THIS WARRANT AND THE SECURITIES UNDERLYING THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”) AND MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED IN
THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH SECURITIES
ACT, ANY APPLICABLE STATE SECURITIES LAWS AND THE RULES AND REGULATIONS
THEREUNDER.

 

PROTEA BIOSCIENCES GROUP, INC.

 

WARRANT

 

TO PURCHASE COMMON STOCK OF THE COMPANY

 

Warrant No. __  Issue Date: , 2013

 

FOR VALUE RECEIVED, PROTEA BIOSCIENCES GROUP, INC., a Delaware corporation (the
“Company”), grants the following rights , and [his/her/its] permitted assigns,
heirs, executors and administrators (individually and collectively, the
“Holder”), as of the day of , 2013 (the “Issue Date”). This warrant (the
“Warrant”) has been issued by the Company in connection with the Conversion of
those certain Notes issued by the Company and held by the Holder into shares of
the Company's common stock, par value $0.0001 per share (the “Common Stock”), at
a conversion price of $0.50 per share, pursuant to the terms and conditions set
forth in that certain Conversion Agreement by and between the Company and the
Holder dated as of , 2013 (the “Conversion Agreement”). Terms not defined herein
shall have the meaning set forth in the Conversion Agreement.

 

Section 1. Grant.

 

The Holder is hereby granted the right (collectively, the “Purchase Rights”), in
accordance with the terms and conditions of this Warrant, from the date hereof
until the expiration of the “Exercise Period” (as defined below), to purchase
from the Company that number of fully paid and non-assessable shares of the
Common Stock of the Company, set forth in Section 2 hereof, at the “Exercise
Price” (as defined below), upon delivery of this Warrant to the Company with the
Notice of Exercise form attached as Exhibit 1 hereto, duly executed, and upon
tender of the Exercise Price for the shares of Common Stock to be purchased.

 

Section 2. Number of Shares of Common Stock Purchasable.

 

2.1 Subject to the other provisions of this Section 2, this Warrant entitles the
Holder to purchase from time to time up to shares of the Company’s Common Stock
(the “Warrant Shares”).

 

2.2 In case prior to the expiration of the Purchase Rights by exercise or by the
terms of this Warrant, the Company shall undertake any reclassification, stock
split, reverse stock split, stock dividend or any similar
proportionately-applied change (collectively, a “Reclassification”) of
outstanding shares of Common Stock (other than a change solely in, of, or from
par value), the Holder shall thereafter be entitled, upon exercise of this
Warrant for the same total consideration as presently required, to purchase the
kind and amount of shares of stock and other securities and property receivable
upon such Reclassification by a holder of the number of shares of Common Stock
which this Warrant entitles the Holder hereof to purchase immediately prior to
such Reclassification. Notice of any such Reclassification shall be given to the
Holder pursuant to Section 11 hereof.

 

1

 

2.3 In case prior to the expiration of the Purchase Rights by exercise or by the
terms of this Warrant, the Company shall determine to consolidate or merge with,
or convey all, or substantially all, of its property or assets to, any other
corporation or corporations, or dissolve, liquidate or wind up, then, as a
condition precedent to such consolidation, merger, conveyance, dissolution,
liquidation or winding up, notice shall be given to the Holder pursuant to
Section 11 hereof and lawful and adequate provision shall be made whereby the
Holder shall thereafter have the right to receive from the Company or the
successor corporation, as the case may be, upon the basis and upon the terms and
conditions specified in this Warrant, in lieu of the shares of Common Stock of
the Company theretofore purchasable upon the exercise of the Purchase Rights,
such shares of stock, securities, or assets as may be issued or payable with
respect to, or in exchange for, the number of shares of Common Stock of the
Company theretofore purchasable upon the exercise of the Purchase Rights had
such consolidation, merger, conveyance, dissolution, liquidation or winding up
not taken place; and in any such event the rights of the Holder to an adjustment
of the number of shares of Common Stock purchasable upon the exercise of the
Purchase Rights as herein provided, shall continue and be preserved in respect
of any stock or securities which the Holder becomes entitled to purchase.

 

2.4 (a) For purposes of this Section 2.4, the capitalized terms in this Section
shall have the following meanings:

 

(i) “Additional Shares of Common Stock” shall mean all shares of Common Stock
issued or sold by the Corporation after the Issue Date, other than Exempted
Securities;

 

(ii) “Convertible Securities” shall mean shares of Common Stock issued or deemed
issued upon the conversion or exercise, as appropriate, of any debt or equity
securities of the Company which are convertible into or exercisable for shares
of Common Stock of the Company;

 

(iii) “Exempted Securities” shall mean:

 

(A) Convertible Securities issued prior to the Issue Date, provided, however,
that the agreements or instruments evidencing the Convertible Securities have
not been amended after the Issue Date so as to increase the number of shares of
Common Stock issuable under the Convertible Securities or to lower the
conversion or exercise price, as appropriate, of the Convertible Securities;

 

(B) shares of Common Stock issued or deemed issued as a dividend or distribution
on the Common Stock;

 

(C) shares of Common Stock issued or issuable upon the exercise of this Warrant;

 

(D) shares of Common Stock issued or issuable by reason of a stock split,
split-up, or other distribution on shares of Common Stock; or

 

(E) shares of Common Stock issued or issuable to employees, consultants,
directors or officers pursuant to an equity incentive plan, employment agreement
or other agreement as compensation for services provided to the Company.

 

2

 

(b) At any time after the Issue Date through December 31, 2013, the Company
issues or sells Additional Shares of Common Stock, for a consideration per
Additional Share of Common Stock that is less than $0.50 (as such amount may be
adjusted proportionately for any Reclassification) (a "Dilutive Issuance"), on
the date of and immediately prior to the Dilutive Issuance, the Exercise Price,
then in effect, will be reduced concurrently with the Dilutive Issuance to a
price (rounded to the nearest cent) calculated by multiplying such Exercise
Price by a fraction, of which (i) the numerator shall be the number of shares of
Common Stock outstanding on a fully diluted basis immediately prior to such
Dilutive Issuance plus the number of shares of Common Stock which the aggregate
consideration received or to be received by the Company for the total number of
Additional Shares of Common Stock issued pursuant to the Dilutive Issuance would
purchase at the Exercise Price; and (ii) the denominator shall be the number of
shares of Common Stock outstanding on a fully diluted basis immediately prior to
such Dilutive Issuance plus the number of such Additional Shares of Common Stock
so issued. The provisions of this Section 2.4(b) shall not operate to increase
the Exercise Price.

 

Section 3. Exercise Period; Registration Statement Notice.

 

3.1 The Purchase Rights represented hereby shall be exercisable in whole or in
part from time to time after the date of issuance of this Warrant until the
earlier of (i) a Qualified Public Offering or (ii) 5:00 p.m. Eastern time on the
fifth anniversary of the Issue Date hereof (the “Exercise Period”). For purposes
of this Warrant, the term “Qualified Public Offering” shall mean the closing of
a firm commitment underwritten offering pursuant to an effective registration
statement under the Securities Act covering the offer and sale of Common Stock
for the account of the Company in which the net cash proceeds to the Company
(after deduction of underwriting discounts and commissions) are at least
$10,000,000.

 

3.2 The Company shall give the Holder written notice, at the address of the
Holder set forth on the Company’s books, not less than twenty days prior to the
closing of a Qualified Public Offering.

 

Section 4. Exercise. The Purchase Rights represented by this Warrant are
exercisable upon the terms and conditions set forth herein at the option of the
Holder in whole at any time and in part, but not for less than 100 shares at a
time, at any time and from time to time during the Exercise Period upon the
delivery of the Notice of Exercise form attached hereto as Exhibit 1 to the
Company with such notice duly executed and upon payment in cash, wire transfer
or bank cashier’s check of the Exercise Price. The Purchase Rights shall be
deemed to have been exercised, and the Holder shall be deemed to have become a
stockholder of record of the Company for the purposes of receiving dividends and
for all other purposes whatsoever with respect to the shares of Common Stock so
purchased, as of the date of delivery of such properly executed notice
accompanied by proper tender of the Exercise Price at the office of the Company.
As promptly as practicable on or after such date, and in any event within three
(3) business days thereafter, the Company at its expense shall issue and
deliver, or cause to be issued and delivered, to the person or persons entitled
to receive the same, a certificate or certificates for the number of shares
issuable upon such exercise. In the event that this Warrant is exercised in
part, the Company at its expense shall execute and deliver a new Warrant of like
tenor exercisable for the number of shares for which this Warrant may then be
exercised.

 

Section 5. Exercise Price. The exercise price for each share of Common Stock
issuable to the Holder hereunder shall be $1.10 per share subject to adjustment
hereunder (the “Exercise Price”).

 

Section 6. Company’s Warranties and Covenants as to Capital Stock. The Company
has taken all action necessary and appropriate to properly authorize, reserve
and issue those shares of Common Stock issuable to the Holder pursuant to this
Warrant including an authorization of issuance and setting of exercise price.
The Common Stock deliverable on the exercise of the Purchase Rights represented
hereby shall, when issued, be duly and validly issued, fully paid and
nonassessable. The Company shall at all times reserve and hold available
sufficient shares of Common Stock to satisfy all conversion and purchase rights
of all outstanding convertible securities and warrants.

 

3

 

 

 

Section 7. Transfer; Compliance With Securities Laws; Right of Company to
Request Opinion of Counsel Confirming Such Compliance; Holder Responsible for
Costs of Transfer Including Reasonable Counsel Fees. The Purchase Rights shall
be registered on the books of the Company, which shall be kept by it at its
principal office for that purpose. This Warrant and the Common Stock issuable
upon exercise of the Purchase Rights, may not be transferred or assigned in
whole or in part without compliance with all applicable federal and state
securities laws by the transferor and the transferee, including, if requested by
the Company, an opinion of counsel satisfactory to the Company to the effect
that the transfer or assignment is in compliance with applicable securities
laws. Subject to such compliance, the Purchase Rights shall be transferable on
said books, in whole or in part, by the Holder in person or by duly authorized
attorney upon surrender of this Warrant properly endorsed by the Holder
executing the Permitted Transfer or Assignment Form attached hereto and made a
part hereof as Exhibit 2. All reasonable and documented costs associated with
any transfer or assignment, including, without limitation, the reasonable fees
of counsel to the Company shall be borne by the transferor or assignor. The
Company agrees that, while the Purchase Rights remain valid and outstanding, its
stock transfer books shall not be closed for any purpose whatsoever except under
arrangements which shall insure to persons exercising warrants or applying for
transfer of stock all rights and privileges which they might have had or
received if the stock transfer books had not been closed and they had exercised
their Purchase Rights at any time during which such transfer book shall have
been closed.

 

Section 8. Charges, Taxes and Expenses. Issuance of certificates for shares of
Common Stock issuable upon the exercise of this Warrant or any portion thereof
(and issuance of a replacement Warrant certificate in the event of partial
exercise) shall be made without charge to the Holder hereof for any issue taxes
or any other incidental expenses in respect of the issuance of such certificates
to and in the name of the registered Holder of this Warrant, all of which taxes
and expenses shall be paid by the Company, and such certificates shall be issued
in the name of the Holder of this Warrant. Certificates will be issued in a name
other than that of the Holder upon the request of a Holder and payment by the
Holder of any applicable transfer taxes and compliance with all applicable
securities laws and with all applicable provisions of this Warrant including but
not limited to Section 7 hereof.

 

Section 9. Exchange for Other Denominations. This Warrant is exchangeable for
new certificates of like tenor and date representing in the aggregate the right
to purchase the number of shares purchasable hereunder in denominations
designated by the Holder at the time of surrender. In the event of the purchase,
at any time prior to the expiration of the Exercise Period, of less than all of
the shares of Common Stock purchasable hereunder, the Company shall cancel this
Warrant upon surrender thereof, and shall promptly execute and deliver to the
Holder hereof a new warrant of like tenor and date for the balance of the shares
purchasable hereunder.

 

Section 10. Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by
the Company of evidence reasonably satisfactory to the Company of the loss,
theft, destruction or mutilation of this Warrant, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Company of all reasonable and documented expenses
incidental thereto, and upon surrender of this Warrant, if mutilated, the
Company shall promptly make and deliver a new warrant of like tenor and date, in
lieu of this Warrant and cancel this Warrant.

 

Section 11. Notices Including Certificate of Company In Event of Adjustment.

 

(a) Whenever the number of shares purchasable hereunder shall be adjusted
pursuant to Section 2 hereof, the Company shall issue a certificate signed by
its Chief Financial Officer or its President or such other appropriate officer,
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated,
and the number of shares purchasable hereunder after giving effect to such
adjustment, and shall cause a copy of such certificate to be mailed (by
first-class mail, postage prepaid) to the Holder of this Warrant.

 

4

 

(b) In case:

 

(i) the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them to receive any dividend or other distribution, or any
right to subscribe for or purchase any shares of stock of any class or any other
securities, or to receive any other right, or

 

(ii) of any capital reorganization of the Company, any reclassification of the
capital stock of the Company, any consolidation or merger of the Company with or
into another corporation, or any conveyance of all or substantially all of the
assets of the Company to another corporation, or

 

(iii) of any voluntary dissolution, liquidation or winding-up of the Company,

 

then, and in each such case, the Company shall mail or deliver or cause to be
mailed or delivered to the Holder or Holders a notice specifying, as the case
may be, (A) the date on which a record is to be taken for the purpose of such
dividend, distribution or right, and stating the amount and character of such
dividend, distribution or right, or (B) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock shall be entitled to exchange their shares
of Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be mailed or delivered
at least 15 business days prior to the date therein specified.

 

(c) All notices, requests, consents and demands required by this Warrant shall
be in writing and shall be personally delivered or mailed, postage prepaid, to
the Company at:

 

PROTEA BIOSCIENCES GROUP, INC.

955 Hartman Run Road

Morgantown, WV 26507

Attn: President

Fax: 304-292-7101

 

with a copy (which shall not constitute notice) to:

 

Richardson & Patel LLP

405 Lexington Avenue, 49th Floor

New York, New York 10174

Attn: David Feldman, Esq.

Fax: (917) 677-8165

 

and to the Holder at the address of such Holder set forth in the Conversion
Agreement executed by the original holder of this Warrant in connection with the
purchase of the Shares and Warrants. All notices required or permitted hereunder
shall be in writing and shall be deemed effectively given: (i) upon personal
delivery to the party to be notified, (ii) when sent by confirmed facsimile if
sent during normal business hours of the recipient, if not, then on the next
business day, (iii) five (5) days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (iv) one (1) day
after deposit with a nationally recognized overnight courier, specifying next
day delivery with written verification of receipt.

 

5

 

Section 12. Miscellaneous. This Warrant shall not entitle the Holder to any of
the rights of a stockholder of the Company. This Warrant shall be binding upon
the Company’s successors. This Warrant shall be governed, construed and enforced
in accordance with the laws of the State of Delaware. In case any provision of
this Warrant shall be invalid, illegal or unenforceable, or partially invalid,
illegal or unenforceable, the provision shall be enforced to the extent, if any,
that it may legally be enforced and the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
This Warrant shall any term hereof may be changed, waived, discharged or
terminated only by a statement in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought. The
headings in this Warrant are for purposes of reference only, and shall not limit
or otherwise affect any of the terms hereof.

 

[Signatures appear on following page.]

 

 

 

 

6

 

 

 

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed,
under seal and delivered on its behalf as of the Issue Date set forth above.

 

  PROTEA BIOSCIENCES GROUP, INC.                     By:       Stephen Turner  
  President

 

 

7

 

EXHIBIT 1

 

NOTICE OF EXERCISE PURSUANT TO

 ATTACHED WARRANT

 

                                  , 20___

 

To: PROTEA BIOSCIENCES GROUP, INC.

 

(1) The undersigned, the Holder of record of the attached Warrant of PROTEA
BIOSCIENCES GROUP, INC., hereby exercises the option granted by the Purchase
Rights evidenced by the attached Warrant and hereby tenders payment of the
Exercise Price as determined by the Warrant to purchase upon the terms set forth
in such Warrant [________] shares of Common Stock, which constitutes all [or a
portion] of the shares of Common Stock issued pursuant to the Purchase Rights
represented by this Warrant of PROTEA BIOSCIENCES GROUP, INC. All capitalized
terms used but not defined in this notice have the meanings assigned to such
terms in the Warrant.

 

(2) In exercising this Warrant, the undersigned hereby confirms and acknowledges
that (a) the undersigned has complied with all terms and conditions of the
Conversion Agreement as defined in the Warrant, including the requirement that
the issuance of the Shares Warrants in connection with the Conversion was
limited to “accredited” investors only, (b) the shares of the Common Stock to be
issued are being acquired solely for investment and solely for the account of
the undersigned, (c) the undersigned will not offer, sell or otherwise dispose
of any such shares of Common Stock except under circumstances that will not
result in a violation of the Securities Act of 1933, as amended, or any
applicable state securities laws, and (d) as required under the terms of the
Conversion Agreement, the certificate or certificates representing said shares
of Common Stock shall bear a restrictive legend prohibiting and restricting
transfer of such shares except in compliance with applicable federal and state
securities laws.

 

(3) Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below.

 

(4) Please issue a new Warrant for the unexercised portion of the attached
Warrant, if any, in the name of the undersigned or in such other name as is
specified below:

 

 

ATTEST: HOLDER:                        By:               Name:              
Title:    

 

(If certificates for Common Stock or new Warrants are requested in a name other
than the undersigned, be advised that the delivery of the certificates and/or
new Warrants will be delayed until the Company assures itself that such change
is permitted under Section 7 of the Warrant that such change does not violate
applicable federal and state securities laws.)

 

8

 

EXHIBIT 2

 

PERMITTED TRANSFER OR ASSIGNMENT FORM

 

NOTE: THIS ASSIGNMENT BEARS A RESTRICTIVE LEGEND BELOW

 

FOR VALUE RECEIVED, the undersigned Holder of record of this Warrant of PROTEA
BIOSCIENCES GROUP, INC. (the “Company”), which is dated ___________, hereby
sells, assigns and transfers unto the Assignee named below all of the rights,
including, without limitation, the Purchase Rights (as such term is defined in
this Warrant) of the undersigned under the within Warrant, with respect to the
number of shares of Common Stock set forth below:

 

Name of Transferee/Assignee Address No. of Shares

 

and does hereby irrevocably constitute and appoint the Secretary of PROTEA
BIOSCIENCES GROUP, INC. to make such transfer on the books of PROTEA BIOSCIENCES
GROUP, INC., maintained for the purpose, with full power of substitution in the
premises.

 

Attached hereto, if and to the extent requested by the Company, is an opinion of
counsel that the assignment does not violate or is exempt from, any federal and
state securities laws. As provided in the Warrant, including but not limited to
Section 7 of the Warrant, the Company may, in its sole discretion, decide
whether such opinion is satisfactory, and Assignee and Holder agree to any
reasonable delay in transfer caused by such evaluation and further acknowledge
and agree that they shall bear all reasonable and documented costs associated
with any transfer or assignment, including, without limitation, the reasonable
fees of counsel to the Company shall be borne by the transferor or assignor.

 

The undersigned also represents that, by assignment hereof, the Assignee
acknowledges that this Warrant and the shares of Common Stock to be issued upon
exercise hereof or conversion thereof are being acquired for investment and that
the Assignee will not offer, sell or otherwise dispose of this Warrant or any
shares of stock to be issued upon exercise hereof or conversion thereof except
under circumstances which will not result in a violation of the Securities Act
of 1933, as amended, or any state securities laws. Further, the Assignee has
acknowledged that upon exercise of this Warrant, the Assignee shall, if
requested by the Company, confirm in writing, in a form satisfactory to the
Company, that the shares of Common Stock so purchased are being acquired for
investment and not with a view toward distribution or resale in violation of
applicable securities laws.

 

Accordingly, the following restrictive legend is made applicable to this
assignment (and to this Warrant and securities covered by this Warrant as
assigned hereby to Assignee):

 

This Assignment and this Warrant and the securities underlying this Warrant as
assigned hereby, have not been registered under the Securities Act of 1933, as
amended (the “Securities Act”), and may not be offered, sold or otherwise
transferred, assigned, pledged or hypothecated in the absence of such
registration or an exemption therefrom under such Securities Act, any applicable
state securities laws and the rules and regulations thereunder.

 

[Signatures appear on following page.]

 

9

 

  

 

Dated:       HOLDER:                       By:           Name:           Title:
              Dated:     ASSIGNEE:                         By:           Name:  
        Title:  

 

 

 

10