Document:

CERTIFICATE
      OF DESIGNATION

     

    ESTABLISHING
      THE DESIGNATIONS, POWERS, PREFERENCES, RIGHTS,
      QUALIFICATIONS,

    LIMITATIONS
      AND RESTRICTIONS OF

     

    6.5%
      CUMULATIVE CONVERTIBLE PREFERRED STOCK

     

    of

     

    MARGO
      CARIBE, INC.

     

    Pursuant
      to Article 5.01 of the General Corporation Law of the Commonwealth of Puerto
      Rico

     

    We,
      the
      undersigned, Vice President and Assistant Secretary of MARGO
      CARIBE, INC.
      (hereinafter called the “Corporation”),
      a
      corporation duly organized and existing under the laws of the Commonwealth
      of
      Puerto Rico, do hereby certify that, pursuant to the authority conferred upon
      the Board of Directors of the Corporation by the Certificate of Incorporation
      of
      the Corporation and resolutions adopted by the Board of Directors on March
      30,
      2007 creating a committee thereof known as the “Preferred Stock Pricing
      Committee,” the said Preferred Stock Pricing Committee on May 17, 2007 adopted
      the following resolutions creating a series of 15,600 shares of Serial Preferred
      Stock designated as the “6.5% Cumulative Convertible Preferred
      Stock.”

     

    RESOLVED,
      that
      pursuant to the authority expressly granted to and vested in the Board of
      Directors of the Corporation and delegated to the Preferred Stock Pricing
      Committee in accordance with the provisions of its Certificate of Incorporation,
      a series of serial preferred stock of the Corporation be and hereby is
      created.

     

    FURTHER
      RESOLVED,
      that
      the Preferred Stock Pricing Committee designated by the Board of Directors
      has
      determined that the preferences and relative, participating, optional or other
      special rights of the shares of such series of preferred stock, and the
      qualifications, limitations or restrictions thereof, as stated and expressed
      herein, are under the circumstances prevailing on the date hereof fair and
      equitable to all the existing shareholders of the Corporation.

     

    FURTHER
      RESOLVED,
      that
      the designation and amount of such series and the voting powers, preferences
      and
      relative, participating, optional or other special rights of the shares of
      such
      series of preferred stock, and the qualifications, limitations or restrictions
      thereof are as follows:

     

    1.   Designation
      and Amount.
      The
      shares of such series of preferred stock shall be designated as the “6.5%
      Cumulative Convertible Preferred Stock” (hereinafter called the “Preferred
      Stock”),
      and
      the number of authorized shares constituting such series shall be
      15,600.

     

    2.   Certain
      Definitions. As
      used
      in this Certificate, the following terms shall have the following meanings,
      unless the context otherwise requires:

     

    “Affiliate”
of
      any
      Person means any other Person directly or indirectly controlling or controlled
      by or under direct or indirect common control with such Person. For the purposes
      of this definition, “control” when used with respect to any Person means the
      power to direct the management and policies of such Person, directly or
      indirectly, whether through the ownership of voting securities, by contract
      or
      otherwise; and the terms “controlling” and “controlled” have meanings
      correlative to the foregoing.

     

    “Board
      of Directors”
means
      either the board of directors of the Corporation or any duly authorized
      committee of such board.

     

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    “Business
      Day”
means
      any day other than a Saturday, Sunday or a day that is a general holiday in
      San
      Juan, Puerto Rico or New York, New York.

     

    “Capital
      Stock”
of
      any
      Person means any and all shares, interests, participations or other equivalents
      however designated of corporate stock or other equity participations, including
      partnership interests, whether general or limited, of such Person and any rights
      (other than debt securities convertible or exchangeable into an equity
      interest), warrants or options to acquire an equity interest in such
      Person.

     

    “Certificate”
means
      this Certificate of Designation.

     

    “Closing
      Bid and Ask Price”
with
      respect to shares of Common Stock or other capital stock or similar equity
      interests as of any date means the average of the closing bid and ask prices
      per
      share (or, if more than one in either case, the average of the average closing
      bid and the average closing ask prices) on such date as quoted on the Pink
      Sheets Electronic Quotation System (or as reported by NASDAQ or by the National
      Quotation Bureau Incorporated, if the Common Stock or other capital stock or
      similar equity interests are listed on NASDAQ). In the absence of such
      quotations, the Corporation shall be entitled to determine the Closing Bid
      and
      Ask Price on the basis it considers appropriate. The Closing Bid and Ask Price
      shall be determined without reference to extended or after hours
      trading.

     

    “Common
      Share Legend”
shall
      have the meaning assigned to it in Section 16(e).
      

     

    “Common
      Stock”
means
      any stock of any class of the Corporation that has no preference in respect
      of
      dividends or of amounts payable in the event of any voluntary or involuntary
      liquidation, dissolution or winding up of the Corporation and that is not
      subject to redemption by the Corporation. Subject to the provisions of Section
      10,
      however, shares issuable on conversion of the Preferred Stock shall include
      only
      shares of the class designated as common stock of the Corporation at the date
      of
      this Certificate (namely, the Common Stock, par value $0.01 per share) or shares
      of any class or classes resulting from any reclassification or reclassifications
      thereof and that have no preference in respect of dividends or of amounts
      payable in the event of any voluntary or involuntary liquidation, dissolution
      or
      winding up of the Corporation and which are not subject to redemption by the
      Corporation;
      provided
      that if
      at any time there shall be more than one such resulting class, the shares of
      each such class then so issuable on conversion shall be substantially in the
      proportion that the total number of shares of such class resulting from all
      such
      reclassifications bears to the total number of shares of all such classes
      resulting from all such reclassifications. 

     

    “Conversion
      Agent”
shall
      have the meaning assigned to it in Section 17(a)
      hereof.

     

    “Conversion
      Price”
per
      share of Preferred Stock means, on any date, the Liquidation Preference divided
      by the Conversion Rate in effect on such date. 

     

    “Conversion
      Rate”
per
      share of Preferred Stock means 41.6666 shares of Common Stock, subject to
      adjustment pursuant to Section 9
      hereof.

     

    “Corporation”
shall
      have the meaning assigned to it in the preamble to this Certificate, and shall
      include any successor to such Corporation. 

     

    

    
      
        
          
          

        

        
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    “Current
      Market Price”
shall
      mean, as of any date of determination, the average of the daily Closing Bid
      and
      Ask Prices per share of Common Stock for the ten consecutive days selected
      by
      the Corporation commencing no more than 30 days before and ending not later
      than
      the earlier of such date of determination and the day before the “ex”
date
      with respect to the issuance, distribution, subdivision or combination requiring
      such computation. For purpose of this paragraph, the term “ex”
date,
      (1) when used with respect to any issuance or distribution, means the first
      Business Day in which the Closing Bid and Ask Price is obtained (or the first
      date on which the Common Stock trades, regular way, on the relevant market)
      without the right to receive such issuance or distribution, and (2) when used
      with respect to any subdivision or combination of shares of Common Stock, means
      the first Business Day (or the first date on which the Common Stock trades,
      regular way, on the such market) after the time at which such subdivision or
      combination becomes effective. If another issuance, distribution, subdivision
      or
      combination to which Section 9(d)
      applies
      occurs during the period of ten consecutive trading days referred to above
      applicable for calculating “Current Market Price” pursuant to this definition,
      the “Current Market Price” shall be calculated for such period in a manner
      determined by the Board of Directors to reflect the impact of such issuance,
      distribution, subdivision or combination on the Closing Bid and Ask Price of
      the
      Common Stock during such period.

     

    “Depositary”
shall
      have the meaning assigned to it in Section 11(e)
      hereof.

     

    “Dividend
      Payment Date”
means
      March 15, June 15, September 15 and December 15 each year, or if any such date
      is not a Business Day, the next succeeding Business Day.

     

    “Dividend
      Period”
shall
      mean the period beginning on, and including, a Dividend Payment Date and ending
      on, and excluding, the immediately succeeding Dividend Payment
      Date.

     

    “Exchange
      Act”
shall
      mean the Securities Exchange Act of 1934, as amended.

     

    “Exchange
      Agreement”
means
      the Exchange Agreement between the Corporation and certain individuals named
      therein, relating to the Preferred Stock.

     

    “Fair
      Market Value”
shall
      mean the amount which a willing buyer would pay a willing seller in an
      arm’s-length transaction.

     

    “Junior
      Stock”
shall
      have the meaning assigned to it in Section 3(d)
      hereof.

     

    “Liquidation
      Preference”
      shall
      have the meaning assigned to it in Section 5(a)
      hereof.

     

    “NASDAQ”
      means
      the National Association of Securities Dealers Automated Quotation
      System.

     

    “Officer”
means
      the Chairman of the Board, the President, any Vice President, the Treasurer,
      any
      Assistant Treasurer, the Controller, any Assistant Controller, the Secretary,
      or
      any Assistant Secretary of the Corporation.

     

    “Outstanding”
means,
      when used with respect to Preferred Stock, as of any date of determination,
      all
      shares of Preferred Stock outstanding as of such date; provided,
      however,
      that,
      in determining whether the holders of Preferred Stock have given any request,
      demand, authorization, direction, notice, consent or waiver or taken any other
      action hereunder, Preferred Stock owned by the Corporation shall be deemed
      not
      to be Outstanding, except that, in determining whether the Registrar shall
      be
      protected in relying upon any such request, demand, authorization, direction,
      notice, consent, waiver or other action, only Preferred Stock which the
      Registrar has actual knowledge of being so owned shall be deemed not to be
      Outstanding.

     

    “Parity
      Stock”
shall
      have the meaning assigned to it in Section 3(c)
      hereof.

     

    “Paying
      Agent”
shall
      have the meaning assigned to it in Section 17(a)
      hereof.

     

    “Person”
means
      an individual, a corporation, a partnership, a limited liability company, an
      association, a trust or any other entity or organization, including a government
      or political subdivision or an agency or instrumentality thereof.

     

    

    
      
        
          
          

        

        
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    “Preferred
      Shares”
shall
      have the meaning assigned to it in Section 15(a)
      hereof.

     

    “Preferred
      Stock”
shall
      have the meaning assigned to it in Section 1
      hereof.

     

    “Preferred
      Stock Director”
shall
      have the meaning assigned to it in Section 6(b)
      hereof.

     

    “Purchase
      Price”
means
      an amount equal to 100% of the Liquidation Preference per share of Preferred
      Stock being purchased, plus an amount equal to any accumulated and unpaid
      dividends, (whether or not earned or declared).

     

    “Record
      Date”
means
      (i) with respect to the dividends payable on March 15, June 15, September 15
      and
      December 15 of each year, March 1, June 1, September 1 and December 1 of each
      year, respectively, or such other record date, not more than 60 days and not
      less than 10 days preceding the applicable Dividend Payment Date, as shall
      be
      fixed by the Board of Directors and (ii) solely for the purpose of adjustments
      to the Conversion Rate pursuant to Section 9,
      with
      respect to any dividend, distribution or other transaction or event in which
      the
      holders of Common Stock have the right to receive any cash, securities or other
      property or in which the Common Stock (or other applicable security) is
      exchanged for or converted into any combination of cash, securities or other
      property, the date fixed for determination of stockholders entitled to receive
      such cash, securities or other property (whether such date is fixed by the
      Board
      of Directors or by statute, contract or otherwise).

     

    “Registrar”
shall
      have the meaning assigned to it in Section 13
      hereof.

     

    “Restricted
      Shares Legend”
shall
      have the meaning assigned to it in Section 15(a).
      

     

    “Securities
      Act”
means
      the Securities Act of 1933, as amended. 

     

    “Senior
      Stock”
shall
      have the meaning assigned to it in Section 3(b)
      hereof.

     

    “Subsidiary”
means,
      with respect to any Person, (a) any corporation, association or other business
      entity of which more than 50% of the total voting power of shares of capital
      stock entitled (without regard to the occurrence of any contingency) to vote
      in
      the election of directors, managers or trustees thereof is at the time owned
      or
      controlled, directly or indirectly, by such Person or one or more of the other
      Subsidiaries of that Person (or a combination thereof) and (b) any partnership
      (i) the sole general partner or the managing general partner of which is such
      Person or a Subsidiary of such Person or (ii) the only general partners of
      which
      are such Person or one or more Subsidiaries of such Person (or any combination
      thereof). 

     

    “Transfer
      Agent”
shall
      have the meaning assigned to it in Section 13
      hereof.

     

    3. 
       Ranking.
      The
      Preferred Stock shall, with respect to dividend rights and rights upon
      liquidation, winding up or dissolution, rank:

     

    (a)    junior
      to
      all existing and future debt obligations of the Corporation (collectively,
      the
“Senior
      Debt”);

     

    (b)    junior
      to
      each class or series of Capital Stock of the Corporation, the terms of which
      expressly provide that such class or series ranks senior to the Preferred Stock
      as to dividend rights and rights on liquidation, winding up and dissolution
      of
      the Corporation (collectively, together with any warrants, rights, calls or
      options exercisable for or convertible into such Capital Stock, the
“Senior
      Stock”);

     

    (c)    on
      a
      parity with any other class or series of Capital Stock of the Corporation,
      the
      terms of which expressly provide that such class or series ranks on a parity
      with the Preferred Stock as to dividend rights and rights on liquidation,
      winding up and dissolution of the Corporation (collectively, the “Parity
      Stock”);
      and

     

     

    

    
      
        
          
          

        

        
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    (d)    senior
      to
      the Common Stock and any other class or series of Capital Stock of the
      Corporation, the terms of which expressly provide that such class or series
      ranks junior to the Preferred Stock as to dividend rights and rights on
      liquidation, winding up and dissolution of the Corporation (collectively, the
      “Junior
      Stock”).

     

    4. 
       Dividends.
      (a)
      Holders of the Preferred Stock shall be entitled to receive, when, as and if,
      declared by the Board of Directors, out of funds of the Corporation legally
      available for the payment of dividends, cumulative cash dividends at the annual
      rate of 6.5% of the Liquidation Preference per share, or $4.0625 per share
      per
      quarter, with each aggregate payment made to each record holder of the Preferred
      Stock being rounded to the next lowest cent. Such dividends shall be payable
      in
      arrears in equal amounts quarterly on each Dividend Payment Date, beginning
      June
      15, 2007, in preference to and in priority over dividends on any Junior Stock
      but subject to the rights of any holders of Senior Stock or Parity
      Stock. 

     

    (b)    Dividends
      shall be cumulative from the initial date of issuance or the last Dividend
      Payment Date for which accumulated dividends were paid, whichever is later,
      whether or not funds of the Corporation are legally available for the payment
      of
      such dividends. Each such dividend shall be payable to the holders of record
      of
      shares of the Preferred Stock, as they appear on the Corporation’s stock
      register at the close of business on a Record Date. Accumulated and unpaid
      dividends for any past Dividend Periods may be declared and paid at any time,
      without reference to any Dividend Payment Date, to holders of record on such
      date, not more than 45 days preceding the payment date thereof, as may be fixed
      by the Board of Directors.

     

    (c)    The
      amount of dividends payable for each full Dividend Period for the Preferred
      Stock shall be computed by dividing the annual dividend rate by four. The amount
      of dividends payable for the initial Dividend Period, or any other period
      shorter or longer than a full Dividend Period, on the Preferred Stock shall
      be
      computed on the basis of a 360-day year consisting of twelve 30-day months.
      Holders of Preferred Stock shall not be entitled to any dividends, whether
      payable in cash, property or stock, in excess of cumulative dividends, as herein
      provided, on the Preferred Stock. 

     

    (d)    No
      dividend shall be declared or paid or set apart for payment or other
      distribution declared or made, whether in cash, obligations or shares of Capital
      Stock of the Corporation (other than Junior Stock) or other property, directly
      or indirectly, upon any shares of Junior Stock or Parity Stock, nor shall any
      shares of Junior Stock or Parity Stock be redeemed, repurchased or otherwise
      acquired for consideration by the Corporation through a sinking fund or
      otherwise, unless all accumulated and unpaid dividends through the most recent
      Dividend Payment Date (whether or not there are funds of the Corporation legally
      available for the payment of dividends) on the shares of Preferred Stock and
      any
      Parity Stock have been or contemporaneously are declared and paid in full or
      set
      apart for payment; provided,
      however,
      that,
      notwithstanding any provisions of this Section 4(d)
      to
      the
      contrary, the Corporation may redeem, repurchase or otherwise acquire for
      consideration Preferred Stock and Parity Stock pursuant to a purchase or
      exchange offer made on the same terms to all holders of such Preferred Stock
      and
      Parity Stock. 

     

    (e)    When
      dividends are not paid in full, as aforesaid, upon the shares of Preferred
      Stock, all dividends declared on the Preferred Stock and any other Parity Stock
      shall be declared and paid pro rata so that the amount of dividends so declared
      on the shares of Preferred Stock and each such other class or series of Parity
      Stock shall in all cases bear to each other the same ratio as accumulated
      dividends on the shares of Preferred Stock and such class or series of Parity
      Stock bear to each other which shall not include any accrual in respect to
      unpaid dividends for prior dividend periods in the case of Capital Stock that
      does not have a cumulative dividend.

     

     

    

    
      
        
          
          

        

        
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    5. 
       Liquidation
      Preference.
      (a) In
      the event of any liquidation, dissolution or winding up of the Corporation,
      whether voluntary or involuntary, before any payment or distribution of the
      Corporation’s assets (whether capital or surplus) shall be made to or set apart
      for the holders of Junior Stock, holders of Preferred Stock shall be entitled
      to
      receive $250.00 per share of Preferred Stock (the “Liquidation
      Preference”)
      plus
      an amount equal to all dividends, (whether or not earned or declared)
      accumulated and unpaid thereon to the date of final distribution to such
      holders; but such holders shall not be entitled to any further payment. If,
      upon
      any liquidation, dissolution or winding up of the Corporation, the Corporation’s
      assets, or proceeds thereof, distributable among the holders of Preferred Stock
      are insufficient to pay in full the preferential amount aforesaid and
      liquidating payments on any Parity Stock, then such assets, or the proceeds
      thereof, shall be distributed among the holders of the Preferred Stock and
      any
      other Parity Stock ratably in accordance with the respective amounts that would
      be payable on such shares of Preferred Stock and any such other Parity Stock
      if
      all amounts payable thereon were paid in full. 

     

    (b)    Neither
      the consolidation or merger of the Corporation with any other corporation,
      nor
      any sale, lease or conveyance of all or any part of the property or business
      of
      the Corporation, shall be deemed to be a liquidation, dissolution, or winding
      up
      of the Corporation.

     

    (c)    Subject
      to the rights of the holders of any Parity Stock, after payment has been made
      in
      full to the holders of the Preferred Stock, as provided in this Section
5,
      holders
      of Junior Stock shall, subject to the respective terms and provisions (if any)
      applying thereto, be entitled to receive any and all assets remaining to be
      paid
      or distributed, and the holders of Preferred Stock shall not be entitled to
      share therein.

     

    6. 
       Voting
      Rights.

     

    (a)    The
      holders of record of shares of the Preferred Stock shall not be entitled to
      any
      voting rights except as hereinafter provided in this Section 6, as otherwise
      provided in the Corporation’s Certificate of Incorporation, or as otherwise
      provided by law.

     

    (b)    If
      at any
      time (1) dividends on any shares of Preferred Stock or any other class or series
      of Parity Stock having like voting rights shall be in arrears for consecutive
      dividend periods, containing in the aggregate a number of days equivalent to
      six
      fiscal quarters, the holders of shares of Preferred Stock (voting separately
      as
      a class with all other series of preferred stock ranking on parity with the
      Preferred Stock upon which like voting rights have been conferred and are
      exercisable) will be entitled, by written notice to the Corporation given by
      the
      holders of a majority in liquidation preference of such shares or by ordinary
      resolution passed by the holders of a majority in liquidation preference of
      such
      shares present in person or by proxy at a separate general meeting of such
      holders convened for this purpose, to appoint at the next annual meeting of
      the
      stockholders of the Corporation or at a special meeting called for such purpose,
      whichever is earlier, two of the authorized number of the Corporation’s
      directors (each, a “Preferred
      Stock Director”)
      at the
      next annual meeting of stockholders and each subsequent meeting until all
      dividends accumulated on the Preferred Stock have been fully paid or set aside
      for payment, to remove any such member from office and to appoint another person
      in place of such Preferred Stock Director. The term of office of such Preferred
      Stock Directors will terminate immediately upon the termination of the right
      of
      the holders of Preferred Stock to vote for directors. Not
      later
      than 30 days after such entitlement arises, if written notice by a majority
      of
      the holders of such shares has not been given as provided for in the preceding
      sentence, the Board of Directors will convene a separate general meeting for
      the
      above purpose. If the Board of Directors or such authorized committee fails
      to
      convene such meeting within such 30-day period, the holders of 10% of the
      outstanding shares of the Preferred Stock and any such other stock, considered
      as a single class, will be entitled to convene such meeting. The provisions
      of
      the Certificate of Incorporation and By-laws of the Corporation relating to
      the
      convening and conduct of general meetings of stockholders will apply with
      respect to any such separate general meeting. Any member of the Board of
      Directors so appointed shall vacate office if, following the event which gave
      rise to such appointment, the Corporation shall have resumed the payment of
      accumulated dividends in full on the Preferred Stock and each such other series
      of stock having similar voting rights.

     

    

    
      
        
          
          

        

        
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    (c)    The
      affirmative vote of holders of at least two-thirds of the outstanding shares
      of
      the Preferred Stock voting as a separate class, in person or by proxy, at a
      special meeting called for the purpose, or by written consent in lieu of
      meeting, shall be required to amend, alter or repeal, whether by merger,
      consolidation, combination, reclassification or otherwise, any provisions of
      the
      Certificate of Incorporation if the amendment would amend, alter or affect
      the
      powers, preferences or rights of the Preferred Stock, so as to materially and
      adversely affect the holders thereof; provided,
      however, that
      any
      increase in the amount of the authorized common stock or authorized preferred
      stock or the creation and issuance of other series of common stock or preferred
      stock ranking on a parity with or junior to the preferred stock as to dividends
      and upon liquidation will not be deemed to materially and adversely affect
      such
      powers, preference or special rights. 

     

    7. 
       Conversion.
      (a)
      Right
      to Convert. Each
      share of Preferred Stock shall be convertible in accordance with, and subject
      to, this Section 7
      into a
      number of fully paid and non-assessable shares of Common Stock (as such shares
      shall then be constituted) equal to the Conversion Rate in effect on the date
      notice of conversion is given. The Preferred Stock shall be convertible only
      upon any of the events, and for the period, specified in the following clause
      (i)
      below.
Upon
      the
      determination that holders of the Preferred Stock are or will be entitled to
      convert shares of Preferred Stock in accordance with any of the following
      provisions, the Corporation shall issue a press release and publish such
      information on its website.

     

    (i)    Conversion
      Rights Based on Common Stock Price. At
      any
      time after May 17, 2007, the Preferred Stock may be surrendered for conversion
      into shares of Common Stock in any fiscal quarter of the Corporation, if the
      Closing Bid and Ask Price of the Common Stock for a period of at least 90
      consecutive Business Days is more than the Conversion Price as of each such
      Business Day.
      A
      holder’s right to convert pursuant to this Section 7(a)(i)
      is
      subject to the Corporation’s right to require conversion pursuant to Section
8.

     

    (b)    Conversion
      Procedures.
      Conversion of shares of the Preferred Stock may be effected by any holder
      thereof upon the surrender to the Corporation, at the principal office of the
      Corporation or at the office of the Conversion Agent as may be designated by
      the
      Board of Directors, of the certificate or certificates for such shares of the
      Preferred Stock to be converted accompanied by a complete and manually signed
      Notice of Conversion (as set forth in the form of Preferred Stock certificate
      attached hereto) along with (A) appropriate endorsements and transfer documents
      as required by the Registrar or Conversion Agent and (B) if required pursuant
      to
      Section 7(c)
      funds
      equal to the dividend payable on the next Dividend Payment Date. In case such
      Notice of Conversion shall specify a name or names other than that of such
      holder, such notice shall be accompanied by payment of all transfer taxes
      payable upon the issuance of shares of Common Stock in such name or names.
      Other
      than such taxes, the Corporation shall pay any documentary, stamp or similar
      issue or transfer taxes that may be payable in respect of any issuance or
      delivery of shares of Common Stock upon conversion of shares of the Preferred
      Stock pursuant hereto. The conversion of the Preferred Stock will be deemed
      to
      have been made on the date (the “Conversion
      Date”)
      such
      certificate or certificates have been surrendered and the receipt of such notice
      of conversion and payment of all required transfer taxes, if any (or the
      demonstration to the satisfaction of the Corporation that such taxes have been
      paid). As promptly as practicable following the Conversion Date, the Corporation
      shall deliver or cause to be delivered (i) certificates representing the number
      of validly issued, fully paid and nonassessable full shares of Common Stock
      to
      which the holder of shares of the Preferred Stock being converted (or such
      holder’s transferee) shall be entitled, and (ii) if less than the full number of
      shares of the Preferred Stock evidenced by the surrendered certificate or
      certificates is being converted, a new certificate or certificates, of like
      tenor, for the number of shares evidenced by such surrendered certificate or
      certificates less the number of shares being converted. On the Conversion Date,
      the rights of the holder of the Preferred Stock as to the shares being converted
      shall cease except for the right to receive shares of Common Stock and the
      Person entitled to receive the shares of Common Stock shall be treated for
      all
      purposes as having become the record holder of such shares of Common Stock
      at
      such time.

     

     

    

    
      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

    

    

    (c)    Dividend
      and Other Payments Upon Conversion. If
      a
      holder of shares of Preferred Stock exercises its conversion rights, such shares
      will cease to accumulate dividends as of the end of the day immediately
      preceding the Conversion Date. On
      conversion of the Preferred Stock, except for conversion during the period
      from
      the close of business on any Record Date corresponding to a Dividend Payment
      Date to the close of business on the Business Day immediately preceding such
      Dividend Payment Date, in which case the holder on such Dividend Record Date
      shall receive the dividends payable on such Dividend Payment Date, accumulated
      and unpaid dividends on the converted shares of Preferred Stock shall not be
      cancelled, extinguished or forfeited, but rather shall be deemed to be paid
      in
      full to the holder thereof through delivery of the Common Stock (together with
      the cash payment, if any, in lieu of fractional shares) in exchange for the
      Preferred Stock being converted pursuant to the provisions hereof. Shares of
      the
      Preferred Stock surrendered for conversion after the close of business on any
      Record Date for the payment of dividends declared and before the opening of
      business on the Dividend Payment Date corresponding to that Record Date must
      be
      accompanied by a payment to the Corporation in cash of an amount equal to the
      dividend payable in respect of those shares on such Dividend Payment Date;
      provided
      that a
      holder of shares of the Preferred Stock on a Record Date who converts such
      shares into shares of Common Stock on the corresponding Dividend Payment Date
      shall be entitled to receive the dividend payable on such shares of the
      Preferred Stock on such Dividend Payment Date, and such holder need not include
      payment to the Corporation of the amount of such dividend upon surrender of
      shares of the Preferred Stock for conversion. 

     

    (d)    Fractional
      Shares. In
      connection with the conversion of any shares of the Preferred Stock, no
      fractions of shares of Common Stock shall be issued, but the Corporation shall
      pay a cash adjustment in respect of any fractional interest in an amount equal
      to the fractional interest multiplied by the Closing Bid and Ask Price of the
      Common Stock on the Conversion Date, rounded to the nearest whole
      cent.

     

    (e)    Total
      Shares. If
      more
      than one share of the Preferred Stock shall be surrendered for conversion by
      the
      same holder at the same time, the number of full shares of Common Stock issuable
      on conversion of those shares shall be computed on the basis of the total number
      of shares of the Preferred Stock so surrendered.

     

    (f)    Reservation
      of Shares; Shares to be Fully Paid; Compliance with Governmental Requirement.
      The
      Corporation shall:

     

    (i)    at
      all
      times reserve and keep available, free from preemptive rights, for issuance
      upon
      the conversion of shares of the Preferred Stock such number of its authorized
      but unissued shares of Common Stock as shall from time to time be sufficient
      to
      permit the conversion of all outstanding shares of the Preferred
      Stock;

     

    (ii)    prior
      to
      the delivery of any securities that the Corporation shall be obligated to
      deliver upon conversion of the Preferred Stock, comply with all applicable
      federal, state and Commonwealth of Puerto Rico laws and regulations that require
      action to be taken by the Corporation (including, without limitation, the
      registration or approval, if required, of any shares of Common Stock to be
      provided for the purpose of conversion of the Preferred Stock hereunder);
      and

     

    (iii)    ensure
      that all shares of Common Stock delivered upon conversion of the Preferred
      Stock, upon delivery, be duly and validly issued and fully paid and
      nonassessable, free of all liens and charges and not subject to any preemptive
      rights.

     

     

    

    
      
        
          
          

        

        
          8

          
            

          

        

        
          
          

        

      

    

    

    8.
       Conversion
      at the Option of the Corporation.
      Shares
      of Preferred Stock shall be convertible at the option of the Corporation in
      accordance with this Section 8. 

     

    (a)    On
      or
      after May 17, 2007, the Corporation shall have the option to cause the Preferred
      Stock to be converted into that number of shares of Common Stock that are
      issuable at the Conversion Price in effect on the day notice of conversion
      is
      given pursuant to clause (b)(i) below, but only if the Closing Bid and Ask
      Price
      of the Common Stock for 90 consecutive Business Days ending on a Business Day
      that is not more than two Business Days prior to the date the Corporation gives
      notice of its intention to convert pursuant to clause (b)(i) below exceeds
      $7.00
      on each such Trading Day. 

     

    (b)    In
      the
      event the Corporation elects to require conversion of the shares of Preferred
      Stock, the Corporation shall:

     

    (i)    issue
      a
      press release for Publication on the Dow Jones News Service (or similar news
      service if the available to the Corporation) prior to the opening of business
      no
      later than the second Business Day after the conditions described in Section
      8(a)
      are met
      (and only while such conditions are met), announcing the Corporation’s intention
      to require conversion.

     

    (ii)    send
      written notice by mail or publication (with subsequent prompt notice by mail)
      to
      each holder of record of the Preferred Stock, announcing the Corporation’s
      intention to require conversion, not later than four Business Days after the
      date of the press release, stating:

     

    (A)    the
      conversion date, which will be a date selected by the Corporation and will
      be no
      more than five Business Days after the date the Corporation issues the press
      release pursuant to clause (b)(i) above;

     

    (B)    the
      number of shares of Common Stock to be issued upon conversion of each share
      of
      Preferred Stock; and

     

    (C)    that
      dividends on the Preferred Stock to be converted will cease to accrue on the
      conversion date;

     

    (c)    Any
      notice which is mailed as herein provided shall be conclusively presumed to
      have
      been duly given, whether or not the stockholder receives such notice; and
      failure duly to give such notice by mail, or any defect in such notice, to
      any
      holder of Preferred Stock shall not affect the validity of the proceedings
      for
      the conversion of the shares Preferred Stock of any other holder. 

     

    (d)    Notice
      having been mailed as aforesaid, from and after the conversion date, all
      dividends on the shares of Preferred Stock called for conversion shall cease
      to
      accrue and all rights of the holders of such shares by reason of the ownership
      of such shares (except the right to receive the shares of Common Stock issuable
      upon conversion thereof), shall cease on the conversion date, and such shares
      shall not after the conversion date be deemed to be outstanding.

     

    (e)    The
      dividend payment with respect to the shares of Preferred Stock called for
      conversion on a date during the period between the close of business on any
      Record Date for the payment of dividends to the close of business on the
      corresponding dividend payment date will be payable on such dividend payment
      date to the record holder of such share on such Record Date if such share has
      been converted after such Record Date and prior to such Dividend Payment Date.
      Except as provided in the immediately preceding sentence no payment or
      adjustment will be made upon conversion of Preferred Stock for accumulated
      and
      unpaid dividends or for dividends with respect to the Common Stock issued upon
      such conversion. 

     

    

    
      
        
          
          

        

        
          9

          
            

          

        

        
          
          

        

      

    

    

    (f)    The
      Corporation may not authorize, issue a press release or give notice of any
      conversion unless, prior to giving the conversion notice, all accumulated and
      unpaid dividends on the Preferred Stock for dividend periods ended prior to
      the
      date of such conversion notice shall have been paid in cash.

     

    (g)    At
      its
      option, the Corporation may, if there are less than 1,560 shares of Preferred
      Stock outstanding, at any time on or after May 17, 2007, cause the Preferred
      Stock to be automatically converted into that number of shares of Common Stock
      equal to $250.00 (the liquidation preference per share of Preferred Stock)
      divided by the lesser of the Conversion Price in effect on the date notice
      of
      conversion is given and the average Closing Bid and Ask Price of the Common
      Stock for the five Business Day period ending on the second Business Day
      immediately prior to the Conversion Date.

     

    9. 
       Conversion
      Rate Adjustments.
      The
      Conversion Rate shall be adjusted from time to time by the Corporation in
      accordance with the provisions of this
      Section
9. 

     

    (a)    If
      the
      Corporation shall hereafter pay a dividend or make a distribution to all holders
      of the outstanding Common Stock in shares of Common Stock, the Conversion Rate
      shall be increased so that the same shall equal the rate determined by
      multiplying the Conversion Rate in effect at the opening of business on the
      date
      following the date fixed for the determination of stockholders entitled to
      receive such dividend or other distribution by a fraction,

     

    (i)    the
      numerator of which shall be the sum of the number of shares of Common Stock
      outstanding at the close of business on the date fixed for the determination
      of
      stockholders entitled to receive such dividend or other distribution plus the
      total number of shares of Common Stock constituting such dividend or other
      distribution; and 

     

    (ii)    the
      denominator of which shall be the number of shares of Common Stock outstanding
      at the close of business on the date fixed for such determination,

     

    such
      increase to become effective immediately after the opening of business on the
      day following the date fixed for such determination. If any dividend or
      distribution of the type described in this Section 9(a)
      is
      declared but not so paid or made, the Conversion Rate shall again be adjusted
      to
      the Conversion Rate that would then be in effect if such dividend or
      distribution had not been declared.

     

    (b)    If
      the
      Corporation shall issue rights or warrants to all holders of any class of Common
      Stock entitling them (for a period expiring within forty-five (45) days after
      the date fixed for determination of stockholders entitled to receive such rights
      or warrants) to subscribe for or purchase shares of Common Stock at a price
      per
      share less than the average of the Closing Bid and Ask Prices of the Common
      Stock for the 10 Business Days preceding the declaration date for such
      distribution, the Conversion Rate shall be increased so that the same shall
      equal the rate determined by multiplying the Conversion Rate in effect
      immediately prior to the date fixed for determination of stockholders entitled
      to receive such rights or warrants by a fraction,

     

    (i)    the
      numerator of which shall be the number of shares of Common Stock outstanding
      on
      the date fixed for the determination of stockholders entitled to receive such
      rights or warrants plus the total number of additional shares of Common Stock
      offered for subscription or purchase; and

     

    (ii)    the
      denominator of which shall be the sum of the number of shares of Common Stock
      outstanding at the close of business on the date fixed for the determination
      of
      stockholders entitled to receive such rights or warrants plus the number of
      shares that the aggregate offering price of the total number of shares so
      offered would purchase at a price equal to the average of the Closing Bid and
      Ask Prices of the Common Stock for the 10 Business Days preceding the
      declaration date for such distribution.

     

    

    
      
        
          
          

        

        
          10

          
            

          

        

        
          
          

        

      

    

    

    Such
      adjustment shall be successively made whenever any such rights or warrants
      are
      issued, and shall become effective immediately after the opening of business
      on
      the day following the date fixed for the determination of stockholders entitled
      to receive such rights or warrants. To the extent that shares of Common Stock
      are not delivered after the expiration of such rights or warrants, the
      Conversion Rate shall be readjusted to the Conversion Rate that would then
      be in
      effect had the adjustments made upon the issuance of such rights or warrants
      been made on the basis of delivery of only the number of shares of Common Stock
      actually delivered. If such rights or warrants are not so issued, the Conversion
      Rate shall again be adjusted to be the Conversion Rate that would then be in
      effect if such date fixed for the determination of stockholders entitled to
      receive such rights or warrants had not been fixed. In determining whether
      any
      rights or warrants entitle the holders to subscribe for or purchase shares
      of
      Common Stock at a price less than the average of the Closing Bid and Ask Prices
      of the Common Stock for the 10 Trading Days preceding the declaration date
      for
      such distribution, and in determining the aggregate offering price of such
      shares of Common Stock, there shall be taken into account any consideration
      received by the Corporation for such rights or warrants and any amount payable
      on exercise or conversion thereof, the value of such consideration, if other
      than cash, to be determined by the Board of Directors. 

     

    (c)    If
      the
      outstanding shares of Common Stock shall be subdivided into a greater number
      of
      shares of Common Stock, the Conversion Rate in effect at the opening of business
      on the day following the day upon which such subdivision becomes effective
      shall
      be proportionately increased, and conversely, in case outstanding shares of
      Common Stock shall be combined into a smaller number of shares of Common Stock,
      the Conversion Rate in effect at the opening of business on the day following
      the day upon which such combination becomes effective shall be proportionately
      reduced, such increase or reduction, as the case may be, to become effective
      immediately after the opening of business on the day following the day upon
      which such subdivision or combination becomes effective.

     

    (d)   If
      the
      Corporation shall, by dividend or otherwise, distribute to all holders of its
      Common Stock shares of any class of Capital Stock of the Corporation or
      evidences of its indebtedness or other assets (including securities, but
      excluding (x) any rights or warrants referred to in 9(b)
      and (y)
      any dividend or distribution (I) paid exclusively in cash or (II) referred
      to in
      Section 9(a))
      (any of
      the foregoing hereinafter in this Certificate called the “Distributed
      Property”),
      then,
      in each such case, the Conversion Rate shall be increased so that the same
      shall
      be equal to the rate determined by multiplying the Conversion Rate in effect
      on
      the Record Date with respect to such distribution by a fraction,

     

    (i)    the
      numerator of which shall be the Current Market Price on such Record Date; and
      

     

    (ii)    the
      denominator of which shall be the Current Market Price on such Record Date
      less
      the Fair Market Value (as determined by the Board of Directors, whose
      determination shall be conclusive, and described in a resolution of the Board
      of
      Directors) on the Record Date of the portion of the Distributed Property so
      distributed applicable to one share of Common Stock,

     

    such
      adjustment to become effective immediately prior to the opening of business
      on
      the day following such Record Date;
      provided
      that if
      the then Fair Market Value (as so determined) of the portion of the Distributed
      Property so distributed applicable to one share of Common Stock is equal to
      or
      greater than the Current Market Price on the Record Date, in lieu of the
      foregoing adjustment, adequate provision shall be made so that each holder
      of
      Preferred Stock shall have the right to receive upon conversion the amount
      of
      Distributed Property such holder would have received had such holder converted
      each share Preferred Stock on the Record Date. If such dividend or distribution
      is not so paid or made, the Conversion Rate shall again be adjusted to be the
      Conversion Rate that would then be in effect if such dividend or distribution
      had not been declared. If the Board of Directors determines the Fair Market
      Value of any distribution for purposes of this Section 9(d)
      by
      reference to the actual or when issued trading market for any securities, it
      must in doing so consider the prices in such market over the same period used
      in
      computing the Current Market Price on the applicable Record Date. 

     

    

    
      
        
          
          

        

        
          11

          
            

          

        

        
          
          

        

      

    

    

    For
      purposes of this Section 9(d),
      Section
9(a)
      and
      Section 9(b),
      any
      dividend or distribution to which this Section 9(d)
      is
      applicable that also includes shares of Common Stock, or rights or warrants
      to
      subscribe for or purchase shares of Common Stock (or both), shall be deemed
      instead to be (1) a dividend or distribution of the evidences of indebtedness,
      assets or shares of capital stock other than such shares of Common Stock or
      rights or warrants (and any Conversion Rate adjustment required by this Section
      9(d)
      with
      respect to such dividend or distribution shall then be made) immediately
      followed by (2) a dividend or distribution of such shares of Common Stock or
      such rights or warrants (and any further Conversion Rate adjustment required
      by
      Sections 9(a)
      and
9(b)
      with
      respect to such dividend or distribution shall then be made), except (A) the
      Record Date of such dividend or distribution shall be substituted as “the date
      fixed for the determination of stockholders entitled to receive such dividend
      or
      other distribution”, “the date fixed for the determination of stockholders
      entitled to receive such rights or warrants” and “the date fixed for such
      determination” within the meaning of Sections 9(a)
      and
9(b)
      and (B)
      any shares of Common Stock included in such dividend or distribution shall
      not
      be deemed “outstanding at the close of business on the date fixed for such
      determination” within the meaning of Section 9(a).

     

    (e)    If
      a
      tender or exchange offer made by the Corporation or any Subsidiary for all
      or
      any portion of the Common Stock shall expire and such tender or exchange offer
      (as amended upon the expiration thereof) shall require the payment to
      stockholders of consideration per share of Common Stock having a Fair Market
      Value (as determined by the Board of Directors, whose determination shall be
      conclusive and described in a resolution of the Board of Directors) that as
      of
      the last time (the “Expiration
      Time”)
      tenders or exchanges may be made pursuant to such tender or exchange offer
      (as
      it may be amended) exceeds the Closing Bid and Ask Price of a share of Common
      Stock on the Trading Day next succeeding the Expiration Time, the Conversion
      Rate shall be increased so that the same shall equal the rate determined by
      multiplying the Conversion Rate in effect immediately prior to the Expiration
      Time by a fraction,

     

    (i)    the
      numerator of which shall be the sum of (x) the Fair Market Value (determined
      as
      aforesaid) of the aggregate consideration payable to stockholders based on
      the
      acceptance (up to any maximum specified in the terms of the tender or exchange
      offer) of all shares validly tendered or exchanged and not withdrawn as of
      the
      Expiration Time (the shares deemed so accepted up to any such maximum, being
      referred to as the “Purchased
      Shares”)
      and
      (y) the product of the number of shares of Common Stock outstanding (less any
      Purchased Shares) at the Expiration Time and the Closing Bid and Ask Price
      of a
      share of Common Stock on the Trading Day next succeeding the Expiration Time,
      and 

     

    (ii)    the
      denominator of which shall be the number of shares of Common Stock outstanding
      (including any tendered or exchanged shares) at the Expiration Time multiplied
      by the Closing Bid and Ask Price of a share of Common Stock on the Trading
      Day
      next succeeding the Expiration Time,

     

    such
      adjustment to become effective immediately prior to the opening of business
      on
      the day following the Expiration Time. If the Corporation is obligated to
      purchase shares pursuant to any such tender or exchange offer, but the
      Corporation is permanently prevented by applicable law from effecting any such
      purchases or all such purchases are rescinded, the Conversion Rate shall again
      be adjusted to be the Conversion Rate that would then be in effect if such
      tender or exchange offer had not been made.

     

     

    

    
      
        
          
          

        

        
          12

          
            

          

        

        
          
          

        

      

    

    

    (f)    If
      the
      Corporation pays a dividend or makes a distribution to all holders of its Common
      Stock consisting of capital stock of any class or series, or similar equity
      interests, of or relating to a Subsidiary or other business unit of the
      Corporation, the Conversion Rate shall be increased so that the same shall
      be
      equal to the rate determined by multiplying the Conversion Rate in effect on
      the
      Record Date with respect to such distribution by a fraction,

     

    (i)    the
      numerator of which shall be the sum of (A) the average of the Closing Bid and
      Ask Prices of the Common Stock for the 10 Business Days commencing on and
      including the fifth Business Day after the date on which “ex-dividend trading”
commences for such dividend or distribution on NASDAQ or such other market
      in
      which such securities are then listed or quoted (the “Ex-Dividend
      Date”)
      plus
      (B) the Fair Market Value of the securities distributed in respect of each
      share
      of Common Stock for which this Section 9(f)
      applies,
      which shall equal the number of securities distributed in respect of each share
      of Common Stock multiplied by the average of the Closing Bid and Ask Prices
      of
      those distributed securities for the 10 Trading Days commencing on and including
      the fifth Business Day after the Ex-Dividend Date; and 

     

    (ii)    the
      denominator of which shall be the average of the Closing Bid and Ask Prices
      of
      the Common Stock for the 10 Trading Days commencing on and including the fifth
      Trading Day after the Ex-Dividend Date,

     

    such
      adjustment to become effective immediately prior to the opening of business
      on
      the day following the fifteenth Business Day after the Ex-Dividend Date;
provided
      that
      if
      (x) the average of the Closing Bid and Ask Prices of the Common Stock for the
      10
      Trading Days commencing on and including the fifth Trading Day after the
      Ex-Dividend Date minus (y) the Fair Market Value of the securities distributed
      in respect of each share of Common Stock for which this Section 9(f)
      applies
      (as calculated in Section 9(f)(i)
      above)
      is less than $1.00, then the adjustment provided by for by this Section
9(f)
      shall
      not be made and in lieu thereof the provisions of Section 10
      shall
      apply to such distribution.

     

    (g)    The
      Corporation may make such increases in the Conversion Rate in addition to those
      required by Sections 9(a),
      (b),
      (c),
      (d),
      (e)
      and
(f)
      as the
      Board of Directors considers to be advisable to avoid or diminish any income
      tax
      to holders of Common Stock or rights to purchase Common Stock resulting from
      any
      dividend or distribution of stock (or rights to acquire stock) or from any
      event
      treated as such for income tax purposes. To the extent permitted by applicable
      law, the Corporation from time to time may increase the Conversion Rate by
      any
      amount for any period of time if the Board of Directors shall have made a
      determination that such increase would be in the best interests of the
      Corporation, which determination shall be conclusive. Whenever the Conversion
      Rate is increased pursuant to the preceding sentence, the Corporation shall
      mail
      to holders of the Preferred Stock a notice of the increase prior to the date
      the
      increased Conversion Rate takes effect, and such notice shall state the
      increased Conversion Rate and the period during which it will be in
      effect.

     

    (h)    No
      adjustment in the Conversion Rate shall be required unless such adjustment
      would
      require an increase or decrease of at least one percent (1%) in such rate;
      provided
      that
      any
      adjustments that by reason of this Section 9(h)
      are not
      required to be made shall be carried forward and taken into account in any
      subsequent adjustment. All calculations under this Section 9
      shall be
      made by the Corporation and shall be made to the nearest cent or to the nearest
      one-ten thousandth (1/10,000) of a share, as the case may be. No adjustment
      need
      be made for rights to purchase Common Stock pursuant to a Corporation plan
      for
      reinvestment of dividends or interest or, except as set forth in this Section
      9,
      for any
      issuance of Common Stock or convertible or exchangeable securities or rights
      to
      purchase Common Stock or convertible or exchangeable securities. To the extent
      the securities become convertible into cash, assets, property or securities
      (other than Capital Stock of the Corporation), subject to Section 10,
      no
      adjustment need be made thereafter as to the cash, assets, property or such
      securities. Dividends will not accrue on any cash into which the Preferred
      Stock
      is convertible.

     

    

    
      
        
          
          

        

        
          13

          
            

          

        

        
          
          

        

      

    

    

    (i)    Whenever
      the Conversion Rate is adjusted as herein provided, the Corporation shall
      promptly file with the Conversion Agent an Officer’s certificate setting forth
      the Conversion Rate after such adjustment and setting forth a brief statement
      of
      the facts requiring such adjustment. Unless and until a responsible officer
      of
      the Conversion Agent shall have received such Officer’s certificate, the
      Conversion Agent shall not be deemed to have knowledge of any adjustment of
      the
      Conversion Rate and may assume that the last Conversion Rate of which it has
      knowledge is still in effect. Promptly after delivery of such certificate,
      the
      Corporation shall prepare a notice of such adjustment of the Conversion Rate
      setting forth the adjusted Conversion Rate and the date on which each adjustment
      becomes effective and shall mail such notice of such adjustment of the
      Conversion Rate to the each holder of Preferred Stock at his last address
      appearing on the register within twenty (20) days after execution thereof.
      Failure to deliver such notice shall not affect the legality or validity of
      any
      such adjustment.

     

    (j)    For
      purposes of this Section 9,
      the
      number of shares of Common Stock at any time outstanding shall not include
      shares held in the treasury of the Corporation, unless such treasury shares
      participate in any distribution or dividend that requires an adjustment pursuant
      to this Section 9,
      but
      shall include shares issuable in respect of scrip certificates issued in lieu
      of
      fractions of shares of Common Stock.

     

    10. Effect
      of Reclassification, Consolidation, Merger or Sale on Conversion
      Privilege.
      (a) If
      any of the following events occur, namely (i) any reclassification or
      change of the outstanding shares of Common Stock (other than a subdivision
      or
      combination to which Section 9(c)
      applies), (ii) any consolidation, merger or combination of the Corporation
      with another Person as a result of which holders of Common Stock shall be
      entitled to receive stock, other securities or other property or assets
      (including cash) with respect to or in exchange for such Common Stock, or
      (iii) any sale or conveyance of all or substantially all of the properties
      and assets of the Corporation to any other Person as a result of which holders
      of Common Stock shall be entitled to receive stock, other securities or other
      property or assets (including cash) with respect to or in exchange for such
      Common Stock, then each share of Preferred Stock shall be convertible, on and
      after the effective date of such reclassification, change, consolidation,
      merger, combination, sale or conveyance, into the kind and amount of shares
      of
      stock, other securities or other property or assets (including cash) receivable
      upon such reclassification, change, consolidation, merger, combination, sale
      or
      conveyance by a holder of the number of shares of Common Stock issuable upon
      conversion of such Preferred Stock (assuming, for such purposes, a sufficient
      number of authorized shares of Common Stock are available to convert all such
      Preferred Stock) immediately prior to such reclassification, change,
      consolidation, merger, combination, sale or conveyance assuming such holder
      of
      Common Stock did not exercise his rights of election, if any, as to the kind
      or
      amount of stock, other securities or other property or assets (including cash)
      receivable upon such reclassification, change, consolidation, merger,
      combination, sale or conveyance (provided
      that,
      if
      the kind or amount of stock, other securities or other property or assets
      (including cash) receivable upon such reclassification, change, consolidation,
      merger, combination, sale or conveyance is not the same for each share of Common
      Stock in respect of which such rights of election shall not have been exercised
      (“non-electing
      share”),
      then
      for the purposes of this Section 10
      the kind
      and amount of stock, other securities or other property or assets (including
      cash) receivable upon such reclassification, change, consolidation, merger,
      combination, sale or conveyance for each non-electing share shall be deemed
      to
      be the kind and amount so receivable per share by a plurality of the
      non-electing shares). 

     

    (b)    The
      Corporation shall cause notice of the application of this Section 10
      within
      twenty (20) days after the occurrence of the events specified in Section
10(a)
      and
      shall issue a press release containing such information and publish such
      information on its website. Failure to deliver such notice shall not affect
      the
      legality or validity of the modification to the conversion rights of the
      Preferred Stock effected by this Section 10.

     

    (c)    The
      above
      provisions of this Section shall similarly apply to successive
      reclassifications, changes, consolidations, mergers, combinations, sales and
      conveyances, and the provisions of Section 9
      shall
      apply to any shares of Capital Stock received by the holders of Common Stock
      in
      any such reclassification, change, consolidation, merger, combination, sale
      or
      conveyance. 

     

    

    
      
        
          
          

        

        
          14

          
            

          

        

        
          
          

        

      

    

    

    (d)    If
      this
      Section 10
      applies
      to any event or occurrence, Section 9
      shall
      not apply.

     

    11. Redemption
      at the Option of the Corporation.
      (a) On
      and after May 17, 2007, the shares of the Preferred Stock will be redeemable
      in
      whole or in part from time to time at the option of the Corporation, upon not
      less than 30 nor more than 60 days’ notice by mail, at the redemption prices set
      forth below, during the periods set forth below, plus accumulated and unpaid
      dividends from the dividend payment date immediately preceding the redemption
      date to the date fixed for redemption. The redemption prices for the twelve
      month periods beginning on May 17, 2007 are shown below.

     

    
      	
              Period

            	 	
              Redemption
                Price

            
	
              2007

            	 	
              101.0%

            
	
              2008

            	 	
              100.5%

            
	
              2009
                and thereafter

            	 	
              100.0%

            

    

    

     

    (b)    In
      the
      event that less than all of the Outstanding shares of the Preferred Stock are
      to
      be redeemed in any redemption at the option of the Corporation, the total number
      of shares to be redeemed in such redemption shall be determined by the Board
      of
      Directors and the shares to be redeemed shall be allocated pro rata or by lot
      as
      may be determined by the Board of Directors or by such other method as the
      Board
      of Directors may approve and deem equitable, including any method to conform
      to
      any rule or regulation of NASDAQ or of any national or regional stock exchange
      or automated quotation system upon which the shares of the Preferred Stock
      may
      at the time be listed or eligible for quotation.

     

    (c)    Notice
      of
      any proposed redemption shall be given by the Corporation by mailing a copy
      of
      such notice to the holders of record of the shares of the Preferred Stock to
      be
      redeemed, at their address of record, not more than 60 nor less than 30 days
      prior to the redemption date. The notice of redemption to each holder of shares
      of Preferred Stock shall specify the number of shares of Preferred Stock to
      be
      redeemed, the redemption date and the redemption price payable to such holder
      upon redemption, and shall state that from and after said date dividends thereon
      will cease to accrue. If less than all the shares owned by a holder are then
      to
      be redeemed at the option of the Corporation, the notice shall also specify
      the
      number of shares of Preferred Stock which are to be redeemed and the numbers
      of
      the certificates representing such shares. Any notice which is mailed as herein
      provided shall be conclusively presumed to have been duly given, whether or
      not
      the stockholder receives such notice; and failure duly to give such notice
      by
      mail, or any defect in such notice, to the holders of any stock designated
      for
      redemption shall not affect the validity of the proceedings for the redemption
      of any other shares of Preferred Stock.

     

    (d)    Notice
      having been mailed as aforesaid, from and after the redemption date (unless
      the
      Corporation shall default in the payment of the redemption price for any shares
      to be redeemed), all dividends on the shares of Preferred Stock called for
      redemption shall cease to accrue and all rights of the holders of such shares
      as
      stockholders of the Corporation by reason of the ownership of such shares
      (except the right to receive the redemption price, on presentation and surrender
      of the respective certificates representing the redeemed shares), shall cease
      on
      the redemption date, and such shares shall not after the redemption date be
      deemed to be outstanding. In case less than all the shares represented by any
      such certificate are redeemed, a new certificate shall be issued without cost
      to
      the holder thereof representing the unredeemed shares.

     

     

    

    
      
        
          
          

        

        
          15

          
            

          

        

        
          
          

        

      

    

    

    (e)    At
      its
      option, the Corporation may, on or prior to the redemption date, irrevocably
      deposit the aggregate amount payable upon redemption of the shares of the
      Preferred Stock to be redeemed with a bank or trust company designated by the
      Board of Directors having its principal office in New York, New York, San Juan,
      Puerto Rico, or any other city in which the Corporation shall at that time
      maintain a transfer agency with respect to its capital stock, and having a
      combined capital and surplus (as shown by its latest published statement) of
      at
      least $50,000,000 (hereinafter referred to as the “Depositary”), to be held in
      trust by the Depositary for payment to the holders of the shares of the
      Preferred Stock then to be redeemed. If such deposit is made and the funds
      so
      deposited are made immediately available to the holders of the shares of the
      Preferred Stock to be redeemed, the Corporation shall thereupon be released
      and
      discharged (subject to the provisions of Section 11(f))
      from
      any obligation to make payment of the amount payable upon redemption of the
      shares of the Preferred Stock to be redeemed, and the holders of such shares
      shall look only to the Depositary for such payment.

     

    (f)    Any
      funds
      remaining unclaimed at the end of two years from and after the redemption date
      in respect of which such funds were deposited shall be returned to the
      Corporation forthwith and thereafter the holders of shares of the Preferred
      Stock called for redemption with respect to which such funds were deposited
      shall look only to the Corporation for the payment of the redemption price
      thereof. Any interest accrued on any funds deposited with the Depositary shall
      belong to the Corporation and shall be paid to it from time to time on
      demand.

     

    (g)    Any
      shares of the Preferred Stock which shall at any time have been redeemed shall,
      after such redemption, have the status of authorized but unissued shares of
      Preferred Stock, without designation as to series, until such shares are once
      more designated as part of a particular series by the Board of
      Directors.

     

    12. Consolidation,
      Merger and Sale of Assets.
      The
      Corporation, without the consent of the holders of any of the outstanding
      Preferred Stock may, consolidate with or merge into any other Person or convey,
      transfer or lease all or substantially all of its assets to any Person or may
      permit any Person to consolidate with or merge into, or transfer or lease all
      or
      substantially all its properties to the Corporation; provided,
      however
      that (a)
      the successor, transferee or lessee is organized under the laws of the United
      States, any political subdivision thereof or Puerto Rico and (b) the shares
      of
      Preferred Stock will become shares of such successor, transferee or lessee,
      having in respect of such successor, transferee or lessee the same powers,
      preferences and relative participating, optional or other special rights and
      the
      qualification, limitations or restrictions thereon, that the Preferred Stock
      had
      immediately prior to such transaction.

     

    Under
      any
      consolidation by the Corporation with, or merger by it into, any other Person
      or
      any conveyance, transfer or lease of all or substantially all its assets as
      described in the preceding paragraph, the successor resulting from such
      consolidation or into which the Corporation is merged or the transferee or
      lessee to which such conveyance, transfer or lease is made, will succeed to,
      and
      be substituted for, and may exercise every right and power of, the Corporation
      under the shares of Preferred Stock, and thereafter, except in the case of
      a
      lease, the predecessor (if still in existence) will be released from its
      obligations and covenants with respect to the preferred stock.

     

    

    13. Transfer
      Agent and Registrar.
      The duly
      appointed Transfer Agent and Registrar for the Preferred Stock shall be American
      Stock Transfer & Trust Company. The Corporation may, in its sole discretion,
      remove the Transfer Agent and Registrar in accordance with the agreement between
      the Corporation and the Transfer Agent and Registrar; provided
      that the
      Corporation shall appoint a successor transfer agent who shall accept such
      appointment prior to the effectiveness of such removal.

     

    14. Currency.
      All
      shares of Preferred Stock shall be denominated in U.S. currency, and all
      payments and distributions thereon or with respect thereto shall be made in
      U.S.
      currency. All references herein to “$”or “dollars” refer to U.S.
      currency.

     

     

    

    
      
        
          
          

        

        
          16

          
            

          

        

        
          
          

        

      

    

    

    15. Form.
      (a)
      Preferred Stock shall initially be issued in the form of one or more
      certificates of Preferred Stock in definitive, fully registered form with,
      until
      such time as otherwise determined by the Corporation and the Transfer Agent,
      the
      restricted shares legend (the “Restricted
      Shares Legend”),
      each
      substantially as set forth on the form of Preferred Stock certificate attached
      hereto as Exhibit
      A
      (each, a
“Preferred
      Share”),
      which
      is hereby incorporated in and expressly made a part of this Certificate. The
      Preferred Share may have notations, legends or endorsements required by law,
      stock exchange rules, agreements to which the Corporation is subject, if any,
      or
      usage (provided
      that any
      such notation, legend or endorsement is in a form acceptable to the
      Corporation). 

     

    (b)        (i) 
       An Officer shall sign the Preferred Shares for the Corporation, in
      accordance with the Corporation’s bylaws and applicable law, by manual or
      facsimile signature.

     

    (ii) 
       If
      an
      Officer whose signature is on a Preferred Share no longer holds that office
      at
      the time the Transfer Agent authenticates the Preferred Share, the Preferred
      Share shall be valid nevertheless.

     

    (iii) 
       A
      Preferred Share shall not be valid until an authorized signatory of the Transfer
      Agent manually countersigns the Preferred Share. The signature shall be
      conclusive evidence that the Preferred Share has been authenticated under this
      Certificate. Each Preferred Share shall be dated the date of its
      authentication.

     

    16. Registration;
      Transfer. (a)
      The
      Preferred Stock and the Common Stock issuable upon conversion of the shares
      of
      Preferred Stock have not been registered under the Securities Act and may not
      be
      resold, pledged or otherwise transferred prior to the date when they no longer
      constitute “restricted securities” for purposes of Rule 144(k) under the
      Securities Act other than (i) to the Corporation, (ii) to “qualified
      institutional buyers” pursuant to and in compliance with Rule 144A under the
      Securities Act, (iii) to a person that is an “accredited investor” as
      defined in Rule 501(a) under the Securities Act, (iv) pursuant to another
      available exemption from the registration requirements of the Securities Act
      or
      (v) pursuant to an effective registration statement under the Securities Act,
      in
      each case, in accordance with any applicable securities laws of any state of
      the
      United States.

     

    (b)    If
      an
      Investor wishes at any time to transfer its shares of Preferred Stock bearing
      the Restricted Shares Legend to a Person who is eligible to take delivery
      thereof in the form of a Preferred Share not bearing the Restricted Shares
      Legend, such owner may cause the exchange of such interest for a Preferred
      Share. Upon receipt by the Transfer Agent at its office in the City of New
      York
      of (A) instructions from the holder directing the Transfer Agent to transfer
      its
      Preferred Share, such instructions to contain the name of the transferee and
      appropriate account information, (B) a certificate in the form of the
      Certificate of Transfer on the reverse side of the form of Preferred Stock
      certificate attached hereto as Exhibit
      B,
      given
      by the transferor, to the effect set forth therein, and (C) such other
      certifications, legal opinions and other information as the Corporation or
      the
      Registrar may reasonably require to confirm that such transfer is being made
      pursuant to an exemption from, or in a transaction not subject to, the
      registration requirements of the Securities Act, then the Registrar shall reduce
      or cause to be reduced such Preferred Share bearing the Restricted Shares Legend
      (in the form attached as Schedule A) by the number of shares to be exchanged
      and
      to issue or cause to be issued a new Preferred Share not bearing the Restricted
      Shares Legend in the aggregate number of shares being exchanged.

     

    (c)    If
      shares
      of Preferred Stock are issued upon the transfer, exchange or replacement of
      Preferred Stock bearing the Restricted Shares Legend, or if a request is made
      to
      remove such Restricted Shares Legend on Preferred Stock, the Preferred Stock
      so
      issued shall bear the Restricted Shares Legend and the Restricted Shares Legend
      shall not be removed unless there is delivered to the Corporation and the
      Registrar such satisfactory evidence, which may include an opinion of counsel,
      as may be reasonably required by the Corporation or the Registrar, that neither
      the legend nor the restrictions on transfer set forth therein are required
      to
      ensure that transfers thereof comply with the provisions of the applicable
      exemption under the Securities Act or that such shares of Preferred Stock are
      not “restricted securities” within the meaning of Rule 144 under the Securities
      Act. Upon provision of such satisfactory evidence, the Registrar, at the
      direction of the Corporation, shall countersign and deliver shares of Preferred
      Stock that do not bear the Restricted Shares Legend.

     

     

    

    
      
        
          
          

        

        
          17

          
            

          

        

        
          
          

        

      

    

    

    (d)    The
      Corporation will refuse to register any transfer of Preferred Stock or any
      Common Stock issuable upon conversion of the shares of Preferred Stock that
      is
      not made in accordance with the provisions of the Restricted Shares Legend
      and
      the provisions of Rule 144A or pursuant to a registration statement that has
      been declared effective under the Securities Act or pursuant to an available
      exemption from the registration requirements of the Securities Act; provided
      that
      the
      provisions of this paragraph (d)
      shall
      not be applicable to any Preferred Stock that does not bear any Restricted
      Shares Legend or to any Common Stock that does not bear the Common Share
      Legend.

     

    (e)    Common
      Stock issued upon a conversion of the Preferred Stock shall be delivered in
      certificated form and shall bear the common share legend (the “Common
      Share Legend”)
      set
      forth in Exhibit
      C
      hereto
      and include on its reverse side the Form of Certificate of Transfer for Common
      Stock set out in Exhibit
      D.
      If (i)
      shares of Common Stock are to be registered in a name other than that of the
      holder of Preferred Stock or (ii) shares of Common Stock represented by a
      certificate bearing the Common Share Legend are transferred subsequently by
      such
      holder, then the holder must deliver to the Registrar a certificate in
      substantially the form of Exhibit
      D
      as to
      compliance with the restrictions on transfer applicable to such Common Stock
      and
      the Transfer Agent shall not be required to register any transfer of such Common
      Stock not so accompanied by a properly completed certificate. Such Common Share
      Legend may be removed, and new certificates representing the Common Stock may
      be
      issued, upon the presentation of satisfactory evidence that such Common Share
      Legend is no longer required as described above in paragraph (c) of this Section
      16
      with
      respect to the Preferred Stock.

     

    17. Paying
      Agent and Conversion Agent.

     

    (a)    The
      Corporation shall maintain in the San Juan, Puerto Rico (i) an office or agency
      for the payment of dividends on the Preferred Stock (the “Paying
      Agent”)
      and
      (ii) an office or agency where Preferred Stock may be presented for conversion
      (the “Conversion
      Agent”).
      The
      Transfer Agent shall act as Paying Agent and Conversion Agent, unless another
      Paying Agent or Conversion Agent is appointed by the Corporation. The
      Corporation may appoint the Transfer Agent, the Paying Agent and the Conversion
      Agent and may appoint one or more additional paying agents and one or more
      additional conversion agents in such other locations as it shall determine.
      The
      term “Paying Agent” includes any additional paying agent and the term
“Conversion Agent” includes any additional conversion agent. The Corporation may
      change any Paying Agent or Conversion Agent without prior notice to any holder.
      The Corporation shall notify the Registrar of the name and address of any Paying
      Agent or Conversion Agent appointed by the Corporation. If the Corporation
      fails
      to appoint or maintain another entity as Paying Agent or Conversion Agent,
      the
      Registrar shall act as such. The Corporation or any of its Affiliates may act
      as
      Paying Agent, Transfer Agent, co-registrar or Conversion Agent. 

     

    (b)    Payments
      due on the Preferred Stock shall be payable by United States dollar check drawn
      on, or wire transfer (provided
      that
      appropriate wire instructions have been received by the Registrar at least
      15
      days prior to the applicable date of payment) to a U.S. dollar account
      maintained by the holder with, a bank located in San Juan, Puerto Rico;
provided
      that
      at
      the option of the Corporation, payment of dividends may be made by check mailed
      to the address of the Person entitled thereto as such address shall appear
      in
      the Preferred Stock register. 

     

    18. Headings.
      The
      headings of the Sections of this Certificate are for convenience of reference
      only and shall not define, limit or affect any of the provisions
      hereof.

     

    

    

    
      
        
          
          

        

        
          18

          
            

          

        

        
          
          

        

      

    

    

    IN
      WITNESS WHEREOF,
      the
      Corporation has caused its corporate seal to be hereunto affixed and this
      Certificate to be signed by its President and its Assistant Secretary, this
      17th
      day of May, 2007. 

    

    
      	 	
              MARGO
                CARIBE, INC.

               

            
	 	
              By:

            	
                         
                /s/ Alison
                Witkovich                                      
                

            
	 	
            	
              
                Name:
                  Alison Witkovich

              

            
	 	
            	
              
                Title:   
                  Vice President & Chief Financial
                  Officer

              

            

    

    

    

    
      	
              ATTEST:

               

            
	
              By:

            	
                         
                /s/ Mirelisa
                Santiago                       
                

            
	
            	
              
                Name:
                  Mirelisa Santiago

              

            
	
            	
              
                Title:   
                  Assistant Secretary

              

            

    

    

    

    

    

     

     

     

     

    
 

    

    

    

    

    

    

    

    

    

    

    

    

    

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    EXHIBIT
      A

    

    FORM
      OF 6.5% CUMULATIVE CONVERTIBLE PREFERRED STOCK

    

    
      	
              Number:
                ___

            	
              ____________
                Shares

            

    

    

    CUSIP
      NO.:

    

    6.5%
      Perpetual Cumulative Convertible Preferred Stock

    (par
      value $0.01 per share)

    (liquidation
      preference $250.00 per share)

    OF

    MARGO
      CARIBE, INC.

    

    FACE
      OF
      SECURITY

    

    THIS
      SECURITY AND THE SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS
      SECURITY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
      (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAWS. NEITHER THIS SECURITY, THE
      SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS SECURITY NOR ANY
      INTEREST OR PARTICIPATION HEREIN OR THEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
      TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
      SUCH
      REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
      REGISTRATION. 

    

    THE
      HOLDER HEREOF, BY PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF MARGO
      CARIBE, INC. THAT (a) THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE
      TRANSFERRED OTHER THAN (1) TO MARGO CARIBE, INC. OR A SUBSIDIARY THEREOF, (2)
      IN
      A TRANSACTION ENTITLED TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
      UNDER THE SECURITIES ACT (IF AVAILABLE), (3) SO LONG AS THIS SECURITY IS
      ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT (“RULE
      144A”), TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
      INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING FOR ITS OWN
      ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE
      IS
      GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON
      RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE
      OF TRANSFER ON THE REVERSE OF THIS SECURITY), (4) TO A PERSON THAT IS AN
“ACCREDITED INVESTOR” AS DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT (AS
      INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF TRANSFER
      ON
      THE REVERSE OF THIS SECURITY) THAT IS ACQUIRING THIS SECURITY FOR INVESTMENT
      PURPOSES AND NOT FOR DISTRIBUTION, AND A CERTIFICATE WHICH MAY BE OBTAINED
      FROM
      MARGO CARIBE, INC. IS DELIVERED BY THE TRANSFEREE TO THE MARGO CARIBE, INC.,
      (5)
      PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM REGISTRATION UNDER THE SECURITIES
      ACT, SUBJECT, IN THE CASE OF CLAUSES (2) OR (4), TO THE RECEIPT BY MARGO CARIBE,
      INC. OF AN OPINION OF COUNSEL OR SUCH OTHER EVIDENCE ACCEPTABLE TO MARGO CARIBE,
      INC. THAT SUCH RESALE, PLEDGE OR TRANSFER IS EXEMPT FROM THE REGISTRATION
      REQUIREMENTS OF THE SECURITIES ACT OR (6) PURSUANT TO AN EFFECTIVE REGISTRATION
      STATEMENT AND THAT (b) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED
      TO, NOTIFY ANY PURCHASER OF THIS SECURITY OF THE RESALE RESTRICTIONS REFERRED
      TO
      HEREIN AND DELIVER TO THE TRANSFEREE (OTHER THAN A QUALIFIED INSTITUTIONAL
      BUYER) PRIOR TO THE SALE A COPY OF THE TRANSFER RESTRICTIONS APPLICABLE HERETO
      (COPIES OF WHICH MAY BE OBTAINED FROM MARGO CARIBE, INC.).

    

    
      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

    

    

    MARGO
      CARIBE, INC., a Puerto Rico corporation (the “Corporation”), hereby certifies
      that ____________ (the “Holder”) is the registered owner of ________ fully paid
      and non-assessable shares of preferred stock of the Corporation designated
      the
      6.5% Cumulative Convertible Preferred Stock, par value $0.01 per share and
      liquidation preference $250.00 per share (the “Preferred Stock”). The shares of
      Preferred Stock are transferable on the books and records of the Registrar,
      in
      person or by a duly authorized attorney, upon surrender of this certificate
      duly
      endorsed and in proper form for transfer. The designation, rights, privileges,
      restrictions, preferences and other terms and provisions of the Preferred Stock
      represented hereby are issued and shall in all respects be subject to the
      provisions of the Certificate of Designation of the Corporation dated May 17,
      2007, as the same may be amended from time to time in accordance with its terms
      (the “Certificate of Designation”). Capitalized terms used but not defined
      herein shall have the respective meanings given to them in the Certificate
      of
      Designation. The Corporation will provide a copy of the Certificate of
      Designation to a Holder without charge upon written request to the Corporation
      at its principal place of business.

    

    Reference
      is hereby made to select provisions of the Preferred Stock set forth on the
      reverse hereof, and to the Certificate of Designation, which select provisions
      and the Certificate of Designation shall for all purposes have the same effect
      as if set forth at this place.

    

    Upon
      receipt of this certificate, the Holder is bound by the Certificate of
      Designation and is entitled to the benefits thereunder. 

    

    Unless
      the Transfer Agent’s Certificate of Authentication hereon has been properly
      executed, the shares of Preferred Stock evidenced hereby shall not be entitled
      to any benefit under the Certificate of Designation or be valid or obligatory
      for any purpose.

    

    

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    
 

    

    

    
      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

    

    

    IN
      WITNESS WHEREOF,
      Margo
      Caribe, Inc. has executed this certificate as of the date set forth
      below.

     

    

    
      	 	
              MARGO
                CARIBE, INC.

               

            
	 	
              By:

            	____________________________
	 	
            	
              Name:

            
	 	
            	
              
                Title:      [Authorized
                  Officer]

              

            
	 	 	 
	 	 	 
	 	
              By:

            	____________________________ 
	 	
            	
              Name: 

            
	 	
            	
              
                Title:      [Authorized
                  Officer]

              

            
	 	 	 
	
               

            	 	 
	 	 	 
	 	 	 
	 	
              Dated:

            	
              _______________

            

    

     

    

    TRANSFER
      AGENT’S CERTIFICATE OF AUTHENTICATION

    

    This
      is
      one of the certificates representing shares of Preferred Stock referred to
      in
      the within mentioned Certificate of Designation.

     

    

    
      	 	
              as
                Transfer Agent

            
	 	
              By:

            	____________________________ 
	 	
            	
              Name:

            
	 	
            	
              
                Title:    
                  Authorized Signatory

              

            
	 	 	 
	 	 	 
	 	
              Dated:

            	
              ____________________

            

    

    

    

    

    

    

     

     

     

    
 

    

    

    
      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

    

    

    REVERSE
      OF SECURITY

    

    MARGO
      CARIBE, INC.

    

    6.5%
      Cumulative Convertible Preferred Stock

    

    Dividends
      on each share of Preferred Stock shall be payable in cash at a rate per annum
      set forth on the face hereof or as provided in the Certificate of
      Designation.

    

    The
      shares of Preferred Stock shall be convertible into the Corporation’s Common
      Stock in the manner and according to the terms set forth in the Certificate
      of
      Designation. 

    

    As
      required under Puerto Rico law, the Corporation shall furnish to any Holder,
      upon request and without charge, a full summary statement of the designations,
      voting rights, preferences, limitations and special rights of the shares of
      each
      class or series authorized to be issued by the Corporation so far as they have
      been fixed and determined.

    

    

    

    

    

    

    

    

    

    

    

     

     

     

     

     

     

     

     

     

     

     

    

    
      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

    

    

    ASSIGNMENT

    

    FOR
      VALUE RECEIVED,
      the
      undersigned assigns and transfers the shares of Preferred Stock evidenced hereby
      to:

    

    ________________________________________________________________

    

    ________________________________________________________________

    

    

    (Insert
      assignee’s social security or tax identification number)

    

    ________________________________________________________________

    

    

    (Insert
      address and zip code of assignee)

    

    ________________________________________________________________

    

    ________________________________________________________________

    

    

    and
      irrevocably appoints:

    

    ________________________________________________________________

    

    agent
      to
      transfer the shares of Preferred Stock evidenced hereby on the books of the
      Transfer Agent and Registrar. The agent may substitute another to act for him
      or
      her.

    

    Date:
      __________________

    

    Signature:
      ______________________

    

    (Sign
      exactly as your name appears on the other side of this Preferred Stock
      Certificate)

    

    Signature
      Guarantee: _____________________1 

    

    

    

    

    

    

    

    
      
        

      

    

    1
      Signature must be guaranteed by an “eligible guarantor institution” (i.e., a
      bank, stockbroker, savings and loan association or credit union) meeting the
      requirements of the Registrar, which requirements include membership or
      participation in the Securities Transfer Agents Medallion Program (“STAMP”) or
      such other “signature guarantee program” as may be determined by the Registrar
      in addition to, or in substitution for, STAMP, all in accordance with the
      Securities Exchange Act of 1934, as amended.

     

    
 

    
      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

    

    

    NOTICE
      OF CONVERSION

    

    (To
      be
      Executed by the Registered Holder

    in
      order
      to Convert the Preferred Stock)

    

    The
      undersigned hereby irrevocably elects to convert (the “Conversion”) _______
      shares of 6.5% Cumulative Convertible Preferred Stock (the “Preferred Stock”),
      represented by stock certificate No(s). __ (the “Preferred Stock Certificates”)
      into shares of common stock, par value $0.01 per share (“Common Stock”), of
      Margo Caribe, Inc. (the “Corporation”) according to the conditions of the
      Certificate of Designation establishing the terms of the Preferred Stock (the
      “Certificate of Designation”), as of the date written below. If shares are to be
      issued in the name of a person other than the undersigned, the undersigned
      will
      pay all transfer taxes payable with respect thereto and is delivering herewith
      such certificates. No fee will be charged to the holder for any conversion,
      except for transfer taxes, if any. A copy of each Preferred Stock Certificate
      is
      attached hereto (or evidence of loss, theft or destruction
      thereof).

    

    The
      undersigned represents and warrants that all offers and sales by the undersigned
      of the shares of Common Stock issuable to the undersigned upon conversion of
      the
      Preferred Stock shall be made pursuant to registration of the Common Stock
      under
      the Securities Act of 1933 (the “Act”) or pursuant to an exemption from
      registration under the Act.

    

    Any
      holder, upon the exercise of its conversion rights in accordance with the terms
      of the Certificate of Designation and the Preferred Stock, agrees to be bound
      by
      the terms of the Exchange Agreement.

    

    The
      Corporation is not required to issue shares of Common Stock until the original
      Preferred Stock Certificate(s) (or evidence of loss, theft or destruction
      thereof) to be converted are received by the Corporation or its Transfer Agent.
      The Corporation shall issue and deliver shares of Common Stock to an overnight
      courier not later than two business days following receipt of the original
      Preferred Stock Certificate(s) to be converted.

    

    Capitalized
      terms used but not defined herein shall have the meanings ascribed thereto
      in or
      pursuant to the Certificate of Designation.

    

    Date
      of
      Conversion: __________________________________________

    Number
      of
      shares of Convertible 

    Preferred
      Stock to be Converted: ________________________________

     

     

    Signature:
      __________________________________________________

    Name:
      _____________________________________________________

    Address:2 
      ___________________________________________________

    Fax
      No.:
      ____________________________________________________

     

     

    
 

    

    
      

    

    2
      Address
      where shares of Common Stock and any other payments or certificates shall be
      sent by the Corporation.

    

    

    

    
      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

    

    

    EXHIBIT
      B

    

    FORM
      OF CERTIFICATE OF TRANSFER

    (Transfers
      pursuant to 16(b)
      and
16(d)

    of
      the
      Certificate of Designation)

    

    [                     
       ] as Transfer Agent

    [ADDRESS]

    [ATTN]

    

    
      	
              Re:
                

            	
              Margo
                Caribe, Inc.

            

    

    6.5%
      Cumulative Convertible Preferred Stock (the “Preferred Stock”)

    

    Reference
      is hereby made to the Certificate of Designation relating to the Preferred
      Stock
      dated May 17, 2007, as such may be amended from time to time (the “Certificate
      of Designation”). Capitalized terms used but not defined herein shall have the
      respective meanings given to them in the Certificate of
      Designation.

    

    This
      Certificate relates to _____ shares of the Preferred Stock (the “Securities”)
      bearing the Restricted Shares Legend ([CUSIP
      NO.]
      ) in the
      name of [name of transferor] (the “Transferor”) to effect the transfer of the
      Securities.

    

    In
      connection with such request, and in respect of the Preferred Stock, the
      Transferor does hereby certify that shares of the Preferred Stock are being
      transferred (i) in accordance with the applicable securities laws of the
      relevant state or jurisdiction of the United States or other jurisdiction and
      (ii) in accordance with their terms:

    

    

    CHECK
      ONE
      BOX BELOW, AS APPLICABLE:

    

    (1)
      [ ]
  to
      a
      transferee that the Transferor reasonably believes is a qualified institutional
      buyer, within the meaning of Rule 144A under the Securities Act, purchasing
      for
      its own account or for the account of a qualified institutional buyer in a
      transaction meeting the requirements of Rule 144A;

    

    (2)
      [
      ]    to
      a
      person that is an “accredited investor” as defined in Rule 501(a) under the
      Securities Act that is acquiring this security for investment purposes and
      not
      for distribution;

    

    (3)
      [
      ]    pursuant
      to an exemption from registration under the Securities Act provided by Rule
      144
      thereunder (if available); 

    

    (4)
      [
      ]    in
      accordance with another exemption from the registration requirements of the
      Securities Act; 

    

    (5)
      [
      ]    to
      the
      Corporation or a subsidiary thereof; or

    

    (6)
      [
      ]    pursuant
      to a registration statement that has been declared effective under the
      Securities Act. 

    

    Unless
      one of the boxes is checked, the Transfer Agent will refuse to register any
      of
      the Securities evidenced by this certificate in the name of any person other
      than the registered holder thereof; provided,
      however,
      that if
      box (3) or (4) is checked, the Transfer Agent and the Corporation shall be
      entitled to require, prior to registering any such transfer of the Securities,
      such legal opinions, certifications and other information as the Corporation
      has
      reasonably requested to confirm that such transfer is being made pursuant to
      an
      exemption from, or in a transaction not subject to, the registration
      requirements of the Securities Act of 1933, such as the exemption provided
      by
      Rule 144 under such Act.

    

    
      	 	
              [Name
                of Transferor]

            
	 	 	 
	 	 	 
	 	
              By:
                                                                              
                

            
	 	
              Name:

            
	 	
              Title:

            
	 	 	 
	 	 	 
	
              Dated:

            	 	 

    

    
      	
              cc:

            	
              Margo
                Caribe, Inc. 

            

    

    Corporate
      Secretary

    Road
      690,
      Kilometer 5.8

    Vega
      Alta, Puerto Rico 00692

    

    

    

    
      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

    

    

    EXHIBIT
      C

    

    Form
      of
      Common Share Legend

    

    

    THIS
      SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
      (THE “SECURITIES ACT”). THE HOLDER HEREOF, BY PURCHASING THIS SECURITY, AGREES
      FOR THE BENEFIT OF MARGO CARIBE, INC. THAT (a) THIS SECURITY MAY NOT BE RESOLD,
      PLEDGED OR OTHERWISE TRANSFERRED OTHER THAN (1) TO MARGO CARIBE, INC. OR A
      SUBSIDIARY THEREOF, (2) IN A TRANSACTION ENTITLED TO AN EXEMPTION FROM
      REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE),
      (3)
      SO LONG AS THIS SECURITY IS ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER
      THE
      SECURITIES ACT (“RULE 144A”), TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS
      A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING
      FOR
      ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
      NOTICE IS GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN
      RELIANCE ON RULE 144A (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON
      THE
      CERTIFICATE OF TRANSFER ON THE REVERSE OF THIS SECURITY), (4) TO A PERSON THAT
      IS AN “ACCREDITED INVESTOR” AS DEFINED IN RULE 501(A) UNDER THE SECURITIES ACT
      (AS INDICATED BY THE BOX CHECKED BY THE TRANSFEROR ON THE CERTIFICATE OF
      TRANSFER ON THE REVERSE OF THIS SECURITY) THAT IS ACQUIRING THIS SECURITY FOR
      INVESTMENT PURPOSES AND NOT FOR DISTRIBUTION, AND A CERTIFICATE WHICH MAY BE
      OBTAINED FROM MARGO CARIBE, INC. IS DELIVERED BY THE TRANSFEREE TO THE MARGO
      CARIBE, INC., (5) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM REGISTRATION
      UNDER THE SECURITIES ACT, SUBJECT, IN THE CASE OF CLAUSES (2) OR (4), TO THE
      RECEIPT BY MARGO CARIBE, INC. OF AN OPINION OF COUNSEL OR SUCH OTHER EVIDENCE
      ACCEPTABLE TO MARGO CARIBE, INC. THAT SUCH RESALE, PLEDGE OR TRANSFER IS EXEMPT
      FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR (6) PURSUANT TO
      AN
      EFFECTIVE REGISTRATION STATEMENT AND THAT (b) THE HOLDER WILL, AND EACH
      SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY OF
      THE
      RESALE RESTRICTIONS REFERRED TO HEREIN AND DELIVER TO THE TRANSFEREE (OTHER
      THAN
      A QUALIFIED INSTITUTIONAL BUYER) PRIOR TO THE SALE A COPY OF THE TRANSFER
      RESTRICTIONS APPLICABLE HERETO (COPIES OF WHICH MAY BE OBTAINED FROM MARGO
      CARIBE, INC.).

    

    

     

     

     

     

     

    
 

    
      
        
          
          

        

        
          1

          
            

          

        

        
          
          

        

      

    

    

    EXHIBIT
      D

    

    FORM
      OF CERTIFICATE OF TRANSFER

    FOR
      COMMON STOCK

    

    (Transfers
      pursuant to Section 16(e)
      of
      the

    Certificate
      of Designation)

    

    [Transfer
      Agent]

    

    

    Attn:

    

    
      	
              Re:

            	
              Margo
                Caribe, Inc.

            

    

    6.5%
      Cumulative Convertible Preferred Stock

    (the
      “Preferred Stock”)

    

    Reference
      is hereby made to the Certificate of Designation relating to the Preferred
      Stock
      dated May 17, 2007, as such may be amended from time to time (the “Certificate
      of Designation”). Capitalized terms used but not defined herein shall have the
      respective meanings given them in the Certificate of Designation.

    

    This
      letter relates to ____ shares of Common Stock represented by the accompanying
      certificate(s) that were issued upon conversion of the Preferred Stock and
      which
      are held in the name of [name of transferor] (the “Transferor”) to effect the
      transfer of such Common Stock. 

    

    In
      connection with such request and in respect of the shares of Common Stock,
      the
      Transferor does hereby certify that the shares of Common Stock are being
      transferred (i) in accordance with applicable securities laws of any state
      of
      the United States or any other jurisdiction and (ii) in accordance with their
      terms:

    

    CHECK
      ONE
      BOX BELOW

    

    (1)
      [
      ]  to
      a
      transferee that the Transferor reasonably believes is a qualified institutional
      buyer, within the meaning of Rule 144A under the Securities Act, purchasing
      for
      its own account or for the account of a qualified institutional buyer in a
      transaction meeting the requirements of Rule 144A;

    

    (2)
      [
      ]   to
      a
      person that is an “accredited investor” as defined in Rule 501(a) under the
      Securities Act that is acquiring this security for investment purposes and
      not
      for distribution;

    

    (3)
      [
      ]   pursuant
      to an exemption from registration under the Securities Act provided by Rule
      144
      thereunder (if available); 

    

    (4)
      [
      ]  in accordance with another exemption from the registration requirements
      of the Securities Act (based upon an opinion of counsel if the Corporation
      so
      requests);

    

    (5)
      [
      ]    to the Corporation or a subsidiary thereof; or

    

    (6)
      [ ]   pursuant to a registration statement that has been declared
      effective under the Securities Act. 

     

    Unless
      one of the boxes is checked, the Transfer Agent will refuse to register any
      of
      the Securities evidenced by this certificate in the name of any person other
      than the registered holder thereof; provided,
      however,
      that if
      box (3) or (4) is checked, the Transfer Agent shall be entitled to require,
      prior to registering any such transfer of the Securities, such legal opinions,
      certifications and other information as the Corporation has reasonably requested
      to confirm that such transfer is being made pursuant to an exemption from,
      or in
      a transaction not subject to, the registration requirements of the Securities
      Act of 1933, such as the exemption provided by Rule 144 under such
      Act.

    

    
      

      
        	 	
                [Name
                  of Transferor]

              
	 	 	 
	 	 	 
	 	
                By:
                                                                                
                  

              
	 	
                Name:

              
	 	
                Title:

              
	 	 	 
	 	 	 
	
                Dated:

              	 	 

      

    

    
      	cc:	
              Margo
                Caribe, Inc. 

            

    

    Corporate
      Secretary

    Road
      690,
      Kilometer 5.8

    Vega
      Alta, Puerto Rico 00692

    

    
 

    

    1Exhibit 10.1 - Exchange Agreement

    
      

      

    

     

     

     

     

     

     

     

     

     

     

     

    

    MARGO
      CARIBE, INC.

    

    6.5%
      CUMULATIVE CONVERTIBLE PREFERRED STOCK

    (LIQUIDATION
      PREFERENCE $250.00 PER SHARE)

     

     

    
      
        

      

    

     

     

    EXCHANGE
      AGREEMENT

    

    DATED
      AS OF MAY 25, 2007

     

     

     

     

     

     

     

     

     

     

     

     

     

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    TABLE
      OF CONTENT

    

    
      	 	 	
              Page

            
	
              ARTICLE
                1 - DEFINITIONS AND RULES OF CONSTRUCTION

            	
              1

            
	 	 	 
	
              SECTION
                1.1.

            	
              DEFINITIONS

            	
              1

            
	
              SECTION
                1.2.

            	
              RULES
                OF CONSTRUCTION

            	
              2

            
	 	 	 
	
              ARTICLE
                2 - EXCHANGE OF INDEBTEDNESS FOR SECURITIES; TERMS OF THE
                SECURITIES

            	
              2

            
	 	 
	
              SECTION
                2.1.

            	
              EXCHANGE
                OF INDEBTEDNESS FOR SECURITIES

            	
              2

            
	
              SECTION
                2.2.

            	
              TERMS
                OF THE SECURITIES

            	
              2

            
	 	 	 
	
              ARTICLE
                3 - REPRESENTATIONS AND WARRANTIES OF THE COMPANY

            	
              3

            
	 	 
	
              SECTION
                3.1.

            	
              CORPORATE
                EXISTENCE; COMPLIANCE WITH LAW AND CONTRACTUAL OBLIGATIONS

            	
              3

            
	
              SECTION
                3.2.

            	
              CORPORATE
                POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS

            	
              3

            
	
              SECTION
                3.3.

            	
              NO
                LEGAL OR CONTRACTUAL BAR

            	
              3

            
	
              SECTION
                3.4.

            	
              NO
                MATERIAL LITIGATION

            	
              3

            
	
              SECTION
                3.5.

            	
              TAXES

            	
              3

            
	
              SECTION
                3.6.

            	
              INVESTMENT
                COMPANY ACT

            	
              3

            
	
              SECTION
                3.7.

            	
              USE
                OF PROCEEDS

            	
              3

            
	
              SECTION
                3.8.

            	
              SOLVENCY

            	
              3

            
	 	 
	
              ARTICLE
                4 - REPRESENTATIONS AND WARRANTIES OF THE SPECTORS

            	
              4

            
	 	 
	
              SECTION
                4.1.

            	
              PURCHASE
                FOR INVESTMENT; ACCREDITED INVESTOR

            	
              4

            
	
              SECTION
                4.2.

            	
              TRANSFEREES

            	
              5

            
	 	 
	
              ARTICLE
                5 - CONDITIONS PRECEDENT

            	
              6

            
	 	 
	
              SECTION
                5.1.

            	
              CONDITIONS
                PRECEDENT

            	
              6

            
	 	 
	
              ARTICLE
                6 - MISCELLANEOUS

            	
              6

            
	 	 
	
              SECTION
                6.1.

            	
              NOTICES

            	
              6

            
	
              SECTION
                6.2.

            	
              STATEMENTS
                OR OPINION

            	
              7

            
	
              SECTION
                6.3.

            	
              WHEN
                TREASURY SECURITIES DISREGARDED

            	
              7

            
	
              SECTION
                6.4.

            	
              LEGAL
                HOLIDAYS

            	
              7

            
	
              SECTION
                6.5.

            	
              GOVERNING
                LAW

            	
              7

            
	
              SECTION
                6.6.

            	
              SUCCESSORS

            	
              8

            
	
              SECTION
                6.7.

            	
              MULTIPLE
                ORIGINALS

            	
              8

            
	
              SECTION
                6.8.

            	
              TABLE
                OF CONTENTS; HEADINGS

            	
              8

            
	
              SECTION
                6.9.

            	
              SURVIVAL
                OF CERTAIN PROVISIONS

            	
              8

            

    

    

    

    

    

    

    

    

    

    
      
        
          
          

        

        
          i

          
            

          

        

        
          
          

        

      

    

    

    EXCHANGE
      AGREEMENT
      dated as
      of May 25, 2007, between MARGO
      CARIBE, INC,
      a
      Puerto Rico corporation (the “Company”), and Michael
      J. Spector and Margaret D. Spector
      (the
“Spectors”).

    

    WHEREAS,
      the
      Company has approximately $7,000,000 in outstanding indebtedness with the
      Spectors (the “Indebtedness”);

    

    WHEREAS,
      the
      parties have agreed to exchange the approximately $3,900,000 aggregate principal
      amount of indebtedness (the “Exchanged Indebtedness”) into 15,600 shares of the
      Company’s newly issued 6.5% Cumulative Convertible Preferred Stock (Liquidation
      Preference $250.00 per share) (the “Securities”);

    

    NOW
      THEREFORE,
      each
      party agrees as follows for the benefit of the other party and for the equal
      and
      ratable benefit of the Holders (as defined below) of the:

    

    ARTICLE
      1

    

    DEFINITIONS
      AND RULES OF CONSTRUCTION

    

    SECTION
      1.1.   DEFINITIONS

    

    “Act”
      means the Securities Act of 1933, as amended, or any similar federal statute
      then in effect.

    

    “Agreement”
      means this Agreement as amended or supplemented from time to time.

    

    “Board
      of
      Directors” means the Board of Directors of the Company or any committee thereof
      duly authorized to act on behalf of such Board.

    

    “Business
      Day” means any day that is not a Legal Holiday, as defined in Section 6.4
      hereof.

    

    “Capital
      Stock” means any and all shares, interests, rights to purchase, warrants,
      options, participations or other equivalents of or interests in (however
      designated) corporate stock, including any Preferred Stock.

    

    “Company”
      means the party named as such in this Agreement until a successor replaces
      it
      and, thereafter, includes the successor.

    

    “Contractual
      Obligation” shall mean, as to any Person, any provision of any security issued
      by such Person or of any agreement, instrument or undertaking to which such
      Person is a party or by which it or any of its property is bound.

    

    “Exchange
      Act” means the Securities Exchange Act of 1934, as amended, or any similar
      federal statute then in effect.

    

    “GAAP”
      shall mean generally accepted accounting principles in the United States of
      America in effect from time to time.

    

    “Governmental
      Authority” shall mean any nation or government, any state, commonwealth or other
      political subdivision or instrumentality thereof, and any entity exercising
      executive, legislative, judicial, regulatory or administrative functions of
      or
      pertaining to government.

    

    “Holder”
      or “Securityholder” means the person in whose name a Security is registered on
      the Registrar’s books.

    

    “Lien”
      means any mortgage, pledge, security interest, conditional sale or other title
      retention agreement or other similar lien.

    

    “Market
      Price” shall have the meaning set forth in the Certificate of
      Designation.

    

    “Material
      Adverse Effect” shall mean a material adverse effect with respect to (a) the
      business, operations or financial condition of the Company, (b) the ability
      of
      the Company to pay and perform its obligations hereunder and under the
      Securities, or (c) the validity or enforceability of this Agreement or the
      Securities or the rights and remedies of the Holders hereunder or
      thereunder.

    

    

    
      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      

    

    

    “Material
      Amount” means, at any time, ten percent (10%) of the Company’s consolidated
      stockholders’ equity, as set forth in the most recent annual or quarterly
      financial statements of the Company delivered to the Holders.

    

    “Officer”
      means the Chairman of the Board, the President, any Vice President or the
      Secretary of the Company.

    

    “Officers’
      Certificate” means a certificate signed by an Officer.

    

    “Opinion
      of Counsel” means a written opinion from legal counsel who is acceptable to the
      Holders. The counsel may be an employee of or counsel to the
      Company.

    

    “Person”
      means any individual, corporation, partnership, joint venture, association,
      joint-stock company, trust, unincorporated organization, government or any
      agency or political subdivision thereof or any other entity.

    

    “Requirements
      of Law” shall mean, as to any Person, the Articles or Certificate of
      Incorporation and By-laws or other organizational or governing documents of
      such
      Person, any law, treaty, rule or regulation, and any final and binding
      determination of an arbitrator or determination of a court or other Governmental
      Authority, in each case applicable to or binding upon such Person or any of
      its
      property or to which such Person or any of its property is subject.

    

    “Subsidiary”
      means any corporation, association, partnership or other business entity of
      which more than 50% of the total voting power of shares of Capital Stock or
      other interests (including partnership interests) entitled (without regard
      to
      the occurrence of any contingency) to vote in the election of directors,
      managers or trustees thereof is at the time owned or controlled, directly or
      indirectly, by (i) the Company, (ii) the Company and one or more Subsidiaries
      or
      (iii) one or more Subsidiaries.

    

    SECTION
      1.2.   RULES
      OF CONSTRUCTION
      Unless
      the context otherwise requires:

    

    
      	 	
              (1)

            	
              a
                term has the meaning assigned to
                it;

            

    

    

    
      	 	
              (2)

            	
              an
                accounting term not otherwise defined has the meaning assigned to
                it in
                accordance with GAAP;

            

    

    

    
      	 	
              (3)

            	
              “or”
                is not exclusive;

            

    

    

    
      	 	
              (4)

            	
              “including”
                means including, without limitation;
                and

            

    

    

    
      	 	
              (5)

            	
              words
                in the singular include the plural and words in the plural include
                the
                singular.

            

    

    

    ARTICLE
      2

    

    EXCHANGE
      OF INDEBTEDNESS FOR SECURITIES;

    TERMS
      OF THE SECURITIES

    

    SECTION
      2.1.   EXCHANGE
      OF INDEBTEDNESS
      FOR
      SECURITIES.
      On the
      closing dated of the exchange, which shall be a date mutually agreed by the
      parties after the satisfaction of the condition set forth in Section 5.1, the
      Company shall issue and deliver the Securities to the Spectors. Effective on
      such closing date, the obligations of the Company with respect to Exchanged
      Indebtedness shall terminate and cease to have any force and effect.

    

    SECTION
      2.2.   TERMS
      OF THE SECURITIES.
      On or
      prior to the closing date of the exchange, the Company shall file with the
      Department of State of Puerto Rico a Certificate of Designation in the Form
      of
Exhibit
      A
      (the
“Certificate of Designation”) creating the series of preferred stock
      constituting the Securities. The terms of Exhibit A, including the definitions
      contained therein, are incorporated herein by reference as if fully set forth
      herein.

    

    The
      Securities shall be substantially in the form of Exhibit
      B,
      which
      is hereby incorporated in and expressly made a part of this Agreement. The
      Securities may have notations, legends or endorsements required by law, stock
      exchange rule, agreements to which the Company is subject, if any, or usage
      (provided that any such notation, legend or endorsement is in a form acceptable
      to the Company). Each Security shall be dated the date of its
      issuance.

    

    

    
      
        
          
          

        

        
          2

          
            

          

        

        
          
          

        

      

    

    

    ARTICLE
      3

    

    REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY

    

    As
      an
      inducement to the Spectors to enter into this Agreement, the Company represents
      and warrants to the Spectors that:

    

    SECTION
      3.1.   CORPORATE
      EXISTENCE; COMPLIANCE WITH LAW AND CONTRACTUAL OBLIGATIONS.
      The
      Company (a) is duly organized, validly existing and in good standing as a
      corporation under the laws of the Commonwealth of Puerto Rico and in each
      jurisdiction where its ownership of property or conduct of business requires
      such qualification, except where the failure to be so qualified would not have
      a
      Material Adverse Effect; (b) has the corporate power and authority and the
      legal
      right to own and operate its property and to conduct business in the manner
      in
      which it does and proposes so to do; and (c) is not in violation of any
      Requirement of Law or any Contractual Obligation if such violation could have
      a
      Material Adverse Effect. 

    

    SECTION
      3.2.   CORPORATE
      POWER; AUTHORIZATION; ENFORCEABLE OBLIGATIONS.
      The
      Company has the corporate power and authority to execute, deliver and perform
      this Agreement and the Securities and has taken all necessary corporate actions
      to authorize such execution, delivery and performance. This Agreement and the
      Securities, when issued, have been or will have been duly executed and delivered
      on behalf of the Company and constitute or will constitute legal, valid and
      binding obligations of the Company, enforceable against it in accordance with
      their respective terms, except as enforceability may be limited by applicable
      bankruptcy, insolvency and other similar laws affecting creditors’ rights
      generally and by general principles of equity.

    

    SECTION
      3.3.   NO
      LEGAL OR CONTRACTUAL BAR.
      The
      execution, delivery and performance of this Agreement and the Securities,
      including the use of the proceeds of the Securities, do not and will not (a)
      violate any Requirement of Law or any Contractual Obligation of the Company
      or
      any of its Subsidiaries, (b) require any license, consent, authorization,
      approval or any other action by, or any notice to or filing or registration
      with, any Governmental Authority or any other Person, other than the filing
      with
      the Secretary of State of the Commonwealth of Puerto Rico of a certified copy
      of
      the resolution of the Board of Directors approving the issuance of the
      Securities and the terms of this Agreement, or (c) result in the creation or
      imposition of any Lien on any asset of the Company or any of its Subsidiaries.
      

    

    SECTION
      3.4.   NO
      MATERIAL LITIGATION.
      Except
      as set forth on Schedule 3.4, no litigation, investigation or proceeding of
      or
      before any arbitrator or Governmental Authority is pending or, to the knowledge
      of the Company, threatened by or against the Company or any of its Subsidiaries,
      or against any of the Company’s or any such Subsidiary’s properties or revenues
      that, if adversely determined, could alone, or with any other litigation,
      investigation or proceeding, affect the business, financial condition or results
      of operations of the Company and its Subsidiaries, taken as a whole, in excess
      of a Material Amount or could have a Material Adverse Effect. 

    

    SECTION
      3.5.   TAXES.
      The
      Company and each of its Subsidiaries have filed or caused to be filed all tax
      returns that are required to be filed and have paid all taxes shown to be due
      and payable on such returns or on any assessments made against them or any
      of
      their property other than taxes and assessments that are being contested in
      good
      faith by appropriate proceedings and as to which the Company or such Subsidiary
      has established adequate reserves in conformance with GAAP. 

    

    SECTION
      3.6.   INVESTMENT
      COMPANY ACT.
      The
      Company is not an “investment company” within the meaning of the Investment
      Company Act of 1940, as amended, and is not controlled by any “investment
      company”. 

    

    SECTION
      3.7.   USE
      OF PROCEEDS.
      The
      proceeds of the Indebtedness were used by the Company for its general corporate
      purposes, including to finance its general working capital needs. 

    

    SECTION
      3.8.   SOLVENCY.
      The
      Company is able to pay its debts as they mature. The aggregate estimated fair
      market value of the Company’s assets is greater than the Company’s liabilities
      (including contingent, subordinated, unmatured and unliquidated liabilities
      and
      any and all obligations hereunder and under the Securities), respectively.
      The
      Company has capital sufficient to carry on the business and transactions in
      which it is engaged and all business and transactions in which it proposes
      to
      engage.

    

    

    
      
        
          
          

        

        
          3

          
            

          

        

        
          
          

        

      

    

    

    ARTICLE
      4

    

    REPRESENTATIONS
      AND WARRANTIES OF THE SPECTORS

    

    SECTION
      4.1.   PURCHASE
      FOR INVESTMENT; ACCREDITED INVESTOR. 

    

    (a)    The
      Spectors are purchasing the Securities for their own account and not with a
      view
      to, or for sale in connection with, the distribution thereof within the meaning
      of the Securities Act, provided that the Spectors have the right to dispose
      of
      the Securities, or any part thereof, if they deem it advisable to do so, either
      pursuant to a registration of the Securities under the Securities Act or
      pursuant to an applicable exemption from the registration requirements of the
      Securities Act. The Spectors understand that the Securities have not been
      registered under the Securities Act, the Puerto Rico Uniform Securities Act
      (“PRUSA”), or any other state or Commonwealth securities or blue sky laws and
      they understand and agree that the Securities may be resold only if registered
      pursuant to the provisions of the Securities Act or if an exemption from
      registration is available thereunder.

    

    (b)    The
      Spectors are “accredited investors” as defined in Rule 501 of Regulation
      D.

    

    (c)    The
      Spectors acknowledge that the Securities have not been registered under the
      Securities Act and may not be sold except as permitted below.

    

    (d)    The
      Spectors understand and agree that the Securities are being offered only in
      a
      transaction not involving any public offering within the meaning of the
      Securities Act, and that (A) if they decide to resell, pledge or otherwise
      transfer any Securities on which the legend set forth below appears, such
      Securities may be resold, pledged or transferred only (i) to the Company or
      a
      Subsidiary thereof, (ii) in a transaction entitled to an exemption from
      registration provided by Rule 144 under the Securities Act (if available),
      (iii)
      so long as the Securities are eligible for resale pursuant to Rule 144A, to
      a
      person whom the Spectors reasonably believe is a qualified institutional buyer
      that purchases for its own account or for the account of a qualified
      institutional buyer to whom notice is given that the resale, pledge or transfer
      is being made in reliance on Rule 144A, (iv) to an “Non U.S. Person” in an
“offshore transaction” pursuant to Regulation S under the Securities Act, (v)
      pursuant to an exemption from registration under the Securities Act to an
“accredited investor” within the meaning of subparagraph (a)(1), (2), (3) or (7)
      of Rule 501 under the Securities Act that is acquiring the Securities for its
      own account, or for the account of such an “accredited investor,” for investment
      purposes and not with a view to, or for offer or sale in connection with, any
      distribution in violation of the Securities Act, or (vi) pursuant to another
      available exemption from registration under the Securities Act, subject, in
      the
      case of clauses (v) or (vi), to the receipt by the Company of an Opinion of
      Counsel or such other evidence acceptable to the Company that such resale,
      pledge or transfer is exempt from the registration requirements of the
      Securities Act, or (vii) pursuant to an effective registration statement, and
      that (B) the Spectors will, and each subsequent purchaser of the Securities
      is
      required to, notify any purchaser of any Securities of the resale restrictions
      referred to in (c) above and to deliver to the transferee (other than a
      qualified institutional buyer) prior to sale a copy of the transfer restrictions
      hereinafter set forth (copies of which may be obtained from the Company). The
      Spectors understand that transfers of the Securities will be registered only
      if
      Securities are transferred in accordance with such transfer
      restrictions;

    

    (e)    The
      Spectors understand that the certificates evidencing Securities sold pursuant
      to
      the exemption from registration under the Securities Act contained in Regulation
      will, unless otherwise agreed by the Company, bear a legend substantially to
      the
      following effect:

    

    “THIS
      SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
      (THE “SECURITIES ACT”), OR UNDER THE PUERTO RICO UNIFORM SECURITIES ACT OR ANY
      OTHER STATE OR COMMONWEALTH OF PUERTO RICO SECURITIES LAWS. NEITHER THIS
      SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
      ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
      ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR
      NOT
      SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.

    

    

    
      
        
          
          

        

        
          4

          
            

          

        

        
          
          

        

      

    

    

    THE
      HOLDER HEREOF, BY PURCHASING THIS SECURITY, AGREES FOR THE BENEFIT OF MARGO
      CARIBE, INC. THAT (A) THIS SECURITY MAY NOT BE RESOLD, PLEDGED OR OTHERWISE
      TRANSFERRED OTHER THAN (1) TO MARGO CARIBE, INC. OR A SUBSIDIARY THEREOF, (2)
      IN
      A TRANSACTION ENTITLED TO AN EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
      UNDER THE SECURITIES ACT (IF AVAILABLE), (3) SO LONG AS THIS SECURITY IS
      ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES ACT (“RULE
      144A”), TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED
      INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A PURCHASING FOR ITS OWN
      ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE
      IS
      GIVEN THAT THE RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON
      RULE 144A, (4) TO A “NON U.S. PERSON” IN AN “OFFSHORE TRANSACTION” PURSUANT TO
      REGULATION S UNDER THE SECURITIES ACT, (5) PURSUANT TO AN EXEMPTION FROM
      REGISTRATION UNDER THE SECURITIES ACT TO AN “ACCREDITED INVESTOR” WITHIN THE
      MEANING OF SUBPARAGRAPH (A) (1), (2), (3) OR (7) OF RULE 501 UNDER THE
      SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE
      ACCOUNT OF SUCH AN “ACCREDITED INVESTOR,” FOR INVESTMENT PURPOSES AND NOT WITH A
      VIEW TO, OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION
      OF THE SECURITIES ACT, OR (6) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM
      REGISTRATION UNDER THE SECURITIES ACT, SUBJECT, IN THE CASE OF CLAUSES (5)
      OR
      (6), TO THE RECEIPT BY MARGO CARIBE, INC. OF AN OPINION OF COUNSEL OR SUCH
      OTHER
      EVIDENCE ACCEPTABLE TO MARGO CARIBE, INC. THAT SUCH RESALE, PLEDGE OR TRANSFER
      IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR (7)
      PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND THAT (B) THE HOLDER WILL,
      AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS SECURITY
      OF THE RESALE RESTRICTIONS REFERRED TO IN THE CERTIFICATE OF DESIGNATION FOR
      THE
      SECURITIES AND DELIVER TO THE TRANSFEREE (OTHER THAN A QUALIFIED INSTITUTIONAL
      BUYER) PRIOR TO THE SALE A COPY OF THE TRANSFER RESTRICTIONS APPLICABLE HERETO
      (COPIES OF WHICH MAY BE OBTAINED FROM MARGO CARIBE, INC.).

    

    IN
      CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND
      TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS MAY BE REQUIRED BY
      THE
      DECLARATION TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
      RESTRICTIONS.”

    

    (f)    The
      Spectors (i) are able to fend for themselves in the transactions contemplated
      by
      this Agreement; (ii) have such knowledge and experience in financial and
      business matters as to be capable of evaluating the merits and risks of its
      prospective investment in the Securities; (iii) have the ability to bear the
      economic risks of its prospective investment and can afford the complete loss
      of
      such investment; and (iv) may be required to bear the financial risks of this
      investment for an indefinite period of time;

    

    (g)    It
      is
      understood that, in making certain of the representations set forth in this
      Agreement, the Company is relying, to the extent applicable, upon your
      representations set forth in this Section 4.1; and

    

    (h)    The
      Spectors have consulted with their own legal, regulatory, tax, business,
      investment, financial and accounting advisers in connection herewith to the
      extent they have deemed necessary, (ii) they have had a reasonable opportunity
      to ask questions of and receive answers from officers and representatives of
      the
      Company concerning its financial condition and results of operations and any
      other matter relevant to the purchase of the Securities, and any such questions
      have been answered to their satisfaction, (iii) they have had the opportunity
      to
      review all publicly available records and filings concerning the Company and
      its
      Subsidiaries and you have carefully reviewed such records and filings as they
      considered relevant to making an investment decision, and (iv) they have made
      their own investment decisions based upon their own judgment, due diligence
      and
      advice from such advisers as they have deemed necessary and not upon any view
      expressed by the Company.

    

    SECTION
      4.2.   TRANSFEREES.
      Any
      transferee of the Securities shall, by its acceptance of such Securities, be
      deemed to have made the same representations regarding the purchase of the
      Securities as the Spectors made pursuant to Section 4.1, above.

    

    

    
      
        
          
          

        

        
          5

          
            

          

        

        
          
          

        

      

    

    

    ARTICLE
      5

    

    CONDITIONS
      PRECEDENT

    

    SECTION
      5.1.  CONDITIONS
      PRECEDENT.
      It shall
      be a condition precedent to the exchange of the Exchanged Indebtedness for
      the
      Securities that the Spectors shall have received the following documents and
      that the following conditions shall have been satisfied:

    

    (a)    a
      certified copy of the resolution of the Board of Directors of the Company
      approving the execution, delivery and performance of this Agreement and the
      Securities and the transactions contemplated herein and therein;

    

    (b)    a
      certificate of an Officer certifying the names and true signatures of the
      Officers of the Company authorized to sign this Agreement and the Securities
      and
      the other documents required to be executed and delivered hereunder, in each
      case dated as of the date of exchange;

    

    (c)    a
      copy,
      stamped as filed with the Department of State of Puerto Rico, of the Certificate
      of Designation in the form of Exhibit A;

    

    (d)    a
      copy of
      the By-laws of the Company, certified by an Officer of the Company as of the
      date of exchange, as being accurate and complete;

     

    (e)    an
      Officer’s Certificate of the Company confirming compliance with the covenants
      and confirming the accuracy of the representations set forth herein as of the
      date of exchange;

    

    (f)    evidence
      satisfactory to the Spectors that all acts and conditions (including the
      obtaining of any necessary regulatory approvals and the making of any required
      filings, recordings or registrations) required to be done and performed and
      to
      have happened prior to the execution, delivery and performance of this Agreement
      and the Securities and to constitute the same legal, valid and binding
      obligations, enforceable in accordance with their respective terms, shall have
      been done and performed and shall have happened in due and strict compliance
      with all applicable laws;

    

    (g)    such
      other documents or legal opinions as the Spectors or its counsel may reasonably
      request, all in form and substance reasonably satisfactory to the
      Spectors;

    

    (h)    all
      documentation, including documentation for corporate and legal proceedings
      in
      connection with the transactions contemplated by this Agreement and the
      Securities, shall be reasonably satisfactory in form and substance to the
      Spectors and its counsel;

    

    (i)    the
      Company shall have paid all fees required to have been paid under this Agreement
      and the Securities;

    

    (j)    no
      default or Event of Default shall have occurred and be continuing;

    

    

    ARTICLE
      6

    

    MISCELLANEOUS

    

    SECTION
      6.1.   NOTICES.
      Any
      notice or communication shall be in writing and delivered in person or mailed
      by
      first-class mail addressed as follows:

    

    

    
      
        
          
          

        

        
          6

          
            

          

        

        
          
          

        

      

    

    

    If
      to the Company:

    

    Margo
      Caribe, Inc.

    ROAD
      690
      KILOMETER 5 8

    VEGA
      ALTA
      PR 00692

    

    Attention:
      Alison Witkovich

    

    Telephone:
      (787) 883-2570

    Telecopier:
      (787) 787-883-3244

    

    If
      to the Spectors:

     

    

    Telephone:
      (787) 

    Telecopier:
      (787) 

    

    The
      Company or the Spectors by notice to the other may designate additional or
      different addresses for subsequent notices or communications.

    

    Any
      notice or communication mailed to a Securityholder shall be mailed to the
      Securityholder at the Securityholder’s address as it appears on the registration
      books of the Registrar and shall be sufficiently given if so mailed within
      the
      time prescribed.

    

    Failure
      to mail a notice or communication to a Securityholder or any defect in it shall
      not affect its sufficiency with respect to other Securityholders. If a notice
      or
      communication is mailed in the manner provided above, it is duly given, whether
      or not the addressee receives it.

    

    SECTION
      6.2.   STATEMENTS
      OR OPINION.
      Each
      certificate or opinion with respect to compliance with a covenant or condition
      provided for in this Agreement shall include:

    

    
      	 	
              (1)

            	
              a
                statement that the person making such certificate or opinion has
                read such
                covenant or condition;

            

    

    

    
      	 	
              (2)

            	
              a
                brief statement as to the nature and scope of the examination or
                investigation upon which the statements or opinions contained in
                such
                certificate or opinion are based;

            

    

    

    
      	 	
              (3)

            	
              a
                statement that, in the opinion of such person, he has made such
                examination or investigation as is necessary to enable him to express
                an
                informed opinion as to whether or not such covenant or condition
                has been
                complied with; and

            

    

    

    
      	 	
              (4)

            	
              a
                statement as to whether or not, in the opinion of such person, such
                covenant or condition has been complied
                with.

            

    

    

    SECTION
      6.3.   WHEN
      TREASURY SECURITIES DISREGARDED.
      In
      determining whether the Holders of the required principal amount of Securities
      have concurred in any waiver or consent, Securities owned by the Company or
      by
      any person directly or indirectly controlling or controlled by or under direct
      or indirect common control with the Company shall be disregarded and deemed
      not
      to be outstanding. Also, subject to the foregoing, only Securities outstanding
      at the time shall be considered in any such determination.

    

    SECTION
      6.4.   LEGAL
      HOLIDAYS.
      A “Legal
      Holiday” is a Saturday, a Sunday or a day on which banking institutions are not
      normally open in the Commonwealth of Puerto Rico. If a payment date is a Legal
      Holiday, payment shall be made on the next succeeding day that is not a Legal
      Holiday, and no interest shall accrue for the intervening period. If a regular
      record date is a Legal Holiday, the record date shall not be affected.

    

    SECTION
      6.5.   GOVERNING
      LAW.
      This
      Agreement and the Securities shall be governed by, and construed in accordance
      with, the laws of the Commonwealth of Puerto Rico but without giving effect
      to
      applicable principles of conflicts of law to the extent that the application
      of
      the laws of another jurisdiction would be required thereby. 

    

    

    
      
        
          
          

        

        
          7

          
            

          

        

        
          
          

        

      

    

    

    SECTION
      6.6.   SUCCESSORS.
      All
      agreements of the Company in this Agreement and the Securities shall bind its
      successors. 

    

    SECTION
      6.7.   MULTIPLE
      ORIGINALS.
      The
      parties may sign any number of copies of this Agreement. Each signed copy shall
      be an original, but all of them together represent the same agreement. One
      signed copy is enough to prove this Agreement. 

    

    SECTION
      6.8.   TABLE
      OF CONTENTS; HEADINGS.
      The
      table of contents and headings of the Articles and Sections of this Agreement
      have been inserted for convenience of reference only, are not intended to be
      considered a part hereof and shall not modify or restrict any of the terms
      or
      provisions hereof. 

    

    SECTION
      6.9.   SURVIVAL
      OF CERTAIN PROVISIONS.
      The
      provisions set forth in Articles 1, 3, 4 and 6 shall survive the redemption
      or
      conversion of the Securities. All other covenants and provisions of the
      Agreement shall expire upon redemption or conversion of all the Securities,
      provided that rights or causes of action accrued prior to such payment or
      conversion shall survive.

    

    

    [SIGNATURE
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          8

          
            

          

        

        
          
          

        

      

    

    

    IN
      WITNESS WHEREOF,
      the
      parties have caused this Agreement to be duly executed as of the date first
      written above.

    

    
      	 	
              MARGO
                CARIBE, INC.

            
	 	 	 
	 	 	 
	 	 	 
	 	
              By:

            	
               
                /s/ Alison
                Witkovich                                       
                

            
	 	
              Name:

            	
                   
                Alison Witkovich

            
	 	
              Title:

            	
                   
                Vice President and Chief Financial Officer

            
	 	 	 
	 	 	 
	 	 	 
	 	 	 
	 	
               /s/
                Michael J.
                Spector                                                       
                

            
	  	
               Michael
                J. Spector

            
	 	 	 
	 	 	 
	 	
               /s/
                Margaret D.
                Spector                                                   
                

            
	 	
               Margaret
                D. Spector

            

    

    
 

     

     

     

     

     

     

     

     

     

     

     

     

     

     

    9

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