Document:

****

 

This 6.0% Convertible Debenture (the
“Debenture”) and the securities underlying this Debenture have not been registered under the Securities Act of 1933,
as amended (the “Securities Act”) and may not be offered, sold or otherwise transferred, assigned, pledged or hypothecated
in the absence of such registration or an exemption therefrom under such Securities Act, any applicable state securities laws and
the rules and regulations thereunder.

 

 

PROTEA BIOSCIENCES GROUP, INC.

6.0% Convertible Debenture

Due September 14, 2013

 

 

	$290,000.00	March 15, 2012

 

 

PROTEA
BIOSCIENCES GROUP, INC., a Delaware corporation (the “Company”, which term includes any successor corporation),
for value received, hereby promises to pay to West Virginia Jobs Investment Trust Board (the “Holder”),
or registered assigns, on September 14, 2013 (the “Maturity Date”), the sum of Two Hundred Ninety Thousand
Dollars ($290,000.00) (the “Principal Amount”), with interest thereon to the registered Holder hereof
from the date hereof as provided herein. Payment of the principal hereof and interest on this Debenture will be made at the office
or residence of the Holder maintained for that purpose at Fifth Floor, 1012 Kanawha Boulevard, EastCharleston, WV 25301 in
such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private
debts. In the event of failure to pay interest on this Debenture as the same shall be due and payable, and subject to the cure
provisions of Article Six, the principal hereof, together with accrued and unpaid interest, shall, at the option of the Holder
hereof, become immediately due and payable.

 

ARTICLE ONE

SUBORDINATION

 

1.1Senior
Indebtedness. As used in this Debenture, the term “Senior Indebtedness” shall mean the principal
of and interest on all indebtedness of the Company regardless of whether incurred on, before or after the date of this Debenture
(a) for money borrowed from any bank or financial institution, including from Centra Bank, a West Virginia banking corporation,
as evidenced by that certain Commercial Loan Agreement, dated August 27, 2009, and any amendments and related documents thereto
(the “Centra Loan”), (b) in connection with any renewals or extensions of any indebtedness described
in (a) above; and (c) any indebtedness secured by assets of the Company, to the extent of and with respect to such assets; provided,
however, that the term shall not include indebtedness which by the terms of the instrument creating or evidencing it is subordinated
to or on a parity with this Debenture.

 

    	 

    	 

    
 

 

1.2.Subordination.
The Company covenants and agrees and the Holder, by acceptance hereof, covenants, expressly for the benefit of holders of Senior
Indebtedness, that the payment of the principal and interest on this Debenture is expressly subordinated in right of payment to
the payment of all principal and interest under the Senior Indebtedness in case of any event of default under the Centra Loan
resulting in acceleration of all or any portion of the indebtedness under the Centra Loan, bankruptcy, insolvency, receivership,
or other similar proceeding, whether voluntary or otherwise, of or with respect to the Company.

 

 

ARTICLE TWO

PAYMENT

 

2.1Rate
and Payment of Interest. Interest will accrue on the Principal Amount of this Debenture (or any portion thereof that remains
unpaid) from the date hereof until the entire Principal Amount is paid, at the rate of 6.0% per annum (computed on the basis of
a year of 360 days). The Company shall be required to pay such interest to the Holder, in cash, monthly and in arrears, on or
before the 14th day of April, 2012 and each month thereafter to and including the Maturity Date and daily thereafter
until the Principal Amount has been paid in full.

 

2.2Principal
Payment. The Principal Amount shall be due and payable on the Maturity Date. No payments on the Principal Amount shall be
due until the Maturity Date.

 

2.3    Prepayment. Prepayments of the Principal Amount, in whole or in part, and any interest thereon shall be permitted
without penalty to the Maker.

 

2.4    Conversion of Interest into Principal. At the option of the Holder, at any time prior to the payment of interest
by the Maker, Holder may elect to convert outstanding interest into principal under this Debenture, such that the Principal Amount
shall then include the amount of interest so converted. The election may be made by Holder by written notice to Maker not less
than ten (10) days prior to an interest payment date as provided in Section 2.1 above.

 

 

ARTICLE THREE

CONVERSION

 

3.1Definitions.
For purposes of this Debenture the following terms shall have the meaning as set forth below:

 

“Common
Stock” shall mean the Company’s Common Stock, par value $0.0001 per share.

 

“Conversion”
shall mean the conversion of this Debenture into shares of Common Stock of the Company as contemplated in this section.

 

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“Sale
of the Company” shall mean (i) the sale of all or substantially all the assets of the Company, or (ii) the transfer,
assignment or sale of all of the outstanding capital stock of the Company to one or more persons who collectively own less than
twenty percent (20%) of the outstanding capital stock of the Company, by merger, stock sale or otherwise.

 

“Transaction
Documents” shall mean this Debenture, the Warrant, the Subscription Agreement and any documents related to any of
the foregoing or the consummation of the transactions contemplated by this Debenture.

 

3.2[Intentionally
omitted]

 

3.3Holder’s
Optional Conversion. At any time after the date hereof, Holder shall have the right, but not the obligation, to convert any
or all of the outstanding principal and accrued but unpaid interest under this Debenture into shares of the Common Stock, provided
that any incremental amount converted in accordance with this Section 3.3 shall be at at least $15,000 or greater. The number of
shares of Common Stock into which this Debenture may be converted shall be determined by dividing (x) the amount of interest and
principal being converted by (y) $2.00, subject to adjustment in the manner set forth in Section 3.5, below. Based solely on a
conversion of the Principal Amount at an initial conversion rate of $2.00 per share, the Debenture would be convertible for 145,000
shares of Common Stock.

 

3.4Effect, Mechanics
of Conversion.

 

(a) Upon Conversion,
the portions of this Debenture related to the Company’s indebtedness and the Company’s obligations thereunder so converted
shall be canceled and Holder shall cease to have any rights except as otherwise provided herein or by applicable law. 

 

(b)The Maker agrees
to take all necessary steps to facilitate the Conversion of this Debenture as set forth herein.

 

(c)As
promptly as practicable, and in any event within ten (10) business days after a surrender of this Debenture for Conversion, the
Maker shall deliver or cause to be delivered to Holder, certificates representing the Common Stock into which the Debenture shall
have been converted. Notwithstanding the foregoing, Maker shall not be required to issue capital stock upon surrender of this
Debenture for Conversion, and no surrender of this Debenture shall be effective for that purpose, if additional time is necessary
to comply with applicable laws in Maker’s reasonable discretion based upon the opinion of its legal counsel; provided,
however, that the Company will continue to make any payments to Holder contemplated in this Debenture until the Company
issues to Holder the requisite Common Stock in consummation of the Conversion. For purposes of this paragraph, surrender of this
Debenture shall be made by sending it to the Maker by overnight mail with written notice of Holder’s intent to convert the
Debenture into such Common Stock, and the date of surrender shall be deemed to be the day following the day on which this Debenture
is placed in overnight mail by Holder.

 

(d)No
fractional shares of Common Stock shall be issued upon Conversion of this Debenture. If the Conversion would result in the issuance
of any fractional share, the number of shares of Common Stock shall be rounded up or down to the nearest whole number, and no
cash shall be paid to Holder in lieu of the deficiency, if any.

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(e)Holder
hereby confirms and acknowledges that (i) the shares of the Common Stock to be issued upon Conversion of this Debenture and the
exercise of the Warrant are being acquired solely for investment and solely for the account of the Holder; (ii) the Holder will
not offer, sell or otherwise dispose of any such shares of Common Stock except under circumstances that will not result in a violation
of the Securities Act of 1933, as amended, or any applicable state securities laws and (iii) the Holder is an “accredited
investor” as such term is defined in Rule 501 of Regulation D promulgated under the Securities Act of 1933, as amended
(the “Act”). The Holder further acknowledges that the certificate[s] evidencing the shares of Common Stock
shall bear a legend to the effect of clause (ii) above.

 

(f)Holder
hereby acknowledges receipt and careful review of this Debenture, the Certificate of Incorporation of the Company and the form
of Warrant, and hereby acknowledges its careful review of the Company’s Form 8-K, as filed with the U.S. Securities and
Exchange Commission (“SEC”) on September 9, 2011, Form 8-K/A, as filed with the SEC on November 14, 2011, Form 10-Q
for the period ended September 30, 2011, as filed with the SEC on November 14, 2011, Form 8-K as filed on December 28, 2011, Form
8-K as filed with the SEC on January 25, 2012, and Form 8-K as filed with the SEC on March 6, 2012 (the “1934 Act Filings”).
Holder also hereby represents that Holder has been furnished by the Company during the course of this transaction with all information
regarding the Company, this Debenture, the Warrant and the Common Stock issuable upon Conversion or exercise thereof (the “Protea
Securities”) which Holder 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 Protea Securities and the affairs of the Company and has received any additional information which Holder has requested. In
evaluating the suitability of this investment in the Company, Holder has not relied upon any representations or other information
(whether oral or written) other than as set forth in this Debenture, the form of Warrant, the Certificate of Incorporation of
the Company, the 1934 Act Filings, and any documents or answers to questions so furnished by the Company.

 

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(g)Holder
agrees that, if Holder is requested by the Company or an underwriter (an “Underwriter”) of shares of the Company’s
Common Stock or other securities of the Company, Holder will not sell, assign or otherwise transfer or dispose of any Protea Securities
or other securities of the Company held by it or under its control for a specified period of time to be specified by the Company
or the Underwriter (not to exceed 180 days) following the effective date of a registration statement filed by the Company under
the Securities Act. Although the obligations set forth in this provision shall be binding upon Holder and its successors and assigns
without the execution of any further agreements or documents memorializing this obligation, if the Company or an Underwriter so
requests Holder 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.

 

3.5Adjustments.
The number of shares of Common Stock into which this Debenture may be converted shall be subject to adjustments as follows:

 

(a)If
the Company is recapitalized through the subdivision or combination of its outstanding shares of Common Stock, as the case may
be, into a larger or smaller number of shares, the number of shares of Common Stock into which this Debenture may be converted
shall be increased or reduced, as of the record date for such recapitalization, in the same proportion as the increase or decrease
in the outstanding shares of Common Stock.

 

(b)If
the Company declares a dividend on Common Stock payable in capital stock (a “Stock Dividend”), the number
of shares of Common Stock for which this Debenture may be converted shall be increased as of the record date for determining which
holders shall be entitled to receive such Stock Dividend, in proportion to the increase in the number of outstanding shares of
Common Stock as a result of such Stock Dividend.

 

(c)If
at any time or from time to time after the date hereof, the Company issues or sells, or is deemed by the express provisions of
this subsection (c) to have issued or sold, Additional Shares of Common Stock (as defined in Section 3.5(f) below)), other than
as a Stock Dividend as provided in Section 3.5(b) above, and other than a subdivision or combination of shares of Common Stock
as provided in Section 3.5(a) above, for an Effective Price (as defined in Section 3.5(f) below) less than the then effective
conversion price (initially, $2.00 as provided in Section 3.2 and 3.3 above, the “Conversion Price”),
then and in each such case the then existing Conversion Price shall be reduced to be equal to said Effective Price.

  

(d)For
the purpose of making any adjustment required under Section 3.5(c), the consideration received by the Company for any issue or
sale of securities shall (A) to the extent it consists of cash, be computed at the net amount of cash received by the Company
after deduction of any underwriting or similar commissions, compensation or concessions paid or allowed by the Company in connection
with such issue or sale but without deduction of any expenses payable by the Company, (B) to the extent that it consists of property
other than cash, be computed at the fair value of that property as deemed in good faith by the Board of Directors, and (C) if
Additional Shares of Common Stock, Convertible Securities (as defined in Section 3.5(e) below) or rights or options to purchase
either Additional Shares of Common Stock or Convertible Securities are issued or sold together with other stock or securities
or other assets of the Company for consideration which covers both, computed as the portion of the consideration so received that
may be reasonably determined in good faith by the Board of Directors to be allocable to such Additional Shares of Common Stock,
Convertible Securities or rights or options.

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(e)For
the purpose of the adjustment required under Section 3.5(c), if the Company issues or sells any (i) stock or other securities
convertible into, Additional Shares of Common Stock (such convertible stock or securities being herein referred to as “Convertible
Securities”) or (ii) rights or options for the purchase of Additional Shares of Common Stock or Convertible Securities,
and if the Effective Price of such Additional Shares of Common Stock is less than the Conversion Price, in each case the Company
shall be deemed to have issued at the time of the issuance of such rights or options or Convertible Securities the maximum number
of Additional Shares of Common Stock issuable upon exercise or conversion thereof and to have received as consideration for such
shares the amount equal to the total amount of consideration, if any, received by the Company for the issuance of such rights
or options or Convertible Securities, plus in the case of such rights or options, the minimum amounts of consideration, if any,
payable to the Company upon the exercise of such rights or options, plus, in the case of Convertible Securities, the minimum amounts
of consideration, if any, payable to the Company (other than by the cancellation of liabilities or obligations evidenced by such
Convertible Securities) upon the conversion thereof; provided that if in the case of Convertible Securities the minimum
amounts of such consideration cannot be ascertained, but are a function of antidilution or similar protective clauses, the Company
shall be deemed to have received the minimum amounts of consideration without reference to such clauses; provided further
that if the minimum amount of consideration payable to the Company upon the exercise or conversion of rights, options or Convertible
Securities is reduced over time or on the occurrence or non-occurrence of specified events other than by reason of antidilution
adjustments, the Effective Price shall be recalculated using the figure to which such minimum amount of consideration is reduced;
provided further that if the minimum amount of consideration payable to the Company upon the exercise or conversion of
such rights, options or Convertible Securities is subsequently increased, the Effective Price shall be again recalculated using
the increased minimum amount of consideration payable to the Company upon exercise or conversion of such rights, options or Convertible
Securities. No further adjustment of the Conversion Price, as adjusted upon the issuance of such rights, options or Convertible
Securities, shall be made as a result of the actual issuance of Additional Shares of Common Stock on the exercise of any such
rights or options or the conversion of any such Convertible Securities. If any such rights or options or the conversion privilege
represented by any such Convertible Securities shall expire without having been exercised, the Conversion Price as adjusted based
upon the issuance of such rights, options or Convertible Securities shall be readjusted to the Conversion Price which would have
been in effect had an adjustment been made on the basis that the only Additional Shares of Common Stock, if any, actually issued
or sold on the exercise of such rights or options of conversion of such Convertible Securities, and such Additional Shares of
Common Stock, if any, were issued or sold for the consideration actually received by the Company upon such exercise, plus the
consideration, if any, actually received by the Company for the granting of all such rights or options, whether or not exercised,
plus the consideration received for issuing or selling the Convertible Securities actually converted, plus the consideration actually
received by the Company (other than by cancellation of liabilities or obligations evidenced by such Convertible Securities) on
the conversion of such Convertible Securities.

 

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(f) “Additional
Shares of Common Stock” shall mean all shares of Common Stock issued by the Company or deemed to be issued
pursuant to Section 3.5(e), other than (A) shares of Common Stock issuable or issued upon conversion of this Debenture; (B)
shares of Common Stock and/or options, warrants or other Common Stock purchase rights and the Common Stock issued pursuant to
such options, warrants or other rights (as adjusted for any stock dividends, splits, recapitalizations and the like) after
the date hereof to employees, officers, directors, consultants or advisors to the Company or any subsidiary pursuant to stock
purchase or stock option plans or other arrangements that are approved by the Board; (C) shares of Common Stock issued
pursuant to the exercise of options, warrants or convertible securities outstanding as of the date hereof; (D) shares of
Common Stock issued and/or options, warrants, or other rights for consideration other than cash pursuant to a merger,
consolidation, acquisition or similar business combination approved by the Board; (E) shares of Common Stock issued and/or
options, warrants or other purchase rights pursuant to any equipment leasing arrangement, or debt financing from a bank or
similar financial institution approved by the Board; (F) shares of Common Stock issued or issuable by the Board by reason of
a dividend, stock split, or other distribution on shares of Common Stock, that is covered by Sections 3.5(a) and (b). .
References to Common Stock in the subsections of this Section 3.5(f) above shall mean all shares of Common Stock issued by
the Company or deemed to be issued pursuant to this Section 3.5(e). The “Effective Price” of
Additional Shares of Common Stock shall mean the quotient determined by dividing the total number of Additional Shares of
Common Stock issued or sold, or deemed to have been issued or sold by the Company under Section 3.5(e), into the
aggregate consideration received, or deemed to have been received by the Company for such issue under this Section 3.5(e),
for such Additional Shares of Common Stock.

 

(g)In
each case of an adjustment or readjustment of the Conversion Price, if this Debenture is then convertible pursuant to this Article
Three, the Company, at its expense, shall compute such adjustment or readjustment in accordance with the provisions hereof and
prepare a certificate showing such adjustment or readjustment, and shall mail such certificate, by first class mail, postage prepaid,
to the Holder in accordance with Section 8.4 herein. The certificate shall set forth such adjustment or readjustment, showing
in detail the facts upon which such adjustment or readjustment is based, including a statement of (i) the consideration received
or deemed to be received by the Company for any Additional Shares of Common Stock issued or sold or deemed to have been issued
or sold, (ii) the Conversion Price at the time in effect, (iii) the number of Additional Shares of Common Stock and (iv) the type
and amount, if any, of other property which at the time would be received upon Conversion of this Debenture, as the case may be.

 

(h)
Upon (i) any taking by the Company of a record of the holders of any class of securities for the purpose of determining the holders
thereof who are entitled to receive any dividend or other distribution or (ii) any Sale of the Company or other capital reorganization
of the Company, any reclassification or recapitalization of the capital stock of the Company, any merger or consolidation of the
Company, with or into any other corporation, or any voluntary or involuntary dissolution, liquidation or winding up of the Company,
the Company shall mail to the Holder of this Debenture at least ten (10) days prior to the record date specified therein a notice
specifying (A) the date on which any such record is to be taken for the purpose of such dividend or distribution, (B) the date
on which any such Sale of the Company, reorganization, reclassification, transfer, consolidation, merger, dissolution, liquidation
or winding up is expected to become effective, and (C) the date, if any, that is to be fixed as to when the holders of record
of Common Stock (or other securities) shall be entitled to exchange their shares of Common Stock (or other securities) for securities
or other property deliverable upon such Sale of the Company, reorganization, reclassification, transfer, consolidation, merger,
dissolution, liquidation or winding up.

 

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ARTICLE FOUR

WARRANTS

 

4.1In
addition to this Debenture, the Company has issued to the Holder warrants to purchase up to Seventy-Two Thousand Five Hundred
(72,500) shares of Common Stock of the Company, at an original exercise price of $2.25 per share (the “Warrant”).
The Warrant is non-detachable from the Debenture and cannot be assigned or transferred separately from the Debenture.

 

ARTICLE FIVE

COVENANTS OF THE COMPANY

 

5.1Financial
Statements. The Company shall maintain a standard system of accounting in accordance with generally accepted accounting principles
applied on a consistent basis and shall make and keep books, records and accounts which, in reasonable detail, accurately and
fairly reflect its transactions. For so long as the Holder holds the Debentures, the Company shall file the periodic reports that
it is required to file pursuant to the Securities Exchange Act of 1934, as amended or otherwise shall deliver to the Holder:

 

(a)As
soon as available, and in any event within one hundred twenty (120) days after the end of each fiscal year of the Company, a consolidated
profit or loss statement for such fiscal year, a consolidated balance sheet of the Company as of the end of such year, and a consolidated
statement of cash flows for such year, certified, without qualification as to scope of the examination, by independent public
accountants of recognized national standing selected by the Company; and

 

(b)As soon as available, and
in any event within forty-five (45) days after the end of each of the first three (3) quarters of the fiscal year an unaudited
consolidated profit or loss statement for such fiscal quarter and an unaudited balance sheet as of the end of such fiscal quarter,
setting forth in comparative form the figures for the corresponding periods of the previous fiscal year. Such financial statements
shall be accompanied by a certificate of the Chief Financial Officer of the Company certifying that the financial statements are
true and complete in all material respects and stating whether or not the Company is in violation of this Debenture or any material
agreements to which the Company is a party.

 

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5.2Use
of Proceeds. The Company shall use the Principal Amount to finance the construction and leasehold improvements for leased
premises recently leased by the Company pursuant to that certain Lease Agreement dated January 25, 2012, by and between White
Birch Properties, LLC and the Company and generally in accordance with the attached “Use of Proceeds Schedule.”

 

ARTICLE SIX

EVENTS OF DEFAULT

 

The occurrence of any
of the following events of default shall, at the option of the Holder hereof, make all sums of Principal Amount and interest then
remaining unpaid hereon and all other amounts payable hereunder immediately due and payable, all without demand, presentment or
notice, all of which hereby are expressly waived:

 

6.1Failure
to Pay Principal Amount or Interest. Failure to pay an installment of interest hereon when due and continuance thereof for
a period of thirty (30) days after written notice to the Company from the Holder, provided, however, that failure to pay interest
on the date that the Principal Amount payment is due and failure to pay the Principal Amount when due shall constitute an immediate
default.

 

6.2Breach
of Covenant. The breach of any covenant or other term or condition of this Debenture and continuance thereof for a period
of thirty (30) days after written notice to the Company from the Holder.

 

6.3Insolvency;
Receiver or Trustee. The Company shall become insolvent or admit in writing its inability to pay its debts as they mature;
or make an assignment for the benefit of creditors; or apply for or consent to the appointment of a receiver or trustee for it
or for a substantial part of its property or business; or such a receiver or trustee otherwise shall be appointed.

 

6.5Bankruptcy.
Bankruptcy, insolvency, reorganization or liquidation proceeding or other proceedings or relief under any bankruptcy law or any
law for the relief of debtors shall be instituted by or against the Company.

 

6.6Default
on Other Loan Agreements. Failure to pay when due any other material obligation for money borrowed or dividend or redemption
payments or any default under any other agreement or obligation involving the borrowing of money or the advance of credit, and
continuance thereof for a period of one hundred twenty (120) days.

 

ARTICLE SEVEN

REGISTRATION OF TRANSFER

 

7.1Register. The Company
shall maintain a register for the recordation of transfers of this Debenture, which shall be transferable in whole or in part.
Upon presentation by the Holder and surrender of this Debenture, the Company shall register such transfer and issue a new Debenture
or Debentures of like aggregate principal amount and bearing the same date.

 

7.2Lost or Destroyed Debentures.
Upon receipt by the Company at its principal office of evidence satisfactory to the company of the loss, theft, destruction or
mutilation of this Debenture, and in the case of any such loss, theft, or destruction, upon delivery of indemnity satisfactory
to the Company or, in case of any such mutilation, upon surrender and cancellation of this Debenture, the Company will issue a
new Debenture of like tenor in lieu of this Debenture with a notification thereof of the date from which interest has accrued.

 

ARTICLE EIGHT

MISCELLANEOUS

 

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8.1Entire
Debenture. This Debenture and the documents referred to herein constitute the entire agreement among the parties and no party
shall be liable or bound to any other party in any manner by any warranties, representations or covenants except as specifically
set forth herein or therein. The terms and conditions of this Debenture shall inure to the benefit of and be binding upon the
respective heirs, personal representatives, successors and assigns of the parties, except to the extent assignability is limited
herein.

 

8.2Governing
Law. This Debenture shall be governed by and construed under the laws of the State of Delaware.

 

8.3Titles
and Subtitles. The titles and subtitles used in this Debenture are used for convenience only and are not to be considered
in construing or interpreting this Debenture.

 

8.4Notices.
Any notice required or permitted under this Debenture shall be given in writing and shall be deemed effectively given upon personal
delivery or upon deposit with the United States Postal Service, by registered or certified mail, postage prepaid, or by reputable
overnight courier such as FedEx and addressed in the following manner:

 

		(a)	If to the Holder:

 

West
Virginia Job Investment Trust Board

Fifth
Floor

1012 Kanawha Boulevard,
East

Charleston, WV 25301

Attention:
Executive Director

Telephone
No. 304-345-6200

Fax:

 

		(b)	If to the Company:

 

Protea
Biosciences Group, Inc.

955
Hartman Run Road

Morgantown,
WV 26507

Attention:
Stephen Turner

Telephone:
304-292-2226

Fax:
304-292-7101

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8.5Finders’
Fees. Each party represents that it neither is, nor will be, obligated for any finders’ fee or commission in connection
with this transaction.

 

The Holder agrees to
indemnify and to hold harmless the Company from any liability for any commission or compensation in the nature of a finders’
fee (and the costs and expenses of defending against such liability or asserted liability) for which such Holder or any of its
partners, employees or representatives is responsible.

 

The Company agrees
to indemnify and hold harmless the Holder from any liability for any commission or compensation in the nature of a finders’
fee (and the costs and expenses of defending against such liability or asserted liability) for which the company or any of its
officers, employees or representatives is responsible.

 

8.6Amendments
and Waivers. Any term of this Debenture may be amended and the observance of any term of this Debenture may be waived (either
generally or in a particular instance and either retroactively or prospectively), pursuant to a written agreement of the Company
and Holder, and not otherwise.

 

The Company and any
agent of the Company may treat the person in whose name this Debenture is registered as the absolute owner hereof for all purposes
whether or not this Debenture be overdue, and neither the Company nor any such agent shall be affected by notice to the contrary.

 

 

 

 

[SIGNATURES ON FOLLOWING PAGE]

 

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IN WITNESS WHEREOF,
the Company has caused this Debenture to be signed in its name by the manual signature of its President.

 

	 	PROTEA BIOSCIENCES GROUP, INC.
	 	a Delaware corporation
	 	 	 
		By	/s/ Stephen Turner
	 	 	Stephen Turner, President

 

	Acknowledged and accepted,	 
	intending to be legally bound hereby:	 
	 	 	 
	WEST VIRGINIA JOBS INVESTMENT TRUST BOARD	 
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	By	/s/ C. Andrew Zulauf	 
	    	 C. Andrew Zulauf, Executive Director 	 

 

    	12****

 

This Warrant and the securities underlying
this Warrant have not been registered under the Securities Act of 1933, as amended (the “Securities Act”) and may not
be offered, sold or otherwise transferred, assigned, pledged or hypothecated in the absence of such registration or an exemption
therefrom under such Securities Act, any applicable state securities laws and the rules and regulations thereunder.

 

PROTEA BIOSCIENCES GROUP, INC.

 

WARRANT

 

TO PURCHASE COMMON STOCK OF THE COMPANY

 

	Warrant No. 402	Issue Date:  March 15, 2012

 

FOR VALUE RECEIVED,
PROTEA BIOSCIENCES GROUP, INC., a Delaware corporation (the “Company”), grants the following rights to West Virginia
Jobs Investment Trust Board, its successors, permitted assigns, heirs, executors and administrators (individually and collectively,
the “Holder”), as of the 15th day of March 2012 (“Issue Date”). This warrant (the “Warrant”)
has been issued by the Company in connection with the issuance by the Company of its Convertible Debenture to West Virginia Jobs
Investment Trust Board and of even date herewith (the “Convertible Debenture”), which by its terms is accompanied by
the delivery to the Holder of one Warrant to purchase the Company’s Common Stock on the terms and conditions set forth herein.

 

Section
1.Grant.

 

The Holder is hereby
granted the right (collectively, the “Purchase Rights”), in accordance with the terms and conditions of this Warrant,
from the date hereof until the expiration of the “Exercise Period” (as defined below), to purchase from the Company
that number of fully paid and non-assessable shares of Common Stock of the Company, par value $0.0001 per share, set forth in Section
2 hereof, at the “Exercise Price” (as defined below), upon delivery of this Warrant to the Company with the Notice
of Exercise form attached as Exhibit 1 hereto, duly executed, and upon tender of the Exercise Price for the shares of Common
Stock to be purchased.

 

Section
2.Number of Shares of Common Stock Purchasable.

 

2.1Subject
to the other provisions of this Section 2, this Warrant entitles the Holder to purchase from time to time up to 72,500 shares
of the Company’s Common Stock (the “Warrant Shares”).

 

2.2In
case prior to the expiration of these Purchase Rights by exercise or by the terms of this Warrant the Company shall undertake
any reclassification, stock split, reverse stock split, stock dividend or any similar proportionately-applied change (collectively,
a “Reclassification”) of outstanding shares of Common Stock (other than a change in, of, or from par value), the Holder
shall thereafter be entitled, upon exercise of this Warrant, to purchase the kind and amount of shares of stock and other securities
and property receivable upon such Reclassification by a holder of the number of shares of Common Stock which this Warrant entitles
the Holder hereof to purchase immediately prior to such Reclassification. Notice of any such Reclassification shall be given to
the Holder pursuant to Section 11 hereof.

 

 

    	 

    	 

    

 

2.3In
case prior to the expiration of these Purchase Rights by exercise or by the terms of this Warrant the Company shall determine
to consolidate or merge with, or convey all, or substantially all, of its property or assets to, any other corporation or corporations,
or dissolve, liquidate or wind up, then, as a condition precedent to such consolidation, merger, conveyance, dissolution, liquidation
or winding up, notice shall be given to the Holder pursuant to Section 11 hereof and lawful and adequate provision shall be made
whereby the Holder shall thereafter have the right to receive from the Company or the successor corporation, as the case may be,
upon the basis and upon the terms and conditions specified in this Warrant, in lieu of the shares of Common Stock of the Company
theretofore purchasable upon the exercise of the Purchase Rights, such shares of stock, securities, or assets as may be issued
or payable with respect to, or in exchange for, the number of shares of Common Stock of the Company theretofore purchasable upon
the exercise of the Purchase Rights had such consolidation, merger, conveyance, dissolution, liquidation or winding up, not taken
place; and in any such event the rights of the Holder to an adjustment of the number of shares of Common Stock purchasable upon
the exercise of the Purchase Rights as herein provided, shall continue and be preserved in respect of any stock or securities
which the Holder becomes entitled to purchase.

 

Section
3.Exercise Period; Registration Statement Notice.

 

3.1The
Purchase Rights represented hereby shall be exercisable in whole or in part from time to time after the date of issuance of this
Warrant until the earlier of (i) a Qualified Public Offering, or (ii) 5:00 p.m. Eastern time on the fifth anniversary of the Issue
Date hereof (the “Exercise Period”). For purposes of this Warrant, the term “Qualified Public Offering”
shall mean the closing of a firm commitment underwritten offering pursuant to an effective registration statement under the Securities
Act covering the offer and sale of Common Stock for the account of the Company in which the net cash proceeds to the Company (after
deduction of underwriting discounts, commissions and fees) are at least $15,000,000.

 

3.2The
Company shall give the Holder written notice, at the address of the Holder set forth on the Company’s books, not less than
ten days prior to the filing of any registration statement with respect to a Qualified Public Offering.

 

Section
4.Exercise.

 

4.1The
Purchase Rights represented by this Warrant are exercisable upon the terms and conditions set forth herein at the option of the
Holder in whole at any time and in part, but not for less than 15,000 shares at a time, at any time and from time to time during
the Exercise Period, upon the delivery of the Notice of Exercise form attached hereto as Exhibit 1, to the Company with
such notice duly executed and upon payment in cash, wire transfer or bank cashier’s or certified check of the Exercise Price.
The Purchase Rights shall be deemed to have been exercised, and the Holder shall be deemed to have become a stockholder of record
of the Company for the purposes of receiving dividends and for all other purposes whatsoever with respect to the shares of Common
Stock so purchased, as of the date of delivery of such properly executed notice accompanied by tender of the Exercise Price at
the office of the Company. As promptly as practicable on or after such date, and in any event within 20 business days thereafter,
the Company at its expense shall issue and deliver, or cause to be issued and delivered, to the person or persons entitled to
receive the same, a certificate or certificates for the number of shares issuable upon such exercise. In the event that this Warrant
is exercised in part, the Company at its expense will execute and deliver a new Warrant of like tenor exercisable for the number
of shares for which this Warrant may then be exercised.

 

    	 

    	 

    
 

 

Section
5.Exercise Price.The Exercise Price for each share of Common Stock issuable to the Holder hereunder shall
be $2.25 per share.

 

Section
6.Company’s Warranties and Covenants as to Capital Stock. The Company has taken all action necessary
and appropriate to properly authorize, reserve and issue those shares of Common Stock issuable to the Holder pursuant to this
Warrant including an authorization of issuance and setting of the Exercise Price. The Common Stock deliverable on the exercise
of the Purchase Rights represented hereby shall, when issued, be duly and validly issued, fully paid and nonassessable. The Company
shall at all times reserve and hold available sufficient shares of Common Stock to satisfy all conversion and purchase rights
of all outstanding convertible securities and warrants.

 

Section
7.Transfer.The Purchase Rights shall be registered on the books of the Company, which shall be kept by
it at its principal office for that purpose. This Warrant and the Common Stock issuable upon exercise of the Purchase Rights,
may not be transferred or assigned in whole or in part without compliance with all applicable federal and state securities laws
by the transferor and the transferee, including, if requested by the Company, an opinion of counsel satisfactory to the Company
to the effect that the transfer or assignment is in compliance with applicable securities laws. Subject to such compliance, the
Purchase Rights shall be transferable on said books, in whole or in part, by the Holder in person or by duly authorized attorney
upon surrender of this Warranty properly endorsed by the Holder executing the Assignment Form attached hereto and made a part
hereof as Exhibit 2. All costs associated with any transfer or assignment, including, without limitation, the reasonable
fees of counsel to the Company shall be borne by the transferor or assignor. The Company agrees that, while the Purchase Rights
remain valid and outstanding, its stock transfer books shall not be closed for any purpose whatsoever except under arrangements
which shall insure to personal exercising warrants or applying for transfer of stock all rights and privileges which they might
have had or received if the stock transfer books had not been closed and they had exercised their Purchase Rights at any time
during which such transfer book shall have been closed.

 

Section
8.Charges, Taxes and Expenses.Issuance of certificates for shares of Common Stock issuable upon the exercise
of this Warrant or any portion thereof (and issuance of a replacement Warrant certificate in the event of partial exercise) shall
be made without charge to the Holder hereof for any issue taxes or any other incidental expenses in respect of the issuance of
such certificates to and in the name of the registered Holder of this Warrant, all of which taxes and expenses shall be paid by
the Company, and such certificates shall be issued in the name of the Holder of this Warrant. Certificates will be issued in a
name other than that of the Holder upon the request of a Holder and payment by the Holder of any applicable transfer taxes and
compliance with all applicable securities laws.

    	 

    	 

    
 

 

Section
9.Exchange for Other Denominations.This Warrant is exchangeable for new certificates of like tenor
and date representing in the aggregate the right to purchase the number of shares purchasable hereunder in denominations designated
by the Holder at the time of surrender. In the event of the purchase, at any time prior to the expiration of the Exercise Period,
of less than all of the shares of Common Stock purchasable hereunder, the Company will cancel this Warrant upon surrender thereof,
and will forthwith execute and deliver to the Holder hereof a new warrant of like tenor and date for the balance of the shares
purchasable hereunder.

 

Section
10.Loss, Theft, Destruction or Mutilation of Warrant.Upon receipt by the Company of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this Warrant, and, in case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to it, and upon reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Warrant, if mutilated, the Company will make and deliver a new warrant of
like tenor and date, in lieu of this Warrant.

 

Section
11.Notices.

 

(a)Whenever
the number of shares purchasable hereunder shall be adjusted pursuant to Section 2 hereof, the Company shall issue a certificate
signed by its Chief Financial Officer or such other appropriate officer, setting forth, in reasonable detail, the event requiring
the adjustment, the amount of the adjustment, the method by which such adjustment was calculated, and the number of shares purchasable
hereunder after giving effect to such adjustment, and shall cause a copy of such certificate to be mailed (by first-class mail,
postage prepaid) to the Holder of this Warrant.

 

(b)In
case:

 

(i)the
Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive any dividend or other
distribution, or any right to subscribe for or purchase any shares of stock of any class or any other securities, or to receive
any other right, or

 

(ii)of
any capital reorganization of the Company, any reclassification of the capital stock of the Company, any consolidation or merger
of the Company with or into another corporation, or any conveyance of all or substantially all of the assets of the Company to
another corporation, or

 

(iii)of
any voluntary dissolution, liquidation or winding-up of the Company,

 

 

    	 

    	 

    

 

then, and in each such case, the Company
will mail or deliver or cause to be mailed or delivered to the Holder or Holders a notice specifying, as the case may be, (A) the
date on which a record is to be taken for the purpose of such dividend, distribution or right, and stating the amount and character
of such dividend, distribution or right, or (B) the date on which such reorganization, reclassification, consolidation, merger,
conveyance, dissolution, liquidation or winding-up is to take place, and the time, if any is to be fixed, as of which the holders
of record of Common Stock shall be entitled to exchange their shares of Common Stock for securities or other property deliverable
upon such reorganization, reclassification, consolidation, merger, conveyance, dissolution, liquidation or winding-up. Such notice
shall be mailed or delivered at least 15 business days prior to the date therein specified.

 

(c)All
notices, requests, consents and demands required by this Warrant shall be in writing and shall be personally delivered or mailed,
postage prepaid, in the following manner:

 

If
to the Holder:

 

West
Virginia Jobs Investment Trust Board

Fifth
Floor, 1012 Kanawha Boulevard, East

Charleston,
WV 25301

Attention:
Executive Director

Telephone
No. 304-345-6200

Fax:
304-345-6262

 

If
to the Company:

 

PROTEA
BIOSCIENCES GROUP, INC.

955
Hartman Run Road

Morgantown,
WV 26507

Attention:
Stephen Turner

Telephone:
304-292-2226

Fax:
304-292-7101

 

or to such address or addresses as provided
by Company or by Holder by such a notice. All notices required or permitted hereunder shall be in writing and shall be deemed effectively
given: (i) upon personal delivery to the party to be notified, (ii) when sent by confirmed facsimile if went during normal business
hours of the recipient, if not, then on the next business day, (iii) five (5) days after having been sent by registered or certified
mail, return receipt requested, postage prepaid, or (iv) one (1) day after deposit with a nationally recognized overnight courier,
specifying next day delivery with written verification of receipt.

 

Section
12.Miscellaneous.This Warrant shall not entitle the Holder to any of the rights of a stockholder of the
Company. This Warrant shall be binding upon the Company’s successors. This Warrant shall be governed, construed and enforced
in accordance with the laws of the State of Delaware. In case any provision of this Warrant shall be invalid, illegal or unenforceable,
or partially invalid, illegal or unenforceable, the provision shall be enforced to the extent, if any, that it may legally be
enforced and the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired
thereby. This Warrant shall any term hereof may be changed, waived, discharged or terminated only by a statement in writing signed
by the party against which enforcement of such change, waiver, discharge or termination is sought. The headings in this Warrant
are for purposes of reference only, and shall not limit or otherwise affect any of the terms hereof.

 

 

[Signatures on following page]

 

 

    	 

    	 

    

 

IN WITNESS WHEREOF,
the parties have caused this Warrant to be duly executed, under seal and delivered on its behalf as of the 15th day
of March, 2012.

 

	 	PROTEA BIOSCIENCES GROUP, INC. (SEAL)	 
	 	 	 	 
	 	 	 	 
	 	By:	/s/ Stephen Turner	 
	 	 	Stephen Turner	 
	 	 	President	 
	 	 	 	 
	 	 	 	 
	 	WEST VIRGINIA JOBS INVESTMENT TRUST BOARD	 
	 	 	 	 
	 	 	 	 
	 	By:	/s/ C. Andrew Zulauf	 
	 	 	C. Andrew Zulauf, Executive Director	 

 

    	 

    	 

    
  

EXHIBIT 1

 

 

NOTICE OF EXERCISE PURSUANT TO

ATTACHED WARRANT

 

	 	 	 	___________ , 20___

 

To: PROTEA BIOSCIENCES GROUP, INC.

 

(1)The undersigned, the Holder
of record of the attached Warrant of PROTEA BIOSCIENCES GROUP, INC., hereby exercises the option granted by the Purchase Rights
evidenced by the attached Warrant to purchase upon the terms set forth in such Warrant [________] shares of Common Stock, which
constitutes all [or a portion] of the shares of Common Stock issued pursuant to the Purchase Rights represented by this Warrant,
of PROTEA BIOSCIENCES GROUP, INC., and hereby tenders payment of the Exercise Price as determined by the Warrant.

 

(2)In exercising this Warrant,
the undersigned hereby confirms and acknowledges that (a) the shares of the Common Stock to be issued are being acquired solely
for investment and solely for the account of the undersigned and (b) the undersigned will not offer, sell or otherwise dispose
of any such shares of Common Stock except under circumstances that will not result in a violation of the Securities Act of 1933,
as amended, or any applicable state securities laws. The undersigned further acknowledges that the certificate[s] evidencing the
shares of Common Stock shall bear a legend to the effect of clause (b) above.

 

(3)Please issue a certificate or
certificates representing said shares of Common Stock in the name of the undersigned or in such other name as is specified below:

 

(4)Please issue a new Warrant for
the unexercised portion of the attached Warrant in the name of the undersigned or in such other name as is specified below:

 

	ATTEST:	HOLDER:	 

 

	 	By:	 
	 	 	 
	 	Name:	 
	 	 	 
	 	Title:	 

 

(If certificates for Common Stock or new
Warrants are requested in a name other than the undersigned, be advised that the delivery of the certificates and/or new Warrants
will be delayed until the Company assures itself that such change is permitted under Section 7 of the Warrant that such change
does not violate applicable federal and state securities laws.)

 

    	 

    	 

    
 

 

EXHIBIT 2

 

TRANSFER OR ASSIGNMENT FORM

 

 

FOR VALUE RECEIVED,
the undersigned Holder of record of this Warrant of PROTEA BIOSCIENCES GROUP, INC., hereby sells, assigns and transfers unto the
Assignee named below all of the rights of the undersigned under the within Warrant, with respect to the number of shares of Common
Stock set forth below:

 

	Name of Transferee/Assignee	Address	No. of Shares

 

and does hereby irrevocably constitute
and appoint the Secretary of PROTEA BIOSCIENCES GROUP, INC. to make such transfer on the books of PROTEA BIOSCIENCES GROUP, INC.,
maintained for the purpose, with full power of substitution in the premises.

 

Attached hereto is
an opinion of counsel that the assignment does not violate or is exempt from, any federal and state securities laws. The Company
may, in its sole discretion, decide whether such opinion is satisfactory, and Assignee and Holder agree to any reasonable delay
in transfer caused by such evaluation.

 

The undersigned also
represents that, by assignment hereof, the Assignee acknowledges that this Warrant and the shares of Common Stock to be issued
upon exercise hereof or conversion thereof are being acquired for investment and that the Assignee will not offer, sell or otherwise
dispose of this Warrant or any shares of stock to be issued upon exercise hereof or conversion thereof except under circumstances
which will not result in a violation of the Securities Act of 1933, as amended, or any state securities laws. Further, the Assignee
has acknowledged that upon exercise of this Warrant, the Assignee shall, if requested by the Company, confirm in writing, in a
form satisfactory to the Company, that the shares of stock so purchased are being acquired for investment and not with a view toward
distribution or resale in violation of applicable securities laws.

 

 

	ATTEST:	HOLDER:	 

 

	 	By:	 
	 	 	 
	 	Name:	 
	 	 	 
	 	Title:	 

 

	ATTEST:	ASSIGNEE: 	 

 

	 	By:	 
	 	 	 
	 	Name:	 
	 	 	 
	 	Title:

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