Exhibit 10.3


 





THIS WARRANT AND THE COMMON STOCK ISSUABLE
HEREUNDER HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS WARRANT AND THE COMMON STOCK ISSUABLE HEREUNDER
MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS WARRANT
OR ANY SHARES ISSUABLE HEREUNDER UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY
TO PROTEA BIOSCIENCES GROUP, INC. THAT SUCH REGISTRATION IS NOT REQUIRED.


 


PROTEA BIOSCIENCES GROUP, INC.


 


WARRANT TO PURCHASE SHARES OF COMMON STOCK


 








1.                 
Issuance. For good and valuable consideration as set forth in the Purchase Agreement (as defined below), including without
limitation the Purchase Price (as defined in the Purchase Agreement), the receipt and sufficiency of which are hereby acknowledged
by Protea Biosciences Group, Inc., a Delaware corporation (“Company”);
St. George Investments LLC, a Utah limited liability
company, its successors and/or registered assigns (“Investor”), is hereby granted the right to purchase at any
time on or after the Issue Date (as defined below) until the date which is the last calendar day of the month in which the fifth
anniversary of the Issue Date occurs (the “Expiration Date”), a number of fully paid and non-assessable shares
(the “Warrant Shares”) of Company’s common stock, par value $0.0001 per share (the “Common Stock”),
equal to $327,500.00 divided by the Market Price (as of the Issue Date), as such number may be adjusted from time to time pursuant
to the terms and conditions of this Warrant to Purchase Shares of Common Stock (this “Warrant”).


 


This Warrant is being
issued pursuant to the terms of that certain Securities Purchase Agreement dated March 4, 2016, to which Company and Investor are
parties (as the same may be amended from time to time, the “Purchase Agreement”). Certain capitalized terms
used herein are defined in Attachment 1 attached hereto and incorporated herein by this reference. Moreover, to the extent
any defined terms herein are defined in any other Transaction Document (as so noted herein), such defined term shall remain applicable
in this Warrant even if the other Transaction Document has been released, satisfied, or is otherwise cancelled. This Warrant was
issued to Investor on March 4, 2016 (the “Issue Date”).




 





2.             Exercise of Warrant.


 


2.1.           
General.


 


(a)               
This Warrant is exercisable in whole or in part at any time and from time to time commencing on the Issue Date and ending
on the Expiration Date. Such exercise shall be effectuated by submitting to Company (either by delivery to Company or by email
or facsimile transmission) a completed and signed Notice of Exercise substantially in the form attached to this Warrant as Exhibit
A (the “Notice of Exercise”). The date a Notice of Exercise is either faxed, emailed or delivered to Company
shall be the “Exercise Date,” provided that, if such exercise represents the full exercise of the outstanding
balance of this Warrant, Investor shall tender this Warrant to Company within five (5) Trading Days thereafter, but only if the
Delivery Shares to be delivered pursuant to the Notice of Exercise have been delivered to Investor as of such date. The Notice
of Exercise shall be executed by Investor and shall indicate (i) the number of Delivery Shares to be issued pursuant to such exercise,
and (ii) if applicable (as provided below), whether the exercise is a cashless exercise.


 






     


     


    

 


(b)              
Notwithstanding any other provision contained herein or in any other Transaction Document to the contrary, at any time prior
to the Expiration Date, Investor may elect a “cashless” exercise of this Warrant for any Warrant Shares whereby Investor
shall be entitled to receive a number of shares of Common Stock equal to (i) the excess of the Current Market Value over the aggregate
Exercise Price of the Exercise Shares, divided by (ii) the Adjusted Price.


 


(c)               
If the Notice of Exercise form elects a “cash” exercise, the Exercise Price per share of Common Stock for the
Delivery Shares shall be payable, at the election of Investor, in cash or by certified or official bank check or by wire transfer
in accordance with instructions provided by Company at the request of Investor.


 


(d)              
Any Delivery Shares issued pursuant hereto that are not Rule 144 Eligible shall be “restricted securities” within
the meaning of Rule 144 under the Securities Act of 1933, as amended (“Rule 144”), and the certificate(s) representing
the Delivery Shares shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed
against transfer of such certificates or other instruments):


 


THE SECURITIES
REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”),
OR ANY STATE SECURITIES LAWS, AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE
TRANSFERRED UNLESS (1) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE
SECURITIES LAWS, OR (2) AN EXEMPTION FROM SUCH REGISTRATION EXISTS AND THE COMPANY RECEIVES AN OPINION OF COUNSEL TO THE HOLDER
OF SUCH SECURITIES, WHICH COUNSEL AND OPINION ARE SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED,
ASSIGNED OR TRANSFERRED IN THE MANNER CONTEMPLATED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR APPLICABLE
STATE SECURITIES LAWS. HEDGING TRANSACTIONS INVOLVING THESE SECURITIES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE SECURITIES
ACT.


 


(e)               
Upon the appropriate payment to Company, if any, of the Exercise Price for the Delivery Shares, Company shall, if such Delivery
Shares are Rule 144 Eligible promptly, but in no case later than the date that is three (3) Trading Days following the date the
Exercise Price is paid to Company (or with respect to a “cashless exercise,” the date that is three (3) Trading Days
following the Exercise Date) (the “Delivery Date”), deliver or cause Company’s Transfer Agent to deliver
the applicable Delivery Shares electronically via the DWAC system to the account designated by Investor on the Notice of Exercise.
If for any reason Company is not able to so deliver the Delivery Shares, if such Delivery Shares are Rule 144 Eligible, via the
DWAC system, notwithstanding its best efforts to do so, such shall constitute a breach of this Warrant, and Company shall instead,
on or before the applicable date set forth above in this subsection, issue and deliver to Investor or its broker (as designated
in the Notice of Exercise), via reputable overnight courier, a certificate, registered in the name of Investor or its designee,
representing the applicable number of Delivery Shares. For the avoidance of doubt, Company has not met its obligation to deliver
Delivery Shares within the required timeframe set forth above unless Investor or its broker, as applicable, has actually received
the Delivery Shares (whether electronically or in certificated form) no later than the close of business on the latest possible
delivery date pursuant to the terms set forth above. Moreover, and notwithstanding anything to the contrary herein or in any other
Transaction Document, in the event Company or its Transfer Agent refuses to deliver any Delivery Shares to Investor on grounds
that such Delivery Shares are not Rule 144 Eligible, Company shall deliver or cause its Transfer Agent to deliver the applicable
Delivery Shares to Investor with a restricted securities legend, but otherwise in accordance with the provisions of this Section
2.1(e). In conjunction therewith, Company will also deliver to Investor a written opinion from its counsel or its Transfer Agent’s
counsel opining as to why the issuance of the applicable Delivery Shares violates Rule 144.






    2


     


    

 


(f)               
If Delivery Shares are delivered later than as required under subsection (d) immediately above, Company agrees to pay, in
addition to all other remedies available to Investor in the Transaction Documents, a late charge equal to the greater of (i) $500.00
and (ii) 2% of the product of (1) the number of shares of Common Stock not issued to Investor on a timely basis and to which Investor
is entitled multiplied by (2) the Closing Trade Price of the Common Stock on the Trading Day immediately preceding the last
possible date which Company could have issued such shares of Common Stock to Investor without violating this Warrant, rounded to
the nearest multiple of $100.00 (such resulting amount, the “Warrant Share Value”) (but in any event the cumulative
amount of such late fees for each exercise shall not exceed 200% of the Warrant Share Value), per Trading Day until such Warrant
Shares are delivered (the “Late Fees”). Company acknowledges and agrees that the failure to timely deliver Delivery
Shares hereunder is a material breach of this Warrant and that the Late Fees are properly charged as liquidated damages to compensate
Investor for such breach. Company shall pay any Late Fees incurred under this subsection in immediately available funds upon demand;
provided, however, that, so long as the Note is outstanding, at the option of Investor, such amount owed may be added to
the principal amount of the Note. Furthermore, in the event that Company fails for any reason to effect delivery of the Delivery
Shares as required under subsection (d) immediately above, Investor may revoke all or part of the relevant Warrant exercise by
delivery of a notice to such effect to Company, whereupon Company and Investor shall each be restored to their respective positions
immediately prior to the exercise of the relevant portion of this Warrant, except that the Late Fees described above shall be payable
through the date notice of revocation or rescission is given to Company. Finally, in the event Company fails to deliver any Delivery
Shares to Investor for a period of ninety (90) days from the Delivery Date, Investor may elect, in its sole discretion, to stop
the accumulation of the Late Fees as of such date and require Company to pay to Investor a cash amount equal to (i) the total amount
of all Late Fees that have accumulated prior to the date of Investor’s election, plus (ii) the product of the number of Delivery
Shares deliverable to Investor on such date if it were to exercise this Warrant with respect to the remaining number of Exercise
Shares as of such date multiplied by the Closing Trade Price of the Common Stock on the Delivery Date (the “Cash Settlement
Amount”). At such time as Investor makes an election to require Company to pay to it the Cash Settlement Amount, such
obligation of Company shall be a valid and binding obligation of Company and shall for all purposes be deemed to be a debt obligation
of Company owed to Investor as of the date it makes such election. Upon Company’s payment of the Cash Settlement Amount to
Investor, this Warrant shall be deemed to have been satisfied. In addition, and for the avoidance of doubt, even if Company could
not deliver the number of Delivery Shares deliverable to Investor if it were to exercise this Warrant with respect to the remaining
number of Exercise Shares on the date of repayment due to the provisions of Section 2.2, the provisions of Section 2.2 will not
apply with respect to Company’s payment of the Cash Settlement Amount.


 


(g)               
Investor shall be deemed to be the holder of the Delivery Shares (not including any Ownership Limitation Shares (as defined
below)) issuable to it in accordance with the provisions of this Section 2.1 on the Exercise Date.


 






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2.2.          Ownership Limitation. Notwithstanding anything to the contrary contained in this Warrant or the other Transaction
Documents, if at any time Investor shall or would be issued shares of Common Stock, but such issuance would cause Investor (together
with its affiliates) to own a number of shares exceeding 4.99% of the number of shares of Common Stock outstanding on such date
(the “Maximum Percentage”), Company must not issue to Investor shares of Common Stock which would exceed the
Maximum Percentage. The shares of Common Stock issuable to Investor that would cause the Maximum Percentage to be exceeded are
referred to herein as the “Ownership Limitation Shares”. In such event, Company shall reserve
the Ownership Limitation Shares for the exclusive benefit of Investor. From time to time, Investor may notify Company in writing
of the number of the Ownership Limitation Shares that may be issued to Investor without causing Investor to exceed the Maximum
Percentage. Upon receipt of such notice, Company shall be unconditionally obligated to immediately issue such designated shares
to Investor, with a corresponding reduction in the number of the Ownership Limitation Shares. Notwithstanding the foregoing, the
term “4.99%” above shall be replaced with “9.99%” at such time as the Market Capitalization is less than
$10,000,000.00. Notwithstanding any other provision contained herein, if the term “4.99%” is replaced with “9.99%”
pursuant to the preceding sentence, such change to “9.99%” shall be permanent. By written notice to Company, Investor
may increase, decrease or waive the Maximum Percentage as to itself but any such waiver will not be effective until the 61st day
after delivery thereof. The foregoing 61-day notice requirement is enforceable, unconditional and non-waivable and shall apply
to all affiliates and assigns of Investor.


 


3.             Mutilation or Loss of Warrant. Upon receipt by Company of evidence satisfactory to it of the loss, theft, destruction
or mutilation of this Warrant, and (in the case of loss, theft or destruction) receipt of reasonably satisfactory indemnification,
and (in the case of mutilation) upon surrender and cancellation of this Warrant, Company will execute and deliver to Investor a
new Warrant of like tenor and date and any such lost, stolen, destroyed or mutilated Warrant shall thereupon become void.


 


4.             Rights of Investor. Investor shall not, by virtue of this Warrant alone, be entitled to any rights of a stockholder
in Company, either at law or in equity, and the rights of Investor with respect to or arising under this Warrant are limited to
those expressed in this Warrant and are not enforceable against Company except to the extent set forth herein.


 


5.             Protection Against Dilution and Other Adjustments.


 


5.1.           
Capital Adjustments. If Company shall at any time prior to the expiration of this Warrant subdivide the Common Stock,
by split-up or stock split, or otherwise, or combine its Common Stock, or issue additional shares of its Common Stock as a dividend,
the number of Warrant Shares issuable upon the exercise of this Warrant shall forthwith be automatically increased proportionately
in the case of a subdivision, split or stock dividend, or proportionately decreased in the case of a combination. Appropriate adjustments
shall also be made to the Exercise Price and other applicable amounts, but the aggregate purchase price payable for the total number
of Warrant Shares purchasable under this Warrant (as adjusted) shall remain the same. Any adjustment under this Section 5.1
shall become effective automatically at the close of business on the date the subdivision or combination becomes effective, or
as of the record date of such dividend, or in the event that no record date is fixed, upon the making of such dividend.


 



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5.2.           
Reclassification, Reorganization and Consolidation. In case of any reclassification, capital reorganization, or change
in the capital stock of Company (other than as a result of a subdivision, combination, or stock dividend provided for in Section 5.1
above), then Company shall make appropriate provision so that Investor shall have the right at any time prior to the expiration
of this Warrant to purchase, at a total price equal to that payable upon the exercise of this Warrant, the kind and amount of shares
of stock and other securities and property receivable in connection with such reclassification, reorganization, or change by a
holder of the same number of shares of Common Stock as were purchasable by Investor immediately prior to such reclassification,
reorganization, or change. In any such case appropriate provisions shall be made with respect to the rights and interest of Investor
so that the provisions hereof shall thereafter be applicable with respect to any shares of stock or other securities and property
deliverable upon exercise hereof, and appropriate adjustments shall be made to the purchase price per Warrant Share payable hereunder,
provided the aggregate purchase price shall remain the same.


 


5.3.           
Subsequent Equity Sales. If Company or any subsidiary thereof, as applicable, at any time and from time to time while
this Warrant is outstanding, shall sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose
of, sell or issue (or announce any offer, sale, grant or any option to purchase or other disposition of) any Common Stock (including
any Common Stock issued under the Note, whether upon any type of conversion or any Deemed Issuance), debt, warrants, options, preferred
shares or other instruments or securities which are convertible into or exercisable for shares of Common Stock (together herein
referred to as “Equity Securities”), at an effective price per share less than the Exercise Price (such lower
price, the “Base Share Price”, and any such issuance, a “Dilutive Issuance”) (if the holder
of the Common Stock or Equity Securities 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 less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such date of
the Dilutive Issuance), then (a) the Exercise Price shall be reduced and only reduced to equal the Base Share Price, and (b) the
number of Warrant Shares issuable upon the exercise of this Warrant shall be increased to an amount equal to the number of Warrant
Shares Investor could purchase hereunder for an aggregate Exercise Price, as reduced pursuant to subsection (a) above, equal to
the aggregate Exercise Price payable immediately prior to such reduction in Exercise Price, provided that the increase in the number
of Exercise Shares issuable under this Warrant made pursuant to this Section 5.3 shall not at any time exceed a number equal to
three (3) times the number of Exercise Shares issuable under this Warrant as of the Issue Date (for the avoidance of doubt, the
foregoing cap on the number of Exercise Shares issuable hereunder shall only apply to adjustments made pursuant to this Section
5.3 and shall not apply to adjustments made pursuant to Sections 5.1, 5.2 or any other section of this Warrant). Such adjustments
shall be made whenever such Common Stock or Equity Securities are issued. Company shall notify Investor, in writing, no later than
the Trading Day following the issuance of any Common Stock or Equity Securities subject to this Section 5.3, indicating therein
the applicable issuance price, or applicable reset price, exchange price, conversion price, or other pricing terms (such notice,
the “Dilutive Issuance Notice”). Dilutive Issuance Notices shall be in the form set forth in Section
6 below. For purposes of clarification, whether or not Company provides a Dilutive Issuance Notice pursuant to this Section 5.3,
upon the occurrence of any Dilutive Issuance, after the date of such Dilutive Issuance, Investor is entitled to receive the increased
number of Warrant Shares provided for in subsection (b) above at an Exercise Price equal to the Base Share Price regardless of
whether Investor accurately refers to the Base Share Price in the Notice of Exercise. Additionally, following the occurrence of
a Dilutive Issuance, all references in this Warrant to “Warrant Shares” shall be a reference to the Warrant Shares
as increased pursuant to subsection (b) above, and all references in this Warrant to “Exercise Price” shall be a reference
to the Exercise Price as reduced pursuant to subsection (a) above, as the same may occur from time to time hereunder.


 


5.4.           
Exceptions to Adjustment. Notwithstanding the provisions of Section 5.3, no adjustment to the Exercise Price shall
be effected as a result of an Excepted Issuance.


 






    5


     


    

 


6.             Certificate as to Adjustments. In each case of any adjustment or readjustment in the number or kind of shares issuable
on the exercise of this Warrant, or in the Exercise Price, pursuant to the terms hereof, Company at its expense will promptly cause
its Chief Financial Officer or other appropriate designee to compute such adjustment or readjustment in accordance with the terms
of this Warrant and prepare a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which
such adjustment or readjustment is based, including a statement of (a) the consideration received or receivable by Company for
any additional shares of Common Stock issued or sold or deemed to have been issued or sold, (b) the number of shares of Common
Stock outstanding or deemed to be outstanding, and (c) the Exercise Price and the number of shares of Common Stock to be received
upon exercise of this Warrant, in effect immediately prior to such adjustment or readjustment and as adjusted or readjusted as
provided in this Warrant. Nothing in this Section 6 shall be deemed to limit any other provision contained herein.


 


7.             Transfer to Comply with the Securities Act. This Warrant and the Warrant Shares have not been registered under the
Securities Act of 1933, as amended (the “1933 Act”). Neither this Warrant nor the Warrant Shares may be sold,
transferred, pledged or hypothecated without (a) an effective registration statement under the 1933 Act relating to such security
or (b) an opinion of counsel reasonably satisfactory to Company that registration is not required under the 1933 Act; provided,
however, that the foregoing restrictions on transfer shall not apply to the transfer of the Warrant to an affiliate of Investor.
Until such time as registration has occurred under the 1933 Act, each certificate for this Warrant and any Warrant Shares shall
contain a legend, in form and substance satisfactory to counsel for Company, setting forth the restrictions on transfer contained
in this Section 7; provided, however, that Company acknowledges and agrees that any such legend shall be removed from all
certificates for DTC Eligible Common Stock delivered hereunder as such Common Stock is cleared and converted into electronic shares
by the DTC, and nothing contained herein shall be interpreted to the contrary. Upon receipt of a duly executed assignment of this
Warrant, Company shall register the transferee thereon as the new holder on the books and records of Company and such transferee
shall be deemed a “registered holder” or “registered assign” for all purposes hereunder, and shall have
all the rights of Investor under this Warrant. Until this Warrant is transferred on the books of Company, Company may treat Investor
as the absolute owner hereof for all purposes, notwithstanding any notice to the contrary.


 


8.             Notices. Any notice required or permitted hereunder shall be given in the manner provided in the subsection titled
“Notices” in the Purchase Agreement, the terms of which are incorporated herein by reference.


 


9.             Supplements and Amendments; Whole Agreement. This Warrant may be amended or supplemented only by an instrument in
writing signed by the parties hereto. This Warrant, together with the Purchase Agreement, contains the full understanding of the
parties hereto with respect to the subject matter hereof and thereof and there are no representations, warranties, agreements or
understandings with respect to the subject matter hereof and thereof other than as expressly contained herein and therein.


 


10.           Purchase Agreement; Arbitration of Disputes; Calculation Disputes. This Warrant is subject to the terms, conditions
and general provisions of the Purchase Agreement, including without limitation the Arbitration Provisions (as defined in the Purchase
Agreement) set forth as an exhibit to the Purchase Agreement. In addition, notwithstanding the Arbitration Provisions, in the case
of a dispute as to any Calculation (as defined in the Purchase Agreement), such dispute will be resolved in the manner set forth
in the Purchase Agreement.


 



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11.           Governing
Law; Venue. This Warrant shall be construed and enforced in accordance with, and all questions concerning the construction,
validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of Utah, without
giving effect to any choice of law or conflict of law provision or rule (whether of the State of Utah or any other jurisdiction)
that would cause the application of the laws of any jurisdiction other than the State of Utah. The provisions set forth in the
Purchase Agreement to determine the proper venue for any disputes are incorporated herein by this reference.




 





12.           Waiver of Jury Trial. COMPANY IRREVOCABLY WAIVES ANY AND ALL RIGHTS IT MAY HAVE TO DEMAND THAT ANY ACTION, PROCEEDING
OR COUNTERCLAIM ARISING OUT OF OR IN ANY WAY RELATED TO THIS WARRANT OR THE RELATIONSHIPS OF THE PARTIES HERETO BE TRIED BY JURY.
THIS WAIVER EXTENDS TO ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY ARISING UNDER COMMON LAW OR ANY APPLICABLE STATUTE, LAW, RULE
OR REGULATION. FURTHER, COMPANY ACKNOWLEDGES THAT IT IS KNOWINGLY AND VOLUNTARILY WAIVING ITS RIGHT TO DEMAND TRIAL BY JURY.


 


13.           Remedies. The remedies at law of Investor under this Warrant in the event of any default or threatened default by
Company in the performance of or compliance with any of the terms of this Warrant are not and will not be adequate and, without
limiting any other remedies available to Investor in the Transaction Documents, at law or equity, to the fullest extent permitted
by law, such terms may be specifically enforced by a decree for the specific performance of any agreement contained herein or by
an injunction against a violation of any of the terms hereof or otherwise without the obligation to post a bond.


 


14.           Liquidated Damages. Company and Investor agree that in the event Company fails to comply with any of the terms or
provisions of this Warrant, Investor’s damages would be uncertain and difficult (if not impossible) to accurately estimate
because of the parties’ inability to predict future interest rates, future share prices, future trading volumes and other
relevant factors. Accordingly, Investor and Company agree that any fees or other charges assessed under this Warrant are not penalties
but instead are intended by the parties to be, and shall be deemed, liquidated damages (under Investor’s and Company’s
expectations that any such liquidated damages will tack back to the Issue Date for purposes of determining the holding period under
Rule 144.


 


15.           Counterparts. This Warrant may be executed in any number of counterparts and each of such counterparts shall for
all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument.
Signatures delivered via facsimile or email shall be considered original signatures for all purposes hereof.


 


16.           Attorneys’ Fees. In the event of any arbitration, litigation or dispute arising from this Warrant, the parties
agree that the party who is awarded the most money (which, for the avoidance of doubt, shall be determined without regard to any
statutory fines, penalties, fees, or other charges awarded to any party) shall be deemed the prevailing party for all purposes
and shall therefore be entitled to an additional award of the full amount of the attorneys’ fees and expenses paid by
said prevailing party in connection with arbitration or litigation without reduction or apportionment based upon the individual
claims or defenses giving rise to the fees and expenses. Nothing herein shall restrict or impair an arbitrator’s
or a court’s power to award fees and expenses for frivolous or bad faith pleading.


 






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17.           Severability. Whenever possible, each provision of this Warrant shall be interpreted in such a manner as to be effective
and valid under applicable law, but if any provision of this Warrant shall be invalid or unenforceable in any jurisdiction, such
provision shall be modified to achieve the objective of the parties to the fullest extent permitted and such invalidity or unenforceability
shall not affect the validity or enforceability of the remainder of this Warrant or the validity or enforceability of this Warrant
in any other jurisdiction.


 


18.           Time is of the Essence. Time is expressly made of the essence with respect to each and every provision of this Warrant.


 


19.           Descriptive Headings. Descriptive headings of the sections of this Warrant are inserted for convenience only and
shall not control or affect the meaning or construction of any of the provisions hereof.


 


[Remainder of page intentionally left
blank; signature page follows]


 


 


 






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IN WITNESS WHEREOF,
Company has caused this Warrant to be duly executed by an officer thereunto duly authorized as of the Issue Date.


 


 




 








	 	COMPANY:
	 	 
	 	PROTEA BIOSCIENCES GROUP, INC.
	 	 
	 	 
	 	By:	              




















	 	Printed Name:	 








	 	Title:	 
	 	 	 







 


 


 


 






    [Signature Page to Warrant]


     


    

 


ATTACHMENT 1


DEFINITIONS


 


For purposes of this
Warrant, the following terms shall have the following meanings:


 


A1.              
“Adjusted Price” means the lower of (i) the Exercise Price (as such Exercise Price may be adjusted from
time to time pursuant to the terms of this Warrant), and (ii) the Market Price.


 


A2.              
“Approved Stock Plan” means any stock option plan which has been approved by the board of directors of
Company and is in effect as of the Issue Date, pursuant to which Company’s securities may be issued to any employee, officer
or director for services provided to Company.


 


A3.              
“Bloomberg” means Bloomberg L.P. (or if that service is not then reporting the relevant information regarding
the Common Stock, a comparable reporting service of national reputation selected by Investor and reasonably satisfactory to Company).


 


A4.              
“Closing Bid Price” and “Closing Trade Price” means the last closing bid price and
last closing trade price, respectively, for the Common Stock on its principal market, as reported by Bloomberg, or, if its principal
market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price (as
the case may be) then the last bid price or last trade price, respectively, of the Common Stock prior to 4:00:00 p.m., New
York time, as reported by Bloomberg, or, if its principal market is not the principal securities exchange or trading market for
the Common Stock, the last closing bid price or last trade price, respectively, of the Common Stock on the principal securities
exchange or trading market where the Common Stock is listed or traded as reported by Bloomberg, or if the foregoing do not apply,
the last closing bid price or last trade price, respectively, of the Common Stock in the over-the-counter market on the electronic
bulletin board for the Common Stock as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is
reported for the Common Stock by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers
for the Common Stock as reported by OTC Markets Group, Inc., and any successor thereto. If the Closing Bid Price or the Closing
Trade Price cannot be calculated for the Common Stock on a particular date on any of the foregoing bases, the Closing Bid Price
or the Closing Trade Price (as the case may be) of the Common Stock on such date shall be the fair market value as mutually determined
by Investor and Company. If Investor and Company are unable to agree upon the fair market value of the Common Stock, then such
dispute shall be resolved in accordance with the procedures in the Purchase Agreement governing Calculations. All such determinations
shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during such
period.


 


A5.              
“Conversion Factor” means 70%, subject to the following adjustments.
If at any time after the Issue Date, Company is not DWAC Eligible, then the then-current Conversion Factor will automatically be
permanently reduced by 5%. If at any time after the Issue Date, the Delivery Shares are not DTC Eligible, then the then-current
Conversion Factor will automatically be permanently reduced by an additional 5%. For example, the first time Company is not DWAC
Eligible, the Conversion Factor for future exercises thereafter will be reduced from 70% to 65% for purposes of this example. If,
thereafter, the Delivery Shares are not DTC Eligible, the Conversion Factor for all future exercises will automatically be permanently
reduced from 65% to 60% for purposes of this example.


 


A6.              
“Current Market Value” means an amount equal to the Trade Price multiplied by the number of Exercise
Shares specified in the applicable Notice of Exercise.


 


A7.              
“Deemed Issuance” means an issuance of Common Stock that shall be deemed to have occurred on the latest
possible permitted date pursuant to the terms of this Warrant or the Note in the event Company fails to deliver shares of Common
Stock as and when required.


 


A8.              
“Delivery Shares” means those shares of Common Stock issuable and deliverable upon the exercise or partial
exercise, as the case may be, of this Warrant.


 


A9.              
“DTC” means the Depository Trust Company or any successor thereto.


 


A10.          
“DTC Eligible” means, with respect to the Common Stock, that such Common Stock is eligible to be deposited
in certificate form at the DTC, cleared and converted into electronic shares by the DTC and held in the name of the clearing firm
servicing Investor’s brokerage firm for the benefit of Investor.


 






    [Attachment 1 to Warrant, Page 1]


     


    

 


A11.          
“DTC/FAST Program” means the DTC’s Fast Automated Securities Transfer program.


 


A12.          
“DWAC” means the DTC’s Deposit/Withdrawal at Custodian system.


 


A13.          
“DWAC Eligible” means that (a) Company’s Common Stock is eligible at DTC for full services pursuant
to DTC’s operational arrangements, including without limitation transfer through DTC’s DWAC system, (b) Company has
been approved (without revocation) by the DTC’s underwriting department, (c) Company’s transfer agent is approved as
an agent in the DTC/FAST Program, (d) the Delivery Shares that are Rule 144 Eligible are otherwise eligible for delivery via DWAC;
(e) Company has previously delivered all Delivery Shares that were Rule 144 Eligible to Investor via DWAC; and (f) Company’s
transfer agent does not have a policy prohibiting or limiting delivery of the Delivery Shares that are Rule 144 Eligible via DWAC.


 


A14.          
“Excepted Issuances” means any shares of Common Stock, options, or convertible securities issued or issuable
in connection with any Approved Stock Plan; provided that the option term, exercise price or similar provisions of any issuance
pursuant to such Approved Stock Plan are not amended, modified or changed on or after the Issue Date.


 


A15.          
“Exercise Price” means $0.75 per share of Common Stock, as the same may be adjusted from time to time
pursuant to the terms and conditions of this Warrant.


 


A16.          
“Exercise Shares” means those Warrant Shares subject to an exercise of this Warrant by Investor. By way
of illustration only and without limiting the foregoing, if (i) this Warrant is initially exercisable for 4,180,000 Warrant Shares
and Investor has not previously exercised this Warrant, and (ii) Investor were to make a cashless exercise with respect to 5,000
Warrant Shares pursuant to which 6,000 Delivery Shares would be issuable to Investor, then (1) this Warrant shall be deemed to
have been exercised with respect to 5,000 Exercise Shares, (2) this Warrant would remain exercisable for 4,175,000 Warrant Shares,
and (3) this Warrant shall be deemed to have been exercised with respect to 6,000 Delivery Shares.


 


A17.          
“Market Capitalization” means the product equal to (a) the average VWAP
of the Common Stock for the immediately preceding fifteen (15) Trading Days, multiplied by (b) the aggregate number of outstanding
shares of Common Stock as reported on Company’s most recently filed Form 10-Q or Form 10-K.


 


A18.          
“Market Price” means the Conversion Factor multiplied by the lowest Closing Bid Price in the twenty (20)
Trading Days immediately preceding the applicable date of exercise. By way of example only, if
the Conversion Factor were 75% and the average of the three lowest Closing Bid Prices in the twenty (20) Trading Days immediately
preceding the applicable date of exercise were $1.00 then the Market Price would be $0.75 (75% x $1.00).


 


A19.          
“Note” means that certain Convertible Promissory Note issued by Company to Investor pursuant to the Purchase
Agreement, as the same may be amended from time to time, and including any promissory note(s) that replace or are exchanged for
such referenced promissory note.


 


A20.          
“Rule 144 Eligible” means Delivery Shares that are eligible for immediate resale without restriction
pursuant to the registration exemption afforded by Rule 144.


 


A21.          
“Trade Price” means the higher of: (i) the Closing Trade Price of the Common Stock on the Issue Date;
and (ii) the VWAP of the Common Stock for the Trading Day that is two (2) Trading Days prior to the Exercise Date.


 


A22.          
“Trading Day” means any day the New York Stock Exchange is open for trading.


 


A23.          
“Transaction Documents” means the Purchase Agreement, the Note, this Warrant, and all other documents,
certificates, instruments and agreements entered into or delivered in conjunction therewith, as the same may be amended from time
to time.


 


A24.          
“VWAP” means the volume-weighted average price of the Common Stock on the principal market for a particular
Trading Day or set of Trading Days, as the case may be, as reported by Bloomberg.


 



    [Attachment 1 to Warrant, Page 2]


     


    




 


EXHIBIT A


 


NOTICE OF EXERCISE OF WARRANT


 


		TO:	PROTEA BIOSCIENCES GROUP, INC.



ATTN: _______________


VIA FAX TO: ( )______________
EMAIL: ______________


 








The undersigned hereby
irrevocably elects to exercise the right, represented by the Warrant to Purchase Shares of Common Stock dated as of March 4, 2016
(the “Warrant”), to purchase shares of the common stock, $0.0001 par value (“Common Stock”),
of Protea Biosciences Group, Inc., and tenders herewith payment in accordance with Section 2 of the Warrant, as follows:




 





		_______	CASH: $__________________________ = (Exercise Price x
Delivery Shares)



 


		_______	Payment is being made by:



		_____	enclosed check



		_____	wire transfer



		_____	other



 


		_______	CASHLESS EXERCISE:



 


Net
number of Delivery Shares to be issued to Investor: ______*


 


*
based on:Current Market Value - (Exercise Price x Exercise Shares)


Adjusted Price


 





		Where:	 	 
	 	Trade Price [“TP”]	=	$____________
	 	Exercise Shares	=	_____________
	 	Current Market Value [TP x Exercise Shares]	=	$____________
	 	Exercise Price	=	$____________
	 	Adjusted Price	=	$____________







 





Capitalized terms
used but not otherwise defined herein shall have the meanings ascribed to them in the Warrant.


 


It is the intention
of Investor to comply with the provisions of Section 2.2 of the Warrant regarding certain limits on Investor’s right to receive
shares thereunder. Investor believes this exercise complies with the provisions of such Section 2.2. Nonetheless, to the extent
that, pursuant to the exercise effected hereby, Investor would receive more shares of Common Stock than permitted under Section
2.2, Company shall not be obligated and shall not issue to Investor such excess shares until such time, if ever, that Investor
could receive such excess shares without violating, and in full compliance with, Section 2.2 of the Warrant.


 


As contemplated by
the Warrant, this Notice of Exercise is being sent by email or by facsimile to the fax number and officer indicated above.


 


If this Notice of
Exercise represents the full exercise of the outstanding balance of the Warrant, Investor will surrender (or cause to be surrendered)
the Warrant to Company at the address indicated above by express courier within five (5) Trading Days after the Warrant Shares
to be delivered pursuant to this Notice of Exercise have been delivered to Investor.


 






    Exhibit
A to Warrant, Page 1


     


    

 


To the extent the
Delivery Shares are not able to be delivered to Investor via the DWAC system, please deliver certificates representing the Delivery
Shares to Investor via reputable overnight courier after receipt of this Notice of Exercise (by facsimile transmission or otherwise)
to:


 


_____________________________________


_____________________________________


_____________________________________


 


 


 


Dated:_____________________


 


___________________________


[Name of Investor]


 


By:________________________


 








    Exhibit A to Warrant, Page 2