Exhibit 10.4

 

PROTEA BIOSCIENCES GROUP, INC.

 

REGISTRATION RIGHTS AGREEMENT

 

THIS REGISTRATION RIGHTS AGREEMENT (the “Agreement”), dated as of the date set
forth on the signature page hereto, is made by and between Protea Biosciences
Group, Inc., a Delaware corporation (the “Company”) and the undersigned investor
(the “Investor”).

 

RECITALS

 

WHEREAS, in connection with that certain Subscription Agreement of even date
herewith by and between the Company and the Investor (the “Subscription
Agreement”) and Unit Purchase Agreement of even date herewith by and between the
Company and the Investor (the “Purchase Agreement”), the Investor purchased from
the Company, certain units (the “Units”), each Unit consisting of (a) 400,000
shares of common stock, par value $0.0001 per share, of the Company (“Common
Stock”), and (b) a warrant to purchase 200,000 shares of Common Stock at an
exercise price of $0.375 per share for a period of 3 years following the Final
Closing Date (the “Warrant”).

 

WHEREAS, to induce the Investor to purchase the Units, the Company has agreed to
grant the Investor certain rights with respect to registration of Registrable
Securities under the Securities Act pursuant to the terms of this Agreement.

 

AGREEMENT

 

NOW, THEREFORE, the Company and the Investor hereby covenant and agree as
follows:

 

1.             Recitals. The recitals set forth above are true and correct and
are incorporated herein by reference.

 

2.             Certain Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:

 

“Agreement” shall have the meaning set forth in the Preamble hereof.

 

“Automatic Registration Statement” shall have the meaning set forth in Section
3(a) of this Agreement.

 

“Closing” shall mean the closing of the sale of the Units in which the Investor
purchased the Units.

 

“Closing Date” means the date on which the Closing occurred.

 

“Commission” shall mean the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.

 

“Common Stock” shall have the meaning set forth in the Preamble hereof.

 

“Company” shall have the meaning set forth in the Preamble hereof.

 

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“Effectiveness Date” shall mean that date which is thirty (30) days following
the date on which the Company is notified that the Commission will not review
the Automatic Registration Statement (and in such case of no Commission review,
not later than sixty (60) days following the Filing Deadline) or, in the event
of a Commission review, within one hundred eighty (180) days following the
Filing Date.

 

“Effectiveness Period” shall have the meaning set forth in Section 3(a) of this
Agreement.

 

“Event” shall have the meaning set forth in Section 3(c) of this Agreement.

 

“Event Date” shall have the meaning set forth in Section 3(c) of this Agreement.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.

 

“Excluded Registrable Securities” shall have the meaning set forth in Section
4(a) of this Agreement.

 

“Existing Registrable Securities” shall mean up to an aggregate of 5,000,000
shares of Common Stock outstanding, or shares of Common Stock underlying
outstanding warrants of the Company, as of the initial Closing which are subject
to piggy-back registration rights

 

“Filing Date” shall mean that date which is forty five (45) days following the
Final Closing Date and, with respect to any additional Registration Statements
which may be required herein, the earliest practical date on which the Company
is permitted by SEC Guidance to file such additional Registration Statement
related to the Registrable Securities.

 

“Final Closing Date” means the final closing date of the Offering after which
the Company ceases to offer the Units for sale.

 

“Greenshoe Option” shall have the meaning set forth in the Subscription
Agreement.

 

“Investor” shall have the meaning set forth in the Preamble hereof.

 

“Investor Representative” shall mean legal counsel appointed to represent the
Investors.

 

“Offering” shall have the meaning set forth in the Subscription Agreement.

 

“Order of Cutback” shall have the meaning set forth in Section 3(a) of this
Agreement.

 

“Piggyback Registration” shall have the meaning set forth in Section 4(a) of
this Agreement.

 

“Prospectus” means the prospectus included in a Registration Statement
(including, without limitation, a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated by the Commission pursuant to
the Securities Act), as amended or supplemented by any prospectus supplement,
with respect to the terms of the offering of any portion of the Registrable
Securities covered by a Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.

 

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“Purchase Agreement” shall have the meaning set forth in the Preamble hereof.

 

“Purchase Price” shall have the meaning set forth in the Purchase Agreement.

 

“Register,” “registered” and “registration” each shall refer to a registration
of the Registrable Securities effected by preparing and filing a Registration
Statement or statements or similar documents in compliance with the Securities
Act and the declaration or ordering of effectiveness of such Registration
Statement or document by the Commission.

 

“Registrable Securities” shall mean (a) all Common Stock included in the Units
delivered to Investor in connection with the Offering, (b) all Warrant Shares
then issuable upon exercise of the Warrants underlying the Units delivered to
Investor in connection with the Offering (assuming on such date the Warrants are
exercised in full without regard to any exercise limitations therein), (c) all
shares of Common Stock issuable upon exercise of the warrants to be issued to
Laidlaw and its agents in connection with the Offering (assuming on such date
such warrants are exercised in full without regard to any exercise limitations
therein) and (d) any securities issued or then issuable upon any stock split,
dividend or other distribution, recapitalization or similar event with respect
to the foregoing; provided, however, that any such Registrable Securities shall
cease to be Registrable Securities (i) when subject to an effective Registration
Statement under the Securities Act as provided for hereunder, (ii) upon any sale
pursuant to a Registration Statement or Rule 144 under the Securities Act or
(iii) at such time such securities become eligible for resale without volume or
manner-of-sale restrictions and without current public information pursuant to
Rule 144 as set forth in a written opinion letter to such effect, addressed,
delivered and acceptable to the Transfer Agent and the affected Investors.

 

“Registration Statement” means any registration statement required to be filed
hereunder pursuant to Sections 3 or 4 and any additional registration statements
contemplated herein, including (in each case) the Prospectus, amendments and
supplements to any such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference or deemed to be incorporated by reference in any such registration
statement.

 

“Rule 415” means Rule 415 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended or interpreted from time to time, or
any similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.

 

“Rule 424” means Rule 424 promulgated by the Commission pursuant to the
Securities Act, as such Rule may be amended or interpreted from time to time, or
any similar rule or regulation hereafter adopted by the Commission having
substantially the same purpose and effect as such Rule.

 

“SEC Guidance” means (i) any publicly-available written or oral guidance,
comments, requirements or requests of the Commission staff and (ii) the
Securities Act.

 

“Securities Act” shall mean the Securities Act of 1933, as amended.

 

“Shares” shall have the meaning set forth in the Preamble hereof.

 

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“Subscription Agreement” shall have the meaning set forth in the first Recital
hereof.

 

“Subsequent Offering” shall mean any public or private offering of the Company’s
securities on or after the date hereof.

 

“Subsequent Offering Effective Date” shall mean the effective date of a Public
Offering Registration Statement.

 

“Subsequent Offering Registration Statement” shall have the meaning set forth in
Section 3(d) of this Agreement.

 

“Warrant” shall have the meaning set forth in the Preamble hereof.

 

“Warrant Shares” shall mean the shares of Common Stock to be issued upon
exercise of the Warrants.

 

“Units” shall have the meaning set forth in the Preamble hereof.

 

Capitalized terms used but not defined herein shall have the meanings set forth
in the Subscription Agreement.

 

3.            Automatic Registration.

 

(a)          On or prior to the Filing Date, the Company shall prepare and file
with the Commission a registration statement (the “Automatic Registration
Statement”) covering the resale of all of the Registrable Securities and (2) the
Existing Registrable Securities for an offering to be made on a continuous basis
pursuant to Rule 415. It is expressly understood and agreed by each Investor
that the Automatic Registration Statement referred to in this Section 3 and the
“Piggyback Registration” referred to in Section 4 below may at the sole option
of the Company include, and the Registrable Securities may be offered for resale
in, the Subsequent Offering Registration Statement referred to in Section 3(d)
below.

 

Except as contemplated in the immediately preceding paragraph, the Company
agrees that it will not file any other registration statement that does not
include all of the Registrable Securities prior to the Filing Deadline. The
Automatic Registration Statement required hereunder shall be on Form S-1 or Form
S-3, as applicable, and shall contain substantially the “Plan of Distribution”
attached hereto as Annex A.  Subject to the terms of this Agreement, the Company
shall use its reasonable best efforts to cause the Automatic Registration
Statement to be declared effective under the Securities Act as promptly as
possible after the filing thereof, but in any event not later than the
Effectiveness Date, and shall use its best efforts to keep the Automatic
Registration Statement continuously effective under the Securities Act until the
earlier of the date when all Registrable Securities covered by the Registration
Statement have been sold thereunder or pursuant to Rule 144 or (ii) may be sold
without volume or manner-of-sale restrictions pursuant to Rule 144 and without
the requirement for the Company to be in compliance with the current public
information requirement under Rule 144, as determined by counsel to the Company
pursuant to a written opinion letter to such effect, addressed and acceptable to
the Company’s transfer agent and the Investor (the “Effectiveness Period”). The
maximum amount of Registrable Securities or Existing Registrable Securities that
may be included in the Automatic Registration Statement at any one time shall be
limited by Rule 415 or as may otherwise be required by the Commission. In the
event that there is a limitation by the Commission on the number of Registrable
Securities or Existing Registrable Securities that may be included for
registration on the Automatic Registration Statements at one time, the removal
of the securities shall be applied, first to, the Existing Registrable
Securities on a pro rata basis then, to the Common Stock on a pro rata basis
then, to the Warrant Shares on a pro rata basis (the “Order of Cutback”). In the
event, any Registrable Securities shall be removed from the Registration
Statement, the Company shall promptly advise any Investor holding such
Registrable Securities and use its best efforts to file an additional Automatic
Registration Statement covering such ineligible Registrable Securities, on a
pro-rata basis, within 30 days of the date such securities become eligible for
registration, which date shall be determined by the Commission, and shall use
its best efforts to cause such Automatic Registration Statement to be declared
effective by the Commission as soon as reasonably practicable. In addition, if
following the initial filing of the Automatic Registration Statement, the
Placement Agent reasonably determines for any reason, after consultation with
the Company, that the offering which is subject to the Automatic Registration
Statement needs to be cut back then the Placement Agent may cut back the number
of Registrable Securities or Existing Registrable Securities subject to the
Automatic Registration Statement in accordance with the Order of Cutback. As of
the date of the Closing, the Placement Agent does not intend to reduce the
number of Existing Registrable Securities anticipated to be included in the
Automatic Registration Statement.

 

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(b)          At any time after the Automatic Registration Statement has become
effective, the Company may, upon giving prompt written notice of such action to
the Investor, suspend the use of any such Automatic Registration Statement if,
in the good faith judgment of the Company, the use of the Automatic Registration
Statement covering the Registrable Securities would be detrimental to the
Company or its stockholders at such time and the Company concludes, as a result,
that it is in the best interests of the Company or its stockholders to suspend
the use of such Automatic Registration Statement at such time. The Company shall
have the right to suspend such Automatic Registration Statement for a period of
not more than thirty (30) consecutive days from the date the Company notifies
the Investor of such suspension, with such suspension not to exceed an aggregate
of sixty (60) days (whether or not consecutive) during any 12-month period. In
the case of the suspension of any effective Automatic Registration Statement,
the Investor, immediately upon receipt of notice thereof from the Company, will
discontinue any sales of Registrable Securities pursuant to such Registration
Statement until advised in writing by the Company that the use of such Automatic
Registration Statement may be resumed.

 

(c)          If: (i) the Automatic Registration Statement is not filed on or
prior to its Filing Date (if the Company files the Automatic Registration
Statement without affording the Investor Representative the opportunity to
review and comment on the same as required by Section 5(a) herein, the Company
shall be deemed to have not satisfied this clause (i)), (ii) a Registration
Statement registering for resale all of the Registrable Securities is not
declared effective by the Commission by the Effectiveness Date (unless the
reason for such non-registration of all or any portion of the Registrable
Securities is as a result of SEC Guidance under Rule 415 or similar rule which
limits the number of Registrable Securities which may be included in a
registration statement with respect to the Investors), or (iii) after the
effective date of a Registration Statement, such Registration Statement ceases
for any reason to remain continuously effective as to all Registrable Securities
included in such Registration Statement, or the Investors are otherwise not
permitted to utilize the prospectus therein to resell such Registrable
Securities, for more than ten (10) consecutive calendar days or more than an
aggregate of fifteen (15) calendar days during any 12-month period (any such
failure or breach being referred to as an “Event”, and for purposes of clause
(i), the date on which such Event occurs, and for purpose of clause (ii) the
date on which such ten (10) or fifteen (15) calendar day period, as applicable,
is exceeded being referred to as an “Event Date”), then, in addition to any
other rights the Investors may have hereunder or under applicable law, on each
such Event Date and on each monthly anniversary of each such Event Date (if the
applicable Event shall not have been cured by such date) until the applicable
Event is cured, the Company shall pay to each Investor an amount in cash, as
partial liquidated damages and not as a penalty, equal to 1.0% of the aggregate
purchase price paid by such Investor pursuant to the Subscription Agreement and
Purchase Agreement. The parties agree that the maximum aggregate liquidated
damages payable to an Investor under this Agreement shall be 6% of the aggregate
Purchase Price paid by such Investor pursuant to the Purchase Agreement. If the
Company fails to pay any partial liquidated damages pursuant to this Section in
full within seven days after the date payable, the Company will pay interest
thereon at a rate of 18% per annum (or such lesser maximum amount that is
permitted to be paid by applicable law) to the Investor, accruing daily from the
date such partial liquidated damages are due until such amounts, plus all such
interest thereon, are paid in full. The partial liquidated damages pursuant to
the terms hereof shall apply on a daily pro rata basis for any portion of a
month prior to the cure of an Event. Notwithstanding the foregoing, no payments
shall be owed with respect to any period during which all of the holder’s
Registrable Shares may be sold by such holder under Rule 144 without volume or
manner-of-sale restrictions pursuant to Rule 144 and without the requirement for
the Company to be in compliance with the current public information requirement
under Rule 144.

 

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(d)          Notwithstanding anything to the contrary, express or implied,
contained in this Section 3 or elsewhere in this Agreement, the Company shall
not be required to file an Automatic Registration Statement or a “Piggyback
Registration” (as defined in Section 4 below) with respect to any Registrable
Securities, and the provisions of this Agreement shall not be applicable to any
registration statement filed with the Commission by the Company in order to
either (i) offer securities of the Company for sale in the Subsequent Offering
or (ii) to register for resale securities of the Company previously sold in the
Subsequent Offering (the “ Subsequent Offering Registration Statement”).

 

4.            Piggyback Registrations.

 

(a)          With respect to any Registrable Securities not otherwise included
in the Automatic Registration Statement or any other Registration Statement as a
result of any limitation imposed by the Commission under Rule 415 (the “Excluded
Registrable Securities”), whenever the Company proposes to register (including,
for this purpose, a registration effected by the Company for other shareholders)
any of its securities under the Securities Act (other than pursuant to (i) an
Automatic Registration pursuant to Section 3 hereof or (ii) registration
pursuant to a registration statement on Form S-4 or S-8 or any successor forms
thereto), and the registration form to be used may be used for the registration
of Registrable Securities (a “Piggyback Registration”), the Company will give
written notice to the holder of Excluded Registrable Securities of its intention
to effect such a registration and will, subject to the provisions of Subsection
4(b) hereof, include in such registration all Excluded Registrable Securities
with respect to which the Company has received a written request for inclusion
therein within twenty (20) days after the receipt of the Company’s notice.

 

(b)          If a Piggyback Registration is an underwritten secondary
registration on behalf of holders of the Company’s securities, and the managing
underwriters advise the Company in writing that in their opinion the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering without adversely affecting the marketability
of the offering, the Company will include in such registration a pro rata share
of Excluded Registrable Securities requested to be included in such Registration
Statement as calculated by dividing the number of Excluded Registrable
Securities requested to be included in such Registration Statement by the number
of the Company’s securities requested to be included in such Registration
Statement by all selling security holders. In such event, the holder of Excluded
Registrable Securities shall continue to have registration rights under this
Agreement with respect to any Excluded Registrable Securities not so included in
such Registration Statement.

 

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(c)          Notwithstanding the foregoing, if, at any time after giving a
notice of Piggyback Registration and prior to the effective date of the
Registration Statement filed in connection with such registration, the Company
shall determine for any reason not to register or to delay registration of such
securities, the Company may, at its election, give written notice of such
determination to each record holder of Excluded Registrable Securities and,
following such notice, (i) in the case of a determination not to register, shall
be relieved of its obligation to register any Excluded Registrable Securities in
connection with such registration, and (ii) in the case of determination to
delay registering, shall be permitted to delay registering any Excluded
Registrable Securities for the same period as the delay in registering such
other securities.

 

5.             Lock-Up of Registrable Securities. Notwithstanding anything to
the contrary, express or implied, contained n this Agreement, in the event and
to the extent that the Company and the managing underwriter or placement agent
in connection with the Subsequent Offering shall, in the exercise of their joint
good faith judgment, determine that immediate resales by holders of Registrable
Securities could have a material adverse effect on the Company’s ability to
complete the Subsequent Offering, the Company and such managing underwriter or
placement agent may restrict resales of such Registrable Securities (a
“Lock-Up”) for a period of up to ninety (90) days following the Subsequent
Offering Effective Date; provided, that, the foregoing right to effect a Lock-Up
is subject to consummation of the sale or registration for resale of not less
than $15,000,000 of the securities offered for the account of the Company in the
Subsequent Offering, either prior to or within three Business Days following the
Subsequent Offering Effective Date. In connection with the foregoing,
appropriate stop transfer instructions with respect to the Registrable
Securities may be given to the transfer agent of the Company.

 

6.              Registration Procedures. If and whenever the Company is required
to affect the registration of any Registrable Securities under the terms herein,
the Company will:

 

(a)           not less than five (5) business days prior to the filing of each
Registration Statement and not less than one (1) business day prior to the
filing of any related Prospectus or any amendment or supplement thereto
(including any document that would be incorporated or deemed to be incorporated
therein by reference), (i) furnish to each seller of Registrable Securities,
copies of all such documents proposed to be filed, which documents (other than
those incorporated or deemed to be incorporated by reference) will be subject to
the review of such sellers, and (ii) cause its officers and directors, counsel
and independent registered public accountants to respond to such inquiries as
shall be necessary, in the reasonable opinion of respective counsel to each
seller of Registrable Securities, to conduct a reasonable investigation within
the meaning of the Securities Act. Notwithstanding the above, the Company shall
not be obligated to provide each seller of Registrable Securities advance copies
of any universal shelf registration statement registering securities in addition
to those required hereunder, or any Prospectus prepared thereto;  

 

(b)          prepare and file with the Commission the Registration Statement
with respect to such securities and use its best efforts to cause such
Registration Statement to become effective in an expeditious manner;

 

(c)          (i) prepare and file with the Commission such amendments, including
post-effective amendments, to a Registration Statement and the Prospectus used
in connection therewith as may be necessary to keep a Registration Statement
continuously effective as to the applicable Registrable Securities for the
Effectiveness Period and prepare and file with the Commission such additional
Registration Statements in order to register for resale under the Securities Act
all of the Registrable Securities, (ii) cause the related Prospectus to be
amended or supplemented by any required Prospectus supplement (subject to the
terms of this Agreement), and, as so supplemented or amended, to be filed
pursuant to Rule 424, (iii) respond as promptly as reasonably possible to any
comments received from the Commission with respect to a Registration Statement
or any amendment thereto and provide as promptly as reasonably possible to each
seller of Registrable Securities true and complete copies of all correspondence
from and to the Commission relating to a Registration Statement (provided that,
the Company shall excise any information contained therein which would
constitute material non-public information regarding the Company), and (iv)
comply in all material respects with the applicable provisions of the Securities
Act and the Exchange Act, with respect to the disposition of all Registrable
Securities covered by a Registration Statement during the applicable period in
accordance (subject to the terms of this Agreement) with the intended methods of
disposition by each seller of Registrable Securities thereof set forth in such
Registration Statement as so amended or in such Prospectus as so supplemented;

 

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(d)          furnish to each seller of Registrable Securities and to each
underwriter such number of copies of the Registration Statement and the
Prospectus included therein (including each preliminary prospectus) as such
persons reasonably may request in order to facilitate the intended disposition
of the Registrable Securities covered by such Registration Statement;

 

(e)          if during the Effectiveness Period, the number of Registrable
Securities at any time exceeds 100% of the number of shares of Common Stock then
registered in a Registration Statement, then the Company shall file an
additional Registration Statement covering such ineligible Registrable
Securities, on a pro-rata basis, within 60 days of the date such securities
become eligible for registration, which date shall be determined by the
Commission, and shall use its best efforts to cause such Registration Statement
to be declared effective by the Commission as soon as reasonably practicable;

 

(f)          use its commercially reasonable efforts (i) to register or qualify
the Registrable Securities covered by such Registration Statement under the
state securities or “blue sky” laws of such jurisdictions as the sellers of
Registrable Securities or, in the case of an underwritten public offering, the
managing underwriter, reasonably shall request, (ii) to prepare and file in
those jurisdictions such amendments (including post-effective amendments) and
supplements, and take such other actions, as may be necessary to maintain such
registration and qualification in effect at all times for the period of
distribution contemplated thereby and (iii) to take such further action as may
be necessary or advisable to enable the disposition of the Registrable
Securities in such jurisdictions, provided, that the Company shall not for any
such purpose be required to qualify generally to transact business as a foreign
corporation in any jurisdiction where it is not so qualified or to consent to
general service of process in any such jurisdiction;

 

(g)          use its commercially reasonable efforts to list the Registrable
Securities covered by such Registration Statement with any securities exchange
on which the common stock of the Company is then listed;

 

(h)          immediately notify each seller of Registrable Securities and each
underwriter under such Registration Statement, at any time when a Prospectus
relating thereto is required to be delivered under the Securities Act, of the
happening of any event of which the Company has knowledge as a result of which
the Prospectus contained in such Registration Statement, as then in effect,
includes any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing and promptly amend or
supplement such Registration Statement to correct any such untrue statement or
omission;

 

(i)           if the offering is an underwritten offering, enter into a written
agreement with the managing underwriter selected in the manner herein provided
in such form and containing such provisions as are usual and customary in the
securities business for such an arrangement between such underwriter and
companies of the Company’s size and investment stature, including, without
limitation, customary indemnification and contribution provisions;

 

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(j)          if the offering is an underwritten offering, at the request of any
seller of Registrable Securities, furnish to such seller on the date that
Registrable Securities are delivered to the underwriters for sale pursuant to
such registration: (i) a copy of an opinion, dated such date, of counsel
representing the Company for the purposes of such registration, addressed to the
underwriters, stating that such Registration Statement has become effective
under the Securities Act and that (A) to the knowledge of such counsel, no stop
order suspending the effectiveness thereof has been issued and no proceedings
for that purpose have been instituted or are pending or contemplated under the
Securities Act, (B) the Registration Statement, the related Prospectus and each
amendment or supplement thereof comply as to form in all material respects with
the requirements of the Securities Act (except that such counsel need not
express any opinion as to financial statements or other financial or statistical
information contained therein) and (C) to such other effects as reasonably may
be requested by counsel for the underwriters; and (ii) a copy of a letter dated
such date from the independent public accountants retained by the Company,
addressed to the underwriters, stating that they are independent registered
public accountants within the meaning of the Securities Act and that, in the
opinion of such accountants, the financial statements of the Company included in
the Registration Statement or the Prospectus, or any amendment or supplement
thereof, comply as to form in all material respects with the applicable
accounting requirements of the Securities Act, and such letter shall
additionally cover such other financial matters (including information as to the
period ending no more than five business days prior to the date of such letter)
with respect to such registration as such underwriters reasonably may request;

 

(k)          promptly notify each seller of Registrable Securities of the
issuance by the Commission of any stop order suspending the effectiveness of the
Registration Statement or the initiation of any proceedings for that purpose and
make every reasonable effort to prevent the issuance of any stop order and, if
any stop order is issued, to obtain the lifting thereof at the earliest possible
time;

 

(l)          take all actions reasonably necessary to facilitate the timely
preparation and delivery of certificates (not bearing any legend restricting the
sale or transfer of such securities) representing the Registrable Securities to
be sold pursuant to the Registration Statement and to enable such certificates
to be in such denominations and registered in such names as each seller of
Registrable Securities or any underwriters may reasonably request; and

 

(m)        take all other reasonable actions necessary to expedite and
facilitate the registration of the Registrable Securities pursuant to the
Registration Statement.

 

7.             Obligations of Investor. The Investor shall furnish to the
Company such information regarding such Investor, the number of Registrable
Securities owned and proposed to be sold by it, the intended method of
disposition of such securities and any other information as shall be required to
effect the registration of the Registrable Securities, and cooperate with the
Company in preparing the Registration Statement and in complying with the
requirements of the Securities Act.

 

8.             Expenses.

 

(a)          All expenses incurred by the Company in complying with Sections 3,
4 and 5 including, without limitation, all registration and filing fees
(including the fees of the Commission and any other regulatory body with which
the Company is required to file), printing expenses, fees and disbursements of
counsel and independent public accountants for the Company, fees and expenses
(including counsel fees of the Company and the Placement Agent, as
representative of the Purchasers, provided, however that any such counsel fees,
of the Placement Agent shall not exceed $50,000 in the aggregate and any related
expenses shall not exceed $100,000 in the aggregate) incurred in connection with
complying with state securities or “blue sky” laws, and fees of transfer agents
and registrars are called “Registration Expenses.” All underwriting discounts
and selling commissions applicable to the sale of Registrable Securities are
called “Selling Expenses.”

 

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(b)          The Company will pay all Registration Expenses in connection with
any Registration Statement filed hereunder, and the Selling Expenses in
connection with each such Registration Statement shall be borne by the
participating sellers in proportion to the number of Registrable Securities sold
by each or as they may otherwise agree.

 

(c) Notwithstanding anything herein to the contrary, at the request of any
Investor, the Company shall employ its counsel at the Company’s expense to
prepare any and all legal opinions necessary for the prompt removal of
restrictive legends from certificates representing Registrable Securities as,
when and to the extent such legends may be removed in compliance with the
Securities Act and/or Rule 144.

 

9.            Indemnification and Contribution.

 

(a)          In the event of a registration of any of the Registrable Securities
under the Securities Act pursuant to the terms of this Agreement, the Company
will indemnify and hold harmless and pay and reimburse, each seller of such
Registrable Securities thereunder, each underwriter of such Registrable
Securities thereunder and each other person, if any, who controls such seller or
underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which such seller,
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any Registration Statement
under which such Registrable Securities were registered under the Securities Act
pursuant hereto or any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
or any violation or alleged violation of the Securities Act or any state
securities or “blue sky” laws and will reimburse each such seller, each such
underwriter and each such controlling person for any legal or other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, that the Company will
not be liable in any such case if and to the extent that any such loss, claim,
damage or liability arises out of or is based upon the Company’s reliance on an
untrue statement or alleged untrue statement or omission or alleged omission so
made in conformity with information furnished by any such seller, any such
underwriter or any such controlling person in writing specifically for use in
such Registration Statement or prospectus.

 

  10

 

 

(b)          In the event of a registration of any of the Registrable Securities
under the Securities Act pursuant hereto, each seller of such Registrable
Securities thereunder, severally and not jointly, will indemnify and hold
harmless the Company, each person, if any, who controls the Company within the
meaning of the Securities Act, each officer of the Company who signs the
Registration Statement, each director of the Company, each underwriter and each
person who controls any underwriter within the meaning of the Securities Act,
against all losses, claims, damages or liabilities, joint or several, to which
the Company or such officer, director, underwriter or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon reliance on any untrue statement or alleged untrue statement of
any material fact contained in the registration statement under which such
Registrable Securities were registered under the Securities Act pursuant hereto
or any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereof, or arise out of or are based upon the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and will
reimburse the Company and each such officer, director, underwriter and
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided that such seller will be liable hereunder in any
such case if and only to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in reliance upon and in
conformity with information pertaining to such seller, as such, furnished in
writing to the Company by such seller specifically for use in such Registration
Statement or prospectus; and provided, further, that the liability of each
seller hereunder shall be limited to the proceeds received by such seller from
the sale of Registrable Securities covered by such Registration Statement.
Notwithstanding the foregoing, the indemnity provided in this Section 8(b) shall
not apply to amounts paid in settlement of any such loss, claim, damage,
liability or expense if such settlement is effected without the consent of such
indemnified party and provided further, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage or liability (or
action in respect thereof) arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission in such Registration
Statement, which untrue statement or alleged untrue statement or omission or
alleged omission is completely corrected in an amendment or supplement to the
Registration Statement and the undersigned indemnitees thereafter fail to
deliver or cause to be delivered such Registration Statement as so amended or
supplemented prior to or concurrently with the sale of the Registrable
Securities to the person asserting such loss, claim, damage or liability (or
actions in respect thereof) or expense after the Company has furnished the
undersigned with the same.

 

(c)          Promptly after receipt by an indemnified party hereunder of notice
of the commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against the indemnifying party hereunder, notify
the indemnifying party in writing thereof, but the omission so to notify the
indemnifying party shall not relieve it from any liability which it may have to
such indemnified party other than under this Section 8 and shall only relieve it
from any liability which it may have to such indemnified party under this
Section 8 if and to the extent the indemnifying party is materially prejudiced
by such omission. In case any such action shall be brought against any
indemnified party and it shall notify the indemnifying party of the commencement
thereof, the indemnifying party shall be entitled to participate in and, to the
extent it shall wish, to assume and undertake the defense thereof with counsel
reasonably satisfactory to such indemnified party, and, after notice from the
indemnifying party to such indemnified party of its election so to assume and
undertake the defense thereof, the indemnifying party shall not be liable to
such indemnified party under this Section 8 for any legal expenses subsequently
incurred by such indemnified party in connection with the defense thereof other
than reasonable costs of investigation and of liaison with counsel so selected;
provided that if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded based upon written advice of its counsel that there may be reasonable
defenses available to it that are different from or additional to those
available to the indemnifying party or if the interests of the indemnified party
reasonably may be deemed to conflict with the interests of the indemnifying
party, the indemnified party shall have the right to select a separate counsel
and to assume such legal defenses and otherwise to participate in the defense of
such action, with the expenses and fees of such separate counsel and other
expenses related to such participation to be reimbursed by the indemnifying
party as incurred.

 

  11

 

 

(d)          In order to provide for just and equitable contribution to joint
liability under the Securities Act in any case in which either (i) any holder of
Registrable Securities exercising rights under this Agreement, or any
controlling person of any such holder, makes a claim for indemnification
pursuant to this Section 8 but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 8 provides for indemnification in such case, or (ii) contribution
under the Securities Act may be required on the part of any such selling holder
or any such controlling person in circumstances for which indemnification is
provided under this Section 8; then, and in each such case, the Company and such
holder will contribute to the aggregate losses, claims, damages or liabilities
to which they may be subject (after contribution from others) in such proportion
so that such holder is responsible for the portion represented by the percentage
that the public offering price of its Registrable Securities offered by the
Registration statement bears to the public offering price of all securities
offered by such Registration statement, and the Company is responsible for the
remaining portion; provided, that, in any such case, (A) no such holder will be
required to contribute any amount in excess of the public offering price of all
such Registrable Securities offered by it pursuant to such Registration
statement and (B) no person or entity guilty of fraudulent misrepresentation
(within the meaning of Section 12(f) of the Securities Act) will be entitled to
contribution from any person or entity who was not guilty of such fraudulent
misrepresentation.

 

10.           Changes in Capital Stock. If, and as often as, there is any change
in the capital stock of the Company by way of a forward or reverse stock split,
stock dividend, combination or reclassification, or through a merger,
consolidation, reorganization or recapitalization, or by any other means,
appropriate adjustment shall be made in the provisions hereof so that the rights
and privileges granted hereby shall continue as so changed.

 

11.           Representations and Warranties of the Company. The Company
represents and warrants to the Investor as follows:

 

(a)          The execution, delivery and performance of this Agreement by the
Company have been duly authorized by all requisite corporate action and will not
violate any provision of law, any order of any court or other agency of
government, the Certificate of Incorporation or Bylaws of the Company or any
provision of any indenture, agreement or other instrument to which it or any or
its properties or assets is bound, conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument or result in the creation or imposition
of any lien, charge or encumbrance of any nature whatsoever upon any of the
properties or assets of the Company or its subsidiaries.

 

(b)          This Agreement has been duly executed and delivered by the Company
and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms, subject to any applicable bankruptcy,
insolvency or other laws affecting the rights of creditors generally and to
general equitable principles and the availability of specific performance.

 

12.          Rule 144 Requirements. The Company agrees to:

 

(a)          make and keep current public information about the Company
available, as those terms are understood and defined in Rule 144 under the
Securities Act;

 

(b)          use its best efforts to file with the Commission in a timely manner
all reports and other documents required of the Company under the Securities Act
and the Exchange Act; and

 

(c)          furnish to any holder of Registrable Securities upon request (i) a
written statement by the Company as to its compliance with the reporting
requirements of Rule 144 and of the Securities Act and the Exchange Act (at any
time after it has become subject to such reporting requirements), (ii) a copy of
the most recent annual or quarterly report of the Company and Current Reports on
Form 8-K, as filed with the Commission, and (iii) such other reports and
documents of the Company as such holder may reasonably request to avail itself
of any similar rule or regulation of the Commission allowing it to sell any such
securities without registration.

 

  12

 

 

13.          Termination. All of the Company’s obligations to register
Registrable Shares under Sections 3, 4 and 5 hereof shall terminate upon the
date on which the Investor holds no Registrable Securities or all of the
Registrable Securities are eligible for resale without volume or manner-of-sale
restrictions and without current public information pursuant to Rule 144, as
determined by counsel to the Company pursuant to a written opinion letter to
such effect, addressed and reasonably acceptable to the Company’s transfer agent
and the Investor.

 

14.          Miscellaneous.

 

(a)          All covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of the
respective successors and assigns of the parties hereto (including without
limitation transferees of any Registrable Securities), whether so expressed or
not.

 

(b)          All notices, requests, consents and other communications hereunder
shall be in writing and shall be delivered in person, mailed by certified mail,
return receipt requested, postage prepaid, addressed or sent by a nationally
recognized overnight courier service: (i) if to the Company, at 955 Hartman Run
Road, Morgantown, WV 26507, Attn: President; and (ii) if to any holder of
Registrable Securities, to such holder at such address as may have been
furnished to the Company or its counsel in writing by such holder; or, in any
case, at such other address or addresses as shall have been furnished, in
writing to the Company or its counsel (in the case of a holder of Registrable
Securities) or to the holders of Registrable Securities (in the case of the
Company) in accordance with the provisions of this paragraph. Any notice or
other communication or deliveries hereunder shall be deemed given and effective
upon actual receipt by the party to whom such notice is required to be given.

 

(c)          This Agreement shall be governed by and construed under the laws of
the State of New York, without giving effect to principles of conflicts of laws.
The Company and Investor (i) agree that any legal suit, action or proceeding
arising out of or relating to this Agreement shall be instituted exclusively in
in New York State Supreme Court, County of New York, or in the United States
District Court for the Southern District of New York, (ii) waive any objection
which the Company or Investor may have now or hereafter to the venue of any such
suit, action or proceeding, and (iii) irrevocably consent to the jurisdiction of
any such federal or state court in any such suit, action or proceeding. The
Company and Investor further agree to accept and acknowledge service of any and
all process which may be served in any such suit, action or proceeding and agree
that service of process upon the Company or Investor mailed by certified mail,
return receipt requested, postage prepaid, to, in the case of the Company, the
Company’s address, and in the case of the Investor, to the Investor’s address as
set forth on the Company’s books and records, shall be deemed in every respect
effective service of process upon the Company, in any such suit, action or
proceeding. THE PARTIES HERETO AGREE TO WAIVE THEIR RESPECTIVE RIGHTS TO A JURY
TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF THIS
AGREEMENT OR ANY DOCUMENT OR AGREEMENT CONTEMPLATED HEREBY.

 

(d)          In the event of a breach by the Company or by the Investor, of any
of their obligations under this Agreement, the Investor or the Company, as the
case may be, in addition to being entitled to exercise all rights granted by law
and under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and the
Investor agree that monetary damages would not provide adequate compensation for
any losses incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.

 

  13

 

 

(e)          This Agreement may not be amended or modified without the written
consent of the Company and the Investor.

 

(f)          Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof. No waiver shall be effective unless and
until it is in writing and signed by the party granting the waiver.

 

(g)          This Agreement may be executed in two or more counterparts
(including by facsimile or .pdf transmission) each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument. This Agreement, once executed by a party, may be delivered to the
other party hereto by facsimile transmission of a copy of this Agreement bearing
the signature of the party so delivering this Agreement.

 

(h)          If any provision of this Agreement shall be held to be illegal,
invalid or unenforceable, such illegality, invalidity or unenforceability shall
attach only to such provision and shall not in any manner affect or render
illegal, invalid or unenforceable any other provision of this Agreement, and
this Agreement shall be carried out as if any such illegal, invalid or
unenforceable provision were not contained herein.

 

(i)          This Agreement constitutes the entire agreement among the Company
and the Investor relative to the subject matter hereof and supersedes in its
entirety any and all prior agreements, understandings and discussions with
respect thereto.

 

(j)          The headings of the sections of this Agreement are for convenience
and shall not by themselves determine the interpretation of this Agreement.

 

[Signature Page Follows]

 

  14

 

 

Signature Page to the Registration Rights Agreement

 

Investors:

 

The Investors set forth on Exhibit A to the Purchase Agreement have executed a
Subscription Agreement with the Company which provides, among other things, that
by executing the Subscription Agreement each Investor is deemed to have executed
the REGISTRATION RIGHTS AGREEMENT in all respects and is bound to purchase the
Units set forth in such Subscription Agreement and Exhibit A to the Purchase
Agreement.

 

THE COMPANY:

 

PROTEA BIOSCIENCES GROUP, INC.

 

By:     Name: Stephen Turner     Title: Chief Executive Officer  

 

Dated: __________________________________, 2015

 

  15

 

 

Annex A

 

Plan of Distribution

 

Each selling stockholder (the “Selling Stockholders”) of the securities and any
of their pledgees, assignees and successors-in-interest may, from time to time,
sell any or all of their securities covered hereby on any stock exchange, market
or trading facility on which the securities of the Company are traded or in
private transactions.  These sales may be at fixed or negotiated prices.  A
Selling Stockholder may use any one or more of the following methods when
selling securities:

 

  · ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;

 

  · block trades in which the broker-dealer will attempt to sell the securities
as agent but may position and resell a portion of the block as principal to
facilitate the transaction;

 

  · purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;

 

  · an exchange distribution in accordance with the rules of the applicable
exchange;

 

  · privately negotiated transactions;

 

  · settlement of short sales entered into after the effective date of the
registration statement of which this prospectus is a part;

 

  · in transactions through broker-dealers that agree with the Selling
Stockholders to sell a specified number of such securities at a stipulated price
per security;

 

  · through the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;

 

  · a combination of any such methods of sale; or

 

  · any other method permitted pursuant to applicable law.

 

The Selling Stockholders may also sell securities under Rule 144 under the
Securities Act, if available, rather than under the prospectus contained in a
Registration Statement.

 

Broker-dealers engaged by the Selling Stockholders may arrange for other
brokers-dealers to participate in sales.  Broker-dealers may receive commissions
or discounts from the Selling Stockholders (or, if any broker-dealer acts as
agent for the purchaser of securities, from the purchaser) in amounts to be
negotiated, but, except as set forth in a supplement to this Prospectus, in the
case of an agency transaction not in excess of a customary brokerage commission
in compliance with FINRA Rule 2440; and in the case of a principal transaction a
markup or markdown in compliance with FINRA IM-2440.

 

In connection with the sale of the securities or interests therein, the Selling
Stockholders may enter into hedging transactions with broker-dealers or other
financial institutions, which may in turn engage in short sales of the
securities in the course of hedging the positions they assume.  The Selling
Stockholders may also sell securities short and deliver these securities to
close out their short positions, or loan or pledge the securities to
broker-dealers that in turn may sell these securities.  The Selling Stockholders
may also enter into option or other transactions with broker-dealers or other
financial institutions or create one or more derivative securities which require
the delivery to such broker-dealer or other financial institution of securities
offered by this prospectus, which securities such broker-dealer or other
financial institution may resell pursuant to this prospectus (as supplemented or
amended to reflect such transaction).

 

  16

 

  

The Selling Stockholders and any broker-dealers or agents that are involved in
selling the securities may be deemed to be “underwriters” within the meaning of
the Securities Act in connection with such sales.  In such event, any
commissions received by such broker-dealers or agents and any profit on the
resale of the securities purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.  Each Selling Stockholder has
informed the Company that it does not have any written or oral agreement or
understanding, directly or indirectly, with any person to distribute the
securities. In no event shall any broker-dealer receive fees, commissions and
markups which, in the aggregate, would exceed eight percent (8%).

 

The Company is required to pay certain fees and expenses incurred by the Company
incident to the registration of the securities.  The Company has agreed to
indemnify the Selling Stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.

 

Because Selling Stockholders may be deemed to be “underwriters” within the
meaning of the Securities Act, they will be subject to the prospectus delivery
requirements of the Securities Act including Rule 172 thereunder.  In addition,
any securities covered by this prospectus which qualify for sale pursuant to
Rule 144 under the Securities Act may be sold under Rule 144 rather than under
this prospectus. The Selling Stockholders have advised us that there is no
underwriter or coordinating broker acting in connection with the proposed sale
of the resale securities by the Selling Stockholders.

 

We agree to keep the prospectus effective until the earlier of (i) the date on
which the securities may be resold by the Selling Stockholders without
registration and without regard to any volume or manner-of-sale limitations and
without current public information by reason of Rule 144 under the Securities
Act or any other rule of similar effect or (ii) all of the securities have been
sold pursuant to this prospectus or Rule 144 under the Securities Act or any
other rule of similar effect.  The resale securities will be sold only through
registered or licensed brokers or dealers if required under applicable state
securities laws. In addition, in certain states, the resale securities covered
hereby may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.

 

Under applicable rules and regulations under the Exchange Act, any person
engaged in the distribution of the resale securities may not simultaneously
engage in market making activities with respect to the common stock for the
applicable restricted period, as defined in Regulation M, prior to the
commencement of the distribution.  In addition, the Selling Stockholders will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including Regulation M, which may limit the timing of
purchases and sales of securities of the common stock by the Selling
Stockholders or any other person.  We will make copies of this prospectus
available to the Selling Stockholders and have informed them of the need to
deliver a copy of this prospectus to each purchaser at or prior to the time of
the sale (including by compliance with Rule 172 under the Securities Act).

 

  17

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