Document:

Note
Purchase Agreement

 

This
Note Purchase Agreement (the “Agreement”) is made as of the latest date set forth on the signature
page hereto (the “Effective Date”) by and among Protea Biosciences Group, Inc.,
a Delaware corporation (the “Company”), and the undersigned purchaser (each, individually, a “Purchaser”,
and collectively, the “Purchasers”). Any capitalized term not otherwise defined herein shall have the
meaning set forth for such term in the Notes (defined below).

 

Recitals

 

WHEREAS, the
Purchasers desire to purchase and the Company desires to sell the Notes (as defined below) on the terms and conditions described
herein.

 

Agreement

 

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

 

1.Amount
and Terms of the Notes. Subject to the terms of this Agreement, at each Closing (as defined below) the Company agrees
to issue and sell to each of the Purchasers, and each Purchaser agrees, severally and not jointly, to purchase from the Company,
a subordinated convertible promissory note in the form attached to this Agreement as Exhibit A (each, a “Note”
and collectively, the “Notes”), in the principal amount set forth on such Purchaser’s signature
page hereto (each, a “Loan Amount”), in an aggregate principal amount of up to Seven Hundred Fifty Thousand
Dollars ($750,000) (the “Maximum”). The Notes shall become immediately due and payable on the one (1)
year anniversary of the Issue Date set forth in the Notes (the “Maturity Date”).

 

2.Conversion
of the Notes. The Notes shall be convertible into the currently contemplated financing (the “Financing”)
through . The Financing is planned to include the sale of units (the “Units”) at a purchase price of $100,000 per Unit
with each Unit consisting of (1) 200,000 shares of the Company’s common stock par value $0.0001 per share (the “Common
Stock”) and (2) two warrants, including (a) a 1 year warrant to purchase 200,000 shares of Common Stock at an exercise
price of $0.50 per share and (b) a 5 year warrant to purchase 100,000 shares of Common Stock at an exercise price of $0.75 per
share. Each $100,000 in outstanding principal and accrued unpaid interest shall be converted into one Unit sold in the Financing
(the “ Conversion Price”). The Financing is also planned to include certain registration and anti-dilution
rights and a right to participate in certain future securities offerings of the Company. All terms of the Financing remain subject
to change in the discretion of the Company and . If an initial closing of the sale of securities in the Financing does not take
place within one hundred twenty (120) days after the issuance of the Notes, the Notes shall be convertible by the Purchasers at
their individual option for the sixty (60) days thereafter. The rate of conversion (the “Optional Conversion Price”)
in the case of an optional conversion outside of the Financing will equal, for each $100,000 of principal and interest converted
(or portion thereof), 200,000 shares of Common Stock (the “Optional Conversion Shares”) and a warrant
(the “Optional Conversion Warrants”) to purchase 150,000 shares of Common Stock, exercisable at $1.10
per share for a period of five years, subject to proportionate adjustments for stock splits, combinations, stock dividends and
other recapitalization events.

 

3.Use
of Proceeds. The Company shall use the net proceeds from the sale of the Notes for general corporate purposes.

 

    	 

    	 

    

 

 

4.
The Closing(s).

 

4.1Closing
Date. The initial closing of the sale and purchase of the Notes (the “Initial Closing”) shall be
held on the Effective Date or at such other subsequent time as the Company and the initial Purchasers agree.

 

4.2Subsequent
Closing(s). The Company may, at its discretion, allow one or more subsequent closings of the purchase and sale of the Notes
up to the Maximum (each a “Subsequent Closing” and together with the Initial Closing and each other Subsequent
Closing, each, a “Closing”). Upon their execution and delivery of this Agreement and such other counterpart
signature pages as contemplated by Section 4.3 below, such parties shall be deemed to be “Purchasers” for all purposes
under this Agreement.

 

4.3Delivery.
At each Closing, (i) each Purchaser will deliver to the Company a check or wire transfer funds in the amount of such Purchaser’s
Loan Amount (unless such Loan Amount was preciously advanced to the Company); and (ii) the Company will issue and deliver
to each Purchaser a Note in favor of such Purchaser payable in the principal amount of such Purchaser’s Loan Amount.

 

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

 

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

 

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

 

5.3Capitalization
of the Company. The authorized capital stock of the Company consists of 200,000,000 shares of Common Stock, and 10,000,000
shares of "blank check" preferred stock, par value $0.0001 per share. The Notes to be issued to the Purchasers have been
duly authorized. The Company shall also have duly authorized the issuance of up to 18,000,000 shares of Common Stock issuable in
connection with the Financing.

 

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

 

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

 

5.6Absence
of Certain Proceedings. Neither the Company nor its subsidiaries is aware of any action, suit, proceeding, inquiry or investigation
before or by any court, public board or body, or governmental agency pending or threatened against or affecting the Company or
any of its subsidiaries, in any such case wherein an unfavorable decision, ruling or finding could reasonably be expected to have
a material adverse effect on the business, properties, operations, condition (financial or other), results of operations or prospects
of the Company, or the transactions contemplated by the Loan Documents or which could adversely affect the validity or enforceability
of, or the authority or ability of the Company to perform its obligations under the Loan Documents; and to the Company's knowledge
there is not pending or contemplated any, and there has been no, investigation by the Commission involving the Company or its subsidiaries
or any of their current directors or officers.

 

5.7Compliance
with Law. Neither the Company nor any of its subsidiaries is in violation of or has any liability under any statute, law, rule,
regulation, ordinance, decision or order of any governmental agency or body or any court, domestic or foreign, except where such
violation or liability could not individually or in the aggregate be reasonably expected to have a material adverse effect on the
business, properties, operations, condition (financial or other), results of operations or prospects of the Company and its subsidiaries,
taken as a whole; and to the knowledge of the Company there is no pending investigation that would reasonably be expected to lead
to such a claim.

 

5.8Tax
Matters. The Company and each of its subsidiaries has filed all federal, state and local income and franchise tax returns required
to be filed and has paid all taxes shown by such returns to be due, and no tax deficiency has been determined adversely to the
Company or any of its subsidiaries which has had (nor does the Company or any of its subsidiaries have any knowledge of any tax
deficiency which, if determined adversely to the Company or any of its subsidiaries, might have) could reasonably be expected to
have a material adverse effect on the business, properties, operations, condition (financial or other), results of operations,
or prospects of the Company or any of its subsidiaries, taken as a whole.

 

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5.9Filings,
Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice
to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other
person in connection with the execution, delivery and performance by the Company of the Loan Documents, other than: (i) the filings
required pursuant to this Agreement, and (ii) the filing of Form D with the Commission and such filings as are required to be made
under applicable state securities laws.

 

5.10Private
Placement. Assuming the accuracy of the representations and warranties of each Purchaser set forth in Section 6 below, no registration
under the Securities Act of 1933, as amended (the “Securities Act”) is required for the offer and sale of the Notes
by the Company to the Purchasers as contemplated hereby.

 

5.11No
General Solicitation. Neither the Company nor any of its officers or directors has offered or sold any of the Notes by any
form of general solicitation or general advertising.

 

5.12Investment
Company. The Company is not, and is not an affiliate of, and immediately after receipt of payment for the Notes, will not be
or be an affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.
The Company shall conduct its business in a manner so that it will not become an “investment company” subject to registration
under the Investment Company Act of 1940, as amended.

 

		6.	Representations and Warranties of the Purchasers.

 

Each Purchaser, solely
and on such Purchaser’s behalf alone, represents and warrants as follows:

 

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

 

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

 

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

 

6.4
The Purchaser represents that the Purchaser is an “accredited investor” as such term is defined in Rule
501 of Regulation D promulgated under the Securities Act, and that the Purchaser is able to bear the economic risk of an investment
in the Notes. If the Purchaser is purchasing in an individual capacity, then Purchaser certifies that either (a) the Purchaser
had an individual income of more than $200,000 in each of calendar years 2011 and 2012, or joint income with the Purchaser’s
spouse in excess of $300,000 in each of those years, and that the Purchaser reasonably expects to reach the same income level in
calendar year 2013 or (b) the Purchaser has an individual net worth, or with the Purchaser’s spouse has a joint net worth,
in excess of $1,000,000 (excluding the value of the individual’s primary residence).

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

6.14The
Purchaser acknowledges that except as set forth in Section 5 of this Agreement, the Company has made no representations with respect
to registration of the Notes, that no such registration is contemplated in the foreseeable future, that there can be no assurance
that there will be any market for the Notes in the future, and that, as a result, the Purchaser must be prepared to bear the economic
risk of the Purchaser’s entire investment for an indefinite period of time.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

6.25The
Purchaser has reviewed copies of (i) the current report on Form 8-K filed by the Company on September 9, 2011, as amended on November
14, 2011; (ii) each periodic report on Form 10-Q and Form 10-K filed by the Company since September 9, 2011; and (iii) each current
report on Form 8-K filed by the Company since September 9, 2011 (collectively, the “Filings”) with the
Commission under the Exchange Act and available for review at www.sec.gov.  The Purchaser further acknowledges that it is
familiar with the contents of the Filings and that there is no further information about the Company that the Purchaser desires
in determining whether to acquire the Notes.

 

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

 

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

 

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9.
Miscellaneous.

 

9.1Notice.
Any notice or other communication given hereunder shall be deemed sufficient if in writing and sent by registered or certified
mail, return receipt requested, by overnight delivery by reputable courier or delivered by hand against written receipt therefor,
if to the Company addressed to Protea Biosciences Group, Inc. 955 Hartman Run Road, #210, Morgantown, WV 26507, Attn: President,
or such other address as has been provided to the Purchaser by the Company in writing, and if to the Purchasers at each Purchaser’s
address stated on the signature page of this Agreement, or such other address as has been provided to the Company by the Purchasers
in writing. Notices shall be deemed to have been given or delivered on the date of mailing, except notices of change of address,
which shall be deemed to have been given or delivered when received.

 

9.2Modification;
Waiver. No modification or waiver of any provision of this Agreement or consent to departure therefrom will be effective unless
in writing and approved by (i) the Company and (ii) the Purchasers holding Notes representing at least fifty one percent (51%)
of the outstanding aggregate Loan Amounts (a “Majority in Interest”). Any provision of the Notes may
be amended or waived by the written consent of the Company and a Majority in Interest. Notwithstanding the foregoing, the written
consent of a Purchaser shall be required to reduce the principal amount of a Note held by such Purchaser, or reduce the rate of
interest of the Note held by such Purchaser.

 

9.3Successors
and Assigns; Entire Agreement. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, legal representatives, successors and assigns. Any such transferee or assignee of a Purchaser will be bound by
this Agreement and shall explicitly assume any obligations of such Purchaser under this Agreement in a writing delivered to the
Company. This Agreement sets forth the entire agreement and understanding between the parties as to the subject matter hereof and
merge and supersede all prior discussions, agreements and understandings of any and every nature among them.

 

9.4Waiver.
A waiver by either party of a breach of any provision of this Agreement shall not operate, or be construed, as a waiver of any
subsequent breach by the same party.

 

9.5Further
Assurances. The parties shall execute and deliver all such further documents, agreements and instruments and shall take such
other and further action as may be necessary or appropriate to carry out the purposes and intent of this Agreement.

 

9.6Counterparts.
This Agreement may be executed in two or more counterparts each of which shall be deemed an original, but all of which shall together
constitute one and the same instrument. Executed facsimile or other electronic signature pages (e.g., portable document format)
to this Agreement shall be considered originals.

 

9.7Governing
Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware without
regard to principles of conflicts or choice of law.

 

9.8Expenses.
Each Purchaser will pay such Purchaser’s own expenses in connection with the transactions contemplated hereby, whether or
not such transactions are consummated.

 

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9.9Survival.
The representations, warranties and covenants of each Purchaser contained herein shall survive the closing of the purchase and
sale of the Notes and any transfer or disposition of the Notes.

 

9.10Titles
and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.

 

9.11Severability.
If any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or
void, portions of such provision, or such provision in its entirety, to the extent necessary, shall be severed from this Agreement,
and such court will replace such illegal, void or unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the same economic, business and other purposes of the illegal, void or unenforceable
provision. The balance of this Agreement shall be enforceable in accordance with its terms.

 

[Signature
Page Follows.]

 

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

 

	
         

         

        Date: ____________________

         

         

         

         

         

         

         

        Date: ____________________
	
        Company:

         

        PROTEA
        BIOSCIENCES GROUP, INC.

         

         

        By:                                                                            

        Name:Stephen Turner

        Title:President

         

         

        PURCHASER:
        

         

         

        

        Purchaser Name (Print)

         

        ____________________________________

        Authorized Person (if Purchaser is an entity
        or trust)

         

        ____________________________________

        Signature of Purchaser or Authorized Person

         

        ____________________________________

        Loan Amount

         

        ____________________________________

        Number of Warrant Shares

         

         

         

 

    	 

    	 

    

 

 

Exhibit
A

 

Form
of Note

 

 

    	 

    	 

    

 

 

Exhibit
B

 

Form
of Accredited Investor Questionnaire

 

PROTEA BIOSCIENCES GROUP, INC.

 

ACCREDITED INVESTOR CERTIFICATION

 

Please complete the following certification.
If the answer to any question is “none” or “none applicable,” please so state.

 

Your answers will, at all times, be kept
strictly confidential, however, you hereby agree that Protea Biosciences Group, Inc. may present this questionnaire to such parties
as it deems appropriate in order to assure itself that the issuance of the securities to you will not result in a violation of
the exemption from registration under U.S. securities laws.

 

In case of insufficient space, please use
the reverse side to assure that complete answers are submitted. If the securities are being purchased jointly, all joint owners
should complete.

 

	Name:	 	

 

	Address:	 	 

 

	Social Security Number
    or Taxpayer Identification Number:	 	 

 

	Telephone Number:	 	 

 

	E-mail Address:	 	 

 

	State of Residence or
    Principal Place of Business:	 	 

 

	Type of Business:	 	 

 

 

    	 

    	 

    

 

 

Accredited Investor Qualification Information--Please
check or initial all that apply.1

 

 

	_____ (a)	 	The undersigned is a natural person whose net worth, or joint net worth with spouse, at the time of purchase, exceeds $1,000,000 (excluding the value of my primary residence).
	 	 	 
	_____ (b)	 	The undersigned is a natural person whose individual gross income (excluding that of my spouse) exceeded $200,000 in the last two fiscal years, and who reasonably expects individual gross income exceeding $200,000 in the current fiscal year.
	 	 	 
	_____ (c)	 	The undersigned is a natural person whose joint gross income with spouse exceeded $300,000 in the last two fiscal years, and who reasonably expects joint gross income with my spouse exceeding $300,000 in the current fiscal year.
	 	 	 
	_____ (d)	 	The undersigned is a bank, savings and loan association, broker/dealer, insurance company, investment company, pension plan, or other entity defined in Rule 501(a)(1) of Regulation D as promulgated under the Securities Act of 1933 by the Securities and Exchange Commission.
	 	 	 
	_____ (e)	 	The undersigned is a trust, and the trustee is a bank, savings and loan association, or other institutional investor as defined in Rule 501(a)(1) of Regulation D as promulgated under the Securities Act of 1933 by the Securities and Exchange Commission.
	 	 	 
	_____ (f)	 	The undersigned is a private business development company as defined in section 202(a)(22) of the Investment Advisers Act of 1940.
	 	 	 
	_____ (g)	 	The undersigned is a trust, and the grantor (i) has the power to revoke the trust at any time and regain title to the trust assets; and (ii) meets the requirements of items (a) (b), or (c) above.
	 	 	 
	_____ (h)	 	The undersigned is a tax-exempt organization described in Section 501(c) (3) of the Internal Revenue Code, or a corporation, business trust, or partnership, not formed for the specific purpose of acquiring the securities with total assets in excess of $5,000,000.
	 	 	 
	_____ (i)	 	The undersigned is a trust with total assets in excess of $5,000,000, not formed for the specific purpose of acquiring the securities, whose purchase is directed by a person who has such knowledge and experience in financial and business matters that he is capable of evaluating the merits and risks of an investment in the securities.
	 	 	 
	_____ (j)	 	The undersigned is an entity in which all of the equity owners meet the requirements of items (a) through (i) above.

 

1If the securities are being
purchased jointly, each joint owner should initial where applicable.

 

 

    	 

    	 

    

 

SIGNATURE PAGE FOR

INDIVIDUALS AND TRUSTS

 

IN WITNESS WHEREOF,
I hereby represent that all of the above representations are true and correct to the best of my knowledge.

 

The securities will
be owned, and should be shown on the records of Protea Biosciences Group, Inc., as follows (please check box):

 

[ ] A single person

 

[ ] Husband and
wife, as community property

 

[ ] Joint tenants
with right of survivorship (both parties must sign)

 

[ ] Tenants-in-Common
(all parties must sign)

 

[ ] Trust (trustee must sign
as trustee and indicate name of trust and date of trust document;

trustee must
also provide a copy of trust document)

 

[ ] Other (explain,
signature as required)

 

Executed this __ day
of ________________, 2013

 
	 	
	 	(Signature)
	 	 
	 	(Please Print Name of Individual or Trust and
	 	Date of Trust if Applicable)
	 	 
	 	(Signature)
	 	 
	 	(Please Print Name of Individual or Trust and
	 	Date of Trust if Applicable)

 

 

    	 

    	 

    

 

 

SIGNATURE PAGE FOR

CORPORATIONS AND PARTNERSHIPS

 

 

IN WITNESS WHEREOF,
I hereby represent that all of the above representations are true and correct to the best of my knowledge.

 

[ ] Corporation
(signature of authorized officer(s) required; please provide certified resolution authorizing investment)

 

[ ] Partnership
(signature of all general partners required by partnership agreement; partnerships must provide copy of partnership agreement)

 

 

Executed this __ day
of ________________, 2013

 

 

 

 

______________________________________

(Please
Print Name of Entity)

 

By: ___________________________________

 

______________________________________

(Name)

 

______________________________________

(Title)

 

By: ___________________________________

 

______________________________________

(Name)

 

______________________________________

(Title)THIS CONVERTIBLE PROMISSORY NOTE (THIS
“NOTE”) AND THE SECURITIES ISSUABLE UPON CONVERSION HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), APPLICABLE STATE SECURITIES LAWS, OR APPLICABLE LAWS OF ANY FOREIGN
JURISDICTION. THIS NOTE AND SUCH SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND
MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED OR OTHERWISE TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND ANY APPLICABLE STATE SECURITIES LAWS AND IN THE ABSENCE OF COMPLIANCE WITH APPLICABLE LAWS OF ANY
FOREIGN JURISDICTION, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED AND SUCH FOREIGN
JURISDICTION LAWS HAVE BEEN SATISFIED.

 

PROTEA
BIOSCIENCES GROUP, Inc.

 

CONVERTIBLE PROMISSORY NOTE

 

	 	 	[Morgantown, West Virginia]
	$[   ]	 	Issue Date: [   ], 2013

 

1.Principal
and Interest. PROTEA BIOSCIENCES GROUP, INC. (the “Company”), a Delaware corporation, for value received,
hereby promises to pay to the order of [ ] or his, her or its assigns (“Holder”), in lawful money of the United
States of America at the address for notices to Holder set forth in the Note Purchase Agreement (as defined below) (or such other
address as Holder shall provide to the Company in writing pursuant hereto), the principal amount of $[ ] (the “Principal
Amount”), together with interest as set forth below.

 

This Note is being
issued pursuant to that certain Note Purchase Agreement (the “Purchase Agreement”) by and among
the Company and the Purchasers thereunder (each a "Holder" and, collectively, the “Holders”)
dated as of the Issue Date first set forth above, setting forth the terms of the offering and sale (the “Offering”)
by the Company of up to $750,000 (the “Maximum Offering”) of 10% convertible promissory notes (each a “Note”
and collectively the “Notes”).

 

This Note shall become
due and payable on the one-year anniversary of the Issue Date set forth above (the “Due Date”). Interest on
the unpaid Principal Amount shall accrue from the Issue Date until the earlier of the Due Date, or such date when the entire Principal
Amount is paid in full, at the rate of ten percent (10%) per annum or such lesser rate as shall be the maximum rate allowable under
applicable law. Simple interest shall be computed on the basis of a 360-day year of twelve 30-day months, and shall be accrued
and added to principal on an annual basis. The Company shall not be obligated to make any interest payments until the Due Date,
or, if earlier, the date when the Principal Amount is paid in full and may be paid, at the Company’s election, either in
cash or shares of the Company’s common stock, par value $0.0001 per share (the “Common Stock”) valued
at $0.50 per share (subject to proportionate adjustment for forward or reverse stock splits, combinations, stock dividends and
other recapitalization events), or any combination of cash and shares.

 

Capitalized terms used
herein but not otherwise defined shall have the respective meanings ascribed to such terms in the Purchase Agreement.

 

    	 

    	 

    

 

2.Automatic Conversion.

 

2.1Financing. At the
initial closing of the Financing, the entire Principal Amount and all accrued unpaid interest thereon will be automatically converted
into Units sold in the Financing as set forth in this Section 2.1. The Financing is planned to include the sale of Units at a purchase
price of $100,000 per Unit with each Unit consisting of (1) 200,000 shares of Common Stock (the “Shares”) and
(2) two warrants (the “Warrant”), including (a) a 1 year warrant to purchase 200,000 shares of Common Stock
at an exercise price of $0.50 per share and (b) a 5 year warrant to purchase 100,000 shares of Common Stock at an exercise price
of $0.75 per share. Each $100,000 in outstanding principal and accrued unpaid interest shall be converted into one Unit sold in
the Financing (the “Conversion Price”). The Financing is also planned to include certain registration and anti-dilution
rights and a right to participate in certain future securities offerings of the Company. All terms of the Financing remain subject
to change in the discretion of the Company and .

 

2.2Effect of Automatic
Conversion. Upon an automatic conversion pursuant to Section 2.1 above, all indebtedness evidenced by this Note shall be automatically
satisfied in full and no interest shall continue to accrue on this Note thereafter and all rights of Holder hereunder shall terminate.
The Company shall not be obligated to issue certificates evidencing the securities issuable upon such conversion unless this Note
is either delivered to the Company or its transfer agent, or Holder notifies the Company or its transfer agent that this Note has
been lost, stolen or destroyed and executes an agreement satisfactory to the Company to indemnify the Company from any loss incurred
by it in connection with this Note. The Company shall, as soon as practicable after such delivery, or such agreement and indemnification,
issue and deliver to such Holder of this Note, a certificate or certificates for the securities to which Holder shall be entitled.
The person or persons entitled to receive securities issuable upon such conversion shall be treated for all purposes as the record
holder or holders of such securities on such date. The Company shall not issue fractional Shares or Warrants but shall round up
the number of Shares and/or Warrants issued to the nearest whole number.

 

3.Optional Conversion.

 

3.1Optional Conversion.
Notwithstanding anything herein to the contrary, if an initial closing of the sale of securities in the Financing does not take
place within 120 days after the Issue Date, the Notes will be convertible by the holders at their option for the 60 days thereafter.
The rate of conversion will be for each $100,000 of principal and interest converted (or portion thereof), the holder will receive
200,000 shares (the “Optional Conversion Shares” and together with the Shares, the “Shares”)
of common stock of the Company and a warrant (the “Optional Conversion Warrant” and together with the Warrant,
the “Warrants”) to purchase 150,000 shares of common stock, which warrant will be exercisable at $1.10 for a
period of five years (the “Optional Conversion Price” and together with the Conversion Price, the “Conversion
Prices”), subject to proportionate adjustments for stock splits, combinations, stock dividends and other recapitalization
events. Holder’s optional conversion right provided under this Section 3.1 is referred to herein as the “Conversion
Option”. The Conversion Prices shall be paid by Holder by forgiveness of such amount of the principal and accrued interest
on this Note being converted as specified in the applicable Conversion Notice (as hereinafter defined).

 

3.2Conversion
Procedure for the Conversion Option. Upon conversion of this Note pursuant to the Conversion Option, Holder shall surrender
this Note, duly endorsed, at the office of the Company and shall provide written notice (the "Conversion Notice")
to the Company at its principal corporate office of the election to convert the same and the amount of unpaid principal and interest
being converted. The date on which the Conversion Notice is received by the Company is referred to herein as the "Conversion
Date". The Company, as soon as practicable thereafter, shall issue and deliver to Holder a certificate or certificates
for the number of Optional Conversion Shares and Optional Conversion Warrants to which Holder shall be entitled (such certificates
bearing such legends as are required by applicable state and federal securities laws).

 

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3.3Mechanics and
Effect of Conversion for the Conversion Option. No fractional Optional Conversion Shares or Optional Conversion Warrants shall
be issued upon any conversion hereunder. All fractional Optional Conversion Shares and/or Optional Conversion Warrants shall be
rounded up to the nearest whole share. Any conversion pursuant to the Conversion Option, and the sale and issuance of Optional
Conversion Shares and Optional Conversion Warrants pursuant thereto, shall be deemed to have occurred immediately upon the Company’s
receipt of the Conversion Notice. From and after such time, Holder shall be treated for all purposes as the record holder of the
Optional Conversion Shares and Optional Conversion Warrants. Upon conversion of this Note in full, with no principal or accrued
interest amount thereafter outstanding, the Company shall be released from all its obligations and liabilities hereunder.

 

4.Fundamental
Transactions. If, at any time while this Note remains outstanding, (A) the Company effects any merger or consolidation of the
Company with or into another entity where the Company is not the surviving corporation (other than in connection with a reverse
merger pursuant to which the owner's of the Company's securities immediately prior to such transaction own a majority of the Company's
securities following such transaction), (B) the Company effects any sale of all or substantially all of its assets in one or a
series of related transactions other than as part of a reorganization, (C) any tender offer or exchange offer (whether by the Company
or another entity) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for
other securities, cash or property, or (D) 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 Note pursuant to the
provisions herein, Holder shall have the right to receive, for each Conversion Share, Conversion Warrant, Optional Conversion Share
and/or Optional Conversion Warrant (collectively, the “Conversion Securities”) that would have been issuable
upon such conversion absent 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 one share of Common Stock and a warrant to purchase one share of Common Stock.

 

5.Prepayment.
At any time when there remains unpaid principal or accrued unpaid interest under this Note, if the Financing has not had an initial
closing within 120 days following the Issue Date, the Company shall have the right to prepay, upon
14 days prior written notice to Holder, without premium or penalty, any or all of such unpaid principal
or interest, during which notice period Holder may exercise the conversion rights under this Note to the extent then applicable.

 

6.Events of Default.

 

6.1Each of the following events
shall constitute a default under this Note (each an “Event of Default”) if not cured by the Company within thirty
(30) calendar days after receipt of written notice thereof from Holder or such longer period as set forth below:

 

(a)failure
by the Company to pay the principal or interest amount when due hereunder;

 

(b)failure
by the Company or the Company’s transfer agent, or the Company’s successor in a Fundamental Transaction, to issue securities
issuable upon conversion of this Note to Holder within thirty (30) calendar days after the receipt of a Conversion Notice or the
event causing automatic conversion and surrender by Holder to the Company or the Company’s transfer agent (or the Company’s
successor or successor’s transfer agent following a Fundamental Transaction);

 

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(c)the
Company shall: (1) make a general assignment for the benefit of its creditors; (2) apply for or consent to the appointment of a
receiver, trustee, assignee, custodian, sequestrator, liquidator or similar official for itself or any of its assets and properties;
(3) commence a voluntary action for relief as a debtor under the United States Bankruptcy Code; (4) file with or otherwise submit
to any governmental authority any petition, answer or other document seeking: (A) reorganization, (B) an arrangement with creditors
or (C) to take advantage of any other present or future applicable law respecting bankruptcy, reorganization, insolvency, readjustment
of debts, relief of debtors, dissolution or liquidation; (5) file or otherwise submit any answer or other document admitting or
failing to contest the material allegations of a petition or other document filed or otherwise submitted against it in any proceeding
under any such applicable law, or (6) be adjudicated a bankrupt or insolvent by a court of competent jurisdiction;

 

(d)any
case, proceeding or other action shall be commenced against the Company for the purpose of effecting, or an order, judgment or
decree shall be entered by any court of competent jurisdiction approving (in whole or in part) anything specified in Section 6.1(c)
hereof, or any receiver, trustee, assignee, custodian, sequestrator, liquidator or other official shall be appointed with respect
to the Company, or shall be appointed to take or shall otherwise acquire possession or control of all or a substantial part of
the assets and properties of the Company, and any of the foregoing shall continue unstayed and in effect for any period of at least
sixty (60) days;

 

6.2If any Event of Default specified
in Sections 6.1(c) or (d) occurs, then following the passage of the applicable cure period the full principal amount of this Note,
together with any other amounts owing in respect thereof, to the date of the Event of Default shall become immediately due and
payable without any action on the part of Holder, and if any other Event of Default occurs, the full principal amount of this Note,
together with any other amounts owing in respect thereof, to the date of acceleration shall become, at Holder’s election,
immediately due and payable in cash. All Notes for which the full amount thereunder shall have been paid in accordance herewith
shall promptly be surrendered to or as directed by the Company. Holder need not provide and the Company hereby waives any presentment,
demand, protest or other notice of any kind, and 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 declaration may
be rescinded and annulled by Holder at any time prior to payment hereunder and Holder shall have all rights as a Note holder until
such time, if any, as the full payment under this Section 6.2 shall have been received by it. No such rescission or annulment shall
affect any subsequent Event of Default or impair any right consequent thereon.

 

7.Notice of Proposed Transfers.
Prior to any proposed transfer of this Note or the Conversion Securities, unless there is in effect a registration statement under
the Securities Act covering the proposed transfer, Holder shall give written notice to the Company of such Holder’s intention
to effect such transfer. Each such notice shall describe the manner and circumstances of the proposed transfer in sufficient detail,
and shall, if the Company so requests, be accompanied by an unqualified written opinion of legal counsel, who shall be reasonably
satisfactory to the Company, addressed to the Company and reasonably satisfactory in form and substance to the Company’s
counsel, to the effect that the proposed transfer of this Note or the Conversion Securities may be effected without registration
under the Securities Act; provided, however, no such opinion of counsel shall be necessary for a transfer without
consideration by a Holder to any affiliate of such Holder, or a transfer by a Holder which is a partnership to a partner of such
partnership or a retired partner of such partnership who retires after the date hereof, or to the estate of any such partner or
retired partner or the transfer by gift, will or intestate succession of any partner to his spouse or lineal descendants or ancestors,
if the transferee agrees in writing to be subject to the terms hereof and of the Purchase Agreement to the same extent as if such
transferee were the original Holder hereunder. Each certificate evidencing this Note or the Conversion Securities transferred as
above provided shall bear an appropriate restrictive legend, except that this Note or certificate shall not bear such restrictive
legend if in the opinion of counsel for the Company such legend is not required in order to establish compliance with any provisions
of the Securities Act.

 

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8.Reservation of Conversion
Securities. The Company covenants and agrees that all Conversion Securities will, upon conversion of this Note, be duly authorized,
validly issued, fully paid and nonassessable, and free of all preemptive rights, liens and encumbrances, except for restrictions
on transfer provided for herein and in the Company’s organizational documents, as amended from time to time. Prior to executing
this Note or as soon as reasonably possible thereafter, the Company shall reserve out of its authorized and unissued Common Stock,
solely for the purpose of providing for the exercise of the rights to convert this Note, such number of Conversion Securities as
shall be sufficient therefore at the applicable Conversion Price, and shall use its best efforts and take such reasonable actions
as are necessary to ensure that such securities remain so reserved for issuance in the future.

 

9.No Impairment. The Company
will not, by amendment of its Certificate of Incorporation 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 Note, but will at all times in good faith assist in the carrying out of all such terms and in the taking
of all such action as may be necessary or appropriate in order to protect the rights of Holder against impairment.

 

10.Waivers. The Company
hereby waives presentment, demand for performance, notice of non-performance, protest, notice of protest and notice of dishonor.
No delay on the part of Holder in exercising any right hereunder shall operate as a waiver of such right or any other right. This
Note is being delivered in and shall be construed in accordance with the laws of the State of Delaware, without regard to the conflicts
of laws provisions thereof.

 

11.No Stockholder Rights.
Nothing contained in this Note shall be construed as conferring upon Holder or any other person the right to vote or to consent
or to receive notice as a stockholder of the Company.

 

12.Amendment. This Note
may only be amended with the written consent of the Holders of a majority of the then outstanding principal amount due under all
Notes issued in the Offering.

 

13.Notices. Any notice,
other communication or payment required or permitted hereunder shall be in writing and shall be deemed to have been given upon
delivery to the address provided pursuant to the Purchase Agreement.

 

14.Subordination.
The Notes shall be, to the extent permitted by applicable law, subordinate to all outstanding debt of the Company. 

 

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ISSUED as of the date first above written.

 

	 	PROTEA BIOSCIENCES GROUP, INC. 
	 	 	 
	 	By:	 
	 	Name:	Steven Turner
	 	Title:	President

 

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