Document:

Exhibit 4.38

 

Warrant Certificate No. _______

 

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.

 

COMMON STOCK PURCHASE WARRANT

 

PROTEA
BIOSCIENCE GROUP, INC.

 

	 	Warrant Shares: 13,333,334	Initial Exercise
    Date: June 5, 2017

 

THIS COMMON
STOCK PURCHASE WARRANT (the “Warrant”) certifies that, for value received, ANDREAS WAWRLA (“Wawrla”)
or his assigns (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 June 5, 2020 (the “Termination Date”) but not thereafter, to subscribe
for and purchase from PROTEA BIOSCIENCES GROUP, INC., a Delaware corporation (the “Company”), up to the number
of shares indicated above (subject to adjustment as provided herein) of Common Stock (the “Warrant Shares”).
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).

 

This Warrant
is being issued together with a 20% unsecured original issue discount convertible debenture of the Company being issued to Wawrla
as of the Initial Exercise Date (the “Debenture”).

 

Section 1.        Definitions.
Capitalized terms used and not otherwise defined herein shall have the meanings set forth in that certain Securities Purchase
Agreement (the “Purchase Agreement”), dated June 5, 2017 among the Company and the purchaser signatory thereto.

 

     

     

    

 

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 facsimile copy of the Notice of Exercise form annexed hereto. Within three (3)
Trading Days following the date of exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for the shares
specified in the applicable Notice of Exercise by wire transfer or cashier’s check drawn on a United States bank unless
the cashless exercise procedure specified in Section 2(c) below is specified in the applicable Notice of Exercise. 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. The Company shall deliver any objection to any Notice of
Exercise within one (1) Business Day of receipt of such notice. The Holder and any assignee, by acceptance of this Warrant,
acknowledge and agree that, by reason of the provisions of this paragraph, following the purchase of a portion of the Warrant
Shares hereunder, the number of Warrant Shares available for purchase hereunder at any given time may be less than the amount
stated on the face hereof.

 

b)              Exercise
Price. The exercise price per share of the Common Stock under this Warrant shall be $0.075 subject to adjustment hereunder
(the “Exercise Price”). In addition to the other adjustment provisions provided herein, in the event that the
price per share of Common Stock sold in the Securities Offering (as such term is defined in the Debenture) shall be lower
than $0.075, the number of Warrant Shares shall be increased by dividing $500,000 by such lower per share price.

 

c)              Cashless
Exercise. If at any time after the six month anniversary of the date of the Purchase Agreement, there is no effective Registration
Statement registering, or no current prospectus available for, the resale of the Warrant Shares by the Holder, then this Warrant
may only be exercised, in whole or in part, at such time by means of a “cashless exercise” in which the Holder shall
be entitled to receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by
(A), where:

 

(A) = the VWAP
on the Trading Day immediately preceding the date on which Holder elects to exercise this Warrant by means of a “cashless
exercise,” as set forth in the applicable Notice of Exercise;

 

(B) = the Exercise Price of this
Warrant, as adjusted hereunder; and

 

(X) = the
number of Warrant Shares that would be issuable upon exercise of this Warrant in accordance with the terms of this Warrant if
such exercise were by means of a cash exercise rather than a cashless exercise.

 

     

     

    

 

Notwithstanding anything herein to
the contrary, on the Termination Date, this Warrant shall be automatically exercised via cashless exercise pursuant to this Section
2(c).

 

d)              Mechanics
of Exercise.

 

i.           Delivery
of Certificates upon Exercise. Certificates for shares purchased hereunder shall be transmitted by the Transfer Agent to the
Holder by crediting the account of the Holder’s prime broker with The Depository Trust Company through its Deposit or Withdrawal
at Custodian system (“DWAC”) if the Company is then a participant in such system and either (A) there is an
effective registration statement permitting the issuance of the Warrant Shares to or resale of the Warrant Shares by the Holder
or (B) the shares are eligible for resale by the Holder without volume or manner-of-sale limitations pursuant to Rule 144, and
otherwise by physical delivery to the address specified by the Holder in the Notice of Exercise by the date that is three (3)
Trading Days after the latest of (A) the delivery to the Company of the Notice of Exercise, (B) surrender of this Warrant (if
required), and (C) payment of the aggregate Exercise Price as set forth above (including by cashless exercise, if permitted) (such
date, the “Warrant Share Delivery Date”). The Warrant Shares shall be deemed to have been issued, and the 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, with payment to the Company of the Exercise Price (or by cashless exercise,
if permitted) and all taxes required to be paid by the Holder, if any, pursuant to Section 2(d)(vi) hereof prior to the issuance
of such shares, having been paid. If the Company 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 (based on the VWAP of the Common Stock
on the date of the applicable Notice of Exercise), $10.00 per Trading Day (increasing to $20.00 per Trading Day on the fifth Trading
Day after such liquidated damages begin to accrue) for each Trading Day after such Warrant Share Delivery Date until such certificates
are delivered or the Holder rescinds such exercise.

 

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 the Holder a new Warrant evidencing the rights of the 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
on Failure to Timely Deliver Certificates upon Exercise. In addition to any other rights available to the Holder, 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 an exercise on or before the Warrant Share Delivery Date (a “Delivery Failure”), then, in addition
to all other remedies available to the Holder, (1) the Company shall pay in cash to the Holder on each day after such third (3rd)
Trading Day that the issuance of such shares of Common Stock is not timely effected an amount equal to two percent (2%) of the
product of (A) the sum of the number of shares of Common Stock not issued to the Holder on a timely basis and to which the Holder
is entitled multiplied by (B) the Closing Sale Price of the Common Stock on the Trading Day immediately preceding the last possible
date which the Company could have issued such shares of Common Stock to the Holder without violating Section 2(d)Error! Reference
source not found., and (2) the Holder, upon written notice to the Company, may void its Notice of Exercise with respect to,
and retain or have returned (as the case may be) any portion of this Warrant that has not been exercised pursuant to such Exercise
Notice, provided that the voiding of a Notice of Exercise shall not affect the Company’s obligations to make any payments
which have accrued prior to the date of such notice pursuant to this Section 2(d)(iv) or otherwise. In addition to the foregoing,
if within three (3) Trading Days after the Company’s receipt of a Notice of Exercise (whether via facsimile or otherwise),
the Company shall fail to issue and deliver a certificate to the Holder and register such shares of Common Stock on the Company’s
share register or credit the Holder’s or its designee’s balance account with DTC for the number of shares of Common
Stock to which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be), and if on or after such
third (3rd) Trading Day the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to
deliver in satisfaction of a sale by the Holder of shares of Common Stock issuable upon such exercise that the Holder anticipated
receiving from the Company (a “Buy-In”), then, in addition to all other remedies available to the Holder, the
Company shall, within three (3) Business Days after the Holder’s request and provision of trade confirmations and in the
Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including
brokerage commissions and other out-of-pocket expenses, if any) for the shares of Common Stock so purchased (the “Buy-In
Price”), at which point the Company’s obligation to deliver such certificate (and to issue such shares of Common
Stock) shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a certificate or certificates representing
such shares of Common Stock or credit the Holder’s balance account with DTC for the number of shares of Common Stock to
which the Holder is entitled upon the Holder’s exercise hereunder (as the case may be) and pay cash to the Holder in an
amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock multiplied
by (B) the VWAP of the Common Stock on the Trading Day immediately preceding the Exercise Date.

 

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 the 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 attached hereto
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 stockholder books or records in any manner which prevents the timely exercise of
this Warrant, pursuant to the terms hereof.

 

e)              Holder’s
Exercise Limitations. The Company shall not effect any exercise of this Warrant, and a 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 as set forth on the applicable Notice of Exercise, the Holder (together with the Holder’s Affiliates, and
any other Persons 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 the foregoing sentence, the number
of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock
issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number of
shares of Common Stock which would be issuable upon (i) exercise of the remaining, nonexercised portion of this Warrant beneficially
owned by the Holder or any of its Affiliates and (ii) exercise or conversion of the unexercised or nonconverted portion of any
other securities of the Company (including, without limitation, any other Common Stock Equivalents) subject to a limitation on
conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates. 
Except as set forth in the preceding sentence, for purposes of this Section 2(e), beneficial ownership shall be calculated in
accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder, it being acknowledged
by the Holder that the Company is not representing to the Holder that such calculation is in compliance with Section 13(d) of
the Exchange Act and the Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent
that the limitation contained in this Section 2(e) applies, the determination of whether this Warrant is exercisable (in relation
to other securities owned by the Holder together with any Affiliates) and of which portion of this Warrant is exercisable shall
be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination
of whether this Warrant is exercisable (in relation to other securities owned by the Holder together with any Affiliates) and
of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company
shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group
status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations
promulgated thereunder. For purposes of this Section 2(e), in determining the number of outstanding shares of Common Stock, a
Holder may rely on the number of outstanding shares of Common Stock as reflected in (A) the Company’s most recent periodic
or annual report filed with the Commission, as the case may be, (B) a more recent public announcement by the Company or (C) a
more recent written notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. 
Upon the written or oral request of a Holder, the Company shall within two Trading Days confirm orally and in writing to the Holder
the number of shares of Common Stock then outstanding.  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 shares of Common Stock 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(e), 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 Warrant held by the Holder and the provisions
of this Section 2(e) 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 provisions of this paragraph shall be construed and implemented in a manner
otherwise than in strict conformity with the terms of this Section 2(e) to correct this paragraph (or any portion hereof) which
may be defective or inconsistent with the intended Beneficial Ownership Limitation herein contained or to make changes or supplements
necessary or desirable to properly give effect to such limitation. The limitations contained in this paragraph shall apply to
a successor holder of this Warrant.

 

     

     

    

 

Section 3.        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
makes 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 shares of Common Stock 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 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.

 

b)              Subsequent
Equity Sales.

 

(i)          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, at an effective price per share less than
the Exercise Price then in effect (such lower price, the “New Issuance Price” and such issuances collectively,
a “Dilutive Issuance”) (it being understood and agreed that 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 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 at such
effective price), then simultaneously with the consummation of each Dilutive Issuance the Exercise Price shall be reduced and
only reduced by multiplying the Exercise Price by a fraction, the numerator of which is the number of shares of Common Stock issued
and outstanding immediately prior to the Dilutive Issuance plus the number of shares of Common Stock which the offering price
for such Dilutive Issuance would purchase at the then Exercise Price, and the denominator of which shall be the sum of the number
of shares of Common Stock issued and outstanding immediately prior to the Dilutive Issuance plus the number of shares of Common
Stock so issued or issuable in connection with the Dilutive Issuance (subject to adjustment for stock splits, reverse splits and
similar capital adjustments). 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.

 

     

     

    

 

As used in this Warrant, the term “Exempt Issuance”
shall mean the issuance of any Common Stock or Common Stock Equivalent by the Company in connection with (a) the acquisition of
the securities, assets or business of, or any joint venture with, any other Person; provided that the Company does not finance
the purchase price of such acquisition or joint venture through the sale of any Common Stock or Common Stock Equivalents, (b)
stock options or stock grants issued to employees of or consultants to the Company or any Subsidiary; or (c) the issuance of Common
Stock or Common Stock Equivalents in exchange for notes, debentures or other evidence of Indebtedness.

 

(ii)         The
Company shall promptly notify the Holder, in writing, following the issuance or deemed 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, the Holder is entitled to exercise the Warrant at the Adjusted Price regardless of whether the Holder
accurately refers to the Adjusted Price in the Notice of Exercise.

 

(iii)        If
the Company enters into a Variable Rate Transaction, despite the prohibition thereon in the Purchase Agreement, the Company shall
be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion or exercise price at which
such securities may be converted or exercised. For clarity, no adjustment of the number of Warrant Shares shall be made upon any
adjustment of the Exercise Price pursuant to this Section 3(b).

 

(iv)        If
the purchase or exercise price provided for in any Common Stock Equivalents, or the rate at which any Common Stock Equivalents
are convertible into or exercisable or exchangeable for shares of Common Stock increases or decreases at any time, the Exercise
Price in effect at the time of such increase or decrease shall be adjusted to the Exercise Price which would have been in effect
at such time had such Common Stock Equivalents provided for such increased or decreased purchase price, additional consideration
or increased or decreased conversion rate, as the case may be, at the time initially granted, issued or sold. For purposes of
this Section 3(b)(iv), if the terms of any Common Stock Equivalents that was outstanding as of the date of issuance of this Warrant
are increased or decreased in the manner described in the immediately preceding sentence, then such Common Stock Equivalents and
the shares of Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as
of the date of such increase or decrease.

 

     

     

    

 

(v)         No
adjustment pursuant to this Section 3(b) shall be made if such adjustment would result in an increase of the Exercise Price then
in effect.

 

c)              [Number
of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to paragraphs (a) or (b) of this Section
3, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately,
so that after such adjustment the aggregate Exercise Price payable hereunder for the adjusted number of Warrant Shares shall be
the same as the aggregate Exercise Price in effect immediately prior to such adjustment (without regard to any limitations on
exercise contained herein).]

 

d)              Subsequent
Rights Offerings. In addition to any adjustments pursuant to Section 3(a) above, 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).

 

e)              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, 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 the then 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.

 

     

     

    

 

f)               Fundamental
Transaction. If, at any time while this Warrant is outstanding, (i) the Company, directly or indirectly, in one or more related
transactions effects any merger or consolidation of the Company with or into another Person, (ii) the Company, directly or indirectly,
effects any sale, lease, license, assignment, transfer, conveyance or other disposition of all or substantially all of its assets
in one or a series of related transactions, (iii) any, direct or indirect, purchase offer, tender offer or exchange offer (whether
by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to sell, tender or exchange
their shares for other securities, cash or property and has been accepted by the holders of 50% or more of the outstanding Common
Stock, (iv) the Company, directly or indirectly, in one or more related transactions effects any reclassification, reorganization
or recapitalization 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, or (v) the Company, directly or indirectly, in one or more related transactions
consummates a stock or share purchase agreement or other business combination (including, without limitation, a reorganization,
recapitalization, spin-off or scheme of arrangement) with another Person or group of Persons whereby such other Person or group
acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person
or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock or share
purchase agreement or other business combination) (each a “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, at the option of the Holder (without regard
to any limitation in Section 2(e) on the exercise of this Warrant), 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 (without regard to any limitation in Section 2(e) on the exercise
of this Warrant). 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. 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 (as
defined below) shall, at the Holder’s option, exercisable at any time concurrently with, or within 30 days after, the consummation
of the Fundamental Transaction, purchase this Warrant from the Holder by paying to the Holder an amount of cash equal to the Black
Scholes Value of the remaining unexercised portion of this Warrant on the date of the consummation of such Fundamental Transaction.
“Black Scholes Value” means the value of this Warrant based on the Black and Scholes Option Pricing Model obtained
from the “OV” function on Bloomberg, L.P. (“Bloomberg”) determined as of the day of consummation
of the applicable Fundamental Transaction for pricing purposes and reflecting (A) a risk-free interest rate corresponding to the
U.S. Treasury rate for a period equal to the time between the date of the public announcement of the applicable Fundamental Transaction
and the Termination Date, (B) an expected volatility equal to the greater of 100% and the 100 day volatility obtained from the
HVT function on Bloomberg as of the Trading Day immediately following the public announcement of the applicable Fundamental Transaction,
(C) the underlying price per share used in such calculation shall be the sum of the price per share being offered in cash, if
any, plus the value of any non-cash consideration, if any, being offered in such Fundamental Transaction and (D) a remaining option
time equal to the time between the date of the public announcement of the applicable Fundamental Transaction and the Termination
Date. The Company shall cause any successor entity in a Fundamental Transaction in which the Company is not the survivor (the
“Successor Entity”) to assume in writing all of the obligations of the Company under this Warrant and the other
Transaction Documents in accordance with the provisions of this Section 3(f) pursuant to written agreements in form and substance
reasonably satisfactory to the Holder and approved by the Holder (without unreasonable delay) prior to such Fundamental Transaction
and shall, at the option of the Holder, deliver to the Holder in exchange for this Warrant a security of the Successor Entity
evidenced by a written instrument substantially similar in form and substance to this Warrant which is exercisable for a corresponding
number of shares of capital stock of such Successor Entity (or its parent entity) equivalent to the shares of Common Stock acquirable
and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such
Fundamental Transaction, and with an exercise price which applies the exercise price hereunder to such shares of capital stock
(but taking into account the relative value of the shares of Common Stock pursuant to such Fundamental Transaction and the value
of such shares of capital stock, such number of shares of capital stock and such exercise price being for the purpose of protecting
the economic value of this Warrant immediately prior to the consummation of such Fundamental Transaction), and which is reasonably
satisfactory in form and substance to the Holder. Upon the occurrence of any such Fundamental Transaction, the Successor Entity
shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this
Warrant and the other Transaction Documents referring to the “Company” shall refer instead to the Successor Entity),
and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant
and the other Transaction Documents with the same effect as if such Successor Entity had been named as the Company herein.

 

     

     

    

 

g)              Calculations.
All calculations under this Section 3 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 3, 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.

 

h)              Notice
to Holder.

 

i.            Adjustment
to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any provision of this Section 3, the Company shall
promptly mail to the Holder a notice setting forth the Exercise Price after such adjustment and any resulting adjustment to the
number of Warrant Shares and setting forth a brief statement of the facts requiring such adjustment.

 

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 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, or 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 (as defined below) of the Company, at least ten (10) Trading Days, or such
longer period as may be required by law, 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. To the extent that any notice provided hereunder constitutes, or contains, material, non-public
information regarding the Company or any of the Subsidiaries, the Company shall simultaneously file such notice with the Commission
pursuant to a Current Report on Form 8-K. The Holder shall remain 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 except as may otherwise be expressly set
forth herein.

 

     

     

    

 

Section 4.        Transfer
of Warrant.

 

a)              Transferability.
Subject to compliance with any applicable securities laws and the conditions set forth in Section 4(d) hereof and to the provisions
of Section 4.3 of the Purchase 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 in accordance herewith, 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 4(a) hereof, 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.

 

     

     

    

 

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 or current public information requirements 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 Section 5.7 of the Purchase Agreement.

 

e)              Representation
by the Holder. The Holder, by the acceptance hereof, represents and warrants that it is acquiring this Warrant and, upon any
exercise hereof, will acquire the Warrant Shares issuable upon such exercise, for its own account and not with a view to or for
distributing or reselling such Warrant Shares or any part thereof in violation of the Securities Act or any applicable state securities
law, except pursuant to sales registered or exempted under the Securities Act.

 

Section 5.        Miscellaneous.

 

a)              No
Rights as Stockholder Until Exercise. This Warrant does not entitle the Holder to any voting rights, dividends or other rights
as a stockholder of the Company prior to the exercise hereof as set forth in Section 2(d)(i).

 

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.

 

The Company covenants
that, during the period the Warrant is outstanding, it will reserve from its authorized and unissued Common Stock a sufficient
number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant.
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 and payment for such Warrant Shares in accordance herewith, 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).

 

     

     

    

 

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 certificate or articles of incorporation or formation 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 Purchase Agreement.

 

f)               Restrictions.
The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if not registered and the Holder does
not utilize cashless exercise, 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 the 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 the 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 the 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 Purchase Agreement.

 

i)               Limitation
of Liability. No provision hereof, in the absence of any affirmative action by the Holder to exercise this Warrant to purchase
Warrant Shares, and no enumeration herein of the rights or privileges of the Holder, shall give rise to any liability of the Holder
for the purchase price of any Common Stock or as a stockholder 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 and permitted assigns of the Company and the successors and permitted assigns
of Holder. The provisions of this Warrant are intended to be for the benefit of any Holder 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)

 

     

     

    

 

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:	/s/ Stephen Turner
	 	 	 
	 	 	Name: Stephen Turner
	 	 	 
	 	 	Title: President

 

     

     

    

 

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 (only
if exercised in full), and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes,
if any.

 

(2)     Payment
shall take the form of (check applicable box):

 

[ ] in lawful
money of the United States; or

 

[ ] [if permitted]
the cancellation of such number of Warrant Shares as is necessary, in accordance with the formula set forth in subsection 2(c),
to exercise this Warrant with respect to the maximum number of Warrant Shares purchasable pursuant to the cashless exercise procedure
set forth in subsection 2(c).

 

(3)     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:

 

_______________________________

 

_______________________________

 

_______________________________

 

(4)    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: ________________________________________________________________________________________

 

     

     

    

 

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

 

_______________________________________________________________.

 

_______________________________________________________________

 

Date:
______________, _______

 

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.Exhibit 4.40

LAIDLAW & COMPANY (UK)
LTD.

 

546 Fifth Avenue41 Dover Street

New York, NY 10036W1S 4NS
London

 

* Member FINRA, SIPC*

*Incorporated in England &
Wales: Company No. 3870324*

 

 

CONFIDENTIAL

 

 

July 19, 2017

Mr. Stephen C. Turner Chief Executive Officer

Protea Biosciences Group, Inc. 955 Hartman Run Road

Morgantown, WV 26507

 

	Re:		Registered Public Offering with Effective Registration Statement

 

Dear Mr. Turner:

 

The purpose of this
engagement letter is to outline our agreement pursuant to which Laidlaw & Company (UK) Ltd., a United Kingdom corporation
with offices at 546 Fifth Avenue, 5th Floor, New York, New York 10036
(“Laidlaw”), will act as the lead underwriter on a firm commitment basis in connection with the proposed
registered public offering (the “Offering”) of common stock (the “Common Stock”) by
Protea Biosciences Group, Inc., a Delaware corporation (collectively, with its subsidiaries and affiliates, the
“Company”). This engagement letter sets forth certain conditions and assumptions upon which the Offering
is premised. However, except as expressly provided herein, this engagement letter is not intended to be a binding legal
document, as the agreement between the parties hereto on the matters relating to the Offering will be embodied in the
Underwriting Agreement (as defined below).

 

The terms of our agreement in principle
are as follows:

 

1.                  
The Company hereby engages Laidlaw, for the period beginning on the date hereof and ending 180 days from the date hereof
or on the consummation of the Offering whichever is the earlier, unless sooner terminated pursuant to the terms of this engagement
letter (the “Engagement Period”), to act as the Company’s lead managing underwriter and/or book runner
and investment banker in connection with the proposed Offering. Conditions of the offering will include, among other items, (a)
approval of and consent by a majority of the voting capital stock of the Company of an additional reverse split of all of the outstanding
shares of the common stock of the Company, as mutually determined by the Company and Laidlaw, after giving effect to such reverse
split, and (b) approval for the listing of the Company’s shares of common stock on the NASDAQ Capital Market or the NYSE
MKT. During the Engagement Period or until the consummation of the Offering, and as long as Laidlaw is proceeding in good faith
with preparations for the Offering, the Company agrees not to solicit, negotiate with or enter into any agreement with any other
source of financing (whether equity or debt), any underwriter, potential underwriter, placement agent, financial advisor, investment
banking firm or any other person or entity in connection with an offering of the Company’s debt or equity, securities or
any other financing by the Company except for agreements already existing at the time this agreement is signed. Notwithstanding
the foregoing, subject to the consent of Laidlaw (such consent not to be unreasonably withheld, conditioned or delayed), the Company
may request that one or more other recognized investment banking firms act as co-managing underwriters to assist Laidlaw
in connection with the Offering; provided that, unless otherwise agreed, Laidlaw shall continue to be the lead managing underwriter
and book runner.

 

    1 

     

    

2.                  
The Offering will consist of the sale of up to $15 million worth of common stock of the Company (the securities to be sold
in the Offering, including any Over-Allotment Shares defined in paragraph 4 below, is hereinafter referred to as the “Securities”).
Laidlaw will act as sole underwriter of the Offering, or as lead managing underwriter of an underwriting syndicate, subject to,
among other matters referred to herein and additional customary conditions, completion of Laidlaw’s due diligence examination
of the Company and its affiliates, and the execution of a definitive underwriting agreement between the Company and Laidlaw in
connection with the Offering (the “Underwriting Agreement”). Laidlaw may: (i) with the Company’s approval
(not to be unreasonably withheld, conditioned or delayed), create an underwriting syndicate for the Offering comprised of broker-dealers
who are members of the Financial Industry Regulatory Authority (“FINRA”), (ii) rely on soliciting dealers who
are FINRA members to participate in placing a portion of the Offering, (iii) offer Securities to such dealers at less than the
public offering price, provided that such offer complies with Securities and Exchange Commission and FINRA rules and regulations
and/or (iv) offer Securities in foreign jurisdictions.

 

3.                  
The actual size of the Offering, the precise number of Securities to be offered by the Company and the offering price per Share
will be the subject of continuing negotiations between the Company, and Laidlaw and will depend
upon, among other factors: (i) the capitalization of the Company at the time of the Offering, (ii) the prevailing market price
for the Company’s publicly traded common stock, (iii) market and general economic conditions and changes in the prospects
and/or forecasts of the Company, (iv) Laidlaw’s review of the Company’s audited annual financial statements, unaudited
quarterly financial statements and any other financial statements and related schedules of the Company on a post-acquisition basis,
(v) Laidlaw’ determination of the Company’s pre-money valuation (based upon the information provided to Laidlaw by
the Company) and (v other factors reasonably determined by Laidlaw and the Company.

 

4.                  
The Underwriting Agreement will provide that the Company will grant to Laidlaw an option, exercisable within 45 days after
the closing of the Offering (“Closing”), to acquire up to an additional 15% of the total number of Securities
to be offered by the Company in the Offering, solely for the purpose of covering over-allotments (the “Over-allotment
Shares”).

 

5.                  
The Company will pay Laidlaw a non-refundable retainer of $40,000 (forty thousand dollars) and an underwriting discount
or spread of 7.0% (seven percent) of the public offering price (the “Discount”); a non-accountable allowance
of 1.0% and warrants (the “Representative Warrants”) to purchase that number of shares of common stock of the
Company equal to 7% of the shares of common stock of the Company sold to the public in the Offering but not including the over-allotment
shares. The Representative Warrants shall have an exercise price equal to 110% of the initial offering price. and will be exercisable
at any time and from time to time, in whole or in part, during the five-year period commencing one year from the Closing and will
provide for registration rights (including a one-time demand registration right and unlimited piggyback rights) and customary anti-dilution
provisions (for stock dividends and splits and recapitalizations) consistent with FINRA Rule 5110, and further, the number of shares
underlying the Representative Warrants shall be reduced if necessary to comply with FINRA rules or regulations. Laidlaw shall also
be paid its expenses incurred as a result of the offering as set forth in paragraph 8 below.

 

6.                  
The Company represents to Laidlaw that it will file with the Securities and Exchange Commission (the “Commission”)
a Registration Statement on Form S-1 (, the “Registration Statement”) under the Securities Act of 1933, as
amended (the “Securities Act”). The Company further represents that neither the Commission nor, to the Company’s
knowledge, any state regulatory authority, has issued any order preventing or suspending the use of the Registration Statement
or any preliminary prospectus included as part of the Registration Statement (the “Prospectus”), or has instituted
or, to the Company’s knowledge, threatened to institute, any proceedings with respect to such an order. The Prospectus shall
contain or incorporate by reference: (i) audited annual financial statements, unaudited quarterly financial statements of the
Company and such other financial statements and schedules as may be required by the Securities Act and rules and regulations of
the Commission thereunder, and (ii) a description of the business of the Company and such other disclosures regarding the Company
and its officers and directors as may be required by the Securities Act and rules and regulations of the Commission thereunder.

    2 

     

    

7.                  
The final Underwriting Agreement will be in form satisfactory to the Company and Laidlaw and will include indemnification
provisions and other terms and conditions customarily found in underwriting agreements for registered public offerings. Without
limiting the generality of the foregoing, the Underwriting Agreement will contain customary representations and warranties of the
Company and will further provide, in addition to the matters addressed herein, that the Company’s directors and officers
as of the pricing date of the Offering, will enter into “lock-up” agreements in favor of Laidlaw as more fully described
in the Prospectus.

 

8.                  
Promptly following the date hereof, the Company shall make all necessary state “blue sky” securities law filings
with respect to the Securities to be sold in the Offering. The Company and Laidlaw will cooperate in obtaining the necessary approvals
and qualifications in such states as Laidlaw deems necessary and/or desirable. The Company will be responsible for and pay all
expenses relating to the Offering, including, without limitation, (a) all filing fees relating to the registration of the Securities
to be sold in the Offering with the Commission; (b) all actual FINRA filing fees associated with the review of the Offering by
FINRA; (c) all fees and expenses relating to the listing of such Securities on the NASDAQ Stock Market; (d) all actual fees, expenses
and disbursements relating to background checks of the Company’s officers and directors; (e) all fees, expenses and disbursements
relating to the registration or qualification of such Securities under the “blue sky” securities laws of such states
and other jurisdictions as Laidlaw may reasonably designate (including, without limitation, all filing and registration fees));
(f) all fees, expenses and disbursements relating to the registration, qualification or exemption of such Securities under the
securities laws of such foreign jurisdictions as Laidlaw may reasonably designate; (g) the costs of all mailing and printing of
the underwriting documents (including, without limitation, the Underwriting Agreement, any Blue Sky Surveys and, if appropriate,
any Agreement Among Underwriters, Selected Dealers’ Agreement, Underwriters’ Questionnaire and Power of Attorney),
Registration Statements, Prospectuses and all amendments, supplements and exhibits thereto and as many preliminary and final Prospectuses
as Laidlaw may reasonably deem necessary; (h) the costs of preparing, printing and delivering certificates representing the Securities;
(i) fees and expenses of the transfer agent for the Common Stock; (j) stock transfer and/or stamp taxes, if any, payable upon the
transfer of securities from the Company to Laidlaw; (k) the fees and expenses of the Company’s accountants; (l) the legal
fees and expenses and fees and expenses of any other agents and representatives of the Company incurred as a result of the Offering;
(m) all fees and expenses of Laidlaw, including, without limitation, its legal fees and expenses, all such fees not to exceed $125,000
in the aggregate and (n) all fees, expenses and disbursements relating to background checks of the Company’s officers and
directors in an amount not to exceed $5,000 in the aggregate. All such expenses in this paragraph 8 will be payable from proceeds
of the Offering or directly by the Company in the event the Offering does not take place.

 

9.                  
If in connection with the Offering, Laidlaw arranges one or more “road show” marketing trips for the Company’s
management to meet with prospective investors, such trips will include visits to a number of prospective institutional and retail
investors. The Company will pay for its own expenses, including, without limitation, the costs of recording and hosting on the
Internet of the Company’s road show presentation and travel and lodging expenses incurred by the Company associated with
such trips. Laidlaw will bear its own roadshow expenses in the event of a successful transaction and will be reimbursed in full
by the Company in the event the Offering contemplated by this engagement does not price.

 

10.               
At such time as the Company and Laidlaw are mutually satisfied that it is appropriate to commence the Offering, the final
terms of the Underwriting Agreement will be negotiated and a final Prospectus will be filed with
the Commission pursuant to Rule 424(b) under the Securities Act.

 

    3 

     

    

11.              
The Offering will be conditioned upon, among other things, the following:

 

(a)                
Satisfactory completion by Laidlaw of its due diligence investigation and analysis of, among other things: (i) the Company’s
arrangements with its officers, directors, employees, affiliates, customers and suppliers and (ii) the Company’s audited
and unaudited historical financial statements as may be required by the Securities Act and the Securities Exchange Act of 1934,
as amended (the “Exchange Act”) and rules and regulations of the Commission thereunder, and approval by Laidlaw’
commitment committee;

 

(b)               
The execution by the Company and Laidlaw of a definitive Underwriting Agreement containing all applicable terms and conditions
provided for in this engagement letter;

 

(c)                
The Common Stock’s being listed on the NASDAQ Capital Market or the NYSE MKT and seeking and using its commercially
reasonable efforts to maintain such listing for a period of at least two years after the closing of the Offering (“Closing”);

 

(d)               
Neither the Company nor any of its affiliates having made any offer or sale of any securities which are required to be “integrated”
pursuant to the Securities Act or the regulations thereunder with the offer and sale of the Securities pursuant to the Prospectus;

 

(e)                
The Company’s registration of the Common Stock under the provisions of Section 12(b) or (g), as applicable, of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) on or prior to the effective date of the Offering;

 

12.               
(a) Except as provided in Paragraphs 1, 11, 12, 13, 16 and 17 hereof (which Paragraphs are intended to be legally binding
and enforceable on and against the Company and Laidlaw), this engagement letter is not intended to be a binding legal document
nor a legal commitment on the part of Laidlaw to provide any financing to the Company, as the agreement between the parties hereto
on these matters will be embodied in the Underwriting Agreement. Until the Underwriting Agreement has been finally negotiated and
signed, the Company or Laidlaw may at any time terminate their further participation in the proposed transactions contemplated
hereby and the engagement by the Company of Laidlaw, and the party so terminating will have no liability to the other on account
of any matters provided for herein, except as provided for in this Paragraph.

 

(b)                 Regardless
of which party elects to terminate their further participation in the proposed transactions contemplated hereby and the
engagement by the Company of Laidlaw, upon such termination, the Company agrees to reimburse Laidlaw for, or otherwise pay
and bear, the expenses and fees to be paid and borne by the Company as provided for in Paragraph 7 above and to
reimburse Laidlaw for the full amount of its actual accountable and documented expenses incurred to such date up to a maximum
of $50,000 (provided, however, that such expense cap in no way limits or impairs the indemnification and contribution
provisions of this engagement letter) for all such expenses (which expenses will include, but will not be limited to, all
reasonable fees and disbursements of Laidlaw’s counsel, travel, lodging and other “road show” expenses,
mailing, printing and reproduction expenses, and any expenses incurred by Laidlaw in conducting its due diligence, including
background checks of the Company’s officers and directors), less amounts, if any, previously paid to Laidlaw in
reimbursement for such expenses; provided, however, that Laidlaw will not be entitled to any such reimbursement if:
(i) Laidlaw terminates Laidlaw’s engagement prior to the execution of the Underwriting Agreement for other than Good
Reason (as defined below) or (ii) the Company terminates Laidlaw’s engagement prior to the execution of the
Underwriting Agreement on account of Laidlaw’s gross negligence or willful misconduct.

    4 

     

    

 

(c)                
As used herein, the term “Good Reason” means: (i) the failure of the Company to proceed with the Offering
in good faith, (ii) the gross negligence or willful misconduct of the Company, (iii) the occurrence of any domestic or international
event or act or occurrence which materially disrupts, or in Laidlaw’s reasonable opinion will, in the immediate future, materially
disrupt, general securities markets in the United States, (iv) the Company will have sustained a material loss by fire, flood,
accident, hurricane, earthquake, theft, sabotage or other calamity or malicious act which, whether or not such loss will have been
insured, will, in Laidlaw’s sole reasonable judgment, make it inadvisable to proceed with the Offering; (v) a material adverse
change in the conditions or prospects of the Company which would make it, in Laidlaw’s sole reasonable judgment impracticable
to proceed with the Offering.

 

13.               
The Company represents to Laidlaw that the Company is or will be liable for any finder’s fees to third parties in
connection with the introduction of the Company to Laidlaw. The Company represents and warrants to Laidlaw that the entry into
this engagement letter or any other action of the Company in connection with the proposed Offering will not violate any agreement
between the Company and any other underwriter. Laidlaw reserves the right to reduce any item of its compensation or adjust the
terms thereof as specified herein in the event that a determination and/or suggestion will be made by FINRA to the effect that
the underwriters’ aggregate compensation is in excess of FINRA rules or that the terms thereof require adjustment; provided,
however, the aggregate compensation otherwise to be paid to the underwriters by the Company may not be increased above the amounts
stated herein without the written approval of the Company.

 

14.               
In addition, the Company will not, without the prior written consent of Laidlaw, make any offer relating to the Securities
that would constitute an “issuer free writing prospectus,” as defined in Rule 433 under the Securities Act, or that
would otherwise constitute a “free writing prospectus,” as defined in Rule 405 under the Securities Act required to
be filed with the Commission.

 

15.               
The Company agrees that it will not issue press releases or engage in any other publicity, without first providing Laidlaw
with a copy of such press release or publicity, commencing on the date hereof and continuing until the Closing. For purposes of
clarity, the Company will file with the SEC any information and issue any press release it reasonably believes is required by law
and it will not provide a copy to Laidlaw in advance of such publication and it will not seek consent from Laidlaw to make such
publication or filing. The Company and its officers, directors and related parties shall at all times abide in all material respects
by all rules and regulations of the Commission relating to disclosures of material non-public information.

 

16.               
During the Engagement Period or until the Closing, the Company agrees to cooperate with Laidlaw and to furnish, or cause
to be furnished, to Laidlaw, any and all information and data concerning the Company and the Offering that Laidlaw reasonably deems
appropriate (the “Information”). The Company will provide Laidlaw reasonable access during normal business
hours upon reasonable advance notice by Laidlaw from and after the date of execution of this Agreement until the date of the Closing
to all of the Company’s assets, properties, books, contracts, commitments and records and to the Company’s officers,
directors, employees, appraisers, independent accountants, legal counsel and other consultants and advisors. The Company represents
and warrants to Laidlaw that all Information: (i) contained in the Registration Statement and/or any preliminary or final Prospectus
prepared by the Company in connection with the Offering, and (ii) contained in any filing by the Company with any court or governmental
regulatory agency, commission or instrumentality, is or will be complete and correct in all material respects and does not and
will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary
to make the statements therein, in the light of the circumstances under which such statements were made, not misleading. The Company
acknowledges and agrees that in rendering its services hereunder, Laidlaw will be using and relying on such Information (and information
available from public sources and other sources deemed reliable by Laidlaw) without independent verification thereof by Laidlaw
or independent appraisal by Laidlaw of
any of the Company’s assets. The Company acknowledges and agrees that this engagement letter and the terms hereof are confidential
and will not be disclosed to anyone other than the officers and directors of the Company and the Company’s accountants, advisors
and legal counsel, except as required by applicable law or regulations of a governmental authority. Except as contemplated by the
terms hereof or as required by applicable law, Laidlaw will keep strictly confidential all non-public Information concerning the
Company provided to Laidlaw. No obligation of confidentiality will apply to Information that: (a) is in the public domain as of
the date hereof or hereafter enters the public domain without a breach by Laidlaw, (b) was known or became known by Laidlaw prior
to the Company’s disclosure thereof to Laidlaw as demonstrated by the existence of its written records, (c) becomes known
to Laidlaw from a source other than the Company, and other than by the breach of an obligation of confidentiality owed to the Company,
(d) is disclosed by the Company to a third party without restrictions on its disclosure or (e) is independently developed by Laidlaw
without using such confidential information.

 

    5 

     

    

17.               
This engagement letter does not create, and shall not be construed as creating rights enforceable by any person or entity
not a party hereto, except those entitled hereto solely by virtue of the indemnification provisions hereof. The Company acknowledges
and agrees that Laidlaw is not and shall not be construed as a fiduciary of the Company and shall have no duties or liabilities
to the equity holders or the creditors of the Company or any other person by virtue of this engagement letter or the retention
of Laidlaw hereunder, all of which are hereby expressly waived.

 

18.                
(a) To the extent permitted by law, the Company will indemnify Laidlaw and its affiliates, stockholders, directors, officers,
employees, members and controlling persons (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) against all losses, claims, damages, expenses and liabilities, as the same are incurred (including the reasonable fees and
expenses of counsel), relating to or arising out of a material misrepresentation by the Company set forth in this engagement letter,
except to the extent that any losses, claims, damages, expenses or liabilities (or actions in respect thereof) are found in a final
judgment (not subject to appeal) by a court of law of competent jurisdiction to have resulted primarily and directly from Laidlaw’
willful misconduct or gross negligence in performing the services described herein.

 

(b)               
Promptly after receipt by Laidlaw of notice of any claim or the commencement of any action or proceeding with respect to
which Laidlaw is entitled to indemnity hereunder, Laidlaw will notify the Company in writing of such claim or of the commencement
of such action or proceeding, but failure to so notify the Company shall not relieve the Company from any obligation it may have
hereunder, except and only to the extent such failure results in the forfeiture by or a material prejudice to the Company of rights
and defenses. If the Company so elects or is requested by Laidlaw, the Company will assume the defense of such action or proceeding
and will employ counsel reasonably satisfactory to Laidlaw and will pay the fees and expenses of such counsel. Notwithstanding
the preceding sentence, Laidlaw will be entitled to employ counsel separate from counsel for the Company and from any other party
in such action if counsel for Laidlaw reasonably determines that it would be inappropriate under the applicable rules of professional
responsibility for the same counsel to represent both the Company and Laidlaw. In such event, the reasonable fees and disbursements
of no more than one such separate counsel for all indemnified parties will be paid by the Company. The Company will have the exclusive
right to settle the claim or proceeding provided that the Company will not settle any such claim, action or proceeding without
the prior written consent of Laidlaw, which will not be unreasonably withheld, conditioned or delayed.

 

(c)                
The Company agrees to notify Laidlaw promptly of the assertion against it or any other person of any claim or the commencement
of any action or proceeding relating to a transaction contemplated by this engagement letter.

 

    6 

     

    

 

(d)               
If for any reason the foregoing indemnity is unavailable to Laidlaw or insufficient to hold Laidlaw harmless, then the Company
shall contribute to the actual amount paid or payable by Laidlaw as a result of such losses, claims, damages or liabilities in
such proportion as is appropriate to reflect not only the relative benefits received by the Company on the one hand and Laidlaw
on the other, but also the relative fault of the Company on the one hand and Laidlaw on the other that resulted in such losses,
claims, damages or liabilities, as well as any relevant equitable considerations. The amounts paid or payable by a party in respect
of losses, claims, damages and liabilities referred to above shall be deemed to include any legal or other fees and expenses incurred
in defending any litigation, proceeding or other action or claim. Notwithstanding the provisions hereof, Laidlaw’s share
of the liability hereunder shall not be in excess of the amount of fees actually received, or to be received, by Laidlaw under
this engagement letter (excluding any amounts received as reimbursement of expenses incurred by Laidlaw).

 

(e)               
These indemnification provisions shall remain in full force and effect whether or not the transaction contemplated by this
engagement letter is completed and shall survive the termination of this engagement letter, and shall be in addition to any liability
that the Company might otherwise have to any indemnified party under this engagement letter or otherwise.

 

19.              
The Company represents that it has the corporate power and authority to enter into this engagement letter and the transactions
contemplated hereby. This engagement letter will be deemed to have been made and delivered in New York City and both the binding
provisions of this engagement letter and the transactions contemplated hereby and by the Underwriting Agreement will be governed
as to validity, interpretation, construction, effect and in all other respects by the internal laws of the State of New York, without
regard to the conflict of laws principles thereof. Each of Laidlaw and the Company: (i) agrees that any legal suit, action or proceeding
arising out of or relating to this engagement letter and/or the transactions contemplated hereby will be instituted exclusively
in New York Supreme Court, County of New York, or in the United States District Court for the Southern District of New York, (ii)
waives any objection which it may have or hereafter to the venue of any such suit, action or proceeding, and (iii) irrevocably
consents to the jurisdiction of the New York Supreme Court, County of New York, and the United States District Court for the Southern
District of New York in any such suit, action or proceeding. Each of Laidlaw and the Company further agrees to accept and acknowledge
service of any and all process which may be served in any such suit, action or proceeding in the New York Supreme Court, County
of New York, or in the United States District Court for the Southern District of New York and agrees that service of process upon
the Company mailed by certified mail to the Company’s address will be deemed in every respect effective service of process
upon the Company, in any such suit, action or proceeding, and service of process upon Laidlaw mailed by certified mail to Laidlaw’
address will be deemed in every respect effective service process upon Laidlaw, in any such suit, action or proceeding. Notwithstanding
any provision of this engagement letter to the contrary, the Company agrees that neither Laidlaw nor its affiliates, and the respective
officers, directors, employees, agents and representatives of Laidlaw, its affiliates and each other person, if any, controlling
Laidlaw or any of its affiliates, will have any liability (whether direct or indirect, in contract or tort or otherwise) to the
Company for or in connection with the engagement and transaction described herein except for any such liability for losses, claims,
damages or liabilities incurred by the Company that are finally judicially determined to have resulted from the bad faith or gross
negligence of such individuals or entities. Laidlaw will act under this engagement letter as an independent contractor with its
duties to the Company.

 

    7 

     

    

20.               Both
during the Engagement Period, and in the event (and only in the event) that the Offering shall be consummated during the
Engagement Period on terms acceptable to the Company and Laidlaw, for a a period of twelve (12) months following
consummation of the Offering, , the Company shall require additional debt or equity financing (a “Financing
Transaction”) or shall desire to enter into an Other Transaction defined below (together with a Financing
Transaction, a “Subsequent Transactions”) requiring a placement agent or financial advisor, Laidlaw shall
have the right to act as the Company’s financial advisor and investment banker on such Subsequent Transactions (the
“Right of First Refusal”). Laidlaw may exercise the Right of First Refusal within 10 days of the receipt
of notice by the Company (as well as any reasonable requested due diligence of its decision to pursue a Subsequent
Transaction. If Laidlaw shall determine to exercise its Right of First Refusal, the Company agrees to retain it under
separate cover to advise it in respect to such Subsequent Transaction, subject to the execution of a mutually acceptable
separate agreement which shall include terms customary for the type of Subsequent Transaction being sought and compensation
consistent with industry standards and, with respect to a Financing Transaction, similar to that previously paid by the
Company to Laidlaw in its capacity as placement agent in prior financing transactions (the “Retention
Agreement”). An (“Other Transaction”) includes, without limitation is a merger, acquisition, or
its equivalent other than those conducted in the ordinary course of the Company’s business; a sale, or exchange of
assets (other than those sold, assigned, or exchanged in the ordinary course of its business) or shares for cash (other than
cash raised in a financing transaction) or for other consideration (other than consideration paid for services in the
ordinary course of business).

 

 

[Signature Page Follows]

 

    8 

     

    

 

We look
forward to a successful Offering. If you are in agreement with the foregoing, please sign and return to us one copy of this engagement.
This engagement letter may be executed in counterparts (including facsimile or .pdf counterparts), each of which shall be deemed
an original but all of which together shall constitute one and the same instrument.

 

Yours Truly,

 

LAIDLAW & COMPANY (UK) LTD.

 

 

		BY:  	
			Hugh Regan 
			Director Investment 
			Banking

 

ACCEPTED AND AGREED as of

the date first written above

 

PROTEA BIOSCIENCES GROUP, INC.

  

 

	BY:  		 

Stephen
C. Turner

President
and CEO

 

 

    9

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