Document:

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: _____ __, 2012

  

FOR VALUE RECEIVED,
PROTEA BIOSCIENCES GROUP, INC., a Delaware corporation (the “Company”), grants the following rights to ________________,
and [his] [her] [its] permitted assigns, heirs, executors and administrators (individually and collectively, the “Holder”),
as of the ___ day of ______, 2012 (the “Issue Date”). This warrant (the “Warrant”) has been issued by the
Company in connection with a sale of [ ] shares of the Company's common stock, par value $0.0001 per share (the “Common Stock”)
(the "Shares"), at a purchase price of $0.50 per share, pursuant to the terms and conditions set forth in that certain
Securities Purchase Agreement by and between the Company and the Holder dated as of the Issue Date (the “SPA”).

 

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.

 

2.1Subject to the
other provisions of this Section 2, this Warrant entitles the Holder to purchase from time to time up to ______________1
shares of the Company’s Common Stock (the “Warrant Shares”).

 

2.2In 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 12 hereof.

 

 

_______________________

1
The number of Warrant Shares shall equal 75% of the number of Shares purchased by Holder at the applicable closing, pursuant
to the terms and conditions set forth in the SPA.

 

    	 

    	 	

    
  

2.3In 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 12 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:

 

(v) 
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;

 

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

 

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

 

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

 

(z)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.

 

    	 

    	 	

    
  

(b) At any time after
the Issue Date through the expiration of the Purchase Rights set forth in this Warrant by exercise or the terms of this Warrant,
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(b) shall not operate to increase the Exercise Price.

 

Section 3.Exercise Period;
Registration Statement Notice.

 

3.1The 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.

 

3.2The 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.

 

4.1The 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.

 

    	 

    	 	

    
  

4.2In lieu of the payment methods
set forth in Section 4.1 above, in the event the Warrant Shares have not been registered under an effective registration
statement filed pursuant to the Securities Act prior to the earlier of: (i) one (1) year from the Issue Date of this Warrant; or
(ii) the closing of the Qualified Public Offering, the Holder may elect to exchange all or some of this Warrant for shares of Common
Stock equal to the value of the amount of the Warrant being exchanged on the date of exchange.  If Holder elects to exchange
this Warrant as provided in this Section 4.2, Holder shall tender to the Company the Warrant for the amount being exchanged,
along with written notice of Holder’s election to exchange some or all of the Warrant, and the Company shall issue to Holder
the number of shares of the Common Stock computed using the following formula:

 

 

	X =	Y (A-B)
	 	A

 

	Where:	X =	the number of shares of Common Stock to be issued to Holder.
	 	Y =	the number of shares of Common Stock purchasable under the amount of the Warrant being exchanged (as adjusted to the date of such calculation).
	 	A =	the Fair Market Value of one share of the Common Stock on the date that the notice of exercise is received by the Company.
	 	B =	Exercise Price (as adjusted to the date of such calculation).

 

“Fair Market Value” of one
share of Common Stock as of a particular date shall mean: (i) if traded on a national securities exchange, the average volume weighted
average price reported by Bloomberg LP (“VWAP”) of the Common Stock of the Company on such exchange over the five (5)
trading days ending immediately prior to the applicable date of valuation; (ii) if quoted on the OTC Bulletin Board or an over
the counter market operated by OTC Markets Group, Inc or its successor, the average VWAP over the thirty (30) trading days ending
immediately prior to the applicable date of valuation; (iii) if determined in connection with a Qualified Public Offering, the
offering price of the Common Stock in the Qualified Public Offering; and (iv) except as set forth in (iii), if neither (i) nor
(ii) applies, the Fair Market Value shall be the value thereof, as agreed upon by the Company and the Holder; provided, however,
that if the Company and the Holder cannot agree on such value, such value shall be determined by an independent valuation firm
experienced in valuing businesses such as the Company and jointly selected in good faith by the Company and the Holder. Fees and
expenses of the valuation firm shall be paid for by the Company.

 

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.

 

    	 

    	 	

    
  

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.Registration
Rights.

 

The Warrant Shares are
subject to the registration rights set forth in Section 8 of the SPA.

 

    	 

    	 	

    
 

Section 12.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.

 

(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

750 Third Avenue, 9th
Floor

New York, New York
10017

Attn: David Feldman,
Esq.

Fax: (917) 677-8165

 

and to the Holder at the address of such
Holder set forth in the SPA executed by the original holder of this Warrant in connection with the purchase of the Shares. 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.

 

    	 

    	 	

    
  

Section 13.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.]

 

    	 

    	 

    
   

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

 

    	 

    	 	

    

 

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] [on a “cashless”
basis as permitted by Section 4.2 of 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 SPA
as defined in the Warrant, including the requirement that the offer and sale of the Shares 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 SPA, 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.)

 

    	 

    	 	

    
 

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.]

 

    	 

    	 	

    
 

	Dated:	 	 	HOLDER:	 
	 	 	 		 
	 	 	 	By:	 
	 	 	 	Name:	 
	 	 	 	Title:	 
	 	 	 	 	 
	Dated:	 	 	ASSIGNEE:	 
	 	 	 	 	 
	 	 	 	By:	 
	 	 	 	Name:	 
	 	 	 	Title:Securities
Purchase Agreement

 

This
Securities Purchase Agreement (the “Agreement”) is made as of November 20, 2012 (the “Effective
Date”) by and among Protea Biosciences Group, Inc., a Delaware corporation
(the “Company”), and the undersigned purchaser (the “Purchaser”).

 

Recitals

 

WHEREAS, the
Purchaser desires to purchase and the Company desires to sell the Shares and the Warrants (each as defined below) on the terms
and conditions described herein.

 

Agreement

 

Now,
Therefore, in consideration of the foregoing, and the representations, warranties, covenants and conditions set forth
below, the Company and each Purchaser, intending to be legally bound, hereby severally and not jointly agree as follows:

 

1.             Purchase of Shares. Subject to the terms of this Agreement,
at the Closing (as defined below) the Company agrees to issue and sell to the Purchaser, and the Purchaser agrees, to purchase
from the Company, up to a maximum of 6,000,000 shares (the “Maximum Purchase”) of the Company's common
stock, par value $0.0001 per share (the “Common Stock”) (the "Shares"), at a
purchase price of $0.50 per share (the “Purchase Price”), for an aggregate purchase price of up to $3,000,000.

 

2.             Warrants.
In addition to the Shares, the Purchaser shall also receive a warrant (each a “Warrant”
and collectively, the "Warrants"), exercisable for a term of five years from the issue date of the Warrant,
substantially in the form attached hereto as Exhibit A, to purchase the number of shares of Common Stock (the “Warrant
Shares”) equal to 75% of the number Shares purchased by the Purchaser pursuant to Section 1 hereof, up to an aggregate
of 4,500,000 shares of Common Stock, at an exercise price of $1.10 per share (the “Exercise Price”).
The Shares, the Warrant(s) and the Warrant Shares may hereinafter, collectively, be referred to as the “Securities”.

 

3.             Use
of Proceeds. The Company shall use the proceeds from the sale of the Shares and Warrant(s) for general corporate purposes.

 

4.
            The Closing(s)

 

4.1             
Closing Date. The initial closing of the sale and purchase of the Shares and Warrant (the “Initial
Closing”) shall be held on the Effective Date.

 

4.2             
Subsequent Closing(s). The Purchaser may, at his discretion, purchase additional Shares and Warrants up to the
Maximum Purchase (the “Option”), from the Effective Date through December 31, 2012 (each a “Subsequent
Closing” and together with the Initial Closing and each other Subsequent Closing, each, a “Closing”),
pursuant to Section 4.3(b) below.

 

4.3             
Delivery.

 

(a)              
Initial Closing. At the Initial Closing, (i) the Purchaser will deliver to the Company a check or wire transfer
funds in the amount of $300,000; and (ii) the Company will issue and deliver to the Purchaser (a) a certificate representing
600,000 Shares, and (b) a corresponding Warrant to purchase 450,000 Shares.

 

    	 

    	 	

    
  

(b)              
Subsequent Closing(s). The Purchaser may effect a Subsequent Closing with respect to all or any part of the number
of Shares and Warrants remaining under the Option by delivering a written Notice of Election substantially in the form attached
hereto as Exhibit B (the “Notice of Election”), to the Company at 955 Hartman Run Road, #210,
Morgantown, WV 26507, Attn: Chief Financial Officer, or any other location specified in any subsequent notice from the Company
to the Purchaser. Such notice shall specify the number of Shares and corresponding Warrants as to which the Option is to be exercised.
A Subsequent Closing will be deemed to have taken place upon the Company’s receipt of a Notice of Election along with the
Purchaser’s check or wire transfer funds in the amount equal to the number of Shares purchased pursuant to such Notice of
Election multiplied by $0.50. At such Subsequent Closing, the Company will issue and deliver to each Purchaser (a) a certificate
representing the Shares purchased thereunder and (b) a corresponding Warrant.

 

5.                 
Representations and Warranties of the Company. Except as
set forth in any periodic reports or current reports filed by the Company with the United States Securities and Exchange Commission
(the “Commission”), the Company hereby represents and warrants to the Purchaser at each Closing, as of
the date of such Closing, as follows:

 

5.1             
Organization and Authority. The Company and each of its respective subsidiaries, (i) is a corporation or company,
as applicable, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation, as applicable,
(ii) has all requisite corporate power or company power, as applicable, and authority to own, lease and operate its properties
and to carry on its business as presently conducted, and (iii) has all requisite corporate power or company power, as applicable,
and authority to execute, deliver and perform their obligations under this Agreement and the Warrant(s) (collectively, the “Offering
Documents”), and to consummate the transactions contemplated thereby.

 

5.2             
Qualifications. Each of the Company and its subsidiaries, is duly qualified to do business as a foreign corporation
or foreign company, as applicable, and is in good standing in all jurisdictions where such qualification is necessary and where
failure so to qualify could reasonably be expected to have a material adverse effect on the business, properties, operations, condition
(financial or other), results of operations or prospects of the Company and its subsidiaries, taken as a whole.

 

5.3             
Capitalization of the Company. The authorized capital stock of the Company consists of 100,000,000 shares of
Common Stock, and 10,000,000 shares of "blank check" preferred stock, par value $0.0001 per share. The Securities to
be issued to the Purchaser have been duly authorized, and when issued and paid for in accordance with this Agreement, the Common
Stock will be duly and validly issued, fully paid and non-assessable. The Warrant Shares, when issued and paid for in accordance
with the Warrant(s), will be duly and validly issued, fully paid and non-assessable.

 

5.4             
Authorization. The Offering Documents have been duly and validly authorized by the Company. This Agreement, assuming
due execution and delivery by the Purchaser, when the Agreement is executed and delivered by the Company, will be, a valid and
binding obligation of the Company, enforceable in accordance with its terms, except as the enforceability hereof may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar laws now or hereafter in effect relating to or affecting
creditors' rights generally and general principles of equity, regardless of whether enforcement is considered in a proceeding in
equity or at law.

 

    	2

    	 

    
  

5.5             
Non-Contravention. The execution and delivery of the Offering Documents by the Company, the issuance of the Securities
as contemplated by the Offering Documents and the completion by the Company of the other transactions contemplated by the Offering
Documents do not and will not, with or without the giving of notice or the lapse of time, or both, (i) result in any violation
of any provision of the certificate of incorporation or by-laws or similar instruments of the Company or its subsidiaries, (ii)
conflict with or result in a breach by the Company or its subsidiaries of any of the terms or provisions of, or constitute a default
under, or result in the modification of, or result in the creation or imposition of any lien, security interest, charge or encumbrance
upon any of the properties or assets of the Company or its subsidiaries, pursuant to any agreements, instruments or documents filed
as exhibits to the Company’s reports filed with the Commission pursuant to the Securities Exchange Act of 1934, as amended,
or any indenture, mortgage, deed of trust or other agreement or instrument to which any of the Company or any of its subsidiaries
is a party or by which the Company or any of its subsidiaries or any of their properties or assets are bound or affected, in any
such case which could reasonably be expected to have a material adverse effect on the business, properties, operations, condition
(financial or other), results of operations or prospects of the Company its subsidiaries, taken as a whole, or the validity or
enforceability of, or the ability of the Company to perform its obligations under the Offering Documents, (iii) violate or contravene
any applicable law, rule or regulation or any applicable decree, judgment or order of any court, United States federal or state
regulatory body, administrative agency or other governmental body having jurisdiction over the Company or any of its subsidiaries
or any of their respective properties or assets that could reasonably be expected to have a material adverse effect on the business,
properties, operations, condition (financial or other), results of operations or prospects of the Company and its subsidiaries,
taken as a whole, or the validity or enforceability of, or the ability of the Company to perform its obligations under the Offering
Documents, or (iv) cause the loss of, or violate, any permit, certification, registration, approval, consent, license or franchise
necessary for the Company or its subsidiaries to own or lease and operate any of its properties and to conduct any of its business
or the ability of the Company or its subsidiaries to make use thereof, except such loss or violations as individually or in the
aggregate would not have a material adverse effect on the business, properties, operations, condition (financial or other), results
of operations or prospects of the Company and its subsidiaries, taken as a whole.

 

5.6             
Information Provided. The Company hereby represents and warrants to the Purchaser that the information, provided
by the Company to the Purchaser, does not contain any untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements therein, in the light of the circumstances under which they are made, not misleading, it being
understood that for purposes of this Section 5.6, any statement contained in such information shall be deemed to be modified or
superseded for purposes of this Section 5.6 to the extent that a statement in any document included in such information which was
prepared and furnished to the Purchaser on a later date modifies or replaces such statement, whether or not such later prepared
and furnished statement so states.

 

5.7             
Absence of Certain Proceedings. Neither the Company nor its subsidiaries is aware of any action, suit, proceeding,
inquiry or investigation before or by any court, public board or body, or governmental agency pending or threatened against or
affecting the Company or any of its subsidiaries, in any such case wherein an unfavorable decision, ruling or finding could reasonably
be expected to have a material adverse effect on the business, properties, operations, condition (financial or other), results
of operations or prospects of the Company, or the transactions contemplated by the Offering Documents or which could adversely
affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations under the Offering
Documents; and to the Company's knowledge there is not pending or contemplated any, and there has been no, investigation by the
Commission involving the Company or its subsidiaries or any of their current directors or officers.

 

    	3

    	 

    
   

5.8             
Compliance with Law. Neither the Company nor any of its subsidiaries is in violation of or has any liability
under any statute, law, rule, regulation, ordinance, decision or order of any governmental agency or body or any court, domestic
or foreign, except where such violation or liability could not individually or in the aggregate be reasonably expected to have
a material adverse effect on the business, properties, operations, condition (financial or other), results of operations or prospects
of the Company and its subsidiaries, taken as a whole; and to the knowledge of the Company there is no pending investigation that
would reasonably be expected to lead to such a claim.

 

5.9             
Tax Matters. The Company and its subsidiaries has filed all federal, state and local income and franchise tax
returns required to be filed and has paid all taxes shown by such returns to be due, and no tax deficiency has been determined
adversely to the Company or any of its subsidiaries which has had (nor does the Company or any of its subsidiaries have any knowledge
of any tax deficiency which, if determined adversely to the Company or any of its subsidiaries, might have) could reasonably be
expected to have a material adverse effect on the business, properties, operations, condition (financial or other), results of
operations, or prospects of the Company or any of its subsidiaries, taken as a whole.

 

5.10         
Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or
order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental
authority or other person in connection with the execution, delivery and performance by the Company of the Offering Documents,
other than: (i) the filings required pursuant to this Agreement, (ii) the filings with the Commission pursuant to Section 8 of
this Agreement, and (iii) the filing of Form D with the Commission and such filings as are required to be made under applicable
state securities laws.

 

5.11         
Private Placement. Assuming the accuracy of the representations and warranties of the Purchaser set forth in
Section 6 below, no registration under the Securities Act is required for the offer and sale of the Securities by the Company to
the Purchaser as contemplated hereby.

 

5.12         
No General Solicitation. Neither the Company nor any of its officers or directors has offered or sold any of
the Securities by any form of general solicitation or general advertising.

 

5.13         
Investment Company. The Company is not, and is not an affiliate of, and immediately after receipt of payment
for the Securities, will not be or be an affiliate of, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended. The Company shall conduct its business in a manner so that it will not become an “investment
company” subject to registration under the Investment Company Act of 1940, as amended.

 

		6.	Representations and Warranties of the
Purchaser

 

6.1             
The Purchaser acknowledges that this subscription may be accepted or rejected, in whole or in part, by the Company in
its sole discretion. The Company shall have no obligation to sell the Securities to the Purchaser unless and until this Agreement
is executed and delivered by the Purchaser and accepted by the Company and the Company has received the Purchase Price.

 

6.2             
Except as provided under applicable state securities laws, this subscription is irrevocable upon acceptance by the Company,
except that the Purchaser shall have no obligation under it in the event that the subscription is rejected in whole or the offering
of the Securities is canceled.

 

    	4

    	 

    
  

6.3             
The Purchaser recognizes that the purchase of the Securities involves a high degree of risk including, but not limited
to, the following: (i) an investment in the Company is highly speculative, and only investors who can afford the loss of their
entire investment should consider investing in the Company and the Securities; (ii) the Purchaser may not be able to liquidate
his or her investment; (iii) transferability of the Securities is extremely limited; (iv) in the event of a disposition of the
Securities, the Purchaser could sustain the loss of his entire investment, and (v) the Company has not paid any dividends
since inception and does not anticipate the payment of dividends in the foreseeable future.

 

6.4             
The Purchaser represents that the Purchaser is an “accredited investor” as such term is defined in
Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended (the “Securities Act”), and
that the Purchaser is able to bear the economic risk of an investment in the Securities. If the Purchaser is purchasing in an individual
capacity, then Purchaser certifies that either (a) the Purchaser had an individual income of more than $200,000 in each of calendar
years 2010 and 2011, or joint income with the Purchaser’s spouse in excess of $300,000 in each of those years, and that the
Purchaser reasonably expects to reach the same income level in calendar year 2012 or (b) the Purchaser has an individual net worth,
or with his or her spouse has a joint net worth, in excess of $1,000,000 (excluding the value of the
individual’s primary residence).

 

6.5             
The Purchaser hereby acknowledges and represents that the Purchaser has prior investment experience, including investment
in securities that are not listed, are unregistered and are not traded on any stock exchange or an automated quotation system.

 

6.6             
The Purchaser hereby acknowledges receipt and careful review of this Agreement and the form of Warrant and hereby represents
that the Purchaser has been furnished by the Company during the course of this transaction with all information regarding the Company
and the Securities that the Purchaser has requested or desired to know, has been afforded the opportunity to ask questions of,
and to receive answers from, duly authorized officers or other representatives of the Company concerning the terms and conditions
of the Securities and the affairs of the Company and has received any additional information which the Purchaser has requested.
In evaluating the suitability of this investment in the Company, the Purchaser has not relied upon any representations or other
information (whether oral or written) other than as set forth in this Agreement.

 

6.7             
To the extent the Purchaser has deemed necessary, the Purchaser has retained, at the sole expense of the Purchaser,
and relied upon appropriate professional advice regarding the investment, tax and legal merits and consequences of this Agreement
and its purchase of the Securities hereunder.

 

6.8             
The Purchaser represents that no Securities were offered or sold to it by means of any form of general solicitation
or general advertising, and in connection therewith the Purchaser did not (A) receive or review any advertisement, article, notice
or other communication published in a newspaper or magazine or similar media or broadcast over television or radio, whether closed
circuit or generally available; or (B) attend any seminar meeting or industry investor conference whose attendees were invited
by any general solicitation or general advertising.

 

6.9             
The Purchaser hereby represents that such Purchaser either by reason of the Purchaser’s business or financial
experience, or the business or financial experience of the Purchaser’s professional advisors (who are unaffiliated with and
who are not compensated by the Company or any affiliate or selling agent of the Company, directly or indirectly), has the capacity
to protect such Purchaser’s interests in connection with the transaction contemplated hereby and to adequately evaluate the
risks and merits of the investment in the Securities.

 

    	5

    	 

    
  

6.10         
The Purchaser is able to bear the substantial economic risks of an investment in the Company and could afford a complete
loss of such investment. The Purchaser's overall commitment to investments which are not readily marketable is not disproportionate
to the Purchaser's net worth and the Purchaser's investment in the Company will not cause such overall commitment to become excessive.
The Purchaser has adequate net worth and means of providing for current needs and personal contingencies to sustain a complete
loss of the Purchaser's investment in the Company, and the Purchaser has no need for liquidity in this investment.

 

6.11         
The Purchaser hereby acknowledges that the Securities have not been reviewed by the Commission or any state regulatory
authority, and that the sale of the Securities is intended to be exempt from the registration requirements of Section 8 of the
Securities Act based in part upon the Purchaser’s representations and agreements contained in this Agreement. The Purchaser
agrees that it shall not sell or otherwise transfer the Securities unless they are registered under the Securities Act and applicable
state securities laws or unless and until the Company receives an opinion of counsel satisfactory to the Company that an exemption
from such registration is available. The Purchaser acknowledges that no federal or state agency has made any determination as to
the fairness of the offering of the Securities, or any recommendation or endorsement of the Securities.

 

6.12         
The Purchaser understands that the Securities have not been registered under the Securities Act by reason of a claimed
exemption under the provisions of the Securities Act which depends, in part, upon the Purchaser’s investment intention. In
this connection, the Purchaser hereby represents that the Purchaser is purchasing the Securities for the Purchaser’s own
account for investment and not with a view toward the resale or distribution to others. If other than a natural person, the Purchaser
was not formed for the purpose of purchasing the Securities.

 

6.13         
The Purchaser understands that the Securities may not be sold, transferred, or otherwise disposed of without registration
under the Securities Act or an exemption therefrom, and that in the absence of an effective registration statement covering the
Securities or an available exemption from registration under the Securities Act, the Securities must be held indefinitely. In particular,
the Purchaser is aware that the Securities may not be sold pursuant to Rule 144 promulgated under the Securities Act unless all
of the conditions of such rule are met.

 

6.14         
The Purchaser acknowledges that except as set forth in Section 6 of this Agreement, the Company has made no representations
with respect to registration of the Securities, that no such registration is contemplated in the foreseeable future, that there
can be no assurance that there will be any market for the Securities in the future, and that, as a result, the Purchaser must be
prepared to bear the economic risk of his or her entire investment for an indefinite period of time.

 

6.15         
The Purchaser consents to the placement of a legend on any certificate or other document evidencing the Securities that
such Securities have not been registered under the Securities Act or any state securities or “blue sky” laws and setting
forth or referring to the restrictions on transferability and sale thereof contained in this Agreement. The Purchaser is aware
that the Company will make a notation in its appropriate records with respect to the restrictions on the transferability of such
Securities.

 

6.16         
The Purchaser hereby represents that the address of the Purchaser furnished by Purchaser on the signature page hereof
is the Purchaser’s legal residence or principal business address, as the case may be.

 

    	6

    	 

    
  

6.17         
The Purchaser represents that the Purchaser has full power and authority to execute and deliver this Agreement and to
purchase the Securities. This Agreement constitutes the legal, valid and binding obligation of the Purchaser, enforceable against
the Purchaser in accordance with its terms.

 

6.18         
The Purchaser acknowledges that at such time, if ever, as the Securities are registered under the Securities Act, sales
of the Securities will continue to be subject to state securities laws.

 

6.19         
The Purchaser represents and warrants that such Purchaser has not engaged, consented to nor authorized any broker, finder
or intermediary to act on such Purchaser’s behalf, directly or indirectly, as a broker, finder or intermediary in connection
with the transactions contemplated by this Agreement. The Purchaser shall indemnify and hold harmless the Company from and against
all fees, commissions or other payments owing to any such person or firm acting on behalf of such Purchaser hereunder.

 

6.20         
The Purchaser shall be the beneficial owner of the Securities for which such Purchaser subscribes.

 

6.21         
If this Agreement is executed and delivered on behalf of a partnership, trust, corporation or other entity, the Purchaser
has been duly authorized to execute and deliver this Agreement and all other documents and instruments executed and delivered on
behalf of such entity in connection with this investment in the Company.

 

6.22         
The Purchaser has completed the Accredited Investor Questionnaire attached hereto as Exhibit C, and represents
and warrants that the information contained in such documents is true and complete as of the date of this Agreement.

 

6.23         
The foregoing representations and warranties are true as of the date of this Agreement and shall be true as of the date
each Closing. If, in any respect, such representations and warranties shall not be true on or prior to such dates, the Purchaser
will give prompt written notice of such fact to the Company.

 

6.24         
The Purchaser understands and acknowledges that the Company may conduct additional offerings simultaneously sale and
may issue shares of Common Stock or other securities at a per share price that may be different than the purchase price paid for
the Securities or with other terms and conditions that may not be offered to the Purchaser hereto.

 

7.                 
“Market Stand-off” Agreement.

 

The Purchaser agrees
that, if the Purchaser is requested by an underwriter (an “Underwriter”) of shares of the Company’s Common
Stock or other securities of the Company, the Purchaser will not sell, assign or otherwise transfer or dispose of any Common Stock,
Warrants or other securities of the Company held by it or under its control for a specified period of time (not to exceed 180 days)
following the effective date of a registration statement filed by the Company under the Securities Act in connection with such
underwritten offering. Although the provisions of Section 7 of this Agreement shall be binding upon the Purchaser and his successors
and assigns without the execution of any further agreements or documents memorializing this obligation, if the Company or an Underwriter
so requests the Purchaser will execute such further agreements and documents as are requested to further memorialize this obligation.
Any such further agreements or documents shall be in a form satisfactory to the Company and the Underwriter. The Company may impose
stop-transfer instructions with respect to the shares of Common Stock or other securities subject to the foregoing restriction
until the end of the specified period.

 

    	7

    	 

    
  

		8.	Registration Rights.

 

8.1             
For purposes of this Section 8 the capitalized terms in this Section 8 shall have the following meanings:

 

(a)“Family
Member” means a) with respect to any individual, such individual’s spouse, any descendants (whether natural
or adopted), any trust all of the beneficial interests of which are owned by any of such individuals or by any of such individuals
together with any organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, the estate of any
such individual, and any corporation, association, partnership or limited liability company all of the equity interests of which
are owned by those above described individuals, trusts or organizations and (b) with respect to any trust, the owners of the beneficial
interests of such trust.

 

(b)“Holders”
means each Purchaser or any of Purchaser’s respective successors and Permitted Assignees who acquire rights in accordance
with this Agreement with respect to any Registrable Securities (defined below) directly or indirectly from a Purchaser or from
any Permitted Assignee (defined below).

 

(c)“Investor
Shares” means the Shares.

 

(d)“Investor
Warrants” means the Warrants.

 

(e)“Permitted
Assignee” means (a) with respect to a partnership, its partners or former partners in accordance with their partnership
interests, (b) with respect to a corporation, its stockholders in accordance with their interest in the corporation, (c) with respect
to a limited liability company, its members or former members in accordance with their interest in the limited liability company,
(d) with respect to an individual party, any Family Member of such party, (e) an entity that is controlled by, controls, or is
under common control with a transferor, or (f) a party to this Agreement.

 

(g)“Registrable
Securities” means the Investor Shares and the Registrable Warrant Shares but excludes (i) any Registrable Securities
sold by a person in a transaction pursuant to a registration statement filed under the Securities Act, or (ii) any Registrable
Securities that are at the time subject to an effective registration statement under the Securities Act.

 

(h)“Registrable
Warrant Shares” means the shares of Common Stock issued or issuable to each Subscriber upon exercise of the Investor
Warrants.

 

8.2             
Piggyback Registration.   In the event the Company shall determine in its sole discretion to register
with the SEC for sale any Common Stock, for its own account or for the account of others, other than (i) a registration relating
solely to employee benefit plans or securities issued or issuable to employees, consultants (to the extent the securities owned
or to be owned by such consultants could be registered on Form S-8) or any of their Family Members (including a registration on
Form S-8) or (ii) a registration relating solely to a Securities Act Rule 145 transaction or a registration on Form S-4 in connection
with a merger, acquisition, divestiture, reorganization or similar event, the Company shall promptly give to the holders of the
Registrable Securities written notice thereof (and in no event shall such notice be given less than ten (10) calendar days prior
to the filing of such registration statement), and shall, include all of the Registrable Securities specified in a written request
delivered by the Holder thereof within five (5) calendar days after receipt of such written notice from the Company. However, the
Company may, without the consent of the Holders, withdraw such registration statement prior to its becoming effective if the Company
or such other stockholders have elected to abandon the proposal to register the securities proposed to be registered thereby.

 

    	8

    	 

    
  

Notwithstanding the
foregoing, if such registration undertaken by the Company is in connection with an underwritten public offering, and the underwriter
in such public offering reasonably determines that inclusion of all of the Registrable Securities in such registration would be
detrimental to the successful completion of the offering contemplated in such registration statement, and based on such determination
recommends inclusion in such registration statement of fewer or none of the Registrable Securities of the Holders, then (x) the
number of Registrable Securities of the Holders included in such registration statement shall be reduced pro-rata among such Holders
(based upon the number of Registrable Securities requested to be included in the registration), if the Company after consultation
with the underwriter(s) recommends the inclusion of fewer Registrable Securities, or (y) none of the Registrable Securities of
the Holders shall be included in such registration statement, if the Company after consultation with the underwriter(s) recommends
the inclusion of none of such Registrable Securities; provided, however, that if Securities are being offered for the account of
other persons or entities as well as the Company, such reduction shall not represent a greater fraction of the number of Registrable
Securities intended to be offered by the Holders than the fraction of similar reductions imposed on such other persons or entities
(other than the Company).

 

8.3             
Expenses. The Company shall bear all expenses incurred by the Company in compliance with the registration obligation
of the Company, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel
for the Company incurred in connection with any registration, qualification or compliance pursuant to this Agreement and all underwriting
discounts, selling commissions and expense allowances applicable to the sale of any securities by the Company for its own account
in any registration. All underwriting discounts, selling commissions and expense allowances applicable to the sale by Purchaser
of Registrable Securities and all fees and disbursements of counsel for the Purchaser shall be borne by the Purchaser.

 

8.4             
Indemnification. 

 

(a)              
To the extent permitted by law, the Company will indemnify each Purchaser, each of its officers, directors, agents,
employees and partners, and each person controlling such Subscriber, with respect to each registration of Registrable Securities
under the Securities Act and qualification of Registrable Securities under state securities laws effected pursuant to this Agreement,
against all claims, losses, damages and liabilities (or actions, proceedings or settlements in respect thereof) arising out of
or based on (i) any untrue statement (or alleged untrue statement) of a material fact contained in any prospectus, offering circular
or other document prepared and filed by the Company pursuant to which Registrable Securities were registered under the Securities
Act (including any related registration statement, notification or the like) incident to any such registration or qualification,
or (ii) any 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 by the Company of the Securities Act or any rule or regulation thereunder
applicable to the Company and relating to action or inaction required of the Company in connection with any such registration or
qualification, and subject to the provisions of this section below, will reimburse each such Purchaser, each of its officers, directors,
agents, employees and partners, and each person controlling such Subscriber, for any legal and any other expenses as they are reasonably
incurred in connection with investigating and defending any such claim, loss, damage, liability or action, provided, however,
that the Company will not be liable to the extent that any such claim, loss, damage, liability or expense arises out of or is based
on any failure of a Purchaser or his representatives to distribute Registrable Securities in accordance with applicable laws (including
failure to deliver any required preliminary prospectus or final prospectus (or the final prospectus as amended and supplemented)
at or before the written confirmation of the sale of such Registrable Securities); nor shall the Company be liable in any such
case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a violation which
occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration
by the Purchaser, any such partner, officer, director, employee, agent or controlling person of such Purchaser, or any such underwriter
or any person who controls any such underwriter. Notwithstanding the foregoing, the indemnity contained in this subsection shall
not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably withheld).

 

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(b)              
To the extent permitted by law, each Purchaser whose Registrable Securities are included in any registration under the
Securities Act and qualification of Registrable Securities under state securities laws effected pursuant to this Agreement will
indemnify the Company, and its directors, officers, agents, employees and each underwriter, if any, of the Company’s securities
covered by such a registration statement, each person who controls the Company or such underwriter within the meaning of the Securities
Act and the rules and regulations thereunder, each other such Purchaser and each of their officers, directors, partners, agents
and employees, and each person controlling such Subscriber, and their respective counsel against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any failure of a Purchaser or his representatives to distribute
Registrable Securities in accordance with applicable laws (including failure to deliver any required preliminary prospectus or
final prospectus (or the final prospectus as amended and supplemented to the extent such amendment or supplement is timely provided
to the Purchaser as required herein) as required by applicable law); or any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering circular or other document, or any 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 such Purchasers, directors, officers, partners, persons, underwriters or control
persons for any legal or any other expenses as they are reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged
untrue statement) or omission (or alleged omission) is made in such registration statement, prospectus, offering circular or other
document in reliance upon and in conformity with written information furnished to the Company by such Purchaser for specific use
in such registration statement, prospectus, offering circular or other document; provided, however, that the obligations of any
Purchaser hereunder shall be limited to an amount equal to the net proceeds to such Purchaser from Registrable Securities sold
under such registration statement, prospectus, offering circular or other document as contemplated herein; provided, further, that
the indemnity agreement contained in this subsection shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the Purchaser, which consent shall not be unreasonably
withheld or delayed.

 

(c)               
Each party entitled to indemnification under this section (the “Indemnified Party”) shall give notice
to the party required to provide indemnification (the “Indemnifying Party”) promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume
the defense of any such claim or any litigation resulting therefrom, provided that counsel for the Indemnifying Party, who shall
conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose approval
shall not unreasonably be withheld), and the Indemnified Party may participate in such defense at such party’s expense; and
provided further that if counsel to the Indemnified Party shall reasonably believe that a material conflict of interest is likely
to exist if the same counsel were to represent such Indemnified Party and the Indemnifying Party then the Indemnified Party may
retain one separate counsel at the expense of the Indemnifying Party; and provided further that the failure of any Indemnified
Party to give notice as provided herein shall not relieve the Indemnifying Party of its obligations under this Agreement unless
and only to the extent that such failure to give notice results in material prejudice to the Indemnifying Party. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry
of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant
or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or litigation. Each Indemnified
Party shall furnish such information regarding itself or the claim in question as an Indemnifying Party may reasonably request
in writing and as shall be reasonably required in connection with defense of such claim and litigation resulting therefrom.

 

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(d)              
If the indemnification provided for in this section is held by a court of competent jurisdiction to be unavailable to
an Indemnified Party with respect to any loss, liability, claim, damage or expense referred to herein, then the Indemnifying Party,
in lieu of indemnifying such Indemnified Party hereunder, shall contribute to the amount paid or payable by such Indemnified Party
as a result of such loss, liability, claim, damage or expense in such proportion as is appropriate to reflect the relative fault
of the Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions
which resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations. The relative
fault of the Indemnifying Party and of the Indemnified Party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission to state a material fact relates to information supplied
by the Indemnifying Party or by the Indemnified Party and the parties’ relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.

 

		9.	Purchaser Indemnification.

 

The Purchaser acknowledges
that the Purchaser understands the meaning and legal consequences of the representations, warranties and agreements contained in
this Agreement, and hereby agrees to indemnify and hold harmless the Company and any affiliate thereof, and the officers, directors,
stockholders, agents and employees of the foregoing or any professional advisors thereto from and against any and all loss, damage,
liability or expense (including reasonable attorneys' fees) due to or arising out of a breach of any representation or warranty
or failure to fulfill any obligation of the Purchaser, contained in this Agreement, or arising out of the sale or distribution
by the Purchaser of any Securities in violation of the Securities Act or any applicable state securities laws. Notwithstanding
any of the representations, warranties, acknowledgments or agreements made herein by the Purchaser, the Purchaser does not hereby,
or in any other manner, waive any rights granted to him or her under federal or state securities laws.

 

		10.	Anti-Dilution.

 

10.1         
Definitions. For purposes of this Section 10 the capitalized terms in this Section 10 shall have the following
meanings:

 

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

 

(b)              
“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

 

(c)               
“Exempted Securities” shall mean:

 

(i)                
Convertible Securities issued prior to the Original Issue Date, provided, however, that the agreements or instruments
evidencing the Convertible Securities have not been amended after the Original 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;

 

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

 

(iii)            
shares of Common Stock issued or issuable upon the exercise of the Warrants;

 

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

 

(v)              
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.

 

(d)              
“Original Issue Date” shall mean the closing date with respect to the purchase and sale of the Securities.

 

(e)"Weighted
Average Adjusted Purchase Price" shall mean the adjusted Purchase Price computed in accordance with the following formula:

 

	P2 =	P1  x	(A + B)
	(A + C)

 

	Where:	P2 =	the Weighted Average Adjusted Purchase Price.
	 	P1 =	the Purchase Price (subject to proportionate adjustment pursuant to forward or reverse stock splits, stock dividends or other similar proportionately-applied change). 
	 	A =	the number of shares of the Common Stock outstanding, on a fully diluted basis, immediately prior to the Dilutive Issuance (defined below).
	 	B =	the number of shares which the aggregate offering price of the total number of Additional Shares of Common Stock issued pursuant to the Dilutive Issuance (assuming receipt by the Company in full of all consideration payable upon exercise of any rights, options or warrants issued in such Dilutive Issuance) would purchase at the Purchase Price (as adjusted for forward or reverse stock splits, stock dividends or other similar proportionately-applied change). 
	 	C =	the number of Additional Shares of Common Stock issued pursuant to the Dilutive Issuance.

 

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10.2         
Adjustment Upon Issuance of Additional Shares of Common Stock. If, at any time prior to December 31, 2013, the
Company issues or sells Additional Shares of Common Stock at a price per share (or conversion or exercise price, as the case may
be) of less than $0.50 (subject to proportionate adjustment for forward or reverse stock splits, stock dividends or other similar
proportionately-applied change)(a "Dilutive Issuance"), then, not later than ten (10) business days following
such Dilutive Issuance, the Company shall be required to issue to the Purchaser, for no additional consideration, an additional
number of shares of Common Stock equal to the difference of (i) an amount equal to (A) the aggregate Purchase Price paid under
this Agreement divided by (B) the Weighted Average Adjusted Purchase Price, less (ii) the number of shares of Common Stock issued
to the Purchaser hereunder, less (iii) the number of shares of Common Stock issued to the Purchaser pursuant to this Section 10.2
as a result of a prior Dilutive Issuance. Such additional shares of Common Stock shall be issued to the Purchaser whenever a Dilutive
Issuance occurs. A Dilutive Issuance shall not include any issuance of Exempted Securities. No additional Warrants shall be issued
pursuant to this Section 10.2 as a result of any Dilutive Issuance.

 

		11.	Miscellaneous

 

11.1         
Notice. Any notice or other communication given hereunder shall be deemed sufficient if in writing and sent by
registered or certified mail, return receipt requested, by overnight delivery by reputable courier or delivered by hand against
written receipt therefor, if to the Company addressed to Protea Biosciences Group, Inc. 955 Hartman Run Road, #210, Morgantown,
WV 26507, Attn: President, or such other address as has been provided to the Purchaser by the Company in writing, and if to the
Purchaser at the Purchaser’s address stated on the signature page of this Agreement, or such other address as has been provided
to the Company by the Purchaser in writing. Notices shall be deemed to have been given or delivered on the date of mailing, except
notices of change of address, which shall be deemed to have been given or delivered when received.

 

11.2         
Amendment. This Agreement shall not be changed, modified or amended except by a writing signed by the parties
to be charged, and this Agreement may not be discharged except by performance in accordance with its terms or by a writing signed
by the party to be charged.

 

11.3         
Successors and Assigns; Entire Agreement. This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their respective heirs, legal representatives, successors and assigns. Any such transferee or assignee of the
Purchaser will be bound by this Agreement and shall explicitly assume any obligations of the Subscriber under this Agreement in
a writing delivered to the Company. This Agreement sets forth the entire agreement and understanding between the parties as to
the subject matter hereof and merge and supersede all prior discussions, agreements and understandings of any and every nature
among them.

 

11.4         
Waiver. A waiver by either party of a breach of any provision of this Agreement shall not operate, or be construed,
as a waiver of any subsequent breach by the same party.

 

11.5         
Further Assurances. The parties shall execute and deliver all such further documents, agreements and instruments
and shall take such other and further action as may be necessary or appropriate to carry out the purposes and intent of this Agreement.

 

11.6         
Counterparts. This Agreement may be executed in two or more counterparts each of which shall be deemed an original,
but all of which shall together constitute one and the same instrument. Executed facsimile or other electronic signature pages
(e.g., portable document format) to this Agreement shall be considered originals.

 

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11.7         
Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the
State of Delaware without regard to principles of conflicts or choice of law.

 

11.8         
Expenses. The Purchaser will pay such Purchaser’s own expenses in connection with the transactions contemplated
hereby, whether or not such transactions are consummated.

 

11.9         
Survival. The representations, warranties and covenants of the Purchaser contained herein shall survive the closing
of the purchase and sale of the Securities and any transfer or disposition of the Securities.

 

 

 

 

 

[Signature
Page Follows]

 

    	14

    	 

    
  

In
Witness Whereof, the parties have executed this Securities Purchase Agreement
as of the date first written above.

 

	 	Company:
	 	 	 
	 	PROTEA BIOSCIENCES GROUP, INC.
	 	 	 
	 	 	 
	 	By: 	Stephen Turner
	 	 	Name: Stephen Turner
	 	 	Title:President
	 	 	 
	 	 	 
	 	PURCHASER: 
	 	 	 
	 	 	 
	 	/s/ Josiah Austin
	 	JOSIAH AUSTIN, Managing Member
	 	El Coronado Holdings, LLC

 

    	 

    	 	

    
 

Exhibit
A

 

Form
of Warrant

 

    	 

    	 	

    
  

Exhibit
B

 

Notice
of Election

 

 

	To: Protea Biosciences Group,
    Inc.	Date:____________________

 

  

		1.	The undersigned hereby irrevocably elects to purchase the Shares of Protea Biosciences Group, Inc.
(the “Company”) listed below pursuant to provisions of that certain Securities Purchase Agreement between
the Company and the undersigned Purchaser dated as of November 20, 2012 (the “SPA”). The undersigned
Purchaser is delivering to the Company, with this Notice of Election, the a bank check or certified check for the aggregate purchase
price of the foregoing number of Shares, computed in accordance with the SPA.

 

Number
of Shares Purchased: ______________________

 

Aggregate
Purchase Price: $ _______________________

 

		2.	In exercising the Option, the undersigned hereby confirms
and acknowledges that the Shares are being acquired solely for the account of the undersigned and not a nominee for any other
party, and for investment, and that the undersigned will not offer, sell or otherwise dispose of any such Shares except under
circumstances that will not result in a violation of the Securities Act of 1993, as amended, or any applicable state securities
laws.

 

		3.	The undersigned further reaffirms that all representations
and warranties made by him under the SPA remain true as of the date of this Notice of Election and shall be true at the Subsequent
Closing. If, in any respect, such representations and warranties shall not be true on or prior to such dates, the Purchaser will
give prompt written notice of such fact to the Company.

 

Please issue
a certificate representing said Shares in the name of the undersigned, along with the

corresponding
Warrant as designated in the SPA.

 

	 	PURCHASER:
	 	 
	 	 
	 	Signature
	 	 
	 	Josiah T. Ausitn, Managing Member
	 	 
	 	El Coronado Holdings, LLC
	 	Print Name
	 	 
	 	4673 Christopher Place, Dallas, TX
	 	Address
	 	 
	 	 
	 	Social Security No.

 

    	 

    	 	

    

   

Exhibit
C

 

Form
of Accredited Investor Questionnaire

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