THE SECURITIES REPRESENTED
HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE SECURITIES LAWS, AND MAY
NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT THERETO
UNDER SUCH ACT AND APPLICABLE LAWS OR AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND APPLICABLE LAWS OR AN OPINION
OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.


 


PROTEA BIOSCIENCES GROUP, INC.


 


CONVERTIBLE PROMISSORY NOTE


 


	$PRINCIPAL AMOUNT	 	Issue Date: April 16, 2012


 


 


Protea Biosciences
Group, Inc., a Delaware corporation (the “Company”), the principal office of which is located at 955 Hartman Run Road,
Morgantown, WV 26507 for value received hereby promises to pay to ___________________________, or its registered assigns (“Holder”),
the sum of [___________________________], or such other amount as shall then equal the outstanding principal amount hereof and
all accrued unpaid interest, as set forth below, on the earlier to occur of (i) the date that is 90 days from the Issue Date (“Maturity
Date”), or (ii) when declared due and payable by the Holder upon the occurrence of an Event of Default (as defined below).
Payment for all amounts due hereunder shall be made by wire transfer of immediately available funds, in lawful tender of the United
States, to an account designated in writing by the Holder.


 


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


 


1.                 
Definitions. As used in this Note, the following terms, unless the context otherwise requires, have the following
meanings:


 


(i)              
“Company” includes any corporation that, to the extent permitted by this Note, shall succeed to or assume the
obligations of the Company under this Note.


 


(ii)            
“Holder,” when the context refers to a holder of this Note, shall mean any person who shall at the time be the
registered holder of this Note.


 


2.                 
Interest. Simple Interest on the unpaid principal balance of this Note shall accrue from the date hereof at
the rate of ten percent (10%) per annum. All accrued unpaid interest shall be due and payable to the Holder on the Maturity Date.


 






    	 



    	 	



    
 


3.                 
Events of Default. If any of the events specified in this Section 3 shall occur (herein individually referred
to as an “Event of Default”), the Holder of the Note may, so long as such condition exists, declare the entire principal
and unpaid accrued interest hereon immediately due and payable, by notice in writing to the Company:


 


(i)              
Any failure to pay the principal balance of or accrued interest on this Note when due hereunder.


 


(ii)            
The institution by the Company of proceedings to be adjudicated as bankrupt or insolvent, or the consent by it to institution
of bankruptcy or insolvency proceedings against it or the filing by it of a petition or answer or consent seeking reorganization
or release under the federal Bankruptcy Act, or any other applicable federal or state law, or the consent by it to the filing of
any such petition or the appointment of a receiver, liquidator, assignee, trustee or other similar official of the Company, or
of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the taking of corporate
action by the Company in furtherance of any such action; or


 


(iii)          
If, within sixty (60) days after the commencement of an action against the Company seeking any bankruptcy, insolvency, reorganization,
liquidation, dissolution or similar relief under any present or future statute, law or regulation, such action shall not have been
resolved in favor of the Company or all orders or proceedings thereunder affecting the operations or the business of the Company
stayed, or if the stay of any such order or proceeding shall thereafter be set aside, or if, within sixty (60) days after the appointment
without the consent or acquiescence of the Company of any trustee, receiver or liquidator of the Company or of all or any substantial
part of the properties of the Company, such appointment shall not have been vacated; or


 


4.                 
Prepayment. This Note may be prepaid at any time without penalty or premium with the express written
consent of the Holder.


 


5.                 
Conversion.


 


5.1             
Voluntary Conversion. The Holder of this Note has the right, at the Holder’s option, at any time prior to payment
in full of the principal balance and all accrued interest of this Note, to convert this Note, in accordance with the provisions
of Section 5.2 hereof, in whole or in part, into fully paid and nonassessable shares of common stock, par value $0.0001 per share
of the Company (“Common Stock”). The number of shares of Common Stock into which this Note may be converted (“Conversion
Shares”) pursuant to this Section 5.1 shall be equal to one (1) share of Common Stock for each $2.00 of outstanding
principal and accrued unpaid interest due under the Note on the date of conversion (the “Conversion Rate”).


 


5.2             
Notice of Conversion. Before the Holder shall be entitled to convert this Note into shares of Common Stock pursuant
to Section 5.1, it shall surrender this Note at the office of the Company and shall give written notice by mail, postage prepaid,
to the Company at its principal corporate office, of the election to convert the same pursuant to Section 5.1, and shall state
therein the name or names in which the certificate or certificates for shares of Common Stock are to be issued. The Company shall,
as soon as practicable thereafter, issue and deliver at such office to the Holder of this Note a certificate or certificates for
the number of shares of Common Stock to which the Holder of this Note shall be entitled as aforesaid. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date of such surrender of this Note, and the person
or persons entitled to receive the shares of Common Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock as of such date.


 






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5.3             
Mechanics and Effect of Conversion. No fractional shares of Common Stock shall be issued upon conversion of this
Note. In lieu of the Company issuing any fractional shares to the Holder, upon the conversion of this Note, the number of shares
issued upon the conversion of this Note shall be rounded up to the nearest whole share. At its expense, the Company shall, as soon
as practicable after conversion, issue and deliver to the Holder at its principal office a certificate or certificates for the
number of shares of Common Stock to which the Holder shall be entitled upon such conversion, together with any other securities
and property to which the Holder is entitled upon such conversion under the terms of this Note.


 


6.                 
Conversion Rate Adjustments.


 


6.1             
Adjustments for Stock Splits and Subdivisions. In the event the Company should at any time or from time to time after
the date of issuance hereof fix a record date for the effectuation of a split or subdivision of the outstanding shares of Common
Stock or the determination of holders of Common Stock entitled to receive a dividend or other distribution payable in additional
shares of Common Stock or other securities or rights convertible into, or entitling the holder thereof to receive directly or indirectly,
additional shares of Common Stock (hereinafter referred to as “Common Stock Equivalents”) without payment of any consideration
by such holder for the additional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common
Stock issuable upon conversion or exercise thereof), then, as of such record date (or the date of such dividend distribution, split
or subdivision if no record date is fixed), the Conversion Rate of this Note shall be appropriately decreased so that the number
of shares of Common Stock issuable upon conversion of this Note shall be increased in proportion to such increase of outstanding
shares, unless such adjustment has already been made to the Conversion Rate.


 


6.2             
Adjustments for Reverse Stock Splits. If the number of shares of Common Stock outstanding at any time after the date
hereof is decreased by a combination of the outstanding shares of Common Stock, then, following the record date of such combination,
the Conversion Rate for this Note shall be appropriately increased so that the number of shares of Common Stock issuable on conversion
hereof shall be decreased in proportion to such decrease in outstanding shares, unless such adjustment has already been made to
the Conversion Rate.


 


6.3             
Reservation of Stock Issuable Upon Conversion. The Company shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock solely for the purpose of effecting the conversion of this Note such number of its
shares of Common Stock as shall from time to time be sufficient to effect the conversion of the Note; and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to effect the conversion of the entire outstanding principal
amount and accrued interest of this Note, in addition to such other remedies as shall be available to the holder of this Note,
the Company will use its best efforts to take such corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes.


 






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7.                 
Assignment. Subject to the restrictions on transfer described in Section 9 below, the rights and obligations
of the Company and the Holder of this Note shall be binding upon and benefit the successors and assigns of the parties.


 


8.                 
Waiver and Amendment. Any provision of this Note may be amended, waived or modified upon the written consent
of the Company and the Holder.


 


9.                 
Transfer of This Note or Securities Issuable on Conversion Hereof. With respect to any offer, sale or other
disposition of this Note or securities into which such Note may be converted, the Holder will give written notice to the Company
prior thereto, describing briefly the manner thereof, together with a written opinion of such Holder’s counsel, to the effect
that such offer, sale or other distribution may be effected without registration or qualification (under any federal or state law
then in effect). Promptly upon receiving such written notice and opinion, if so requested, the Company, as promptly as practicable,
shall notify such Holder that such Holder may sell or otherwise dispose of this Note or such securities, all in accordance with
the terms of the notice delivered to the Company. Each Note thus transferred and each certificate representing the securities thus
transferred shall bear a legend as to the applicable restrictions on transferability in order to ensure compliance with the Act,
unless in the opinion of counsel for the Company such legend is not required. The Company may issue stop transfer instructions
to its transfer agent in connection with such restrictions.


 


10.             
Notices. Any notice, request or other communication required or permitted hereunder shall be in writing and
shall be deemed to have been duly given if personally delivered or if faxed with confirmation of receipt by telephone or if mailed
by registered or certified mail, postage prepaid, at the respective addresses of the parties set forth below. Any party hereto
may by notice so given change its address for future notice hereunder. Notice shall conclusively be deemed to have been given when
personally delivered, faxed, or when deposited in the mail in the manner set forth above and shall be deemed to have been received
when delivered.


 








	 	Holder:	_______________________
	 	 	_______________________
	 	 	_______________________
	 	 	_______________________
	 	 	 
	 	Borrower:	Protea Biosciences Group, Inc.
	 	 	955 Hartman Run Road
	 	 	Morgantown, WV 26507
	 	 	Attn: Stephen Turner
	 	 	Fax: 304-292-7101










 


 






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


 





	 	 	Richardson & Patel LLP
	 	 	750 Third Avenue, 9th Floor
	 	 	New York, NY 10017
	 	 	Attn: David N. Feldman
	 	 	Fax: 917-677-8165










 


11.             
No Stockholder Rights. Nothing contained in this Note shall be construed as conferring upon the Holder or
any other person the right to vote or to consent or to receive notice as a stockholder in respect of meetings of stockholders for
the election of directors of the Company or any other matters or any rights whatsoever as a stockholder of the Company; and no
dividends or interest shall be payable or accrued in respect of this Note or the interest represented hereby or the Conversion
Shares obtainable hereunder until, and only to the extent that, this Note shall have been converted pursuant to Section 5.1.


 


12.             
Usury. This Note is hereby expressly limited so that in no event whatsoever, whether by reason of acceleration
of maturity of the loan evidenced hereby or otherwise, shall the amount paid or agreed to be paid to the Holder hereunder for the
loan, use, forbearance or detention of money exceed that permissible under applicable law. If at any time the performance of any
provision of this Note or of any other agreement or instrument entered into in connection with this Note involves a payment exceeding
the limit of the interest that may be validly charged for the loan, use, forbearance or detention of money under applicable law,
then automatically and retroactively, ipso facto, the obligation to be performed shall be reduced to such limit, it being the specific
intent of the Company and the Holder that all payments under this Note are to be credited first to interest as permitted by law,
but not in excess of (i) the agreed rate of interest set forth herein or therein or (ii) that permitted by law, whichever
is the lesser, and the balance toward the reduction of principal. The provisions of this Section 12 shall never be superseded or
waived and shall control every other provision of this Note and all other agreements and instruments between the Company and the
Holder entered into in connection with this Note.


 


13.             
Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State
of Delaware, excluding that body of law relating to conflict of laws.


 


14.             
Heading; References. All headings used herein are used for convenience only and shall not be used to construe
or interpret this Note. Except where otherwise indicated, all references herein to Sections refer to Sections hereof.


 


15.             
Waiver. The Company hereby waives demand, notice, presentment, protest and notice of dishonor.


 


 


[Signature Page to
Convertible Promissory Note Follows]


 






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IN WITNESS WHEREOF, the Company has caused
this Note to be issued this 16th day of April, 2012.


 


 


 


PROTEA BIOSCIENCES GROUP, INC.


a Delaware corporation


 


 


By: /s/ Stephen Turner                       


Name: Stephen Turner


Title: Chief Executive Officer


 


 


 


 


Name of Holder:__________________


 


Address:_______________________


 


                _______________________


 


 


 



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NOTICE OF CONVERSION


 


(To Be Signed Only Upon Conversion of Note)


 


TO PROTEA BIOSCIENCES GROUP, INC.


 


The undersigned, the holder of the foregoing
Note, hereby surrenders such Note for conversion into shares of Common Stock of PROTEA BIOSCIENCES GROUP, INC. to the extent of
$__________________ unpaid principal amount and accrued interest of such Note, and requests that the certificates for such shares
be issued in the name of, and delivered to ____________________, whose address is _________________________________.


 


Dated: _____________________


 


 


_______________________________________

(Signature must conform in all respects to 

name of
holder as specified on the face of the Note)


 


_______________________________________


(Address)


 



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