Document:

EXHIBIT 10.2

                          REGISTRATION RIGHTS AGREEMENT

      REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of June 1, 2004
by and between CTI INDUSTRIES CORPORATION, a Illinois Corporation (the
"Company"), and CORNELL CAPITAL PARTNERS, LP, a Delaware limited partnership
(the "Investor").

      WHEREAS:

      A. In connection with the Standby Equity Distribution Agreement by and
between the parties hereto of even date herewith (the "Standby Equity
Distribution Agreement"), the Company has agreed, upon the terms and subject to
the conditions of the Standby Equity Distribution Agreement, to issue and sell
to the Investor that number of shares of the Company's common stock, no par
value per share (the "Common Stock"), which can be purchased pursuant to the
terms of the Equity Line Credit Agreement for an aggregate purchase price of up
to Five Million Dollars ($5,000,000). Capitalized terms not defined herein shall
have the meaning ascribed to them in the Standby Equity Distribution Agreement.

      B. To induce the Investor to execute and deliver the Standby Equity
Distribution Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"1933 Act"), and applicable state securities laws.

      NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Investor
hereby agree as follows:

      1.    DEFINITIONS.

      As used in this Agreement, the following terms shall have the following
meanings:

            a. "Person" means a corporation, a limited liability company, an
association, a partnership, an organization, a business, an individual, a
governmental or political subdivision thereof or a governmental agency.

            b. "Register," "registered," and "registration" refer to a
registration effected by preparing and filing one or more Registration
Statements (as defined below) in compliance with the 1933 Act and pursuant to
Rule 415 under the 1933 Act or any successor rule providing for offering
securities on a continuous or delayed basis ("Rule 415"), and the declaration or
ordering of effectiveness of such Registration Statement(s) by the United States
Securities and Exchange Commission (the "SEC").

            c. "Registrable Securities" means the Investor's Shares, as defined
in the Standby Equity Distribution Agreement and shares of Common Stock issuable
to Investors pursuant to the Standby Equity Distribution Agreement.

<PAGE>

            d. "Registration Statement" means a registration statement under the
1933 Act which covers the Registrable Securities.

2.    REGISTRATION.

            a. Mandatory Registration. The Company shall prepare and file with
the SEC a Registration Statement on Form S-1, S-3 or on such other form as is
available. The Company shall use reasonable commercial efforts to cause such
Registration Statement to be declared effective by the SEC prior to the first
sale to the Investor of the Company's Common Stock pursuant to the Standby
Equity Distribution Agreement.

            b. Sufficient Number of Shares Registered. In the event the number
of shares available under a Registration Statement filed pursuant to Section
2(a) is insufficient to cover all of the Registrable Securities which the
Investor has purchased pursuant to the Standby Equity Distribution Agreement,
the Company shall amend the Registration Statement, or file a new Registration
Statement (on the short form available therefore, if applicable), or both, so as
to cover all of such Registrable Securities which the Investor has purchased
pursuant to the Standby Equity Distribution Agreement as soon as practicable,
but in any event not later than fifteen (15) days after the necessity therefore
arises. The Company shall use it best efforts to cause such amendment and/or new
Registration Statement to become effective as soon as practicable following the
filing thereof. For purposes of the foregoing provision, the number of shares
available under a Registration Statement shall be deemed "insufficient to cover
all of the Registrable Securities" if at any time the number of Registrable
Securities issuable on an Advance Notice Date is greater than the number of
shares available for resale under such Registration Statement.

3.    RELATED OBLIGATIONS.

            a. The Company shall keep the Registration Statement effective
pursuant to Rule 415 at all times until the date on which the Investor shall
have sold all the Registrable Securities covered by such Registration Statement
(the "Registration Period"), which Registration Statement (including any
amendments or supplements thereto and prospectuses contained therein) shall not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein, or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading.

            b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to a Registration
Statement and the prospectus used in connection with such Registration
Statement, which prospectus is to be filed pursuant to Rule 424 promulgated
under the 1933 Act, as may be necessary to keep such Registration Statement
effective at all times during the Registration Period, and, during such period,
comply with the provisions of the 1933 Act with respect to the disposition of
all Registrable Securities of the Company covered by such Registration Statement
until such time as all of such Registrable Securities shall have been disposed
of in accordance with the intended methods of disposition by the seller or
sellers thereof as set forth in such Registration Statement. In the case of
amendments and supplements to a Registration Statement which are required to be
filed pursuant to this Agreement (including pursuant to this Section 3(b)) by
reason of the

                                       2
<PAGE>

Company's filing a report on Form 10-K, Form 10-Q or Form 8-K or any analogous
report under the Securities Exchange Act of 1934, as amended (the "1934 Act"),
the Company shall have incorporated such report by reference into the
Registration Statement, if applicable, or shall file such amendments or
supplements with the SEC on the same day on which the 1934 Act report is filed
which created the requirement for the Company to amend or supplement the
Registration Statement.

            c. The Company shall furnish to the Investor without charge, (i) at
least one copy of such Registration Statement as declared effective by the SEC
and any amendment(s) thereto, including financial statements and schedules, all
documents incorporated therein by reference, all exhibits and each preliminary
prospectus, (ii) ten (10) copies of the final prospectus included in such
Registration Statement and all amendments and supplements thereto (or such other
number of copies as such Investor may reasonably request) and (iii) such other
documents as such Investor may reasonably request from time to time in order to
facilitate the disposition of the Registrable Securities owned by such Investor.

            d. The Company shall use reasonable commercial efforts to (i)
register and qualify the Registrable Securities covered by a Registration
Statement under such other securities or "blue sky" laws of such jurisdictions
in the United States as the Investor reasonably requests, (ii) prepare and file
in those jurisdictions, such amendments (including post-effective amendments)
and supplements to such registrations and qualifications as may be necessary to
maintain the effectiveness thereof during the Registration Period, (iii) take
such other actions as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (w) make any change to its certificate of incorporation or by-laws,
(x) qualify to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 3(d), (y) subject itself to general
taxation in any such jurisdiction, or (z) file a general consent to service of
process in any such jurisdiction. The Company shall promptly notify the Investor
of the receipt by the Company of any notification with respect to the suspension
of the registration or qualification of any of the Registrable Securities for
sale under the securities or "blue sky" laws of any jurisdiction in the United
States or its receipt of actual notice of the initiation or threat of any
proceeding for such purpose.

            e. As promptly as practicable after becoming aware of such event or
development, the Company shall notify the Investor in writing of the happening
of any event as a result of which the prospectus included in a Registration
Statement, as then in effect, includes an untrue statement of a material fact or
omission to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading (provided that in no event shall such notice contain any
material, nonpublic information), and promptly prepare a supplement or amendment
to such Registration Statement to correct such untrue statement or omission, and
deliver ten (10) copies of such supplement or amendment to each Investor. The
Company shall also promptly notify the Investor in writing (i) when a prospectus
or any prospectus supplement or post-effective amendment has been filed, and
when a Registration Statement or any post-effective amendment has become
effective (notification of such effectiveness shall be delivered to the Investor
by

                                       3
<PAGE>

facsimile on the same day of such effectiveness), (ii) of any request by the SEC
for amendments or supplements to a Registration Statement or related prospectus
or related information, and (iii) of the Company's reasonable determination that
a post-effective amendment to a Registration Statement would be appropriate.

            f. The Company shall use reasonable commercial efforts to prevent
the issuance of any stop order or other suspension of effectiveness of a
Registration Statement, or the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction within the United States of
America and, if such an order or suspension is issued, to obtain the withdrawal
of such order or suspension at the earliest possible moment and to notify the
Investor of the issuance of such order and the resolution thereof or its receipt
of actual notice of the initiation or threat of any proceeding for such purpose.

            g. At the reasonable request of the Investor, the Company shall
furnish to the Investor, on the date of the effectiveness of the Registration
Statement and thereafter from time to time on such dates as the Investor may
reasonably request (i) a letter, dated such date, from the Company's independent
certified public accountants in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering, and (ii) an opinion, dated as of such date, of counsel
representing the Company for purposes of such Registration Statement, in form,
scope and substance as is customarily given in an underwritten public offering,
addressed to the Investor.

            h. The Company shall make available for inspection by (i) the
Investor and (ii) one firm of accountants or other agents retained by the
Investor (collectively, the "Inspectors") all pertinent financial and other
records, and pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably deemed necessary by each
Inspector, and cause the Company's officers, directors and employees to supply
all information which any Inspector may reasonably request; provided, however,
that each Inspector shall agree, and the Investor hereby agrees, to hold in
strict confidence and shall not make any disclosure (except to an Investor) or
use of any Record or other information which the Company determines in good
faith to be confidential, and of which determination the Inspectors are so
notified, unless (a) the disclosure of such Records is necessary to avoid or
correct a misstatement or omission in any Registration Statement or is otherwise
required under the 1933 Act, (b) the release of such Records is ordered pursuant
to a final, non-appealable subpoena or order from a court or government body of
competent jurisdiction, or (c) the information in such Records has been made
generally available to the public other than by disclosure in violation of this
or any other agreement of which the Inspector and the Investor has knowledge.
The Investor agrees that it shall, upon learning that disclosure of such Records
is sought in or by a court or governmental body of competent jurisdiction or
through other means, give prompt notice to the Company and allow the Company, at
its expense, to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, the Records deemed confidential.

            i. The Company shall hold in confidence and not make any disclosure
of information concerning the Investor provided to the Company unless (i)
disclosure of such information is necessary to comply with federal or state
securities laws, (ii) the disclosure of such information is necessary to avoid
or correct a misstatement or omission in any Registration

                                       4
<PAGE>

Statement, (iii) the release of such information is ordered pursuant to a
subpoena or other final, non-appealable order from a court or governmental body
of competent jurisdiction, or (iv) such information has been made generally
available to the public other than by disclosure in violation of this Agreement
or any other agreement. The Company agrees that it shall, upon learning that
disclosure of such information concerning the Investor is sought in or by a
court or governmental body of competent jurisdiction or through other means,
give prompt written notice to the Investor and allow the Investor, at the
Investor's expense, to undertake appropriate action to prevent disclosure of, or
to obtain a protective order for, such information.

            j. The Company shall use reasonable commercial efforts either to
cause all the Registrable Securities covered by a Registration Statement (i) to
be listed on each securities exchange on which securities of the same class or
series issued by the Company are then listed, if any, if the listing of such
Registrable Securities is then permitted under the rules of such exchange or to
secure the inclusion for quotation on the National Association of Securities
Dealers, Inc. OTC Bulletin Board for such Registrable Securities. The Company
shall pay all fees and expenses in connection with satisfying its obligation
under this Section 3(j).

            k. The Company shall cooperate with the Investor to the extent
applicable, to facilitate the timely preparation and delivery of certificates
(not bearing any restrictive legend) representing the Registrable Securities to
be offered pursuant to a Registration Statement and enable such certificates to
be in such denominations or amounts, as the case may be, as the Investor may
reasonably request and registered in such names as the Investor may request.

            l. The Company shall use reasonable commercial efforts to cause the
Registrable Securities covered by the applicable Registration Statement to be
registered with or approved by such other governmental agencies or authorities
as may be necessary to consummate the disposition of such Registrable
Securities.

            m. The Company shall otherwise use its best efforts to comply with
all applicable rules and regulations of the SEC in connection with any
registration hereunder.

            n. Within two (2) business days after a Registration Statement which
covers Registrable Securities is ordered effective by the SEC, the Company shall
deliver, and shall cause legal counsel for the Company to deliver, to the
transfer agent for such Registrable Securities (with copies to the Investor)
confirmation that such Registration Statement has been declared effective by the
SEC in the form attached hereto as Exhibit A.

            o. The Company shall take all other reasonable actions necessary to
expedite and facilitate disposition by the Investor of Registrable Securities
pursuant to a Registration Statement.

      4.    OBLIGATIONS OF THE INVESTOR.

      The Investor agrees that, upon receipt of any notice from the Company of
the happening of any event of the kind described in Section 3(f) or the first
sentence of 3(e), the Investor will immediately discontinue disposition of
Registrable Securities pursuant to any Registration Statement(s) covering such
Registrable Securities until the Investor's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 3(e) or receipt of
notice that no

                                       5
<PAGE>

supplement or amendment is required. Notwithstanding anything to the contrary,
the Company shall cause its transfer agent to deliver unlegended certificates
for shares of Common Stock to a transferee of the Investor in accordance with
the terms of the Standby Equity Distribution Agreement in connection with any
sale of Registrable Securities with respect to which the Investor has entered
into a contract for sale prior to the Investor's receipt of a notice from the
Company of the happening of any event of the kind described in Section 3(f) or
the first sentence of 3(e) and for which the Investor has not yet settled.

      5.    EXPENSES OF REGISTRATION.

      All expenses incurred in connection with registrations, filings or
qualifications pursuant to Sections 2 and 3, including, without limitation, all
registration, listing and qualifications fees, printers, legal and accounting
fees shall be paid by the Company.

      6.    INDEMNIFICATION.

      With respect to Registrable Securities which are included in a
Registration Statement under this Agreement:

            a. To the fullest extent permitted by law, the Company will, and
hereby does, indemnify, hold harmless and defend the Investor, the directors,
officers, partners, employees, agents, representatives of, and each Person, if
any, who controls the Investor within the meaning of the 1933 Act or the 1934
Act (each, an "Indemnified Person"), against any losses, claims, damages,
liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys'
fees, amounts paid in settlement or expenses, joint or several (collectively,
"Claims") incurred in investigating, preparing or defending any action, claim,
suit, inquiry, proceeding, investigation or appeal taken from the foregoing by
or before any court or governmental, administrative or other regulatory agency,
body or the SEC, whether pending or threatened, whether or not an indemnified
party is or may be a party thereto ("Indemnified Damages"), to which any of them
may become subject insofar as such Claims (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon: (i)
any untrue statement or alleged untrue statement of a material fact in a
Registration Statement or any post-effective amendment thereto or in any filing
made in connection with the qualification of the offering under the securities
or other "blue sky" laws of any jurisdiction in which Registrable Securities are
offered ("Blue Sky Filing"), or the omission or alleged omission to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading; (ii) any untrue statement or alleged untrue statement of
a material fact contained in any final prospectus (as amended or supplemented,
if the Company files any amendment thereof or supplement thereto with the SEC)
or the omission or alleged omission to state therein any material fact necessary
to make the statements made therein, in light of the circumstances under which
the statements therein were made, not misleading; or (iii) any violation or
alleged violation by the Company of the 1933 Act, the 1934 Act, any other law,
including, without limitation, any state securities law, or any rule or
regulation there under relating to the offer or sale of the Registrable
Securities pursuant to a Registration Statement (the matters in the foregoing
clauses (i) through (iii) being, collectively, "Violations"). The Company shall
reimburse the Investor and each such controlling person promptly as such
expenses are incurred and are due and payable, for any legal fees or
disbursements or other reasonable expenses incurred by them in connection with
investigating or

                                       6
<PAGE>

defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained in this Section 6(a): (x) shall
not apply to a Claim by an Indemnified Person arising out of or based upon a
Violation which occurs in reliance upon and in conformity with information
furnished in writing to the Company by such Indemnified Person expressly for use
in connection with the preparation of the Registration Statement or any such
amendment thereof or supplement thereto; (y) shall not be available to the
extent such Claim is based on a failure of the Investor to deliver or to cause
to be delivered the prospectus made available by the Company, if such prospectus
was timely made available by the Company pursuant to Section 3(e); and (z) shall
not apply to amounts paid in settlement of any Claim if such settlement is
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld. Such indemnity shall remain in full force and
effect regardless of any investigation made by or on behalf of the Indemnified
Person.

            b. In connection with a Registration Statement, the Investor agrees
to indemnify, hold harmless and defend, to the same extent and in the same
manner as is set forth in Section 6(a), the Company, each of its directors, each
of its officers who signs the Registration Statement and each Person, if any,
who controls the Company within the meaning of the 1933 Act or the 1934 Act
(each an "Indemnified Party"), against any Claim or Indemnified Damages to which
any of them may become subject, under the 1933 Act, the 1934 Act or otherwise,
insofar as such Claim or Indemnified Damages arise out of or is based upon any
Violation, in each case to the extent, and only to the extent, that such
Violation occurs in reliance upon and in conformity with written information
furnished to the Company by the Investor expressly for use in connection with
such Registration Statement; and, subject to Section 6(d), the Investor will
reimburse any legal or other expenses reasonably incurred by them in connection
with investigating or defending any such Claim; provided, however, that the
indemnity agreement contained in this Section 6(b) and the agreement with
respect to contribution contained in Section 7 shall not apply to amounts paid
in settlement of any Claim if such settlement is effected without the prior
written consent of the Investor, which consent shall not be unreasonably
withheld; provided, further, however, that the Investor shall be liable under
this Section 6(b) for only that amount of a Claim or Indemnified Damages as does
not exceed the net proceeds to the Investor as a result of the sale of
Registrable Securities pursuant to such Registration Statement. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of such Indemnified Party. Notwithstanding anything to the contrary
contained herein, the indemnification agreement contained in this Section 6(b)
with respect to any prospectus shall not inure to the benefit of any Indemnified
Party if the untrue statement or omission of material fact contained in the
prospectus was corrected and such new prospectus was delivered to the Investor
prior to the Investor's use of the prospectus to which the Claim relates.

            c. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a Claim,
such Indemnified Person or Indemnified Party shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 6,
deliver to the indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the

                                       7
<PAGE>

Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses of not more than one counsel
for such Indemnified Person or Indemnified Party to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The Indemnified Party or Indemnified Person shall cooperate fully
with the indemnifying party in connection with any negotiation or defense of any
such action or claim by the indemnifying party and shall furnish to the
indemnifying party all information reasonably available to the Indemnified Party
or Indemnified Person which relates to such action or claim. The indemnifying
party shall keep the Indemnified Party or Indemnified Person fully apprised at
all times as to the status of the defense or any settlement negotiations with
respect thereto. No indemnifying party shall be liable for any settlement of any
action, claim or proceeding effected without its prior written consent,
provided, however, that the indemnifying party shall not unreasonably withhold,
delay or condition its consent. No indemnifying party shall, without the prior
written consent of the Indemnified Party or Indemnified Person, consent to entry
of any judgment or enter into any settlement or other compromise which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party or Indemnified Person of a release from all liability
in respect to such claim or litigation. Following indemnification as provided
for hereunder, the indemnifying party shall be subrogated to all rights of the
Indemnified Party or Indemnified Person with respect to all third parties, firms
or corporations relating to the matter for which indemnification has been made.
The failure to deliver written notice to the indemnifying party within a
reasonable time of the commencement of any such action shall not relieve such
indemnifying party of any liability to the Indemnified Person or Indemnified
Party under this Section 6, except to the extent that the indemnifying party is
prejudiced in its ability to defend such action.

            d. The indemnification required by this Section 6 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or Indemnified Damages are incurred.

            e. The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar right of the Indemnified Party or Indemnified
Person against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.

      7.    CONTRIBUTION.

      To the extent any indemnification by an indemnifying party is prohibited
or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that:
(i) no seller of Registrable Securities guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 1933 Act) shall be entitled to
contribution from any seller of Registrable Securities who was not guilty of
fraudulent misrepresentation; and (ii) contribution by any seller of Registrable
Securities shall be limited in

                                       8
<PAGE>

amount to the net amount of proceeds received by such seller from the sale of
such Registrable Securities.

      8.    REPORTS UNDER THE 1934 ACT.

      With a view to making available to the Investor the benefits of Rule 144
promulgated under the 1933 Act or any similar rule or regulation of the SEC that
may at any time permit the Investors to sell securities of the Company to the
public without registration ("Rule 144") the Company agrees to:

            a. make and keep public information available, as those terms are
understood and defined in Rule 144;

            b. file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 6.3 of the
Standby Equity Distribution Agreement) and the filing of such reports and other
documents is required for the applicable provisions of Rule 144; and

            c. furnish to the Investor so long as the Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company that
it has complied with the reporting requirements of Rule 144, the 1933 Act and
the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the
Company and such other reports and documents so filed by the Company, and (iii)
such other information as may be reasonably requested to permit the Investor to
sell such securities pursuant to Rule 144 without registration.

      9.    AMENDMENT OF REGISTRATION RIGHTS.

      Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only by a written agreement. Any amendment or waiver effected
in accordance with this Section 9 shall be binding upon the Investor and the
Company. No consideration shall be offered or paid to any Person to amend or
consent to a waiver or modification of any provision of any of this Agreement
unless the same consideration also is offered to all of the parties to this
Agreement.

      10.   MISCELLANEOUS.

            a. A Person is deemed to be a holder of Registrable Securities
whenever such Person owns or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more Persons with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or
election received from the registered owner of such Registrable Securities.

            b. Any notices, consents, waivers or other communications required
or permitted to be given under the terms of this Agreement must be in writing
and will be deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated

                                       9
<PAGE>

and kept on file by the sending party); or (iii) one business day after deposit
with a nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:

If to the Company, to:         CTI Industries Corporation
                               22160 N. Pepper Road
                               Barrington, IL 60010
                               Attention:   Stephen M. Merrick
                               Telephone:   (847) 382-1000
                               Facsimile:   (847) 382-1219

With a copy to:                Merrick & Klimek
                               33 N. LaSalle Street
                               Chicago, IL 60602
                               Attention:   John M. Klimek, Esq.
                               Telephone:   (312) 284-1520
                               Facsimile:   (312) 284-1521

If to the Investor, to:        Cornell Capital Partners, LP
                               101 Hudson Street - Suite 3700
                               Jersey City, NJ 07302
                               Attention:   Mark Angelo
                                            Portfolio Manager
                               Telephone:   (201) 985-8300
                               Facsimile:   (201) 985-8266

With copy to:                  Butler Gonzalez LLP
                               1416 Morris Avenue - Suite 207
                               Union, NJ 07083
                               Attention:   David Gonzalez, Esq.
                               Telephone:   (908) 810-8588
                               Facsimile:   (908) 810-0973

Any party may change its address by providing written notice to the other
parties hereto at least five days prior to the effectiveness of such change.
Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C)
provided by a courier or overnight courier service shall be rebuttable evidence
of personal service, receipt by facsimile or receipt from a nationally
recognized overnight delivery service in accordance with clause (i), (ii) or
(iii) above, respectively.

            c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.

                                       10
<PAGE>

            d. The corporate laws of the State of Illinois shall govern all
issues concerning the relative rights of the Company and the Investor. All other
questions concerning the construction, validity, enforcement and interpretation
of this Agreement shall be governed by the internal laws of the State of New
Jersey, without giving effect to any choice of law or conflict of law provision
or rule (whether of the State of New Jersey or any other jurisdiction) that
would cause the application of the laws of any jurisdiction other than the State
of New Jersey. Each party hereby irrevocably submits to the non-exclusive
jurisdiction of the Superior Courts of the State of New Jersey, sitting in
Hudson County, New Jersey and the Federal District Court for the District of New
Jersey sitting in Newark, New Jersey, for the adjudication of any dispute
hereunder or in connection herewith or with any transaction contemplated hereby
or discussed herein, and hereby irrevocably waives, and agrees not to assert in
any suit, action or proceeding, any claim that it is not personally subject to
the jurisdiction of any such court, that such suit, action or proceeding is
brought in an inconvenient forum or that the venue of such suit, action or
proceeding is improper. Each party hereby irrevocably waives personal service of
process and consents to process being served in any such suit, action or
proceeding by mailing a copy thereof to such party at the address for such
notices to it under this Agreement and agrees that such service shall constitute
good and sufficient service of process and notice thereof. Nothing contained
herein shall be deemed to limit in any way any right to serve process in any
manner permitted by law. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement in that
jurisdiction or the validity or enforceability of any provision of this
Agreement in any other jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY
RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION
OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS
AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

            e. This Agreement, the Standby Equity Distribution Agreement, the
Escrow Agreement and the Placement Agent Agreement constitute the entire
agreement among the parties hereto with respect to the subject matter hereof and
thereof. There are no restrictions, promises, warranties or undertakings, other
than those set forth or referred to herein and therein. This Agreement, the
Standby Equity Distribution Agreement, the Escrow Agreement and the Placement
Agent Agreement supersede all prior agreements and understandings among the
parties hereto with respect to the subject matter hereof and thereof.

            f. This Agreement shall inure to the benefit of and be binding upon
the permitted successors and assigns of each of the parties hereto.

            g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.

            h. This Agreement may be executed in identical counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.

                                       11
<PAGE>

            i. Each party shall do and perform, or cause to be done and
performed, all such further acts and things, and shall execute and deliver all
such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

            j. The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent and no rules of
strict construction will be applied against any party.

            k. This Agreement is intended for the benefit of the parties hereto
and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       12
<PAGE>

      IN WITNESS WHEREOF, the parties have caused this Registration Rights
Agreement to be duly executed as of day and year first above written.

                                            COMPANY:
                                            CTI INDUSTRIES CORPORATION

                                            By: /s/ Stephen M. Merrick
                                                --------------------------------
                                            Name:  Stephen M. Merrick
                                            Title: Executive Vice-President

                                            INVESTOR:
                                            CORNELL CAPITAL PARTNERS, LP

                                            By:    Yorkville Advisors, LLC
                                            Its:   General Partner

                                            By: /s/ Mark Angelo
                                                --------------------------------
                                            Name:  Mark Angelo
                                            Title: Portfolio Manager

                                       13
<PAGE>

                                                                       EXHIBIT A

                         FORM OF NOTICE OF EFFECTIVENESS
                            OF REGISTRATION STATEMENT

INSERT

Attention: _____________

            Re:   CTI INDUSTRIES CORPORATION

Ladies and Gentlemen:

      We are counsel to CTI Industries Corporation, a Illinois corporation (the
"Company"), and have represented the Company in connection with that certain
Standby Equity Distribution Agreement (the "Standby Equity Distribution
Agreement") entered into by and between the Company and Cornell Capital
Partners, LP (the "Investor") pursuant to which the Company issued to the
Investor shares of its Common Stock, no par value per share (the "Common
Stock"). Pursuant to the Standby Equity Distribution Agreement, the Company also
has entered into a Registration Rights Agreement with the Investor (the
"Registration Rights Agreement") pursuant to which the Company agreed, among
other things, to register the Registrable Securities (as defined in the
Registration Rights Agreement) under the Securities Act of 1933, as amended (the
"1933 Act"). In connection with the Company's obligations under the Registration
Rights Agreement, on ____________ ____, the Company filed a Registration
Statement on Form ________ (File No. 333-_____________) (the "Registration
Statement") with the Securities and Exchange Commission (the "SEC") relating to
the Registrable Securities which names the Investor as a selling stockholder
thereunder.

      In connection with the foregoing, we advise you that a member of the SEC's
staff has advised us by telephone that the SEC has entered an order declaring
the Registration Statement effective under the 1933 Act at [ENTER TIME OF
EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and we have no knowledge, after
telephonic inquiry of a member of the SEC's staff, that any stop order
suspending its effectiveness has been issued or that any proceedings for that
purpose are pending before, or threatened by, the SEC and the Registrable
Securities are available for resale under the 1933 Act pursuant to the
Registration Statement.

                                          Very truly yours,

                                          By:
                                             -----------------------------------

cc:   Cornell Capital Partners, LPExhibit 4.1

              CERTIFICATE OF DESIGNATION OF RIGHTS AND PREFERENCES

                                   RELATING TO

                 SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK

      Supreme Holdings, Inc., a corporation organized and existing under and by
virtue of the General Corporation Law of the State of Nevada (the
"Corporation"), DOES HEREBY CERTIFY:

      FIRST: That the Board of Directors of said Corporation effective the 16th
day of February, 2004 adopted the following resolution:

      RESOLVED, that out of the Corporation's 5,000,000 shares of preferred
stock, par value $0.0001 per share ("Preferred Stock"), there shall be a series
of Preferred Stock designated and known as "Series A Cumulative Convertible
Preferred Stock" consisting of 50,000 shares ("Series A Stock") with an
aggregate face value of $5,000,000 ($100 per share); which shall have the
following relative rights, preferences, voting powers, qualifications and
privileges:

      1. Voting.

      lA. General Voting Rights. Except as may be otherwise provided in
subparagraph 1B, the terms of the Series A Stock or by law, the Series A Stock
shall be entitled to notice of all stockholders' meetings in accordance with the
Corporation's By-laws and the holders of the Series A Stock shall be entitled to
vote on all matters submitted to the stockholders for a vote, including the
election of directors, together with the holders of the common stock, $0.0001
par value per share, of the Corporation ("Common Stock"). Each share of Series A
Stock shall be entitled to one vote for each share of Common Stock into which
the Series A Stock is convertible as of the record date for such vote or, if no
record date is specified, as of the date of such vote. The record date or, if no
record date is specified, the date of such vote, shall be the date used for the
determination of the number of shares of Common Stock into which the Series A
Stock is convertible for the purposes of such vote, such determination to be
otherwise made in accordance with subparagraph 4B hereof.

      2B. Separate Voting Rights. In addition to the general voting rights set
forth in subparagraph 1A, but subject to the qualifications hereinafter set
forth, the holders of the Series A Stock shall have the right to vote,
separately as a single class, at a meeting of the holders of the Series A Stock
or by such holders' written consent or at any annual or special meeting of the
stockholders of the Corporation on any of the following matters: (i) the
creation, authorization, or issuance of any class or series of shares ranking
ahead of the Series A Stock, dissolution, or winding up of the Corporation, and
(ii) any agreement or other corporate action which would adversely affect the
powers, rights, or preferences of the holders of the Series A Stock. A majority
of the shares of Series A Stock, represented in person or by proxy, shall
constitute a quorum at any meeting of the holders of the Series A Stock. Action
may be taken at any meeting of the Series A Stock holders at which a quorum is
present by the holders of a majority of the shares of Series A Stock represented
at such meeting in person or by proxy. The holders of Series A Stock may take
action, in lieu of a meeting, by a written consent signed by the holders of such
number of shares of Series A Stock as is required to approve such action at any
meeting of the holders of Series A Stock.

<PAGE>

      2. Dividends.

      2A. Cumulative Dividends. The holders of record of the Series A Stock
shall be entitled to receive cumulative dividends at a rate of ten percent (10%)
per annum on the face value ($100 per share) denominated thereon (subject to
adjustment for stock splits, stock dividends, reorganization reclassification or
similar events) (the "Adjusted Face Value"). At the discretion of the
Corporation, any and all dividends, when paid, shall be payable in additional
shares of Series A Stock in lieu of cash. On and after the first Dividend
Payment Date which is twenty four (24) months after the date of issuance of the
Series A Stock, any holder of the Series A Stock may elect to have dividends
paid in cash. The Series A Stock shall bear anew dividend rate of fifteen
percent (15%) per annum on the Adjusted Face Value if the Series A Stock is not
convertible into Common Stock within six months after the issuance of the Series
A Stock because the Corporation does not at such future date have available
sufficient shares of Common Stock necessary to fulfill the conversion requests
of the holders of Series A Stock.

      2B. Payment. Dividends on shares of Series A Stock that have not been
redeemed or converted shall be payable quarterly in arrears, when and as
declared by the Board, commencing on March 31, 2004, and continuing on each
March 31, June 30, September 30 and December 31 or the next business day if such
date falls on a Saturday, Sunday, or legal holiday (each such date being
hereinafter referred to as a "Dividend Payment Date'), of each year to holders
of record as they appear on the records of the Corporation on any record date
not exceeding sixty (60) days preceding such Dividend Payment Date. Dividends in
arrears may be declared by the Board and paid at any time out of funds legally
available therefor, without reference to any regular Dividend Payment Date, to
holders of record on any record date, not exceeding sixty (60) days preceding
the payment date thereof, as may be fixed by the Board.

      2C. Default in Payment. Dividends on the Series A Stock shall commence to
accrue and shall be cumulative from and after the date of initial issuance
thereof whether or not declared by the Board. To the extent that dividends
remain unpaid after the applicable Dividend Payment Date, they shall accrue
interest at a rate of ten (10 %) per annum until paid and shall be a continuing
obligation of the Corporation. Cash dividends paid on the shares of Series A
Stock in an amount less than the total amount of dividends at the time accrued
and payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding.

      2D. Dividends on Common or Junior Stock. No dividend or distribution
(other than a dividend or distribution paid in Common Stock or in any other
Junior Stock (as defined below) shall be declared or paid or set aside for
payment on the Common Stock or on any other Junior Stock, nor shall any Common
Stock or any other Junior Stock be redeemed, purchased or otherwise acquired for
any consideration (or any moneys be paid to or made available for a sinking fund
for the redemption of any shares of any such stock) by the Corporation (except
by conversion into or exchange for shares of Common Stock or other Junior Stock)
unless, in each case, full cumulative dividends on all outstanding shares of the
Series A Stock shall have been declared and paid through and including the most
recent Dividend Payment Date.

      "Junior Stock" shall mean the Common Stock and all other equity securities
of the Corporation over which the Series A Stock has preference or priority in
the payment of dividends, in the distribution of assets, upon redemption and
upon dissolution, liquidation or winding up, voluntary or involuntary, of the
Corporation.

                                       2
<PAGE>

      "Parity Stock" shall mean the stock or class of stock, the holders of
which shall be entitled to the receipt of dividends or of amounts distributable
upon redemption or upon dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, in proportion to their respective
dividend rates or liquidation prices or values, without preference or priority,
one over the other, as between the holders of such stock or class of stock and
the holders of shares of the Series A Stock.

      3. Liquidation. Upon any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, before any distribution or
payment is made with respect to any Junior Stock, holders of each share of
Series A Stock shall be entitled to be paid an amount equal to the greater of
(i) the face value denominated thereon (subject to adjustment for stock splits,
stock dividends, reorganizations, reclassification or other similar events) (the
"Adjusted Face Value") plus, in the case of each share, an amount equal to all
dividends accrued or declared but unpaid thereon, computed to the date payment
thereof is made available, or (ii) such amount per share of Series A Stock as
would have been payable had each such share been converted to Common S tock
pursuant to paragraph 4 hereof immediately prior to such liquidation,
dissolution or winding up, and the holders of Series A Stock shall not be
entitled to any further payment, such amount payable with respect to Series A
Stock being sometimes referred to as the "Liquidation Payments". If upon such
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, the assets to be distributed among the holders of Series A Stock,
and any and all Parity Stock, after distribution on any Senior Stock, shall be
insufficient to permit payment to the holders of Series A Stock of the amount
distributable to such parties, then the entire assets of the Corporation
available to be so distributed, if any, shall be distributed among the holders
of the Series A Stock and the holders of any and all Parity Stock pro rata so
that the amount of assets distributed with respect to the Series A Stock and the
Parity Stock shall bear to each other the same ratio that liquidation payments
due per share of Series A Stock and Parity Stock bear to each other. Upon any
such liquidation, dissolution or winding up of the Corporation, after the
holders of Series A Stock and any Parity Stock shall have been paid in full the
entire Liquidation Payments to which they shall be entitled, the remaining net
assets of the Corporation may be distributed to the holders of Junior Stock.
Written notice of such liquidation, dissolution or winding up, stating a payment
date, the amount of the Liquidation Payments and the place where said
Liquidation Payments shall be payable, shall be delivered in person, mailed by
certified or registered mail, return receipt requested, or sent by reputable
overnight courier service, not less than 20 days prior to the payment date
stated therein, to the holders of record of Series A Stock entitled to such
Liquidation Payments, such notice to be addressed to each such holder at its
address as shown by the records of the Corporation. The consolidation or merger
of the Corporation into or with any other entity or entities which results in
the exchange of outstanding shares of the Corporation for securities or other
consideration issued or paid or caused to be issued or paid by any such entity
or affiliate thereof (other than a merger to reincorporate the Corporation in a
different jurisdiction), and the sale, lease, abandonment, transfer or other
disposition by the Corporation of all or substantially all its assets, shall be
deemed to be a liquidation, dissolution or winding of the Corporation within the
meaning of the provisions of this paragraph 3 ("Deemed Liquidation").

      4. Conversion.

      4A. Optional Conversion. At any time after December 31, 2003, the shares
of Series A Stock and all accrued but unpaid dividends owing thereon through the
date of conversion shall be convertible, at the option of the holder, into
shares of Common Stock. In the event of a conversion, the number of shares of
Common Stock to be issued on account of each share of Series A Stock shall be
determined by dividing (i) the Adjusted Face Value plus the amount of any
accrued but unpaid dividends thereon by (ii) $0.20 (the "Per Share Conversion
Price"). The Per Share Conversion Price

                                       3
<PAGE>

shall be adjusted similarly to the face value for stock splits, stock dividends,
reorganization, reclassification or similar events in a manner that maintains
the ratio of the Adjusted Face Value to the Per Share Conversion Price as of the
date of issuance of the Series A Stock.

      4B. Mechanics of Conversion. To effect a conversion of shares of Series A
Stock, the holder of the shares of Series A Stock shall give written notice to
the Corporation of its intention to convert such shares and the date upon which
such conversion is to occur. Such notice shall also state the date, place and
time at which the holder of the shares of Series A Stock to be converted is to
tender the shares of Series A Stock being converted into shares of Common Stock
to be delivered at such time by the Corporation. On the date set forth in such
notice, the shares of Series A Stock to be converted shall no longer be
outstanding and shall thereafter represent only the right to receive the shares
of Common Stock issuable upon the conversion thereof. The shares of Common Stock
issued upon such conversion shall bear a restrictive legend substantially as
follows:

      THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE.
SUCH SHARES MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH
LAWS AND THE DELIVERY TO THE COMPANY OF A WRITTEN OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

      4C. Fractional Shares: Dividends. No fractional shares shall be issued
upon conversion of Series A Stock into Common Stock. If any fractional share of
Common Stock would, except for the provisions of the first sentence of this
subparagraph 4C, be delivered upon such conversion, the Corporation, in lieu of
delivering such fractional share, shall pay to the holder of the Series A Stock
being converted an amount in cash equal to the Fair Market Value applicable to
such fraction of a share. No holder of Series A Stock, upon conversion, shall be
entitled to receive any payments or adjustments to the number of shares of
Common Stock to be received upon conversion for any dividends declared on the
Common Stock prior to the date of such conversion effected under this paragraph
4.

      For the purposes hereof, the "Fair Market Value" of a share of Common
Stock shall be the last reported sale price of a share of Common Stock on any
national securities exchange or, if not listed on any such exchange, the average
of the bid and asked prices of such share as reported by the National
Association of Securities Dealers Automated Quotation System ("NASDAQ") or the
Over-The-Counter Bulletin Board ("OTC BB") or a comparable agency; or, if no
such reports are rendered by the NASDAQ, OTC BB or a comparable agency, the fair
market value per share as determined in good faith by the Board of Directors of
the Corporation.

      4D. Reorganization or Reclassification. If any capital reorganization or
reclassification capital of the capital stock of the Corporation shall be
effected in such a way that holders of Common Stock shall be entitled to receive
stock, securities or assets with respect to or in exchange for Common Stock,
then, as a condition of such reorganization or reclassification, lawful and
adequate provisions shall be made whereby each holder of a share or shares of
Series A Stock shall thereupon have the right to receive, upon the basis and
upon the terms and conditions specified herein and in lieu of the shares of
Common Stock immediately theretofore receivable upon the conversion of such
share or shares of Series A Stock, such shares of stock, securities or assets as
may be issued or payable with respect to or in exchange for a number of
outstanding shares of

                                       4
<PAGE>

such Common Stock equal to the number of shares of such Common Stock immediately
theretofore receivable upon such conversion had such reorganization or
reclassification not taken place, and in any such case appropriate provisions
shall be made with respect to the rights and interests of such holder to the end
that the provisions hereof shall thereafter be applicable, as nearly as may be,
in relation to any shares of stock, securities or assets thereafter deliverable
upon conversion.

      4E. Other Notices. In case at any time:

      (i)   the corporation shall declare any dividend upon any Junior Stock or
            Parity Stock payable in cash or stock or make any other distribution
            to the holders of any Junior Stock or Parity Stock;

      (ii)  the Corporation shall offer for subscription pro rata to the holders
            of any Junior Stock or Parity Stock any additional shares of stock
            of any class or other rights;

      (iii) there shall be any capital reorganization or reclassification of the
            capital stock of the Corporation, or a consolidation or merger of
            the Corporation with or into another entity or entities, or a sale,
            lease, abandonment, transfer or other disposition of all or
            substantially all its assets; or

      (iv)  there shall be a voluntary or involuntary dissolution, liquidation
            or winding up of the Corporation;

then, in any one or more of said cases, the Corporation shall give, by delivery
in person, certified or registered mail, return receipt requested and postage
prepaid, or by reputable overnight courier service, charges prepaid, addressed
to each holder of shares of Series A Stock at the address of such holder as
shown on the books of the Corporation, (a) at least 20 days prior written notice
of the date which the books of the Corporation shall close or a record shall be
taken for such dividend, distribution or subscription rights or for determining
rights to vote in respect of any such reorganization, reclassification,
consolidation, merger, disposition, dissolution, liquidation or winding up and
(b) in the case of any such reorganization, reclassification, consolidation,
merger, disposition, dissolution, liquidation or winding up, at least 20 days
prior written notice of the date when the same shall take place. Such notice in
accordance with the foregoing clause (a) shall also specify, in the case of any
such dividend, distribution or subscription rights, the date on which the
holders of Common Stock shall be entitled thereto and such notice in accordance
with the foregoing clause (b) shall also specify the date on which the holders
of Common Stock shall be entitled to exchange their Common Stock for securities
or other property deliverable upon such reorganization, reclassification,
consolidation, merger, disposition, dissolution, liquidation or winding up, as
the case may be.

      4F. No Reissuance of Series A Stock. Shares of Series A Stock which are
converted into shares of Common Stock as provided herein shall not be reissued.

      4G. Issue Tax. The issuance of certificates for shares of Common Stock
upon conversion of Series A Stock shall be made without charge to the holders
thereof for any issuance tax in respect thereof, provided that the Corporation
shall not be required to pay any tax which may be payable in respect of any
transfer involved in the issuance and delivery of any certificate in a name
other than that of the holder of the Series A Stock which is being converted.

                                       5
<PAGE>

      4H. Closing of Books. The Corporation will at no time close its transfer
books against the transfer of any Series A Stock or of any shares of Common
Stock issued or issuable upon the conversion of any shares of Series A Stock in
any manner which interferes with the timely conversion of such Series A Stock,
except as may otherwise be required to comply with applicable securities laws.

      4J. Definition of Common Stock. As used herein, the term "Common Stock"
shall mean and include the Corporation's authorized Common Stock, par value
$0.0001 per share, as constituted on the date of filing of these terms of the
Series A Stock, and shall also include any capital stock of any class of the
Corporation thereafter authorized which shall not be limited to a fixed sum or
percentage in respect of the rights of the holders thereof to participate in
dividends or in the distribution of assets upon the voluntary or involuntary
liquidation, dissolution or winding up of the Corporation; provided that the
shares of Common Stock receivable upon conversion of shares of Series A Stock
shall include only shares designated as Common Stock of the Corporation on the
date of filing of this instrument, or in case of any reorganization or
reclassification of the outstanding shares thereof, the stock, securities or
assets provided for in subparagraph 4D hereof.

      5. Redemption.

      5A. Optional Redemption. The Corporation may, at its option, at any time
commencing two (2) years after the initial date of issuance of the Series A
Stock, redeem all or any portion of the outstanding shares of Series A Stock.

      5B. Redemption Price and Payment. The Series A Stock to be redeemed on the
Redemption Date (as defined in paragraph 5C hereof) shall be redeemed by paying
for each share an amount equal to the Adjusted Face Value, plus an amount equal
to all dividends accrued or declared but unpaid thereon (the "Redemption
Price"), computed to the Redemption Date. Such payment shall be made in full on
the Redemption Date to the holders entitled thereto.

      5C. Redemption Mechanics. The Corporation must give the holders(s) of the
Series A Stock at least thirty (30) days prior written notice (the "Redemption
Notice") of such redemption. The Redemption Notice will be sent to the
holders(s) of Series A Stock at the address indicated of record on the
Corporation's stockholders' list and will indicate (a) the number of shares of
Series A Stock held by such holder or holders, (b) the number of shares being
redeemed by the Corporation, and (c) the date on which such redemption shall
take place (such date being referred to herein as the "Redemption Date"), which
date shall not be fewer than thirty (30) days from the date the applicable
Redemption Notice is delivered from the Corporation by delivery in person,
certified or registered mail, return receipt requested, postage prepaid or by
reputable overnight courier service, charges prepaid to the holder. From and
after the close of business on the Redemption Date, unless there shall have been
a default in the payment of the Redemption Price, all rights of holders of
shares of Series A Stock being redeemed (except the right to receive the
Redemption Price) shall cease with respect to such shares, and such shares shall
not thereafter be transferred on the books of the Corporation or be deemed to be
outstanding for any purpose whatsoever.

      5D. Redeemed or Otherwise Acquired Shares to be Retired. Any shares of
Series A Stock redeemed pursuant to this paragraph 5 or otherwise acquired by
the Corporation in any manner whatsoever shall be cancelled and shall not under
any circumstances be reissued; and the Corporation may from time to time take
such appropriate corporate action as may be necessary to reduce accordingly the
number of authorized shares of Series A Stock.

                                       6
<PAGE>

      5E. Priority of Redemption. The Series A Stock shall have priority over
shares of all Junior Stock, including but not limited to Common Stock, with
respect to the rights of redemption set forth in this paragraph 5. In the event
the Corporation has insufficient funds to redeem all of the Series A Stock at
the then applicable Redemption Price, The Corporation shall not be permitted to
redeem shares of Junior Stock until such time as the Corporation has redeemed
all of the issued and outstanding Series A Stock.

      5F. Surrender of Certificates. Each holder of shares of Series A Stock to
be redeemed shall surrender the certificates(s) representing such shares to the
Corporation at the principal offices of the Corporation or such other place as
the Corporation may designate in writing on the Redemption Date and upon the
payment of the full Redemption Price for such shares as set forth in this
Paragraph 5 in order of the person whose name appears on such certificate(s),
each surrendered certificate shall be cancelled and retired. In the event some
but not all of the shares of Series A Stock represented by the certificates)
surrendered by a holder are being redeemed, the Corporation shall execute and
deliver to or on the order of the holder, at the expense of the Corporation, a
new certificate representing the number of shares of Series A Stock which were
not redeemed

      6. Restrictions and Limitations. For so long as any shares of Series A
Stock remain outstanding, and subject to the right of holders of Series A Stock
to vote on certain matters separately as a class pursuant to paragraph 1B
hereof, the Corporation shall not, without the approval of the holders of at
least a majority of the then outstanding shares of Series A Stock.

      (i)   redeem, purchase or otherwise acquire for value (or pay into or set
            aside a sinking fund for such purpose) any shares of Junior Stock,
            including without limitation, shares of Common Stock, but excluding
            shares of the Corporation's Redeemable Stock;

      (ii)  amend, repeal or change any provision of, or add any provision to,
            this Designation of Preferences;

      (iii) amend, repeal or change any provision of the Corporation's Restated
            and Amended Certificate of Incorporation or By-laws if such action
            would materially adversely impact the Series A Stock or the
            designation, powers, preferences and rights and the qualifications,
            limitations and/or restrictions thereof provided for herein;

      (iv)  permit any significant subsidiary to issue capital stock to any
            person other than the Corporation or a wholly owned subsidiary
            (other than as nominee for the Corporation or a wholly owned
            subsidiary of the Corporation to comply with applicable law);

      (v)   authorize, designate, issue, and sell shares of preferred stock with
            powers, rights and preferences prior or senior to or on a parity
            with any powers, rights and preferences of the Series A stock; or

      (vi)  issue any Common Stock or warrants or options to purchase Common
            Stock to employees, officers or directors exceeding in the aggregate
            five percent (5%) of the aggregate amount of Common Stock and
            warrants and options to purchase Common Stock outstanding on the
            date hereof, excluding any such issuances pursuant to the
            Corporation's current plans providing for the issuance of Common
            Stock or warrants or options to purchase Common Stock to employees,
            officers and directors and such subsequently adopted plans as may be
            approved by the holders of the Series A Stock.

                                       7
<PAGE>

      7. Additional Rights; Demand and Piggyback Registration Rights. The Series
A Stock is also entitled to the rights and benefits, including without
limitation certain demand and piggyback registration rights, set forth in the
Preferred Stock Purchase Agreement entered into by and between the Corporation
and each holder of the Series A Stock.

      SECOND: That the aforesaid resolution was duly adopted in accordance with
the applicable provisions of the General Corporation Law of the State of Nevada.

      IN WITNESS WHEREOF, said Corporation has caused this Designation of
Preferences to be signed by Charles T. Phillips, its Chief Executive Officer,
and attested by Sandy Livney, its Secretary, this the 16th day of February,
2004, and by execution hereof does declare and certify that this is the act and
deed of the Corporation and the facts herein stated are true.

                                   /s/ Charles T. Phillips
                                   ---------------------------------------------
                                   Charles T. Phillips, Chief Executive Officer

                                   /s/ Sandy Livney
                                   ---------------------------------------------
                                   Sandy Livney, Secretary

                                       8

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00072-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00072-of-00352.parquet"}]]