Exhibit
4.1


  


NEITHER
THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE
COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND APPLICABLE STATE SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE OFFERED
OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO 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 AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL
BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.


 


Original
Issue Date: November 17, 2016

Original Conversion Price (subject to adjustment herein): $1.25


 


$937,500.00


 


ORIGINAL
ISSUE DISCOUNT

SENIOR SECURED CONVERTIBLE DEBENTURE

DUE June 30, 2018


 


THIS
ORIGINAL ISSUE DISCOUNT SENIOR SECURED CONVERTIBLE DEBENTURE is duly authorized and validly issued Original Issue Discount Senior
Secured Convertible Debenture of SG Blocks, Inc., a Delaware corporation, (the “Company”), having its principal
place of business at 912 Bluff Road, Brentwood, TN 37027, designated as its Original Issue Discount Senior Secured Convertible
Debenture due on the Maturity Date (this debenture, the “Debenture”).


 


FOR
VALUE RECEIVED, the Company promises to pay to Hillair Capital Investments L.P. or its registered assigns (the “Holder”),
or shall have paid pursuant to the terms hereunder, the principal sum of $937,500.00 on the Maturity Date or such earlier date
as this Debenture is required or permitted to be repaid as provided hereunder. This Debenture is subject to the following additional
provisions:


 


Section
1.        Definitions.
For the purposes hereof, in addition to the terms defined elsewhere in this Debenture, (a) capitalized terms not otherwise defined
herein shall have the meanings set forth in the Purchase Agreement and (b) the following terms shall have the following meanings:


 


“Alternate
Consideration” shall have the meaning set forth in Section 5(e).


 






    


     


    

 


“Bankruptcy
Event” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in
Rule 1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement,
adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the
Company or any Significant Subsidiary thereof, (b) there is commenced against the Company or any Significant Subsidiary thereof
any such case or proceeding that is not dismissed within 60 days after commencement, (c) the Company or any Significant Subsidiary
thereof is adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered,
(d) the Company or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial
part of its property that is not discharged or stayed within 60 calendar days after such appointment, (e) the Company or any Significant
Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Company or any Significant Subsidiary thereof
calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts or (g) the Company
or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence
in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.


 


“Base
Conversion Price” shall have the meaning set forth in Section 5(b).


 


“Beneficial
Ownership Limitation” shall have the meaning set forth in Section 4(d).


 


“Business
Day” means any day except any Saturday, any Sunday, any day which is a federal legal holiday in the United States or
any day on which banking institutions in the State of New York are authorized or required by law or other governmental action
to close.


 


“Buy-In”
shall have the meaning set forth in Section 4(c)(v).


 


“Change
of Control Transaction” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof
by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act)
of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise)
of in excess of 33% of the voting securities of the Company (other than by means of conversion or exercise of the Debentures and
the Securities issued together with the Debentures), (b) the Company merges into or consolidates with any other Person, or any
Person merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company
immediately prior to such transaction own less than 66% of the aggregate voting power of the Company or the successor entity of
such transaction, (c) the Company sells or transfers all or substantially all of its assets to another Person and the stockholders
of the Company immediately prior to such transaction own less than 66% of the aggregate voting power of the acquiring entity immediately
after the transaction, (d) a replacement at one time or within a three year period of more than one-half of the members of the
Board of Directors which is not approved by a majority of those individuals who are members of the Board of Directors on the Original
Issue Date (or by those individuals who are serving as members of the Board of Directors on any date whose nomination to the Board
of Directors was approved by a majority of the members of the Board of Directors who are members on the date hereof), or (e) the
execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events
set forth in clauses (a) through (d) above.


 






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“Conversion”
shall have the meaning ascribed to such term in Section 4.


 


“Conversion
Date” shall have the meaning set forth in Section 4(a).


 


“Conversion
Price” shall have the meaning set forth in Section 4(b).


 


“Conversion
Schedule” means the Conversion Schedule in the form of Schedule 1 attached hereto.


 


“Conversion
Shares” means, collectively, the shares of Common Stock issuable upon conversion of this Debenture in accordance with
the terms hereof.


 


“Debenture
Register” shall have the meaning set forth in Section 2(c).


 


“Dilutive
Issuance” shall have the meaning set forth in Section 5(b).


 


“Dilutive
Issuance Notice” shall have the meaning set forth in Section 5(b).


 


“Event
of Default” shall have the meaning set forth in Section 8(a).


 


“Fundamental
Transaction” shall have the meaning set forth in Section 5(e).


 


“Maturity
Date” means June 30, 2018.


 


“Mandatory
Default Amount” means the sum of (a) the greater of (i) the outstanding principal amount of this Debenture, divided
by the Conversion Price on the date the Mandatory Default Amount is either (A) demanded (if demand or notice is required to create
an Event of Default) or otherwise due or (B) paid in full, whichever has a lower Conversion Price, multiplied by the VWAP on the
date the Mandatory Default Amount is either (x) demanded or otherwise due or (y) paid in full, whichever has a higher VWAP, or
(ii) 130% of the outstanding principal amount of this Debenture, plus all other amounts, costs, expenses and liquidated damages
due in respect of this Debenture.


 


“New
York Courts” shall have the meaning set forth in Section 9(d).


 


“Notice
of Conversion” shall have the meaning set forth in Section 4(a).


 


“Original
Issue Date” means the date of the first issuance of the Debentures, regardless of any transfers of any Debenture and
regardless of the number of instruments which may be issued to evidence such Debentures.


 


“Permitted
Indebtedness” means (a) the indebtedness evidenced by the Debentures and (b) lease obligations, purchase money indebtedness
incurred in connection with the acquisition of capital assets and lease obligations with respect to newly acquired or leased assets.


 






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“Permitted
Lien” means the individual and collective reference to the following: (a) Liens for taxes, assessments and other governmental
charges or levies not yet due or Liens for taxes, assessments and other governmental charges or levies being contested in good
faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of the Company)
have been established in accordance with GAAP, (b) Liens imposed by law which were incurred in the ordinary course of the Company’s
business, such as carriers’, warehousemen’s and mechanics’ Liens, statutory landlords’ Liens, and other
similar Liens arising in the ordinary course of the Company’s business, and which (x) do not individually or in the aggregate
materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business
of the Company and its consolidated Subsidiaries or (y) are being contested in good faith by appropriate proceedings, which proceedings
have the effect of preventing for the foreseeable future the forfeiture or sale of the property or asset subject to such Lien,
(c) Liens incurred in connection with Permitted Indebtedness under clause (a) and (d) Liens incurred in connection with Permitted
Indebtedness under clause (b) thereunder, provided that such Liens are not secured by assets of the Company or its Subsidiaries
other than the assets so acquired or leased.


 


“Prior
Debenture” means the Original Issue Discount Senior Secured Convertible Debenture due June 30, 2018 issued by the Company
to Hillair Capital Investments L.P. on June 30, 2016 in the original principal amount of $2,500,000.


 


“Prior
Security Agreement” means the Security Agreement, dated as of June 30, 2016, by and between the Company, SG Building
Blocks, Inc., and Hillair Capital Investments L.P., pursuant to which the Company granted security interests in certain property
to Hillair Capital Investments L.P. as further described therein.


 


“Prior
Subsidiary Guarantee” means the Subsidiary Guarantee, dated as of June 30, 2016, by SG Building Blocks, Inc., a Delaware
corporation, and any other entity that may become party to such agreement (collectively, the “Guarantors”)
in favor of Hillair Capital Investments L.P., pursuant to which the Guarantors guarantee the Obligations (as defined therein)
of the Company under the Prior Debenture.


 


“Purchase
Agreement” means the Securities Purchase Agreement, dated as November 16, 2016, between the Company and the Holder as
amended, modified or supplemented from time to time in accordance with its terms.


 


“Registration
Statement” means a registration statement covering the resale of the Underlying Shares by the Holder.


 


“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.


 


“Share
Delivery Date” shall have the meaning set forth in Section 4(c)(ii).


 






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“Successor
Entity” shall have the meaning set forth in Section 5(e).


 


“Trading
Day” means a day on which the principal Trading Market is open for trading.


 


“Trading
Market” means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on
the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the
New York Stock Exchange, OTCQB or OTCQX (or any successors to any of the foregoing).


 


“VWAP”
means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then
listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest
preceding date on which the Common Stock actually traded) on the Trading Market on which the Common Stock is then listed or quoted
as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)),
(b) if the OTCQB or OTCQX is not a Trading Market, the volume weighted average price of the Common Stock for such date (or the
nearest preceding date) on the OTCQB or OTCQX, as applicable, (c) if the Common Stock is not then listed or quoted for trading
on the OTCQB or OTCQX and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets
Group Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per
share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined
by an independent appraiser selected in good faith by the Holders of a majority in interest of the Securities then outstanding
and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.


 


Section
2.        Interest.


 


a)       No
Interest. This is an original issue discount obligation and accordingly there is no regularly scheduled interest payments.


 


b)       Prepayment.
Except as otherwise set forth in this Debenture, the Company may not prepay any portion of the principal amount of this Debenture
without the prior written consent of the Holder.


 


Section
3.        Registration
of Transfers and Exchanges.


 


a)       Different
Denominations. This Debenture is exchangeable for an equal aggregate principal amount of Debentures of different authorized
denominations, as requested by the Holder surrendering the same. No service charge will be payable for such registration of transfer
or exchange.


 


b)       Reliance
on Debenture Register. Prior to due presentment for transfer to the Company of this Debenture, the Company and any agent of
the Company may treat the Person in whose name this Debenture is duly registered on the Debenture Register as the owner hereof
for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Debenture is overdue,
and neither the Company nor any such agent shall be affected by notice to the contrary.


 






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Section
4.         Conversion.


 


a)       Voluntary
Conversion. At any time after the Original Issue Date until this Debenture is no longer outstanding, this Debenture shall
be convertible, in whole or in part, into shares of Common Stock at the option of the Holder, at any time and from time to time.
The Holder shall effect conversions by delivering to the Company a Notice of Conversion, the form of which is attached hereto
as Annex A (each, a “Notice of Conversion”), specifying therein the principal amount of this Debenture
to be converted and the date on which such conversion shall be effected (such date, the “Conversion Date”).
If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion
is deemed delivered hereunder. No ink-original Notice of Conversion shall be required, nor shall any medallion guarantee (or other
type of guarantee or notarization) of any Notice of Conversion form be required. To effect conversions hereunder, the Holder shall
not be required to physically surrender this Debenture to the Company unless the entire principal amount of this Debenture has
been so converted in which case the Holder shall surrender this Debenture as promptly as is reasonably practicable after such
conversion without delaying the Company’s obligation to deliver the shares on the Share Delivery Date (as defined below).
Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Debenture in an amount equal
to the applicable conversion. The Holder and the Company shall maintain records showing the principal amount(s) converted and
the date of such conversion(s). The Company may deliver an objection to any Notice of Conversion within one (1) Business Day of
delivery of such Notice of Conversion. In the event of any dispute or discrepancy, the records of the Holder shall be controlling
and determinative in the absence of manifest error. The Holder, and any assignee by acceptance of this Debenture, acknowledge
and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Debenture, the unpaid
and unconverted principal amount of this Debenture may be less than the amount stated on the face hereof.


 


b)      Conversion
Price. The conversion price in effect on any Conversion Date shall be equal to $1.25, subject to adjustment herein
(the “Conversion Price”).


 


c)       Mechanics
of Conversion.


 


i.       Conversion
Shares Issuable Upon Conversion of Principal Amount. The number of Conversion Shares issuable upon a conversion hereunder
shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Debenture to be converted
by (y) the Conversion Price.


 






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ii.       Delivery
of Conversion Shares Upon Conversion. Not later than the earlier of (i) three (3) Trading Days and (ii) the number of Trading
Days comprising the Standard Settlement Period (as defined below) after each Conversion Date (the “Share Delivery Date”),
the Company shall deliver, or cause to be delivered, to the Holder the Conversion Shares which, on or after the earlier of (i)
the six month anniversary of the Original Issue Date or (ii) the Effective Date, shall be free of restrictive legends and trading
restrictions (other than those which may then be required by the Purchase Agreement) representing the number of Conversion Shares
being acquired upon the conversion of this Debenture. On or after the earlier of (i) the six month anniversary of the Original
Issue Date or (ii) the Effective Date, the Company shall deliver any Conversion Shares required to be delivered by the Company
under this Section 4(c) electronically through the Depository Trust Company or another established clearing corporation performing
similar functions. As used herein, “Standard Settlement Period” means the standard settlement period, expressed
in a number of Trading Days, on the Company’s primary Trading Market with respect to the Common Stock as in effect on the
date of delivery of the Notice of Conversion.


 


iii.       Failure
to Deliver Conversion Shares. If, in the case of any Notice of Conversion, such Conversion Shares are not delivered to or
as directed by the applicable Holder by the Share Delivery Date, the Holder shall be entitled to elect by written notice to the
Company at any time on or before its receipt of such Conversion Shares, to rescind such Conversion, in which event the Company
shall promptly return to the Holder any original Debenture delivered to the Company and the Holder shall promptly return to the
Company the Conversion Shares issued to such Holder pursuant to the rescinded Conversion Notice.


 


iv.       Obligation
Absolute; Partial Liquidated Damages. The Company’s obligations to issue and deliver the Conversion Shares upon conversion
of this Debenture in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by
the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against
any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach
or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of
law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation
of the Company to the Holder in connection with the issuance of such Conversion Shares; provided, however, that
such delivery shall not operate as a waiver by the Company of any such action the Company may have against the Holder. In the
event the Holder of this Debenture shall elect to convert any or all of the outstanding principal amount hereof, the Company may
not refuse conversion based on any claim that the Holder or anyone associated or affiliated with the Holder has been engaged in
any violation of law, agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and
or enjoining conversion of all or part of this Debenture shall have been sought and obtained, and the Company posts a surety bond
for the benefit of the Holder in the amount of 150% of the outstanding principal amount of this Debenture, which is subject to
the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the underlying dispute and
the proceeds of which shall be payable to the Holder to the extent it obtains judgment. In the absence of such injunction, the
Company shall issue Conversion Shares or, if applicable, cash, upon a properly noticed conversion. If the Company fails for any
reason to deliver to the Holder such Conversion Shares pursuant to Section 4(c)(ii) by the Share Delivery Date, the Company shall
pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of principal amount being converted, $10
per Trading Day (increasing to $15 per Trading Day on the fifth (5th) Trading Day after such liquidated damages begin to accrue)
for each Trading Day after such Share Delivery Date until such Conversion Shares are delivered or Holder rescinds such conversion.
Nothing herein shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section
8 hereof for the Company’s failure to deliver Conversion Shares within the period specified herein and the Holder shall
have the right to pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of
specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from seeking to enforce
damages pursuant to any other Section hereof or under applicable law.


 






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v.       Compensation
for Buy-In on Failure to Timely Deliver Conversion Shares Upon Conversion. In addition to any other rights available to the
Holder, if the Company fails for any reason to deliver to the Holder such Conversion Shares by the Share Delivery Date pursuant
to Section 4(c)(ii), and if after such Share Delivery Date the Holder is required by its brokerage firm to purchase (in an open
market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver
in satisfaction of a sale by the Holder of the Conversion Shares which the Holder was entitled to receive upon the conversion
relating to such Share Delivery Date (a “Buy-In”), then the Company shall (A) pay in cash to the Holder (in
addition to any other remedies available to or elected by the Holder) the amount, if any, by which (x) the Holder’s total
purchase price (including any brokerage commissions) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate
number of shares of Common Stock that the Holder was entitled to receive from the conversion at issue multiplied by (2) the actual
sale price at which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions)
and (B) at the option of the Holder, either reissue (if surrendered) this Debenture in a principal amount equal to the principal
amount of the attempted conversion (in which case such conversion shall be deemed rescinded) or deliver to the Holder the number
of shares of Common Stock that would have been issued if the Company had timely complied with its delivery requirements under
Section 4(c)(ii). For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In
with respect to an attempted conversion of this Debenture with respect to which the actual sale price of the Conversion Shares
(including any brokerage commissions) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately
preceding sentence, the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice
indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount
of such loss. Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law
or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s
failure to timely deliver Conversion Shares upon conversion of this Debenture as required pursuant to the terms hereof.


 


vi.       Reservation
of Shares Issuable Upon Conversion. The Company covenants that it will at all times reserve and keep available out of its
authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of this Debenture, each as herein
provided, free from preemptive rights or any other actual contingent purchase rights of Persons other than the Holder (and the
other holders of the Debentures), not less than such aggregate number of shares of the Common Stock as shall (subject to the terms
and conditions set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section
5) upon the conversion of the then outstanding principal amount of this Debenture. The Company covenants that all shares of Common
Stock that shall be so issuable shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable and, if the
Registration Statement is then effective under the Securities Act, shall be registered for public resale in accordance with such
Registration Statement.


 


vii.     Fractional
Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of this Debenture.
As to any fraction of a share which the Holder would otherwise be entitled to purchase upon such conversion, the Company shall
at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied
by the Conversion Price or round up to the next whole share.


 


viii.    Transfer
Taxes and Expenses. The issuance of Conversion Shares on conversion of this Debenture shall be made without charge to the
Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such Conversion
Shares, provided that, the Company shall not be required to pay any tax that may be payable in respect of any transfer involved
in the issuance and delivery of any such Conversion Shares upon conversion in a name other than that of the Holder of this Debenture
so converted and the Company shall not be required to issue or deliver such Conversion Shares unless or until the Person or Persons
requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid. The Company shall pay all Transfer Agent fees required for same-day processing of
any Notice of Conversion and all fees to the Depository Trust Company (or another established clearing corporation performing
similar functions) required for same-day electronic delivery of the Conversion Shares.


 






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Section
5.        Certain
Adjustments.


 


a)       Stock
Dividends and Stock Splits. If the Company, at any time while this Debenture 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 Debentures or in connection with an Exempt Issuance), (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
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 re
classification.


 


b)       Subsequent
Equity Sales. If, at any time while this Debenture is outstanding, the Company or any Subsidiary, as applicable, sells or
grants any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale,
grant or any option to purchase or other disposition), any Common Stock or Common Stock Equivalents entitling any Person to acquire
shares of Common Stock at an effective price per share that is lower than the then Conversion Price (such lower price, the “Base
Conversion Price” and such issuances, collectively, a “Dilutive Issuance”) (if the holder of the
Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset
provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which
are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that
is lower than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such
date of the Dilutive Issuance), then the Conversion Price shall be reduced to equal the Base Conversion Price. Such adjustment
shall be made whenever such Common Stock or Common Stock Equivalents are issued. Notwithstanding the foregoing, no adjustment
will be made under this Section 5(b) in respect of an Exempt Issuance. If the Company enters into a Variable Rate Transaction,
despite the prohibition set forth in the Purchase Agreement, the Company shall be deemed to have issued Common Stock or Common
Stock Equivalents at the lowest possible conversion price at which such securities may be converted or exercised. The Company
shall notify the Holder in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents
subject to this Section 5(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion
price and other pricing terms (such notice, the “Dilutive Issuance Notice”). For purposes of clarification,
whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 5(b), upon the occurrence of any Dilutive
Issuance, the Holder is entitled to receive a number of Conversion Shares based upon the Base Conversion Price on or after the
date of such Dilutive Issuance, regardless of whether the Holder accurately refers to the Base Conversion Price in the Notice
of Conversion.


 






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c)       Subsequent
Rights Offerings. In addition to any adjustments pursuant to the other subsections of this Section 5, if at any time the Company
grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata
to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder will
be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder could
have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Debenture
immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such
record is taken, the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or
sale of such Purchase Rights.


 


d)       Pro
Rata Distributions. During such time as this Debenture is outstanding, if the Company shall declare or make any dividend or
other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital
or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of
a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a “Distribution”),
at any time after the issuance of this Debenture, then, in each such case, the Holder shall be entitled to participate in such
Distribution to the same extent that the Holder would have participated therein if the Holder had held the number of shares of
Common Stock acquirable upon complete conversion of this Debenture immediately before the date of which a record is taken for
such Distribution, or, if no such record is taken, the date as of which the record holders of shares of Common Stock are to be
determined for the participation in such Distribution.


 






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e)       Fundamental
Transaction. If, at any time while this Debenture is outstanding, (i) the Company, directly or indirectly, in one or more
related transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly
or indirectly, effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially
all of its assets in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange
offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell,
tender or exchange their shares for other securities, cash or property and has been accepted by the holders of 50% or more of
the outstanding Common Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification,
reorganization or recapitalization of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is
effectively converted into or exchanged for other securities, cash or property, or (v) the Company, directly or indirectly, in
one or more related transactions consummates a stock or share purchase agreement or other business combination (including, without
limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person
acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person
or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share
purchase agreement or other business combination) (each a “Fundamental Transaction”), then, upon any subsequent
conversion of this Debenture, the Holder shall have the right to receive, for each Conversion Share that would have been issuable
upon such conversion immediately prior to the occurrence of such Fundamental Transaction, the number of shares of Common Stock
of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional consideration
(the “Alternate Consideration”) receivable as a result of such Fundamental Transaction by a holder of the number
of shares of Common Stock for which this Debenture is convertible immediately prior to such Fundamental Transaction (without regard
to any limitation in Section 4(d) on the conversion of this Debenture). For purposes of any such conversion, the determination
of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate
Consideration issuable in respect of one (1) share of Common Stock in such Fundamental Transaction, and the Company shall apportion
the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components
of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received
in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon
any conversion of this Debenture following such Fundamental Transaction. The Company shall cause any successor entity in a Fundamental
Transaction in which the Company is not the survivor (the “Successor Entity”) to assume in writing all of the
obligations of the Company under this Debenture and the other Transaction Documents (as defined in the Purchase Agreement) in
accordance with the provisions of this Section 5(e) pursuant to written agreements in form and substance reasonably satisfactory
to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction and shall, at the
option of the holder of this Debenture, deliver to the Holder in exchange for this Debenture a security of the Successor Entity
evidenced by a written instrument substantially similar in form and substance to this Debenture which is convertible for a corresponding
number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable
and receivable upon conversion of this Debenture (without regard to any limitations on the conversion of this Debenture) prior
to such Fundamental Transaction, and with a conversion price which applies the conversion price hereunder to such shares of capital
stock (but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the
value of such shares of capital stock, such number of shares of capital stock and such conversion price being for the purpose
of protecting the economic value of this Debenture immediately prior to the consummation of such Fundamental Transaction), and
which is reasonably satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction,
the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction,
the provisions of this Debenture and the other Transaction Documents referring to the “Company” shall refer instead
to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the
Company under this Debenture and the other Transaction Documents with the same effect as if such Successor Entity had been named
as the Company herein.


 






    	 	11	 



     


    

 


f)       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.
For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall
be the sum of the number of shares of Common Stock (excluding any treasury shares of the Company) issued and outstanding.


 


g)       Notice
to the Holder.


 


i.       Adjustment
to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5, the Company shall
promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement
of the facts requiring such adjustment.


 


ii.       Notice
to Allow Conversion by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on
the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C)
the Company shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase
any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required
in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any
sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common
Stock is converted into other securities, cash or property or (E) the Company shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be filed at each office
or agency maintained for the purpose of conversion of this Debenture, and shall cause to be delivered to the Holder at its last
address as it shall appear upon the Debenture Register, at least twenty (20) calendar days prior to the applicable record or effective
date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record
to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date
as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common
Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or
share exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect
the validity of the corporate action required to be specified in such notice. To the extent that any notice provided hereunder
constitutes, or contains, material, non-public information regarding the Company or any of the Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled
to convert this Debenture during the 20-day period commencing on the date of such notice through the effective date of the event
triggering such notice except as may otherwise be expressly set forth herein.


 






    	 	12	 



     


    

 


Section
6.        [RESERVED]


 


Section
7.      Negative
Covenants. As long as any portion of this Debenture remains outstanding, unless the holders of at least 50.1% in principal
amount of the then outstanding Debentures shall have otherwise given prior written consent, the Company shall not, and shall not
permit any of the Subsidiaries to, directly or indirectly:


 


a)       other
than Permitted Indebtedness, enter into, create, incur, assume, guarantee or suffer to exist any indebtedness for borrowed money
of any kind, including, but not limited to, a guarantee, on or with respect to any of its property or assets now owned or hereafter
acquired or any interest therein or any income or profits therefrom;


 


b)       other
than Permitted Liens, enter into, create, incur, assume or suffer to exist any Liens of any kind, on or with respect to any of
its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom;


 


c)       amend
its charter documents, including, without limitation, its certificate of incorporation and bylaws, in any manner that materially
and adversely affects any rights of the Holder;


 


d)       repay,
repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of its Common Stock or Common
Stock Equivalents other than as to (i) the Conversion Shares as permitted or required under the Transaction Documents and (ii)
repurchases of Common Stock or Common Stock Equivalents of departing officers and directors of the Company, provided that such
repurchases shall not exceed an aggregate of $150,000, or such greater amount as is approved by the Board of Directors, for all
officers and directors during the term of this Debenture;


 


e)       repay,
repurchase or offer to repay, repurchase or otherwise acquire any Indebtedness, other than the Debentures if on a pro-rata basis,
other than the repayment of principal and other amounts owing on the Prior Debebenture;


 


f)       pay
cash dividends or distributions on any equity securities of the Company;


 


g)       enter
into any transaction with any Affiliate of the Company which would be required to be disclosed in any public filing with the Commission,
unless such transaction is made on an arm’s-length basis and expressly approved by a majority of the disinterested directors
of the Company (even if less than a quorum otherwise required for board approval); or


 


h)       enter
into any agreement with respect to any of the foregoing.


 






    	 	13	 



     


    

 


Section
8.        Events
of Default.


 


a)       “Event
of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether
such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any
court, or any order, rule or regulation of any administrative or governmental body):


 


i.       any
default in the payment of (A) the principal amount of any Debenture or (B) liquidated damages and other amounts owing to a Holder
on any Debenture, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or by acceleration
or otherwise);


 


ii.       the
Company shall fail to observe or perform any other covenant or agreement contained in the Debentures (other than a breach by the
Company of its obligations to deliver shares of Common Stock to the Holder upon conversion, which breach is addressed in clause
(x) below) or in any Transaction Document, the Prior Security Agreement or the Prior Subsidiary Guarantee, which failure is not
cured, if possible to cure, within the earlier to occur of (A) 5 Trading Days after notice of such failure sent by the Holder
or by any other Holder to the Company and (B) 20 Trading Days after the Company has become or should have become aware of such
failure;


 


iii.       a
default or event of default (subject to any grace or cure period provided in the applicable agreement, document or instrument)
shall occur under (A) any of the Transaction Documents or (B) any other material agreement, lease, document or instrument to which
the Company or any Subsidiary is obligated (and not covered by clause (vi) below);


 


iv.       any
representation or warranty made in this Debenture, any other Transaction Documents, any written statement pursuant hereto or thereto
or any other report, financial statement or certificate made or delivered to the Holder or any other Holder shall be untrue or
incorrect in any material respect as of the date when made or deemed made;


 


v.       after
the effectiveness of the Plan, the Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation
S-X) shall be subject to a Bankruptcy Event;


 


vi.       the
Company or any Subsidiary shall default on any of its obligations under any mortgage, credit agreement or other facility, indenture
agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced,
any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement that (a) involves an obligation
greater than $250,000, whether such indebtedness now exists or shall hereafter be created, and (b) results in such indebtedness
becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;


 






    	 	14	 



     


    

 


vii.       the
Common Stock shall not be eligible for listing or quotation for trading on a Trading Market and shall not be eligible to resume
listing or quotation for trading thereon within fifteen Trading Days;


 


viii.       the
Company shall be a party to any Change of Control Transaction or Fundamental Transaction or shall agree to sell or dispose of
all or in excess of 33% of its assets in one transaction or a series of related transactions (whether or not such sale would constitute
a Change of Control Transaction);


 


ix.       at
any time after six months after the date hereof the Company does not meet the current public information requirements under Rule
144 in respect of the Underlying Shares;


 


x.       the
Company shall fail for any reason to deliver Conversion Shares to a Holder prior to the fifth Trading Day after a Conversion Date
pursuant to Section 4(c) or the Company shall provide at any time notice to the Holder, including by way of public announcement,
of the Company’s intention to not honor requests for conversions of any Debentures in accordance with the terms hereof;
or


 


xi.       any
monetary judgment, writ or similar final process shall be entered or filed against the Company, any subsidiary or any of their
respective property or other assets for more than $150,000, and such judgment, writ or similar final process shall remain unvacated,
unbonded or unstayed for a period of 45 calendar days.


 


b)       Remedies
Upon Event of Default. If any Event of Default occurs, the outstanding principal amount of this Debenture, plus, liquidated
damages and other amounts owing in respect thereof through the date of acceleration, shall become, at the Holder’s election,
immediately due and payable in cash at the Mandatory Default Amount. Commencing 5 days after the occurrence of any Event of Default
that results in the eventual acceleration of this Debenture, the interest rate on this Debenture shall accrue at an interest rate
equal to the lesser of 18% per annum or the maximum rate permitted under applicable law. Upon the payment in full of the Mandatory
Default Amount, the Holder shall promptly surrender this Debenture to or as directed by the Company. In connection with such acceleration
described herein, the Holder need not provide, and the Company hereby waives, any presentment, demand, protest or other notice
of any kind, and the Holder may immediately and without expiration of any grace period enforce any and all of its rights and remedies
hereunder and all other remedies available to it under applicable law. Such acceleration may be rescinded and annulled by Holder
at any time prior to payment hereunder and the Holder shall have all rights as a holder of the Debenture until such time, if any,
as the Holder receives full payment pursuant to this Section 8(b). No such rescission or annulment shall affect any subsequent
Event of Default or impair any right consequent thereon.


 






    	 	15	 



     


    

 


Section
9.       Miscellaneous.


 


a)       Notices.
Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation,
any Notice of Conversion, shall be in writing and delivered personally, by facsimile, by email attachment, or sent by a nationally
recognized overnight courier service, addressed to the Company, at the address set forth above, or such other facsimile number,
email address, or address as the Company may specify for such purposes by notice to the Holder delivered in accordance with this
Section 9(a). Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing
and delivered personally, by facsimile, by email attachment, or sent by a nationally recognized overnight courier service addressed
to each Holder at the facsimile number or email address or address of the Holder appearing on the books of the Company, or if
no such facsimile number or email attachment or address appears on the books of the Company, at the principal place of business
of such Holder, as set forth in the Purchase Agreement. Any notice or other communication or deliveries hereunder shall be deemed
given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile
at the facsimile number or email attachment to the email address set forth on the signature pages attached hereto prior to 5:30
p.m. (New York City time) on any date, (ii) the next Trading Day after the date of transmission, if such notice or communication
is delivered via facsimile at the facsimile number or email attachment to the email address set forth on the signature pages attached
hereto on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the second Trading
Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service or (iv) upon actual receipt
by the party to whom such notice is required to be given.


 


b)       Absolute
Obligation. Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of, liquidated damages, as applicable, on this Debenture at
the time, place, and rate, and in the coin or currency, herein prescribed. This Debenture is a direct debt obligation of the Company.
This Debenture ranks pari passu with all other Debentures now or hereafter issued under the terms set forth herein.


 


c)       Lost
or Mutilated Debenture. If this Debenture shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver,
in exchange and substitution for and upon cancellation of a mutilated Debenture, or in lieu of or in substitution for a lost,
stolen or destroyed Debenture, a new Debenture for the principal amount of this Debenture so mutilated, lost, stolen or destroyed,
but only upon receipt of evidence of such loss, theft or destruction of such Debenture, and of the ownership hereof, reasonably
satisfactory to the Company.


 






    	 	16	 



     


    

 


d)       Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of this Debenture shall be governed
by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles
of conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense
of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective
Affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting
in the City of New York, Borough of Manhattan (the “New York Courts”). Each party hereto hereby irrevocably
submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith
or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction
Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not
personally subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for
such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any
such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence
of delivery) to such party at the address in effect for notices to it under this Debenture and agrees that such service shall
constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any
way any right to serve process in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to
the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating
to this Debenture or the transactions contemplated hereby. If any party shall commence an action or proceeding to enforce any
provisions of this Debenture, then the prevailing party in such action or proceeding shall be reimbursed by the other party for
its attorneys fees and other costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.


 


e)       Waiver.
Any waiver by the Company or the Holder of a breach of any provision of this Debenture shall not operate as or be construed to
be a waiver of any other breach of such provision or of any breach of any other provision of this Debenture. The failure of the
Company or the Holder to insist upon strict adherence to any term of this Debenture on one or more occasions shall not be considered
a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this
Debenture on any other occasion. Any waiver by the Company or the Holder must be in writing.


 


f)       Severability.
If any provision of this Debenture is invalid, illegal or unenforceable, the balance of this Debenture shall remain in effect,
and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons
and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable
law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of
interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it shall not at
any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury
law or other law which would prohibit or forgive the Company from paying all or any portion of the principal on this Debenture
as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance
of this Debenture, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of
any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein
granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted.


 






    	 	17	 



     


    

 


g)       Next
Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day.


 


h)       Headings.
The headings contained herein are for convenience only, do not constitute a part of this Debenture and shall not be deemed to
limit or affect any of the provisions hereof.


 


i)       Secured
Obligation. The Company acknowledges and agrees that the obligations of the Company under this Debenture are subject to and
secured by the security interest granted by the Company pursuant to the Prior Security Agreement, including all UCC-1 filing receipts
in connection therewith, and the Company acknowledges and agrees that the obligations of the Company under this Debenture are
“Obligations” under the Prior Security Agreement. The Company acknowledges and agrees that the obligations of the
Company under this Debenture are subject to and guaranteed by the guarantee by the Guarantors under the Prior Subsidiary Guarantee
and the Company acknowledges and agrees that the obligations of the Company under this Debenture are “Obligations”
under the Prior Subsidiary Guarantee. The Company shall take any and all actions as may be necessary or appropriate in order to
grant and perfect to the Holders a first priority security interest in the assets of the Company and the Subsidiaries, including
all UCC-1 filing receipts as required, to secure the obligations of the Company under this Debenture. This Debenture shall be
pari passu with the Prior Debenture.


 


*********************


 


(Signature
Page Follows)


 




    	 	18	 



     


    


 


IN
WITNESS WHEREOF, the Company has caused this Debenture to be duly executed by a duly authorized officer as of the date first above
indicated.


 


	 	SG
    BLOCKS, INC.
	 	 	 
	 	By:	/s/
    Paul M. Galvin
	 	 	Name:
Paul Galvin
	 	 	Title:
 Chief Executive Officer
	 	 	 
	 	Facsimile No. for delivery of Notices:________


 




    	 	19	 



     


    


 


ANNEX
A



NOTICE OF CONVERSION


 


The
undersigned hereby elects to convert principal under the Original Issue Discount Senior Secured Convertible Debenture due on the
Maturity Date of SG Blocks, Inc., a Delaware corporation (the “Company”), into shares of common stock (the
“Common Stock”), of the Company according to the conditions hereof, as of the date written below. If shares
of Common Stock are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company
in accordance therewith. No fee will be charged to the holder for any conversion, except for such transfer taxes, if any.


 


By
the delivery of this Notice of Conversion the undersigned represents and warrants to the Company that its ownership of the Common
Stock does not exceed the amounts specified under Section 4 of this Debenture, as determined in accordance with Section 13(d)
of the Exchange Act.


 


The
undersigned agrees to comply with the prospectus delivery requirements under the applicable securities laws in connection with
any transfer of the aforesaid shares of Common Stock.


 


	Conversion
    calculations:	 
	 	Date
    to Effect Conversion:
	 	 
	 	Principal
    Amount of Debenture to be Converted:
	 	 
	 	Number
    of shares of Common Stock to be issued:
	 	 
	 	 
	 	Signature:
	 	 
	 	Name:
	 	 
	 	Address
    for Delivery of Common Stock Certificates:
	 	 
	 	Or
	 	 
	 	DWAC
    Instructions:
	 	 
	 	Broker
    No:                                           
	 	Account
    No:                                       


 




    	 	20	 



     


    


 


Schedule
1



CONVERSION SCHEDULE


 


This
Original Issue Discount Senior Secured Convertible Debentures due on the Maturity Date in the original principal amount of $937,500
is issued by SG Blocks, Inc., a Delaware corporation. This Conversion Schedule reflects conversions made under Section 4 of the
above referenced Debenture.


 


Dated:


 


	Date of Conversion 

(or for first entry, 

Original Issue Date)	 	Amount of 

Conversion	 	Aggregate 

Principal 

Amount 

Remaining 

Subsequent to 

Conversion

 (or original 

Principal Amount)	 	Company Attest
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 	 	 	 	 	 	 



 




 


21