Document:

Exhibit 10.14

 

Exhibit B

 

NEITHER THIS SECURITY NOR THE SECURITIES
INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION
OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH
EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION
OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

	Original Issue Date: 	[_________ __, 2016]	 
	Face Amount: 	$[         ]	 
	Purchase Price	$[         ]	 
	No.: 	[           ]	 

 

20% ORIGINAL ISSUE DISCOUNT UNSECURED
CONVERTIBLE DEBENTURE

DUE [_____________ __, 2017]1

 

THIS 20% ORIGINAL ISSUE
DISCOUNT UNSECURED CONVERTIBLE DEBENTURE is one of a series of duly authorized and validly issued 20% Original Issue Discount Unsecured
Convertible Debentures of Protea Biosciences Group, Inc., a Delaware corporation, (the “Company”), having its
principal place of business at 1311 Pineview Drive, Suite 501, Morgantown, WV 26505, designated as its 20% Original Issue Discount
Unsecured Convertible Debenture due [February __, 2017]1 (this debenture, the “Debenture” and, collectively
with the other debentures of such series, the “Debentures”).

 

FOR VALUE RECEIVED,
the Company promises to pay to [     ] or its registered assigns (the “Holder”),
or shall have paid pursuant to the terms hereunder, the principal sum of $[     ] on [__, 2017]1
(the “Maturity Date”), or such earlier date as this Debenture is required or permitted to be repaid or
converted, as provided hereunder, and to pay interest to the Holder on the aggregate unconverted and then outstanding principal
amount of this Debenture in accordance with the provisions hereof. This Debenture is subject to the following additional provisions:

 

 

1   Six months from the Original
Issue Date.

 

    	 	1	 

     

    

 

Section 1.         Definitions.
For the purposes hereof, in addition to the terms defined elsewhere in this Debenture, (a) capitalized terms not otherwise defined
herein shall have the meanings set forth in the Subscription Agreement and (b) the following terms shall have the following meanings:

 

"Affiliate”
means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common
control with a Person, as such terms are used in and construed under Rule 405 under the Securities Act.

 

“Alternate
Consideration” shall have the meaning set forth in Section 5(c).

 

“Automatic
Conversion Price” shall have the meaning set forth in Section 4(d).

 

“Bankruptcy
Event” means any of the following events: (a) the Company or any Significant Subsidiary (as such term is defined in Rule
1-02(w) of Regulation S-X) thereof commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment
of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or
any Significant Subsidiary thereof, (b) there is commenced against the Company or any Significant Subsidiary thereof any such case
or proceeding that is not dismissed within 60 days after commencement, (c) the Company or any Significant Subsidiary thereof is
adjudicated insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered, (d) the
Company or any Significant Subsidiary thereof suffers any appointment of any custodian or the like for it or any substantial part
of its property that is not discharged or stayed within 60 calendar days after such appointment, (e) the Company or any Significant
Subsidiary thereof makes a general assignment for the benefit of creditors, (f) the Company or any Significant Subsidiary thereof
calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts or (g) the Company
or any Significant Subsidiary thereof, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence
in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.

 

“Base
Conversion Price” shall have the meaning set forth in Section 5(b).

 

“Beneficial
Ownership Limitation” shall have the meaning set forth in Section 4(c)(ii).

 

“Business
Day” means any day except any Saturday, any Sunday, any day which shall be a federal legal holiday in the United States
or any day on which banking institutions in the State of New York are authorized or required by law or other governmental action
to close.

 

“Buy-In”
shall have the meaning set forth in Section 4(e)(v).

 

    	 	2	 

     

    

 

 

“Change
of Control Transaction” means the occurrence after the date hereof of any of (a) an acquisition after the date hereof
by an individual or legal entity or “group” (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of
effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of
in excess of 50% of the voting securities of the Company (other than by means of conversion or exercise of the Debentures and the
Securities issued together with the Debentures), (b) the Company merges into or consolidates with any other Person, or any Person
merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company immediately
prior to such transaction own less than 50% of the aggregate voting power of the Company or the successor entity of such transaction,
or (c) the Company sells or transfers all or substantially all of its assets to another Person and the stockholders of the Company
immediately prior to such transaction own less than 50% of the aggregate voting power of the acquiring entity immediately after
the transaction, (d) a replacement at one time or within a three year period of more than one-half of the members of the Board
of Directors which is not approved by a majority of those individuals who are members of the Board of Directors on the date hereof
(or by those individuals who are serving as members of the Board of Directors on any date whose nomination to the Board of Directors
was approved by a majority of the members of the Board of Directors who are members on the date hereof), or (e) the execution by
the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth
in clauses (a) through (d) above.

 

“Closing
Bid Price” means on any particular date (a) the last reported closing bid price per share of Common Stock on such
date on the Trading Market (as reported by Bloomberg L.P. at 4:15 p.m. (New York City time)), or (b) if there is no such price
on such date, then the closing bid price on the Trading Market on the date nearest preceding such date (as reported by Bloomberg
L.P. at 4:15 p.m. (New York City time)), or (c)  if the Common Stock is not then listed or quoted on a Trading Market and
if prices for the Common Stock are then reported in the “pink sheets” published by Pink Sheets LLC (or a similar organization
or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported,
or (d) if the shares of Common Stock are not then publicly traded the fair market value of a share of Common Stock as determined
by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Company, the fees and expenses
of which shall be paid by the Company; provided that in each case where Bloomberg L.P. data is being relied upon, Holder shall
provide to the Company a copy of such information for the Company's records.

 

“Common
Stock Equivalent” shall have the meaning set forth in Section 4(b).

 

“Conversion”
shall have the meaning ascribed to such term in Section 4.

 

“Conversion
Date” shall have the meaning set forth in Section 4(a).

 

“Conversion
Price” shall have the meaning set forth in Section 4(b).

 

“Conversion
Schedule” means the Conversion Schedule in the form of Schedule 1 attached hereto.

 

    	 	3	 

     

    

 

“Conversion
Shares” means, collectively, the shares of Common Stock issuable upon conversion of this Debenture in accordance with
the terms hereof.

 

“Debenture
Register” shall have the meaning set forth in Section 2(c).

 

“Dilutive Issuance”
shall have the meaning set forth in Section 5(b).

 

“Dilutive
Issuance Notice” shall have the meaning set forth in Section 5(b).

 

“Event
of Default” shall have the meaning set forth in Section 8(a).

 

“Equity
Conditions” means, during the period in question, (a) the Company shall have duly honored all conversions by virtue of
one or more Notices of Conversion of the Holder, if any, (b) the Company shall have paid all liquidated damages due under Sections
2(d), 4(e)(iv) and 4(e)(v) and other fees and expenses (other than principal and interest) owing to the Holder in respect of this
Debenture, (c) the Common Stock is trading on a Trading Market and all of the shares issuable pursuant to the Transaction Documents
are listed or quoted for trading on such Trading Market (and the Company believes, in good faith, that trading of the Common Stock
on a Trading Market will continue uninterrupted for the foreseeable future), (d) there is a sufficient number of authorized but
unissued and otherwise unreserved shares of Common Stock for the issuance of all of the shares issuable pursuant to the Transaction
Documents, (f) there is no existing Event of Default or no existing event which, with the passage of time or the giving of notice,
would constitute an Event of Default, (g) the issuance of the shares in question to the Holder would not violate the limitations
set forth in Section 4(c) herein provided that any shares proposed to be issued that would cause a violation of Section
4(c) will be automatically deemed canceled by the Company and upon such cancellation this clause (g) shall be satisfied, (h) there
has been no public announcement of a pending or proposed Fundamental Transaction or Change of Control Transaction that has not
been consummated, and (i) the Holder is not in possession of any information provided by the Company that constitutes, or may constitute,
material non-public information other than information required to be provided by the Company under Sections 5.11 and 5.12 of the
Subscription Agreement.

 

“Fundamental
Transaction” shall have the meaning set forth in Section 5(c).

 

“Interest
Notice Period” shall have the meaning set forth in Section 2(a).

 

“Interest
Payment Date” shall have the meaning set forth in Section 2(a).

 

“Interest
Share Amount” shall have the meaning set forth in Section 2(a).

 

"Interest
Rate" shall mean ten percent (10%) per annum.

 

    	 	4	 

     

    

 

“Late
Fees” shall have the meaning set forth in Section 2(d).

 

“Liens”
means a lien, charge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

 

“Mandatory
Default Amount” means the sum of (a) 100% of the outstanding principal amount of this Debenture, plus 100% of accrued
and unpaid interest hereon, and (b) all other amounts, costs, expenses and liquidated damages due in respect of this Debenture.

 

“New
York Courts” shall have the meaning set forth in Section 8(d).

 

“Notice
of Conversion” shall have the meaning set forth in Section 4(a).

 

“Original
Issue Date” means the date of the first issuance of the Debentures, regardless of any transfers of any Debenture and
regardless of the number of instruments which may be issued to evidence such Debentures.

 

“Person”
means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

“Public
Offering Closing” shall have the meaning set forth in Section 4(b).

 

“Subscription
Agreement” means the Subscription Agreement, dated as of [__________ __, 2016] among the Company and the original Holders,
as amended, modified or supplemented from time to time in accordance with its terms.

 

“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Share
Delivery Date” shall have the meaning set forth in Section 4(e)(ii).

 

“Stockholder
Approval” means approval by the stockholders of the Company to authorize the issuance of the full number of shares
of Common Stock which would be issuable upon full conversion of the then outstanding Debentures, as discussed in Section 5.12 of
the Subscription Agreement.

 

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

 

“Trading
Day” means a day on which the New York Stock Exchange is open for business.

 

“Trading
Market” means the following markets or exchanges on which the Common Stock may be listed or quoted for trading on the
date in question: the NYSE MKT, LLC, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the
New York Stock Exchange or the OTC Bulletin Board, or the other OTC markets, including the OTCQX, OTCQB and OTC Pink markets

 

    	 	5	 

     

    

 

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

 

Section 2.         Interest.

 

a)  Payment
of Interest in Cash or Kind. The Company shall pay interest to the Holder at the Interest Rate on the aggregate principal amount
of the principal being converted on any Conversion Date (as to that principal amount then being converted), and on the Maturity
Date (each such date, an “Interest Payment Date”) (if any Interest Payment Date is not a Business Day, then
the applicable payment shall be due on the next succeeding Business Day), in cash or, at the Company’s option, in duly authorized,
validly issued, fully paid and non-assessable shares of Common Stock (the dollar amount to be paid in shares, the “Interest
Share Amount”) or a combination thereof; provided, however, that payment in shares of Common Stock on account
of interest may only occur if (i) all of the Equity Conditions have been met (unless waived by the Holder in writing) during the
2 Trading Days immediately prior to the applicable Interest Payment Date (the “Interest Notice Period”) and
through and including the date such shares of Common Stock are actually issued to the Holder, (ii) the notice of Conversion delivered
by the Holder to Company affirms that the issuance of the Conversion Shares on account of principal and interest will not violate
Section 4(c) hereunder. To the extent that any such issuance of Conversion Shares on account of interest under this Section 2(a)
would violate section 4(c), such interest shall either be paid in cash or at the Company's election deferred and paid in Conversion
Shares at the next Conversion Date. In the event that the Company shall elect to pay all or any part of the interest amount in
Common Stock, the number of shares of Common Stock issuable to the Holder shall be determined by dividing (i) the Interest Share
Amount, by (ii) the Conversion Price then in effect.

 

b)  Payment
of Principal Amount in Cash or Kind. On the Maturity Date, in the event that the Holder has not elected to convert all or any
portion of the Principal Amount into Common Stock, the Company may pay all or any portion the then outstanding principal amount
of this Debenture in cash or, at the Company’s option, in duly authorized, validly issued, fully paid and non-assessable
shares of Common Stock (the dollar amount to be paid in shares, the “Principal Share Amount”) or a combination
thereof; provided, however, that payment in shares of Common Stock on account of the principal amount may only occur
if (i) all of the Equity Conditions have been met (unless waived by the Holder in writing) during the 2 Trading Days immediately
prior to the applicable Maturity Date (the “Principal Notice Period”) and through and including the date such
shares of Common Stock are actually issued to the Holder, (ii) the notice of Conversion delivered by the Holder to Company affirms
that the issuance of the Conversion Shares on account of principal and interest will not violate Section 4(c) hereunder. To the
extent that any such issuance of Conversion Shares on account of the principal amount under this Section 2(b) would violate Section
4(c), such principal amount shall be paid in cash. In the event that the Company shall elect to pay all or any part of the principal
amount in Common Stock, the number of shares of Common Stock issuable to the Holder shall be determined by dividing (i) the Principal
Share Amount, by (ii) the Conversion Price then in effect.

 

    	 	6	 

     

    

 

c)   Company’s
Election to Pay Principal and/or Interest in Cash or Shares of Common Stock. Subject to the terms and conditions herein, including
the existence of the Equity Conditions, the decision whether to pay interest or the principal amount hereunder in cash, shares
of Common Stock or a combination thereof shall be at the sole discretion of the Company.

 

d)   Interest
Calculations. Interest on the principal balance of this Debenture shall be calculated on the basis of a 360-day year, consisting
of twelve 30 calendar day periods, and shall accrue daily commencing on the Original Issue Date until payment in full of the outstanding
principal, together with all accrued and unpaid interest, liquidated damages and other amounts which may become due hereunder,
has been made. Interest shall cease to accrue with respect to any principal amount converted, provided that, the Company actually
delivers the Conversion Shares within the time period required by Section 4(e)(ii) herein. Interest hereunder will be paid to the
Person in whose name this Debenture is registered on the records of the Company regarding registration and transfers of this Debenture
(the “Debenture Register”). Except as otherwise provided herein, if at any time the Company pays interest partially
in cash and partially in shares of Common Stock to the holders of the Debentures, then such payment of cash shall be distributed
ratably among the holders of the then-outstanding Debentures based on their (or their predecessor’s) initial purchases of
Debentures pursuant to the Subscription Agreement.

 

e)   Late
Fee. All overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at an interest rate equal to the
lesser of 18% per annum or the maximum rate permitted by applicable law (the “Late Fees”) which shall accrue
daily from the date such interest is due hereunder through and including the date of actual payment in full.

 

f)   Prepayment.
Except as otherwise set forth in this Debenture, the Company may not prepay any portion of the principal amount of this Debenture
without the prior written consent of the Holder.

 

Section 3.         Registration
of Transfers and Exchanges.

 

a)   Different
Denominations. This Debenture is exchangeable for an equal aggregate principal amount of Debentures of different authorized
denominations, as requested by the Holder surrendering the same. No service charge will be payable for such registration of transfer
or exchange.

 

b)  Investment
Representations. This Debenture has been issued subject to certain investment representations of the original Holder set forth
in the Subscription Agreement and may be transferred or exchanged only in compliance with the Subscription Agreement and applicable
federal and state securities laws and regulations.

 

    	 	7	 

     

    

 

c)   Reliance
on Debenture Register. Prior to due presentment for transfer to the Company of this Debenture, the Company and any agent of
the Company may treat the Person in whose name this Debenture is duly registered on the Debenture Register as the owner hereof
for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Debenture is overdue, and
neither the Company nor any such agent shall be affected by notice to the contrary.

 

Section 4.         
Conversion.

 

a)   Voluntary
Conversion. At any time after the Original Issue Date until this Debenture is no longer outstanding, this Debenture shall be
convertible, in whole or in part, into shares of Common Stock at the option of the Holder, at any time and from time to time (subject
to the conversion limitations set forth in Section 4(c) hereof). The Holder shall effect conversions by delivering to the
Company a Notice of Conversion, the form of which is attached hereto as Annex A (each, a “Notice of Conversion”),
specifying therein the principal amount of this Debenture to be converted and the date on which such conversion shall be effected
(such date, or the date of a mandatory conversion pursuant to Section 4(d), the “Conversion Date”). If no Conversion
Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is actually delivered
hereunder. To effect conversions hereunder, the Holder shall not be required to physically surrender this Debenture to the Company
unless the entire principal amount of this Debenture, plus all accrued and unpaid interest thereon, has been so converted. Conversions
hereunder shall have the effect of lowering the outstanding principal amount of this Debenture in an amount equal to the applicable
conversion. The Holder and the Company shall maintain records showing the principal amount(s) converted and the date of such conversion(s).
The Company may deliver an objection to any Notice of Conversion within 1 Business Day of delivery of such Notice of Conversion.
In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of
manifest error.

 

b)   Conversion
Price. The conversion price in effect on any voluntary Conversion Date shall be equal to $0.25, subject to adjustment
herein (the “Conversion Price”).

 

c)   Conversion
Limitations. Holder shall not have the right to convert any portion of this Debenture, pursuant to Section 4 or otherwise,
to the extent that after giving effect to such issuance after conversion the Holder (together with the Holder’s Affiliates,
and any other person or entity acting as a group together with the Holder or any of the Holder’s Affiliates), would beneficially
own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of this Section beneficial ownership shall
be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. Holder
is solely responsible for any schedules required to be filed in accordance therewith. The Company shall have no obligation to verify
or confirm the accuracy of such filings.  In any case, the number of outstanding shares of Common Stock shall be determined
after giving effect to the conversion or exercise of securities of the Company, including this Debenture, by the Holder or its
Affiliates since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial
Ownership Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving
effect to the issuance of shares of Common Stock issuable upon exercise of this Debenture. The Holder, upon not less than 61 days’
prior notice to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 4(c), provided
that the Beneficial Ownership Limitation in no event exceeds 9.99% of the number of shares of the Common Stock outstanding immediately
after giving effect to the issuance of shares of Common Stock upon exercise of this Debenture held by the Holder and the provisions
of this Section 4(c) shall continue to apply. Any such increase or decrease will not be effective until the 61st day
after such notice is delivered to the Company. The limitations contained in this paragraph shall apply to a successor holder of
this Debenture.

 

    	 	8	 

     

    

 

d)   Automatic
Conversion. In the event that after the Original Issue Date through and including the Maturity Date the Company shall close
an underwritten public offering, for cash (the “Public Offering Closing”), of Common Stock, or any security convertible
into or exercisable of exchangeable for shares of Common stock (a “Common Stock Equivalent”), then on the date of the
Public Offering Closing the entire outstanding principal amount of and accrued but unpaid interest on this Debenture shall automatically,
without necessity of any action by the Company or the Holder, be converted into shares of Common Stock at a conversion price equal
to the lesser of (i) the Conversion Price or (ii) 85% of the per share price to the public of the Common Stock (or of the conversion,
exercise or exchange price per share of Common Stock contained in the Common Stock Equivalent) sold in the Public Offering Closing
(the “Automatic Conversion Price”).

 

e)   Mechanics of Conversion.

 

i.        Conversion
Shares Issuable Upon Conversion of Principal and Interest Amount. The number of Conversion Shares issuable upon a conversion
hereunder shall be determined by the quotient obtained by dividing (x) the outstanding principal amount and accrued but unpaid
interest of this Debenture to be converted by (y) the Conversion Price then in effect or the Automatic Conversion Price, as applicable.

 

ii.        Delivery
of Certificate Upon Conversion. Not later than four Trading Days after each Conversion Date (the “Share Delivery Date”),
the Company shall deliver, or cause to be delivered, to the Holder (A) a certificate or certificates representing the Conversion
Shares which, on or after the six month anniversary of the Original Issue Date, shall be free of restrictive legends and trading
restrictions (other than those which may then be required by the Subscription Agreement) representing the number of Conversion
Shares being acquired upon the conversion of this Debenture and (B) a bank check in the amount of accrued and unpaid interest (if
the Company has elected or is required to pay accrued interest in cash). On the six month anniversary of the Original Issue Date,
the Company shall use its best efforts to deliver any certificate or certificates required to be delivered by the Company under
this Section 4(e) electronically through the Depository Trust Company or another established clearing corporation performing similar
functions.

 

    	 	9	 

     

    

 

iii.        Failure
to Deliver Certificates. If in the case of any Notice of Conversion such certificate or certificates are not delivered to or
as directed by the applicable Holder by the fourth Trading Day after the Conversion Date, the Holder shall be entitled to elect
by written notice to the Company at any time on or before its receipt of such certificate or certificates, to rescind such Conversion,
in which event the Company shall promptly return to the Holder any original Debenture delivered to the Company and the Holder shall
promptly return to the Company the Common Stock certificates representing the principal amount of this Debenture unsuccessfully
tendered for conversion to the Company.

 

iv.        Obligation
Absolute; Partial Liquidated Damages. The Company’s obligations to issue and deliver the Conversion Shares upon conversion
of this Debenture in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by
the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against
any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach
or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law
by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the
Company to the Holder in connection with the issuance of such Conversion Shares; provided, however, that such delivery
shall not operate as a waiver by the Company of any such action the Company may have against the Holder. In the event the Holder
of this Debenture shall elect to convert any or all of the outstanding principal amount hereof, the Company may not refuse conversion
based on any claim that the Holder or anyone associated or affiliated with the Holder has been engaged in any violation of law,
agreement or for any other reason, unless an injunction from a court, on notice to Holder, restraining and or enjoining conversion
of all or part of this Debenture shall have been sought and obtained, and the Company posts a surety bond for the benefit of the
Holder in the amount of 130% of the outstanding principal amount of this Debenture, which is subject to the injunction, which bond
shall remain in effect until the completion of arbitration/litigation of the underlying dispute and the proceeds of which shall
be payable to the Holder to the extent it obtains judgment. In the absence of such injunction, the Company shall issue Conversion
Shares or, if applicable, cash, upon a properly noticed conversion. If the Company fails for any reason to deliver to the Holder
such certificate or certificates pursuant to Section 4(e)(ii) by the fifth Trading Day after the Conversion Date, the Company shall
pay to the Holder, in cash, as liquidated damages and not as a penalty, for each $1,000 of principal amount being converted, $10
per Trading Day (increasing to $20 per Trading Day on the seventh (7th) Trading Day after such liquidated damages begin
to accrue) for each Trading Day after such fourth (4th) Trading Day until such certificates are delivered. Nothing herein
shall limit a Holder’s right to pursue actual damages or declare an Event of Default pursuant to Section 7 hereof for the
Company’s failure to deliver Conversion Shares within the period specified herein and the Holder shall have the right to
pursue all remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance
and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant
to any other Section hereof or under applicable law.

 

    	 	10	 

     

    

 

v.        Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon Conversion. In addition to any other rights available to the Holder,
if the Company fails for any reason to deliver to the Holder such certificate or certificates by the Share Delivery Date pursuant
to Section 4(e)(ii), and if after such Share Delivery Date the Holder is required by its brokerage firm to purchase (in an open
market transaction or otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in
satisfaction of a sale by the Holder of the Conversion Shares which the Holder was entitled to receive upon the conversion relating
to such Share Delivery Date (a “Buy-In”), then the Company shall (A) pay in cash to the Holder (in addition
to any other remedies available to or elected by the Holder) the amount by which (x) the Holder’s total purchase price (including
any brokerage commissions) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common
Stock that the Holder was entitled to receive from the conversion at issue multiplied by (2) the actual sale price at which the
sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and (B) at the option of
the Holder, either reissue (if surrendered) this Debenture in a principal amount equal to the principal amount of the attempted
conversion or deliver to the Holder the number of shares of Common Stock that would have been issued if the Company had timely
complied with its delivery requirements under Section 4(e)(ii). For example, if the Holder purchases Common Stock having a total
purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of this Debenture with respect to which the
actual sale price of the Conversion Shares (including any brokerage commissions) giving rise to such purchase obligation was a
total of $10,000 under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000.
The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In and,
upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s right to pursue any
other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to timely deliver certificates representing shares of Common Stock
upon conversion of this Debenture as required pursuant to the terms hereof.

 

    	 	11	 

     

    

 

vi.        Reservation
of Shares Issuable Upon Conversion. Subject to the Stockholder Approval, the Company covenants that it will at all times reserve
and keep available out of its authorized and unissued shares of Common Stock for the sole purpose of issuance upon conversion of
this Debenture and payment of interest on this Debenture, each as herein provided, free from preemptive rights or any other actual
contingent purchase rights of Persons other than the Holder (and the other holders of the Debentures), not less than such aggregate
number of shares of the Common Stock as shall (subject to the terms and conditions set forth in the Subscription Agreement) be
issuable (taking into account the adjustments and restrictions of Section 5) upon the conversion of the outstanding principal amount
of this Debenture and payment of interest hereunder. The Company covenants that all shares of Common Stock that shall be so issuable
shall, upon issue, be duly authorized, validly issued, fully paid and nonassessable.

 

vii.        Fractional
Shares. No fractional shares or scrip representing fractional shares shall be issued upon the conversion of this Debenture.
As to any fraction of a share which Holder would otherwise be entitled to purchase upon such conversion, the Company shall at its
election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the
Conversion Price then in effect or the Automatic Conversion Price, as applicable or round up to the next whole share.

 

viii.        Transfer
Taxes. The issuance of certificates for shares of the Common Stock on conversion of this Debenture shall be made without charge
to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such
certificates, provided that, the Company shall not be required to pay any tax that may be payable in respect of any transfer involved
in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of this Debenture
so converted and the Company shall not be required to issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction
of the Company that such tax has been paid.

 

Section 5.         Certain
Adjustments.

 

a)   Stock
Dividends and Stock Splits. If the Company, at any time while this Debenture is outstanding: (i) pays a stock dividend or otherwise
makes a distribution or distributions payable in shares of Common Stock on shares of Common Stock or any Common Stock Equivalents
(which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company upon conversion of, or payment
of interest on, the Debentures), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines
(including by way of a reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues,
in the event of a reclassification of shares of the Common Stock, any shares of capital stock of the Company, then the Conversion
Price then in effect shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding
any treasury shares of the Company) outstanding immediately before such event and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section shall become effective
immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall
become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

    	 	12	 

     

    

 

b)   Subsequent
Equity Sales. If, at any time while this Debenture is outstanding, the Company or any Subsidiary, as applicable, sells or grants
any option to purchase or sells or grants any right to reprice, or otherwise disposes of or issues (or announces any sale, grant
or any option to purchase or other disposition), any Common Stock or Common Stock Equivalents entitling any Person to acquire shares
of Common Stock at an effective price per share that is lower than the then Conversion Price (such lower price, the “Base
Conversion Price” and such issuances, collectively, a “Dilutive Issuance”) (if the holder of the Common
Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions,
floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which are issued
in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share that is lower than
the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive
Issuance), then the Conversion Price shall be reduced to equal the Base Conversion Price. Such adjustment shall be made whenever
such Common Stock or Common Stock Equivalents are issued. Notwithstanding the foregoing, no adjustment will be made under this
Section 5(b) in respect of an Exempt Issuance. The Company shall notify the Holder in writing, no later than 1 Business Day following
the issuance of any Common Stock or Common Stock Equivalents subject to this Section 5(b), indicating therein the applicable issuance
price, or applicable reset price, exchange price, conversion price and other pricing terms (such notice, the “Dilutive
Issuance Notice”). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant
to this Section 5(b), upon the occurrence of any Dilutive Issuance, the Holder is entitled to receive a number of Conversion Shares
based upon the Base Conversion Price on or after the date of such Dilutive Issuance, regardless of whether the Holder accurately
refers to the Base Conversion Price in the Notice of Conversion.

 

c)   Fundamental
Transaction. If, at any time while this Debenture is outstanding, (i) the Company effects any merger or consolidation of the
Company with or into another Person, (ii) the Company effects any sale of all or substantially all of its assets in one transaction
or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person) is completed
pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property,
or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common
Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a “Fundamental
Transaction”), then, upon any subsequent conversion of this Debenture, the Holder shall have the right to receive, for
each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental
Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence
of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of 1 share of Common
Stock (the “Alternate Consideration”). For purposes of any such conversion, the determination of the Conversion
Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable
in respect of 1 share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among
the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.
If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction,
then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Debenture
following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company
or surviving entity in such Fundamental Transaction shall issue to the Holder a new debenture consistent with the foregoing provisions
and evidencing the Holder’s right to convert such debenture into Alternate Consideration. The terms of any agreement pursuant
to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with
the provisions of this Section 5(b) and insuring that this Debenture (or any such replacement security) will be similarly adjusted
upon any subsequent transaction analogous to a Fundamental Transaction.

 

    	 	13	 

     

    

 

d)   Calculations.
All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be.
For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall
be the sum of the number of shares of Common Stock (excluding any treasury shares of the Company) issued and outstanding.

 

e)   Notice
to the Holder.

 

i.        Adjustment
to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any provision of this Section 5, the Company shall
promptly deliver to each Holder a notice setting forth the Conversion Price after such adjustment and setting forth a brief statement
of the facts requiring such adjustment.

 

ii.        Notice
to Allow Conversion by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on
the Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C)
the Company shall authorize the granting to all holders of the Common Stock of rights or warrants to subscribe for or purchase
any shares of capital stock of any class or of any rights, (D) the approval of any stockholders of the Company shall be required
in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale
or transfer of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common Stock
is converted into other securities, cash or property or (E) the Company shall authorize the voluntary or involuntary dissolution,
liquidation or winding up of the affairs of the Company, then, in each case, the Company shall cause to be filed at each office
or agency maintained for the purpose of conversion of this Debenture, and shall cause to be delivered to the Holder at its last
address as it shall appear upon the Debenture Register, at least twenty (20) calendar days prior to the applicable record or effective
date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution,
redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record
to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date
as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common
Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share
exchange, provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the
validity of the corporate action required to be specified in such notice. The Holder is entitled to convert this Debenture during
the 20-day period commencing on the date of such notice through the effective date of the event triggering such notice.

 

    	 	14	 

     

    

 

Section 6.        Rule
144. The Company covenants to use its reasonable best efforts to facilitate the public resale by Holder(s) of any Conversion
Shares pursuant to Rule 144 under the Securities Act of 1933 as amended.

 

Section 7.        Negative
Covenants. As long as any portion of this Debenture remains outstanding, unless the holders of at least 51% in principal amount
of the then outstanding Debentures shall have otherwise given prior written consent, the Company shall not, and shall not permit
any of its subsidiaries (whether or not a Subsidiary on the Original Issue Date) to, directly or indirectly:

 

a)   repay,
repurchase or offer to repay, repurchase or otherwise acquire any Indebtedness, other than the Debentures if on a pro-rata basis,
other than regularly scheduled principal and interest payments as such terms are in effect as of the Original Issue Date, provided
that such payments shall not be permitted if, at such time, or after giving effect to such payment, any Event of Default exist
or occur; or

 

b)   enter
into any agreement with respect to any of the foregoing.

 

Section 8.          Events
of Default.

 

a)   “Event
of Default” means, wherever used herein, any of the following events (whatever the reason for such event and whether
such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any
court, or any order, rule or regulation of any administrative or governmental body):

 

    	 	15	 

     

    

 

i.      any default
in the payment of (A) the principal amount of any Debenture or (B) interest, liquidated damages and other amounts owing to a Holder
on any Debenture, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or by acceleration
or otherwise) which default, solely in the case of an interest payment or other default under clause (B) above, is not cured within
5 Trading Days;

 

ii.     the
Company shall fail to observe or perform any other covenant or agreement contained in the Debentures (other than a breach by the
Company of its obligations to deliver shares of Common Stock to the Holder upon conversion, which breach is addressed in clause
(xi) below) which failure is not cured, if possible to cure, within the earlier to occur of (A) 7 Trading Days after notice of
such failure sent by the Holder or by any other Holder to the Company and (B) 12 Trading Days after the Company has become or should
have become aware of such failure;

 

iii.    a default
or Event of Default (subject to any grace or cure period provided in the applicable agreement, document or instrument) shall occur
under (A) any of the Transaction Documents or (B) any other agreement, lease, document or instrument to which the Company or any
Subsidiary is obligated (and not covered by clause (vi) below) that could reasonably be expected to have a Material Adverse Effect;

 

iv.    the
Company shall fail to satisfy its obligations to obtain Stockholder Approval under Section 5.12 of the Subscription Agreement on
or prior to October 31, 2016;

 

v.     any representation
or warranty made in this Debenture, any other Transaction Documents, any written statement pursuant hereto or thereto or any other
report, financial statement or certificate made or delivered to the Holder or any other Holder shall be untrue or incorrect in
any material respect as of the date when made or deemed made;

 

vi.    the
Company or any Significant Subsidiary (as such term is defined in Rule 1-02(w) of Regulation S-X) shall be subject to a Bankruptcy
Event;

 

vii.   the
Company or any Subsidiary shall default on any of its obligations under any mortgage, credit agreement or other facility, indenture
agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced,
any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement that (a) involves an obligation
greater than $250,000, whether such indebtedness now exists or shall hereafter be created, and (b) results in such indebtedness
becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;

 

    	 	16	 

     

    

 

viii.  the
Common Stock shall not be eligible for listing or quotation for trading on a Trading Market and shall not be eligible to resume
listing or quotation for trading thereon within seven Trading Days;

 

ix.     the
Company shall be a party to any Change of Control Transaction or Fundamental Transaction or shall agree to sell or dispose of all
or in excess of 40% of its assets in one transaction or a series of related transactions (whether or not such sale would constitute
a Change of Control Transaction);

 

x.      the Company
shall fail for any reason to deliver certificates to a Holder on or prior to the fifth Trading Day after a Conversion Date pursuant
to Section 4(e) or the Company shall provide at any time notice to the Holder, including by way of public announcement, of the
Company’s intention to not honor requests for conversions of any Debentures in accordance with the terms hereof; or

 

xi.     any
monetary judgment, writ or similar final process shall be entered or filed against the Company, any subsidiary or any of their
respective property or other assets for more than $50,000, and such judgment, writ or similar final process shall remain unvacated,
unbonded or unstayed for a period of 45 calendar days.

 

b)   Remedies
Upon Event of Default. If any Event of Default occurs, the outstanding principal amount of this Debenture, plus accrued but
unpaid interest, liquidated damages and other amounts owing in respect thereof through the date of acceleration, shall become,
at the Holder’s election, immediately due and payable in cash at the Mandatory Default Amount. Commencing 5 days after the
occurrence of any Event of Default that results in the eventual acceleration of this Debenture, the interest rate on this Debenture
shall accrue at an interest rate equal to the lesser of 18% per annum or the maximum rate permitted under applicable law. Upon
the payment in full of the Mandatory Default Amount, the Holder shall promptly surrender this Debenture to or as directed by the
Company. In connection with such acceleration described herein, the Holder need not provide, and the Company hereby waives, any
presentment, demand, protest or other notice of any kind, and the Holder may immediately and without expiration of any grace period
enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such acceleration
may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a holder
of the Debenture until such time, if any, as the Holder receives full payment pursuant to this Section 8(b). No such rescission
or annulment shall affect any subsequent Event of Default or impair any right consequent thereon.

 

    	 	17	 

     

    

 

Section 9.         Miscellaneous.

 

a)   Notices.
Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation,
any Notice of Conversion, shall be in writing and delivered personally, by facsimile, by electronic communication or sent by a
nationally recognized overnight courier service, addressed to the Company, at the address set forth above, or such other facsimile
number or address as the Company may specify for such purpose by notice to the Holder delivered in accordance with this Section
9(a). Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and
delivered personally, by facsimile, by electronic communication or sent by a nationally recognized overnight courier service addressed
to each Holder at the facsimile number or address of the Holder appearing on the books of the Company, or if no such facsimile
number or address appears, at the principal place of business of the Holder. Any notice or other communication or deliveries hereunder
shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered
via facsimile or electronic communication prior to 5:30 p.m. (New York City time), (ii) the date immediately following the date
of transmission, if such notice or communication is delivered via facsimile or electronic communication between 5:30 p.m. (New
York City time) and 11:59 p.m. (New York City time) on any date, (iii) the second Business Day following the date of mailing, if
sent by nationally recognized overnight courier service or (iv) upon actual receipt by the party to whom such notice is required
to be given.

 

b)   Absolute
Obligation. Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of, liquidated damages and accrued interest, as applicable,
on this Debenture at the time, place, and rate, and in the coin or currency, herein prescribed. This Debenture is a direct debt
obligation of the Company. This Debenture ranks pari passu with all other Debentures now or hereafter issued under
the terms set forth herein.        

 

c)   Lost
or Mutilated Debenture. If this Debenture shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver,
in exchange and substitution for and upon cancellation of a mutilated Debenture, or in lieu of or in substitution for a lost, stolen
or destroyed Debenture, a new Debenture for the principal amount of this Debenture so mutilated, lost, stolen or destroyed, but
only upon receipt of evidence of such loss, theft or destruction of such Debenture, and of the ownership hereof, reasonably satisfactory
to the Company.

 

    	 	18	 

     

    

 

d)   Governing
Law. All questions concerning the construction, validity, enforcement and interpretation of this Debenture shall be governed
by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of
conflict of laws thereof. Each party agrees that all legal proceedings concerning the interpretation, enforcement and defense of
the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective Affiliates,
directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City
of New York, Borough of Manhattan (the “New York Courts”). Each party hereto hereby irrevocably submits to the
exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any
transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents),
and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally
subject to the jurisdiction of such New York Courts, or such New York Courts are improper or inconvenient venue for such proceeding.
Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action
or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such
party at the address in effect for notices to it under this Debenture and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process
in any other manner permitted by applicable law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by
applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Debenture or the
transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Debenture,
then the prevailing party in such action or proceeding shall be reimbursed by the other party for its attorneys fees and other
costs and expenses incurred in the investigation, preparation and prosecution of such action or proceeding.

 

e)   Waiver.
Any waiver by the Company or the Holder of a breach of any provision of this Debenture shall not operate as or be construed to
be a waiver of any other breach of such provision or of any breach of any other provision of this Debenture. The failure of the
Company or the Holder to insist upon strict adherence to any term of this Debenture on one or more occasions shall not be considered
a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Debenture.
Any waiver by the Company or the Holder must be in writing.

 

f)    Severability.
If any provision of this Debenture is invalid, illegal or unenforceable, the balance of this Debenture shall remain in effect,
and if any provision is inapplicable to any Person or circumstance, it shall nevertheless remain applicable to all other Persons
and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates the applicable
law governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum rate of
interest permitted under applicable law. The Company covenants (to the extent that it may lawfully do so) that it shall not at
any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury
law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on
this Debenture as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants
or the performance of this indenture, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits
or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution
of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been
enacted.

 

    	 	19	 

     

    

 

g)   Next
Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment
shall be made on the next succeeding Business Day.

 

h)   Headings.
The headings contained herein are for convenience only, do not constitute a part of this Debenture and shall not be deemed to limit
or affect any of the provisions hereof.

 

i)    Assumption. 
Any successor to the Company or any surviving entity in a Fundamental Transaction shall (i) assume, prior to such Fundamental Transaction,
all of the obligations of the Company under this Debenture and the other Transaction Documents pursuant to written agreements in
form and substance satisfactory to the Holder (such approval not to be unreasonably withheld or delayed) and (ii) issue to the
Holder a new debenture of such successor entity evidenced by a written instrument substantially similar in form and substance to
this Debenture, including, without limitation, having a principal amount and interest rate equal to the principal amount and the
interest rate of this Debenture and having similar ranking to this Debenture, which shall be satisfactory to the Holder (any such
approval not to be unreasonably withheld or delayed).  The provisions of this Section 9(i) shall apply similarly and equally
to successive Fundamental Transactions and shall be applied without regard to any limitations of this Debenture.

 

(Signature Pages Follow)

 

    	 	20	 

     

    

  

IN WITNESS WHEREOF,
the Company has caused this Debenture to be duly executed by a duly authorized officer as of the date first above indicated.

  

	 	Protea Biosciences Group, Inc.
	 	 	 
	 	By:	 
	 	 	Name: Stephen Turner
	 	 	Title: Chief Executive Officer
	 	 	Facsimile No. for delivery of Notices: 304-292-7101

 

    	 

     

    

 

ANNEX A

 

NOTICE OF CONVERSION

 

The undersigned hereby
elects to convert principal under the 20% Original Issue Discount Convertible Debenture due [__________ __, 2017] of Protea Biosciences
Group, Inc., a Delaware corporation (the “Company”), into shares of common stock (the “Common Stock”),
of the Company according to the conditions hereof, as of the date written below. If shares of Common Stock are to be issued in
the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is
delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will
be charged to the holder for any conversion, except for such transfer taxes, if any.

 

By the delivery of
this Notice of Conversion the undersigned represents and warrants to the Company that its ownership of the Common Stock does not
exceed the amounts specified under Section 4 of this Debenture, as determined in accordance with Section 13(d) of the Exchange
Act.

 

The undersigned agrees
to comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer of the
aforesaid shares of Common Stock.

 

Conversion calculations:

Date to Effect Conversion:

 

Principal Amount of Debenture
to be Converted:

 

Payment of Interest in Common
Stock __ yes __ no

If yes, $_____ of Interest Accrued.

 

Number of Conversion
Shares payable on Principal or Interest that would exceed the limits set forth in Section 4(c) of the Debenture:

 

Number of shares of Common Stock
to be issued:

 

 

Signature:

 

Name:

 

Address for Delivery
of Common Stock Certificates:

 

    	 	 	 

     

    

 

Schedule 1

 

CONVERSION SCHEDULE

 

The 20% Original Issue Discount Unsecured
Convertible Debenture due on [________ ___, 2017] in the original principal amount of $____________ is issued by Protea Biosciences
Group, Inc., a Delaware corporation. This Conversion Schedule reflects conversions made under Section 4 of the above referenced
Debenture.

 

Dated:

 

	Date of Conversion
 (or for first entry,
 Original Issue Date)	 	Amount of
 Conversion	 	Aggregate
 Principal
 Amount
 Remaining
 Subsequent to
 Conversion
 (or original
 Principal
 Amount)	 	Company AttestExhibit 10.15

 

NEITHER THIS SECURITY NOR THE SECURITIES
FOR WHICH THIS SECURITY IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION
OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH
EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON EXERCISE
OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.

 

FORM OF COMMON STOCK PURCHASE WARRANT

 

PROTEA
BIOSCIENCES GROUP, INC.

 

	Warrant No.[  ]	Issue Date: September __, 2016

 

THIS COMMON STOCK PURCHASE
WARRANT (the “Warrant”) certifies that, for value received, [             ] (the “Holder”)
is entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on
or after the date hereof (the “Initial Exercise Date”) and on or prior to the close of business on the
three year anniversary of the Final Closing Date under the Subscription Agreement (the “Termination Date”)
but not thereafter, to subscribe for and purchase from Protea Biosciences Group, Inc., a Delaware corporation (the “Company”),
up to [            ] shares (the “Warrant Shares”) of Common Stock. The purchase price of one share of Common
Stock under this Warrant shall be equal to the Exercise Price, as defined in Section 2(b).

 

Section 1.            Definitions.
For the purposes hereof, in addition to the terms defined elsewhere in this Warrant, (a) capitalized terms not otherwise defined
herein shall have the meanings set forth in the Subscription Agreement and (b) the following terms shall have the following meanings:

 

“Business
Day” means any day except any Saturday, any Sunday, any day which shall be a federal legal holiday in the United
States or any day on which banking institutions in the State of New York are authorized or required by law or other governmental
action to close.

 

“Common
Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof
to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, rights, options, warrants or other
instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to
receive Common Stock.

 

“Person”
means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability
company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

    1 

     

    

 

“Subscription
Agreement” means the Subscription Agreement, dated as of [August __, 2016] among the Company and the original Holders,
as amended, modified or supplemented from time to time in accordance with its terms.

 

“Securities
Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

 

“Trading
Day” means a day on which the New York Stock Exchange is open for business.

 

“Trading
Market” means the following markets or exchanges on which the Common Stock may be listed or quoted for trading on
the date in question: the NYSE MKT, LLC, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market,
the New York Stock Exchange or the OTC Bulletin Board, or the other OTC markets, including the OTCQX, OTCQB and OTC Pink markets.

 

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

 

“VWAP”
means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed
or quoted on a national securities exchange, the daily volume weighted average price of the Common Stock for such date (or the
nearest preceding date) on the trading market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P.
(based on a Trading Day from 9:30 a.m. New York City time to 4:02 p.m. New York City time); (b) if the Common Stock is quoted on
the OTC Bulletin Board, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on
the OTC Bulletin Board; (c) if the Common Stock is not then listed or quoted for trading on the OTC Bulletin Board and if prices
for the Common Stock are then reported on the OTC markets, including the OTCQX, OTCQB and OTC Pink markets, or in the “Pink
Sheets” published by Pink Sheets, LLC (or a similar organization or agency succeeding to its functions of reporting prices),
the most recent bid price per share of the Common Stock so reported; or (d) in all other cases, the fair market value of a share
of Common Stock as determined by an independent appraiser selected in good faith by the Subscribers of a majority in interest of
the Securities then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company;
provided that in each case where Bloomberg L.P. data is being relied upon, Holder shall provide to the Company a copy of such information
for the Company's records.

 

Section 2.             Exercise.

 

a)            Exercise
of Warrant. Exercise of the purchase rights represented by this Warrant may be made, in whole or in part, at any time or times
on or after the Initial Exercise Date and on or before the Termination Date by delivery to the Company (or such other office or
agency of the Company as it may designate by notice in writing to the registered Holder at the address of the Holder appearing
on the books of the Company) of a duly executed notice of exercise (“Notice of Exercise”) form attached
hereto as Exhibit A; and, within three (3) Trading Days of the date said Notice of Exercise is delivered to the Company, the Company
shall have received payment of the aggregate Exercise Price of the shares thereby purchased by wire transfer or cashier’s
check drawn on a United States bank. Notwithstanding anything herein to the contrary, the Holder shall not be required to physically
surrender this Warrant to the Company until the Holder has purchased all of the Warrant Shares available hereunder and the Warrant
has been exercised in full, in which case, the Holder shall surrender this Warrant to the Company for cancellation within three
(3) Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial exercises of this Warrant resulting
in purchases of a portion of the total number of Warrant Shares available hereunder shall have the effect of lowering the outstanding
number of Warrant Shares purchasable hereunder in an amount equal to the applicable number of Warrant Shares purchased. The Holder
and the Company shall maintain records showing the number of Warrant Shares purchased and the date of such purchases. In the event
of any dispute or discrepancy, the records of the Company shall be controlling and determinative in the absence of manifest error.

 

    2 

     

    

 

b)           Exercise
Price. The exercise price per share of the Common Stock under this Warrant shall be $0.3251,
subject to adjustment hereunder (the “Exercise Price”).

 

c)           Exercise
Limitations. Holder shall not have the right to exercise any portion of this Warrant, pursuant to Section 2 or otherwise, to
the extent that after giving effect to such issuance after exercise, the Holder (together with the Holder’s affiliates, and
any other person or entity acting as a group together with the Holder or any of the Holder’s affiliates), would beneficially
own in excess of the Beneficial Ownership Limitation (as defined below). For purposes of this Section, beneficial ownership shall
be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. Holder
is solely responsible for any schedules required to be filed in accordance therewith. The Company shall have no obligation to verify
or confirm the accuracy of such filings. In any case, the number of outstanding shares of Common Stock shall be determined after
giving effect to the conversion or exercise of securities of the Company, including this Warrant, by the Holder or its affiliates
since the date as of which such number of outstanding shares of Common Stock was reported. The “Beneficial Ownership
Limitation” shall be 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect
to the issuance of Warrant Shares issuable upon exercise of this Warrant. The Holder, upon not less than 61 days’ prior notice
to the Company, may increase or decrease the Beneficial Ownership Limitation provisions of this Section 2(c), provided that the
Beneficial Ownership Limitation may not exceed 9.99% of the number of shares of the Common Stock outstanding immediately after
giving effect to the issuance of Warrant Shares upon exercise of this Warrant held by the Holder and the provisions of this Section
2(c) shall continue to apply, unless the Holder upon not less than 61 days’ prior notice to the Company determines to waive
the Beneficial Ownership Limitation requirements described in this Section 2(c) in its entirety. Any such increase or decrease
will not be effective until the 61st day after such notice is delivered to the Company. The limitations contained in
this paragraph shall apply to a successor holder of this Warrant.

 

 

1
A thirty percent premium over the conversion price.

 

    3 

     

    

 

d)          Mechanics
of Exercise.

 

i.            Delivery
of Certificates Upon Exercise. Certificates for shares purchased hereunder shall be transmitted by the Company’s transfer
agent (the “Transfer Agent”) to the Holder by crediting the account of the Holder’s prime broker
with the Depository Trust Company through its Deposit Withdrawal Agent Commission (“DWAC”) system if
the Company is then a participant in such system and either (A) there is an effective registration statement permitting the resale
of the Warrant Shares by the Holder or (B) the shares are eligible for resale without volume or manner-of-sale limitations pursuant
to Rule 144, and otherwise by physical delivery of certificates to the address specified by the Holder in the Notice of Exercise
within four (4) Trading Days from the delivery to the Company of the Notice of Exercise Form, surrender of this Warrant (if required)
and payment of the aggregate Exercise Price as set forth above (the “Warrant Share Delivery Date”). This
Warrant shall be deemed to have been exercised on the date the Exercise Price is received by the Company. The Warrant Shares shall
be deemed to have been issued, and Holder or any other person so designated to be named therein shall be deemed to have become
a holder of record of such shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of
the Exercise Price and all taxes required to be paid by the Holder, if any, pursuant to Section 2(d)(vi) prior to the issuance
of such shares, have been paid. If the Company is obligated to and fails for any reason to deliver to the Holder certificates evidencing
the Warrant Shares subject to a Notice of Exercise by the Warrant Share Delivery Date, the Company shall pay to the Holder, in
cash, as liquidated damages and not as a penalty, for each $1,000 of Warrant Shares subject to such exercise, $10 per Trading Day
(increasing to $20 per Trading Day on the seventh Trading Day after such liquidated damages begin to accrue) for each Trading Day
after such Warrant Share Delivery Date until such certificates are delivered.

 

ii.         Delivery
of New Warrants Upon Exercise. If this Warrant shall have been exercised in part, the Company shall, at the request of a Holder
and upon surrender of this Warrant certificate, at the time of delivery of the certificate or certificates representing Warrant
Shares, deliver to Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by
this Warrant, which new Warrant shall in all other respects be identical with this Warrant.

 

iii.         Rescission
Rights. If the Company fails to cause the Transfer Agent to transmit to the Holder a certificate or the certificates representing
the Warrant Shares pursuant to Section 2(d)(i) by the Warrant Share Delivery Date, then the Holder will have the right to rescind
such exercise.

 

iv.        Compensation
for Buy-In on Failure to Timely Deliver Certificates Upon Exercise. In addition to any other rights available to the Holder,
if the Company fails for any reason to deliver to the Holder such certificate or certificates by the Warrant Share Delivery Date,
and if after such Warrant Share Delivery Date the Holder is required by its brokerage firm to purchase (in an open market transaction
or otherwise), or the Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver in satisfaction of a
sale by the Holder of the Warrant Shares which the Holder was entitled to receive upon the conversion relating to such Warrant
Share Delivery Date (a “Buy-In”), then the Company shall (A) pay in cash to the Holder (in addition to
any other remedies available to or elected by the Holder) the amount by which (x) the Holder’s total purchase price (including
any brokerage commissions) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of Warrant Shares
that the Company was required to deliver to the Holder in connection with the exercise at issue multiplied by (2) the price at
which the sell order giving rise to such purchase obligation was executed (including any brokerage commissions) and (B) at the
option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise
was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common
Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example,
if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise
of this Warrant with respect to which the sale price of the Warrant Shares (including any brokerage commissions) giving rise to
such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence, the Company shall be required
to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect
of the Buy-In and, upon request of the Company, evidence of the amount of such loss. Nothing herein shall limit a Holder’s
right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief with respect to the Company’s failure to timely deliver certificates representing Warrant
Shares upon exercise of this Warrant as required pursuant to the terms hereof.

 

    4 

     

    

 

v.          No
Fractional Shares or Scrip. No fractional shares or scrip representing fractional shares shall be issued upon the exercise
of this Warrant. As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company
shall, at its election, either pay a cash adjustment in respect of such final fraction in an amount equal to such fraction multiplied
by the Exercise Price or round up to the next whole share.

 

vi.         Charges,
Taxes and Expenses. Issuance of certificates for Warrant Shares shall be made without charge to the Holder for any issue or
transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall
be paid by the Company, and such certificates shall be issued in the name of the Holder or in such name or names as may be directed
by the Holder; provided, however, that in the event certificates for Warrant Shares are to be issued in a name other
than the name of the Holder, this Warrant when surrendered for exercise shall be accompanied by the assignment form (“Assignment
Form”) attached hereto as Exhibit B duly executed by the Holder and the Company may require, as a condition thereto,
the payment of a sum sufficient to reimburse it for any transfer tax incidental thereto.

 

vii.         Closing
of Books. The Company will not close its shareholder books or records in any manner which prevents the timely exercise of this
Warrant, pursuant to the terms hereof.

 

Section 3.             Redemption
of Warrant. Commencing at any time after the date on which after the Common Stock closing bid price reported by Bloomberg LP
remains at an amount $0.752 per share (as adjusted
for forward or reverse stock splits, stock dividends or other similar proportionately-applied change) for at least twenty (20)
consecutive Trading Days (the “Call Condition”), the Company shall have the right, upon sixty (60) days’
notice to the Holder given not later than thirty (30) Trading Days after the date on which the Call Condition is satisfied (the
“Redemption Notice”) to redeem the number of Warrant Shares specified in the Redemption Notice, less
any amount previously exercised, at a price of $0.01 per Warrant Share (the “Redemption Price”), on the
date set forth in the Redemption Notice, but in no event earlier than sixty (60) days following the date of the receipt by the
Holder of the Redemption Notice (the “Redemption Date”). The Redemption Notice shall be provided to the
Holder promptly and in all events within five (5) Trading Days after Company announces its intention to exercise its redemptions
rights under this section. The Holder may exercise this Warrant at any time (in whole or in part) prior to the Redemption Date.
Any portion of this Warrant that is subject to the Call Condition which is not exercised by 5:30 p.m. (Eastern time) on the Redemption
Date shall no longer be exercisable and shall be returned to the Company (and, if not so returned, shall automatically be deemed
canceled), and the Company, upon its receipt of the unexercised portion of this Warrant, shall issue therefore in full and complete
satisfaction of its obligations under such called but unexercised portion of this Warrant to the Holder an amount equal to the
number of shares of Common Stock called but remaining unexercised multiplied by the Redemption Price. The Redemption Price shall
be mailed to such Holder at its address of record, and the Warrant shall be canceled.

 

 

2
Represents 3x the conversion price of $0.25

 

    5 

     

    

 

Section 4.             Certain
Adjustments.

 

a)           Stock
Dividends and Splits. If the Company, at any time while this Warrant is outstanding: (i) pays a stock dividend or otherwise
make a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable
in shares of Common Stock (which, for avoidance of doubt, shall not include any Warrant Shares issued by the Company upon exercise
of this Warrant), (ii) subdivides outstanding shares of Common Stock into a larger number of shares, (iii) combines (including
by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares or (iv) issues by reclassification
of shares of the Common Stock any shares of capital stock of the Company, then in each case the Exercise Price shall be multiplied
by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding
immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately
after such event and the number of shares issuable upon exercise of this Warrant shall be proportionately adjusted such that the
aggregate Exercise Price of this Warrant shall remain unchanged. Any adjustment made pursuant to this Section 3(a) shall become
effective immediately after the record date for the determination of shareholders entitled to receive such dividend or distribution
and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification.

 

b)          Subsequent
Equity Sales. If the Company or any Subsidiary thereof, as applicable, at any time while this Warrant is outstanding, shall
sell or grant any option to purchase, or sell or grant any right to reprice, or otherwise dispose of or issue (or announce any
offer, sale, grant or any option to purchase or other disposition) any Common Stock or Common Stock Equivalents entitling any Person
to acquire shares of Common Stock, at an effective price per share less than the then Exercise Price (such lower price, the “Base
Share Price” and such issuances collectively, a “Dilutive Issuance”) (if the holder
of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments,
reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share
which are issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share
which is less than the Exercise Price, such issuance shall be deemed to have occurred for less than the Exercise Price on such
date of the Dilutive Issuance), then, the Exercise Price shall be reduced and only reduced to equal the Base Share Price and the
number of Warrant Shares issuable hereunder shall be increased such that the aggregate Exercise Price payable hereunder, after
taking into account the decrease in the Exercise Price, shall be equal to the aggregate Exercise Price prior to such adjustment.
Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. Notwithstanding the foregoing,
no adjustments shall be made, paid or issued under this Section 3(b) in respect of an Exempt Issuance. The Company shall notify
the Holder, in writing, no later than the Trading Day following the issuance of any Common Stock or Common Stock Equivalents subject
to this Section 3(b), indicating therein the applicable issuance price, or applicable reset price, exchange price, conversion price
and other pricing terms (such notice, the “Dilutive Issuance Notice”). For purposes of clarification,
whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 3(b), upon the occurrence of any Dilutive
Issuance, after the date of such Dilutive Issuance the Holder is entitled to receive a number of Warrant Shares based upon the
Base Share Price regardless of whether the Holder accurately refers to the Base Share Price in the Notice of Exercise

    6 

     

    

 

c)           Subsequent
Rights Offerings. In addition to any adjustments pursuant to the other subsections of this Section 4, if at any time the Company
grants, issues or sells any Common Stock Equivalents or rights to purchase stock, warrants, securities or other property pro rata
to the record holders of any class of shares of Common Stock (the “Purchase Rights”), then the Holder
will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which the Holder
could have acquired if the Holder had held the number of shares of Common Stock acquirable upon complete exercise of this Warrant
(without regard to any limitations on exercise hereof, including without limitation, the Beneficial Ownership Limitation) immediately
before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken,
the date as of which the record holders of shares of Common Stock are to be determined for the grant, issue or sale of such Purchase
Rights (provided, however, to the extent that the Holder’s right to participate in any such Purchase Right would result
in the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not be entitled to participate in such Purchase
Right to such extent (or beneficial ownership of such shares of Common Stock as a result of such Purchase Right to such extent)
and such Purchase Right to such extent shall be held in abeyance for the Holder until such time, if ever, as its right thereto
would not result in the Holder exceeding the Beneficial Ownership Limitation).

 

d)           Pro
Rata Distributions. If the Company, at any time while this Warrant is outstanding, shall distribute to all holders of Common
Stock (and not to the Holder) evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants
to subscribe for or purchase any security other than the Common Stock, then in each such case the Exercise Price shall be adjusted
by multiplying the Exercise Price in effect immediately prior to the record date fixed for determination of stockholders entitled
to receive such distribution by a fraction of which the denominator shall be the VWAP determined as of the record date mentioned
above, and of which the numerator shall be such VWAP on such record date less than the per share fair market value at such record
date of the portion of such assets or evidence of indebtedness or rights or warrants so distributed applicable to one outstanding
share of the Common Stock as determined by the Board of Directors in good faith. In either case the adjustments shall be described
in a statement provided to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription
rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall
become effective immediately after the record date mentioned above.

 

    7 

     

    

 

e)           Fundamental
Transaction. If, at any time while this Warrant is outstanding, (i) the Company effects any merger or consolidation of the
Company with or into another Person, (ii) the Company effects any sale of all or substantially all of its assets in one or a series
of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant
to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property or (iv)
the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock
is effectively converted into or exchanged for other securities, cash or property (each “Fundamental Transaction”),
then, upon any subsequent exercise of this Warrant, the Holder shall have the right to receive, for each Warrant Share that would
have been issuable upon such exercise immediately prior to the occurrence of such Fundamental Transaction, the number of shares
of Common Stock of the successor or acquiring corporation or of the Company, if it is the surviving corporation, and any additional
consideration (the “Alternate Consideration”) receivable as a result of such Fundamental Transaction
by a holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such Fundamental
Transaction. For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply
to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock
in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable
manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are
given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given
the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction.
To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental
Transaction shall issue to the Holder a new warrant consistent with the foregoing provisions and evidencing the Holder’s
right to exercise such warrant into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction
is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this Section
4(d) and insuring that this Warrant (or any such replacement security) will be similarly adjusted upon any subsequent transaction
analogous to a Fundamental Transaction. Notwithstanding anything to the contrary, in the event of a Fundamental Transaction that
is (1) an all cash transaction, (2) a “Rule 13e-3 transaction” as defined in Rule 13e-3 under the Exchange Act, or
(3) a Fundamental Transaction involving a person or entity not traded on a national securities exchange, the Company or any successor
entity shall pay concurrently with the consummation of the Fundamental Transaction, and the Holder shall accept an amount of cash
equal to the value of this Warrant as determined in accordance with the Black Scholes Option Pricing Model obtained from the “OV”
function on Bloomberg L.P. using (A) a price per share of Common Stock equal to the VWAP of the Common Stock for the Trading Day
immediately preceding the date of consummation of the applicable Fundamental Transaction, (B) a risk-free interest rate corresponding
to the U.S. Treasury rate for a 30 day period immediately prior to the consummation of the applicable Fundamental Transaction,
(C) an expected volatility equal to the 100 day volatility obtained from the “HVT” function on Bloomberg L.P. determined
as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction and (D) a remaining
option time equal to the time between the date of the public announcement of such transaction and the Termination Date; provided
that in each case where Bloomberg L.P. data is being relied upon, Holder shall provide to the Company a copy of such information
for the Company's records.

 

f)             Calculations.
All calculations under this Section 4 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be.
For purposes of this Section 4, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall
be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding.

 

g)           Notice
to Holder.

 

i.            Adjustment
to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 4, the Company shall promptly
mail to the Holder a notice setting forth the Exercise Price after such adjustment and setting forth a brief statement of the facts
requiring such adjustment.

 

    8 

     

    

 

ii.         Notice
to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or any other distribution in whatever form) on the
Common Stock, (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock, (C) the
Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares
of capital stock of any class or of any rights, (D) the approval of any shareholders of the Company shall be required in connection
with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer
of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted
into other securities, cash or property, or (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation
or winding up of the affairs of the Company, then, in each case, the Company shall cause to be mailed to the Holder at its last
address as it shall appear upon the Warrant Register of the Company, at least 20 calendar days prior to the applicable record or
effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend,
distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common
Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the
date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or
close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares
of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale,
transfer or share exchange; provided that the failure to mail such notice or any defect therein or in the mailing thereof shall
not affect the validity of the corporate action required to be specified in such notice. The Holder is entitled to exercise this
Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice.

 

Section 5.             Transfer
of Warrant.

 

a)           Transferability.
Subject to compliance with any applicable securities laws and the conditions set forth in Section 5(d) herein and to the provisions
of the Subscription Agreement, this Warrant and all rights hereunder (including, without limitation, any registration rights) are
transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company or its designated agent,
together with a written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its
agent or attorney and funds sufficient to pay any transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or
assignees, as applicable, and in the denomination or denominations specified in such instrument of assignment, and shall issue
to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall promptly be cancelled.
The Warrant, if properly assigned, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant
issued.

 

b)           New
Warrants. This Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the
Company, together with a written notice specifying the names and denominations in which new Warrants are to be issued, signed by
the Holder or its agent or attorney. Subject to compliance with Section 5(a), as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants
to be divided or combined in accordance with such notice. All Warrants issued on transfers or exchanges shall be dated the Initial
Exercise Date and shall be identical with this Warrant except as to the number of Warrant Shares issuable pursuant thereto.

 

    9 

     

    

 

c)          Warrant
Register. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant
Register”), in the name of the record Holder hereof from time to time. The Company may deem and treat the registered
Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and
for all other purposes, absent actual notice to the contrary.

 

d)          Transfer
Restrictions. If, at the time of the surrender of this Warrant in connection with any transfer of this Warrant, the transfer
of this Warrant shall not be either (i) registered pursuant to an effective registration statement under the Securities Act and
under applicable state securities or blue sky laws or (ii) eligible for resale without volume or manner-of-sale restrictions pursuant
to Rule 144, the Company may require, as a condition of allowing such transfer, that the Holder or transferee of this Warrant,
as the case may be, comply with the provisions of the Subscription Agreement.

 

Section 6.             Miscellaneous.

 

a)          No
Rights as Shareholder Until Exercise. This Warrant does not entitle the Holder to any voting rights or other rights as a shareholder
of the Company prior to the exercise hereof.

 

b)          Loss,
Theft, Destruction or Mutilation of Warrant. The Company covenants that upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant
Shares, and in case of loss, theft or destruction, of indemnity or security reasonably satisfactory to it (which, in the case of
the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock certificate,
if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation,
in lieu of such Warrant or stock certificate.

 

c)         Saturdays,
Sundays, Holidays, etc. If the last or appointed day for the taking of any action or the expiration of any right required or
granted herein shall not be a Business Day, then, such action may be taken or such right may be exercised on the next succeeding
Business Day.

 

d)         Authorized
Shares.

 

Subject to
Shareholder Approval (as such term is defined in the Purchase Agreement), the Company covenants that, during the period the Warrant
is outstanding, it will reserve from its authorized and unissued Common Stock one hundred (100%) of the number of shares to provide
for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. In case such amount of Common
Stock is insufficient at any time, the Company shall call and hold a special meeting to increase the number of authorized shares
of common stock. Management of the Company shall recommend to shareholders to vote in favor of increasing the number of authorized
shares of common stock.

 

The Company
further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty
of executing stock certificates to execute and issue the necessary certificates for the Warrant Shares upon the exercise of the
purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant
Shares may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the Trading
Market upon which the Common Stock may be listed. The Company covenants that all Warrant Shares which may be issued upon the exercise
of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly
authorized, validly issued, fully paid and nonassessable and free from all taxes, liens and charges created by the Company in respect
of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue).

 

    10 

     

    

 

Except
and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation,
amending its amended and restated certificate of incorporation, as amended, or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such
terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in
this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (i) not increase the par value
of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (ii)
take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and
nonassessable Warrant Shares upon the exercise of this Warrant and (iii) use commercially reasonable efforts to obtain all such
authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof, as may be, necessary to enable
the Company to perform its obligations under this Warrant.

 

Before
taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or
in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary
from any public regulatory body or bodies having jurisdiction thereof.

 

e)           Jurisdiction.
All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be determined in accordance
with the provisions of the Subscription Agreement.

 

f)            Restrictions.
The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered, will have restrictions
upon resale imposed by state and federal securities laws.

 

g)          Nonwaiver
and Expenses. No course of dealing or any delay or failure to exercise any right hereunder on the part of Holder shall operate
as a waiver of such right or otherwise prejudice Holder’s rights, powers or remedies, notwithstanding the fact that all rights
hereunder terminate on the Termination Date. If the Company willfully and knowingly fails to comply with any provision of this
Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be sufficient
to cover any costs and expenses including, but not limited to, reasonable attorneys’ fees, including those of appellate proceedings,
incurred by Holder in collecting any amounts due pursuant hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.

 

h)          Notices.
Any notice, request or other document required or permitted to be given or delivered to the Holder by the Company shall be delivered
in accordance with the notice provisions of the Subscription Agreement.

 

    11 

     

    

 

i)             Limitation
of Liability. No provision hereof, in the absence of any affirmative action by Holder to exercise this Warrant to purchase
Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for
the purchase price of any Common Stock or as a shareholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.

 

j)             Remedies.
The Holder, in addition to being entitled to exercise all rights granted by law, including recovery of damages, will be entitled
to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation
for any loss incurred by reason of a breach by it of the provisions of this Warrant and hereby agrees to waive and not to assert
the defense in any action for specific performance that a remedy at law would be adequate.

 

k)           Successors
and Assigns. Subject to applicable securities laws, this Warrant and the rights and obligations evidenced hereby shall inure
to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder. The provisions
of this Warrant are intended to be for the benefit of all Holders from time to time of this Warrant and shall be enforceable by
the Holder or holder of Warrant Shares.

 

l)             Amendment.
This Warrant may be modified or amended or the provisions hereof waived with the written consent of the Company and the Holder.

 

m)          Severability.
Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective
to the extent of such prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions
of this Warrant.

 

n)           Headings.
The headings used in this Warrant are for the convenience of reference only and shall not, for any purpose, be deemed a part of
this Warrant.

 

[Signature Page Follows.]

 

    12 

     

    

 

IN WITNESS WHEREOF,
the Company has caused this Warrant to be executed by its officer thereunto duly authorized as of the date first above indicated.

 

	PROTEA BIOSCIENCES GROUP, INC.	 
	 	 	 
	By:	 	 
	 	Name: Steve Turner	 
	 	Title:   Chief Executive Officer	 

  

     

     

    

 

EXHIBIT A

 

NOTICE OF EXERCISE

 

		TO:	PROTEA BIOSCIENCES GROUP, INC.

 

(1)   The
undersigned hereby elects to purchase ________ Warrant Shares of the Company pursuant to the terms of the attached Warrant and
tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any.

 

(2)   Please
issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is
specified below:

 

_______________________________

 

The Warrant Shares shall be delivered to the following DWAC
Account Number or by physical delivery of a certificate to:

 

_______________________________

 

_______________________________

 

_______________________________

 

(3)   Accredited Investor. The undersigned
is an “accredited investor” as defined in Regulation D promulgated under the Securities Act of 1933, as amended.

 

[SIGNATURE OF HOLDER] 

 

Name of Investing Entity:

________________________________________________________________________

 

Signature of Authorized Signatory of Investing Entity:

_________________________________________________

 

Name of Authorized Signatory:

___________________________________________________________________

 

Title of Authorized Signatory:

____________________________________________________________________

 

Date:

________________________________________________________________________________________

 

     

     

    

 

EXHIBIT B

 

ASSIGNMENT FORM

 

(To assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.)

 

FOR VALUE RECEIVED, [____] all of or [_______]
shares of the foregoing Warrant and all rights evidenced thereby are hereby assigned to

 

_______________________________________________ whose address
is

 

_______________________________________________________________.

 

 _______________________________________________________________

 

Dated: ______________, _______             

 

	 	Holder’s Signature:	 	 
	 	 	 	 
	 	Holder’s Address:	 	 
	 	 	 	 
	 	 	 	 

 

Signature Guaranteed: ___________________________________________

 

NOTE: The signature to this Assignment Form must correspond
with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be
guaranteed by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity
should file proper evidence of authority to assign the foregoing Warrant.

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