reduced to such lower conversion
price; or

     

    (b)           the
Company issues any Common Stock at a purchase price less than the Conversion
Price (then in effect) or issues any securities that permit the holder to
acquire Common Stock at a purchase, conversion or exercise price less than the
Conversion Price (then in effect), then the Conversion Price (then in effect)
will be reduced to such lower purchase, conversion or exercise
price.  The foregoing adjustment will be made whenever the Company
issues the Common Stock or common stock equivalents. The foregoing adjustment to
the Conversion Price will not apply to any sales by the Company of any
securities (i) if the sale of the securities is for other than capital raising
purposes, (ii) if the sale of the securities is in connection with or occurs
after a private placement or public offering of Company securities, where the
Company receives at least $3,000,000 in gross proceeds, (iii) if the sale of the
securities occurs after the Conversion Shares are registered for resale pursuant
to an effective registration statement filed with the Securities and Exchange
Commission, or (iv) if the sale of securities is made in connection with the
Rodman Offering.

     

    5.4           Calculations.  All
calculations under this Section 5 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be; provided, however, that the
Company shall not be required to issue fractions of shares pursuant to Section
4.3 above.

     

    5.5           Notice of Adjustment.
In each case of an adjustment or readjustment of the Conversion Price or the
number and kind of any securities issuable upon conversion of the Note, the
Company will promptly calculate such adjustment in accordance with the terms of
this Note and prepare a certificate setting forth such adjustment, including a
statement of the adjusted Conversion Price and adjusted number of shares of
Common Stock or type of alternate consideration issuable upon conversion of the
Note (as applicable), describing the transactions giving rise to such
adjustments and showing in reasonable detail the facts upon which such
adjustment is based. Upon request, the Company will promptly deliver a copy of
each such certificate to the Holder.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    6.                  
  Registration
Rights.

     

    6.1           Piggyback Registration
Rights.  If, at any time there is not an effective registration
statement covering the resale of the Conversion Shares (for purposes of this
Section 6, the “Registrable Securities”), the Holder of this Note shall have the
right, until such time as the Holder may sell the Registrable Securities without
regard to the holding period requirements pursuant to Rule 144 under the
Securities Act of 1933, as amended (the “Act”), to include, to the extent
allowed by the Securities and Exchange Commission, all or any of the Registrable
Securities as part of any registration of securities filed by the Company, other
than on Form S-4 or Form S-8 or their then equivalents. However, if, in the
written opinion of the Company's managing underwriter or underwriters, if any,
for such offering (the “Underwriter”), the inclusion of the Registrable
Securities, when added to the securities being registered by the Company or the
other selling stockholder(s), will exceed the maximum amount of the Company’s
securities which can be marketed (i) at a price reasonably related to their then
current market value, or (ii) without materially and adversely affecting the
entire offering, the Holder agrees that the Registrable Securities held by the
Holder, together with any other securities being registered pursuant to any
other piggyback registration right, shall be removed from the registration
statement, pro rata based on the number of securities being registered for such
holders of piggyback registration rights.

    


    For purposes of clarity of the above
provisions, in the event any or all of the Holder’s Registrable Securities are
not included in a registration statement due to Underwriter cutbacks, the
Company shall not be required to prepare and file any additional registration
statement.  However, to the extent there are any Registrable Securities which
have not been heretofore registered, the Holder will have the right to include
those Registrable Securities on any subsequent registration statement pursuant
to the piggyback registration rights set forth in this Section 6.1.

    


    6.2           Registration
Terms.  The Company shall bear all fees and expenses attendant
to registering the Registrable Securities, but the Holder shall pay any and all
underwriting and other selling commissions and the expenses of any legal counsel
selected by the Holder to represent it in connection with the sale of the
Registrable Securities. In the event of such a proposed registration, the
Company shall furnish the then Holder of outstanding Registrable Securities with
not less than twenty days written notice prior to the proposed date of filing of
such registration statement. The Holder of the Registrable Securities shall
exercise the piggyback rights provided for herein by giving written notice,
within ten days of the receipt of the Company’s notice of its intention to file
a registration statement. The Company shall cause any registration statement
filed pursuant to the above piggyback rights to remain effective until the
earlier of (i) all Registrable Securities thereunder have been sold, (ii) the
date on which the Holder may sell the Registrable Securities without regard to
the holding period requirements pursuant to Rule 144 under the Act, or any
successor rule, or (iii) one year from the date of effectiveness of such
registration statement.

    


    6.3           Indemnification.

    


    (a)           The
Company shall indemnify the Holder of the Registrable Securities to be sold
pursuant to any registration statement hereunder and each person, if any, who
controls such Holder, within the meaning of Section 15 of the Securities Act or
Section 20 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), against all loss, claim, damage, expense or liability (including all
reasonable attorneys' fees and other expenses reasonably incurred in
investigating, preparing or defending against any claim whatsoever) to which any
of them may become subject under the Act, the Exchange Act or otherwise, arising
from such registration statement.  The Holder of the Registrable Securities to
be sold pursuant to such registration statement shall indemnify the Company
against all loss, claim, damage, expense or liability (including all reasonable
attorneys' fees and other expenses reasonably incurred in investigating,
preparing or defending against any claim whatsoever) to which it may become
subject under the Act, the Exchange Act or otherwise, arising from information
furnished by or on behalf of such Holder, in writing, for specific inclusion in
such registration statement, provided, however, that the obligation to indemnify
shall be limited to the amount of the proceeds received by the Holder from the
sale of the Registrable Securities pursuant to the registration
statement.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    (b)           If
any action is brought against a party hereto, ("Indemnified Party") in respect
of which indemnity may be sought against the other party ("Indemnifying Party"),
such Indemnified Party shall promptly notify Indemnifying Party in writing of
the institution of such action and Indemnifying Party shall assume the defense
of such action, including the fees of counsel reasonably satisfactory to the
Indemnified Party.  Such Indemnified Party shall have the right to employ its
own counsel in any such case, but the fees and expenses of such counsel shall be
at the expense of such Indemnified Party unless (i) Indemnifying Party shall not
have employed counsel to defend such action, or (iii) Indemnified Party shall
have been advised by counsel that there may be one or more legal defenses
available to it which may result in a conflict between the Indemnified Party and
Indemnifying Party (in which case Indemnifying Party shall not have the right to
direct the defense of such action on behalf of the Indemnified Party), in any of
which events, the reasonable fees and expenses of not more than one additional
firm of attorneys designated in writing by the Indemnified Party shall be borne
by Indemnifying Party.  Notwithstanding anything to the contrary contained
herein, if Indemnified Party shall assume the defense of such action as provided
above, Indemnifying Party shall not be liable for any settlement of any such
action effected without its written consent.

    


    (c)           If
the indemnification provided for hereunder is finally judicially determined by a
court of competent jurisdiction to be unavailable to an Indemnified Party (other
than as a consequence of a final judicial determination of willful misconduct,
bad faith or gross negligence of such Indemnified Party), then Indemnifying
Party agrees, in lieu of indemnifying such Indemnified Party, to contribute to
the amount paid or payable by such Indemnified Party (i) in such proportion as
is appropriate to reflect the relative benefits received, or sought to be
received, by Indemnifying Party on the one hand and by such Indemnified Party on
the other or (ii) if (but only if) the allocation provided in clause (i) of this
sentence is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in such clause
(i) but also the relative fault of Indemnifying Party and of such Indemnified
Party; provided, however, that in no event shall the aggregate amount
contributed by the Holder exceed the amount of the proceeds received by the
Holder from the sale of the Registrable Securities pursuant to the registration
statement.

    


    (d)           The
rights accorded to Indemnified Parties hereunder shall be in addition to any
rights that any Indemnified Party may have at common law, by separate agreement
or otherwise.

    


    7.                  Security
Interest.  To secure the payment of the Obligations, the
Company hereby grants to the Holder a continuing, security interest in and lien
upon all assets of the Company and its subsidiaries, whether now owned or
hereafter acquired, and wherever located.

     

    8.                  Successors and
Assigns.  Subject to the restrictions on transfer described in
Section 10 below, the rights and obligations of the Company and the Holder of
this Note shall be binding upon and benefit the permitted successors, assigns,
heirs, administrators and transferees of the parties.

     

    9.                  Waiver and
Amendment.  Any provision of this Note may be amended, waived
or modified upon the written consent of the Company and the Holder.

     

    10.                Transfer of This
Note.  Subject to the terms of the Agreement, this Note may not
be transferred in violation of any restrictive legend set forth hereon. Subject
to the terms of the Agreement, each new Note issued upon transfer of this Note
shall bear a legend as to the applicable restrictions on transferability in
order to ensure compliance with the Act and any applicable state securities
laws, unless in the opinion of counsel for the Company such legend is not
required in order to ensure compliance with the Act and any applicable state
securities laws, and the Company may issue stop transfer instructions to its
transfer agent in connection with such restrictions. Prior to presentation of
this Note for registration of transfer, the Company shall treat the registered
Holder hereof as the owner and holder of this Note for the purpose of receiving
all payments of principal and interest hereon, in each case which are to be
satisfied through the issuance of the Conversion Shares, and for all other
purposes whatsoever, and the Company shall not be affected by notice to the
contrary.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    11.                Assignment.  Neither
this Note nor any of the rights, interests or obligations hereunder may be
assigned, by operation of law or otherwise, in whole or in part, by the Company,
without the prior written consent of the Holder. This Note and the rights,
interests and obligations hereunder are freely assignable by the Holder without
the prior consent of the Company.

     

    12.                Treatment of
Note.  To the extent permitted by generally accepted accounting
principles, the Company will treat, account and report this Note as debt and not
equity for accounting purposes and with respect to any returns filed with
federal, state or local tax authorities.

     

    13.                No Rights as
Shareholder.  This Note, as such, creates a lender/borrower
relationship and shall not entitle the Holder to any rights as a shareholder,
officer, director other employee or agent of the Company, except until this Note
is converted in accordance with Section 4.

     

    14.                Payment in Shares of Common
Stock.  Notwithstanding anything in this Note to the contrary,
payment of any amounts due under this Note shall be made in shares of Common
Stock valued at the then-applicable Conversion Price.

     

    15.                Benefits of this
Note.  Nothing in this Note shall be construed to give to any
person, corporation or other entity other than the Company and any Holder of the
Note (including permitted successors and assigns) any legal or equitable right,
remedy or claim under the Note, and the Note shall be for the sole and exclusive
benefit of the Company and any Holder of the Note.

     

    16.                Governing Law; Submission to
Jurisdiction.  This Note shall be governed by and construed and
enforced in accordance with the law of the State of Delaware, without giving
effect to conflict of laws. The parties hereby agree that any action, proceeding
or claim against it arising out of, or relating in any way to this Note shall be
brought and enforced in the courts of the State of New York or of the United
States of America in the Southern District of New York, and irrevocably submits
to such jurisdiction, which jurisdiction shall be exclusive. The parties hereby
waive any objection to such exclusive jurisdiction and that such courts
represent an inconvenient forum. Any process or summons to be served upon a
party may be served by transmitting a copy thereof by registered or certified
mail, return receipt requested, postage prepaid, addressed to it at the address
for notices set forth in the Agreement. Such mailing shall be deemed personal
service and shall be legal and binding upon such party in any action, proceeding
or claim. The parties agree that the prevailing party(ies) in any such action
shall be entitled to recover from the other party(ies) all of its reasonable
attorneys’ fees and expenses relating to such action or proceeding and/or
incurred in connection with the preparation therefore.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    IN
WITNESS WHEREOF, the Company has caused this Note to be issued as of the date
first written above.

    


    
      
        
          	 
      	
                  NF
      ENERGY SAVING CORPORATION

                
	 
      	 
      
	 
      	
                  By:

                	 
      
	 
      	 
      	
                  Name:
      Gang Li

                
	 
      	 
      	
                  Title:
      Chief Executive Officer

                


        

      

    

     

    
      
        
        

      

      
        8